Foreign Relations of the United States, 1969–1976, Volume XXVII, Iran; Iraq, 1973–1976

189. Action Memorandum From the Deputy Secretary of State (Robinson) to Secretary of State Kissinger ¹

Washington, October 1, 1976.

SUBJECT

• Suspension of Negotiations with Iran on a Bilateral Oil Agreement

You have seen the attached telegram (Tehran 9795) conveying Ansary’s rejection of Frank Zarb’s revised terms for a bilateral oil agreement.²

It has been obvious to both sides for some time that a seller’s market in crude oil is likely to prevail over most of the next six years, certainly in 1976–77. This reality relieves the Iranians of need to grant substantial price concessions to us. Similarly, it has been obvious that the U.S. Government would not go into an unprecedented form of business—buying Iranian oil on long-term contract—without a publicly demonstrable financial advantage over the conventional alternative of short-term competitive supply contracts. Ansary was right in seeing that these positions could not be reconciled.

I suggest that we accept Ansary’s judgment while expressing regret that a long-term supply agreement has eluded our best efforts, leaving the door open for future talks.

Recommendation:

That you authorize the attached instruction to Helms.³

1. Source: National Archives, RG 59, Central Foreign Policy Files, P840036–2216. Confidential; Exdis. Kissinger wrote on the memorandum: “Send copy of Ansary cable to Scowcroft.”
2. Robinson sent the revised terms for the oil agreement in telegrams 229942 and 234132 to Tehran, September 17 and 21. (Both ibid., Central Foreign Policy Files, D760350–1267) Telegram 9795 from Tehran, September 30, attached but not printed, transmitted a message from Ansary to Robinson: “I regret that your new proposal represents such complete departure from the principles which we have consistently maintained should form the basis of our negotiations that it cannot in any way be considered by us.” Ansary declared that Iran was abandoning negotiations on the subject.
3. Attached but not printed. The instruction was sent in telegram 246014 to Tehran, October 2, in which Kissinger commented that the various requirements of the two governments “led us to a series of American proposals that appeared one-sided to HIM and led Ansary to a set of ‘principles’ that appeared one-sided to us.” He added his hope that the establishment of the U.S. strategic oil reserve and the changing oil market would produce conditions for an agreement in the future. (Ibid., D760372–0953)