78. Telegram From the Under Secretary of State (Irwin) to the Department of State1

74/UNSTO 18. Dept Pass London, Jidda, Dhahran, Tehran, Tripoli, Paris.2 OECD for Trezise. From Irwin. For President and Secretary.

This morning Ambassador Walsh, Messrs. Davies, Akins, and I met for an hour and a half with Sabah Salim, the Amir of Kuwait, and Abdul Rahman al-Atiqi, Minister of Oil and Finance. I delivered President’s letter,3 conveyed his warm regards and his recollection of the [Page 195]Amir’s courtesy in calling on him during his campaign in 1968. I made essentially the same points as I had to the Shah and King Faisal,4 with particular emphasis on the need for stability in the oil market and the importance of oil to the well-being and security of the free world. Although the United States might not be directly affected by a cutoff in oil supplies, any disruption in deliveries would be felt immediately by Europe and Japan. In such a case, the United States probably would be compelled to come to their assistance even if this meant rationing in the United States.
I also explained how the companies had been prevented by our anti-trust legislation from negotiating with OPEC until they were given some relief from it last Friday.5 Therefore, we hoped that the OPEC countries could be patient with them and not demand immediate results in the negotiations.
I said in addition to security of supply, our main concern had been that there might be constant increases in prices, as one section of OPEC would play off the companies against another section. Fortunately, had been very reassured by both the Shah and King Faisal that this would not happen, that any agreement reached in the Gulf would be firm and binding for the length of the agreement and would not be affected by concessions given elsewhere in OPEC. I had not understood this earlier, and I thought companies had not. I also told Amir that we were particularly disturbed by the attempts of one OPEC country, Libya, to use oil for political purposes in the Middle East. The United States Government view is that the agreement should be fair to the producing countries, the consuming countries and the companies.
The Amir opened with greetings for President Nixon and inquiries of the health of both President Nixon and President Johnson. He said that Kuwait was a member of the free world and that its well-being was tied closely to that of the United States and other countries. He said he agreed perfectly that politics and oil should be kept separate and negotiations in oil should not be and would not be allowed to disrupt the good relations between our two countries. He said he, too, did not wish to get into details of the negotiations. But it was important as I had said that the companies reach a favorable agreement with the countries of the Gulf which would take into account their legitimate desires. In return the companies could also expect fair treatment. He said that Kuwait’s relations with its oil companies had been excellent and that Kuwait hoped that this would continue. In any case, he would turn all negotiations over to his experts, especially Finance [Page 196]Minister Atiqi. At this point, Atiqi added that final decisions on policy would of course have to be made by the Amir himself.
Atiqi said Kuwait’s income per barrel in current dollars as that of other producing countries, had remained constant and had even declined in the last twelve years while the price of all materials which they must import had constantly gone up. In the case of Kuwait, he said the purchasing power, the real income that Kuwait received per barrel of oil, had declined 60 percent in the last twelve years. Kuwait and all other producing countries had decided that this trend must be reversed. He said he was gratified that the companies now not only had recognized OPEC, but were prepared to deal with it.
I told the Ruler and Atiqi that their position re inflation was understandable and that the companies had already agreed to negotiating this point.
The Ruler and Atiqi then made the same points as the Iranians and the Saudis had made on the necessity of negotiating non-discriminatory agreement for the Gulf states. They stated explicitly that agreements in Libya and Venezuela would not affect any agreement in the Gulf. It was of course clear that no agreement could last forever but that the companies’ proposal for a five year period of stability was sensible and acceptable to them.
In separate conversation after we left the Amir’s office, Atiqi told Davies and Akins that the Gulf producers did not plan to make outrageous demands. Akins repeated my statement that we could not get into details or any negotiations but we had never said or implied that there should be no increase in taxes. The companies and other consuming nations also understood this. The demands recently made by Libya, however, exceeded reasonable limits and it would be difficult, probably impossible, for the consumers to meet them. Atiqi agreed that this was true. He said that the Gulf producers had no intention of making similar demands. He said “we are not fools. We have our slide rules and we know the cost of transportation and marketing and we know how much the companies have increased prices in Europe.” He said that the plan just proposed in Tehran would be to ask only for an increase in taxes which could be absorbed out of company profits and that there would be no need for increase in prices to the consumers.
Comment: The concept of our mission had been viewed negatively by the GOK. Ambassador Walsh informs me that there was a conscious decision by Atiqi not to provide official entertainment and indeed Atiqi himself had planned not to be at the meeting. They apparently had expected some ultimatum or at least strong pressure on them. In the course of the conversation, the Amir and Atiqi both warmed perceptibly. They said they were most pleased with the message from the President and the position taken by the United States [Page 197]Government. The Amir in an aside to Atiqi in Arabic, asked why no official reception had been planned for me. Atiqi replied rather lamely that my time was short and my plans indefinite. After my meeting this morning I can only repeat the recommendations made after my visits with the Shah and King Faisal.
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 620, Country Files, Middle East, Saudi Arabia, Vol. II. Secret; Nodis.
  2. A note at the end of the telegram indicates that it was not passed to these posts.
  3. See footnote 1, Document 72.
  4. See Documents 7476.
  5. See footnote 6, Document 74.