10. Telegram From the Embassy in France to the Department of State1
24689. For Secretary Kissinger and Secretary Simon. From Bennett, Enders and Cooper. Subject: Camp David Follow-up.
1. Summary: During our talks October 16/18 the British moved close to our position and the Germans indicated a basic responsiveness. OECD Secretary General Van Lennep will launch a “defensive” recycling scheme remarkably similar to our own.2 But the French raised strong objections on both substance and procedure. Predicting that most of the OPEC surplus would gravitate to the New York market, the French said that it would be politically more difficult for them to accept money recycled through a consumers’ group in which the U.S. played a leading role than through the IMF. Arguing variously that it would of[Page 51]fend the Community, would not be possible while we are “railroading” the IEP through, or would accomplish nothing because the decisions are too political, French representatives declined to envisage a meeting of the Five3 at official level. Regarding a Ministerial meeting of the Five, they said only that the question of when and if it would be held is open.
2. Analysis: The French attitude places us before the following option: We can:
(A) Slow down the IEP, in return for French agreement to use the Five at both official and Ministerial level for ongoing discussions of energy and financial matters; or
(B) Go ahead with the IEP, have multilateral discussion of the Van Lennep plan in the restricted membership OECD Working Party Three,4 and carry on bilateral discussions among the Five, perhaps on the basis of a U.S. paper (which the French would welcome).
3. Option A would give us an opportunity to develop the Five as a valid and independent forum. On the other hand, since the timetable for the IEP is already agreed, and since the French have already signalled to the Community and to us that they will not stand in its way, delay would put the IEP and energy cooperation among the 125 in jeopardy. In addition, there is from this first contact no reason to believe that the French would lift their political objections to our financial proposal if the IEP were delayed; rather to the contrary.
4. Option B would not exclude another Ministerial meeting of the Five (the French were precisely non-committal on this point). It would make the process of preparing such a meeting much less efficient, although not impossible. It would bring pressure on the French (through the fait accompli of the IEP and Van Lennep’s initiative) without our having to bring it. And it would appear to be the fastest means of moving towards creation of the recycling mechanism we will in any case need this winter.
5. Recommendation:
(A) That we stay on course with the IEP, looking towards creation of the new agency in the OECD November 18;
(B) That we circulate to the Five an expanded version of our “Illustrative Proposals;”6
[Page 52](C) That we encourage Van Lennep to flesh out his proposal for discussion informally at dinner preceding Working Party Three meeting on November 19; and
(D) That we continue to propose a multilateral officials meeting, but in any case have a further round of bilateral contacts (including the French) with a view towards a Ministerial meeting of the Five in early December. This gives the French an option to back off if they want without loss of face.
6. Report on London discussions: British (Treasury’s Mitchell, FCO’s Maitland, Energy Ministry’s Williams) moved close to U.S. positions on both substance and procedure, but tried to keep open the option of doing both our recycling facility and the Healey plan.7
7. On conservation, British said that the new government would give high priority to developing package of measures such as heating and speed limits. They argued against a public group conservation target, saying that it would be too easy for OPEC to offset it and too difficult for the consumer to agree on burden-sharing. After some discussion, however, they did agree that a group conservation target held in private could be considered as well as a group meeting to review national measures and perhaps to package them into a coherent whole. We insisted that serious conservation measures are an indispensable part of the whole package and that coordination is important not only for burden-sharing but for impressing the OPEC with the seriousness of our intent. We added that the U.S. would be willing to consider additional conservation if others do.
8. On financial solidarity, the British repeated their concerns about the reaction of IMF constituents, LDCs in general, and OPEC in particular, to a consumers’ financial club, but with less conviction. They said that they had not understood our proposal at Washington and are interested in it. Noting that “at official level they have never believed in numbers as large as Healey’s” the British argued that we should do both a medium-sized Healey plan in the IMF, and a medium-sized recycling device among ourselves. We answered that there might be a case for a moderate increase in the Witteveen Fund, and something should be done in the IMF for the LDCs. But only a few billions would be involved; the main effort we said must be much larger and it must be politically under the control of the consumers through creation of a new institution, perhaps in an OECD framework.
9. On economic relations with producers, the British agreed that all of the measures we listed should be studied. They did not give an appearance of recoiling at the implications of economic warfare.
[Page 53]10. On procedure, the British agreed with a schedule calling for the U.S. to circulate a revised and expanded version of its Illustrative Proposals paper at the end of the month, a meeting of the Five at official level in the U.S. in early November, and a Ministerial meeting of the Five in early December. They agreed that the purpose of the Ministerial should be to establish agreed concepts in each of the three categories for subsequent negotiation and implementation, probably in other forums. They noted their belief that the French would accept meeting in the Five at Ministerial level but would be reluctant to do so at official level; the British said they would cooperate with us in trying to bring the French along.
11. Discussion in Bonn: We found the German officials (Treasury’s Poehl and Weber, Foreign Office’s Lautenschlager, Economics Ministry’s Kittel) almost completely unprepared; Genscher and Apel had evidently passed on nothing from Camp David. They expressed “deep interest” in our proposals, some anxiety about their ultimate financial liability in the recycling scheme, and went along with our procedural proposals.
12. On conservation, Germans noted they will come out next week with a package of measures such as conversion of generators from oil to coal-fired heating units in the context of their overall energy policy. At first they said that that is all that they can do, then accepted the notion that measures taken by each country should be evaluated together, with a view both to equity in burden-sharing and to overall adequacy.
13. On financial solidarity, Germans remarked that our proposals are opposite to their current emphasis on how to encourage OPEC investment in the consuming countries. They expressed concern that international lending would be like “reparations,” ending in unpayable claims. But they recognized that German liability would not necessarily be greater under our scheme than under alternatives, and could be less. They agreed to give our proposals serious attention.
14. On economic relations with the producers, the Germans noted possible problems in addressing anything to do with trade without some sort of EC okay, but concluded that these questions, including the offsetting measures, should be addressed by the Five. In response to their question, we said that conservation and financial solidarity are not in our view preconditions for the producer/consumer dialogue, but remarked our judgment that the dialogue will yield nothing until the consumers are better organized.
15. On procedure, the Germans welcomed our proposal to provide a fleshed-out version of the “Illustrative Proposals,” and agreed to meet à cinq during November to consider it. They were non-committal about a December Ministerial but raised no problem. Poehl felt the French would come along on the proposed procedure, citing Schmidt/
[Page 54]Giscard exchanges on the value of informal meetings of the Five. He also stressed the need for secrecy and to keep the group small.
16. Discussions with OECD Secretary General Van Lennep: Draft recycling concept Van Lennep showed to us October 18 differs from ours only in that it (A) is written in terms of guarantees only, without giving the loan option; and (B) gives a central role to the Basel-based Bank for International Settlements.8
17. After some discussion, Van Lennep agreed to revise his proposal in both respects. He will now float it confidentially with the main OECD countries, looking towards a discussion when OECD Working Party Three meets October 19.
18. We did not discuss our proposals or activities with Van Lennep.
19. Discussions in Paris: French officials (Foreign Office’s Brunet, Treasury’s De Larosiere, Energy Office’s Vissacq) were welcoming, polite, but somewhat less forthcoming than at Washington. Institutional aspects (the IEP, the development of a new club rather than use of the IMF) were clearly the center of French preoccupations.
20. On conservation, French indicated that their plans for reducing oil imports based on need to reduce balance of payments current account deficit. Restricting heating oil to 90 percent of 1973 usage (10 percent for each household, 10 percent reserve for new users) by mandatory cutbacks in supplies is the toughest part of program which includes other means to limit gasoline consumption and industrial use of fuel oil. For 1975 they projected current account reduction of $2 billion, e.g., current account deficit of $4 billion rather than $6 billion.
21. On financial solidarity, De Larosiere found little or no merit in establishing new mechanism outside of IMF. He argued that since most Arab dollars would come to U.S., new mechanism would simply be way of “secondary recycling” by U.S. to others and that this would be politically much more difficult for French than direct recycling of Arab dollars through IMF. De Larosiere and Brunet both skeptical that U.S. proposal would be more saleable politically in U.S. than expansion of IMF facilities.
22. On economic relations with producers, Brunet argued for early establishment of small group for discussions only along lines of Yamani proposal.9 Brunet stressed that current situation in which Pres[Page 55]ident’s remarks in Detroit answered by Shah in Canberra10 was unsatisfactory. French apparently agreed that common line among consumers prerequisite to productive consultations with oil producers but had no proposals on how such common line might be developed. Brunet expressed French view that common action to deal with oil price problem by serious national efforts on conservation should be number one priority for consumers.
23. Brunet then raised subject of ECG and said French viewed IEP as nominal accomplishment, with emergency cooperation program a second-order accomplishment which could have been achieved in OECD. Brunet suggested that the accelerated production and conservation elements of IEP were seemingly empty boxes thrown in at last moment because of French criticism. Brunet stated that IEP would set back efforts to develop common energy policy in EC.
24. On procedure, French expressed strong disagreement with idea that there should be multilateral discussions of the Five at official level prior to Ministerial meeting and indicated no view one way or other on desirability of early meeting at Ministerial level. Several reasons adduced for their opposition to official meeting including political problems with other EC members outside Five, likelihood that officials would not be able resolve problems that were essentially political, and adequacy of national papers circulated in advance of preparations needed for Ministerial meeting. Brunet closed by indicating that if U.S. were willing defer implementation of IEP, climate for further discussions of U.S. proposals by the Five would be much better. He virtually proposed we defer implementation of IEP if we wanted French to participate in official discussions of U.S. proposals.
- Source: Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, Box 4, France:—State Department Telegrams to SECSTATE–NODIS (1). Secret; Immediate; Nodis.↩
- Van Lennep’s recycling plan involved the OECD establishing a system whereby funds could be mobilized quickly from financial markets and oil producers to lend to the OECD countries “most heavily hit” by a rise in oil prices. He did not envision the plan duplicating the IMF oil facility, which he viewed “mainly” as a channel through which oil producers would lend money to LDCs. (Telegram 22870 from USOECD Paris, September 27; National Archives, RG 59, Central Foreign Policy Files, D740273–0203) For the U.S. recycling plan, see Document 15.↩
- The United States, the United Kingdom, France, West Germany, and Japan.↩
- The economic and finance officials of Working Party Three, which operated under the OECD’s Economic Policy Committee, analyzed macroeconomic policy issues.↩
- Members of the Energy Coordinating Group that signed the initial IEP Agreement in Brussels on September 27. See footnote 6, Document 9.↩
- See footnotes 13, 14, and 16, Document 9.↩
- Healey’s proposal involved OPEC countries depositing funds in an IMF facility for the IMF to distribute. See Document 9.↩
- The Bank for International Settlements is the international organization of central banks, the goal of which is to foster international monetary and financial cooperation. It is also known as the bank for central banks.↩
- Yamani first discussed the idea of a mini-consumer-producer conference on a trip to London during the week of May 6. He said that Saudi Arabia wanted the United Nations “to take the initiative in recommending small, restricted group of ten consumers and producers meeting outside UN forum at a very high level with a minimum of publicity.” He suggested that participants might include the United States, EEC, Japan, India, and Brazil from the consuming side, and Saudi Arabia, Iran, Algeria, Venezuela, and possibly Indonesia from the producing side, adding that “it was necessary first to settle on an agenda” that dealt with issues beyond “the price question.” (Telegram 5983 from London, May 14; National Archives, RG 59, Central Foreign Policy Files, D740118–0621) Yamani most recently raised the issue on September 9. (Telegram 5205 from Jidda, September 9; ibid., D740249–1000)↩
- Regarding Ford’s speech at the World Energy Conference in Detroit on September 23, see Document 8. The Shah responded to the President’s speech while on a trip to Australia: “I have not had time to receive official texts of those declarations, but if they are what you have just said, first of all it is not acceptable to us. Nobody could dictate to us. No one could wave a finger at us, because we could wave back.” He also suggested the establishment of “one fixed price of oil in the whole world, except for the geographical location and the quality of oil, and that related to an index price of say 20 to 30 commodities as a basket of prices.” “We have got to defend our interests,” he said. “We have got to keep our purchasing power.” (Telegram 6505 from Canberra, October 3; National Archives, RG 59, Central Foreign Policy Files, D740279–0901)↩