The Prize, Chapter 16 Overview

The Prize, Chapter 16 Overview

In chapter 16, we return to Asia and learn about Japan’s incentive to engage in a war. Several reasons accounted for this shift in military expansionism: vulnerability due to its lack of natural resources, economic hardship from the Great Depression and the collapse of world trade, dwindling access to international markets, extreme nationalism, moral distress, arrogance, and the mystical belief in the superiority of Japanese culture as well as “The Imperial Way” (Asia under Japanese control).

When Prime Minister Osachi Hamaguchi won a large election victory in February 1930 and favored cooperation with Britain and the United States, he was assassinated by a youth, and that killed any spirit of cooperation. Ultra-nationalism took hold thereafter. After being reprimanded for its actions by the League of Nations (United Nations), Japan left the League, rejected liberalism, capitalism, and democracy as engines of weakness, and embarked on its own destructive course. The Emperor sought to establish a “national defense state” in which all resources, especially oil, were targeted for war based on Germany's failure/defeat in WWI from lack of resources (oil).

Japan was a good example of the desperation that comes from lack of energy security and independence. By the late 1930s, Japan produced only 7% of the oil it consumed. It imported the rest, with 80% coming from the U.S., and 10% from the Dutch East Indies. Japan sought to dominate the oil industry to serve its needs. Up to that time, 60% of its internal market was held by two Western companies (Rising Sun & Stanvac). Rising Sun was the Japanese affiliate of Royal Dutch/Shell, and Stanvac was a joint venture between Standard Oil of New Jersey and Standard Oil of New York. In other words, even in cases driven by national interests, the global companies are ever-present.

As with the Middle East experience we saw in Chapter 15, sometimes national feelings toward another country or culture clashes with the reality of dependence, especially with oil. With Japan’s actions, the United States emerged as Japan’s antagonist in the Pacific, as the U.S. had an “open door” policy which was counter to Japan’s strategy. With the U.S. as Japan’s major oil supplier and likely antagonist, the question was where was Japan going to get its oil in case of war? To help address this, the military won passage in 1934 of the Petroleum Industry Law, which gave the government the power to control imports, set quotas, fix prices, and make compulsory purchases. The underlining objectives of the law were to build up refining industry, reduce the role of foreign companies, and prepare for war. The oil companies, U.S., and Britain all recognized and disapproved of the “squeeze and restrictive oil” policies of Japan.

Japan didn’t want any disruption of its oil supply and passed the Synthetic Oil Industry Law which provided a 7-year plan to produce synthetic fuels from coal by 1943. Japan began to establish industrial self-sufficiency and to break its dependence on the U.S. in anticipation of an oil embargo. But in the meantime, it needed to ensure supply and ironically kept buying gasoline from America. This rings of the current paradox we see with Russian oil and the European countries.

With the increased escalation and tension, an embargo was virtually the only way left, and on July 25, 1941, the U.S. ordered all Japanese financial assets in the U.S. frozen. While it was not an embargo, a lack of assets to buy oil virtually turned it indirectly into an embargo. On July 28, Japan, as expected, invaded Indochina, taking another step towards war. Effectively, by August 1, 1941, there were no more oil exports to Japan from the U.S. Japan’s oil situation was so serious that there were some last-minute diplomatic efforts to avoid the confrontation in addition to intense discussions between the Emperor and his top military generals.

With the Pearl Harbor attack, even though it was not the only reason for the war, Japan, however, made one grave mistake – not sending a third wave to attack the oil supplies and repair facilities on the island of Oahu. All oil on the island had been transported from the mainland. Thus, the destruction of the oil reserves and tanks holding them at Oahu would have immobilized every ship of the U.S. Pacific Fleet not just those destroyed, accomplishing exactly what the Japanese original intention had been. The sparing of the aircraft carriers, the oil, and repair facilities ended up being the only good fortune of the U.S. on that day. “Oil had been central to Japan’s decision to go to war. Yet the Japanese forgot about oil when it came to planning Operation Hawaii.”