Foreign Relations of the United States, 1969–1976, Volume XVI, Soviet Union, August 1974–December 1976

265. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford¹

Washington, February 21, 1976.

SUBJECT

• US-Soviet Oil Agreement

Frank Zarb, Alan Greenspan, Chuck Robinson, and I met on February 18, 1976 to discuss the status of the US-Soviet oil negotiations. The draft agreement would give the US an option to purchase 200,000 bpd of Soviet oil.

The Soviet team arrived a month ago to resume negotiations on the basis of the letter of intent signed by Chuck Robinson at the conclusion of our grain negotiations in Moscow last year.² Although this letter was worded broadly enough to leave open the possibility of a marginal price discount to the United States, it is now apparent that we cannot in fact obtain an overt or significant price discount. The immediate economic benefits to the US must therefore come from advantageous shipping requirements, which would have the effect of reducing subsidies and increasing the use of US ships, or from import diversification and the new source of supply for US “independent” oil companies.

Zarb, Greenspan and I agreed with Robinson that to break off the negotiations now because we have been unable to obtain a price discount would be costly. It would risk charges of bad faith from the Soviets, who could point out that such a discount had not been a precondition of resumption of the talks. We believe it would be preferable to simply note at the end of this stage of the negotiations that we have “made progress,” and move on to the discussion of the shipping aspects of the agreement. We would reach interagency agreement now on “bottom line” shipping criteria (minimum terms which we would require on shipping in order to sign an overall oil agreement) and seek your approval of these criteria. If the Soviets did not agree to these minimum requirements, we could attempt again to negotiate a substantial price break; alternatively, we would have a more defensible basis for terminating the negotiations. If they did agree to adequate maritime provisions, we would have solid economic advantages to shipping which would outweigh the lack of an overt and significant oil price discount.

In any case, we concluded that we lose nothing by continuing negotiations, and that it would be difficult to terminate them gracefully at this point.³

1. Source: Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, 1974–1977, Box 18, USSR (30). Secret; Sensitive. Although no drafting information appears on the memorandum, Butler forwarded a draft to Scowcroft on February 19; Scowcroft made a minor revision to the text. A note on the memorandum reads: “The President has seen.” Ford also initialed it. According to an attached correspondence profile, Ford noted it on February 24.
2. See footnote 6, Document 211.
3. In a February 27 memorandum to Scowcroft, Butler reported that 10 days of further talks had not “substantially altered the situation.” “Therefore,” Butler concluded, “the prospect at this time and under current guidelines is for continued stalemate—for perhaps ten days to two weeks—followed by termination of the negotiations.” Scowcroft wrote in the margin: “Keep me posted.” (Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, 1974–1977, Box 18, USSR (31))