1964-1968, Volume XXXI, South and Central America; Mexico|
Released by the Office of the Historian
Venezuela 522. National Intelligence Estimate
522. National Intelligence Estimate/1/
Washington, February 19, 1964.
/1/ Source: Central Intelligence Agency, Job 79-R01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet this estimate was prepared in the Central Intelligence Agency with the participation of the intelligence organizations of the Departments of State and Defense, the National Security Agency and the Federal Bureau of Investigation. The United States Intelligence Board concurred in this estimate on February 19.
PROSPECTS FOR POLITICAL STABILITY IN VENEZUELA
To estimate the outlook for political stability in Venezuela over the next two years.
President-elect Leoni will almost certainly take office without serious challenge, and will probably enjoy an initial period of relative political calm. Nonetheless, the problems of creating and maintaining a viable administration and of coping with underlying social and economic tensions-together with the likelihood of further terrorist activities-will almost certainly produce a series of political crises during the period of this estimate. The Leoni government probably will survive these crises.
A. Leoni is an experienced, generally capable political leader; but his ability to supply vital national leadership during a crisis is as yet untested. (Para. 15)
B. Leoni’s relations with Congress are likely to start out relatively peacefully. His political opposition will almost certainly turn more belligerent over time, but we believe he will be able to maintain control of Congress on key issues through 1965. (Paras. 16-20)
C. The Communist and Castroist insurgents almost certainly will be unable to force their way to power during the period of this estimate, although they will retain a high capability for hit and run terrorism, including attacks against US personnel and property. Leoni probably will have to resort at times to extraordinary measures such as suspension of constitutional guarantees to contain the insurgency threat within tolerable limits (by Venezuelan standards), and his timing in initiating these measures may involve him in difficulties with either Congress or the military. (Paras. 22-28)
D. The armed forces, the ultimate arbiters of political power in Venezuela, are generally disposed to support constitutional government for as long as it proves reasonably effective in dealing with national problems. In any event, the military is anxious to avoid an arbitrary move against the government which might alienate a large segment of the population. Thus a military coup is not likely unless Leoni becomes generally discredited with the population. Under such circumstances, a military coup would probably follow a relatively moderate course and offer the leftist insurgents little opportunity for substantial gains. (Paras. 29-31)
I. Introduction: The Importance of Venezuela
1. Raul Leoni is scheduled to succeed Romulo Betancourt as President of Venezuela in March 1964. Leoni’s success or failure in office will be of great importance to the US. Venezuela is of strategic importance as the world’s largest exporter of oil. US capital investment in Venezuela totals about $3 billion, exceeded only by our investments in Canada and in the UK. Venezuela, moreover, holds great symbolic value for our policy in Latin America as a country attempting rapid social and economic progress through constitutional democracy. Venezuela remains a priority target in Communist efforts to promote violent revolution in Latin America, primarily because Fidel Castro cannot afford to allow such an important democratic reformist regime to succeed. Venezuela is also the only Latin American country in which leftist extremists, with moral and material support from Cuba, have been able to sustain an impressive level of insurgency.
II. Leoni’s Inheritance: Betancourt’s Problems and Achievements
2. President Betancourt’s political legacy to his successor is a mixed one. On the one hand, Betancourt has moved constitutional democracy an important step forward by the very fact of surviving his legal term and successfully holding free elections. He also initiated an extensive program of social and economic reform. Finally, the last few months have been marked by a subsiding of political tensions, leading to a relatively auspicious environment for the transfer of power. On the other hand, Leoni will inherit, to one degree or another, the problems which have created recurrent crises for Betancourt from 1959 to the present: acute social tensions, limited national experience with representative government, Communist and Castroist insurgency, and the threat of a military takeover.
Political and Social Heritage
3. In addition to the direct assaults of leftist extremists and military dissidents, the Betancourt government has had to withstand harassment by opposition parties, obstruction of its program in Congress, and widespread popular indifference to the fate of constitutional democracy. These latter problems are rooted in Venezuela’s lack of experience and confidence in representative government and in the acute social tensions prevailing in urban areas.
4. Venezuela has traditionally been ruled by military dictators; its only previous experience with democratic reformist government (1945-1948) was terminated by a military coup which led to the repressive dictatorship of General Marcos Perez Jimenez (1948-1958). Following his election in December 1958, Betancourt was able to form a strong multi-party coalition, because of widespread concern over the threat of another military intervention. By 1962, however, this coalition had splintered, and the opposition parties had gained control of the lower house of Congress. Various opposition parties joined with Communists and Castroists in a systematic obstruction of government programs, particularly of measures to control terrorism. The primary objective was to discredit Betancourt’s Democratic Action party (AD). The political opposition apparently had come to fear AD’s domination of the 1963 elections as much as it did the consequences of a military coup. From time to time the opposition parties threatened to boycott the elections.
5. Thanks largely to its petroleum, Venezuela has the highest per capita income in Latin America (over $700), and its government is assured of substantial revenues, much of which the Betancourt administration has directed into programs to promote the welfare of the poorest classes. Nonetheless, one-half of the country’s eight million people lives under severely depressed conditions. Moreover, because of a large rural-to-urban migration in recent years, much of the country’s economically depressed population now lives pressed together in urban slums, without steady employment or other conventional social ties, and without much concern for Venezuela and the maintenance of orderly government. Particularly in Caracas, where lawlessness is prevalent among the 300,000 slum dwellers, much of the population has regarded the government and the police-not the terrorists-as its main antagonists.
6. Betancourt has had to contend with rightist military plotting throughout much of his term. Moreover, of the five garrison rebellions during 1960-1962, the last two, Carupano and Puerto Cabello, involved dissident military officers collaborating with leftist extremist civilians. Betancourt has survived these plots and assaults largely because the chief military commanders, and through them the bulk of the armed forces,/2/ have remained loyal to the government. Betancourt, recognizing the military to be the ultimate arbiters of political power in Venezuela, assiduously cultivated this loyalty. He maintained military perquisites at a high level, flattered the military with frequent presidential attention and praise, and courted the personal friendship of key officers and garrisons. Most importantly, he maintained exceptionally good channels of communication between his office and all sectors of the armed forces as a means of explaining his policies and of monitoring the moods and anticipating the demands of the military. His efforts were favored by a growing political moderation among the military, stemming in part from an increasing professionalism among top officers and their fear that another military dictatorship would encounter stiff civilian opposition. At the same time, the military, keenly aware of Castro’s extermination of the prerevolutionary military establishment in Cuba, regarded nervously Betancourt’s politically motivated reluctance to crack down on leftist subversive agitation and violence. At times during 1963 a considerable restiveness spread throughout the military establishment.
/2/ The Venezuelan armed forces consist of four separate services with the following numbers of officers and men: Army-17,800; National Guard (a militarized constabulary)-12,000; Navy (including Marines)-5,600; Air Force-2,500. [Footnote in the source text.]
Communist and Castroist Insurgency
7. Leftist extremists, led by the Venezuelan Communist Party (PCV), were the major disruptive force during the final years of the Betancourt administration. The PCV participated in the 1958 election, gaining 160,000 votes and nine seats in Congress. The party was propelled toward "armed struggle" against the government by its impatience with its limited opportunities to make gains through "political struggle," by the example of Castro’s success in Cuba, and by the opportunities for violent action existing in Venezuela. The Communists found ready allies for insurgency in other extremist groups, most notably the Movement of the Revolutionary Left (MIR), a pro-Castro faction which split off from the AD party. They also found allies of convenience among rightist military dissidents.
8. The leftist extremists work through an organization called the Armed Forces of National Liberation (FALN). The PCV generally dominates FALN affairs, but undisciplined activists sometimes initiate terrorist activities on their own. The FALN is well organized and trained, aggressive and resourceful, but limited in numbers. Although the PCV and MIR combined probably can count on a political following in the tens of thousands, we estimate that the FALN has only some 600 to 800 active trained members, including those deployed in rural-based guerrilla bands. Most members are recruited from among urban youth, traditionally defiant of authority and extremist in politics.
9. The FALN has been able to obtain most of its funds, small arms, and explosives in Venezuela, primarily through robberies. Almost certainly, however, it has received material and financial assistance from Cuba. Most notably, government forces last November discovered a cache of small and medium weapons on the Paraguana Peninsula./3/ In addition, more than a hundred FALN members have received paramilitary training in Cuba and elsewhere in the Communist Bloc. Cuban broadcasts to Venezuela endorsing the FALN cause and heralding its exploits have been an important boost to the insurgents’ morale. Castro’s moral and material assistance was an important factor in the early stages of the development of the FALN. Although Castro probably can call upon some elements in Venezuela to step up terrorism whenever it suits his purposes, at least over the past year the FALN has become an aggressive and effective terrorist organization that does not appear to need outside prodding.
/3/ Located in northwest Venezuela, the major area of FALN guerrilla activity (see map). [Footnote in source text. The map is not reproduced. On November 28, 1963, the Venezuelan Government announced that it had discovered a large arms cache on the coast of the Paraguaná Peninsula; that an internal investigation had determined that the arms were of Cuban origin, intended for use in a guerrilla operation to seize power in Caracas before the Presidential elections of December 1; and that evidence against Cuba would be presented to the Organization of American States thereby justifying retaliatory measures under the Inter-American Treaty of Reciprocal Assistance, the so-called "Rio Treaty" of 1947. Documentation on the subsequent campaign to indict and sanction Cuba before the OAS is in Documents 1 ff., and Foreign Relations, 1961-1963, vol. XII, Documents 169-171.]
10. The leftist extremists have used a variety of tactics in attacking the Betancourt government. During 1960-1962 they tried to force their way to power directly, first by means of a series of urban riots and then by a combination of guerrilla warfare in rural areas and the two garrison rebellions. These attempts only proved that they lacked sufficient popular and military support for the purpose. By late 1962, therefore, they turned to terrorism and sabotage as operations which could be conducted by a relatively few dedicated militants, but which would serve to discredit and weaken the Betancourt government while building up their own image and strength. In August 1963, they launched a major terrorist offensive to disrupt the December elections and provoke a military coup, hoping to profit from the resultant disorder and discord.
11. During most of 1963 the FALN was able to strike at a wide variety of targets, with a good chance of success, and very little risk of casualties or losses through capture. The police,/4/ handicapped by poor organization, inadequate training, low morale, and legal restrictions established or enforced in reaction to the Perez Jimenez dictatorship, were no match for the terrorists. The political leaders of the FALN were protected from arrest by congressional immunity; rank and file members were able to take advantage of the legal sanctuaries provided by the autonomous universities and the de facto asylums of the slum districts. Moreover, even when arrested, terrorists often were able to regain their freedom through legal technicalities, bribery, or escapes.
/4/ Civilian police forces in Venezuela number nearly 19,000 men. In the Caracas area, there are five separate civilian forces with a total of over 10,000 men and a National Guard contingent of 700 men engaged in police duties. [Footnote in the source text.]
12. FALN efforts to disrupt the election through terrorism were thwarted, however, by the combination of a well-timed government crackdown, a notable improvement in police performance, and a show of determination by the population not to be intimidated by the terrorists. Betancourt, using some measures of doubtful constitutionality, moved to reduce FALN’s disruptive capability, before military restiveness got out of hand, and after five anti-government candidates had committed themselves to the presidential race. On 30 September the military was called upon to assist in a roundup of known extremists and suspected terrorists, including those hiding out in slum districts. In all, some 300 to 400 were jailed, including several PCV and MIR congressmen. In October, in response to pressure from the government, school officials closed Caracas’ Central University, which further reduced the maneuverability of the terrorists. Starting in October, moreover, the police in Caracas, political nerve center of the country, proved to be a better match for the terrorists, inflicting more casualties and taking more prisoners than previously./5/ The FALN still was able to undertake a large number of hit-and-run raids, especially outside of Caracas. But because of accumulated losses in manpower and morale, it was either unable or unwilling to mount an impressive last-minute attack. Its repeated threats against the voters probably proved counterproductive. On election day (1 December) the population went to the polls in overwhelming numbers; FALN attacks were few and ineffectual. Since the election, the terrorists have been relatively inactive, which is in large part responsible for the political calm of the final Betancourt months.
/5/ US advice and assistance contributed in large part to the improved performance of the police. Among other things, we were primarily responsible for the introduction of training in marksmanship and other practical subjects and the establishment of improved coordination among Caracas’ many and often competing police agencies. [Footnote in the source text.]
[Omitted here is the final section of the estimate, "The Outlook for the Leoni Administration," which includes a detailed discussion of the Inauguration, President Leoni, Political Prospects, Social and Economic Issues, Leftist Insurgency, Leoni and the Military.]
523. Action Memorandum From the Assistant Secretary of State for European and Canadian Affairs (Tyler) to Secretary of State Rusk/1/
Washington, July 10, 1964.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 3 IA. Secret. Drafted by William B. Cobb, Jr. (EUR/BNA), on July 8. A copy was sent to Ball. A notation on the memorandum indicates Rusk saw it.
A reliable controlled American source reports that Venezuela’s Foreign Minister Ignacio Irribaren Borges wishes to talk with you privately during the Latin American Foreign Ministers Conference about British Guiana. He is expected to tell you that Venezuela is prepared to support the overthrow of Cheddi Jagan, and to seek our support for this venture.
Our Ambassador in Caracas has learned from the Minister of the Interior that Venezuela is ready to provide financial support for Forbes Burnham when the time is ripe for Jagan’s overthrow.
A report from Georgetown advises that a person with good contacts in Venezuela is urging Burnham and D’Aguiar to form a "Revolutionary Government"; attempt a coup with the assistance of 100 trained men who will have had 30 days special training in Venezuela, and at the same time Cheddi and Janet Jagan will be kidnapped and taken to Venezuela.
You may wish to urge restraint on the Venezuelans, pointing out that plans are underway to seek a political resolution in BG through the democratic process of a Proportional Representation election. We hope that nothing will happen to impede this plan and we cannot support the Venezuelans even though we share their hope that someone other than Jagan will reach the top in British Guiana./2/
/2/ According to the Secretary’s Appointment Book Rusk met Iribarren on July 16 and 20. (Johnson Library) Memoranda of conversation, confined to discussion of the OAS resolution on Cuba, are in the National Archives and Records Administration, RG 59, Central Files 1964-66, POL 3 IA. No evidence has been found to indicate whether Iribarren raised the Venezuelan proposal to intervene in British Guiana.
524. Memorandum From the Director of the Office of Colombian-Venezuelan Affairs (Margolies) to the Assistant Secretary of State for Inter-American Affairs (Mann)/1/
Washington, January 13, 1965.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 32-1 BR GU-VEN. Confidential. Drafted by Crowley; cleared by Cobb, Whiteman, and Randolph. A copy was sent to Adams.
On December 15, 1964, the Venezuelan Foreign Minister called on Mr. Ball (then Acting Secretary), and requested that the U.S. Government use its good offices to help bring the current negotiations between Venezuela and Great Britain on the British Guiana boundary dispute to a conclusion favorable to Venezuela. Mr. Ball told the Foreign Minister that he could not comment on the problem because he was not familiar with it, but said he would look into it./2/
/2/ According to a memorandum of this conversation Iribarren said "he hoped that the United States would lend support to the Venezuelan position." (Ibid.)
In presenting his views to Mr. Ball, the Foreign Minister handed over a memorandum/3/ that stated that the Venezuelan Government has obtained evidence which allegedly casts some doubt on the integrity of the American citizen members of the 1899 arbitration tribunal. The memorandum states that this information has not yet been made public, but offers to furnish the evidence to the Department in confidence for our study.
/3/ Attached but not printed.
Another noteworthy development in this situation is the number of recent confidential reports indicating that the Venezuelan military are very sensitive to the boundary problem. They view the possibility that British Guiana may become independent under a pro-Communist government as opening the way for a Castro beach-head on the continent. They are also apprehensive because of the proximity of British Guiana to Venezuela’s developing iron and steel and hydro-electric complex in Guayana State. There are indications that the military have already prepared a contingency plan for the seizure of the area by force should this seem to them necessary at some future time.
A further complicating factor is that Forbes Burnham, the new Premier of British Guiana, is reliably reported to believe that the U.S. Government has sufficient influence with Venezuela to cause the latter to drop its claim.
Our continuing attitude (with which EUR agrees) toward this boundary dispute is that we hope to see the problem satisfactorily settled between the two interested governments through quiet and friendly negotiations without our becoming involved.
We believe that Britain would be most reluctant to modify the 1899 arbitration award, and the head of the UK Foreign Office desk for Latin America, Mr. John Slater told us recently that the British experts have found no evidence in the material submitted to them by the Venezuelans which would in the British view vindicate the Venezuelan claim.
We believe that Britain in any event will not wish to impose a boundary change on the present inhabitants of British Guiana against their will. The Venezuelans are aware of this problem, but nevertheless seek to have the boundary rectified before independence so as to avoid the awkwardness of having to demand territory from an independent neighbor. Responsible leaders in British Guiana also hope that the problem will be solved before independence, since some of them fear that Venezuela might actually seize the disputed area from a weak and newly-independent neighbor.
/4/ There is no indication on the memorandum that Mann approved these recommendations. In a January 28 memorandum to Margolies, Adams dismissed any serious consideration of "evidence." "I think it is ridiculous on the part of the Venezuelan Foreign Minister to seek our ‘good offices’ with the U.K., and at the same time threaten to blackmail us on the allegedly fraudulent findings of an American 66 years ago." Adams suggested that the United States refuse to accept the evidence if Venezuela submitted it "in any formal way," e.g. by diplomatic note. Otherwise, Adams agreed that the United States should avoid involvement in the dispute unless it appeared that Castro might establish a "beach-head" in British Guiana. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 32-1 BR GU-VEN)
Even though Venezuela regards this problem as a very real one, we believe that our present position of non-intervention should remain unchanged. However, since Mr. Ball said that we would look into it, we propose from a precautionary standpoint the following:
1. When the documentary evidence is received from the Venezuelan Government, it should be translated and furnished to L for a review of the alleged proofs submitted as to any fraud on the part of members of the arbitration tribunal, and of any possible implications regarding the U.S. members. Further action, if any, would depend upon the authenticity of the evidence submitted by Venezuela as it might implicate American citizen members of the tribunal.
2. Apart from whatever conclusions the Department might draw from the evidence provided by Venezuela, it would, of course, be possible for Venezuela and the United Kingdom, should they so agree, to submit the question of the existence of any fraud and any consequent invalidity of the award either to an ad hoc arbitral tribunal, or to the International Court of Justice. For the present, however, we do not believe that the U.S. Government should try to urge this line of action upon the interested governments.
3. In order to allay the understandable fears of Venezuela that British Guiana might become a Castro beach-head on the continent after independence, the U.S. Government should give assurances to the Government of Venezuela, either through our Ambassador, or high-level officers of the Department, that we do not intend to stand idly by and allow such a course of events to take place, and that on the contrary we would use every resource to prevent such a development.
On January 15, Embassy Caracas reported that the visit of Prime Minister Burnham to Caracas was well received and that the subject of the boundary dispute was merely mentioned, and was neither discussed nor debated. (Emb Caracas 962.)/5/
/5/ Dated January 15. (Ibid.)
525. Telegram From the Embassy in Venezuela to the Department of State/1/
Caracas, March 22, 1965, 8 a.m.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 1 VEN. Confidential; Immediate. Repeated to USCINCSO.
1255. In my first substantive interview with President Leoni late last week,/2/ I found him very in command of situation and fully informed on such varying subjects as Venezuela’s counterinsurgency efforts, its military equipment procurement program, its requirements for foreign loans for housing and other social development projects, and its aspirations for better treatment in US oil import policy. President was remarkably forthright and outgoing for first interview and obviously at present intends, within limits his domestic political situation, cooperate with us on give and take basis to improve US-Ven relations.
/2/ March 18. Bernbaum first met Leoni on March 4 to present his credentials. The Embassy reported that "Leoni instead of limiting himself to the diplomatic pleasantries normal to such occasions lost no time in making a lengthy statement concerning US petroleum restrictions and the forthcoming US-Venezuelan petroleum discussions." (Airgram A-591 from Caracas, March 10; ibid., PET 17 US-VEN)
In response to my expression of our concern about possibility of increased Castro Communist emphasis on and support to guerilla movement, President expressed realistic assessment of situation, saying he had no allusions about sustained character of Communist subversion program so long as Castro in control of Cuba. He said he was being kept informed of developments and his info agreed substantially with ours./3/ He was familiar with attempted arms smuggling from Colombia but interested in possible smuggling from Algeria. He described continuing measures being taken against guerillas to keep them off balance and efforts to control border and maritime provinces. He further acknowledged he had been criticized for releasing a few unimportant prisoners but said this done to sow dissension among Communists and he had no intention at present of releasing important and dangerous prisoners. He welcomed my assurance that he could continue to count on US collaboration in meeting Communist insurgency threat and specifically expressed appreciation for prompt delivery
/3/ Reference is to a U.S. Government memorandum on Cuban subversion. Bernbaum told Leoni "that prior to leaving Washington, I had had a productive talk with President Johnson regarding United States-Venezuelan problems. I had found him greatly interested in the Venezuelan situation and in the solution to these problems. He had just read a memorandum covering the likelihood of a new Communist drive through Cuba against Venezuela and other Latin American countries and asked that I give a copy of this memorandum to President Leoni." (Airgram A-627 from Caracas, March 24; ibid., POL 23 VEN) President Johnson met Bernbaum and four other U.S. Ambassadors in Latin America February 8, 5:31-6:25 p.m. (Johnson Library, President’s Daily Diary) No substantive record of the meeting has been found.
HU 1B helicopters.
I questioned President about aircraft procurement program, pointing out that while Venezuela military was indicating interest in stepping up credit sales purchases from $10 to $20 million annually from US it was also purchasing Canberras from UK causing US some problems. President was fully familiar with Canberra purchase, underscoring it was necessary purchase for replacement, but was less sure about other negotiations (presumably for Hawker Hunters) although he knew question was one of price and availability as between US and UK. He appeared fully to accept that Venezuela needed improve aircraft inventory for coastal surveillance and for defense against Cuba.
As conversation turned to economic subjects, President welcomed my statement to American Chamber of Commerce that Venezuela (like other less developed countries) would not be prejudiced by US balance of payments measures and, while recognizing reasons why aid concessional loans would no longer be available, he gave great importance to having continued access to long term IDB loans especially for housing. With respect to US investment, President acknowledged difficult position in which oil companies and Orinoco Mining had been put as result uncertainties about taxes and expressed hope that compromise could be reached by mutual concessions.
Leoni hit question of "discrimination" in our oil import policy hard (it is favorite theme of his) emphasizing it was political as well as economic question. He said he had sent President Johnson letter on subject through Minister of Mines Perez Guerrero and thought it essential that some progress be made at least on some aspects of problem./4/ He also urged revision of trade agreement, which he believed archaic, through quiet negotiations.
/4/ Leoni claimed that "he had attempted in this letter to make President Johnson aware of the necessary relationship between a satisfactory solution [of the petroleum problem] and Venezuela’s ability to reach a successful conclusion against the Communist threat emanating from Cuba." (Airgram A-635 from Caracas, March 24; National Archives and Records Administration, RG 59, Central Files 1964-66, PET 17 US-VEN) Leoni’s letter to Johnson, however, deals exclusively with petroleum; it does not refer to Cuba or communism. A copy of the letter, dated March 13 and delivered to the Department of State on March 19, is ibid., PET 1 US-VEN.
Range of subjects covered, some at my initiative and some at his, impressed me that Leoni is pretty well on top of his job, knows what he wants, and has a practical politician’s rather than a theoretician’s approach. It is, of course, too early to form a firm judgment but, this first interview gives basis for hope this is someone we can work with.
More detailed memcon follows./5/
/5/ Memoranda of conversation are attached to airgram A-627 from Caracas, March 24 (ibid., POL 23 VEN); airgram A-632 from Caracas, March 24 (ibid., DEF 19-3 US-VEN); and airgram A-635 from Caracas, March 24 (ibid., PET 17 US-VEN).
526. Letter From the Director of the Office of Colombian-Venezuelan Affairs (Margolies) to the Ambassador to Venezuela (Bernbaum)/1/
Washington, March 22, 1965.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, PET 17-2 US-VEN. Confidential; Official-Informal.
Dear Mr. Ambassador:
The oil talks ended up relatively well under the circumstances due to the intervention of Tom Mann.
As I wrote to you before the talks opened,/2/ our positions had frozen into a basically negative stance and I was very worried that the US would have no position other than a generally negative one.
/2/ Letter from Margolies to Bernbaum, March 9. (Ibid.)
Fortunately your telegram/3/ arrived just at the right time and alerted Tom Mann to the serious political implications that were involved. He later said that when he saw your reference to the "black spot" in President Leoni’s speech, his antennae quivered and he felt that it was necessary for him to take an active interest in the talks.
/3/ In telegram 1219 from Caracas, March 12, the Embassy reported on a speech before the Venezuelan Congress, March 11, in which Leoni criticized U.S. policy on oil imports: "The maintenance of this discriminatory regime is a black blot on existing relations between Venezuela and the United States." (Ibid., POL 15-1 VEN)
His intervention introduced a degree of movement in our position, and at the luncheon on Thursday/4/ with Secretary Udall, the Secretary told the Venezuelan delegation that we were giving active consideration to the possibility of some preferential treatment for Venezuelan oil in our market as against oil from the Middle East. It turned out, however, that the Venezuelans insisted on receiving not merely better treatment than the Middle East but equal treatment with Canada. We then had rather sticky negotiations on the afternoon of Thursday and all day Friday in which the Venezuelans adopted a rather obdurate position in which they insisted that all discrimination between Venezuela and Canada had to be removed and furthermore that they wished to have a written assurance that the US Government agreed in principle with this position, even though we might not be clear as to how we might work it out technically. They stated that they were prepared to remain indefinitely until we were in a position to give them such an assurance in writing.
/4/ March 18.
The situation as I say looked rather grim with Interior and the E area both expressing the view that in asking too much the Venezuelans were likely to lose the opportunity to gain what appeared to us to be a substantial advantage in the situation.
This was the way the position rested until we met in Tom Mann’s office late Friday afternoon. Tom with his customary frankness and directness explained to them that the issues involved required extensive consultations on our part with the President, the Congress and with our domestic industry and with other countries involved. Therefore, it was not practicable to give them the type of written assurance they required. He would, however, give them his personal undertaking to see that the issue was fully explored, although he made it clear that he could not guarantee any satisfactory results. They were satisfied, therefore, with the minute which was drafted by Mr. Mann and the Minister of Mines which was sent to you under cover of Deptel 975./5/
/5/ Dated March 19. (National Archives and Records Administration, RG 59, Central Files 1964-66, PET 17-2 VEN)
As Tom outlined the situation there appeared to be only two methods of fully satisfying the Venezuelan complaint that overland exemption/6/ was discriminatory.
/6/ On April 30, 1959, the Eisenhower administration proclaimed an "overland exemption" to the Mandatory Oil Import Program, thereby allowing Canada and Mexico to avoid restrictions that applied to other oil exporting countries. (24 Federal Register 3527)
One method, which the Venezuelans favored, was to award Venezuela a country quota. He said that this would in effect allow Venezuela to determine the amount of oil that we would receive and the price at which we would receive it. He said that it was politically impossible to work out a solution along these lines. He said that he had become involved in this type of question in connection with the coffee agreement and he was quite clear in his own mind that Congress would never tolerate an arrangement under which another country could dictate to the United States the price which it must pay for its imports of a specific commodity.
The Venezuelans demurred, sought to give assurances that any such power would be exercised by the Venezuelans with restraint, understanding, etc. Mr. Mann insisted, however, that it was hopeless to consider pursuing such a solution in the context of our political situation.
He said that the other possibility, and it seemed to him the only alternative, if the Venezuelans demands were to be met in full, was to set up some sort of Western Hemisphere licensing arrangement under which oil imported from Canada would be subjected to a licensing arrangement comparable to that imposed on oil of Venezuelan origin with a preference to Western Hemisphere oil as against Middle East oil.
He said that this course of action was politically difficult for the United States and also, in his opinion, involved political risks for Venezuela. He noted that the Canadians were highly emotional on the subject of their oil exports to the United States. He said that he hoped that the Venezuelans would make it clear to the Canadians that they were the ones that insisted on our exploring such a solution, since he could well believe that the Canadians would not be pleased by this development. He noted that the arrangement would also involve a departure from our traditional policy of avoiding trade preferences which would stir up opposition at home and also might create problems with the Middle Eastern oil producing countries who also tended to become emotional about such issues. He asked whether the Venezuelan Government would make clear to the Middle East governments concerned that they had initiated this matter with us and would help to reconcile the Middle Eastern countries to this policy were it to be adopted by us.
Mr. Mann said that he had not, quite frankly, been fully informed of the Venezuelan feeling on the subject and President Johnson had not been informed of the matter at all up to the present. He said that he would take steps to see that the President was informed.
Mr. Mann said that in advancing the best solution he would not recommend it but would point out that it was apparently the only feasible answer to the Venezuelan complaint. He was unable to see how the matter would come out, depending on the consultations that were involved. The main thrust of his statement to the Venezuelans, however, was that this issue would be given serious and urgent consideration. It was on this basis that the Venezuelans left in a reasonably content frame of mind.
Speaking personally, I believe that it will be very difficult to put Venezuela and Canada on a completely equal footing. As a matter of fact the Venezuelans themselves recognize this and therefore suggested that the word "similar" rather than "equal" be used as identifying their position.
The new approach will of course require imposing licensing arrangements on Canadian oil and thereby introducing a form of frontier control between ourselves and Canada. As you know, we have been working over the past decades in efforts to limit such border controls and this will be a retrogressive step. It will undoubtedly give rise to considerable opposition both within this government and within Canada.
A favorable feature for anticipating some satisfactory solution lies in the fact that the domestic oil industry and the Department of Interior have not been satisfied with the rapid growth of Canadian oil imports to our market, and indeed the Canadian Government itself has been uneasy at the rate of growth which has been developing over the past year or so. At any rate we are starting this week to explore this subject in the Department on an urgent basis and talks with Canada should be held in the near future which should throw some light on how far we can get.
One of the subjects that arose from time to time during the talks was the possibility of a multilateral conference before our policy was finally firmed up. The Venezuelans thought it would be useful to have themselves, ourselves, and the Canadians around the table at the same time. It might be that the Mexicans, who also enjoy an overland exemption (which to be sure is of little economic importance) might have to be invited as well. The Interior Department seems for some reason very reluctant to arrange for multilateral talks. Mr. Mann left the question open for the time being.
I was encouraged by the fact that President Leoni in the message you sent up (Embtel 1255)/7/ indicated that he expected progress to be made "at least on some aspects of the problem" and would be satisfied with a solution which improved the Venezuelan position in our market and augmenting the amount of money realized by Venezuela for the sale of its oil, without insisting that the position of Venezuela should be placed on an exact parallel with that of Canada. I hope the Venezuelans will take a realistic view of the situation because I believe that the possibilities are that something quite favorable to them can be worked out provided they do not adopt as rigid position as they took prior to our meeting in Mr. Mann’s office.
/7/ Dated March 22. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 1 VEN)
With best regards,
Daniel F. Margolies/8/
/8/ Printed from a copy that bears this typed signature.
527. Memorandum From the Acting Assistant Secretary of State for Economic Affairs (Solomon) to the President’s Special Assistant for National Security Affairs (Bundy)/1/
Washington, May 26, 1965.
/1/ Source: National Archives and Records Administration, RG 59, Office of Fuels and Energy, Petroleum Files: Lot 69 D 76, Petroleum 17-/2/, Oil Imports, 1965 May. A note on the memorandum indicates it was hand-carried to the White House on May 27.
Since Tom Mann is in New York this afternoon he has asked me to take up this urgent matter with you.
1. The fundamental issue is that the Government of Venezuela is demanding that the new oil import control program covering the next five years which is to be announced by Presidential Proclamation the end of next month should provide "equal treatment" for Venezuela with that given to Canada. This has become a major political issue within the Venezuelan Government, the opposition parties to the Government and the Venezuelan public. Ideally they would like to receive an "over land exemption" like that enjoyed by Canada (that is no U.S. imposed limitation on oil imports leaving it up to the Government of Venezuela to control the exports of its oil companies to the U.S.). Both Interior and State agree that we cannot agree to this for many reasons. The other method of giving fully "equal treatment" to Venezuela would be to abolish formally the Canadian over land exemption (Mexico’s is unimportant) as well as limiting in fact the rate of increase of Canadian oil exports to the U.S. The Canadian Government and our own people believe that to do so would possibly, and perhaps probably, result in the downfall of the Pearson Government and jeopardization of the bilateral defense and increasing free trade arrangements between Canada and the U.S. In brief this can become the hottest political issue in both Canada and Venezuela vis-à-vis the U.S.
2. Interior and State believe that the most practical and appropriate solution-although by definition not fully satisfactory to either side-is that contained in the attached position paper./2/ Presidential Proclamation before the end of June require that the content of this package be advised to the Canadian technical people in the next day or two and the Venezuelans shortly thereafter. We probably will need during the following week a Ministerial level meeting with the Canadians and we will insist on a Venezuelan meeting at the Ministerial level to extract an acceptance by them of our proposals which could be issued publicly after the Presidential Proclamation.
/2/ Not attached.
In brief the package consists of:
a. The press release accompanying the Presidential Proclamation and future public references by us would talk of "planned coordinated pipeline movements" instead of "over land exemption".
b. A private formal commitment to us from the Canadian Government that it would confine its annual rate of increase in its oil exports to the U.S. to an over all of five percent. In addition the Government in Canada would be advised privately that if it were unsuccessful in meeting this annual commitment, the United States would take measures to enforce it.
c. The Government of Venezuela would be informed of the Canadian commitment, and would be assured that we would review with Venezuela each year Canadian performance, and that if it were not satisfactory the United States would consider the measures required to ensure this result.
d. A Western Hemisphere preference formula which would in fact make it slightly more attractive for U.S. refineries to import Venezuelan oil as compared to Near Eastern oil. In practice the Venezuelans could get some modest price increase as well as modest tonnage increase from this formula./3/
/3/ On May 27 Bundy asked the President if the memorandum required White House action. Johnson responded he would not be able to consider the issue until June 1. (Johnson Library, Recordings and Transcripts, Recording of telephone conversation between President Johnson and Bundy, May 27, 1965, 7:29 p.m., Tape F65.42, Side B, PNO 3) The President called Mann on June 4 to discuss "a memo on Venezuela and Canadian oil", an apparent reference to Solomon’s May 26 memorandum. Johnson asked Mann "to go over this carefully from the President’s standpoint and the national standpoint and see if there isn’t something that can be done to ride it out for sixty to ninety days." Johnson said the proposal had been represented as "the best solution even though it will make both countries angry and also our industry." "It seemed to him," however, "the best way out is more of the same. No change, but we are studying it. Get rid of the Congress and then do what we need to do." (Ibid., Papers of Thomas C. Mann, Telephone Conversations with LBJ, May 2, 1965-June 2, 1966) Solomon met Perez Guerrero in New York to explain the President’s decision. A memorandum of the conversation, June 14, is in the National Archives and Records Administration, RG 59, Central Files 1964-66, PET 17-2 US-VEN.
Anthony M. Solomon/4/
/4/ Printed from a copy that bears this typed signature.
528. Telegram From the Embassy in Venezuela to the Department of State/1/
Caracas, November 15, 1965, 0215Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, PET 15 US. Confidential; Immediate. Repeated to Rio de Janeiro. Passed to the White House.
542. Following summary conversation between Secretary Rusk, President Leoni and others Nov 14 is based on uncleared memcom is FYI Noforn and subject to revision upon review:
Part I: U.S. Petroleum Restrictions
President Leoni said petroleum income central to Venezuela’s economy and Venezuela would not be concerned if U.S. import restrictions were just and non-discriminatory. He recalled when matter arose during President Eisenhower’s administration latter had agreed necessity of just solution to problem on basis hemisphere preference./2/ Subsequently President Kennedy had acknowledged agreement called for along hemisphere preference lines./3/ To date no progress has taken place. Meantime Venezuela’s income from petroleum has been decreasing at same time balance of trade with U.S. turning disadvantageously against Venezuela and now is at unfavorable rate of over $300 million annually. President said further drain taking place through reliance on Venezuelan credits by American firms rather than through use dollar funds or credits. He said U.S. announcement continuation existing oil import policy without solution Venezuela problem could create serious difficulties.
/2/ On March 10, 1959, President Eisenhower signed Proclamation 3279 instituting the Mandatory Oil Import Program. (24 Federal Register 1781) The same day Eisenhower released the following statement: "The United States recognizes, of course, that within the larger sphere of free world security, we, in common with Canada and with the other American Republics, have a joint interest in hemisphere defense. Informal conversations with Canada and Venezuela looking toward a coordinated approach to the problem of oil as it relates to this matter of common concern have already begun." (Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1959, pp. 240-241)
/3/ On February 20, 1963, after 2 days of discussion in Washington, Presidents Kennedy and Betancourt issued a joint statement, including an agreement "that a strong and healthy petroleum industry is essential to Venezuela’s prosperity, to the achievement of the goals set by the Alliance for Progress and for the security of the Hemisphere as a whole." (Ibid., John F. Kennedy, 1963, pp. 187-188)
Secretary responded that he hoped gov understands U.S. faces many problems with its many trading partners in all parts free world. U.S. desires see Venezuela maximize its income but our producers also have income problems. Difficulties arise from close trading relations rather than from ignorance respective problems. The Secretary added that U.S. would consider what could be done to help Venezuela but
he did not know whether what we could do would be acceptable. The important thing was that efforts to find a reasonably acceptable solution will be continued. Minister Mines Perez Guerrero expounded on petroleum restriction along lines already well known in Washington. He described negotiations and impasse due Venezuela’s inability after considerable study to accept "Solomon" proposal/4/ and U.S. inability go along with compromise solution of two ticket system which represented a considerable watering down of Venezuela’s counter proposal. He also complained against suits instituted by U.S. Treasury against U.S. petroleum firms attempting to comply with Venezuelan pricing policies. I explained this due practice of some firms in paying Venezuelan taxes on basis prices higher than these actually realized to prevent later tax recovery suits by the gov thereby reducing taxes due to USG.
/4/ Reference is evidently to the proposal outlined in Document 527.
President Leoni then invited former Minister Mines Dr. Juan Pablo Perez Alfonso to discuss subject. Perez Alfonso said last year’s trade deficit with U.S. totalled $344 million figure which represented 5 percent gross national product. He referred also to fact that U.S. direct investment in Venezuela is 70 percent of total foreign investment in country and that U.S. interests derive 23 percent return on investment. He admitted surplus in all-over trade balance but emphasized declining markets in other areas and difficulties with countries with which gov has favorable trade balances.
Secretary then asked Minister Perez Guerrero given difficulties that solution he had in mind. Dr. Perez said that at one time in talks with Secretary Udall two-ticket proposal had been made and hemisphere preference system also suggested. Now U.S. had decided neither approach to problem is feasible. Venezuela he said has no cleancut answer but takes view that since oil import restrictions are authored by U.S. an adjustment should be offered by U.S. He confirmed in later talk with me that revival Solomon proposal would not be satisfactory. Secretary responded by saying U.S. and gov should keep in close touch. Although not expert in this field, Secretary said he would take matter up with President Johnson and Secretary Udall. He said he could not guarantee an acceptable solution but would report on matter and perhaps in end something could be worked out.
Secretary requests one more review of problem be made to see if something can be done to break impasse, even though such review will probably involve postponement proclamation. Results review should then be communicated to gov prior issuance proclamation. This will fulfill his commitment to President Leoni to look at the problem again.
529. Telegram From the Department of State to the Embassy in Brazil/1/
Washington, November 19, 1965, 7:20 p.m.
/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.
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 542/2/ 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."
/2/ Document 528.
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/
/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)
530. Editorial Note
On December 10, 1965, President Johnson signed Proclamation 3693, "Modifying Proclamation 3279 Adjusting Imports of Petroleum and Petroleum Products." (30 Federal Register 15459) The proclamation met the concerns of the petrochemical industry in Puerto Rico, but Venezuelan concerns for equal treatment under the oil import program were not addressed. At the press conference announcing the proclamation, Secretary of Interior Udall admitted that the negotiations with Canada and Venezuela had not produced "the type of ultimate consensus that could have resulted in changes." (Proceedings, December 10; National Archives and Records Administration, RG 59, Office of Fuels and Energy, Petroleum Files: Lot 69 D 76, Petroleum 17-2, Oil Imports, 1965 December) In an accompanying press statement, however, Udall proposed continuing discussions with Venezuela and recognized "that the oil industry in Venezuela has a special position in the contribution it makes to Western Hemisphere security." (Circular telegram CA-6451, December 22; ibid., Central Files 1964-66, PET 17-2 US)
On December 21 the Department of Interior issued several amendments to the oil import regulation, including an increase in the allocation for imports to the eastern United States and Puerto Rico, two markets traditionally dominated by the oil industry in Venezuela. (30 Federal Register 16080) Although the amended regulations did not specify a system of country quotas, the Department of State estimated that Venezuela could reasonably expect to increase its oil imports by 35,000 barrels per day. (Telegram 512 to Caracas, December 22; National Archives and Records Administration, RG 59, Central Files 1964-66, PET 17-2 US) The Department was encouraged by the initial reaction in Venezuela to the proclamation, thereby justifying "the efforts which Ambassador Bernbaum and the Department made to have references to the Venezuelan problem included in Secretary Udall’s press statement." (Memorandum from Hill to Vaughn, December 15; ibid., ARA/NC/V Files: Lot 66 D 469, PET 17-2 U.S. Import Program, July-September 1965)
On December 31 the Leoni government informed the oil companies of a new regulation governing discounts on its residual fuel oil, a measure designed to raise revenue by raising the price of exports to the United States. (Washington National Records Center, E/CBA/REP Files: FRC 72 A 6248, Current Economic Developments, No. 745, January 18, 1966)
531. National Intelligence Estimate/1/
Washington, December 16, 1965.
/1/ Source: Central Intelligence Agency, Job 79-R01012A, O/DDI Registry. Secret; Controlled Dissem. According to a note on the cover sheet this estimate was prepared in the Central Intelligence Agency with the participation of the intelligence organizations of the Departments of State and Defense and the National Security Agency. The United States Intelligence Board concurred in this estimate on December 16.
To estimate the situation in Venezuela and the prospects under the Leoni administration (until general elections in 1968).
A. Venezuela will probably continue to experience political stability and a favorable rate of economic growth over the next few years. However, it will still face deep-seated social problems. Most economic and social reform programs will be pushed vigorously through 1966. Thereafter budgetary restraints are likely to lead to some loss of momentum. This slowdown will almost certainly become a major issue in the December 1968 elections.
B. The government and security forces have dealt reasonably effectively with the leftist insurgency; the capabilities of the guerrillas and terrorists will probably decline further. The insurgents are not likely to pose a major threat to the government during the period of this estimate.
C. Some misgivings regarding the Leoni administration still persist among the military, but the military establishment is generally disposed to support the constitutional government. We believe that there is little chance of a successful military coup within the period of this estimate.
D. Leoni’s governing coalition will probably hold together at least until the near approach of the elections scheduled for December 1968. The contest is then likely to be between two center-left parties, AD and COPEI, each claiming to be the more effective means of achieving social reform. If, in anticipation of this contest, Leoni should initiate a more radical reform program, he might thereby antagonize the military and increase the chances of a military coup.
E. The administration will make some attempts to increase Venezuelan influence in Latin American affairs, while holding to the Betancourt Doctrine of denying recognition to governments which come to power by overthrowing constitutionally-elected ones. Manifestations of economic nationalism-and in particular resentment over US restrictions on the importation of Venezuelan oil-will probably produce frictions in relations with the US./2/
/2/ Bowdler forwarded an advance copy of the estimate with a December 17 memorandum to Bundy in which he noted that "the picture may not be as rosy as described." Citing telegram 648 from Caracas, December 16, Bowdler explained that "Bernbaum is sufficiently concerned to speak to Leoni about it and, subsequently, to selected military leaders. I have asked ARA to make sure Bernbaum does not tarry in letting military leaders know how strongly opposed we are to a coup against Leoni." (Johnson Library, National Security File, Country File, Venezuela, Vol. II, 8/64-8/66) Leoni told Bernbaum that he was not concerned by the rumors, since "there is no real basis for coup" and not "enough support within the military to stage one." Bernbaum reported that the Embassy would "continue to follow situation closely and take advantage any opportunities to discourage plotters." (Telegrams 648 and 653 from Caracas, December 16 and 17, respectively; National Archives and Records Administration, RG 59, Central Files 1964-66, POL 23-9 VEN)
[Omitted here is the Discussion section of the estimate.]
532. Memorandum From the Under Secretary of State for Economic Affairs (Mann) to the President’s Special Assistant (Califano)/1/
Washington, January 6, 1966.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, PET 17-2 US. Confidential. Drafted by Mann. President Johnson called Mann on January 6 to discuss "the resid matter," asking if Mann "was going to be able to work it out." Mann told Johnson that "it looked pretty tough for us to do anything because we do not have leverage. He asked the President to read the memo sent over today." (Memorandum of conversation, January 6; Johnson Library, Papers of Thomas C. Mann, Telephone Conversations with LBJ, May 2, 1965-June 2, 1966)
The conclusions expressed here supplement the two background memoranda on Venezuela residual oil, copies of which you have./2/
/2/ Neither found. The memorandum of conversation cited in footnote 1 above notes that the President saw the two memoranda sent over on January 6. (Ibid.) Johnson may have seen a paper entitled "Consequences of Proposed Action of Venezuela re Residual Fuel Oil," January 4. (National Archives and Records Administration, RG 59, E/ORF FSE Files: Lot 70 D 54, PET 17-2, U.S. Imports, January 1966) No evidence has been found, however, that the paper was forwarded to the White House.
Our best guess is that Venezuela seeks about 28¢ a barrel increase in the price of its residual oil.
This would mean a net loss to us balance of payments wise of about 50 million dollars. On the assumption that Interior continues to carry out its plans to liberalize the import of residual oil, we would expect that the price increase would be partially off-set by more competition, by a decline in the value of the "tickets" for imported resid, by the probable desire of residual oil importers to stay competitive with coal, and by the continuance of discounts to large users. Moreover, the price increase would probably be delayed for a while due to existing contracts but prices would probably gradually rise by almost 10¢ a barrel, if current ticket premiums are eliminated. There are about 300 million barrels of residual oil consumed annually in the United States.
If the Venezuelans after further discussion with the companies do not insist on the companies increasing prices but use the new price as the basis for tax calculation, it is Interior’s judgment that the companies for competitive reasons may pass on only the 15 cent cost increase which will wipe out the ticket value and may result in very little price increase to the consumer.
On the other hand, efficient oil industries no longer produce resid in large quantities and we would probably have to admit that the Venezuelan price of resid is lower than it should be-principally because the private companies have deliberately kept it low in order to maximize their sales.
I do not believe the Venezuelan action was the result of our liberalizing our imports of residual oil since the Venezuelan motivation has been to capture the ticket premium. More probably it was something that the Venezuelans have been thinking about doing for some time and which they were loath to do while they still had hopes of getting us to change our policy so as to permit Venezuela to realize more on its sale of crude to the United States.
The oil companies will be negotiating with the Venezuelan Government and they have some hope of getting the Venezuelans to modify this price increase. I do not expect, however, that they will allow this to reach a breaking point with the Venezuelan Government.
We should instruct our Ambassador to support the companies’ effort by making the following points at a high level:
1. There was no advance consultation with the United States.
2. The United States is doing everything possible to hold the line on balance of payments and price problems while carrying a very heavy load in Viet-Nam and around the world. Venezuela has both an economic and a security stake in our efforts. The recent action on residual oil makes it much more difficult for us.
3. If the purpose of the resid order was to use government action to force increased prices, this is bad in principle and violates the terms of the oil concessions. If the purpose of the order is to modify existing tax arrangements without advance notice and discussion with the companies, this is also bad in principle.
4. The price action if carried through rigidly may adversely affect in the long run the investment decisions of the oil companies.
5. While Venezuela and the United States have not agreed on the Venezuelan proposal to de-ticket Venezuelan crude, the United States is nevertheless the principal market for both Venezuela’s crude and residual oil. It has been a safe and reliable market in which Venezuela is earning annually only slightly under a billion dollars. One of the reasons for this is the attitude of the United States to encourage preferences for Venezuelan crude. For example, Canada continues to import large amounts of Venezuelan crude and has refrained from exporting to the United States market some 50,000 barrels of crude a day which is readily available. In Puerto Rico the United States has required the two refineries and petro-chemical complexes to import feed stock from the Western Hemisphere, i.e., Venezuela. In spite of its balance of payments difficulties, the United States has maintained a requirement that the Defense Department continue to purchase foreign crude at the 1962 level of 120 million dollars a year, most of which is supplied by Venezuela. The action of the Venezuelan Government is inconsistent with these acts of cooperation.
Turning now to the question of leverage, I would be less than candid if I did not point out that these arguments may have no effect whatever on Venezuela for the following reasons:
A. Venezuela has a long established policy of trying to raise the price of its crude and residual oils while discouraging increased production on the ground that Venezuela is using up its irreplaceable natural resources too fast. They are not likely to be impressed with the argument about reducing the volume of their exports so long as they believe their revenues will not decline especially in the short term. They can carry through their new price policy flexibly, so as to preserve their European market.
B. What GOV wants from us in essence is an exemption of Venezuelan crude oil imports from our controls. This would pass to Venezuela the more than a dollar a barrel which our refineries now make on the "tickets" and, from their point of view, might result in price increases in the future in both crude and resid to say nothing of giving them a stranglehold on U.S. oil companies in Venezuela.
C. Venezuela technicians know that our leverage is very limited in the short term. While Venezuelan oil prices are somewhat higher FOB they are competitive in our market because of lower shipping costs as compared with Near Eastern and North African oils. And, insofar as resid is concerned, there is no alternate source to which we could readily turn for comparably priced residual oils. It is doubtful that the Defense Department could buy elsewhere more than a fraction of the heavier fuels we now buy from Venezuela, and to the extent they could buy in the United States, our balance-of-payments savings would be more than offset by the loss to our budget. Such measures as this and the freeing of the refineries and petro-chemical plants in Puerto Rico to buy elsewhere could be irritants rather than deterrents but as events develop, it might become advisable to try them.
D. Opinions of the experts are that the sheer inconvenience and cost of handling coal as compared with fuel oil make coal non-competitive with most users of oil even at the price which Venezuela has in mind. Further, a sudden demand on the coal industry for substantial additional amounts of coal for the east coast would, it is estimated, result in a price increase in coal.
E. In addition, Venezuela has very considerable leverage on the United States because of our large investments there-more than 3 billion dollars. In the nationalistic climate which prevails there, steady pressures on investors in the form of increased taxes and otherwise is an ever-present danger. Also, it should be noted that Venezuela holds about $400 million in dollars and treasury obligations in its reserves and has been resisting pressures to follow the European pattern of increasing its gold holdings. There is nothing to prevent them from turning in dollars for gold.
If holding the price line is the decisive consideration, probably the most effective action-in addition to approaching the Venezuelans as suggested above-would be to de-control residual oil or so administer it so as to eliminate the ticket premiums. This would probably have the effect of eliminating the value of the tickets, currently estimated at 15¢ a barrel, from the resid price. Tighter restrictions on U.S. imports of Venezuelan residual oil would perpetuate the additional 15¢ a barrel ticket cost and would put pressure on resid prices in this market. It would not give us any leverage with Venezuela.
While de-control of residual imports would make economic sense from the standpoint of holding the price line-especially since the coal industry is said to be operating at a near capacity level and is experiencing a scarcity of coal miners-de-control would be strongly opposed by the coal industry and by those users of resid in this country who would lose the value of their "tickets."
Thus, this recommendation involves domestic political questions more than international ones.
Thomas C. Mann/3/
/3/ Printed from a copy that indicates Mann signed the original.
533. Telegram From the Embassy in Venezuela to the Department of State/1/
Caracas, January 12, 1966, 2131Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, FN 10 VEN. Secret; Priority.
700. 1. All but last paragraph Deptel 5542 read in translation to MinMines Perez Guerrero this morning.
/2/ In telegram 554 to Caracas, January 11, the Department instructed the Embassy to "convey at high level USG concern with recent action taken by GOV concerning residual fuel oil," following the recommendations outlined in Document 532. (National Archives and Records Administration, RG 59, Central Files 1964-66, PET 17-1 VEN)
2. Perez clearly not impressed by balance of payments argument, pointing out that Venezuela also has its own budgetary problems which created by steady decline prices petroleum and products. He was sympathetic, however, to the argument regarding internal price stability. While admitting that the new program would inevitably involve price increases, he repeated previous assurances of flexibility in application designed not only to meet problem of competition but also to avoid excessive consumer impact. He again expressed belief that this could be facilitated by elimination excessive and unnecessary intermediary discounts and profit margins.
3. Perez conceded that many American consumers, particularly in New York area, were considering changeover to alternate fuel sources and that present measure might accelerate this process, but felt that this disadvantage far from adequate to outweigh numerous other advantages to Venezuela of program. One important factor in decision was anticipation of price decline due to enhanced competition resulting from first easing and then elimination of fuel oil import quotas. Since companies themselves could not prevent such a decline due to U.S. anti-trust laws, felt necessary for gov to establish new discount procedure and thereby prevent price deterioration. Second and perhaps even more important, was the need to demonstrate to the Venezuelan people that the gov had a clear policy to protect Venezuela’s interests and knew how to apply it. Failure to take this or similar "reasonable" measure would have inevitably given clear field to proponents of more radical solutions to the petroleum problem, such as currently proposed increased taxes on "excessive petroleum profits" and even limitation of fuel oil exports to the U.S. While the measure taken was emphatically not in retaliation for the failure of petroleum negotiations, it was considered the most reasonable manner of facing up to the problem created by failure of the negotiations. He repeated this political argument a number of times.
4. With respect to our complaint regarding lack of prior consultation, Perez pointed out that we had not been distinguished for our prior consultations with Venezuela and inquired what would have been our position if Venezuela had consulted. He answered this by saying that we would undoubtedly have opposed the projected measure and that Venezuela would have been forced to go forward in the face of such opposition. He conceded my point that we might have been able to work out a solution with which both parties could live, but emphasized the impracticability of such talks in view of the danger of leaks and the limited time available.
5. It was made quite clear by Perez, in view of the foregoing, that there was no chance of reconsideration of the new discount policy but he did give assurances that all possible, consistent with Venezuela’s "legitimate" aspirations to protect its own interests, would be done to ensure reasonable, intelligent and moderate application of variations from the 10 percent discount which was termed only as a point of departure, depending on conditions in the various consuming markets. In this regard, Perez argued that the Venezuelan aspiration for a price increase in fuel oil, with 1958 prices as the point of departure, was not unreasonable. Although the dols 2.00 price that year followed the Suez crisis, prices of manufactured products purchased by Venezuela have risen considerably since that date, whereas non-U.S. crude and fuel oil prices have steadily declined. Taking into consideration price inflation during the past seven years, it seemed to him that the Venezuelan program was quite reasonable and just. He emphasized that Venezuela has steadily been suffering from price increases arising from the increased prices of U.S. products attributable to wage increases as well as U.S. inflation, and did not see why the U.S. could not accept Venezuela’s attempt to protect its own position.
6. Perez said that he expected to be in New York City January 18 and 19, and in Washington January 20 and 21 on business involving the World Bank and the International Monetary Fund in connection with a study on Libya. He was instructing Perez de la Cova to suggest a luncheon or other meeting with USG officials at which time this problem could be discussed further.
7. What Perez told me today was essentially similar to what he had told me January 4 and reported in this Embassy’s A-530/3/ of January 8 which was presumably received in Washington on January 10. I did not believe then and I do not believe now that it would be practical to expect any reconsideration of the gov action. I do, however, feel that our talk today and talks to be held in Washington next week should make more likely implementation of the announced intention of the gov to apply the program with minimum danger to the competitive position of fuel oil and to the price structure.
/3/ Not printed. (Ibid., FN 10 VEN)
8. Having in mind the politically sensitive position of the gov on petroleum, increased jockeying within and between the various political groups in anticipation of the ‘68 elections and gov preoccupation over the inadequacy of government revenues to finance its politically important social and economic programs, it does not seem realistic to expect any more. Our strongest cards today are the Venezuelan hope, however remote, of an eventual breakthrough on restrictions and the special position accorded Venezuela among petroleum producers on capital movements from the U.S. Our vulnerabilities are illustrated by the new policy on fuel oil prices, large U.S. investments and sizeable Venezuelan Central Bank dollar deposits.
9. Although Perez Guerrero intimated that his government’s action on residual fuel oil and claims for back taxes attributable to inadequate export prices would forestall more radical measures, I am not optimistic regarding the future. It seems to me and also to petroleum producers here that efforts toward increased taxation are most likely, if only because of the government’s budgetary problem, and that the petroleum industry will be one of the prime targets./4/
/4/ In a January 14 letter to Hill, Bernbaum emphasized that "retaliation by US would aggravate the Venezuelans-certainly this would be the case with an open kind of retaliation. And, I am afraid that the political importance of this issue is so great in Venezuela as to make it more likely that irritation here will be accompanied by further retaliation than by back-tracking on positions already taken." (Ibid., FN 11 VEN)
534. Memorandum of Conversation/1/
Washington, January 14, 1966, 10:15 a.m.
/1/ Source: Johnson Library, Papers of Thomas C. Mann, Telephone Conversations with LBJ, May 2, 1965-June 2, 1966. No classification marking. Drafted by Patricia A. Saunders. According to the President’s Daily Diary Johnson called Mann at 10:10 a.m. (Johnson Library)
The President said that Marlin Sandlin/2/ had raised the price of sulphur $5 a ton. Mr. Mann said this was the first he had heard of it. The President said that was the trouble, we were not on top of it. He said he thought Mr. Mann should call Mr. Sandlin and tell him that we certainly hope that he does not press this and remind him that if they keep the price up we will have to go to controls. The President said he thought this was awful. Mr. Mann said perhaps he should ask Mr.
/2/ Marlin E. Sandlin, chairman of the Pan American Sulphur Company in Houston, Texas.
Sandlin to put a freeze on it and then come up here for a talk. The
President said he thought this would be too late.
The President asked Mr. Mann if we had any leverage on Vene-zuela and Mr. Mann said we did not. The President said he thought it was foolish to raise the quota when we did. He said it seems almost idiotic for us to take public funds to feed hungry children while we import extra oil from Venezuela. He said he thought that we ought to use coal and keep this oil out and put these people to work in the coal mines.
Mr. Mann said that would be great if it would work but went on to explain that only about 10% of the big users-mostly utilities-would be likely to convert to coal soon. Therefore, the conclusion was that coal could not replace the oil.
Mr. Mann said that the difficulty in his opinion really stems from the fact that the Venezuelans want the $1.25 that every refiner gets in this country as a result of his ticket taken away from the refiners and passed on to Venezuela.
Mr. Mann said that he would talk to Marlin Sandlin about the sulphur thing and would also let the President know after he had talked to the Venezuelan Minister of Mines Perez Guerrero who was coming to town. Mr. Mann told the President he hoped that Venezuela could administer this order in such a way as not to hurt us.
The President said if Mr. Mann was unable to reach him, he should give the info to Mr. Valenti./3/
/3/ Immediately following this conversation, Johnson called Udall to discuss the problem of Venezuelan oil. The President urged the Secretary to "find some way to
really bring in a good load of this stuff that we can protect ourselves a little bit, and then say to Venezuela: ‘When we try to increase your quota, give you a little relief, why then you stick a price to us. Now, we’re not going to do that, we’re just not going to have it. We want a lower price with a bigger quantity rather than a higher price.’ " Johnson suggested a barter deal, possibly in the Middle East, but was otherwise emphatic: "I want somebody that’s smarter than Venezuela." Udall admitted "maybe our people haven’t looked hard enough at some move that would have the effect of shaking these Venezuelans." (Johnson Library, Recordings and Transcripts, Recording of telephone conversation between President Johnson and Udall, January 14, 1966, 10:15 a.m., Tape F66.01, Side B, PNO 5)
535. Editorial Note
On January 14, 1966, the Venezuelan Embassy informed the Department that Minister of the Interior Gonzalo Barrios was planning to visit Washington for 1 week starting January 18. The Embassy requested that Barrios receive an appointment with President Johnson, possibly in connection with the Minister of Mines and Hydrocarbons, Manuel Perez Guerrero, who was coming to Washington for oil consultations. (Telegram 569 to Caracas, January 14; National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 VEN) In a meeting with Ambassador Bernbaum on January 15, President Leoni made a separate appeal for the appointment, explaining that its main purpose would be to allow "first direct contact with President Johnson through Barrios, who is most trusted aid." Barrios would deliver a personal letter to Johnson addressing several issues of mutual concern, including recent petroleum developments, the Venezuela-British Guiana border dispute, and the Vietnam war. (Telegram 709 from Caracas, January 15; ibid.)
Under Secretary of State Mann raised the Venezuelan request with President Johnson on January 15. According to a memorandum of the conversation: "The President said that was the last thing he wanted to do, negotiate on oil. Mr. Mann said that was right but Venezuela is so important that if the President could see him and then refer him to Udall and State, he thought it would be a good political move. He said he did not think the President should discuss details. He said he thought it would be good if the President could receive him because when the President sends people down to Leoni they are received by him and if his people could not get through to the President, it might hurt feelings. The President said for Mr. Mann to bring him in for five minutes then, and to be sure that was all he stayed." (Johnson Library, Papers of Thomas C. Mann, Telephone Conversations with LBJ, May 2, 1965-June 2, 1966) A January 19 memorandum from Mann to the President requesting the appointment for Barrios is in the National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 VEN.
536. Telegram From the Department of State to the Embassy in Venezuela/1/
Washington, January 24, 1966, 3:35 p.m.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, AID(VEN) VIET S. Confidential; Limdis. Drafted by Hill on January 21, cleared by Sayre and Bowdler, and approved by Mann. Repeated to London and Georgetown. According to the President’s Daily Diary the meeting was held from 12:56 until 1:14 p.m. (Johnson Library)
585. Following summary FYI only and Noforn. It is based on uncleared MemCon and subject to amendment upon review MemCon.
President Johnson this noon received President Leoni’s special emissaries Gonzalo Barrios and Manuel Perez Guerrero who delivered letter from Leoni and, as expected, brought up Vietnam, British Guiana border dispute, and petroleum./2/
/2/ As the Venezuelan emissaries waited outside his office, Johnson returned a telephone call from Senator Clinton P. Anderson (D-New Mexico). Anderson explained the reason for his earlier call: "I know the boys from Venezuela are up in town. I’ve got friends in the petroleum industry that are worried about that situation." After a general discussion of Venezuelan oil, the President asked: "Now, what are we going to do ultimately, Clint, on this price thing? Now here is an illustration. These people are happy with what they are getting, they’re doing well. Then we come along and say ‘we are going to give you a great opportunity to bring in a lot more’ and they answer us with a hell of a good price increase." The Senator suggested: "I think you ought to threaten them someday with a Price Control Act, have them start exploring it, hold some hearings on it, they might behave themselves." (Johnson Library, Recordings and Transcripts, Recording of telephone conversation between President Johnson and Anderson, January 21, 1966, 12:40 p.m., Tape F66.02, Side B, PNO 1) An uncorrected transcript of the conversation is also ibid., Chron Series.
Barrios opened by expressing President Leoni’s solidarity with President Johnson’s policy of peace and said Venezuela wished express that solidarity by sending food and medicine to South Vietnam. President Johnson said we would welcome any help in resisting aggression and keeping Communism from enveloping free countries.
Barrios then turned to British Guiana border dispute, stating Presi-dent Leoni had charged him to say Venezuela wanted peaceful solution and desired to keep British Guiana out of hands of Communist demagogues as that would be not only threat to hemisphere but direct threat to Venezuela. Barrios did not advance any particular solution but suggested President Johnson seek to obtain greater understanding of problem by all parties especially British. President Johnson said it was U.S. policy avoid getting involved in boundary disputes and doubted whether such involvement would be useful or acceptable to parties.
When petroleum came up, Perez Guerrero made presentation of importance petroleum to Venezuela’s economy and political stability. He underscored Venezuela did not object to restrictions on imports of crude to U.S. but did object to discrimination in favor other countries. Described past conversations with U.S. as conducted with frankness and mutual understanding but said President Leoni disappointed no solution had been found. Leoni had, however, welcomed indication that U.S. recognized special position Venezuelan petroleum and was hopeful something could be worked out in near future. President Johnson replied that Venezuela was wise in continuing discussions with Departments State and Interior, as he had not personally dealt with details oil program since taking office. He expressed hope mutually satisfactory solution could be worked out.
At close interview, President indicated that, while he personally not involved in these matters, he would direct officials to work with Venezuelans here and Caracas towards eventually satisfactory solutions. Venezuelan delegates expressed themselves as pleased with interview. Barrios said President Leoni hoped two Presidents could meet and President Johnson said he hoped this would be possible within their respective terms of office.
Ambassador Tejera Paris also attended as did Mann, Sayre and Hill for Department. Copy letter being pouched Caracas./3/
/3/ A copy of Leoni’s letter to Johnson is in the National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 VEN.
537. Telegram From the Embassy in Venezuela to the Department of State/1/
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1964-66, PET 6 VEN. Confidential; Priority. Repeated to USCINCSO, Bogota, Georgetown, and Mexico for Assistant Secretary Gordon.
Caracas, September 29, 1966, 1955Z.
1840. 1. President Leoni’s confident announcement that basis for solution of problems between petroleum companies and gov has now been found and final agreement and discussion of bright economic prospects has pulled rug out from under those political elements who have been seeking discredit and undermine stability government. At same time, it is most positive step in last several months toward restoration economic confidence. Details speech reported separate tel./2/ While die-hard opposition sectors will undoubtedly continue their efforts, without substantive base of crisis between petroleum sector and government their cries of gloom, doom and communism will be ineffective. Thus, inspired anxiety (Embtel 1449)/3/ which has existed past two months should taper off rapidly.
/2/ Telegram 1846 from Caracas, September 30. (Ibid., POL 2 VEN) Although Leoni did not announce the details of the settlement, the government allowed the companies to sell oil at competitive prices in return for payment of taxes on the basis of predetermined "reference prices." The companies also agreed to pay $155 million in back taxes through 1965.
/3/ In telegram 1449 from Caracas, September 9, the Embassy explained that "uncertainty in financial community in past month resulted in contraction credit available and in last week a limited run on dollars. These developments in turn stimulated concern within the business community and now within the public at large." (Ibid., POL 15 VEN)
2. Political effects of particular importance include:
A. Opposition groups at ordinary session Congress which opens October 1 unlikely mount meaningful opposition to government on pending basic legislation, including tax reform bill.
B. Position of main opposition parties, COPEI, FDP, and FND, are at tactical disadvantage and will have hard choices to make when tax reform bill finally comes to vote.
C. With revenue base assured for remaining two years and several months of administration, government can move ahead confidently with social-economic program. AD party, particularly in states receiving substantial assistance in public works and alliance for progress projects, will be assured resources for building a record of accomplishment.
D. Opposition groups may now concentrate on charges of government mismanagement and press for investigation of public expenditures.
E. URD party which had considered withdrawal from coalition and expressed particular concern re petroleum policy may now be considerably more reluctant leave government.
3. Question of attitude Venezuelan military toward government and their role in nation’s stability (which is always key ingredient) had again arisen last week as result number top level transfers which purportedly included replacing two top respected army officers with generals who are widely considered AD favorites. However consensus Country Team is that while number of top level changes have developed, the controversial changes have not yet occurred. Regardless whether they now do occur or not, government, having removed fundamental petroleum question from contention, has at same time significantly reduced possibility that military malcontents could count on national economic crisis as foundation for Golpe aspirations.
4. In addition, it should be noted that AD party at its national convention last week emphatically confounded irresponsible critics and press speculation by unanimously selecting highly respected Minister of Interior, Gonzalo Barrios, as party’s secretary general. AD sources confirm to us that President intervened forcefully with party leaders to insure party unity would not be undermined by personal ambition by various potential presidential candidates.
5. In short, government agreement in principle with petroleum companies constitutes fundamental contribution national stability, and outlook today considerably brighter than it has been for several months.
538. Telegram From the Embassy in Venezuela to the Department of State/1/
Caracas, January 31, 1967, 2000Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 23-8 VEN. Secret. Repeated to USCINCSO, Rio de Janeiro, Bogota, Santo Domingo, Santiago, Buenos Aires, Georgetown, and Moscow.
4034. 1. Ever sensitive military-government relationship in Venezuela has come under particular scrutiny in past month in wake of dramatic government use of military to intervene in Central University following Communist efforts to assassinate Army Chief of Staff./2/ The Communist effort to generate friction between government and military establishment has clearly backfired in terms of welfare of the Communist movement in Venezuela. At this point however, some speculation is extant re long-range effect on relations between the civilian government and military officers. On basis government’s determination to carry through reforms which terminate once and for all inviolability of university campus (which enabled Communist exploitation of the campus) our assessment is that these doubts and irritations are in the process of being resolved.
/2/ On December 13 General Roberto Morean Soto, Chief of the General Staff of the Army, was wounded in a terrorist attack. The next day the Leoni administration suspended certain rights guaranteed by the constitution and occupied the Central University in Caracas.
2. Following Embassy comments are also designed to provide the context for DAO message no. 0051, January 1967 and [1 line of source text not declassified]/3/ which reported on existence military distrust and impatience with government in connection with university crisis.
/3/ Neither found.
3. Possibility that ever present irritations between military and civilian government could flare up into a significant crisis of stability is heavily influenced by general state of nation’s economic and political situation. In a period of political crisis in which law and order are threatened, such as that which was manifested in Carupano and Puerto Cabello uprising, that which existed prior to the 1963 elections and on a lesser degree a year ago (see A-537 of January 11, 1966),/4/ and briefly prior to the government’s intervention in the university this past December, military unrest and dissatisfaction with government inefficiency inevitably increases. Same holds true, although to a lesser degree, in periods of economic deterioration. There is little doubt, for example, that many military officers were watching the crisis between the government and the petroleum companies which the government finally resolved last summer. In all of these periods of strain, when showdown came, military stood behind government. Both the political and economic situations have now improved over the past year and there are no fundamental pressures for the military to consider moving against the government.
/4/ Airgram A-537 is not printed. (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 23-9 VEN)
4. Although some military officers have expressed serious reservations about the government’s determination to carry through university reforms, there is no reason to doubt record to date indicating that government fully intends to carry through these reforms.
5. University residences which were long a virtual fortress of Communist activities have been closed and converted into classrooms. University Hospital which was a particular target for Communist activities is being fenced out of the campus and incorporated directly into the city. Government’s draft university regulation which has now been publicly presented goes further than anyone would have expected and reserves for the government the responsibility for maintaining law and order within the campus. Although government spokesmen have indicated that there is flexibility in some of the more unexpected and sweeping effects of new regulations, have consistently and publicly reiterated that there is no flexibility in their determination that government police will patrol the campus just as though it were part of the city and thus inviolability of Communist campus haven is terminated once and for all. This was most recently stated to the Embassy by former Minister of Interior and present Secretary General of the AD party, Gonzalo Barrios, on January 27 and in press interview January 28 by present Minister of Interior Leandro.
6. Military officers with particular political interests naturally view university situation and government’s performance from their own vantage point. It must, of course, be recognized that government has a much broader responsibility and it thereby seeks to construct a solution to national problems which reflects the national interest, which is not necessarily always exactly the same as the interpretation of national interest held by some military officers. Thus, some of chronic military critics are now denouncing government on these grounds.
7. Finally, it is essential in weighing military attitudes to recognize that Venezuelan military establishment is complex, varied and far from monolithic as to political attitudes. There are many officers, particularly at upper levels who are close to AD party or the opposition COPEI party which is also dedicated to constitutional government. Perhaps a majority of officers are largely apathetic about political issues and unlikely to actively play a role in such questions. There are some officers who are devoted to a "golpe" and military dictatorship regardless of which political party is in power. This means, of course, that we are not dealing with a solid bloc of military opinion.
8. In summary, we consider military government relationship has passed a number of tough tests since 1958 and present politico-
economic situation in general, and government objectives and performances on university in particular, give ample basis for hope these relations will improve rather than deteriorate.
539. Telegram From the Embassy in Venezuela to the Department of State/1/
Caracas, March 15, 1967, 0030Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 23 VEN. Confidential; Priority. Repeated to Bogota, Rio de Janeiro, and USCINCSO.
4778. Subj: Insurgency Problem.
1. In conversation with Leoni today, he drew parallel between present insurgency problem/2/ and that faced by President Betancourt in 1962 prior to electoral period. He said it was important to build up extra forces for protection of cities and particularly communities near guerrilla zones so that main body of armed forces could function normally and provide essential security for electoral process.
/2/ Reference is to the assassination on March 3 of Dr. Julio Iribarren Borges, former Director of Social Security and brother of the Venezuelan Foreign Minister. On March 4 the Leoni administration reinstated its suspension of constitutional rights, 2 days after those rights had been fully restored. Venezuela subsequently blamed Cuba for the assassination, thereby justifying further retaliatory measures from the OAS. Leoni raised this issue with President Johnson at Punta del Este; see Document 50.
2. Accordingly, Leoni said his government would require additional arms for special forces which will be created. He anticipates these arms will come from Western European countries (he mentioned Belgian guns) and from the U.S. He emphasized importance of more armament for helicopters so that they could better attack targets of opportunity, although he stated he believed for time being armed forces had sufficient numbers helicopters.
3. Leoni commented that Colombian insurgency a complicating factor and an even greater problem than it appears to be on surface. He said he confident gov and armed forces can manage situation in Venezuela.
4. Military credits and MilGrp agreement also discussed but are subjects of other message./3/
/3/ Telegram SCVE 034-67 from the Commander of the U.S. Military Group in Venezuela to USCINCSO, March 15. (National Archives and Records Administration, RG 59, Central Files 1967-69, FN 6-1 VEN)
540. Memorandum of Conversation/1/
Punta del Este, Uruguay, April 11, 1967, 6 p.m.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 IA-Summit. Confidential. Drafted by Seidenman and approved in the White House on April 28. The memorandum is part 1 of 3; parts 2 and 3 are Documents 541 and 50, respectively. According to George Christian, the meeting was held at Leoni’s residence in Punta del Este. (Press statement, April 11; Johnson Library, President’s Daily Diary) President Johnson attended the meeting of American Chiefs of State at Punta del Este, April 12-14.
President Leoni said that it was very gratifying for him to receive President Johnson and to have the opportunity on this occasion to discuss with him a very serious problem affecting Venezuela that had already been mentioned through correspondence on two previous occasions./2/ This was the problem that had been posed by President Leoni’s personal envoys in the past, namely former Minister of Mines Guerrero and former Minister of Interior Barrios, who had discussed the fundamentals of the matter with the President at the White House./3/
/2/ Leoni raised the oil issue in two letters to Johnson, March 13, 1965, and January 17, 1966. (National Archives and Records Administration, RG 59, Central Files 1964-66, PET 1 US-VEN and POL 7 VEN, respectively)
/3/ For an account of Johnson’s meeting with Barrios and Perez Guerrero, January 21, 1966, see Document 536.
President Johnson replied that he was happy to have the opportunity to visit with President Leoni. He expressed the desire of the Administration to be of help to Venezuela and said that he had read the letter/4/ from the Venezuelan Government that had been received the week before. The President added that in the event that President Leoni got tired of having those fellows around, he, President Johnson, would not mind having their very able services to help him develop our trade relations with many countries in the world.
/4/ Dated April 4. The Department forwarded the text of the letter to Punta del Este on April 10. (Telegram 1172104/Tosec 64 to USDEL Punta del Este; National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 IA SUMMIT) In an April 7 memorandum to Bowdler, Sayre summarized the letter, outlined the U.S. position, and suggested points for the President to make in his meeting with Leoni. (Ibid., ARA/NC/V Files: Lot 69 D 19, PET 17-2, U.S. Import Program 1967, January-April)
President Leoni stated that he could appreciate the workload being shouldered by the President. At the same time Venezuela has problems that must be grappled with and to which solutions must be found. At this particular time the most serious problem for Venezuela is oil. Today this problem is being compounded and Venezuela’s prospects are being rendered increasingly obscure by the new restrictions that have gone into effect relating to the sulphur content of Venezuelan oil.
President Johnson stated that very careful consideration is being given to this problem. We realize what oil means to the Venezuelan economy, so that what we want to do is to try to roll with the punches and help Venezuela as much as possible. In this respect what we are aiming at is: 1) to solve the sulphur problem; and 2) to be able to use more oil from Venezuela. The President added that President Leoni and his associates have done such a good job in this area that the United States buys more oil from Venezuela than from any other country. The percentage involved here is 60 percent of our imports, and Venezuela has at least 30 percent more of our oil import market than any other country. We want to keep Venezuela’s oil sales high, and therefore one thing we are doing at this time is to initiate talks with Canada to see whether or not we can get Canada to reduce its share (i.e. share of the growth rate, as Solomon explained to Mayobre the next day).
The President indicated that he had just signed a very important amendment to the proclamation on the oil import program that was going into effect relating to our imports of asphalt./5/ By this means certification could be issued by the Secretary of Interior for additional imports of asphalt based on the situation as evaluated by the Secretary. Such additional imports of asphalt would appear to be beneficial to Venezuela and would help us to meet our national requirements. We are studying the asphalt situation, and various members of the Cabinet have examined the issue of import controls. We are convinced that with additional imports of asphalt Venezuela would stand to benefit, and this would be useful to our people. The Secretary of Interior will have the authority to issue new allocations and documentation for such imports.
/5/ Proclamation 3779, April 10. (32 Federal Register 5919)
The President pointed out that this new paragraph means that the Secretary will carry out a continuing study of the supply and demand situation, and based on his judgment, consistent with our needs and objectives, will have additional authority to recommend maximum levels of asphalt importation outside of the present MOIP. This means that he can authorize additional imports of asphalt on this basis for consumption in our country without additional allocations or licensing procedures. President Johnson told President Leoni that if he had no objection to sending us this additional asphalt at a low price, he would issue the order the following day.
President Johnson went on to say that he took pride in, and wished to maintain, the record dollar volume of imports into this country, from Venezuela, of crude oil, residual oil, and asphalt, of any period in history. He noted that as he was signing this proclamation he had noticed some of the figures involved: in the period of his predecessor’s administration-1961-63-the volume of imports was at 1,394 million barrels; during this administration, from 1964 to 1966, the volume was 1,604 million barrels. We went from $3.1 billion to $3.5 billion. Those were the three highest years for imports and revenues. In 1964 the figure was $1.127 billion; in 1965, $1.208 billion; and in 1966, $1.314 billion. The President summed up that we want to do three things: 1) to see what we can do to get the sulphur out of Venezuelan oil so that we can use it for our cities in a way that will not aggravate our air-
pollution problems; 2) we want to try and see if we can get Canada to reduce its exports (i.e., its growth rate of exports) to this country, and the President said, "If I lose friends on the Canadian side, I hope that you will make them up to me on the Venezuelan side"; and 3) we would like to increase our purchases of asphalt at low prices so that we can put in roads for some of our poor farmers. This, concluded President Johnson, was just about all he could do at this time. This may make the Canadians mad at him.
President Leoni stated that he could recognize that we are now importing more volume from Venezuela than in the past; however, there has been a trend recently in Venezuelan exports that is not considered good. At present, these exports to the United States consist of cheaper grades of oil, which bring in smaller returns. There has been an increasing trend away from the crude oils toward the residual oils, which of course sell at lower prices, and each time the price per barrel goes down by five cents there is a huge loss involved for Venezuela. This trend has been noticeable and growing since 1959, and there has been a drop in the price each year. For this reason, the Venezuelan Government, together with the companies, is grappling with this problem and an arrangement has been reached by which to curb the downward trend of the price.
With regard to the sulphur, the Venezuelan Government endorses compliance with the regulations that have been put into effect by the health and municipal authorities. The government is working with the companies to encourage them to adopt the necessary techniques and processing that will enable them to comply with these standards. The largest American company operating in this area in Venezuela is, of course, Creole, which as things now stand will have to invest between $110 million and $118 million in order to be able to meet the new requirements.
President Leoni went on to say that the problem of the Venezuelan oil market in the United States is considered not merely from the standpoint of Venezuela’s self-seeking interests, but also in the light of what Venezuela represents as a country in the Latin American area. Venezuela is a nation that is building a democracy with strong foundations. Its policy has reflected the principles that were endorsed in this very place (Punta del Este) at the time the Alliance for Progress was launched a few years ago. Venezuela has brought about a transformation in the lives of its people in the rural as well as in the urban areas. This has involved considerable expenditure on the part of the Venezuelan Government. This, of course, is something that the Venezuelan Government desires, and a part of this is the wish to promote industry in the country. But Venezuela in the past has been fertile soil to the natural enemies of democracy in Venezuela, and of the United States.
President Johnson said in answer to this that he was in agreement with what President Leoni was saying. He reiterated that we want to buy more oil from Venezuela so as to raise these purchases in volume and in dollar value. At present the totals for both of these items stand at their highest mark in our history, and we want to increase them. We are now trying to get Canada to reduce their participation in our market, to help us to do this. The President said that, in the second place, he wished to lift restrictions on residual oil imports, which from his political experience he knew would make a lot of miners mad at him. He added his hope that this would make the Venezuelans love him. The President explained that by using more residual we are cutting more and more into the coal market. Number three, we are requiring the Defense Department to supply its oil needs from Caribbean sources, which would mean that we would use large amounts of oil from Venezuela for defense purposes. Fourth, an increase in refining capacity will open up greater opportunities for Puerto Rico, where Venezuelan oil is used. Finally, the President pointed out that his own state of Texas produced more oil than all of the other oil-producing states in the United States. At the present time the production quota is down to eight or nine days per month. The pumps are idle during the other twenty-two days of the month. Many people have gone away as a result-many operators have folded. The President said that we are doing all of this to help Venezuela sustain a sound economy. We are aware of the problems that Venezuela has to face and we are aware of the activities of our natural enemies in Venezuela and in the Hemisphere.
The President stressed that he hoped President Leoni understood that we were taking an unprecedented step in these talks with Canada, which involve an attempt to get Canada to change its trade relations with our country by limiting Canadian access to the U.S. oil market. As these talks progress, there is bound to be a strain on relations between the United States and Canada, but we are doing this in order to insure that the MOIP will not work to the detriment of Venezuela. This means a change in our treatment of Canada, but we consider it to be the best way to assure Venezuelan access to the U.S. market on a high level of sales.
President Leoni stated that the Venezuelan Government has recognized and appreciated the receptive approach on the part of the United States authorities toward the problem faced by Venezuela involving unequal treatment of Venezuelan oil. The measures that the President mentioned seemed to constitute one more step in the direction in which Venezuela was striving; namely, to attain equal treatment of Venezuelan oil vis-à-vis Canadian oil. What the President said about the talks with Canada would be helpful but the ideal solution would be to give Venezuela the same treatment as Canada. The solution to these problems admittedly is no easy undertaking, but with perseverance Leoni said he was confident that a way could be found to devise a formula satisfactory to the interests of both countries.
Going back to a previous point, President Leoni said he wished to call the President’s attention to the fact that Venezuela, despite guerrilla activities, has developed a solid and stable political situation. It is sufficient to witness that labor unrest is no more to be found in Venezuela, whereas if we look over at the situation in the United States we find that there are frequent labor-management disputes, and a serious strike seems to be in the offing at present.
President Johnson interrupted President Leoni to report that a bill he had proposed in connection with the strike mentioned had just been passed in the Senate by a vote of 82 to 1, and in the House by a majority of 400 to 8, putting off the strike for a 20-day grace period./6/ He explained that at the end of these twenty days something else would very likely have to be done, but we were not going to have a major railroad strike in the country. The President explained to Leoni that he thought he would be interested in this, as the leader of a democracy.
/6/ On April 11 the U.S. Congress passed the President’s proposal for an additional 20 day "cooling-off" period in the nationwide railroad labor dispute. The bill was delivered to Punta del Este where it was signed into law on April 12. (81 Stat. 12)
President Leoni went on to say that several years had gone by without major strikes in Venezuela and industrial peace in his country now seemed to be on a solid footing. If, however, Venezuela were unable to maintain budgetary stability and thus were to run into difficulties in financing programs now underway for national development and social progress, there was no doubt that Venezuela would be subject to social upheaval. Our natural enemies have not been able to gain a foothold in Venezuela heretofore, but if this were to happen-if Venezuela were to be rocked by social imbalance-this could provide a welcome opening to them. This is why the oil problem appeared to be of significance to hemispheric security.
President Leoni said that it would perhaps be desirable for his Minister of Mines to be in touch with Assistant Secretary Solomon in connection with the dispositions that were mentioned by the President.
President Johnson heartily agreed, adding that if the President of Venezuela had no objection he would hold off issuing the asphalt order until the following morning just so that it would not appear that he had come here to "lose his trousers".
President Leoni said that this was encouraging to him, in view of the fact that he had hoped to be able to take something concrete back to Venezuela with him as a result of the encounter in Punta del Este. He was glad to receive information of the forthcoming talks with Canada and hoped that these would lead to the desired solution.
The President warned President Leoni that he would possibly have to pry him away from chasing communists in his country in order to get some angry Texans off his back. President Leoni replied that he was confident Texans would always be his friends. President Johnson said that Texans had always been his friends until he came to Punta del Este and spoke with the Venezuelan President. He went on to say that if a man is working only eight days a month, he will get very angry at anyone who tries to take one of those days away from him, and when they get angry these people sometimes lose their judgment. President Leoni reiterated his confidence that Texans would continue to be their friends, since they had once been "Latin Americans" themselves. He added the expression of his understanding of the heavy burden the President had to carry, and that this problem was not nearly as grave as the struggle the President had to face in Vietnam, which he does in solitude and with admirable strength and wisdom.
The President reiterated his desire to cooperate with the Venezuelans in the work of facing the trials they are going through. The President once again said that we will try to find a solution to the oil problem through talks with Canada. The President concluded the conversation by telling President Leoni that the latter was fortunate to enjoy the services of one of the most popular and capable of all the Ambassadors to our country-that he and his wife were among the best liked members of the Diplomatic Corps./7/
/7/ Enrique Tejera-Paris.
541. Memorandum of Conversation/1/
Punta del Este, Uruguay, April 11, 1967, 6 p.m.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 IA SUMMIT. Confidential. Drafted by Seidenman and approved in the White House on April 28. The memorandum is part 2 of 3; parts 1 and 3 are Documents 540 and 50, respectively.
President Leoni said that the Venezuelan Government had reason to believe that there would be an intensification of communist aggression in the northern region of Latin America, meaning, he said, Guatemala, Colombia and Venezuela. Besides the need to combat in Venezuela any step-up in guerrilla activities, there was also a need to guaranty peaceful elections. This posed a need for Venezuela to strengthen its military forces in order to provide for the safety of peaceful, democratic processes. Therefore, Venezuela will have to undertake additional outlays from its Treasury to meet defense needs. Ambassador Tejera-Paris has recently approached U. S. authorities, including the Defense Department, in order to present Venezuela’s requirements in military equipment for these purposes. President Leoni stressed that what he was talking about would be outside of presently existing agreements with us. The principal interest involved here is a foreshortening of the period of delivery of military equipment. Failure to obtain the necessary equipment in a brief period of time would necessitate obtaining this equipment elsewhere. This was something that the President of Venezuela believed could not be postponed inasmuch as it was of vital importance to the country. He suggested that the President might use his good offices to help Venezuelan authorities solve the problem. Venezuela would make payment as soon as it could, but again he stressed that this was to be outside of present arrangements. President Leoni noted that Venezuela’s present dollar commitment for arms and equipment being purchased from the United States and Europe amounted to approximately $12 million.
President Johnson asked precisely what kind of equipment he wanted. President Leoni said that there was no need for rockets or supersonic aircraft, of course, but only equipment and matériel necessary for maintaining internal security: ammunition, transportation vehicles, communications equipment, etc. He stressed, however, that the principal need here is for a brief delivery time, and not the 18 to 24 months normally required under present arrangements. The desirable delivery time would be three months.
President Johnson stated that our problem is: first, we do not want to be the arms merchants of the world; second, that Congress has forced us to reduce our program for financing military programs in Latin America to 85 million, including sales and grant;/2/ thirdly, we do not want the communists to take over Venezuela. Therefore, we want to help if Venezuela wants to buy equipment. Fourthly, the problem that we are grappling with in Vietnam is causing a great drain on our military supplies. The enemy there is building up to try to overrun us in one area and to keep them from doing this we are pouring everything over there; this means ammunition, helicopters and other types of equipment, but if we have an available surplus in any of the items that Venezuela needs, we can sell them to her. This is why we would have to know exactly what items Venezuela would need.
/2/ Reference is to an amendment, sponsored by Senator J. William Fulbright (D-Arkansas), to the Foreign Assistance Act of 1966, which set a ceiling of $85 million per fiscal year for military assistance and sales to Latin America, not including support for military training or the Inter-American Peace Force in the Dominican Republic. (80 Stat. 803)
President Johnson noted that he knew Ambassador Tejera-Paris very well. He had even been at the President’s ranch the week before, together with his charming wife./3/ He said that he would go over this with the Ambassador. If we have the equipment available to sell, and if Venezuela wants it, they can have it, and we will do everything we can to help. The President said that if there was a problem of slowness in deliveries he would find a way to clear this up upon his return to the United States.
/3/ President Johnson entertained most of the Latin American diplomatic corps at his Texas ranch on April 1. (Johnson Library, President’s Daily Diary)
The President reiterated his desire to cooperate with the Venezuelans in the work of facing the trials they are going through. He reiterated our support for Venezuela’s cause in the OAS against Cuba, which he said he hoped they would pursue with aggressiveness; we want to be of help in the matter of military equipment if we can-because we don’t want Venezuela to have to wait one minute to chase the communists./4/
/4/ On May 12 Venezuela announced the capture of a guerrilla landing party led by officers of the Cuban army near the village of Machurucuto, 130 miles east of Caracas. Documentation of U.S.-Venezuelan efforts to seek retaliatory measures against Cuba under the OAS charter is in the regional compilation. In telegram 6106 from Caracas, May 17, the Embassy reported that a "US-Venezuelan agreement to provide equipment for 10 new anti-guerrilla battalions, pursuant to President Johnson-Leoni agreement at Punta del Este is in jeopardy," due to DOD concern for the limitations set by the Fulbright amendment. (National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 19-4 US-VEN) The agreement was signed on May 18. In a May 19 memorandum to the President, Rostow commented: "This is a nice end to a move initiated by you at the Latin American Summit." (Johnson Library, National Security File, Country File, Venezuela, Vol. III, 12/66-12/68)
542. Telegram From the Embassy in Venezuela to the Department of State/1/
Caracas, June 7, 1967, 1805Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, PET 15 VEN. Confidential; Immediate. Passed to the White House and USIA.
6491. 1. I was called this morning to FonOff at request of FonMin, who received me in presence Minister Mines Mayobre. They told me they were under instructions President Leoni (a) to pledge Venezuelan petroleum to needs of free world in current crisis,/2/ but (b) also to convey request GOV be included in planning now going on in Washington for distribution this natural resource.
/2/ Reference is to the outbreak on June 5 of the 1967 Arab-Israeli war. In response to Egyptian charges of Western support for Israeli air strikes, most Arab oil-producing states agreed by June 7 to suspend oil shipments to the United States and Great Britain.
2. Mayobre said wire service stories report Emergency Committee on Petroleum is now being convened in Washington and GOV desires to be consulted. FonMin asked this request be telegraphed at once. He added Tejera Paris will be informed.
3. Mayobre stated events convince GOV that Venezuela is an essential part of "security zone" and should be accorded corresponding privileges. He said GOV concerned that great demands might now be made on its petroleum and, after crisis, market would again be limited. GOV wants to avoid this situation and therefore believes status in U.S. market should be improved.
4. I pointed out at this juncture that dislocation petroleum supply situation, if crisis continues, would be mainly in Western Europe. Mayobre agreed. He then said GOV realized on normal basis Middle Eastern and African oil more competitive in Europe. Venezuela, on other hand, from economic, political and hemisphere security point of view has a natural and complementary relationship with U.S.
5. Would appear from foregoing that GOV believes Middle East crisis supports their contention that Ven oil vital to U.S. national security and therefore that Ven should receive better treatment under MOIP.
6. Although Emb of opinion that GOV has perhaps overestimated U.S. need for additional Venezuelan oil in present situation it nevertheless believes would be desirable for Dept give consideration to GOV participation, as appropriate, in meetings to consider effect present situation on petroleum supply and distribution, and that GOV be kept informed regarding plans involving increased use Ven petroleum.
7. GOV position re consultation consistent with text Kennedy-Betancourt communiqué of Feb 20, 1963./3/
/3/ See footnote 3, Document 528.
8. I would appreciate Department’s response soonest to considerations raised in foregoing conversation with two ministers./4/
/4/ In telegram 209131 to Caracas, June 7, the Department replied that Solomon and Tejera Paris had discussed the impact of the Arab oil embargo on Western Europe, agreeing to "consult closely together during the present crisis." The Department added: "We are reluctant to go further than bilateral consultations since we see considerable problems in inviting GOV to participate even as observer in US Foreign Petroleum Supply Committee." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL ARAB-ISR) Bernbaum later reported that the Leoni administration had decided to increase production by 300,000 barrels per day, but that "production beyond that amount will be subject new conditions." (Telegram 6586 from Caracas, June 14; ibid., PET 17-2 VEN)
543. Memorandum From the President’s Special Assistant (Rostow) to President Johnson/1/
Washington, July 28, 1967.
/1/ Source: Johnson Library, National Security File, Country File, Venezuela, Vol. III, Memos, 12/66-12/68. Confidential.
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/
/2/ Dated July 25; attached but not printed.
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.
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/
/3/ Congressman George H. Mahon (D-Texas), chairman of the House Appropriations Committee.
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.
You want to receive him
Speak to me
/4/ Johnson checked this option.
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.
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:
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).
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.
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".
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 the attention of Ambassador Linowitz to the latter understanding, indicating that he was awaiting news./5/
/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)
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 re-definition 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 Hemis-phere, 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.
/6/ Proclamation 3794. (32 Federal Register 10547)
4. Passing mention was also made by the President to an increase of refining capacity in Puerto Rico, where Venezuelan oil is used.
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 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/
/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)
544. Telegram From the Department of State to the Embassy in Venezuela/1/
Caracas, July 13, 1968, 2159Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 33-4 VEN. Confidential; Immediate. Drafted and approved by Hill. Also sent to Georgetown and London and repeated to USUN, USCINCSO, Recife, and Sao Paulo for Oliver.
202053. Following is uncleared memcon:
Under Secretary Katzenbach called in Venezuelan Ambassador Tejera Paris to discuss July 9 Venezuelan decree asserting sovereignty over territorial seas from 3 to 12 miles off of part of Guyana claimed by Venezuela. In cordial but serious discussion, Under Secretary made following points:
(1) Meaning of decree was unclear to us and we would appreciate explanation, as it was potentially serious both from point of view international law and point of view internal Guyanese politics.
(2) If intent decree were merely to put world on notice that when and if Venezuela attained sovereignty over territory it claimed, Venezuelan law with respect territorial waters would obtain, we would have no problem with it although it was difficult to see what advantage there was to Venezuela in issuing it at this time.
(3) If, however, as accompanying explanatory note seemed to suggest, Venezuela intended immediately to exercise rights of sovereignty in 3-12 mile zone we would take "most serious" view of situation. As international lawyer, he himself could not see how such claim could be asserted and doubted that Ambassador Tejera would, in his capacity as lawyer, defend it. International law was clear that maritime rights and rights to continental shelf (which Guyana always claimed) attached to coastal state and at present Guyana was clearly the coastal state. The U.S., therefore, did not accept decree’s validity if it implied actual exercise of sovereignty and, if matter came up in international forum, we could not support Venezuela. While we would not make public statement unless we had to, we would have to advise U.S. shipping and other private interests if they asked that we did not accept validity of decree.
(4) We also viewed decree as serious in terms Guyanese electoral situation. It was, we thought, of more immediate interest to Venezuela than to us and hemisphere that Burnham win elections which would probably take place in December and that Jagan be excluded. Moves such as this claim were not helpful as they eroded Burnham electoral strength in difficult elections and diverted his attention during critical remaining six month campaign period. It also made it difficult for us to counsel Burnham to use moderation as he felt obligated to defend his position.
(5) We viewed explanatory note, with allusions such as "physical act of possession", as more disturbing than decree itself and wondered what intent of Venezuela was in light of assurances President of Venezuela and country’s highest officials had given that Venezuela would not resort to force. Under Secretary again emphasized seriousness of our concern if Venezuela intended exercise sovereignty.
Tejera replied that he knew nothing of decree and explanatory note, having only received their texts, but he would immediately report to Caracas and ask for instructions. Speaking personally, he at first attributed decree to Guyanese intransigence in Mixed Commission and especially their refusal to accept Venezuelan proposals for joint development. He recited history of Venezuela’s frustrations in attempt to get Guyana to discuss settlement of issue in Mixed Commission and claimed Venezuela, which desired settlement by peaceful means had used great restraint in contrast to Burnham’s inflammatory actions such as his recent speech in Birmingham, U.K. With regard to claim to territorial sea, he was certain that disputed territory would someday return to Venezuela and it was only natural and right Venezuela should have territorial waters which she would have under her Constitution and which are not claimed by party which wrongfully occupied disputed territory through inheritance from U.K. He would, however, query Caracas and let Under Secretary know as soon as he received reply.
For Caracas: You should convey above to President Leoni as soon as possible after clearance of memcon, hopefully early Monday./2/
/2/ July 15. In telegram 6896 from Caracas, July 16, the Embassy reported that Venezuelan officials were "piqued over US position on decree as stated Saturday by Katzenbach." In a meeting with Bernbaum on July 16, Iribarren declared that Venezuela’s "territorial claims must take precedence over any consideration their effect on Guyana’s domestic political situation." The same day Minister of Interior Leandro Mora told an Embassy officer that the Department did not appreciate "Venezuela’s ‘feelings’ on this matter." (Telegram 6898 from Caracas, July 16; ibid.)
For London:You should convey substance to FonOff.
For Georgetown: You may convey general line of conversation to Burnham in strictest confidence but should avoid giving him any encouragement to take matter to international organizations.
545. Telegram From the Embassy in Venezuela to the Department of State/1/
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 33-4 VEN-CUBA. Confidential; Immediate.
Caracas, November 20, 1968, 2002Z.
8970. 1. President Leoni called me to Miraflores shortly after noon today to discuss Venezuelan seizure of 575 ton Cuban fishing vessel Alecrin. Although the President did not indicate the location, he said that the vessel, when seized, was in Venezuelan territorial waters.
2. He then reviewed the belief of the GOV, based on hard intelligence, that Castro Cuba was supporting and activating the launching of guerrilla elements along the coast and Trinidad and probably hoped to stage a dramatic incident before the Venezuelan elections December 1.
3. As a result of information obtained by the GOV that several Cuban fishing vessels were near Venezuelan waters, the navy, in the past few days, had intensified patrols and the seizure of the Alecrin resulted.
4. I asked the President what the facts were with regard to news reports from Havana that the fishing boat was machine-gunned and perhaps the target of cannon fire. The President said that he could not answer this question yet since he did not have all the facts, but that as the facts came in he would have the Foreign Minister, who was present at the meeting, let me know.
5. The President said that the seizure of the Alecrin would have to be accepted by Castro in the same way that the U.S. has had to accept the seizure of the Pueblo by the North Koreans. He made it quite clear that Venezuela’s patience is exhausted over Castro Cuba’s continued efforts to intervene subversively in its affairs. He added that the Communist Party in Venezuela at the present time is playing a double game. On the one hand it has sought temporary respectability so that it can participate in the Venezuelan electoral process while at the same time preparing to resume subversive and possibly terrorist activities after the election.
6. The President seemed somewhat tense as he discussed this matter and apparently was seeking through me the moral support of the U.S. It is also my impression that GOV action in this case is to give an unequivocal [garbled text] to Cuba to stop its support of the armed struggle in Venezuela.
546. Telegram From the Department of State to the Embassy in Venezuela/1/
Washington, November 21, 1968, 0149Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 33-4 VEN-CUBA. Secret; Immediate; Limdis. Drafted by Vaky; cleared by Petersen; cleared in substance by Fitzgerald, Meeker, and Henry Bardach (EA); and approved by Oliver.
275231. Ref: Embtel 8970./2/ Subj: Venezuelan Seizure of Cuban Fishing Vessel.
/2/ Document 545.
1. Cuba has circulated note at U.N. violently protesting firing upon and seizure of Cuban vessel 100 miles from Venezuelan coast and accusing U.S. of complicity. Cuban Ambassador has appointment with U.N. SecGen tonight.
2. FYI. As you aware there strong reasons believe Cuban vessel seized in international waters and that Venezuelans themselves know it. End FYI.
3. For Ambassador: Possibility additional incidents as result of continued Venezuelan naval patrols obviously of great concern. There is no reason to assume that Havana will permit future incidents, if indeed it permits this one, to pass without retaliation, and as GOV aware Cuban air and naval forces have sophisticated equipment. Moreover there is some outside possibility that repeat incident may provoke some Cuban act against U.S. Serious confrontation between Venezuela and Cuba of this nature, or risk of Cuban military action, is obviously undesirable in terms of U.S., Venezuelan or hemisphere interests.
4. President Leoni’s comparison of Alecrin seizure with Pueblo incident was not felicitous one. USG has maintained North Korea action in firing upon and seizure Pueblo, even if Pueblo was not in international waters as we believe it was violation of established international law. North Korea singularly unfortunate nation for Venezuela to imitate. Any case we do not wish encourage or stimulate seizures of vessels especially on high seas.
5. Recognizing provocation which GOV subject to and noting from reftel that Leoni probably seeking U.S. moral support, we think it important cool down Venezuelans and seek dissuade them from taking this kind of action. We especially think it important to avoid repetition of vessel seizure.
6. Accordingly you are asked to convey to GOV at appropriate level and in most appropriate way you think advisable, above concerns and advise them to cool it. Recognize that you are under constraints re revealing to Venezuelans that we aware seizure took place in international waters especially since Leoni told you it took place in territorial waters. Recognize also that we cannot abandon GOV in face of insurgency threat or seem convey unconcern. Hence will take tact to center Venezuelan attention on tactics used to combat Cuban threat and international repercussions of incidents such as this one which may not help Venezuelans. Obviously if there clear evidence Alecrin engaged in subversive mission and this provable Venezuelan position would be stronger. Our main concern this point is to dissuade them from seizure in international waters simply on suspicion which may later prove unwarranted and to avoid risk of confrontation and retaliation mentioned above.
547. Telegram From the Embassy in Venezuela to the Department of State/1/
Caracas, November 21, 1968, 2325Z.
/1/ Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL US-VEN. Secret; Priority; Limdis.
9001. Ref: Caracas 8987./2/
/2/ In telegram 8987 from Caracas, November 21, Bernbaum reported: "Due unavailability FonMin until tomorrow morning, I conveyed substance reftel [Document 546] to Manuel Mantilla SecGen Presidency. He said would immediately inform President Leoni. He showed understanding our position but emphasized importance of not giving Cubans idea US so worried over danger any problem with Cuba as to give Castro idea he could operate with impunity. He hoped Cubans would not get this impression from our position in UN debate. I said this obviously delicate problem and assured him that what I just said strictly between US and Venezuelan Government." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL US-VEN)
1. President Leoni’s reaction to my conversation this morning with Mantilla was prompt and vigorous. I saw him at his request late this afternoon. The President said he had been greatly concerned by Mantilla’s description of his conversation with me. Our position implied to him a US tendency to wash its hands of the situation because of preoccupation with serious problems in other parts of the world. He was able to understand this but felt that it left Venezuela in the position of fending for itself on matters of vital importance to its security. He asked rhetorically whether it would not be necessary for Venezuela to turn to France for military equipment to defend itself now that there was the implication that the US would not assume responsibility and did not, in any case, want to furnish Venezuela with equipment at least equal in quality to that secured by the Cubans from the Soviet Union. He said that Venezuela might even find itself in the position of being forced to come to terms with the Soviet Union for its own protection. The President spoke in this vein for some time and I listened patiently, knowing from experience that he was blowing off steam.
2. After he finished, I read suitable excerpt from Deptel 275231/3/ to give him the flavor of the Department’s position as I had previously described it to Mantilla. This then produced another monologue along the same lines./4/
/3/ Document 546.
/4/ In a November 29 letter to Vaky, Bernbaum expressed fear that emphasizing Cuban access to "highly sophisticated equipment" may have backfired, noting "the emotional reactions of both Leoni and Leandro Mora to our admonition as an indication that they could not count on U.S. support." Although Leoni only hinted at the consequence, Leandro Mora was more explicit: if the Venezuelans "did not get the necessary equipment from us they would turn to Europe." Bernbaum admitted: "I have been kicking myself for having conveyed that portion of the Department’s telegram to Leoni. We are now, unfortunately, in the position of having stimulated a desire, even demand, by the Venezuelans for the kind of equipment we don’t want to furnish them and probably cannot furnish them in view of the temper of our Congress. I am afraid that both ARA and I fell down on this one." (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 33-4 VEN-CUBA)
3. [I] then told the President that in my opinion he was misinterpreting the Department’s position. We were most definitely not washing our hands of Venezuela’s problem. We understood and appreciated Venezuela’s position at this critical electoral period with respect to very clear efforts by the Cubans to cause trouble. We had access to the same intelligence information he did. The Department’s reaction, I said, was that of a friend and ally offering advice. We were counseling caution and the importance of playing the game according to the rules to avoid giving our common enemy an argument against Venezuela which could be used effectively in the UN and other international forums and as an excuse for reprisal. This was the tactic followed by us in our dealings with Cuba, the Soviet Union and the Communist world as a whole in the face of provocation. We felt it important for Venezuela to act only when sure of its position. In effect, I said, we were asking the President to "cool it." This apparently struck his fancy since he smiled broadly and visibly relaxed.
4. The President said that there was no question that the Cubans would allege that the vessel was seized outside of Venezuelan territorial waters. Venezuela’s position was that the vessel was seized within Venezuela’s territorial waters. There was no reason to believe the Cubans more than the Venezuelans. In the case of the Pueblo, the North Koreans claimed that it was seized within North Korean territorial waters while we claimed it was seized outside of territorial waters. As far as the President was concerned, Venezuela has acted in accordance with the rules and very definitely intended to do so in the future-that is, exercise its sovereignty over suspicious vessels when they were in Venezuelan territorial waters. He said Venezuela had no desire to impede the right of innocent passage. The important thing was that the passage had to be innocent. If foreign vessels wanted to transmit Venezuelan waters, there was nothing to prevent them from doing so by notifying the Venezuelan authorities of their intention. If, however, foreign vessels were found in Venezuelan waters, particularly vessels of countries to be considered hostile, it was incumbent upon the GOV to make certain of their bona fides. In this case, the Cuban fishing vessel was called upon to stop. Instead of acceding to this legitimate request, it ignored it, therefore rendering itself suspect. The President said that as far as he was concerned, any Cuban vessel found in Venezuelan territorial waters was going to be looked upon as suspicious. Fidel Castro was now on notice to that effect.
5. The conversation then turned to the domestic situation. The President said that the Communists presumably with Cuban assistance were planning to stage disturbances in Caracas with the allegation of electoral fraud. Subversive elements were infiltrating Caracas for that purpose. Recent assistance from Cuba was substantial and was continuing. A UPA announcement published in Ultimas Noticias on November 18 for all practical purposes represented a declaration of war. The GOV did not look upon this threat as dangerous but it was required to take all precautionary measures. The investigation of the Cuban vessel had to be appraised in the light of this situation.
6. Although I do not think that the President’s ire and preoccupation over our position has been eliminated, I do believe that I left him in a considerably more relaxed state of mind and conscious of the need for caution in the future. I think it important that we have his problem in mind during any UN debate which may ensure and avoid statements which might tend to exacerbate GOV suspicions and concern without necessarily supporting this specific Venezuelan action, in the debate which may take place, reference by us to historically demonstrated Cuban subversive intervention in Venezuela and to its continuation would be in order and well received in Venezuela and other parts of LA. The Communists would do no less for their allies./5/
/5/ The Alecrin was allowed to return to Cuba on December 20, nearly 3 weeks after the Presidential elections on December 1. The Venezuelan Foreign Ministry released a statement admitting that, "although vessel’s way of proceeding was suspicious, no proof was found to confirm that ship was being used for transport of guerrillas or weapons." (Telegram 9396 from Caracas, December 21; ibid., POL 33-4 CUBA-VEN)
548. Information Memorandum From the President’s Special Assistant (Rostow) to President Johnson/1/
Washington, December 9, 1968, 6:35 p.m.
/1/ Source: Johnson Library, National Security File, Country File, Venezuela, Filed by LBJ Library. Confidential. A notation on the memorandum indicates the President saw it.
The Christian Democratic candidate, Rafael Caldera, has finally been declared winner in Venezuela by the narrowest of margins./2/ He won by about 30,000 votes, or a margin of approximately 29 percent to 28.4 percent for his nearest rival. The election was held in remarkably good order, and there is every indication that power will pass peacefully to the opposition next March for the first time in Venezuela’s recent history.
/2/ In a December 3 memorandum to the President, Rostow reported that the election was "still too close to call," with Caldera clinging to a narrow lead over Barrios, the AD candidate. Rostow noted: "Either man would be satisfactory from our viewpoint, although Caldera would probably take a somewhat more nationalistic position on economic matters." (Ibid.)
President-elect Caldera is founder of Venezuela’s Christian Democratic Party, and has run unsuccessfully several times before for the presidency. He is able, responsible, and a moderate leftist-an expert in the field of labor law-and a strong anti-communist. He knows the United States well, and has supported the Alliance for Progress in general while criticizing "errors of operation".
Caldera’s Party will be the second largest in the Congress and will have to form a coalition to put through a program. He may be somewhat more nationalistic in his dealings with American oil companies in Venezuela, but the general lines of Venezuelan policy toward the United States should continue after he takes office./3/
/3/ In telegram 9245 from Caracas, December 10, the Embassy analyzed the election results. (National Archives and Records Administration, RG 59, Central Files, 1967-69, POL 14 VEN) In airgram A-1366 from Caracas, December 13, the Embassy assessed the implications of the election for the United States. (Ibid., POL VEN)
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