Germany-Japan: The Exchange of Strategic Resources

One of the avowed war aims of the Axis powers was to fashion conquered lands and satellites into self-sufficient economic “spheres” that would serve the strategic and economic needs of each master race. During the Second World War, however, neither Germany nor Japan nor any of the wider areas they brought under their temporary control was fully self-sufficient in the raw materials and industrial techniques needed for modern warfare. Germany and her “sphere” were deficient in a large number of industrial raw materials, among which rubber and certain ferroalloys had been traditionally imported from East and Southeast Asia. Japan lacked raw materials and manufacturing skills, among them certain techniques —particularly in the chemical, machine-tool, and precision-instrument industries—which were available in Germany. The failure of the two powers to work out a satisfactory exchange, trading what they had for what they needed, is further proof of the weakness of their wartime alliance.

When the Second World War broke out in Europe, there existed no general program for economic or technological coordination between the two countries. The recent Russo-German pact had left the Japanese in no mood to collaborate. A general economic treaty, considered by the two countries for over a year and finally initialed in late July 1939, was suspended by the Japanese in early September in the wake of the political rupture between the two nations and because of the difficulty of conducting ordinary business transactions with German companies under wartime conditions.

In the fall of 1939, the outbreak of the war in Europe naturally affected the German economy more decisively than it did the Japanese, because Germany’s new status as a belligerent and the British blockade cut her off immediately from some of her most important overseas sources of imports. By contrast, Japan still had access to the American market and to the raw-material resources of Southeast Asia on which her war economy primarily depended. Her peacetime pattern of trade had been only slightly affected by the undeclared Sino-Japanese war and the recent (July 1939) American decision to cancel the Japanese-American trade treaty as of early 1940.

Germany therefore depended on Japan more than Japan did on her. In particular, the Germans expected Japan to defy the British blockade and to provide the Reich with materials produced both in the area which Japan controlled politically and militarily (Japan, Manchuria, and parts of China) and in other countries, primarily of Southeast Asia and South America, where Japan could act as a purchaser of German imports. Unfortunately for Berlin, the condition of the Japanese economy and the policy of her government during the period of the “phony war” made a defiance of the British blockade neither feasible nor desirable from the Japanese point of view. Japan’s own dependence on the markets of the Empire and of other areas in part susceptible to British influence made it inopportune for her to risk British displeasure for the sake of Germany.

Political considerations such as these were chiefly responsible for the limited amount of assistance which Japan lent the German war economy during the first few months of the war. Economic considerations also played a role, though smaller, Germany’s cancellation of a number of Japanese orders for heavy equipment contracted before the outbreak of hostilities and heavy German commitments for the export of capital goods to the Soviet Union (in the wake of the German-Soviet pact) convinced the Japanese that they stood to obtain little from those sectors of German industry in which they were anxious to place their heaviest orders.

A Trickle of Aid

To recount in detail the story of Germany’s disappointment over inadequate Japanese assistance during the “phony war” would be tedious. It will be sufficient to mention a few of the areas in which Japanese aid fell sorely short of German expectations. One critical area for Germany was that of edible oils and fats, since domestic production provided only 60 per cent of the amount needed. Before the war, imports of soybeans and similar crops from Manchuria had played an important role in closing the German “fat gap ‘ (Fettlücke). With the outbreak of the war, German imports dropped precipitately; during the “phony war” period, German soybean imports from Manchuria sank to about 4 per cent of their prewar level; during the second half of 1940, they climbed back to about 12 per cent of their prewar level, while during the first half of 1941 they approached only 30 per cent.

The steep decline of German soybean imports was felt all the more bitterly in Berlin since ample means of transportation from Manchuria were available during the first twenty months of the Second World War. In fact, as early as September 1939, the Soviet Union had granted Germany a 50-per-cent reduction in freight rates for the shipment of soybeans over the Trans-Siberian Railroad. This favorable arrangement was renewed in the German-Soviet commercial treaties of early 1940 and early 1941 and continued in force down to the outbreak of the Russo-German war. Against this background of Soviet cooperation, the Germans held the Japanese solely responsible for frustrating German bean imports from Manchukuo. Specifically, the Japanese were accused of succumbing to British pressure to cut bean exports to the Reich, and of having reduced the amounts available to Germany by their own increased purchase of Manchurian beans. It is perhaps further evidence of an inability or failure of each country to imagine the point of view of the other, a weakness already noted more specifically earlier, that Germany ignored the hostility she had invited among the Japanese by her pact with Russia. Thus the German charges could well have been true, if curiously unimaginative. In any case, there is no doubt that Japanese exports to Germany from areas under her immediate control fell far below what Berlin had anticipated.

Germany fared hardly better with her hopes that she would benefit from Japanese purchases on her behalf in Southeast Asia and South America. Berlin was most interested in having Japan purchase rubber in Southeast Asia, tin in Malaya and South America, and a number of ferroalloys in China and Southeast Asia, without which German steel production was gravely handicapped. No specific import figures for the period of the “phony war” are available, but a study by OKW’s Office for War Economy and Armament of September 1940 gives totals for Japan’s purchases on behalf of Germany during the entire first year of World War Two.

Rubber, for example, was one of the strategic commodities which Germany had previously imported largely from Asia. Despite the progress of her synthetic-rubber production, Germany was still dependent in 1939 on imports of natural rubber, because the synthetic needed an admixture of natural rubber and still met only a part of the German need. The great hopes placed in Japan were once more disappointed, since Japan managed to purchase no more than 2800 tons of rubber on Germany’s behalf, under 5 per cent of Germany’s annual peacetime imports from Asia. The Germans therefore were very short of rubber during the first nine months of the war, particularly since German rubber stockpiles at the beginning had covered only a two-months supply. In June 1940 the situation eased considerably when large Dutch and French stocks of raw and manufactured rubber fell into German hands. By this time Japan also seemed to change her attitude toward the German war economy’s needs.

The story of tin and tungsten is similar. With Japan’s help, Germany was able to acquire during the first year of the war somewhat over 5 per cent of her prewar annual tin imports from Asia and somewhat less than 5 per cent of her prewar tungsten imports.

In some respects, however, the German shortages of tin and Far Eastern ferroalloys turned out to be less damaging to her war production than might be expected from the crude comparison of prewar and wartime import figures. For one thing, German stockpiles in almost all the nonferrous metals and ferroalloys were considerably larger than her rubber stockpiles at the outbreak of the war. Tin and tungsten reserves, for instance, were adequate for approximately one year and alternative supplies were available in Europe. Moreover, booty from the occupied countries and scrap drives at home made up in part for the imports which were no longer available. Most significantly, however, technical ingenuity permitted the production of less highly alloyed steels with little loss in quality, which meant that, despite sharply curtailed imports, German steel production was never seriously hampered by a shortage of ferroalloys.

Since Japanese purchasing of the materials requested by Germany was still unhampered during the first twelve months of the war by the British policy of “control at source” (pre-emptive buying, etc.) which became so important after the autumn of 1940, and since Germany apparently made adequate supplies of currency available to Japan, the conclusion that Japan made fewer exertions on Germany’s behalf than she might have made seems unavoidable. The heavy blow dealt to German-Japanese relations in August 1939 accounts for the very modest exertions which Japan made on behalf of her former friend during the opening months of the European war. The late summer of 1940 marks, here as elsewhere, a turning point in German-Japanese relations, While the German ambassador had spoken as late as the second half of April of “serious German displeasure [Verstimmung] caused by the inadequate economic support on the part of Japan,” a mutually more advantageous though not always agreeable relation was worked out after the fall of 1940. The political rapprochement of the two powers, the acquisition of greater Japanese control over the resources of Indo-China, and the continued availability of overland communications through Siberia—all these three factors account for the more intensive economic relations between the Axis powers in the period from the autumn of 1940 to June 1941.

Cooperation and Competition

In Indo-China, Germany could now purchase directly, since hostilities with France had ceased. In Thailand, the German purchasing organization had been improved since the beginning of the war. Even so, German raw-material purchases proved difficult and less rewarding than she had expected. Where the Reich had previously battled British blockade measures, she now found herself competing with Japan in those parts of Southeast Asia which were newly accessible to her. The amounts of the Indo-Chinese rubber harvest of 1940 which had not been sold at the time of the Franco-German armistice were quickly bought up by the Japanese and the Americans and eluded Germany. But with her close relations to Vichy, Germany could expect to obtain a sizable portion of the total 1941 harvest, estimated at some 70,000 tons. Although Germany had played a distinctly minor role in the Indo-Chinese rubber market before the war, she now concluded agreements with France (in September 1940 and January 1941) which allotted to her 25,000 tons of the anticipated 1941 production. A substantial share of the French quota of 18,000 tons was also promised to the Reich. The German effort to secure such a considerable share of the 1941 harvest ran into immediate opposition from Japan, however. Japan’s objections to the impropriety of direct Franco-German dispositions concerning Indo-China have already been mentioned. Yet Japan did not object for reasons of prestige alone. The allotments to Germany and France and the 25,000 tons assigned to the United States (in order to acquire badly needed dollars for the French colony) threatened to leave Japan with practically no rubber imports from Indo-China. Japan was by now feeling the effects of Britain’s policy of “control at source,” which was directed against both Germany and herself. With imports from Malaya and the Dutch East Indies curtailed, she competed more fiercely with the Reich for a share of Indo-Chinese rubber production.

In the end, and as a result more of competition in the market than of political agreement, both nations were remarkably successful in obtaining the share they had wanted, Germany secured for herself the whole 25,000 tons, out of which she had initially promised to satisfy Japanese demands, and Japan acquired almost that much, at the expense of the shipment initially intended for the United States. Despite the lack of any formal agreement, the situation seemed tolerable for both sides.

It might seem that the Japanese occupation of French Indo-China (the northern part in September 1940; the southern in July 1941), reducing the political influence Germany might exercise there via Vichy, should have added to the German-Japanese strain. But on balance Germany profited economically from the military hold which Japan, partly with German assistance, had established over the French colony. Without Japanese occupation, the British policy of pre-emptive buying, supported by the United States, would have greatly reduced the rubber quota available to the Germans. Instead, Japanese pressure on the French authorities in Indo-China probably explains the colony’s failure to cooperate fully in British economic warfare—a cooperation initially promised by the French early in 1941. In the absence of Japanese garrisons, a pro-de Gaullist uprising might have removed Indo-China completely from German influence.

Whatever the extent of Japan’s indirect assistance to Germany by virtue of her military presence in Indo-China, her aid in matters of transportation during this phase of the war is beyond doubt. All the Indo-Chinese rubber that reached Germany via the Trans-Siberian Railroad during the first five months of 1941 (some 12,000 tons) had been transported from Indo-China to Manchuria in Japanese bottoms. Additional quantities had in fact been taken by Japanese vessels to Manchuria, where they could not be loaded because of the outbreak of the Russo-German war.

The German success in obtaining rubber, however, obviously owed much to a special combination in Indo-China, Neither a general plan nor Japanese determination to cooperate assured as much success with other materials, as the quest for nonferrous metals and ferroalloys showed. No German or Japanese figures are available and it is necessary to rely on Russian data for transshipments from the Far East. According to Stalin, the following commodities passed through the Soviet Union from the Far East in this period: 1,087 tons of tungsten ore (compared with a German annual prewar import of 9,000 tons from China alone); 587 tons of tin ore and 538 tons of tin (compared with prewar annual imports from China and the Dutch East Indies together of about 13,000 tons of ore); 260 tons of antimony ore and 42 tons of antimony (compared with a prewar annual import of about 2,600 tons of ore from China alone). Again, as in the first year of the war, imports of these metals from the Far East satisfied only a fraction of Germany’s annual needs. But for reasons already mentioned (and also because ferroalloys were made available by Spain, Russia, and Finland) Germany’s failure to obtain more of these metals from East Asia did not restrict the German steel industry seriously.

Several factors will suggest why Japan’s help in the procurement of these metals was not greater. Just when the Japanese became politically ready to aid the German war economy by purchases in third countries, the British shifted their blockade effort from control at sea to control at source. Pre-emptive buying in areas under British control and in the Dutch East Indies thus reduced the amounts Japan was able to import, and consequently to re-export to Germany. Since Germany’s enemies considered her shortage in ferroalloys to be one of the chief bottlenecks in her war industry, their pre-emptive buying and export controls were particularly stringent and effective in the case of these metals.

The areas which Japan controlled directly produced only a small share of the metals requested by Germany. Indo-China, partly subject to Japanese control and the main source of Germany’s rubber imports during this phase of the economic war, produced few of the required metals in sufficient quantities. China’s production of these metals, it is true, was more abundant than Indo-China’s. Yet Japan’s partial occupation of China was of relatively little use to her or her ally, since most of the tin and tungsten production took place in Free China where the whole output was under government control. There the amounts produced in 1940 and 1941 had been allotted to the Soviet Union and the United States, where they served as collateral for some of the loans Chungking had secured, particularly those from Washington.

Furthermore, Japan herself was experiencing shortages in the very materials Germany requested her to purchase. This was due in part to the Allied policies already referred to, but also to the Japanese policy of stockpiling for a war which seemed to come ever closer. With limits on her own metal imports from China, the Dutch East Indies, the British colonies, and America, Japan reserved whatever amounts she could secure exclusively for her own needs. Japanese pressure on Saigon, for example, helped her acquire practically all of Indo-China’s 1941 metal production for her own needs. When the Germans tried to obtain guarantees of delivery from the French, as they had for rubber, they were told that the disposition of metals was out of the hands of Vichy. Finally, after July 1941, Japanese buying, both for Germany and for herself, was drastically reduced as a result of the American, British, and Dutch embargoes, and so was Japan’s capacity to re-export strategic materials to the Reich.

By this time, however, an even more significant obstacle to German-Japanese economic exchanges had arisen with the closing of the Siberian overland route after June 22, 1941. Several of Hitler’s advisers had tried to dissuade the Führer from the attack on the Soviet Union by calling attention to the serious economic consequences of the rupture of Germany’s last overland connection with the Far East. But Hitler decided, as Keitel aptly phrased it, “not to let himself be influenced by these economic difficulties.”17 What was a minor consideration for the German leader proved to be for the British “the real turning point in the economic war.”

Transportation Problems

Just as Germany began to make sure of her sources of supply—with the aid of a better purchasing organization in Southeast Asia established after Wohlthat’s arrival in Tokyo in late April 1941—her road from the Far East was cut. As if to increase the irony, the supplies waiting for her at the end of the blocked road grew to enormous proportions after Pearl Harbor, when Japan put large quantities at Germany’s disposal out of the stocks and supplies she had conquered in the south. German raw-material stocks accumulated in Far Eastern ports and warehouses to the point where insurance and storage charges became a real burden. By December 1941 total German stockpiles in the Far East amounted to about 90,000 tons; a considerable portion of this amount probably consisted of soybeans and other oil-producing substances and oils stockpiled in Japan proper or in Manchuria. From 1942 on, extensive German stocks of some of the Southeast Asian raw materials accumulated in Japanese and Malayan warehouses. In July 1942 the German purchasing mission in Tokyo reported to Berlin that Japan had put a total of 60,000 tons of rubber from the 1942 harvest at Germany’s disposal. One thousand tons of tungsten had also been promised, though on the whole the procurement of tungsten still proved difficult even in Japanese-dominated Asia. In most other respects, German-Japanese competition for raw materials now gave way to an expansive generosity on the part of the Japanese, who had brought the produce of Malaya and the Dutch East Indies under their control and who, no doubt, also attempted to improve their own chances of obtaining German economic aid by making generous offers of raw materials.

With transportation a critical need by early 1942 and an overland route out of the question, Germany had to consider the possibilities of shipping by sea. French shipping had aided in the transport of Indo-Chinese raw materials to Axis Europe in 1940 and 1941 but seems to have played no role after Pearl Harbor. Japan had suspended shipping to Europe after August 1940 and was unable or unwilling to put vessels at Germany’s disposal for the purpose of blockade running. Germany therefore had to fall back on her own ships and a few that Italy made available. In addition, a number of German merchant ships had either been caught in Japan at the time the war broke out in Europe or had escaped to Japan from British and South American waters afterward. With that small fleet, the blockade was challenged.

German and Italian blockade-breakers operated during a total of four shipping seasons, one prior to the German-Russian war and the others in the three winter seasons that followed. For all practical purposes, blockade running was restricted to the period from October to March, when heavy fog and bad seas in the Atlantic, where interception was most effective, hindered the hunters more than the hunted.

Of the five ships that had started on their way to Europe before June 1941, three reached their destination.20 During the 1941-1942 season, eleven ships in all were sent from the Far East to Europe. All took the route through the South Pacific and around Cape Horn, with remarkable success. Nine ships reached Europe safely, one was intercepted by American forces in the Atlantic and detained, and only one was sunk—by a German submarine by mistake.

The departures from the Far East during the next shipping season were even more numerous, though the number remained behind earlier goals. Sixteen ships left the Far East, but only four reached Axis Europe. Among the other twelve, four returned to Japan or were recalled, two were sunk, and six scuttled themselves when they were intercepted by the Allied blockade. Most of these losses occurred in the North Atlantic or the Bay of Biscay when the ships had completed nine-tenths of their voyage. The route during the 1942-1943 shipping season was around the Cape of Good Hope, where Japanese control of the eastern Indian Ocean presumably gave the ships a certain measure of protection. The Allied occupation of North Africa after November 1942 and the consequent control of the sea approaches to southwestern Europe explained the drastic decline in successful blockade breaking from one year to the next. During the winter of 1943-1944, results were even more disastrous. Only five ships departed from the Far East, and only one of them reached Europe. Blockade breaking with surface vessels was therefore abandoned.

In spite of the tremendous losses sustained, especially after late 1942, the blockade-runners had contributed much to the German war economy. During the four shipping seasons from 1940-1941 to 1943-1944, more than 200,000 tons of cargo were sent to Germany from East and Southeast Asia and over half of it reached the Reich. Of that half, 44,000 tons were rubber, over 50,000 tons edible oils and fats, over 6000 tons metals and ores (an exact breakdown is not available), and the remainder minor quantities of mica, quinine, wood oil, tea, etc.

The heavy losses of the 1942-1943 season had already turned the German government’s attention to the possibility of blockade breaking by submarine. In January 1943, Hitler gave orders to build special cargo submarines with a loading capacity of 500 tons. Twenty boats were scheduled to be completed by mid-1944, after which, it was estimated, Germany might count on them to ship 20,000 tons from the Far East annually (20 boats times 2 annual trips times 500 tons).24 In the meantime, standard submarines with a very much smaller loading capacity (seldom much over 200 tons) had to be put in operation. The Italians, who had contributed four surface vessels to run the blockade, now made a number of submarines available. The Japanese, too, were prevailed upon during the latter part of 1943 to participate with two submarines in the blockade-running program.

Despite the apparent superiority of submarines on some counts—their ability to escape detection and sail year round—they fared badly. Allied radar had made such progress by the time the submarine program got under way in the second half of 1943 that the losses were almost as heavy as were those of the surface vessels. A large number of boats were lost on the way to the Far East. Many others could not make the return journey because of damages sustained en route or the need for extensive repairs. Of the twelve submarines that left Japan for Europe, only four reached their destination. Of the two Japanese submarines, only one reached Europe, and it was lost on the return voyage.

The results of the submarine transport program, if measured in bulk alone, can hardly have been large. The maximum cargo that could have reached Europe on the five boats which made the trip safely may have been around 1000 tons. To judge from the loading schedule of one of the boats, most of this tonnage must have consisted of rubber, with some tungsten and small amounts of quinine and opium.