On 11 November 1938 the Roosevelt administration imposed a "moral embargo" against Japan which, while not legally binding on American businesses, was voluntarily joined by enough exporters to effectively end export of
aircraft and aeronautical technology to Japan.
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On 10 February 1939 Japan seized
Hainan and a month later laid claim to the
Spratly Islands. The western powers correctly interpreted this as the opening feelers of a Japanese move south.
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By June 1939, Gallup polls showed that 72 percent of Americans favored an embargo on war materials shipped to Japan.
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[26 July 1939] the United States served notice that it would abrogate the 1911 Treaty of Commerce and Navigation in six months. This would remove legal obstacles to formal embargoes by the United States.
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Enabling legislation for an embargo did not pass into law until July 1940, following the collapse of metropolitan
France. The United States did not even increase tariffs, as required by a 1930 U.S. law regarding trade from countries with which the United States did not have a trade agreement, because the Roosevelt Administration was able to find a loophole based on an executive proclamation dating back to the Ulysses S. Grant administration! Even when the embargo legislation was finally passed, it was framed in terms of restricting exports of commodities and materiel required for the United States' own defense buildup.
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These developments finally prompted the United States to embargo sales of scrap
iron and aviation gasoline to Japan, on 22 July 1940. Both were considered critical for the United States' own defense buildup and were embargoed on that basis. Initially only gasoline with an octane rating of 87 or greater was embargoed, and only number 1 heavy melting scrap, which accounted for only 20 percent of exports to Japan. Since most Japanese aircraft engines could operate on 86-octane gasoline, the effects of the embargo were relatively mild, and the Japanese began ordering all the 86-octane gasoline they could find. Japanese gasoline purchases in the U.S. had totaled 1.2 million barrels in 1939; in the six months following the July 1940 embargo, gasoline imports from the U.S. rose to 3.4 million barrels.
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Japan responded to events in Europe by occupying northern
French Indochina and joining the
Tripartite Pact in September 1940. The combination of events was probably coincidental but appeared highly provocative. The United States responded by extending the embargo to include all scrap iron.
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Matters came to a head when Japan occupied southern French Indochina on 21 July 1941. Ten days later American
intelligence intercepted and
decoded a message from the Japanese Foreign Ministry to diplomats abroad stating that (Prange 1981):
Commercial and economic relations between Japan and third countries, led by England and the United States, are gradually becoming so horribly strained that we cannot endure it much longer. Consequently, our Empire, to save its very life, must take measures to secure the raw materials of the South Seas....
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This convinced American leaders that Japan's assurances that the occupation of French Indochina was not as a springboard for further conquests were false. The United States, Britain, and the
Netherlands responded with a complete
oil embargo.