FOREIGN RELATIONS, 1934, VOLUME III



  1. During past month there have been signs of modification of
monopoly program which is reported to have been originally con-
ceived without prior approval of the Japanese Government by Hashi-
moto, who is a director of the Nippon Oil Company and president of
the Manchuria Oil Company and leading spirit in the oil monopoly
and a brother-in-law of General Hishikari, Commander in Chief of
the Kwantung Army and Japanese Ambassador to "Manchukuo".
  2. Subsequent to the publication of the above information, and
protests by the American and British Governments, the scheme had
been held up and ban placed on press news regarding subject. Indi-
cations are that "Manchukuo" authorities wish to reach direct agree-
ment with foreign interests possibly upon quota basis similar to that
now in force in Japan and Korea.
  3. Local manager of the Standard-Vacuum Oil Company views
with suspicion the desire of the "Manchukuo" authorities for direct
conversations and feels that in view of apparent success of previous
representations at Tokyo further efforts should be made through
Japanese authorities.
  4. However, Chase23 concurs with his British colleague that: (a)
the fact is [that?] important officials of the Oil Monopoly Bureau
are also Nippon Oil Company officials, together with the relationship
between Hashimoto and Hishikari, makes it appear possible that there
may be less of a national defence policy and more of a private interest
behind the monopoly than has hitherto appeared probable; which fact
should make opposition to the monopoly easier provided face-saving
does not become involved, (b) that direct conversations between oil
companies and "Manchukuo" authorities might be productive of the
results provided it is clearly understood that the treaty position of
the companies will not be affected and provided further that suitable
negotiators are available, (c) that it is considered efforts to hasten eco-
nomic development in Manchuria will increase total demand for oil
to an extent partially compensating companies for decreased propor-
tional share of trade.
  5. In view of the above Chase suggests that the situation calls for,
(a) prompt agreement between foreign firms concerned on common
plan of action and size of quota to be sought, and (b) appointment
and despatch to Manchuria of qualified negotiators as soon as actual
intentions of Tokyo and Hsinking are definitely clarified.
  6. Legation's 368, August 20, 6 p. m. Chase reports available trust-
worthy information as indicating that this action has no connection
with oil monopoly but is due to tension between Japan and Russia.
He cites also announcement of "liquidation sale" by "The Foreign

I Augustus S. Chase, Consul at Mukden.



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