46. Telegram From the Mission to the Organization for Economic Cooperation and Development to the Department of State1

6923. Subj: High Level Group Meeting, OECD Oil Committee.

Summary: Meeting High Level Group OECD Special Oil Committee was dominated by apprehension Western Europe and Japanese dels over possible interruption of flow of crude oil from Near East and Libya with potentially devastating impact on economic life Europe and Japan. USDel stated that (A) U.S. ready participate immediately in any necessary tanker allocation exercise (B) North America would have some capacity assist Europe and Japan with crude oil in any emergency in immediate future but that this capacity probably would decline at least until Alaska oil available (C) in any event, U.S. obviously could not be indifferent to plight West Europe and Japan in oil emergency (D) that increased European and Japanese capacity is indispensable insurance policy and that costs such policy not nearly as large as those U.S. accepts [Page 109]for its own oil security program. Response U.S. statement was good and HLG promptly agreed recommend setting up special small group to review and advise on stockpile policies and objectives and Oil Committee readily accepted recommendation. End Summary.

1.
This two-day meeting highlighted by European anxieties about petroleum supplies North Africa and Near East. Arab-Israeli confrontation, coupled with current Libyan uncertainties, has again brought to fore virtually total dependence West Europe’s economic life on continuing flow oil from Near East and North Africa. All recognized that any interruption Libyan supply, even for fairly brief period, could disrupt European economy in most serious way.
2.
All members HLG asked for clarification U.S. position (both as to reserves and policy). Evident that Europeans and Japan look to U.S. assistance in any crisis and gravely concerned regarding U.S. capabilities. Also evident was the underlying European resentment and apprehension at being dependent upon U.S.U.K. oil companies for most of their oil.
3.
U.S. Delegate (Trezise) intervention covered main elements U.S. Task Force report, culminating in President’s decision to establish Oil Policy Committee.2 He pointed out that current U.S. capacity to assist Europe in an emergency is about same as in 1967, but of course this capacity will diminish in the next few years, at least until Alaskan oil enters market. He noted that in contradistinction to 1967, U.S. would be ready today to participate from start in OECD international industry advisory body which would have responsibility for assuring efficient allocation tanker-tonnage in world. He said further that U.S. has far reaching commitments to the common defense of Europe and Japan and that it not conceivable that U.S. would fail cooperate fully in OECD action on petroleum. He emphasized, however, that beyond any emergency assistance which could be expected from North America or from reallocation tankers, European and Japanese security of supply depends on their stockpiling policies.
4.
Other members expressed relief and reassurance on hearing U.S. statement and proceeded take action review European members’ stockpiling commitments. Recommendation made to Special Committee for Oil that small working group begin review stockpiling objectives and report at early date. This will be purely European body, as it should be.
5.
Both Japan and FRG Dels stated intention their governments to examine possibility increase in oil stock levels.
6.
Comment: Atmosphere in HLG one of very general concern if not yet alarm over oil supply prospects. Our position of course has its own real delicacies: on one hand, Europeans and Japanese always tempted take line that U.S. policies are at bottom of problem and that dominant position of U.S. companies exposes European and Japanese economies willy-nilly to disruption and even catastrophe; as we saw first in 1967, there is clear danger that European response to emergency could be to act against U.S. international companies if deliveries fell off substantially. On other, it plain we could not realistically propose make up from North America any major shortfall in Near East or North African shipments. We believe line we took past two days fell reasonably well between promising too much and appearing to be indifferent to European-Japanese worries (which indeed have all too much substance for anybody’s comfort). Mildly encouraging is fact that stockpiling question has been brought up more or less to front burner, but of course increase in Euro-Japanese storage capacity is hardly short-term matter.
7.
U.S. Del’s statement about our ability participate promptly in tanker allocating advisory body, if necessary, was especially well received. As we understand it, our ability to do so rests on authority in Defense Production Act,3 which must be renewed by June 30. We understand further that both OFP and Justice favor renewal but we take occasion to express trust that there is no hazard that this legislative action could fall between stools.
Greenwald
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 3 OECD. Limited Official Use; Priority.
  2. See Document 43.
  3. The Defense Production Act, which originated in 1950 at the outbreak of the Korean war, gave the President wartime powers to mobilize nonmilitary materials and facilities. It remained the primary legislation for ensuring the domestic availability of industrial resources and critical technology essential for national defense. (Department of Energy, Executive Secretariat, Historian’s Office, Energy History Series, Vol. 1, No. 2, “The Office of Oil and Natural Gas Supply Development,” November 1978, p. 4)