38. Memorandum of Conversation1
PARTICIPANTS
- Prime Minister Harold Wilson
- James Callaghan, Secretary of State for Foreign and Commonwealth Affairs
- Sir John Hunt, Secretary to the Cabinet
- President Ford
- Dr. Henry A. Kissinger, Secretary of State and Assistant to the President for National Security Affairs
- Lt. Gen. Brent Scowcroft, Deputy Assistant to the President for National Security Affairs
SUBJECT
- Economic Policy; Energy Cooperation; Africa
[Omitted here is discussion unrelated to energy.]
Energy Cooperation
Wilson: People see you in your State of the Union2 really having a go at it.
President: It is a confidence-building program, even if it is changed somewhat by Congress.
Energy is a tougher problem, and I am accused of trying to ram something down their throats. But if I hadn’t, Congress would have continued to drift. Congress is now trying to remove my authority to do it, but I will stick to it. They are trying to come up with something, but I don’t think it will be comprehensive. We must save a million barrels a day; we must have better utilization of coal and develop other sources of energy.
Wilson: It takes a lot of time. During the war I was Chairman of the Production Resources Board of the U.S., Great Britain and Canada. So I know your resources.
Our newly discovered coal, you know, is equal to what we will gain from North Sea oil.
Kissinger: Where is this?
Wilson: In Yorkshire.
Callaghan: This is the first break we have had in a century.
Wilson: Our energy industry has been subsidized for years; now coal prices went up 75% last year. We are removing the subsidies from all the nationalized industries. We’re also taxing gas more.
Callaghan: We have had no demand for rationing yet.
Wilson: What is popular is the idea of a two-tier pricing system. So it would be a somewhat lower price.
President: I am of the feeling that those who are proposing rationing have never experienced it. They don’t realize we have to have a long-range program. This means five to ten years.
Wilson: We need a basic change in attitude if we are to be able to deal with the long-range problem. We are grateful for the international cooperative programs you have developed.
President: Henry has told me of the strong support you have given. We appreciate it.
Wilson: It was the right group to organize.
Callaghan: The next big problem is the consumer-producer conference. The French gave a friendly report of the Martinique meeting, but I still foresee them going in a somewhat different direction.
[Page 125]Kissinger: They tend to use the conference as a substitute for any other kind of action.
Wilson: At the EC–Nine Summit meeting, Giscard said he is prepared for a meeting of the consumers, but as the prelude to the consumer-producer conference.3 The first time he mentioned indexation, I said, OK, but it had to be at a lower price.
Callaghan: Timing is important. The French are already lining people up for the preparatory conference of consumers and producers in March.
Kissinger: But there can’t be one if we won’t come. And we will come to a conference when the preparations are made, but not when the consumers are still quarreling.
Callaghan: There won’t be quarreling at the preparatory meeting. It is just to set up the consumer-producer conference.
The French want to chair it. They say it’s because it was their idea, but it is deeper than that. I think the preparatory conference should be at the official, not the ministerial, level.4
Wilson: That way you could more easily preserve your position. We have a problem with the French, and I think Giscard has a problem. The Gaullists are putting out this stuff about his private life. Schmidt thinks they are putting out that if Mitterand would break with the Communists, Giscard could join them and isolate both extremes.
Callaghan: He wants better cooperation with the United States.
Kissinger: Since Martinique he has been better.
Callaghan: But you can assume they will play with the Arabs on the Mideast.
Your financial plan5 went very well.
Kissinger: Healey gave us a hard time for a couple of hours.
Wilson: Names got put on proposals unfortunately. Ours is too little but it was early. Yours works late but adequately.
Kissinger: They are totally complementary.
[Page 126]Callaghan: Our consumer solidarity, the other aspects are conservation and alternative sources. How far do you want to go before you are ready?
Kissinger: On alternative sources we will be ready with proposals for the IEA meeting next week. We would like to have agreement on the direction in which we’ll go. We could have mutual investment in each other’s programs and a country would get a return proportionate to its investment. If all these things work, we could have agreement on a common overall price to protect the new investment in alternative sources.
Wilson: Our proven oil reserves, at OPEC prices less 10%, amount to $120 billion. By 1980 we will be self-sufficient. We will refine about two-thirds of it ourselves. The rest of it will be sold non-discriminatorily.
President: Do you have a refining capacity?
Wilson: Not enough. We have to build some. It is beautiful low-sulfur oil. I think there is more oil west of Britain and North of France.
The first gas strike is much shallower than in the North Sea. We will run into a boundary problem with France.
Callaghan: The Saudis offered us 300,000 barrels a day in exchange for repayment with our oil after 1980. We don’t know what interest they would charge. We wanted to talk to you first. We would like to pursue it, but wanted to let you know about it first.
President: What percent of your imports is that?
Callaghan: It is quite sizable, maybe 15 to 20 percent.
Wilson: We should get the Arabs interested in other forms of energy, because they will run out.
Kissinger: We heard that the Saudis would offer bilateral deals with the Europeans to ease the pressure on them.
Wilson: In six years, when Jim is Chairman of OPEC . . .
Kissinger: A terrifying thought!
Wilson: Are you thinking about other “PEC’s”? Many other raw materials prices are going down now, fortunately. But there’s phosphate ore, copper, and so on. We are returning to the old producer cartels, which never worked. The tin agreement, the sugar agreement, never did well. But shouldn’t we be looking into this?
Kissinger: We are looking at it, and we haven’t come to any conclusion. We had a preliminary bureaucratic study which concluded it wasn’t possible. We would be happy to study it jointly with you.
Callaghan: This question will be raised at the consumer-producer conference and at our next Commonwealth conference. If we could [Page 127] start some work in this area, we could maybe break up the Group of 77.6 The UN is always against us.
Wilson: Oil is all tied up with the Mideast. To the extent that we can look at price rigging without the oil/political aspects, we can see what might be done on a purely economic basis.
President: Producer cartels work well in good times but I wonder about it in bad times.
Kissinger: What the Prime Minister is saying is if we could get something going in a commodity in which the Third World would be interested—like fertilizer—we could use it as an example of how to go about this.
Wilson: The Commonwealth Conference is a good forum for members to look at things from a perspective which they don’t ordinarily use. We should use it more.
[Omitted here is discussion unrelated to energy, followed by a discussion of British and U.S. domestic energy policy.]
- Source: Ford Library, National Security Adviser, Memoranda of Conversations, Box 9. Secret; Nodis. The meeting was held in the Oval Office.↩
- See footnote 3, Document 33.↩
- See footnote 2, Document 24.↩
- On January 31, Kissinger told Davignon that to hold the conference at the Ministerial level “would give it bigger significance than it should have.” He also said that he “would not be happy with the French as chairman.” Davignon informed Kissinger that he was “getting nowhere with the French except on a purely bilateral and unofficial basis,” adding that “on substance, though, they are close to all of us, but they remain stubborn on procedures,” which he called a “silly position.” Davignon hoped that, by March, the French would “be more reasonable—after the preliminary meeting,” and was happy that they had at least agreed to IEA participation in the meeting. (Memorandum of conversation, January 31; National Archives, RG 59, Central Foreign Policy Files, P840157–0509)↩
- See Document 15.↩
- The Group of 77, or G–77, was a group of developing countries established in 1964.↩