Foreign Relations of the United States: Diplomatic Papers, 1942, The American Republics, Volume V

811.20 (D) Regulations/8407: Airgram

The Chargé in Argentina (Reed) to the Secretary of State

Buenos Aires, August 12, 1942—12:15 p.m.
[Received August 20—12:45 p.m.]

A–73. Department’s telegrams 1170 of August 7, 3 p.m., 1186 of August 8, 8 p.m., 1187 of August 8, 9 p.m.⁴⁸ It is the Embassy’s understanding of the Pool Agreement⁴⁹ that South American participants must contribute all tankers owned or chartered and all petroleum supplies, including stock on hand, local production, and future imports from sources outside of the Pool. The total quantity for which the Pool is able to supply tanker space is then prorated so that each participant will have available in the future the same total percentage quantity of petroleum. The tanker delivered quantity is the prorated percentage less all supplies from local resources.

If the Embassy’s understanding of the basic Pool Agreement is correct, which the Department is requested to confirm, should Argentina now join the Pool they would be obliged to give up:

1. All of their Argentine flag tanker tonnage.

2. All tanker tonnage which may in the future accrue to Argentina by purchase or charter.

3. Nearly all benefit from the crude oil which soon will be brought into Argentina from Bolivia.

4. Approximately 40% of present Argentine crude oil production.

5. Nearly all of any increase in production, which might accrue if Argentina were able to purchase production material in the United States.

In return for this very considerable contribution:

1. Argentina would have the knowledge that she had adhered to hemispheric solidarity to the extent that she had handled her petroleum resources in a “fair and equitable” manner, in the eyes of the United States and the other American Republics.

2. The United States would not object to further acquisitions by Argentina of such tanker tonnage as might be impossible for the United States to acquire directly; but in accordance with the Pool principle, all petroleum which might be imported into Argentina in such tankers would be shared by all of the Pool members, by the additional export from Argentine production of the prorata quantity of petroleum.

3. Argentina might be granted export licenses for sufficient drilling material to maintain her present rate of production, or even to increase it substantially, but in exchange, just as in the case of the acquirement of additional tanker tonnage, the extra production would have to be exported prorata for the benefit of the Pool members.

In view of Argentina’s attitude and actions to date, the Embassy has no reason to believe that the Argentine authorities would be willing to join the Pool on the above basis, and therefore believes that it is preferable not to make the direct proposal. In the discussion which the Embassy will hold with the Argentine authorities, the Embassy will make it clear that no more critical materials can be spared nor any export licenses issued, except that if the Argentine Government should decide to collaborate in the petroleum Pool operation, the United States Government would then be prepared to make further sacrifices, which would be justified by the way in which Argentina would lighten the petroleum transportation load now being carried by the United States Government.

Should it be that the Department would welcome the adherence of Argentina to the Tanker Pool on some basis less severe than the Embassy’s understanding of the present basis as outlined above, the Department’s instructions would be appreciated. For instance, if the Department approves, in the original discussion with the Foreign Office it might be suggested that an acceptable basis for Argentine participation in the Pool would be:

1. That Argentina would assign to the Pool all of her tanker tonnage not required for the coastwise movement of petroleum.

2. Products manufactured from all crude oil production in excess of the monthly average production during the period of July 1, 1941, to June 30, 1942, be exported to the Pool members.

Production material in considerable quantity would then justifiably be released to the Y.P.F.,⁵⁰ and to mixed companies to be formed in accordance with the terms of the present petroleum law. It would be agreed that the mixed company charters would be available to both the foreign-owned and the native-owned oil companies now operating in Argentina, so that the best of the governmental reserves would be drilled as soon as possible. (By law, the mixed companies are eligible to drill in the reserved areas.) A participation in this manner by all of the oil operators in Argentina would be sure to result in a greatly increased production within twelve months, and might even make Argentina entirely independent of outside petroleum resources, within a very few years.

There has been considerable objection on the part of Y.P.F. to the formation of mixed companies, where the other partner is one of the foreign oil companies. It may be pointed out that the existing laws of Argentina provide absolute protection to the national interests, and it is very difficult to see how anything but benefit could accrue to the nation through an all-out effort of this kind. It would be necessary for Argentina to accept the fact that Y.P.F. would be giving up any hope of having a petroleum monopoly, but it is entirely possible that Y.P.F. could retain permanently its present percentage of the market, and form a cartel arrangement with the other oil companies in the country under which they would all participate in supplying the remaining consumption.

A telegraphic reply will be appreciated.

Reed

48. None printed.
49. See section entitled “Proposal by the United States for the control of the distribution of petroleum products among the American Republics,” Foreign Relations, 1941, vol. vi.
50. Yacimientos Petrolíferos Fiscales.