268. Telegram From the Department of State to All OECD Capitals1
112008. Subject: Démarche In Response to Iranian Oil Cutoff.
1. Entire text Confidential.
2. Posts should promptly approach host government to inform them of measures taken or being contemplated by the U.S. Government in response to the cutoff of Iranian oil to Japanese and British oil companies and to seek their cooperation in coordinated efforts aimed at avoiding the repetition of last year’s price explosion in the world oil market.
3. You may draw upon the following talking points:
(A) The National Iranian Oil Company (NIOC) is seeking a $2.50 per barrel increase in the price of Iranian oil. British and Japanese oil companies which were purchasing Iranian oil have refused to buy at the higher price and on April 21 Iran stopped all crude oil deliveries to those companies.
(B) Because of this, Iranian exports have reportedly fallen substantially. It is possible that Iran will find other customers for a portion of its [Page 846] exports, although it will probably have to lower its asking price in order to do so.
(C) In the meantime, we are seeking ways to cope with the cutoff in order to prevent an explosion of spot prices which could lead to increased OPEC official prices such as occurred in 1979.
(D) At this time, loss of Iranian oil to UK and Japan ought not to pose unmanageable difficulties if the oil consuming countries cooperate in several ways.
(E) We urge IEA member governments and France to counsel their oil companies to refrain from spot purchases beyond normal levels and at unwarranted prices.
(F) Consuming countries should also urge producers with whom they have influence to increase production to offset the impact on the market of the loss of Iranian supplies.
(G) The United States is taking the following measures:
—We are discussing with the major U.S. oil companies ways of allocating oil within their systems on a consumption basis, to ensure that countries which suffer an interruption in oil supplies from Iran do not bear an unfair burden;
—We are actively seeking antitrust mechanisms (i.e., Business Review Letters) to improve the capability of U.S. oil companies to operate more effectively in dealing with shortfalls which may emerge;
—We are approaching certain producing countries in OPEC and elsewhere to encourage them to maintain or increase production levels;
—With respect to the spot market, we are ready to implement immediately a quick response reporting system; this will give us lifting prices for crude imports by our 35 largest refiners, with a maximum lag of two weeks from the date of loading;
—We are already discussing with our largest companies the need to avoid spot market pressure, and have alerted them to the prospect of coordinated IEA action;
—We are willing to consider with other IEA members additional measures to dampen spot market pressures.
4. For Tokyo: Please assure GOJ that we have their requests very much in mind. We continue to work with U.S. oil majors and with oil producing countries, and we are actively considering what else we can do. In the meantime, however, it will be important that the GOJ do what it can to keep companies from paying high spot prices, to draw down stocks as required in the interim, and to share supplies as necessary among refiners.
5. For London and Oslo: We urge that the UK and Norway maximize production during this period in order to alleviate the impact of the Iranian cutoff.
[Page 847]6. For London and Paris: Host governments should be encouraged to approach Iraq, Kuwait, and the UAE to seek expanded production.
- Source: National Archives, RG 59, Central Foreign Policy Files, D800212–0983. Confidential; Immediate; Exdis. Drafted by Todd and approved by Rosen. Repeated to Algiers, Abu Dhabi, Baghdad, Caracas, Doha, Jakarta, Jidda, Kuwait, Lagos, Libreville, Mexico, and Quito.↩