Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
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- 216. Information Memorandum From the Assistant Secretary of Energy for International Affairs (Bergold) to Secretary of Energy Schlesinger
- Harry E. Bergold, Jr.
- 217. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter
- 218. Summary of Conclusions of Presidential Review Committee Meeting
- 219. Telegram From the Department of State to the Embassies in the United Kingdom and France
On June 10, Gerlach met with Yamani, whom he described as “extremely pessi-
mistic” about the energy picture. Yamani said that Kuwait and the UAE were “insisting”
that a price of $20 per barrel be set at the next OPEC meeting, but that Saudi Arabia
would “make every effort” to hold the price to $17 per barrel, with an outside limit of
$17.50. He thought that a decrease in U.S. oil consumption was the “only hope” of avoid-
ing a major worldwide energy crisis, and that only a major reduction in Free World con-
sumption, or a major recession that produced such a result, would allow Saudi Arabia to
maintain a ceiling on oil prices, as it did not have the productive capacity to do so. (Tele-
gram 944 from Riyadh, June 11; ibid., D790264–0594) At West’s June 12 meeting with
Fahd, the Crown Prince said that he would “do his utmost” to hold the price increase at
the next OPEC meeting to a minimum, and that he was “favorably inclined” to consider
an increase in production. (Telegram 4466 from Jidda, June 13; ibid., D790267–0057)
670 Foreign Relations, 1969–1976, Volume XXXVII
216. Information Memorandum From the Assistant Secretary of
Energy for International Affairs (Bergold) to Secretary of
Washington, June 11, 1979.
SCC Meeting on Tokyo Summit Energy Proposals
To provide the Secretary with information on the status of Tokyo
Summit preparations for the SCC meeting on June 12.
The SCC, possibly chaired by the President, is tentatively sched-
uled to meet Tuesday afternoon, June 12, to determine the U.S. propos-
als and positions on energy issues to be discussed at the final
pre-Summit consultations to be held in Paris June 15–16.
Since there is general agreement within the U.S. Government, as
well as among our Summit partners, on the longer-term energy meas-
ures to be agreed in Tokyo, the SCC discussions will be devoted to fi-
nalizing U.S. initiatives keyed to moderating the critical short-term oil
supply and price pressures on the world market. Because the near term
prospects for increased OPEC production remain uncertain, the vari-
ous short term measures being considered within the USG rely exclu-
sively on demand restraint, specifically oil import limitations, and spot
market price control actions. With growing concern over future oil
availability and price paths, the success of the Summit is likely to be
judged on the public perception of the potential effectiveness of any
agreed measures. This requires that we transcend last year’s general
and mild commitment made in Bonn to reduce dependence on im-
ported oil. The President, moreover, has indicated his willingness to
consider tough, new measures designed to achieve a more satisfactory
world oil market balance.
In anticipation of the meeting with the President, the NSC staff
has prepared the attached background paper (Tab A).
Source: Library of Congress, Manuscript Division, Schlesinger Papers, Box 1,
Japan. Secret. Drafted by Treat on June 8. A typed notation at the end of the memo-
randum reads: “Original given to JRS directly by John Treat,” and a handwritten note on
the first page reads: “JRS has seen.”
The Presidential Review Committee met on June 12, not the Special Coordination
Committee. See Document 218.
Dated June 7; attached but not printed.
January 1979–January 1981 671
Treasury (Ed Fried) has redrafted the paper you reviewed at the June 1
SCC meeting (Tab B).
An effective demand restraint objective will be the centerpiece of
any Summit agreement. While the IEA and EC have agreed to reduce
demand on the world market by 5 percent, and the IEA has recently ex-
tended this commitment to 1980, there is skepticism that these targets
are meaningful. Chancellor Schmidt believes that any 1980 Summit tar-
get should be measured from an historical rather than, as in the IEA,
from a projected base and should be made distinct. Following are the
various proposals to meet, strengthen and make the 5 percent target
—The NSC staff (particularly Henry Owen) prefers extending the
1979 target to 1980 and increasing it from 5 to 7.5 percent. His target
would still be measured against pre-crisis demand projections.
—They have also proposed adding a collective oil import goal
without specific national targets. This could be expressed by agreeing
to hold oil imports in 1980 to a level no higher than a particular base
year, such as 1977 or 1979. In volume terms, those levels would amount
to 22 MMB/D or 21.5, respectively. (See attached table)
—There is also support in the NSC and Treasury for considering
specific national import targets allowing for no growth in 1980 imports
over those of 1979.
I believe DOE should propose a commitment to extend and rede-
fine, on a historical basis, the 5 percent demand restraint target to 1980,
coupled with a group commitment to hold 1980 oil imports to 1977 lev-
els (22 MMB/D). A strengthening of the target underlines Summit
countries determination to restrain oil imports and support public ef-
forts to dramatize the seriousness of the present crisis. It also meets
Chancellor Schmidt’s concerns for a more specific target and, by using
1977 as a base year, permits each Summit country to marginally in-
crease imports. For the U.S., this increase would be on the order of
Not attached; it may be the paper attached to Document 213.
Attached but not printed.
Schlesinger wrote in the margin next to this paragraph: “not to exceed ’77.”
672 Foreign Relations, 1969–1976, Volume XXXVII
Triggering the IEA general allocation mechanism
Treasury, State and the NSC express considerable sympathy for
formally or informally triggering the IEA general sharing mechanism
to allocate oil, as a supplement to demand restraint measures. DOE has
resisted triggering the allocation system although we could agree to a
closer IEA monitoring of current company allocation practices if neces-
sary to achieve support for stronger demand restraint efforts.
In response to your recent conversation with French Energy Min-
ister Giraud, we are studying the feasibility of instituting practices to
curb spot market prices; the French are sending a member of Giraud’s
staff to Washington to present their proposal on Tuesday, June 12. Im-
plementation of any mutually agreed price related practices under this
option are currently constrained by German opposition. Schmidt has
hinted, however, that he would not stand alone in opposition to a
summit consensus on this issue.
The following agreed longer term measures for Summit action re-
quire approval by the SCC:
—Coal—a commitment to increase use and production of coal and
create an International Coal Advisory Board;
—Nuclear Power—a reaffirmation of the need for nuclear power
coupled with increased national and international efforts in the field of
—Energy Technology—a commitment to establish an International
Energy Technology Group composed of experts able to assemble con-
sortia to finance large scale projects involving new energy technologies;
—LDC Energy Assistance—an agreement to increase efforts to assist
LDCs identify and develop conventional and renewable energy
sources in conjunction with the World Bank.
Schlesinger underlined the phrase “IEA monitoring of current company allocation
practices” and made a checkmark in the margin.
Printed from a copy with this typed signature.
January 1979–January 1981 673
217. Memorandum From the President’s Assistant for National
Security Affairs (Brzezinski) to President Carter
Washington, June 12, 1979.
Presidential Emissary on Energy
At the meeting on energy and the summit you might consider the
possibility of a special emissary, to galvanize the consciousness of the
consumer nations and perhaps also to encourage a new dialogue be-
tween the consumers and the producers.
There are two basic alternatives: one would be an emissary who
would essentially try to generate a united front among the principal
consumers, including some of the developing countries (e.g., India).
Good candidates for such an emissary would include the Vice Presi-
dent, or George Ball, or Paul Austin,
and Mike Blumenthal.
An alternative approach would involve more of an effort to gen-
erate a new consumers/producers dialogue (on the model of the
CIEC—Conference on International Economic Cooperation—run out
of Paris). The best candidate for an emissary along these lines would be
David Rockefeller, who would have the ear of both the consumers and
the producers. If security issues were to be related, particularly in the
dialogue with the producers, I could be an alternative to Rockefeller,
but that would be distinctly a second choice.
Depending on the sense of urgency felt by the participants at the
meeting, such an emissary could go either prior to the forthcoming
OPEC meeting (scheduled to open on June 26) or after the Tokyo
I recommend you consider this idea in the context of this after-
Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File,
Box 48, Oil, 3–6/79. Confidential.
J. Paul Austin, Chairman of the Board of the Coca Cola Company.
674 Foreign Relations, 1969–1976, Volume XXXVII
218. Summary of Conclusions of Presidential Review
Washington, June 12, 1979, 4–5:30 p.m.
Energy Policy at the Economic Summit
The Vice President
Richard Cooper, Undersecretary
Julius Katz, Assistant Secretary
Anthony Solomon, Undersecretary
Edward Fried, U.S. Executive Director, IBRD
Harold Brown, Secretary
Charles Duncan, Deputy Secretary
James Schlesinger, Secretary
John Treat, Advisor
James McIntyre, Director
Eliot Cutler, Associate Director
Charles Schultze, Chairman
George Eads, Member
Summary of Conclusions
The President reviewed with the listed advisers five issues re-
garding energy policy at the Economic Summit:
Source: Carter Library, National Security Affairs, Staff Material, International Eco-
nomics File, Box 32, Rutherford Poats File, Summit: Tokyo. Confidential. The meeting
was held in the Cabinet Room of the White House.
January 1979–January 1981 675
1. Oil Import Restraint in 1979. The President decided that we will
seek agreement among the Summit nations to translate the present
IEA/EEC commitment (for a reduction of oil imports equal to 5% of
projected 1979 consumption) into a more understandable and credible
set of individual country ceilings, to accelerate achievement of these re-
ductions by lagging countries, and to jointly monitor performance.
2. Oil Import Restraint in 1980. The United States will seek a Summit
commitment to an undefined “deeper” cut of oil imports in 1980, as
compared with a rising demand curve, deferring until later expert dis-
cussion agreement on the actual import ceilings. The discussion dealt
with a range of import reductions up to 500,000 b/d below the other-
wise likely US import level.
3. International Allocation. We will advocate moving now into an in-
formal system of international oil allocation, short of formally trig-
gering the IEA/EEC system, so as to prevent competitive scrambles for
scarce supplies and assure equitable treatment of all countries; we also
will propose communique´ language indicating readiness to consider
undefined other measures if the informal mechanism is inadequate.
4. Spot Oil Markets. As a supplement to the fundamental actions
above, we will give limited support to the French proposal for action to
stabilize the spot markets,
agreeing now only to take action within
each nation’s law and policy to discourage our companies from en-
gaging in transactions on the spot markets at extraordinarily high or
speculative prices; meanwhile, the legal counsel will be asked to advise
the President on whether US law permits him to impose restrictions on
imports of oil or refined products priced above certain levels.
5. Strategic Oil Reserve Procurement. We will propose concerted ac-
tion to refrain from purchases for national oil reserves when this would
put undue pressure on oil prices.
Jean-Pierre Capron of the French Ministry of Industry outlined the proposal in
meetings with Department of State officials June 14–15. France recommended that the
Rotterdam spot market be reorganized by: “(a) limiting the number of traders/brokers
through official licensing system which would be implemented by individual countries
(notably Netherlands); (b) requiring traders to publish official quotations, limiting these
quotations to actual transactions; (c) creating a supervisory board under EC aegis with
extensive powers of investigation, and with regulatory powers to be established over
time. The system would be designed to discourage ‘daisy chains’ which artificially drive
up published Rotterdam prices, create transparency, and provide a vehicle for regulating
the market.” (Telegram 154557 to Paris, June 15; National Archives, RG 59, Central For-
eign Policy Files, D790271–0695)
676 Foreign Relations, 1969–1976, Volume XXXVII
219. Telegram From the Department of State to the Embassies in
the United Kingdom and France
Washington, June 15, 1979, 0202Z.
153526. London for Calingaert, also for USOECD. Subject: IEA In-
formal Meeting on Actions To Reduce Pressures on World Oil Prices.
Ref: Paris 18632.
1. Following gives analysis and U.S. position for your use in Sat-
urday informal meeting of IEA in Paris. Sections are arranged in same
sequence as “Options” in reftel, with brief summary of each followed
by U.S. position.
2. Demand restraint: summary of IEA proposal. The IEA paper
calls for accelerating the group 5 percent demand restraint effort, and
for considering the possibility of going to 7 percent. It points to the
need to be able to respond within 4–6 weeks in the event of some fur-
ther cutback in oil availability. It points out that reliance on price to re-
strain demand (German style) is not sufficient. The paper also points
out the very serious product imbalances (e.g., plenty of resid but not
3. U.S. position. We support the idea of accelerating the 5 percent
demand restraint as much as possible and have already made major
progress toward achieving our target. We would be interested in more
information on progress on demand restraint by other countries (U.S.
has already forwarded its updated demand restraint questionnaire to
IEA Secretariat). We favor the idea of extending 5 percent demand re-
straint into 1980. At this point we consider it premature to go to a 7 per-
cent level, but deepening the cut should be given further consideration.
We see the same product imbalance problem, and would be interested
in suggestions on how to rectify it.
4. Spot market monitoring: summary of proposal. The EEC has al-
ready begun a voluntary program to collect weekly and monthly infor-
mation on transaction prices and volumes from spot operators. The
IEA paper presents as one option a mandatory reporting system for all
persons trading oil into, out of, and between IEA countries. The IEA pa-
Source: National Archives, RG 59, Central Foreign Policy Files, D790269–1104.
Confidential; Immediate. Drafted by Bullen, cleared by Katz and Schotta and in DOE/IA
and EUR/RPE, and approved by Rosen. Repeated Immediate to Copenhagen, Ottawa,
Bonn, Rome, Tokyo, The Hague, and Brussels.
Telegram 18632 from Paris, June 11, transmitted the text of an IEA paper entitled
“Options for Action To Reduce Pressures on World Oil Prices.” According to the Em-
bassy, Lantzke explained that it represented documentation for informal discussion by a
restricted group that he hoped to convene in Paris on June 16, just prior to the EC Energy
Ministers meeting on June 18. (Ibid., D790265–0094)
January 1979–January 1981 677
per also discusses a “code of conduct” for buyers and sellers, but gives
only cursory indication of the content of such a code and no indication
of how it could be enforced. But the IEA paper cautions that setting up
a reporting system and code of conduct would be difficult and take a
long time. It notes that reporting system might run into legal problems
in some countries.
5. U.S. position. U.S. supports the idea of studying the spot market,
and in that sense monitoring it. DOE/ERA already requires informa-
tion from companies on spot purchases of crude landed in the United
States. We have taken a position in favor of the proposed IEA study of
the spot market, and are sympathetic to the EEC’s studying it.
However, we are not presently in favor of moving beyond an
information-gathering exercise to some more active type of monitoring.
We join the IEA Secretariat in being skeptical that an IEA-wide data-
gathering system of sufficient timeliness and reliability could be insti-
tuted fast enough and could keep pace with the market for the present
crisis. We share the IEA Secretariat’s skepticism that a code of conduct
would be really meaningful, though we would be willing to discuss the
idea further. The United States believes that careful attention should be
paid to possible anti-competitive effects of any measures taken to mon-
itor the spot market, particularly the potential for disclosure of propri-
etary information that would affect competition adversely.
6. Relax anti-trust: summary of IEA paper. The paper examines the
proposition that anti-trust restrictions should be relaxed to permit co-
operation among the oil companies, but expresses doubt that the in-
tended cooperation could be designed and set up fast enough. How-
ever, the paper does not say what company cooperative measures are
envisaged, and simply assumes such measures would be desirable.
7. U.S. position. We do not at this point see any justification for a
further relaxation of anti-trust requirements beyond what is already
permitted as needed for implementation of the IEA agreement. As a ba-
sis for further consideration of such an idea, we would need to see a
fully developed discussion of what cooperative measures would be en-
visaged, what benefits they would provide to the consuming world,
and what the risks would be.
8. Activate the IEA and EEC allocation systems: summary. The pa-
per discusses the benefits and risks of international allocation. It poses
the basic question of whether the governments and their publics are po-
litically ready to carry out international allocation with enough dedica-
tion to make it work in the shortfall. An unsuccessful effort to allocate
internationally would discredit the system and the IEA. But the paper
suggests that, if properly presented, allocation could be made accept-
able to consumers, and producer countries could be persuaded that al-
location was a reasonable move to manage the situation and not a con-
678 Foreign Relations, 1969–1976, Volume XXXVII
frontational step. The paper stresses the need for domestic allocation if
international allocation is triggered, and points out that the IEA alloca-
tion system has no price control mechanism.
9. U.S. position. We believe the emergency sharing system should
not be triggered at this time. We appear to be confronted with a short-
fall of limited depth and uncertain duration. There is, however, the pos-
sibility of further supply disruptions, or market anticipation of further
disruptions, which could aggravate significantly the current imbalance.
For the time being, we favor a close monitoring by the IEA of supply
distribution, an accelerated implementation of agreed measures to re-
strain demand on the world market, and a consideration of possible
measures to reinforce the demand restraint effort. Active consideration
should be given to allocation or other steps if these measures in time
10. International price controls: summary. The IEA paper shoots
down the idea of international price controls as unworkable, at least
without international oil allocation. It points out that to work, an inter-
national price control would also have to be supplemented by agree-
ment on appropriate intra-IEA transfer prices, and domestic price con-
trol systems within all participating countries; and these domestic price
control systems would have to be harmonized. The IEA Secretariat pa-
per says that agreement on an import price level, transfer price, and
harmonized national price control systems would pose insurmount-
able technical and political problems. It also points out the danger that
an IEA ceiling price would risk becoming an OPEC price floor.
11. U.S. position. We concur in all the arguments against interna-
tional price control advanced by the IEA paper. Price controls would be
treating the symptoms, not the disease, and would in any case be ex-
tremely difficult to manage. We do better to strike at the underlying
problem of supply/demand imbalance through demand restraint and
other measures. In addition, a price control system would tend to drive
oil supplies away from the IEA group.
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