14. Draft Paper Prepared by the National Security Council Staff1

Purpose

This paper discusses the national security issues raised in the Task Force’s summary paper.2

Problem

Oil import quotas are justified on national security grounds. The Task Force estimates that the cost to the U.S. consumer of this national security policy was $5 billion in the year 1969 and will be $8.8 billion in the year 1980.3

For these oil import restrictions to be justified on national security grounds it must be the case that:

  • —they preclude impairment, resulting from inadequate supplies of oil, of U.S. or U.S. and critical allied war-fighting capability in the event of plausible war contingencies; or
  • —they are required for reasons of foreign policy in order to prevent political blackmail which could endanger U.S. interests abroad, for example in the Middle East; or
  • —they are necessary to prevent a deterioration in the U.S. balance of payments so severe as to jeopardize the strength of the U.S. economy.

The Approach

This paper will examine the war contingency justification for oil import restrictions. This justification will be studied in two oil import cases: (a) under existing oil import restrictions and (b) after the removal of existing oil import restrictions.

Current U.S. Production Consumption, and Imports

In 1968 the U.S. consumed 13.1 million barrels of oil per day. U.S. production was 10.6 m bl/day leaving 2.5 m bl/day or 19% of total demand to be met from imports.

U.S. imports were allocated as follows:

U.S. Imports

Source Percent
I Western Hemisphere 79%
—Venezuela and Caribbean 47%
—Canada 19%
—Other Western Hemisphere 13%
II Middle East (Arab and Iran) 12%
III Indonesia 3%
IV Other 6%

War Demand

Possible war needs for oil fall in the following categories:

  • —supply adequacy: Is the total supply sufficient to meet war needs?
  • —security of supply: Will the sources of supply be available in wartime?
  • —transportation: Can available supplies be transported to meet wartime needs?

Present military consumption of oil is 8% of total U.S. demand. DOD estimates that a prolonged conventional war would increase this requirement by 6%. Such an increase could come from current non-war consumption or a production/import increase of 6%. This increase is strikingly different from the World War II experience which saw military demand increase from 1% of total consumption in 1940 to 33% of [Page 50]total consumption in 1945.4 This difference arises from the severalfold increase in oil production since the war (oil production has doubled in the last ten years).

In the aggregate, therefore, expected war demands for oil would be less burdensome than in World War II.

It still must be asked, however, whether the sources of current supply are secure in the event of war. This question will be addressed in the war contingency section below.

It must also be asked whether secure shipping capabilities are adequate to meet wartime needs. The World War II experience indicates the shipping, rather than adequate and secure supply sources is the most likely bottleneck. The only way the import restriction alternatives under consideration might impinge on the security or adequacy of transport is to the extent one or the other would require a greater reliance on wartime insecure means and routes of transport.

War Contingencies

Unlimited Nuclear War—Unlimited nuclear war, involving massive nuclear attacks on the United States, would so devastate the economy that consumption requirements would decline markedly. If such an attack were followed by prolonged warfare, domestic and military requirements for oil would be impossible to predict. There is no reason to expect production to decline more than consumption, and imports would probably be affected less than in proportion to consumption. Extensive port damage might make port capacity a critical bottleneck. To the extent this is true, and if the immediate post-strike recuperative ability of our defense forces is critical to a successful outcome in such a war, then stockpiling beyond the current 75 days of supplies (minus destroyed supplies) may be required.

However, except for port capacity, shipping requirements and supply requirements would likely be significantly less than in the case of prolonged conventional war, discussed below. Port capacity, it should be pointed out, is probably not significantly affected by oil import restrictions.

Limited Nuclear War—It would be expected that military installations or key cities would be the primary targets in a limited nuclear war.

Such a war, by definition, would not involve an attack on the gross military or civilian capacity of the U.S. Rather it would involve strikes [Page 51]on targets selected for their punitive, political, or strategic (e.g. command and control centers) value. To the extent such a war escalated it would become similar to unlimited nuclear war as discussed above. To the extent it merged into a long-term struggle involving conventional and limited nuclear forces it would resemble the prolonged war contingency discussed below. However, because a limited nuclear war might be judged more likely than an unlimited nuclear war, it should be pointed out that in such a war a high premium would be placed on the recuperative ability of U.S. defense forces. As above, this would suggest port capacity would be the likely first bottleneck in the oil production-(import)-consumption sequence. As just noted, this issue would not favor oil import restrictions as a national security policy.

Prolonged Conventional War5—The U.S. currently bases its general purpose force defense planning on the assumption that it may have to conduct major and long-term ground operations against the Chinese in Asia or the Soviet Union in Europe. It would seem appropriate to consider the implications of such warfare for the two oil import cases under consideration, i.e. current restrictions or no restrictions.

Prolonged conventional warfare would generate a demand for 6% more oil than currently required by the U.S. and, among all war contingencies would place the greatest strain on the supply system. Import sources could be denied the U.S. for reasons of alliance with the enemy; U.S. production capacity could be damaged or destroyed; and oil shipped by sea from some or all sources could be cut off. In the absence of any estimate of war damage to U.S. production capacity, we move to the security of supply question.

The Arab world is the most likely candidate for wartime alliance with either the Soviet Union or China. Whether the Soviet Union in cooperation with China and with the acquiescence of possibly war-neutral consumers of Arab oil, such as Japan or Germany (in the case of a war with China), could sustain the Arab economies needs to be analyzed. However, since it is unlikely that a definitive answer can be arrived at, it may be more useful to assume that Russia could occupy the Middle East oil fields in war-time or destroy them. Thus, we arrive at the same conclusion—that these supplies could be denied the U.S.

In addition, prolonged conventional warfare could involve threats to the sea transport of oil to the U.S. Here, what is needed is a DOD estimate of the oil shipping capacity over particular routes that could be protected in wartime. Is it reasonable to assume that supplies from the Western Hemisphere can be protected? Would supplies be transportable from the Eastern Hemisphere? Iran? North Africa? Without [Page 52]this analysis it would seem reasonable, as a minimum, that in a prolonged conventional war, the U.S. could not count on the availability of oil from the Middle East.

Limited or Regional Wars—On oil supply grounds alone, the most damaging limited war case would be a lengthy war in the Middle East. Insurgency (e.g. Vietnam) or civil wars (e.g. Nigeria) are unlikely to give rise to greatly increased oil requirements. Nor, because both arise from factors that are not of widespread significance, are they likely to threaten our multiple sources of supply. Thus, we return to the Middle East war contingency.

Two limited war outcomes could threaten Western access to Middle East oil: (a) the Arab countries could attempt to embargo oil shipments to the U.S., or (b) the oil producing and exporting capacity of the Middle East might be destroyed by Israel.

The CIA doubts that the Arabs could maintain an embargo for more than a brief period, primarily because there is too much dissention in the Arab world and because Saudi Arabia, Libya, and Kuwait want to maintain their Western ties. For example, in June 1967 they could not agree on such a policy.

However, since Kuwait, Saudi Arabia, and Libya subsidize the UAR and Jordan, Israel might consider that a strike against their supplies would indirectly reduce the threat to Israel. The CIA does not consider such a move likely but “cannot rule it out, especially if the Israelis become involved in a major, protracted war with the Arabs.”

Conclusion

It would seem appropriate for the U.S. to plan on the assumption that as a result of either a regional war in the Middle East or a prolonged conventional war with China or the Soviet Union, we would not have access to Middle East supplies of oil. To what extent Western Europe would have access to these supplies is uncertain, although most likely their access would be severely curtailed.

If this conclusion is plausible, then the Task Force’s calculations based on the assumption of a three-year denial of Arab oil seem appropriate if adjusted to reflect denial of access to Middle East oil. The results from these calculations, assuming import restrictions are removed, indicate that with mild rationing in the Western Hemisphere and severe rationing elsewhere, oil supplies would be adequate in wartime to meet free world requirements.

The major unanswered questions would seem to be:

  • —can the U.S. protect the supply of Western Hemisphere oil in wartime?
  • —is there a requirement to maintain surplus U.S. oil capacity in anticipation of direct conventional war damage to U.S. capacity?

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If the answers to these questions are respectively yes and no, then the issue for decision is whether it is worth the annual $5–$8 billion cost for us to maintain quotas, given our ability to supply our own needs in any case and to meet free world needs with U.S. mild rationing and European severe rationing.

  1. Source: National Archives, RG 220, Records of the Cabinet Task Force on Oil Import Control, Entry 10, Box 4, Classified Documents, NSC Document, National Security Issues Raised in the Task Force’s Summary Paper. Secret. No final version of this paper was found and no other NSC paper was found as having been submitted to the Task Force.
  2. A reference to Paper X–1. See Document 15.
  3. This cost results from the $3.30 per barrel domestic oil price which compares with the non-restriction price of $2.00 per barrel. [Footnote in the original.]
  4. Only in the latter half of World War II was rationing required to allocate petroleum products. However, throughout the war crude oil was available in surplus from Venezuela and West Texas. Persian reserves were not exploited although a refinery was set up in Saudi Arabia to supply navy fuel to the Far East. [Footnote in the original.]
  5. Includes warfare with tactical nuclear weapons. [Footnote in the original.]