Foreign Relations of the United States, 1969–1976, Volume XXXVII, Energy Crisis, 1974–1980

153. Memorandum From Secretary of State Vance, Secretary of the Treasury Blumenthal, the President’s Assistant for National Security Affairs (Brzezinski), and Henry Owen of the National Security Council Staff to President Carter¹

Washington, June 7, 1978.

SUBJECT

• Action on Energy at the Summit

We are seriously concerned that the forthcoming Summit² will be branded as a failure unless you are in a position to demonstrate forceful action on energy. Such a failure would erode your position of world leadership and damage your image at home—and would increase the risk of a serious attack on the dollar.

The ingredients for a successful Summit form a “concerted action” program:

—German and Japanese actions to promote faster growth;

—U.S. action on energy and inflation; and

—Others to refrain from protectionist measures and, where appropriate, stimulate more growth.

It is clear from the preparatory meetings that if we and the Germans deliver, the others are likely to fall into line. Moreover, while there is some encouragement that Schmidt may agree to seek Parliamentary approval for major stimulus measures, his decision will be influenced heavily by what you can say on energy and inflation. There is little more to say on inflation at this point. On energy, Schmidt and the others will expect a pledge of action by a specific date.

To meet these expectations and put maximum pressure on Schmidt, we believe you need to be prepared to:

—Express confidence that Congress will approve the four bills which have been agreed upon by the conference committee.³

—Express hope that the Congress will approve COET.

—Offer your assurance that if Congress has not approved COET by a certain date (not later than December 31, 1978), you will, after consultation with Congressional leaders, take administrative actions so phased as to raise domestic oil prices to the world level by 1980.

It is not essential to specify at the Summit exactly what actions you would take. The options of fees and/or quotas, and/or exercising your authority under the Energy Policy and Conservation Act (and the questions of their mix and phasing) would be open for determination after the Summit. This may not be as strong as Schmidt would like. But it should be sufficient to give him the “quid pro quo” he feels he needs to obtain domestic acceptance of a German stimulus package. Anything less would give him the opportunity to assert that the U.S. is not fulfilling its responsibilities and that for that reason no agreement on “concerted action” is possible.

If we cannot promise action on energy and the Germans and others then hold back on growth, our balance of payments prospects will deteriorate and there is likely to be a resurgence of heavy pressure on the dollar. Our Summit partners are, at this point, prepared to accept U.S. action on energy and inflation—the “fundamentals”—as the right U.S. contribution to greater stability in international currency markets. If we cannot deliver on energy, this understanding will almost certainly come unglued.

If basic agreements can be reached in the MTN ⁴ prior to the Summit meeting, a Summit endorsement would provide a badly needed contribution to the total package. The British and French are not likely to have much to offer at the Summit beyond generalities on protectionism. But if we and the Germans fail to deliver, they are likely to expand their protectionist measures.

We recognize that the course of action recommended above has implications for the energy legislation on the Hill and we have informed Jim Schlesinger of our proposal. Congressional consultation will be needed, and a separate memorandum will be sent to you on this point. In view of the importance of this issue we recommend that you meet with us and Jim prior to our leaving on Tuesday for the OECD meetings,⁵ in order to arrive at a decision.⁶

1. Source: Carter Library, National Security Council, Institutional Files, Box 69, PRC 61: Economic Summit, Energy, 6/9/78. Secret. The memorandum is typed on Secretary of the Treasury stationery.
2. The G–7 Bonn Economic Summit was scheduled for July 16–17.
3. See footnote 2, Document 151. The fourth dealt with the creation of a national market for natural gas.
4. Reference is to the Tokyo Round of GATT negotiations.
5. The OECD Ministerial meeting was held June 13–15 in Paris.
6. The President did not indicate whether or not he approved the meeting, but a Presidential Review Committee meeting was held on June 8 in the White House Situation Room from 2 to 3 p.m. “The dangers posed by the decline in the dollar, and the need for effective action on the energy front in order to arrest that decline, were discussed,” and “It was agreed to propose to the President that he meet with Congressional leaders to discuss the handling of energy at the Summit.” (Carter Library, National Security Council, Institutional Files, Box 69, PRC 61: Economic Summit, Energy, 6/9/78)