IPC VIEWS ON ITS PROBLEM IN PERU

• Document Type: CREST
• Collection: Library of Congress
• Document Number (FOIA) /ESDN (CREST): LOC-HAK-2-1-8-9
• Release Decision: RIPLIM
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: January 11, 2017
• Document Release Date: August 2, 2010
• Sequence Number: 8
• Publication Date: July 1, 1969
• Content Type: MEMO

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N1E1N1tiJ\11LN1JVWi ~ k, 5!U ,ly HA5 S 'Na
THE WHITE HOUSE
MEMORANDUM FOR THE PRESIDENT
FROM: Henry Kissinger
SUBJECT: IPC Views on its Problem in Peru
Information
July 1, 1969
Attached is a brief cable relating the views of IPC and Standard
Oil of New Jersey officials on the IPC/Hickenlooper problem
in Peru. Their views are interesting, and I thought should be
brought to your attention.
These officials stated that:
a. a prolong 'd deferral of application of Hickenlooper
amendment is highly desirable;
b. internal pressures will build and force moderation if
sufficient time is allowed;
the six months in Hickenlooper is too short for resolu-
tion of such a complicated issue, and any deadline is
not a useful aspect of the law;
d. they are concerned about finding grounds for the next
deferral if the administrative appeal is rejected; and
NSS, DOS reviews
completed.
they do not want to go to the Peruvian courts; although
they could not take the lead in developing a buy-out scheme
by other companies, they would listen to proposals put
forward by any group.
State's message to Embassy Lima (103934), June
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TI"
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THE WHITE HOUSE ACTION
WASHINGTON
July z, .1969
SECRET
MEMORANDUM FOR THE PRESIDENT
Henry A. Kissinger
FROM:
BJECT: IG Paper on Peru
SU
4-1 1'
eat period whit
time begins to run at in American Inte tdepa pm ental GroP as
As the L
terminates in August, the Also included is a
completed a game plan which is attached at Tab A. aspects of the study
CIA analytical annex supporting the study. The key follow:
Basic Recommendations q
The paper concludes, in effect:
pressure to move Peru
We should continue to maintain
~ the direction of a
slowly over an -extended period settlement and more constructive position, but
we should avoid the disadvantages of a country to countti on
^ confrontation which would occur from
galv~anizep uLatin
of Hickenlooper and which would
American support on the side of Peru;
we should defer applying Hickenlooper for a
therefore, lausible basis to do so
prolonged period so long as any p
can be found, and
we should actively seek a basis fr such administrative app defe
process in
beyond the end a
August.
The line of argument which the paper stresses is:
the IPC case is very unlikely to be settled in the remaining
period up to August in any case;
more time is needed than we had on finally thought;
SECRET
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,;C RET l -2- W
a Hickenlooper confrontation will not only make settle-
ment impossible even in the longer run, but damage US
interests generally and radicalize Peru;
hence, our best chance of protecting US interests in bal-
ance is to buy a prolonged period of several months to work
out a settlement and to permit the external pressures to
work on the political situation and the government.
ANALYSIS
The Issue. The paper argues that the chances for Velasco com-
promising in the immediate future are extremely slim, and that no
economic pressures we can bring to bear in this period are likely either
to force a compromise on IPC or bring about a government change in Peru.
Therefore, the issue we will have to face very soon is whether or not to
impose Hickenlooper sanctions without Peru's having taken more than
token steps toward a settlement.
The Results of Hickenlooper. The paper assesses the gains and
losses of formally invoking Hickenlooper in the light of three sets of US
interests -- (a) obtaining compensation for IPC; (b) future US-Peru
relations, and (c) general impact on the US position in the hemisphere.
It concludes that in each case, but especially the second, the losses to the
US interest outweigh the gains. Its main conclusions are:
1. Obtaining compensation -- The pressure from Hickenlooper
does not add enough to existing pressures to force or induce
a settlement; on the contrary, officially imposing sanctions
will make it impossible to settle the IPC case for a long
time to come, because the nationalistic reaction it will
produce will make it impossible politically for any eventual
successor government to compromise.
2. US-Peruvian relations - The Velasco regime can probably
survive the economic effect of Hickenlooper. The psycholog-
ical effect would probably be to strengthen nationalistic
reactions and Velasco's hold on power; it would also stimu-
late anti-US elements. There would also be immediate
retaliation within Peru against other US businesses.
SECRET
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SECRET -3-
3. Effect on the hemisphere - The gains-losses ratio de-
pends greatly in this dimension upon how the confrontation
takes place. Against the desirability of maintaining the
credibility of our legislation and our previous threats,
is the probable impossibility of assuring unified Latin
American support for us against Peru in such a confronta-
tion. In balance, there is a risk of prejudicing our efforts
to introduce new policies stressing greater sensitivity to
Latin viewpoints and of labelling this Administration's
;policies as a return to "big stick" diplomacy.
Conclusion. The paper does not analyze domestic US ramifica-
tions either in the business community or in the US Congress. But
on the basis of the three foreign policy interests involved, it concludes
that "the weight of argument strongly supports deferring sanctions
for a prolonged period" so long as it can plausibly be done.
This conclusion implies a strategy, according to the paper, that
would:
continue to be unforthcoming on economic matters and main-
tain economic pressure to provide a framework for settle-
ment and constructive change; but
meanwhile, actively seek all plausible ways of deferring
invocation of Hickenlooper even well beyond the end of the
present administration appeal process; we should specific-
ally:
press on with negotiations via the Irwin mission on
some form of debt reduction/ compensation formula;
b. actively attempt to develop viable petroleum company
buy-out schemes; and
c. explore the feasibility of judicial remedies as an
adequate measure.
keep lines of communication open and avoid public hostility
toward Peru.
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SECRET W -4_ W
BASIC OPTIONS
What is implicit in the paper is that we really have only two basic
choices in the developing situation:
either a major effort to bring Velasco down, or
a strategy such as that outlined in the paper -- i. e. ,
actively avoid a formal confrontation and seek a long-
range resolution over time.
If the Peruvian regime were to develop into a Castroist anti-US
force, we would have to take some action against it. That point has
not arrived, however, and the present circumstances do not appear
to warrant this major step by us at this time:
Velasco himself is not the problem; almost the whole
officer corps supports the Peruvian IPC policy; even
if we could bring Velasco down, we have no one to put
in his place; we could therefore be no closer to solu-
tion on IPC, and merely have shifted the problem to one
of reaction to US intervention.
The dimension of the present problem therefore is simply
not worth taking the risk of US intervention and the conse-
quences that would result for our hemisphere and inter-
national position.
In balance, therefore, I believe that the paper's conclusion has
merit.
IMPLICATIONS FOR STRATEGY
The paper's conclusions pose two problems for strategy:
What should be done to secure a deferral and buy time, and
How toouse the time, once we have bought it.
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SECRET -,5-
The paper sketched some directions in which a strategy might go.
Recent developments, moreover, indicate a sudden greater will-
ingness on the part of Peru to find an accommodation to the IPC
and fisheries problems which should provide better opportunity to
carry out a strategy of this kind.
Tentative agreement on a procedure to call a fisheries conference
has led the Peruvian Governraent to suggest that this lays the found-
ation for movement on the IPC problem. The Peruvian Foreign
Minister has suggested that President Velasco may want to send a
message directly to you proposing a renewal of the Irwin talks.
Embassy Lima interprets these recent developments as a signal
from Velasco that he is ready to move forward-on IPC and that this
is a direct change from his attitude of a few weeks ago. Embassy
Lima, as a result, is proposing a scenario combining an appeal on
the administrative process and renewed Irwin talks which could
permit us to avoid a confrontation in August while maintaining
general economic pressure.
I believe it would be possible, taking advantage of the openings now
offered us, to work out a "game plan" along the following lines:
Renew the third round of bilateral negotiations; keep
the talks going even if forward motion is slow; work
toward a debt-reduction/net compensation formula.
b. Press efforts to develop a "buy-out" scheme with a pet-
roleum consortium.
Decide internally the bases under which "local judicial
remedies" would be acceptable to us, and prepare to
fall back to their use, even on a limited scale, should
administrative processes fail.
If you agree with the general conclusions of the attached paper, I
recommend that you authorize me to ask State to develop implement-
ing measures along the above lines.
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 RECOMMENDATION:
Tab A - The IG paper on Peru, and a CIA summary of the IPC
controversy.
SECRET
That you authorize implementing action in line with the above,
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~V Disapprove See me
Approve Vr,
Attachment`:
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