220. Minutes of the Secretary of State’s Staff Meeting1
(The meeting convened at 12:10 p.m., Secretary Kissinger presiding as Chairman.)
[Omitted here are the Summary of Decisions and discussion unrelated to oil.]
Mr. Casey: The only thing I might bring up: We see the high level oil committee is meeting. They have called a meeting on Wednesday.2
Secretary Kissinger: What—the oil?
Mr. Casey: Yes. On Wednesday. To review the current situation.
Secretary Kissinger: What do they want to do—assess us for the emergency share?
Mr. Casey: No. I think nothing was developed there. They want to consider what they call—to activate the Industry Advisory Committee.
Secretary Kissinger: What does that do? I don’t know.
Mr. Casey: Well, the Industry Advisory Committee is ad-hoc sharing—quite apart from anything we’ve been talking about. They operated in the Suez situation. And they had, in the 1967 war, an ad hoc oil-sharing on a European-wide basis.
Secretary Kissinger: Between us and Europe or between Europe and—
Mr. Casey: That conference involves us and Europe. All they have—[Page 605]
Secretary Kissinger: I just don’t want them to vote us into a sharing plan because they’ve got more votes than we do.
Mr. Casey: Well, everything is unanimous. I have nothing to say about it.
Secretary Kissinger: So what’s the point of the meeting?
Mr. Casey: Most of the members got together to assess the current situation—assess the actions in the arms—
Secretary Kissinger: To assess the actions we’ve taken?
Mr. Casey: No. The Arab states have taken. The companies are meeting in London on Tuesday to try to assess what all this means and—3
Secretary Kissinger: Is somebody talking to the companies? They’re the biggest menace in the present situation—seriously.
Mr. Casey: Well, they’ve filed a report.
Secretary Kissinger: Is somebody telling them to stay cool?
Mr. Rush: Yes.
Secretary Kissinger: Now, when you say “the companies are meeting,” what can come out of such a meeting?
Mr. Casey: What would come out of such a meeting is their response to the actions that the Arabs have taken—what kind of protests, the price of supplying arrangements.
Secretary Kissinger: Can we give them any guidance?
Mr. Casey: They’ll accept I think any guidance we’ll give them. I haven’t discussed the development in sufficient depth with them.
Secretary Kissinger: Well, I wouldn’t trust them with letting them know our strategy.
Mr. Casey: Oh, no; not at all.
Secretary Kissinger: But can we give them some general guidance? Joe?
Mr. Sisco: Well, I think this is a case where we must give them guidance.
Secretary Kissinger: I agree.
Mr. Sisco: Take the price issue, first of all. This is a price increase from $3 a barrel to a little over $5 a barrel. My own judgment—and I haven’t had a chance to talk to Bill [Casey] and so on—is that the oil companies really have no alternative but to really go along with the price hike, basically. And my own judgment politically—in terms of [Page 606]our situation—is that we don’t want here a confrontation between the oil companies and the Arab producers at this particular junction. And, therefore, I think our guidance ought to be in the direction of accommodation in terms of the oil companies with the producers.
I’m not sure. You know, we have to get very specific in this regard. But this is not a time, in my view, for business as usual—if I can put it that way—and a situation where this is viewed strictly from a technical economic-financial point of view. I think the politics are so intimately related to this that this is the sort of guidance we ought to be giving them.
Mr. Casey: Joe, this is the most scared bunch of guys you ever saw, and that type of guidance is not necessary because this is the way they’re thinking.
Now, there are questions that are going to come up. In cutback, nobody knows how it’s going to be applied. Nobody knows how it’s going to be implemented. How do they handle the cutback that goes back to them as distributed between the Europeans, the United States, and so on?
Secretary Kissinger: Well, we have a letter from the British Prime Minister to the President4—who wants to take some considered action—but he hasn’t got a clue as to what it should be.
Mr. Casey: It’s everybody’s posture. Everybody thinks something should be dealt out but there’s no general formulation.
Mr. Sisco: Well, I had no doubt that this was the case when I just said what I said, but it just seems to me that it’s helpful for us to say this in very calm tones because I know it’s their disposition.
And, secondly, I would couple with it their problem. Among other things, Bill, is that they’re making too damn much noise publicly about what are very, very serious problems not only from their point of view but from our point of view as well. And I just think that we ought to be saying to them: “We know you’re disposed to moving in this direction and in the direction of accommodation, but let’s play this quietly and privately in terms of your discussions and let’s stay away from the public domain. The trouble is that this nervousness that you’re talking [Page 607]about is being reflected publicly by the oil companies and it’s increasing our problems politically. That’s the problem.”
Mr. Rush: Well, I think we ought to be very careful here. First of all, we’re dealing with large oil companies which are not necessarily American. Secondly, you don’t want to take on the responsibility of government-to government responsibilities with regard to oil. Much of our strength in the past has been in the fact that this has been dealt with in the private sector. There’s no difference whatever as to what we want to do.
Secretary Kissinger: What do we want to do?
Mr. Rush: The oil companies have got to accept this. Secondly, the oil companies—
Secretary Kissinger: Why? Just for my information, why is that true?
Mr. Rush: They may make a pro forma protest.
Secretary Kissinger: All right, but the next year they go to $10. Will they then have to accept that too?
Mr. Rush: Actually, they’re in a position, as of now, where their entire maneuver is very, very small.
Secretary Kissinger: Then they go to $20. Is there some point at which they have to resist?
Mr. Rush: Yes. There are economic points at which the oil companies are cutting their troops because alternate sources of supply come in. Coal, for example, at $5—coal becomes cheaper for many, many things than oil—and you’re going to have a marked turnup—not overnight. There’s going to be a turn toward alternate sources of supply that’s going to affect oil.
Secretary Kissinger: I should think the companies have to accept it at this time because of the Middle East crisis and because we don’t want to inflame the situation more.
Mr. Rush: I don’t think they have much room to maneuver, really.
Secretary Kissinger: On the other hand—well, since we don’t have the strategy, since I haven’t seen one, it’s hard for me to make a judgment. My instinct would be that since the situation is going to get worse, it’s better to have a confrontation early.
Mr. Casey: Well, what does a confrontation mean? Nobody in this Government has come up with any way to deal with these demands.
Secretary Kissinger: I could pass it on to other guys from the White House when I was there but now I’ve got people here that I can assign to it!
Mr. Casey: Well, I think the only effective way is to—
Secretary Kissinger: Which is what?
Mr. Casey: —do everything you can to cut back. Use this emergency to—
Secretary Kissinger: That’s what we’re doing anyway.
Mr. Casey: —subsidize all type of sources of production. I don’t think three, four, five years would have any effect. In the meantime, I think it’s just to scrapple and wrestle with it.
Mr. Rush: The Government can do it. We can do a great deal with regard to oil shale; with regard to classification of coal, with regard to the use of coal. This sort of thing can make a tremendous impact on the supply and demand picture.
Now, in terms of just a Cold War confrontation, they have the oil, and they have to have the oil; and they say: “We’ll sell the oil to you at this price,” and they say: “The confrontation means you don’t get the oil unless you pay the price.”
Secretary Kissinger: And they can hold out longer.
Mr. Rush: That’s right. And they can hold out longer.
Secretary Kissinger: That’s right. This is what I’d like to analyze. We’re not going to get a strategy by next Monday. Therefore, we have to do it by this—but they’re certainly going to come back in six months to a year with another rise in prices. And what we have never—I have never—been able to get done from the White House—partly because I never gave it enough time—is to see what should be the relationship between the Government and the companies, what should be the negotiating strategy that the companies follow—vis-à-vis the producing nations.
I’ve heard a lot of generalities that a grouping of consumer nations is either desirable or undesirable. I’ve heard both points of view, frankly, in platitudes. I don’t know what a grouping of consumer nations would be, but this is something we’re in the process of. The more powerful nations in the world are being paired together and we can let them be picked up individually.
Also, we don’t know what such a grouping would do, and so we wander along from every issue. When we’re 72 hours away from it we’re not going to be able to make a rational decision. It could be, after we examine it, we’d still decide we wouldn’t do anything except be caught 72 hours to make a decision in a crisis.
Mr. Rush: We have the American oil companies and international oil companies with about 90 percent of the production going not to this country but to Europe and to Japan. Now, the governments of Europe and Japan are also very vitally concerned about it—[Page 609]
Secretary Kissinger: That’s right.
Mr. Rush: —because they’re getting it through the American oil companies into Germany, into France, into England.
Secretary Kissinger: But here’s the Prime Minister of Great Britain writing to the President. We don’t know what to tell him. Last week when the French Foreign Minister was here5—George [Springsteen] wasn’t at that meeting; Stoessel was—he raised the issue, and he said, “What are we going to do with respect to the price, and what principles do we follow?”
I didn’t know the answer to either of these questions—
Mr. Rush: Right, right.
Secretary Kissinger: —and I said, “We have to do something” and he didn’t know what they were willing to do.
That’s not a tenable position for us to have. At least, analytically, we ought to understand what the relationship is between the various governments on this issue and what the relationship is between the governments and the companies.
Now, OECD is going to try to maneuver us into an oil-sharing plan that’s favorable to the majority in OECD and hope that our perennial request for unanimity and unwillingness to stand alone is going to make us vote on the basis of unanimity. But who can do such a study quickly?
Win [Lord], you can get involved, but how about the Economic Bureau too?
Mr. Casey: I have a paper that addresses most of these questions.6 I’d say it’s 75 percent finished. And I would say I can probably get it finished by the end of the week.
Secretary Kissinger: Can you do that?
Mr. Casey: Yes; I’ll pass it around because the thinking thus far—I couldn’t agree with you more—the thinking thus far has been totally inadequate.
Secretary Kissinger: It hasn’t got the guts—that’s right.
Mr. Rush: See, most of the oil goes to the other countries. And we take the heat for a price increase by telling our oil companies to accept; and then the political heat, worldwide, descends on us.
What these oil companies must do, and what we must take into account—they must consult with the German Government, with the French Government, with the Japanese. I remember, when I was in Germany, [Page 610]the German Government was just mad as hell because the gas price went up and they weren’t consulted. The oil companies have got to be the consultants with all of these companies [governments?].
Secretary Kissinger: Yes. But the oil companies are political idiots—excuse me, Ken [Rush]—
—but I’ve never seen such a group. I’d like to be able to get them in here—say, in three or four weeks.
My experience with the oil companies—which was only two enterprises with Sadat—was entirely tactical, entirely short range, and they they have no understanding of what they’re getting themselves into—even at an intermediate period of time—and then they start flapping when things get bad because they have no sense of the framework. They were storming the White House all last week that we were ruining our relations with Saudi Arabia, and the opposite has been true.
Mr. Rush: Yes. I’ve been seeing delegations of them regularly.
Secretary Kissinger: What I think we ought to do here, in about three or four weeks, when this crisis is over, is to get the leading oil companies in here and tell them our political strategy, so that they have a sense of knowing what we’re doing and they can figure out what role they should be playing.
I don’t know what it is, but it’s ridiculous that these companies have so much power that they can hurt our foreign policy in Europe. But that could also be a positive good that should be operating entirely blindly.
Bill, could you and Win, together with the E Bureau, do a paper on that—say, within the next two weeks?
Mr. Lord: Keep it administrative, at this point?
Mr. Rush: Yes.
Secretary Kissinger: If we can do a good paper here, then we can get it to the NSC.
Mr. Sisco: I think we’ve got a very good basis, as Ken knows, for an intensive and deep exchange with the oil companies because, you know, they do come in here very frequently. We have kept one another very well informed. I think the posture we’ve adopted, in a very difficult situation over the last several years of not taking on the onus of whatever deal they include—but, really, trying to give them the general guidance in terms of the political context in which they’re operating—is basically a pretty sound approach.
Secretary Kissinger: Yes, but the problem is going to get tougher and tougher—
Mr. Sisco: Sure it is.[Page 611]
Secretary Kissinger: —because we’re going to be facing constant demands for rising prices.
Mr. Casey: And they themselves have a fierce public relations problem.
Secretary Kissinger: That’s one problem. The other problem is that we will come under increasing pressure from European governments to cooperate with them without knowing what the cooperation consists of. They don’t know, but what’s worse is I don’t know. And maybe cooperation is impossible, but then I’d like to know why. But as it is now, I’m in no position.
Maybe it’s my own ignorance, but I haven’t heard anybody put forth a coherent view of how governments cooperate and why they should cooperate and what their relations should be with the oil companies.
Mr. Casey: Well, the general thrust of the oil cooperation that one can conceive of is that it’s substantially ineffective. That’s the general thrust.
Mr. Sisco: We each do our own.
Secretary Kissinger: What does that mean? We should throw our bilateral weight around?
Mr. Casey: Or your economic weight.
Secretary Kissinger: But that means we’re going to throw our own weight around, which is the only alternative—which is all right with me, but I just want to know the strategy.
Mr. Casey: We’re in a very good position, relatively. We don’t have to throw it around.
Secretary Kissinger: In order to protect what we think they need, we can rely on our own economic strength. It’s a policy, but we can do it.
Mr. Casey: A great part of our own economic strength is at home, our command over indigenous sources.
Mr. Rush: Until last year, we had an oil import problem, where our big problem was to stimulate domestic production and keep foreign oil out. And that 12 percent came from Venezuela, and Middle East oil was nothing to us.
Now, two things have happened—the oil shortage and environmental considerations, where oil is very much needed; and, secondly, we have the oil shortage—well, this has suddenly come about in the last year and a half—our entire approach has to change. But up until this time it’s been Venezuelan oil, but as little as possible.
Secretary Kissinger: But we can’t avoid the problem if the President goes to Japan. The one issue on which the Japanese talked like [Page 612]human beings when they were here last time7—forgive my original fan dance—
—which cannot be brought to a point—was on energy—on which we, in turn, had nothing to say. If the President goes to Japan, it is guaranteed that the Japanese are going to raise the energy problem.
Now, maybe we have to say no, but I’d like to know why we’re going to say no and what it is we can or can not do with them.
Mr. Casey: They can tell us what they want us to do.
Secretary Kissinger: No, no—but that gives us, potentially, a great possibility for leadership—in any event, the leverage—because even if we go bilaterally, we can still, out of that bilateral relationship, develop leverage, because they may still then need us on a case-by-case basis. But the last time we could have sold a hell of a lot to Tanaka for something on energy, except he didn’t know what he wanted and we didn’t know what we could offer. So it was a weird conversation that you had—one man eager one time. I’ve seen Japanese eager to move fast and cooperatively and we didn’t even know—we literally didn’t know what we were rejecting!
Mr. Casey: Well, I had that experience, when I was in Tokyo at the GATT meeting,8 talking to the government people—and with a Tokyo gas company and Tokyo electric—and they talk in terms of wanting to get us in as partners in all these bilateral deals they’re making.
Secretary Kissinger: Well, it seems to me even if we go bilateral—which has many advantages, because it means we can operate and don’t have to wait for a consensus in an emergency situation, or even in situations where price rises come up—we would have tremendous leverage, which we could apply across the board. And that’s what I’d like to get worked out. So could you and Win and the E Bureau get together?
Mr. Casey: Yes.
Secretary Kissinger: And then we could put it into the NSC system and get it implemented.
Mr. Tarr: Well, wouldn’t the food be a factor?[Page 613]
Mr. Casey: It doesn’t balance. I mean, their food requirements are nothing compared to our fuel requirements. Infinitesimal, in my view.
Secretary Kissinger: It isn’t judged by magnitude.
Mr. Casey: Yes, but they can get food elsewhere. I’m pessimistic about this fuel/energy tradeoff.
[Omitted here is discussion unrelated to oil.]
- Source: National Archives, RG 59, Transcripts of Secretary of State Kissinger’s Staff Meetings, 1973–1977, Box 720, Secretary’s Staff Meetings 9/73–10/73. Secret. According to an attached list, the following people attended the meeting: Kissinger, Rush, Porter, Tarr, Kubisch, Casey, Weiss, Sisco, Hummel, Pickering, Ross, Springsteen, Lord, and Eagleburger.↩
- The meeting occurred on October 25. Members of the OECD Oil Committee’s HLG agreed on the seriousness of the threat to the oil supply from production cuts and an embargo, and on the serious effects on their economies should the situation persist. They also wanted periodic joint reports on the supply situation from major oil companies, rejected a formal convocation of the International Industry Advisory Board (IIAB), and agreed that member countries could approach OPEC members to express their concerns about the unilateral abrogation of the Tehran agreement. (Telegram 27835 from USOECD Paris, October 25; ibid., Central Foreign Policy Files) Telegram 214629 to all OECD capitals, October 31, contains a summary of the meeting of the OECD Oil Committee October 25–26. (Ibid.)↩
- Tuesday, October 23. It was announced in Kuwait on October 17 that 11 oil producing states would cut production by 5 percent.↩
- Heath’s undated letter to Nixon outlined his great concern over the oil situation and recommended that the United States, the United Kingdom, the EC, and Japan develop a coordinated approach to negotiations with OPEC nations. (National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–69, Senior Review Group Meetings, SRG Meeting, Energy 10/30/73) In an undated cover letter to Nixon transmitting a draft reply, Kissinger stated that Heath “does not take fully into account the problems posed by the current Arab-Israeli fighting and the need to develop strategy for a longer-range solution to the oil supply problem.” (Ibid.)↩
- See Document 211.↩
- Not further identified. Possibly a reference to the paper summarized in footnote 3, Document 221.↩
- On July 31, Prime Minister Kukuei Tanaka told Nixon and Kissinger that in terms of energy issues, Japan “would positively support international cooperation, centered on the United States.” During a longer conversation on August 1 with Nixon, Rogers, and Kissinger, Foreign Minister Ohira stated that “not the slightest difference in view” existed between the United States and Japan, that both countries had agreed to exchange information and engage in joint research and development projects, and looked forward to talks on uranium enrichment and lessening the environmental pollution caused by the use of energy sources. (Both in the National Archives, Nixon Presidential Materials, NSC Files, Box 927, VIP Visits, Japan, PM Tanaka, July 31, 1973)↩
- September 12–14.↩