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149. Memorandum From Henry Owen of the National Security Council Staff to President Carter 1

SUBJECT

  • Energy and the Summit

1. Attached is a memo to you from Mike Blumenthal suggesting that you call in key members of the Congress to stress the need for US action to limit oil imports before the Summit, and to indicate that you will be compelled to take administrative action if a COET has not been enacted by the time you go to Bonn. (Tab A)2

2. I endorse Mike’s recommendation from the standpoint of foreign policy; I’m not competent to judge the domestic implications.

If we are to get the economic concessions from other countries needed for a successful Summit—notably higher German and Japanese growth, and British and French trade liberalization—we will have to contribute something to the package. The contribution that our partners want and expect is effective US action on energy. Schmidt implied to me at Bonn that “German stimulus measures would hinge on a favorable international economic environment—i.e., the US vigorously attacking its inflation and energy problems”, in order to strengthen the dollar. He was more direct at London: According to a report received yesterday from Prime Minister Callaghan, Schmidt “told the Prime Minister explicitly that if President Carter would act on inflation and energy, then he would act (notwithstanding his lack of intellectual conviction) on stimulating the FRG economy”. So the outcome of the Summit hinges, to some extent, on what we do about energy.

I realize that other parts of the energy legislation are important; nonetheless, our Summit partners have made clear their belief that the [Page 481]test of whether the US will reduce oil imports is whether COET is passed or administrative action is taken in its place.

The most effective way of convincing Schmidt and others that you will act to limit oil imports would thus be for Congress to have passed COET or for you to have taken administrative action before the Summit. If a pre-Summit action is not feasible for domestic reasons, you could announce publicly at the Summit that you would take administrative action by a fixed and specified date, if COET had not passed by then. This would have far less impact on our allies’ attitudes than pre-Summit action.

  1. Source: Carter Library, National Security Affairs, Staff Material, Special Projects File, Box 5, Henry Owen, Chron: 5/9–15/78. Secret. Sent for information.
  2. Reference is to the G–7 Bonn Economic Summit scheduled for July. Blumenthal’s May 8 memorandum is attached but not printed. In a May 11 memorandum to Carter, Schultze wrote: “I agree with the Secretary [Blumenthal] that it is very important to have some concrete results in the energy area for the Summit. It would strengthen your leadership role, and would be a major bargaining chip with the Germans and Japanese for action on their part. (Ibid., Box 25, Henry Owen, Summit: Bonn, 5/78) In a May 11 memorandum to the President, Director of the OMB McIntyre explained that, while he agreed with Blumenthal “on the pressing need for an energy policy that over the longer term eliminates subsidies for domestic oil and, more realistically, prices oil at world market replacement cost,” he questioned whether the July Summit should drive the President’s “overall approach to Congress on energy.” (Ibid., Box 30, Henry Owen, Summit: Preparatory Group Meeting, 5/27–29/78 in Washington, 3–6/78)