199. Memorandum From the Director of the Bureau of Intelligence and Research (Hughes) to Secretary of State Rusk1


  • Political Ramifications of Oil Issue in Argentina2

Issue Reflected in Illia’s Cabinet Selections. Influential members of President-elect Illia’s newly announced cabinet apparently stand solidly behind his party’s campaign promise to annul Argentina’s contracts with US and other foreign oil companies. Those who stand out in this respect are Foreign Minister Miguel Angel Zavala Ortiz, Economy Minister Eugenio Blanco, and Justice Minister Carlos Alconada Aramburu. Alconada resigned as Interior Minister in 1958 in a clash with the conservative Minister of Commerce and Industry, who sought to have private capital participate in oil development. At that time Alconada came out for “absolute nationalization.”

Illia evidently wishes to take as moderate a course as is politically feasible on the contracts. He has suggested the possibility of renegotiating the contracts that his government finds unsatisfactory. Illia, nevertheless, almost certainly felt obligated to take into account strong sentiment against the contracts in his own party and other popular groupings when he selected his cabinet.

Public Attitude Toward the Contracts. Former President Frondizi’s contracts with the foreign companies have realized considerable savings in foreign exchange, but the public bias against them—in part a reflection of deep-seated nationalism—remains. When Frondizi negotiated the contracts in 1958, they were opposed by nearly all political parties, organized labor, and important elements of the military. The contracts helped to undermine Frondizi’s public support and to pave the way for his ouster by the military in 1962.

The Military Viewpoint. The present attitude of the military on the contracts is not known. Some officers, however, have already indicated dissatisfaction with the incoming President, who has made known his plans to reestablish firm civilian control. They are probably apprehensive [Page 415] about Illia on a number of counts. Should Illia’s policy on oil arouse strong public dissatisfaction and thereby weaken his position, they might regard this situation as creating an opportune atmosphere for intervention.

  1. Source: Kennedy Library, National Security Files, Countries Series, Argentina, General, 10/63. Secret.
  2. On September 20 Executive Secretary Read sent McGeorge Bundy a paper explaining in detail the Argentine petroleum contracts issue. In this paper, the Department characterized the U.S. fundamental objective as a solution “which would avoid lasting damage to U.S.-Argentine relations” and “protect the legitimate rights and interests of U.S. oil companies.” (Library of Congress Manuscript Division, Harriman Papers, Kennedy and Johnson Administrations, Argentina)