Foreign Relations of the United States, 1969–1976, Volume XXXVI, Energy Crisis, 1969–1974

57. Memorandum for the Files by the President’s Assistant for International Economic Affairs (Flanigan)¹

Washington, September 29, 1970.

• RE
  • Libyan Oil

On Thursday, September 24th Mr. Trezise called to alert me to the potential crisis which could develop from the cutting off of Libyan oil produced by major U.S. companies. On the evening of the 25th, Julius Katz reported to me the substance of conversation between John McCloy, representative of the International Oil Company, and Under Secretary Johnson.² On the evening of the 26th Abe Lincoln reported the substance of a conversation he had had between Marion Epley of Texaco and Mr. Miller of Standard of California.³

As a result of these conversations it appeared that the various oil companies negotiating with the Libyans were inhibited from talking together and that they had a communications problem. In addition, no government position had been taken with regard to the crisis but rather that the general thrust of both Lincoln and Johnson’s comments have been that a settlement was desirable.

On the morning of the 26th I cleared with Johnson that U.S. Embassy communications in Libya would be made available for use by the oil companies. I also cleared with Mitchell that should the oil companies wish to discuss a proposal made by Libya they could do so if they were to sit down together with a member of the Justice Department. This information was given to John McCloy who also spoke to Mitchell. He very much appreciated the cooperation that these activities indicated.

With regard to whether or not the oil companies should hold out, I suggested to McCloy that it would seem to me that the penalties of a break with Libya, in terms of emphasizing the degree to which Russian-controlled Arab states hold Europe and Japan in pawn for energy requirements and also as a result of the exacerbation of the existent tanker shortage, were much greater than the negatives which would result from a settlement with Libya. If a settlement were made, the result would obviously be that all producing countries would demand the same deal. The increased cost would be passed on to consumers in Europe and Japan and, to the extent the U.S. imports oil of and from Canada to U.S. consumers. Since this increase would affect 100% of European and Japanese petroleum supplies and only a small per cent of U.S. petroleum supplies, the result would be a competitive benefit to the United States. This conclusion was concurred in by Johnson and Lincoln.

I told McCloy that regardless of the above comments we would expect the oil companies to follow the course that they and he thought best.

1. Source: National Archives, Nixon Presidential Materials, White House Central Files, Subject Files, Confidential Files, Box 26, EXTA 4/CM Tariff Imports, Oil Sep 28–Nov 1970. No classification marking. Printed from a copy that does not bear Flanigan’s initials.
2. See Document 56.
3. Telegram 159013 to several posts, September 26, reported on the meeting. The Department was in general agreement with Esso that the elimination of tanker cross-hauls and increased U.S. production would allow Europe to withstand the winter with only a modest use of stocks. However, if further production limits occurred, European net loss and stock drawdowns would increase. The Department concluded that Europeans would make arrangements with Libya and Iraq before they would permit a decline of their stocks. (National Archives, RG 59, Central Files 1970–73, PET 6 LIBYA)