Peru: Challenging the U.S.

Peru seems headed toward a major diplomatic showdown with the U.S. that could produce serious repercussions throughout South America. It is a highly paradoxical crisis that neither side really wants—or can avoid. The dispute centers on a Standard Oil of New Jersey subsidiary, International Petroleum Co., whose Peruvian oilfields and refinery were seized last October by the country's new military regime, headed by General Juan Velasco Alvarado. The pretext: that I.P.C. years ago had illegally acquired its oil concession in Peru.

Aware of the highly charged nationalistic feelings involved in the I.P.C. case, the U.S. asked only that the junta...