212. Memorandum by the Chairmen of Exxon Corporation (Jamieson), Mobil Oil Corporation (Warner), Texaco, Inc. (Granville), and Standard Oil Company of California (Miller)1

The oil industry in the Free World is now operating “wide open,” with essentially no spare capacity.
The terms demanded by OPEC at Vienna2 are of such a magnitude that their impact could produce a serious disruption in the balance of payments position of the Western world.
The demands, if acceded to or imposed, could increase the Free World oil cost from the Persian Gulf alone by $15 billion per year.
Market forces have pushed crude prices up substantially. A significant increase in posted prices and in the revenues of the producing countries appear justified under these circumstances; but the magnitude of the increase demanded by OPEC, which is in the order of a 100 percent increase, is unacceptable. Any increase should be one which allows the parties an opportunity to adjust to the situation in an orderly fashion. Accordingly, the companies are resisting the OPEC demands and they are seeking an adjustment of them which can be fair to all the parties concerned.
In the midst of pressing these demands vigorously, the Arab negotiators in Vienna have stated that their governments were angered by the speech of Ambassador Scali before the United Nations3 which they interpreted as a clear expression of support of the Israeli position by reason of its specification of the October 6 boundaries. They also report that a request from the United States to King Faisal that he urge Arab combatants to retire to this ceasefire line produced great [Page 580] irritation.4 We have been told that the Saudis will impose some cutback in crude oil production as a result of the United States position taken thus far. A further and much more substantial move will be taken by Saudi Arabia and Kuwait in the event of further evidence of increased U.S. support of the Israeli position.
We are convinced of the seriousness of the intentions of the Saudis and Kuwaitis and that any actions of the U.S. Government at this time in terms of increased military aid to Israel will have a critical and adverse effect on our relations with the moderate Arab producing countries.
In the present highly charged climate in the Middle East, there is a high probability that a single action taken by one producer government against the United States would have a snowballing effect that would produce a major petroleum supply crisis.
The bulk of the oil produced in the Persian Gulf goes to Japan and Western Europe. These countries cannot face a serious shut-in. Regardless of what happens to United States interests in the Middle East, we believe they will of necessity continue to seek Middle East oil and that they may be forced to expand their Middle East supply positions at our expense.
Much more than our commercial interests in the area is now at hazard. The whole position of the United States in the Middle East is on the way to being seriously impaired, with Japanese, European, and perhaps Russian interests largely supplanting United States presence in the area, to the detriment of both our economy and our security.
  • J. K. Jamieson
  • Maurice F. Granville
  • Rawleigh Warner, Jr.
  • Otto N. Miller
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 251, Agency Files, National Energy Office, Vol. III. No classification marking. The memorandum was delivered under an October 12 covering memorandum from McCloy to Haig, which stated that the “chief ARAMCO shareholders” wished this “placed in the President’s hands as soon as possible,” and that Kissinger should receive a copy. In his covering summary memorandum to Nixon, November 3, Kissinger wrote that as programs for alternative energy sources were at least three years away, “if we are to hold down prices over the shorter term it will probably be necessary to take some new government initiatives aimed at backing the companies in their weakened negotiating position.” A notation on Kissinger’s memorandum indicates the President saw it. (Ibid.)
  2. See Document 210.
  3. Ambassador John Scali’s October 8 speech is printed in the Department of State Bulletin, November 12, 1973, pp. 598–599.
  4. Transmitted in telegram 199583 to Amman and Jidda, October 6, printed in Foreign Relations, 1969–1976, volume XXIV, Arab-Israeli Crisis and War, 1973, Document 102. In a public reply, Faisal responded that this was an act of aggression against the Arab states and that the attack was a link in the “Israeli chain to execute its expansion policy which it has planned to enforce its policy of aggression against the Arab states.” (FBIS 113, October 6; National Archives, Nixon Presidential Materials, NSC Files, Box 1173, Saunders Files, Middle East Negotiations Files, 1973 Middle East War, 6 October 1973–)