108. Memorandum of Conversation1
PARTICIPANTS
- Secretary Kissinger
- Mr. Robinson, Deputy Secretary
- Mr. Rogers, Under Secretary for Economic Affairs
- Mr. Katz, Assistant Secretary for Economic & Business Affairs
- Mr. Atherton, Assistant Secretary for Near East and South Asian Affairs
- Jock Covey, notetaker
SUBJECT
- OPEC Price Increase
Robinson: There are two reasons for this meeting. One, to make it clear that an OPEC price increase would have a crucial effect on European economies and, secondly, that the only strategic thinking that anyone has shown so far is contained in the Presidential letters2 that you saw a couple of days ago—and nobody feels that these letters will be a breakthrough.
Kissinger: No, the only thing the Arabs understand is threats and promises.
[Page 378]Katz: They know that they will bear the burden of the consequences.
Kissinger: That is crap! They know no such thing.
Atherton: The Saudis do.
Kissinger: But you know the Shah does not understand.
Rogers: He thinks in terms of the myth. He just doesn’t understand how rickety the UK and Italian economies are. We can propose an action program right now, but we probably should wait until Tuesday to decide who we should send out there.
Kissinger: Who did you have in mind?
Rogers: Any of us or maybe Alan Greenspan.
Kissinger: Absolutely not! The present state of our own economy is proof that it would be stupid to send him. He is a slightly more polished version of Zarb, who did such a great job on the Iran oil deal. The Shah will not listen to another amateur in business for himself.
Katz: You think it would be better to send someone from outside the government?
Kissinger: Sure.
Atherton: What about David Rockefeller?
Kissinger: Too soft.
Robinson: If production limits do not go up, then the prices will go up. The Saudis are expecting us to be responsible and by that they mean they expect us to show responsibility in arms sales and in our handling of the boycott and in our behavior in CIEC.
Kissinger: CIEC! Bullshit! They have nothing to gain in CIEC.
Robinson: You are absolutely right, but that is what they are saying. The oil companies are accelerating the whole process by paying up to a 50¢ premium on the oil they are buying now. They are laying in their stocks before the price goes up and they expect to make a large profit on it and they have clearly signalled that they expect a price increase. Now we have got to make it clear to these guys how disastrous a price increase would be for the situation in the UK and Italy. These guys are not naive. They are among the most sophisticated economists in the world, but they must be motivated. We have to get to them but we cannot do it ourselves. We have to coordinate this with the British and with the Italians.
Kissinger: Bullshit!
Robinson: We should not be in the position of pleading for Europe.
Kissinger: I want Porter to get back there. There is no sense not having our Ambassador in place there. He is doing us no good on that promotion board. Do you think you need him there?
Atherton: It’s not all that busy.
[Page 379]Rogers: The OPEC price increase is the biggest financial event in years.
Robinson: It does not look as if we are concerned.
Kissinger: Just get him back there and I need by Monday a strategy paper.3 For the Saudis we have to consider arms, discriminatory legislation . . . but I do not think we can get the UK and the Italians to go along.
Robinson: I just don’t think we should be in the position of pleading for the Europeans.
Kissinger: They will not get out in front. They will try to show that they are all good boys and after all, we are pleading for the world economy. But we will never get anybody—not the French, maybe the Germans.
Let’s have a talk with the French, British and Germans. See what they think about the price increases and what they will be doing to deal with it. What penalties do they suggest to try to avoid it?
Robinson: What about the Japanese?
Katz: They will run.
Kissinger: They are all terrified. The Japanese will not join anything. Let’s do this on an informal basis. Ask the Ambassadors in Washington to get papers. Can you (Robinson) follow that?
Robinson: Yes. Just a word on Mexico. They need capital to develop the Gulf oil field. The idea is to get U.S. oil companies to participate—to be paid out of future proceeds.
Kissinger: How would you do that?
Robinson: Jova discussed the plan with Lopez-Portillo. He says that he is receptive to the idea. We ought to have someone go down there, though . . .
Kissinger: Who do you have in mind?
Robinson: Bill Rogers would be good.
Kissinger: Fine.
- Source: Library of Congress, Manuscript Division, Kissinger Papers, Box CL 180, Geopolitical File, Middle East. Secret; Sensitive; Nodis.↩
- See Document 110.↩
- Not found.↩