Heading for a Showdown

What were those Seabees doing last week bricking over windows in the U.S. embassy in Lima? Repairing earthquake damage was the official reply. Earthquakes? Lima has not suffered a serious shake in 30 months. Actually, the Seabees were preparing for a possible upheaval of a far different sort. In the past few months, relations between the U.S. and Peru have been disintegrating so rapidly that American diplomats fear that the embassy may become a target for mob violence.

Time is pressing. Unless there is a last-minute compromise, or a U.S. decision to delay, Washington this week will be forced to end all aid to Peru as well as sugar purchases at preferential prices. The political consequences of such action are cloudy, but the economic effects are clear. Peru would lose at least $50 million a year in U.S. trade and aid.

The conflict between Peru and the U.S. revolves around a Standard Oil of New Jersey subsidiary, the International Petroleum Co., which has been pumping oil out of Peruvian soil since 1924. Last October, only six days after they had overthrown President Fernando Belaunde, Peru's new military masters seized IPC's property. Under the 1962 Hickenlooper Amendment, the U.S. is obliged to halt foreign aid and preferential-trade deals with any country that expropriates American property without making adequate compensation. Under Hickenlooper, the cutoff must take place six months after the seizure unless "meaningful" negotiations are in progress toward a settlement.

For his part, General Juan Velasco Alvarado, the leader of the Peruvian junta, professes that he cannot comprehend why the U.S. is so upset. The seizure was legal under Peruvian law, he explains. Furthermore, according to the junta's charge, IPC still owes some $690 million for oil it "illegally" extracted. To the junta's way of thinking, it is Peru that should be angry. The U.S., says General Velasco, "is a just country. I cannot believe that the amendment will be applied."

Presidential Emissary. Last month, as the deadline drew near, President Nixon sent to Lima a personal emissary, Wall Street Lawyer John N. Irwin, who previously helped negotiate new Panama Canal treaties. At week's end, after a number of fruitless sessions with the junta, Irwin flew back to the U.S. for consultations before returning to Lima. "I am not optimistic," he said in Washington, "but I refuse to be pessimistic until we have completed our conversations."

The Nixon Administration would like to prevent a crisis by finding a way to avoid invoking the amendment. It has managed to extend the deadline for ending aid by five days. General Velasco could release the U.S. from its duty by agreeing to a negotiated settlement, but he can hardly back down under U.S. pressure without destroying his own reputation. It was largely because President Belaunde had failed to crack down on IPC, and thus defy the U.S., that Velasco was able to whip up popular support for his military takeover. The support continues, as far as Velasco's expropriation of IPC is concerned. But many Peruvians are finally realizing that the U.S. is also serious, and they have become concerned about the economic consequences of U.S. action. As a result, Velasco could very well find his position seriously weakened.

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