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French-Mexican goodwill dries up over oil dispute

Charles de Gaulle's visit to Mexico in 1964 was a curtain-raiser for relations between Mexico and France. Marketing the start of an era of good feeling between the two nations after decades of trouble, Mexican-French economic ties became substantial in the 1970 s.

By 1980, Mexico was supplying France with a sure flow of 100,000 barrels of oil daily; France in return was providing Mexico with $240 million in credits to finance Mexican purchases of French nuclear technology, and France was assisting Mexico in the floating of peso bonds in the European Community.

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Equally important to many Mexicans was the French role in constructing Mexico City's $3 billion subway system, an impressive underground network begun in the early 1960s that now has six main lines.

That goodwill and economic togetherness may be over.

Mexico has abruptly canceled the oil contract because a French company refused last week to pay $2 more a barrel effective July 1, as Petroleos Mexicanos (PEMEX), the state oil enterprise, ordered. Moreover, the Mexicans have scuttled key technology and nuclear agreements, as well as further subway construction.

These moves come as several United States companies have also rejected the $2 increase, announcing a hold on Mexican oil purchases for the third quarter of 1981.

It is unlikely, however, that Mexico would apply similar sanctions against the US. Mexican observers note that the Mexican and US oil contracts are different in nature from those that Mexico wrote with the French. Moreover, although the Mexican and US governments have a number of bilateral agreements, the majority of Mexican government contracts with the US are with private interests.

Mexico City observers suggest that Mexico may take punitive action against US firms that decided not to buy Mexican oil at the new price. These companies include the Exxon Corporation and the Ashland Oil Company. Ashland had earlier refused to take any Mexican oil in the second quarter.

In addition, the Shell Oil Company, another major Mexican customer, denounced the $2 a barrel price increase as unjustified and said it had entered into talks with PEMEX about the price boost. PEMEX officials refused comment July 4 about these talks or about the possibility that the action against France would be extended to other countries, or companies.

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Still, the Mexican action in the French case is being watched carefully for its implications on a dozen or so oil contracts Mexico has with other nations.

The action against France did not come without warning. In late June when Mexico named a new head for PEMEX, following the resignation of Jorge Diaz Serrano as director-general of the state enterprise, PEMEX indicated it expected to boost the price for its oil and threatened to take retaliatory action against any country refusing to go along with the increase.

Jose Andres de Oteyza Fernandez, the minister of industrial development and chairman of the PEMEX board, said Mexico would "purge" from its list of buyers those who are unwilling to pay the higher price, adding:

"Buyers will have to contemplate the possibility that a barrel of oil lost today may be a barrel of oil lost forever." France obvisouly has run afoul of the Mexican stand.

Ironically, the Mexican action against the French comes at a time when the new French government of President Francois Mitterrand has told Washington it needs to do more to help the countries of the developing world. This plea is dear to the heart of Mexican President Jose Lopez Portillo. He has frequently spoken out on the issue and told Washington it needs to be more conscious of the needs of third-world countries.

The Mexican action surprised Paris. Mitterrand associates were reportedly aghast.

The goodwill developing over the years between Mexico and France had been expected to continue. Mexico is understood to ha ve privately invited Mr. Mitterrand to visit.

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