Iron Ore. Foreign Office has handed me an aide-memoire expressing
the hope amelioration of embargo and in verbal amplification
conveyed suggestion that the Commonwealth Prime Minister's earlier
statement [1] that survey would be continued implied conservation
might not be found so immediately necessary and they therefore
asked that the export of 1,000,000 tons annually be meanwhile
permitted in which event they could better understand an ultimate
prohibition which they felt sure would prove unnecessary. They
also said that this particular project was regarded as important
by Japanese military authorities. They then admitted that the
project itself was purely inter company and that Japan did not
claim that it was inter Governmental and further that the company
expenditure has also included construction of blast furnaces in
Japan itself (for which there is use in any case).

I based my own verbal rejoinders upon contents of the Prime
Minister's letter to the Consul-General early this month [2] (text
cabled through London to the Embassy) and recent cables regarding
ore consumption discouraging pursuit of their intermediate scheme
which must obviously create an impossible situation as I have been
informed that even then they would seek at least twenty-five
million tons which would nullify the Commonwealth's precautions as
they well know.

Another example of their dictatorial outlook is illustrated by
their even trying to tell me that so long as ore export is
prohibited so also should the export of iron manufactures be
concurrently forbidden, a piece of reasoning which could hardly be
accepted.

I did not inform them of Baron Ito's [3] remarks.

I am not writing any local reply.

LLOYD