Peru: Postponed Problem

Peru's ruling junta defiantly observed a "Day of National Dignity" last week with, among other things, an issue of commemorative postal stamps. The stamps portrayed a worker stripped to the waist who proudly held aloft the Peruvian flag in one fist and clutched an oil derrick in the other. The design —and the holiday — had been purposely chosen for the date that the U.S. was scheduled to cut off assistance to Peru as punishment for expropriation of the U.S. owned International Petroleum Co. Just two days before the deadline, President Nixon decided that an IPC appeal pending before Peru's Ministry of Energy and Mines represented "appropriate action" under terms of the Hickenlooper Amendment (TIME, April 11). The President therefore postponed application of the amendment's penalties, which would have meant a $79 million annual loss to Peru in aid and preferential sugar purchases.

Unusual Hoorahs. Washington has been warning since the expropriation last October that unless Peru paid compensation, the U.S. Government had no recourse but to enforce the law. As a result some critics read last week's action as a retreat after fruitless bar gaining on the issue and scoffed at the "Chickenlooper" amendment."Maybe there was an element of brinkmanship in this whole situation, and if so, we blinked,"said a U.S. official in a back ground observation that was later contradicted by the State Department. Gen erally, however, the U.S. received the kind of welcome hemispheric hoorah that it seldom hears these days. Peru's President and junta head man, Juan Velasco Alvarado, greeted the news with a joyous statement: "Is this, or is this not, a benefit for the country?"

Overlooked in the cheering was the fact that Peru's problem has merely been postponed. The burden of action now rests with the junta. The U.S. does not refute Peru's right to expropriate. Indeed, this would be pointless, since the government's Empresa Petrolera Fiscal is operating IPC's Talara refinery with Mexican assistance, and is ripping down Esso gas-station signs in favor of its own brand name Petroperu. Nor does the Nixon Administration quibble with the reimbursement—at $71 million—that Peru is willing to pay. But the U.S. firmly opposes the blue-sky figure of $690 million that Velasco insists is owed Peru for 44 years of oil theft, and against which he is determined to apply whatever reimbursement IPC is finally allowed. Says Lawyer John N. Irwin, who has been representing the U.S. in negotiations on the impasse: "The declaration of such debts after the expropriation of the properties in effect means that there will not be any effective payment in compensation for IPC."