Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
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A similar letter was sent to Schmidt on February 22. (Telegram 40613 to Bonn;
ibid., Presidential Country Files for Europe and Canada, Box 6, Germany—State Depart-
ment Telegrams from SECSTATE–NODIS (2))
On February 24, Deputy Chief of Mission Thomas P. Shoesmith delivered Ford’s
letter to Vice Foreign Minister Togo, who assured him that he would convey it
“promptly” to the Prime Minister. (Telegram 2364 from Tokyo; ibid., Presidential
Country Files for East Asia and the Pacific, Box 8, Japan—State Department Telegrams,
To SECSTATE–NODIS (4)) Miki replied on March 4 and, raising the issue of the IEA,
wrote: “In the Agency’s formulation and the implementation of the specific cooperative
measures for this purpose, full consideration should be given to the situation of those
countries which have little energy sources to develop within their own countries and that
care should be taken to present those measures in a least confrontational manner in rela-
tion to the oil producing countries.” (Telegram 2828 from Tokyo, March 5; ibid., Presi-
dential Correspondence with Foreign Leaders, Box 2, Japan—Prime Minister Miki (1))
Telegram From the Department of State to the Embassy in
Washington, March 1, 1975, 0332Z.
46576. Subject: French Invitations to Prepcon. For the Ambassador
from the Secretary for delivery before 8 AM March 1. In response to
Sauvagnargues’ letter delivered to me February 28 and transmitted to
Source: Ford Library, National Security Adviser, Presidential Country Files for
Europe and Canada, Box 4, France—State Department Telegrams from SECSTATE–
NODIS (2). Secret; Flash; Nodis. Drafted by Preeg, cleared by Enders and Hartman, and
approved by Eagleburger.
August 1974–April 1975 153
please deliver following message to Sauvagnargues in
your call on him scheduled for March 1.
This is a revised text that re-
places message sent to you earlier today.
Dear Mr. Minister:
In response to your letter to me dated February 28, I have further
considered carefully the arguments you put forward for sending out
invitations to the preparatory meeting at this time. My strong view re-
mains, however, that we should wait until the requisite consumer soli-
darity is achieved before proceeding to make formal proposals for such
In support of this conclusion, I want to take strong exception once
again to the notion that the consumers ought to gear themselves to
OPEC meetings. This idea seems to be based on the premise that we
cannot have a productive dialogue without taking measures to tranqui-
lize the producers. On the contrary, as we explained in Martinique and
subsequently, the preparations among consumers for meetings with
producers are the indispensable elements for a successful and con-
structive dialogue with the producers. We intend to do our part in
order to make the necessary preparations for such a meeting and,
indeed, we look forward to making good progress on the major re-
maining issue at the next meeting of the IEA Governing Board sched-
uled for March 6–7.
Contrary to the suggestion that producing governments hope that
the invitations will be issued prior to the Algiers summit, several
members of OPEC have indicated to us that they made no final decision
on the timing and composition of a preparatory meeting. Since France’s
intention to issue an invitation to producers, consumers, and develop-
ing countries can be a mystery to no one, it would seem prudent to de-
Sent in telegram 46562 to Paris, March 1. (National Archives, RG 59, Central For-
eign Policy Files, P850086–2207)
Rush delivered Kissinger’s letter to Sauvagnargues on March 1. Before reading it,
Sauvagnargues informed the Ambassador that France had sent the invitations to the
producer-consumer conference the previous day. The Foreign Minister explained that
the decision was Giscard’s, which he made because he and Sauvagnargues believed that:
1) consumer solidarity had been achieved; 2) Algeria posed a potential problem in terms
of agreeing to the conference’s list of participants and agenda, prompting the French to
distribute the invitations before the next OPEC summit meeting (which Yamani and
other Arab representatives agreed was the right thing to do); and 3) “no approval of the
U.S. or IEA was necessary for calling the meeting.” (Telegram 5327 from Paris, March 1;
Ford Library, National Security Adviser, Presidential Country Files for Europe and
Canada, Box 4, France—State Department Telegrams to SECSTATE–NODIS (3)) Giscard
sent invitations to the Chiefs of State of Algeria, Saudi Arabia, Brazil, India, Iran, Japan,
Venezuela, Zaire, and the United States to attend the conference. A translation of the text
is in telegram 5328 from Paris, March 1. (Ibid.)
Telegram 45836 to Paris, February 28. (Ibid., France—State Department Telegrams
from SECSTATE–NODIS (2))
154 Foreign Relations, 1969–1976, Volume XXXVII
lay issuance of the invitations themselves until the main parties in
question have made a decision on the mode and timing of their partici-
pation. To do otherwise would put at risk a process on which we both
agree and which appears to be advancing properly.
I recognize of course that the French Government may be in a posi-
tion in its discussions with producers wherein you might consider it
desirable, even imperative, to communicate with them before the
OPEC summit meeting next week regarding invitations for the prepa-
ratory conference. This may be possible with a communication that
does not go to the point of a formal invitation to a preparatory meeting.
You could inform the producers of the likelihood that invitations
would be forthcoming shortly for a preparatory meeting along the lines
of the timing we discussed last week. You might wish to relate this to
the current status of deliberations in the IEA, including the importance
of the March 6–7 meeting, as well as to the understanding reached with
the United States at Martinique that proposals for holding a prepara-
tory meeting would be contingent upon substantial progress among
consumers in the fields of energy conservation, financial solidarity, and
the development of new sources of energy.
With best regards,
Sincerely, Henry A. Kissinger
His Excellency Jean Sauvagnargues,
Minister of Foreign Affairs,
On March 3, Kissinger sent a message to Callaghan and Genscher regarding the
conference invitations that France distributed on February 28. He relayed Sau-
vagnargues’s justifications for sending them and told them of his previous efforts to pre-
vent France from doing so “until the requirements specified in the Martinique agreement
and in the December 19–20 IEA Governing Board decision had been satisfied.” He wrote:
“By issuing invitations before the OPEC meeting, we risk formation of a united OPEC
stand. Algeria’s reaction suggests that this is just what is going to happen.” While he and
Ford would do their “utmost to avoid any public debate with the French” over the issue,
Kissinger said, he advised that the IEA Governing Board “take no action on the French
invitation” until it reached “final agreement on alternate sources.” He concluded: “For
our part, we do not plan to respond to the French invitation until the established require-
ments are met.” (Telegram 46724 to London and Bonn, March 3; ibid., Box 15, United
Kingdom—State Department Telegrams from SECSTATE–NODIS (3))
August 1974–April 1975 155
Memorandum of Conversation
Washington, March 3, 1975, 7:45–8:15 p.m.
U.S. Energy Policy
Assistant Secretary Enders
Under Secretary Bennett
Mr. G.P. Balabanis (notetaker)
Assistant Secretary Cooper
Assistant Secretary Parsky
(Secretaries Kissinger and Simon met privately from 7:30–7:45)
Kissinger: Bill and I are trying to prevent contradictions from ap-
pearing about our policy. We can’t have statements coming out that are
At this juncture, we simply can’t afford it.
Parsky: But that didn’t happen . . . What happened was . . . if you
are talking about the misrepresentation in the Newsweek article . . .
Kissinger: Whatever happened, we simply can’t afford it being
said that we have no firm policy. We can debate the mechanism of the
policy, but we can’t have the situation where Sauvagnargues can say
the Americans really don’t have a policy.
Parsky: I thought we had previously only agreed to a study of al-
ternative mechanisms for achieving the general policy goal of encour-
aging conservation and development.
Kissinger: The President has approved the basic concept of a guar-
anteed floor price.
We can let countries choose their own means of
achieving it—whether you use peanut oil to support the price or a vari-
able levy or whatever—but the concept of the guaranteed floor price
has been agreed to.
Can we agree on this paper.
This would be from Kissinger and
Simon, directed to Parsky and Enders.
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 Gordon P. Balabanis (EB/IFD/OMA). The meeting was held in the Secre-
See footnote 2, Document 43.
Ford and Kissinger discussed it during a meeting that morning. (Memorandum of
conversation, March 3; Ford Library, National Security Adviser, Memoranda of Conver-
sations, Box 9)
156 Foreign Relations, 1969–1976, Volume XXXVII
What has to come out of this meeting isn’t an academic study.
I am concerned with our overall strategic aims. We need to have a max-
imum number of ties to keep the Europeans from trying to screw us.
They’ve already screwed us in this call for the preparatory producer-
consumer conference. That’s why we can’t afford to let them exploit
public differences . . .
Parsky: But I didn’t say . . .
Kissinger: I don’t know what you said—all I know is that every
newspaperman on my plane understood it that way. But let’s not argue
about the past. What we need to get settled is how we proceed from
here. My boy Enders has a devious mind—he figures they won’t agree
to a common external tariff, so we need to have another proposal—
Enders: Right. They won’t agree to adopt a tariff.
Kissinger: I can give you an absolute guarantee they won’t.
Simon: If you think they won’t agree to a tariff, why do you think
they will agree to a floor price?
Kissinger: They will, if we really get behind it, and use some
Bennett: I’m worried about putting U.S. firms at a competitive dis-
advantage, if they have to operate with higher priced oil. That’s why
we need to get them to put on a tariff too.
Enders: The U.S. tariff will be phased out anyway—it is only
Bennett: What worries me is that we won’t end up with an inte-
grated program with the other consumers.
Kissinger: We’re talking about entirely different things. You’re
saying . . . we’re putting on a $2 tariff, so you (the Europeans) do it too.
What we’re saying is—whatever you do now about conservation, we
wish to protect against a drastic price drop later on—which will put us
in a worse position of dependence than we’re in now.
Bennett: What we’re really talking about is getting investment in
energy development. I’m absolutely convinced that a tariff will do a
better job in getting the investment we need.
Kissinger: But a lot more will agree to a floor price than a tariff.
Enders: We can probably get agreement to a position which in-
cludes a fork of $6–8.
Kissinger: What’s the argument against both?
Enders: Fine, but others probably won’t agree. We can’t go to the
Europeans and say, we are putting on a tariff, so, in order that our ex-
porters won’t be at a competitive disadvantage, you do too.
August 1974–April 1975 157
Bennett: But can’t we put it this way—we all need to conserve in
our own best interests . . .
Enders: They’re already doing more in conservation than we are.
Also, the burden of a tariff is greater on them, with their heavier reli-
ance on imported oil.
Bennett: I don’t think so. They get to keep the tariff proceeds.
Enders: Unless you can generate some support for the tariff, you
need to go for the floor concept.
Cooper: I’m not sure a $6–8 range is worth much.
Kissinger: What makes you think it’s not worth much?
Enders: I think we can get $7.
Kissinger: The French will accept it. The Germans will accept.
Enders: Maybe not Germany.
Kissinger: Schmidt told me he was for it.
Simon: The Germans will want to set a price so low it becomes
Kissinger: I can understand your preference for a tariff, and I
would go along if it were equally attainable. You’ve got the economic
expertise, and I would yield to your judgment.
For me, having agreement on the floor price is a means of political
warfare. We’ll have a range going into the conference. The producers
won’t know what floor price we’re aiming at—exactly where the
trigger is—when we’ll do nasty things to them.
What I want to avoid at the meeting is a discussion after which we
end up doing nothing.
My preference would be to go for some bilateral deals myself. I
have every intention of screwing the Europeans before they screw us.
Parsky: But they claim to like the floor price idea themselves.
Kissinger: Yes, but they claim to like a lot of things—conservation,
for example. They’re no longer talking so tough—saying they can put
the oil price wherever they please. They no longer have that fighting
Can we agree to this paper?
Simon: I think this is the position we’ve had right along.
Kissinger: We can satisfy your theological points. You can go for
your tariff, and they will turn you down. Then, the question is, what do
we do then? Do we just go home to think it over? Or do we go right
away for the floor price?
Now, I know that Enders is a pain in the neck—a genius, but a pain
in the neck—
Parsky: Are we going to accept the last part of that statement?
158 Foreign Relations, 1969–1976, Volume XXXVII
Kissinger: You’d better watch Enders—make sure the tariff gets a
Parsky: Ok, then, we’re anticipating that we can’t get agreement on
the tariff, then we go for floor price.
Kissinger: If we get them to agree to a tariff, I have no problems
Parsky: You’ll agree to a tariff.
Kissinger: A phased in tariff on the price drops doesn’t seem very
different from a floor price.
Enders: That’s equivalent to a floor, what they’re talking about is a
tariff phased in independent of what happens to price.
Kissinger: You want to have my sense of the negotiations at this
stage on getting the floor price. Once Congress has legislated the $2 im-
port fee, then, if we use enough muscle we can get them to substitute it
or phase it in.
If everyone can live with this paper let’s sign it. (to Parsky) If we
sign this, will you take Simon’s orders?
Parsky: I take them every day.
Kissinger: Enders never makes that claim, that he follows my
orders every day. Can you imagine what it’s like in a Department with
both Enders and Sonnenfeldt?
I am no economist. I will take my economic lead from you—but I
want to create the appearance of some objective ties—some obstacles to
the Europeans going off on bilateral deals. Before any of these long-run
contingencies occur, before all this happens, other things will change—
I am convinced of that.
(meeting ended at 8:15 p.m.)
August 1974–April 1975 159
Memorandum From Robert Hormats of the National Security
Council Staff to Secretary of State Kissinger
Washington, March 4, 1975.
Report on Meetings in the Middle East
Under Secretary Robinson’s trip
was a valuable step toward
strengthened cooperation with OPEC and Middle East countries. Intro-
ducing Robinson to key officials as your representative gave the trip
significant momentum. Robinson’s meetings gave credibility to the po-
sition that we are genuinely interested in stronger bilateral ties and elic-
ited a positive response by Arab and Iranian officials. The visit fur-
thered our policy of “constructive cooperation” with OPEC countries
on broader consumer/producer oil and financial issues, and removed
much of the suspicion which had built up in Arab circles that the US
was seeking a confrontation.
Several significant points emerged from our meetings. The decline
in demand for oil is putting strains on OPEC. These will lead to greater
friction among OPEC countries. But the common desire to maintain re-
munerative oil prices, and a common recognition that a price-cutting
free-for-all harmful to all members could occur without some degree of
organization still provides enough incentive to ensure cohesion suffi-
cient to maintain OPEC as a viable organization.
But OPEC has lost some of its confidence. It is now searching for
ways of dealing with the adverse impact on it resulting from the inter-
national economic problems it has in large measure caused. There is a
possibility that, as a result of downward pressure on oil demand and
thus on prices (resulting in part from conservation and new production
in response to price increases of the past year, and from the worldwide
recession) and of erosion of the value of reserves and oil receipts
through inflation and the depreciation of the dollar, OPEC countries
will take disruptive actions such as unilateral indexation, tying oil pay-
ments to SDR’s, arbitrary cutbacks in production by major producers,
and shifts in reserve holdings. Some countries, anxious to translate eco-
nomic power into political power, will be attracted to investments
which provide influence and leverage. Some will receive attractive of-
fers from consuming countries attempting to minimize the adverse ef-
Source: Ford Library, National Security Adviser, Presidential Country Files for
Middle East and South Asia, Box 1, Middle East General (6). Secret.
Robinson toured the Middle East during the last 2 weeks of February.
160 Foreign Relations, 1969–1976, Volume XXXVII
fects of their present economic circumstances by increasing exports and
Our policies toward key OPEC countries should aim at achieving
the following objectives: (a) reduction of the possibility of disruptive
behavior by OPEC countries and their potential for separating other oil
consumers from the US, (b) developing orderly international arrange-
ments to ensure that OPEC financial resources are used constructively,
(c) making other consumer countries more comfortable with an intensi-
fication of consumer cooperation by quieting fears about confrontation
and easing OPEC pressures on the one hand while, on the other, letting
them understand that we can beat them in competition for bilateral
deals should they refuse to cooperate in a multilateral approach and in-
dulge in excessive efforts to work out their own bilateral deals with
producers and (d) complementing your political efforts to normalize
relations with Arab nations and help to bring about a Middle East set-
tlement by forging strong ties of economic self-interest.
In order to achieve the above results we should concentrate, in the
following ways, on Iran, Saudi Arabia, Egypt and Algeria.
of the above mentioned nations, is politically, and economi-
cally, closest to us. It has no interest in using its oil to make life difficult
for the US or the West (on the contrary, it wants to move closer to us) or
to exert political pressure vis-a`-vis Israel; and it has no interest in
leading a crusade in behalf of the Third World. Iran wants to develop
its economy and to play a growing and stabilizing political and military
role in West Asia. While Iran clearly wants to prevent a decline in the
purchasing power of its oil revenues (and thus has proposed indexa-
tion and a possible link of oil prices to SDR’s), it is prepared to discuss
with us the best method of achieving this rather than lead a unilateral
OPEC effort to increase prices. Our interests lie in (a) sharing our analy-
sis of these oil price proposals with Iran in order to avoid giving the im-
pression that we do not take seriously Iranian concerns and (b) to find,
if possible, common ground to meet our needs for oil price stability, re-
liable access to supplies, and constructive use of OPEC financial re-
sources. Iran has tabled a constructive proposal for developed, devel-
oping, and OPEC cooperation to assist the poorest nations, and is
willing to marry its proposal with our proposal for an IMF Trust Fund
In investing its own surplus revenues (which Iran expects will de-
crease substantially, with Iran suffering a deficit by 1977), Iran has
demonstrated a genuine desire to work closely with the US. (A notable
example was its ready agreement to our suggestions on how to handle
the PanAm issue.) We clearly want to encourage an Iranian commit-
ment to consult in a similar fashion before major new investments.
August 1974–April 1975 161
An ongoing process of assisting key areas of the Iranian economy
(nuclear energy development, industrial projects, management and
technology needs) building on the Joint Commission, and Robinson’s
relationship with Ansari and Amuzegar, will help strengthen our ties
with the Iranians. At key points, you would want to keep the bureau-
cracy moving to develop specific proposals rather than generalities,
and to be in touch with the Shah to stress the political context within
which we are developing this relationship.
is less able to deliver the other OPEC countries behind
price reductions and other constructive proposals than Yamani likes to
have us believe, but is still the key actor in OPEC. Because of its huge oil
reserves and excess producing capacity it will, for the next several
years, be the one country which can, acting alone, significantly affect
the oil market by increasing or decreasing production. It will also gen-
erate huge payments—half of total OPEC surpluses over the next dec-
ade. As a result, it will have an enormous capacity to reward or punish
developed and developing countries alike through trade and financial
policy. No international agreement on oil pricing or on use of OPEC re-
serves can have any meaning without Saudi support. If, on the other
hand, we can reach agreement with the Saudis on issues of price and
use of financial reserves, other countries will find it extremely difficult
to disrupt the oil or financial market with any degree of success or for
any significant length of time.
The key to dealing with Saudi Arabia in these areas lies in (a) con-
structive participation in Saudi development through the Bilateral
Commission, particularly in improved cooperation between the USG,
Saudi Arabia, and private US firms in manpower training and educa-
tion, industrial development and agriculture, (b) ensuring a safe, prof-
itable outlet for enormous Saudi payments reserves, giving the Saudis a
stake in the health of US and other Western economies and a responsi-
ble role in the international financial system, (c) protecting Saudi Ara-
bia from countries such as Algeria, Iraq and Libya, which can apply po-
litical pressure on the Saudis to take disruptive actions, (d) working
discreetly to obtain parallel if not joint action by Saudi Arabia and Iran
so the two are mutually reinforcing rather than competitive, (e) encour-
aging the Saudis to support constructive positions for the consumer/
producer dialogue, and maintaining an ongoing bilateral dialogue on
economic issues of mutual interest, (f) anticipating and developing con-
structive responses to criticism of Saudi policies such as the boycott, re-
[Omitted here is a section on Egypt.]
’s importance results in significant measure from its ideo-
logical leadership role. It has established itself as the policy leader for
the so-called Third World, to the point where even the Saudis and Ira-
162 Foreign Relations, 1969–1976, Volume XXXVII
nians have difficulty in opposing outright its demagogic appeals. It is
able to incite other developing countries to engage in inflammatory
rhetoric or to take actions which are disruptive of the established eco-
nomic order. In a political context it can put pressure on other OPEC
countries to use their financial resources as policy instruments of a
harder Arab position vis-a`-vis Israel. And it is able to place substantial
pressure on the Saudis vis-a`-vis Israel. While Boumediene’s depth of
conviction makes it unlikely he can be “bought off,” he is a pragmatist
highly concerned with Algeria’s domestic interests. A strengthening of
our bilateral effort to support Algerian development would to some ex-
tent produce a trade-off in diminished Algerian opposition on world
economic and, perhaps, political issues. Algeria’s strong concern that
we are seeking to push oil prices down to harm its economy, and there-
fore its strong resistance to any policy aimed at lower prices, might also
be allayed by an effort to assist Algerian economic development. While
one cannot but have serious doubts about the wisdom or the viability of
certain aspects of Algeria’s costly and ambitious development policy
(which will lead to a $2 billion trade deficit in 1975) there are areas in
which we could make a limited contribution. We might also find ways
of channeling Saudi and Kuwaiti capital into Algeria. These countries
might see it in their interest to provide capital if it were helpful in bring-
ing about a more constructive Algerian position on international politi-
cal, economic, and energy problems.
The consumer/producer conference represents a
psychologically important step toward a more constructive relation-
ship with producers as well as an ideal opportunity to begin a dialogue
which can prevent both producers and consumers from taking disrup-
tive actions. Preparations within the USG for the conference should re-
flect not only the views of those immersed in IEA activities but also of
those who are conversant with issues relating to the producers. They
should focus on using the conference to begin a dialogue which places
special emphasis on dealing with the most constructive and moderate
producers in order to strengthen their influence and minimize that of
the more radical countries. In order to do this and to have the best
chance of achieving constructive understandings, the time devoted to
the plenary session should be minimized; the emphasis should be
placed on working groups established to deal with special issues—re-
cycling, investment by producers in developed countries, development
of producer nations, aid to developing countries, long-term security of
oil supply, and a mutually acceptable understanding on oil prices (in-
cluding a dialogue on inflation—i.e., how producers and consumers
can cope with and minimize it—which would avoid commitments to
indexation or unilateral action). In virtually all of the working groups,
the Saudis and Iranians would be able to play the key role. With them
August 1974–April 1975 163
we could create a manageable atmosphere conducive to constructive
solutions rather than rhetoric.
Your personal prestige will be called on increasingly to ensure
progress both on bilateral cooperation (which is essential given the ten-
dency of technicians to debate endlessly on many of these issues) and
the multilateral energy and financial issues. Careful preparation and
increased coordination within the USG will be necessary. It would be
extremely useful for Chuck Robinson to assume responsibility for, and
to work directly under you on, supervision and coordination of our
various initiatives with producers. He is in a strong position to coordi-
nate bilateral and multilateral initiatives, to ensure that these initiatives
proceed in step with your political initiatives, and to maintain consis-
tency between our evolving relationships with producers and prepara-
tions for the consumer/producer dialogue. Using the Under Secretaries
Committee and other interagency and intradepartment apparatus,
Robinson is in an excellent position to pull together the various policy
threads and to develop a balance among our economic interests within
your established political framework.
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