893.6363 Manchuria/225
The Consul General at Mukden (Ballantine) to the Minister in China (Johnson)12
Sir: I have the honor to refer to my despatches Nos. 99 and 100 of May 18 and May 21, 1935,13 regarding the “Manchukuo” Petroleum Monopoly, and to inform the Legation that according to a report made to me today by Mr. Bristow of the Standard-Vacuum Oil Company, he and representatives of the Asiatic Petroleum Company called on Mr. Hoshino, Director of the Bureau of General Affairs of the Department of Finance, on May 21, in response to the latter’s invitation to discuss with him the reasons for the companies’ request to withdraw their stocks from the country. The representatives explained that their request was prompted by the fact that under Ordinance No. 4 of the Department of Finance the companies were prevented from making further sales of the products which are the subjects of the Monopoly. Mr. Hoshino, after examining the text of the ordinance, admitted that the restriction claimed had been imposed on their trade. Mr. Hoshino then made the following proposals, which were embodied in a written memorandum in Japanese:
1. Marketing in the country will be allowed of petroleum import formalities for which have been completed.
2. (The Government) is prepared to allow Government dealers to buy up such petroleum.
Therefore if your companies wish that the dealers buy instructions will be issued that they may purchase.
An expression of the companies’ wishes in regard to this point will be awaited.
3. Marketing may also be done by dealers other than dealers designated by the Government.
4. If it is necessary for the purpose of selling out the foregoing appropriate assistance and help will be rendered.
5. If it is desired to sell to the Government stocks in bonded warehouses proposals therefor will be entertained. Provided, these shall not be marketed in the country.
The representatives replied that they would refer these proposals to their head offices for decision, but they expressed the tentative opinion that they came too late for the following reasons: (1) low seasonal demand; (2) large dealer stocks; (3) difficulty of extending further dealer credits; (4) the disruption of agency organization effected by the enforcement of the Monopoly Law and by the [Page 917] Monopoly activities; and (5) the expense of maintaining a sales organization for the sole purpose of disposing of these remaining stocks.
The companies have reported to their head offices that their opinion remains unchanged that the kerosene stocks are not necessary to the Monopoly at this time, and they therefore interpret Mr. Hoshino’s proposals as being prompted by a desire to shift to the companies responsibility for the decision to withdraw stocks.
Mr. Hoshino suggested, if favorable consideration was given to his proposals, that the representatives discuss with him such difficulties as might be encountered so that he might be enabled to assist with special instructions to overcome existing legal restrictions and to facilities [facilitate] the movement of the stocks. In answer to his direct question, the representatives informed the director that it was a general principle of the companies not to sell their products to a Monopoly. He then volunteered the information that the Monopoly must either purchase refined products or enlarge the capacity of the refinery.
Respectfully yours,