800.6363/1208: Telegram
The Secretary of State to the Ambassador in Argentina (Armour)
920. Your 1367, June 18, 1 p.m. Any agreement involving the allocation of strategic materials under present conditions must be compatible with the determination of this Government that its facilities and resources are to be used first of all for the prosecution of the war. Consistent with this, the Government is prepared to share the strategic resources at its disposal with other countries of like determination. No other consideration takes priority. This was clearly pointed out in the Department’s 628, April 30, 6 [9] p.m.
As applied to the oil negotiations which you have been conducting, this Government is prepared to supply material of strategic importance in return for Argentina’s collaboration in oil supply only under [Page 394] conditions which will not be prejudicial either to the war effort or to this Government’s obligations to assist other nations which have cooperated with it.
This means that strategic material will be supplied to Argentina only in return for tanker transportation savings which are at least equal to the new tankers which otherwise would be built with the same material in this country. For your information tanker construction here is now limited by the availability of material closely similar to that for which Argentina has expressed a need.
Whether Argentina makes such transportation saving possible by hauling Argentine oil to areas now supplied by pool tankers thus releasing them for other service, or by making supplies of oil available in Argentina for pool tankers to pick up and deliver with a shorter haul than from the Caribbean, is a minor matter. Similarly, whether oil supplies for the pool be made available in Argentina by reduction in consumption there, or by increasing production, is not in itself important. The essential requirement is that at least as much additional tanker transportation be made available as would otherwise become available through using that material in the shipyards here.
Furthermore, in making this evaluation we are not concerned, except for purposes of calculation, with the ports or countries to which either Argentine tankers or Argentine oil would move. This is because this Government intends in any case, as in the past, to supply all the other republics with their essential oil requirements. All that concerns this Government at the present moment is the net additional tanker tonnage which would become available for its purposes, assuming the level of oil supply to all the republics, excepting Argentina, to remain the same as at present. Such tonnage would then be utilized either for direct war purposes or for increasing the pool supply as circumstances warrant.
The Department requests that in the light of the foregoing you review the proposal which you now have under consideration and submit to the Department some modification of it which will satisfy the requirements described. The evidence supporting the modified proposal, to be convincing, must disclose in practical terms how the saving in transportation is to be effected. Moreover, there must be evidence that the material requested would be necessary to bring about this saving in transportation and the amount requested should be fully justified for this purpose.
. . . . . . . . . . . . . .
The Department believes that your own analysis of this situation will convince you that a solution not in accord with the reasoning outlined here would in fact result in a burden rather than a benefit upon both the war effort and the oil supply pool. For example, the 36,000 [Page 395] tons of steel and equipment mentioned in Embassy’s 1165 of June 2, 6 p.m., would provide seven modern tankers which, according to our calculations could accomplish approximately twice the improvement in oil supply contemplated in your proposal.
You may inform the Foreign Minister frankly of the substance of the foregoing, explaining to him the reasons why the Department is unable to approve the proposal now before it and the bases on which it can consider furnishing petroleum equipment to Argentina. In this connection, you should point out that the circumstances determining this Government’s decisions are subject to rapid change, due to the prosecution of the war. It is for this reason that these negotiations must be kept on an ad referendum basis.