Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
Memorandum for the 40 Committee
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Memorandum for the 40 Committee
Washington, January 21, 1975.
[Source: National Security Council, Ford Intelligence Files, Subject
Files, Box M–2/I012, Saudi Arabia, 24 October 1974–21 January 1975,
Secret; Sensitive. 6 pages not declassified]
August 1974–April 1975 119
Memorandum From Robert Hormats and Robert Oakley of
the National Security Council Staff to Secretary of State
Washington, January 23, 1975.
You have had considerable success to date in persuading the con-
sumers to go along with our policies on international energy and recy-
cling matters. However, pressures are building which could lead to di-
visions among the consumers. These could jeopardize our ability to get
the essentials of what we want in the way of consumer policies and
—Concern in Europe that, because of differences between the
Congress and the Executive Branch and serious domestic economic
problems, the United States will be unable to deliver on its commit-
ments, e.g., the “financial safety net.”
—A growing number of bilateral deals between oil producers and
individual European countries (France, the UK, Germany and Italy).
Some of these involve the sale of oil at below market prices. Such ar-
rangements dilute enthusiasm for consumer cooperation and hold out
the hope that the oil producers have a greater ability and will to aid
Western Europe than does the US.
—The progressive weakening of the economies of Western Europe
raising the prospects of new trade barriers, or other “beggar-
thy-neighbor” policies, which will further weaken consumer
—An increase in producer pressure on certain consumers, ex-
pressly designed to counter what the producers perceive as a United
States wish to somehow “break” the producer position by trying to
delay consumer-producer dialogue while we build up enough con-
sumer solidarity for a successful confrontation with the producers.
(This perception stems from several factors: our overall lack of enthu-
siasm about a producer-consumer conference, our lack of progress in
beginning a serious bilateral dialogue with the producers on economic
problems other than price; what is misunderstood as our threats to use
military force, and the impression given in the Joint Commissions that
Source: Ford Library, National Security Adviser, Presidential Subject File, Box 4,
Energy (5). No classification marking. Sent for information. At the top of the page, Kissin-
ger wrote: “Want to have oil group meeting, Burns, Simon, Robinson, Enders, early in the
week. Want to discuss this paper which is good.”
120 Foreign Relations, 1969–1976, Volume XXXVII
we are stalling and do not want to get down to effecting specific
projects.) We have reports of Saudi and Iranian operations with Italy,
the UK and other countries where there is a clear link between large
loans and other financial benefits from the producers and sympathetic
policies from the consumers.
To counter these trends before they pose a serious threat to our
economic strategy and before they begin to raise questions about our
basic political relationship in the minds of leaders like the Shah and
King Faisal, we suggest that the United States:
—Begin right away a series of bilateral talks at high levels with key
producer governments (Iran, Saudi Arabia, Algeria, Kuwait, Nigeria
and Venezuela) in order to have in-depth exchanges on the major
themes outlined below. This would be in keeping with what you have
already arranged between Shultz and the Shah and with the visit by a
“senior colleague” to Algiers. If at all possible, these talks should take
place prior to the OPEC “summit” in Algiers in mid-February.
—Shift the immediate emphasis of our discussions with the pro-
ducers from price to financial issues (without abandoning pressures for
a lower price). Whether or not the price of oil is lowered, recycling
poses massive problems, as does the large-scale transfer of resources to
producers. While the producers feel compelled to maintain unity of
price, they are far from unified on financial matters. We would have the
opportunity to wean the moderates from the radicals on this issue.
Saudi and Iranian acceptance of suggestions for a scheme of delayed oil
payments (e.g., 75% now, 25% later) with a low interest rate and a long
repayment period on the unpaid portion would effectively lower the
oil price by nearly 25%. Both countries could do this without appearing
to “break” the cartel.
—Begin to develop a strategy of rewards and punishments to ca-
jole countries into producing more oil and, therefore, to put downward
pressure on price. There is presently over 7 million barrels of “shut-in”
oil capacity. Foreign exchange needs have already forced countries like
Ecuador to increase pumping. A selective World Bank voting policy
and Ex-Im lending policy to restrict loans to those countries with exces-
sive shut-in policy would provide additional incentives. We could pro-
vide special considerations to countries which agree to increase per-
centage of capacity utilized.
—Engage in discussion with the holders of large amounts of re-
serves on “ground rules” for investment in industrialized countries.
Trying to reach agreement on general guidelines on what percentage of
what types of companies would be tolerable and on fair treatment
The OPEC summit was held March 3–6. See Document 48.
August 1974–April 1975 121
(guarantees) for investment would have a highly beneficial reaction in
countries such as Saudi Arabia, Kuwait or Iran. Moreover, it would
better enable the US to attract continuing high levels of investment
from the producers, investment which we need but which can be
scared away by the absence of clearly understood guidelines.
—Seek common objectives and perhaps parallel programs for aid
to developing countries taking advantage of international develop-
ment institutions which can utilize OPEC funds in the most efficient
way, and work toward getting maximum amount of concessional de-
velopment funds from OPEC countries. This, too, would have the effect
of lowering prices and the build up of OPEC revenues.
Washington, January 27, 1975, 8–9:03 a.m.
[Omitted here is discussion unrelated to energy.]
Mr. Boeker: The OPEC Ministers communique´
endorses a broad
international conference on the state of the world economy, on the state
of raw-materials development—which would appear to be the format
we saw in the UN Special Session last April, which producers have
shown they could control pretty well.
Our reaction would be that we welcome their endorsement of co-
operation without commenting on this format. And we reiterate that
we hope the consumers, by that time, will take the steps for that kind of
Secretary Kissinger: By what time? They haven’t given any time
for a communique´ [conference?], have they?
Source: National Archives, RG 59, Transcripts of Secretary of State Kissinger’s
Staff Meetings, Lot 78D443, Box 3, Secretary’s Staff Meetings. Secret. Kissinger presided
over the meeting, which was attended by all the principal officers of the Department or
their designated alternates. A table of contents and list of attendees are not printed.
The OPEC conference took place in Algiers January 24–26. Although the Embassy
in Algiers did not transmit the complete text of the communique´, it reported that OPEC
“agreed to what is called ‘French proposal for meeting of industrialized countries and
LDCs to study problems of raw materials and development’ in order to further ‘true in-
ternational cooperation’ and ‘dialogue.’” The Embassy concluded: “Believe conference
results better than we had anticipated as far as interests industrialized countries con-
cerned. For whatever reasons, conference has decided take path of relative moderation.
Hope we will be able to demonstrate that moderation pays.” (Telegram 235 from Algiers,
January 26; ibid., Central Foreign Policy Files, D750029–0224)
122 Foreign Relations, 1969–1976, Volume XXXVII
Mr. Boeker: This year, it seems to me, by implications.
Mr. Hartman: It seems to me the Algerians have won their point on
Secretary Kissinger: We can just say we’ve made our position
clear. As late as Friday I said we’re in favor of a dialogue.
we’re in favor of a dialogue and we’re willing to discuss it when con-
sumer cooperation has reached a certain point.
Mr. Hartman: But you will be asked immediately: “Are you in
favor of a dialogue on all commodities?”
Secretary Kissinger: We’ll discuss that at the preparatory confer-
ence. That’s what the preparatory conference is for. It depends on
whether we want to screw the meeting up or have some progress.
Mr. Boeker: Right.
Secretary Kissinger: It’s as simple as that. It’s inconceivable to have
one conference and discuss that and have anything other than what the
Special Session came up with. Is it conceivable to you?
Mr. Hartman: No.
Mr. Boeker: No.
Mr. Hartman: But this is the thing that he’s been pushing because
he sees that if you get into a conference just on oil, there is a possibility
that we can bring pressure on them via the LDCs. And so what he’s try-
ing to do is line up the LDCs.
Secretary Kissinger: Oh, come now! The LDCs won’t bring pres-
sure on them. That’s one of these childish naivete´s.
I would be just as happy if the LDC’s didn’t come. I understand
some of the producers don’t want them either. That’s one of the illu-
sions. That’s like the Kennedy Administration used to think India
would support us on Berlin. We spent a year and a half trying to get
The LDCs will not support us against the producers in an open
Mr. Lord: Now that we’re going to get some aid—
Secretary Kissinger: It’s out of the question. The LDCs sympathize
with us—which is far from saying that they will support us. Is there one
Latin American country that will support us?
Mr. Rogers: A.I.D. will keep its mouth shut! (Laughter.)
Secretary Kissinger: Name one LDC that will support us at the con-
ference. Can anyone think of one?
January 24. Kissinger addressed the Los Angeles World Affairs Council. For the
text of his speech, see Department of State Bulletin, February 17, 1975, pp. 197–204.
August 1974–April 1975 123
Mr. Habib: If we promise them enough aid.
Secretary Kissinger: Which? Name one.
Mr. Habib: I think Singapore! (Laughter.)
I think Korea would, if you gave them enough assurances that
there wouldn’t be a cut-off.
Secretary Kissinger: Korea won’t even be at the conference. Korea
will never be invited. I mean all these—let’s not drown ourselves in
platitudes. If the producers want to exclude the LDCs, we should be de-
lighted to exclude them. There’s nothing in it for us.
I think we ought to play it cool—just say that we note it, we wel-
come it—but in a low-key way—and say, as I pointed out on Friday, all
our policy is geared to having a consumer-producer dialogue.
On what the contents should be, we’ll discuss it at a preparatory
meeting. But if you go across the whole range of economic issues, it’s
going to be a long process.
Mr. Atherton: OPEC is going to have three more meetings in the
summer before anything else happens.
Secretary Kissinger: That’s right. I think we should quite agree.
[Omitted here is discussion unrelated to energy.]
Washington, January 30, 1975, 11 a.m.–12:50 p.m.
Prime Minister Harold Wilson
James Callaghan, Secretary of State for Foreign and Commonwealth Affairs
Sir John Hunt, Secretary to the Cabinet
Dr. Henry A. Kissinger, Secretary of State and Assistant to the President for
National Security Affairs
Lt. Gen. Brent Scowcroft, Deputy Assistant to the President for National Security
Economic Policy; Energy Cooperation; Africa
Source: Ford Library, National Security Adviser, Memoranda of Conversations,
Box 9. Secret; Nodis. The meeting was held in the Oval Office.
124 Foreign Relations, 1969–1976, Volume XXXVII
[Omitted here is discussion unrelated to energy.]
Wilson: People see you in your State of the Union
really having a
go at it.
President: It is a confidence-building program, even if it is changed
somewhat by Congress.
Energy is a tougher problem, and I am accused of trying to ram
something down their throats. But if I hadn’t, Congress would have
continued to drift. Congress is now trying to remove my authority to
do it, but I will stick to it. They are trying to come up with something,
but I don’t think it will be comprehensive. We must save a million
barrels a day; we must have better utilization of coal and develop other
sources of energy.
Wilson: It takes a lot of time. During the war I was Chairman of the
Production Resources Board of the U.S., Great Britain and Canada. So I
know your resources.
Our newly discovered coal, you know, is equal to what we will
gain from North Sea oil.
Kissinger: Where is this?
Wilson: In Yorkshire.
Callaghan: This is the first break we have had in a century.
Wilson: Our energy industry has been subsidized for years; now
coal prices went up 75% last year. We are removing the subsidies from
all the nationalized industries. We’re also taxing gas more.
Callaghan: We have had no demand for rationing yet.
Wilson: What is popular is the idea of a two-tier pricing system. So
it would be a somewhat lower price.
President: I am of the feeling that those who are proposing ra-
tioning have never experienced it. They don’t realize we have to have a
long-range program. This means five to ten years.
Wilson: We need a basic change in attitude if we are to be able to
deal with the long-range problem. We are grateful for the international
cooperative programs you have developed.
President: Henry has told me of the strong support you have
given. We appreciate it.
Wilson: It was the right group to organize.
Callaghan: The next big problem is the consumer-producer confer-
ence. The French gave a friendly report of the Martinique meeting, but I
still foresee them going in a somewhat different direction.
See footnote 3, Document 33.
August 1974–April 1975 125
Kissinger: They tend to use the conference as a substitute for any
other kind of action.
Wilson: At the EC–Nine Summit meeting, Giscard said he is
prepared for a meeting of the consumers, but as the prelude to the
The first time he mentioned indexa-
tion, I said, OK, but it had to be at a lower price.
Callaghan: Timing is important. The French are already lining
people up for the preparatory conference of consumers and producers
Kissinger: But there can’t be one if we won’t come. And we will
come to a conference when the preparations are made, but not when
the consumers are still quarreling.
Callaghan: There won’t be quarreling at the preparatory meeting.
It is just to set up the consumer-producer conference.
The French want to chair it. They say it’s because it was their idea,
but it is deeper than that. I think the preparatory conference should be
at the official, not the ministerial, level.
Wilson: That way you could more easily preserve your position.
We have a problem with the French, and I think Giscard has a problem.
The Gaullists are putting out this stuff about his private life. Schmidt
thinks they are putting out that if Mitterand would break with the
Communists, Giscard could join them and isolate both extremes.
Callaghan: He wants better cooperation with the United States.
Kissinger: Since Martinique he has been better.
Callaghan: But you can assume they will play with the Arabs on
Your financial plan
went very well.
Kissinger: Healey gave us a hard time for a couple of hours.
Wilson: Names got put on proposals unfortunately. Ours is too
little but it was early. Yours works late but adequately.
Kissinger: They are totally complementary.
See footnote 2, Document 24.
On January 31, Kissinger told Davignon that to hold the conference at the Ministe-
rial level “would give it bigger significance than it should have.” He also said that he
“would not be happy with the French as chairman.” Davignon informed Kissinger that
he was “getting nowhere with the French except on a purely bilateral and unofficial
basis,” adding that “on substance, though, they are close to all of us, but they remain
stubborn on procedures,” which he called a “silly position.” Davignon hoped that, by
March, the French would “be more reasonable—after the preliminary meeting,” and was
happy that they had at least agreed to IEA participation in the meeting. (Memorandum of
conversation, January 31; National Archives, RG 59, Central Foreign Policy Files,
See Document 15.
126 Foreign Relations, 1969–1976, Volume XXXVII
Callaghan: Our consumer solidarity, the other aspects are conser-
vation and alternative sources. How far do you want to go before you
Kissinger: On alternative sources we will be ready with proposals
for the IEA meeting next week. We would like to have agreement on
the direction in which we’ll go. We could have mutual investment in
each other’s programs and a country would get a return proportionate
to its investment. If all these things work, we could have agreement on
a common overall price to protect the new investment in alternative
Wilson: Our proven oil reserves, at OPEC prices less 10%, amount
to $120 billion. By 1980 we will be self-sufficient. We will refine about
two-thirds of it ourselves. The rest of it will be sold non-
President: Do you have a refining capacity?
Wilson: Not enough. We have to build some. It is beautiful
low-sulfur oil. I think there is more oil west of Britain and North of
The first gas strike is much shallower than in the North Sea. We
will run into a boundary problem with France.
Callaghan: The Saudis offered us 300,000 barrels a day in exchange
for repayment with our oil after 1980. We don’t know what interest
they would charge. We wanted to talk to you first. We would like to
pursue it, but wanted to let you know about it first.
President: What percent of your imports is that?
Callaghan: It is quite sizable, maybe 15 to 20 percent.
Wilson: We should get the Arabs interested in other forms of en-
ergy, because they will run out.
Kissinger: We heard that the Saudis would offer bilateral deals
with the Europeans to ease the pressure on them.
Wilson: In six years, when Jim is Chairman of OPEC . . .
Kissinger: A terrifying thought!
Wilson: Are you thinking about other “PEC’s”? Many other raw
materials prices are going down now, fortunately. But there’s phos-
phate ore, copper, and so on. We are returning to the old producer car-
tels, which never worked. The tin agreement, the sugar agreement,
never did well. But shouldn’t we be looking into this?
Kissinger: We are looking at it, and we haven’t come to any conclu-
sion. We had a preliminary bureaucratic study which concluded it
wasn’t possible. We would be happy to study it jointly with you.
Callaghan: This question will be raised at the consumer-producer
conference and at our next Commonwealth conference. If we could
August 1974–April 1975 127
start some work in this area, we could maybe break up the Group of
The UN is always against us.
Wilson: Oil is all tied up with the Mideast. To the extent that we
can look at price rigging without the oil/political aspects, we can see
what might be done on a purely economic basis.
President: Producer cartels work well in good times but I wonder
about it in bad times.
Kissinger: What the Prime Minister is saying is if we could get
something going in a commodity in which the Third World would be
interested—like fertilizer—we could use it as an example of how to go
Wilson: The Commonwealth Conference is a good forum for
members to look at things from a perspective which they don’t ordi-
narily use. We should use it more.
[Omitted here is discussion unrelated to energy, followed by a dis-
cussion of British and U.S. domestic energy policy.]
The Group of 77, or G–77, was a group of developing countries established in
Memorandum of Conversation
Washington, February 3, 1975, 5–6 p.m.
Honorable Henry A. Kissinger, Secretary of State
Honorable Charles W. Robinson, Under Secretary for Economic Affairs
Honorable Thomas O. Enders, Assistant Secretary/EB
Mr. Stephen W. Bosworth, Director, Office of Fuels and Energy/EB
Honorable William E. Simon, Secretary of the Treasury
Honorable Jack F. Bennett, Under Secretary for Monetary Affairs
Honorable Charles A. Cooper, Assistant Secretary/OAS/IA
Honorable Gerald L. Parsky, Assistant Secretary/TE&FR
Source: National Archives, RG 59, Records of Henry Kissinger, Lot 91D414, Box
10, Classified External Memoranda of Conversations, January–April 1975. Secret; Nodis.
Drafted by Bosworth. The meeting was held in the Secretary’s office.
128 Foreign Relations, 1969–1976, Volume XXXVII
Kissinger: When are you leaving for Paris?
Parsky: No, Tom and I are going to Paris.
Kissinger: Somehow I had heard that you, Bill, were going.
Simon: No, I just came back from London. I was there with a group
of Congressmen and others taking care of your friend, Denis Healey, at
the Ditchley Conference.
I thought that with Gerry and Chuck going to Paris for these
various negotiations and me testifying on the Hill, we should focus on
some areas of our policy that appear to be most unclear. The major
question I’m getting, Henry, from all people, is whether we have re-
versed our price objectives. Are we now trying to keep prices high
rather than to get some lower? These are some questions that are
growing out of your speech.
Kissinger: I understood that my speech
had been cleared by
Parsky: Oh yes, I read it and cleared it.
Kissinger: I had not planned to give that speech. The President
specifically asked me to make it.
Simon: Well, on this price question, the line I’m taking is that
higher prices now will bring down prices later.
Kissinger: Plus the fact that if OPEC puts in higher prices the
money is lost through the balance of payments. These conservation
price increases will be money for the USG and not for the producers.
Simon: So, you agree, our objective is still to bring down prices?
Kissinger: Definitely. The only person I know against lower prices
is Enders. Seriously, is anyone against bringing down prices?
Enders: Absolutely not.
Parsky: The issue is really this question of a floor price.
Kissinger: Well, if we got prices down to $7.00, that would be an
effective 30 percent decrease. That certainly won’t happen soon in any
convened in Paris on February 5.
The meeting was held February 1–2 at the Ditchley Park estate outside of Oxford,
England, to discuss the financial problems stemming from surplus oil revenues. Simon,
Burns, and other U.S. officials attended.
In a speech at the National Press Club, February 3, Kissinger outlined the proposal
the United States would make at the February 5 IEA Governing Board meeting: “In order
to bring about adequate investment in the development of conventional nuclear and
fossil energy sources, the major oil-importing nations should agree that they will not
allow imported oil to be sold domestically at prices that would make those new sources
noncompetitive.” Either the consumer nations could set a common floor price or the IEA
nations could establish a common IEA tariff on oil imports. For text, see Department of
State Bulletin, February 24, 1975, pp. 237–245.
August 1974–April 1975 129
Simon: Well, I’m not so sure, Henry. I’m personally convinced,
though I don’t go around saying this, that prices will come down soon,
if we just let the market work.
Kissinger: But how can the market work if the sellers operate as a
Simon: Well, there’s a lot of oil in the world.
Bennett: The question before us is really whether to go for a floor
price or a tariff. The floor price strikes the producers as a completely in-
flexible position and offers them no incentive to raise production and
Kissinger: Well, can’t we put both forward at this time? Either
must be geared in any case to a common price. We must also offer some
price protection for our investors.
Bennett: Can’t we find a balance between no price protection and
no possibility of the market price ever going below the protected price?
We don’t need to eliminate all risk for the private companies. Com-
panies are willing to take risks.
Kissinger: Do we have to settle this now?
Simon: The floor price is just one option. I don’t believe a floor
price is either politically or economically viable. But we don’t have to
settle this here.
Kissinger: Then what is the problem?
Simon: The problem is that in some quarters it is perceived that the
floor price is the preferred US position.
Kissinger: But I still don’t see what is the problem.
Bennett: Do you really have in mind using either a floor price or a
tariff as options for getting a fixed bottom price?
Kissinger: I thought the tariff, frankly, was just another way of get-
ting a floor price. But what is this sliding scale for a tariff and what does
that mean? I’m confident that we can get the consumers to agree on a
Cooper: But at what level?
Kissinger: Around $7.00. What do you think?
Cooper: I think you could get them at $3 or $4.
Kissinger: But that’s trivial and meaningless.
Cooper: But when you get up to $6 to $7 it’s much more difficult.
That’s why $3 to $4 tariff would be much better.
Simon: I for one believe that the future price will be below $7 and
when the price falls, the other consumers will say, why a floor price?
and then they’ll all fall away.
Enders: But Bill, at $5 we’ll be importing 20 million barrels of oil a
day by 1985.
130 Foreign Relations, 1969–1976, Volume XXXVII
Simon: You economists make me sick. We can get a lot of oil at $5.
We can get Alaskan oil at $5. Companies are willing to go do it right
Enders: Then why do the companies say that we’ll be importing 15
MMBD by 1985? Jamieson
says it’s totally unrealistic to set a depend-
ency figure of 5 million barrels.
Simon: Jamieson said that?
Bennett: I don’t trust Jamieson’s figures. I should know. I used to
give them to him.
My feeling is that to sell something we must have a figure with
some give in it. We must have some incentive to the Arabs to lower
their price. We must strike a balance between protection for US in-
vestors and the need for a flexible position with which to begin talking
with the producers. We can’t begin to talk with the producers if we just
have one set price.
Kissinger: Why not? We can do a 5 year agreement at prices below
current levels, but above those which will exist in 10 years.
Cooper: That just says that in the long run you’re going to be
crushed. The producers just won’t find that a convincing position.
Enders: At the moment producers don’t believe any of this. They
don’t think we are really serious.
Bennett: When we get to a producer-consumer conference we must
be able to show them that at a lower price they will get more income.
Kissinger: But even with a floor price, you will have all that area
between $7 and $11 to play with in talking with producers.
Enders: Also, Jack, that kind of calculation overlooks the fact that
demand is very inelastic. The producers know that and they gear their
whole strategy to it. They stand to lose revenues by cutting prices.
Simon: That’s just a short-term argument.
Kissinger: But let me see if I understand this. The major difference
between Jack’s proposal and my proposal of today doesn’t exist be-
tween $7 and $11. The difference is you would like something with a
variable floor price.
Enders: In addition, Jack would also have a tariff above the floor
Bennett: We’ve got one now.
Robinson: You are really proposing a variable tariff?
Kissinger: Jack, please give me a description of how your system
would work. I’m sorry, but I need a tutorial.
L. Kenneth Jamieson, Chairman and Chief Executive Officer of Exxon
August 1974–April 1975 131
Bennett: Well, there are essentially two versions. Under the first,
with a fixed tariff, Arab oil would always be more expensive. Under the
second, you would have a variable tariff which would contract as the
Kissinger: Suppose I thought $7 was the right price, then the price
of oil would have to go below $4 before there would be any difference
between a floor price and $3 tariff.
Bennett: There’s another issue here. Are we going to guarantee
OPEC an outlet for its oil? That’s moving awfully fast toward socialism.
Kissinger: The companies are dumb enough for socialism, that
idiot Warner, for example.
Simon: I think Warner
is one of the best of the oil people.
Kissinger: But doesn’t he believe the US should import more oil?
Enders: They all do, all the company people.
Jack, we have many alternative sources with known costs or rela-
tively known costs—nuclear energy and conventional oil, for example.
Maybe these costs will go down, but it’s very unlikely. We want to give
them basic protection.
Kissinger: Well, my first question is what is going to happen at the
IEA? The US simply cannot afford another spectacle of our delegation
presenting differing views. It would just be disastrous if, two days after
my speech, we did something like that. Then the other question is what
are we going to say here in town. And then how are we going to decide
Do we have to decide the issue now? Since I don’t believe mid-East
oil is ever going below $4, what is the argument against a $3 tariff?
Enders: The question is, which is more negotiable?
Cooper: Well, the tariff could have a trigger point at, say, $7.
Enders: If you have a trigger point, then it’s the same proposal.
Kissinger: I want to prevent a situation in which the US carries all
the water. We’ll spend all this money to bring down energy prices and
everyone else will reap all the benefits. If we don’t get the Europeans
locked onto something now, they’ll take advantage of us in the future.
We don’t need them to develop our alternative energy, but my objec-
tive has always been to get them locked onto something that will pro-
tect us in the future.
Bennett: Exactly, we must have some commonality. That’s
Rawleigh Warner, Chairman and Chief Executive Officer of Mobil Oil
132 Foreign Relations, 1969–1976, Volume XXXVII
Kissinger: Right now they are weak, and they need us. Five years
from now they won’t be weak. When they catch on to how weak this
country is domestically, they’ll jump to take advantage of us. Already,
as a result of my Business Week statement,
they are getting special price
treatment from the Arabs. I don’t really mind that. It actually helps us
in the Middle East. But the people most consistently opposing US ini-
tiatives are the Europeans. The Japanese at least move in response to
their own self-interest. But the history of Europe is that countries
always join together to cut up the strongest nation. Any system we can
devise now on energy, which can prevent this from happening to us in
the future, is fine with me.
Enders: This was the principle which was set forth in the Presi-
dent’s State of the Union message—the need to provide some price pro-
tection for domestic investors.
Kissinger: My concern is that if we don’t go into this meeting this
week as though we know what we are doing, we are going to get killed.
Can’t we delay for three weeks on our decision on which of two ap-
proaches we will use? We could say that they need further technical
study. We could also use that same line here in Washington.
Bennett: That’s fine.
Kissinger: Look Jack, I don’t want to try solutions which make no
economic sense, so let’s review this further and then, if necessary, we’ll
go to the President for a decision.
Enders: But the common tariff will be much more difficult to
Kissinger: Perhaps, but you will get a reading on that this week.
It’s possible that we won’t be able to sell either approach.
Simon: On another subject, Henry. At Ditchley last weekend there
was great discussion of the producer-consumer conference. All the
people there thought the conference should be scrubbed. Everyone
thought what we should do is encourage more Arab investments in our
Kissinger: Listen, if I can get Parsky and Robinson to run those bi-
lateral commissions as I want, I’m prepared to run a producer-
consumer conference bilaterally. We’ve got to come up with ways to
soak up their dough. If those Bedouins want to use all of their money to
build soccer stadiums, that’s fine with me. I’m rather attracted to the
The idea of establishing such mutual funds appeals to me
if we can do it bilaterally.
See Document 30.
Roosa wanted to establish a giant mutual fund in which OPEC nations could in-
vest their accumulating petrodollars over the long term.
August 1974–April 1975 133
On Pan American, I told Peter Peterson last week that I had no for-
eign objection to Iranian purchase of Pan American stock.
I definitely think we should use the commissions. I don’t care
about a producer-consumer conference. You will all remember that I
have never been very enthusiastic about it, and I’ve been stalling as
much as possible. The French will just try to make us their straight men
in any conference such as that.
Simon: Henry, another issue which is concerning us are the pro-
posals coming out of State to limit OPEC investments to 10% in any one
Kissinger: Who has said that?
Kissinger: Ah, Enders! Enders goes around town saying he has
never had a Secretary out of whom he has gotten such good work. Let’s
get a paper together and get a policy decided. I think we should absorb
as much of their money as we possibly can. I have no intention of put-
ting all US interest into a producer-consumer conference.
Simon: Our objective of attracting more Arab money is going to be
complicated if the Enders plan surfaces for a 10 percent limit.
Enders: That’s neither a plan nor a proposal. My only objective
was to ensure that all feasible options are considered. The original draft
issue paper had only one option, and I just wanted to get others in-
cluded for examination.
Kissinger: Well, can’t we get a policy on this by the end of Feb-
ruary? I do want them out of national security industries and those
areas where their investment control would be demoralizing to US cit-
izens. But, beyond that, our principal objective should be to maximize
their dependence on us.
Simon: I’m glad to hear that. That’s the only reason I’m here—to
make sure you have not been brainwashed. I’ve been hearing different
sorts of things from levels underneath ours.
Kissinger: Enders does not consider himself beneath any level. His
psychological view of our relationship is symbolized by the difference
in our heights. Seriously, we must at all cost avoid open dissent. We
simply can’t afford that.
Simon: I agree fully. One more point. On the Roosa recycling idea,
I don’t think we need the Roosa mechanism.
Kissinger: I’ve asked George Shultz to ask the Shah what he thinks
about it. Shultz will simply ask him the question and won’t put it for-
ward as a US proposal. Then we will consider it in the light of the
Shah’s reaction. I’m very open-minded on these subjects. I am in favor
of anything that will get the job done fast. The advantage I see in the
Roosa proposal is that it couples the interest of the producers with the
134 Foreign Relations, 1969–1976, Volume XXXVII
objects of their potential political blackmail. What is your objection to
Simon: Just imagine what the Arabs will say if we tell them we will
take their money and then tell them what to do with it.
Enders: But Roosa proposes doing that through private companies
and through the US Government.
Robinson: I think we must look at this carefully. We have a
growing political problem on this issue which might be blunted by
something along the lines of the Roosa idea.
Bennett: I don’t think that idea would blunt anything.
Kissinger: I’ll only support it if a major producer such as the Shah
says he likes it.
Well, let’s see if we can summarize what we have agreed on. First,
on the floor price—we will keep open the two alternatives, a floor price
or a tariff—as long as it is a tariff on a sliding scale. We agree that any
international agreement must be made now, not put off until the need
actually arises. At this week’s meeting we will put forward both con-
cepts as feasible and give them equal exposure. Then, we will proceed
with more technical study and, if necessary, go to the President for a
On the investment question, we agree that we must have a
short-term policy proposal to take to the President by March 1. I can’t
conceive that we won’t agree on this one.
On the commissions, we will push hard to try to get as much done
through them as possible. We will try to have a fait accompli at any
producer-consumer conference. If we can handle investment through
the commissions, so much the better.
August 1974–April 1975 135
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