831.6363/1684
The Ambassador in Venezuela (Corrigan) to the Secretary of State
[Received June 23.]
Subject: Reaction of the Venezuelan Government to recent representations by United States, British and Netherlands Governments with regard to limitations on the refining of Venezuelan crude oil in the Caribbean area.
Sir: I have the honor to report that the reaction of the Venezuelan Government to the recent representations made by the United States, British and Netherlands Governments on the above-mentioned subject, which arose through the issuance of certain Resolutions by the Ministry of Fomento of Venezuela, was immediately reflected by a complete stoppage of all transactions with foreign companies which comprise the petroleum industry in Venezuela. The transactions chiefly affected were the pending bids for new concessions and matters relating to increasing refining facilities in Venezuela.
The Venezuelan officials, from the President down, were very much annoyed by the representations of the three Governments and at first were inclined to believe that the oil companies had provoked the representations. Many of the companies were so far along in their negotiations with the Venezuelan Government for new concessions that they had made heavy commitments for material for construction, drilling and pipe-line operations. This situation placed them in a very difficult position and they could obtain no information from the Venezuelan Government as to when, if ever, the situation would open up again. Some of the newer companies which have recently entered the Venezuelan field and which were consequently not familiar with the local situation were quite depressed and showed an inclination to withdraw from the field. This was the impasse which was finally broken by [Page 1674] my conference with President Medina on Wednesday June 14, as reported in my confidential despatch No. 6045, June 14, 1944.
During the remaining days of last week there was an attitude of expectancy. Rumors of action by the Government were rife and a new attitude was noted on the part of the interested officials during the remaining days of the week and especially after the long Cabinet meeting which took place on the afternoon of Friday June 16, which lasted for three and one-half hours. Then on Monday June 19, the dam broke. First there was a telephone call from one company representative who had received direct information from the Minister of Fomento. At this time all he said to Mr. Maleady,64 the member of my staff in most direct touch with petroleum matters, was “Well, we have the green light”. Later in the day Mr. Van Hasselt, head of the local Shell group who has just been promoted for duty in the London office of the company, called up. He had gone to see President Medina by a previous appointment to make his farewell visit before leaving. At this time the President informed him that he had given instructions to the Ministry of Fomento to go ahead with the new concessions. Last night Mr. Butterworth of the Richmond Oil Company (Standard Oil of California) reported to me that there had been favorable action on his bids that afternoon.
Mr. Butterworth, of the Richmond Oil Company, is one of the recent arrivals who had come to me in a pessimistic mood last week to tell me that his company was very disturbed about the way things seemed to be going. It happened that his visit was on the afternoon of the day on which I had conferred with the President and Dr. Gustavo Herrera, Minister of Fomento, and I was able to express to Mr. Butterworth a degree of optimism that gave him some encouragement. His parent company, the Standard of California, is ready to make investments running into many millions of dollars in Venezuela.
The companies most affected by the paralysis which prevailed for a time in negotiations with the Venezuelan Government were companies that are still in the exploration and development stage and as yet have no production. Such companies as Socony, Texas65 and others have sunk as much as twenty-five million dollars each (Atlantic Refining somewhat less) in pure development work and were hoping to recover this from the new concessions which they expect to receive.
The Venezuelan Government had taken a very firm, one might say stubborn stand, and would make no concession of any kind until the diplomatic imbroglio had been cleared up. Mr. Proudfit, Manager of the Creole Company, told me that the Venezuelan officials would not even talk to him about the location of a large refinery that his [Page 1675] company is ready to build, although refinery construction is what the Venezuelan Government has most desired. Vital interests and investments running into really impressive figures were being adversely affected by the stagnation which had resulted from our representations, mild as they were, and the Venezuelan Government’s reaction to them.
This was the situation that led me to ask for instructions to terminate the present phase of the diplomatic interchange. The ire of the Government was directed principally at us. They had expected such action from the British and Dutch but not from the Americans.
The oil company officials are now giving a sigh of relief, but several have told me, now that it is all over, that they think the general moral effect has been good and had made the Venezuelan Government realize that it must not forget the existence of certain basic principles.
Respectfully yours,