812.6363/6354½
Memorandum by the Under Secretary of State (Welles) of a Conversation With the Mexican Ambassador (Castillo Nájera)
[For the first part of this memorandum on the subject of agrarian expropriations, see page 664.]
[Page 715]I then passed to the subject of the oil problem and said to the Ambassador, after a few moments discussion, that since he now confirmed to me what Mr. Richberg said, namely, that both the Mexican Government and the oil companies had reached the conclusion that negotiations were now impossible, it seemed to me that there was no solution now available other than arbitration. The Ambassador inquired whether I meant arbitration as to the value of the properties. I said that I did not but that I was not prepared at this stage to give him any indication as to what this Government believed arbitration should cover. I said that I hoped within a few days to ask the Ambassador to have another conversation with me when I might explain to him by authorization of the President and after the Secretary of State had had an opportunity of giving fullest consideration to the problem, what the views of this Government with regard thereto might be.
In conclusion I stated to the Ambassador that the Secretary of State had requested me to say to him that now that the generalization of duty reductions on petroleum imports was to become effective within the next few days and that under the allocation of quotas determined upon by this Government Mexico would be enabled to compete for the 3.8 percent of imports allotted to countries not accorded a specific quota, if Mexico attempted to export to the United States any petroleum from expropriated properties Mexico would create such a storm of indignation in the United States as to have very seriously prejudicial effects upon the friendly relations between the two countries. I said that the Secretary of State and I both hoped for this reason that the Government of Mexico would take effective steps to see that no petroleum from Mexico was exported to the United States. The Ambassador took this statement very calmly and said that he understood our point of view and would communicate immediately with his Government in that sense.