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

236. Memorandum of Conversation¹

Washington, September 28, 1979, 11:20 a.m.–12:30 p.m.

SUBJECT

• Bilateral Issues and President Lopez Portillo’s Energy Proposals

PARTICIPANTS

• U.S.
• The President
• The Vice President
• Secretary Vance
• Secretary Duncan
• Dr. Brzezinski
• Assistant Secretary Jules Katz
• Assistant Secretary Viron Vaky
• Robert Krueger, Amb. at Large-Des.
• Ambassador Patrick Lucey
• Ambassador Henry Owen
• Jerry Schecter, NSC Staff
• Guy F. Erb, NSC Staff
• Everett Briggs, State
• Mexico
• President Lopez Portillo
• Jorge Castaneda, Secretary of Foreign Relations
• Jorge de la Vega Dominguez, Secretary of Commerce
• Jose Andres Oteyza, Secretary of Patrimony and Industrial Development
• Alfonso de Rosenzweig Diaz, Under Secretary for Foreign Relations
• Jorge Diaz Serrano, Director of PEMEX
• General Miguel A. Godinez Bravo, Chief of Staff, Pres. Gen. Staff
• Rafael Izquierdo, Advisor to the President
• Jose Antonio Ugarte, Advisor to the President
• Dr. Robert Casillas Hernandez, Private Secretary to the President
• Rosa Luz Alegria, Under Secretary for National Planning and Budget
• Andres Rozental Gutman, Director General of North American Affairs, Secretariat of Foreign Relations
• Hugo Margain, Mexican Ambassador to the United States
• Jose Ramon Lopez Portillo, Director of Analysis, Secretariat of Programming and Budget
• Abel Garrido, Director of Bilateral Trade Relations, Ministry of Commerce

President Carter opened the meeting by saying he was delighted, pleased, and honored to meet again with President Lopez Portillo in the White House.² Lopez Portillo thanked him. President Carter suggested that they take up bilateral issues at this meeting and international issues on the next day. Lopez Portillo agreed.

[Omitted here is discussion unrelated to energy.]

Lopez Portillo said the two countries had made substantial progress with regard to gas. There had been some misunderstandings. What was important to him was the principle on which our dealings would be based. We now had a permanent basis and it was worth the long discussion.³ Now we had established a principle and had a pattern to follow in our negotiations. He was happy with the outcome. It gave us a structure that can be taken to any other field.⁴

[Omitted here is discussion unrelated to energy.]

On energy, Castaneda said that there had been an agreement on gas. It was well received and he was well satisfied. Mexico sold 500,000 b/d of crude petroleum to the United States, 80% of their crude oil exports. Sales of electric energy were promising across the California and Texas borders, particularly in the San Diego area. There was a possibility of selling electrical energy generated through geothermal facilities. This could take place by 1983.

President Carter said this was all very encouraging. There was no need, he said, to repeat our frequent statements that how Mexico develops and sells its energy was your decision. We wanted to be reliable customers and good trade partners, that was our goal. Mutual analysis of energy programs had good prospects. He and his government had expressed their willingness to explore new ways to sell energy across the border.

[Omitted here is discussion unrelated to energy.]

President Carter said that he was very interested in Lopez Portillo’s energy plan and he suggested that he discuss it.⁵

President Lopez Portillo said he would like to underline two things. The problem was that we were in transition between two eras. If this were so we must face other problems. Give or take a decade, in forty years, he said, petroleum would no longer be the principal energy source for the human race. Humanity was moving at an accelerated pace. The stone age had lasted thousands of years, the iron age much less, the petroleum age might last no more than 100 years. We were living at the end of an era. His first appeal was that we understand this situation. Our generation would witness the end of the petroleum era. The objectives of our energy plans should be clear: to prepare the transition from one era to another and to introduce the use of other resources. In this transition we must explore, conserve, produce and rationalize use of petroleum. We must use it in a more satisfactory manner. By doing this we would be able to make the change to the next era.

A universal body should prepare the substance of the solution of the energy issue. This in itself required a strategy. That was the thrust of his proposal to the United Nations General Assembly: to plan the transition between two eras, to lay out a program, to establish a Working Group which would encompass the industrialized countries of both East and West, oil exporters, and the oil consuming developing countries. Mexico had consulted with all these groups and was ready, in general, to sit around the table and discuss this. If we were to establish this group we could take up both broad and narrow issues. The Working Group could make proposals that could be studied and considered by others.

The energy problem affected the entire world. Lopez Portillo was especially concerned with the situation of developing countries. Rich countries could find substitutes for petroleum. They had the ways and means to do so. Developing countries had no such possibilities. He always gave two specific examples that moved him, he said: Costa Rica and Jamaica. Both had democratic governments, very respectable democratic governments. Their problem was that more and more of their GNPs was devoted to the purchase of oil. He had met President Carrazo of Costa Rica before the oil price rise. At that time 27% of Costa Rica’s GNP was used to buy oil. Perhaps it was 30% now. This caused him great anxiety. Costa Rican democracy was running a great risk because of this problem. A similar reflection, not so dramatic perhaps, was made by Manley at the Non-Aligned Movement meeting in Cuba. That was why, while proposing long term measures of transition, he also sought immediate solutions. Developing countries said that they were not interested in the long term. What were we going to do in the short term?

One of his great concerns, he said, and Mexico was a potential oil producer, was to look for ways out for these countries, not for tomorrow but for today. And this must include supply, prices and conditions of purchase, avoidance of speculation, and a mechanism to transfer real resources to the developing countries. That was why he had proposed a fund, or several funds, which would finance the long-term and the anxiety-creating problems of developing countries that import oil. The oil exporters should recognize that we had a special commitment to them.

This had been set out in general terms. He would give an example of what he meant by rationalization of the management of oil while we enjoyed that product. Between Mexico and Guatemala flowed the Usumacinta River. It was the largest river in Central America and could generate a great deal of electric power. To do this we needed funding, equipment and a political agreement because the lands threatened by the dam would be Guatemalan. We had not yet reached an agreement with Guatemala that would provide power to all Central America. Under his proposal the global community would make it necessary to come to an agreement, said Lopez Portillo. It was not right not to use potentially available electricity. It was a case of what he meant by rationalization, that is, the use of a parallel source of energy. This project could solve the energy problems of Mexico and Central America and would make it possible to save oil.

Lopez Portillo said that if we explored in each country in the world, we would discover sources that had not been tapped because of a lack of funds, technology, or equipment. It should be possible to organize mankind in such a way that energy was wisely used. The only substitute today for oil is the oil we discover tomorrow. It was our responsibility to discuss this problem.

The developed countries only wanted to discuss the price of oil in their conversations with oil exporters, as if this were the only issue between them, said Lopez Portillo. The exporters would not discuss this point in isolation from others. They wanted to discuss the entire economic order. That was where things stood. In the meantime other things were happening. If we reflect on this impasse, it was not a matter of principle but of methodology. We should agree on methods. President Carter nodded his agreement. President Lopez Portillo said that he believed that his method was appropriate. We had determined that energy, not only oil but alternative sources, was the principal problem of mankind. We should determine long-term and short-term solutions. He believed that with political will we would be able to make the best use of the world’s last oil opportunity.

Disorder could not continue, said Lopez Portillo. Either we put order into the situation or else it would be imposed on us by the party that won the struggle, which itself would consume energy. Order would come in one way or another. He believed that the rational way was best.

President Carter said that Secretary Duncan, the State Department, and the National Security Council Staff were studying the proposal and its bilateral and multilateral aspects. He asked Secretary Duncan and Henry Owen to report to him tomorrow. He said he had thought it would be useful to hear the remarks of President Lopez Portillo so that we could prepare our response overnight.

President Carter said that he looked forward to seeing President Lopez Portillo that evening. Tomorrow they could discuss international issues and meet alone as well. President Carter said that the American people had been excited about the visit and were hopeful of beneficial results. He knew he shared a desire not to disappoint them.

Lopez Portillo thanked him and said he looked forward to the meeting tomorrow with great pleasure.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 37, Memoranda of Conversation: President, 7/79–9/79. Confidential. Drafted by Erb on October 3. The meeting was held in the Cabinet Room of the White House. The full text of this memorandum of conversation is scheduled for publication in Foreign Relations, 1977–1980, volume XXIII, Mexico, Cuba, and the Caribbean. President López Portillo was in Washington for an official visit September 28–29.
2. López Portillo was last in Washington in February 1977.
3. The first of six rounds of U.S.-Mexican natural gas negotiations, which mainly involved discussions over the price that the United States would pay for Mexican gas, took place in Mexico City April 3–4. (Carter Library, National Security Affairs, Staff Material, International Economics File, Box 1, Subject File, Mexico: Gas Negotiations, 3–4/79) The second was held in Washington May 3–4 (ibid., Country File, Box 49, Mexico, 5–6/79); the third in Mexico City July 11–13 (ibid., 7/79); the fourth in Washington on July 27 (ibid., 8–9/79); the fifth in Mexico City on August 10 (telegram 13518 from Mexico City, August 10; National Archives, RG 59, Central Foreign Policy Files, P840175–2453); and the sixth in Mexico City August 29–30 (telegram 14866 from Mexico City, August 31; ibid., P840175–2441). At the last meeting, Mexican Foreign Minister Castañeda proposed that the United States pay $3.625 per million cubic feet for Mexican natural gas, while Christopher countered that “the initial price be set at $3.50, to be escalated at three-month intervals from time gas starts flowing, but that price would be at least $3.625 on April 1, 1980.” Castañeda wanted the guaranteed floor price of $3.625 to start on January 1, 1980, and said that “both price and date had acquired ‘political importance.’” (Ibid.)
4. According to a September 12 memorandum from Erb to Brzezinski, “a consensus emerged” that day in favor of accepting “the last Mexican offer on gas prices, subject to negotiation by the U.S. private companies of satisfactory clauses on the escalation of gas prices and the termination of the contract.” (Carter Library, National Security Affairs, Staff Material, International Economics File, Box 3, Subject File, Mexico: Gas Negotiations, 9–10/79) According to the text of the ad referendum agreement that the Ambassador reached with Castañeda, the Governments of Mexico and the United States had reached an understanding on a framework for the sale of 300 million cubic feet per day of natural gas by Petróleos Mexicanos (PEMEX) to U.S. purchasers, with an initial price of $3.625 per million BTU as of January 1, 1980. (Telegram 16281 from Mexico City, September 20; National Archives, RG 59, Central Foreign Policy Files, P840175–2419) On September 21, the U.S. and Mexican Governments issued a joint announcement on the agreement. For text of the announcement, see Public Papers of the Presidents of the United States: Jimmy Carter, 1979, pp. 1703–1704.
5. On September 27, Brzezinski sent a copy of López Portillo’s speech, delivered that day to the UN General Assembly, to the President with a covering memorandum highlighting the central recommendations of López Portillo’s “World Energy Plan.” Brzezinski wrote that it would: “guarantee full and permanent sovereignty over national resources; rationalize exploration, production, distribution, consumption, and conservation of energy sources; increase the exploitation of energy resources; facilitate national energy plans that would be consistent with a world energy policy; promote auxiliary energy industries in developing countries; address the short term problems of oil importing developing countries; set up financing and development funds based on contributions from industrialized and oil exporting countries to meet the needs of oil importing developing countries; improve technology transfers in the field of energy; create an international energy institute, as proposed by U.N. Secretary General Waldheim.” (Carter Library, National Security Affairs, Staff Material, International Economics File, Box 3, Subject File, Mexico: Gas Negotiations, 9–10/79)