Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
Notes of a Meeting Between Secretary of State Kissinger and
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42. Notes of a Meeting Between Secretary of State Kissinger and French President Giscard d’Estaing 1 Paris, February 19, 1975. NOTES FOR THE SECRETARY—BREAKFAST MEETING WITH PRESIDENT GISCARD D’ESTAING 1. February 19 breakfast meeting included President Giscard d’Estaing, Foreign Minister Sauvagnargues, Secretary Kissinger and myself. Atmosphere was relaxed and friendly. A broad range of sub- jects was covered, with particular emphasis on the Middle East and energy. [Omitted here is discussion unrelated to energy.] 6. Turning to the question of energy, the Secretary and the Presi- dent agreed from their recent meetings with the Shah 2 that he presently is more cooperative than was the case last November. He was more worried about the West’s economy, and much less assured that all factors, including the pricing of oil, were under his control. The Secre- tary said that last November the Shah believed he was in complete con- trol of the pricing situation. He is now less sure and may even be recep- tive to lowering prices. The President said the Shah was not even excited about the so-called “guaranteed price” now under discussion among the consumers. Secretary Kissinger explained that by “floor price” we mean a guaranteed price established below the current price. The producers, in order to protect themselves, might want to have long-term contracts which would include such a floor price. Americans and Europeans alike seem to be thinking in terms of $6.00 or $7.00 a barrel. Prices could be raised unilaterally by each country, but an agree- ment in principle among consumers not to go below the floor price should be reached in order to protect needed new investment. Chan- cellor Schmidt and Prime Minister Wilson seem to agree with this formula. 7. Replying to a question from the President, the Secretary said he had not thought through just how France could participate in guaran- teed price procedures, but that this question should not present insur- mountable problems. 1 Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL 140, Geopolitical File, France, February–March, 1975. Secret; Nodis. Drafted by Rush on Feb- ruary 19. 2 Kissinger met with the Shah in Zurich on February 18. 365-608/428-S/80010 144 Foreign Relations, 1969–1976, Volume XXXVII 8. The President noted that the French press had characterized Sec- retary Kissinger’s introduction of the floor price proposals 3 as “con-
frontation” and as a repudiation of important aspects of the Martinique understanding. The Secretary replied that this obviously was not the case and by way of analogy pointed out that the U.S. press always at- tempted to portray events or statements as being confrontational. The Business Week article
4 was also brought up by the President, who noted that the French had not reacted adversely. The Secretary expressed appreciation. 9. Returning to the Middle East, the President said there are cred- ible reports that the U.S. is increasing its military strength in the area. The Secretary replied that we did have an additional aircraft carrier there and some other vessels. Responding to the President’s inquiry, he then outlined what he had meant in the Business Week article about the use of military force. The circumstances under which we would use force would have to be a massive onslaught on the economy of the West, and Europe would be very deeply affected. The US, of course, would not use military force without consultation. As of now, the Sec- retary could see no conceivable circumstances where the use of force would even be considered. Replying to the President’s inquiries, he stated that it would be feasible to carry out military action and that in such an event he did not believe the USSR would react seriously. 10. With regard to the proposed consumer/producer conference, it was agreed that an attempt should be made to keep participation as presently envisioned, at least for the first round, that the Yamani list of countries looked about right, and that the conference should be re- stricted to the energy problem. The President said that prestige was not an issue, as far as France is concerned, in the conference; rather what is desired are substantive results. He said the Shah seemed to think the Saudis had agreed with the U.S. line and would be a stalking horse for the United States. To this the Secretary replied that we have no under- standing with the Saudis concerning the line to be pursued at the con- ference and that the United States would speak for itself. 11. Concerning the question of when the conference should be con- vened, the Secretary pointed out that some work remains to be done. (a) Guaranteed Price. What is wanted is a general agreement in prin- ciple. There is no requirement that a price be fixed precisely. A general range ($6 to $7) could be used. It would seem that this requirement could be quickly met. 3 See footnote 4, Document 39. 4 See Document 30. 365-608/428-S/80010 August 1974–April 1975 145 (b) A date. Secretary Kissinger suggested the date for the prepara- tory meeting be April 10, rather than the latter part of March, as he will be in the Middle East in late March and will need some time after his return to help prepare the U.S. position. The President replied that this would pose no problem. The date is not a matter of principle, but he would like to send the invitations as quickly as possible. (c) Level. It was agreed that participation in the preparatory confer- ence should be at a high expert level. Secretary Kissinger said the U.S. delegate would probably be the new Under Secretary for Economic Af- fairs, Mr. Robinson, although it possibly might be Mr. Enders. The President said that the French representative would probably be M. de Guiringaud and agreed that this was the proper level. 12. With regard to the IEA being a participant in the meeting, Pres- ident Giscard did not think that this would be advisable. The EEC, OECD, OPEC would be represented and Davignon could be physically present but not as a representative of the IEA. Secretary Kissinger will discuss this in Washington and will inform the President or the Foreign
. 5 13. The President said that he had understood that Secretary Kiss- inger had suggested to the Irish Foreign Minister that the conference be held in Dublin. The Secretary replied that this was not the case, that he had not made any such suggestion but that something might have been said in jest. The meeting should be in Paris, with the French taking the chair at the beginning and thereafter the chairmanship should rotate. [Omitted here is discussion unrelated to energy.] 5 In a February 26 letter to Sauvagnargues, Kissinger wrote: “Now after careful ex- amination of the question I wish to express to you my firm conviction that the IEA should be represented at the preparatory meeting. Such participation corresponds to the hopes we both have that the conference succeed. We both envision a serious conference to deal with issues of grave importance to the world economy. We will not be able to deal with these issues effectively if the oil consumer organization, the IEA, is not present. The OECD simply cannot fill this role. Although the OECD provides a framework for the IEA, it has not been the locus of consumer cooperation.” (Telegram 43054 to Paris, February 26; Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, Box 4, France—State Department Telegrams from SECSTATE–NODIS (2))
365-608/428-S/80010 146 Foreign Relations, 1969–1976, Volume XXXVII 43. Memorandum of Conversation 1 Washington, February 20, 1975, 3:50–4:10 p.m. SUBJECT Energy
PARTICIPANTS The Honorable Henry A. Kissinger, Secretary of State Deputy Secretary Ingersoll Assistant Secretary Enders Kissinger: I still don’t understand how we got into this mess with Treasury. I thought this problem had been worked out with Simon’s people. Enders: I don’t understand it either. Did you talk to the President about it? Kissinger: Never mind the President. I know what he knows. He knows what I told him. Now how did this happen? Did you not tell me what Bennett’s objections to the floor price were? Enders: Yes I did. I thought we had worked it out. You had better ask Parsky. Kissinger: I’m not talking to Parsky. Enders: I was careful in Paris to put both the floor price and common tariff concept on the table, and this is the approach I took in my backgrounder with the press. Parsky, in his talks with the press, chose to emphasize the differences between the two approaches. I have the feeling that when he got back Simon told him he’d been had. 2 1
cret; Sensitive; Nodis. Drafted by Lawrence R. Raicht (EB/ORF/FSE). The meeting was held in the Secretary’s office. 2 At the February 5–7 IEA Governing Board meeting in Paris, Enders presented the price floor plan as an “administration proposal,” whereas Parsky reportedly “denied” that it was “more than the State Department position.” (The Washington Post, February 13, 1975, p. A19) The text of Enders’s statements to the Board on February 5 and 6 are in tele- grams 3210 and 3338 from USOECD Paris, February 6 and 7, respectively. (National Ar- chives, RG 59, Central Foreign Policy Files D750043–1095, D750045–0740) According to their joint report on the meeting: “Canada, Netherlands, Switzerland, Denmark favored a floor price approach. Britain said the trend of their government discussions is towards the floor price. All of these countries but Canada would be interested in a low floor (i.e. $5–$7 a barrel); Canada might want a higher figure after the Athabasca tar sands bailout. Italy, Germany and Japan expressed serious reservations about the floor price on grounds of general economic policy, although Germany recognized that some coordi- nated action by the consumers is necessary, and Japan said it would not rule out the floor price if it were accompanied by assurances of access to energy within the group.” (Tele- gram 3453 from USOECD Paris, February 7; Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, Box 4, France—State Department Telegrams to SECSTATE–NODIS (2)) 365-608/428-S/80010 August 1974–April 1975 147 Kissinger: But I don’t understand their concept. If this approach is successful and the price falls, we will have worked to get low prices for the Europeans. Is that what they want? Enders: I’m not sure they know what they want. Kissinger: But they keep talking about $4–5 oil prices. How can the market get alternative sources in that range? Enders: It can’t. Kissinger: The price will never break below $6 unless we have al- ternative sources. Either we protect them alone and give Europe a gift or we do it by an international agreement. Ingersoll: Bill expects the cartel to collapse and prices to fall. Kissinger: I don’t believe that. If the cartel doesn’t collapse we’ll soon be up to 60% and OPEC will be charging $25. Enders: Bill believes we can do the same thing through the common tariff. Kissinger: But Congress just legislated against the god damn tariff, didn’t it? Enders: Yes, the Treasury proposal is just not credible. Ingersoll: He has not accepted the fact . . . Kissinger: Is Bill back in town? Enders: Yes, we appeared before Dingell’s committee together on Monday.
3 We both agreed in our statements on the need for some pro- tection and indicated that the President would have to decide later on the mechanism to be used. Kissinger: I don’t care how we do it. That doesn’t make any difference. Enders: What reaction did you get from Faisal? Kissinger: He has no problems with the concept. 4 However, the press just doesn’t understand. They keep asking whether I have ob- tained agreement from the producers to our floor price proposal. I personally think we will be able to get a floor price within a year. If we do, we don’t need agreement with the producers and we could tell them to go screw themselves. Now where do we stand? The Germans, French and British are ready to go along with a protected price. Enders: They’re ready to accept the concept? 3 February 17. Representative John D. Dingell, Jr. (D–MI) was Chairman of the House Committee on Energy and Commerce. 4 No memorandum of conversation has been found of the February 15 meeting be- tween Kissinger and King Faisal. 365-608/428-S/80010 148 Foreign Relations, 1969–1976, Volume XXXVII Kissinger: Giscard said he could agree to a price below $7. The British want $8. Enders: Then the Japanese are the only major problem. They seem ready to go along with a protected price as long as they have assur- ances on participation. Kissinger: Well why not let them buy in? Enders: Your second tier lets them do that. Kissinger: Are you discussing this with Treasury? Enders: We haven’t gotten anywhere in your absence. Kissinger: Do they know I’m totally displeased with their actions? Enders: They have been very docile while you were away, but I think they are ready to get on board now. Kissinger: How do they explain the Newsweek interviews? 5 Enders: Well they said they gave them. Kissinger: Do they think it helps for them to admit it? Enders: I don’t know, but I think they are ready to go along with us. Kissinger: Who gave the information to Joe Kraft on the PANAM thing? 6 Enders: Treasury has been pushing it. Kissinger: Well I was mildly favorable but I did not get a chance to study it in detail. Next, in the IEA. You will continue to push for a floor price agree- ment. I will tell the French next week that we are ready to go to a meet- ing if they are prepared to go along with the floor price. Enders: Should we try to set a level now or should we leave it flexible? Kissinger: I think we ought to try for a range of $6 to $8. I would like you to draft a letter for me to Schmidt. Enders: I take it you didn’t like the other we sent you. Kissinger: I was not ready, I thought it was premature. Schmidt is hipped about the danger of bank failures because of Arab maneu- vering. He doesn’t want to hear from us that there is no problem, he is convinced there is one. Every time he talks to Simon, Simon tells him there is no problem. Schmidt told me this doesn’t help if a German 5 Kissinger is presumably referring to the February 10 issue of Newsweek. The cover story is entitled “All About the New Oil Money.” 6 Syndicated columnist Joseph Kraft wrote about questions raised within the gov- ernment about an Iranian loan to Pan American Airlines. The Washington Post, February 18, 1975, p. A15. 365-608/428-S/80010 August 1974–April 1975 149 bank fails. All he wants from us is some kind of contingency plan. He is sending someone over to discuss it. Enders: Who is he sending? Dr. Hiss? He is pretty good. I think you should send a letter to Miki too. Kissinger: OK, you draft it. One more article about you in the papers, Enders and you are through. Now I’m serious about that. Enders: Do you have any openings in Africa? Kissinger: You know Bob, in my years here I have made one im- provement. The press used to be masochistic. They used to say all the people I appointed were bad, that was wrong. Now they say all of the people I appoint are good, and that is equally inaccurate. But Enders will you stop making inflammatory statements about economic blockade being like nuclear warfare? Enders: Yes. Kissinger: Next. Enders: I’ll try to work out an economic structure with Zarb for the floor price so that we’ll have protection when prices drop below the trigger level. But on the international side we’ll need letters to the Japanese and Germans. Kissinger: OK, we’ll do the letters. Tell them I’m ready to go along with the meeting if they’re ready to agree on a floor price. Emphasize two basic ideas: the importance of massive alternatives soon and the range of the floor price. I talked with Giscard about Davignon’s attendance at the meeting. He is agreeable to have him there as a member of the OECD Delegation. Enders: We can’t go along with that. OPEC will be there along with the UN and the OECD as observers. If we go without the IEA it signals that we are ready to drift back. Kissinger: I’m never ready to drift back. Why should we give up our strongest assets? Tom, you deal with EUR on this. I want you to make clear that we won’t go along. Who is this Renner? Ingersoll: He’s one of Hartman’s people in Brussels. 7 Kissinger: Well send him an instruction that we don’t accept the French idea. Enders: Do you want to send a letter to Sauvagnargues? 7 John C. Renner was in the Office of Trade Policy, Bureau of Economic and Busi- ness Affairs. 365-608/428-S/80010 150 Foreign Relations, 1969–1976, Volume XXXVII Kissinger: Yes, but clear it with Hartman. Enders: I’ll do that. Is there anything else? Kissinger: No. Enders: What about our strategy on the Hill? Did you discuss this with the President this morning? Kissinger: No. Enders: I think we need to move quickly. [Omitted here is discussion unrelated to energy.] [Kissinger]: OK, I think I would like to talk without the note taker in the room. (Note taker left at 4:10.)
1 Washington, February 22, 1975, 0148Z. 40604. Subject: IEA Agreement on Alternative Sources. 1. Request you deliver the following letter from President Ford to Prime Minister Miki. 2. Begin text. Dear Mr. Prime Minister: Our two governments are now working with the other members of the International Energy Agency to complete an overall framework of consumer country coop- eration on financial solidarity, energy conservation and the accelerated development of new energy supplies. We have already reached agree- ments on the first two of these. We must now complete our overall co- operative efforts with basic understandings on our approach to acceler- ated development. As I see it, our common policy on accelerated development should fulfill the following requirements. It should assure rapid development of available energy opportunities in the consuming countries without giving investors a wholly risk-free opportunity. It should allow for the diversity in energy opportunities among the consuming countries, while recognizing that all consuming countries will benefit equally 1 Source: Ford Library, National Security Adviser, Presidential Country Files for East Asia and the Pacific, Box 8, Japan—State Department Telegrams from SECSTATE–NODIS (6). Confidential; Immediate; Nodis. Drafted by Enders, cleared in FEA and by Parsky, and approved by Kissinger.
365-608/428-S/80010 August 1974–April 1975 151 from the market impact of increased production of energy by any one of them. And it should create a basis on which stable economic and po- litical relationships can be negotiated with the producing countries. At my request, Secretary Kissinger has advanced a set of proposals for consumer cooperation on accelerated development. These pro- posals include a commitment by members of the International Energy Agency to provide protection against future price uncertainty for in- vestors in conventional nuclear and fossil fuels in our countries, either by a common floor price or tariff; an agreement setting forth the general terms and conditions under which member countries could participate in each other’s programs to develop synthetic fuels and other higher cost energy sources; and a similar agreement under which two or more member countries could pool their energy research and development efforts in specific areas and projects. Within this framework, it should be possible to assure an equitable balance of cost and benefits among participating countries. Countries with large fossil fuel potential would achieve greater self-sufficiency, but would have to assume the larger share of the investment burden. Countries whose principal domestic energy opportunity is increased nuclear power would obtain the balance of payments and fiscal benefit of lower oil pices as investment in other parts of the IEA resulted in lower world prices. We would all agree not to increase our consump- tion of imported oil if prices fell. I understand that countries such as Japan, which have relatively little domestic potential to develop fossil fuels, might be concerned over the need to assure that they would have access to the new energy supplies produced in other IEA countries under such a framework of cooperation. We understand this concern and believe that in an effort to strengthen our overall cooperative framework, we should examine the merits of possible undertakings regarding access to supply and to mar- kets for energy produced within our countries. I am optimistic that we will be able to make substantial progress in this area within the next few weeks and thus that we will be in a posi- tion to hold a preparatory meeting by the end of March for the formal dialogue with the oil producing countries. Clearly, we will not be able to reach detailed agreement on all aspects of our cooperation in acceler- ated development by the end of March. However, I believe we must reach a firm understanding on the basic elements and principles of our overall approach on accelerated development before beginning discussions with the producers. We cannot hope to achieve agreement with producers on the elements of a long-term equilibrium of interests between us unless we as consumers have firmly established our own common measures of cooperation in this important area of our overall cooperative effort. 365-608/428-S/80010 152 Foreign Relations, 1969–1976, Volume XXXVII I would like to take this opportunity to convey to you personally my appreciation for the positive contribution Japan is making to the work of the International Energy Agency and your very constructive role in our joint effort to resolve the energy crisis. Sincerely, Gerald R. Ford. End text. 2 3. You should raise in low key manner that it might be worthwhile to have bilateral discussions on this subject before the next meeting of the Governing Board of the IEA and inquire whether Prime Minister Miki believes that it would be useful for senior US officials to travel to Tokyo for this purpose early next month. US representatives would be Assistant Secretaries Enders and Parsky, FEA Assistant Administrator Conant.
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