543. Memorandum From the President’s Special Assistant (Rostow) to President Johnson 1

Mr. President:

Venezuelan Ambassador Tejera-Paris called me yesterday to ask for an appointment with you to deliver a letter from President Leoni. He said he was under instructions to deliver it to you and make some oral remarks. I gave him no encouragement but did not close the door. An advanced copy of the English translation is at Tab A.2

What Leoni wants is revision of our Mandatory Oil Import Program (MOIP) to put Venezuela on a par with Canada and Mexico and permit higher imports of Venezuelan oil. He looks upon increased demand on Venezuelan production resulting from the Middle East crisis as further justification for this request.

We are not in a position to do what Leoni wants on the MOIP. You told him this at the Summit when you outlined the steps you were prepared to take:

  • —talks with Canada to restrict their deliveries.
  • —additional imports of asphalt.
  • —assistance in desulphurization technology.
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We are moving forward on all three of these commitments as described in the report at Tab B. Tony Solomon tells us that Stu Udall has not moved faster toward carrying out the pledge on asphalt because of opposition of his staff and Congressman Mahon.3

Because you can’t oblige Leoni on what he is after, it is inadvisable for you to receive Tejera-Paris. Were you to see him, it would become known and expectations in Venezuela aroused. The government might even encourage such hopes. The resulting let-down of an unforthcoming reply would then be increased. Covey Oliver and Tony Solomon agree with this assessment.

I recommend that I tell Tejera-Paris that I have consulted you on an appointment and because of the pressure of business you asked that I receive him on your behalf.

Walt

You want to receive him

I should receive him4

Speak to me

Tab B

Memorandum From the Director of the Office of North Coast Affairs (Hill) to William G. Bowdler of the National Security Council Staff

Washington, July 27, 1967.

SUBJECT

  • Venezuelan Petroleum Problems

In the course of the President’s April 11 conversation with President Leoni at Punta del Este a number of commitments to actions were made by the President within the overall context of our desire to help Venezuela as much as possible by using more oil from Venezuela. These undertakings, and the current status of the related U.S. actions, are summarized hereunder:

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1. To initiate talks with Canada to see whether or not we can get Canada to reduce its share in the growth rate of the United States market (thereby giving Venezuela an opportunity to share in such growth).

Action taken:

A series of meetings has been held with Canada, the most recent being to present a U.S. revision of an informal Canadian proposal. This latest U.S. revision was presented by Assistant Secretary Solomon to Canadian Ambassador Ritchie on July 26. We feel that our position and degree of flexibility is fully outlined to the Canadians. At the moment we are not able to anticipate their willingness to agree to voluntary limitations of exports at a suitable level. We must await their response.

The Canadians have been insistent in their desire to expand petroleum exports to the U.S., and the most that we can expect by limiting the Canadians is only a small increase in offshore imports rather than the decline which would otherwise occur. The Venezuelans, while understanding our strong efforts to keep the Canadians from forcing a cutback in imports from overseas, will not get significantly more imports as a result of our negotiations with Canada.

2. The President indicated that he had just signed an important proclamation relating to U.S. imports of asphalt, enabling the Secretary of Interior to certify to the need of additional imports thereof outside the MOIP. The President indicated that the U.S. would like to increase its purchase of asphalt and that the matter would be kept under continuing review.

Action taken:

Following issuance of the proclamation, the Office of Emergency Planning has progressed with a detailed study of the U.S. asphalt requirements. Interior has under consideration implementation of the asphalt authority, and is awaiting the recommendations of the OEP study.

3. An undertaking to “see what we could do to get the sulphur out of Venezuelan oil”.

Action taken:

a.
The White House has established a Committee to coordinate technical economic research on the impact of air pollution problems under the chairmanship of HEW and CEA.
b.
HEW to make available $2.7 million from FY 1968 contingency funds for research, including desulphurization. Findings as developed will be made available to Venezuela. President Leoni recently called [Page 1133]the attention of Ambassador Linowitz to the latter understanding, indicating that he was awaiting news.5
c.
Although not specifically discussed at Punta del Este, residual fuel oil was redefined by a Presidential Proclamation issued July 17 to include #4 fuel oil as a step toward air pollution abatement.6 The redefinition had been supported by the GOV. This redefinition, which has been welcomed by the GOV, could allow Venezuela to maintain substantially the same level of earnings it has been receiving by supplying the great bulk of imported residual and thus offset the potential loss caused by the fact that the residual Venezuela has been supplying can no longer be sold under anti-pollution regulations. It will not, however, result in the use of more oil by the U.S. Moreover, the GOV, in a statement welcoming this U.S. action, has expressed serious concern with regard to a discretionary provision of the Proclamation which gives the Secretary of the Interior authority to reimburse with import allocations U.S. refiners who produce low sulphur residual. Venezuela fears this could redound to the benefit of non-Venezuelan crudes. Interior has told Venezuelan representatives that the implementation of this authority would provide the mechanism for utilizing traditional Western Hemisphere, low gravity, high sulphur crude to produce the required low sulphur residual. Interior is preparing regulations which will be open to public comment prior to implementation.

4. Passing mention was also made by the President to an increase of refining capacity in Puerto Rico, where Venezuelan oil is used.

Action taken:

Import applications for supplies to these refineries are still under study by Interior.

5. The President was categoric in asserting to President Leoni that 1 to 3 above was just about all he could do at this time. A more fundamental revision of the MOIP to remove “discrimination” in favor of overland imports by extending equal treatment to Venezuela remains a major Venezuelan aspiration. President Leoni in a conversation with Ambassador Linowitz on June 26 asserted that the Middle East crisis had shown the vital importance of Venezuela’s oil resources to the United States and hoped this would be taken into account in the continuing discussions and negotiations between Venezuela and the U.S. regarding petroleum. The Venezuelan Ambassador has inquired at the Department of State about the possibility of revising the MOIP in [Page 1134]Venezuela’s favor (he was given discouragement) and the Venezuelan press has also played up this theme. Venezuela has increased production by 300,000 barrels a day (about 9%) and President Leoni has stated that increases beyond that amount must be covered by long-term contract. Venezuela has no intention of increasing production on a crash basis only to find itself in economic difficulties after the crisis ends, as in 1956. President Leoni has used the current crisis to point out that Venezuelan production is just as strategically important to the U.S. as that of Canada and Mexico. We can therefore expect greatly increased pressure from Venezuela as and when the current crisis subsides, precisely at a time when domestic producers will also be resisting cutbacks.7

  1. Source: Johnson Library, National Security File, Country File, Venezuela, Vol. III, Memos, 12/66–12/68. Confidential.
  2. Dated July 25; attached but not printed.
  3. Congressman George H. Mahon (D–Texas), chairman of the House Appropriations Committee.
  4. Johnson checked this option.
  5. Leoni met Linowitz in Caracas on June 26. An account of their discussion on petroleum was transmitted in telegram 6824 from Caracas, June 28. (National Archives and Records Administration, RG 59, Central Files 1967–69, PET 15 VEN)
  6. Proclamation 3794. (32 Federal Register 10547)
  7. In a letter to Leoni on August 8, President Johnson outlined the action taken to support Venezuelan oil, but discounted any hope of further improvement: “To go beyond these measures would involve a fundamental and drastic change in our entire petroleum policy and would bring into question the whole structure of our oil policy. Indeed, since we last spoke, the crisis in the Middle East has made it even more difficult to envisage changes in our oil import program.” (National Archives and Records Administration, RG 59, Central Files 1967–69, POL 23–7 VEN) Bernbaum later warned that relations would deteriorate if Venezuela’s share in the U.S. oil market declined due to events in the Middle East and clean-air requirements. (Telegram 1219 from Caracas, August 25; ibid., PET 17–1 VEN)