Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
Telegram From the Department of State to All Diplomatic
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- Vance 235. Memorandum From Secretary of Energy Duncan and Henry Owen of the National Security Council Staff to President Carter
- 236. Memorandum of Conversation
234. Telegram From the Department of State to All Diplomatic
and Consular Posts
Washington, September 15, 1979, 1354Z.
243027. Inform Consuls. Subject: Update on Energy Issues.
1. This cable updates where we stand on a number of energy
—The state of the international oil market for the next year;
—The U.S. energy situation;
—Oil import pledges made by the US; and
—The status of U.S. domestic energy initiatives.
2. International Oil Market Situation. Even with a partial restora-
tion of Iranian oil production to an average level of about 3.5 million
barrels per day (MBD) and with production running near capacity in
most other OPEC countries, the world oil supply continues to be tight
but adequate to meet current demand and rebuild depleted stocks.
Given probable trends in supply and demand, this delicate balance is
likely to continue through the next six to twelve months, barring a large
drop in oil demand precipitated by deep recession, or a sharp reduction
in supply for political or other reasons.
A. Demand. An average rise of 59 percent in official crude oil
prices in 1979, dampening world economic growth, has been an impor-
tant contributing factor in an anticipated increase of only 0.8 percent in
non-Communist world oil demand from 50.4 MBD in 1978 to 50.8 MBD
in 1979, according to Department of Energy (DOE) estimates. World oil
demand next year will depend on the severity of projected global eco-
nomic turndown and efficiency of demand restraints. Assuming 2 per-
cent OECD growth, total demand estimates show a 0.8 percent in-
crease, rising to 51.2 MBD in 1980. Most growth in demand will occur
in developing countries, especially in OPEC countries, Mexico and
more developed LDC’s. On the other hand, a world economic down-
turn in 1980 could result in a drop in world demand to below 50.0
B. Supply. The most problematic element in a near term market as-
sessment is production levels of key OPEC countries. Current (third
quarter 1979) Free World production (52.3 MBD) is at a level permitting
significant stock re-building, principally due to Saudi Arabia’s 1 MBD
Source: National Archives, RG 59, Central Foreign Policy Files, D790421–1109.
Limited Official Use. Drafted by Alan P. Larson (EB/ORF/FSE) and D. Dolan (EB/ORF/
FSE); cleared by Katz, Rosen, and Calingaert and in DOE/IA, NEA, ARA, EA, AF/EPS,
and EUR/RPE; and approved by Cooper.
746 Foreign Relations, 1969–1976, Volume XXXVII
temporary increase in crude oil production from 8.5 to 9.5 MBD. The
Saudi Government will review this temporary increase later this
producers produce at more or less current levels, DOE estimates that
Free World oil production will be about the same in 1979 and 1980
(about 51.4 MBD). This scenario assumes a slight increase in non-OPEC
production and an off-setting decrease in net exports from Communist
countries as Soviet production peaks and begins to decline.
3. Oil Demand and Supply Balance. While the market has eased
somewhat during third quarter 1979 owing to the Saudi temporary in-
crease and near maximum output levels elsewhere, excess capacity that
existed before the Iranian crisis has disappeared and the market re-
mains very vulnerable to supply disruptions. In addition to those of
Saudi Arabia and Iran, production levels from Nigeria, Iraq and Ku-
wait are also subject to political and/or technical uncertainties. While
an unusually cold U.S. or European winter would further increase de-
mand, DOE estimates foresee a slightly improved Free World stock sit-
uation at year-end 1979 (a rise of about 220 million barrels, or about 5
percent above December 1978 levels).
4. U.S. Energy Situation. DOE data indicate that U.S. oil consump-
tion for the year to date (through August 24) is running at about 18.7
million barrels per day (MBD), down slightly from 18.8 MBD for the
comparable period last year. Significantly, consumption of motor gaso-
line is 7.1 MBD, 3 percent below last year’s level.
5. Net U.S. petroleum imports for the year to date are 7.7 MBD, a
slight increase over the level of 7.1 MBD for the first eight months of
1978. Both figures exclude imports for the Strategic Petroleum Reserve,
which averaged 160,000 B/D in 1978 but which declined sharply this
spring after purchases were suspended in response to the tight oil
6. Stocks of crude oil and products are still somewhat below the
optimal levels, but are being rebuilt in a generally satisfactory manner.
There is particular concern that we achieve an adequate level of distil-
late (i.e., diesel fuel and home heating oil). Distillate stocks now total
about 190 million barrels, roughly 50 million barrels short of the admin-
istration’s goal for this fall. It is expected that continued stockbuilding
will result in an adequate level of distillate stocks by the end of October.
The White House issued a statement on September 26 confirming reports that the
Saudi Government would continue production of 9.5 million barrels of oil per day for 3
more months. The statement is printed in Public Papers of the Presidents of the United States:
Jimmy Carter, 1979
, p. 1766.
January 1979–January 1981 747
7. U.S. Energy Initiatives. There are a number of U.S. energy initia-
tives which have been adopted since April:
—The phased decontrol of domestic crude oil prices has begun.
The price of newly discovered oil was decontrolled on June 1. Other do-
mestic crude oil prices will be gradually raised and by September 30,
1981, all domestic crude oil prices will be decontrolled.
—Mandatory building temperature standards went into effect in
July. It is estimated that they will result in oil import savings of 0.2
—In August, the administration decontrolled the price of heavy
oil, an almost tar-like substance that must be heated to be produced.
The President has also proposed that heavy oil be exempted from the
windfall profits tax. It is estimated that with these incentives 0.5 MBD
of heavy oil can be produced by 1990.
8. In response to a request by the President, the Federal Energy
Regulatory Commission is moving to create a special incentive price for
natural gas from tight sands (low permeability gas basins primarily in
the Rocky Mountain region).
9. There are several administration proposals currently before the
—An amended version of the windfall profits tax has passed the
House and is now being studied by the Senate Finance Committee;
—The Energy Security Corporation (a catalyst for development of
synthetic fuels plants) is the subject of hearings in several House and
—The Energy Mobilization Board (which would establish binding
schedules for Federal, State and local decision-making on critical,
non-nuclear facilities) is being addressed by committees in both
—A wide variety of proposals to promote residential conservation
have been made both by the administration and by various Con-
gressmen, including mandatory programs under which utilities would
conduct “energy audits” for residential customers, make recommenda-
tions for energy saving investments, and provide long term financing
to their customers for conservation improvements;
—Legislation to require utilities to reduce oil use by 50 percent by
1990 is being prepared but has not yet been sent to the Hill;
—Programs to help low income households pay their fuel bills are
—Proposals for greater Federal spending on mass transit are being
—House and Senate conferees are attempting to work out differ-
ences in bills that would give the President authority to develop a
standby gasoline rationing plan;
748 Foreign Relations, 1969–1976, Volume XXXVII
—Request for Presidential authority to set State-by-State targets
for energy conservation is included in the gasoline rationing bill which
is in conference (If State conservation plans did not result in achieve-
ment of their targets, the Federal government would be permitted to
impose a plan for that State.);
—Hearings have been held on a bill to grant authority to establish
a solar bank;
—Initial hearings have been held on tax credits for investments in
solar energy and biomass technologies, e.g. a permanent exemption of
gasohol from the 4 cents per gallon Federal excise tax; and
—A tax credit for producers of natural gas from tight sands has
10. Oil Import Commitments. At the Tokyo Summit, the U.S.
pledged that U.S. oil imports in 1979, 1980 and 1985 will not exceed
1977 levels, i.e., 8.5 MBD. In July the President announced that an oil
import quota would be established, and that 1979 oil imports would be
held at or below 8.2 MBD.
The quota level for 1980 has not yet been set.
11. The administration is reviewing alternative oil import quota
mechanisms, e.g. quota-auction or the allocation of import rights based
on historical patterns or refinery capacity. A notice on oil quota mecha-
nisms will be published in the Federal Register in September and public
comments will be solicited. A decision on a quota mechanism might be
made within a few months by early 1980. (Implementation should not
be required before 1980 since 1979 oil imports are projected to fall short
of the 8.2 MBD ceiling without imposition of a quota.)
12. The U.S. will more than meet its IEA goal of reducing demand
for oil on world markets to roughly one million barrels per day under
what it otherwise would have been. (U.S. oil imports had previously
been projected to be as much as 9.5 MBD in 1979. In making compari-
sions with oil import figures of other countries it is important to note
that U.S. import figures include bunkers (about 0.5 MBD), but exclude
imports by U.S. territories (about 0.3 MBD)).
13. Tokyo Summit Follow-up. At Tokyo the Summit countries
adopted oil import targets and pledged:
—To review programs toward meeting the targets;
—To set up a register of international oil transactions to “bring into
the open” the working of oil markets and thereby to moderate the spot
—Not to buy oil for government stockpiles when this would place
undue pressure on prices and to consult on such decisions;
He announced the goal at Kansas City on July 16. See footnote 2, Document 226.
January 1979–January 1981 749
—To increase as much as possible coal use, production and trade;
—To cooperate on assuring safety in the expanded use of nuclear
—To establish an International Energy Technology Group (IETG)
linked to the OECD, IEA and other international organizations to re-
view the actions being taken or planned domestically by each Summit
country to develop new energy technologies and to report on the need
and potential for international collaboration including financing; and
—To place special emphasis on helping developing countries ex-
ploit their energy potential.
14. There will be a meeting of Summit Energy Ministers (plus rep-
resentatives from the EC and possibly the OECD/IEA) on Sept 26 in
Paris to discuss implementation of Summit decisions.
Washington, September 27, 1979.
This memorandum reports on the results of the meeting of Summit
Energy Ministers held in Paris on September 26, 1979 at President Gis-
card’s initiative to assure fulfillment of the Tokyo agreements. The U.S.
delegation was led by Charles Duncan and included Henry Owen and
At this meeting, the Tokyo Summit agreements and your July
energy initiatives provided the basis for making progress toward
securing country specific oil import commitments from the EC coun-
Source: Carter Library, National Security Affairs, Brzezinski Material, Agency
File, Box 8, Energy Department, 8–10/79. Confidential.
Telegram 256287 to Paris, September 29, summarized the Energy Ministers’
meeting. (National Archives, RG 59, Central Foreign Policy Files, D790445–0563) Tele-
gram 256740 to Paris, September 29, transmitted memoranda of conversation of bilateral
meetings held during the meeting. (Ibid., D790446–0231)
750 Foreign Relations, 1969–1976, Volume XXXVII
tries, as well as on several other Summit energy measures, and a bet-
ter understanding by our partners of the importance of your July
1. 1985 European National Oil Import Targets. The European Summit
countries carried out their Tokyo commitment to specify 1985 national
import targets. The five non-Summit EC countries also fixed their 1985
national targets. The intra-EC negotiation that led to agreement on
these nine national targets was only completed halfway through our
meeting; we were told that it might not have been completed at all
without the pressure created by holding this Ministers’ meeting. The
European import ceilings are set at or slightly above 1978 import levels,
except for Italy (which, you will remember, was granted exceptional
treatment at Tokyo) and the Netherlands—both of which secured large
increases. The 1985 European total is 472 million tons (approximately
9.5 MMB/D), which was the EC net import total in 1978. Within this to-
tal, the UK will move from its current position of being a net importer
to becoming a marginal net exporter of 5 million tons (100 MB/D) in
1985. The four European Summit governments each made a political
commitment at the Paris meeting to achieve the national ceilings that
they specified. Although the targets of Italy and the Netherlands are
not sufficiently rigorous, they resulted from complicated intra-EC
negotiations; taken as a whole the EC total is acceptable. We have
gained considerable ground by the EC’s adoption of the national
target approach and by the stringency of the French and German
2. North Sea Oil. The U.S. indicated, as did the Japanese and Cana-
dians, that North Sea 1985 oil exports over the indicated 5 million tons
could not be used to increase individual European country import
targets for 1985.
The UK took the same position and made clear, more-
over, that if its 1985 exports went over 5 million tons it could give no
assurance that these exports would go to the EC; British Energy Secre-
tary Howell said this not only in the meeting but publicly at the press
conference that followed. In private bilateral talks, the French and Ger-
mans disputed this US–UK view, saying that North Sea oil should be
viewed as community property. The EC representative took the same
position until Howell publicly outlined the UK view; after that, he told
us the U.S. had won its point. This question will be discussed further
when a small internal high-level group of the seven Summit nations
and the EC meets early next month. This group will meet periodically
thereafter, in accordance with the Tokyo Declaration, to monitor fulfill-
ment of Tokyo import pledges.
Regarding this North Sea oil issue, see Document 228.
January 1979–January 1981 751
3. 1980 European National Targets. We pressed for fulfillment of the
Tokyo commitment to develop 1980 European national import ceilings.
After some discussion, we were assured that this would be done, prob-
ably next month.
4. Japan. Energy Minister Esaki repeated to the meeting what he
earlier had said in Washington to the Vice President: that Japan was
planning to achieve the lower end of the 6.3–6.9 MMBD 1985 range that
Japan had accepted at Tokyo. He repeated this statement of intent at the
press conference, while protecting himself by pointing out that Japan’s
formal commitment remained within the 6.3–6.9 range.
5. U.S. Import Ceilings. The others seemed impressed by Secretary
Duncan’s description of measures being taken by the U.S. to restrict im-
ports—particularly the 8.2 MMBD ceiling for 1979 and the fact that im-
port quotas would be used, if necessary, to achieve the 8.5 ceiling for
1980. The Paris press gave front-page treatment to this latter point,
stressing Secretary Duncan’s statement that these quotas would not re-
quire Congressional approval. This may have been an important step
in increasing European awareness of U.S. energy policy. In fact,
throughout the Ministerial and related bilateral meetings, it was the
U.S. which appeared to be on the offensive in terms of meaningful com-
mitments to action, and the Europeans who appeared to be on the de-
fensive. This difference was less than at Tokyo, however, since all were
committed to fulfill the Tokyo decisions.
6. Registration of Crude Oil Transactions. It was agreed, in accord-
ance with the Tokyo Declaration, to activate immediately a system for
monthly registration and publication of crude oil import transactions.
Through this reporting of prices and terms on a cargo basis, we will in-
crease market transparency, and thus inhibit the kind of speculative
purchases that destabilized the market last spring. The International
Energy Agency and the EC will study extending this system to all prod-
ucts and making it a fortnightly, instead of monthly, system.
7. Spot Market. The French made further proposals for surveillance
of the spot market,
including a Tokyo–Brussels–Washington hotline to
discuss actual or impending violations of the Tokyo commitment to
moderate use of the spot market. These proposals were referred to the
IEA and EC for urgent study. The hotline idea may be useful.
8. Alternative Energy Sources. It was decided to activate the Interna-
tional Energy Technology Group agreed on in Tokyo, on the basis of a
U.S. paper outlining the Group’s charter. The Group will assess what
each country is doing to develop alternative energy sources, and will
French officials initially discussed their spot market proposals in Washington
June 14–15. See footnote 2, Document 218.
752 Foreign Relations, 1969–1976, Volume XXXVII
explore possibilities for international collaboration, including financ-
ing. Its first meeting will be in late October or early November, and it
will present its report to the Venice Summit.
9. Distillate Entitlement. In accordance with your decision, Secre-
tary Duncan indicated that there would be no further extension of the
$5 distillate entitlement beyond October 31.
This brought a very favor-
able reaction at the meeting and in the French press.
10. Conclusion. The French press treated the meeting as a large
success in translating the Tokyo decisions into concrete actions earlier
and more effectively than had been anticipated. Our view is more tem-
pered. We made progress on specific European national import ceilings
and other decisions to fulfill Tokyo commitments. But some of these
targets (Italy’s in particular) are too high. How rigorously the other Eu-
ropean import targets bite will depend on whether the UK maintains its
projected lower level of exports (designed to extend the life of its oil re-
serves), and whether the UK continues to insist (along with the U.S.,
Canada, and Japan) that any increase in exports over this level will not
alter existing national European import ceilings. We will discuss how
best to nail down this latter point and related matters with UK Secre-
tary Howell when he visits Washington next week.
All in all, the Paris meeting was a promising start toward fulfilling
the Tokyo energy commitments; we made all of the progress that could
reasonably be expected; other participating governments were pleased.
But a good deal of hard work still remains if effective implementation
of the Tokyo decisions is to be assured.
Regarding the Carter administration’s original decision on middle distillates and
the European reaction, see footnote 2, Document 214.
January 1979–January 1981 753
236. Memorandum of Conversation
Washington, September 28, 1979, 11:20 a.m.–12:30 p.m.
Bilateral Issues and President Lopez Portillo’s Energy Proposals
President Lopez Portillo
The Vice President
Jorge Castaneda, Secretary of
Jorge de la Vega Dominguez,
Secretary of Commerce
Assistant Secretary Jules Katz
Jose Andres Oteyza, Secretary of
Assistant Secretary Viron Vaky
Patrimony and Industrial
Robert Krueger, Amb. at
Alfonso de Rosenzweig Diaz,
Ambassador Patrick Lucey
Under Secretary for Foreign
Ambassador Henry Owen
Jerry Schecter, NSC Staff
Jorge Diaz Serrano, Director of
Guy F. Erb, NSC Staff
Everett Briggs, State
General Miguel A. Godinez
Bravo, Chief of Staff, Pres.
Rafael Izquierdo, Advisor to the
Jose Antonio Ugarte, Advisor to
Dr. Robert Casillas Hernandez,
Private Secretary to the
Rosa Luz Alegria, Under
Secretary for National
Planning and Budget
Andres Rozental Gutman,
Director General of North
American Affairs, Secretariat
of Foreign Relations
Hugo Margain, Mexican Ambas-
sador to the United States
Jose Ramon Lopez Portillo, Direc-
tor of Analysis, Secretariat
of Programming and Budget
Abel Garrido, Director of Bilateral
Trade Relations, Ministry of
Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File,
Box 37, Memoranda of Conversation: President, 7/79–9/79. Confidential. Drafted by Erb
on October 3. The meeting was held in the Cabinet Room of the White House. The full
text of this memorandum of conversation is scheduled for publication in Foreign Rela-
, 1977–1980, volume XXIII, Mexico, Cuba, and the Caribbean. President Lo´pez Por-
tillo was in Washington for an official visit September 28–29.
754 Foreign Relations, 1969–1976, Volume XXXVII
President Carter opened the meeting by saying he was delighted,
pleased, and honored to meet again with President Lopez Portillo in
the White House.
Lopez Portillo thanked him. President Carter sug-
gested that they take up bilateral issues at this meeting and interna-
tional issues on the next day. Lopez Portillo agreed.
[Omitted here is discussion unrelated to energy.]
Lopez Portillo said the two countries had made substantial
progress with regard to gas. There had been some misunderstandings.
What was important to him was the principle on which our dealings
would be based. We now had a permanent basis and it was worth the
Now we had established a principle and had a pattern
to follow in our negotiations. He was happy with the outcome. It gave
us a structure that can be taken to any other field.
[Omitted here is discussion unrelated to energy.]
On energy, Castaneda said that there had been an agreement on
gas. It was well received and he was well satisfied. Mexico sold 500,000
b/d of crude petroleum to the United States, 80% of their crude oil ex-
ports. Sales of electric energy were promising across the California and
Texas borders, particularly in the San Diego area. There was a possi-
Lo´pez Portillo was last in Washington in February 1977.
The first of six rounds of U.S.-Mexican natural gas negotiations, which mainly in-
volved discussions over the price that the United States would pay for Mexican gas, took
place in Mexico City April 3–4. (Carter Library, National Security Affairs, Staff Material,
International Economics File, Box 1, Subject File, Mexico: Gas Negotiations, 3–4/79) The
second was held in Washington May 3–4 (ibid., Country File, Box 49, Mexico, 5–6/79);
the third in Mexico City July 11–13 (ibid., 7/79); the fourth in Washington on July 27
(ibid., 8–9/79); the fifth in Mexico City on August 10 (telegram 13518 from Mexico City,
August 10; National Archives, RG 59, Central Foreign Policy Files, P840175–2453); and
the sixth in Mexico City August 29–30 (telegram 14866 from Mexico City, August 31;
ibid., P840175–2441). At the last meeting, Mexican Foreign Minister Castan˜eda proposed
that the United States pay $3.625 per million cubic feet for Mexican natural gas, while
Christopher countered that “the initial price be set at $3.50, to be escalated at three-month
intervals from time gas starts flowing, but that price would be at least $3.625 on April 1,
1980.” Castan˜eda wanted the guaranteed floor price of $3.625 to start on January 1, 1980,
and said that “both price and date had acquired ‘political importance.’” (Ibid.)
According to a September 12 memorandum from Erb to Brzezinski, “a consensus
emerged” that day in favor of accepting “the last Mexican offer on gas prices, subject to
negotiation by the U.S. private companies of satisfactory clauses on the escalation of gas
prices and the termination of the contract.” (Carter Library, National Security Affairs,
Staff Material, International Economics File, Box 3, Subject File, Mexico: Gas Negotia-
tions, 9–10/79) According to the text of the ad referendum agreement that the Ambas-
sador reached with Castan˜eda, the Governments of Mexico and the United States had
reached an understanding on a framework for the sale of 300 million cubic feet per day of
natural gas by Petro´leos Mexicanos (PEMEX) to U.S. purchasers, with an initial price of
$3.625 per million BTU as of January 1, 1980. (Telegram 16281 from Mexico City, Sep-
tember 20; National Archives, RG 59, Central Foreign Policy Files, P840175–2419) On Sep-
tember 21, the U.S. and Mexican Governments issued a joint announcement on the agree-
ment. For text of the announcement, see Public Papers of the Presidents of the United States:
Jimmy Carter, 1979
, pp. 1703–1704.
January 1979–January 1981 755
bility of selling electrical energy generated through geothermal facil-
ities. This could take place by 1983.
President Carter said this was all very encouraging. There was no
need, he said, to repeat our frequent statements that how Mexico de-
velops and sells its energy was your decision. We wanted to be reliable
customers and good trade partners, that was our goal. Mutual analysis
of energy programs had good prospects. He and his government had
expressed their willingness to explore new ways to sell energy across
[Omitted here is discussion unrelated to energy.]
President Carter said that he was very interested in Lopez Por-
tillo’s energy plan and he suggested that he discuss it.
President Lopez Portillo said he would like to underline two
things. The problem was that we were in transition between two eras. If
this were so we must face other problems. Give or take a decade, in
forty years, he said, petroleum would no longer be the principal energy
source for the human race. Humanity was moving at an accelerated
pace. The stone age had lasted thousands of years, the iron age much
less, the petroleum age might last no more than 100 years. We were
living at the end of an era. His first appeal was that we understand this
situation. Our generation would witness the end of the petroleum era.
The objectives of our energy plans should be clear: to prepare the tran-
sition from one era to another and to introduce the use of other re-
sources. In this transition we must explore, conserve, produce and ra-
tionalize use of petroleum. We must use it in a more satisfactory
manner. By doing this we would be able to make the change to the next
A universal body should prepare the substance of the solution of
the energy issue. This in itself required a strategy. That was the thrust
of his proposal to the United Nations General Assembly: to plan the
transition between two eras, to lay out a program, to establish a
On September 27, Brzezinski sent a copy of Lo´pez Portillo’s speech, delivered that
day to the UN General Assembly, to the President with a covering memorandum high-
lighting the central recommendations of Lo´pez Portillo’s “World Energy Plan.” Brze-
zinski wrote that it would: “guarantee full and permanent sovereignty over national
resources; rationalize exploration, production, distribution, consumption, and conser-
vation of energy sources; increase the exploitation of energy resources; facilitate national
energy plans that would be consistent with a world energy policy; promote auxiliary en-
ergy industries in developing countries; address the short term problems of oil importing
developing countries; set up financing and development funds based on contributions
from industrialized and oil exporting countries to meet the needs of oil importing devel-
oping countries; improve technology transfers in the field of energy; create an interna-
tional energy institute, as proposed by U.N. Secretary General Waldheim.” (Carter Li-
brary, National Security Affairs, Staff Material, International Economics File, Box 3,
Subject File, Mexico: Gas Negotiations, 9–10/79)
756 Foreign Relations, 1969–1976, Volume XXXVII
Working Group which would encompass the industrialized countries
of both East and West, oil exporters, and the oil consuming developing
countries. Mexico had consulted with all these groups and was ready,
in general, to sit around the table and discuss this. If we were to estab-
lish this group we could take up both broad and narrow issues. The
Working Group could make proposals that could be studied and con-
sidered by others.
The energy problem affected the entire world. Lopez Portillo was
especially concerned with the situation of developing countries. Rich
countries could find substitutes for petroleum. They had the ways and
means to do so. Developing countries had no such possibilities. He
always gave two specific examples that moved him, he said: Costa Rica
and Jamaica. Both had democratic governments, very respectable
democratic governments. Their problem was that more and more of
their GNPs was devoted to the purchase of oil. He had met President
Carrazo of Costa Rica before the oil price rise. At that time 27% of Costa
Rica’s GNP was used to buy oil. Perhaps it was 30% now. This caused
him great anxiety. Costa Rican democracy was running a great risk be-
cause of this problem. A similar reflection, not so dramatic perhaps,
was made by Manley at the Non-Aligned Movement meeting in Cuba.
That was why, while proposing long term measures of transition, he
also sought immediate solutions. Developing countries said that they
were not interested in the long term. What were we going to do in the
One of his great concerns, he said, and Mexico was a potential oil
producer, was to look for ways out for these countries, not for to-
morrow but for today. And this must include supply, prices and condi-
tions of purchase, avoidance of speculation, and a mechanism to
transfer real resources to the developing countries. That was why he
had proposed a fund, or several funds, which would finance the
long-term and the anxiety-creating problems of developing countries
that import oil. The oil exporters should recognize that we had a special
commitment to them.
This had been set out in general terms. He would give an example
of what he meant by rationalization of the management of oil while we
enjoyed that product. Between Mexico and Guatemala flowed the Usu-
macinta River. It was the largest river in Central America and could
generate a great deal of electric power. To do this we needed funding,
equipment and a political agreement because the lands threatened by
the dam would be Guatemalan. We had not yet reached an agreement
with Guatemala that would provide power to all Central America.
Under his proposal the global community would make it necessary to
come to an agreement, said Lopez Portillo. It was not right not to use
potentially available electricity. It was a case of what he meant by ra-
January 1979–January 1981 757
tionalization, that is, the use of a parallel source of energy. This project
could solve the energy problems of Mexico and Central America and
would make it possible to save oil.
Lopez Portillo said that if we explored in each country in the
world, we would discover sources that had not been tapped because of
a lack of funds, technology, or equipment. It should be possible to orga-
nize mankind in such a way that energy was wisely used. The only sub-
stitute today for oil is the oil we discover tomorrow. It was our respon-
sibility to discuss this problem.
The developed countries only wanted to discuss the price of oil in
their conversations with oil exporters, as if this were the only issue be-
tween them, said Lopez Portillo. The exporters would not discuss this
point in isolation from others. They wanted to discuss the entire eco-
nomic order. That was where things stood. In the meantime other
things were happening. If we reflect on this impasse, it was not a matter
of principle but of methodology. We should agree on methods. Presi-
dent Carter nodded his agreement. President Lopez Portillo said that
he believed that his method was appropriate. We had determined that
energy, not only oil but alternative sources, was the principal problem
of mankind. We should determine long-term and short-term solutions.
He believed that with political will we would be able to make the best
use of the world’s last oil opportunity.
Disorder could not continue, said Lopez Portillo. Either we put
order into the situation or else it would be imposed on us by the party
that won the struggle, which itself would consume energy. Order
would come in one way or another. He believed that the rational way
President Carter said that Secretary Duncan, the State Department,
and the National Security Council Staff were studying the proposal and
its bilateral and multilateral aspects. He asked Secretary Duncan and
Henry Owen to report to him tomorrow. He said he had thought it
would be useful to hear the remarks of President Lopez Portillo so that
we could prepare our response overnight.
President Carter said that he looked forward to seeing President
Lopez Portillo that evening. Tomorrow they could discuss interna-
tional issues and meet alone as well. President Carter said that the
American people had been excited about the visit and were hopeful of
beneficial results. He knew he shared a desire not to disappoint them.
Lopez Portillo thanked him and said he looked forward to the
meeting tomorrow with great pleasure.
758 Foreign Relations, 1969–1976, Volume XXXVII
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