110. Letter From President Ford to Venezuelan President Pérez1

Dear Mr. President:

The decision last May of the Organization of Petroleum Exporting Countries not to increase the price of oil2 was a responsible action which has contributed to the process of global economic recovery. In the spirit of our countries’ close relationship, however, I wish to bring to your attention my deep concern about reports that Venezuela may seek an increase in the price of oil at the December OPEC meeting, and to urge you to bring your country’s considerable influence to bear instead to oppose an increase, which would have harmful effects on world inflation and recovery, the plight of the developing countries, and international economic cooperation.

The oil exporting countries have already made substantial gains in purchasing power as a result of economic recovery and greater de[Page 387]mand for oil in the oil-importing countries. OPEC nations will earn $125 billion this year from their oil exports, about 20 percent more than in 1975, and more than 400 percent above what they earned in 1973 on a similar volume of oil exports. In this regard, I understand that the marketing difficulties confronted by Venezuela earlier this year have eased, at least in part because of the modifications made by my Government in our domestic oil entitlements program. It is unfortunate that Venezuela appears to have responded to this strengthened market position by implementing a unilateral price increase, during a period in which OPEC had decided not to increase the prices.

A further oil price increase would generate inflationary pressures which are not in any nation’s interest. Currently the industrialized countries are making dramatic progress in controlling inflation through major policy actions, with the average rate of inflation for major countries falling to half its 1974 rate. Our analysis of the composition of exports from the major industrialized countries to the oil producers indicates that the prices of these goods have risen only by 30 percent since mid-1973, and by only 4 percent over the past year. Prices of our largest export—grain—have actually fallen by $50 a ton in the last year. But the industrialized countries alone cannot solve the problem of inflation. Oil-producing countries too have a responsibility to control world inflation.

I am also concerned that an increase in the price of oil could undermine the fragile economic recovery and the already weak balance of payments situation in both developing and industrialized countries. The oil bill of the oil-importing developing countries has quadrupled from $2 billion in 1973 to $13 billion this year. Some of these developing countries are just beginning to regain a more satisfactory rate of growth and to reduce their trade deficits as demand for their exports has increased and they have begun to adjust to the burden of higher oil prices. Many of the poorer developing countries, however, continue to experience desperate balance of payments difficulties and, as a result, wholly unsatisfactory prospects for economic growth. Among the industrialized countries, there are several which have not yet begun to recover from the severe economic recession of 1974–1975 and continue to experience large balance of payments deficits; a number have virtually exhausted their ability to borrow. Even in the United States, where recent economic activity has been more vigorous, the recovery has slowed. My deep concern, therefore, is that the possibility of truly global economic recovery which we are seeing will be threatened by the slowdown in growth and the adverse inflationary and balance of payments effects of a new increase in the price of oil. All countries have a vital interest in the maintenance and strengthening of the global recovery and the increase in international trade which will accompany it.

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Finally, I am concerned that a new increase in oil prices could prejudice the creative and constructive process of dialogue among developed and developing countries to which your government and you yourself have made a major contribution. I am also committed to that process. I have taken a number of decisions to ensure a positive United States approach to the problems of the developing world. This year the United States will provide more funds for economic assistance than in any year since our post-war Marshall Plan, more aid than any other country in the world. I also have committed my Government to give serious consideration to a number of other new approaches to the problems of the developing countries. I am working to maintain support for constructive policies toward the developing world. I believe that further progress in a number of areas of the North-South relationship, including the official development assistance made available to the developing world, should be possible in the coming months. In particular, I am optimistic that the Conference on International Economic Cooperation, which is scheduled to meet at the ministerial level in mid-December, can achieve positive and concrete results beneficial to developed and developing countries. But the international structure which both you and I wish to build must be based on due regard for the impact of individual national decisions on the rest of the world. Actions which appear to overlook this impact seriously undermine domestic support in this country for a constructive approach to the problems of the developing world.

I hope, therefore, that when you have given full consideration to all the implications of the oil price question, the significant influence of Venezuela and your personal stature and international leadership will contribute to a decision by the oil-exporting countries as responsible as that of May and that there will be no new price increase.3


Gerald R. Ford
  1. Source: Ford Library, National Security Adviser, Presidential Correspondence with Foreign Leaders, Box 5, Venezuela—President Carlos A. Pérez. Secret. Similar letters were sent to King Khalid and the Shah on October 29. (Both ibid., NSC International Economic Affairs Staff: Convenience Files, Box 5, OPEC (1)) Telegram 275886 to Caracas, November 9, instructed the Ambassador to inform either the President or the Foreign Minister that similar “démarches” were being made to Saudi Arabia and Iran. (National Archives, RG 59, Central Foreign Policy Files, P840105–0533)
  2. See footnote 2, Document 98.
  3. In his November 20 reply, Pérez wrote that it was “not just to persist in attributing the problems of the world economy, especially inflation, to the Organization of Petroleum Exporting Countries.” (National Archives, RG 59, Central Foreign Policy Files) King Khalid wrote to Ford that Saudi Arabia would “continue to play a role to withstand moves” toward raising oil prices,” as it always had, but that it could not “impose its will upon all of the (OPEC) members.” (Telegram 7452 from Jidda, November 14; Ford Library, National Security Adviser, Presidential Country Files for the Middle East and South Asia, Box 29, Saudi Arabia—State Department Telegrams to SECSTATE–NODIS (15)) The Shah replied that if oil was “sold cheaply,” no “alternative source of energy” would be developed and “the world dependence on the rapidly depleting supplies of oil” would continue to increase. (Telegram 277569 to Tehran, November 11; National Archives, RG 59, Central Foreign Policy Files, D760421–0054)