JAPAN: Oil for the Bombs of China

The only important war material which the U. S. has not embargoed against Japan is oil. In the past Japan has bought about 75% of her oil from the U. S.; in the future she may get none. Last week Japan’s eagerness to find other sources for oil before the U. S. gusher goes dry gave rise to two mysterious stories.

» From Mexico there leaked out a story of a concession of 250,000 acres of land leased for five years by the Mexican Government to Compania Mexicana Veracruzana for the exploration and exploitation of oil. The concession lay between the towns of Jalapa and Misantla.

Curious oilmen discovered some fishy business about this deal. So, as it turned out, did Mexico’s President Cérdenas.

First of all, the conceded area had been explored extensively by big British and U. S. firms long ago, and though it was only 60 miles from the rich Poza Rico fields, had been rejected as not worth bothering about. Furthermore, it was reported that the lease was signed by Modesto C. Rolland, who is sub-secretary of the Ministry of Economy, who was president and is still thought to be an officer of Mexicana Veracruzana. But the shocker was that Cia. Mexicana Veracruzana was found to be controlled by La Laguna Co., which is owned by Pacific Petroleum Co., which is owned by Kobe Petroleum Co., which is owned by the House of Mitsui, which supplies oil to the Japanese Navy.

Why should Mexico lease such a large area to Japanese oil interests when the Government went to such pains to expropriate the properties of all foreign oil companies two years ago? Why should Japanese oil interests want to lease dud property? There were many guesses as to the answers, and none was pleasant for the U. S.

Perhaps it was a matter of profits. Japanese penetrators pay fantastic prices for war materials. They had cornered the Mexican mercury market and bought considerable stocks of molybdenum by offering $4.74 against the U. S. price of $4.43 for mercury, $3.55 against $2.75 for molybdenum. They offered 5 to 6% more than U. S. prices for Mexican antimony, copper, fluorspar, tungsten. Another Mexican motive was thought to be a covering move against possible U. S. embargo pressure: Mexico could tell the U. S. she would gladly embargo oil, but could not block operations of Japanese-controlled firms actually operating in Mexico.

The Japanese may have desired a base for all sorts of economic penetration of Mexico. They may have wanted a seedling base for eventual military operations: the area is less than 500 air miles from Texas, less than 1,300 from the Panama Canal. But the most plausible theory was that they wanted a base for getting oil across Mexico, in order to avoid the uncertainties and tolls of the sea voyage via the Canal. Some oil for Japan was already being transported across Mexico by rail. Last week Mexicans tried to borrow money in the U. S. to expand rail lines leading across Mexico’s throat to Salina Cruz from single to triple track. A Japanese dream is of an eventual pipeline.

All this was known to Senor Cardenas when the deal was made. This week, for reasons best known to him, he decided to call the whole thing off. Left for him—and the U. S.—was a useful lesson in Japanese penetration.

» The New York Times last week printed an unqualified statement that Royal Dutch-Shell and a Standard-Vacuum Oil Co. subsidiary had virtually agreed, under pressure, to supply Japan with 40% of her oil needs for the next six months out of their Netherlands East Indies wells. The pressure was presumed to have come from The Netherlands East Indies Government. East Indian oil is a politically inflammable commodity. It was not strange that the U. S. State Department professed ignorance of any such deal, that “authoritative British sources” hastened to announce that Britain had cornered the entire Netherlands East Indies supply of high-octane gas, that The Netherlands Indies officials should announce that negotiations had reached a “stalemate.” Only the Japanese were silent. They had a feeling they would get their oil, a feeling that Britain and the U. S. were not ready to force a fight in the Pacific. Oil was one thing for which everyone thought Japan would be willing to fight.