527. Memorandum From the Acting Assistant Secretary of State for Economic Affairs (Solomon) to the President’s Special Assistant for National Security Affairs (Bundy)1

SUBJECT

  • Oil Import Controls and U.S. Relations With Venezuela and Canada

Since Tom Mann is in New York this afternoon he has asked me to take up this urgent matter with you.

1.
The fundamental issue is that the Government of Venezuela is demanding that the new oil import control program covering the next five years which is to be announced by Presidential Proclamation the end of next month should provide “equal treatment” for Venezuela with that given to Canada. This has become a major political issue within the Venezuelan Government, the opposition parties to the Government and the Venezuelan public. Ideally they would like to receive an “over land exemption” like that enjoyed by Canada (that is no U.S. imposed limitation on oil imports leaving it up to the Government of Venezuela to control the exports of its oil companies to the U.S.). Both Interior and State agree that we cannot agree to this for many reasons. The other method of giving fully “equal treatment” to Venezuela would be to abolish formally the Canadian over land exemption (Mexico’s is unimportant) as well as limiting in fact the rate of increase of Canadian oil exports to the U.S. The Canadian Government and our own people believe that to do so would possibly, and perhaps probably, result in the downfall of the Pearson Government and jeopardization of the bilateral defense and increasing free trade arrangements between Canada and the U.S. In brief this can become the hottest political issue in both Canada and Venezuela vis-à-vis the U.S.
2.
Interior and State believe that the most practical and appropriate solution—although by definition not fully satisfactory to either side—is that contained in the attached position paper.2 Presidential Proclamation before the end of June require that the content of this package be advised to the Canadian technical people in the next day or two and the Venezuelans shortly thereafter. We probably will need during the following week a Ministerial level meeting with the Canadians and we will insist on a Venezuelan meeting at the Ministerial [Page 1098]level to extract an acceptance by them of our proposals which could be issued publicly after the Presidential Proclamation.

In brief the package consists of:

a.
The press release accompanying the Presidential Proclamation and future public references by us would talk of “planned coordinated pipeline movements” instead of “over land exemption”.
b.
A private formal commitment to us from the Canadian Government that it would confine its annual rate of increase in its oil exports to the U.S. to an over all of five percent. In addition the Government in Canada would be advised privately that if it were unsuccessful in meeting this annual commitment, the United States would take measures to enforce it.
c.
The Government of Venezuela would be informed of the Canadian commitment, and would be assured that we would review with Venezuela each year Canadian performance, and that if it were not satisfactory the United States would consider the measures required to ensure this result.
d.
A Western Hemisphere preference formula which would in fact make it slightly more attractive for U.S. refineries to import Venezuelan oil as compared to Near Eastern oil. In practice the Venezuelans could get some modest price increase as well as modest tonnage increase from this formula.3

Anthony M. Solomon 4
  1. Source: National Archives and Records Administration, RG 59, Office of Fuels and Energy, Petroleum Files: Lot 69 D 76, Petroleum 17–2, Oil Imports, 1965 May. A note on the memorandum indicates it was hand-carried to the White House on May 27.
  2. Not attached.
  3. On May 27 Bundy asked the President if the memorandum required White House action. Johnson responded he would not be able to consider the issue until June 1. (Johnson Library, Recordings and Transcripts, Recording of telephone conversation between President Johnson and Bundy, May 27, 1965, 7:29 p.m., Tape F65.42, Side B, PNO 3) The President called Mann on June 4 to discuss “a memo on Venezuela and Canadian oil”, an apparent reference to Solomon’s May 26 memorandum. Johnson asked Mann “to go over this carefully from the President’s standpoint and the national standpoint and see if there isn’t something that can be done to ride it out for sixty to ninety days.” Johnson said the proposal had been represented as “the best solution even though it will make both countries angry and also our industry.” “It seemed to him,” however, “the best way out is more of the same. No change, but we are studying it. Get rid of the Congress and then do what we need to do.” (Ibid., Papers of Thomas C. Mann, Telephone Conversations with LBJ, May 2, 1965–June 2, 1966) Solomon met Perez Guerrero in New York to explain the President’s decision. A memorandum of the conversation, June 14, is in the National Archives and Records Administration, RG 59, Central Files 1964–66, PET 17–2 US–VEN.
  4. Printed from a copy that bears this typed signature.