Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

VE–29. Telegram from the Acting Secretary of State to the Embassy in Great Britain¹

Washington, April 28, 1959, 9:13 pm

Prior to his departure for Arab Petroleum Conference Venezuelan Minister of Mines Pérez Alfonso was requested by Department to stop in Washington for consultation on proposed exemption from U.S. import restrictions of crude oil and derivative products transported into this country by pipeline. Latest information indicates he is returning from conference via Athens, Belgrade, London and Washington, not arriving here until May 4. View his change of plans and imminence Canadian debate on national energy resources bill it not possible delay public announcement of exemption until Department has had opportunity consult with him as originally planned.

Embassy is therefore requested contact Pérez Alfonso as soon as he arrives in London later this week to inform him before April 30 if possible of action being taken and reasons such action essential in advance of agreement with Venezuela on possible broader hemisphere approach to oil import problem. Probable timing this action which amends President’s Proclamation of March 10 to provide exemption for crude oil, unfinished oils and finished products imported by pipeline, motor carrier or rail is that it will be approved by President April 29 and announced April 30 to become effective on or after June 1, 1959. The proclamation President proposes to issue in effect provides for exemption from U.S. restrictions of Canadian crude oil and derivative products imported by overland transportation.

In discussing amended oil import program with Pérez Alfonso following major considerations should be emphasized:

1. Possibility that U.S. might have to take action along these lines has been subject informal conversations between U.S. and Venezuela for several months.

2. Although we had hoped through informal discussions with Canada and Venezuela to reach agreement on some form of hemisphere approach to oil import problem action concerning Canadian oil was necessary soonest because Canadian Parliament begins debate April 30 on national energy resources bill with broad policy-making and regulatory authority including control of imports and exports of oil and gas. Ultimately adoption of such policy probably would involve building uneconomic pipeline across Canada and imposing restrictions against foreign oil which now supplies Montreal refining area.

3. Since market for Venezuelan oil in eastern Canada is second in importance only to U.S. market we believe any action we can take that would tend preserve this market is in Venezuela’s long-term interest as well as our own.

4. We do not expect exemption will result in important increase in imports of Canadian oil nor that it will cause any significant reduction in amount of oil imported from other supplying countries including Venezuela. Levels of imports established for allocation purposes shall not apply to crude oil and derivative products exempted from program and therefore no significant reduction is expected in allocations as result amendment. Allocations can be reduced under amended program only if President finds such action necessary to prevent total imports from attaining levels which seriously impair accomplishment purpose of program.

5. Canadian oil is high cost relative to that of other major producing countries and competes successfully only in Districts II and V neither of which is important market for Venezuelan oil. Present program announced March 10 already provides for what in effect is preferred treatment for Canadian oil imported into District II. It is not expected that increase in Canadian oil imported into District V as result proposed exemption will substantially exceed present level. Nevertheless if contrary to our expectations any substantial displacement of Venezuelan oil should occur as result exemption U.S. is prepared consult with Venezuela and Canada to adjust situation.

6. We regard amended program as consistent with our joint interest in common with Canada and the other American Republics in defense and security of hemisphere. We therefore hope that Venezuela will not/repeat not consider our action as discriminatory but as necessary initial step toward possible broader hemisphere approach to problem.

7. We have Venezuela’s interests very much in mind and will in future give full and sympathetic consideration to views of GOV. We are mindful of understanding and cooperation displayed by present GOV on oil imports problem in the past and hope that bilateral talks seeking broader solution may be resumed near future. FYI Perez Alfonso is close adviser to Venezuelan President on petroleum matters and is understood have President’s complete confidence and support. In past he has shown sympathetic and cooperative attitude toward restrictions U.S. has imposed on oil imports. Present Venezuelan Government took the initiative in preparing Venezuelan public opinion for imposition March 10 of mandatory oil import program and President Betancourt apparently hopes do so in regard Canadian exemption from program. President and Minister of Mines have particularly emphasized interest in maintaining Venezuela’s share of U.S. market and stabilizing oil prices at high level. They recognize that U.S. restrictions have contributed to market stability. Since action we are about to take applies only to Canadian oil it introduces new feature in U.S. oil import program to which GOV objects in principle on grounds it discriminates against Venezuela in favor Canada.

END FYI

Cable Department and repeat Caracas report conversation with Perez Alfonso.²

Dillon

1. Source: Department of State, Central Files, 411.316/4–2859. Confidential. Drafted by Bartch and approved by Snow; repeated for information to the U.S. Embassies in Canada and Venezuela.
2. Pérez did not arrive in Great Britain until May 1, 1959, and because of his limited stay in London, the general purport of the message, as given in telegram 9575, was reported to him by Venezuelan Embassy officials. (033.3141/5–259)