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

76/UNSTO 19. Department pass Immediate to AmEmbassy Tehran; also pass Priority to London, EC Brussels, Dhahran, The Hague, Jidda, OECD Paris, AmEmbassy Paris, and Tripoli. Paris OECD for Trezise.2 Subject: Oil Situation. Ref: A. Tehran 279; B. Kuwait 69; C. Tehran 01; D. Tehran 302.3

Regarding issue of whether companies negotiate with all OPEC members as a unit, which is companies’ position, or with the Gulf states separately, which is OPEC’s and the Gulf states’ position, I did not comment one way or another on this issue in my talks in Iran, Saudi Arabia, and here in Kuwait. See para. 9 ref. A. Telling of meeting with Amouzegar in which we asked what Iran’s attitude would be if companies did not accept Iran’s position re negotiation with Gulf states. He said Iran probably would go along reluctantly but that resulting [Page 198]agreement would be more unfavorable to companies. It was clear that Shah, King and Amir felt strongly on this issue, but I thought this was issue on which I should not take a position. My own opinion, as our cables have included, is that companies will have easier negotiations and better results if they negotiate separately with Gulf states. Nevertheless, I have carefully avoided commenting on this in my talks with the three countries.
Akins’ and my understanding before leaving Washington was that a principal reason for companies’ decision to negotiate only on an OPEC-wide basis was fear of ratcheting effect if companies negotiated with the separate groups. Once we obtained assurance, first from Shah and Amouzegar (confirmed by Yamani and Atiqi) that Gulf states would give firm agreement irrespective of later actions of Libya, Venezuela or others, this particular fear of companies seemed answered. It was to learn if the companies had other reasons, and, if so, whether these would alter my above-stated opinion that we sent ref. B.
It appears from refs. C and D that companies’ reasons are related to the agreement among themselves. Obviously, I do not know the extent of the problem this is for the companies but it seems to us that a favorable agreement with the Gulf states might have a moderating and limiting effect on Libya and the other OPEC members, although we recognize they would not be bound by any Gulf states agreement. Request this cable be shown to Mr. McCloy and companies.
For Tehran: request this cable be shown by MacArthur to company representatives in Tehran.
  1. Source: National Archives, RG 59, Central Files 1970–73, PET 3 OPEC. Secret; Immediate; Exdis.
  2. A note at the end of the telegram indicates it was not passed to these posts.
  3. For telegram 279 from Tehran, see footnote 2, Document 74. Telegram 69 from Kuwait is Document 75. Telegram 1 from Tehran, January 3, contained a memorandum by Hoveyda calling for an upward increase in the posted price of Persian Gulf oil and for one posted price system that included a transportation component. (National Archives, RG 59, Central Files 1970–73, PET 6 IRAN) Telegram 302 from Tehran, January 19, stated that Iran had asked OPEC to delay its meeting until January 25. Should the companies agree to finalize negotiations by February 3, Iran, Saudi Arabia, and Iraq would suggest the formation of a Mediterranean committee to which they would send representatives. If the companies demanded global negotiations, then OPEC would meet on January 25. MacArthur commented that neither he nor Irwin had told the companies to proceed with Gulf negotiations prior to negotiations with Mediterranean producers. (Ibid., PET 3 OPEC)