My despatch 9th February No. 22. 
The Netherlands Minister  informed the Foreign Office on 24th February that the Japanese Government were renewing pressure on the Portuguese Government to obtain oil concessions in Portuguese Timor and asked whether His Majesty's Government in the United Kingdom would be prepared to put pressure on the Portuguese Government to dissuade them from granting any concession in Timor to the Japanese. He was informed that our interests and those of the Netherlands Government in this matter were identical and that the possibility of instructing His Majesty's Ambassador at Lisbon  to raise the matter with the Portuguese Government would be further considered.
On 22nd February, His Majesty's Ambassador at Lisbon reported that the Portuguese Minister for Colonies , despite previous verbal undertakings to the contrary, had stated that he could not grant concessions for western parts of the Island to Oil Concessions Limited outright but that he would be prepared to award the western area to Wittouck  and if satisfactory arrangement could be reached by Asia Investment Company and Oil Concessions Limited to sanction transfer to Oil Concessions. On 29th February however His Majesty's Ambassador reported that after discussion with the Portuguese Prime Minister , the Minister for the Colonies had informed the representative of Oil Concessions Limited that it would be difficult at present to authorize such transfer. The Minister had remarked that neither His Majesty's Government in the United Kingdom nor His Majesty's Government in the Commonwealth of Australia had made any official demarche with regard to the western area. It is understood that the Minister hopes that his hand may be strengthened by a statement either that the award of a concession to the Japanese would occasion anxiety to His Majesty's Governments or that His Majesty's Government in the United Kingdom and His Majesty's Government in the Commonwealth of Australia support the application of Oil Concessions Limited.
The Director of Asia Investment Company has informed Oil Concessions Limited that Wittouck will be prepared to relinquish his rights in Timor and to make every effort to obtain concessions for the western area which, if obtained, he will transfer to Oil Concessions Limited in return for cash payment of 25,000 and 25 per cent of the shares issued or to be issued by the Company which exploits the area at present held by Oil Concessions Limited. This offer is apparently unacceptable but subsequent enquiry shows Wittouck may be prepared to reduce his terms to cash payment not exceeding 50,000.
The Lisbon representative of Oil Concessions Limited  now in London has represented that the decision of the Portuguese Government not to award concessions to his firm outright is undoubtedly due to Japanese pressure and that, if Wittouck realises the position, there is distinct possibility of his raising the price or selling out to the Japanese. He stated that western area though it might be petroliferous had not been surveyed and he did not think it a sound commercial proposition for his company to pay a large sum to obtain this area. He raised the question whether Hs Majesty's Government in the Commonwealth of Australia would wish to participate in the company and give financial support.
The Netherlands Minister at Lisbon  has intimated to His Majesty's Embassy that the Netherlands Government would be prepared to make financial sacrifice in order to prevent the Japanese from obtaining a footing in Timor.
We should be glad to receive the observations of the Commonwealth Government as to any action which they would wish to see taken.