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

294. Memorandum From Rutherford Poats of the National Security Council Staff to the Deputy Assistant Secretary of State for International Energy Policy (Morse)¹

Washington, December 23, 1980.

SUBJECT

• Approach Paper on OPEC Long Term Strategy

Your planning paper on an Ottawa Summit approach to a deal with oil producers on long-term supply and pricing principles² would be most useful if it forced us to recognize, and at least start the process of reconciling, conflicting US ambitions. As you know, much of the talk within the USG and among the IEA countries about a producer-consumer deal derived from the OPEC Long Term Strategy has fallen short of resolving the hard choices among alternative consumer goals. Your paper might helpfully delineate our price, supply, and political objectives.

For example, do the industrial nations want to minimize OPEC price increases and rely on means other than international oil prices to keep demand and supply balanced and to allocate supply among nations? Or do we want steady, predictable real OPEC price increases to assure market allocation of supply and guide decisions in oil-importing nations on energy-related investments and conservation?

Do the industrial nations want rising OPEC production, including higher Persian Gulf production, so as to permit rising or at least stable oil consumption by the industrial countries, with consequent faster depletion of reserves and narrower margins of stand-by production capacity than otherwise? Or do we want a stable and predictable supply, implying a slowly declining availability of OPEC oil to the industrial nations but prolongation of reserves and greater surge capacity for emergencies?

Are we ready to accept, much less rely on, intergovernmental assurances of oil supply containing an express exception for politically determined oil export embargoes, thus implicitly condoning Arab use of the oil weapon? Or do we prefer to leave the OPEC supply assurances loose and unspecific rather than encourage injection of Middle East political issues into the producer-consumer negotiation?

These questions simply illustrate the point. We need to deal with objectives in addition to terms and conditions of a deal.

1. Source: Carter Library, National Security Affairs, Staff Material, International Economics File, Box 49, Rutherford Poats File, Chron, 12/9–23/80. Confidential.
2. Not found. The seventh G–7 Summit was held in Ottawa in July 1981.