348. Memorandum From the President’s Deputy Assistant for International Economic Affairs (Cooper) to Secretary of State Kissinger1

    • CIA Assessment of Recent Bilateral Oil Agreements

At your meeting with oil company executives there was considerable discussion of “bilateral deals” and their effect on oil prices.2 I am skeptical that at the moment this problem is very serious.

[Page 988]

The CIA has recently completed a short review (attached)3 of the bilateral oil deals arranged among major consumers and producers. The CIA study confirms what was becoming more obvious:

  • —Fewer bilateral oil deals are being sought by major consuming nations. Japan, Germany, the UK, and even France do not seem, any longer, to be in the market for bilateral oil.
  • —Some of the previous “agreements” have been cancelled, in certain cases negotiations have been suspended, and only in two or three cases have deals been finalized. Even in these cases, only 300,000 b/d is involved.
  • —Some LDCs facing large oil debts (e.g., India) are still seeking bilateral agreements, but their efforts have met with limited success. In fact, not many of the OPEC producers appear interested in bilateral arrangements, Iran and Libya being the salient exceptions.

The reasons for increasing consumer reluctance to enter bilaterals is clear: now that the initial shocks of supply cutbacks and high spot prices have been absorbed, consumers have begun to take harder looks at the costs of bilateral deals and have apparently realized that bilateral oil may be no more secure from disruption than oil derived from major oil firms.

In sum, the prospect of a dizzying rush towards bilateral oil deals has faded, and the international oil market is settling down into many of its older patterns.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 251, Agency Files, National Energy Office, Vol. III, Aug 74. Secret. Sent for information. Kissinger initialed the memorandum.
  2. See Document 345.
  3. Attached but not printed is the undated paper entitled “Bilateral Oil Deals Fizzle.”