Foreign Relations of the United States, 1969–1976, Volume E–11, Part 2, Documents on South America, 1973–1976

383. Transcript of Secretary of State Kissinger’s Staff Meeting¹

Washington, July 16, 1974, 3 p.m.

The Secretary’s Principals’ and Regionals’ Staff Meeting, Tuesday, July 16, 1974, 3:00 p.m.

[Omitted here is material not related to Venezuelan affairs.]

pp 9–10 Venezuela Economic Nationalism—Four pending proposals of the new GOV. The importance of avoiding sniping at Venezuela stressed.

[Omitted here is material not related to Venezuelan affairs.]

Secretary Kissinger: Jack?

Mr. Kubisch: Venezuela?

I really would like to say a few words about it today because in recent weeks—really, since President Pérez came to office in late March—he’s embarked upon a number of programs that’s been causing a lot of pain around Washington and proposed a number of actions that are of great concern to American companies and American investors in Venezuela.

I think I’d just like to say a couple of words to make sure that we see this in its proper perspective and assess what the implications are for American companies and for us.

In the first place, I think it’s important to realize that Venezuela has one of the highest standards of living in Latin America and the highest per capita income.

Secretary Kissinger: What’s that got to do with “economic nationalism”?

Mr. Kubisch: I’m coming to that.

As a result, it has this high standard of living because it has squandered—there’s a feeling in the country they have squandered their foreign exchange earnings in petroleum and iron ore exports on imports without industrializing and developing an economic infrastructure in the country. There’s been a growing resentment in Venezuela at the massive foreign—primarily U.S.—domination of the economy of the country.

Now, with the great increase in oil prices and the oil revenues from perhaps two billion last year to 10 billion this year. There’s a feeling they have an opportunity really to develop their own country, and there is a wide consensus in the country to try and do this—to develop an industrial capacity to an economic infrastructure, and so on. And President Pérez has come to power against this kind of background. He’s made four major proposals.

One is a series of populist measures—such as wage increases, redistribution of income, revitalizing the agricultural sector, and just generally things that have widespread appeal to the people of Venezuela.

The second and third concern: oil and iron ore. Oil and iron ore together account for about 95 percent of Venezuela’s wage earnings. The oil concessions that have about 10 years to run were scheduled to revert to Venezuela beginning about 1983. He and all the other Presidential candidates campaigned on a program of having them converted immediately. And he said that he’s going to nationalize the oil properties within two years, and he has established a commission to make recommendations in six months—around three more months now—on how to accomplish this. On the iron ore side—primarily Bethlehem Steel, U.S. Steel—he says he’s going to nationalize those too.

Secretary Kissinger: What does that mean for us?

Mr. Kubisch: For us it means this: We have, I think, several very important interests in Venezuela. On the oil front, we need a long-term secure supply of oil. So whatever program is developed by the Venezuelan Government with the oil companies, it should assure us access to this oil—not only for the proved reserves they have now but perhaps in the Orinoco tar sands where there are additional deposits to be developed. In iron ore we really need a short-term access to iron ore, and the companies can develop other sources of supply. President Pérez has indicated he wants to establish a steel industry there and use the iron ore—

Secretary Kissinger: But how is he going to nationalize?

Mr. Kubisch: This hasn’t been determined yet. He’s going to the companies. He’s going to his own commission.

Secretary Kissinger: Is McClintock there?

Mr. Kubisch: Yes.

Secretary Kissinger: He hasn’t put forward a proposal yet.

Mr. Kubisch: No. He’s waiting for recommendations by this commission on the oil.

Secretary Kissinger: Sure. I assume we don’t care whether he nationalizes as long as there’s adequate compensation.

Mr. Kubisch: That’s a primary concern. His settlement—whatever it is—does not prejudice other American investment elsewhere in the world—in other words, that there be fair compensation—something that’s negotiated mutually satisfactorily with the companies themselves.

There’s a fourth element in his program that has appeal in Venezuela also. And that is there are certain sectors of the economy—service and merchandising sectors—that have, to some extent, been dominated by Americans. Sears has a large chain of department stores there. IBEC—the Rockefeller chain—has a large group of supermarkets there. He has issued instructions that those American investors must reduce their investment to 20 percent or less equity within three years.

Those are the main elements of what he’s seeking to do.

In the meetings that—

Secretary Kissinger: But do we have to make any decisions about any of that?

Mr. Kubisch: I think the only decision we need to make now is to not panic about this and not be sniping away at the at the Venezuelans all the time in such a way as to—

Secretary Kissinger: Well, I can’t panic because I’m not on the distribution list for any of these cables. (Laughter.)

Mr. Kubisch: Well, every once in a while there’s a meeting—

Secretary Kissinger: There’s nothing like ignorance to keep a man calm! (Laughter.)

Mr. Kubisch: Every once in a while there’s a meeting of an inter-agency group that says, “Did you hear what’s happening in Venezuela? We better go in and pound on the table before President Pérez.” If so, it’s a sure losing proposition. It’s the sort of thing we can’t win inside of Venezuela, though it might enhance our stance around the world.

[Omitted here is material not related to Venezuelan affairs.]

1. Summary: Kubisch briefed Kissinger on economic nationalism in Venezuela.

   Source: National Archives, RG 59, Transcripts of Kissinger Staff Meetings, Lot 78D443, Box 2. Secret; Nodis. Kissinger chaired the meeting, which was attended by all of the principal officers of the Department or their designated alternates.