Dollars without the Flag: The Case of Sinclair and Sakhalin Oil

Abstract

OCCASIONALLY a single international business transaction acts as a prism through which a ray of diplomatic history may be directed in order to isolate separate components. The contract signed in January 1922 for the exploration and development of oil deposits in the northern part of the island of Sakhalin offers such an opportunity. It reveals the unsoundness of a policy directed toward maintaining equal economic opportunity when unsupported by adequate force. At the same time it illustrates how American refusal to recognize the Soviet Union undermined the balance of power in the Far East during the 1920s. Washington's failure to assist its own advance agent of economic expansion served only to accelerate Japanese military and economic aggression and to increase the threat of open hostility in the Far East. Japanese power in Asia became obvious to the rest of the world during the Russo-Japanese War of 1904-1905. The Twenty-One demands upon China made under cover of World War I and Japanese actions in 1918-1919 during the joint Japanese-American intervention in Siberia removed any reasonable doubt about Japan's selfassigned role in the power structure of the Far East. The withdrawal from Siberia of American forces, never sufficient in number and without a clear enough purpose to restrain the Japanese, and the monotonous rise and fall of factional combinations which passed for civil government in the Russian Far East combined to offer a fertile field for Japanese expansion. Nor could China offer effective resistance. Consequently, Japanese power on the continent grew apace and, using the Nikolaievsk affair as a pretext, Japan in July 1920 moved troops into the Russian portion of Sakhalin.