831.6363/1633: Telegram

The Secretary of State to the Ambassador in Venezuela ( Corrigan )

367. While the initiative in conversations with the Venezuelan authorities should be taken by the British and Netherlands representatives because of the immediate interests involved in the case under reference, this Government is concerned lest an unfortunate precedent be established by inclusion in the Shell contract of the proviso referred to in the Embassy’s telegram no. 435 of April 22, 10 p.m. For your information Department assumes that action is based on interpretation of Chapter 1, Article 5 of law of March 13, 1943.

The Department feels, on the basis of the information thus far available to it, that however permissible from the standpoint of the aforementioned law, inclusion of such a proviso would be unfortunate and detrimental to the best interests of all countries concerned, including Venezuela, for the following reasons:

During development of the new petroleum law and concurrent discussions of the refinery agreements, the Department is not aware of any mention having been made by the Venezuelan Government of any contemplated limitations of this nature with respect to the export of crude oil from Venezuela. The new proviso would therefore appear to be in conflict with the impression given the oil companies that these agreements provided a stable basis for the future relations between the oil companies and the government.
The proviso could be detrimental to the war effort of the United Nations, since it is understood that oil could be shipped from the new Shell concession within a few months’ time.
This Government has consistently adhered to the position that, in the interests of expansion of international trade, practices which divert trade from its natural economic courses must be avoided, and that all forms of discriminatory treatment in international commerce should be eliminated. The effect of the proviso would appear to be contrary to these principles.

Please consult with your British and Netherlands colleagues in order that your separate approach to the Venezuelan authorities will take into consideration their respective approaches, and bring the foregoing viewpoints of this Government to the attention of the appropriate Venezuelan authorities. Please keep the Department fully informed of developments and of action taken.