FOREIGN RELATIONS, 1934, VOLUME III



shown to me in confidence and which he proposes to hand informally
to the Vice Minister for Foreign Affairs after hearing affirmatively
from me.
  Following is a summary of the British provisional aide-mimoire.
It is couched in courteous phraseology.
   (1) British Government has carefully studied memorandum
of October 31 explaining substance of law   and policy of its
administration.
   (2) Grateful for explanation and pleased that Japanese authorities
do not wish to deprive persons engaged in this industry of security
for their business. Explanation however has not removed anxiety
lest wide powers which the law confers might be so exercised as in
effect to constitute discrimination against interests of British oil
companies.
   (3) While Japanese memorandum states that the insistence upon
annual submission of plans of operation does not connote desire to
hamper continuance of bUsiness nevertheless such insistence 'Would
appear to deprive British oil interests of all security as to scale of
future operations. British interests unable to count on sharing in-
crease of trade while in the event of a contraction of demand Japanese
companies might maintain their position while British quotas could
be reduced.
   (4) Lack of British refineries in Japan and uncertainty whether
they would upon application be permitted to refine upon a scale com-
mensurate with their present business seem to place British oil interests
at a disadvantage with Japanese companies. Japanese memorandum
states that establishment of refineries would be facilitated for com-
panies whose capital was predominantly Japanese, but even this per-
mission may be withheld in special circumstances, and in any case
under such financial arrangements British oil interests would forfeit
financial control of their company in Japan, a step which they find
themselves unable to contemplate.
  (5) Sansom 74 of British Embassy after consultation with Dick-
over 75 here inserts following observation which I quote in full:
  "(Foreign Office instructions are to include an objection to those
provisions of law which provide for
      (a) Purchase of petroleum from companies by Government.
      (b) Interference by Government in selling price of oil. I feel
    that we are on unsafe ground here. Any government can prop-
    erly commandeer supplies in emergency, at current prices, and
    there does not seem to me to be any sinister implication in the
    use of the words 'military affairs' as well as 'urgent necessity in
    public interest'. Similarly as to price fixing, it is not a discrimi-
    nating provision, as I rea it.
  I should say that our only just ground of objection here is that, by
their cumulative effect, such provisions add to the uncertainty of the
companies,-making it difficult to decide future plans. I therefore
suggest a modification as follows:)



4 George B. Swansom, Commercial Counselor of the British Embassy in Japan.
75 Erle R. Dickover, First Secretary of Embassy in Japan.



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