298 Mr R. G. Menzies, Prime Minister, to Mr S. M. Bruce, High Commissioner in London

Cablegram unnumbered 29 May 1940,

Your 358, Timor. [1] Your views and proposals generally concurred in, as it seems evident that Oil Concessions are not now in position to carry out undertakings.

As to your alternatives, it is felt (2) should be adopted, as once existing concession is allowed to lapse, there will not only be great difficulty and delay in obtaining another but the whole territory would again be open to competition at a time when Portugal may not be able to resist Japanese pressure.

Consequently, and with a view to keeping concession alive until major companies can obtain modifications or replace it with a new concession altogether, you are authorized to agree to advance on behalf of Commonwealth Government the 500 or 1000 necessary for the statutory payments to be made at Lisbon.

This advance to be repaid by major companies when they take over from Oil Concessions.

The close attention now being paid to Netherlands Indies area by Japan renders early decision and quick subsequent action most advisable, and I would be glad if you could expedite proposed meeting to this end. [2]

MENZIES

1 Document 278.

2 Negotiations between Oil Concessions Limited and the Anglo- Iranian, Shell and Standard Vacuum oil companies continued for several months. On 28 October 1940 an agreement was signed providing for the transfer of the concession to the oil companies in return for an immediate payment to Oil Concessions Limited of 12 000 and further payments of 5000 and 16 000 when the daily production of oil reached 50 and 500 tons respectively. The initial 12 000 was advanced by the Commonwealth and United Kingdom Govts, who were to be reimbursed in instalments by the oil companies if the field was developed. The Portuguese Govt agreed to extend the deadline for the commencement of development work for six months from the original expiry date of 22 November 1940.

See file AA: A981, Timor (Portuguese) 22, v.

[AA: A981, TIMOR (PORTUGUESE) 22, v]