529. Telegram From the Department of State to the Embassy in Brazil 1

Tosec 59. Udall has informed Mann that time for issuance of proclamation covering period January–June 1966 is fast running out and is pressing for issuance of proclamation which would not meet Venezuela’s position. Puerto Ricans also urging prompt action for different reasons.

Udall states if proclamation is not issued soon we will have to postpone issuance until some time prior to July 1, 1966. I understand he is personally committed to domestic industry to make some minor changes in present proclamation.

Would appreciate knowing whether your conversation with Leoni reported in Caracas 5422 contemplated personal conversation with President and Udall before final decision reached. Problem has as you know been under review for several months and even Solomon proposal which is unacceptable to the Venezuelans was opposed by the industry. We know of no compromise proposal which would meet Venezuela’s demand which essentially is that we take away from domestic refiners of Venezuelan oil approximately 1.25 a barrel and pass on this difference between price of U.S. and Venezuelan crude to Venezuelan government. In course of last of several conversations we have had with Perez-Guerrero on this subject he indicated he would accept for time being passing on a fraction (say 10 to 20%) of the total involved but indicated that Venezuelan aim would be to increase this to a full 100% that is to say “de-ticketing” all Venezuelan crude. As you know this would require a country quota for Venezuela and in addition to objections of domestic refiners we would have to face strong opposition of US oil investors in Venezuela who, with some justification, are convinced Venezuela would use country quota as a basis for controlling sales of Venezuelan crude in this market. Since receiving your instructions we have reviewed once again our position both internally and with the Venezuelans and we have no new proposal to make. Perez-Guerrero has also sent us word that he has nothing new to offer other than this “de-ticketing.”

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Some of the largest oil investors have been frankly told of the danger of a nationalistic reaction in Venezuela and they have informed us they prefer this risk to the risks inherent in the “de-ticketing” and country quota arrangement.

Would appreciate your instructions.3

  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, PET 17 US–VEN. Confidential; Priority; Limdis. Drafted by Mann, cleared by Solomon, and approved by Mann. Rusk was in Rio de Janeiro November 16–24 for the Second Special Inter-American Conference.
  2. Document 528.
  3. In telegram Secto 31 from Rio de Janeiro, November 20, Rusk replied: “It seemed obvious from my talks in Caracas that no formula is in sight which offers a solution regarding Venezuelan oil. Simply as a matter of courtesy, I would hope we could have some kind of consultation with the Venezuelan Government following my visit to indicate that we have been unable to find a necessary solution beyond those already suggested and it will be necessary now to proceed with the issuance of a proclamation. I look upon this as a diplomatic courtesy to let them know that their discussion with me had not been ignored. Probably Department’s 431 to Caracas fully meets this requirement. Do not believe this issue will affect Rio Conference significantly.” (National Archives and Records Administration, RG 59, Central Files 1964–66, ORG 7 S) According to telegram 431 to Caracas, State and Interior representatives informed the Venezuelan Embassy on November 17 that, although the U.S. Government “did not exclude possibility finding new approach,” the “likelihood of discovering brand new scheme quite slim.” (Ibid., PET 12 VEN)