271. Memorandum From the Under Secretary of Defense for Policy (Komer) to the President’s Special Representative for Economic Summits (Owen)1
Harold, Dick Cooper, David Aaron and I agree that the energy crunch has critical security implications which ought somehow to be aired at the Venice Summit. Here are some propositions to prove the point.
Oil price increases are slowing economic growth and promoting inflation in both developed countries and LDCs to an extent that is seriously undermining needed real defense budget increases. In the US, FRG, France, Japan and other countries added fuel costs appear to be major reasons why defense strengthening cannot proceed faster and why real budget increases instead get partially eaten up by inflation.
Indeed added fuel costs themselves are directly eating up an ever greater proportion of defense outlays. The FY 80 DoD fuel bill alone will be around $7 billion, compared to $3.3B in FY 79.
The oil cost impact is even greater on key LDCs like Korea, Thailand, Pakistan, and Turkey whose net outflow on oil account probably exceeds the net inflow from foreign aid. We are providing massive military and economic aid credits to these countries which will never be repaid because the money will go to OPEC instead.
The energy crunch has far greater adverse impact on Free World deterrence/defense than it does on the USSR’s. It is an added major Free World burden not imposed on the USSR, whose military spending already is much larger than that of the US. In sum, we keep running faster just to stay in place, and can’t catch up with the Soviet effort.
Ironically, this impact of the energy crunch is undermining our ability to defend the oil-producing states, who depend on our security umbrella to protect them from the Soviets. The Persian Gulf producers are good cases in point. They are now undermining their own security as well.
For all these reasons we must not treat energy issues as primarily politico-economic, but take fully into account the dire security implications.
[Page 853]The West badly needs an energy strategy which will reduce the security impact of the energy bind.