Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
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- 238. Letter From President Carter to Crown Prince Fahd of Saudi Arabia
- Jimmy Carter
- 239. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to Director of Central Intelligence Turner
- 240. Memorandum From Director of Central Intelligence Turner to the President’s Assistant for National Security Affairs (Brzezinski)
- 241. Memorandum From the Executive Secretary of the Department of State (Tarnoff) to the President’s Assistant for National Security Affairs (Brzezinski)
- Peter Tarnoff
- 242. Paper Prepared in the Department of State
237. Memorandum of Conversation
Washington, September 29, 1979, 10:15–11:30 a.m.
International Issues and Energy
President Lopez Portillo
The Vice President
Jorge Castaneda, Secretary of
Jorge de la Vega Dominguez,
Secretary of Commerce
Jose Andres Oteyza, Secretary of
Assistant Secretary Jules Katz
Patrimony and Industrial
Assistant Secretary Viron Vaky
Robert Krueger, Amb at
Alfonso de Rosenzweig Diaz,
Under Secretary for
Ambassador Patrick Lucey
Ambassador Henry Owen
Jorge Diaz Serrano, Director of
Jerry Schecter, NSC Staff
Guy F. Erb, NSC Staff
General Miguel A. Godinez
Bob Pastor, NSC Staff
Bravo, Chief of Staff,
Everett Briggs, State
Pres. Gen. Staff
Rafael Izquierdo, Advisor to the
Jose Antonio Ugarte, Advisor to
Dr. Robert Casillas Hernandez,
Private Secretary to the
Rosa Luz Alegria, Under Secre-
tary for National Planning
Andres Rozenthal Gutman, Direc-
tor 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.
January 1979–January 1981 759
President Carter said he had enjoyed the dinner and that the toasts
and comments showed our publics that we are working well together.
President Lopez Portillo agreed. He lamented the impression that
had been given of the last meeting.
The spirit had always been as it
was today. He was very glad of that.
President Carter said he had looked into Lopez Portillo’s U.N.
speech and his proposal for a UN Working Group,
which he found
to be promising. It would be advisable if the two Secretaries of State
quietly kept each other informed on this matter. We would confine our
public remarks to the joint positions that they reach.
President Carter said that the United States would continue to sup-
port energy development in developing countries through the World
Bank and bilateral programs. At the Tokyo Summit, we and others had
resolved to limit to the maximum degree possible the future imports of
oil. Actions which he had taken alone and with the Congress would re-
duce our otherwise likely imports by four million barrels a day by 1985.
Additional measures now awaiting Congressional approval would re-
duce our demand for oil imports by another 4 million barrels a day by
1990. With your permission, Secretary Duncan would describe briefly
the presentation that he made in Paris.
Secretary Duncan described the Paris meeting of the seven Energy
Ministers of the Summit countries.
The meeting had opened with a de-
termination that world oil supply and demand were in a fragile bal-
ance, but for several reasons there existed a possibility of supply inter-
ruptions. The situation seemed to be set for 1980, but that could be
affected by economic changes or by political events or disruptions. In
the medium and long term the fact that the system would continue to
be fragile drove the need for conservation measures and constraints on
Duncan then discussed the measures that had been taken since the
Summit to reduce reliance on oil imports. The main questions had been
what the members of the European Community would agree to as their
individual targets for 1979 and 1985. They had agreed to 472 million
tons, approximately 9.5 million b/d, as the ceiling for EC members in
1980. The figure of 472 million tons compared favorably to EC imports
in 1979, which were projected at 515 million tons. All nine EC countries
For text of the toasts at the dinner on the evening of September 28, see Public Papers
of the Presidents of the United States: Jimmy Carter, 1979
, pp. 1781–1784.
Reference is to their February 15 meeting in Mexico City; see Document 190.
See footnote 5, Document 236.
See Document 235.
760 Foreign Relations, 1969–1976, Volume XXXVII
had accepted the necessity of adopting national targets and the four
Summit countries in the EC had already made national commitments.
Japan had accepted a range but the Japanese Energy Minister had said
at the meeting and at a press conference that he would try to achieve
the lower end of the range, that is 6.3 million barrels per day. Secretary
Duncan also mentioned the 1980 U.S. import commitment of 8.5 mil-
lion b/d and the 1979 target of 8.2 million b/d a day.
In Paris, Duncan said, they had also discussed a crude oil transac-
tion register. It would record transactions in the crude oil market and
make them public on a monthly basis. There was also a discussion of
energy technology and how to communicate that technology. Improve-
ments would be sought in the exploitation of coal, nuclear power, with
an emphasis on safety, and alternative sources of fuel. Conservation
was also emphasized. There had been considerable interest in the Presi-
dent’s energy program. With the President’s approval Secretary
Duncan gave a fact sheet to Secretary Castaneda.
President Carter thanked Secretary Duncan. To summarize, the
President said, all of us realized that we had been using, wasting, and
importing too much oil. All agreed that despite economic growth, im-
ports would not increase through 1985 and then would be reduced
through the use of alternate sources of energy. To help maintain stable
supply and stable prices we were eager to share our technology with
developing countries and provide or help provide finance for explora-
tion. He understood that these goals were compatible with Lopez
President Lopez Portillo said yes, he was not saying anything new,
only that there would be serious and grave consequences if there were
no action. He believed that, put together, the Tokyo Summit ideas and
President Carter’s energy programs were close to his U.N. proposals.
But there were certain considerations that he would like to raise. The
Tokyo Summit countries were trying to reduce their dependence by
controlling demand. There were two problems with that approach.
If bloc policies were followed, said Lopez Portillo, then the pro-
ducers would cartelize supply; they would look for balance in the
market and for an advantageous situation in the world economy.
Therefore, reliance on blocs was ill advised. Bloc bargaining added
great danger. During the period in which we try to control demand we
ran the risk of a recession because a cut in demand would reduce eco-
nomic growth. A reduction in demand would cause OPEC to reduce
supply and upward pressure on prices thus would continue. The posi-
tion of developing-country oil importers would become even more se-
rious. They would be cut by a scissors: the price of petroleum would
rise while a recession affected their exports. This would be very unfa-
vorable for the developing countries.
January 1979–January 1981 761
That is why President Carter’s energy program for the U.S. was in-
teresting. What you had proposed for the United States was close to
what should be approved by the entire world. We could not act on iso-
lated parts of the whole problem. For this reason we supported your
plan. President Lopez Portillo had reservations about the Tokyo results
and but he hoped that reason would prevail and that energy would be
taken up in a global forum.
Lopez Portillo said that there were dangers of misunderstanding.
An OPEC country had already said that Mexico’s proposal had been
thought up as a means of dividing OPEC. He had foreseen that this
would happen and for that reason had said that the United Nations is
the place in which to raise the problem. Mexico’s position was separate
from the producer and consumer positions. He believed, however, that
it was the correct view. He viewed the Tokyo Declaration with sympa-
thy, but it had the dangers to which he had referred. However, the
Tokyo meeting indicated that there was a trend toward order which
gave him hope that it would be possible to negotiate.
President Carter said he recognized the concerns of Lopez Portillo.
We were making every effort to avoid creating a recession. Our prin-
cipal emphasis was on conservation and elimination of waste. Our
second effort was to produce oil and gas more efficiently from existing
fields and with advanced techniques for recovery. We wished to use
other forms of energy which were plentiful; that is shale, coal and solar
energy, as well as increase the ability of developing countries to find
energy resources. We were eager to share our superior technology with
all other nations and were making some progress.
[Omitted here is discussion unrelated to energy.]
762 Foreign Relations, 1969–1976, Volume XXXVII
238. Letter From President Carter to Crown Prince Fahd of Saudi
Washington, October 3, 1979.
Your Royal Highness:
I am very pleased with your announced decision to continue pe-
troleum production at third-quarter levels.
As I said publicly, your ac-
tion is a constructive complement to the efforts of oil-importing nations
to curb consumption and switch to other fuels. It will greatly assist the
world in meeting important energy needs and helping to stabilize
The courage and responsibility which your government has con-
sistently demonstrated in developing its policies is a source of strength
and stability in international affairs. I take deep personal satisfaction in
the close and friendly relationship existing between our two nations,
and I will continue to seek ways to deepen and broaden our areas of
cooperation and mutual understanding.
Source: Carter Library, National Security Affairs, Brzezinski Material, President’s
Correspondence with Foreign Leaders File, Box 16, Saudi Arabia: Crown Prince and First
Deputy Prime Minister Fahd ibn Abd Al-Aziz Al Saud, 2/77–5/80. No classification
marking. An undated covering memorandum from Brzezinski to the President recom-
mended that he send the letter to Fahd.
See footnote 2, Document 234. On September 19, Brzezinski sent Vance a memo-
randum informing him that Yamani had told the Danish press that there was a 50–50
chance that OPEC would again raise prices at the December Ministerial meeting. Accord-
ing to Brzezinski, Carter’s response was, “Let’s move to prevent this.” Brzezinski advised
Vance that the Department of State “should implement the President’s instruction.” (Car-
ter Library, National Security Affairs, Brzezinski Material, Country File, Box 67, Saudi
January 1979–January 1981 763
239. Memorandum From the President’s Assistant for National
Security Affairs (Brzezinski) to Director of Central
Washington, October 17, 1979.
[Source: Carter Library, National Security Affairs, Brzezinski Ma-
terial, Agency File, Box 3, Central Intelligence Agency, 9–12/79. Secret;
Sensitive. 1 page not declassified.]
Washington, October 30, 1979.
[Source: National Security Council, INT/Subject Files, F–R/I026,
OPEC. Secret; Sensitive. 2 pages not declassified.]
241. Memorandum From the Executive Secretary of the
Department of State (Tarnoff) to the President’s Assistant for
National Security Affairs (Brzezinski)
Washington, November 2, 1979.
OPEC Price Increases
In response to the President’s directive that we mount a campaign
against the OPEC price increases,
the Department is preparing instruc-
Source: Carter Library, National Security Affairs, Staff Material, Special Projects
File, Box 13, Henry Owen, Chron, 11/1–5/79. Secret; Sensitive.
The President’s instruction was circulated in an October 17 memorandum from
Brzezinski. (Ibid., Brzezinski Material, Agency File, Box 3, Central Intelligence Agency:
764 Foreign Relations, 1969–1976, Volume XXXVII
tions for our Embassies. These instructions will be differentiated be-
tween two groups of consuming countries—LDC’s and the industrial-
The message to the non-oil producing LDC’s, our major target
group, will be a follow-up to our earlier message on the same subject
(State telegram 151031 of June 12),
and will seek to convince these
countries that it is in their interest to engage in private and, particu-
larly, public criticism of the price policies of the producing countries.
This effort, however, will have to be handled with care. We would not
want it to appear that other countries were acting on behalf of the
United States, because that impression would sharply diminish the im-
pact of their pleas. It is also important, particularly in terms of contin-
ued Saudi cooperation, that any campaign differentiate between OPEC
“price hawks” and nations which have been helpful on price and pro-
duction decisions. Such a campaign must also take into consideration
the world wide support we wish to evoke for some action on Mexican
President Lopez Portillo’s energy proposal,
which is encountering
considerable opposition among the Group of 77.
Our efforts among the industrialized countries will, of course, be
more direct and result in bringing about a more forthright public posi-
tion on the price increases.
These instructions will be coordinated with the deliberations in
course within the SCC on developing a comprehensive policy to meet
the energy crisis.
We understand that ICA is responding directly on the aspects of
the campaign within its purview.
In telegram 151031 to all diplomatic and consular posts, the Department noted:
“OPEC countries are coming under increasing pressure from oil importing LDCs to mod-
erate price increases or to assist their development efforts in other ways. We wish to in-
crease public awareness of the economic costs to developing countries of rapidly rising
oil prices. Attached talking points may be helpful in underscoring these problems.” (Na-
tional Archives, RG 59, Central Foreign Policy Files, D790266–0803)
See footnote 5, Document 236.
January 1979–January 1981 765
242. Paper Prepared in the Department of State
Iranian Oil Contingencies
Iranian oil production in recent months has averaged about 3.7
million barrels per day, with late October production up to 4.1 million
b/d. Exports have been about 3.1 million b/d, of which about 700,000
b/d comes to the U.S. This constitutes about 8 percent of U.S. oil im-
ports and about 3.7 percent of total U.S. oil availability.
If Iran decides to embargo oil shipments to the U.S., a basic ques-
tion is whether Iran also decides to reduce its total exports. We believe
this would be the case. As the 1973–74 experience showed, it is very dif-
ficult to target an embargo on a single country, and greater impact is
achieved if production is cut at the same time. The Iranian regime is
presently earning foreign exchange at about twice the rate of its foreign
exchange expenditures. Even before the occupation of the American
Embassy, the Iranian National Oil Company told us that they would
cut back oil production by 300,000 b/d in 1980.
Even if no other market adjustments were made to compensate, an
Iranian embargo of the U.S. would not trigger the IEA sharing system
because the size of the cutback to the U.S. would be below the trigger
level. To activate the system, the IEA group or any member country
must sustain a cut in available oil to a level at least 7% below base
period consumption (roughly the previous year). U.S. oil imports from
Iran are only about 3.7% of total oil available to the U.S.; in view of the
recent increase in our total oil availability, a complete and uncompen-
sated stoppage of Iranian exports to the U.S. would leave us with ex-
pected oil availability about 2.2% below base period.
Source: National Archives, RG 59, Executive Secretariat Files: Lot 82D85, Box 1,
Iran Update, November 1979. Secret. Drafted by Bullen and Dolan and cleared by Rosen,
Calingaert, in NEA/IRN and NEA/ARP, and by Poats. The paper is attached to a No-
vember 6 memorandum from Katz and Goldman to Vance and Duncan that explained
that the paper had been prepared for a November 7 SCC meeting on Iranian oil. The
meeting’s Summary of Conclusions indicated that officials at the Departments of Energy
and Treasury would meet with oil company executives on November 8 and “raise with
them the question of reallocation of supplies” in anticipation of a significant Iranian re-
duction. (Carter Library, National Security Council, Institutional Files, Box 105, SCC 196:
Iran, 11/07/79) On November 4, a group of university students had seized the U.S. Em-
bassy in Tehran and taken most of its staff hostage. Documentation on the Iranian hos-
tage crisis is scheduled for publication in Foreign Relations, 1977–1980, volume XI, Iran:
Hostage Crisis, November 1979–January 1981.
766 Foreign Relations, 1969–1976, Volume XXXVII
A larger Iranian cutback (e.g. one million b/d) would have its im-
pact on the consuming world as a whole. Even if it all fell on IEA coun-
tries, it would be far below the 2.6 million b/d trigger level for the IEA
as a group.
It is possible to activate the IEA sharing system at less than a 7%
shortfall by unanimous agreement, but it is doubtful that unanimity
would be achieved. Many IEA countries, and the Secretariat, believe
that triggering the allocation system—which would inevitably entail
domestic allocation—is much less desirable for a shortage below 7%
than more informal coordination of policies. However, if something ap-
proaching a total shutdown of Iranian production ensues, we would
not exclude IEA sharing as a tool for joint action.
Possible Replacement Oil
Major producing countries with spare crude capacity are shown
in the attached table.
A number of them increased production when
Iran shut down early this year, and some might do so again. On the
other hand, a number are expected to reduce production in early 1980.
is now producing 9.5 million b/d from Aramco fields,
one million b/d over its ceiling. It may have capacity to produce some
additional oil, but analysts doubt whether a substantial increase can be
sustained for long.
is now producing at about 2.3 million b/d, slightly below
capacity; this is scheduled to drop to 2.2 million b/d, and the Kuwaitis
are reportedly considering an even steeper cut of up to 500,000 b/d.
The Kuwaitis do not need the income and view oil in the ground as po-
tentially more valuable than additional financial investments.
has about 500,000 b/d unused capacity due to pro-
duction ceilings imposed by the Algerian-managed national oil com-
pany for “technical reasons”. The technical justification for these
limits is questioned by Western oilmen, but their imposition clearly
reflects a broadly accepted local desire to maximize long-term field
raised its output in early 1979 to about 2.4 million b/d in re-
sponse to the Iranian crisis, but production has since been reduced to
about 2.2 million b/d because of technical reasons (falling pressure in
small fields) and conservationist sentiment.
and Libya have 200,000 and 100,000 b/d of spare capacity
which they might bring back on the market if they desired the addi-
tional income. Iraq also has perhaps 300,000 b/d of spare capacity.
Attached but not printed.
January 1979–January 1981 767
The United Kingdom recently cut output by 85,000 b/d because of
the reintroduction of restrictions on flaring gas from the Brent field.
The U.K. may be amenable to another relaxation of flaring rules. While
has announced it would cut production by 150,000 b/d for
conservation reasons in 1980, they might be persuaded to maintain pro-
duction at 2.35 million b/d.
A major argument in urging additional production would be the
risk of harm to the world economy from a renewed shortfall. This
might well persuade the Saudis to keep their production up to 9.5 mil-
lion b/d, although whether they would be willing to go beyond that is
questionable. Kuwait and Abu Dhabi, however, might be very reluc-
tant to raise their oil production at this point if that were confronta-
tional with Iran, since they have a strong interest in not antagonizing
their larger neighbor. We could not expect our argumentation to have
any impact on Algeria or Libya. Strong urgings from the world com-
munity might well cause Nigeria and Venezuela to resume higher pro-
duction on a temporary basis. Iraq could conceivably increase produc-
tion principally for commercial reasons, either secretly or in some way
as to be portrayed as benefitting countries other than the U.S.
If Iran were to embargo the U.S. but maintain its overall produc-
tion level, we would expect oil companies to readjust supplies among
themselves so as to send Iranian oil to non-U.S. destinations, and
non-Iranian oil to the U.S. Market changes in the past year (tight
market, increased oil sales moving through producer government com-
panies, reduced amounts of oil available to the majors for third-party
sales) have made this more difficult but not impossible. However, the
average price paid for such oil imports to the U.S. would be higher,
since much of the replacement oil would be at spot prices.
While we believe this would happen naturally, it might be acceler-
ated and coordinated through USG persuasion. This would have par-
ticular impact on companies active in the U.S., who would see behind it
the potential for regulatory action. It would be essential, in pursuing
such efforts with the companies, to consult our IEA partners to reassure
them that the U.S. was not seeking to overcompensate for a shortfall at
The more serious problem is that Iran would be likely to reduce
total output in conjunction with any embargo on exports to the U.S. We
would still expect through normal market action and persuasion to be
able to mitigate to some extent the impact on the U.S., but the conse-
quences for price in the U.S. and eventually worldwide would be more
768 Foreign Relations, 1969–1976, Volume XXXVII
A list of the companies currently importing oil from Iran is at-
The top two companies—Amerada Hess and Ashland—are
very heavily dependent on Iranian oil. Unless oil were rapidly made
available to them from elsewhere, they would very quickly be on the
spot market, and would likely feel compelled to pay exceptionally high
While DOE buy/sell orders (which mandate oil transfers to
crude-short companies) are normally restricted to small refineries,
which generally do not directly import foreign crude, it might be ap-
propriate for DOE to review the possibility of regulatory changes
which would permit orders requiring other US companies to make oil
available to firms cut off under such circumstances. Alternatively, full
domestic crude oil allocation might be considered.
Attached but not printed.
On November 12, Carter issued Proclamation 4702 ordering the cessation of oil
imports from Iran into the United States. In remarks that day, Carter emphasized: “It is
necessary to eliminate any suggestion that economic pressures can weaken our stand on
basic issues of principle. Our position must be clear.” For text of his remarks and the Pres-
idential Proclamation, see Public Papers of the Presidents of the United States: Jimmy Carter,
, pp. 2109–2112.
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