Memorandum by Mr. Emilio G. Collado, Special Assistant to the Under Secretary of State ( Welles )64

There are attached telegrams 1465 and 1477 from Santiago65 in which Ambassador Bowers urges strenuously that the reduction in tanker deliveries to 40% for civilian needs not be put into effect in Chile ever or, at least, until after the visit of President Ríos. There are also attached memoranda66 by Mr. Thornburg67 and Mr. Norden68 regarding the Chilean oil situation.

The problem may easily be resolved down to its bare bones:

Ambassador Bowers states that a reduction in oil supplies to Chile below 60% of 1941 level for “civilian uses” may threaten disruption of the national economy.
Chile actually receives more petroleum proportionately than any of the other American republics since its “war essential” uses are very heavy—copper companies, nitrates (the biggest increase), et cetera. If we average all shipments to Chile, deliveries are actually at a rate of 101% of 1941, a somewhat irrelevant figure.
Chile has been warned repeatedly since January that it will have to curtail civilian consumption of gasoline and other products. Nevertheless, its consumption of aviation gasoline was up 48.4% during the first seven months of this year, kerosene up 30.6%, and motor gasoline up 1.9%.
The Embassy has been repeatedly warned that consumption must be cut. On June 29 the Department advised Ambassador Bowers to inform Chile that the cut would be to “less than 50%”. This reduction was to be effective August 1, but in reality took effect [Page 114] nearer September 1, as products scheduled or en route were not affected. Mr. Welles at meetings of the Inter-American Economic and Financial Advisory Committee repeatedly discussed the situation, advising of a cut of not more than 40% at the August 6 meeting. Thus there seems to be no basis for the Ambassador’s statement that Chile heard of the reduction only on September 12.

Since the supply of tankers for American republics’ needs is fixed (in fact, declining due to sinkings), we can provide more petroleum to Chile only by taking it away from one of the other republics. Brazil and Uruguay have already been put on a 40% basis, and they are the only countries from which tankers could be taken. Any increase in deliveries to the three countries could be done only by removing tankers from other areas—that is, from direct war uses in Australia, England, et cetera. This I believe the Department would hesitate to request.

I agree with Mr. Thornburg that there is no permanent solution to this problem short of an amelioration in the war situation and the construction of additional tankers. Nevertheless, as it is of the greatest political expediency, the effective date of this cut can probably be made September 15 or October 1. I do not see how it can be postponed any further.

In the absence of Mr. Thornburg, EO68a is attempting to keep certain of these petroleum matters moving and I should appreciate your directions as to whether we should ask the Petroleum Pool to make the effective date September 15 or possibly October 1.

Emilio G. Collado
  1. Addressed to the Secretary of State and the Chief of the Division of the American Republics (Bonsal). Mr. Bonsal added the notation: “I suggest postponement to Oct. 1.”
  2. Dated September 11, 3 p.m., and September 12, 11 p.m., and printed, respectively, on pp. 110 and 112.
  3. Not printed.
  4. Max W. Thornburg, Petroleum Adviser.
  5. Carl F. Norden, Consul at Paramaribo, assigned to the Department.
  6. Board of Economic Operations of the Department of State.