48. Telegram From the Department of State to the Embassy in Iran1

249539. Subj: Pricing Policies at OPEC Meeting. Ref: Jidda 5626 (Notal), Tehran 9001 (Notal).2 Kuwait pass Doha.

1. Acting Assistant Secretary Davies called Iranian Ambassador Zahedi to express concern at reports that USG receiving about possible inordinate price increases for oil at forthcoming OPEC meeting sched[Page 163]uled to begin in Tehran on December 22.3 If OPEC countries sought to take short-term advantage of situation, it would create critical problem both for industrialized countries and, especially, developing countries which do not have their own sources of energy such as India and Pakistan. US believed that the Middle East producers such as Iran and Saudi Arabia had long-term interest in stability of oil prices but if there were a three-fold increase in realized prices, which we understand some producers were advocating, the adverse pressures on industrialized economies and on world development generally would be tremendous and could generate countermeasures. Slowing of the developmental process would have implications for stability in developing countries which could only adversely affect Free World including Iranian and Saudi interests.

2. Zahedi said that he had already sent his personal views to the Shah that the disruption of the oil pricing system was unhealthy and that it would be a mistake for OPEC to let oil prices to get too far out of hand. Zahedi thought, however, that the mistake had originally been made by American companies submitting bids for Nigerian oil of $16–18 per barrel. While he could appreciate that these purchases had been due perhaps to force majeure, nevertheless, they had affected world oil prices generally.

3. Zahedi said he would try to convey the Department’s concern immediately to the Shah, who is about to leave for his vacation in Switzerland. Zahedi himself is leaving for Switzerland tomorrow and he would also be in contact with the Shah there.

  1. Source: National Archives, RG 59, Central Foreign Policy Files, [no film number]. Secret; Immediate. Drafted by Dickman, cleared by William B. Whitman (EB/ORF/FSE), and approved by Davies. Repeated Immediate to all OECD capitals, Caracas, Algiers, Tripoli, Baghdad, Kuwait, Jidda, Abu Dhabi, Lagos, Jakarta, Quito, Brasilia, New Delhi, Islamabad, and Geneva for Kissinger who was attending the opening session of the Middle East Peace Conference.
  2. In telegram 5626 from Jidda, December 21, the Embassy transmitted a warning from Yamani that he had little hope of preventing OPEC from raising prices dramatically at the OPEC meeting in Tehran December 22–23. (Ibid.) Telegram 9001 from Tehran, December 21, summarized a conversation between the Shah and Helms in which the Shah “indicated that he is seriously considering trying to persuade the other OPEC members at the meeting in Tehran on December 22 that wholly new pricing arrangement for crude oil should be established.” He intended to eliminate the posted price and fix the price of crude oil in relation to the cost of other energy sources like coal, shale, and atomic energy. (Ibid., P750033–2405)
  3. In a telephone conversation on June 5, 1975, columnist Jack Anderson asked Kissinger about a “Government paper” that he had describing the Secretary’s December 19 meeting with French Foreign Minister Jobert. The paper indicated that “Jobert could not understand the American Government’s attitude toward the Shah of Iran. It was clear, he said, that the Shah was going to push for another major oil price increase by exploiting the current embargo, induce shortage, and yet the United States acted as if it considered the Shah to be a friendly country with the same interest.” Noting the $22–23 per barrel auction prices that the American independent oil companies had recently paid, Jobert had “warned the Secretary of State that these artificial prices would be used as a pretext to justify higher overall OPEC prices.” (Department of State, Electronic Reading Room, Transcripts of Kissinger Telephone Conversations) A memorandum of conversation of Kissinger’s December 19 meeting with Jobert is in the Library of Congress, Manuscript Division, Kissinger Papers, TS 26, Geopolitical Files, France, Cronological File, 19 July–20 Dec 1973.