800.6363/1204: Telegram
The Secretary of State to the Ambassador in Argentina (Armour)
878. Your telegrams 1165, June 2; 1308, June 11; and 1329, June 14. As indicated in our 854 of June 9, we have considered the proposed agreement with the other Government agencies concerned. The consensus is that the terms of the Argentine proposal as set forth in your telegram under reference, considered completely on its merits, are unsatisfactory.
A study is being made of the materials which this country would be called upon to supply, but it can be stated now that it would be extremely [Page 389] difficult to supply the amount requested, even with an improved quid pro quo.
The situation today affecting oil equipment, including both steel and fabricated materials, is very tight and there is difficulty in obtaining a sufficient quantity of such equipment for the direct war needs of the United States and the other United Nations. In this connection, it is noted that the over-all material requirements for the oil industry in 15 other American republics, not including Argentina, amount to 13,420 tons for the fourth quarter of 1943. Comparing this with a quarter of the 36,000 tons desired by Argentina during the next 12-month period, it is quite apparent that Argentina is asking for an amount of critical materials equivalent to approximately 68% of the entire over-all material for the other countries referred to.
Under the proposed agreement approximately four or five supply pool tankers would be released from supplying Argentina’s neighbors. This saving in tankers would not be fully realized for several months. Although the tanker situation is very serious at the present time, for your confidential information it is anticipated that the tanker-building program will have reached such a stage that in a period of from 4 to 6 months from now the release of the 4 or 5 tankers would be of no great assistance. The tanker saving under the proposed agreement today has little appeal to us, whatever it might have had 6 months or a year ago.
While it is recognized that the new Argentine authorities may have gained the impression from the previous Government that the agreement was on the point of being approved by the Department, in view of the foregoing, the Department does not feel justified in authorizing you to conclude the proposed agreement.
It is believed that the best procedure in the circumstances is for you to inform the Foreign Minister quite frankly that this Government had not from the moment the proposal was submitted on June 2 considered it a satisfactory one. This Government would like to conclude a mutually satisfactory agreement of course, but any such agreement would have to provide only a part of the materials and equipment requested by the Argentine authorities. Obviously this Government cannot enter into an agreement which would provide more favorable treatment to Argentina than to the other American republics, which freely entered into the supply pool arrangement at its inception and have cooperated fully since in that arrangement.
You should advise the Foreign Minister that your Government will send you for submission to him a counter-proposal as soon as possible. In preparing this counter-proposal, the Department desires urgently from you a reduced list of minimum equipment and materials necessary to maintain present Argentine production and meet needs of [Page 390] Uruguay, Paraguay and Southern Brazil. This list should give clearly (1) the total tonnage of steel and other controlled materials, and (2) the approximate dollar valuation of fabricated materials.
With further reference to material requirements, those of the oil industry in Peru, which as regards output is roughly comparable to Argentina’s, are estimated at 2,200 tons per quarter.