189. Airgram From the Embassy in Kuwait to the Department of State1
SUBJECT
- U.S. Policy Toward the Organization of Petroleum Exporting Countries (OPEC); U.S. Contact with OPEC Secretariat
REF
SUMMARY
The Country Team welcomes the policy of review of U.S. attitudes towards OPEC; and concludes that the establishment of a U.S. Government working relationship with OPEC would serve U.S. interests.
U.S. Attitudes
The present aloof U.S. attitude toward OPEC is not a lively issue in US-Kuwaiti relations, but we are somewhat at loss to find a locally acceptable theoretical defense of our position and appreciate the opportunity to participate in this policy review.
A Kuwaiti advocate of OPEC might claim that its mandate rests on the right of a state to exercise commercial regulation of its petroleum reserves and to seek this regulation in an entity transcending state boundaries when the companies controlling its petroleum industry are engaged in “interstate commerce.” He might assert that OPEC is not dissimilar from a commodity agreement in which the leading exporters of petroleum, developing nations heavily dependent upon foreign exchange earnings of the commodity, are seeking to improve its international terms of trade. In our own historical experience and present economic policy, we find little theoretical justification for remaining unsympathetic to an organization so founded and motivated.
On a more practical level, OPEC is ostensibly opposed to the interests of American petroleum companies which the United States [Page 345] Government has a certain obligation to protect. We are insufficiently expert to determine, but we wonder, nevertheless, if certain OPEC objectives—stability in crude production and price and a uniformity in producing-country petroleum laws and concession terms—might not, in the long run, be in the interest of some American oil companies.
We wonder if, at some point, the United States itself might not conceivably become a “petroleum exporting country.” We particularly question, as the dust settles in Libya, whether there is one definable “U.S. oil company interest” on which the U.S. Government can afford to hang a petroleum policy. When our oil companies deal with individual producing-country governments, the U.S. Government, through normal diplomatic channels, quite properly maintains a separate identity, permitting us the flexibility to assist in mediating possible disputes and to avoid impairing wider U.S. policy interests in the country concerned. If our petroleum companies accept the reality that, in their multi-national negotiations with the producing countries, they are dealing with OPEC, should not the United States Government be in a position to exercise a similar third-party role?
We see OPEC as a manifestation of a strong historic trend toward economic nationalism in Arab and other developing countries. Like it or not, we have little enough possibility of directing this trend, and even less of opposing it successfully. There are issues on which the U.S. Government must oppose this trend. If OPEC is not one of these, we would seem to be borrowing trouble and foregoing a possible opportunity in failing to establish a working relationship with it.
Certainly, our oil companies might wish that there were no demand for an organization such as OPEC, but OPEC does exist. While OPEC’s viability and reputation for economic statesmanship are by no means assured, the organization does appear to have mellowed with age. In the context of economic nationalism—certainly in the context of Arab nationalism—OPEC may emerge as a force for reason and moderation. In our assessment, American oil companies, in spite of their economic power and technical prowess, are politically and psychologically on the defensive in their dealings with the producing countries. As an offensive alliance, OPEC is a somewhat cumbersome one. By attempting to force the companies to deal with OPEC, the producing countries have to reduce their collective objectives to the lowest common denominator. In Kuwait, at the moment, it is, after all, not the Government, but Gulf-BP that is seeking ratification of the “OPEC settlement.” In short, if there were no OPEC, perhaps the companies would have to create one.
Contact with OPEC
We understand from Kuwaiti oil officials that OPEC is considering shifting its attentions from obtaining larger benefits from international [Page 346] companies to seeking a reduction of consumer country restrictions and tariffs on crude oil. In anticipation of this possible shift of emphasis, the U.S. Government should be in position to deal directly with the organization.
Consequently, we think that establishment of a U.S. Government working relationship with OPEC would serve U.S. interests. The form such recognition might take raises tactical as well as legal questions. In the Arab world, OPEC is not above suspicion for its “ineffectiveness” in obtaining producing-country demands and because it is subject to “subversive” Iranian and Venezuelan influences. Should the U.S. Government embrace OPEC too warmly,OPEC’s credibility as a champion of producing-country aspirations might be further impaired. For this reason, perhaps our approach to OPEC should stress the establishment of a working relationship rather than formal recognition.
- Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1964–66, PET 6 IRAN. Confidential. Drafted by J. Twinam (ECON), and concurred in by J. Gatch, Jr. (DCM), W. Bromell (POL), and J. Vonier (USIS). Pouched to Algiers, Baghdad, Beirut, Benghazi, Bonn, Brussels, Cairo, Caracas, Djakarta, Jidda, Lagos, London, Ottawa, Paris, Rome, The Hague, Tehran, Tripoli, USEC Brussels, USEC Luxembourg, USRO Paris, Mission in Geneva, and Vienna.↩
- Document 185.↩
- Not printed. (National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1964–66, PET 2 AUS)↩