Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
Letter From President Ford to Venezuelan President Pe´rez
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110. Letter From President Ford to Venezuelan President Pe´rez
Washington, November 9, 1976.
Dear Mr. President:
The decision last May of the Organization of Petroleum Exporting
Countries not to increase the price of oil
was a responsible action
which has contributed to the process of global economic recovery. In
the spirit of our countries’ close relationship, however, I wish to bring
to your attention my deep concern about reports that Venezuela may
seek an increase in the price of oil at the December OPEC meeting, and
to urge you to bring your country’s considerable influence to bear in-
stead to oppose an increase, which would have harmful effects on
world inflation and recovery, the plight of the developing countries,
and international economic cooperation.
The oil exporting countries have already made substantial gains in
purchasing power as a result of economic recovery and greater de-
Source: Ford Library, National Security Adviser, Presidential Correspondence
with Foreign Leaders, Box 5, Venezuela—President Carlos A. Pe´rez. Secret. Similar
letters were sent to King Khalid and the Shah on October 29. (Both ibid., NSC Interna-
tional Economic Affairs Staff: Convenience Files, Box 5, OPEC (1)) Telegram 275886 to
Caracas, November 9, instructed the Ambassador to inform either the President or the
Foreign Minister that similar “de´marches” were being made to Saudi Arabia and Iran.
(National Archives, RG 59, Central Foreign Policy Files, P840105–0533)
See footnote 2, Document 98.
October 1975–January 1977 387
mand for oil in the oil-importing countries. OPEC nations will earn
$125 billion this year from their oil exports, about 20 percent more than
in 1975, and more than 400 percent above what they earned in 1973 on a
similar volume of oil exports. In this regard, I understand that the mar-
keting difficulties confronted by Venezuela earlier this year have eased,
at least in part because of the modifications made by my Government
in our domestic oil entitlements program. It is unfortunate that Vene-
zuela appears to have responded to this strengthened market position
by implementing a unilateral price increase, during a period in which
OPEC had decided not to increase the prices.
A further oil price increase would generate inflationary pressures
which are not in any nation’s interest. Currently the industrialized
countries are making dramatic progress in controlling inflation
through major policy actions, with the average rate of inflation for
major countries falling to half its 1974 rate. Our analysis of the composi-
tion of exports from the major industrialized countries to the oil pro-
ducers indicates that the prices of these goods have risen only by 30
percent since mid-1973, and by only 4 percent over the past year. Prices
of our largest export—grain—have actually fallen by $50 a ton in the
last year. But the industrialized countries alone cannot solve the
problem of inflation. Oil-producing countries too have a responsibility
to control world inflation.
I am also concerned that an increase in the price of oil could under-
mine the fragile economic recovery and the already weak balance of
payments situation in both developing and industrialized countries.
The oil bill of the oil-importing developing countries has quadrupled
from $2 billion in 1973 to $13 billion this year. Some of these developing
countries are just beginning to regain a more satisfactory rate of growth
and to reduce their trade deficits as demand for their exports has in-
creased and they have begun to adjust to the burden of higher oil
prices. Many of the poorer developing countries, however, continue to
experience desperate balance of payments difficulties and, as a result,
wholly unsatisfactory prospects for economic growth. Among the in-
dustrialized countries, there are several which have not yet begun to re-
cover from the severe economic recession of 1974–1975 and continue to
experience large balance of payments deficits; a number have virtually
exhausted their ability to borrow. Even in the United States, where re-
cent economic activity has been more vigorous, the recovery has
slowed. My deep concern, therefore, is that the possibility of truly
global economic recovery which we are seeing will be threatened by
the slowdown in growth and the adverse inflationary and balance of
payments effects of a new increase in the price of oil. All countries have
a vital interest in the maintenance and strengthening of the global re-
covery and the increase in international trade which will accompany it.
388 Foreign Relations, 1969–1976, Volume XXXVII
Finally, I am concerned that a new increase in oil prices could prej-
udice the creative and constructive process of dialogue among devel-
oped and developing countries to which your government and you
yourself have made a major contribution. I am also committed to that
process. I have taken a number of decisions to ensure a positive United
States approach to the problems of the developing world. This year the
United States will provide more funds for economic assistance than in
any year since our post-war Marshall Plan, more aid than any other
country in the world. I also have committed my Government to give se-
rious consideration to a number of other new approaches to the
problems of the developing countries. I am working to maintain sup-
port for constructive policies toward the developing world. I believe
that further progress in a number of areas of the North-South relation-
ship, including the official development assistance made available to
the developing world, should be possible in the coming months. In par-
ticular, I am optimistic that the Conference on International Economic
Cooperation, which is scheduled to meet at the ministerial level in
mid-December, can achieve positive and concrete results beneficial to
developed and developing countries. But the international structure
which both you and I wish to build must be based on due regard for the
impact of individual national decisions on the rest of the world. Actions
which appear to overlook this impact seriously undermine domestic
support in this country for a constructive approach to the problems of
the developing world.
I hope, therefore, that when you have given full consideration to
all the implications of the oil price question, the significant influence of
Venezuela and your personal stature and international leadership will
contribute to a decision by the oil-exporting countries as responsible as
that of May and that there will be no new price increase.
Gerald R. Ford
In his November 20 reply, Pe´rez wrote that it was “not just to persist in attributing
the problems of the world economy, especially inflation, to the Organization of Petro-
leum Exporting Countries.” (National Archives, RG 59, Central Foreign Policy Files)
King Khalid wrote to Ford that Saudi Arabia would “continue to play a role to withstand
moves” toward raising oil prices,” as it always had, but that it could not “impose its will
upon all of the (OPEC) members.” (Telegram 7452 from Jidda, November 14; Ford Li-
brary, National Security Adviser, Presidential Country Files for the Middle East and
South Asia, Box 29, Saudi Arabia—State Department Telegrams to SECSTATE–NODIS
(15)) The Shah replied that if oil was “sold cheaply,” no “alternative source of energy”
would be developed and “the world dependence on the rapidly depleting supplies of oil”
would continue to increase. (Telegram 277569 to Tehran, November 11; National Ar-
chives, RG 59, Central Foreign Policy Files, D760421–0054)
October 1975–January 1977 389
111. Memorandum of Conversation
Washington, November 29, 1976, 9:58–10:37 a.m.
Amb. Ali Alireza, Saudi Ambassador to the United States
Brent Scowcroft, Assistant to the President for National Security Affairs
President: It’s not very pleasant weather.
Alireza: I rather like it. We are deprived of rain in Saudi Arabia so I
President: First, I appreciate your delaying your trip to meet with
me. I wanted to consult with you about an issue that is of importance to
us all. It’s not a partisan political issue in this country but a problem of
general concern. When Governor Carter was here
we discussed it and
we are in general agreement on the problem of oil prices.
You were here when I had that good talk with Prince Saud last
We have been communicating with other governments on this
and will continue to do so. I am gravely concerned about the
world economic situation and the possible impact of an increase in oil
prices. I noticed that President Perez visited Moscow where it was an-
nounced there was a friendship agreement and that Soviet leaders
would visit Venezuela. I am deeply worried about the economic situa-
tion both in the more industrial states and in the less developed coun-
tries, which are very vulnerable. In Portugal we have been working
hard to get a moderate government operating and eliminate Commu-
nist influence. A deterioration in this economic situation could reverse
the progress we have made. In Italy also there are grave economic
problems, which if the present government can’t solve, it will undoubt-
edly bring Communists into the government. Great Britain is now
trying to negotiate an IMF loan to stabilize its currency. While it is not
directly related, the Australians have just devalued. . . .
Source: Ford Library, National Security Adviser, Memoranda of Conversations,
Box 21. Secret; Nodis. The meeting was held in the Oval Office. Brackets are in the orig-
inal. Ford met again with Alireza on December 14 to discuss OPEC’s consideration of an
oil price rise at its Doha meeting scheduled for December 15. (Ibid.)
Ford met with President-elect Jimmy Carter in the Oval Office from 3:40 to 4:44
p.m. on November 22. (Ibid., White House Office Files, President’s Daily Diary)
See footnote 6, Document 103.
See footnote 6, Document 106 and Document 110.
390 Foreign Relations, 1969–1976, Volume XXXVII
I think our two countries have been working together against the
expansion of Soviet and Communist influence and I wanted to talk
about what we might be able to do in this situation.
I don’t need to tell you my feelings for Saudi Arabia over the many
years. I have fought hard for Saudi Arabia and supported the closest of
relations between us. I fought against irresponsible actions on the boy-
cott on the part of the Congress. I will continue to do so because our
aims and objectives are identical. I will continue to do so even after I
leave office. But it is difficult when the American people see a price in-
crease which does such damage around the world. I want to help, but
when my economists tell me of the jeopardy a price increase could put
the world economy recovery in, I want to work with you to deal with
Soviet influence in the Middle East has been much reduced, but a
change in attitude in the United States could also jeopardize that. We
want to continue working for peace in the Middle East, but any sharp
action by OPEC will make it harder to move toward peace.
I know it is a very difficult problem for the King and I know he is
working toward our common goal, but I hope you will communicate to
him my deep concern about the economic and political difficulties we
face. Again, I am sorry I had to delay your trip.
Alireza: Mr. President, it is always a privilege to be able to meet
with you and convey your views to my King.
My government has spent about 10 percent of its wealth in helping
other countries around the world. Prince Saud has told me to tell you
that we are still doing everything we can, but one thing has changed—
demand has now outrun supply. But the problem is political not eco-
nomic. We will do everything we can without breaking OPEC. But if
you could bring pressure on other members it would be helpful. If
through your good office you can persuade other producers . . .
President: I plan to meet with others of your colleagues.
Alireza: Tomorrow the pilgrimage begins and the King plans to
meet at Mecca to discuss this issue.
As far as Great Britain, Italy, and the other countries you men-
tioned are concerned, we have done what we could through loans and
President: You have been very responsible.
Alireza: As far as the Communists and the Soviet Union are con-
cerned, you know our position and I need not repeat it. We greatly ap-
preciate your fight on the Maverick and the boycott with the Congress.
Ford discussed his concerns about an oil price increase with the Venezuelan Am-
bassador on December 1. (Ford Library, National Security Adviser, Memoranda of Con-
versations, Box 21)
October 1975–January 1977 391
President: I have spoken with my successor on this and urged that
he oppose further legislation. Notwithstanding his campaign rhetoric,
he indicated his position would be responsible.
Alireza: Secretary Kissinger has spoken with me and Ambassador
Zahedi, and Deputy Secretary Robinson spoke to me. We understand
your message. But again I would urge your intervention with other
President: We shall do so. We have the prospect of a substantial
world economic recovery right now, but it is very fragile in a number of
areas and I am afraid it could be destroyed.
Alireza: We have been hit hard by inflation in industrial prices.
President: I agree. But we are making progress in that regard, but it
takes time. I also appreciate your responsible leadership on Lebanon,
such as at the Riyadh conference. I think there is real progress now,
thanks to your leadership.
Alireza: I hope you can restrain the neighbor to the south. Without
the Syrian troops in the area, the guerrillas will have free rein.
President: We are working with the Israelis on that point and I am
hopeful that the Lebanese situation can be resolved.
Alireza: We are grateful for your leadership over your term of of-
fice. As you know, the Saud family has for years led the fight against
Communism. We are fortunate to have them leading our country.
[More discussion on these lines.]
President: We are very grateful for that leadership. I will impress
on my successor the importance of our two countries working together
for our common objectives.
Alireza: You are not only head of the United States, but the leader
of one of the two great powers in the world. We look to you to lead us
in the fight against radicalism and leftist influence.
President: Please convey my greetings to King Khalid. Please as-
sure him of my warm regards and my hope that we can continue to
work together to meet these problems.
price of oil, we appreciate Your Excellency’s clarification, and undoubtedly you appre-
ciate the efforts which the Kingdom made to freeze the price of oil for 15 months; we defi-
nitely wanted to prolong this period at the coming meeting of OPEC. However, the in-
creasing demand for oil has led to a rise in its price.” Khalid explained that the real price
of oil had risen 5 percent above its posted price and that “the consumer in Europe and
America and Japan, moreover, is paying this price, while the oil companies are benefiting
from the differential.” Khalid concluded by assuring Ford that Saudi Arabia would “con-
tinue its efforts with its friends in OPEC to lighten the burden, and to arrive at the lowest
increase (in the price of oil) that is reasonable and acceptable.” (Telegram 7941 from
Jidda, December 9; National Archives, RG 59, Central Foreign Policy Files, D760455–
392 Foreign Relations, 1969–1976, Volume XXXVII
Alireza: It is never an imposition for me to discuss with you on be-
half of my government. I am always at your disposal.
President: I hope you have a good trip. I think the new Mexican
President is a good man. I met with him last September.
Alireza: Their currency is in trouble right now.
President: They have problems but I think with half a chance the
new President will do well.
[The conversation ended.]
112. Memorandum of Conversation
Washington, December 7, 1976, 10–11:23 a.m..
Amb. Ardeshir Zahedi, Ambassador of Iran
Brent Scowcroft, Assistant to the President for National Security Affairs
Alan Greenspan, Chairman of the Council of Economic Advisors
[There is a brief discussion of the weather here and in Iran,
hydro-electric projects in Iran, the Helmand River project. etc.]
The President: Let me extend to the Shah my personal regards. I
have great personal regard and affection for him. I hope that in the fu-
ture years the close relations we have between our two countries will
continue. There is a strong feeling in the United States for the Shah and
But I want to talk about an issue which troubles me—the Doha
and a possible oil price increase. I have read the Shah’s letter
very carefully. I both agree and disagree with it. I agree wholeheartedly
with his points about conservation. The industrial world has not done
enough, and it is essential. I have proposed a conservation plan which
the Congress has not yet accepted. We are searching and we need to do
more with respect to alternate sources of energy. I do disagree with him
Source: Ford Library, National Security Adviser, Memoranda of Conversations,
Box 21. Secret; Nodis. The meeting was held in the Oval Office. Brackets are in the
The meeting of OPEC Oil Ministers was held in Doha December 15–17. See Docu-
See footnote 3, Document 110.
October 1975–January 1977 393
on the issue of oil price and its relation to industrial prices. These are
honest differences between friends.
But let me talk about the impact that an increase will have. There is
unanimity among my advisers that the world economic health is not
good. Any increase in the price of oil would have a serious impact on
the world financial structure. Its precise impact is hard to predict
An increase would also have a serious impact on our capability to
help the developing countries. If economic conditions here don’t im-
prove, the American people will ask how they can continue helping the
developing world when we have such serious difficulties at home. If
our economic situation improves—I am an optimist, but we do have
this pause, which I feel will be resolved in the direction of stable
growth—we will be able to continue and expand our efforts toward
North-South cooperation. The other industrial countries are lagging be-
hind now the United States, and the resources for North-South cooper-
ation simply wouldn’t be available if economic progress halted.
I am a strong supporter of the Shah. I think he has done great
things for his country and is a strong force for moderation and stability
in the Middle East. I spoke out publicly during the campaign in support
of the Shah. I want to continue my participation in public affairs after I
leave. I want to continue my support of Iran—I would like to visit there
at some time. It would help me greatly in my efforts if the Shah could
exercise a moderating influence in the OPEC meeting. I understand his
position and I agree with part of his position. But we have to look at it
in a broader perspective now and I think an increase would have a seri-
ous impact on the world economic structure.
Zahedi: It is a great honor for me to meet with you, Mr. President. I
want you to know how greatly you are admired by the Shah and by my
people. I say that from the heart on his behalf and my behalf.
I don’t want to take your time, but two years ago when prices were
going up I talked to Secretary Kissinger and Secretary Simon and
would have gone to the area right then and would have helped. But the
past is past.
Again, the meetings on the North-South dialogue have not gone
well. There are people in this government who are not sympathetic.
Then under President Johnson and early in the Nixon Administration,
when I was Foreign Minister, we proposed that oil resources be set
aside to buy industrial equipment on a swap basis. The Congress ob-
jected to that too and it never came to fruition.
The decision on holding this meeting in December was accidental,
based on a number of countries’ budgets. But I have been talking to
other Ambassadors about postponing the meeting. I talked with His
Imperial Majesty about it, but it is almost impossible. Had I known of
394 Foreign Relations, 1969–1976, Volume XXXVII
your letter to His Imperial Majesty, I would have urged that it be held
earlier or not at all. The timing was not good.
The Shah told me how much respect he has for you and he would
like to do whatever he could. But he said he could not propose a change
of date for the meeting but would accept it if others do.
On the question of price, he said it is inevitable there would be
an increase but he proposed that it be a moderate one. Our industrial
import costs are going up rapidly. The price of services has risen tre-
mendously. The price per month has gone up from $3–4,000 to
But we do understand the problem, and we have been thinking of
only a 10 percent increase. We thought about setting aside 10 percent of
each barrel to help the needy countries. This failed, and we compro-
mised on $600 million of which we—the Arabs—gave 40 percent.
Again, on the agricultural fund, we have contributed about $400 mil-
lion and the developed countries haven’t done too well. Then bilater-
ally we have set aside about 7 percent of our Gross National Product to
help the developing world and our neighbors. [He listed some who are
We do understand the problem. The recommendations for the pro-
posed increase range from Algeria who is proposing 40 percent—that
would be irresponsible—to Saudi Arabia which publicly says 5 percent
but they are trying to be the white knight. There will be an increase.
What would be moderate?
The President: The only way we can reassure the world economy
is to have no increase.
Zahedi: That is not possible.
The President: I am telling you the facts. Any increase would jeop-
ardize the economy and no increase would be a shot in the arm. The
next best would be a delay. Is that possible?
Zahedi: Now, it is almost impossible. If it were done early in the
fall—when Secretary Kissinger and I were joking about it—if you had
asked for March, it would have been easy. But Secretary Kissinger said
wait until after the election.
I know how you spoke up for Iran and the Shah is deeply grateful.
I don’t believe any of the OPEC countries would agree to a delay be-
cause it would look like they were forced to.
The President: That’s why I asked you to come in quietly. I want to
have no confrontation, and that is why this meeting is private. You say
a delay or no increase is out of the question. Start with the Nigerian 40
percent. That would be catastrophic.
Zahedi: Most of them are talking of 20–25 percent.
October 1975–January 1977 395
The President: That would also be catastrophic. Alan, maybe you
can address it in more detail.
Greenspan: I think it is a fact that the world has not yet adjusted to
the earlier increase.
The early very sharp increase was very destabi-
lizing. It was possible to accommodate as well as we did because there
was considerable lending flexibility, both among borrowers and
lenders. Now, however, that flexibility has vanished. The international
financial structure is now stretched thin. What is wrong in the strong
industrial countries is a lack of confidence. That is the basic reason for
the pause. The reason for the confidence gap is the huge increase in
debts. The overhang of an oil price increase adds greatly to that lack of
confidence. No price increase would have a very beneficial psycholog-
ical effect around the world. It would bring us together and help the
world economy to move again.
I agree with the Shah that oil is scarce and has to be priced against
competing fuels. It is a matter of time. Alternate sources take time and
Since it is a matter of psychological confidence, there is no such
thing as a moderate increase. And the psychological benefit of no in-
crease, in the face of all the current fears, would be substantial.
The President: There is just one more thing. The situation, in sev-
eral countries, is very serious. Take Italy. They are having serious eco-
nomic problems but at the bottom it is political. If the government can’t
cope, there will be Communists in the government. In France, the situa-
tion is potentially serious, with strong Communist forces. In Portugal,
the situation is very tenuous with the government just hanging on and
the threat of a collapse. In Spain also, they are making great progress,
but it is still fragile. That is why I come back to no increase or a delay.
Any increase adds to the danger of a financial crisis, to failure in some
governments, even to the danger of military crisis.
Zahedi: I think there is no doubt there will be an increase, espe-
cially after the steel price increase in this country. Many newspapers
are now speculating there will be a 7–15 percent increase. We would
not accept a big increase. There will be an increase, but we are con-
cerned about the security situation in Europe. We know more than
most how important Europe is and the dangers of being isolated. That
is why we are giving bilateral help to European governments. The price
of oil is about one-half percent in the United States and about one or
one-and-a-half percent in Europe. Unless people get a shock, they
won’t realize we have to switch from oil. We have plenty of coal.
See footnote 4, Document 82.
396 Foreign Relations, 1969–1976, Volume XXXVII
I spoke in Mexico with President Lopez Portillo. What a great love
he has for you.
The President: He is very impressive.
Zahedi: We cannot let Mexico collapse. Some are going to help
them. Our Minister of Finance is going there in January.
I think if nothing unusual happens—and the Shah hasn’t told me
so I am guessing—it would be about ten percent. The highest would be
15 percent and we would fight anything over 15 percent. Less than ten
percent, I don’t know, but I honestly don’t think so. The Shah said I
could promise you he would be moderate and very moderate.
I will report this conversation also. But the Shah understands; he
has great feeling for you and for the United States. And I feel very
strongly about the United States and our relationship. Anything I can
do, I would like to.
The President: I appreciate that and I know it is true. That is why I
thought we could talk together this way as close friends. Please express
to him my admiration and affection for him. I hope that the great influ-
ence he has will be directed toward a moderate increase.
Zahedi: I will tell him again. You and Mrs. Ford have an invitation
to visit Iran. I hope you come as many times as you can and stay as long
as possible. You are a great man and we love you, whether you are in or
out of office.
The President: I am very grateful and we would at some time like
to take advantage of your very kind offer.
October 1975–January 1977 397
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