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foreign oil. Two such agreements exist, the Gen-
eral Agreement on Tariffs and Trade and the bi-
lateral trade agreement with Venezuela.^ The
fundamental intent of the General Agreement on
Tariffs and Trade and the Venezuelan agi-eement
is to stimulate the broadest possible international
jxchange of goods. There is a basic inconsistency
between the petroleum restrictions and this intent.
However, the GATT and the Venezuelan agree-
ment make exception for the national defense re-
3(uirements of their contracting parties. The
United States maintains that such exceptions
provide legal justification for its petroleum policy.
Phis legal justification mitigates the conflict be-
tween these restrictions and the goal of these trade
agreements but only for such time as there is
Bvidence that they are necessary to safeguard the
security of the United States.

Second, the letter stated: "We would like to
dave your views as to the possibility of the United
States being deprived of foreign oil and the con-

' Made before Subcommittee 4 of the House Select Com-
mittee on Small Business on Nov. 21 (press release 801).
Mr. Nichols is Special Assistant to the Assistant Secre-
tary for Economic Affairs.

' 54 Stat. 2375 ; 3 UST 4195.

comitant importance of maintaining a healthy
and adequate domestic oil production industry."

The Department believes that full considera-
tion of this subject requires also the coordinated
views of several agencies, including the Depart-
ment of Defense, the Office of Emergency Plan-
ning, and the Department of the Interior. The
following comments are offered with this in mind.

There are a number of possible developments in
world production and trade in petroleum that
might affect U.S. oil supplies. Wo witnessed one
such event in the Suez Canal difficulty in 1956-57.
In that case, however, the loss of oil supplies to
the U.S. was less important than the interruption
of the oil flow to European destinations that de-
pended on it, but we suffered some inconvenience
in the adjustment that had to be made.

It is highly unlikely that developments short
of war could cause a serious interference with U.S.
access to foreign oil. In the first place, the large
and growing number of oil-producing countries
provide alternative sources. Secondly, since most
major oil-exporting countries have a one-product
economy, they have a strong interest in maintain-
ing their position in the U.S. market.

A wartime situation can be described only in
the most general of terms because the possibility
of deprivation would vary with the participants
and the type of war being fought. Oil from ad-
jacent friendly countries obviously is as safe as
domestic oil from a military standpoint. This is
the reason for the overland exemption to the pres-
ent oil import control program.

Military authorities can speak with greater au-
thority than the Department of State on the
extent to which oil brought in by tanker might
be vulnerable to submarine attack. It may be
pointed out, however, that any war so general in
nature as to involve submarine attack on our ocean
shipping also would involve a high probability
of damage to ports, refineries, railroads, highways,
and consuming areas. Because of such damage,
available supplies both of oil and of solid fuels
might be surplus to requirements during such all-
out conflict. "Brush fire" wars might interfere
with some sources of oil, but it is improbable that
the U.S. woidd suffer a crippling shortage on that
account. The existence of well-developed foreign
sources would probably mean advantage in local
overseas fighting.

The Department believes that security in oil

lanuary h 1962


demands a balanced approach. A healthy, effi-
cient, and progressive industry is needed to pro-
vide oil, in an emergency, to our oountiy and its
allies. Government intei-vention in tlie oil mar-
ket may be necessary but should not be pushed
beyond the point of diminishing returns.

In assessing what Government should imder-
take, one must consider the need of the economy
for low-cost fuel, the effect of import restrictions
in this country on our efforts to open up foreign
markets for the products of American farms and
factories, and the stake of American investors in
oil production abroad. We also must consider
the security effect of political repercussions in
friendly countries dependent for a livelihood on

The third question took the following form:
"It would be helpful if you . . . would ex-
plain . . . the arrangements by which foreign
imported oil is trucked into this country from
Mexico as exempt overland imports."

The circumstances that led to the import of oil
by truck into the U.S. from Mexico were an un-
expected byproduct of the oil import control pro-
gram. Before the program began, PEMEX, the
Mexican petroleum coi-poration, used to sell oil,
in approximately the quantities now entering at
Brownsville, to customers in the New York City
area. When the progi-am started, these custom-
ers, being historic importers, received import
quotas. The New York importers subsequently
were absorbed, along with their import quotas,
by a major international oil company which de-
cided to utilize these import quotas to bring in its
own oil from Trinidad instead of buying oil in
Mexico. The Brownsville arrangement resulted
from PEMEX's effort to locate replacement cus-
tomers for some 30,000 barrels a day. Mexico
needed the income from these sales, both for the
Mexican company and as a small contribution to-
ward meeting the large perennial deficit in
Mexico's trade with the U.S. The functioning of
the import control program had created an imf ore-
seen and unintended hardship for Mexico.

In the absence of adequate unloading and stor-
age facilities for petroleum products on the Mexi-
can side of the border at Matamoros-Brownsville
or of a pipeline from the Gulf Coast oil fields of
Mexico to the U.S. border, Mexico sought and
found another means whereby it could continue to
export the small amount of residual and other

oils produced in Mexico wliich it had exported
to the U.S. under import quotas imtil the above-
mentioned absorption of the former importers by
other companies.

The arrangements by which oil enters the United
States under this exemption are:

1. Mexican oil is shipped by tanker from Mexico
to Brownsville, Texas, where it enters a customs
bonded warehouse or otherwise remains in con-
tinuous customs custody.

2. It subsequently is withdrawn by the Mexican
petroleum corporation under a "warehouse with-
drawal for exportation," or from other customs
custody under an immediate export entry, in order
that it may be taken into Mexico for sale. Under
U.S. customs rulings the oil has not been imported
into the U.S.

3. The oil is transported by motor carrier to
Matamoros, Mexico, via the Gateway Bridge.
Ownership is transferred after the oil enters

4. The new owner takes possession, and the oil
enters the United States by motor carrier.

As this is Mexican oil entering the U.S. over-
land from Mexico, its entry is consistent with the
President's amended proclamation No. 3279 of
March 10, 1959 (which imposed restrictions on
oil imports), which exempts from tlie restrictions
crude oil, unfinished oils, and finished products
entering the United States by pipeline, motor car-
rier, or rail from the country of production.

Tanker shipments direct from Tampico to con-
suming areas are more economic and involve less
handling of product than the Brownsville ar-
rangement. Consequently, PEMEX is continuing
its efforts to find new customers entitled to import
quotas. The company regards the Brownsville
procedure as a supplementary marketing method
and intends to utilize direct tanker shipments to
the fullest extent possible. The Mexican Gov-
ernment has given the United States assurances
that its overland shipments via Brownsville will
average not over 30,000 barrels a day tlirough

The subcommittee's fourth and last question
was : "We would also like to have your views as
to the extent and probable effect upon this nation
and (he other free world countries of the current
tremendous expansion in oil exportation by the
Soviet Union."

The U.S.S.R., which is endowed bountifully


Deporfmenf of Sfofe Bulletin

with extensive sedimentary basins, has, during
recent years, increased its production of petro-
leum at a rapid rate. This production, which
amounted to slightly more tlian a million barrels
a day in 1953, has increased almost threefold to
slightly less than 3 million barrels a day in 1960.
The 7-year plan of the U.S.S.R. has set as its ob-
jective the production of 4.8 million barrels a day
in 1965. At present rates of increase in produc-
tion, this target may be exceeded by as much as
15 percent.

The U.S.S.R. has not been increasing consump-
tion at as rapid a rate as production and has
found itself with an increasing surplus of oil
available for export. As a consequence, since
1955 Soviet oil exports to the free world have in-
creased sharply.

Exports of Soviet oU to the free world, which
averaged about 100,000 barrels a day in 1955,
have increased rapidly to approximately 450,000
barrels a day in 1960. Such exports are currently
estimated to be nmning in the neighborhood of
550,000 barrels a day. It has been estimated that
the Soviets may have the capacity in 1965 to ex-
port approximately 1 million barrels a clay of
crude oil and petroleum products to the free
world, with an additional export of some 500,000
barrels a day to the Eastern European satellites
and Communist China.

The ability of the Soviet Union to achieve this
rate of export will be enhanced by the completion,
which is planned for 1965, of pipelines to ports
on the Baltic and Black Seas. The extension of
a pipeline from central Siberia to the Pacific is
also under consideration and may be available
about the same time.

The Soviets have pointed out that they have
been traditional exporters of oil in the past and
have as their objective regaining their previous
market position in the period 1925 to 1935,
which averaged some 14.3 percent of the total oil
imports of Western countries. In 1959 Soviet
exports were about 4 percent of estimated free-
world trade in petroleum. If the Soviets export
1 million barrels a day in 1965, their phase of
the market would be roughly 7 percent of esti-
mated free-world trade in petroleum.

At present approximately 75 percent of Soviet
exports of oil are moving to Western Europe.
The Soviets have found this market relatively
easy to penetrate, owing to its geographical prox-

imity and its large and rapidly growing demand
for ci-ude oil and petrolemn products. Many in-
dustrialists in Western Europe desire a cheap
form of energy and are thus keenly interested in
importing low-priced Soviet oil. The Soviets, in
return, find that the Western European countries
are able to supply many of the industrial items
which are needed for the domestic expansion pro-
gram in the U.S.S.II.

There is a general overcapacity to produce oil
throughout the free world at the present time,
and this condition will probably exist for several
years. This condition of surplus supply has, for
some time, tended to have a softening effect on
petroleum prices. The addition of more than half
a million barrels a day of Soviet oil to a market
already overloaded with surplus oil has added
significantly to the weakening of the oil price
structure. Moreover, the Soviets, in order to sell
oil in Western markets, have in some instances
reduced their prices to obtain the business. The
effects of these reduced prices greatly outweigh
the importance of Soviet oil measured as a percent-
age of total movements of oil.

While it is probable that exports of oil from
the U.S.S.R. to Europe are made to a considerable
extent for economic reasons, oil shipments to less
developed countries seem to have a great degree
of political motivation. Since the market for
petroleum in less developed countries is generally
small, a small volume of exports of oil to any one
country by the U.S.S.R. can cause considerable
disruption of the markets there. In several cases
the Soviet Union has been willing to accept local
currency for shipments of oil to less developed
countries or, on the basis of barter transactions, to
accept surplus goods which these countries have
had difficulty in exporting to the free world. Such
trading tactics on the part of the U.S.S.R. may,
in the long rim, result in some less developed
coimtries' becoming dependent upon the Soviet
Union to an extent whereby their freedom of ac-
tion is compromised.

Since the bulk of exports of Soviet oil obviously
displace oil wliich would have been sold from
other sources, Soviet oil has had the effect of de-
creasing the rate of growth which free- world pro-
ducer countries might otherwise have expected to
attain. This has resulted in lessening the antici-
pated amounts of revenue which these countries
had hoped to receive. Recently at the third Arab

January J, J 962


Oil Congress a delegate spoke strongly against the
depressing effect on prices for free-world oil
caused by exports of low-priced Soviet oil. Con-
cern has also been expressed in both Europe and
the United States.

Overdependence on Soviet oil exports or on the
U.S.S.R. as a market for Western products is a
danger that free-world countries must take very
seriously. The Soviet Union will have to be
reckoned with as a substantial oil supplier in world
markets for a number of yeare to come.

President Sets Cuban Sugar Quota
at Zero for First Half of 1962


Whereas section 408(b) (1) of the Sugar Act of 1&18,
as amended by the act of March 31, 1961, provides that
the President shall determine, notwithstanding any other
provision of Title II of the Sugar Act of 1948, as amended,
the quota for Cuba for the period ending June 30, 1962,
in such amount or amounts as he shall find from time to
time to be in the national interest, and further provides
that in no event shall such quota exceed such amount
as would be provided for Cuba under the terms of Title
II of the Sugar Act of 1948, as amended, in the absence
of section 408(b) ; and

Whereas section 408(b) (1) of the Sugar Act of 1948,
as amended, further provides that determinations made
by the President thereunder shall become effective im-
mediately upon publication in the Federal Register ; and

Whereas section 408(b) (2) and section 408(b) (3) of
the Sugar Act of 1948, as amended, authorize the Presi-
dent, subject to certain requirements, to cause or permit
to be brought or imported into or marketed in the United
States a quantity of sugar not in excess of the amount
by which the quotas which would be established for
Cuba under the terms of Title II of such Act exceed the
quotas established for Cuba by the President pursuant
to section 408(b) of the Act; and

Whereas, by Proclamation No. 3401 of March 31, 1961,'
the President determined the quota for Cuba for the
calendar year 1961, to be zero ; and

Whereas, pursuant to section 40S(b)(l) of the Sugar
Act of 1948, as amended, I find it to be in the national
interest that the amount of the quotas for sugar and for
liquid sugar for Cuba pursuant to the Sugar Act of 1948,
as amended, for the six-month period ending June 30,
1962, should be zero :

Now, therefore, I, John F. Kennedy, President of the

United States of America, acting under and by virtue of
the authority vested in me by section 408(b) of the Sugar
Act of 1948, as amended, and section 301 of title 3 of the
United States Code, and as President of the United
States :

1. Do hereby determine that in the national interest the
amount of the quotas for sugar and for liquid sugar for
Cuba pursuant to the Sugar Act of 1948, as amended, for
the six-month period ending June 30, 1962, shall be zero ;

2. Do hereby continue the delegation to the Secretary
of Agriculture of the authority vested in the President
by section 408(b) (2) and section 408(b) (3) of the Sugar
Act of 1948, as amended, such authority to be continued
to be exercised with the concurrence of the Secretary of

This proclamation shall become effective immediately
upon publication in the Federal Register.

In witness whereof, I have hereimto set my hand and
caused the Seal of the United States of America to be

Done at the City of Washington this first day of Decem-
ber in the year of our Lord nineteen hundred
[seal] and sixty-one and of the Independence of the
United States of America the one hundred and

f^J /L^

By the President:
Dean Rusk,
Secretary of State.

Department Explains U.S. Position
on Dominican Sugar

Department Statement

Press release 864 dated December 8

In connection with the statement in an an-
nouncement by the Department of Agriculture on
December 8 that authorization to purchase the
tonnage of nonquota sugar allocated to the Do-
minican Eepublic would be withheld at tliis time,
the Department of State wishes to make clear
that the reason for withholding purchase authori-
zation is the fact that the United States does not
maintain diplomatic relations with the Dominican

' No. 3440 ; 26 Fed. Reg. 11714.

" For text, see Bulletin of Apr. 24, 1961, p. 592.

' For background, see Bulletin of Sept. 12, 1060, p.


Department of State Bulletin

Existing legislation authorizes the Executive to
withhold purchases of nonquota sugar from any
country with which we do not maintain diplo-
matic relations. Purchases of nonquota sugar
from the Dominican Republic will be authorized
when diplomatic relations are resumed, provided
the resumption takes place within a reasonable

The resumption of diplomatic relations de-
pends upon (1) action by the Council of the Or-
ganization of American States to rescind the res-
olution of the Sixth Meeting of Foreign Ministere
at San Jose, Costa Rica, in August 1960, which
called for the breaking of diplomatic relations of
all member states with the Dominican Republic,^
and (2) a determination by the United States
and by the Dominican Republic that diplomatic
relations between the two countries should be re-
sumed. In making its determination, the United
States would, of course, be guided by its estimate
of the extent to which its renewal of diplomatic
relations with the Dommican Republic would as-
sist that country in its efforts toward democrati-

deposited to the credit of the United States and
will be available for use by the U.S. Government.
The agreement provides that, beginning January
2, 1972, the Polish Government will repurchase for
dollars at the rate of $1.5 million annually such
zlotys as have not been used.

This agreement represents a further step of this
Government to meet Polish needs by sales of agri-
cultural commodities. Since 1957 similar agree-
ments under Public Law 480 have provided for a
total of $365.3 million in such sales to Poland. A
total of $61 million in credits has also been ex-
tended to Poland between 1957 and 1959 through
the Export-Import Bank, which has been used
primarily for the purchase of equipment and ma-
terials, agricultural commodities, and poliomy-
elitis vaccine. Shipments of these items have con-
tributed directly to an improvement in Polish
diets and medical care, and they have been ac-
cepted by the Polish people as material evidence
of the continuing interest and friendship of the
United States for Poland.

P.L. 480 Agreement Signed
by U.S. and Poland

The Department of State announced on Decem-
ber 15 (press release 884) that an agreement ^ was
concluded at Washington on that day by the
United States and Poland which provides for the
sale to Poland of agricultural commodities having
a total export market value of $44.6 million includ-
ing certain ocean transportation costs. Under the
provisions of the Agricultural Trade Development
and Assistance Act, as amended (Public Law 480) ,
Poland will purchase surplus agricultural com-
modities, including wheat, barley, edible oils, and
tallow. Shipments under this agreement are ex-
pected to help meet current urgent Polish needs
in these commodities.

As provided in the act, payment will be in local
currency (Polish zlotys). This currency will be

' For background, see ibid., Sept. 5, 1960, p. 358 ; Feb.
20, 1961, p. 273; Dec. 4, 1961, p. 929; and Dec. 18, 1961,
p. 1000.

' For text, see press release 884 dated Dec. 15.


Recess Appointments

The President on December 7 made the following recess
appointments :

William' J. Handley to be Ambassador to Mali. (For
biographic details, see White House press release (Palm
Beach, Fla.) dated December 7.)

Ridgway B. Knight to be Ambassador to Syria. (For
biographic details, see White House press release (Palm
Beach, Fla.) dated December 7.)

Raymond L. Thurston to be Ambassador to Haiti. ( For
biographic details, see Department of State press release
891 dated December 18.)

The President on December 10 appointed Seymour
Janow to be Assistant Administrator for the Far East,
Agency for International Development. (For biographic
details, see White House press release (Palm Beach, Fla.)
dated December 9.)

The President on December 14 appointed Parker
Thompson Hart to be Ambassador to Kuwait. (For
biograjjhic details, see White House press release dated
December 14.)

January h 1962



Calendar of International Conferences and Meetings '

Scheduled January Through March 1962

U.N. ECAFE Committee for Coordination of Investigations of ttie Phnom Penh, Cambodia . . . Jan. 3-

Lower Mekong Basin: 16th (General) Session.

CENTO Scientific Council Lahore Jan. 4-

CENTO Symposium on the Role of Science in the Development of Lahore Jan. 8-

Natural Resources With Particular Reference to Iran, Pakistan, and


IMCO Maritime Safety Committee: 5th Session London Jan. 8-

U.N. ECOSOC Commission on Human Rights: 14th Session of Sub- New York Jan. 8-

commission on Prevention of Discrimination and Protection of


ICAO Communications Division: 7th Session Montreal Jan. 9-

U.N. ECAFE Intraregional Trade Promotion Talks Bangkok Jan. 10-

U.N. ECAFE Working Party on Commercial Arbitration Bangkok Jan. 11-

CENTO Economic Experts Ankara Jan. 15-

FAO Desert Locust Control Technical Advisory Committee: 10th Rome Jan. 15-


IAEA Diplomatic Conference on Maritime Law (including third-party Brussels Jan. 22-

liability for nuclear shipping).

U.N. ECAFE Committee on Trade: 5th Session Bangkok Jan. 22-

FAO Desert Locust Control Committee: 7th Session Rome Jan. 24-

North Pacific Fur Seal Commission: Scientific Committee Ottawa Jan. 29-

FAO Meeting on Hemorrhagic Septicemia Kuala Lumpur Jan. 29-

WMO Commission for Instruments and Methods of Observation: 3d New Delhi Jan. 29-


U.N. ECOSOC Regional Seminar on the Participation of Women in Singapore Jan. 30-

Public Life.

U.N. ECAFE Committee on Industry and Natural Resources: 14th Bangkok Jan. 31-


WHO Executive Board: 29th Session (and Standing Committee on Geneva January

Administration and Finance).

U.N. Special Fund Governing Council: 7th Session New York January

North Pacific Fur Seal Commission: 5th Meeting Ottawa Feb. 7-

U.N. ECAFE Inland Transport and Communications Committee: 10th Bangkok Feb. 12-


OECD Maritime Transport Committee: 2d Session Paris Feb. 14-

FAO International Rice Commission: 6th Session of Consultative Sub- Rangoon Feb. 15-

committee on the Economic Aspects of Rice.

IMCO Council: Extraordinary Session London Feb. 19-

U.N. Economic Commission for Africa: 4th Session Addis Ababa Feb. 19-

IMCO Council: 6th Session London Feb. 20-

CENTO Economic Committee Washington Feb. 26-

lAEA Board of Governors Vienna Feb. 27-

ICAO Air Traffic Control Automation Panel Montreal February

ICAO Panel on Origin and Destination Statistics: 4th Meeting . . . Montreal February

U.N. International Wheat Conference Geneva February

OAS/UNESCO/ECLA Conference on Education and Economic and Santiago Mar. 5-

Social Development.

U.N. ECOSOC Committee for Industrial Development: 2d Session . . New York Mar. 5-

U.N. Economic Commission for Asia and the Far East (ECAFE) : 18th Tokyo Mar. 6-


ILO Committee of Experts on the Application of Conventions and Geneva Mar. 15-


Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 46, Jan- Mar 1962) → online text (page 14 of 101)