Memorandum by the Petroleum Adviser (Thornburg)21

It is apparent that the Venezuelan Government intends to reach a settlement of some kind with the American and British oil companies in the near future. In as much as the Royal Dutch Shell concessions expire in December of this year, according to my information, there is little enough time left for considered negotiation and none at all for unnecessary delays. Our primary interest is that Venezuelan oil remains available for the war. Reduced exports of 200,000 to 300,000 barrels per day have created certain economic problems for Venezuela. Even more serious, however, may be the fact that a reduction to this low level over a considerable period might make it impossible to resume production on short notice at 700,000 to 800,000 barrels per day, which might be necessary if we were to lose our sources of supply in the Middle East at a time of high military activity. Consequently it is of the greatest importance that the arrangements made between the Venezuelan Government and the oil companies not only insure uninterrupted supplies from Venezuela at their present level, but also provide for sufficient development work and adequate personnel to enable practically our entire European and African war effort to be supplied from Venezuela on short notice. This, I say, should be this Government’s first concern in the Venezuelan oil situation.

I have seen a great deal of Dr. Manrique since he reached this country. He was introduced by a mutual friend, and our frequent meetings have been entirely informal. However, he has talked hours at a stretch about the Venezuelan oil situation. I have not made written reports of these conversations because, actually, the substance of almost everything he has told me was reported by Mr. Welles and Mr. Bonsal after his official conversations with them.

Last Sunday, however, he mentioned for the first time a “commission” which, he indicated, is to make a survey of the Venezuelan oil situation and make recommendations to him as to what kind of arrangement should be offered to the oil companies. He explained that this commission is to consist of American experts not connected with any of the oil companies directly concerned, plus two or three Venezuelan oil experts who are intimately familiar with the oil operations there. This commission, he said, is to review the history of oil development in Venezuela with particular reference to the benefits already received by the oil companies and also by Venezuela and then recommend a new basis of division based upon past history, present conditions, and an estimate of the future. These recommendations, according [Page 752] to Manrique, are to be based upon “justice” as closely as “justice” can be determined by impartial and fair-minded men, and without consideration of present legislation or contracts. Manrique’s idea on this point appears to be that if a fair arrangement can be agreed upon, the laws and contracts can easily be changed to accord with it, whereas, in his opinion, it will be impossible to find a sound and lasting solution by matching lawyers’ wits over the technicalities of contracts and existing laws.

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[Here follow comments regarding choice for head of proposed commission and representative of oil companies for negotiations.]

Max Thornburg
  1. Addressed to the Chief of the Division of the American Republics (Bonsal), the Adviser on Political Relations (Duggan), and the Under Secretary of State (Welles).