894.6363/150: Telegram
The Ambassador in Japan (Grew) to the Secretary of State
[Received December 13—8:20 a.m.]
274. 1. In recent conversations between Kurusu of the Japanese Foreign Office and Neville of this Embassy and Sansom of the British Embassy, held at Kurusu’s request, he advanced proposal that, as the Japanese petroleum law was oppressive for all oil companies, Japanese as well as foreign, the foreign oil companies should combine with the Japanese oil companies in a strong joint protest to the Ministry of Commerce and Industry in an endeavor to obtain some modification of the law. He intimated that the Japanese authorities are beginning to realize the difficulties entailed by the law and are weakening in their attitude and he mentioned the dissatisfaction of Japanese oil men with the law.
2. Department’s 201, December 10, 8 p.m. In the opinion of the British Embassy here the representations which it proposes to make would not constitute an official démarche but rather an informal paving of the way for the possible future discussions between the representatives of the foreign oil companies and the Japanese authorities, in that the proposed representations would point out that the Japanese Government’s reply of October 3177 was insufficient to remove the anxieties felt by the British oil interests, especially as the reply did not refer to the question of stock holding.
3. I feel that failure to inform the Japanese Government in some way that its reply to our original representations was unsatisfactory would be misleading and might be misinterpreted. Acceptance without comment of the Japanese reply would place the oil companies in a less favorable position in their future negotiations with the Japanese authorities because it could create the impression that their Governments were not continuing to support them.
[4.] It appears, as is indicated in paragraph 1 above, the Japanese authorities are believed to be showing signs of weakening. Further representations at the moment therefore might be effective in preparing the way for any compromise plan which the representatives of the foreign oil companies may evolve from their present discussions at Shanghai.
5. It seems important both to Clive and myself that our informal representations should be so formulated as to avoid on the one hand creating an impression that we are now going to let our companies work out their own problem without further diplomatic support, and equally to avoid on the other hand placing the Japanese Government [Page 786] in a position which would make it more difficult for the authorities to recede and compromise without serious loss of face.
6. I therefore feel that it would be advisable for us to go over the ground again in an informal conversation as envisaged in paragraph 4 of the Department’s telegram No. 201, to be held preferably between the Counselor of the Embassy and the Vice Minister for Foreign Affairs or a bureau chief. For the purposes of clarity our points could be embodied, if the Department approves, on an informal sheet of paper which could be left with the Japanese official with the understanding that our representations were oral and not formal.
7. The British Embassy is recommending to its Foreign Office that the British representations be altered to the same basis as those suggested above.
8. The following are the lines suggested for the informal and oral representations:
- (a)
- After expressing appreciation of the explanations made in the Japanese memorandum of October 31, state that these explanations, as well as those which it is understood were made orally by the Vice Minister of Commerce and Industry on November 20, have not been sufficient to dispel the anxieties felt by the American oil interests.
- (b)
- While noting the assurances given by the Japanese Government that there is no intention, in the granting of annual quotas, of ignoring the interests of those engaged in the oil industry in Japan or of impairing the continuous character of the industry, the American Government still feels constrained to point out that the wide powers conferred by the law in the granting of quotas are such as to render it impossible for American oil interests to gauge with any degree of certainty the scale of their future business in Japan.
- (c)
- It appears from the Japanese memorandum that even if American oil interests are granted permission to manufacture refined products in Japan, they will not be permitted to share in the natural growth of the industry but will be restricted at best to the refining of an amount not exceeding their present import quotas, while any increase in the demand will be allocated to the Japanese refiners. The American Government expresses the hope that the Japanese Government will see its way clear to permit those interests to continue their business on equal terms with the Japanese oil interests.
- (d)
- The American Government notes that the Japanese memorandum does not refer to the stock-holding requirements of the petroleum industry law, which are considered by the American oil interests to be the most burdensome provisions of the law. Because of the elastic nature of these provisions, added to the uncertainty of future sales and the lack of any assurance of compensation for the increased investment entailed by the stock-holding provisions, the American oil interests are unable to decide whether it is commercially feasible to invest further funds in their business in Japan.
- (e)
- The American Government therefore hopes that the Japanese Government will again consider the problems confronting the American oil interests in Japan and will endeavor to remove the causes of their anxieties.