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

265. Memorandum of Conversation¹

Washington, March 20, 1980.

SUBJECT

• Meeting between Secretary Vance and Foreign Minister Okita

PARTICIPANTS

• US
• Secretary Vance
• Undersecretary Newsom
• Undersecretary Cooper
• Richard Holbrooke, Assistant Secretary (EA)
• Reginald Bartholomew, Director Pol-Mil Bureau
• Donald Gregg, NSC Staff
• Michael Armacost, Deputy Assistant Secretary (EA)
• Nicholas Platt, Deputy Assistant Secretary (DOD/ISA)
• Japan
• Foreign Minister Saburo Okita
• Ambassador to US Fumihiko Togo
• Deputy Foreign Minister Yasue Katori
• Shinichiro Asao, Director General, N. American Bureau
• Kiyoshi Sumiya, Minister, Japanese Embassy
• Mitsuhiko Hazumi, Deputy Director Gen. Economic Bureau
• Yoshio Hatano, Economic Minister, Japanese Embassy

1. Following a one hour briefing earlier in the morning by INR and Assistant Secretary Holbrooke on Soviet naval and air deployments in Southeast Asia and the Indian Ocean area, on developments within Indochina, and on Secretary Vance’s meeting with PRC Vice Minister Zhang, Foreign Minister Okita met with Secretary Vance during a working luncheon and follow-on talk for three and a half hours on March 20.

2. The Secretary welcomed Okita warmly, noting that “productive partnership” is of vital importance to the US. Okita responded that he had been trying to come to the US ever since assuming his post in November 1979, but that Diet business had prevented that.

[Omitted here is discussion unrelated to energy.]

Energy

14. Okita then turned the conversation to broader energy matters. He said the discussion in IEA² centered on three aspects: a) scientific cooperation; b) energy economy and savings; and c) shifting to alternative sources of energy. He said that the GOJ has introduced a plan this year to save 7 percent on energy usage. He noted that for the last six years, real GNP has grown at over 6 percent annually, but oil consumption has not grown at all. Thus there has already been great economizing. There might be some increase this year, but this would be discussed in the IEA.

15. On alternative sources, the GOJ plans to reduce its dependence on oil from 74 percent at present to under 50 percent by 1990. This will require large imports of coal, a subject he had discussed with the Australians during his visit there in January. In addition to coking coal, they can provide some burning coal for power generation. Also, they can supply some uranium and natural gas. The Chinese also said that while the oil prospects are not so bright as before, the PRC could supply 100 million tons of coal if Japan requires that. Okita also mentioned US coal. Beyond that, Japan is working on alternative sources such as solar and fusion. They appreciate US cooperation in all these areas.

16. Under Secretary Cooper then described our view of the energy situation and its relation to the Venice Summit. He said we have been working with Japan and others for three years on these issues. In preparing for the Venice Summit, we would be relying on progress at the IEA Ministerial in Paris in May. We hope there to establish a common assessment of the near- and mid-term future, including oil consumption targets for 1981 and goals for 1985. Cooper said there is some controversy on this, largely with Germany and the UK who think the exercise may be unnecessary and unwise. Most others, however, feel that some international framework regarding conservation and substitution is necessary. The Secretary added that the President certainly feels that way.

17. The Secretary and Under Secretary Cooper stressed the importance of progress at the IEA Ministerial for success at Venice. Cooper said there was also the question of measures to be taken individually by countries. These would vary, of course, from country to country, but each needs to take steps.

18. Beyond the IEA meeting and individual country measures, Cooper noted a third concern was the spot market. We have, of course, discussed this issue with Japan, the UK and others. There is no magic solution so long as demand exceeds supply. However, in 1979, some countries got substantial supplies on the spot market, scrambling for oil and building stocks, only to find in the end that supplies were not short. We need new, multilateral technical discussions, Cooper said.

19. The Secretary observed that a collateral issue was how the energy discussion in the UN special session³ was related to the IEA/Venice discussions. Although it has not worked in the past, to what extent should we seek a producer/consumer dialogue?

20. Cooper said that the whole question of a late August special session was obscured by the agreement to global negotiations. Until we have various preparatory meetings in the Committee of the Whole we will not be able to sort out the respective responsibilities of the special session (e.g. international development strategy for the 80’s with which the LDCs do not seem to want to grapple) and the global negotiations (where people now think energy is the key issue). The G–77 thinks the global negotiations should go from January to September 1981, thus filling up the entire gap between UNGAs. In fact, the Indians, who are in the chair of the G–77, have said they would welcome suggestions how to use all that time.

21. To speak of a “dialogue” on energy is much too vague, Cooper continued. Some in the US and elsewhere literally think of a global bargain between suppliers and producers. But though they don’t rule it out, most who have looked hard at this question, including OPEC countries, are skeptical. Much is possible short of that, however. Perhaps the greatest promise, Cooper said, is in helping non-OPEC LDCs in developing conventional and non-conventional sources of energy. It is certainly in our interest to do so, and OPEC countries sees it in their interest as well. Thus there is a clear convergence of interests if we can work out the modalities. So far as OPEC is concerned, some of the members are cool on multilateral efforts, others would like to see them linked to aid flows.

22. Okita responded that, so far as the special session is concerned, there are too many countries participating for meaningful results. Though there is need for a dialogue, the size of that session is not conducive to a good outcome. The dialogues should mainly be conducted bilaterally. For its own part, Japan needs to work on shifting from purchases of oil from majors to direct deals since supply to Japanese refineries by US majors had been cut back. There has been a serious effort in this respect over the past several months. In the past, the majors supplied 1.4 million barrels/day (b/d), but now that is down to 400,000 b/d, and this will disappear completely after the spring. This has presented very serious problems. Some government officials say that the GOJ should ask the USG to influence majors to keep supplies going to Japan. But, Okita said, this may not be “quite easy”. So, Japan has endeavored to increase contacts with producer governments to increase supply. This is one aspect of Japan’s relations with the Middle East. (In response to a question from Cooper, Okita noted that, though the government was trying to facilitate them, these direct deals were private, not governmental.)

23. Regarding assistance to LDCs in developing their own energy, Okita agreed this was very important and said it is an issue that we need to face at Venice including in the areas of solar, biomass, coal, natural gas, etc.

24. At the Secretary’s request, Cooper explained the consequences of the Saudi takeover of ARAMCO.⁴ Cooper said that if it is carried out in “benign” circumstances, it will be a sheer formality with no substantive change. The Saudis already consider ARAMCO theirs and have only delayed the takeover for interministerial reasons. ARAMCO is viewed by the Saudis as a service company now, and it will continue as that after the takeover, though it will get some payment in oil.

25. In response to the Secretary’s question whether the shares of the majors would be affected, Cooper said that in the short run they should not be affected, again assuming a “benign” takeover. Over the long run, the Saudis are still considering how to handle it. Congress and the FTC are fishing for sensitive data. If the pressure is too great, Saudi Arabia could say it is too difficult to deal with the US. This is not likely, but it is possible.

26. Under Secretary Newsom observed that the total amount of oil in the world now under control of the majors has been reduced. Cooper said that the share of crude handled by the majors has dropped from 65 percent to 45 percent. But shares in distribution of product are not so different from the past.

[Omitted here is discussion unrelated to energy.]

1. Source: National Archives, RG 59, Executive Secretariat Files: Lot 84D241, Nodis 1980 Memoranda of Conversation for Secretary Vance. Secret; Nodis. Drafted by Alan Romberg, Country Director for Japan, and approved by Raymond Seitz of S/S on April 7. A note indicates the list of participants was continued on the last page, which is not printed here. The full text of this memorandum of conversation and additional documentation on Okita’s visit are scheduled for publication in Foreign Relations, 1977–1980, volume XIV, Korea; Japan.
2. The IEA Governing Board met March 13–14. During the meeting, the members “went to work in earnest” on preparing for the IEA Ministerial meeting in May. (Telegram 71281 to Ankara, March 18; National Archives, RG 59, Central Foreign Policy Files, D800137–0534)
3. The Preparatory Committee of the UN Conference on New and Renewable Sources of Energy held a special session in New York February 4–8 to lay the groundwork for the Conference in Nairobi in August 1981. For further information on the Committee’s session, see Yearbook of the United Nations, 1980, pp. 705–708.
4. Saudi Arabia completed the full acquisition of Aramco in early September although the final payment was reportedly made on March 9. (The New York Times, September 5, 1980, p. D3)