393.115 Standard Vacuum Oil Co./280: Telegram
The Consul at Shanghai (Butrick) to the Secretary of State
[Received September 4—1:30 p.m.]
868. Reference my 791, August 16, 4 p.m., and Nanking’s 84, August 19, 6 p.m.,11 regarding Japanese interference with American shipments from Shanghai to the hinterland. The Standard Oil Company reports that there has been no relaxation in the restrictions imposed by the Japanese military and naval authorities upon American shipments from Shanghai to the interior. The General Manager of the company recently informed me that Mr. Imoto, mentioned in my 657, July 19, 1 p.m.,12 has approached him to inquire why the American [Page 535] businessmen seemed to be against Japan. The General Manager prepared for him a memorandum and at my request supplied me with a copy. Extracts from the memorandum dated August 26 follow:
“In the area served from Shanghai we have been able to make shipments only under permits approved by the Japanese authorities. Permits issued recently also bear the stamp of the Japanese Oil Association which indicates that American oil shipments require the approval of Japanese oil merchants. For the past 6 weeks we have been unable to obtain any permits in our own name and only a few permits for negligible quantities in the names of our Japanese agents.
While few rail shipments have been made to Chinkiang, Nanking and Wuhu, we have been unable to make water shipments to those places and no shipments at all in our own name to Kiukiang and Hankow. On the other hand, during the past few months Japanese importers of petroleum products who have purchased different supplies in free markets abroad have made large shipments from Shanghai to the Yangtze valley points. Our shipments to South China coast ports from Shanghai have been stopped entirely by Japanese action. The situation today is that our business in this area is restricted to city of Shanghai and there is no immediate prospect that the Japanese authorities intend to permit us to regain direct participation in the trade in the Yangtze area.”
The memorandum then comments that while the establishment of a monopoly in China, such as was established in Manchuria in April 1936,13 may not be contemplated at the time, the exchange and shipping regulations now enforced in China seem to indicate that a quota system will be imposed which will greatly reduce direct participation by the American company in the petroleum trade to the advantage of Japanese importers who are still able to purchase in a free market.
The Japanese consular officer with whom the matter was discussed by a member of my staff maintains that restrictions on shipments to the interior apply equally to Japanese and other foreign merchants. He denied that Japanese oil merchants are enjoying special shipping privileges and asserted that the only possible exceptions now being made in favor of Japanese oil firms are in cases of petroleum products ordered to meet the requirements of the Japanese armed forces. He counselled patience and argued that Japanese regulations of traffic with the interior is designed to prevent supplies falling into the hands of Chinese guerrillas, intimating that the present disinclination of the Japanese authorities to permit shipments reflected unsettled conditions in the interior and considerable guerrilla activity.
Private advices from various American firms and all available information [Page 536] on the subject indicate that Japanese firms are regularly forwarding large shipments of petroleum products and other commodities to points in the interior.
Local representations on the subject to the Japanese authorities have not led to any amelioration of the situation and I perceive little reason to hope that the position of the affected American firms will improve in the near future.
Sent to the Department, repeated to Chungking, Peiping, Nanking, by air mail to Tokyo.
- Neither printed.↩
- Post, p. 753.↩
- For correspondence regarding the establishment of oil monopolies in Japan and Manchuria, see Foreign Relations, 1936, vol. iv, pp. 786 ff.↩