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

46. Memorandum of Conversation¹

Washington, March 3, 1975, 7:45–8:15 p.m.

SUBJECT

• U.S. Energy Policy

PARTICIPANTS

• Department of State
• The Secretary
• Assistant Secretary Enders
• Mr. G.P. Balabanis (notetaker)
• Treasury
• Secretary Simon
• Under Secretary Bennett
• Assistant Secretary Cooper
• Assistant Secretary Parsky

(Secretaries Kissinger and Simon met privately from 7:30–7:45)

Kissinger: Bill and I are trying to prevent contradictions from appearing about our policy. We can’t have statements coming out that are contradictory.² At this juncture, we simply can’t afford it.

Parsky: But that didn’t happen . . . What happened was . . . if you are talking about the misrepresentation in the Newsweek article . . .

Kissinger: Whatever happened, we simply can’t afford it being said that we have no firm policy. We can debate the mechanism of the policy, but we can’t have the situation where Sauvagnargues can say the Americans really don’t have a policy.

Parsky: I thought we had previously only agreed to a study of alternative mechanisms for achieving the general policy goal of encouraging conservation and development.

Kissinger: The President has approved the basic concept of a guaranteed floor price.³ We can let countries choose their own means of achieving it—whether you use peanut oil to support the price or a variable levy or whatever—but the concept of the guaranteed floor price has been agreed to.

Can we agree on this paper.⁴ This would be from Kissinger and Simon, directed to Parsky and Enders.

What has to come out of this meeting isn’t an academic study. I am concerned with our overall strategic aims. We need to have a maximum number of ties to keep the Europeans from trying to screw us. They’ve already screwed us in this call for the preparatory producer-consumer conference. That’s why we can’t afford to let them exploit public differences . . .

Parsky: But I didn’t say . . .

Kissinger: I don’t know what you said—all I know is that every newspaperman on my plane understood it that way. But let’s not argue about the past. What we need to get settled is how we proceed from here. My boy Enders has a devious mind—he figures they won’t agree to a common external tariff, so we need to have another proposal—right?

Enders: Right. They won’t agree to adopt a tariff.

Kissinger: I can give you an absolute guarantee they won’t.

Simon: If you think they won’t agree to a tariff, why do you think they will agree to a floor price?

Kissinger: They will, if we really get behind it, and use some muscle.

Bennett: I’m worried about putting U.S. firms at a competitive disadvantage, if they have to operate with higher priced oil. That’s why we need to get them to put on a tariff too.

Enders: The U.S. tariff will be phased out anyway—it is only temporary.

Bennett: What worries me is that we won’t end up with an integrated program with the other consumers.

Kissinger: We’re talking about entirely different things. You’re saying . . . we’re putting on a $2 tariff, so you (the Europeans) do it too. What we’re saying is—whatever you do now about conservation, we wish to protect against a drastic price drop later on—which will put us in a worse position of dependence than we’re in now.

Bennett: What we’re really talking about is getting investment in energy development. I’m absolutely convinced that a tariff will do a better job in getting the investment we need.

Kissinger: But a lot more will agree to a floor price than a tariff.

Enders: We can probably get agreement to a position which includes a fork of $6–8.

Kissinger: What’s the argument against both?

Enders: Fine, but others probably won’t agree. We can’t go to the Europeans and say, we are putting on a tariff, so, in order that our exporters won’t be at a competitive disadvantage, you do too.

Bennett: But can’t we put it this way—we all need to conserve in our own best interests . . .

Enders: They’re already doing more in conservation than we are. Also, the burden of a tariff is greater on them, with their heavier reliance on imported oil.

Bennett: I don’t think so. They get to keep the tariff proceeds.

Enders: Unless you can generate some support for the tariff, you need to go for the floor concept.

Cooper: I’m not sure a $6–8 range is worth much.

Kissinger: What makes you think it’s not worth much?

Enders: I think we can get $7.

Kissinger: The French will accept it. The Germans will accept.

Enders: Maybe not Germany.

Kissinger: Schmidt told me he was for it.

Simon: The Germans will want to set a price so low it becomes inoperative.

Kissinger: I can understand your preference for a tariff, and I would go along if it were equally attainable. You’ve got the economic expertise, and I would yield to your judgment.

For me, having agreement on the floor price is a means of political warfare. We’ll have a range going into the conference. The producers won’t know what floor price we’re aiming at—exactly where the trigger is—when we’ll do nasty things to them.

What I want to avoid at the meeting is a discussion after which we end up doing nothing.

My preference would be to go for some bilateral deals myself. I have every intention of screwing the Europeans before they screw us.

Parsky: But they claim to like the floor price idea themselves.

Kissinger: Yes, but they claim to like a lot of things—conservation, for example. They’re no longer talking so tough—saying they can put the oil price wherever they please. They no longer have that fighting spirit.

Can we agree to this paper?

Simon: I think this is the position we’ve had right along.

Kissinger: We can satisfy your theological points. You can go for your tariff, and they will turn you down. Then, the question is, what do we do then? Do we just go home to think it over? Or do we go right away for the floor price?

Now, I know that Enders is a pain in the neck—a genius, but a pain in the neck—

Parsky: Are we going to accept the last part of that statement?

Kissinger: You’d better watch Enders—make sure the tariff gets a fair hearing.

Parsky: Ok, then, we’re anticipating that we can’t get agreement on the tariff, then we go for floor price.

Kissinger: If we get them to agree to a tariff, I have no problems with that.

Parsky: You’ll agree to a tariff.

Kissinger: A phased in tariff on the price drops doesn’t seem very different from a floor price.

Enders: That’s equivalent to a floor, what they’re talking about is a tariff phased in independent of what happens to price.

Kissinger: You want to have my sense of the negotiations at this stage on getting the floor price. Once Congress has legislated the $2 import fee, then, if we use enough muscle we can get them to substitute it or phase it in.

If everyone can live with this paper let’s sign it. (to Parsky) If we sign this, will you take Simon’s orders?

Parsky: I take them every day.

Kissinger: Enders never makes that claim, that he follows my orders every day. Can you imagine what it’s like in a Department with both Enders and Sonnenfeldt?

I am no economist. I will take my economic lead from you—but I want to create the appearance of some objective ties—some obstacles to the Europeans going off on bilateral deals. Before any of these long-run contingencies occur, before all this happens, other things will change—I am convinced of that.

(meeting ended at 8:15 p.m.)

1. Source: National Archives, RG 59, Records of Henry Kissinger, Lot 91D414, Box 10, Classified External Memoranda of Conversations, January–April 1975. Secret; Nodis. Drafted by Gordon P. Balabanis (EB/IFD/OMA). The meeting was held in the Secretary’s office.
2. See footnote 2, Document 43.
3. Ford and Kissinger discussed it during a meeting that morning. (Memorandum of conversation, March 3; Ford Library, National Security Adviser, Memoranda of Conversations, Box 9)
4. Not found.