TO ITALY, engaged in a military venture in East Africa, oil is probably the commodity of the greatest strategic importance. A committee of experts of the League of Nations has estimated that if a general embargo were laid down on oil shipments to Italy the present stocks of that country would be exhausted in from three to three and a half months. This obviously would halt the campaign in Ethiopia.

In its early efforts to check the flow of oil to the belligerents the United States went further than any of the other Great Powers. It gave a broad interpretation to existing legislation, and where legal authority was lacking it resorted to moral suasion. Its policy during the autumn of 1935 clearly indicated a desire to prevent any action by American citizens which might thwart efforts of the League of Nations to end the war by economic pressure against the aggressor. Despite that, the League's committee of experts, in its report of February 12, 1936, found that the policies of the American Government were an obstacle to the adoption of an oil sanction by members of the League. It believed that such a sanction would be ineffective unless the United States agreed formally to restrict oil exports to Italy to the normal peace-time level.

The committee's action was widely interpreted in the United States as an effort to shift to American shoulders the responsibility for the failure of the member states to agree promptly to discharge their duties under the Covenant. But motives need not concern us here. The important question is whether the judgment was in accord with the facts. Had the United States indicated a purpose to break through an embargo which might be imposed against Italy and thereby to reap rich war profits at the expense of self-denying members of the League? Were the normal American shipments of oil sufficient to frustrate collective action by the League members against an adjudged aggressor?

At least two facts seem well established: (1) the amount of oil shipped to Italy from this country even under the existing war-time demands is only a small portion of Italy's total purchases; and (2) the Administration at Washington has used every means at its command, compatible with existing legislation, to check such shipments from the United States. Since these are vital points in any discussion of an oil sanction, they deserve consideration in some detail.

Before the outbreak of the war in Ethiopia, Italy's purchases of American petroleum products were relatively unimportant. In the years 1931-1934 she obtained only 6.6 percent of her supplies from the United States, and her American purchases during the first nine months of 1935 were in approximately the same proportion. Rumania and the Soviet Union were Italy's chief sources of supply; together they furnished nearly two-thirds of her requirements. After launching her campaign in East Africa, Italy greatly increased her imports of oil. But for obvious reasons the government has maintained complete secrecy with regard to its procurement of war materials.

The League of Nations committee of experts has estimated Italy's purchases in 1935, excluding bunker oil bought by Italian ships in foreign ports, at 3,800,000 tons, compared with 3,000,000 tons in 1934, an indicated increase of 27 percent. It appears from the available figures that the increase in American oil exports to Italy during 1935 was relatively much greater than that for other countries. If the League committee's estimate of the total increase in 1935 at 800,000 tons is reasonably accurate, it would seem that something like 290,000 tons came from the United States and the remaining 510,000 tons from other producing countries.

This estimate is based on export statistics of the various producing countries. American exports of the more important petroleum products to Italy in the past two years were as follows:

 

AMERICAN PETROLEUM EXPORTS TO ITALY, 1934-35
(in thousands of metric tons)
  1934 1935 Tonnage Percentage
      Increase Increase
Crude petroleum 62.0 206.6 144.6 233.2
Fuel oils 61.9 152.7 90.8 146.5
Gasoline 7.2 50.2 43.  597.2
Lubricating oils 44.2 63.3 19.1 43.2
  ---- ---- ----  
  Total 175.3 472.8 297.5 169.7

While the percentage of increase for the United States is much greater than that for the producing countries as a whole (169.7 percent, as compared with 27), it is to be noted that this expansion of the small American exports of previous years, at a time when other countries were also increasing their shipments, raised the American proportion of sales to the Italian Government only to 12.5 percent of the total for the full year, 1935, and to 17.8 percent for the war months, October-December, 1935.

The League committee, however, based its findings not on actual but potential exports from this country. It attached little significance to the 6.6 percent quota of 1931-1934 and pointed out that "the quantity of oil products available for export from the United States greatly exceeds Italian probable demands." By implication the committee suggested that the United States might make a definite commitment, which it was under no obligation to do, before the League members themselves undertook to discharge their obligations under Article XVI of the Covenant. Such a proposal should be examined in the light of the official attitude adopted by Washington regarding trade in war materials not specifically forbidden by the Neutrality Act of 1935.

During the last quarter of 1935 the United States Government, acting on its own initiative, took the lead in: (1) placing an embargo on the export of arms, ammunition and implements of war; (2) warning its citizens that "transactions of any character with either of the belligerents" would be at their own risk; (3) urging them (October 10, 20, 27 and 30) not to be tempted by trade opportunities which would prolong the war; (4) advising manufacturers not to accept war orders from Italy; (5) denouncing the increasing exports of oil and other war materials as "directly contrary to the policies of this government"; (6) requesting shipping companies indebted to the government on ship purchases or construction loans not to carry unembargoed war materials to the belligerents; and (7) preventing the departure for Italy of a loaded tanker on which the government held a mortgage then in default.[i]

In contrast with this procedure, the League's oil policy in past months seems to have been timid and vacillating. Consideration of an oil sanction was brought up at Geneva on November 2, on December 12, on January 20, and on March 2. On each occasion it was postponed, and a decision is still awaited as these lines are written. Italy meanwhile has taken advantage of the delay to accumulate still larger stocks. Moreover, all the countries recently selling oil to Italy, except the United States, are either members of the League or territories belonging to members, and every one of these countries was represented on the Coördination Committee created expressly to deal with sanctions. Although the Soviet Government took a strong stand at Geneva in favor of sanctions, it did not hesitate in the meantime to place large contracts with the Italian Government for the delivery of oil at Black Sea ports. And the British Government has been indirectly purveying oil to Italy through the Anglo-Persian Oil Company, in which it holds a controlling interest.[ii] In fairness to the Anglo-Persian and the Soviet producers, however, it should be said that, unlike their leading competitors, they actually sold less oil to Italy in 1935 than they did in 1934.

It is also true that American exporters were making record sales to Italy in this period in spite of the Administration's efforts at moral suasion. Nevertheless, the American oil companies which had obtained the bulk of the export business seem to have been disposed (at first, at any rate) to follow the suggestions of the Department of State and limit their sales to Italy to normal amounts. But brokers and companies which previously had had no foreign business began to accept Italian orders, and exports increased by leaps and bounds. The Administration hoped to correct this situation by new legislation empowering the President at his discretion to restrict American sales of key commodities to the usual peace-time volume. But proceedings at Geneva weakened American faith in the intentions of the League States ever to enforce a real oil embargo, and the new temporary legislation enacted by Congress in February did not authorize the President to impose such restrictions.

When Sir Samuel Hoare and Premier Laval showed their readiness to forget sanctions and anti-war treaties and to appease Premier Mussolini at the expense of Ethiopia, the Administration discovered that it had been left out on a limb. Its attitude under such circumstances became more passive; its ardor for moral suasion abated; and it showed a disposition to "wait and see" before making any further moves.

[i] For details of these actions see Dulles and Armstrong, "Can We Be Neutral?", Chapters V and VI.

[ii] Shipments of Soviet oil to Italy from October to December 1935, after war had begun in Ethiopia, are estimated at 128,900 tons, or 14.6 percent of the total sent to Italy in this period. For Persia the corresponding figures are 39,000 tons and 4.4 percent.

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  • WILLIAM O. SCROGGS, Director of Information, Council on Foreign Relations; joint author of "The United States in World Affairs"
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