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217. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter 1

SUBJECT

  • NSC Weekly Report #100
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[Omitted here is discussion unrelated to a shift from dollar to SDR oil pricing.]

A Shift from Dollar to SDR Oil Pricing

In response to your request, we have considered, and discussed with other agencies, whether the U.S. should favor use of SDRs, instead of dollars, to pay for crude oil.2 The argument for making the change is twofold: that Germany and Japan have come out ahead since 1973 as buyers of oil at prices denominated in depreciated dollars, making them “cheap energy” countries; and that use of dollars places an undue burden on the U.S.

State, Treasury, CEA and Henry Owen believe that dollar pricing should be maintained for two reasons:

1. An announcement that dollars were no longer being used as the unit of account in paying for oil would trigger selling of dollars on the foreign exchange markets. So we would suffer.

2. It is hard to see any offsetting gain, since OPEC would probably raise prices in SDR terms, as necessary to recover revenue losses, if the SDR appreciated relative to the dollar.

Thus, while conversion from dollar to SDR oil pricing probably would not have much effect on the course of oil prices, it could have serious dangers for the dollar’s position in exchange markets.

As to the burden on the U.S.: Whatever the pros and cons of getting the U.S. dollar out of its role as a global reserve currency, using SDRs, instead of dollars, to buy oil would not accomplish this change: The total amounts paid for oil each year pale into insignificance compared to the amounts of dollars sloshing around the world as a reserve currency.

In any event, the question is probably moot, since U.S. encouragement of a shift would not persuade OPEC countries to make the shift while the dollar is as strong as it now is.

[Omitted here is discussion unrelated to a shift from dollar to SDR oil pricing.]

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Subject Chron File, Box 126, Weekly National Security Report: 6–9/79. Secret. Carter wrote at the top of the page: “Zbig. C.”
  2. See Document 213.