893.6363/8–2349
The Assistant Secretary of State (Gross) to Senator William F. Knowland
My Dear Senator Knowland: I refer to Mr. Delanoy’s56 telephone conversation on August 11 with Mr. Sprouse, Chief of the Division of Chinese Affairs, requesting information concerning the petroleum situation in Communist-occupied areas of China. While exact data on requirements and availabilities for Communist China is not available, the general information summarized below may prove useful.
The Chinese Communists claim that petroleum stocks of private firms and of the National Government in north and central China amounted to one million barrels at the time the Communists occupied those areas. It has been estimated that the portion of this stock held by American firms was 400,000 barrels.
The only important domestic source of petroleum available to the Chinese Communists is the shale oil refinery at Fushun, Manchuria. The output at this plant has reportedly been reduced from 1,300,000 barrels (1943) to 100,000 barrels annually, due in part to Soviet stripping. The Communists control a large refinery at Hulutao, taken over intact upon the withdrawal of Chinese Government forces from Manchuria, and another at Dairen, under Soviet control, but both these installations are at present reported to be idle for lack of crude oil supplies.
[Page 1026]The USSR has supplied limited quantities of petroleum products to Manchuria since the war, in exchange for soybeans, grains, and other foodstuffs. These imports were probably sufficient for limited Communist requirements until the end of 1948, when the Communists assumed control of the industrialized urban sectors of the Northeast. The barter arrangement will be continued under the terms of a recently announced trade agreement between the Soviet Union and Manchurian authorities. The Department has received reports to the effect that approximately 200,000 barrels of kerosene and gasoline were shipped from Constanza, Rumania to Dairen during the latter part of July.
Communist north China has received some shipments of petroleum from Manchuria, the Soviet Union, and Hong Kong during 1949. However, interference with shipping at Shanghai by the Chinese Government has prevented, as far as is known, any imports of petroleum at that port since the latter part of June 1949.
The above sources of petroleum are believed to meet only a fraction of minimum requirements in Communist-controlled areas of China and Manchuria. These minimum requirements have been estimated roughly at five million barrels annually. Indications of a severe petroleum shortage in Communist China are to be found in the frequent demands of Communist authorities that civilians cut down oil consumption, in the hasty conversion of the Shanghai Power Company and other industrial plants from oil to coal, and in the installation of charcoal burners in motor vehicles.
Sincerely yours,
- William C. Delanoy, Secretary to Senator Knowland.↩