580. Memorandum of a Conversation, Washington, November 5, 19561

SUBJECT

  • Venezuelan Request for Credit to Purchase Military Equipment

PARTICIPANTS

  • Mr. Robert Murphy, Deputy Under Secretary
  • Mr. John B. Hollister, Director, ICA
  • Mr. Gordon Gray, Assistant Secretary of Defense, ISA
  • Mr. Roy R. Rubottom, Acting Assistant Secretary of State, ARA
  • Mr. Robert G. Barnes, U/MSA
  • Mr. Terry B. Sanders, ARA/OSA
  • Mr. Tap Bennett, G
  • Mr. Seymour Weiss, ICA
  • Mr. Chick Ellis, ICA

Mr. Murphy explained that he had suggested this meeting as a means of settling rapidly any questions that might have arisen in connection with the long-standing Venezuelan request for credit to cover purchases of certain items of military equipment. A decision on this was necessary in order to implement the U.S.-Venezuelan military talks, to which Defense attached great importance. He [Page 1146] suggested they might review Mr. Hollister’s letter to Mr. Gray of October 29, 1956 to see if all the questions were settled.

Mr. Murphy and Mr. Gray confirmed the assumptions stated in Mr. Hollister’s letter that (1) Venezuela was considered a vital strategic area and (2) the achievement of U.S. objectives in this area was sufficiently important to justify the furnishing of reimbursable military aid on a credit basis.

Turning to the specific questions raised by Mr. Hollister, it was agreed that granting this Venezuelan request might give rise to similar requests from other countries. It was felt in the Department of State, however, that we had a sufficiently valid position to be able to deal with other requests. No general rule could be laid down about these, but each would be judged on its merits. In this connection, it was noted that the U.S. had not given any great assistance to Venezuela and that Venezuela was currently spending about $27 million per year on arms purchases. The proposed program should therefore not increase pressures from other countries for off-setting U.S. assistance.

Turning to the magnitude of the program, it was noted that we were not committed to Venezuela in respect to any particular dollar figure or any particular list of equipment. What we proposed to offer was credit for the purchase of items of equipment costing about $180 million and that we would not agree to a major upward revision of this figure. It was agreed that this offer would extend over a ten-year period, subject to appropriate Congressional action, that not more than $25 million could be utilized in any one year, and that the credit would be standard three-year credit at 3. [It was subsequently confirmed that this meant 10 down payment and five equal semi-annual installments.]2

Defense suggested that future funding of this credit might be through a global revolving fund in the Mutual Security Act, and Mr. Hollister said he thought a working group should get together to consider the technical aspects of this.

Note:

The effect of the above meeting was to answer satisfactorily all of Mr. Hollister’s questions. It has been subsequently learned that [Page 1147] ICA is now prepared to present the case to the NAC, recommending the latter’s approval.3

  1. Source: Washington National Records Center, ICA Director’s Files, FRC 61 A 32, Box 313, Venezuela. Secret. Drafted by Barnes.
  2. Brackets in the source text.
  3. On November 20, the National Advisory Council Staff Committee recommended the proposed $10 million credit in fiscal year 1957, but decided that it could not recommend the total $180 million figure because that would be a long-term commitment for which no Congressional authority existed. Availability of the funds to assist in the financing of the planned total program of $180 million for the next 10 years would be dependent on annual Congressional appropriations. The NAC formally approved the $10 million credit on November 24. Documentation on this matter is in Department of State, Central Files, 731.5–MSP/11–2056, 731.5/7–2456, and 713.00/12–1256.