Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
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- Ingersoll 365-608/428-S/80010 242 Foreign Relations, 1969–1976, Volume XXXVII 69.
Telegram From the Department of State to the Embassy in
Washington, June 14, 1975, 2152Z.
139949. Subject: Message for Sauvagnargues.
1. Please transmit the following message to Foreign Minister Sau-
vagnargues at earliest convenience:
A representative from your Embassy here was in touch with us last
concerning your concept of moving directly to an enlarged
Ministerial meeting of 27 countries as a means of relaunching the
dialogue on energy, commodities, and other development issues.
Since then I have had a report of the conversation between Messrs.
I have given your concept considerable thought. In order to enable
us to proceed in close cooperation I thought it might be helpful if I put
our own thoughts before you.
I recognize your desire to build on the discussions at Kleber in
There was only a tentative understanding on a 26 or 27 member group,
and on its division between energy producing countries, developing
countries, and industrial countries. The whole was at that time condi-
tioned on agreement on an agenda, and on such contentious issues as
the status of the International Energy Agency observers. To attempt
now through bilateral contacts to establish a basis for agreement on
who the 27 would be, on the representation of the Agency, and on what
the 27 would do strikes me as an impossibly difficult task.
But even if it could succeed, I believe there would be a real ques-
tion as to its utility. An enlarged conference of this type would be
tempted to get into the substance of issues, and to try to set up some
way of leveraging issues one against the other. A large conference
would be tempted to perpetuate itself, subordinating the commissions
to its governance. We could thus have all too easily a mini-UN and the
ingredients for a new failure.
Source: Ford Library, National Security Adviser, Presidential Country Files for
Europe and Canada, Box 4, France—State Department Telegrams from SECSTATE–
NODIS (3). Secret; Immediate; Nodis. Drafted by Enders and approved by Kissinger.
Henri Froment-Meurice, Chief of the Asian Division of the French Foreign
The Kle´ber Conference Center in Paris, where the April 7–15 Prepcon took place.
236 Foreign Relations, 1969–1976, Volume XXXVII
It seems to me far more prudent to build on Kleber by reconvening
the preparatory conference in the same format. After all, the 10 partici-
pants agreed that they were not ending their effort, but only sus-
pending it. Although not free of controversy, this forum has the merit
of existing; participants in it could very probably agree to reconvene it
with a minimum of negotiation.
I recognize the point that has been made to us by many of the pro-
ducing countries that legitimacy of commissions created by only 10
countries might be contested, notably by developing countries that did
not participate in Kleber. To overcome that point, which I believe valid,
the correct solution would appear to be that proposed by Yamani: To
use the preparatory meeting to agree on the whole process, the mem-
bership of the commissions, their terms of reference, their status
vis-a`-vis each other, and then to convene a 1 or 2 day meeting of For-
eign Ministers to launch them.
A further point that has been raised by some, that there should be
an arrangement for the commissions to report back, seems to me to
have much less force. Countries that are concerned that the work of the
commissions should proceed more or less at the same pace, can satisfy
themselves that this is so by arrangements for the commission
chairmen to report to each other the progress of their work. But to re-
port back to the enlarged Ministerial meeting would suppose that the
Ministerial meeting would have to be held again, and that it will have
to deal with substantive issues. I do not think we should commit our-
selves now to such a substantive membership meeting at Ministerial
Please let me know your thoughts on this issue,
as I think that
there is a strong advantage to both of us to remain in close harmony as
the dialogue develops. I hope in any event to see you soon.
[Omitted here is material unrelated to a producer-consumer
The French Embassy delivered Sauvagnargues’s reply to Kissinger on June 23.
The Foreign Minister wrote that France had “no preconceived idea” regarding procedure
and was “prepared to support what will be likely to receive general approval in condi-
tions suited not only to ensure the resumption, but above all to guarantee the pursuit and
continuation, of the dialogue.” However, he added, he was “thoroughly convinced of the
need for an approach that is both global and differentiated.” On the subject of establishing
“three committees of actually unequal status whose results could no longer be com-
pared,” he did not think the formula would “receive the approval of the developing
countries which will inevitably interpret it in terms of priority for energy.” Furthermore,
in terms of the conference’s composition, he argued that Kissinger’s “reasoning against
the 27 formula is equally applicable to the 10 formula.” (Telegram 151916 to Cairo, June
27; National Archives, RG 59, Central Foreign Policy Files, P850036–2564)
April 1975–October 1975 237
Memorandum of Conversation
Washington, June 16, 1975, 10:25–10:50 a.m.
Dr. Henry A. Kissinger, Secretary of State and Assistant to the President for
National Security Affairs
Alan Greenspan, Chairman, Council of Economic Advisers
Charles W. Robinson, Under Secretary of State for Economic Affairs
Lt. Gen. Brent Scowcroft, Deputy Assistant to the President for National Security
Bilateral Oil Agreement with Iran
Kissinger: The President wanted me to discuss something we have
been discussing with Iran. This is for you only and is highly sensitive.
When I saw the Shah in March [May],
he complained his liftings
were falling and he had 500,000 barrels a day excess. I said that under
specific conditions we might take it off their hands. Chuck [Robinson]
has discussed it further with them and they have now gone up to
700,000 barrels a day. They would sell to us for Treasury notes with a
forgiveness period. The notes could be redeemed for the purchase of
I am interested in this idea because, number one, it breaks the
OPEC front because it shifts the surplus.
Greenspan: It would have to be at Saudi expense, and they
wouldn’t like it. How long would it be for?
Kissinger: It’s up to us. Second, it would make it harder to raise the
prices. Third, it’s insurance against another embargo. Fourth, it puts
pressure on the suppliers.
There are two possible schemes. The first one is that we pay the
market price for oil. The other is to sell at current prices plus an adjust-
ment tied to the wholesale price index.
Greenspan: That breaks the OPEC price structure.
Kissinger: If they give us a forgiveness feature, one year gives us $1
Source: Ford Library, National Security Adviser, Memoranda of Conversations,
Box 12. Secret; Nodis. The meeting was held in the Secretary’s office in the White House.
See footnote 3, Document 62.
Brackets in the original.
238 Foreign Relations, 1969–1976, Volume XXXVII
Greenspan: If we could keep Iran at full production it puts severe
pressure on the Saudis. We would want to insure that Iran would not
cut back elsewhere.
Robinson: They could but that obviously is not their scheme. They
want to keep their revenue up.
The basic scheme is a barter. If they contract way out for oil, they
need the assurance that the price will go up in line with other goods
they would buy. By either scheme—the OPEC price, or the current
price plus the wholesale price index (so long as it didn’t go above
OPEC). We would give them Treasury notes without interest for the
first year and that are non-negotiable for the first year. So for the first
year we would have $2 billion in our hands.
This will take imagination and a change in how we operate.
Greenspan: So in effect you have $2 billion in escrow. So if they
broke the deal or entered an embargo, we have the $2 billion.
Robinson: We get a discount. We will have to establish a specific
arrangement, which can go far to break OPEC.
Greenspan: When this gets out . . . the only real issue is price. It
would be crucial that the price not escalate beyond the OPEC price.
Robinson: I think I got that, but I haven’t nailed that down yet.
Greenspan: It seems obvious that if you look at 1978 at these prices,
the Saudis are the only ones who will not be a net borrower. The others
are committing funds at such a rate. The 700,000 barrels by itself won’t
do it. But as a symbol . . . The Saudi reaction will be important.
Kissinger: Will the companies give us trouble because the Saudis
will be upset?
Greenspan: The idea properly packaged seems very attractive. Let
me think about it. An essential ingredient is not to let the price go above
the OPEC price. I will think on the negative elements, but I am
Robinson: There are two alternatives: a government purchase to be
auctioned off, or we could buy it for the Navy reserve and so on.
Greenspan: We can buy it for the stockpile. We are talking about a
$1 billion stockpile, but we don’t have the Salt Dome capacity. Maybe
you can solve the company problem by having them take the oil.
The notes would have to be non-negotiable. Have you looked at
the different interest rates?
Robinson: It is about $1 a barrel at the current interest rates. I am
thinking of a five-year maturity with no interest if they don’t use it for
Kissinger: Another option is to lower the interest rate and have no
forgiveness. How will it look to our IEA partners? It really helps them.
April 1975–October 1975 239
Robinson: But we must be careful how we do it.
Greenspan: It will have a devastating impact on OPEC. So you
want the maximum apparent price concession.
Robinson: Iran insists that the non-negotiable aspect be covered by
a side letter, as well as the price not going above OPEC.
Kissinger: I know we would like the greatest apparent price differ-
ential . . . The side letters will look . . . the Saudis will be very upset.
Greenspan: If you then have the same deal with the Saudis, I
would not favor it. Because then OPEC becomes Saudi.
Kissinger: That is a separate issue. Let the Saudis worry about that.
Robinson: It would be politically difficult to say we do it with Iran
but won’t for the Saudis.
Greenspan: Let me think it through. The critical thing is what
happens in 1980, with Iran and with or without the Saudis. We may
need a total strategy before we move.
Kissinger: I think we should pick up what we can and develop a
total strategy after Iran is signed up.
[The meeting ended]
On June 23, Kissinger, Greenspan, and Robinson met with Zarb at the Department
of State to discuss the idea of a bilateral oil deal with Iran. Zarb said that while he liked
the idea as a “possible way to crack the oil cartel,” he thought “the notion of a gov-
ernment agency handling this sort of matter is inconceivable and inconsistent with our
idea of a free enterprising system.” The three agreed that they did not want Congress too
deeply involved in the matter, with Zarb saying that “getting into a legislative process”
would mean that the administration “would lose control.” Regardless, Zarb believed that
they should proceed with the deal, and Kissinger and Robinson added that, if they did so,
the price that the United States paid to Iran could not “ever exceed the OPEC price.” (Na-
tional Archives, RG 59, Records of Henry Kissinger, Lot 91D414, Box 15, Miscellaneous
Documents, 1975, Folder 2)
240 Foreign Relations, 1969–1976, Volume XXXVII
Telegram From the Department of State to Secretary of State
Washington, July 2, 1975, 2016Z.
Tosec 50095/156455. Subject: Producer/Consumer Dialogue.
1. My recent discussions on the producer-consumer dialogue with
Yamani in Saudi Arabia and Yeganeh, Ansary, and the Shah in Iran
have been reported by separate telegrams.
Based on these discussions,
I believe that we could reach agreement in principle with Saudi Arabia
and Iran on the following approach:
2. Basic plan: Group of 10 to meet first with the same level of repre-
sentation as at the April Prepcon, and agree on all the important ques-
tions cited below before giving way to the group of 27 at the Ministerial
level. The larger group would formally launch the three commissions
on energy, other commodities, assistance to least developed countries.
3. Important questions—to be resolved in advance:
(A) Enlarged launching group: It appears that we will likely end
up with 27 participants—8 industrialized nations, 8 OPEC and 11
LDC’s—to be selected by the respective groups. The chairman of the
group of 27 should be from a neutral country (not France), rotated
amongst the 3 participating groups, or possibly from the UN.
(B) Commissions: Three separate commissions to be formed on en-
ergy, other commodities and least developed countries relations with
financial and monetary questions to be considered in each. (Hopefully
Yamani’s demand for a separate commission on finance and monetary
matters can be resolved by agreeing to set up a sub-committee under
the energy commission.)
(C) Commission participants: Participants in each commission to
be selected from among the group of 27 countries by use of objective
criteria modified as may be required to meet anticipated political pres-
sure. (These criteria would justify US membership in all three commis-
sions but preclude multiple membership for most of the 27.)
(D) Guidelines for commission programs: General outline of the
scope of each commission’s activities to be set for them based largely on
Source: National Archives, RG 59, Central Foreign Policy Files, P850036–2256. Se-
cret; Immediate; Nodis. Drafted and approved by Robinson. Kissinger was in the Virgin
Islands to meet with Israeli officials.
Robinson’s June 29 meeting with Yamani in Jidda was reported in telegram 6252
from Tehran, June 30. His June 11 meeting with Ansary was reported in telegram 15112
from USOECD Paris, June 11, and his June 30 meeting with him and Iranian Central Bank
Governor Yeganeh was reported in telegram 6260 from Tehran, June 30. (All ibid.,
D750226–0501, P850061–1762, D750226–0506)
April 1975–October 1975 241
the draft agenda considered at the April Prepcon; more detailed
agendas to be developed by each commission. Each commission would
proceed at its own individual pace reflecting the nature of its tasks and
relationships with other international fora operating in the same field.
(E) Commission linkage: Some form of regular contact will be
maintained between commissions and with other fora dealing with
these subjects. In spite of our continuing opposition, it appears likely
that most governments will insist on some arrangement for progress
reports back to the group of 27. In this event, we should push for a loose
arrangement without fixed schedules and with agreement that there is
to be no substantive debate in the group of 27 so as to prevent its be-
coming a mini-UN. (Both Saudi Arabia and Iran would support this
4. Anticipated schedule:
(A) Announcement: The plan for resumption of the producer-
consumer dialogue and the date of the Group of 10 meeting to be an-
nounced not later than August so as to precede and influence the
UNGA Special Session commencing September 1 and the OPEC meet-
ing commencing September 24.
(B) Group of 10 meeting: To take place in Paris in early October
(Yamani is still pushing for August, but Iran firmly supports our view
that more time is required for careful preparation).
(C) Group of 27 Ministerial: To take place (at a site to be decided) in
December (at least 30–60 days after the Group of 10 meeting to allow
for selection of the 17 additional participants, issuance of invitations
and conclusion of detailed arrangements).
5. The foregoing represents my judgment as to the basis on which
Saudi Arabia and Iran would support resumption of the producer-
consumer dialogue. My meetings with Venezuela, Brazil (and possibly
Algeria) during early and mid-July could indicate the desirability of
some change in this plan to ensure the support of these key developing
countries which we would want before proceeding with this program.
242 Foreign Relations, 1969–1976, Volume XXXVII
Minutes of the Secretary of State’s Staff Meeting
Washington, July 7, 1975, 8–8:57 a.m.
[Omitted here is discussion unrelated to energy.]
Mr. Enders: We have, I think, a pretty difficult situation in the
native sources policy. But I think the real concern is whether there’s go-
ing to be enough headway over the next six months to keep the organi-
zation moving. And I’ll be submitting to you a couple of letters to the
British and the Germans on this subject.
Secretary Kissinger: Yes. I’ll talk to the President about it on the
basis of your cable.
That doesn’t propose any course of action, but I
told him what is happening. What’s the reason for the slowdown?
Mr. Enders: Well, one is we’re up against real problems. For ex-
ample, the Japanese have got to come up with five million dollars to
build up stocks from 60 to 90 days.
The alternative sources thing is very expensive. There’s a lot of op-
position from the oil countries, as there is here.
The other thing is that we have particular problems in Italy and
Japan. The Italians want to be bought off. They want foreign financing
for their nuclear program. And I think that it will be in our commer-
cial—and I believe in our political—interest to be responsive to that at
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 IEA Governing Board met in Paris June 30–July 2. The highlights of the ses-
sions are in telegram 17267 from USOECD Paris, July 3. (Ibid., Central Foreign Policy
Files, D750231–0004) The decisions reached by the Governing Board on long-term coop-
eration, as printed in a Secretariat paper, are in telegram 17238 from USOECD Paris, July
2. (Ibid., D750229–0987) The Governing Board’s working paper on “considerations for re-
suming the producer-consumer dialogue” is in telegram 158819 to Algiers and other
posts, July 4. (Ibid., D750232–1177)
On July 2, Enders reported to Kissinger on the IEA Governing Board meetings. At
the end of the telegram, Enders concluded: “My strategy is to try to maneuver the IEA
into a straight up or down vote on all the substantive issues by year-end, in the hope the
Japanese and Italians won’t have the guts to break ranks. If OPEC is bloody-minded and
puts the price up a lot in September, this approach has a fair chance of succeeding. But to
make it work we have to be seen to be ready to break out of all new IEA commitments
and go it alone. I am prepared to take that position because IEA will be a paper organiza-
tion unless it does make progress in these fields; it will be so perceived (that is already a
danger, and failure to meet our July 1 deadline for alternative sources doesn’t help), and
thus of less utility to us than heretofore.” (Telegram 17130 from USOECD Paris; National
Archives, RG 59, Central Foreign Policy Files, P840125–2606)
April 1975–October 1975 243
the right time, because they’ll need to show movement towards
The Japanese, basically—they’re in the position they’ve been in
since the very start. They want it both ways. They want good relations
with the producers. They don’t want to have a domestic energy policy
even less than some of the others. They’d like to kind of wait this one
out. On the other hand, they’re responsive to group pressure. So we’ve
got to orchestrate a circumstance in which the Japanese don’t have the
guts to stand up to it.
Secretary Kissinger: Yes, but what do we ask in these letters?
Mr. Enders: Well, the letters simply suggest, (1), indicate to the
British and the Germans, that unless we speed the thing up and make—
Secretary Kissinger: Will you give me a more detailed paper on ex-
actly what the issues are so that I can raise it when I see Schmidt?
have to know what I’m asking them to do rather than speed the thing
Mr. Enders: Yes.
Secretary Kissinger: —and what, concretely, do we want them to
Mr. Enders: Well, what we want them to do is to support us for
going to an overall package deal.
Secretary Kissinger: But can you put it on paper, what an overall
package deal is?
Mr. Enders: Yes.
[Omitted here is discussion unrelated to energy.]
The paper was not found. Ford, Kissinger, and Scowcroft met with Schmidt in
Bonn on July 27. According to the memorandum of conversation, July 27, the Chancellor
said: “We would react negatively in Europe to a confrontation with OPEC. If oil prices go
up, it eventually benefits the U.S. and the Soviet Union who are rich in raw materials. But
there is no chance for Europe, who could not stand a confrontation. They need stable
prices and assured supply.” Kissinger and Schmidt agreed that they should try to split
the OPEC nations as well as the “poor non-oil countries” from OPEC. (Ford Library, Na-
tional Security Adviser, Memoranda of Conversations, Box 14) At another meeting on
July 28, Schmidt said that he and Giscard wanted to propose that “the OPEC discussion
be kept in the Foreign Ministries and not be scattered among the different ministries.” He
also recommended that “the invitations for the dialogue” go out before the next OPEC
meeting to “show that something was being done and give the Saudis an argument for
trying to postpone a price rise, at least until the year end.” (Ibid.)
244 Foreign Relations, 1969–1976, Volume XXXVII
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