233. Memorandum From the Executive Secretary of the Department of State (Pickering) to Secretary of State Kissinger1

    • Middle East Oil and European Reactions

Your strategy in handling the Arab oil embargo has caused a number of I think essentially helpful comments from the Department, including one which Winston Lord has forwarded to you and one from INR.2 I believe you are essentially correct in pursuing the Arabs on the basis of the no oil, no U.S. participation actively in a peace settlement formula.

Beyond that there are a number of nuances which might be worth looking into. I am particularly concerned that for rather narrow domestic reasons we are losing an opportunity with the Europeans. Their dependence upon Arab oil is obviously much greater than ours. Similarly, this gives us a much stronger position of leverage with the Europeans should we be prepared to take a number of minimal steps to help them in the oil crisis. It might mean the diversion of some small percentage of our own resources with some further belt-tightening domestically. A good bit of it might be more rhetorical than real—since the steps we will have to take will also reinforce your bargaining position with the Arabs and may well result in breaking the embargo before the actual steps have to be implemented.

However, helping the Europeans form a solid front against the Arab oil embargo with some minimal assistance from ourselves puts the leadership into our hands in an essentially important economic question in Europe. The leverage to be gained by this is great not only in facing the Arabs with a united front of oil consumers and the appropriate and implied action that this might carry with it in terms of what the consumers can do to the Arabs on both trade and on control [Page 662] over Arab monetary sources now deposited either in the United States or Europe, but it puts us in a position to begin to drive rather than be driven by the Europeans on important economic issues.

I broached this particular thesis to Larry and Winston3 and they believe it is worth further study. I will leave it to Winston to see what he can provide in the way of a more comprehensive and thoughtful analysis of the question, but believed you might be interested in an initial raising of it prior to your trip to the Middle East.

Thomas R. Pickering
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 17–1. Confidential. A copy was sent to Eagleburger and Lord. A handwritten notation at the top of the page by Kissinger reads: “Good idea. Get more work done. HK.”
  2. The first document is presumably a November 3 memorandum from Katz and Lord to Kissinger. (Ibid., PET 1 US) The INR study, November 2, is entitled “Economic Dependence of Arab Oil Producers on Trade and Financial Relations with Major Oil Importing Countries.” (Ibid., RG 56, Records of Secretary of the Treasury George P. Shultz 1971–74, Box 7, GPS Secretary of State C–1974) These documents are summarized in Document 235, to which copies are attached as Tabs A and B respectively.
  3. Lawrence Eagleburger and Winston Lord.