The Acting Secretary of State to the Ambassador in Brazil ( Berle )
1836. Reurtels 2166, July 10; 2181, July 11; 2182, July 11.45 Dept believes that it has not adequately explained recent changes in petroleum situation which have brought about difficulty if not impossibility of providing Brazil fuel oil for textile and food programs in addition to recently approved increase of 5,000 tons monthly. These changes have occurred since May 9, 1945 the date fuel oil-linseed oil exchange was signed with Argentina.
Prior to V–E Day, May 8, limiting factor to increasing fuel oil deliveries to Brazil was shortage of tanker tonnage. For some 6 months prior to May 8 it had prevented approval of any increases except those supported by the strongest justification. During that period there was no shortage of fuel oil in the Caribbean area. Stocks in fact were excessive and petroleum operating officials pressed the Dept from time to time to find some means of giving the refineries relief. Unfortunately little relief could be found that did not involve WS A tonnage, and this was not available.[Page 684]
It was with this petroleum background—burdensome stocks of fuel oil and extremely critical shortage of tankers—that Argentine transaction was negotiated. To extent that WSA tonnage was committed for shipment of fuel oil to Argentina it may be argued that the transaction was not consistent with facts indicated but need for vegetable oils made deal imperative. On other hand commitment to ship fuel oil southbound in WSA tonnage was limited to 20 per cent of total or to 100,000 tons, and of this 25–30,000 tons will probably be shipped as excess bunkers on dry cargo vessels. Argentina undertook to transport other 400,000 tons.
It may be pointed out that recently approved increase of 5,000 tons monthly of fuel oil for Brazil involves almost as great demand on WSA tanker tonnage as entire Argentine deal. In addition Brazil’s petroleum allotments for 1945 had previously been increased since December 1, 1944 by 584,000 barrels not including recent increase in gasoline estimated by Emb to require 105,000 barrels. Of the 103,500 tons which these increases total, some 77,000 tons will be shipped in WSA vessels. Thus additional commitments of WSA tonnage for Brazil in 1945 total 107,000 tons in comparison with about 75,000 tons for Argentina. Total Brazilian allotments require use of over million tons WSA tanker capacity. It may also be pointed out that Argentina’s supply of combustibles was not increased by the exchange since it provides only for the replacement of linseed oil by fuel oil on a caloric content basis.
It is assumed that Emb does not question vital need for linseed oil to be obtained from Argentina. Until Embs 2166 was received it was assumed that Ambassador understood from his discussions in Washington that priority of need was so great, and nature of commitment was such, that any consideration of reducing deliveries of fuel oil to Argentina under the linseed deal for the purpose of giving such fuel oil to Brazil was out of the question. This situation has not changed. Dept therefore believes nothing can be gained from further consideration of this possibility. For Embs information present fuel oil shortage is making it extremely difficult to obtain necessary fuel oil to carry out this U.S. commitment.
Since V–E Day petroleum situation has changed drastically as a result of greatly increased demands for fuel oil to meet both bunkering and Navy requirements. Within short space of 6 weeks these new demands have transformed surplus which previously existed into serious shortage not only of Navy grades but of Bunker C as well. This conclusion based on studies petroleum situation which are kept fully up-to-date by petroleum authorities. Additional fuel oil that is added now to program of any country must come out of oil which Navy is scheduled to lift or out of programs of other countries. Petroleum [Page 685] available for liberated European countries today is only 40 to 50 per cent of their pre-war consumption as compared with Brazil’s 80–85 per cent for all products and over 90 per cent for fuel oil. Until oil supplies of these countries are brought more nearly into line with those of other countries, any increase in an existing program can only be provided for a use which carries highest priority.
ReDeptel 1678, July 4. Embs 2166 did not answer Depts question regarding use of approved 5,000 tons fuel oil in such a manner as to facilitate not only food but also textile program.
What consequences may be expected if additional fuel oil is not made available for textile program? Embs A–861, June 13,46 stated only that fuel oil requested by National Petroleum Council must be provided if textile contracts to be completed in minimum time. Does Dept understand that failure to provide additional fuel oil involves only delay in completion of textile contracts and not danger that program will break down completely? Is Dept not correct that Brazil signed textile contracts without asking for and without receiving any commitments regarding additional fuel oil?