821.6363 Barco/445: Telegram

The Minister in Colombia ( Caffery ) to the Secretary of State

17. My telegram No. 11, January 29, 2 p.m. Rublee handed me today following memorandum of which I respectfully suggest substance be transmitted immediately to Gulf Company:

“President Olaya told Rublee today that he wished to submit five modifications of the Barco contract for the consideration of the Gulf Company. He said that absolutely no further modifications would be suggested. The President stated he did not insist upon the acceptance of the five modifications in question and would sign the contract in the [Page 21] form agreed upon in case the Gulf Company should refuse to accept them. In his judgment however it would be in the interest of both parties to incorporate them in the contract since this would enable the Minister of Industries to defend the contract more aggressively before the Congress and substantially improve the chance of securing its approval. There are only two of the proposed modifications which the President regarded as really important, namely,

(a)
One which requires the maintenance of the agreed minimum production provided that the wells have the necessary productive capacity and that the petroleum can be produced without loss.
(b)
One which fixes a definite term at the close of which exploitation must begin or the contract terminated.

Of these two the President considers the latter as much the more important. He said that the Congress is obsessed with the idea that the oil companies seek concessions in Colombia not for the purpose of production but for the purpose of creating reserves. The President said that he did not share the view but that it was an influential factor in the situation which must be reckoned with. He thought that unless the contract specifies some definite term when exploitation must commence there is serious danger that the opposition in Congress may succeed in preventing the approval of the contract. The President said that the term might be a long one. Rublee suggested a term of 10 years. The President thought this acceptable. Rublee has communicated the five modifications proposed by the President to Folsom who is cabling them to Wallace23 today”.

In my opinion the acceptance of these modifications by the Gulf would have beneficial effect upon treatment of the contract by the Congress, and especially the suggestion as to definite term when exploitation must commence.

[Paraphrase.] I think it would be well to indicate to Gulf that their conception of the situation in regard to the Barco controversy is apparently erroneous. Gulf seems to think that the Colombian authorities are really very anxious to enter into a contract with them; that it is simply a matter of negotiations between them and the Government of Colombia. As the Department is aware, the facts are very different. The Colombian authorities are proceeding with the negotiations principally because they think the Department desires them to do so. In fact, the Government of Colombia might be inclined to drop the whole matter did not the present administration feel under certain definite obligations to the Department and to this Legation. Otherwise the administration might possibly welcome negotiations with well-known British companies which have expressed interest in the territory. As the Department is also aware, the possibility of the Supreme Court deciding in favor of Gulf in their suit is so extremely remote that it is not worth discussing. In the [Page 22] meantime both Rublee and I are doing our best to obtain the best possible terms for the Gulf. [End paraphrase.]

Caffery
  1. William T. Wallace, Vice President of the South American Gulf Oil Company.