Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
Memorandum From the Director of the International
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- 244. Telegram From the Mission to the Organization for Economic Cooperation and Development to the Department of State
- 245. Telegram From the Department of State to Selected Diplomatic Posts
- Vance 246. Memorandum From Henry Owen of the National Security Council Staff to President Carter
- 247. Telegram From the Embassy in the United Kingdom to the Department of State and the Department of Energy
243. Memorandum From the Director of the International
Communication Agency (Reinhardt) to the President’s
Assistant for National Security Affairs (Brzezinski)
Washington, November 8, 1979.
Response to Presidential Directive on OPEC Oil Price Increase
In response to your memorandum of October 17, 1979,
know that the International Communication Agency is giving in-
creased attention to the potentially disruptive effects of sharp oil price
increases on the world economy and, more particularly, on the Less De-
veloped Countries. Energy supplies and energy costs are a continuing
high priority of USICA media. An analysis of the major issues for over-
Source: Carter Library, National Security Affairs, Staff Material, Special Projects
File, Box 13, Henry Owen, Chron: 11/1–5/79. Secret; Sensitive.
See footnote 2, Document 241.
January 1979–January 1981 769
seas posts is being prepared, and it will stress the points in your
Two notable examples of our media coverage to date were:
—VOA took advantage of the anniversary of the 1929 crash to
compare, in a news analysis, industrial workers harshly affected by the
’29 crash with the worst potential victims of the present energy-
dominated economic cycle—the developing countries.
—On October 27th, Under Secretary of the Treasury Anthony M.
Solomon spoke at the Friedrich Ebert Foundation Seminar on
U.S.-European “Perspectives for the 1980s.” Our wire service focused
on the energy aspects of the Under Secretary’s remarks and his state-
ment that the U.S. has been alone in encouraging OPEC to exercise
price moderation and maintain or expand oil production levels.
In the coming days and weeks, USICA media will stress the fol-
lowing themes regarding oil price increases:
—The recent round of price hikes, in addition to having a destabi-
lizing effect on the still-shaky international economy, is having an espe-
cially debilitating effect on the developing world. These countries are
dependent on growth to underwrite their national commitments to de-
velopment and to keep their debt-laden financial structures from
—The U.S., a major consumer of energy, has made significant cuts
in its consumption as it pledged at the 1979 Tokyo Summit. These ef-
forts show that the U.S. is acting responsibly and has the right to expect
that other international players exercise as much responsibility and
—The world community finds itself in its present predicament, not
because of the actions of one single group, but because of a number of
interrelated and rarely complementary actions or events. The more im-
portant factors affecting the situation are well-known but worth re-
peating: an increasing demand for petroleum products throughout the
world in the face of decreasing known reserves; nationalism, the
“me-first” attitude; irrationalism, as evidenced by recent events in Iran;
and waste. This all graphically leads to the conclusion that any solution
of the problem will require the cooperation of all countries—devel-
oping and developed, planned and free-market economies.
These themes will be stressed in media programming and other ac-
tivities which will include:
—The international visitor program will arrange, where possible,
meetings between foreign visitors who are involved in energy-related
matters and appropriate officials in the White House, the State Depart-
ment, the Department of Energy, the Department of Treasury and other
concerned U.S. government agencies to discuss U.S. energy policy and
770 Foreign Relations, 1969–1976, Volume XXXVII
concerns. Our media services will interview these visitors as
—Our media services will also interview Agency-sponsored
American speakers who have lectured abroad on energy-related sub-
jects. Specific emphasis would be put on foreign audiences’ energy con-
cerns and reactions.
—Other U.S. Government agencies will be asked to give us the in-
formation to demonstrate how these price increases are affecting the
world economy and particularly the developing world. It will be this
attributable information—briefings, testimony and backgrounders—
which will make our case credible and keep the issue active.
Paris, November 16, 1979, 1813Z.
36138. Dept pass also DOE and NSC. Subject: Proposal Tabled at
IEA Governing Board Meeting, November 16.
1. (C)—Entire text.
2. Following is the text of a proposal for concerted action in re-
sponse to worsening oil market situation prepared by U.S. delegation
and circulated by Secretariat at International Energy Agency Gov-
erning Board meeting on November 16. Posts may draw on this text in
energy policy discussions with host governments.
3. Begin text
Recent developments in oil exporting countries, including
growing uncertainty over production prospects in Iran, have drama-
tized the urgent need for additional action by consuming countries to
further limit oil import demand. Additional production cutbacks by
Iran or other producers for political, technical, and economic reasons
are a very real possibility. The 1980 oil import targets proposed by the
IEA Secretariat, taken collectively, are higher than the prospective sup-
plies, particularly from OPEC. There is therefore an obvious need to set
more stringent 1980 oil import targets for the IEA countries. In addi-
Source: National Archives, RG 59, Central Foreign Policy Files, D790528–0085.
Confidential; Immediate. Repeated Immediate to all IEA capitals.
January 1979–January 1981 771
tion, given oil market uncertainties, any system of targets must be capa-
ble of revision in light of future market developments.
Given the urgency of this situation, the IEA should convene a Min-
isterial meeting in early December, to be held before the OPEC meeting
The IEA Ministers should establish 1980 oil import targets for all
member countries. The targets must be stringent, clearly stated on a na-
tional basis, and adjusted to expected supply availability. A working
group should be established immediately to assess 1980 supply avail-
ability as a basis for establishing targets at the Ministerial.
The 1980 targets of Summit countries and similar targets for other
countries should be used as a starting point. They should be adjusted
by the Ministers to meet the projected available supply. The targets
should specify oil import levels, but an evaluation of national efforts,
consumption and inventory changes should also be taken into account.
The targets should be strict; they should meet the low range of esti-
mated supply. They should also be adjustable on a quarterly basis to
meet changing market conditions.
Since these targets must be credible if they are to have any effect on
the oil market and on other nations, particularly members of OPEC, it
should be a major part of this program that each country should devise
and present the specific national policies to implement its target.
Ultimately, the credibility of our actions will rest on our perform-
ance, not on pledges or policies. The IEA should therefore regularly
monitor the progress of each country in meeting its targets. Every quar-
ter, a formal review should take place. These should be thorough,
frank, and confrontation should not be avoided. Private and public
pressure should be applied to nations which do not meet their targets,
and they should be even more closely monitored in the next quarter.
Triggering the emergency sharing system would be the last resort to
ensure compliance if political persuasion fails. This represents a sub-
stantial strengthening of the more informal, less stringent review proc-
ess which occurred after the IEA initiative of March, 1979.
the seriousness of the current and prospective oil market situation and
the need for strong internationally credible action to meet it, fully war-
rants this new approach.
Medium Term Measures. Looking beyond 1980 the IEA should
give added impetus to the SLT to develop targets for 1981–85, taking
into account the results of the ongoing SLT review process. The SLT
should be instructed to prepare a recommendation for Governing
See footnote 6, Document 192.
772 Foreign Relations, 1969–1976, Volume XXXVII
Board action to deal with the supply outlook, which may deteriorate
Spot Market. The IEA should also intensify efforts to analyze the
changing structure of the world oil market, with particular emphasis
on the role of spot markets. Rapid implementation of the oil registry
system, including the quick reporting procedures and extension to
product sales should be given the highest priority. We need to per-
suade exporting and importing nations, traders, and companies to ab-
stain as much as possible from spot market transactions. The success of
our efforts to improve the demand/supply balance will strengthen our
activities in this regard. At the same time, the extent to which IEA na-
tions are perceived to be concerned about spot market trends and to be
taking actions to moderate them, will be critical to the success of our
larger efforts to instill greater stability in the oil market. End text.
According to telegram 300912 to all OECD capitals, November 20, the Governing
Board “reached provisional agreement to advance the date of its next Ministerial meeting
to the week of December 10” and “made further progress toward the adoption of individ-
ual country 1985 oil import targets and a reduction of the current IEA group 1985 im-
port goal of 26 MMB/D.” (National Archives, RG 59, Central Foreign Policy Files,
Washington, November 19, 1979, 2256Z.
300653. Subject: Suspension of Oil Imports From Iran.
1. Several posts have raised questions or reported host gov-
ernment officials’ queries as to how the suspension of U.S. oil imports
from Iran will be implemented and what effects we anticipate this may
Source: National Archives, RG 59, Central Foreign Policy Files, D790533–0760.
Confidential; Immediate. Drafted by Todd; cleared by Poats and in DOE/IA, EUR/RPE,
and NEA/ECON; and approved by Rosen. Sent Immediate to Brussels and Madrid and
to Ankara, Athens, Bern, Bonn, Canberra, Copenhagen, Dublin, London, Luxembourg,
Oslo, Ottawa, Paris, Rome Stockholm, The Hague, Tokyo, Vienna, and Wellington. Re-
peated to Jidda, Kuwait, Tripoli, Baghdad, Abu Dhabi, Algiers, Doha, Caracas, Lagos, Ja-
karta, Libreville, and Quito.
See footnote 4, Document 242.
January 1979–January 1981 773
have upon the world oil market. Our assessment of this latter point is
necessarily tentative and preliminary, but posts may draw as appro-
priate from this cable with those caveats in discussions with host gov-
ernments. You should also draw upon statements carried in the USICA
Wireless File, and cabled excerpts from the Department’s daily press
2. Implementation: The suspension was implemented by a No-
vember 12 Presidential Proclamation, which prohibits the entry into the
customs territory of the United States of crude oil produced in Iran (ex-
cept crude oil loaded aboard maritime vessels prior to November 13,
1979) or unfinished oil or finished products refined in possessions or
free trade zones of the United States from such crude oil. The Proclama-
tion is based upon the President’s authority under 232 (B) of the Trade
Expansion act of 1962, as amended. The suspension does not prevent
U.S. companies from trading in Iranian oil or shipping it to other desti-
nations, nor does it affect imports of refined products produced from
Iranian crude in foreign refineries, in the Caribbean or elsewhere. It is
intended to prohibit imports into the U.S. of products refined from Ira-
nian crude in the Virgin Islands.
3. Effects on the world oil market: As noted in the President’s an-
nouncement, we hope to reduce oil consumption in the United States
enough to offset a significant portion of the 700,000 barrels per day of
oil we had been importing from Iran. A number of domestic measures
are under intensive consideration to achieve this reduction. Iran has
thus far given no indication that it plans to reduce oil production, and
other oil producers continue to supply normal amounts to the world oil
market. Continued adequate supply levels, together with the antici-
pated reduction in U.S. demand, should ensure that additional upward
price pressures are kept to a minimum.
4. There will be a number of readjustments in the world oil market,
especially since Iran has suspended deliveries of any oil to U.S. firms.
Countries which formerly received Iranian oil through U.S. firms will
probably seek to obtain continued supplies directly, and may even in-
crease their purchases somewhat. Some of the Iranian oil formerly sold
under contract to U.S. companies will doubtless be offered on the spot
market. We doubt that most oil consumers would exchange existing
long-term supply arrangements for insecure and uncertain arrange-
ments to purchase Iranian oil.
5. The extent to which U.S. refiners will seek to replace Iranian
crude supplies with oil from other sources and on the spot market will
On November 13, the day after Carter’s announcement, Abolhassan Bani-Sadr an-
nounced in Tehran that the Iranian Revolutionary Council had decided to stop all oil ex-
ports to the United States.
774 Foreign Relations, 1969–1976, Volume XXXVII
depend upon the success of U.S. effort to reduce oil demand and the
type of allocation arrangements made to ensure supply availability for
6. In sum, though there will be some readjustments and disloca-
tions in the world oil market, the presence of adequate supplies and ef-
forts to reduce demand (both in the U.S. and by the IEA nations) should
minimize upward price pressures which might otherwise be attributed
to the U.S. suspension of Iranian oil imports.
246. Memorandum From Henry Owen of the National Security
Council Staff to President Carter
Washington, November 21, 1979.
Danger and Opportunity
US and allied reactions to the Iranian crisis may have created an
opportunity for a more dramatic breakthrough on the energy problem
than seemed possible even a month ago.
the cut-off of Iranian oil has produced widespread media
demands for more vigorous action to restrain oil imports.
our representatives at the recent Paris meeting of the Inter-
national Energy Agency received wide support when they proposed
setting up a working group to devise a procedure for continually ad-
justing 1980 oil import targets to changing (and probably diminishing)
oil availabilities, and to specify the concrete measures that countries
will take to achieve resulting (and probably reduced) import targets.
They also got allied agreement to move the IEA Energy Ministers’
meeting from January to December, so that these proposals can be
acted on in time to influence the first quarter production levels set by
several major OPEC countries. Such an agreement to allocate the
Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File,
Box 48, Oil, 8–12/79. No classification marking. Sent for information. The President init-
ialed the memorandum.
See Document 244.
January 1979–January 1981 775
prospective marginal oil shortage internationally would greatly reduce
the competitive scramble for oil that runs up prices and gives political
power to radical OPEC countries.
If the Energy Ministers agree to these tighter and more effective
limits on 1980 oil imports, we can decide whether any new domestic re-
straints on US demand are needed to play our part in fulfilling this
agreement. Against a background of evident allied cooperation, such
measures might stand a better chance of public and Congressional ac-
ceptance than in the past.
It is not just the Iran crisis, but your firm stand in that crisis, which
has produced the apparent change in US and allied attitudes. Any ac-
tion that was seen as a US retreat could dissipate the change.
Even without such an upset, the opportunity described above may
prove a mirage: Confronted with specific proposals, our allies and the
Congress may back away. But we won’t find out without trying. The
chances of success now seem sufficient to warrant the attempt—first in
the IEA and, if this works, at home. We will report back to you on the
247. Telegram From the Embassy in the United Kingdom to the
Department of State and the Department of Energy
London, November 30, 1979, 2220Z.
23874. Pass Iran Working Group. Subject: Iran Oil Reporting from
London. Ref: (A) State 299840, (B) London 22119.
1. Confidential—entire text.
Source: National Archives, RG 59, Central Foreign Policy Files, D790556–0628.
In telegram 299840 to London, November 18, the Department authorized travel
for the Petroleum Officer at the Embassy in Tehran, Andrew Grossman, from Tehran to
London for 60 days, starting November 4. (Ibid., D790530–0416) Telegram 22119 from
London, November 8, informed the Department that Grossman was “in safe haven from
Tehran” and had been assisting “in reporting on Iranian economic issues, including reg-
ular reports on oil production and export.” It added: “In view of the heavy load of work
resulting from Iranian crisis, and Grossman’s ability to reach his contacts in Tehran,
Kharg and Ahwaz by phone from London, Embassy requests that Grossman be assigned
TDY to London until Embassy Tehran can reopen for business.” (Ibid., D790515–0185)
776 Foreign Relations, 1969–1976, Volume XXXVII
2. Iran Oil Sitreps from London
have contained extensive data col-
lected directly from Iran by long distance telephone conversations be-
tween Embassy Tehran Petroleum Officer and his established contacts
in Iran. Some of the latter are located in the oil-producing regions far
3. Data being collected by this direct link include daily production
and export figures; information on the physical state of oil facilities, the
organizational state of the National Iranian Oil Company, progress in
construction projects, labor-management relations, product prices; and
items of attendant politico-economic interest.
4. Embassy London has supplemented the above reports with in-
formation from some of the same sources we used last winter during
the interruption in communications between Tehran and Iran’s oil re-
gions: BP, Shell, and other oil company London offices. However, with
the old Iranian oil participants consortium now largely defunct, and
with few foreigners now travelling to Iran, our own access to data is not
what it once was. Most of the data in the Sitreps has been provided by
Petroleum Officer Tehran’s daily telephone calls.
5. With Iranian events unpredictable, one cannot say how long the
direct telephone channel will last. To the extent that it does, it seems to
be unusable except through established personal rapport: some of the
contacts in Iran are already uneasy about using the channel—even with
someone whom they know.
6. If EB/FSE, the Department of Energy, and other Washington
agencies find this direct connection to be of value, as we do, they
should contact PER/FCA and NEA/EX to pursue some arrangement
on Tehran Petroleum Officer’s London TDY (which currently expires
January 2) to ensure that it is not curtailed precipitately.
It should be
The first Iran Oil Sitrep was telegram 22008 from London, November 7. (Ibid.,
D790513–0136) Beginning with telegram 22365 from London, November 10, which was
“Iran Oil Sitrep No. 11,” all of the reporting on Iran’s oil industry from London had the
subject heading, “Iran Oil Sitrep,” followed by a number and a date. (Ibid., D790518–
On December 11, the Department informed the Embassy in London that, while it
“appreciated” Grossman’s reporting, it believed that “his TDY assignment should be cur-
tailed as of January 30.” (Telegram 319717 to London; ibid., D790571–0327) Upon the im-
minent reassignment of Grossman, the Ambassador wrote to the Department on January
25, 1980: “I find it difficult to believe that Washington is prepared to sever this established
direct link to Iran at a time when American journalists have just been expelled from Iran
and when events near the Persian Gulf are the focus of the world—and Presidential—at-
tention.” He concluded: “We will obviously accept whatever decision comes out from
Washington. However, in view of the above considerations, I believe senior officials in
Washington should carefully review the decision to terminate his assignment here next
week.” (Telegram 1840 from London; ibid., [no film number])
January 1979–January 1981 777
pointed out that given the heavy ongoing energy workload, we are also
able to make good overall use of this TDY resource.
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