Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
Telegram From the Mission to the Organization for
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- 109. Memorandum of Conversation
107. Telegram From the Mission to the Organization for
Economic Cooperation and Development to the Department
Paris, October 29, 1976, 1940Z.
32138. Subject: CIEC: Text of G–8 Paper on Energy Investment Ta-
bled by U.S. in ENC.
Proposal for Cooperation in Energy Investment
Source: National Archives, RG 59, Central Foreign Policy Files, D760404–0665.
Unclassified; Priority. Repeated to all OECD capitals, Algiers, Jidda, Buenos Aires, Brasi-
lia, Yaounde, New Delhi, Jakarta, Baghdad, Tehran, Kingston, Mexico City, Lagos, Islam-
abad, Lima, Cairo, Caracas, Belgrade, Lusaka, Kinshasa, and USUN.
The seventh round of the CIEC commissions was held in Paris October 20–28. Dis-
cussion on the first day was devoted to an EC working paper on “Energy Cooperation”
that had been introduced on the last day of the September round. The Saudi co-chairman
described the paper as an “attempt to establish a mechanism which could be used to de-
prive producer countries of their ‘sovereign right’ to dispose of their resources as they
saw fit.” (Telegram 31366 from USOECD Paris, October 22; ibid., D760397–0268) The Oc-
tober 22 and 23 sessions are summarized in telegram 31467 from USOECD Paris, October
25; the October 25 and 26 sessions in telegram 31793 from USOECD Paris, October 27;
and the October 27 and 28 sessions in telegram 32132 from USOECD Paris, October 29.
(All ibid., D760399–0139, D760401–0556, D760404–0652)
376 Foreign Relations, 1969–1976, Volume XXXVII
1. Participating countries recognize that the establishment and
maintenance of a satisfactory global balance of energy supply and de-
mand during and beyond the transition period will require major capi-
tal investment in the exploration, development, and utilization of new
energy, both conventional and non-conventional. It is recognized that
in order to create a climate more conducive to investment under mutu-
ally satisfactory conditions, international cooperation on a continuing
basis should be intensified.
2. The industrialized countries recognize the need to facilitate in-
vestment in the development of energy resources, conventional and
non-conventional, in their own territories and in the developing coun-
tries commensurate with the urgent need to assure adequate world en-
ergy supplies. In this regard, they recognize the need to maintain and
improve access to capital markets by the developing countries.
3. The oil exporting countries recognize the need to take account of
the world’s requirements for energy, and in particular requirements for
oil and gas, during the transition period in formulating their plans for
investment in new production capacity and supporting infrastructure.
4. The participating countries recognize that the accelerated devel-
opment of the indigenous energy resources, conventional and non-
conventional, of the energy deficient developing countries is essential
to the economic progress of these countries. This development will re-
quire major amounts of capital. The industrialized and oil exporting
countries, to a greater or lesser extent, are the primary sources of such
5. Participating countries recognize the important role the private
sector plays in providing much of the capital, as well as much of the
technology and know-how, for the exploration and development of the
energy resources of the energy deficient developing countries. It is also
recognized that, in order to facilitate the flow of such capital into en-
ergy resource development in the EDDCs, unnecessary constraints
should be reduced. In this respect, cooperation agreements between in-
vesting and host countries could be appropriate in some cases. Foreign
investment should be consistent with the needs of the host countries
and make an optimum contribution to the fulfillment of their economic
6. The Energy Commission conducted a preliminary examination
of the proposal to establish an International Resources Bank to facilitate
investment in raw materials, including energy, in developing coun-
tries, with particular attention to its potential to facilitate increased in-
vestment in energy development in the energy deficient developing
countries. The participating countries welcome the recent decision by
the IBRD/IMF Development Committee to study the International Re-
sources Bank proposal and suggest that the Development Committee’s
October 1975–January 1977 377
examination of the proposal take account of the urgent need of many
developing countries to reduce their dependence on imported energy.
7. It is also recognized that the official international lending institu-
tions have played and will continue to play an important role in the de-
velopment of indigenous energy resources in the energy deficient de-
veloping countries. Participating countries recommend that these
institutions, in the context of their overall development lending activ-
ities, recognize the urgency of the energy investment requirements, in-
cluding infrastructure, of such countries.
Washington, October 30, 1976.
Mr. Robinson, Deputy Secretary
Mr. Rogers, Under Secretary for Economic Affairs
Mr. Katz, Assistant Secretary for Economic & Business Affairs
Mr. Atherton, Assistant Secretary for Near East and South Asian Affairs
Jock Covey, notetaker
OPEC Price Increase
Robinson: There are two reasons for this meeting. One, to make it
clear that an OPEC price increase would have a crucial effect on Euro-
pean economies and, secondly, that the only strategic thinking that
anyone has shown so far is contained in the Presidential letters
you saw a couple of days ago—and nobody feels that these letters will
be a breakthrough.
Kissinger: No, the only thing the Arabs understand is threats and
Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL 180,
Geopolitical File, Middle East. Secret; Sensitive; Nodis.
See Document 110.
378 Foreign Relations, 1969–1976, Volume XXXVII
Katz: They know that they will bear the burden of the
Kissinger: That is crap! They know no such thing.
Atherton: The Saudis do.
Kissinger: But you know the Shah does not understand.
Rogers: He thinks in terms of the myth. He just doesn’t understand
how rickety the UK and Italian economies are. We can propose an ac-
tion program right now, but we probably should wait until Tuesday to
decide who we should send out there.
Kissinger: Who did you have in mind?
Rogers: Any of us or maybe Alan Greenspan.
Kissinger: Absolutely not! The present state of our own economy is
proof that it would be stupid to send him. He is a slightly more pol-
ished version of Zarb, who did such a great job on the Iran oil deal. The
Shah will not listen to another amateur in business for himself.
Katz: You think it would be better to send someone from outside
Atherton: What about David Rockefeller?
Kissinger: Too soft.
Robinson: If production limits do not go up, then the prices will go
up. The Saudis are expecting us to be responsible and by that they
mean they expect us to show responsibility in arms sales and in our
handling of the boycott and in our behavior in CIEC.
Kissinger: CIEC! Bullshit! They have nothing to gain in CIEC.
Robinson: You are absolutely right, but that is what they are
saying. The oil companies are accelerating the whole process by paying
up to a 50¢ premium on the oil they are buying now. They are laying in
their stocks before the price goes up and they expect to make a large
profit on it and they have clearly signalled that they expect a price in-
crease. Now we have got to make it clear to these guys how disastrous a
price increase would be for the situation in the UK and Italy. These
guys are not naive. They are among the most sophisticated economists
in the world, but they must be motivated. We have to get to them but
we cannot do it ourselves. We have to coordinate this with the British
and with the Italians.
Robinson: We should not be in the position of pleading for Europe.
Kissinger: I want Porter to get back there. There is no sense not
having our Ambassador in place there. He is doing us no good on that
promotion board. Do you think you need him there?
Atherton: It’s not all that busy.
October 1975–January 1977 379
Rogers: The OPEC price increase is the biggest financial event in
Robinson: It does not look as if we are concerned.
Kissinger: Just get him back there and I need by Monday a strategy
lation . . . but I do not think we can get the UK and the Italians to go
Robinson: I just don’t think we should be in the position of
pleading for the Europeans.
Kissinger: They will not get out in front. They will try to show that
they are all good boys and after all, we are pleading for the world
economy. But we will never get anybody—not the French, maybe the
Let’s have a talk with the French, British and Germans. See what
they think about the price increases and what they will be doing to deal
with it. What penalties do they suggest to try to avoid it?
Robinson: What about the Japanese?
Katz: They will run.
Kissinger: They are all terrified. The Japanese will not join any-
thing. Let’s do this on an informal basis. Ask the Ambassadors in
Washington to get papers. Can you (Robinson) follow that?
Robinson: Yes. Just a word on Mexico. They need capital to de-
velop the Gulf oil field. The idea is to get U.S. oil companies to partici-
pate—to be paid out of future proceeds.
Kissinger: How would you do that?
Robinson: Jova discussed the plan with Lopez-Portillo. He says
that he is receptive to the idea. We ought to have someone go down
there, though . . .
Kissinger: Who do you have in mind?
Robinson: Bill Rogers would be good.
380 Foreign Relations, 1969–1976, Volume XXXVII
109. Memorandum of Conversation
Washington, November 8, 1976, 2:30 p.m.
OPEC Meeting on Oil Price and CIEC Ministerial
The Deputy Secretary
Under Secretary Rogers
Assistant Secretary Atherton
Paul Boeker, EB
Richard Vine, EUR
Robert Hormats, NSC
Stephen Bosworth, EB/ORF (Notetaker)
[Omitted here is discussion unrelated to energy issues.]
The Secretary: All right, on OPEC . . . what are we trying to
Rogers: We want at a minimum to eliminate any OPEC price in-
crease or even to have the current freeze extended. The issue has enor-
mous significance. A 15 percent price increase will reduce the GNP of
the seven largest industrialized countries by $32 billion.
The Secretary: Why?
Rogers: That is assuming no offsetting policy measures. It will
happen because . . .
The Secretary: How did we keep Joan Braden
out of this meeting?
Rogers: I am having another meeting on this subject. She will be in-
cluded. Do you want her here?
The Secretary: No.
Rogers: A 15 percent increase for the US will impact on our trade
balance by $11 billion. It will reduce GNP growth from 5½ to 4½
The Secretary: How do we answer the Shah’s point when he asks
why he should pay the price of our lousy policy?
Rogers: In fact, the increase of his import costs is only 4 percent. He
has no case for price increase.
Source: National Archives, RG 59, Central Foreign Policy Files, P820118–1904. Se-
cret; Nodis. Drafted by Bosworth on November 19. The meeting was held in the Secre-
Consumer Affairs Coordinator and Special Assistant, Bureau of Economic and
October 1975–January 1977 381
Robinson: This is basically correct. But the Shah and the rest of
OPEC feel that the best [last?] price adjustments were not adequate. The
LDCs will be the hardest hit. A 15 percent increase would raise the oil
bill by $3.2 billion. And exports would also be hit, but in effect, the total
cost would be perhaps $5 billion. The LDCs’, of course, strongest argu-
ment is for holding down prices. But the OPEC also claim that we are
not reducing oil consumption and that they will be helping us to do
that by raising prices.
The Secretary: This is just an elegant way of saying that market
conditions are favorable to an increase.
Robinson: We must bring every effort to bear on this.
The Secretary: Another round of bleeding argument won’t work.
What does Porter say about this?
Robinson: Saudi Arabia has already said it won’t support an
The Secretary: But that is what the Saudis always say.
Hormats: We must also pressure Iran and Venezuela.
The Secretary: What is our pressure?
Rogers: We have the arms supply point, the bids to fill the strategic
oil reserve, and our imports of the LNG.
The Secretary: The SOR is no longer of interest to them. They are
now selling as much as they can produce. The SOR is now bidding up
the oil price. This is a classic example of why we are in this mess. We
had a 15-month window in which we could have had a $1 price cut. The
geniuses wanted $3. It is a classic horror story of what happens when
we subordinate strategy to bureaucracy.
Atherton: It is not typical of the Shah to react favorably to a threat
on the arms issue. It would be more likely that he would call our bluff
and go elsewhere.
The Secretary: It is not viable unless we get French cooperation. I
am more inclined to get the IEA together and say what we are going to
Rogers: That is important, but it doesn’t impact on the decision.
The Secretary: I think we ought to meet with the IEA at as high a
level as possible.
Rogers: Why not at your level? We could call urgently for a
meeting to discuss the price increase.
Robinson: Some of these things are better pursued bilaterally.
The Secretary: We can arrange that in the context of an IEA
Hormats: The IEA might be somewhat too public. Bilaterals with
key Europeans followed by emissaries to key OPEC countries might be
382 Foreign Relations, 1969–1976, Volume XXXVII
The Secretary: Who would we send?
Hormats: It could be Bill or yourself.
(Secretary leaves briefly and then returns.)
Rogers: Mr. Secretary, I think we have an idea to propose. First, we
will have Jules Katz make a statement in the IEA meeting, which is go-
ing on today and tomorrow, about the OPEC price issue saying that we
want to consult.
We will then get the Ambassadors of four major coun-
tries (UK, Germany, France, and Japan) in here and say we want to be-
gin urgent consultations. We will stress that we should make coordi-
nated de´marches to the OPEC countries on arms. We will need to know
whether we can talk from a common front.
The Secretary: You can’t have the Japanese. They will go immedi-
ately to the Arabs and tell them everything.
Robinson: Do we know for sure that the UK doesn’t favor a price
Vine: Yes, they are sweating a possible increase.
The Secretary: OK, so we have a statement by Jules Katz.
Rogers: We will try to draft something right after this meeting.
Robinson: Shouldn’t we also have a public statement?
The Secretary: Yes, we have to do something publicly.
Rogers: First, we have to level with the public on the impact of a
price increase. We have the CIA analysis.
The Secretary: We can’t talk tough unless we say what we are
willing to do.
Rogers: We can then say we are consulting with the Europeans and
make de´marches to OPEC on possible consequences of price increase.
Would it be appropriate for you to say that?
The Secretary: When?
Rogers: As soon as possible.
The Secretary: Who will talk to the Ambassadors?
Rogers: You could do it, or I could do it.
The Secretary: You do it. Let’s get the Saudi Ambassador in here. I
want him to understand that this is not a minor matter. It could affect
the whole US attitude toward the Mid East.
Katz’s statement in the November 8–9 IEA meeting is in telegram 33245 from
USOECD Paris, November 9. (National Archives, RG 59, Central Foreign Policy Files,
D760417–0660) A summary of the meeting is in telegram 33428 from USOECD Paris, No-
vember 10. (Ibid., D760419–0298)
Not further identified. On November 12, The New York Times reported that a De-
partment of State spokesman said that the Department had told OPEC of U.S. opposition
to a price rise.
October 1975–January 1977 383
Robinson: We should also do the Iranian.
The Secretary: Let’s get them both in here.
Atherton: I think a good argument is the one about getting off to a
good start with the new US Administration.
The Secretary: But the problem is that they would like to stick the
old Administration rather than the new one. I want to tell them that
if they increase the price, I’ll make sure they pay a heavy price
Hormats: Another point is the international financial system. A
price increase could topple it. We have already massive LDC debt.
The Secretary: That is how we got Downey released from China.
We said his Mother was dying. They let him go and his Mother has
never looked better. We can try that argument, but I don’t think it’s too
strong. OK, within 48 hours I want the French, German, and British
Ambassadors in here. We want to talk about what coordination meas-
ures they would be willing to take. We will send letters from me to their
foreign ministers setting out the problem, indicating what might be
done, and asking for urgent consultations.
We want to know their atti-
tude toward particular items. In the meantime, I’ll see the Iranian and
Hormats: I think you should also include the Venezuelans.
The Secretary: OK. I don’t think anyone should visit these coun-
tries until we get some answer on the consultations with the
Rogers: I don’t see what Simon can do.
Robinson: He is PNG in Saudi Arabia from his last visit.
The Secretary: Why?
Robinson: He threw his weight around and aroused a lot of
Boeker: The political argument might be more effective. The Vice
President might be a more appropriate emissary.
The Secretary: You go and then have them turn us down; that will
Hormats: But the only way to make these points is with a personal
Robinson: There is a problem in the Saudi Government on this
issue. With Yamani on one side and the King and others opposed.
Telegram 280066 to Londaon, Bonn, and Paris, November 13, transmitted the text
of Kissinger’s letter that Rogers gave to U.K., West German, and French Embassy officials
in Washington. The letter to the Foreign Ministers proposed “consultations on possible
common elements of approaches to the oil producers.” (National Archives, RG 59, Cen-
tral Foreign Policy Files, D760425–0190)
384 Foreign Relations, 1969–1976, Volume XXXVII
Hormats: Fahd is the key.
The Secretary: There are two reasons to send someone—to see that
they are doing something and to see what, if anything, we can achieve.
Atherton: I like the idea of the Vice President.
The Secretary: That is out of the question.
Atherton: But they will listen to . . .
The Secretary: What about Ford?
Rogers: It won’t hurt his political future.
The Secretary: I have no problem with the Vice President, but let
that issue wait until we do the other things.
Boeker: There is one other issue which is related to this. The Euro-
peans are having trouble getting themselves together on CIEC, and
they may try to get it postponed and blame it on us.
The Secretary: I’m strongly in favor of postponing the CIEC Minis-
terial. Who’s been saying it should not be postponed?
Boeker: It may well happen, but that does not fit well with our plan
with oil price increase. If it is possible, OPEC will raise prices in Decem-
ber and then face us with a second price decision after a postponed
Ministerial. They will set us up for a double dip.
The Secretary: I don’t understand how anyone cannot favor a post-
ponement. I don’t understand what this Administration could produce
with only four months to go.
Robinson: That is right. The G–77 has asked Perez Guerrero
to Carter. We also have a report that Kuwait wants a postponement.
The Secretary: That is fine.
Boeker: But can we accept the possibility that it is postponed be-
cause of us?
The Secretary: CIEC would be a disaster. We have no Administra-
tion that can take any decisions. Who is talking about our wanting a
Rogers: All we are saying is that we not take the initiative for
The Secretary: Why don’t we take the initiative?
Robinson: I have already discussed with the French, the Dutch and
Rogers: The problem is the Europeans would like to postpone it
and blame it on us. We should maintain our current position through
the November session.
Manuel Pe´rez Guerrero of Venezuela and Canadian Foreign Secretary Allan
MacEachen were co-chairmen of the CIEC.
October 1975–January 1977 385
The Secretary: I don’t see what the advantage is of having it. If, by
the end of November, it is not postponed, then we should take the initi-
ative. We won’t deal and we shouldn’t give the impression that we can.
Boeker: But we have to be careful that we do not pay a price for
postponement. We don’t want to raise LDC expectations.
The Secretary: But what can we possibly produce. If the election
had gone the other way, I was willing to use CIEC to make a step for-
ward. But now it is senseless to try and do that. It would be irresponsi-
ble for us to try to take a major step in December. Nothing can come out
of the meeting four weeks before a change in Administration.
Robinson: A December CIEC meeting certainly won’t satisfy the
The Secretary: If it hasn’t been postponed by November 20, we
should take the initiative. I don’t know what I would do at the De-
Rogers: We can wait through the November commission session.
The Secretary: We can’t possibly get a good package by De-
cember—only a bureaucratic deal.
Boeker: If we take the initiative on postponement we may have to
The Secretary: Why should we pay? Just tell them. Tell the Euro-
peans that on the whole we think postponement is in the interest of the
Hormats: It gives the LDCs a pretext. They can say we are drag-
ging our feet.
The Secretary: But we can’t go forward now and should just tell
them. They are not children.
Rogers: It is really their problem. That is, to decide whether to ter-
minate CIEC to take the chance of going forward.
The Secretary: They’d be nuts to break it off. Carter is likely to be
more forward. CIEC is not a way out of an oil price increase. If the Ad-
ministration were not changing we could have used the CIEC to head
off a price increase. Our position on the whole is that we prefer to defer
the Ministerial. If it is not deferred by the twentieth, then we must ac-
tively work to defer it. If we have it, I’ll send you (Robinson). There is
no function that I would have, and I could play games and make a great
speech, but so what? Tell MacEachen that this is our view. We won’t
say anything useful there. What can we possibly get out of Treasury
Rogers: They will go for increasing ODA. We have a proposal on
The Secretary: Fine.
386 Foreign Relations, 1969–1976, Volume XXXVII
Hormats: We also need strategy for the LDCs.
The Secretary: Who do we approach?
Rogers: The moderate LDCs.
The Secretary: OK. We want letters to the Germans, French, and
British Foreign Ministers. Call in their Ambassadors and give them to
them. Get the Saudi and Iranian in for me, and the Venezuelan.
Robinson: Do we try to contact MacEachen before he meets with
The Secretary: Yes, tell him our views.
Telegram Tosec 320162/299942, December 10, informed Kissinger that Mac-
Eachen and Pe´rez Guerrero announced the postponement of the CIEC Ministerial until
the “first part” of 1977. (National Archives, RG 59, Central Foreign Policy Files,
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