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104. Memorandum of Conversation1

PARTICIPANTS

  • Jamshid Amuzegar, Iranian Minister of Interior
  • Charles Robinson, Under Secretary of State
  • Richard M. Helms, US Ambassador to Iran
  • Jack C. Miklos, Deputy Chief of Mission
  • Robert Hormats, Senior Staff Member, National Security Council

SUBJECT

  • US-Iranian Economic Relations

Amuzegar stressed that there is not all that much oil money available. Abu Dhabi was having its problems as were a number of other OPEC countries so that there was not as much of a financial problem as the US thought. Iran wants to have a constructive consumer/producer conference. It wants representatives of the Third World to attend, but to sit with OPEC, and agrees that we can keep raw materials out of the picture insofar as the conference is concerned.

Iran wants to play a constructive role but it cannot agree that oil is the only problem in the international economy. Also, the problem of oil should not cause panic among the Western countries. Among the developed countries, Germany is doing well, Japan has adjusted remarkably, France does not have major problems (Giscard told this to the Shah), and the small countries such as Belgium, Sweden and Norway are doing okay. The two big problems are Italy and the UK. Iran has made an effort to help them. Last year it loaned $750 million to the IMF oil facility. This year the Shah has told the IMF that Iran will contribute $1 billion. This will help these countries substantially. Also, Iran has no objection to the Kissinger plan for a $25 billion safety net. This is okay with us. We do not care what you do to help one another financially.

With respect to Italy, the problems are less oil related than related to the state of the Italian economy. It has no leadership and no ability to solve its problems. Both Britain and Italy for instance are really not making much of an effort to deal with inflation. Every time there is a [Page 313]strike in Britain, I cringe because I know I will have to pay for it. The price of the goods Iran buys has shot up dramatically, so our oil buys less than it did before—24% less by our calculations.

We agree with the American position that such products as bananas, copper and other raw materials should not be part of a consumer/producer conference. Most producing countries also agree. Algeria, however, wants to bring in other raw materials lest it be accused of not taking up the needs of other developing countries. Iran’s experts have just come back from a meeting of experts from OPEC countries. Iran will propose to the developed countries that we discuss all raw materials, including oil, but that we do so in sections, first addressing oil and then, perhaps at a subsequent meeting, discussing other raw materials. This will give Algeria a way out. We proposed this to Algeria in the experts meeting, but he said he was not authorized to do this.

On oil questions, Iran and the US are not far apart. The importance is to keep the free world free and keep the communists out. But you must understand that we need many imports from the West. Prices of the equipment we buy have increased so that our oil buys 24% less than it did on January 1 of last year. We cannot sanction a decrease in price. But we do think that a consumer/producer conference can achieve a better dialogue with industrialized nations. We genuinely want to reach agreement and to work together on investment and aid to developing countries and other areas of common interest.

Iran is in the Western camp. We do not share the goals of some OPEC countries. We do not agree to OPEC desires to weaken the West. I alone, and not our foreign or finance ministers, went to the Algerian meeting of foreign and finance and oil ministers. The Shah sent me alone because we want to keep oil out of political matters. It is for us a strictly economic proposition and should not be injected into politics.

With respect to the details of a consumer/producer conference, France invited major consumers, major producers, and developing countries.2 The Algerians are against this. They do not want OPEC separated from non-oil producing developing countries. They argue that OPEC countries are developing countries. They think the French want to split the LDCs from OPEC in order to strengthen the attack on OPEC. OPEC has supported the Algerians in their effort to avoid a split. Perhaps we could envisage a two-party negotiation including de[Page 314]veloping countries sitting on the OPEC side but as observers who would say very little.

We also agree that the conference should not be large—perhaps five OPEC countries, five developed countries, and five developing countries playing a minor role. We do not care how many you want on your side. If you want five, we have already chosen who our five would be. If you want six, we could accommodate you and have already chosen the sixth.

Algeria, as I mentioned, wants to deal not only with oil but also with other raw materials. I have told them that this is not a good idea, and that success cannot be achieved. It is unrealistic to think that you can have any success by handling the conference this way.

But Iran wants to play a constructive role. As I mentioned, we have contributed to the IMF oil facility. We have also proposed an International Development Fund in the UN Special Session last April.3 The US opposed this, stating that it would be difficult to get through the Congress. Then the Germans opposed and the UK was ambiguous. But Iran believes in providing assistance. Iran has provided 50% of all the OPEC aid to developing countries. It has helped India and many other LDCs. Its fund proposal was designed to bring other OPEC countries into the assistance effort through multilateral channels.

Our fund was designed to have tripartite management—OPEC, developed countries and developing countries. Each would contribute $150–200 million, for a total fund of roughly $4 billion. But some people thought that it was not equitable to have everyone contribute the same amount. We then revised our plan to make contributions based on per capita income. But at the WFC, where we proposed this, the US objected that it would mean too large a contribution by the US. Iran is willing to make compromises in the development of this fund—either equal contributions, contributions based on per capita income, or some other way of doing it. We are very flexible. But we intend to make some proposal in the coming meeting in Algiers. If we can have your guidance, we will take it into account in developing our position. I depart for Algiers on the 25th, so I would need it before then.

We have just received the formal French invitation to the conference. We understand the desire is to jump from an expert level meeting to a summit meeting. But we question whether you can jump this far. We in OPEC plan to move from an experts meeting to a meeting of oil ministers to a meeting of foreign, oil and finance ministers and then to the summit on the 4th or 5th. This permits greater preparation and we [Page 315]think it is advisable for us. This might be a better way of organizing the overall meetings.

Getting back to the question of raw materials again, we will desire to work out a reasonable solution with Algeria to keep this out of the consumer/producer conference.

With respect to indexation, we are, as I mentioned, extremely concerned about the declining purchasing power of our oil revenues. One way out is to index the price of oil, tying it to 20–30 commodities. Of course there is the question of which commodities. We, ourselves, understand the difficulties in developing an indexation scheme and we are certain that we will find tough going in working one out with other OPEC countries. But we will try to reach a compromise which is satisfactory to OPEC nations to preserve our purchasing power.

Robinson: We are not opposed to the proposition but the question is how to do it. It is extremely hard to get a weighting which accurately reflects the situation. Weights change among commodities and over time. Some countries import more military equipment than others. Others attach greater importance to industrial goods. We are willing to explore possibilities of indexation but are skeptical that the technicalities can be agreed upon. One possible alternative might be an international forum to discuss the impact of inflation and what might be done to adjust to it. In this way consumers and producers could maintain a dialogue on these issues in order to find the best means of compensating for the erosion of purchasing power.

Amuzegar: With respect to the conservation of oil, we have no objection to your cutting back on imports. We encourage it. Many of our investments are eroding in value so that we do not have a particular interest in buying large amounts of securities which become worth less and less. We have our import needs and we are desirous of investing in industries which give us additional amounts of technology to help our economy. But we are not interested in investment for the sake of piling up investment. We would be happy if you could reduce the amount of oil we need to export. We were somewhat shocked by the reaction to the floor price by your allies. This is a good idea. It would help Iran and it would help you. You could get more off-shore oil and we would be relieved of the obligation of having to supply you with oil. It is surprising that other countries in the developed world do not understand the importance of the concept and agree to it.

  1. Source: Ford Library, National Security Adviser, Backchannel Messages, Box 4, Mideast/Africa, March 1975 Outgoing. Secret. The meeting was held at the Iranian Ministry of the Interior. Robinson toured the Middle East the last two weeks of February. According to telegram 29483 to Tehran, February 8, his mission was to discuss economic matters of mutual interest and “particularly to explore the possibility of actions which might be undertaken jointly to develop cooperation regarding petroleum-related (including financial) issues.” (Library of Congress, Manuscript Division, Kissinger Papers, Box CL–152, Iran, Chronological Files, 4 January–23 March 1975)
  2. France sent invitations to Algeria, Saudi Arabia, Brazil, India, Iran, Japan, Venezuela, Zaire, and the United States to attend the conference. A translation of the text is in telegram 5328 from Paris, March 1. (Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, Box 4, France—State Department Telegrams to SECSTATE-NODIS (3))
  3. The Sixth Special Session of the UN General Assembly, which met in New York April 9–May 2, focused on raw materials and development.