761.94/780
The Ambassador in Japan (Grew) to the Secretary of State
[Received September 8.]
Sir: Since the drafting of my despatch No. 916 of August 378 Soviet-Japanese relations have again become tense as the result of events relating to the Chinese Eastern Railway.
[Page 252]On August 4 sabotage against the railway apparently recommenced with the arrest of the (Soviet) Assistant Station Master at Harbin who was accused of assisting bandits who wrecked a train on the eastern branch of the railway near Imienpo and exploded an ammunition car. After this prologue the scene shifted to Tokyo where on August 10 the Soviet Ambassador called once more on the Japanese Foreign Minister. The press reported that Mr. Yureneff had again refused, after reconsideration, the Japanese-drafted “Manchukuo” proposal of July 23, that he requested Mr. Hirota to submit a Soviet counter proposal to “Manchukuo”, and that he listened to Mr. Hirota’s suggestion that direct negotiations now be carried on without Japanese mediation. Later on the same day Mr. Ohashi, Vice-Minister of “Manchukuo”, was called to the Gaimusho by Mr. Hirota and told of Ambassador Yureneff’s call. Mr. Ohashi reportedly replied that “Manchukuo” would make no further concessions. The vernacular papers elaborated on these two interviews, as is customary in Japan, and declared that “official circles” were of the opinion that the Soviets wished to prolong negotiations until Japan had become involved in the “crisis of 1935–1936”.
Then on August 12, the Tokyo Nichi Nichi published a sensational report from Moscow declaring that the Soviet press had published charges that Japan was planning to seize the railroad and provoke war in the Far East. A somewhat similar report from Habarovsk was published by three more Tokyo papers on the 15th. Meanwhile, however, the situation seemed to be developing ominously both in Tokyo and in Hsinking. On the 13th Mr. Ohashi, who has been a prominent “Manchukuo” delegate to the sale conference, made a final call on the Soviet Ambassador probably in the hopes of laying the responsibility for the failure of the negotiations on a Russian doorstep, and then left town on the following evening after making it clear that his action was not to be interpreted as final disruption of the negotiations. His statement terminated in a manner typical of the Japanese and “Manchukuo” propaganda on the subject, “What will happen in the Far East if the negotiations come to rupture? That must be left to God. But ‘Manchukuo’ always wishes to give her efforts for the peace of the Far East.”
In Hsinking a statement of policy was issued at this juncture and was printed in Tokyo as follows:
- 1.
- The Manchukuo Government’s reply to Japanese Foreign Minister Koki Hirota’s final mediation proposal represents the final concession possible, while the Soviet counter proposal allows no further consideration.
- 2.
- In the event of a breakdown of the negotiations, the Soviet Government must bear the entire responsibility for the failure.
- 3.
- Should a breakdown take place, the Manchukuo Government will regard the CER as a commercial organization under her jurisdiction, and with this in view, will supervise and bring all matters related to the CER to a speedy settlement.
The meaning of this third point was made clear by reports which indicated that the accounts of all Soviet officials of the railway would be called for, that “Manchukuo” would demand equal rights in the employment of railroad labor, and that in general the administration of the railroad would be closely observed. On August 14 these threats were made good through the arrest of 19 Soviet officials of the road on suspicion of complicity in the recent accidents along the eastern branch of the line. On the 15th, in explanation of these arrests, a despatch from Harbin announced the discovery of an alleged “huge anti-Japanese, anti-Manchukuo plot”. Yet, despite the detention of additional Soviet officials, there has been no cessation of the accidents along the bandit infested region between Weiho and Pogranichnaya since two more accidents are said to have occurred on August 14 and 18 in the neighborhood of Hengtaohotzu.
At this point, to the apparent astonishment and indignation of the Japanese, a report from Moscow reached Tokyo that the Soviets had published the details of the recent negotiations although Ambassador Yureneff and Foreign Minister Hirota had definitely agreed last March, it is said, that no details of the negotiations were to be given out. The terms of the various offers as published by the Soviets were not at first printed in Japan owing to a long standing press ban. Then on August 21 the press ban was lifted, the Soviet statement appeared in full, and the Japanese Foreign Office released a communiqué narrating the course of the negotiations and seeking, in its turn, to absolve the Japanese of all blame for the latest delay in reaching an agreement.
The two statements agree on all important points and reveal that there remains only the surprisingly small difference of ¥40,000,000 between the bid and offer price, “Manchukuo” having bid ¥120,000,000 and Soviet Russia having offered the railroad for ¥160,000,000. In addition “Manchukuo” is willing to pay ¥30,000,000 in discharge allowances to Soviet employees while Soviet Russia is willing to receive two-thirds of the purchase price proper in Japanese goods to be evaluated, it seems, in a manner as yet undecided. While it is too early to predict the effect in Japan of publication of the course of bargaining, tension should in the end be relieved. It is scarcely thinkable that war could break out between Japan and Soviet Russia on this issue with only a difference of ¥40,000,000 remaining. When it is remembered that the Soviet share of the railroad profit allegedly amounted to 7 million rubles (¥17,500,000 at the official Soviet rate) [Page 254] last year* and that in normal years it is said to average around 15 million rubles (¥37,500,000), it does not seem as though the Soviet offering price of ¥160,000,000 is excessive especially when the political advantages to Japan and “Manchukuo” of a formal liquidation of Soviet interests are considered.
Before considering the reaction of the press, the Army, the Foreign Office, as well as the opinion of several of my colleagues, to the recent course of Soviet-Japanese relations, it seems best to enumerate the miscellaneous and ubiquitous petty irritants of the last two weeks. On August 1 from Harbin it was reported that the “Manchukuo” authorities had recently discovered that the Soviets had removed two boundary markers into “Manchukuo” territory and set sentries to guard them. On August 6 a version of the report of the chief of the Japanese Navy Office in “Manchukuo”, Rear Admiral Shozo Kobayashi, was published and indicated that the Soviets not only had 25 gunboats, ten of them in the 1000 ton class, in the Amur River Squadron, but also had two airplane carriers, and 22 submarines (soon to be increased to 52) in the Far East. The report as published seems grossly exaggerated. Several days later the local press published a rumor that the Soviets had three destroyers on Lake Baikal. Furthermore reports have been published in the last several weeks that the Soviets were constructing a poison gas factory at Kulun in Outer Mongolia and that 110 Soviet planes have just been transferred eastward from Irkutsk to Chita. On August 9 a report was given prominence which stated that the residents of a “Manchukuo” border town near Heiho were mildly gassed by Soviet shells dischargéd in the course of maneuvers across the Amur. It was reported on August 15 that the Acting Soviet Consul General in Harbin had protested alleged indignities suffered by the Consul General, Mr. Slavutsky, who was proceeding to Moscow on furlough.
Little has been heard of the Soviet–“Manchukuo” waterway negotiations at Heiho lately. It now appears, however, that the optimistic reports which reached Tokyo some time ago were ill-founded and had to do only with the preliminary sessions of the conference. According to a report from Hsinking on August 14 the conference, in formal session, has been totally unable to agree on the phraseology and applicability of amendments agreed upon in the preliminary sessions.
One other report of some importance remains unconfirmed but can probably be relied upon. On August 15 the Japanese press published an article stating that the Soviets had agreed to accept the exchange rate of 32.5 sen per ruble for the last six months of the year unless—which is most unlikely—a revised rate should be agreed upon before [Page 255] the beginning of 1935. Presumably the Soviets realized that there was little they could do to force the Japanese fisheries companies to pay additional installments for a higher exchange rate short of going to war. The Japanese had the naval force to control the fishing grounds and furthermore the fishing near Kamchatka has now been virtually finished for 1934.
The reaction in Japan to the recent course of Soviet-Japanese relations has been prompted in the main, of course, by the rupture of negotiations for the sale of the Chinese Eastern Railway. The press has devoted a great deal of space to the question, and for some days many of the Tokyo newspapers have given the Russian situation the place of greatest prominence. The editorial comment before the terms of the recent bargaining were published has been confined in general to a review of the case ending with an exhortation to the Soviets to be more “sincere”. Two ideas stand out, first that the question is important to the “peace of East Asia” and second doubt as to whether Soviet Russia really ever intended to sell the railroad. On August 22, the day the terms of the various bids and offers were made public, virtually every paper in Tokyo commented editorially and took a serious view of the situation. Curiously enough there was no reference to the encouraging fact that the bid and offer prices are now only ¥40,000,000 apart, but there was universal condemnation of the bad faith of the USSR in publishing the facts and figures contrary to agreement.
The army has taken a hand in the situation through several statements given out by the War Office spokesman which indicate that the army intends to take a firm stand against “anti-Manchukuo intrigues by railroad officials and others”. The War Office has also apparently seen an opportunity to link the Soviet attitude towards the sale of the railway with a list of 15 border incidents which have occurred since the beginning of the year as well as with a list of 13 accidents along the C. E. R. which occurred between April 17 and July 25. A War Office communiqué remarked that these thirteen accidents all occurred to trains carrying military supplies and charged Soviet officials of the railroad with directing the bandits who made the actual attacks. All 13 of the accidents enumerated occurred on the eastern branch of the railway, the least useful branch to the Japanese, and consequently relatively poorly guarded by Japanese and “Manchukuo” troops. Although the army is reported as being dissatisfied, as usual, with the attitude of the Japanese Foreign Office, there have been no threats as yet that the army will take matters into its own hands. Nevertheless General Hayashi reported at length on the border incidents at the meeting of the Cabinet which occurred on August 21 and, afterwards, in a press interview, stated that he deemed the question of such seriousness that all Cabinet members should be kept in touch with it.
[Page 256]The Foreign Office, as usual, has had an embarrassing time of it. Always in danger of interference at home the Soviets forced its hand by publishing the course of negotiations. Furthermore, up to the present, Japan is gaining little credit as mediator between “Manchukuo” and the USSR, and mediation was proposed by Foreign Minister Hirota. From day to day during the past two weeks the Foreign Office spokesman has been called upon to steer between Scylla and Charybdis, preserve Mr. Hirota’s conciliatory policy and at the same time avoid the criticisms of the more violent chauvinists. This he has done by consistently decrying Soviet propaganda, denying all intimations that Japan might use force to settle the problem, and declaring on several occasions, notably August 17, that the Foreign Office had under consideration a general protest to the Soviet Government. On August 20 the Spokesman stated that publication of the terms of the recent negotiations was in direct violation of the agreement reached by Mr. Hirota with Ambassador Yureneff on March 5 and that the Foreign Office would protest the matter as soon as the publication was confirmed. Nothing further has been heard of this protest. Meanwhile Mr. Hirota is said to have expressed optimism all along at Cabinet meetings that the sale of the railroad will be ironed out in the course of time.
Several of my colleagues have expressed their views to me on this general subject recently. About ten days ago the Belgian Ambassador came to see me again and expressed again his great and increasing anxiety that the Soviets might attack the Japanese at any moment. He apparently had no factual basis for this opinion but had arrived at it after reflecting on the firm stand of the Soviets and the vast improvement in their political position in Europe. He was visibly relieved when I explained why I did not share his views and he later declared that he now agreed with me.
On August 17 the British Ambassador told me that, after thinking over the Soviet-Japanese situation, he had, on the occasion of his last conversation with the Foreign Minister expressed his opinion that Soviet Russia now held all the cards and that Japan would do well to recognize the fact. He told Mr. Hirota that if war should break out tomorrow, the world would consider Japan the aggressor. Russia, he declared, had played her hand well. Not only had she on the one hand improved her position through American recognition and by concluding non-aggression pacts with all her European neighbors, and by her preparedness in the Far East but she would be able to point out that Japan alone had refused to conclude a non-aggression pact and she would be able to produce the Hishikari documents which the world as a whole believed genuine. The Ambassador concluded by saying that in his opinion Japan would be foolish to attack the Soviets. [Page 257] In reply Mr. Hirota laughed and remarked “There’s no danger of that”. The Ambassador also told me that a member of the Soviet Embassy had told one of his secretaries that if the Japanese should show signs of mobilizing in Manchuria that they, the Soviets, would not wait but would attack at once. In the opinion of the British Military Attaché the Japanese army has passed in certain respects the peak of efficiency which it reached several months ago. This last opinion is of course at variance with that held by the majority of Military Attachés who feel that peak efficiency has not yet been reached because the modernization program has not yet been completed.
I enclose with this despatch a copy of a letter79 received from the American Consul at Seoul in regard to a conversation he had there with Mr. Jourba of the Soviet Embassy in Tokyo. It will be noted that Mr. Jourba took the customary pessimistic view and spoke, as, apparently, do all Soviet officials in the Far East, of the inevitability of war.
Up to the present I do not feel inclined greatly to revise my own estimate of the situation. Several days ago in talking of the C. E. R. negotiations Mr. Babb of the Associated Press remarked to a member of my staff that both sides were playing a very dangerous game of bluff, that neither wished war, but that both were courting the risk of finding themselves in a position from which it would be impossible to escape save by war. Both sides of course were very anxious to shift responsibility for any trouble on the other. I agree on the whole with these statements and also with the remarks of the British Ambassador to Mr. Hirota. Mr. Babb further stated that in his opinion only the Soviets could initiate a war at the present time and that that is where the principal danger now lies.
It seems evident that the initiative has passed to the Soviets who, it should not be forgotten, are the ones who hold a large military force on or near the Manchurian frontier. I do not think they wish war but nevertheless they alone are prepared for a war in the immediate future. The Military Attaché of the Embassy assures me that no general Japanese offensive could be started without military indications here which could not escape him. Members of his staff are constantly conducting inspections in Japan and there is up to the present absolutely no indication of abnormal activity. Incidentally one officer who is on duty with a Japanese regiment has just reported that both officers and men in his regiment are off duty every afternoon in August. This does not sound like intensive military training. I shall continue, however, to follow the situation with the utmost care and will be on [Page 258] the alert to detect any change in Japanese policy which might follow on the recent developments in the Chinese Eastern Railway situation. It is nevertheless my present feeling in regard to this matter that after a suitable and typically oriental period of delay, common sense will prevail and that the gap of ¥40,000,000 will be successfully bridged.
Respectfully yours,