893.6363/161: Telegram

The Ambassador in China ( Johnson ) to the Secretary of State

329. Reference Tokyo’s 248, April 15, 11 a.m.35 and the Department’s 273, April 18, 9 p.m., oil monopoly in North China.

The Hankow representative of the Standard Vacuum Oil Company, acting on instructions from his Shanghai office, called on me today and stated that information has been received from the Tientsin representative of the firm to the effect that the managing director of the Manchuria Oil Company had called on the three foreign oil companies at Tientsin on June 30, stating that at the suggestion of the Mengchiang36 Autonomous Government an oil marketing company will be formed July 5, with the head office to be established at Kalgan, to sell oil products in the so-called Mengchiang area, “that is, in the area adjacent to the Pingsui Railway”; that the capital of the proposed company will be yen 800,000 of which the Manchuria Oil Company will subscribe yen 450,000, the Mengchiang Government Bank and Bus Company yen 200,000, while the three foreign oil companies are offered the opportunity to subscribe presumably yen 50,000 each; that the managing director of the Manchuria Oil Company has confirmed the foregoing declaration in writing to the foreign companies; that further examination will be given subsequently, but meanwhile no information is available as to the plans for the allocation of trade or the brands of the products to be marketed by the proposed company; and that the director of the Manchuria Oil Company expects to receive a reply from the foreign oil companies as to intended investment and participation on or before July 10. The Tientsin representative of the Standard Oil Company is understood to have stressed to his Shanghai office that the participation of the South Manchuria Railway and the Mengcheng [Mengchiang?] Bank in the proposed company will have obvious consequences to trade in connection with transportation and banking facilities.
The local representative of the Standard Oil Company was instructed to ascertain my attitude in the light of the developments set forth above.
I am of the opinion that the situation as related above seems to call for renewed protest to the Japanese authorities on the ground that the proposed oil marketing company will probably tend to assume a monopolistic position calculated to force the foreign oil companies to participate in the proposed company or be denied equality of treatment in the marketing of oil products in the areas where the new company proposes to operate, thus resulting in the ultimate exclusion of the foreign companies therefrom.
I am informing the local representative of the Standard Oil Company that I am not in a position to advise what attitude the company should adopt toward the proposal set forth by the managing director of the Manchuria Oil Company, and that I have referred the matter to Washington for consideration and possible action.
I am informed that the Shanghai office of the Standard Oil Company has brought this matter to the attention of its Yokohama and New York offices.

Repeated to Peiping, Tientsin, and Shanghai. Shanghai please repeat to Tokyo.

  1. See telegram No. 548, April 15, 5 p.m., from the Consul General at Shanghai, p. 13.
  2. Inner Mongolia.