of the fifth year after the date of the signing of the supplemental agreement, to wit, January 23, 1923, if normal official relations had not been resumed between the United States of America and the Far Eastern Republic in the form of a judicial recognition (recognition de jure). It is unnecessary to go into the long history of this matter as presented to the State Department by the Sinclair Oil Company and the State Department's reply. It is sufficient to say that the Japanese Government, whose military forces have occupied Northern Sakhalin, declined to permit the employees of the Sinclair Oil Company to enter Northern Sakhalin for the purpose of exploration and development. The Sinclair Company appealed to the State Department asking the assistance of the United States Government to carry out its contract. The State Department declined on the ground that this Government had never recognized the Far Eastern Republic or the Soviet Government and, therefore, could not make any representations to that Government in relation to the contract.

The Sinclair Oil Company later claimed that Japan had entered into a treaty with Russia whereby the Japanese troops were to be removed by the fifteenth of May, 1925, and the ownership and control of Northern Sakhalin was conceded to the Soviet Government and that the Soviet Government had by a Protocol granted a concession to industries recommended by the Japanese Government for the exploration of fifty per cent of certain areas. It was provided that as for the other fifty per cent the Soviet Union decided to offer such lots, whole or in part, for foreign concession. The Sinclair Company claimed this was in violation of the declaration of the Japanese Delegation at the Washington Conference which reads as follows:

5

"In conclusion, the Japanese Delegation is authorized to declare that it is the fixed and settled policy of Japan to respect the territorial integrity of Russia, and to observe the principle of nonintervention in the internal affairs of that country, as well as the principle of equal opportunity for the commerce and industry of all nations in every part of the Russian possessions."

There are two answers to these propositions. In the first place, any representations this Government should make would necessitate a support of the contract made between Sinclair Company and a Government which the United States has not recognized, a protest to the Soviet Government which we are not in a position to make. Second, it is extremely doubtful whether the concession is in violation of the declaration of the Japanese Delegation. Under the treaty between the Nine Powers as to China, there was a similar provision

3

Treaty of Jan. 20, 1925, Protocol (A), art. ш, League of Nations, Treaty Series, vol. xxxiv, p. 38.

6

Protocol (B), ibid., p. 40.

Conference on the Limitation of Armament, p. 346.

* Foreign Relations, 1922, vol. I, p. 271.

as to equal opportunity for development in China and yet the State Department approved a contract between an American corporation and China whereby the development or exploration of fifty per cent of the oil bearing territory in a given province in China was granted to the American corporation,' the opinion of the Secretary being that as the balance was open freely to the nationals of other countries that it was not an exclusive or monopolistic contract. In any event, in my opinion, we cannot support a contract between American nationals and a Government which we have not recognized. The Sinclair Company and all other nationals enter into contracts. with the Russian Government with the full knowledge that they take their own risk and that they will not receive the support of this Government.

861b.6363/131

Memorandum by the Secretary of State

[WASHINGTON,] June 3, 1925.

MEMORANDUM FOR THE SOLICITOR'S OFFICE:

re: Sinclair Concession-Northern Sakhalin.

I had an interview with Mr. Lansing this morning relative to the Northern Sakhalin matter:

(1) I explained to Mr. Lansing that I did not care to discuss the question as to the legality of Sinclair's concessions from the Soviet Government as between those parties I did not think the question was material to any action which the State Department had been or should be asked to take. He fully agreed with me as to this.

(2) Generally I admitted to be correct the statement that a mere military occupation of foreign territory did not give the occupant the right to dispose of real estate or make permanent concessions, that I did not understand that Japan had done this. It might be true, or it likely was, that the concessions promised by the Soviet Government were induced by the wish of that Government to obtain the military evacuation by the Japanese in Northern Sakhalin but the concessions promised, if made to Japanese concerns or the Japanese Government, could not, of course, be considered on the basis of the military occupation but would depend entirely upon the right of the Soviet Government to dispose of rights in its own territory. He acquiesced in this position.

'Concession by the Province of Szechwan to the China Petroleum Syndicate, Nov. 3, 1922. The syndicate was dissolved by action of its managers June 27, 1924. The text of the contract is printed as annex XII to List of Contracts of American Nationals With the Chinese Government. (Washington, Government Printing Office, 1925.)

Robert Lansing (former Secretary of State), of the law firm of Lansing & Woolsey, representing the Sinclair Exploration Co.

(3) That in my opinion the clauses in the supplementary contract signed by the Soviet Government and the Sinclair Company relative to protection of Sinclair's rights in the United States and giving the Soviet Government the right to cancel the contract if that Government was not recognized by the United States within five years, were placed there for the purpose of using the Sinclair Company to influence the United States and [to?] grant such recognition. He admitted this to be true and said this agreement was forced from Sinclair by the Soviet Government. I did not dispute this but told him that nevertheless the fact remained the contract was made for this purpose and that was a question of public policy which did have a bearing upon the action this Department should take in protecting the Sinclair Company's rights. This he admitted and frankly conceded that the Department should not recognize the Soviet Government and could not and should not protest to that Government for the protection of the Sinclair Company's rights. He said that Sinclair's contract had been cancelled by the Soviet Courts, that there was no possibility of the rights being reinstated by the present Government in Russia and, therefore, there was no present necessity of taking any action.

(4) I then discussed with him the Japanese declaration at the Washington Conference, also the Chinese Treaty for equal rights in China, and said that the Department had taken the position that a grant of fifty per cent. of a certain territory was not denying equal rights within China in violation of the Chinese Treaty, that I was not prepared to say that the promises made by the Soviet Government to grant to Japanese concerns or the Japanese Government certain rights of exploration and fifty per cent. of the described territory was in violation of the Japanese declaration. In any event, I did not think it wise at present to make any protest to the Japanese Government in view of the fact that the Sinclair concessions had been cancelled by the courts of the Soviet Government. He acquiesced in this and suggested that the only thing he expected was that if there should be a change of Government in Russia and the new Government should come to the conclusion that an injustice had been done to the Sinclair Company and were prepared to make a concession to it, that we should lay the facts before the Japanese Government and ask, if such occasion should arise, that the Sinclair Company be given an equal opportunity to obtain concessionary rights and without opposition of the Japanese Government. He did not desire to write me a letter asking for it at present and thought that possibly I could take the matter up with the Japanese Government, not with a view to obtaining any immediate action by that Government but should the Sinclair Company in the future some time try to get a reasonable concession, he thought that it would be

well to file some sort of a notice to Japan so that the Japanese Government could not claim that we knew all about it and had never made any protest. This seemed to be a very reasonable attitude and, of course, we wish to do everything we can to protect the legitimate interests of the Sinclair Company when those interests are entirely divorced from any agreement to obtain recognition of Russia. I suggest that at the proper time a memorandum be prepared reviewing the history of the whole transaction and informing our Ambassador of the situation so that he can informally take the matter up with the Japanese Government.

861b.6363/135

The Solicitor for the Department of State (Hackworth) to the Secretary of State

[Extract]

[WASHINGTON,] July 1, 1925.

DEAR MR. SECRETARY: As I informed you a few days ago, Mr. Woolsey inquired informally whether an instruction had been sent to the Embassy in Tokyo regarding the Sinclair concession in northern Sakhalin. I told him at that time that it was my understanding from your memorandum of your conversation with Mr. Lansing that it was not intended that an instruction should be sent to Tokyo unless some Government in Russia should be recognized by this Government. After talking with you I told him that you had confirmed my understanding of the situation.

G. H. H[ACKWORTH]

RESERVATIONS BY THE UNITED STATES RESPECTING THE DISPOSAL MADE BY GREAT BRITAIN AND FRANCE OF RUSSIAN GOLD RECEIVED FROM GERMANY

861.51/1827

The British Ambassador (Howard) to the Secretary of State 1o

No. 833

MANCHESTER, MASS., September 17, 1924.
[Received September 18.]

SIR: Under the Treaty of Brest-Litovsk certain Russian gold was ceded to Germany and this gold was, under Article 15 of the Armistice and Article 259 (6) of the Treaty of Versailles," transferred by Germany to the Allied and Associated Governments.

Lester H. Woolsey of the law firm of Lansing & Woolsey, representing the Sinclair Exploration Co.

10

A similar note of the same date was received from the French Chargé. "Malloy, Treaties, 1910-1923, vol. 1, pp. 3307, 3310, and pp. 3329, 3443.

His Majesty's Government and the French Government having now completed the disposal of this Russian gold I have the honour, under instructions from His Majesty's Principal Secretary of State for Foreign Affairs, and in concert with my French Colleague, to communicate to you, as a matter of courtesy, the following notification regarding this matter:

"The equivalent of sixty-two million dollars was paid over to French and British Governments in equal moieties and applied to the reduction of the Russian debt to those countries."

The above has also been communicated to the Italian and Japanese Governments as parties to the Treaty of Versailles. I have [etc.]

(For the Ambassador) HERBERT W. BROOKS

861.51/1827

The Secretary of State to the British Ambassador (Howard) 12

WASHINGTON, March 3, 1925.

EXCELLENCY: I have the honor to acknowledge the receipt of your note of September 17, 1924, in which, acting under instructions from your Government and in concert with your French colleague, you were good enough to communicate to me the following notification with respect to certain Russian gold which, you state, was transferred by Germany to the Allied and Associated Governments under Article 15 of the Armistice and Article 259 (6) of the Treaty of Versailles:

"The equivalent of sixty-two million dollars was paid over to French and British Governments in equal moieties and applied to the reduction of the Russian debt to those countries."

In reply, permit me to invite your attention to the provisions of Paragraph 7 of Article 259 of the Treaty of Versailles and more particularly to recall the considerations set forth in the note addressed by the Acting Secretary of State on June 30, 1920, to His Excellency, The Right Honorable Sir Auckland Geddes,13 in regard to the proposal put forward at that time by the British and French Governments to apply the gold in question to redeem a part of the AngloFrench loan of 1915. You will note that in that communication this Government observed that the proposal seemed to involve a question of doubtful right respecting the use of property held in trust for Russia, and that the propriety of disposing of these funds on the sole

A similar note was sent on the same date to the French Ambassador. 13 Note not printed.