517. Telegram From the Embassy in Peru to the Department of State1

8032. For Oliver. Ref: State 257311.2 Subj: IPC.

Reftel discussed at length within Embassy this morning. We under no illusions as to grave repercussions on US relations with Peru for years to come, and in hemisphere if amendments invoked. We [Page 1074] nevertheless decided best course was to advise revolutionary government informally that possible application of Hickenlooper amendment and Sugar Act as a result of 1967 expropriation is under active consideration in the Department. In doing so we felt it best not to reveal that IPC and Jersey Standard have asked USG invoke these provisions. We therefore presented current study by lawyers as a natural requirement of the law itself which binding on executive.
DCM informed FonOff SecGen privately in latter’s home this afternoon. Siracusa was careful to reiterate that no decision has been made and that USG respects the right of expropriation so long as there is compensation. He presented to the SecGen for ready reference copies in English and Spanish of our Notes numbers 116 and 152 of August 8 and 21, 1967, which were presented in reaction to the expropriation at that time.3 He also presented copies of the two amendments in question as well as of our aide-mémoire of Nov. 7, 1963 presented in reaction to the nullification in that year of the arbitration award which is basic to IPC case.4
Ambassador Perez de Cuellar’s reaction was grave. He said this was not the kind of a government likely to respond to pressure. He felt invocation of these acts by the USG would unify Peruvians against US and that Peru would receive solid support of other countries in the hemisphere. He thought such acts would prejudge the legal determination of compensation now in the courts. (See Lima 7982.)5 He promised to inform the Foreign Minister, General Mercado, with great care so they would not jump to premature conclusions. He and the DCM agreed on the imperative necessity of keeping this matter out of the public domain until the two governments had had a chance to try to deal with it.
Comment: We assure IPC and Jersey Standard’s decision to request invocation of the amendments represents a willingness on their part to accept the possible total expropriation of their interests in Peru and a termination of all their activities here. Their attitude as expressed in para. 3 of reftel seems clearly to suggest this. If we interpret para. 3 correctly it would seem almost a challenge to the GOP to intervene or in someway take over, possibly by expropriation, IPC marketing system to avoid the exhaustion of stocks implied by the company’s unwillingness to purchase from the expropriated refinery. We believe that [Page 1075] if matters come to this the military government will be more unified than ever and, at the outset at least, will be enthusiastically supported by Peruvians on a patriotic basis. The reaction would be not only against IPC but US-Peruvian relations would suffer an historic setback. A wave of anti-Americanism, which might endanger American lives and property, would result. We hope therefore that the Department in making its study will do so with fullest appreciation of potential consequences. Also urge make every effort to avoid publicity so long as the matter is under study and the vital decisions have not been taken.
With reference to the Embassy telegram no. 79946 recommending a prompt resumption of relations with the revolutionary GOP, we suggest that this is now more desirable than before. We have already said the GOP meets the normal requirements and should be recognized. Because of the seriousness of the subject of this telegram it is important that the avenues of normal intercourse be opened immediately so that we can deal with the matter. It is essential that the GOP not get the impression that recognition is being delayed as a pressure tactic in favor of IPC.
  1. Source: National Archives and Records Administration, RG 59, Central Files 1967–69, PET 15–2 PERU. Confidential; Priority; Limdis.
  2. In telegram 257311 to Lima, October 17, the Department reported a formal request from officials of IPC and Jersey Standard to invoke the Hickenlooper amendment. The Department also issued the following instructions: “You are authorized in your discretion pass word to military government that matter now in hands our lawyers; that we cognizant as we trust they are too of consequences of application of Hickenlooper; but proceedings are required by law and so we are bound to act accordingly.” (Ibid.)
  3. See footnote 6, Document 516.
  4. A copy of the aide-mémoire is in the National Archives and Records Administration, RG 59, Lima Embassy Files, Subject Case File on the International Petroleum Company: Lot 71 F 154, Sep–Dec 1963.
  5. Telegram 7982 from Lima, October 17, reported that the IPC had filed a “habeas corpus action” in an attempt to nullify expropriation of its property. (Ibid., Central Files 1967–69, PET 6 PERU)
  6. See footnote 7, Document 516.