126. Telegram From the Department of State to the Embassy in Saudi Arabia1

142372. Subject: Oil Prices: Message From the Secretary to Crown Prince Fahd.

1. Please deliver the following letter from the Secretary to Fahd:

2. Begin text:

Your Royal Highness, your recent visit here2 did much to reaffirm and strengthen the relationship between our two countries. The President and the others of us who were privileged to meet with you benefitted greatly from your views and counsel on a wide variety of issues. We shall wish to keep in close touch with you on the broad range of matters affecting the common interests of our nations.

[Page 432]

I would like to raise with you at this time one subject of very high and continuing importance to both of our countries and also to the global economy: the question of oil prices. When you were here, the President expressed our appreciation for the policy of your government on this subject, and we were extremely pleased to hear your reaffirmation of the determination of the Kingdom of Saudi Arabia to continue its course of moderation with regard to oil prices.

Following your visit, there have been some reports to the effect that your government intends to increase the price of Saudi oil by five percent within the coming month, in the context of the forthcoming OPEC meeting. These same reports state that the eleven members of OPEC which increased their prices by ten percent last January would forego any additional price increase until the end of 1977. We do not know whether these reports are correct.

From our point of view, it appears clear that the interests of the global economy would be best served by avoiding further increases in the price of oil. With regard to any possible price increases which your government might be planning for the remaining months of this year, we trust that you are also considering the desirability of achieving an understanding that would call for a period of stability in the prices of the other producers beyond the end of 1977.3

I would value greatly your sharing with me your thoughts at this time on the prospects for oil pricing in the months ahead.4 As we agreed during your visit here, continued cooperation between our two countries on energy matters will remain of the highest importance. For our part, the President is continuing to press his proposals for a United States energy program that places special emphasis on the need for maximum conservation, and we will wish to keep you informed of the progress of our efforts in this regard.

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The President has asked me to convey to you, and through you to King Khalid, his warmest wishes and his hopes for your good health. I join in these wishes and hopes. Sincerely, Cyrus Vance End text.

  1. Source: National Archives, RG 59, Central Foreign Policy Files, D770218–1164. Secret; Immediate. Drafted by Sober; cleared by Katz, Cooper, and in the NSC and White House; and approved by Vance.
  2. See Document 124 and footnote 2 thereto.
  3. On June 29, OPEC announced: “In the interest of unity and solidarity of OPEC, the following member countries of the organization: Algeria, Ecuador, Gabon, Indonesia, Iran, Kuwait, Nigeria, Qatar and Venezuela have resolved to forego the application of the 5 percent increase in the price of oil as of 1 July 1977, a decision which was taken in Doha in December 1976.” (Telegram 6143 from Vienna, June 29; National Archives, RG 59, Central Foreign Policy Files, D770232–0451)
  4. On June 26, Fahd replied that Saudi Arabia was “following with concern the fluctuating oil prices in OPEC producing states.” He continued: “Saudi Arabia believes that such fluctuations do not serve the common interests of the producing states themselves; that wisdom and moderation call for an end to this situation, and thence for an attempt to create a positive dialogue in the light of which a single formula for oil might be reached during the coming period.” A unified price for oil, Fahd wrote, was “definitely in the interest of consumers,” even if that entailed “an increase in the price of oil exported from Saudi Arabia and the United Arab Emirates” due to “the absence of an oil price hike” by the other OPEC members. However, Fahd concluded, “the prices—as Your Excellency is aware—are basically subject to the law of supply and demand.” (Telegram 4503 from Jidda; ibid., D770228–0548)