487. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Oliver) to President Johnson 1

SUBJECT

  • International Petroleum Company Case in Peru
[Page 1015]

The Peruvian Congress has adopted and sent to President Belaunde a law purporting to expropriate a portion of the properties of the International Petroleum Company (IPC). Belaunde must now decide (1) either to sign or act otherwise on this legislation, and (2) once the law is promulgated to take one of several alternative actions to carry out its terms. Our latest information indicates that Belaunde is trying to postpone signing the measure until late this month, in the hope that meanwhile he can work out an acceptable solution to this problem. We believe that the best such solution would be for Belaunde to conclude the long-pending negotiations with the company for a 25year service contract—in return for the company’s ceding its claim to surface or sub-surface rights on its oil property in northern Peru.

We have had Ambassador Jones set out our views on this problem to President Belaunde and Foreign Minister Vasquez.2 We have sent our Deputy Chief of Mission in Lima to London to talk with Haya De La Torre, leader of Belaunde’s political opposition, to urge him to take some of the pressure off Belaunde on the IPC issue.3 We have also suggested following up your exchange of letters with Belaunde of February of last year by sending a letter to him from Walt Rostow urging a reasonable settlement.4

We are considering still further steps. Depending on developments, we could send a high-level emissary to Lima to urge Belaunde to reach a settlement with IPC. We are also trying to use our other assets to help Belaunde reach a reasonable decision, and our best means for this purpose would be the immediate approval and announcement of the pending $15 million program loan to his country. Our objectives are to convince Belaunde that the IPC decision is up to him, and him alone, and to use all the means available to us to persuade him to reach the right decision.

C.T.O.
  1. Source: Johnson Library, National Security File, Country File, Peru, Vol. II, 1/66–10/67. Secret.
  2. Jones met the Foreign Minister on July 13 to discuss the issues raised in his meeting with Belaúnde, July 10. (Telegram 251 from Lima, July 13, National Archives and Records Administration, RG 59, Central Files 1967–69, PET 15–2 PERU)
  3. IPC representatives, Jones recommended Siracusa for an “urgent” mission to secure Haya’s support in the IPC case. (Telegram 231 from Lima, July 13; ibid., PET 6 PERU) The Department authorized Siracusa’s trip to London after consultation in Washington. (Telegram 6379 to Lima, July 13; ibid.)
  4. Bowdler wrote the following note on the memorandum: “Walt Rostow has asked your views on whether to do this.” Rostow also sought guidance in a July 15 memorandum to the President. The President decided that Rusk should write the letter; Read was so informed on July 17. (Ibid.) No evidence has been found that Rusk sent the letter to Belaúnde.