34. Memorandum From Robert Oakley of the National Security Council Staff to Secretary of State Kissinger1


  • Economic Impact of Mid East Crisis—A WSAG Issue and Need for Formal Follow-Up

One of the issues on the approved agenda for last week’s WSAG meeting on the Middle East2 was the whole realm of possible economic ramifications of a new Middle East crisis and what steps could be taken to minimize the effects of Arab action in the economic (oil) sphere.

In the absence of in-depth discussion of this issue at the WSAG, Deputy Secretary of State Ingersoll and Deputy Secretary of Defense Clements both believe that some form of follow-up action is necessary.

Deputy Secretary Ingersoll has asked NEA (at Tab A)3 to take the lead in a follow-up study and to involve EB, S/P and other agencies such as CIA and Treasury. I see two problems with this approach: (a) There is no mention of involving NSC or DOD; (b) Treasury was not involved in the WSAG exercise.

Deputy Secretary Clements (at Tab B)4 has suggested that you request appropriate agencies to address the economic issues or that the NSC lead a study which would involve all of the relevant agencies. Clements’ letter also contains some constructive observations on the various substantive issues.

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In view of the interest in and the importance and sensitivity of this issue, you may wish to recommend that the NSC chair an inter-agency study on the economic issues of a possible Middle East conflict, as a follow-up to the WSAG meeting. Alternatively, you could have such a study done by the Under Secretaries Committee. In either case, the study should be completed within three weeks’ time. In the interim, no action should be taken on various contingency measures without your explicit approval.

We assume that State, NSC, DOD and CIA—the original WSAG participants—should be involved in this matter. You may or may not wish to include Treasury or the Federal Energy Agency in this particular follow-on study.

Recommendation: That you agree to a formal follow-on study on the economic aspects of a Mid East conflict by indicating your preference for the following:5

Agree with study under the USC

Agree with study chaired by NSC in inter-agency framework

Prefer original WSAG participants only

Add Treasury


  1. Source: Ford Library, National Security Adviser, “Outside the System” Chronological Files, Box 1, 1/10/75–1/21/75. Secret; Nodis; Sensitive. Sent for action. Colonel Clinton E. Granger of the NSC Staff concurred. Sent through Scowcroft.
  2. See Document 32.
  3. Not attached. Ingersoll asked for a follow-up study to consider “what the Arabs could do with regards to oil prices,” a boycott, and “the manipulation of their financial holdings abroad.” He requested that the study examine “the effects such actions could have on the U.S. and other countries, what we could do about such moves, and the steps we need to take to prepare for such a crisis.” (Memorandum from Pendleton to Atherton, Enders, and Lord, January 16; Ford Library, National Security Adviser, “Outside the System” Chronological Files, Box 1, 1/10/75–1/21/75)
  4. Not attached. Clements sought to explore the “possible economic measures, short of war, that might be utilized to ease the economic/financial situation arising before or during an Arab oil embargo.” He explained that such measures “might be designed to: 1) Make an Arab oil embargo less likely; 2) Limit its scope; and 3) Limit its effects, should it occur.” Attached to Clements’s memorandum is a Department of Defense background paper that outlines the “economic options available to the U.S., Western Europe, and Japan” that would help achieve the three goals Clements listed. He concluded that such options “would be most effective if taken long before an embargo begins and would also greatly increase the effectiveness of other U.S. and allied options after an embargo is imposed.” (Ibid.)
  5. Kissinger checked the second and fourth options.