51. Action Memorandum From the Deputy Assistant Secretary of State for International Resources and Food Policy (Katz) to the Assistant Secretary of State for Economic Affairs (Trezise)1
- Oil Problems in Libya and the Middle East
Attached Annex A spells out current and potential problems caused by production cutbacks in Libya and the closure of Tapline. The resulting tanker shortage has caused shortages in the US of residual fuel oil and asphalt, threatened to curtail air pollution regulations, and could severely hurt the profitability of small inland refiners. If the situation continues to deteriorate it could lead to rapid changes in existing patterns of US oil ownership in the Eastern Hemisphere and severe political strains between us and our European allies (and to a lesser extent with Japan).
Annex B spells out in some detail existing problems between oil companies and the Libyan government. Annex C reviews the Tapline problem. Annex D reviews the tanker situation.2
- That you call in representatives of US oil companies in Libya—at least Esso and Occidental—express our concern over the seriousness of the situation there, ask for their assessment of the situation, and urge they seek every means available to deal imaginatively with the problem of seeking to accommodate themselves with the foreseeable evolution of events in Libya, consonant with their own long-term best interests; that you say specifically that we fear that failure to move on the posted price issue will result in Libyan action against the companies.3
- That you speak to Aramco representatives, express our concern with the wide-spread effects the temporary closure of Tapline is having, the more serious effects should Tapline remain closed for the rest of this year or longer, ask for their assessment of the situation, and urge they make every effort to work something out with Syria and other transit countries consonant with Aramco’s best interests.
If you approve in principle to this approach, we will send you separate memoranda on the talking points.
- Source: National Archives, RG 59, Central Files 1970–73, PET 6 LIBYA. Secret. Drafted by Clark; and cleared in AF/N, NEA/ARP, NEA/ARN, and E/FSE.↩
- Attached but not printed at Annex B is the paper entitled “Outstanding Issues Regarding Petroleum in Libya.” Annexes C and D were not found, but the topics are summarized in Annex A.↩
- Akins and Trezise met with Esso officials on August 4. Executive Vice President Emilio Collado stated that Esso would not pay unilaterally imposed posted price increases, even though this would bring the company into “immediate conflict” with Libya. Collado gave several reasons: high prices could not be passed on to consumers, the company could not operate at a loss, and Esso feared that similar demands would develop in the Persian Gulf setting off a “never ending process.” Trezise and Akins stated “we do not take seriously” the Esso assertion that nationalization was preferable to an increase in posted prices. They commented that higher costs of oil from either the Persian Gulf or Libya would be passed on to the European consumer. (Memorandum of conversation, August 4; National Archives, RG 59, Central Files 1970–73, PET 14 LIBYA) During a subsequent meeting that day, Esso executives discussed the European supply picture, tankers, pipelines, and increased Western Hemisphere production. (Ibid., PET 18 NEAR E)↩