201. Memorandum From John Knubel of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

    • Meeting between John McCloy and Under Secretary Casey

I have received an informal rundown on the Libyan aspects of this morning’s McCloy/Casey meeting.2 The following information may be useful in preparation for your meeting with McCloy this afternoon.3

McCloy made the following points:

The compensation terms are totally inadequate. They were determined by government committees and are less than the Bunker Hunt proposal.
By continuing to pump oil, the companies are being backed into de facto acceptance of the company demands.
Thus, their choice is to cease lifting or finding some legal way of avoiding de facto acceptance of Libyan demands. McCloy believes that the companies will choose to stop pumping oil.
If company operations cease, they will proceed with an orderly withdrawal. One complication is under the Libyan law, the oil workers could be prosecuted.
If the major oil companies cease operation, some of the resulting shortfalls will be made up by expanding output on other fields operated by the independents which have already yielded to demands. The net shortfall to the U. S. this winter would be about 50,000 barrels per day—a manageable amount (according to McCloy).

What the Companies Want from the USG

At the State meeting, McCloy made the following requests:

  • —That a strong note be sent regarding the illegality of the Libyan action, the refusal of the Libyans to concede to arbitration, etc.
  • —That a message be sent to the Libyans stating USG confidence that withdrawal of foreign nationals will proceed quickly should pumping stop.
  • —That the USG work with the Europeans to “make the Libyan expropriation attempt fail.” This would entail getting an agreement from the Europeans not to buy oil from the fields operated by the majors.
  • —That we lift the environmental sulphur restriction (Libyan low sulphur oil is needed to keep many refineries in operation under current law). This was requested as a demonstration of political determination to back the companies if a decision is made to stop pumping oil.

McCloy added that these actions would also be timely in view of the Algiers Conference in which Faisal will be receiving pressure to increase his use of oil for political purposes.

There would be major difficulties with implementing a comprehensive embargo and I recommend you carefully avoid a commitment until we have had time to investigate the implications on the tight oil situation projected for this winter. Even a 50,000 barrel per day shortfall might require mandatory rationing this winter.

Moreover, the request to lift sulphur restrictions will have to be investigated in cooperation with Governor Love’s office and the Committee on International Aspects of Energy.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 251, Agency Files, National Energy Office, Vol. III, Aug 73. No classification marking. Urgent; Sent for information.
  2. A memorandum of conversation of the McCloy-Casey meeting is ibid., RG 59, Central Files 1970–73, PET 6 LIBYA.
  3. No other record of either meeting was found.