143 Mr A. Eden, U.K. Secretary of State for Dominion Affairs, to Commonwealth Government

Circular cablegram D124 LONDON, 14 April 1940, 4 a.m.

SECRET

My Circular D. 123. [1]

As the immediate action open [to us] [2] to prevent acquisition by Germany of deficient commodities via Asiatic Russia is of limited scope, His Majesty's Government in the United Kingdom in consultation with the French Government consider that further endeavours should be made at once to overcome the practical difficulties in the way of making any system of control completely effective i.e. through some sort of understanding with Japan to ensure her collaboration in the measures to be taken and some kind of an understanding with the United States.

2. We should thus wish to open negotiations with Japan for an understanding whereby she would undertake:

(a) to prevent commodities specified by us as being those most needed by Germany for war purposes from (1) leaving Japanese territory or territory either in or under Japanese control for any Russian or German destination whether directly consigned to either of those countries or sent via a third state;

(2) being carried to any such destination on any Japanese controlled form of transport by sea, land or air.

(b) To take measures to restrain Japanese traders etc. from taking part in or facilitating transactions likely to lead to the importation of these commodities either to Germany or Russia.

(c) To prevent the use of Japanese or Japanese controlled ports for transshipment of such commodities destined for Germany or Russia.

3. In return, it is thought that we should have to consent to facilitate the acquisition by Japan of raw materials or other key commodities which she requires from British or French sources up to certain quantities which could be shown to be justified for her domestic requirements, judged by her minimum imports during the last five years less the amounts usually re-exported by her to Germany and Russia.

4. With a view to the successful conduct of these negotiations it is proposed that we should temporarily place somewhat severe restrictions on exports to Japan of certain key commodities of which she is known to stand most in need, explaining our action to her on the grounds of military necessity and domestic needs.

During our negotiations, we should maintain contact with the French Government whose negotiations, it is thought, should be parallel but not joint. Our negotiations would be conducted in London by the Minister of Economic Warfare in order that political issues extraneous to the economic questions involved should not be introduced.

5. Simultaneously, we should propose to make approaches (a) to the Chinese Government with a view to arriving at an understanding for the restriction of their exports to Russia under the Sino-Soviet barter agreement and (b) to the Netherlands Government with a view to limiting exports of tin and rubber from the Netherlands East Indies to Vladivostock or to Dairen.

6. With a view to arriving at some sort of complementary understanding with the United States, we should propose to explain to the administration what action is intended, the reasons for it and why some measure of co-operation by the Japanese is essential to this end. It would be made clear we have no intention of trying to secure Japanese cooperation by any deflection from the line which we have taken in regard to Japan's actions or intentions in China. While the United States authorities may feel unable to go beyond the maintenance of their present policy of moral embargo of certain goods normally imported by aggressive nations [3], it is hoped that they would be prepared to acquiesce in our negotiations with Japan and, without withdrawing assistance to our cause which their embargo policy might represent, to acquiesce in the limited supply by us of certain key commodities to Japan for the special objects described above and to refrain from making difficulties over the interception of United States ships or cargoes bound for Vladivostock or Dairen.

7. In view of the urgency of the matter, details of the scheme outlined above have been communicated to His Majesty's Ambassadors at Tokyo [4] and Washington [5] with a view to obtaining their advice as to the probable reactions of the Japanese and United States authorities respectively if it is decided to make official approaches on these lines. As soon as the Ambassadors' views have been received, they will of course be communicated to you at once.

Meanwhile His Majesty's Government in the United Kingdom would be very grateful for an early expression of the preliminary views of His Majesty's Government in the Commonwealth of Australia and for information whether the Commonwealth Government would be prepared to co-operate in the measures proposed in paragraph four above for temporarily restricting the supply of key commodities to Japan in so far as restrictions to the quantities mentioned have not already been imposed. The principal commodities which we have in mind in this connection would be ferro-alloys, non-ferrous metals, scrap and pig iron, rubber, wool, jute and jute bags, asbestos, mica and industrial diamonds.

We feel sure that the Commonwealth Government will appreciate the importance of treating this subject as most secret and ensuring that our intentions are in no way disclosed.

1 Document 141.

2 Inserted from the copy on file AA: CP290/6, 34.

3 For information on United States export policy see memorandum Was.94/40 of 23 April 1940 on file AA: A981, Trade 342.

4 Sir Robert Craigie.

5 Lord Lothian.

[FA: A3195, 1.2456]