832.6363/12–2447: Telegram

The Secretary of State to the Embassy in Brazil

confidential

6. Dept concerned over statements attributed to Barreto that revised draft petroleum law now in Dutra’s hands provides for control refineries and inland transportation facilities by Brazilian nationals. Such restrictions would probably be so unacceptable to Amer oil cos that they would be unwilling enter Brazil and would thus go counter to Dutra’s repeated assurances to Amb Pawley that law will be acceptable to foreign capital.

Braz requests covered urtels 1740 and 1744 Dec 2451 would appear to give opening for requesting informally from Dutra copy proposed law now before it is sent to Congress. If obtainable and it contains unacceptable clauses you are authorized to request Dutra delay presentation until you can consult Dept for comments. You will appreciate [Page 467]difficulty of obtaining favorable amendments after draft reaches Congress.

Tels 1740 and 1744 point up world shortage oil and transportation therefor. So far as can be foreseen situation will become progressively worse. Only way for Brazil to be sure eventually of sufficient oil for its needs is by adequate production therein. We believe firmly that this can be obtained only through utilizing experience of established oil industry. It is for this reason that satisfactory oil law seems so essential for Brazil’s own interests. While Dutra is aware of these arguments it might be well to stress them in your conversations with him.

For your own info it may be difficult to justify special measures to aid Brazil in present emergency unless it modifies present development criteria which will effectively prevent any real utilization its own resources in future.

Supply Govt-owned surplus warbuilt tankers earmarked for foreign sale exhausted. Marit Comm will only charter govt-owned tankers for discharge in US ports.

All petroleum products including gasoline, diesel and fuel oil are short in US. Gas oil and diesel 15 percent short Middle Atlantic and New England States, 10 percent short in area east of Rockies. Residual fuel about 10 percent short same area. US endeavoring reduce own consumption to available supplies. Under these conditions not possible for US guarantee Brazil’s minimum petroleum requirements first 6 months 1948 or any other period especially since US has not been normal supplier for Brazilian petroleum products.

Marshall
  1. Latter not printed.