893.6363 Manchuria/246
The Chargé in Japan (Neville) to the Secretary of State
[Received September 7.]
Sir: I have the honor to refer to the Embassy’s despatch No. 1420, dated August 7, 1935,22 and to previous correspondence on the subject of the oil monopoly in “Manchukuo” and its effect upon American oil interests in Manchuria, and to report that, although there have been no important developments in the situation, various minor occurrences have somewhat clarified the position of the foreign oil interests.
Foreign Companies’ Claims for Compensation.
Mr. Tsuge, the Petroleum Adviser of the “Manchukuo” government, called on the representatives of the Standard-Vacuum Oil Company and the Rising Sun Petroleum Company in Yokohama on August 13, 1935, and, after discussing the proposed sale of the two companies’ duty-paid stocks in Manchuria to the monopoly, turned to the subject [Page 925] of the companies’ offers to sell their property in “Manchukuo” to the monopoly. He said that the offers were under consideration by the “Manchukuo” authorities, but in their opinion the price was very high. It was explained to him that the offers were not simply for the sale of property, but were offers to sell going concerns and the prices were therefore justified. Asked whether he agreed to the principle of compensation to the oil companies for the loss of their business in Manchuria, he replied that he did “to some extent”. He also intimated that the sales of both the stocks and the properties to the monopoly would be greatly facilitated if the companies would agree to supply the Manchuria Oil Company with crude oil and the monopoly with refined products. He stated that the monopoly was working very smoothly and that the Manchuria Oil Company was deluged with offers of crude oil, but he nevertheless seemed most anxious to enlist the Standard-Vacuum Oil Company and the Rising Sun Petroleum Company as suppliers to the Manchuria Oil Company and the monopoly.
From the conversation of Mr. Tsuge, therefore, it would appear that the foreign oil companies have some chance of recovering something for the invalidation of their properties and the loss of their business in Manchuria, although it is believed that the amount recovered will be small unless the companies agree to supply the monopoly and the Manchuria Oil Company with the oils desired.
Katakura’s Offer.
Discussions were held at Yokohama between the local officials of the Standard-Vacuum Oil Company and Mr. Itami, the President of Katakura and Company, on August 6 and August 14. From these discussions it developed that Katakura’s original offer to act as agents of the Standard-Vacuum Oil Company in Manchuria had no governmental backing, but was made by Katakura and Company in the expectation that that Company would be able to supply large buyers such as the Kwantung Army and the South Manchurian Railway with the foreign companies’ oils at lower prices than were being charged by the monopoly. In the course of the conversation it developed that the Kwantung Army dislikes paying Yen 1.30 more per unit for its supplies of oils than it did before the monopoly was instituted. Before his second interview with the Standard-Vacuum Oil Company, however, Mr. Itami obtained governmental permission to handle the brands of the three foreign oil companies previously operating in Manchuria, to the amount of the shortage of supplies in Manchuria, but the authorities also stipulated that the three companies should agree to supply crude oil to the Manchuria Oil Company.
The Standard-Vacuum Oil Company and the Rising Sun Petroleum Company are not inclined to favor the offer of Katakura and [Page 926] Company, as they feel that by supplying the shortage of oils in Manchuria they will be assisting the monopoly rather than undermining its influence.
Katakura and Company also offered to buy the foreign companies’ duty-paid stocks in Manchuria at prices considerably above the prices offered the companies by the monopoly. In the meantime, however, the monopoly has given permission to the remaining agents of the foreign oil companies to continue to sell the companies’ stocks, until such stocks are exhausted, and as the Standard-Vacuum Oil Company and the Rising Sun Petroleum Company estimate that they can dispose of their remaining duty-paid stocks in this way in three to four months, they are not disposed to accept any offer which will require them to make any considerable concession in prices.
Respectfully yours,
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