831.6363/6–746

The Acting Secretary of State to the Secretary of War ( Patterson )

secret

My Dear Mr. Secretary: With reference to your letter of June 770 addressed to the Secretary of State, I take pleasure in stating that the Department has been following the developments in the Venezuelan petroleum industry with keen and continued interest and on the basis of information at hand, I wish to comment on the points raised in the four paragraphs of your letter, as follows:

1.
The Venezuelan oil industry labor agreement was reached on May 30, to run until December 31, 1947. The Department believes that there is nothing in this agreement to warrant the statement that it will ultimately force the oil companies out of business or effectively curtail their control of production. The terms of the agreement are not excessively out of line as compared with agreements reached in the domestic petroleum industry in recent years. Furthermore, it is probable that when the United States ceiling prices on petroleum are lifted, the price then received for Venezuelan oil will more than compensate for the increased labor costs.
2.
This Department through the Embassy has been informed of the activities of the Soviet Embassy in Caracas. Both the Embassy and the Department are fully aware of the seriousness of certain implications of Soviet and Communist activities in Venezuela, and there is no reason to believe that the Embassy will not continue to report thereon.
3.
This Department has over a long period of years maintained a very close working liaison with American petroleum companies operating [Page 1347] in Venezuela. It has no reason to believe that those companies feel that the United States Government is not adequately protecting their interests within the limits of proper Government activity. The Deparment does not believe that the interests of our Government or the American petroleum companies would be best served if the latter were encouraged to resist the reasonable demands of labor. None of the American oil companies operating in Venezuela has complained to the Department or to our Embassy that the terms of the recently negotiated settlement were either unreasonable or impossible.
4.
This Department has long been well aware of the military and economic importance of the Venezuelan petroleum industry. Developments in that connection are a primary concern of the adviser on petroleum policy, the Petroleum Division, and the Office of American Republic Affairs, none of which offices is lacking in an appreciation either of the basic factors involved or the seriousness of any movement which might lead to curtailment of Venezuelan production.
Ambassador Corrigan has served in the American republics for twelve years and in Venezuela since 1939. He is assisted by a Petroleum Attaché who has had twenty years of Latin American service and has been in Venezuela since 1940. They in cooperation with the other members of the Embassy staff have provided this Department with full and adequate reports concerning petroleum developments in that country. No evidence has come to my attention which would indicate that the Embassy staff in Caracas is not thoroughly alive to the present situation.

It appears that the concern expressed in your letter may partly arise from the reports of the acting Military Attaché in Caracas, as exemplified by his telegram no. 39 of May 13 last.71 I should like to point out that the estimate of the situation set forth in that telegram, incorporating many of the thoughts expressed in your letter of June 7, was not even discussed with the Ambassador prior to transmittal. That is to say, the acting Military Attaché apparently did not see fit to ascertain whether his interpretation of the situation coincided with those of the American Ambassador to Venezuela or the special Petroleum Attaché whose sole function and responsibility during the past six years has been liaison with and reporting on the Venezuelan petroleum industry.

The Embassy in Caracas upon inquiry from the Department concerning telegram no. 39 from the acting Military Attaché informed the Department of State that the telegram in question was distinctly overdrawn and that the problem treated therein, while meriting study by policy officers, should more appropriately be considered on the basis of long range consideration of Communist tactics and petroleum unions.

Several officers of the Department of State have recently had the opportunity of discussing with the acting Military Attaché his views [Page 1348] with respect to problems inherent in the recent negotiations between Venezuelan petroleum labor unions and the operators. These conversations did not alter the unanimous opinion of all interested officers in the Department of State that the present situation is not alarming but rather is one which must be followed carefully and alertly in order that the long range interests of our Government and the American petroleum operators may be safeguarded.

Should the foregoing not adequately cover the points raised in your letter of June 7, I shall be most happy to receive your further comments.

Very sincerely yours,

Dean Acheson
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