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 the Embassy in
Download 8.4 Mb.Pdf ko'rish
- Bu sahifa navigatsiya:
- 201. Memorandum of Conversation
- 202. Paper Prepared in the Department of State
- 203. Memorandum From Rutherford Poats of the National Security Council Staff to Henry Owen of the National Security Council Staff
200. Telegram From the Department of State to the Embassy in
Washington, April 16, 1979, 2210Z.
95864. Subject: Saudi Production Ceiling.
1. Embassy is instructed to approach SAG soon at an appropriate
level to inform them of USG concern over reimposition of 8.5 million
barrels per day production ceiling on Aramco, to stress the oil market’s
continuing need for incremental output, and to urge SAG to continue to
permit production at 9.5 MMBD level throughout this quarter. You
should make it clear you are making this approach under instructions,
and it may be made written or orally at your discretion. You should
draw upon the following points:
—We appreciate the fact that the Saudi Government has permitted
Aramco to produce at near-maximum capacity levels since late last
year in order to help offset the shortfall in world oil supplies owing to
the interruption in Iranian oil exports.
—Despite the recent resumption of Iranian oil exports (at a level
still far below previous years),
there is a continuing need for increased
production by other OPEC countries in order to permit orderly oil mar-
ket conditions and the rebuilding of working stocks. In any event, Iran-
ian production levels are uncertain and Iran cannot be firmly counted
upon for 3.5–4.0 MMBD output levels for some time.
—World oil stocks were drawn down during the December–
March period by about 2 MMBD more than otherwise would have oc-
curred. These stocks must be rebuilt prior to the heavy demand period
of the 1979–80 winter in order to meet the essential energy needs of all
oil consuming nations.
Source: National Archives, RG 59, Central Foreign Policy Files, D790175–0949.
Confidential; Immediate; Exdis. Drafted by Todd; cleared by Rosen, Katz, Twinam, Ber-
gold, Owen, and Helen B. Junz (Treasury Department) and in EB/ORF; and approved by
Cooper. Repeated Immediate to Riyadh and Dhahran.
Iranian oil production had reportedly recently risen to its highest level since De-
cember 1978. (The New York Times, April 11, 1979, p. D7)
632 Foreign Relations, 1969–1976, Volume XXXVII
—Market is very unsettled and a “shortage psychology” is devel-
oping. Production cutbacks now will reinforce shortage psychology
and will help sustain high spot oil prices, which will both further un-
settle the world market and undermine the agreed OPEC price
—The industrialized oil consumers are attempting to help offset
the effects of the Iranian situation by reducing their collective demand
on the world oil market by 2 MMBD by year-end. The President has just
announced the steps the US will take to meet our share of the demand
restraint commitment. It will take time to implement demand restraint
and other measures, however, and the greatest impact will likely not
occur until the fourth quarter.
—At a time when there are differences on some issues between our
two countries, we should seek to reinforce our longstanding history of
mutually beneficial relations through cooperation wherever possible.
—We believe that the steps the USG is taking to restrain demand
for imported oil provide ample evidence of our good intentions and the
seriousness with which we view the current oil situation; we urge con-
tinued cooperation by the SAG in permitting maximum feasible output
in order to help meet the world’s essential demand for oil and
re-establish stability in the world oil market.
2. Ambassador West will discuss the production ceiling and other
issues more generally when he returns, but Dept. believes it important
that our views be made known to SAG very soon. Charge´ should there-
fore proceed to target most appropriate SAG official for making above
approach, keeping in mind likely Yamani sensitivity to recently re-
leased SFRC Subcommittee staff report on Saudi oil
and possible need
to let dust settle a few days before making above approach.
The report by the Subcommittee on International Economic Policy noted that the
future output of Saudi oil would be “far less than predicted.” (Ibid., April 15, 1979, p. A1)
Charge´ Daniels met with Deputy Foreign Minister Abd al-Rahman Mansuri on
May 6 and made his presentation as instructed. Daniels reported: “Mansuri was quick to
the point and said that, in sum, our message was that we wanted increased production
pari passu with Iranian shortfall. He promised to pass the information on to the appro-
priate authorities.” (Telegram 3544 from Jidda, May 7; National Archives, RG 59, Central
Foreign Policy Files, D790206–1126)
January 1979–January 1981 633
201. Memorandum of Conversation
Washington, April 23, 1979, 5 p.m.
Tokyo Economic Summit with Under Secretary Cooper at 5:00 p.m.—April 23,
1979, The Secretary’s Office
Mr. Bergold opened the meeting by noting he would be leaving the
next day along with Mr. Poats and Mr. Rosen for Tokyo to discuss the
preparations for the June Economic Summit. Mr. Poats then noted that
the NSC had not sought formal interagency clearances of the various
initiatives outlined in the attached NSC draft paper,
wanting to en-
courage the development of “fresh ideas.” The participants then re-
viewed the various options outlined by Mr. Poats.
• Oil Import Target—Secretary Schlesinger indicated either of the
two approaches outlined in the NSC paper
was acceptable, but pre-
ferred to substitute the phrase “traditional exporters of oil” for “OPEC”
to avoid a confrontational tone. He also suggested that the Summit or
the IEA propose a comprehensive study of the advantages of rational-
izing world refinery utilization, with a view towards increasing gaso-
line production and minimizing the production of boiler fuels, which
are more easily substitutable.
• Coal—Participants agreed that a coal initiative and creation of an
International Coal Advisory Board were highly desirable.
• Nuclear Safety—Secretary Schlesinger stressed the need to make a
positive statement about the need for nuclear power as an alternative to
Source: Department of Energy, Executive Secretariat Files, Job #8824, International
Affairs: 1/79–6/79. Confidential. Drafted by John E. Treat who initialed at the bottom of
the last page.
Brackets in the original. The list is at the end of the memorandum of conversation.
The April 19 draft, sent to Naohiro Amaya, chairman of the multilateral group
drafting the energy issues paper for the Summit, is attached but not printed. According to
the drafters, “These suggestions have not been fully reviewed and approved within the
US Government and thus do not at this time constitute US proposals for Summit action.”
Regarding the Amaya group, see Document 197.
The first approach, under the heading “Oil Imports and Prices,” delineated that
the G–7 seek to preclude further oil price increases by reducing demand for oil through
individual and cooperative action. The second approach added that the G–7 should reaf-
firm the commitment of the seven heads of government to reduce oil imports by 5 percent
in 1979 before looking beyond that year. It also noted that, regardless of the “recovery of
Iranian oil production,” there would “continue to be a need to ease demand and price
pressures on the world oil market.”
634 Foreign Relations, 1969–1976, Volume XXXVII
imported oil, while simultaneously pushing for expanded IAEA work
on nuclear safety.
• LDC Energy Development
—Mr. Poats discounted this initiative
as unlikely to succeed.
• Energy RD&D—All participants agreed that there is a clear need
for financial support of technologies which are ready for commerciali-
zation. Mr. O’Leary stated his strong support for the initiative devel-
oped by the Treasury Department. Mr. Deutch stressed the need to dis-
tinguish between research (capability) and demonstration (capacity).
He stated that no new institutions are needed for international coopera-
tion in research; bilateral agreements and the IEA provide the neces-
sary frameworks. Mr. Deutch agreed that new financing efforts to sup-
port demonstration facilities were warranted, but stressed the need to
remain flexible on the institutional approach. Secretary Schlesinger
agreed that a financing initiative should be explored.
• Renewable Energy Development in LDCs—Mr. Poats described this
initiative as a “reaffirmation” of the work already underway. Mr.
Deutch and Mr. Rosen agreed that more emphasis should be given in
national R&D programs to the development of appropriate technolo-
gies for the LDCs. Mr. Owen opined that there was an urgent need for
improved coordination of bilateral programs and noted a World Bank
meeting on this issue has been scheduled for June. Mr. Cooper ob-
served that the development of “a coordinated global program” for
LDC cooperation was a laudable goal, but that previous multilateral ef-
forts had failed.
• Investment Targets—Mr. Poats described this initiative as of lim-
ited merit and primarily an effort to respond to a Japanese suggestion.
Secretary Schlesinger noted that the U.S. has little to fear since our
record on the federal R&D budget is excellent and will continue to be
so; he suggested the idea be further explored.
Department of State
Richard Cooper, Under Secretary for Economic Affairs
Julius Katz, Assistant Secretary, Economic and Business Affairs
Gerald Rosen, Director, Office of Fuels and Energy
The fourth heading of the NSC draft paper was “Immediate Development of LDC
Hydrocarbon Resources.” The last part of this section reads: “The heads of government
expressed satisfaction with the positive response of the World Bank to their request at the
Bonn Summit for expansion of the Bank’s assistance to oil, gas and coal exploration and
development in developing nations. They agreed that additional measures may be re-
quired to encourage the risk-taking participation of private foreign companies in energy
exploration and production in developing nations and expressed readiness to consider
support of sound private or public initiatives to assure greater reliability of agreements
and contracts in this field.”
January 1979–January 1981 635
National Security Council
Ambassador Henry Owen, Special Representative of the President for Economic
Rutherford Poats, Senior Staff Member
Department of Energy
James R. Schlesinger, Secretary of Energy
John F. O’Leary, Deputy Secretary of Energy
Harry E. Bergold, Jr., Assistant Secretary for International Affairs
John Deutch, Assistant Secretary for Energy Technology
Les Goldman, Principal Deputy Assistant Secretary for Policy and Evaluation
John Treat, Director, Office of Producing Nations International Affairs
Washington, April 23, 1979.
PRC Meeting on Saudi Arabia, April 27, 1979
We need to determine a strategy for managing our relationship
with Saudi Arabia over the next few months in a manner which will
further both our short and our long term interests in a number of areas
of major importance—the peace process, energy and other economic
questions, and regional security including our bilateral military rela-
tionship and Saudi financing of US arms sales to other countries.
The last year has witnessed an unprecedentedly intense US-Saudi
contact involving frequent high-level discussions on a number of key
issues. It has been a period of testing the limits of mutual interest, and
in the process we have developed a finer appreciation of where the
Saudis feel their basic interests on key issues part company with ours.
In furtherance of Middle East peace, we have been willing to place sig-
nificant strain on the overall relationship, while at the same time we
have done much in the security area to strengthen it.
[Omitted here is discussion unrelated to oil.]
The Saudis have clearly demon-
strated their resistance to our persistent urging to increase sustainable
production capacity, and recently have brought production back to the
self-imposed 8.5 million b/d limit, over a million barrels per day below
existing sustainable capacity. In the tight oil market foreseeable for at
Source: Carter Library, National Security Council, Institutional Files, Box 74, PRC
102, Saudi Arabia, 4/27/79. Confidential.
636 Foreign Relations, 1969–1976, Volume XXXVII
least the rest of this year and for most of the next decade, the Saudi atti-
tude toward oil pricing, however moderate, becomes less relevant in
the absence of greater Saudi production.
While the overall quality of our relationship, particularly the Saudi
perception of our pursuit of Middle East peace, does set the environ-
ment in which the Saudis listen to our concerns on the oil front, there is
increasing evidence that they perceive our interests diverging on en-
ergy. Conservationist pressures on Saudi oil policy have intensified.
There is no convincing evidence that Saudi Arabia’s income needs in
the near future will require producing above the present production
level. We have devised no persuasive economic incentives for in-
creasing Saudi productive capacity, and both industrial prospects and
social/economic concerns within Saudi Arabia work against the case
for increased production.
We have, however, a pressing national need to continue to urge
the Saudis to keep production near sustainable capacity and to bring
sustainable capacity promptly up to at least 12 million b/d. Absent eco-
nomic incentives such as protection of financial assets and advantages
for Saudi petrochemical industrialization, we have to base our argu-
ments primarily on the substantial Saudi perception of mutual eco-
nomic interest, an argument which has particular weight because of
Saudi interest in protecting the value of their substantial dollar assets,
and on the Saudi sense of responsibility toward the international
economy. (It can be also argued that it is cheaper for the Saudis to in-
crease capacity now rather than later.) This suggests that we need a sus-
tained and sophisticated bilateral dialogue on the relationship of the
energy problem to the overall health of the world economy, and the re-
lated impact on the internal security stability. As they approach such a
dialogue, however, the Saudis will be looking with increased skepti-
cism at what the consumer nations, and the US in particular, are doing
to bring use of energy under control and to assure economic stability in
[Omitted here is discussion unrelated to oil.]
—How to encourage greater production
We need a sustained low-key and sophisticated dialogue with the
Saudis on oil. It should focus convincingly on what we are doing in this
country to lessen our dependence on foreign imports. This dialogue
should be cast in the broader context of the international economic situ-
ation, with emphasis on the sacrifice we are making in this country to
strengthen the dollar and to curtail inflation.
The Saudis are well aware that we want them to increase produc-
tion and productive capacity. What is required in the coming months is
not exhortation but a sophisticated exchange of views to set a better
January 1979–January 1981 637
context of strong mutuality of economic interests as basis for our
long-term persuasive effort on production. We need to engage the
Saudis in serious discussion of the long-term supply and demand out-
look for crude oil.
In this dialogue we should appear receptive to seriously exam-
ining Saudi ideas on financial or industrial incentives we might pro-
vide for greater Saudi production. We should also seek wherever pos-
sible to draw the Saudis into the international economic dialogue and
to exhibit interest in Saudi ideas on the range of North-South issues.
While the main burden of sustaining such a dialogue must fall on
the diplomatic channel, it is essential that our diplomatic contacts be
supported by sophisticated documentation and the occasional visit to
Saudi Arabia of appropriate economic experts. Last year’s visit by a
senior economic policymaker to brief the Saudis on the Bonn Summit
was quite useful and might be repeated this summer.
Our tactical goal should be constructive Cabinet level discussions
with the Saudis during a Fahd visit to Washington and a subsequent
Joint Economic Commission
meeting here in the fall.
[Omitted here is discussion unrelated to oil.]
At the President’s request, Cooper briefed Prince Fahd on the Bonn Summit on
July 22, 1978. (Telegram 5680 from Jidda, August 2, 1978; National Archives, RG 59, Cen-
tral Foreign Policy Files, D780316–0648)
Documentation on the meetings of the U.S.-Saudi joint commissions is scheduled
for publication in Foreign Relations, 1969–1976, volume E–9, Documents on Middle East
Region; Arabian Peninsula; North Africa, 1973–1976.
At the April 27 PRC meeting, “all agreed that some progress would be necessary
on the peace negotiations and/or security issues” before the United States “could weigh
in seriously with the Saudis on increasing their long-term production capacity.” The
Summary of Conclusions of the meeting also noted: “With regard to current production
levels, we probably cannot affect their decision to resume production at the previous
level of 8.5 million barrels per day. However, we should be prepared to object if their pro-
duction drops below this level. We should make clear that it is our understanding that
they are reducing production in response to the resumption of a substantial level of Iran-
ian exports, and we would anticipate a reconsideration on their part if Iranian production
should again drop off.” (Carter Library, Plains File, Box 10)
638 Foreign Relations, 1969–1976, Volume XXXVII
203. Memorandum From Rutherford Poats of the National
Security Council Staff to Henry Owen of the National
Security Council Staff
Washington, April 30, 1979.
Output of Energy Working Group for Economic Summit
Two and one-half days of committee drafting (including a session
ending at 2:25 a.m.) produced the attached energy issues paper (Tab
nique´ material can be readily excerpted; however, the group refused,
on the basis on instructions uniformly differing with mine, actually to
draft the energy section of the communique´. In fact, no other delegation
came to the meeting with specific proposals for action at the Summit.
We agreed to meet on May 23 in Paris, immediately after the IEA
Ministerial meeting, to draft the communique´ language in the light of
IEA decisions and the Preparatory Group comments.
Much of the debate was devoted to two of the proposals that I sub-
mitted in writing and one contained in the Japanese draft of the issues
—Our proposal of continued restraint on oil demand beyond 1979;
—Our proposal of an international finance corporation to lend at
market rates directly to commercial scale energy project enterprises
employing innovative technologies.
—The Japanese proposal to invite a resumption of multilateral dia-
logue between oil producer and consumer nations.
Differing views of the weight to give the Three-Mile Island inci-
in pronouncing on the nuclear option also consumed many
hours. The result is at Tab A, paragraph 17–D, Nuclear.
We reached general agreement on continued oil demand restraint,
as reflected in the first strategy statement (paragraph 16(i)) and first
concrete policy guideline (paragraph 17(a)(1)(i)). I believe the commu-
Source: Carter Library, National Security Affairs, Staff Material, International Eco-
nomics File, Box 45, Rutherford Poats File, Chron, 4/12–30/79. Confidential. Copies were
sent to Schlesinger, O’Leary, Cooper, Solomon, Katz, Brzezinski, Eizenstat, Press,
Schirmer, and Cutler.
Tabs A–C are attached but not printed. Poats is presumably referring to meetings
of the Amaya group. See footnote 2, Document 201.
The core of the nuclear power plant on the Susquehanna River near Harrisburg,
Pennsylvania, experienced a partial meltdown on March 28. It was the worst nuclear ac-
cident in U.S. history.
January 1979–January 1981 639
nique´ language I submitted (Tab B)
can be adopted, after haggling
over the Mexican “out” for the US.
No delegation was ready to endorse our new IFI for energy com-
mercialization without a detailed paper and governmental study, but
Amaya personally supported it and McPhail was very positive.
Lantzke of IEA also was enthusiastic. The text of my proposed commu-
nique´ language on this initiative is at Tab C.
Note that it does not esti-
mate total capitalization. I did not pass out the Treasury paper because
it contained capitalization figures (contrary to Stu’s instructions to
avoid numbers), implied that the institution would finance
pre-commercialization projects, and was too heavy on technologies of
primarily US interest or source. Despite these precautions, the Japanese
evidently briefed the press during the last day of the meeting, leading
to at least one news account that included the $20 billion figure. I am
baffled as to the source of that number, unless it was retained by
Sawada from his prior meeting with us in Washington.
I promised to send to each member of the working group by the
end of this week a paper stating the rationale, functional fields, fi-
nancing methods, capitalization, etc., of the proposed international en-
ergy finance corporation. Chairman Amaya urged that this paper ex-
press a firm USG proposal, subject only to Presidential review in the
light of responses from the other six governments. As you know, I
could not present a firm US proposal at Hakone because of OMB
The paper should spell out answers to the following questions,
which I fielded orally at Hakone:
—What evidence do you have that ad hoc arrangements won’t be
sufficient, that is, that the number of large commercialization projects
The “Oil Import Restraint” statement at Tab B reads: “The heads of government
reaffirm their commitments to achieve as early as possible in 1979 reduction of their na-
tions’ demand for oil on the world market by the equivalent of 5% of previously projected
1979 oil consumption. Looking beyond 1979 they agreed that, irrespective of the recovery
of Iranian oil production, there will continue to be a need to ease demand and price pres-
sures on the world oil market. The seven governments will take individual and coopera-
tive action to restrain demand for oil, increase production of oil, and expand production
and use of alternative fuels, so as to avoid significant increases in their demand for oil
from traditional suppliers while their economies continue to grow.”
The text at Tab C reads in part: “In order to assure that diverse, adapted technol-
ogies are ready for large-scale, privately-financed investment in the 1990s, the first gener-
ation of commercial applications should be operating by the mid-1980s. Accordingly,
governments should act now to assure project financing to competent enterprises willing
to take a substantial share of the investment risk in establishing commercial-scale projects
employing innovative energy technologies. The seven heads of government decided,
therefore to appoint representatives to prepare the charter of an international corporation
which would provide or guarantee long-term loan capital at market interest rates to se-
lected energy production projects.”
640 Foreign Relations, 1969–1976, Volume XXXVII
requiring public international financing will be great enough to war-
rant the struggle to create a new IFI? Why not use the same informal
consortium arrangement we use for grant-supported demonstration
—What’s in it for us? The technologies you mention are either US
or German, and your proposal states that a project could be in an LDC
that is not a subscribing member of the finance corporation, and the as-
sisted sponsors must agree to license the technologies to all comers on
non-discriminatory and reasonable terms. So why should my country
put up money?
—Private money will be available when output costs minus sub-
sidies are seen to be equal to oil or gas prices. Until that is sure, you will
need to offer subsidies (grants or off-take contracts) more generous
than market rate loans to induce private companies to risk big money
on commercialization projects. A lending corporation can’t solve this
—In some cases, commercialization projects will be sponsored by
state corporations such as utilities, which don’t need to borrow interna-
tionally; if the project makes sense, their parent governments will or
should put up the loan capital.
—How can we make it attractive to OPEC governments to sub-
—Can we create an international finance institution to support in-
novative energy projects while continuing to refuse public financing
for other high-risk energy investments, such as oil exploration?
My answers satisfied some members of the working group, but I
doubt that Sir Jack Rampton, the British delegation head, or Francois de
Wissocq, the French Director General of Energy, was persuaded. The
most persuasive argument in our favor is this: The world will need the
equivalent in energy supply capacity of a present Saudi Arabia about
every 10 years beginning around 1990; only wide commercial applica-
tion of several new technologies starting in the 1980s can promise that;
we would be reckless to count on private investment decisions on com-
mercialization of new technologies to be made early enough in the
1980s to lay the basis for a broad proliferation of commercial applica-
tions by 1990.
January 1979–January 1981 641
Download 8.4 Mb.
Do'stlaringiz bilan baham:
ma'muriyatiga murojaat qiling