100. Memorandum of Conversation1
Dr. Henry A. Kissinger, Secretary of State and Assistant to the President for National Security Affairs
Charles Robinson, Under Secretary of State for Economic Affairs
Lt. Gen. Brent Scowcroft, Deputy Assistant to the President for National Security Affairs
President: Fill me in.
Shultz: I had two missions. One with the Shah, whom I met in Switzerland,2 and one with the small group of Five, which was set up at Schmidt’s suggestion.
The Shah was very cordial and anxious to do what he could to be friendly. It was a beautiful setting in St. Moritz. We talked for an hour and a half. He is a broad-gauge, secure, and very impressive man.
President: Where was he educated?
Kissinger: In Switzerland. He is very tough-minded.
Shultz: He mentioned coming here on May 16. I have three categories of points to convey. First is points the Shah wanted to make to the President. He wanted to know what we thought about the U.S. agreeing to take specific amounts of oil from Iran.
President: At what price?
Shultz: That wasn’t discussed. But he said to me: “Why are you buying from Saudi Arabia when I haven’t used oil as a weapon?”
Separately I raised the Roosa plan.3 He said it was interesting but he wouldn’t have any money to invest because his liftings were down by 16%.
[Page 302]Back in the early days of the Administration we recommended a fee system like you have put in. The Shah told me then he offered to fill our Salt Dome for $1.00 a barrel.
Kissinger: That’s an interesting proposition. A lower price over a long period would be a way of breaking the cartel.
Shultz: That was the first point.
Secondly, he feels the U.S. should regard Iran as her country in the Middle East. It is important to the United States that Iran develops—Iran is a western country. He places great value on the Joint Commission. He is aiming at putting out 17 million tons of steel.
Third, he wanted to express his personal esteem for you and Secretary Kissinger. He regarded my visit as a symbol of your friendship.
Fourth, he is looking forward to his visit here in May.
Kissinger: We are looking to put together a $10 billion program of investment with Iran. We’ll have a preliminary agreement by March and have a signature during his visit. I agree: he is profoundly a friend of the United States. He is a cold-blooded realist. He needs the money and there is a level below which he won’t cut the price.
Shultz: He wanted to register these general points: First, the era of cheap energy is over. I told him the price could erode. He calls oil a noble resource, because of its many uses. He understood the implications of the fee system but had decided not to comment because it would have made it difficult for you.
Second, he said he hopes to develop nuclear energy for Iran.
Third, he said that inflation in the West is bad for everybody. He is pessimistic—especially about Britain and Italy. He says the British don’t want to work any more; if they did, they wouldn’t have inflation. I told him there were different types of inflation. I said your program basically was to fight inflation and you would stick to it.
Fourth, on OPEC. Iran is in the middle he says. Iraq is a hawk; Venezuela is in the middle. No one pays any attention to Yamani.
Indexing is one of his themes. He argued for it. I said there are technical problems with it. What is the base? What is the basket of goods you measure it against? How can you make it work for the variety of basic materials—some of which had dropped badly?
Fifth, he noted that Iran had given a lot of aid—about 7% of its GNP. That is a gigantic effort, which he won’t be able to sustain.
I told him about the meeting in Germany. He made no comment at all. The British said the Shah had played a role in giving Schmidt the idea for the private group.
I tried to point out how much many of the basic materials had come down.
[Page 303]President: How old is he?
Kissinger: The Shah wouldn’t let the Soviets make overflights over Iran during the October war. He is strong, and he is a friend.
President: How did he take over?
Kissinger: His father or grandfather, was a sergeant. He took over as a very young man and was kicked out by the leftist Mossadegh. Then Mossadegh was overthrown with CIA help, and the Shah put back on the throne.
He runs the country himself. He is a total autocrat, but a man with global vision.
He is convinced that we can’t fight another Middle East war from our base structures. So he is thinking of buying some 747 tankers to help us.
He is a good friend of the United States except on oil pressures. He can’t afford to cut his oil production because he needs the income.
If we shifted some of our imports from Saudi Arabia to Iran, we could increase the pressure on Saudi Arabia.
President: How could we have an exclusive contract with Iran?
Shultz: If you have a fee system, you can discriminate among countries by adjusting the fees.
Kissinger: That is one of the drawbacks of quotas.
[Omitted here is discussion unrelated to Iran.]
Source: Ford Library, National Security Adviser, Memoranda of Conversations, Box 9. Secret. The meeting was held in the Oval Office.↩
Shultz met with the Shah in St. Moritz on January 31 to discuss energy issues. Regarding Shultz’s mission, see Document 93.↩
Former Under Secretary of the Treasury for Monetary Affairs Robert V. Roosa had recommended an OPEC Mutual Investment Trust in the January issue of Foreign Affairs. By limiting concentrated investment by OPEC members in a single company, industry, or country, the trust would allay fears of OPEC control of Western corporations. The proposal attracted the attention of Kissinger, who wrote to Shultz in an unnumbered cable to London and Zurich, January 30, asking him to elicit the Shah’s reaction to the plan. (National Archives, RG 59, Central Foreign Policy Files, P830114–1618) The Department transmitted a paper to Shultz on the Roosa Proposal, prepared by Roosa’s staff, in telegram 22606 to London and Zurich, January 31. (Ibid., P850093–2440)↩