Memorandum of Conversation, by the Under Secretary of State (Welles)

Participants: Venezuelan Ambassador, Sr. Dr. Don Diógenes Escalante;
Venezuelan Attorney General, Dr. Gustavo Manrique Pacanins;
Under Secretary, Mr. Welles

The Ambassador of Venezuela called to see me this morning, accompanied by Dr. Gustavo Manrique Pacanins, Attorney General of Venezuela.

The Ambassador took no part in the conversation and Dr. Pacanins made the following statement:

He stated that he had been sent to the United States with a personal letter from the President of Venezuela addressed to the President of the United States which he hoped he would be afforded the opportunity of handing the President. I told him that I would of course be glad to request that these arrangements be made at the White House.

The purpose of the visit of Dr. Pacanins to Washington and the reason for sending this personal and confidential message to the President of the United States on the part of the President of Venezuela were as follows. The three major oil companies doing business in Venezuela were the Shell, Gulf, and Standard Oil Company of New Jersey. For many years past, the government of President López Contreras and the present government of President Medina have been making every effort to reach an equitable and legal agreement [Page 748] with these companies whereunder the companies would comply with the obligations imposed upon them through the concessions which they had obtained in Venezuela, whereby the grossly unjust concessions and privileges obtained through corruption and fraud by the companies would be abrogated and negotiated on a new, legal and fair basis, and whereby the companies would be willing to enter into new agreements, in certain instances, with the Venezuelan Government as a result of which anachronistic privileges (such as exemption from customs duties for their commissaries) obtained in the earliest days of the concessions, some 30 or more years ago, would be abandoned.

Dr. Pacanins said that all of the efforts of the two Venezuelan governments above referred to had been fruitless. He stated that as a last resort just a year ago he had been sent to New York by the Government of Venezuela to attempt to reach a satisfactory understanding with the companies at their home offices. He stated that he had requested the companies to present him with a project covering what they believed to be fair and reasonable in view of changed conditions and in the light of the facts above set forth. He stated that when this project had been received it had offered nothing except the prospect of interminable negotiations which the Government of Venezuela was unwilling to contemplate.

The Attorney General stated that before the conclusion of this year of 1942 the Government of Venezuela was afforded the opportunity, by the terms of the concession granted the Shell Company, which had been in existence for just 20 years, to terminate the concession or negotiate a new concession. Dr. Pacanins stated that, by the terms of the concession, if the Government of Venezuela did not avail itself of this opportunity this autumn, the existing terms of the concession would continue in effect for another 30 years. He stated that it was therefore imperative for his Government to take this opportunity, and it desired, consequently, at the same time, to eliminate all of its differences with the other two American companies, although only a few of the subsidiary concessions of the American companies expired during the next twelve months.

The Attorney General stated that he was instructed officially to state to this Government that the Government of Venezuela had not the remotest intention of expropriating foreign-owned oil properties in Venezuela. He stated further that the Government of Venezuela desired that the exploitation of Venezuelan oil resources be continued by foreign companies and specifically the companies already doing business in Venezuela. Finally, he stated that the Government of Venezuela would not undertake a single act which was not strictly in [Page 749] accordance with the precepts of international law and with the laws of Venezuela, and that any action undertaken by the Government of Venezuela to which the companies objected would be submitted to the tribunals of Venezuela for fair and legal adjudication.

. . . . . . . . . . . . . .

I stated that this Government was of course deeply interested in the satisfactory and equitable and legal adjustment of the controversies which had arisen between the American companies and the Government of Venezuela. I said that for a long time past the Department of State had been urging the American companies to negotiate in a friendly and reasonable spirit the adjustment of these difficulties. I stated that, of course, under present conditions, the continued and full supply of oil from the Venezuelan oil fields was a vital necessity for the war effort of the United States and of the nations which are supporting, like Venezuela, the cause of the United Nations. I said anything that would interrupt this essential war service during the period of the war would constitute a grave danger to the Allied Nations.

Dr. Pacanins interjected to say that that is exactly the view of the Government of Venezuela, and that nothing would be permitted to interfere with the full and orderly operation of the oil properties.

I stated that I welcomed the very categoric and satisfactory assurances offered by the Government of Venezuela through Dr. Pacanins, and that, as the Government of Venezuela well knew, this Government would not claim, for American companies doing business in other countries, and in particular in the other American Republics, any undue or illicit privileges or rights, and would certainly condemn any operations on the part of American interests doing business in the other American Republics which constituted participation in bribery or corruption or unlawful procedure. I stated in conclusion that if the Government of Venezuela adopted the policy announced to me, namely strict observance of the tenets of international law, complete compliance with the terms of Venezuelan legislation, submission to the tribunals of any controversies which could not be solved by negotiation, and the determination to encourage the American companies to continue to do business in Venezuela, I felt sure that fair negotiations between the companies and the Government could result in a just and satisfactory settlement. To that end, I said, the Department of State would do whatever it appropriately could to facilitate a friendly adjustment.

S[umner] W[elles]