493.419/9–1350
Memorandum of Conversation, by Mr. Robert N. Magill of the Office of Chinese Affairs
Subject: Control of Petroleum to China, Including Formosa
| Participants: | Mr. Pridham—British Embassy1 |
| Mr. Barnett—CA | |
| Mr. Magill—CA |
Mr. Pridham called this afternoon to discuss the problem, reported to us earlier from Hong Kong, of Caltex’s efforts to export aviation gasoline from Hong Kong to Formosa. He said that, after the Hong Kong Government had refused a license for this purpose, the Governor had referred the matter to London which in turn had asked the Embassy to inform the Department of the British position.
Mr. Pridham stated that the Foreign Office position is that UK and Hong Kong export controls must be applied with equal severity to the Chinese mainland and to Taiwan as a part of China. He stated that this position is necessary in order to avoid giving the lie to prohibition of petroleum exports from Hong Kong to China on grounds of need by the British armed services—that action inconsistent with this publicly-stated reason might be quite harmful to British interests in view of the delicacy of their relations with the Chinese Communists. Mr. Pridham added that a related consideration was that the [Page 661] accumulation of excessive petroleum stocks on Formosa would be dangerous so long as there was a possibility that the island might be taken by the Chinese Communists, but he acknowledged that this was not particularly applicable to the small quantity that Caltex had desired to export from Hong Kong. He concluded by saying that the Foreign Office hoped that the Department would understand the reasons for the British position and that it would be possible for U.S. companies to find adequate alternatives sources of supply for Formosa.
Mr. Barnett responded that we understood the situation as Mr. Pridham had described it. He observed that there had been a clear understanding during the discussions between the U.S. and U.K. Governments on export controls for China that the U.S. Government would differentiate between Formosa and the Chinese mainland where as the U.K. Government would not be able to do so. He added that, so far as he was aware, the question of alternative sources of supply was not a major problem, but that, if it should become one, we might wish to discuss the matter again with the British. (It was recognized that the problem of alternative sources would not involve availabilities but rather concerned the time factor for urgently needed ad hoc shipments.)
Mr. Pridham then turned to another aspect of the general subject and said that the Foreign Office was rather concerned over reports from Shell that two shipments of petroleum had taken place from Kobe to Tientsin on August 10 and August 6 respectively. He supplied the details of these reported shipments. Mr. Barnett told him that we were not aware of these shipments and would send a query to Tokyo for the facts involved. He added, however, that we had followed up on an earlier report of a petroleum transshipment via Japan to Communist China and had received an assurance from SCAP, subsequent to August 10, that SCAP was taking the necessary steps to ensure that no petroleum products on the U.S. Positive List would be exported from Japan to Commnist China.
Mr. Pridham asked whether there were any other unresolved questions relating to US-UK cooperation in controlling petroleum exports to China. Mr. Magill observed that the only point that occurred to him at the moment was the question of whether road-surfacing asphalt should be included in the petroleum categories on International List I. Mr. Pridham stated that he could not recall the details but that he believed that a Foreign Office opinion in the negative had been received within the last month and relayed to the Department.
(Note: Following the conversation above, Hong Kong’s despatch 292 of August 282 on the subject of asphalt controls at Hong Kong [Page 662] was noted. This despatch states that, effective immediately, all asphalt, except asphalt-treated roofing rolls, is prohibited export to China from the Colony.)