80. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon1 2

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  • Bolivian Expropriation of Gulf Oil Company

On October 17 the Bolivian Government nationalized the properties of the Gulf Oil Company. There are reports that nationalization of additional U.S. interests—mining companies, banks, utilities—may occur. However, no moves in that direction have yet been made. Press comment in La Paz and the attitude of Government officials in the last several days have been strongly nationalistic, almost chauvinistic. Much of it is anti-U.S. in tone and directed against alleged “foreign” control and direction of the economy and the nation’s affairs.

The expropriation of Gulf is a potential Hickenlooper problem. Whether it is or not depends upon what the Bolivian Government does about compensation. It has said it would compensate, but comments by the Minister of Mines and others suggest that they may intend no more than token reimbursement. If steps are not taken toward adequate compensation within six months, i.e., April 17, the Hickenlooper amendments will at that time become applicable.

Ambassador Castro has been instructed to make a strong demarche to the Bolivian Government, to protest the anti-U.S. content of Government actions and declarations. He is to ask for an explanation of Bolivia’s policy toward the U.S. and to indicate that our ability to continue general cooperation, financial and otherwise, depends upon Bolivia. He will raise the question of compensation, point out the necessity for adherence to international norms in this regard, and ask what their intentions are.

A deeper question is what direction the Bolivian Government will now take, and what the internal dynamics are. Nationalization of Gulf, the largest foreign investment, was in many ways a “revolutionary” symbol and a watershed. The political climate when the Ovando Government took power in the September 26 coup was such that he was clearly committed to some revision of Gulf’s relations with the Bolivian state although not necessarily to nationalization. Pressure to nationalize increased after September 26, but there was division within the Government over the proper course to follow right up to the seizure. The nationalistic elements within the Government, both military and civilian, moved suddenly. General Ovando was either presented with a fait acompli when the Armed Forces Commander, General Juan Torres, ordered the seizure of Gulf properties, or he was persuaded by the nationalists that political pressures permitted no other course and no further delay.

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In effect, therefore, Gulf’s expropriation means that control over the direction of the government has for the time being fallen into the hands of the young radical civilian nationalists who were invited into the “Revolutionary Government” to popularize it, and some key military figures who share and exhibit this same nationalist sentiment. The Armed Forces, largely without ideas and programs of their own but with the coercive power, have thus largely been won over by the civilian elements radical line and are giving it full support as a means of legitimizing their hold of power. President Ovando’s style, as in the past, is to lead by following changing consensus, and he has acquiesced in this more radical line.

At the moment there appears to be considerable flux in the situation, and no single strong leader has emerged. Gulf’s expropriation has radicalized the regime’s course and is in that sense somewhat self-fulfilling. The Government has emphasized the politically popular and the nationalistic as the basis for its support, and it has sought to drum up that emotion. Its ability to move is thus circumscribed by the popular reaction it itself loosed from Pandora’s box with the expropriation and the subsequent public justification of it which it made. It can now, as Embassy La Paz notes, do little more than listen to the voice of the mob. Things may thus get worse before they get better. Sooner or later some strong, probably military, figure will emerge as leader. Whether that will be a conventional Caudillo or a Nasserist figure remains to be seen.

There is no evidence that the Bolivian action was in any way influenced by the Peruvians, except possibly by example, or that there is any link between the two governments.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 770, Country Files, Bolivia, Vol. 1 1969–1970. Confidential. Sent for information. The memorandum was not initialed by Kissinger. The Hickenlooper Amendment to the Foreign Assistance Act of 1961 was initially approved in August 1962 and subsequently revised in December 1963. Sponsored by Senators Burke B. Hickenlooper and E. Ross Adair, the amendment stipulated that the President suspend assistance to any country that expropriated the property of U.S. citizens or corporations without proper compensation. (76 Stat. 260)
  2. Kissinger outlined for President Nixon the implications of the nationalization of Gulf Oil.