247. Memorandum of Conversation1

    • Secretary Kissinger, Under Secretary William Donaldson, Mr. Walter J. Levy, Oil Consultant, Mr. Jan M. Lodal, NSC Senior Staff

Mr. Kissinger: I’d like to have a brief talk about where the energy situation stands. Mr. Donaldson will handle these matters in the Department and Mr. Lodal for the National Security Council. I would like to marshal our resources on the subject.

Mr. Levy: First, I would like to say that the President did not go far enough in his program announced last night.2 We are facing unknown [Page 698] contingencies; if we have a harsh winter or an increase in Arab cutbacks, we could have a very severe situation.

Mr. Kissinger: Further cutbacks would hurt the Europeans, but not us wouldn’t they?

Mr. Levy: They would hurt us also, because more severe cutbacks might require us to share with them.

Mr. Kissinger: With respect to sharing, why have we not done anything for the Dutch? (To Donaldson) Why hasn’t the paper been done yet? The staff always does it in the last four hours anyway, and I asked for it ten days ago. I need a paper telling me what should be done, what can be done, and why we are not doing everything we could be doing. (To Mr. Lodal) Do you know why the paper hasn’t been done?

Mr. Lodal: Quite honestly, I did not realize you had asked for it. Nevertheless, I agree thoroughly that it needs to be done immediately.

Mr. Kissinger: Can you have it for me by tomorrow?

Mr. Lodal: Yes.3

Mr. Levy: Briefly, back to the domestic problems, the major problem is with residual fuel oil. If people use electric heaters, and we have a harsh winter, we will run out of residual fuel. Power plants will have to shut down or cut back voltage, burning up our electrical equipment. We need a residual allocation program.

Mr. Kissinger: What I would like to know is what can we do here that might impress the Arabs.

Mr. Levy: It’s important that we protect our domestic flanks.

Mr. Kissinger: What are those flanks?

Mr. Levy: I’m speaking of a potential breakdown in our economy.

Mr. Kissinger: It would never come to that. We would have to use military power first.

Mr. Levy: It’s not clear that would work.

Mr. Kissinger: Couldn’t we invade Abu Dhabi?

Mr. Levy: Yes, but in Saudi Arabia, with the pipelines, we might not succeed. In any event, you want to be reasonably free from domestic problems.

Mr. Kissinger: What are the Arabs going to do?

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Mr. Levy: I think they will stay at their 25% cutbacks. However, as I said on Meet the Press yesterday, I believe that no Middle East settlement is possible unless the Saudis approve. We’re going to have to put pressure on the Israelis to do that. But they might cut further, and we should be prepared domestically. We should set up a residual allocation program.

Mr. Lodal: You are going to get domestic arguments about the residual allocation program. Love and some of his people feel that coal substitution and other efforts now being planned will handle the situation.

Mr. Kissinger: What do you think we should do with the Europeans?

Mr. Levy: I think that you should meet with people at “next to the Prime Minister” level, in the most important European countries and with Japan. You should give them unofficial assurance of an internal allocation scheme which would ensure that the U.S. oil companies do not divert oil from them. This would remove a great fear—the Japanese are extremely worried about this. I believe all this should be done unofficially. The OECD is out of the question—they are a talk group. Also, I believe we should look out for developing countries and make sure they get a minimum allocation.

Mr. Kissinger: (To Donaldson) You should go with me to the NATO meetings and go around to the countries, provided you’ll be tough enough. The Europeans can’t continue to act as they have in the past.

Mr. Levy: You can force the companies to cooperate; if you and Heath tell them they will cooperate.

Mr. Kissinger: Can you give your ideas on this to Bill in some detail?

Mr. Levy: Yes. In addition, I think we should pressure the Europeans to keep the price below $16/barrel.

Mr. Kissinger: How?

Mr. Levy: We must get agreement and pressure the oil companies not to accept such prices.

Mr. Kissinger: First, I need to figure out what I want to ask the oil companies to do. But will they do it?

Mr. Levy: They left their meeting with you with a sense of overwhelming respect. They would do what you ask. But you should probably bring them in before your trip.4

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Mr. Kissinger: I don’t understand the $16/barrel?

Mr. Levy: I think it was Coastal States perhaps; they bought the oil at that price in Nigeria.

Mr. Kissinger: Is my understanding correct? If we don’t stand up now, the Arabs will drive us crazy for the next five or ten years.

Mr. Levy: That’s right.

Mr. Kissinger: By early next week we have to know what we want from the Europeans. I need to know what my options are. Can we have some work done on this?

Mr. Lodal: The CIA has started a study; also, you might wish to have an interagency meeting before your trip.

Mr. Kissinger: The CIA never tells you your options, and I don’t work through committees. I don’t work with the Interior Department. Once we know what we should do, I’ll worry about selling it within the Government. (To Donaldson) Can you get some work started for me on this?

Mr. Levy: I believe you might wish to warn the Soviets before discussing this program with the Europeans. By the way, the Soviet gas proposals are a bad deal economically, but you might wish to go through with them for political reasons.

Mr. Kissinger: The political base is better with the Soviets for long term export stability; they would be less likely to cut us off than the Arabs.

Mr. Levy: But they have cut back Eastern Europe. One would not have said that the Arabs would have cut us off a few months ago.

Mr. Kissinger: I have been saying for years that the Arabs would cut us off. They are sufficiently weak that they are essentially invulnerable. They have nothing to fear from us.

Mr. Levy: That’s right. The less they produce, the more money they make. I have one other suggestion. We should get an informal group from the nations you talk to to study the longer-term situation. It should probably be sponsored outside the Government.

Mr. Kissinger: I believe you have to have Government people involved. People outside the Government are not well enough informed to deal with the problem. (Interruption while Sec Kissinger took a telephone call from the Mexican Foreign Minister.)

Mr. Levy: Might I suggest something? Would it be helpful for me to go on the trip as a backstop to Bill Donaldson?

Mr. Kissinger: I think that would be a good idea.

Mr. Levy: We need a program that rational Europeans will accept. If necessary, I believe we should force the French out. Our policy should be to make it more costly to the other Europeans to be anti-American [Page 701] than it is to be anti-French. Also, we must include the Japanese from the beginning. We can’t bring them in after the fact.

Mr. Donaldson: Will you be doing this at your NATO meetings?

Mr. Kissinger: No. I will use the occasion of my being in Europe for the NATO meetings to independently meet with them on these issues. We have to put together our program.

Mr. Donaldson: Once again, I think the weakness of the present domestic program will cause you trouble.

Mr. Kissinger: We have to separate our domestic problems from the international ones. I want to know what our domestic problems are; but the place I have authority to deal in is with the international problems. We have problems with the long-term relations between the consuming nations; we have to deal with the current shortage and we have to understand how the West can have a coordinated energy policy. If we have a higher standard of performance within the Government on dealing with foreign issues, that will give us more influence in dealing with domestic issues.

  1. Source: National Archives, RG 59, Central Files 1970–73, FSE 1 US. Secret; Sensitive. Drafted by Lodal. The meeting took place in Kissinger’s office at the Department of State. Talking points for the meeting are ibid., Nixon Presidential Materials, NSC Files, Box 250, Agency Files, National Energy Office, Vol. II.
  2. See Document 237.
  3. The November 27 memorandum from Lodal and Sonnenfeldt noted that the Netherlands was a strong transshipment point in Europe for petroleum products. It also noted that the Dutch had not asked the United States for help, but that the United States could minimize Dutch shortfalls through the emergency sharing program asked for by the OECD. (National Archives, Nixon Presidential Materials, NSC Files, Box 321, Subject Files, Energy Crisis, Nov 73–Feb 74)
  4. Between December 8 and 22, Kissinger traveled to parts of Europe, North Africa, and the Middle East. He was in Belgium (December 8–11), the United Kingdom (December 12), Algeria (December 13), Egypt (December 14), Saudi Arabia (December 14), Syria (December 15), Jordan (December 15), Lebanon (December 16–17), Israel (December 17), Portugal (December 17–18), Spain (December 18–19), France (December 19–20), and Switzerland (December 20–22).