every way possible, even though the resistance may work a temporary
hardship on some interests, such as small independent producing com-
panies in California which occasionally sell small quantities of crude
oil to the Japanese refineries.
  The local managers of the two large foreign oil companies operating
in Japan are agreed that the plan of controlling Japan's supply of
crude oil would be commercially feasible, provided that the American
Government could control exports from the United States. The
Netherlands Indies fields are controlled by the Shell and Standard
interests; the Persian and Burman fields are controlled by the Shell
interests; the Iraq field is under the control of an international com-
pany of which large shares are held by the Shell and certain American
interests. Other sources available outside the United States are in
Mexico, Venezuela, Rumania and Russia. The Soviets are not ex-
pected to be able to supply Japan with large quantities of crude oil,
as their production is only slightly in excess of their own require-
ments; their crude oil, moreover is not adapted to the existing Jap-
anese refineries and the cost of transportation from the Black Sea
is excessive. - The Rumanian oil interests are anxious to sell crude oil
to Japan, but the quality of the oil is poor and transportation costs
are again excessive. The Japanese hope to be able to find sources of
supply in Mexico and Venezuela, but as yet the quantities available
from independent producers are small and the cost of transportation
is heavy. Moreover, such sources as Mexico, Venezuela, Rumania and
Russia would not be satisfactory in time of war, as the lines of trans-
portation are long and could be easily cut. The managers of the
foreign oil companies in Japan therefore believe that if the American
Government could control the export of crude oil to Japan from the
United States, the Shell and Standard interests would limit the ex-
port from other fields controlled by them, and the Japanese refineries
would be placed in a most difficult position, from which they could
only extricate themselves by abandoning their plans for monopolizing
the oil trade of Japan and Manchuria.
  Compelling the Japanese to abandon their plan of building up
large reserves of oil at the expense of the oil companies would also
appear to be advisable from a military point of view. The Japa-
nese military machine is one of the most powerful in the world and
therefore constitutes a constant menace to the peace of the world. It
would seem, under the circumstances, to be inadvisable to consent
to any measures which would tend to strengthen this machine.
  In its telegram No. 182, August 20, 3 p. m., this Embassy offered
the suggestion that exports of crude oil to Japan and Manchuria be
limited or stopped, and further suggested that, as an indication that
some such measure was being considered, the American Government



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