Office of the Historian

281. Memorandum From William J. Jorden of the National Security Council Staff to the President’s Deputy Assistant for National Security Affairs (Scowcroft)1

Washington, February 8, 1973.

SUBJECT

  • Investment Dispute with Peru

This is a particularly sensitive matter and is forwarded for your information only.

You may be aware that we have had a long-standing dispute with Peru centering on nationalization of the International Petroleum Company (Standard Oil of New Jersey) properties in 1968. It is the single, most sensitive issue between us. IPC had a bad record, indeed, in Peru and nationalist sentiment is such that no Peruvian government can survive if it agrees to make payment for the properties. We have argued that some repayment should be made, however modest, as a matter of principle.

We have tried for years to find some way out of this impasse to no avail. The last effort, through third parties, was blown out of the water by premature press disclosure.

At NSC–CIEP sessions last November it was agreed to make one more try. Peter Flanigan was given responsibility for the effort. He now believes that he has developed an approach that at least has some promise. It amounts to getting Peru to pay the U.S. for all claims. We would then distribute the payment to all U.S. companies owed by Peru—including IPC. Peru would, of course, insist that she was making no payment to IPC.

I have studied the suggested approach and conclude it is worth a try. It is going to be a hard row to hoe and I remain skeptical about [Page 752] Peru’s acceptance. But Peru is too important to us—in the future especially—to fail to try every possible route to a solution.

The proposal is outlined in the attached draft memo from Flanigan to the President. Also attached is a draft letter from the President to President Velasco of Peru which designates James Greene (of Hanover Trust) as the authorized intermediary to deal with this problem.

I have studied this and agree it is the only sensible approach available at the moment. I have cleared it—but with the clear understanding that I was informing you immediately.

If you agree with this, you could have someone on your staff inform Dean Hinton in Flanigan’s shop that you approve for the NSC. Or, you can wait until Flanigan submits it to the President—in which case I assume it will come to you for clearance—and then act. In any case, I felt you should know the state of play and be aware that I have read this carefully and approve.

Recommendation:

That you have Dean Hinton informed that this is approved for NSC.

  1. Summary: Jorden informed Scowcoft of the state of play involving the IPC investment dispute.

    Source: National Archives, Nixon Presidential Materials, NSC Files, Country Files, Box 793, Latin America, Peru, Vol. 3, January 1972–December 31, 1973. Secret; Sensitive; Eyes Only. Outside the System. Sent for action. Attached but not published were undated draft letters from Flanigan to the President and from the President to Velasco. Although there is no indication that Scowcroft informed Hinton of NSC approval, Nixon decided in late February to send Greene as an intermediary to Peru. (Paper prepared by the Department of State, April 21; ibid. RG 59, National Security Study Memoranda, 1969–1977: Lot 80D212, NSSM 158)

    ↩