Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department of state washington
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- 266. Telegram From the Department of State to the Embassies in France, the United Kingdom, Italy, West Germany, Japan, and Canada
- Vance 267. Action Memorandum From the Assistant Secretary of Energy for International Affairs (Goldman) to Secretary of Energy
265. Memorandum of Conversation
Washington, March 20, 1980.
Meeting between Secretary Vance and Foreign Minister Okita
Foreign Minister Saburo Okita
Ambassador to US Fumihiko
Richard Holbrooke, Assistant
Deputy Foreign Minister Yasue
Reginald Bartholomew, Director
Shinichiro Asao, Director General,
N. American Bureau
Donald Gregg, NSC Staff
Kiyoshi Sumiya, Minister,
Michael Armacost, Deputy Assist-
ant Secretary (EA)
Mitsuhiko Hazumi, Deputy Direc-
Nicholas Platt, Deputy Assistant
tor Gen. Economic Bureau
Yoshio Hatano, Economic
Minister, Japanese Embassy
1. Following a one hour briefing earlier in the morning by INR and
Assistant Secretary Holbrooke on Soviet naval and air deployments in
Southeast Asia and the Indian Ocean area, on developments within In-
dochina, and on Secretary Vance’s meeting with PRC Vice Minister
Zhang, Foreign Minister Okita met with Secretary Vance during a
working luncheon and follow-on talk for three and a half hours on
2. The Secretary welcomed Okita warmly, noting that “productive
partnership” is of vital importance to the US. Okita responded that he
had been trying to come to the US ever since assuming his post in No-
vember 1979, but that Diet business had prevented that.
[Omitted here is discussion unrelated to energy.]
Source: National Archives, RG 59, Executive Secretariat Files: Lot 84D241, Nodis
1980 Memoranda of Conversation for Secretary Vance. Secret; Nodis. Drafted by Alan
Romberg, Country Director for Japan, and approved by Raymond Seitz of S/S on April 7.
A note indicates the list of participants was continued on the last page, which is not print-
ed here. The full text of this memorandum of conversation and additional documentation
on Okita’s visit are scheduled for publication in Foreign Relations, 1977–1980, volume XIV,
836 Foreign Relations, 1969–1976, Volume XXXVII
14. Okita then turned the conversation to broader energy matters.
He said the discussion in IEA
centered on three aspects: a) scientific co-
operation; b) energy economy and savings; and c) shifting to alterna-
tive sources of energy. He said that the GOJ has introduced a plan this
year to save 7 percent on energy usage. He noted that for the last six
years, real GNP has grown at over 6 percent annually, but oil consump-
tion has not grown at all. Thus there has already been great economiz-
ing. There might be some increase this year, but this would be dis-
cussed in the IEA.
15. On alternative sources, the GOJ plans to reduce its dependence
on oil from 74 percent at present to under 50 percent by 1990. This will
require large imports of coal, a subject he had discussed with the Aus-
tralians during his visit there in January. In addition to coking coal,
they can provide some burning coal for power generation. Also, they
can supply some uranium and natural gas. The Chinese also said that
while the oil prospects are not so bright as before, the PRC could sup-
ply 100 million tons of coal if Japan requires that. Okita also mentioned
US coal. Beyond that, Japan is working on alternative sources such as
solar and fusion. They appreciate US cooperation in all these areas.
16. Under Secretary Cooper then described our view of the energy
situation and its relation to the Venice Summit. He said we have been
working with Japan and others for three years on these issues. In pre-
paring for the Venice Summit, we would be relying on progress at the
IEA Ministerial in Paris in May. We hope there to establish a common
assessment of the near- and mid-term future, including oil consump-
tion targets for 1981 and goals for 1985. Cooper said there is some con-
troversy on this, largely with Germany and the UK who think the exer-
cise may be unnecessary and unwise. Most others, however, feel that
some international framework regarding conservation and substitution
is necessary. The Secretary added that the President certainly feels that
17. The Secretary and Under Secretary Cooper stressed the impor-
tance of progress at the IEA Ministerial for success at Venice. Cooper
said there was also the question of measures to be taken individually
by countries. These would vary, of course, from country to country, but
each needs to take steps.
18. Beyond the IEA meeting and individual country measures,
Cooper noted a third concern was the spot market. We have, of course,
The IEA Governing Board met March 13–14. During the meeting, the members
“went to work in earnest” on preparing for the IEA Ministerial meeting in May. (Tele-
gram 71281 to Ankara, March 18; National Archives, RG 59, Central Foreign Policy Files,
January 1979–January 1981 837
discussed this issue with Japan, the UK and others. There is no magic
solution so long as demand exceeds supply. However, in 1979, some
countries got substantial supplies on the spot market, scrambling for oil
and building stocks, only to find in the end that supplies were not
short. We need new, multilateral technical discussions, Cooper said.
19. The Secretary observed that a collateral issue was how the en-
ergy discussion in the UN special session
was related to the IEA/
Venice discussions. Although it has not worked in the past, to what ex-
tent should we seek a producer/consumer dialogue?
20. Cooper said that the whole question of a late August special
session was obscured by the agreement to global negotiations. Until we
have various preparatory meetings in the Committee of the Whole we
will not be able to sort out the respective responsibilities of the special
session (e.g. international development strategy for the 80’s with which
the LDCs do not seem to want to grapple) and the global negotiations
(where people now think energy is the key issue). The G–77 thinks the
global negotiations should go from January to September 1981, thus
filling up the entire gap between UNGAs. In fact, the Indians, who are
in the chair of the G–77, have said they would welcome suggestions
how to use all that time.
21. To speak of a “dialogue” on energy is much too vague, Cooper
continued. Some in the US and elsewhere literally think of a global bar-
gain between suppliers and producers. But though they don’t rule it
out, most who have looked hard at this question, including OPEC
countries, are skeptical. Much is possible short of that, however. Per-
haps the greatest promise, Cooper said, is in helping non-OPEC LDCs
in developing conventional and non-conventional sources of energy. It
is certainly in our interest to do so, and OPEC countries sees it in their
interest as well. Thus there is a clear convergence of interests if we can
work out the modalities. So far as OPEC is concerned, some of the
members are cool on multilateral efforts, others would like to see them
linked to aid flows.
22. Okita responded that, so far as the special session is concerned,
there are too many countries participating for meaningful results.
Though there is need for a dialogue, the size of that session is not con-
ducive to a good outcome. The dialogues should mainly be conducted
bilaterally. For its own part, Japan needs to work on shifting from pur-
chases of oil from majors to direct deals since supply to Japanese refin-
eries by US majors had been cut back. There has been a serious effort in
The Preparatory Committee of the UN Conference on New and Renewable
Sources of Energy held a special session in New York February 4–8 to lay the ground-
work for the Conference in Nairobi in August 1981. For further information on the Com-
mittee’s session, see Yearbook of the United Nations, 1980, pp. 705–708.
838 Foreign Relations, 1969–1976, Volume XXXVII
this respect over the past several months. In the past, the majors sup-
plied 1.4 million barrels/day (b/d), but now that is down to 400,000
b/d, and this will disappear completely after the spring. This has pre-
sented very serious problems. Some government officials say that the
GOJ should ask the USG to influence majors to keep supplies going to
Japan. But, Okita said, this may not be “quite easy”. So, Japan has en-
deavored to increase contacts with producer governments to increase
supply. This is one aspect of Japan’s relations with the Middle East. (In
response to a question from Cooper, Okita noted that, though the gov-
ernment was trying to facilitate them, these direct deals were private,
23. Regarding assistance to LDCs in developing their own energy,
Okita agreed this was very important and said it is an issue that we
need to face at Venice including in the areas of solar, biomass, coal, nat-
ural gas, etc.
24. At the Secretary’s request, Cooper explained the consequences
of the Saudi takeover of ARAMCO.
Cooper said that if it is carried out
in “benign” circumstances, it will be a sheer formality with no substan-
tive change. The Saudis already consider ARAMCO theirs and have
only delayed the takeover for interministerial reasons. ARAMCO is
viewed by the Saudis as a service company now, and it will continue as
that after the takeover, though it will get some payment in oil.
25. In response to the Secretary’s question whether the shares of
the majors would be affected, Cooper said that in the short run they
should not be affected, again assuming a “benign” takeover. Over the
long run, the Saudis are still considering how to handle it. Congress
and the FTC are fishing for sensitive data. If the pressure is too great,
Saudi Arabia could say it is too difficult to deal with the US. This is not
likely, but it is possible.
26. Under Secretary Newsom observed that the total amount of oil
in the world now under control of the majors has been reduced. Cooper
said that the share of crude handled by the majors has dropped from 65
percent to 45 percent. But shares in distribution of product are not so
different from the past.
[Omitted here is discussion unrelated to energy.]
Saudi Arabia completed the full acquisition of Aramco in early September al-
though the final payment was reportedly made on March 9. (The New York Times, Sep-
tember 5, 1980, p. D3)
January 1979–January 1981 839
266. Telegram From the Department of State to the Embassies in
France, the United Kingdom, Italy, West Germany, Japan,
Washington, April 1, 1980, 1855Z.
85839. Subject: Venice Summit: Energy Preparatory Meeting.
1. Summary. The Energy Preparatory Meeting chaired in Germany
by Engelmann (FRG) on March 26–27, agreed that the oil market out-
look was serious (although the UK remains skeptical) and that the
Venice Summit should focus on longer term (1990), but delegations dif-
fered significantly on specific actions to be taken. The United States was
represented by Fried (NSC), Treat (DOE), and Pickering (State). The
FRG and the UK opposed quantified objectives, preferring general al-
though strengthened commitments to additional policy measures and
monitoring of results. After a year or so experience, they argued, the
base might exist to establish 1990 goals. However, neither excluded
some quantification as a possible compromise. Canada, Japan, and
Italy all expressed some support for quantified objectives if limited to
two or three aggregate targets, e.g., oil consumption, non-oil supply,
energy/GNP ratio. Only France indicated strong support for the U.S.
position, which called for sectoral oil consumption goals and targets for
coal, synthetics, and nuclear power. In spite of FRG and UK opposition,
strong U.S. advocacy of quantified objectives resulted in clear majority
for at least some quantification. Energy group will meet again May
25–26 in Rome to complete preparations for the Summit. End
2. Summit Objectives. All delegations agreed that short and me-
dium term (1981, 1985) should be the subject of the IEA Ministerial,
with the Venice Summit focussing on the longer term. All delegations
agreed that the oil market outlook was pessimistic, although UK
(Jones), citing a recent OECD study (“Shriner Report”) insisted that a
soft market was still a possibility in 1990. Chairman Engelmann out-
lined his intention to redraft his discussion paper for eventual presenta-
tion at the April preparatory meeting in Sardinia, but agreed at U.S. in-
sistence to attach U.S. draft communique´ containing quantitative
projections. Delegations were invited to submit latest 1990 forecasts by
April 2 so that Engelmann could disseminate second draft by April 4.
Energy group will convene again May 25–26 in Rome, following IEA
Ministerial, to complete draft communique´. At that meeting, IEA Exec-
Source: National Archives, RG 59, Central Foreign Policy Files, D800165–0421.
Confidential. Drafted by Treat; cleared by Treat, Fried, and Pickering; and approved by
840 Foreign Relations, 1969–1976, Volume XXXVII
utive Director Lantzke will provide a report on the progress made in
implementing the decisions taken at the Bonn and Tokyo Summits, ful-
filling commitment to monitor results.
3. Oil Consumption Objectives. U.S. pushed hard for reduced con-
sumption targets for major sectors (utility, residential/commercial, in-
dustry, and transport). Only the French indicated support for this ap-
proach. FRG and UK strongly opposed quantified sectoral targets,
citing lack of credibility of previous targets and inadequate time for
analysis of appropriate consumption levels. Canada, Japan, and Italy
took middle ground, supporting concept of some quantified objectives
for oil consumption, but not accepting need for targets in each sector.
FRG and UK left door open for possible compromise, with Engelmann
agreeing to present options in his redrafted backup paper.
4. Coal. All delegations supported strong statement on doubling
the use and production of coal, although Canada insists on an equally
strong statement on protecting the environment. UK urged consulta-
tion with non-Summit countries, particularly Australia, at IEA Ministe-
rial to avoid any misunderstanding.
5. Synthetics. All delegations agreed Summit should endorse IETG
report, but U.S. proposal to set 2 MMB/D goal for synthetics produc-
tion in 1990 met widespread opposition. Delegations also concluded
the work should go forward in OECD/IEA on developing new energy
technologies and constructing demonstration plants. FRG and UK were
particularly vehement in opposing establishment of 1990 targets on
grounds (ostensibly) that such a decision went beyond the hard-fought
IETG compromise on a two-phase approach and would be “revising”
the report only days after its adoption. U.S. argued that while IETG re-
port did not have quantitative goals, it was within the province of Min-
isters or Heads of Government to react to the report by setting goals.
6. Nuclear Energy. With the exception of objections by the FRG
and the UK to the idea of quantified objectives for 1990, there was a
general agreement that, in the nuclear energy area, increased efforts
should be made to develop nuclear power. In doing so, account should
be taken of the requirement to improve health and safety protection
and to undertake programs to demonstrate the safe storage and dis-
posal of nuclear waste. Germany proposed, as did the U.S. draft com-
munique´, that special account be taken of the work of INFCE and that
the IAEA be the center for future cooperative works. Japan proposed
more support for reprocessing and the creation of a nuclear energy
pressure group, but did not receive support. France, and to a lesser ex-
tent Canada and Japan, supported the U.S. proposal for quantitative
7. LDC Energy Production. U.S. proposal for considering estab-
lishment of a new energy development facility affiliated with the
January 1979–January 1981 841
World Bank received sympathetic hearing from all delegations. While
other delegations stressed need to consult in capitals with Finance Min-
istries, all indicated strong support for additional action to encourage
primary energy production in LDCs and indicated interest in specific
U.S. proposal on conditions that OPEC surplus countries would partic-
ipate. In addition to briefing by World Bank (Chardenet) on status of its
energy program, group focussed extensively on tactics of presentation.
Strong desire to win OPEC financial support translated into differing
views on appropriate form of Summit action. FRG and others initially
counselled slow approach, suggesting no new initiative should be pre-
sented at Summit, but should wait for progress in the UN global negoti-
ations. However most other delegations joined U.S. in favoring Summit
action in June. Engelmann agreed that issue would be discussed again
at May meeting.
8. Relations With Producers. No delegations expressed expectation
of imminent breakthrough in prospects for producer/consumer dia-
logue. Group generally accepted U.S. draft language for communique´,
but preferred to omit specific reference to price and supply as poten-
tially dangerous. All considered this area as troubling and most ex-
pressed perplexity as to what should be done.
267. Action Memorandum From the Assistant Secretary of Energy
for International Affairs (Goldman) to Secretary of Energy
Duncan and the Deputy Secretary of Energy (Sawhill)
Washington, April 23, 1980.
Impact of Iranian Oil Embargo/Boycott
What action should be taken in response to an Iranian oil embargo
or in support of a coordinated boycott of Iranian oil by our allies.
Source: Department of Energy, Executive Secretariat Files, Job #8824, International
Affairs, 4/80–5/80. Confidential. Drafted by Treat. A handwritten note indicates that the
memorandum was handcarried to Duncan.
842 Foreign Relations, 1969–1976, Volume XXXVII
In the first quarter of 1980, Iranian oil production averaged 2.5 mil-
lion b/d, with exports of about 1.8–1.9 million b/d. Of these exports,
approximately 1.5 million b/d went to the OECD countries. Since early
April, however, there has been a substantial drop in Iranian exports. In
response to the pricing dispute between NIOC and various Japanese
and British companies, exports are reported to have recently fallen to a
level of .3–.4 million b/d. Thus, the balance of Iranian exports, roughly
1.5 million b/d, are at stake.
The distribution of Iranian exports among the industrialized coun-
tries is very uneven (as shown on Table 1),
ranging from the relatively
high dependence of Japan, Germany, and some smaller European
countries, to very low levels in France, the UK, Italy, and Canada.
The current debate over sanctions
could result in various actions
which might interrupt Iranian oil exports to major industrialized coun-
tries, or political groupings such as the European Communities or the
IEA. The EC plus Japan might eventually discontinue their purchases
of Iranian oil; the IEA might take action to activate its sharing system;
or the Iranians themselves might declare an embargo in retaliation for
other political/economic measures. Whatever the precise nature of
events, the loss of Iranian oil to all or some of our allies does not appear
at this juncture to pose insurmountable difficulties to the world oil mar-
• Analysis by both DOE and CIA suggests that the oil market
could absorb a complete loss of Iranian exports with only modest pres-
sures on oil prices, if spot market speculation or inventory hoarding
can be avoided. Demand has been falling rapidly due to the past price
increases and to the reductions in economic activity.
• Iran may elect to sell a substantial portion of its exports to alter-
native markets in Eastern Europe and the Third World. Such sales
could displace other sources of supply which might then become avail-
able to our allies to offset the loss of Iranian oil.
• Some additional supplies may be available from other OPEC
producers. Iraq might be willing to sell an additional 300,000 b/d. Ven-
Attached but not printed.
On April 7, President Carter announced a break in diplomatic relations with Iran
and issued Executive Order 12205, which imposed several economic sanctions on Iran,
including the prohibition of U.S. exports. Executive Order 12211, April 17, extended the
sanctions to include the prohibition of all direct or indirect imports from Iran. See Public
, pp. 612–614 and 714–716.
Meeting in Luxembourg on April 22, the European Community also voted to impose full
economic sanctions on Iran on May 17. The text of the EC resolution was published in The
New York Times
, April 23, 1980, p. A12. On April 24, Japan allied itself with the EC
January 1979–January 1981 843
ezuela may have some volumes of heavy oil for sale and might also be
persuaded to raise its production ceiling by 200,000–300,000 b/d. Ku-
wait has some oil available for contract sales and could temporarily re-
lax its recently announced production cut, although the Kuwait stance
on prices and contract terms has become harsh, as of late. There may be
offsetting potential elsewhere, such as Nigeria, the North Sea, and
small Gulf producers such as Qatar.
• Current world stocks are 500 million barrels above last year’s
level and at least 200–250 million barrels above normal. If properly
used, these “excess” stocks could offset the loss of 1.5 million b/d from
Iran for up to 6 months.
The principal danger in the current situation is panic buying and a
competitive scramble for incremental supplies, particularly by the
Japanese and British companies which were most dependent on Iran.
To deal with this threat, there is a continuum of actions which the
United States might consider:
• Company Approach—The Deputy Secretary has initiated calls to
major U.S. oil companies (Talking Points are attached),
urging them to
facilitate a reallocation of world oil supplies. Following the results of
the ongoing IEA discussions, a second round of discussions with com-
panies should be undertaken to cover spot market and inventory man-
• Good Offices—We could also approach key producing gov-
ernments to urge that production be increased to offset the loss of Ira-
• IEA Action—The IEA Governing Board (GB) is currently consid-
ering two possible courses of action:
—Soft Option—The GB may soon endorse this approach, which
calls for consultations with oil companies, approaching other produc-
ing countries, careful monitoring of oil market developments, re-
straints on spot market activities and consultations on stock
—Hard Option—In addition to the above actions, the GB could trig-
ger the IEA sharing system. If the loss of Iranian supplies stems from a
self-imposed boycott rather than an embargo, there might be some op-
position from the IEA neutrals, but this should be manageable. Prelimi-
nary calculations indicate that activation of the IEA system would only
require a minor reduction in U.S. imports (of perhaps 100,000 b/d) and
Attached but not printed.
844 Foreign Relations, 1969–1976, Volume XXXVII
would require the triggering countries to first absorb a 7 percent short-
fall; further work in this area is underway.
• Increase U.S. Production—If the State of Alaska would tempo-
rarily relax its MER requirements, we could increase Alaskan produc-
tion by about 100,000 b/d for a period of perhaps 3 months. This would
be a modest but dramatic gesture, emphasizing our willingness to be
supportive. The incremental Alaskan oil should be kept in the United
States. A more ambitious option—seeking legislative authority to ex-
change or export Alaskan oil, seems unnecessary and politically
• Reduce U.S. Import Quota—The President could also reduce the
1980 U.S. import quota to emphasize willingness to free up supplies for
our allies. This action would not necessarily require additional U.S.
policy actions since the impact of higher prices, existing prices, and
lower economic growth seem very likely to keep U.S. imports well
below 7.5 million b/d this year.
Our most important objective should be to prevent a competitive
scramble for marginal oil supplies which drives up spot prices, in turn
touching off further increases in official prices. We need to reassure the
Japanese, other allied governments, and the public that the loss of Ira-
nian oil can be absorbed with only minor adjustments. Some overt U.S.
action is essential in this regard, as is close cooperation with our allies.
As a first response, we should:
• Maintain close consultations with our major companies, ad-
vising them of Governing Board actions on inventories and spot
market activity, and enlisting their support;
• Initiate approaches to other producing countries, in coordination
with our IEA partners;
• Implement other elements of the IEA soft option, as they may
emerge from today’s Governing Board;
• Assess rapidly the feasibility of quickly increasing Alaskan
As a later round of actions to be taken, if deemed necessary, we
courage or support a boycott of Iranian oil by our allies by a) obtaining White House con-
currence that the United States would be prepared to forego a portion of our oil supplies
to share in a likely supply shortfall, and b) exploring with Congress the possibilities of
using existing authority or seeking new legislation to facilitate the diversion of some oil
from the United States for this purpose.” Johnston added: “Whether or not a boycott is
agreed on, these steps would encourage our allies to impose economic sanctions in the
face of Iranian threats to embargo oil exports to nations joining in sanctions.” (National
Archives, RG 59, Central Foreign Policy Files, P870128–2590)
January 1979–January 1981 845
• Support activation of the IEA allocation system;
• Increase Alaskan production;
• Reduce our oil import ceiling either individually or in conjunc-
tion with our allies.
We should maintain close consultations with the Congressional
leadership throughout these efforts, but we need not seek new legisla-
tive authority at this time.
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