File No. 825.6374/304

The Acting Secretary of State to the Chilean Chargé ( Munizaga Varela )

No. 81

Sir: The Department has received with much pleasure your note of the 25th instant wherein you state that you had received a telegram from your Government requesting you to inform the Government of the United States that the difficulties regarding petroleum [Page 713] have been adjusted, and that the embargo placed on the reservoir has been raised.

The telegram from your Government also states that all the difficulties over the embargo have been now adjusted not to occur again, and referring specifically to the German embargoes at Iquique and Tocopllla, states that they “have been adjusted and the Government guarantees they will not occur again, and that nothing hereafter will disturb the free production of nitrate.”

You conclude your note by expressing the hope that the United States Government, on the strength of the contents of the telegram above quoted, will issue the orders needed to make inoperative the measures taken in the matter of importing petroleum and lubricants that are urgently needed by Chile for the production of nitrate and the operation of the Chilean railways.

In reply I am glad to be able to inform you that relying upon your Government’s above-mentioned guarantees, the War Trade Board has resumed the granting of licenses for the exportation of petroleum from the United States destined for Chile.

The action of the War Trade Board in refusing to sanction exports of petroleum to Chile has been the result of the litigation in the Chilean courts against the Union Oil Company and the International Petroleum Company, which in turn resulted in a situation by which exportation of oil would be indirectly trading by the Union Oil Company and the International Petroleum Company with oficinas in Chile belonging to enemies of the United States. Since the Union Oil Company and the International Petroleum Company still remain subject to the operations of the Statutes of the United States, the War Trade Board assumes that consistently with the assurances received in your note of July 25, the decree hereinbefore entered in the suit of Gildemeister, which brought about the embargo of oil to be imported into Chile from the United States, will be vacated, and that a new decree to that effect will be formally entered upon the court record.

It is further assumed in view of your assurances that the existing litigation against the Union Oil Company asking for the same remedy granted against the International Petroleum Company will be withdrawn, and that a formal court order designating the litigation will be entered.

The Department would be glad to be informed if its above-mentioned assumptions are not correct.

Accept [etc.]

Frank L. Polk