To boycott or not: How oil was at the centre of Japan-US oil relations in the perilous 1930s
This piece analyzes dilemmas on the oil question from three sides: for Japan, accessing oil when almost all of it was imported by Western companies; for the oil companies, fearing Japan was using the oil that these companies supplied for empire-building; and for the United States, concerned about Japan’s expansion through the 1930s but was also reluctant to provoke Japan into even more aggression actions.
Scott McKnight
Securing adequate oil supplies was central to Japan’s fateful decision to attack Pearl Harbor in December 1941. The surprise attack was meant to incapacitate the US fleet in the Pacific and seal off a vast perimeter from northeast Asia to modern-day Indonesia, all of which was motivated by Japan’s growing fears of being unable to access enough oil for its imperial project. So, while the growing threat of imperial Japan was multifaceted, it was through the oil question that the United States and a more anxious Britain primarily confronted Japan in the perilous decade of the 1930s in the lead-up to World War II.
Japan’s dilemma
Japan came under a series of nationalistic and militaristic governments through the 1930s. As a populous nation stretched across just several islands, Japan was also acutely aware of its own vulnerabilities—on the ideas side, from the spread of Soviet communism and Chinese nationalism; and on the resource side, to the country’s almost complete dependence on imports of several key raw materials. Both of these motivated Japan’s expansion into northeast Asia through the first decades of the twentieth century.
The growing threat of imperial Japan was multifaceted, but it was through the oil question that the US and Britain primarily confronted Japan in the decade leading up to World War II
No region was more important in this calculus than northeast China, a nearby resource-rich region that one Japanese prime minister called ‘Japan’s life line’. China’s political weakness and on-again off-again civil war through the 1920s and 1930s eased the way for Japan to gain greater control over the region, including forming a puppet state known as ‘Manchukuo’. Japan’s further expansion into China was only a matter of time. So, in context of years of tensions and periodic fighting, the so-called ‘Marco Polo Bridge incident’ of 1937 triggered outright war between Japan and China, several years before war broke out in Europe.
Oil wasn’t the only worry for Japanese strategists. After all, oil only made up 7% in Japan’s overall energy mix. But the resource was vital to Japan’s shipping fleet and navy: the former kept Japan’s thriving manufactured exports going out and necessary raw materials coming in, while the latter had emerged as the world’s third-largest in the 1930s and was central to its imperial project. By the late 1930s, Japan produced barely one-tenth of the oil its consumed. Not only was this large gap made up by imports, but about four of every five barrels came from American oilfields (the US was a net oil exporter at the time). Another tenth came from Indonesia (then known as the Dutch East Indies), a fact that helps to explain Japan’s southward expansion through east Asia and its eventual attack on Pearl Harbor to form a safe corridor for oil shipments back to Japan from the Dutch East Indies.
For Japan then, the dilemma was clear. The need for oil pushed Japan deeper into east Asia, but this expansion required greater oil for its ships and planes. In the immediate term then, two things were needed: first, stock up enough oil for this imperial expansion; and second, to gain greater control over the oil industry from foreign companies, especially American ones who may limit oil to Japan in the event of a war with the United States. But either of these moves risked provoking the oil companies, and more importantly, the US government into cutting Japan off from its vital oil supply.
Despite this concerns, Japan passed a new petroleum law in July 1934, which among other things forced oil-importing companies to maintain oil stocks equal to one-half of their previous year’s imports. The Japanese-run puppet state in northeast China joined in and established a state monopoly on oil refining. It was now to the oil companies and the US government to respond.
The companies’ dilemma
The new oil legislation threatened the profits and flexibility of the oil companies. At the time, oil to Japan and its puppet state in northeast China came mostly from three oil giants—the joint venture known as Stanvac (a combination of what is now Exxon and Mobil, the former with access to abundant oilfields and the latter with marketing capacity in the Far East) as well as Royal Dutch Shell. Other players like the Texas Company (Texaco), Standard of California (later Chevron) and the Union Oil Company also supplied oil to Japan, but in much smaller quantities.
“‘Once we start sanctions against Japan, we must see them through to the end, and the end may conceivably be war’”
Among these measures to gain greater control of its oil industry—an industry it saw as too important to be in the hands of private hands, much less foreign ones—Japan also demanded to vastly increased oil storage. Seeing developments in Japan and its actions in the region, the oil companies became concerned about their role in the process. The companies found common ground with the British government, itself deeply concerned about Japan’s encroachment on Shanghai (the home of three-fourths of all British investment in China) and its crown jewel in India as well as Malaya. The oil companies and British government saw coordinated action in the form an oil embargo as necessary, but it wouldn’t matter without firm support of the United States government.
The American dilemma
Japan’s nationalistic oil law and forming of a state-run oil monopoly in China’s northeast wasn’t ideal for the United States government and its globe-spanning firms. But if seen only through the lens of the oil industry itself, the stakes were still low: Japan’s new oil law deprived the companies of markets, not oilfields themselves. More broadly, Japan asserting control over what it saw as a strategic industry was in line with the times. Oil-rich governments expropriating oil properties, first starting with the Bolsheviks in the late 1910s, didn’t turn out to be a one-off event. Instead, the US government and its companies found themselves confronting ‘creeping nationalizations’ and outright takeovers of oil assets in Latin America through the 1930s (the nearly twenty-year standoff with Mexico came to a head in 1938).
The FDR administration didn’t want to upset either isolationist sentiment at home or provoke Japan into even more aggressive actions, something an oil embargo would almost certainly do
In Japan, however, the crisis was about a lot more than oil and it was far more threatening to regional stability.
Roosevelt (left) and his Sec. of State Cordell Hull (right) saw free trade, not trade embargoes, as promoting peace
On questions of oil policy, the Franklin D. Roosevelt administration didn’t depart greatly from the three business-minded Republican administrations that preceded it. This meant no oil sanctions on Japan because the administration feared pushing out moderates within the Japanese bureaucracy and military (those were gone or silenced by the late 1930s). Likewise, the Roosevelt administration saw free trade—not trade embargoes—as promoting peace (This was certainly the view of FDR’s long-serving Secretary of State Cordell Hull). As a result, the US stayed committed to the so-called ‘Open Door’ foreign economic policy, which sought equal treatment and access for its own companies as for others. Overall, the Roosevelt administration didn’t want to upset either isolationist sentiment at home or provoke Japan into even more aggressive actions, something an oil embargo would almost certainly do. The US ambassador to Japan warned that that ‘once we start sanctions against Japan, we must see them through to the end, and the end may conceivably be war’.
Access to oil in the Dutch East Indies as well as ensuring safe shipment back to Japan required forming a vast perimetre through much of the western Pacific, which eventually resulted in Japan launching an attack on America’s Pacific fleet in Hawaii in late 1941
So, for whatever sympathy there was in the US government and American public for Chinese suffering through Japanese atrocities, Japan’s territorial expansion and oil-related moves were causes for concern but not enough for bold action. The broader international situation didn’t help either, as order seemed to be breaking down in Europe, with all focus on Nazi Germany. In a short few years, the rising power had concluded an alliance with Italy (a country that had just invaded Ethiopia), remilitarized the Rhineland and annexed Austria in March 1938. Although Japan fit into this alignment (Japan had signed the Anti-Comintern Pact in 1936), the Roosevelt administration had no interest in antagonizing the Japanese, and thus no interest in an oil embargo.
That didn’t mean there was consensus on this policy. Several influential voices within the US government—and even several close to Roosevelt himself—pushed for tighter restrictions on oil to Japan. Instead, the administration well into the late 1930s turned to more limited measures like banning the sale of iron and steel scrap as well as certain refining technologies and later high-octane gasoline (especially important for planes) to Japan. But even immediately following Japan’s invasion of Indochina, Japan’s imminent entry into the alliance with Germany and Italy as well as Japan’s massive increase in its order of oil from the Dutch East Indies—all signs of a country ready for an even greater war than it was already fighting—the Roosevelt administration nevertheless refused to implement an oil embargo. Oddly, though, sensing it would one day need to confront Japan while also protecting the Atlantic from German submarines, the Roosevelt administration took ground-breaking measures, including authorizing the building of a two-ocean navy.
Conclusion
Oil was at the centre of growing tensions between Japan on the one hand and the United States and Britain on the other, but merely providing Japan’s economy and military with sufficient oil supplies wasn’t enough. For Japan, securing sufficient oil supplies drove its territorial expansion, not the other way around. Its nationalistic oil policies through the 1930s were direct products of its acute sense of weakness as well as its much larger imperial plans. To both, the oil companies were largely helpless without stronger support from their home governments, notably that of the US. Given these imperial ambitions then, Japan sought control over a strategically important industry, but these measures became part of a multi-year process that first increased tension with the United States and eventually to the two engaged in all-out war.
On changes in Japanese oil policy, the Roosevelt administration largely delayed and dithered. However concerned the administration was with the moves, they weren’t urgent enough. Preoccupied with economic recovery at home and spiraling tensions in Europe, the administration refused to take action that it figured would push Japan into even more aggressive actions. The oil companies, the British government as well as some close to Roosevelt made their pleas, but they fell on deaf ears.
Seeking oil, Japan pushed through coastal China and parts of the interior, eventually into southeast Asia, and finally accepting that only complete control of the Pacific would ensure oil supplies from the Dutch East Indies could reach Japan safely. In late 1941, Japan took what oil historian Daniel Yergin called ‘Yamamoto’s gamble’ and launched the surprise attack on Pearl Harbor.
