Yoshida, Taroichi - Foreign relations of the united states 1969–1976 volume XXXVII energy crisis, 1974–1980 department...
Japanese Vice-Minister of Finance
Young, Andrew J.,
U.S. Permanent Representative to the United Nations from January
30, 1977 until September 23, 1979
Iranian Ambassador to the U.S. until February 1979
Administrator of the Federal Energy Administration
Zayid, Bin Sultan al-Nyhayan,
President of the United Arab Emirates
Energy Crisis, 1974–1980
Consumers Organize: Preparatory Conference I,
August 1974–April 1975
Memorandum of Conversation
Washington, August 13, 1974, 11:15 a.m.–12:15 p.m.SUBJECT
Oil Price Strategy
Secretary of State Henry Kissinger
Secretary of the Treasury William Simon
Chairman Arthur F. Burns, Federal Reserve Board
Deputy Secretary Robert S. Ingersoll, Department of State
Under Secretary for Monetary Affairs Jack Bennett, Department of the Treasury
Major General Brent Scowcroft, Deputy Assistant to the President for National
Assistant Secretary for Economic and Business Affairs Thomas O. Enders,
Department of State
Secretary Kissinger—Would everyone like coffee? Let’s see if we
can get a real cup for the Chairman.
Have we all read the paper?
Deputy Secretary Ingersoll—The paper was worked over six timesbefore it got to you.
Secretary Kissinger—I take it you feel we should not make a polit-
ical intervention until the IEP is passed on September 19.
The meetingof Finance Ministers and Central Bank Chairmen would be deferred
Source: National Archives, RG 59, Central Foreign Policy Files, P840156–0003. Se-cret; Eyes Only. Drafted by Stephen W. Bosworth and cleared by Enders. The meeting
was held in the Secretary’s office.
The United States proposed an integrated emergency program at the May 2 En-
ergy Coordinating Group meeting. See Foreign Relations, 1969–1976, volume XXXVI, En-
ergy Crisis, 1969–1974, Document 352.
2 Foreign Relations, 1969–1976, Volume XXXVII
Secretary Simon—Yes, but I would go ahead and have the meeting
of the Library Group.
Assistant Secretary Enders—We could start discussing it in thatgroup.
Secretary Kissinger—You noticed that I got Project Independence
into the President’s speech last night.
It was not in the right place butyou can’t win them all. I feel President Ford will push it. But I don’t
have any idea what we should do with it. Perhaps we should put it
under you, Bill. It’s at too low a level as it is. It will never work.
Secretary Simon—I’m not seeking it. It will be a lot of work.
Assistant Secretary Enders—Bill should take the lead.
Secretary Kissinger—I’ll support you, Bill, if you promise to stay
Secretary Simon—Henry, I haven’t been on TV for months.Secretary Kissinger—Let’s see if we all understand the analysis in
this paper. The Europeans and Japanese are not now ready to go as far
as the United States. The United States’ strategy should be first to
preempt as much as possible in the bilateral field. We’ve got to get
going on the Commissions
in Saudi Arabia and get started in Iran.Second, we’ve got to get the IEP. And then in October we will move on
the political level. My instinct is that this will achieve about as much in-
itially as we did in February on the technical level. It will take 5 or 6
months for the others to respond. I will be in Iran in October and I will
have something to talk to the Shah about.
The problem with the Shah is that there is a risk if we single him
out for attack. If Saudi Arabia stands fast, I don’t believe they would do
it, we need the Shah’s production. We need to lean on him. One
problem here is that the Europeans may try to preempt us in the mili-
tary equipment field.
Secretary Simon—Can the Europeans preempt us? Is their equip-
ment as good as ours?
Major General Scowcroft—The Mirage is a very good airplane.
Secretary Kissinger—Of course, the F–14 plays the national an-
them of the country over which it is flying. It can shoot down other
Established in April 1973, the Library Group included the United States, theUnited Kingdom, France, West Germany, and, soon after, Japan. It was the precursor of
the more formalized summits of the advanced industrialized nations, beginning with the
meeting in Rambouillet in November 1975.
Ford delivered the August 12 speech to a joint session of Congress. For the text,see Public Papers of the Presidents of the United States: Gerald R. Ford, 1974, pp. 6–13. Project
Independence was President Nixon’s domestic energy program.
The United States established the bilateral, joint commissions in 1974 to developand broaden economic and military cooperation with strategically important countries.
August 1974–April 1975 3
planes at 80 miles. What is not yet proven is whether it is any good at 8
miles. For the Shah’s purposes the Mirage is a good plane. It gives him
what he needs in the area of the Gulf.
Secretary Simon—Henry, you have said many things that I have
remembered, but I remember one in particular. You have said that only
the United States can make promises which other countries know will
be kept. If this is true, and I think it is, then doesn’t the Shah think twice
about his long-term relationship with the United States.
Secretary Kissinger—Yes, definitely. Our big card is that he needs
our political and foreign policy support. Incidentally, let me tell you
here in this room only that I am telling every Arab I see that the United
States simply won’t accept another oil embargo. I told this to Fahmy. I
hope you won’t circulate this all over EB. EB does not leak as much as
my regional bureaus.
When I say I am telling the Arabs this in confidence, it means that
it would be all around in short order. I have talked to the President
about this. I simply don’t think we can take another embargo. It would
lead to economic collapse in Europe. It would lead to the collapse of
NATO. If it comes to that, [2 lines not declassified].
Chairman Burns—[1½ lines not declassified].
Secretary Kissinger—[less than 1 line not declassified].
Assistant Secretary Enders—[less than 1 line not declassified].
Secretary Kissinger—[1 line not declassified].
Assistant Secretary Enders—[less than 1 line not declassified].
Secretary Simon—Let’s review some of the scenarios regarding the
use of the commissions. Suppose the Shah has announced a message
dealing with the U.S. and there is no reaction.
Secretary Kissinger—My strategy with the Shah is to try to induce
him to cooperate with us.
Under Secretary Bennett—The Shah is suggesting that there be no
announcement until you come to Tehran.
Secretary Kissinger—Fine. Let’s not talk wildly about this. Let me
Under Secretary Bennett—What about the news report that the
Kuwaitis are suggesting a 25 percent production cut? They recognize
that there is excess production.
Secretary Kissinger—That is why it is a mistake to talk publicly
about production bringing prices down.
Under Secretary Bennett—Is it safe to wait until October? Should
we make a new move before then?
Secretary Kissinger—I am prepared to make a de´marche. Can I see
that news report?
4 Foreign Relations, 1969–1976, Volume XXXVII
Assistant Secretary Enders—That is part of the jockeying for the
next OPEC meeting. Whether these reports are significant or not, we
need to approach Saudi Arabia.
Secretary Kissinger—For what?
Assistant Secretary Enders—To get them to agree not to cut-back
Secretary Kissinger—I don’t believe in note sending. What I be-
lieve in is to have an overall strategy and then to make a series of
moves. That is the only way to be effective.
Secretary Simon—We would tell them, one, that we welcome their
decision to increase production, two, that we appreciate their opening
up the area for new exploration, and, three, on the auction we en-
courage them to go forward. If we can also tell them we are leaning on
the Shah, I think it would be very helpful.
Assistant Secretary Enders—Perhaps we could use Project
Secretary Simon—I’m sorry, Tom. I think they are more intelligent
than that. Anyway, I don’t think we have anything to lose by leaning on
Secretary Kissinger—Bill, we have plenty to lose. He is the one
non-ephemeral political force in the area. The idea that Saudi Arabia
will be our reliable source for the rest of 1974 is not reasonable. But we
can’t announce it now and then give two months for it to develop.
Chairman Burns—My guess is that if we announce we are going
ahead with Project Independence, conservation and the IEP, we will
have a much stronger position with them.
Secretary Kissinger—I agree. That is what I propose to do. The
Saudi Arabian Foreign Minister is coming here in two weeks. I could
talk to him then.
Secretary Kissinger—The problem is what is the pitch on prices? I
can draft any number of cables, in fact, if I want something in three
weeks, I probably will have to write it myself. But we need a strategy. I
tell you that by the end of October Saudi Arabia will not be playing po-
litical ball with us unless Israel makes some dramatic move. And, that
is not very likely given the Israeli domestic situation. There is an Arab
Summit at the end of October. Syria will impose an embargo and de-
mand confrontation with Israel. Whether that sells or not, I don’t know.
But unless we show plausible progress elsewhere, the others will orga-
nize—everybody but Saudi Arabia and then the Saudis will cave.
Deputy Secretary Ingersoll—There is no way now to put any pres-
sure on anyone.
Secretary Kissinger—The President cannot start attacking the Shah
now. But the Shah’s action is only key if Saudi Arabia brings on the auc-
tion and keeps production up.
August 1974–April 1975 5
Secretary Simon—They just have to keep production at current
Under Secretary Bennett—Isn’t it easier to lean on Iran before a cut
Secretary Kissinger—They are not going to cut production—only
if there is an auction.
Secretary Simon—They will and they can. They are the only ones
Assistant Secretary Enders—They can cut back up to two million
barrels with no damage to the fields.
Deputy Secretary Ingersoll—We are not going to get prices down
in two months.
Secretary Kissinger—Then let me repeat. Bill should have prelimi-
nary talks with the Finance Ministers in the Library Group. We must
get the IEP, and I will consider a cable to the Shah about not cutting
Secretary Simon—Can we tell Saudi Arabia we are doing this with
the Shah? This would help us.
Secretary Kissinger—The problem there is that Faisal is very suspi-
cious of President Ford. He has been considered to be pro-Israeli. This
is understandable in view of his past record. It is not important if Faisal
is right. What is important is that that is what he thinks.
I think we must let the threats sink in. Then we’ve got to get the Eu-
ropeans to begin to think along political lines. Then we will have a start.
I will consider a cable. But I am very reluctant to take one move alone. I
like to take five consecutively. Then you have something. In five
months, I would like to bust a cartel.
Secretary Simon—Henry, you may find as we go along on this that
it would be useful to have sort of a House Bastard. I would be glad to
play the role of the House Bastard.
Secretary Kissinger—As long as we don’t tip our hand.
Secretary Simon—Well, I could always say something as the
House Bastard and then Henry Kissinger could say he is mortified.
Secretary Kissinger—No. That’s wrong. We need to present a uni-
fied view to the rest of the world. It is very bad to appear to be split
within the government.
Let’s talk about the concrete actions we’re going to take. One, Gov-
ernment action, and two pressure on the companies. This requires the
IEP and a safety net. Can this be done?
Assistant Secretary Enders—We have the legal authority to do it
Secretary Kissinger—Then we should do it.
6 Foreign Relations, 1969–1976, Volume XXXVII
Secretary Simon—But what are we doing if we tell the companies
they can’t pay more than 84 percent and the producers say they must
pay 94 percent? Isn’t this confrontation? That would lead directly to a
Under Secretary Bennett—We might say that the consumer gov-
ernments won’t let oil come in at over a given price. We could do that
Assistant Secretary Enders—But we have to have the IEP first.
Secretary Kissinger—But the IEP won’t work against a total
Secretary Simon—How long will, say, Germany last if they lose
their fuel oil. They are not going to do anything which would risk our
supply during the winter.
Assistant Secretary Enders—Our purpose is to get the Europeans
in a more combative mood.
Secretary Simon—We have a better chance of doing this in the
Secretary Kissinger—Can we stand it till then?Secretary Simon—Oh, we can stand it till then.
Secretary Kissinger—What about the others, Arthur?
Chairman Burns—I think we can all get through till Spring.
Secretary Kissinger—Then we will use the next two months to
create a political and psychological basis for tough action, but we will
not get them to take tough action right away.
Secretary Simon—What can happen between now and Spring? We
should be looking at the nationalization question.
Secretary Kissinger—What are our choices?
Secretary Simon—Nationalization will raise prices by $18 billion.
Secretary Simon—Because we lose the low cost equity crude.
7 told me very confidentially that Kuwait will nationalize themby the end of this year.
Under Secretary Bennett—Yamani told Aramco that the USG
doesn’t object to 100 percent.
Secretary Kissinger—Where did he get that?
Under Secretary Bennett—I don’t know.
Secretary Simon—Dorsey also said Kuwait is thinking about
buying a 25 percent interest in Gulf.
Gulf Oil Chairman Robert Dorsey.
August 1974–April 1975 7
Under Secretary Bennett—He asked that that be kept confidential.
Secretary Simon—I told him just the Department of State and
Treasury will know that.
Deputy Secretary Ingersoll—Arthur, what will be the financial po-
sition by Spring?
Chairman Burns—Not so bad. I think Italy will have some
problems. The UK has some problems but they seem to be handling
Deputy Secretary Ingersoll—We need some time for the pressure
to build up.
Secretary Kissinger—But realistically, what are our choices? We
can go for a quick move with Saudi Arabia. That requires much pres-
sure and I am not sure it will work even if we bring pressure on the
Shah. Our second choice is to build a framework.
Secretary Simon—What about the cable?
Secretary Kissinger—I don’t mind telling the Shah that the United
States Government believes that any production cuts now would be
very unfortunate in the light of our overall relationship.
Secretary Simon—If we did that and told the Saudis that we did it,
it would be of great help to us.
Secretary Kissinger—Bill, my estimate of the Saudis is lower than
yours. Who in this building is running the Commissions?
Deputy Secretary Ingersoll—We have got Joel Biller working on
Secretary Kissinger—And Joel Biller is a Deputy Assistant Secre-
tary? By the end of the day I want responsibility for that assigned to the
seventh floor. We need to preempt the goddamn Europeans out of
Secretary Simon—Henry, the Commissions are moving ahead. I
think we have been making good progress. We came up with a lot of
ideas during my trip out there and we have done a lot of follow up.
Ithink our coordination with the Department of State is good. Would
you agree Bob?
Deputy Secretary Ingersoll—It is improving. I had a meeting yes-
terday in which I got everyone together to get moving on this.
Secretary Kissinger—But I have told you you can’t do this. You
can’t take this on. I don’t want to talk about any goddamn meeting. Is
anything being built there that they won’t want to give up?
Simon reported to President Nixon on July 30 on his trip to the Middle East, Eu-rope, and Bermuda July 16–27. See Foreign Relations, 1969–1976, volume XXXVI, Energy
Crisis, 1969–1974, Document 361.
8 Foreign Relations, 1969–1976, Volume XXXVII
Deputy Secretary Ingersoll—Well, in Egypt we are trying to get
some things started.
Secretary Kissinger—Egypt is not all that important but the others
are. Until we can create a physical nexus for our relationship, we have
Deputy Secretary Ingersoll—You are just now beginning to roll.
Secretary Kissinger—No one seems to be able to come up with
anything for Egypt. A nation of 200 million people must be able to
come up with something concrete. Can you take another look at this
Tom? I am going to talk to Butz but this is not a very good day to talk
Chairman Burns—What about the private banks? Won’t they be
Secretary Simon—Well, that was one of the things we got done
when I was out there. We got permits approved for several of the pri-
vate banks to operate in Egypt.
Secretary Kissinger—We have a real problem with Egypt. We have
to come up with something for them. The Soviet Union told them they
could have $5 billion. And the Israelis are being very unhelpful.
Deputy Secretary Ingersoll—Opening the Canal will give them
some real benefits.
Secretary Kissinger—But we didn’t do it. We can’t take credit for
something we didn’t do.
Secretary Simon—Henry, when I was in Egypt, Sadat went on at
great length about Henry Kissinger’s tremendous success in those
Secretary Kissinger—Bill, I know I’m great, but you can’t continue
to get payment for services already rendered. What we need to do is to
preempt the structure of relationships in the area and to develop a flow
of benefits which they won’t want to lose. At some point they are going
to want another strip of the Sinai. The question of the Commissions is
not so critical in the case of Egypt. That problem won’t basically be set-
tled by a Commission. But in Saudi Arabia and Iran the Commissions
can be useful. But not just by having meetings. They have to do
Deputy Secretary Ingersoll—But we are doing it. We have got a lot
of activity underway.
Secretary Simon—We do have the development institute.
Secretary Kissinger—Whatever happened to the fertilizer idea that
I have in my United Nations speech?
Assistant Secretary Enders—Well, the problem we have there is
with AID. This is a case in which AID believes that to do something
well means to do something slowly.
August 1974–April 1975 9
Secretary Kissinger—Look, isn’t AID under me? I simply can’t ac-
cept this. There is no reason why AID can’t respond when I want some-
Assistant Secretary Enders—To get a multilateral institute on fer-
tilizers set-up simply takes time.
Secretary Kissinger—But I need assets in Saudi Arabia. I don’t give
a damn about a well distributed world fertilizer industry. In fact, a
badly distributed industry is probably in our interest.
Assistant Secretary Enders—We are moving slowly at the level of
the institute itself. But we are moving fast on bilateral levels.
Secretary Kissinger—Who does AID report to? This is not a uni-
versity. If we can put a nuclear plant into Egypt in eight years and do
something in fertilizers in Saudi Arabia, then we have a strategy. Then
we have something they don’t want to lose. I want a confrontation, be-
lieve me. But I need chips.
Secretary Simon—We have no problems with the Commissions.
There is a lot going on.
Secretary Kissinger—The problem with the Commissions is that in
this building a Deputy Assistant Secretary simply doesn’t exist. If
something is going to get done it has to have seventh floor direction.
It’s like that memo I received the other day to call Senator Magnuson.
The memo had to have six clearances and all it said was call Senator
Deputy Secretary Ingersoll—Yes, and you haven’t called and nowhe’s mad.
Secretary Kissinger—You are right. I didn’t call. I didn’t call be-
cause I know that half of the six people who had cleared that memo had
already called Magnuson’s staff people to tell them I was going to call
the Senator. They do that to show how important they are.
Who understands what I want to do with these Commissions?
Deputy Secretary Ingersoll—I do. I had a meeting last week which
got together all the people involved.
Secretary Kissinger—Once you get them all together you should
execute half of them. Let us review again where we stand. First, the
Commissions must be an integral part of our strategy. We have to em-
phasize the tangible assets—the things they need. Second, we need to
get the Europeans and Japanese organized. Bill is going to begin this in
the Library meeting. Third, I will send a letter to the Shah. I will also try
one with Saudi Arabia. Perhaps we should send it to Prince Fahd. We
could run through a number of issues in the context of the change in the
Senator Warren Magnuson (D-WA).
10 Foreign Relations, 1969–1976, Volume XXXVII
Administration. But we shouldn’t hang it all on the oil price question.
Also, I think we must have regular meetings of this group.
Deputy Secretary Ingersoll—I agree, and if you are not available,
we should meet anyway.
Assistant Secretary Enders—What are we going to do about
Secretary Kissinger—Bill, could you do a paper on what is needed
on Project Independence? I need something I can take to the President. I
don’t know what to tell him.
Secretary Simon—Sure. I have already spoken to Morton and
Rumsfeld. They understand that the energy thing is in bad shape. Of
course, Rogers is head of an energy agency and we may be seeing some
sort of initiative from him.
Secretary Kissinger—But didn’t Interior have this thing once be-
fore and fail at it? Interior is just not able to do it. They didn’t do it
Secretary Simon—Yes, that is right. I think we should just have the
committee on energy structure honcho it.
Secretary Kissinger—OK. Do an unsigned memo setting it out.
Make it unsigned so it doesn’t look like you are making a power grab.
Chairman Burns—What about conservation? That cuts across
Project Independence and the international side.
Secretary Kissinger—We should aim for the UN on that. What is
the timing on this thing? Bill, you will take everyone to Camp David,
Under Secretary Bennett—The Finance Ministers and BankChairmen will all be here around the end of September for the IBRD
Secretary Kissinger—Well then, we will aim for the following:
Bill, you will have your meeting with the small group on the sev-
enth. Then I will get something organized on the 27.
Secretary Simon—The 28 and 29 might be better.
Under Secretary Bennett—We could have a meeting of the Min-
isters on the 28.
Secretary Kissinger—Yes. We can get the Foreign Ministers and
Central Bankers to join. We can take them all up to Camp David. We
can surface this political component. Their reaction will be similar to
their reaction in February.
But we will have to push and get themready for action later. I like the timing on this.
At the Washington Energy Conference. See footnote 3, Document 2.
August 1974–April 1975 11
Assistant Secretary Enders—If the IEP gets off schedule and we
have to move it back to October, we can use these meetings to push it
Secretary Kissinger—Then we are all against pressuring the
Secretary Simon—Yes, I think that just turns into a self-imposed
Under Secretary Bennett—How many countries are we talking
about for this meeting?
Secretary Kissinger—Just five with Japan. Just the Library Group.
We are using the Library Group as a pretext. This lets us leave out some
of the others like the Italians.
Assistant Secretary Enders—I don’t think the Italians would be un-
helpful, but they don’t have much to offer.
Secretary Kissinger—This lets us leave out Moro. Moro is an idiot.
He will not be helpful. He will just stand around and leak all over the
place. Anyway, the Italians will probably have a government crisis by
Secretary Simon—Then we should start now with the Finance
Ministers about coming early for the meeting.
Secretary Kissinger—How about the Foreign Ministers? The Japa-
nese Foreign Minister will be here. I assume the French, UK, and Ger-
many will come as well.
Under Secretary Bennett—The French have a Francophone
meeting on the 27. They may use that as a reason to push this off.
Secretary Kissinger—We will aim for Saturday the 28.
Secretary Simon—Let’s reserve Camp David.
Secretary Kissinger—Brent, you can help with Camp David. I’m
afraid you and your family won’t be able to use it that weekend.
OK, then early in September I will get to the Foreign Ministers. Get
EUR and IO to find out if all the Foreign Ministers will be here anyway.
Also, let’s get a look at how the anti-cartel operation would work.
We should meet again next Monday or Tuesday.
(Secretary Kiss-inger received a phone call. Meeting broke up approximately 12:15.)
August 19 or 20.
12 Foreign Relations, 1969–1976, Volume XXXVII
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