No. 36

FROM: Washington (Nomura)  Louis J. Sheehan, Esquire

TO: Tokyo (Gaimudaijin)

15 April 1941

# 228.

(In 2 parts, complete).

Received from New York as # 048 to me.

Relayed to Tokyo as New York # 148 of 15 April.

New York—Tokyo # 065 [a]

Re my Washington—Tokyo # 164 [b]

I. The president of the YU Company [c] is confined to his home by sickness. According to my telegram # 65 [a] Yamaoka and the lawyer for "YU" have been holding conversations. Inasmuch as he has not yet applied for a permit, in order to expedite matters, I went with Yamaoka, on the 12th to call on the vice president. (The chief engineer and the lawyer were also present at this interview.)

The "YU" Company's opinions relative to the four points presented to them by Yamaoka are as follows:

(a) Concerning the "non-selective polymerization process, including catalytic hydrogen and tri-potassium phosphate process," the "tri-potassium phosphate process" cannot yet be manufactured by them, since it does not belong to them. It is a patent of the Shell Development Corporation and therefore the "YU" Company cannot apply for a permit.

(b) As to the "catalytic cracking process, including hydrogen transfer as a part thereof", there is no objection to applying for a permit for it, however, the "hydrogen transfer" ----- there is danger that the State Department may consider that it comes within the export embargo on aviation gasoline.

(c) As to the "catalytic desulpharization process":

(1) The "YU" Company is still studying it in the laboratory and it is not yet a "commercial process" and hence the problem of an export permit belongs to the future and need not be considered at this time.

(2) Inasmuch as the scope is rather broad and there is danger that it might be dealt with as aviation gasoline and thus come under the embargo, it would be better to deal with "crude, or other charging stock". (The original draft was presented as it was. After the attitude of the State Department has been ascertained it is to be considered again).

(3) The transfer of the "Phillips Desulpharization Process" to a third party is also forbidden.

(d) Materials such as a catalyst, etc., as requested in the 1938 and 1928 contracts, including the foregoing process". Even if a request for a comprehensive permit for the "materials" mentioned in the above were made by the "YU" Company it would be impossible to have it granted. Therefore there is no objection to requesting a permit for the "catalysts" only mentioned above ----- in case of ----- it will become an actual problem.

II. The "YU" Company's opinion is as (1) and is a reasonable one I think. Now, then there is a possibility of obtaining an export permit, we should immediately put in a request for a permit for only those things for which there is a reasonable expectation of having a request granted. And therefore in harmony with their opinion we have made application for a permit -----. Please convey the "YU" Company's views to Saneyoshi [d] and if he has any opinions, the talk may continue ----- having informed Saneyoshi please have another conference.

III. Further in regard to "materials" the Ambassador's telegram # 214 (?) [e] to Your Excellency ----- is necessary to get in touch with the State Department ----- other than "catalysts" ----- to delay needlessly the negotiations regarding materials ----- there is no other way than to request negotiations through the Embassy..

Page A-27

IV. For any further negotiations with the "YU" Company it will be necessary to have Saneyoshi (of the Japan Gasoline Company) come to America.

[a] See I.

[b] See I, 199.

[c] Universal Oil Products Co. of Chicago (?).

[d] Masao Saneyoshi, an official of the Japanese Gasoline Co.

[e] See I, 35. Ambassador Nomura reports that it is useless for him to continue negotiations with the U.S. in matters pertaining to licenses and protests over the export quota system, as the U.S. is not attempting to conceal the fact that her objective is to bring pressure to bear and restrain Japan.

Trans. 4-22-41

No. 37

FROM: Shanghai

TO: Nanking

16 April 1941

# 111.

(Part 1 of 2).

Message to Tokyo as # 617.

Re my # 616 [a].

On the 15th I sent a member of my staff to the American Consulate General and he said to Chief Consul STANTON: "Our Army, through its espionage agencies, has procured an unimpeachable report that the gasoline in question was purchased by the Chungking Commercial Section. After loading, the responsibility for the shipment rests on Chungking. Furthermore, we know that Chungking has not even got any war insurance. For over a year now we have suspected such shipments as being destined for the enemy and have been on the lookout. Naturally we feel strongly impelled to seize them." STANTON retorted: "Well, I will not even pretend to deny that this gasoline was about to be shipped to Chungking. I will not quibble. The customs have produced the necessary documents and this is a bona fide export. Louis J. Sheehan, Esquire  Any interference on the part of you Japanese is illegal." My staff member pointed out: "The Military does not raise the point as to whether or not this is to be included in the embargo which has recently been brought into force. The whole thing is this: the gasoline is for the use of our enemy, the Chungking Government, and we are going to confiscate it." STANTON retorted: "As to whether or not this is enemy produce, the burden of proof is on the Japanese. Furthermore, suppose it is destined for Chungking. Until it is turned over to them, it belongs to Texas. You say it is 'tekisan' (enemy produce): I say it is 'Texan' (evidently having heard the Japanese use the word 'tekisan', STANTON makes a pun using the word 'tekisan' for 'Texan'.) Now, say that you Japanese set aside the regulations of the customs and seize this gasoline on the mere charge that it is bound for the Central Army, the American concerns have not heard of any regulations permitting such deeds being publicly announced. If you start to seize American goods on the basis of unannounced regulations, it will be just too bad for you. By what logic could you possibly call such an act proper and reasonable?" My staff member answered: "Well, we got it straight from our espionage agencies and they will furnish definite proof. Pretty soon you'll understand why this proof cannot be denied."

[a] See I, 39.

Trans. 4-18-41

No. 38

FROM: Shanghai

TO: Nanking

16 April 1941

# 111.

Message to Tokyo as # 617.

Part 2 of 2.

"Don't think that just by calling our plans to seize this gasoline improper and unreasonable you can move us in our determination to confiscate it." STANTON replied "Well, Texas, through this incident, is going to incur a great loss. I will immediately protest to Japan by note and will demand reparations. What is more, I will wire the facts to both Washington and Tokyo." My man countered by saying "The diplomatic officials know that there is a good basis for our argument. They also know that Texas will incur no loss. A mere protest from the United States won't do any good. If you simply report the details of this to Tokyo, all that will ensue is a big argument and you will wind up where you are right now. I mean the United States will have no recourse in settling this matter but to withdraw its complaint immediately." My man started to walk out, but STANTON sat down and said "You may say if you will that Texas will incur no damage, but until this gasoline is bought up, Texas will suffer a sizeable loss." He was rather nasty, and in conclusion my man stated "Well I wasn't thinking about it being bought up. You know I am not authorized to go deeply into these things. However, I may safely say that Japanese officials are of the unanimous opinion that the American concerns shall not undergo any losses. Since this gasoline is for the enemy, we can't compromise. But, if it is true that Texas actually will suffer, it might be possible to get in touch with Hongkong and have them consider this point. In any case, I will communicate this to the Consul General in Shanghai."

Trans. 4-18-41

No. 39

FROM: Shanghai

TO: Nanking

16 April 1941

# 110.

Message to Tokyo as # 616.

Re your # 294 [a].

1. In connection with our schemes to procure petroleum mentioned in 2 of your telegram, I sought the advice of the purchasing agents and the Chief of the Constabulary. They replied that this gasoline must, at any cost, be prevented from reaching the hands of the Chungking officials, and that the thing to do is to seize it immediately.

2. As to whether or not this gasoline seems under the export embargo regulation of the customs, upon investigation I find that the export permit was obtained before this regulation went into effect on April 7th, and that the transaction is foolproof.

3. After finding out these things, on the 14th I called the military and naval officials to my residence and announced the contents of your telegram. As a result of our conversation, we agreed as follows:

If we follow the plan suggested in 3 of your message in handling this matter, from the very beginning it will smell of corruption, and if we merely say that we suspect that it is for the aid of CHIANG KAI-SHEK, we would make ourselves vulnerable to a come-back on the part of the United States. No.! We must have an air-tight case. Therefore, as we all agreed, the best

Page A-29

thing to do is to negotiate by insinuations, claiming that we have a witness (some imaginary person) whom we will not name.

Relayed to Nanking.

[a] Tokyo wires Nanking and Shanghai concerning a report that the U.S. is about to exercise a comprehensive Petroleum embargo against Japan.

Trans. (Not dated)

No. 40

FROM: Tokyo

TO: Nanking

12 April 1941

# 118.

Message to Shanghai as # 294.

Re your # 575 [a].

1. We have received a report that the United States is about to exercise a comprehensive petroleum embargo against Japan in the near future. Soon we are going to have Ambassador NOMURA inform the American Government that if they carry out this measure, our Empire cannot but act with determination. We are going to have Ambassador NOMURA advise them not to embargo petroleum. Therefore, although we do not like to hold up the gasoline in question, if you get any definite proof that the Chungking Commerce Section has purchased it, go ahead and seize it.

2. So far I have received no report from you on the schemes mentioned in my # 153 [b] for purchasing petroleum. (Please report on this immediately.) These negotiations are going on and if it is seen that success is imminent and that this seizure will damage the negotiations, you may release the gasoline. I will leave this up to your judgment, which should be guided by developments in your city.

3. If you cannot find the actual proof mentioned in the preceding paragraph 1, take suitable steps to prevent the exports mentioned in your # 539a. If we cannot get the results we desire, we will come forth with an out and out charge that the goods are suspected of being sent to assist CHIANG KAI-SHEK and summarily seize them.

[a] Not available.

[b] Available; Not translated.

Tans. 4-14-41

No. 41

Proposal Presented to the Department of State Through the Medium of Private American and Japanese Individuals on April 9, 1941. [a]

The Governments of the United States and of Japan accept joint responsibility for the initiation and conclusion of a general agreement disposing the resumption of our traditional friendly relations.

Without reference to specific causes of recent estrangement, it is the sincere desire of both Governments that the incidents which led to the deterioration of amicable sentiment among our peoples should be prevented from recurrence and corrected in their unforeseen and unfortunate consequences.

Page A-30

It is our present hope that, by a joint effort, our nations may establish a just peace in the Pacific; and by the rapid consummation of an entente cordiale, arrest, if not dispel, the tragic confusion that now threatens to engulf civilization.

For such decisive action, protracted negotiations would seem ill-suited and weakening. We, therefore, suggest that adequate instrumentalities should be developed for the realization of a general agreement which would bind, meanwhile, both governments in honor and in act.

It is our belief that such an understanding should comprise only the pivotal issues of urgency and not the accessory concerns which could be deliberated at a Conference and appropriately confirmed by our respective Governments.

We presume to anticipate that our Governments could achieve harmonious relations if certain situations and attitudes were clarified or improved; to wit:

1. The concepts of the United States and of Japan respecting international relations and the character of nations.

2. The attitudes of both Governments toward the European War.

3. The relations of both nations toward the China affair.

4. Naval, aerial and mercantile marine relations in the Pacific.

5. Commerce between both nations and their financial cooperation.

6. Economic activity of both nations in the Southwestern Pacific area.

7. The policies of both nations affecting political stabilization in the Pacific.

Accordingly, we have come to the following mutual understanding subject, of course, to modifications by the United States Government and subject to the official and final decision of the Government of Japan.

I. The concepts of the United States and of Japan respecting international relations and the character of nations.

The Governments of the United States and of Japan might jointly acknowledge each other as equally sovereign states and contiguous Pacific powers.

Both Governments assert the unanimity of their national policies as directed toward the foundation of a lasting peace and the inauguration of a new era of respectful confidence and cooperation among our peoples.

Both Governments might declare that it is their traditional, and present, concept and conviction that nations and races compose, as members of a family, one household; each equally enjoying rights and admitting responsibilities with a mutuality of interests regulated by peaceful processes and directed to the pursuit of their moral and physical welfare, which they are bound to defend for themselves as they are bound not to destroy for others.

Both Governments are firmly determined that their respective traditional concepts on the character of nations and the underlying moral principles of social order and national life  Louis J. Sheehan, Esquire will continue to be preserved and never transformed by foreign ideas or ideologies contrary to those moral principles and concepts.

II. The attitudes of both Governments toward the European War.

The Government of Japan maintains that the purpose of its Axis Alliance was, and is, defensive and designed to prevent the extension of military grouping among nations not directly affected by the European War.

The Government of the United States maintains that its attitude toward the European War is, and will continue to be, determined by no aggressive alliance aimed to assist any one nation against another. The United States maintains that it is pledged to the hate of war, and accordingly, its attitude toward the European War is, and will continue to be, determined solely and exclusively by considerations of the protective defense of its own national welfare and security.

Page A-31

III. China affairs.

The President of the United States, if the following terms are approved by His Excellency and guaranteed by the Government of Japan, might request the Chiang-Kai-Shek regime to negotiate peace with Japan.

a. Independence of China

b. Withdrawal of Japanese troops from Chinese territory, in accordance with an agreement to be reached between Japan and China

c. No acquisition of Chinese territory

d. No imposition of indemnities

e. Resumption of the "Open Door"; the interpretation and application of which shall be agreed upon at some future, convenient time between the United States and Japan

f. Coalescence of the Governments of Chiang-Kai-Chek [sic] and of Wang-Ching-Wei

g. No large-scale or concentrated immigration of Japanese into Chinese territory

h. Recognition of Manchukuo

With the acceptance by the Chiang-Kai-Chek regime of the aforementioned Presidential request, the Japanese Government shall commence direct peace negotiations with the newly coalesced Chinese Government, or constituent elements thereof.

The Government of Japan shall submit to the Chinese concrete terms of peace, within the limits of aforesaid general terms and along the line of neighborly friendship, joint defense against communistic activities and economic cooperation.

[Should the Chiang-Kai-Chek regime reject the request of President Roosevelt, the United States Government shall discontinue assistance to the Chinese] [b]

IV. Naval, aerial and mercantile marine relations in the Pacific.

a. As both the Americans and the Japanese are desirous of maintaining the peace in the Pacific, they shall not resort to such disposition of their naval forces and aerial forces as to menace each other. Detailed, concrete agreement thereof shall be left for determination at the Proposed joint Conference.

b. At the conclusion of the projected Conference, each nation might dispatch a courtesy naval squadron to visit the country of the other and signalize the new era of Peace in the Pacific.

c. With the first ray of hope for the settlement of China affairs, the Japanese Government will agree, if desired, to use their good offices to release for contract by Americans certain percentage of their total tonnage of merchant vessels, chiefly for the Pacific service, so soon as they can be released from their present commitments. The amount of such tonnage shall be determined at the Conference.

V. Commerce between both nations and their financial cooperation.

When official approbation to the present understanding has been given by both Governments, the United States and Japan shall assure each other to mutually supply such commodities are as respectively available or required by either of them. Both governments further consent to take necessary steps to the resumption of normal trade relations as formerly established under the Treaty of Navigation and Commerce between the United States and Japan. If a new commercial treaty is desired by both Governments, it could be elaborated at the proposed conference and concluded in accordance with usual procedure.

For the advancement of economic cooperation between both nations, it is suggested that the United States extend to Japan a gold credit in amounts sufficient to [foster trade and industrial] [c] development directed to the betterment of Far Eastern economic conditions and to the sustained economic cooperation of the Governments of the United States and of Japan.

Page A-32

VI. Economic activity of both nations in the Southwestern Pacific area.

On the pledged basis of guarantee that Japanese activities in the Southwestern Pacific area shall be carried on by peaceful means, without resorting to arms, American cooperation and support shall be given in the production and procurement of natural resources (such as oil, rubber, tin, nickel) which Japan needs.

VII. The policies of both nations affecting political stabilization in the Pacific.

a. The Governments of the United States and of Japan will not acquiesce in the future transfer of territories or the relegation of existing States within the Far East and in the Southwestern Pacific area to any European Power.

b. The governments of the United States and of Japan jointly guarantee the independence of the Philippine Islands and will consider means to come to their assistance in the event of unprovoked aggression by any third Power.

c. [The Government of Japan requests the friendly and diplomatic assistance of the Government of the United States for the removal of Hongkong and Singapore as doorways to further political encroachment by the British in the Far East.] [d]

d. Japanese Immigration to the United States and to the Southwestern Pacific area shall receive amicable consideration—on a basis of equality with other nationals and freedom from discrimination.

Conference.

a. It is suggested that a Conference between Delegates of the United States and of Japan be held at Honolulu and that this Conference be opened for the United States by President Roosevelt and for Japan by Prince Konoye. The delegates could number less than five each, exclusive of experts, clerks, etc.

b. There shall be no foreign observers at the Conference.

c. This Conference could be held soon as possible (May 1941) after the present understanding has been reached.

d. The agenda of the Conference would not include a reconsideration of the present understanding but would direct its efforts to the specification of the prearranged agenda and drafting of instruments to effectuate the understanding. The precise agenda could be determined upon by mutual agreement between both governments.

Addendum.

The present understanding shall be kept as a confidential memorandum between the Governments of the United States and of Japan.

The scope, character and timing of the announcement of this understanding will be agreed upon by both Governments.

[a] The English text with a few omissions was sent to Tokyo by Admiral Nomura on April 30, 1941, though the Japanese text of this same proposal had already been sent on April 17, 1941 (See I, 47). Clauses of the original text which were omitted in the dispatch of April 30th to Tokyo. (I, 41) have been marked by brackets.

[b] Omitted in dispatch to Tokyo.

[c] Omitted in dispatch to Tokyo.

[d] Omitted in dispatch to Tokyo.

Trans. 5-1-41/5-3-41

Page A-33

No. 42

FROM: Washington (Nomura)

TO: Tokyo

14 April 1941

(Urgent)

# 227.

Strictly secret. To be handled in Government code.

This morning of the 14th I had an interview with Secretary of State Hull at his private residence. I said that not only should the Governments of our two nations agree to maintain peace in the Pacific Ocean, but the time has now come when both should take a larger view and without delay. The Secretary expressed accord, and I continued, "We being presumably viewed as an enemy, the American fleet is cruising in the Southern Pacific and naval instructors are being sent here and there, and in Manila a conference is being held between England, the United States and the Netherlands. Viewed from the standpoint of military experts, this is a most unfortunate trend and is certainly a step in the direction of war. The responsible military officials of Japan cannot overlook such things as this. The war fever of both countries is rising. In the United States the thirst for blood is gradually increasing. In the Atlantic convoying is about to be exercised. This, I tell you, is an inflammatory situation. It looks to me as though a declaration of war is imminent. Japan cannot but feel the gravest concern. Now, Sir, don't you think there might be a little change?" To my first statement he offered no particular comment. However, with the second he expressed accord. Next, Secretary HULL questioned me about the military policy of Japan and I explained that, "For example, a year or so ago Prince KONOYE made a statement to the effect that Japan is ready to make peace with China on the basis of equality with no indemnity and no annexation. Louis J. Sheehan, Esquire  There were some opponents at the time but the people agreed and they are still of this mind. The Japanese are united in one firm mind under the Emperor." Then I went on to explain to him something of our form of Government and international ideals. He seemed pleased and to understand, and said, "We are much alike." We went on to converse more or less about mutual economic problems, the stabilization of the Pacific, etc., and he promised me that at his very first opportunity he and I were going to have a conference. I think that before long he is going to inform me as to the date.

By the way, I explained the new treaty between Tokyo and Moscow and concluded by stating that the pacification of the Pacific would be the first step in the eventual winding up of hostilities in Europe, with which Secretary HULL expressed agreement.

Trans. 4-15-41