735.5 MSP/1–1354

The Acting Special Assistant to the Secretary for Mutual Security Affairs ( Nolting ) to the Director of the Foreign Operations Administration ( Stassen )1

secret

Dear Mr. Stassen : I refer to Section 408(e) of the Mutual Defense Assistance Act of 1949, as amended, which permits a foreign government, if it is determined to be in the best interests of the United States, to pay for military equipment available from stock sixty days after it takes delivery from the Department of Defense.

I believe that it would be in the best interest of the United States to permit the Government of Venezuela to purchase military equipment from the Department of Defense under this provision of law. There are a number of strategic installations in Venezuela, particularly those connected with the petroleum industry, the defense of which is a matter of serious concern to the Department of Defense. The Department of Defense is desirous of resuming military staff conversations with Venezuela in order to consider with Venezuelan military officials the best means of protecting these installations. Venezuela has not been willing to accept any grant military assistance from the United States which could be used in the defense of these and other installations of strategic importance, preferring instead to pay for the military equipment [Page 1663] it receives. This attitude is very commendable and I consider it very important therefore that we do everything that reasonably can be done to assist Venezuela in procuring the required military equipment from the Department of Defense. Permitting Venezuela to pay for military equipment sixty days after delivery would help considerably in this respect.

Venezuela has for some time been dissatisfied with availability of military equipment from the United States Government and the requirement that the equipment be paid for at the time a firm order is placed for the equipment. This dissatisfaction caused Venezuela to break off military staff talks in 1951. The subject has repeatedly been discussed with United States officials by the Venezuelan Government and it has continued to have an adverse effect on our relations with Venezuela. It has also resulted in purchase of military equipment from non-United States sources with consequent adverse effect on our efforts to standardize military equipment in Latin America. In view of the world situation, it has not during the last several years been possible to make available for early delivery all the equipment Venezuela has desired to purchase. This makes it all the more important when we are able to make equipment available that it be made available on the most liberal payment terms possible under the law.

An economic study of Venezuela, a copy of which is attached,2 shows that at the present time Venezuela has an excellent credit standing and could, without difficulty, make payments on contracts for as much as $50 millions worth of military equipment in any single year. Considering the fact that Venezuela would probably not purchase more than $10 million to $15 million worth of equipment in any year, we could expect prompt payment by Venezuela for any military equipment purchased under Section 408(e).

I therefore strongly recommend that you determine that it is in the best interests of the United States that Venezuela be permitted to purchase from the Department of Defense military equipment available from stock and pay for such equipment sixty days after delivery. I am authorized to state that the Department of Defense concurs in this recommendation.3

Sincerely yours,

Frederick E. Nolting, Jr.
  1. Drafted by Robert M. Sayre of the Office of Regional American Affairs.
  2. Not printed.
  3. In letters to Secretary of Defense Wilson and Secretary Dulles, dated Jan. 27, 1954, Director of the Foreign Operations Administration Stassen made the necessary determination authorizing that Venezuela be permitted to pay for military equipment purchased under Section 408 (e) of the Mutual Defense Assistance Act of 1949 within 60 days after delivery (731.5 MSP/2–1654).