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

275. Memorandum From Secretary of Energy Duncan to President Carter ¹

Washington, June 7, 1980.

SUBJECT

• Meeting with Sheik Yamani, June 5, 1980

I was with Sheik Yamani for 6 hours and 15 minutes on Thursday, June 5th, at his home in Surrey, England. Part of this time was devoted to a birthday dinner in honor of his daughter.

—Summary: We discussed a variety of energy issues and details follow. The key points were our discussion of the Strategic Petroleum Reserve, and his statement that he “is recommending to Crown Prince Fahd the continuance of a 9.5 million barrels per day production rate for the third quarter.”

—United States Energy Developments: I briefed him on legislative programs, our conservation achievements thus far in 1980, and responded to his questions concerning Congressional action to discontinue your authority to impose a conservation import fee on crude oil to be allocated to gasoline. He was impressed with our legislative program and conservation achievements, and was disdainful of the Congress for their unwillingness to support you on the fee, citing the low U.S. tax rate on gasoline as compared to other industrialized countries. (It was interesting to see the change in his position on this issue since our visit in Riyadh.)²

—World Economic Conditions: We discussed generally the economic conditions prevailing in the United States, the industrialized nations and the less developed countries, making the point that further energy price increases or supply constraints at this time would be severely disadvantageous. He seemed to understand this position.

—International Energy Agency Meeting: He was interested in the IEA meeting in Paris and I gave him a rather complete debrief.³

—Future Price Prospects: He told me he had been very disappointed when other producing countries raised their prices following the Saudi increase of $2.00 per barrel on May 14th. He told me he felt he had firm commitments that other producers would not raise their prices. He does not anticipate achieving pricing unity at the June 9 OPEC meeting in Algiers. He hopes this might be possible later in the year, if sufficient crude oil availability continues throughout the next few months. He thought a $30.00 “unified” price would be the appropriate level, and that an indexing formula to increase beyond that level should be considered. This would involve a further $2.00 increase for Saudi Arabia, but decreases for many other countries. Our average cost of imported crude would be about $2.00 per barrel less than at present. I was left with the impression that his view of the timing for a unified price was late this year.

—Saudi Production Levels for the Third Quarter: He agreed that maintaining the 9.5 million barrels per day production level was important in view of the economic issues and pricing considerations mentioned above, and said he “was recommending the 9.5 million barrel per day production rate to Prince Fahd for the third quarter.” He said this statement should be very closely held and I have classified this document “Secret” for that reason.

—National Security: I made the point that inflation was eroding the capacity of most nations to fund adequate defense needs which contributed adversely to the Western-Soviet military balance. This situation was energy derived to a significant extent. It was a mutual problem. I said that Harold Brown would be discussing their military equipment needs with Prince Sultan. I did not discuss the national security issue as fully as contemplated in my agreed talking points because every time it was mentioned, he would launch into a discussion of the counter-productiveness of the U.S. policy towards Israel. Detail on this issue is best left to Harold.

—Strategic Petroleum Reserve (SPR): I mentioned the language in S–932⁴ requiring a SPR fill of 100,000 barrels per day within six months, or the discontinuance of production at the Naval Petroleum Reserve. He said while Saudi Arabia is not a democracy, the opinion leaders there argue for a lower production level on technical and business grounds. Our filling the SPR will cause concern and we shouldn’t be surprised if this happens. He said we should do everything possible to control publicity on the SPR, and lower the visibility threshold. I told him I understood these considerations, but he should understand our political considerations too, that we would work to minimize the publicity, and that it would not be constructive to sell further Naval Petroleum Reserve oil at exorbitant prices.

—Your letter to Prince Fahd: I mentioned your letter to Prince Fahd, and the general points made.⁵ He did not react.

—Venice Summit: He was very interested in the agenda and the extent to which energy issues would be involved. I told him energy was very heavily involved, and that I felt the meeting would be a good one with respect to energy issues. I mentioned our expectations as to outcome, in the identical way we had done with the IEA member countries in Paris. He responded favorably to the forty percent target for oil’s share of total energy consumption for Summit countries by 1990, and the target of .6 for the ration of growth in energy consumption to growth in Gross National Product.

—Future Duncan/Yamani Meeting: He inquired as to whether I would be at the Venice Summit. When I responded affirmatively, he asked if we could get together immediately following the Summit. He said he could brief me on the OPEC meeting and I could brief him on the Summit. We made a tentative date to get together on June 23rd in either London or Geneva.

He was concerned about the United States political scene, mentioning specifically:

—the adverse consequences of Senator Kennedy’s continuing to seek the nomination.

—the possible adverse consequences of the Anderson candidacy.⁶

—his concern that Ronald Reagan does not comprehend energy issues, could only be a one-term President because of his age, and said “If Ronald Reagan is elected, it would set the Middle East back five years.”

He wants very badly for you to be reelected and thinks it would be severely disadvantageous to the interest of the Middle East in general, and Saudi Arabia in particular if this did not happen.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Agency File, Box 8, Energy Department, 11/79–9/80. Secret. Copies were sent to Muskie, Brown, Miller, Brzezinski, Eizenstat, and Owen.
2. See Document 263.
3. See Document 273.
4. Introduced in the Senate on April 9, 1979, the bill became the Energy Security Act of 1980 (P.L. 96–294), which President Carter signed on June 30. Among other things, it established the Synthetic Fuels Corporation.
5. See Document 274.
6. Congressman John Anderson (R–IL) ran as an independent candidate for President in 1980.