213. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter 1
- NSC Weekly Report #95
1. Opinion: Dollar Pricing of Oil
Several months ago in the midst of the dollar crisis, Michael Blumenthal observed at an SCC Meeting that the United States was bearing a large and unfair burden as a consequence of the fact that oil is priced in dollars. This severely depresses the exchange rate for dollars, and the result is that Germany and Japan are paying less for oil today in real terms than they were before the 1973 price increases. They are becoming “cheap energy” countries which gives them a strong competitive edge in other areas of industry and international trade, aggravating the problem of trade balances and putting further pressure on the dollar.
Nonetheless, at the time, Mike was against even studying proposals to convert oil pricing to a “basket of currencies,” for fear that this would show lack of confidence in the dollar and lead to an even heavier speculation. Now that we are past the crisis, I think we should face this issue squarely.[Page 619]
I believe it is very unwise to continue to accept a substantive economic disadvantage just to keep up appearances. Great Britain drove its economy into the ground in a futile effort to maintain the prestige of sterling as a reserve currency. Now that the dollar has stabilized, I plan to direct (unless you object) an analysis, on a close-hold basis, of the possibility of the United States taking the initiative to propose the “basket of currencies” approach to pricing oil. If this approach proves to have merit, you may want to explore it at the Economic Summit.2
[Omitted here is discussion unrelated to the dollar pricing of oil.]