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251. Memorandum From Secretary of Energy Duncan and Henry Owen of the National Security Council Staff to President Carter 1

SUBJECT

  • IEA Ministerial

We reached agreement with our IEA partners at Paris on the main elements that we mentioned to you last week:2

—Agreement on firm 1980 import ceilings by all 20 IEA countries (paralleling the import ceilings agreed to by seven of these countries at Tokyo).

—Agreement to meet again in the first quarter of 1980 to decide whether, and if so how much, to cut these ceilings in light of what we then estimate to be likely oil availability.

—Agreement to meet quarterly thereafter to review and revise these ceilings in light of changing oil availabilities.

—Agreement by all countries to take additional restraint measures, as needed, to avoid exceeding their ceilings.

—Agreement to review each country’s performance quarterly.

—Agreement to convene meetings of ministers, as necessary, to confront countries that are exceeding their ceilings and shame them publicly into taking additional measures.

—Agreement to undertake an urgent study of whether the IEA allocation system, which goes into effect whenever there is a 7% drop in oil availability, can be structured so as to penalize countries that violate the commitments they make at this IEA meeting. This system is embodied in agreements that have been ratified by some parliaments, but we are hopeful necessary changes can be made.

What we have done, in effect, is to create a structure for continuously adapting the Tokyo Summit national import ceilings to changing circumstances—and for monitoring national observance of these ceilings. If IEA Members carry out the commitments that they made at [Page 788]this meeting, oil supply and demand will be brought into continuing balance—which should substantially mitigate pressure on oil prices.

We obtained this agreement through difficult negotiations. Many of our allies would rather have waited for bad news on oil availability to materialize next year instead of anticipating it now. The British were particularly concerned about any changes in the targets because of their fear that this would reopen the debate over the relationship of increased North Sea oil production to EC import ceilings. The Germans were more helpful than expected and the British became more supportive through the course of the meeting as they observed the emerging trend.

It will be imperative that we maintain the same level of U.S. firmness and leadership as we proceed, through a newly established working group, to the even more difficult meeting that will be held in March.3 We will have to press in the working group to turn the general allocation principles agreed upon in Paris into an allocation of specific cuts among countries.

We were pressured to include in the Communiqué a statement endorsing the need for replacement cost energy pricing, and were able to finally secure agreement to the exact oil pricing language used in the Summit Communiqué.4 It was clear that our ability to secure further demand restraint commitments is related to our willingness to deal with U.S. oil pricing levels. In particular, the U.K. Energy Minister and others said privately that it would be much easier for them to secure firm domestic support for U.S. proposals for greater demand restraint if U.S. gasoline were selling for more than a third of European prices.5 Thus, any action in this area before next March could help in our forthcoming negotiations.6

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 48, Oil, 8–12/79. No classification marking. Carter initialed the memorandum.
  2. See Document 250. The IEA Governing Board met at the Ministerial level in Paris on December 10. The communiqué issued at the end of the meeting was transmitted in telegram 38652 from Paris, December 10. (National Archives, RG 59, Central Foreign Policy Files, D790569–0839) Telegram 327981 to all OECD capitals, December 20, circulated an account of the meeting. (Ibid., D790586–0729) The communiqué is printed in Scott, The History of the International Energy Agency, vol. III, pp. 364–367.
  3. Carter wrote “I agree” in the margin next to this sentence.
  4. See footnote 18, Document 221. Both communiqués “agreed on the importance of keeping domestic oil prices at world market levels or raising them to these levels as soon as possible.”
  5. Under this paragraph, Carter wrote: “It’s more than 1/3 now.”
  6. On December 14, the Department of State sent an aide-mémoire to the Embassy in Venezuela to be delivered to the Government of Venezuela as well as to the Embassies of OPEC members in Caracas, which in turn were asked to transmit it and the IEA communiqué to their nations’ representatives to the OPEC Ministerial meeting scheduled for December 17–20. The aide-mémoire described the “firm action” taken by the member states of the IEA at their December 10 meeting “to help restore stability to the international oil market.” It concluded: “The IEA nations agreed that a solution to the world’s serious energy problems requires a common approach by producing and consuming countries, both developed and developing. They expressed their confidence that oil producers will recognize their important role in pursuing policies which contribute to the stabilization of conditions in the world oil market and in the world economy.” (Telegram 321925 to Caracas; National Archives, RG 59, Central Foreign Policy Files, D790574–0785)