243. Memorandum of Conversation1

  • SUBJECT
    • Meeting with Oil Company Executives
  • PARTICIPANTS
    • Henry A. Kissinger, Secretary of State
    • Kenneth Rush, Deputy Secretary of State
    • William Clements, Deputy Secretary of Defense
    • William J. Casey, Under Secretary of State for Economic Affairs
    • William Donaldson, Under Secretary of State-Designate
    • Major General Brent Scowcroft, Deputy Assistant to the President
    • Joseph Sisco, Assistant Secretary of State/NEA
    • Thomas Kauper, Assistant Attorney General for Antitrust, Department of Justice
    • Julius L. Katz, Acting Assistant Secretary/EB
    • George Aldrich, Acting Legal Adviser
    • Harold Saunders, NSC Staff
    • Kenneth Jamieson, Chairman, EXXON
    • Otto Miller, Chairman, Standard of California
    • Robert Dunlop, Chairman, Sun Oil
    • John McCloy, Milbank and Tweed
    • B. F. Dorsey, Chairman, Gulf
    • Robert O. Anderson, Chairman, Atlantic-Richfield
    • M. F. Granville, Chairman, TEXACO
    • Charles Spahr, Chairman, American Petroleum Institute
    • Leon Hess, Chairman, Amerada Hess
    • Howard Hardesty, Executive Vice President, Continental Oil
    • Louis Cabot, Chairman, Cabot Co. (Distrigas)

Kissinger: I thought we might have a review of the political situation in the Middle East as we now see it.

The press knows about this meeting and will pursue each of us after we leave this room. I hope we can follow the same procedure as we did after our last meeting2 and to say only that we had a review of the current situation. I am glad to say that there were no leaks about contents of our last meeting and I would hope the same would be true on this occasion.

[Page 684]

First, I will speak about the status of our negotiations, and then I will have some reflections on the oil situation.

Our first objective was to solidify the ceasefire. The Egyptians showed statesmanship in accepting what they did in the six-point agreement when they could have argued for the October 22 lines.3 This would not have meant anything in terms of the longer range settlement they sought but would have impeded progress toward that goal. On the other hand, we were not helped by the Europeans who chose the very day of agreement on the six-point plan to issue their declaration. This did not help Sadat. The Egyptians had done some serious thinking about the long term. They know what they want. Certain elements of their objectives will be unacceptable to the Israelis but the Israelis will have to give. Of all of the Arab leaders I met, Sadat was the most impressive. He is moderate and he is pro-Western.

Our next objective is to attempt to organize a peace conference. We expect the conference to be chaired by the Secretary General of the United Nations and will be held under U.S. and USSR auspices. The conference will be attended by the Israelis, Egyptians, Syrians and Jordanians. The first stage of the peace conference should deal with disengagement. The next stage will deal with such matters as boundaries, security guarantees, etc.

There are a number of major difficulties ahead. First, there is the pressure from radical Arabs, which has more of an impact on conservative Arab governments than on the moderate governments. Secondly, there is the behavior of the Europeans and Japanese. I will have more to say about this later. Third, there is the possibility that the Soviets may be tempted to try to get back into the game by taking more extreme positions than we do.

Our position is that we will not be driven by pressure from one point to another. This is a game we could not win and it would be disastrous for us to try to compete with the Europeans or the Russians or the Japanese. Our line with the Arabs is that the Soviets can give you weapons but only we can get you a settlement. The Europeans can give you rhetoric but only we can give you performance. We may promise less but we deliver on our promises.

The problem is that major concessions will have to be made by the Israelis. Everyone knows this. Increasingly, the Israelis are recognizing this. What makes our life difficult is when the Europeans and the Japanese cave to Arab pressures. Since there are limitations on how fast we can produce results, it makes us vulnerable to outbidding by other countries.

[Page 685]

Jamieson: Yes, we are very familiar with the problem of leapfrogging.

Kissinger: If they want performance, they can’t expect us to act under pressure or under blackmail.

I spent a most anguishing evening with King Faisal listening to his view of history and his description of his role in world affairs. After my meeting with him I was visited by several half brothers and sons who told me not to take literally all of his statements and stressing that the King’s position was not irrevocable.4 It reminded me somewhat of the workings of the NSC system. The important thing, is that our point about not being pressured has gotten through. The problem is how to get the Saudis off the hook without subjecting them to pressure from radical Arabs.

We have had some indications that the Saudis are in fact seeking a way out. We have a report, for example, that they are trying to send oil to us through a third country.5 Yamani has been in constant touch with me and in recent days the Shah and the King of Morocco have sent emissaries to King Faisal urging him to moderate his position. We have been urged from a number of sources not to be too discouraged. We have been told the King is old and stiff-necked and it is difficult for him to change his position. He needs something he can hang his hat on. It has been suggested to us, for example, that it might have been better if the six-point agreement had been signed in Saudi Arabia rather than in Cairo. We are waiting to see what will be the effects of the opening of the peace negotiations early next month. I can’t tell you with assurance now that the embargo will be lifted. What is clear, however, is that they are looking for a way out. We are getting daily signals to this effect. We will be making some suggestions to the Saudis but at the time we can’t appear too anxious. I must stress that we cannot get into a competition with the Russians and the Japanese since we can’t win. We will be driven from one position to another until the Israelis are driven back to war.

As one to whom the concept of Atlantic partnership was central, I must say I find the behavior of the Europeans incredible. It is just not true, as has been alleged, that we failed to consult with the Europeans. On the contrary, we consulted regularly and frequently. In fact, those Europeans with whom we consulted most frequently are the ones who [Page 686]have given us the most difficulty. Those Europeans with whom we consulted the least have been the most understanding of our policy and our position. I would like, Jack McCloy, to meet with you and a group of Atlanticists in the next two weeks or so to discuss this question at greater length. What the Europeans have done has not only been harmful to our own efforts but contrary to their own interests.

It is in our interest that moderate Arabs be in a position to demonstrate that the Arab cause will not be helped by unreasonable demands. The Europeans and Japanese, however, are making it more difficult for the moderates to prevail. From that point of view alone the Europeans’ performance has been discouraging but I can also make the case that certain Europeans have used every bit of information given to them against us to further their own position with the Arabs. Nevertheless, it is clear that the Arabs prefer to deal with us. The Europeans are not helpful to the Arabs either as a military or negotiating conduit.

This is the situation we are up against. If we can get the negotiating process under way, there is a chance we can get some movement on the oil boycott but we must hold to the line that we are not going to be pressured. I would like to ask those of you who deal with the Arabs to follow this same line.

The arguments I have found persuasive are (1) to the extent that the embargo hurts us, they undermine the government they need most to help them, and (2) they run a risk of having sentiment and public opinion turned against Arabs.

A number of moderate Arab leaders have sent messages to Faisal along these lines. Even Sadat conveyed our arguments to Faisal without, however, endorsing them. This is where we stand at the moment and you can help us by not giving the impression that you are seeking to pressure us. In any case we are not going to yield to pressure.

Jamieson: What about Faisal himself?

Kissinger: Faisal said he was working on a nervous breakdown. He gave me his proposal for Jerusalem and I told him that if he were prepared to wait ten years he might succeed. He then told me of the pressure he was under from the radicals, from Yemen and Iraq and said he was about to have a nervous breakdown. One must distinguish between Faisal’s formal position and what he is really thinking. Two of the four people present at my meeting with him told me afterwards that we should not take his formal position as irrevocable. This view was echoed by Fahd, Saqqaf, and by Prince Sultan.

Incidentally, the Saudis have told us that any public speculation in the United States that the embargo may be lifted will be disastrous. I realize there were some comments made to this effect last week and we must avoid this at all costs.

Anderson: Have the Israelis been cooperative?

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Kissinger: The toughest negotiations I have ever had, other than the ones I had with Thieu, were with Mrs. Meir. But one has to understand the Israeli position. They have suffered casualties which would be the equivalent of 150,000 for the U.S. They thought themselves to be the victims of aggression. Now they find they have no friends left in the world except the U.S. There is however a change taking place in their appreciation of the situation. This is not to say that they will agree with us on all of the specifics, but the realities of the present situation are now being impressed upon them. They realize that this is no longer a time-buying exercise. It is my feeling that over a period of some weeks and after their election they will be more flexible.

Dorsey: What about Japan?

Kissinger: When I met with the Japanese last week6 they had rehearsed in advance all of their arguments in support of a change in their policy, including a break in relations with Israel. I told them that it was foolish for them to do this before negotiations had even begun. I had them persuaded last week but the pressures of their internal political situation will probably lead them to make some kind of a statement on Thursday. The Japanese are facing elections next summer and this appears to be an overriding preoccupation with the Tanaka government. My estimate is that the Arabs want a settlement, not statements. I understand the difficulty the Japanese have, but their leaping ahead is just not helpful.

Dunlop: What about our situation here? What should we be doing to help at home?

Kissinger: This is really for the domestic side of the government to determine. I just want to make it clear that it is not helpful for you to be telling us what and how to negotiate.

Jamieson: I am very concerned about a possible domestic reaction. We have an obligation to tell people what the problem is and how serious it is likely to be.

Kissinger: I have no problem with that. Moreover, we should take resolute measures to deal with our domestic situation. To the extent that we can show that we are dealing with our domestic situation, our negotiating position is strengthened. Anything which supports the authority of the government in this connection is helpful.

Jamieson: Can’t we do something in the OECD to produce a unified position among oil consuming countries?

[Page 688]

Casey: The Europeans have been afraid that any action they might take in the OECD and elsewhere to deal with the oil problem might be viewed by the Arabs as a hostile act. Thus, they have not even been willing to convene the Industry Advisory Group of the OECD.

Kissinger: Again, I will say that the European performance has been incredible to me. It is suicidal from their own point of view. The idea that 10 million Arabs can hold up and blackmail Europe notwithstanding its military, economic and financial strength should be intolerable from the point of view of the Europeans themselves.

Anderson: By the end of the year, the supply problem will be catastrophic for us.

Jamieson: I agree. If we don’t get control of our demand now, the problem will be so much worse by January and February. We could face a situation where fuel supplies in the northeast will be 50 percent of demand by late winter. We have prepared a paper which shows how the impact grows worse as we delay taking action to reduce demand (paper attached).

Kissinger: Aren’t we dealing with this situation?

Clements: No, not now, but hopefully by the first of January we will be.

Jamieson: The industry can help the Government deal with this problem but antitrust laws stand in the way.

Kauper: We can’t waive the antitrust laws. We just don’t have that authority. If anything is to be done about the antitrust laws, it will require legislation.

Kissinger: Well if we need legislation, can we get it?

Katz: The Emergency Petroleum legislation requested by the President is in the Congress now.7 The Senate passed the bill yesterday and it will be considered in the House next week. If we need a provision on the antitrust laws, there is a vehicle for getting it.

Kissinger: Well we should work with Justice and the White House to get whatever we need.

What about the idea of the Saudis sending us oil through a third party? Do we have a problem working with the industry on this? We will certainly need industry to help work out details of such a proposal.

[Page 689]

Jamieson: I have some doubts that we could obtain oil through third parties without other people knowing about it, especially Arab radicals. In any case, the amount of oil we would be getting in this way would be so small as to be insignificant.

Kissinger: I understand. We will be moving in any case to set up the peace talks next week and there should be an incentive on the part of the Arabs to start oil moving again.

Jamieson: Would it be helpful for the ARAMCO principals to see Faisal?

Kissinger: Faisal has expressed his appreciation for our getting involved. The problem is that it is his assessment that if he keeps our feet to the fire, we will move faster. We need to convince him that this is not so, and that our ability to be helpful in the peace negotiations will be harmed rather than helped by the pressure of the oil boycott. If you can make this point to him without appearing to be pleading, it could be helpful. On the other hand, he has heard our line of argument from the Shah and from the King of Morocco and from Sadat.

Jamieson: Is there anything else we can do?

Kissinger: No, you have been extremely cooperative. I have no complaints, such as I had the last time we met. Evidently, you have sent the word to your people and they have been disciplined. What we want to do is make the seriousness of the situation to be made to work for us rather against us.

Spahr: It is not too early to have whatever antitrust clearances are required tonight or tomorrow morning. We just can’t afford to wait until the end of the year.

Kauper: While we have some discretion with respect to the advice we give, it must be realized that I have no authority to repeal the antitrust laws. Dividing markets is illegal under the law and nobody can waive this provision.

Miller: The only solution to our oil problems is to have the embargo lifted. Will the December talks be a sufficient basis to permit the resumption of oil shipments?

Kissinger: The peace conference will get under way early in December but we must realize that we are not going to have much progress on its engagement until after the Israeli election. Nonetheless, the Arabs will have a basis for moving on the boycott if they wish to do so. After all, our record of performance with the Arabs is pretty good. But for us the Third Egyptian Army would have been annihilated. We did get a six-point agreement. We did arrange for the kilometer 101 talks. It should be clear to the Arabs they have to come to us to get results.

McCloy: What about the Soviets?

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Kissinger: They have been somewhat nervous about our getting out in front but they have come around and they are being helpful at the present time.

McCloy: What can we do about improving the performance of our allies?

Kissinger: I don’t know. I do want to get together with you and a group of people interested in Atlantic Affairs. Up to now the Europeans and Japanese, as I have said, have just been unhelpful. The British and French, for example, have been trying to ingratiate themselves with the Arabs by insisting on being present at the peace talks. The Arabs, on the other hand, don’t want them present. We don’t care one way or the other, but clearly the Israelis don’t want the Europeans present, and the Egyptians directly and the Syrians, though the Soviets, have told us that they would just as soon not have the British and French present. I will get in touch with you Jack about a meeting in the next week or so.8

Once again gentlemen, I would like to thank you for the cooperation and understanding that you have shown.

Jamieson: Mr. Secretary we want to thank you for the outstanding job that you are doing and to thank you for the time you have given us. You have our full support.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 1027, Presidential/HAK MemCons, Memcons, April–Nov 1973. Confidential. Drafted by Katz. Cleared by Saunders and approved in S by Eagleburger on December 3. The meeting was held in the Secretary’s Conference Room. Attached but not printed is an unattributed, undated handout, presumably from the oil companies, entitled “Impact of Reduced Arab Oil Production/Embargoes.”
  2. See Document 230.
  3. The Six-Point Agreement, aimed at stabilizing the cease-fire achieved in UN Security Resolution 338 of October 22, was signed on November 11 at Kilometer 101 on the Cairo–Suez road.
  4. See Document 238.
  5. A November 15 intelligence report indicated that Yamani asked a Jordanian official “to attempt to locate a country or company willing to accept a ‘sizeable’ amount of Saudi oil for non-attributable transshipment to the United States,” and that the request came from Faisal. (National Archives, Nixon Presidential Materials, NSC Files, Kissinger Office Files, Box 139, Country Files, Middle East, Saudi Arabia, Nov–Dec 73)
  6. Kissinger met with Foreign Minister Masayoshi Ohira of Japan on November 14 in Tokyo. The memorandum of conversation is ibid., RG 59, Central Files 1970–73, POL 27 ARAB–ISR. On November 22, the Japanese issued a statement that called upon Israel to withdraw from all Arab territories it occupied in the 1967 war. Failure to do so would cause Japan to reconsider its policy toward Israel. (Los Angeles Times, “Japan Urges Israeli Pullback, Threatens to Reverse Policy,” November 22, 1973, p. 1)
  7. See Document 237. The Emergency Petroleum Allocation Act sought to ensure equitable distribution of available products, to establish equitable prices, and to preserve the independent segments of the oil industry. It established a two-tiered pricing system for domestic crude: “old” oil (crude from properties producing at or below 1973 levels) were subject to a price ceiling; and “new” oil and “released oil” were allowed to be sold at market price. The price of imported oil remained unregulated. (www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/chronology/petroleumchronology2000.htm#T_3_)
  8. On November 21, Scowcroft informed Kissinger that John McCloy was prepared to assemble some Americans and some Europeans for the meeting Kissinger had suggested during his meeting with oil company executives. McCloy also suggested that Kissinger meet with Jerry Wagner, head of Royal Dutch Shell. (National Archives, Nixon Presidential Materials, NSC Files, Box 321, Subject Files, Energy Crisis, Nov 73–Feb 74)