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
Following the discussion with you of the proposed contract between Texaco and China Petroleum Corporation (Communist) on August 24, I telephoned Mr. Kavanaugh at his home and suggested that he drag his feet and do nothing toward implementation of this contract for the time being. Mr. Kavanaugh explained that Texaco was reluctant to take any action at the present time indicating that it would not go through with any such arrangements for fear of the effect it would have on the position of Texaco personnel in China. He said that no action was contemplated under the contract at present and that the first cargo was scheduled for January 1, 1950. He explained that he [Page 1027] had merely wished to keep the Department informed in this regard and to ascertain if there had been any change in the Department’s position.
I promised that I would again get in touch with him within the next few days and give him a more definite indication of the Department’s views.