QUESTION OF BUILDING ASWAN DAM

You referred to the Aswan Dam, Senator. I recall quite well when Secretary of State Dulles testified before this committee on the question of the building of the Aswan Dam.

We had the option to finance the building of that dam. I asked him about our financing it, and he said that he did not advise it. I asked him about the possibility of the Soviet Union building it, to which he replied that they can't, they can't finance it.

Very shortly they did finance it and they retained a very strong position in that country for a long, long time as a result of their building the Aswan Dam. It wasn't until recently that the hold they had on Egypt was broken and the Soviet technicians and military people were told to go home.

I thought I would throw that in.

Senator GRAVEL. Mr. Chairman, I would like to throw in something, too, that would be ironic. The group that can most easily finance a new sea-level canal would be the Arab community. The Arab community thereby could build a canal in Panama and control the price of Alaskan oil to the marketplace, in addition to their other capabilities with oil. The CHAIRMAN. Senator Sarbanes.

Senator SARBANES. Thank you, Mr. Chairman.

RIGHT OF REFUSAL TO BUILD NEW CANAL

Senator Gravel, on the option question, in your statement you refer to it as a right of first refusal. I think that is probably more accurate. We don't have the option to build a sea-level canal in the sense that we can go ahead and do it if we choose. The Panamanians would have to agree with us to build it. But they have bound themselves that no one else shall build such a canal there until the year 2000, unless we were to concur in that happening. So, in effect, we have the power of preventing a sea-level canal being built by anyone else and further the commitment here to negotiate between ourselves and Panama to build such a canal if the two parties choose to do so.

Senator GRAVEL. I think, Senator, you are very correct. That may be what Senator Stone was referring to-except that I would attribute it to the highest degree of arrogance in the present context that we would think that we could put into the treaty that we could unilaterally go in and build a new canal on their soil.

The 1970 study-and this is the reason why that study went nowhere was premised on the fact that we would build and own. As I view a scenario here, the Panamanians could build and own. All we would do would be to guarantee the financing and thereby guarantee a certain rate through the canal for our product. So, the interpretation that you give is very accurate. We have the right of first refusal if the Panamanians deem that they want to go ahead with a sea level canal. Senator SARBANES. Actually it is even a right of more than first refusal. It is a right of total refusal. They could say to us that they want us to build a sea level canal. Then we could say that we don't want to do it. They could then say, "If you're not going to do it, we are going to let somebody else do it." But someone else could be precluded by us from doing it until the year 2000. Isn't that so?

Senator GRAVEL. Under a scenario that I would envision, I would say that if we did not want to get involved in building a sea level canal with Panama, they could do it themselves. Panama is a sovereign nation and a nation can undertake public works projects within its own state.

Now the nature of support that they would receive from other nations would not be that somebody else would come and build it for them. They just need financial help. They need somebody to buy the bonds, to buy the indebtedness. There is no way that you can exclude in a treaty the sovereign right of a nation to go out and indebt itself in order to perform a public works project.

So, what we do is we guarantee that if we want to, we can be their partner in this new venture; but if we don't want to, they can go ahead and build a new canal. That is the way I would interpret it.

Senator SARBANES. I thought we really had more than that, because it says: "No new interoceanic canal shall be constructed in the territory of the Republic of Panama during the duration of this treaty," being the treaty that runs until the year 2000, "except in accordance with the provisions of this treaty or as the two parties may otherwise agree." So, in effect, I think Panama has given up its power to build a new interoceanic canal until the year 2000 if the United States does not agree that that should be done.

Senator GRAVEL. I think that that could be an interpretation. I would reserve my opinion on it.

UNITED STATES GIVING UP OF SEEKING TO BUILD CANAL ELSEWHERE

Senator SARBANES. In return, what we are giving up is seeking to build such a canal elsewhere, other than in the Republic of Panama. I take it your point on that is while that appears on first examination perhaps to be giving up a lot, it really is not, because in practical terms the only place where it would be feasible to build a sea level canal would be somewhere through the territory of the Republic of Panama. Is that correct?

Senator GRAVEL. That is accurate, Senator.

Senator SARBANES. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Senator Griffin.

INTERPRETATION OF RIGHT OF FIRST REFUSAL

Senator GRIFFIN. Senator Gravel, I think your answers and your prepared testimony are very interesting and rather revealing. I think you are candid and accurate in saying that Senator Sarbanes' interpretation could be one interpretation of the language insofar as there might be any kind of prohibition upon Panama. I think the question might be how Panama interprets that particular language which says: No new interoceanic canal shall be constructed in the territory of the Republic of Panama during the duration of this treaty, except in accordance with the provisions of this treaty, or as the two parties may otherwise agree.

I would think and be very concerned that your interpretation in your printed statement is probably the one that Panama sees, and that is that we only have a right of first refusal.

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You are a lawyer, and a very good one. A right of first refusal means that we have a chance to take a crack at entering into an agreement with Panama, but if their terms are unrealistic or too high and we don't want to do it, they have complied with their agreement and, as you say, they can go ahead and build a canal, can't they?

Senator GRAVEL. There would be several factors involved. First of all, I think that if we did approve and ratify this treaty, the good will that would be present at that point in time would be rather overwhelming. Also, they are basically orientated toward our economy. With that good will situation, effecting a sea level canal would really be small potatoes. It is not a very complicated situation. You are really constrained by the economics of waterborne transportation.

Senator GRIFFIN. Let us get back to the legal obligations. I am interested, of course, in the political good will, but that is another consideration. Let's get back to what the contract says and means. The fact is that to comply with the provisions of this treaty, the only thing that Panama has to do is consult with us and negotiate with us. If we, as the two parties, the United States and Panama, cannot agree on the terms for building a new canal, then Panama can go ahead. Isn't that correct?

Senator GRAVEL. Senator, under existing interpretation of international law, I believe any nation can give immediate notice that its rights are not being fulfilled and can abrogate any treaty, and that is acceptable in international law.

Senator GRIFFIN. I am not suggesting that they will abrogate it. I am suggesting that they will be in compliance with it if they negotiate with us.

Senator GRAVEL. I think that Senator Sarbanes read the language very clearly. I don't think they would be in compliance with it. But I think, as we have done with some of our treaties in the past, we would be in a position to walk away from it if we felt that it was not in our enlightened self-interest. But I cannot conceive of that scenario. Senator GRIFFIN. You cannot conceive of them proposing terms that we would not agree to?

Senator GRAVEL. No. I can't take out of hand that they would act any less enlightened than we would in economic terms.

Senator GRIFFIN. They would have us over a barrel.

Senator GRAVEL. No, they would not have us over a barrel. There is elasticity. I just explained that you could close the present canal today and they would not have us over a barrel. They would have themselves over a barrel. If a sea level canal is not built, a railroad infrastructure and pipeline infrastructure can be built which will not be dependent upon foreign sources.

POSSIBILITY OF CHANGE IN PANAMANIAN GOVERNMENT

Senator GRIFFIN. Do you assume that this "friendly, reasonable, responsible" General Torrijos is going to continue in power indefinitely, or could there be a change in government in Panama?

Senator GRAVEL. There is no question that there could be a change of government in Panama.

There could also be a change here in our country. Who is to say that we are going to continue to be responsible 50 years from now in this situation?

I think it is somewhat arrogant for us, as Americans, to look down at the Panamanians and say, "Well, they are not going to act quite the way we think they should." Maybe we won't act quite the way they think we should.

U.S. PRECLUSION FROM BUILDING CANAL ANYWHERE

Senator GRIFFIN. The point of concern here, Senator, is that we are giving away a very important option or alternative, one which you dismiss out of hand because you say that any alternative routes would not be feasible. While I concede that a canal through Nicaragua would be considerably more expensive, you point out that on the basis of transporting oil alone you could pay for a new sea level canal through Panama and you don't even take into account the other tonnage involved. You don't take into account the military significance which you also say is important-and I agree with you-we might very well find it in our national interest to pay three times as much or more to put a sea level canal through Nicaragua. But here in this treaty Panama can be in compliance by merely negotiating with us and not coming to an agreement, then going ahead and building its own canal, and we have precluded ourselves until the year 2000 from building a canal anywhere else. That is the way I read this.

Senator GRAVEL. First of all, if you feel or if the Nation felt that it would be safer building a canal through Nicaragua and that the leadership of Nicaragua is more stable and better than the leadership of Panama, we can do that. All we have to do is not approve this treaty. This is sort of all tied together in an interrelated situation. We presuppose that if we do approve the treaty, we go on to a higher degree of friendship than we presently have-and that friendship is considerable-and that we could go on to a greater realization of our enlightened self-interest. I submit that the ability to do that on the part of the Americans is considerable, as is the ability of the Panamanians to do that also considerable.

Their finance minister is a Ph. D. Most of their people are edu-. cated out of the United States. He is an economist, is very highly respected, and I think he is very able.

DIFFERENCES IN AN INTERPRETATION OF TREATY'S TERMS

Senator GRIFFIN. To examine the question of how much good will there is, one of the matters of great concern to me is somewhat underscored by your comment that it really does not matter what the intepretations are-it only depends upon who has the military muscle. That troubles me because I thought a treaty was a contract and that we should be concerned about its terms and what they mean. In one important respect, that is, whether or not there is a right to intervene militarily after the year 2000 to preserve the neutrality, there is obviously no meeting of the minds, no agreement on that

provision. Likewise, on another provision which provides for the expeditious passage of U.S. ships, we find that there is no meeting of the minds between the two countries on what that means. Is that true?

Senator GRAVEL. Senator, just imagine a situation 50 years from now. If we have a conflict with the leadership of Panama and we feel that we have to intervene militarily, do you think we would get a favorable interpretation of the treaty from the leadership at that point in time?

Of course not.

Senator GRIFFIN. I would rather like to think that we at least had an agreement we were ratifying, but obviously we don't.

Senator GRAVEL. The situation in which you would find yourself would be that might, or muscle, would be what would determine. That is the reason you have a quarrel to begin with.

To avoid quarrels we now put down in contract what we feel the event should be. That is why this treaty is so important, because it will establish justice in our relationship with Panama and it will place us in mode to secure a sea level canal.

I think anybody could look at an agreement or a contract and find millions of ways why it won't work. So, then, perhaps we should enter into social contracts or agreements because there are always possible negatives.

But General Torrijos came to this country. The leadership of Latin America came to this country. They signed a treaty before God and country. We have had unbelievable expressions of friendship. Now why would people say that this won't work, that won't work? Why you might get up from your chair and fall over the other chair dead. But that possibility is not going to stop you from getting out of your chair to walk across the room. You know, we are going to eat at noon and we will perhaps eat some bread. That bread may be poisoned, but we are still probably going to eat the bread because that is what we customarily do.

It is very customary to have treaties, and we have a good one. This one, I think, meets all eventualities.

Senator GRIFFIN. Thank you, Mr. Chairman.

I have other questions, but I don't want to dominate the time.
The CHAIRMAN. Senator Clark.

Senator CLARK. Thank you, Mr. Chairman. I have one brief question.

OTHER APPROACHES TO MOVING OIL ACROSS CANAL

Senator Gravel, you discussed the expense of off-lifting from supertankers in order to transit the canal in small ships. I think at one point you said that the expense of North Slope oil afone going through would pay for a new sea level canal.

Did Arthur D. Little or anyone else do any kind of study with regard to other approaches to moving that oil across the canal, such as pipelines? Were other things suggested?

Senator GRAVEL. Yes; Senator. Before you got here, we discussed these lines on the chart [indicating), which would be the TransMountain Reversal, the Northern Tier, the Sohio line, and the Guate