Foreign Relations of the United States, 1961–1963, Volume XII, American Republics

200. Telegram From the Embassy in Argentina to the Department of State¹

Buenos Aires, November 8, 1963, 11 p.m.

835. For President and Secretary from Harriman.² I delivered your letter³ to President Illia this evening. He was warmly pleased at its expression of friendship and said he would like to have translation released to press. He likewise spoke warmly of his high regard for you and the objectives of your administration.

I covered same ground made with FonMin this morning but dwelt largely on oil contract problem and political effect in United States and Argentina of contemplated annulment contracts.

President listened carefully to my exposition and then gave me rationale of his feeling of compulsion that contracts must be annulled.

Illia said that although he had been elected with less than thirty per cent of popular vote, other parties joined with his own in electoral college to vote him into presidency. All parties were unanimous on one point; that 1958 oil contracts had to be annulled. Illia clearly feels he has mandate from Argentine people and there can be no question that contracts must be annulled. As for political impact in United States, he recalled that his party’s consistent attitude on foreign contracts had been known at least five years back when contracts were signed and when political situation in U.S. was different from what it is today.

Speaking with great deliberation President said that, although he would regret if action on contracts might injure Alliance for Progress, diminish chances of passage of a satisfactory foreign aid bill and reduce opportunities for future U.S. investment in Argentina, he nevertheless had to carry out mandate of his people. This was not a caprice or a decision taken lightly but one arrived at only after carefully matured deliberation and study.

President did, however, say companies whose contracts would be annulled would have opportunity to be heard and to arrive by judicial means at what he called “a mutual estimation” of proper indemnification—and the companies would be paid. He mentioned figure of $200 million as his approximation of amount involved. When I pressed Illia as to any possibility of some means being found to minimize unfortunate repercussions of his act, he said that he did not exclude possibility that once annulment had taken place Argentine Government might consider negotiating with companies to use their technical skills on basis of service contracts.

In answer to his question, I said that without knowledge as to precise nature of decrees forthcoming, it was difficult for me to give advice on what to do. President authorized me at Embassy dinner this evening with his Minister and other high officials to explore more precisely nature of these decrees. He also authorized me to discuss with his Ministers question of renegotiation of contracts after annulment. Fact this authorization was given in presence of Central Bank President Elizalde, who acted as interpreter for President, may give opportunity to explore modifications of pending decrees. Elizalde has been leader of Firebrand group insisting on immediate annulment.

(Illia also agreed to see us tomorrow for report on tonight’s talks and further consideration.)

My present estimate resembles that of a prisoner condemned to capital punishment who at least knows appeal for reprieve has gone to governor.

McClintock

1. Source: Department of State, Central Files, PET 15 ARG. Confidential; Limit Distribution. Passed to the White House on November 9.
2. Harriman was en route to Sao Paulo for the second annual meeting of the Inter-American Economic and Social Council at the Ministerial level, November 11-16. Harriman met with Argentine officials to discuss the oil contracts issue.
3. Dated November 3, the letter was an attempt to convince the Illia government to reexamine or delay its expected decision to annul its contracts with U.S. oil companies; in effect, to expropriate them with undetermined compensation to be decided later. The text of the letter was attached to a memorandum from Read to Bundy, November 3. (Department of State, Central Files, PET 15 ARG)