893.6363 Manchuria/52
The Consul at Mukden (Chase) to the Minister in China (Johnson)36
Subject: Oil Monopoly in Manchuria.
Sir: I have the honor to refer to my despatches No. 951 dated August 17 and No. 952 dated August 22, 1934,37 on the above subject, and to submit more recent information, and observations based thereon.
The local manager of the Standard-Vacuum Oil Company has informed a member of my staff that according to information given him by a Japanese employee of the firm in whom he places considerable faith, a lieutenant-commander of the Japanese Navy, whose name was not divulged, was in Hsinking early this month to confer with the authorities there, especially the “Manchukuo” naval office, regarding the proposed oil monopoly. The manager also stated that, according to his informant, the Japanese navy feels that the time is not ripe for an oil monopoly in “Manchukuo”, and that at least two or three years should elapse before the consummation of plans for such an organization. No adequate reasons for this coolness on the part of the navy were given, it merely being said that radical steps should not be taken until the quality of the refined products turned out by the new refinery of the Manchuria Oil Company in Dairen could be tested. The Japanese and “Manchukuo” navies’ needs would certainly not appear to warrant such an interest in the supply of refined oil in Manchuria, however; and it would seem more reasonable to ascribe the navy’s attitude to a fear of possible international repercussions which might among other things result in retaliatory action by the oil companies and the navy’s inability to obtain its crude oil requirements. The informant, moreover, confirmed previous rumors that the army also was luke-warm regarding the proposed monopoly, as has already been reported to the Legation. Reasons for this are also lacking.
In view of these rumors, substantiated by the statements of an official spokesman (page 5, despatch No. 951) in much the same tenor, I feel rather strongly that the monopoly will not go through as at first planned, in spite of what was told Mr. Timperley of the Associated Press (despatch No. 952, dated August 22, 1934). Nevertheless, I feel that some sort of oil control will probably be substituted.
Mr. Timperley was recently informed by officials of the “Manchukuo” Finance Bureau that plans for the monopoly were being completed, and that they would probably be put into force within two or three months. The Finance Bureau, it should be remembered, is [Page 736] largely made up of civilians, many of whom have financial interests in Japan. Prominent among these is Mr. Tsuge, who has the title of “adviser”, and who is a director of the Nippon Oil Company. It will also be recalled that Mr. Hashimoto, president of both the Nippon Oil Company and the recently formed Manchurian Oil Company, is the brother-in-law of General Hishikari. It becomes more and more apparent, in the light of the probable non-support of the army and navy, that these two capitalists have been the sole strong protagonists of the monopoly, with nominal support from General Hishikari himself. It is more than likely that they have used their influence also with the Departments of Commerce and Industry, and Overseas, in Tokyo, to get support from civilian official quarters for their monopoly, which would accordingly be more for private gain than for “defence” as has always been maintained.
It also seems apparent that army and navy officials, not only being jealous of the influence in the “Manchukuo” government of civilian enterprises, but also beginning to realize the serious consequences which might arise from an international standpoint following the erection of a complete oil monopoly, have decided that the time is not propitious. No doubt the representations made to the Foreign Office by both the American and British ambassadors in Tokyo have contributed not a little to the military’s adoption of this viewpoint. Now that the Overseas Department has been relegated to the background in Manchurian affairs by the liquidation on September fifteenth of the so-called “trinity” system of administration, I feel confident that, for the present at least, individual capitalist schemes will receive but slight consideration, and that the oil monopoly plans will be either abandoned, postponed, or substantially altered.
In connection with the above, I have been informed by the British Vice Consul here that the British Economic Mission, soon to visit Japan and “Manchukuo”, has evidenced great interest in the general question of oil, and has been supplied with data relating to the proposed monopoly, which it proposes to make the basis of unofficial representations.
Although the rumors of the abandonment of the oil monopoly persist, I am nevertheless informed by the local manager of the Standard-Vacuum Oil Company that requests for trade statistics of all kinds keep coming in from Hsinking. No reasons for these requests are given, and there is no indication as to whether they are required as bases for quotas and other methods of control under a projected oil control law, or whether they are desired by the Finance Bureau in connection with matters relating to the monopoly. So long as no positive information regarding the abandonment of the oil monopoly is received, the likelihood of such an eventuality must always be borne in mind.
[Page 737]Some sort of oil control which will be monopolistic in effect if not in name will sooner or later undoubtedly be announced. Such a system, I understand, has already been instituted in Japan, where the several treaties applicable to China have no effect, and to which the principle of the “Open Door” does not apply; but if set up in Manchuria, although the foreign oil companies might not suffer from it as they would under a monopoly, the control would be as much in contravention of the treaties and principle as the monopoly.
Respectfully yours,