Memorandum of Conversation, by the Chief of the Division of North and West Coast Affairs (Flack)

Participants: Assistant Secretary Braden
Mr. Wright, A–Br
Mr. Loftus, PED
Mr. John J. McCloy, former Assistant Secretary of War, now Attorney for Pantepec
Mr. Flack, NWC

Mr. McCloy called to see Mr. Braden at the Secretary’s suggestion, as he had first talked with Mr. Byrnes about the proposal of Pantepec to protest the Venezuelan Surplus Profits Decree of December 31, 1945. He stated that Secretary Byrnes had expressed some doubt about taking up a matter for one petroleum company to the exclusion of the others, but Mr. McCloy considers that Pantepec’s position is unique in this matter, and it is my opinion that he has some ground for this view. The reasons are Pantepec was the last company to convert its concessions under the 1943 Petroleum Law and, unlike the three major companies in Venezuela, it had paid no dividends whatever over a period of twenty years until 1945. With the application of the December 31, 1945 Decree, Pantepec’s dividend position was greatly affected.

Mr. Braden suggested that the draft of the protests which Pantepec is to present to the Venezuelan Government be gone over with me and the petroleum officers and said that it might be possible for the Department, through our Ambassador at Caracas, to reiterate orally some of the things we had said orally when the December 31 Decree had been issued, namely, the disadvantages inherent in the precipitate nature of such action in dealing with petroleum companies who had cooperated with the Government.

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At Mr. Braden’s suggestion, I accompanied Mr. McCloy to see Mr. Loftus and we there read over the draft of a protest to the Venezuelan Government and a letter to the State Department, with which a copy of the draft will be submitted at a later date. Various suggestions were made about shortening and pointing up these two communications and Mr. McCloy agreed to redraft the proposed protest and send it to the Department to be examined by Messrs. Rayner, Loftus, Townsend,66 and Flack. Mr. McCloy said he would come to Washington again also if it seemed desirable. He will send the redrafts to me, after which I will immediately get in touch with the other interested officials for a meeting to examine the redrafts.

In his letter to the Department and in his conversation, Mr. McCloy stressed what he styled the influence exerted by the State Department to cause the companies to accept the 1943 Petroleum Law in Venezuela, and I told him that I had lived through that epoch in Venezuela and was unaware of any influence which had been directed by this Government as he intimated, but that on the contrary the Law had resulted from round table discussion between the companies’ representatives and the Government and that all companies, big and small alike, had every opportunity to present their views and that once the Law was enacted the companies were not obliged, other than by apparent economic advantage, to accept the Law.67 Mr. McCloy said that the situation in Washington had been somewhat different, where he understood that the war exerted a certain influence on the desirability of bringing about a tranquil situation in the disturbed relations between the oil companies and the Government in Venezuela. I said that I was not aware what had transpired here in Washington but that, irrespective of any of the facts which might be known to various people, the degree of protection and representations which this Government would make in aiding American firms abroad would not be augmented or diminished by any such circumstance.

Mr. Loftus and I were in agreement, in the case of the proposed protest by Pantepec, that about the maximum which this Government could do would be to refer to its comments made last January about the undesirability of many features of the Decree of December 31 and cite the Pantepec protest as an illustration of the effect in one instance upon an American oil company, but that all of this should be informal and oral.

  1. Charles B. Rayner, John A. Loftus, and Rex M. F. Townsend were members of the Petroleum Division.
  2. For previous documentation on this situation, see Foreign Relations, 1942, vol. vi, pp. 743 ff. and ibid., 1943, vol. vi, pp. 807 ff.