LONDON, 26 February 1941, 3.30 p.m.
PRESENT R. G. Menzies, Prime Minister S. M. Bruce, High Commissioner in London F. G. Shedden, Secretary of the Department of Defence Co- ordination Lord Cranborne, U.K. Dominions Secretary R. A. Butler, U.K. Parliamentary Under-Secretary of State for Foreign Affairs Sir Alexander Cadogan, U.K. Permanent Under-Secretary of State for Foreign Affairs Sir Horace Seymour, U.K. Assistant Under-Secretary of State for Foreign Affairs W. Strang, U.K. Assistant Under-Secretary of State for Foreign Affairs J. C. Sterndale Bennett, Head of the Far Eastern Department, U.K.
In reply to a question by Mr. Menzies as to the tendencies and probabilities of Japanese action, SIR A. CADOGAN said that the Japanese had engaged on a drive in which they had obtained a footing in Indo-China and to some extent in Thailand with the apparent object of bypassing Singapore. They had their eye on the Netherlands East Indies and constituted a menace to Australia and New Zealand. Up till recently we thought their plans would develop slowly, but recent indications from reliable sources had convinced us that there was some plan with Germany for the simultaneous development of trouble in this part of the world and in the Far East. We had let them see that our suspicions were aroused, the United States and Australia had done the same, and the results had been satisfactory. There were indications that the sudden development we had suspected had been postponed. But Japanese aspirations remained what they were.
MR. BUTLER said that the question was what the Japanese meant by development in the South Seas. Did they merely want rubber and other commodities or were they out for territorial expansion? In Indo-China their objective might be bases like Camranh Bay, or their main object might be to get commodities on the cheap.
MR. MENZIES enquired whether we thought the move into Indo-China was vital.
SIR A. CADOGAN said that, if it resulted in the Japanese getting bases in Indo-China or in Thailand, it was dangerous.
MR. MENZIES asked whether the possession of air bases would be so vital that we ought to resist.
SIR A. CADOGAN thought that if the Japanese obtained bases on the west coast of Thailand it would be vital.
MR. MENZIES supposed that the Japanese would proceed methodically.
As a result of their mediation they might obtain training bases or aerodromes for civil aviation. Everything would be done under a cloak of this kind. During his passage through the Netherlands East Indies he had had a long talk with the Governor-General.  The latter had at first adopted a temporising policy, but had now reached the conclusion that the Japanese meant business. They had made a series of demands, including one for the entry of Japanese nationals, and the Governor-General felt that they were trying to get the Netherlands authorities into a position where an incident could be created. The Governor-General definitely expected trouble and Mr. Menzies enquired whether we regarded the Netherlands East Indies as vital.
As regards Thailand, Sir J. Crosby  had told him that a good deal of criticism attached to the French and the Americans. The Americans had lectured the Thais on aggression and had adopted a high moral tone. The French had forgotten they were no longer a great Power and did not make concessions in time. Mr. Menzies had derived the impression, not only from what Sir J. Crosby had told him but from his own observation, that there was a solid core of friendly feeling in Thailand towards Great Britain which we ought not to neglect.
On the general question, the Japanese were opportunists. They would take steps forward and then look round. But they might get into a position where they could not retreat without loss of face.
The question for us was where the line was to be drawn which we could not allow the Japanese to cross and which we should let them know that we could not allow them to cross. The difficulty, he recognised, was that we might not be in a position to nail our colours to the mast without knowing the United States attitude. He felt, however, that drift was dangerous. Whenever we had taken a firm line it had paid.
There was one other point. The Japanese might say that they wanted to make peace and that their relations with the Axis were nebulous, but that unless they knew what we had to offer in return there was little they could do. Mr. Menzies wondered therefore whether there was any positive policy which we could adopt to win the Japanese from the Axis.
SIR A. CADOGAN said that the difficulty was to know where to draw the line and how to do it. The Japanese were pursuing in Indo- China and Thailand a policy of infiltration similar to that which the Germans were following in Bulgaria. The Japanese in Thailand would be a menace to us, but if they established themselves there they might take the line that it was a matter entirely between them and Thailand. Could we, without a firm guarantee of United States support, say that we would not tolerate certain kinds of bargain between the Japanese and Thailand? It was pointed out by SIR H. SEYMOUR and SIR A. CADOGAN that the Americans were clearly not ready yet to commit themselves, and the plans of their Service Chiefs showed that they did not appear yet to realise the extent of the menace in Thailand.
MR. MENZIES suggested that we should try to look at the matter through Japanese eyes. If they thought that there was even a fair chance of the Americans coming in it was a gamble, and to risk bringing in a first-class naval Power was to gamble with their whole existence.
SIR H. SEYMOUR said that this would act as a deterrent on the major questions such as the occupation of the Netherlands East Indies, but it did not apply so much to taking over Indo-China.
MR. BUTLER said that Mr. Hopkins  had given the impression that if the Japanese took any definite step against ourselves or the Dutch the Americans were likely to take action. They were not, however, likely to take action against Japanese nibbling tactics.
MR. MENZIES said that diplomacy and military action could not be in watertight compartments and in his view the reinforcement of Singapore was the most important diplomatic move which we could make. He was also impressed with the necessity of remedying the munitions position at Singapore and the aircraft position. When he was at Singapore there were no fighter aircraft. Since then a bomber squadron and a fighter-bomber squadron had been sent, but the great need was for Hurricanes. He had been told here that there were no Hurricanes to spare. But on the other hand he was told that our fighter strength now equalled that of Germany and in that case our fighter forces in this country were superior to the numbers which Germany could employ against us. He believed therefore that without substantial subtraction from our strength here it would be possible to send two or three squadrons to Singapore where they would have an effect out of all proportion to their immediate importance here. This was a matter which he was bound to press on account of its importance to Australia. If the Japanese were to establish themselves in the Netherlands East Indies the whole Australian defence policy would have to be recast.
The taking of the Netherlands East Indies by the Japanese would be so vital to Australia that he thought it ought to be made clear to the Japanese that it would mean war with us. It also should be made clear that any other action which threatened Australia or Singapore would create a serious situation.
SIR A. CADOGAN explained that there had been discussions with the Dutch about mutual defence. The question of a mutual guarantee was at present in suspense. It depended on how far the United States were willing to come in, and the Prime Minister's  view was that the Lease and Lend Bill must be passed before this question could be taken up again.
LORD CRANBORNE said that if we were to defend the Netherlands East Indies the issue for the United States would not be the defence of the Netherlands East Indies but whether they could afford to see the British Empire go down.
There was general agreement with this view, but it was recognised that it was unlikely that any United States guarantee could be obtained in advance of the emergency.
A discussion then took place on whether there was any alternative to a purely defensive policy against Japan.
MR. MENZIES enquired whether there was any chance of explaining to the Japanese the risk that they were running by their present course and suggesting a talk with a view to finding a basis on which the Far East could be settled. He was anxious that we should not settle into the mental condition of thinking that all was lost and making up our minds that there must be war.
It was pointed out that there were two difficulties. In the first place, it was clear that the Japanese were not looking for ordinary economic facilities. They clearly wanted physical control over these commodities and the territories in which they were situated. Secondly, it was difficult to see how any settlement could be come to which did not involve our throwing over China.
Apart from any other consideration, this was a thing to which the United States would never agree.
MR. BUTLER said it was difficult to pursue simultaneously a policy of the closest relations with the United States and closer relations with the Japanese. When the China problem was thrown in the pursuit of these two policies simultaneously was quite impossible.
MR. BRUCE thought that while the war was in progress it was difficult to promise anything to Japan. The present Japanese policy was the most desperate policy she had ever tried. She had started in the belief that the European war would end in some compromise settlement and she had hoped to nibble away for herself something which she would have in her possession when this settlement came. She realised now that there was not going to be a compromise peace. If the United States and the British Empire won the war Japan would be in an awkward position. On the other hand, if Germany won she would be so strong that even Asia would go Nazi. The Japanese were afraid that if we won we would hem them into Japan economically, and in conversation with the Japanese Ambassador  he had taken the line that he was sure that Japan would get a square deal if she had not gone too far with the Axis.
Mr. Bruce thought that it was necessary to go on impressing on the Japanese that they were running a great risk if they did not pull up and at the same time to show that we were ready to give them a fair deal eventually if they kept out of the war. In the meantime, although we did not want to give them large quantities of oil and other commodities, it might steady them if we could make it a little easier for them to get these commodities.
MR. BUTLER said that the immediate need was to make the front between ourselves, the United States and the Dutch as solid as possible and to extend that front to events in Thailand. If the Japanese thought that things were not going well they might be prepared to talk sense.
MR. MENZIES agreed and recommended that as soon as the Lease and Lend Bill had gone through there should be a joint approach to the United States, who ought to be made to see that they could stop the Japanese danger by a clear indication of the risk which the Japanese were running.
Mr. Menzies having raised the question of China, MR. BUTLER explained how much weaker our position would be if China collapsed, and he referred to the signs of weakness in China's economic situation, in her communications and in the difficulties between Chiang Kai-shek  and the Communists.
There was general agreement that we must do everything possible to assist China.
MR. BRUCE returned to the question of a general settlement and suggested that we must at some time indicate that we were ready to consider Japan's difficulties. The United States might think this weak. But it would be hard for Japan to change her policy unless we did say that we appreciated her difficulties, and he did not think that this could be regarded as weakness.
MR. MENZIES repeated that he was afraid of a sense of inevitability on both sides. But he thought we ought to declare categorically to Japan that the Netherlands East Indies were vital to us and that we should have to watch Japanese activities elsewhere closely because they had a bearing on the security of the Netherlands East Indies.
MR. BUTLER enquired whether Mr. Menzies would be in favour of a similar declaration as regards Thailand.
MR. MENZIES said that he would not be in favour of anything so categorical. He thought we should make an effort to get the Thais on our side and to stimulate resistance by Thailand to Japanese demands. He had the distinct impression from his journey through Bangkok that the Thai Prime Minister  had embarked on his present policy without consulting his Cabinet.
SIR A. CADOGAN said that Sir J. Crosby had given repeated warnings to the Thai Government about the danger of placing themselves under any obligation to Japan.
The meeting closed with a discussion of the attitude to be taken up if the dispute between Indo-China and Thailand was settled on the terms which the Japanese were now understood to have proposed, i.e. the cession of a considerable part of Cambodia as well as the two areas on the right bank of the Mekong which constituted the original Thai claim.
SIR H. SEYMOUR thought that the Thais had a good claim to this territory and that we should recognise its transfer without making too much fuss.
SIR A. CADOGAN said that the matter would have to be considered in the light of a declaration made by the Prime Minister about the recognition of transfers of territory before the end of the war.
He thought that this excepted territory transferred by mutual agreement.
It was pointed out also that the effect on General de Gaulle  of recognising the transfers would have to be taken into account.
MR. MENZIES said that it was his practice to recognise facts. He thought it a pity that the term 'recognition' had ever been invented.
MR. BUTLER thought it would be unwise not to be sympathetic towards the Thai claims and he felt that we should not allow General de Gaulle's feelings to wreck our policy. He thought that the matter must be handled in such a way as not to antagonise the Thais.