Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
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After its informal August 25 meeting to address the French aide-me´moire, the IEA
Governing Board issued a “Secretariat note” that explained that the “delegations agreed
as to the importance of resuming the dialogue promptly, and were generally of the view
that the procedures outlined in the aide-me´moire for resuming the dialogue formed a ba-
sis on which participating countries of the Agency could accept invitations to participate
in a new preparatory meeting,” subject to a list of items it wanted clarified. (Telegram
22249 from USOECD Paris, August 29; ibid., D750300–0060)
April 1975–October 1975 273
Telegram From the Embassy in Saudi Arabia to the
Department of State
Jidda, August 28, 1975, 1330Z.
6009. Subject: Oil Policy.
Summary: According to Oil Minister Yamani, the Saudis had de-
cided to hold the line for zero price increases in the September OPEC
meeting. They had even gone so far as to point out to Iranian Oil Minis-
ter Amouzegar that the Saudis might even risk destruction of OPEC to
prevent a price increase. In view of what the Saudis consider our “new
hard line” toward them to be however, price policy is now undergoing
review, and Yamani is not rpt not sure what position the Saudis will
take. Although the Ambassador stressed to Yamani that arguments
he had previously made about price increases had not changed, and
said he knew of no “signals” of changed U.S. policy toward the
Saudis, the outcome of the Saudis’ current policy review is in doubt.
Any letter from President Ford or other U.S. leaders to King Khalid,
Prince Fahd or Yamani should call attention to the Saudis’ public
statements on oil policy and express hope that Saudis will be able to
hold that line at the OPEC meeting. A tough letter on oil prices
would almost certainly be counterproductive; it might tend to
confirm their fears that U.S. policy toward Saudi Arabia had shifted.
1. Saudi Oil Minister Yamani told me Aug 27 that my approaches
to him from April through July on oil prices had been discussed at
length in the Saudi Cabinet and had finally been accepted. The Cabinet
had agreed that at the OPEC meeting the end of September Saudi Ara-
bia must hold the line against any price increase.
2. Prince Fahd discussed the matter with the Shah when he was
there recently and with Amouzegar when the latter recently came to
The Iranian position was that prices should rpt should
be increased by the full 35 percent increase in cost of imports, namely
$3.50. Iran, however, would be willing to “compromise” on a price
increase of “only” $2.00 or $2.50. Yamani said Fahd, unfortunately,
Source: National Archives, RG 59, Central Foreign Policy Files, D750299–0620.
Confidential; Immediate; Exdis. Repeated to Abu Dhabi, Algiers, Bern, Bonn, Brussels for
the Embassy, USEC, and USNATO, Cairo, Caracas, Copenhagen, Doha, The Hague,
Jakarta, Kuwait, Lagos, Libreville, London, Rome, Paris for the Embassy and USOECD,
Tehran, Tokyo, Tripoli, Vienna, Brasilia, Kinshasa, New Delhi, and Quito.
Fahd was in Iran July 1–3, and Amouzegar visited Saudi Arabia during the first
week of August.
274 Foreign Relations, 1969–1976, Volume XXXVII
had been rather weak in dealing with the Shah; Fahd had urged him
to reconsider his position and to adopt a lower price, but he made
no threats and he gave no indication of independent Saudi action
if Iran refused to move. When Amouzegar was here, however, the
Saudi position was much stronger. Amouzegar was told, Yamani
said, that if Iran insisted on a high price increase Saudi Arabia
would sell at the lower price and increase its production markedly
even if this risks a split in OPEC. Yamani will be going to Tehran
this afternoon (Aug 28) or tomorrow to discuss the matter with the
3. Yamani said it was absolutely crucial that the United States un-
derstand this Saudi action was a result of the approaches I had made,
and especially that the decision had been taken long before the “new
hard American line” toward Saudi Arabia. We should not deceive our-
selves into thinking they had yielded to pressure. There was ample evi-
dence of this if we are willing to see it. He had made a statement to the
Cairo press three weeks ago, which we surely had noted, on the neces-
sity of keeping oil prices frozen and Prince Fahd, when in Paris,
had said that oil prices had risen far enough. (Note: There had been
several SRF reports on the same line.) Yamani was also quoted in
on Aug 12 as saying the Kingdom saw no justified economic
reason for raising petroleum prices, and the interview published in Al
Aug 21 repeated this statement almost word for word.
4. Yamani said the situation had now changed. Assistant Secretary
Enders in London at the opening of the Prepcon launched U.S. policy to
The Saudis chose to ignore this but our new policy,
Yamani said, had clearly been formalized in my dismissal
adoption of a “new hard line” toward Saudi Arabia. Yamani said he
was not rpt not now sure what position Saudi Arabia would take on oil
5. I told the Minister that this matter was infinitely more important
than the person of the Ambassador, that I had no idea what “signals” if
any we were trying to send to the Saudis. Yamani said he had long sus-
pected that some in the U.S. administration really wanted oil prices to
go up. A number of the Saudis’ friends in the OECD and the oil indus-
try have told him that Assistant Secretary Enders has said that the U.S.
favored higher oil prices now as a means of uniting the consumers in
economic or even military war against producers. Yamani knew that I
had taken quite another position, that I had constantly fought, cajoled,
Not further identified. Prepcon I was held in Paris not London.
See footnote 4, Document 52.
April 1975–October 1975 275
persuaded the Saudis to keep the lid on oil prices and I had been suc-
cessful in persuading them to do so. He also had no doubt that this was
the policy favored by the Secretary and Treasury and very likely by the
President of the United States, but others, he said, seem to be playing
6. I told him that I did not know if anyone were playing a game
at all. My instructions had been clear, but even if there were any
taking such a devious position the Saudis should not rpt not play
into their hands and agree to increased oil prices. Yamani said he
understood this point but we should also understand that many of
the Saudi Cabinet now felt that with the “new hard line” toward
Saudi Arabia, the Saudi policy on oil prices must undergo a complete
7. Comment: Under the circumstances, I strongly urge that any
letter sent by President Ford to King Khalid or any letter from any U.S.
leader to the King, the Crown Prince or the Petroleum Minister prior to
the OPEC meeting call attention to the statements made by Prince Fahd
and by Yamani in Cairo; that the letter express the hope that
Saudi Arabia will be able to hold its publicly proclaimed line on prices
in the OPEC meeting. An expression of appreciation for the earlier ac-
tions of Saudi Arabia in restraining oil prices would also be well re-
ceived here. In no circumstances should Saudi Arabia be lumped to-
gether with those countries which have publicly demanded higher oil
8. The Saudis are already disturbed at what they have interpreted
as a change of American policy and they are beginning to worry
again about the invasion threat. If we send them a tough letter
on oil prices—particularly given the fact that they had accepted
the arguments I had earlier made and confirmed this by public
statements—they will conclude that we are attempting to provoke
9. There can be no guarantee that the Saudis will not rpt not yield
to OPEC pressures, particularly in face of what they interpret as
an American challenge, but there seems no doubt that there is
(or has been) a desire to hold the line on prices, with no increase or
at most an increase of 50 cents per barrel. A word of appreciation
and encouragement here would be much more effective than
On July 22, Fahd told Giscard that if the industrialized countries stabilized cur-
rency rates, the oil producers did not plan to raise prices later in the year. (The New York
, July 23, 1975, p. 6)
276 Foreign Relations, 1969–1976, Volume XXXVII
any threat or hard line we could and should take with other OPEC
Referring to this telegram and others, Sober sent a personal message to Atherton
in which he wrote: “I believe we must assume that the SAG is genuinely concerned that
we may be beginning a process of turning away from them.” Sober added that the De-
partment “should not ignore the possibility that the SAG actually intends to fight for
keeping the present line on prices.” “Most importantly,” he wrote, “I believe we need to
get to the Saudis as quickly as possible and in a way that can best stem their current incli-
nation to read strong negative political signals into our forthcoming change of Ambassa-
dors.” Sober recommended a visit to Saudi Arabia by Kissinger, so that the Royal family
could “hear the word directly” concerning U.S. intentions. Finally, Sober suggested mo-
difying a previously proposed letter from President Ford to King Khalid on oil prices
based on Akins’s advice, “if we are to believe Yamani.” (Telegram Tosec 100281/205854
to USDel Secretary, August 28; National Archives, RG 59, Central Foreign Policy Files,
Telegram From the Department of State to the Embassy in
Washington, September 9, 1975, 2107Z.
214124. Subject: OPEC Oil Price Decision.
1. You are requested to deliver the following letter from President
Ford to the Shah as soon as possible.
“Your Imperial Majesty: I wish to present for your consideration
my thoughts on an issue of great importance to relations between de-
veloped and developing countries, and to the economic well-being of
our two countries and all the nations of the world.
Since the consumer/producer preparatory meeting in Paris last
April, the United States has made a major effort to re-establish a basis
for dialogue and cooperation between the nations of the developing
world, including those which export oil, and the industrialized nations.
We have undertaken a fundamental review of our overall policy
Source: National Archives, RG 59, Central Foreign Policy Files, D750312–0062.
Confidential; Immediate; Exdis. Drafted by Marion V. Creekmore (EB/ORF/FSE);
cleared by Enders, Sober, and Sorenson; and approved by Kissinger.
Ford sent similar letters to Khalid in telegram 214123 to Jidda, September 10, and
to Pe´rez in telegram 214126 to Caracas, September 9. (Both ibid., D750313–0835 and
April 1975–October 1975 277
toward the developing countries. This review has resulted in a new ap-
proach to the producer/consumer dialogue that responds more fully to
these nations’ concerns, particularly those raised by your government’s
representatives and other delegations during the Paris meeting. Since
Secretary Kissinger articulated the general outlines of this approach in
speeches in Kansas City and Paris in May, we have made much
progress in establishing the constructive understandings necessary to
promote further mutually beneficial cooperation not only between our
two nations but among the broader world community. Furthermore, as
you know, we have made a number of important specific proposals for
cooperation at the current Special Session of the United Nations Gen-
The economic dialogue will be a centerpiece in the new evolving
relationship between the industrial and developing nations. We are
pleased that our efforts, and those of your government and others, have
succeeded in establishing a consensus for resuming these discussions.
Over the past months, we have clearly demonstrated our commitment
to a constructive dialogue and our belief that its success requires each
participant to recognize and take full account of the vital interests of the
As you can appreciate, the support of the American public for the
new US position must be based on an awareness of the concerns of the
oil producers and other developing countries and the need to seek co-
operative solutions to our common economic problems. I am con-
cerned, however, that this necessary support will be jeopardized
should the member countries of OPEC increase the price of oil this fall.
I am also concerned that such action could raise serious questions
among the American public regarding the close cooperation we seek
and are actively developing with your country in several fields of our
bilateral relationship. I value this relationship greatly and sincerely
wish to continue to broaden and deepen it.
Another oil price increase by OPEC would also have a significant
negative impact on the economies of all the oil importing nations—
A key paragraph of Kissinger’s address before the Seventh Special Session of the
UN General Assembly on September 1 (as read by Moynihan) reads: “These economic is-
sues have already become the subject of mounting confrontation—embargoes, cartels,
seizures, countermeasures—and bitter rhetoric. Over the remainder of this century,
should this trend continue, the division of the planet between North and South, between
rich and poor, could become as grim as the darkest days of the cold war. We would enter
an age of festering resentment, increased resort to economic warfare, a hardening of new
blocs, the undermining of cooperation, the erosion of international institutions—and
failed development . . . Can we reconcile our competing goals? Can we build a better
world, by conscious purpose, out of the equality and cooperation of states?” The speech
is printed in Department of State Bulletin, September 22, 1975, pp. 425–441. Excerpts were
published in The New York Times, September 2, 1975, p. 20.
278 Foreign Relations, 1969–1976, Volume XXXVII
both developed and developing—at the very time that signs of prog-
ress in the fight against recession and inflation are appearing. Such a
price increase would impose shocks on the U.S. economy, on the more
vulnerable economies of Europe and Japan, and finally on the highly
fragile economies of the developing world. It would at the very least re-
duce the progress toward economic recovery and could, in fact, plunge
a number of countries into extremely serious difficulties.
It is because I am aware, Your Majesty, of your sensitivity to the in-
terdependence of the world economy and your commitment to a suc-
cessful economic dialogue that I am asking you to weigh heavily the
adverse effects—both psychological and real—which a price increase
could have. It is my hope that you will use your considerable influence
among the producing countries to urge restraint on oil prices and to
argue that our long-term mutual interest in a more rational global eco-
nomic structure should prevail over short-term economic advantage.
Sincerely, Gerald R. Ford. His Imperial Majesty Mohammad Reza
Pahlavi, Shahanshah of Iran, Tehran.”
2. Report when delivery effected.
In his response, the Shah listed reasons why he believed an oil price increase
would be justified and noted that “the tax imposed by the consuming industrialized na-
tions on oil products which on average nearly equals the government take of the oil pro-
ducing nations can very well be adjusted to take care of any increase in oil prices.” (Tele-
gram 8946 from Tehran, September 11; National Archives, RG 59, Central Foreign Policy
Files, D750314–0640) Khalid replied on September 23 that Saudi Arabia was “making an
effort to curb the pressures for a further increase in the price of oil,” but that it did not
want “to maintain a position singlehandedly if all of the other OPEC states insist upon an
increase in prices.” (Telegram 6525 from Jidda, September 23; ibid., D750330–0344) Pe´rez,
in a September 23 letter to Ford, argued that an oil price rise would be justified because
“inflation generated in the industrialized countries” was “constantly eating away at the
purchasing power of our revenues.” (Ford Library, National Security Adviser, Presiden-
tial Correspondence with Foreign Leaders, Box 5, Venezuela—President Carlos A. Perez)
April 1975–October 1975 279
Memorandum of Conversation
Taif, Saudi Arabia, September 11, 1975.
Zaki Yamani, Minister of Petroleum and Natural Resources
Henry A. Kissinger, Secretary of State
James E. Akins, U.S. Ambassador to Saudi Arabia
Joseph Sisco, Under Secretary of State for Political Affairs
Robert Hormats, Senior Staff Member, National Security Council (Notetaker)
Oil Price Increase and the Producer-Consumer Dialogue
Secretary Kissinger: I am extremely pleased to see you again.
Minister Yamani: It is my pleasure, and I am glad you could visit
Secretary Kissinger: I have read of some conversations in which
you indicated that you believed that the US was embarking on a policy
of getting tough with Saudi Arabia. I just wanted to tell you personally
that this is not our policy. If you believe everything that Joe Kraft
writes, you will be in very bad shape.
Minister Yamani: Well, we have heard of this and are concerned.
Secretary Kissinger: Let me assure you that you have nothing to be
concerned about. There is absolutely no truth to this. It is certainly not
I would like to discuss two other issues briefly: an oil price increase
and the consumer/producer dialogue.
On the issue of an oil price increase, I won’t go into the economic
issues. You know these far better than I do. I am no expert. But I will
comment on the political side. A price increase will be used by our op-
ponents in the US—by those opponents of our policy toward the Arab
World. They’ll say we are not tough enough with the Arabs knowing
full well that if we get tougher the Arabs will retaliate. This would
worsen the climate between the US and the Arab World and will be
very harmful to our efforts to improve relations with the Arabs and to
our efforts in the Middle East. The cost will outweigh any conceivable
Minister Yamani: Sometimes we are confused. When His Highness
Prince Fahd was in Tehran, the Shah told us that your view was that it
was necessary to have a price increase.
Source: National Archives, RG 59, Central Foreign Policy Files, P820123–1520. Se-
cret; Nodis. The meeting took place in the King’s compound.
Syndicated newspaper columnist Joseph Kraft.
280 Foreign Relations, 1969–1976, Volume XXXVII
Secretary Kissinger: It is not conceivable that that could be por-
trayed as my view.
Minister Yamani: Well, the US view. They said that it was your
view that an increase was needed to help you increase your independ-
ence. But our view is that we do not want an increase. In fact, we have
sent a message to the Shah from the King against a price increase. The
Shah wants a large increase of perhaps 20%, more than $2 per barrel.
He thinks that OPEC might compromise at about 15%, and he would
go along with this. The Shah is the one who wants an increase. We in
Saudi Arabia do not and have said so. But you must convince the Shah.
Secretary Kissinger: If the price of oil goes up it will lead to mas-
sive political problems for our efforts in the Middle East. It would also
have enormous economic consequences which you know.
Minister Yamani: We know your views. We are not in the forefront
of those who want a price increase. That is not our traditional position.
But your views should be told to other OPEC countries who feel
Secretary Kissinger: When I return, the President will send a mes-
sage to the Shah so he can be under no misconception about our atti-
tude on this.
Minister Yamani: We will, of course, be talking to other OPEC
countries as well. But you must understand that we really do not know
what to make of what we read about the US tough line. This obviously
has influence on our position.
Secretary Kissinger: I can assure you there is no tough line. It is
pure newspaper idle speculation. There is no truth to it. I give you my
With respect to the consumer/producer conference, it is coming
out along the lines you and I discussed. You must accept total victory.
Minister Yamani: What?
Secretary Kissinger: Yes, total victory. This is very much, almost
exactly, what you wanted.
Minister Yamani: We have worked hard on this.
Secretary Kissinger: You played a very constructive role. When I
think back, we are very close to what you and I discussed.
Minister Yamani: There seem to be some issues not yet agreed.
Secretary Kissinger: Do you think that Saudi Arabia and the US
can discuss how we can proceed in these meetings. We need to coordi-
nate closely in our mutual interest.
Minister Yamani: Yes, but we have many differences, too.
See Document 55.
April 1975–October 1975 281
Secretary Kissinger: Yes, but we have many areas of agreement.
These outweigh any differences. And I am not aware of major
Minister Yamani: Well, I think we can work closely.
Secretary Kissinger: Chuck Robinson will be in touch with you. He
is working closely on this. Of course, you are always welcome to be in
touch with me.
Minister Yamani: I might be in Washington in the first half of Sep-
tember, but only for four or five days.
Secretary Kissinger: Let me know when you will be there. Maybe
we can have lunch or tea or something. I would very much welcome
visiting with you again.
Minister Yamani: It is very nice to see you here in Taif, and I look
forward to seeing you again in Washington.
Secretary Kissinger: It is important that we work closely together,
and I will welcome your visit.
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