Foreign Relations of the United States, 1969–1976, Volume XXXVII, Energy Crisis, 1974–1980

2. Memorandum of Conversation¹

Washington, August 17, 1974.

PARTICIPANTS

• President Ford
• Dr. Henry A. Kissinger, Secretary of State and Assistant to the President for National Security Affairs
• Lt. General Brent Scowcroft, Deputy Assistant to the President for National Security Affairs

Kissinger: On the energy situation, we have to find a way to break the cartel.² We can’t do it without cooperation with the other consumers. It is intolerable that countries of 40 million can blackmail 800 million people in the industrial world.

We have to get into position carefully so we don’t get out ahead and our allies don’t move in to pick up the pieces and get an economic advantage. That was the purpose of the Washington Energy Conference.³ We are getting the IEP by the end of September. It is effective only against a selective embargo and it creates a framework for communication. The Europeans probably think we should use it only passively.

Simon wants a confrontation with the Shah. He thinks the Saudis would reduce prices if the Shah would go along. I doubt the Saudis want to get out in front. Also the Saudis belong to the most feckless and gutless of the Arabs. They have maneuvered skillfully. I think they are trying to tell us—they said they would have an auction—it will never come off. They won’t tell us they can live with lower prices but they won’t fight for them. They would be jumped on by the radicals if they got in front.

The Shah is a tough, mean guy. But he is our real friend. He is the only one who would stand up to the Soviet Union. We need him for balance against India. We can’t tackle him without breaking him. We can get to him by cutting military supplies, and the French would be delighted to replace them.

President: He didn’t join the embargo.

Kissinger: Right. Simon agrees now, though. The strategy of tackling the Shah won’t work. We are now thinking of other ways. First, we have to get the IEP going. Second, we have to use the Library Group,⁴ an informal finance group which is meeting on 7 September to raise the problem of oil prices and work for a coherent structure to deal with it. Third, there is a meeting of the IMF board at the end of September, and the UN Foreign Ministers will be here. We thought of assembling the Finance and Foreign Ministers then and put a more daring action program to them. It will be refused—like the February Energy Conference. France won’t go along. That is okay, because in six months they will be eager to join. If there is a crisis, we will be out in front and can organize it. We will get some cooperation, though.

But as a precondition, we need to get our own energy program in hand. Conservation has gone by the board. If we don’t show a shrinkage; our allies won’t. There is a forty percent chance of a Middle East blowup.

President: There is no problem getting conservation started again, but the coal moratorium is a problem. Maybe that gives us a lever to get conservation going again.

Kissinger: If the public focuses on the fact this is not just a coal strike but an energy crisis.

President: We don’t have to attack the workers but show it as an illustration of the energy problems.

Kissinger: Everyone now agrees on the necessity of what we proposed at the Washington Energy Conference.

President: The conservationists are launching an offensive and this would give us a chance to fight against it on grounds the crisis continues.

When the consumers get organized and we start dealing with the producers—if it worked as you wish—what would you do?

Kissinger: We are organizing the consumers. Then we are organizing bilateral commissions to tie their economies as closely to us as possible. So we have leverage and the Europeans can’t just move in in a crisis. We want to tie up their capital.

When the Shah sees us organizing the consumers—he will see, if we don’t do it in a way appearing threatening to him.

I perhaps should visit him in October, in connection with the Soviet trip, and talk about bilateral arrangements.

President: Does he want higher prices?

Kissinger: Yes. He has limited supplies. He knows the profit is higher on petrochemicals and that the Saudis get more from the companies in everything.

We won’t be in a position to confront the producers before the middle of 1975. We have got to get rolling.

President: We have the Alaskan pipeline, and ERDA. I’m glad Scoop⁵ moved.

Kissinger: We called him yesterday and he was conciliatory. You might consider talking to him again next week. I told Dinitz he had to help us here and that Rabin had to come in early September.

President: We have to give Scoop his amendment.⁶

Kissinger: If you get waiver authority, that Congress would have to veto, it’s okay.

President: What he wants is his amendment. The supporters don’t understand the waiver authority.

Kissinger: The Soviet Union won’t buy going in every year for legislation. They will complain about this, but will go along with it.

A Member of Congress last night said they want a compromise.

President: If we can pull it off and get the bill, it is the best thing we can do.

Kissinger: Next week you will be hit with a recommendation for export controls. I would like a chance to comment.

President: I notice the Japanese are buying heavily.

Kissinger: That is the problem. It leads to scare buying—like surpluses. Commodities are one of our big foreign policy tools.

President: Who is for it?

Kissinger: Not Butz. I think OMB and Treasury.

I will have a paper for you on Monday.⁷ I want to ensure it won’t be decided on domestic grounds alone.

President: It won’t be.

1. Source: Ford Library, National Security Adviser, Memoranda of Conversations, Box 5. Secret; Nodis. The meeting was held in the Oval Office and lasted from 9:45 to 10:15 a.m. (Ibid., White House Office Files, President’s Daily Diary)
2. The Organization of Petroleum Exporting Countries (OPEC).
3. The Washington Energy Conference of the major industrialized nations, including the United States, the United Kingdom, West Germany, Japan, and France—a reluctant participant—was convened at the Department of State in February to develop common energy policies in response to the Arab oil embargo precipitated by the Arab-Israeli war of October 1973. At the conference, which revealed the extent of Franco-American discord over whether the European Community should even coordinate energy policy with Washington, the United States proposed that a permanent organization of energy-consuming states be created. See Foreign Relations, 1969–1976, volume XXXVI, Energy Crisis, 1969–1974, Document 318.
4. See footnote 4, Document 1.
5. Senator Henry “Scoop” Jackson (D–WA), Chairman of the Senate Committee on Interior and Insular Affairs, which later became the Committee on Energy and Natural Resources.
6. Jackson wanted to attach an amendment on emigration from the Soviet Union to the trade bill stalled in the Senate.
7. August 19. The paper was not found. An undated August memorandum from Kissinger to Ford on “Oil Strategy” is in the Ford Library, National Security Adviser, Presidential Subject File, Box 4, Energy (2).