105. Telegram From the Mission to the Organization for Economic Cooperation and Development to the Department of State1

642. Subject: OECD Oil Committee, High Level Group, January 10, 1972.

1.
Summary. Prevailing sentiment was that although industry faced difficult set of situations of which Venezuelan most ominous in principle, Libyan action against BP had unique political origins and that if those actions could be contained, parity and participation issues [Page 252]should be susceptible of settlement on basis “reasonable” company concessions, although with inevitable cost to consumer. Members favored early resolution dollar parity issue, with Japan and FRG stressing companies should not use increased costs to increase their own profits at expense consumer. Consensus was that participation, however deplorable, was probably inevitable and companies had no choice but to open negotiations this subject now. Nonetheless participation would be in violation Tehran agreements and it might be possible to postpone changes in existing company-government relationships until 1976. In any case moves toward participation should be resisted by consumers. UK and France said they would consider associating themselves with any diplomatic representations US may make on that point. Members endorsed efforts of BP and HMG to prevent Libyans profiting from BP takeover and welcomed news that US companies currently intending to resist Venezuelan measures.2 These seen as potentially most dangerous developments of all. Group applauded US and Dutch plea for OECD solidarity and UK stressed need to put stockpiling and other emergency measures on current basis to make solidarity effective. Chairman described encouraging outlook in North Sea and urged on US importance of early approval Alaskan pipeline. Group agreed Canada should be invited to take part in high level meetings. End summary.
2.
UK (Chalmers of FCO) made strong presentation on Libyan nationalization of BP. He described takeover as political action related to Gulf Islands; referred to BP invocation of arbitration and BP’s letters and advertisements putting potential purchasers on notice; said HMG had acted to support BP in form of protest to Libya and representations to OECD governments. He expressed gratification for positive responses HMG had had from OECD governments and underlined BP’s determination to proceed legally against purchasers and HMG’s intention support BP.
3.
Akins (US) expressed strong US support for HMG position on Libya, saying that Libyan success in action against BP could lead to similar actions against other companies in Libya and elsewhere. For that reason US had associated itself with HMG’s representations to OECD governments and hoped that governments would use their influence to deny to Libya commercial benefits from BP takeover.
4.
Other members (FRG, Italy, France, Netherlands) termed Libyan takeover unique in that it politically motivated action against single company and country. They were reluctant to discuss political origins of dispute. However, they agreed that Libyan success in carrying off takeover [Page 253]profitably could have adverse implications for all consumers, and they endorsed BP and HMG efforts to deny benefits to Libya.
5.
In response Dutch question about role of Bunker Hunt, Chalmers said Bunker Hunt had cooperated fully with BP. He added that BP had no wish interfere with Bunker Hunt efforts to obtain its rightful share of oil from concession but intended to claim any oil from concession which is not shipped by Bunker Hunt to Bunker Hunt customers.
6.
Dollar parity. UK spokesman (Williams DTI) said that HMG understood companies have evolved formula based on trade values which would provide “reasonable” return to producers, and that companies would argue that 2–5 percent inflation increment in Tehran agreement should also be credited toward satisfaction of parity claims. Williams added that companies seeking best bargain feasible in terms their own interests and those of consumers but he guessed that they would do well if they could settle at or below 8.5 per cent (including 2.5 per cent inflation increment) as against reported OPEC demands amounting to 12.5 per cent or more.
7.
Akins (US) said that US had similar information about producer demands and company intentions and similar expectations about probable outcome. He added that companies and USG taking position that resolution and settlement of this issue not in conflict with Tehran or Tripoli agreements3 but supplementary adjustment necessitated by unexpected monetary events of August and December. He suggested that that position essential to defense of Tehran and Tripoli agreements against other encroachments.

[No additional pages of this telegram have been found.]

Greenwald
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 3 OECD. Confidential. Repeated to Ankara, Athens, Bern, Bonn, Brussels, Canberra, Caracas, Copenhagen, Dublin, Geneva, The Hague, Helsinki, Jidda, Kuwait, Lagos, Lisbon, London, Luxembourg, Madrid, Oslo, Ottawa, Reykjavik, Rome, Stockholm, Tehran, Tripoli, Tokyo, Vienna, Paris, and Dhahran.
  2. See footnote 2, Document 103.
  3. For the terms of the Tripoli agreement, see Document 88.