893.6363 Manchuria/29
Memorandum by the First Secretary of Embassy in Japan (Dickover) of a Conversation With the Chief of the Commercial Affairs Bureau, Japanese Foreign Office (Kurusu)7
Mr. Kurusu said that our informal memorandum on the Manchurian oil monopoly question8 had to be studied by two bureaux, the Asiatic Bureau and his, and that the memorandum had not yet come to him. He said that he thought that the foreign companies were taking the matter too seriously—that the idea was not to put them out of business, either in Japan or in Manchuria, but to build up domestic refining industries in both countries, as a matter of national defense.
He then said that he wanted to ask me about a report which he had heard to the effect that the foreign oil companies were considering the placing of an embargo on the exportation of crude oil to Japan, if the Japanese and “Manchukuo” governments continued to take measures to restrict the foreign companies’ business.
I said that I knew almost nothing about the matter. I had first seen the matter mentioned in the minutes of the Oil Control Bill Committee of the Diet, where a member had expressed a fear that some such step might be taken by the foreign oil companies. I said that I had asked an American oil man about the possibility of such an embargo, and had been told that there were so many independent oil companies in California, Mexico, Venezuela and elsewhere, that an oil embargo would hardly be practicable. It had been explained to me, however, I said, that California crude, because of its higher gasoline content, was almost indispensable to the profitable operation [Page 716] of the Japanese refineries, but even in California, because of the existence of independent producers, such as the Union Oil Company, the exportation of crude to Japan could not be stopped.
Mr. Kurusu said that his understanding of the situation was much the same; that the Standard and Shell interests could stop the exportation of crude to Japan and Manchuria by only two methods; one was for those interests to buy up all the producing fields, which would be too expensive, and the other was for the oil companies to induce their governments to prohibit the exportation of crude to Japan and Manchuria. He asked if I knew of any attempt to obtain governmental action.
I said that I did not know of any such attempt—that we had no official knowledge whatever regarding the matter—and that I did not even know if the foreign oil companies were discussing the question among themselves. I said that I did not see how any such action would be possible in the United States, except possibly under the N. R. A.9
Mr. Kurusu then said that he supposed that if workmen in the refineries in California should lose their jobs because of the cutting off of a part of their Japanese and Manchurian markets through the operations of the refineries over here, the N. R. A. might step in, and, to protect the American workmen, impose an embargo on the exportation of crude to Japan and Manchuria.
I said that I had no idea whether or not the matter was being considered at all at present; that I thought it a question which might possibly come up at some time in the future, but not now. I said that the possibility always existed that, if the foreign oil companies found their large investments in Japan and Manchuria threatened by the expansion of the Japanese oil business, aided by licensing systems and sales monopolies, they might endeavor to prevail upon their governments to cut off the supply of crude to Japan and Manchuria.
Mr. Kurusu then said that the question of an embargo on the exportation of crude to Japan was more serious than appeared at first glance, because it touched upon the question of national defense. It would be of no use, he said, for Japan to build more war ships if there was no oil to run them. He said that for this reason any proposal to cut off Japan’s supply of crude would arouse much resentment in Japan and make an amicable settlement of the oil question more difficult.
I said that the foreign oil companies also regarded very seriously the possible loss of their business in Japan and Manchuria. I said that I believed that they had over a hundred million yen invested in Japan alone, and a considerable amount in Manchuria. If they were [Page 717] forced out of business, they could of course sell their equipment to Japanese firms, but it would be a forced sale and they could not obtain the value of the properties. I also explained that the large oil companies needed an outlet for their kerosene, which nowadays was a bye-product in the refining of gasoline, and that the only large market now was in Asia, since America and Europe used very little kerosene. For this reason also the American oil companies regarded the possibility of cutting off their Manchurian market very seriously.
Mr. Kurusu said again that the idea was not to deprive the foreign oil companies of their business. He said that the demand for oil products would increase so fast that the Japanese and Manchurian refineries could not keep up with the demand, and that the foreign companies would stay in business just the same. He said that the refinery which was going to be put up in Dairen could not take care of even half of the Manchurian demand. I said that that might be true, at present, but that it would be possible, in the future, if the refining capacity in Manchuria increased sufficiently, to use the law to stop the sales of imported products in Manchuria entirely. Mr. Kurusu laughed and said that he thought that a remote possibility.
Mr. Kurusu then said that he did not believe in arguing about all these treaty rights—that Japan could reply that she did not understand the treaty clauses the same way. I said that it was principally a question of the maintenance of the Open Door. Mr. Kurusu said that the Open Door applies to China, but that “Manchukuo” can claim that it is an independent state and does not have to regard the principle of the Open Door. I said that the present regime in Manchuria, on announcing its independence, announced its intention of abiding with the treaties regarding China and respecting the obligations which China had incurred under the treaties. But, Mr. Kurusu said, the Western nations have not recognized “Manchukuo”, and an unrecognized state has the right to change its mind. I pointed out, however, that Japan was still bound by its obligations under Article III of the Nine-Power Treaty, and that under this Article it could not seek for its nationals any monopolistic privileges in Manchuria. Mr. Kurusu said that Japan’s nationals could engage in monopolistic enterprises if they were invited by “Manchukuo” to do so.
Mr. Kurusu then asked if the whole matter were not one of vested interests rather than treaty rights. I said that of course the vested interests of the foreign oil companies, both in Japan and Manchuria, were of considerable importance, but that the oil monopoly question in Manchuria was of especial interest because of the principle of the Open Door. Mr. Kurusu said that other countries, France as an example, had imposed oil monopolies on the trade, but that one did not hear the oil companies complaining about their vested interests in [Page 718] those countries. I said that I did not believe that the large foreign oil companies had any large vested interests in those countries, and, anyway, those countries were not bound by treaties or the principle of the Open Door.
Mr. Kurusu then said that he did not think that he was going to get more than three or four days’ holiday this summer, as he was going to be busy with “this Batavia business” and with “this fellow Saito’s return” to Japan.10 He said that he thought that Saito was bringing back with him some sort of plan for a trade agreement. I asked what sort of a trade agreement. Mr. Kurusu said that he did not know and could not see any necessity for a trade agreement, as the trade with the United States was nearly balanced and did not conflict in any important respects.11
I then asked Mr. Kurusu about the “pinky” seal fur skins, but he said that he did not know how the case was getting along but would look it up.
- Copy transmitted to the Department by the Ambassador in Japan in his despatch No. 887, July 12, 1934; received August 6.↩
- Dated July 7, 1934, Foreign Relations, Japan, 1931–1941, vol. i, p. 130.↩
- National Recovery Administration.↩
- Reference is to Hirosi Saito, the Japanese Ambassador at Washington.↩
- See pp. 799 ff.↩