893.6363/8–2349
Memorandum by the Chief of the Division of Chinese Affairs (Sprouse) to Mr. Livingston T. Merchant of the Office of Far Eastern Affairs
Mr. Kavanaugh of the Texas-California Oil Company telephoned this afternoon to discuss the question of Texaco’s entering into a contract with the China Petroleum Corporation (now Communist-controlled) at Shanghai for the delivery of crude oil to Shanghai. He pointed out that he had previously discussed this matter with Mr. Butterworth and that at that time Mr. Butterworth had indicated the Department would have no objection. He explained that the proposed [Page 1025] contract was on the shortest term basis possible, six to nine months, and that deliveries were to be made f.o.b. with one cargo every two months, the first cargo to be January 1, 1950. He further explained that the proposed contract provided for possible shipment by Texaco if the latter had ships available, thus providing an out for Texaco if it decided not to make the shipment itself but to require the China Petroleum Corporation to provide its own vessels. He stated that source of the crude oil was the Persian Gulf from which shipments would be made.
I informed Mr. Kavanaugh that I was not familiar with this matter but that I would discuss it with Mr. Merchant with a view to giving him an answer at the meeting tomorrow afternoon.55
- Marginal notation by Mr. Merchant: “This would be in accord with present policy but I recommend that you ask Kavanaugh to keep the time period of any contract as low as possible—preferably three months”.↩