[Page 576]

194. Memorandum of Conversation1

SUBJECT

  • Iranian Sales of Oil for the U.S. Strategic Reserve

PARTICIPANTS

  • Iran
  • Ambassador Zahedi, Embassy of Iran
  • United States
  • Charles Robinson, Acting Secretary of State
  • Rutherford Poats, Senior Adviser
  • Charles Naas, Director, NEA/IRN

Mr. Robinson stated that at the instruction of Secretary Kissinger, he had requested Ambassador Zahedi to call for a further discussion of the oil price issue. He noted that the Ambassador was fully familiar with our views concerning the severe economic impact on western European countries and the possible political instability which could develop as a result of price increases. His purpose in talking with the Ambassador today was not, he said, to review these economic arguments nor to restate the points made by Secretary Kissinger to the Ambassador recently. Rather, he wanted in very general terms to explore with the Iranian Government what we could do together for our mutual advantage.

Is there, he questioned, a possible basis for an arrangement on oil which would bring about a modification of the Shah’s present position on the price of oil?

We are currently interested in making arrangements for the purchase of oil for the Strategic Reserve. Under the legislation, FEA will have to submit to Congress by December 15, its proposal concerning the arrangements for filling the Reserve, for example whether the oil will be domestic or foreign and whether such arrangements will be on the basis of a long-term contract or spot purchases. Purchases for the Strategic Reserve will at the outset be in the range of two to three hundred thousand barrels per day and half of this could possibly come from Iran if NIOC is able to supply at least one half of the amount in light oils. Mr. Robinson stated that we would be willing to look carefully at the idea of a prepayment arrangement. He noted that after the turn of the year the demand for Iranian oil, which is currently very [Page 577]high, is likely to decrease. Therefore, it is possible the Iranian Government might wish to explore with us a long-term contract. The Acting Secretary emphasized that he was not making any specific proposal at this time but that we were willing to explore with the Iranians whether some sort of arrangement could be found which would benefit Iran and argue in favor of modification of Iran’s current position on the next OPEC price increase. He emphasized that we are not thinking of a discount plan such as was presented earlier by Mr. Zarb.

The Acting Secretary concluded his presentation by stating that if there were Iranian interest we would be willing to send someone to Tehran immediately to discuss the specific details and seek an arrangement whereby we would both benefit.2

Ambassador Zahedi, who took notes during the Acting Secretary’s presentation, sought a recapitulation of the above presentation and then stated that personally he thought the idea would be attractive to his Government. He reviewed briefly previous Iranian efforts (1968–69) to sell large quantities to the United States for its reserves and referred briefly to the previous efforts of Frank Zarb and Minister Ansary to reach agreement on Iranian sales for the Strategic Reserve. He stated that he would immediately inform the Shah and that he hoped to be able to give a response to Mr. Robinson before Sunday, November 28, when he would go to Mexico for the inaugural ceremonies.

  1. Source: National Archives, RG 59, Central Foreign Policy Files, P830162–0139. Secret; Exdis. Drafted by Naas and approved by Poats.
  2. In telegram 303406 to Tehran, December 15, Robinson sent Helms more details on the benefits for Iran of the Strategic Petroleum Reserve procurement plan, which was to be announced December 16 and submitted to Congress. (National Archives, RG 59, Central Foreign Policy Files, D760460–1108) Telegram 307887 to Tehran, December 21, sent the details of a briefing on the plan presented to an Iranian Embassy officer. (Ibid., D760467–0918)