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BRITISH AND US INTERVENTION IN THE VENEZUELAN OIL INDUSTRY A CASE STUDY OF ANGLO-US RELATIONS 1941-1948 A thesis submitted for the degree of Doctor of Philosophy by Mark Seddon Department of History University of Sheffield July 2014 Abstract This thesis analyses British and US government intervention in the Venezuelan oil industry between the years 1941 and 1948 as a case study of Anglo-US relations. During the Second World War, Britain was entirely reliant on imports for its oil needs and Venezuela became a vital source of supply. Concurrently, US government officials were concerned that their domestic oil reserves would soon be exhausted and they perceived Venezuela as an important future supplier. As such, British and US policy-makers were inclined to intervene when it seemed as though their access to Venezuelan oil was threatened. Such a threat materialised as, during the 1940s, Venezuelan politics became characterised by popular demand for economic reform and dramatic regime change. However, British and US officials came into conflict as they sought to further their independent and often conflicting policies in Venezuela. Indeed, the Anglo-US wartime and Cold War alliance did not preclude disputes from arising between the two governments in matters relating to oil and Latin America. In order to defend their interests in Venezuelan oil, Whitehall and Washington developed intimate ties with privately-owned companies operating in the country. This thesis elucidates the role of state-private sector interaction within foreign relations and the effect of this dynamic on British and US policy towards Venezuela. It argues that multinational oil companies had the capacity to significantly influence events and their relationships with national governments played an important role within international politics. Indeed, the ability of Whitehall and Washington to gain the support of oil company officials was, in many instances, a pre-requisite for their ability to exercise power in Venezuela. iii Contents Acknowledgements vii Abbreviations ix Introduction 1 1. The Formation of British and US Policy towards Venezuelan Oil, 1938-1942 33 2. British and US Intervention in Venezuelan Tax Negotiations, 1941-1943 91 3. Applying the Atlantic Charter to the Venezuelan Oil Industry, 1943-1944 137 4. Asymmetries of Influence, 1944-1945 186 5. Venezuelan Oil and the Onset of the Cold War, 1945-1948 221 Conclusion 288 Bibliography 299 v Acknowledgements I never viewed my PhD as a means to an end and I feel enormously fortunate to have had the opportunity to spend years of my life contemplating how the world around me came into being. The last six years have left me with cherished memories and I especially value the relationships I have forged and developed during this formative time. My friends and family have been a constant source of love, support and encouragement, which I prize above all else. It’s been a great pleasure to work alongside and befriend the postgraduate students of the University of Sheffield’s Department of History. Throughout my PhD, the camaraderie of these smart and decent people provided me with the caffeine, beer and moral support necessary to fuel my progress. I hope that we can drink in The Bath until we get wrinkly. I would have been unable to complete this thesis without the assistance and patience of Professor Bob Moore, Professor Holger Nehring and Dr Abdel Razzaq Takriti whose advice and guidance have been invaluable. I am also grateful to the Department of History for awarding me a fee-waiver to undertake this project and to all the department staff for their help over the years. I am indebted to everyone who supplied feedback on my work, the archivists who aided my research and the friends who provided me with a free place to stay during my transatlantic trips to the archive. I wish to thank the University of Sheffield, the Society for Latin American Studies, the Society for Historians of American Foreign Relations, and the Business History Conference for providing me with the funding necessary to undertake my research and to attend conferences. Thank you to all of those who have, throughout my life, encouraged my interest in history and inspired my curiosity. vii Abbreviations In the text: AD Acción Democrática CIA Central Intelligence Agency CPAD Commercial Policy and Agreements Division of the State Department FO Foreign Office ID Intelligence Division of the Department of the Army MFP Ministry of Fuel and Power PAW Petroleum Administration for War PD Petroleum Department / Petroleum Division after June 1942 PRC Petroleum Reserves Corporation RTAA Reciprocal Trade Agreement Act SoCal Standard Oil Company of California SOCNJ Standard Oil Company of New Jersey In source references: FDRL Franklin D. Roosevelt Presidential Library FRUS Foreign Relations of the United States HSTL Harry S. Truman Presidential Library LC Library of Congress NA The National Archives of the United Kingdom NARA United States National Archives and Records Administration RAC Rockefeller Archive Center RFA Rockefeller Family Archive PSF President’s Secretary’s Files RG Record Group SLA Shell Group Archives, London UDL University of Delaware Library UNA United Nations Archive ix Introduction This thesis analyses British and US government intervention in the Venezuelan oil industry between the years 1941 and 1948 as a case study of Anglo-US relations. During this period, the Second World War and Cold War greatly increased the international importance of Venezuelan crude. The outbreak of the Second World War underlined modern armed forces’ dependence on oil but, lacking an indigenous supply, Britain was forced to rely on imports for its needs. Venezuelan crude took on particular significance within the British war effort as oil from the Middle East became less accessible following the closure of the Mediterranean in 1940.1 In 1939, forty per cent of Britain’s total oil imports were of Venezuelan origin and this had risen to around eighty per cent by 1942.2 Concurrently, Washington officials, concerned that the USA’s domestic oil reserves would soon be exhausted, sought to secure access to overseas sources of supply. Thus, in the early 1940s, the US government began to formulate, and carry out, a more cohesive foreign oil policy within which Venezuela played a significant role.3 In order to defend these vital interests, British and US policy-makers independently developed intimate ties with privately-owned oil companies operating in Venezuela. Yet British and US interests appeared to be under threat when, during the 1940s, Venezuelan domestic politics became characterised by popular demand for economic reform and dramatic regime change. In 1941, the Venezuelan government began making overtures to the foreign-owned oil companies that new tax laws would have to be 1 Charles More, Black Gold: Britain and Oil in the Twentieth Century (London, 2009), p. 72. 2 The National Archives of the United Kingdom, Kew [hereafter NA], FO 371/22851/A5540, F. C. Starling, head of the Petroleum Department, to John Balfour, head of the FO American Department, 8 August 1939; NA, CAB 77/5, OCB (41) 131, ‘Security Measures at Curacao and Aruba’ memorandum by Geoffrey William Geoffrey-Lloyd, Oil Control Board Chairman, 17 December 1941; NA, FO 371/30748/A1220, FO memorandum, 2 February 1942. 3 Max Weston Thornburg Papers, in the custody of the author, [hereafter Max Thornburg Papers] ‘Notes on the Development of our National Foreign Oil Policy in Preparation for Senate Inquiry’ by Max Weston Thornburg, 14 March 1944; David S. Painter, Oil and the American Century: The Political Economy of U.S. Foreign Oil Policy, 1941-1954 (Baltimore, MD, 1986), pp. 199-210. 1 BRITISH AND US INTERVENTION IN THE VENEZUELAN OIL INDUSTRY negotiated in order to guarantee a greater state share of industry profits. Furthermore, the government began placing pressure on the companies to increase the amount of oil refining done in Venezuelan territory.4 These developments must also be placed within the context of the Second World War as the threat of Axis aggression led to British and French occupation of the Dutch West Indies, where the vast majority of Venezuelan oil was refined.5 In addition, the period of 1941 to 1948 saw political upheaval in Venezuela as a 1945 leftist overthrow of the government was followed in 1948 by a military coup d'état.6 While all these developments are significant in themselves, they also revealed and exacerbated tensions within the Anglo-US wartime and post-war alliance. A principal objective of this thesis is to contextualise British and US intervention within the two governments’ wider foreign policies amid the rapidly changing geopolitical climate of the 1940s. By overtly placing British and US policy towards Venezuela within this broader perspective, this thesis aims to make the study of oil diplomacy more relevant to a range of historical inquiry. During the Second World War, British officials were aware that their country would emerge from the conflict in a position of comparative weakness to the USA and Soviet Union. Nevertheless, the British government sought to maintain its international standing and viewed the Second World War as an opportunity to expand, as well as defend, its interests. Total war on a global scale emphasised Britain’s reliance on its links with overseas territories and, throughout the 1940s, the government endeavoured to extend its influence into areas beyond the formal Empire.7 Whitehall’s intervention in the 4 John Knape, ‘British Foreign Policy in the Caribbean Basin 1938-1945: Oil, Nationalism and Relations with the United States’, Journal of Latin American Studies, Vol. 19, No. 2 (November 1987), pp. 279-294. 5 Bob Moore, ‘Anglo‐American Security Policy and its Threats to Dutch Colonial Rule in the West Indies, 1940–42’, The Journal of Imperial and Commonwealth History, Vol.

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