80. Telegram From the Department of State to the Embassy in Iran1

214124. Subject: OPEC Oil Price Decision.

1. You are requested to deliver the following letter from President Ford to the Shah as soon as possible.2

“Your Imperial Majesty: I wish to present for your consideration my thoughts on an issue of great importance to relations between developed and developing countries, and to the economic well-being of our two countries and all the nations of the world.

Since the consumer/producer preparatory meeting in Paris last April, the United States has made a major effort to re-establish a basis for dialogue and cooperation between the nations of the developing world, including those which export oil, and the industrialized nations. We have undertaken a fundamental review of our overall policy [Page 277] toward the developing countries. This review has resulted in a new approach to the producer/consumer dialogue that responds more fully to these nations’ concerns, particularly those raised by your government’s representatives and other delegations during the Paris meeting. Since Secretary Kissinger articulated the general outlines of this approach in speeches in Kansas City and Paris in May, we have made much progress in establishing the constructive understandings necessary to promote further mutually beneficial cooperation not only between our two nations but among the broader world community. Furthermore, as you know, we have made a number of important specific proposals for cooperation at the current Special Session of the United Nations General Assembly.3

The economic dialogue will be a centerpiece in the new evolving relationship between the industrial and developing nations. We are pleased that our efforts, and those of your government and others, have succeeded in establishing a consensus for resuming these discussions. Over the past months, we have clearly demonstrated our commitment to a constructive dialogue and our belief that its success requires each participant to recognize and take full account of the vital interests of the others.

As you can appreciate, the support of the American public for the new US position must be based on an awareness of the concerns of the oil producers and other developing countries and the need to seek cooperative solutions to our common economic problems. I am concerned, however, that this necessary support will be jeopardized should the member countries of OPEC increase the price of oil this fall.

I am also concerned that such action could raise serious questions among the American public regarding the close cooperation we seek and are actively developing with your country in several fields of our bilateral relationship. I value this relationship greatly and sincerely wish to continue to broaden and deepen it.

Another oil price increase by OPEC would also have a significant negative impact on the economies of all the oil importing nations—[Page 278]both developed and developing—at the very time that signs of progress in the fight against recession and inflation are appearing. Such a price increase would impose shocks on the U.S. economy, on the more vulnerable economies of Europe and Japan, and finally on the highly fragile economies of the developing world. It would at the very least reduce the progress toward economic recovery and could, in fact, plunge a number of countries into extremely serious difficulties.

It is because I am aware, Your Majesty, of your sensitivity to the interdependence of the world economy and your commitment to a successful economic dialogue that I am asking you to weigh heavily the adverse effects—both psychological and real—which a price increase could have. It is my hope that you will use your considerable influence among the producing countries to urge restraint on oil prices and to argue that our long-term mutual interest in a more rational global economic structure should prevail over short-term economic advantage. Sincerely, Gerald R. Ford. His Imperial Majesty Mohammad Reza Pahlavi, Shahanshah of Iran, Tehran.”

2. Report when delivery effected.4

  1. Source: National Archives, RG 59, Central Foreign Policy Files, D750312–0062. Confidential; Immediate; Exdis. Drafted by Marion V. Creekmore (EB/ORF/FSE); cleared by Enders, Sober, and Sorenson; and approved by Kissinger.
  2. Ford sent similar letters to Khalid in telegram 214123 to Jidda, September 10, and to Pérez in telegram 214126 to Caracas, September 9. (Both ibid., D750313–0835 and D750312–0063)
  3. A key paragraph of Kissinger’s address before the Seventh Special Session of the UN General Assembly on September 1 (as read by Moynihan) reads: “These economic issues have already become the subject of mounting confrontation—embargoes, cartels, seizures, countermeasures—and bitter rhetoric. Over the remainder of this century, should this trend continue, the division of the planet between North and South, between rich and poor, could become as grim as the darkest days of the cold war. We would enter an age of festering resentment, increased resort to economic warfare, a hardening of new blocs, the undermining of cooperation, the erosion of international institutions—and failed development . . . Can we reconcile our competing goals? Can we build a better world, by conscious purpose, out of the equality and cooperation of states?” The speech is printed in Department of State Bulletin, September 22, 1975, pp. 425–441. Excerpts were published in The New York Times, September 2, 1975, p. 20.
  4. In his response, the Shah listed reasons why he believed an oil price increase would be justified and noted that “the tax imposed by the consuming industrialized nations on oil products which on average nearly equals the government take of the oil producing nations can very well be adjusted to take care of any increase in oil prices.” (Telegram 8946 from Tehran, September 11; National Archives, RG 59, Central Foreign Policy Files, D750314–0640) Khalid replied on September 23 that Saudi Arabia was “making an effort to curb the pressures for a further increase in the price of oil,” but that it did not want “to maintain a position singlehandedly if all of the other OPEC states insist upon an increase in prices.” (Telegram 6525 from Jidda, September 23; ibid., D750330–0344) Pérez, in a September 23 letter to Ford, argued that an oil price rise would be justified because “inflation generated in the industrialized countries” was “constantly eating away at the purchasing power of our revenues.” (Ford Library, National Security Adviser, Presidential Correspondence with Foreign Leaders, Box 5, Venezuela—President Carlos A. Perez)