My despatch 9th February No. 22. [1]

The Netherlands Minister [2] informed the Foreign Office on 24th
February that the Japanese Government were renewing pressure on
the Portuguese Government to obtain oil concessions in Portuguese
Timor and asked whether His Majesty's Government in the United
Kingdom would be prepared to put pressure on the Portuguese
Government to dissuade them from granting any concession in Timor
to the Japanese. He was informed that our interests and those of
the Netherlands Government in this matter were identical and that
the possibility of instructing His Majesty's Ambassador at Lisbon
[3] to raise the matter with the Portuguese Government would be
further considered.

On 22nd February, His Majesty's Ambassador at Lisbon reported that
the Portuguese Minister for Colonies [4], despite previous verbal
undertakings to the contrary, had stated that he could not grant
concessions for western parts of the Island to Oil Concessions
Limited outright but that he would be prepared to award the
western area to Wittouck [5] and if satisfactory arrangement could
be reached by Asia Investment Company and Oil Concessions Limited
to sanction transfer to Oil Concessions. On 29th February however
His Majesty's Ambassador reported that after discussion with the
Portuguese Prime Minister [6], the Minister for the Colonies had
informed the representative of Oil Concessions Limited that it
would be difficult at present to authorize such transfer. The
Minister had remarked that neither His Majesty's Government in the
United Kingdom nor His Majesty's Government in the Commonwealth of
Australia had made any official demarche with regard to the
western area. It is understood that the Minister hopes that his
hand may be strengthened by a statement either that the award of a
concession to the Japanese would occasion anxiety to His Majesty's
Governments or that His Majesty's Government in the United Kingdom
and His Majesty's Government in the Commonwealth of Australia
support the application of Oil Concessions Limited.

The Director of Asia Investment Company has informed Oil
Concessions Limited that Wittouck will be prepared to relinquish
his rights in Timor and to make every effort to obtain concessions
for the western area which, if obtained, he will transfer to Oil
Concessions Limited in return for cash payment of 25,000 and 25
per cent of the shares issued or to be issued by the Company which
exploits the area at present held by Oil Concessions Limited. This
offer is apparently unacceptable but subsequent enquiry shows
Wittouck may be prepared to reduce his terms to cash payment not
exceeding 50,000.

The Lisbon representative of Oil Concessions Limited [7] now in
London has represented that the decision of the Portuguese
Government not to award concessions to his firm outright is
undoubtedly due to Japanese pressure and that, if Wittouck
realises the position, there is distinct possibility of his
raising the price or selling out to the Japanese. He stated that
western area though it might be petroliferous had not been
surveyed and he did not think it a sound commercial proposition
for his company to pay a large sum to obtain this area. He raised
the question whether Hs Majesty's Government in the Commonwealth
of Australia would wish to participate in the company and give
financial support.

The Netherlands Minister at Lisbon [8] has intimated to His
Majesty's Embassy that the Netherlands Government would be
prepared to make financial sacrifice in order to prevent the
Japanese from obtaining a footing in Timor.

We should be glad to receive the observations of the Commonwealth
Government as to any action which they would wish to see taken.