269. Telegram From the Department of State to the Embassies in Venezuela, Nigeria, and Saudi Arabia1
112009. Subject: Approach Re Increased Oil Production.
1. Entire text Confidential.
2. Unless you believe it would be counterproductive, Embassy Caracas should promptly approach host government to urge that current oil production levels be increased to meet market demand stemming from cutoff of Iranian oil to Japanese oil companies, British Petroleum and Shell. Embassy Lagos should make a similar approach, expressing USG appreciation that oil production was not reduced April 1, and urging that present output be maintained and if possible increased. Posts may draw upon the following points:
—Since Iranian oil exports resumed in March 1979, Iran has demanded prices not justified by traditional standards of quality and location, and it is not surprising that the market will not support Iran’s latest price hikes.
—The absence of substantial quantities of Iranian oil in the marketplace risks renewal of unsettling pressures on the spot market, which, owing to joint efforts by producers and consumers, has recently been in somewhat better balance.
—Any disturbances in the world oil market at this time will further exacerbate the current delicate state of the world economy.
—The United States is pursuing a strong conservation policy and producing at maximum levels; we believe orderly oil market conditions are in the best interests of producers and consumers alike.
[Page 848]—Thus we urge producer governments, especially those which recently reduced oil production levels, to increase output to meet market demand resulting from the loss of Iranian oil exports.
3. For Jidda: Unless Ambassador West sees overriding reasons not to do so because of the other pressures on our relationship at this time, it would be helpful if he could make our concerns known to Petroleum Minister Yamani, and pursue with him in the context of the SAG effort to reunify OPEC oil prices Yamani’s thoughts on what might be done to encourage other producers with the capacity of doing so to increase production at this time, and whether the Saudis might be helpful in this regard.
4. Info addressees in oil producing nations may draw upon this message if they believe it might be useful, or if they discern any evidence that host governments might be contemplating a reduction in present oil production levels. FYI We are suggesting to the British and French Governments that they consider making similar approaches in Iraq, Kuwait and the United Arab Emirates.
- Source: National Archives, RG 59, Central Foreign Policy Files, D800212–0980. Confidential; Immediate; Exdis. Drafted by Todd; cleared by Hinton, Twinam, Michael A. Armacost (EA), and Edward L. Morse (E) and in ARA/AND, AF/W, and DOE/IA; and approved by Rosen. Repeated Priority to all OECD capitals, Algiers, Abu Dhabi, Jakarta, Kuwait, Baghdad, Doha, Quito, Libreville, and Mexico, and to Helsinki and Reykjavik.↩