256. Memorandum From the Director of the Policy Planning Staff (Lord) to Secretary of State Kissinger1
THE SILVER LININGS OF THE OIL EMBARGO
In the present hand-wringing over the clouds of the “energy crisis” it is useful to recall some silver linings.
The Saudi/Kuwaiti oil embargo is an inconvenience for the US. It does not threaten our vital interests if we manage our resources well.
In return for the inconvenience we get the following:
- a)
- A clear demonstration of US power. We are the only major Western country which cannot be shut down by an embargo.
- b)
- An opportunity to revitalize our alliances by moving toward cooperation across the energy front.
- c)
- It forces attention domestically on the longer term energy supply issue and its relationship to our security and ecology.
- d)
- It forces a serious review of our international oil logistics system and its implications for our security.2
- e)
- It encourages objectivity in US attitudes on the Arab/Israeli issue.
- f)
- It maintains pressure on the Israelis to be reasonable.
- g)
- By clearly demonstrating who needs whom it gives us a powerful future bargaining weapon with the Saudis on future prices and quantities of oil for the US.
The Saudis cannot live with the embargo very long because:
- a)
- It kindles internal dissent.
- b)
- It strengthens the Soviets whom they find anathema.
- c)
- It damages their long term economic interests.
The Saudis know that there are ample energy resources in the world. The Saudis are, and will continue to be the residual world supplier of oil (read energy). They know that the introduction of other modes of energy and the development of new oil fields cuts into present and future Saudi markets. Stated differently, any expansion of supply beyond normal growth in demand occurs at the expense of Saudi Arabia.
That is a very poor position in the long run, especially if the forces for uneconomic expansion of energy resources have been unleashed.
The Saudis know that. It is in their interest to get out of the embargo corner. The corner encourages contemplation and enhances our position not only on the Arab/Israeli issue, but also on the future price of oil.