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

245. Telegram From the Department of State to Selected Diplomatic Posts¹

Washington, November 19, 1979, 2256Z.

300653. Subject: Suspension of Oil Imports From Iran.²

1. Several posts have raised questions or reported host government officials’ queries as to how the suspension of U.S. oil imports from Iran will be implemented and what effects we anticipate this may have upon the world oil market. Our assessment of this latter point is necessarily tentative and preliminary, but posts may draw as appropriate from this cable with those caveats in discussions with host governments. You should also draw upon statements carried in the USICA Wireless File, and cabled excerpts from the Department’s daily press briefing.

2. Implementation: The suspension was implemented by a November 12 Presidential Proclamation, which prohibits the entry into the customs territory of the United States of crude oil produced in Iran (except crude oil loaded aboard maritime vessels prior to November 13, 1979) or unfinished oil or finished products refined in possessions or free trade zones of the United States from such crude oil. The Proclamation is based upon the President’s authority under 232 (B) of the Trade Expansion act of 1962, as amended. The suspension does not prevent U.S. companies from trading in Iranian oil or shipping it to other destinations, nor does it affect imports of refined products produced from Iranian crude in foreign refineries, in the Caribbean or elsewhere. It is intended to prohibit imports into the U.S. of products refined from Iranian crude in the Virgin Islands.

3. Effects on the world oil market: As noted in the President’s announcement, we hope to reduce oil consumption in the United States enough to offset a significant portion of the 700,000 barrels per day of oil we had been importing from Iran. A number of domestic measures are under intensive consideration to achieve this reduction. Iran has thus far given no indication that it plans to reduce oil production, and other oil producers continue to supply normal amounts to the world oil market. Continued adequate supply levels, together with the anticipated reduction in U.S. demand, should ensure that additional upward price pressures are kept to a minimum.

4. There will be a number of readjustments in the world oil market, especially since Iran has suspended deliveries of any oil to U.S. firms.³ Countries which formerly received Iranian oil through U.S. firms will probably seek to obtain continued supplies directly, and may even increase their purchases somewhat. Some of the Iranian oil formerly sold under contract to U.S. companies will doubtless be offered on the spot market. We doubt that most oil consumers would exchange existing long-term supply arrangements for insecure and uncertain arrangements to purchase Iranian oil.

5. The extent to which U.S. refiners will seek to replace Iranian crude supplies with oil from other sources and on the spot market will depend upon the success of U.S. effort to reduce oil demand and the type of allocation arrangements made to ensure supply availability for crude-short refiners.

6. In sum, though there will be some readjustments and dislocations in the world oil market, the presence of adequate supplies and efforts to reduce demand (both in the U.S. and by the IEA nations) should minimize upward price pressures which might otherwise be attributed to the U.S. suspension of Iranian oil imports.

Vance

1. Source: National Archives, RG 59, Central Foreign Policy Files, D790533–0760. Confidential; Immediate. Drafted by Todd; cleared by Poats and in DOE/IA, EUR/RPE, and NEA/ECON; and approved by Rosen. Sent Immediate to Brussels and Madrid and to Ankara, Athens, Bern, Bonn, Canberra, Copenhagen, Dublin, London, Luxembourg, Oslo, Ottawa, Paris, Rome Stockholm, The Hague, Tokyo, Vienna, and Wellington. Repeated to Jidda, Kuwait, Tripoli, Baghdad, Abu Dhabi, Algiers, Doha, Caracas, Lagos, Jakarta, Libreville, and Quito.
2. See footnote 4, Document 242.
3. On November 13, the day after Carter’s announcement, Abolhassan Bani-Sadr announced in Tehran that the Iranian Revolutionary Council had decided to stop all oil exports to the United States.