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185. Memorandum From Rutherford Poats of the National Security Council Staff to the President’s Assistant for National Security Affairs (Brzezinski)1

SUBJECT

  • Urgent Presidential Message to Prince Fahd

Tony Solomon, Dick Cooper, Bill Quandt and I recommend that the attached Presidential message, prepared in State/NEA and amended here, be sent this morning to Prince Fahd. Its purpose is to nail down our understanding of Fahd’s commitment to Secretary Kreps 2 on oil production and pricing before Yamani or others cause him to reverse it or compromise it.

Briefly, the sequence of events was:

1. Yamani instructed ARAMCO to limit production to 9.5 mmbd and to pay for the increment above the normal 8.5 mmbd limit at fourth quarter 1979 prices, i.e., an increase of 9.5%.3

2. Kreps asked Fahd about “rumors” of such a decision.4 Fahd denied the report and assured her and West that Saudi policy remained as before: maximum sustainable production during the Iranian crisis and at posted current OPEC prices.

3. West told Yamani of Fahd’s statement, and Yamani expressed amazement because he said he had acted on written instructions from Fahd. He said he would seek urgent clarification.5

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We know that others in the Saudi cabinet favor restricting production and pressing other OPEC countries to increase production.6 Libya already is pushing prices up to fourth quarter levels. Saudi profiteering on the Iranian situation would spread like wildfire through OPEC.7

We need to bolster Fahd’s commitment before it is undermined by his colleagues.

If you can’t clear this as a Presidential message during this morning, Secretary Vance is prepared to send it.

Attachment

SUBJECT

  • Presidential Message on Saudi Oil Policy

Ambassador should deliver urgently following message from the President to Crown Prince Fahd, provided, understanding expressed in second paragraph is consistent with latest statement by Fahd of SAG’s position.

Begin Quote:

Your Royal Highness:

I want you to know how delighted I am that we will be getting together in Washington in March. I very much look forward to that opportunity in view of the importance I attach to having a quite thorough exchange of views on matters affecting the strong community of interests between the Kingdom of Saudi Arabia and the United States.

In the meantime, I wish to express my appreciation of your decision to maintain Saudi Arabia’s oil production at maximum sustainable capacity of over 10 million barrels daily and at OPEC first-quarter price schedules. This will make a major contribution to world economic stability during the difficulties created by the Iranian situation.

Saudi Arabia’s wise decision is particularly important at this time in view of our strong mutual interest in the strength of the dollar in world markets. The dollar has weathered the pressures created by the recent OPEC price decision and the Iranian problem and we now expect that it will maintain stability with some possibility for further re[Page 592]covery. Any unexpected increase in oil prices could have serious impact on the dollar with consequences that we cannot fully foresee.

The constructive approach of Saudi Arabia to this problem will, I am certain, have a significant and favorable impact on American and world public opinion, and will lay an even stronger basis for the broad cooperative relationship which I am dedicated to building between our two countries.

Sincerely, Jimmy Carter

End Quote. 8

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 67, Saudi Arabia, 1–3/79. Secret. Sent for action.
  2. Secretary of Commerce Kreps visited Saudi Arabia at the end of January for discussions on trade.
  3. See footnote 3, Document 182.
  4. As reported in telegram 785 from Jidda, January 28. (National Archives, RG 59, Central Foreign Policy Files, D790042–1228) Kreps also read aloud a message from Carter to Fahd welcoming “the fact that Saudi Arabia has maintained its petroleum production levels, thus helping to compensate for the Iranian shortfall.” The message continued: “Given the tightness of the current market, our understanding is that Saudi Arabia will continue production at full capacity levels. It is our further understanding that you will continue to sell at the price schedules agreed upon at the OPEC meeting in Abu Dhabi. A pricing change by Saudi Arabia would encourage other producers to increase their prices, and could therefore lead to a general price increase above the OPEC level.” The message concluded: “We therefore urge you, as a sincere friend, to reject any thoughts of reducing production from recent high levels or accelerating the schedule of price increases.” (Telegram 822 from Jidda, January 29; ibid., P850017–2222)
  5. As reported in telegram 857 from Jidda, January 30. (Ibid., D790046–0109)
  6. On February 1, West wrote: “Our apparently successful efforts to persuade Prince Fahd to reverse the recent Saudi oil pricing decision may well be a pyrrhic victory. Whatever the economic benefits may be to USG, and in the Saudi view they are infinitesimally small, we will have exacerbated existing divisions within SAG and damaged further Fahd’s credibility here.” (Telegram 1010 from Jidda; ibid., P850027–2583)
  7. The Department instructed the Ambassador in Kuwait to seek similar assurances on oil pricing from the Government of Kuwait. (Telegram 37743 to Kuwait, February 13; ibid., P850011–1016)
  8. The message was not sent. A handwritten note at the top of the first page of the covering memorandum by Poats reads: “ZB: Last minute telephone conversation with West conveyed West’s belief that Fahd’s commitment will stick so no Presidential message is necessary now. State/NEA is asking Vance whether he wants to proceed with this message. He may call you. I still prefer Presidential message and Quandt will settle for Vance message. RP” Above Poats’s note, another note in an unknown hand reads: “ZB agrees message should not be sent at this time.”