Foreign Relations of the United States, 1969–1976, Volume XXXVI, Energy Crisis, 1969–1974

36. Memorandum From Viron P. Vaky of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)¹

Washington, January 9, 1970.

• SUBJECT
  • U.S. Oil Import Policy and Venezuelan Concern—Your Meeting with Flanigan

An issue which has very serious foreign policy implications is Venezuela’s deep concern over U.S. oil import policy and its desire to protect its own interests.

Venezuela considers the Cabinet Task Force review of U.S. oil import policy to be the most important single matter affecting U.S.-Venezuelan relations. Petroleum accounts for over 90% of Venezuela’s foreign exchange income and for almost two-thirds of its total revenue. In recent years Venezuela’s share in the U.S. market has been declining and its goal is to increase its annual oil sales to the U.S. as a means of achieving economic growth. The President’s decision on U.S. oil import program will, then, vitally affect Venezuela’s interests.

Problems with Venezuela will arise from two of its primary concerns: (1) that the new U.S. policy give it equal treatment with all other oil suppliers, especially Canada (presently our policy accords Canada a privileged position in the U.S. market and gives Venezuela only limited benefits); and (2) that the Venezuelan Government be consulted before the President makes a final decision on oil import policy. The GOV feels we are committed to such consultations; in a letter to President Caldera on November 14, 1969,² President Nixon in fact reaf-firmed the commitment of previous Administrations to consult with the GOV beforehand on changes in the oil import program which would affect Venezuela. The general commitment contained in the President’s October 31 speech³ to consult on trade matters is also relevant in this case.⁴

The Venezuelans have clearly indicated that they see the eventual treatment of oil imports and the maintenance of our commitment to consult as a test of President Nixon’s Latin American policy. Their sensitivity and the political storms that this question occasions internally in Venezuela were illustrated by the recent unfavorable reaction to our announcement of quotas under the oil import program for the first six months of 1970. (Since the Task Force Report was not ready, it was necessary to extend the existing program into 1970. The announcement was made by Interior on December 21. Venezuela was not consulted or notified before the announcement.)⁵ The Venezuelans reacted sharply, in both press and public official reaction, to what they considered to be maintenance of discriminatory restrictions on their exports as compared to Canada. They also stated that the extension of the quota system was surprising following the President’s statement that he intended to encourage a policy of stimulating trade with Latin America. They reacted most sharply of all to the lack of consultation or notification.

The December announcement in effect accentuated Venezuelan fears that their interests may not be recognized in the final U.S. policy, and a period of uncertainty before a definitive U.S. oil import policy is established may result in the spread of unfavorable, emotional and defensive reactions.

Another element in the picture is that U.S. oil concessions are due to expire in 1983, as well as various service contracts. If Venezuelan aspirations are not met in the new import policy, oil concessions and service contracts will be particularly vulnerable should Venezuela focus on steps which they can take against U.S. interests as leverage or reaction.

The Cabinet Task Force on Oil Import Control has concluded its meetings and will submit its report to the President on January 30. Fred Bergsten has submitted a separate memo to you covering the situation.⁶ The report will not recommend that Venezuela be accorded parity of treatment with Canada, in which case it can be expected to be received with strong disappointment in Venezuela where the issue of equal treatment is a very sensitive one. It is therefore more important than ever that we be responsive on the point of consultation, which is of great concern to the GOV, before enunciating our final policy.

The Task Force report is being handled, as you know, by Peter Flanigan. Flanigan had earlier asked the State Department not to consult with other countries before the final decision is made. However, Flanigan has made an exception for Venezuela, after he was told that consultations were in progress with Canada, and State is inviting the Venezuelans for consultations in Washington next week.

In a conversation with our Chargé on January 8,⁷ the Venezuelan Minister of Mines stated flatly that he would not head a delegation to the U.S. for oil talks unless he had the opportunity to meet with President Nixon, if only briefly. He believed it preferable to send a technical commission up to consult on the Shultz report, after which the Minister would propose a meeting with President Nixon to present GOV views. The Minister said that after his failure during two prior visits to Washington to see the President, President Caldera feared that for the Minister not to see the President would create an intense political reaction in Venezuela. I attach Embassy Caracas’ account of this conversation for your information, because it is so illustrative of the intensity of the Venezuelans’ feelings about this general subject. I stress the fact that the Venezuelans are concerned not only with consultations, but also interpret consultations to include—at the proper moment—personal presentation of their views to President Nixon.

In sum:

• —Whatever the impact of the Venezuelan situation on the total considerations going into our oil policy, our oil policy has an overwhelming impact on Venezuela. Thus, our decision on this matter is crucial in terms of our policy toward Venezuela and, by derivation, on trade policy toward Latin America generally.
• —A reasonable treatment of Venezuela is important, even if we cannot meet all of its aspirations.
• —Consulting with them will compensate greatly for our inability to give them parity with Canada. Consultation is important. We should understand that Venezuela is going to make an issue out of consultation including personal presentation of views to the President.
• —The handling of the report—publication, etc.—is also important; it would be inadvisable to publish the report during the IA–ECOSOC conference, which is being held in Caracas.
• —Because of the importance of the foreign policy aspect of this problem (the Middle East aspect must be equally important), I believe the matter deserves NSC consideration. It is such a difficult problem that I think the President would be served by having his decision buttressed and clothed in NSC consideration.

Recommendation

That in your conversation with Flanigan you suggest the Report be considered in the NSC.⁸

That you stress to Flanigan:

• —the sensitivity of the Venezuelans and the consequent importance of this question to the success of the President’s Latin American policy and to his image in the hemisphere;
• —the relationship of how the report and its consideration is handled—publication, et al—to our foreign policy, and particularly Venezuela;
• —the Venezuelan insistence on consultation.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 367, Subject Files, Oil 1970. Confidential. Sent for action. Concurred in by Johnston for Bergsten.
2. Not printed. (Ibid., White House Central Files, Subject Files, Confidential Files, Box 25, EXTA 4/CM Tariff Imports Oil, October–December 1969)
3. For the full text of Nixon’s speech at the Annual Meeting of the Inter American Press Association, October 31, 1969, see Public Papers: Nixon, 1969, pp. 893–901.
4. A handwritten notation by Kissinger in the margin next to this paragraph reads: “Pete: Make sure this happens.”
5. In telegram 6087 from Caracas, December 29, 1969, the Embassy reported the degree to which Venezuela was caught off guard by the U.S. announcement. (National Archives, RG 59, Central Files 1967–69, PET 2 VEN)
6. Document 35.
7. As reported in telegram 90 from Caracas, January 8. (National Archives, Nixon Presidential Materials, NSC Files, Box 367, Subject Files, Oil 1970)
8. Kissinger crossed out the recommendation and initialed the disapprove line on January 14. Kissinger’s handwritten notation below the disapprove line is illegible.