142. Editorial Note

Representatives of the United States and Canada met in Washington on October 12, 1972, and again on December 8, 1972. The U.S. delegations were led by James Akins, Director of the Office of Fuels and Energy; the Canadian delegations were led by D. S. McPhail, Director General, Economic and Scientific Branch, Department of External Affairs. The summary of the October 12 meeting stated that the meeting was “part of a series of discussions concerning future U.S./Canadian petroleum relations. Three subjects were discussed: (1) Respective responses to an OECD request that non-European member countries join in an OECD-wide plan to share oil in time of emergency; (2) the vulnerability of North America to cutoffs of overseas oil; and (3) the time of the next meeting—to discuss Canadian proposals for the switching of oil in North America during periods [Page 354]of emergency. The U.S. advised that it would express support at the next OECD Oil Committee Meeting of the formation of a committee to study the question of sharing. The Canadians said this probably would also be their position, although it had not yet received ministerial approval. No consensus was reached concerning vulnerability to supply cutoffs. The Canadians asked that the U.S. develop a chronological sequence indicating the possible timing of major cutoffs requiring advance planning and preparation. In turn, Canada would reconsider the possible consequences and likelihood of the various risks described by the U.S. The Canadians expressed doubt that it would be possible to hold further discussions until after the U.S. elections in November.”

Discussion on the possible cut-off of Middle East oil dominated the discussions. Akins stated that the 1970 Cabinet Level Task Force Report on Oil Import Control (see Document 32) remained the basis for U.S. emergency planning. He also stated that the United States worked on the possibility of a one-year cut-off, including a cut-off resulting from an invasion of Saudi Arabia by its neighbors, as the Saudis feared. However, he stated, “short of war or revolution in the Middle East, the U.S. does not envisage a serious physical shortage of oil before 1975.” Akins illustrated how the impact of any cut-off was directly related to the amount of imported oil coming into the United States and production levels in key producing states.

Akins also informed the Canadians that successful Libyan and Iraqi nationalization was a worst-case scenario as it would “completely undermine the domestic position of the Shah and conservative Arab governments and result in their overthrow. Europe and Japan would become entirely dependent on production from Venezuela, Nigeria and Indonesia. Under these circumstances, we have to assume that all Venezuelan oil would not be available to North America. Pressures to supply our allies would be irresistible. The cutoff of overseas oil to North America could then be almost total.” Should the Saudi Government fall, or should another Arab-Israeli war break out, or should Iran invade Saudi Arabia, the oil fields “will be sabotaged” and all of Saudi production “lost,” which would “spread chaos to other areas of the Middle East.”

Akins reminded the Canadians that if Middle East, especially Saudi, production were secure “we would not be worrying about talks with Canada and Venezuela.”

McPhail responded that Canada had “intentionally excluded” these worst case situations, and assumed a 25 percent cut-off over a 6–month period of time. Canada, he stated, “had difficulty in envisaging an escalation from a cutoff by one country to a complete cutoff of Middle East oil to consumers.” (Memorandum of conversation, October 12; National Archives, RG 59, Central Files 1970–73, PET 1 CAN–US)

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According to a summary, in the December 8 meeting an “agreement was reached, subject to the approval of both governments, concerning the conditions under which the U.S. and Canada might be willing to enter into a voluntary OECD wide agreement for the sharing of oil in times of emergency. Both delegations also agreed to submit to their respective governments a proposal for an exchange of Diplomatic Notes which would constitute a formal agreement between the United States and Canada for sharing and exchanging oil in times of emergency. The agreement, if accepted by both governments, would also eliminate quantitative restrictions on future U.S. imports of Canadian oil.”

Akins made it clear that the sharing of oil did not include internal North American production and that any apportionment scheme would require that American and Canadian oil be treated as a “single unit.” He also anticipated that the Europeans, Australians, and Japanese would agree, even if reluctantly. McPhail expressed relief that the United States “did not intend to give away any more than was absolutely necessary,” saying this would probably be accepted in Canada. Neither side could agree on security considerations (that is, the extent, duration, and consequences of an oil cut-off) but found compromise on exchange ratios. Both sides reviewed their positions that were to form the basis of a future agreement. The meeting ended with McPhail warning against leaks. (Memorandum of conversation, December 8; ibid.)