172. Memorandum of Conversation1

SUBJECT

  • Secretary’s Meeting with Saudi Foreign Minister Prince Saud: Luncheon Session

PARTICIPANTS

  • Saudi Arabia

    • His Royal Highness Prince Saudc al-Faisal bin Abd al-Aziz, Minister of Foreign Affairs of Saudi Arabia
    • Ali Abdallah Alireza, Ambassador of Saudi Arabia
    • Sheikh Abdallah Alireza, Deputy Minister for Economic and Cultural Affairs, Ministry of Foreign Affairs of Saudi Arabia
    • Dr. Nizar O. Madani, First Secretary, Embassy of Saudi Arabia
  • United States

    • The Secretary
    • Andrew J. Young, Permanent Representative of the United States to the United Nations
    • Alfred L. Atherton, Jr., Ambassador at Large
    • Richard N. Cooper, Under Secretary for Economic Affairs
    • Lucy Wilson Benson, Under Secretary of State for Security Assistance, Science and Technology
    • Richard M. Moose, Jr., Assistant Secretary of State for African Affairs
    • Harold Saunders, Assistant Secretary of State for Near Eastern and South Asian Affairs
    • John C. West, American Ambassador to Saudi Arabia
    • William B. Quandt, National Security Council
    • William R. Crawford, Deputy Assistant Secretary of State for Near Eastern and South Asian Affairs
    • Joseph W. Twinam, Director, Office of Arabian Peninsula Affairs, Bureau of Near Eastern and South Asian Affairs (Notetaker)

Summary. The Secretary, in the context of Saud’s expression of appreciation for the Administration’s efforts in behalf of the Middle East aircraft sales, put the Congressional issue in context, noting that the Senate vote was not one against Israel but essentially recognition of the importance of the moderate states in determining what kind of place the Middle East will be.2 Prince Saud noted the seriousness with which the Congress had looked into the basic issues involved. The Secretary urged the importance of Saudi Arabia’s trying to get Arafat to bring the Palestinians to cooperate with the UN forces in Lebanon. Prince Saud stressed that an announcement of Israeli withdrawal would be helpful in encouraging such cooperation and the Secretary assured Saud we had Begin’s commitment to move on this in the next few days. A number of economic issues were discussed, with Saud expressing concern that imposition of a fee on crude oil imports as an alternative to a domestic crude oil tax would be misunderstood abroad and encourage further OPEC price increase. The U.S. side suggested that Saudi Arabia add more economic staff to its participation in the UN Overview Committee. Prince Saud said the Saudis would look into this. The Secretary agreed with Saud’s recommendation that there be more bilateral consultations on important economic issues prior to key international conferences.

[Page 554]

(In the course of social pleasantries prior to the luncheon, Prince Saud expressed to the Secretary the Saudi Government’s appreciation for the Administration’s efforts in behalf of the sale of F–15s to Saudi Arabia.)

South Lebanon and UNIFIL

The Secretary noted the real problems of morale in the UN peacekeeping forces in South Lebanon as a result of Palestinian attacks on the forces. As a result there is real concern that the forces, now up to 5,000 and scheduled soon to reach 6,000 men, might be withdrawn. The French have expressed concern. If the UN presence starts to become unstrung it would be a disaster for all concerned. The Secretary said we hope Saudi Arabia would use its influence on Arafat to bring the Palestinians under control.

Ambassador Young noted the chaotic situation; there are several factions which the Palestinians have to control. He noted this is the first sustained violation of the neutrality of UN forces and establishes, for example, an unfortunate precedent for Africa where in time there may be as many as 10,000 UN peacekeeping personnel.

The Secretary continued that Prime Minister Begin had promised to meet with the Israeli Cabinet in the next few days to set a date for the withdrawal of Israeli forces from South Lebanon, but this would of course be difficult if the continuation of the UN presence appears uncertain. In response to Prince Saud’s question, the Secretary said we do not feel Arafat is doing all he could to bring the Palestinians under control.

Prince Saud said that Israel’s setting a date for permanent withdrawal would help. He added that the Syrians should be helpful.

The Secretary said we have talked to the Syrians.

Mr. Saunders noted the importance of a parallel approach in which we push for a date for Israeli withdrawal and at the same time work to assure the safety of UNIFIL.

Prince Saud said that from Saudi talks with the Palestinians they appear to be serious about cooperating with UNIFIL but that SAG would be raising this question again. He continued that any apparent conflict between the Cairo Accords3 and the UN force mandate in South Lebanon is manageable and that the real problem is uncertainty about Israel’s intentions to withdraw. Should Israel announce its withdrawal [Page 555]this would be an important breakthrough and the announcement should come soon to avoid a deteriorating situation.

The Secretary said we would keep in touch with the Israelis. We understand the Cabinet would be meeting by May 22. Begin had made a commitment to him on this question.

Ambassador Young noted that the UN had been generally supportive of the Palestinian cause. Troops from several nations have suffered casualties from Palestinian attacks in South Lebanon. It is important to realize that the UN peacekeeping force is not so much a fighting force as a moral authority and it is this moral authority that is being challenged in South Lebanon.

Prince Saud said that Saudi Government is in complete agreement that the authority of the peacekeeping force must be upheld.

F–15 Sale

In response to the Prince’s question, the Secretary said that the Vice President will address the UN on the 24th4 because the President is facing an extremely tight schedule, needing to focus on such difficult domestic issues as the labor bill after having devoted so much time personally to such issues as the Panama Canal Treaty5 and the Middle East aircraft sales.

Ambassador Young noted that because party discipline is not strong in the Congress, the President had had to deal with numerous individual members of Congress on the aircraft sales.

The Secretary referred to the President’s, Vice President’s and his own frequent discussions with members of Congress on this question. He agreed with Prince Saud that issues of great importance were involved in the Middle East aircraft issue, but cautioned that the Senate vote in support of the Saudi sale was not an anti-Israel vote. He said the vote was essentially recognition of the importance of the moderate states in determining what kind of place the Middle East will be. In response to Prince Saud’s comment on how carefully members of Congress had gone into the issues, the Secretary noted Congressman Studds’ letter to his constituents explaining the issues in careful detail. Ambassador Atherton added that the general public appears to have gone through much the same sort of thought process as the Congress in evaluating the merits of the aircraft sales. The Secretary added that editorial support in the press had been very helpful. He congratulated [Page 556]Ambassador Alireza and his associates on the good job they had done in convincing people of the importance of the sale. The Secretary added that even some Congressmen who voted against the Administration’s proposal did not seem unhappy with the outcome.

Economic Issues

At the Secretary’s request, Mr. Cooperbriefly reviewed the international economic situation, which he described as “middling.” He said the U.S. economy is progressing very well with employment in good shape and the growth rate being well managed. He noted that Japanese Prime Minister Fukuda has indicated that Japan will be pushing for seven percent growth rate. Europe is the weak spot with slow growth and unemployment problems leading to increased government intervention into the economies sector by sector. The threat of increased protectionism is growing. This will be the major focus of the July Economic Summit.6 In addition some commodity prices, such as Zambian copper, are depressed and it is difficult to foresee a revival until the overall world economy picks up.

Turning to the U.S. energy picture, Mr. Coopernoted that the President’s energy program has been before the Congress a year, that three of the five key sections of the package have been agreed to, and that the fourth, natural gas price controls, appeared to be within 48 hours of agreement. The final section is the very controversial proposal of a domestic crude oil tax designed to raise domestic oil prices to the world price level in order to encourage conservation. This may be worked out in the Congress in four to six weeks but we must think about alternatives if it does not pass.7 One alternative would be to impose an import fee on crude oil at a level which would raise the average weighted price for all crude consumed within the United States to that price which would have prevailed had the domestic crude oil tax been passed. Mr. Cooper>noted that Saudi Oil Minister Yamani had publicly expressed reservations about U.S. imposition of an import fee and he stressed that this is only a second-best alternative to the crude oil tax and that it is being considered at the technical level with no Presidential decision having been taken.

Prince Saud said that Yamani obviously had been referring to the OPEC precedent that whenever industrial countries raised tariffs on oil, OPEC always increased oil prices. He cautioned that imposition of a U.S. tariff on oil to solve a domestic problem would be misinterpreted and misused abroad, that rather than solving domestic problems it [Page 557]would create other problems internationally. After Mr. Cooperhad stressed that a U.S. import fee would not affect world price, in response to Ambassador Atherton’s question whether the imposition of a tariff by only one country would cause OPEC to raise the world price, Prince Saud said it would if that country were the United States.

The Secretary noted the importance to the international economy of our cutting down on oil consumption and the consequent need for the United States to raise the price of oil consumed in this country one way or another. Mr. Coopernoted that we are also looking at other alternatives and will want to consult closely with Saudi Arabia, recognizing that the OPEC reaction is very important.

Ambassador Young stressed that it is not certain how the President will finally act but that in an open society there is a need to discuss all options publicly.

Mr. Cooperadded that there is of course a link between our problem of increased oil imports and turbulence in international financial markets.

Prince Saud noted that the Europeans are very anxious about what the United States is doing about its economic situation. Minister Alireza noted European concern about the dollar. Prince Saud asked if the Economic Summit can’t do something to deal with these problems.

The Secretary noted the importance of the Economic Summit stressing that each of the industrialized countries must contribute in its own way to the improvement of the overall international economy. In so far as the United States contribution is concerned, the key issues are whether we can conserve energy and control inflation. We need to do both as our share in contribution to overall world economic progress.

In response to Prince Saud’s question, the Secretary said we have had useful discussions with the Japanese who are going to take some action to accelerate their economic growth. They are considering a supplemental budget to expand both growth and imports. We believe the Japanese are making a genuine effort, but it remains to be seen whether this will be enough.

Prince Saud referred to the problems of the underdeveloped countries, such as Zambia, and said that nothing really seems to be moving in the UN forum since all of the LDS’s countries are waiting to see the results of the Economic Summit.

Ambassador Young noted the importance of greater Saudi input in UN economic fora, such as the Overview Committee. He sketched the way that regional blocs tend to control UN fora with political rhetoric, constantly chipping away at the real economic interests of the moderate states.

Prince Saud indicated that in general the Saudis feel that the Soviet Union blocks useful activity at the UN. It was for this reason that the [Page 558]Saudis pushed for the Paris Conference (CIEC). He added, however, that there may be some utility in the Overview Committee. Minister Alireza reiterated that the Saudis doubt that the UN is serious about economic issues and that since the end of CIEC, the Saudi Government has looked to UNCTAD in Geneva for serious treatment of economic issues. He noted how when UNCTAD bogs down the action seems to shift to the UN where the issues are subjected to political pressures. He pointed out that even in Geneva Saudi Arabia must deal with bloc politics in the Group of 77 and that it is hard to get a consensus. Mr. Coopernoted that the substance on some economic questions does seem to be shifting to the UN and there is a general problem of developing countries tending to rely on politically-oriented ambassadors to deal with these complex issues. He noted the value of the Overview Committee in both covering gaps in the management of the overall international economic system and monitoring developments. He said the Overview Committee is an effort to institutionalize things like CIEC. He said it would be useful to have frequent, ongoing dialogues with the Saudis on these issues.

Prince Saud said that the Saudi Government would look into beefing up the economic side of its UN Mission and would be happy to cooperate on all of these questions. He stressed that it would be particularly helpful to understand before economic meetings what the U.S. position will be and what specifically the U.S. wants from Saudi Arabia in the way of cooperation.

The Secretary agreed with this last point.

Ambassador Young noted the difficulty of combating Soviet efforts to stalemate UN activities, citing the problem of keeping the African states lined up beyond [behind?] constructive proposals in the face of Soviet influence on liberation groups, and he reiterated the need for more Saudi input into UN economic matters.

Prince Saud said Saudi Arabia would like to see the UN become of more practical use.

  1. Source: Carter Library, National Security Affairs, Staff Material, Middle East, Subject File, Box 81, Saudi Arabia: 3–5/78. Secret; Nodis. Drafted by Twinam; approved by Wisner on June 5. The meeting took place in the James Madison Room at the Department of State.
  2. On May 15, the Senate approved the aircraft sales package for Saudi Arabia, Egypt, and Israel. The President had sent a letter on May 12 to members of Congress urging approval of the sale, and on May 15 he released a statement expressing his gratification at the Senate’s action. See Public Papers: Carter, 1978, Book I, pp. 896–897 and 916.
  3. Reference is to the November 2, 1969, agreement between the PLO’s Yassir Arafat and the Lebanese Government that called for a cease-fire and established an understanding between the Lebanese Government and Palestinian guerrillas concerning the allowed level of the guerrillas’ activity. (James Feron, “Israel: Guerrilla Pact Will Mean New Peril,” The New York Times, November 9, 1969, p. E4)
  4. Mondale delivered the address to the United Nations Special Session on Disarmament on May 24. For the text of his speech, see the Department of State Bulletin, June 1978, pp. 31–35.
  5. The Senate ratified the 1977 Panama Canal treaties, which led to the return of the Canal Zone to Panama, on March 16 and April 18.
  6. Reference is to the G–7 Economic Summit, scheduled to take place in Bonn in July.
  7. Congress finally passed all five bills that constituted the National Energy Act on October 15.