Foreign Relations of the United States, 1969–1976, Volume XXXVII, Energy Crisis, 1974–1980

40. Paper Prepared in the Department of State¹

Washington, undated.

A CONTINGENT ENERGY STRATEGY

It is the object of this paper to demonstrate that the U.S. should minimize its energy dependence upon the Persian Gulf and disperse its pattern of energy acquisition so as to maximize the political and geographic disparity of its suppliers. Such a policy is both feasible and consistent with current U.S. energy initiatives internationally and in Project Independence.

If adopted, the objective of such a policy would be to reduce acquisition of U.S. petroleum imports from the Persian Gulf and the Mediterranean to an absolute minimum and to maximize imports from Canada, Mexico, Indonesia, Nigeria, and Venezuela.

Key Considerations

1. While U.S. oil interests in the Persian Gulf have been very substantial, the area was not a significant source of supply to the U.S. until recently. Historically, these U.S. corporate assets were developed to service primarily Europe and Japan, not the U.S. They are now in the process of being liquidated. The U.S. international oil industry anticipates it will very shortly have no fixed assets in the Gulf and, with their disappearance, will go a long-standing U.S. national interest—maintenance of the industry’s concessionary stakes.

2. In contrast to the virtual insignificance of the Gulf as a source of U.S. petroleum imports, Canada and Venezuela have been very substantial suppliers to the U.S. market. In earlier days, Mexico supplied the U.S. and remains a logical and probably an increasingly important source. More recently, both Indonesia and Nigeria have expanded their position in the U.S. market. This is particularly true of Nigeria. With the possible exception of Canada, these variegated sources are fully capable of satisfying all their domestic needs and still provide an impressive export potential. Assuming U.S. import volumes decline chiefly as a result of the President’s National Energy Program, these sources—even without Canada—could meet U.S. import requirements.

3. From the U.S. perspective, the Persian Gulf is geographically the most distant point of all significant petroleum sources. Strategically it is the least defensible because of the high concentration of the wells, pipelines, storage tanks, docking facilities, tankers, and increasingly, refineries. Moreover, tankers from the Persian Gulf must traverse the Straits of Hormuz and the African Coast routes which are, under almost any realistic situation, exceptionally vulnerable. A realistic assessment of the implications of defense appropriations in the United States in recent years does not warrant confidence that the Congress will provide adequate and timely resources to build an Indian Ocean fleet with the capacity to defend a U.S. petroleum lifeline transiting that region.

By contrast, Canada and Mexico are both contiguous with the United States; Venezuela is accessible via the Caribbean, and petroleum from both Nigeria and Indonesia can be given protection by the Atlantic and Pacific fleets respectively. All of these represent far more secure sources; their role in supplying the U.S. should be deliberately and imaginatively encouraged.

4. Geography, culture, and contemporary political affairs all constitute unifying factors above and beyond petroleum for the countries of the Persian Gulf. While this observation applies with less force to Iran, it nevertheless applies.

Since concerted action among petroleum suppliers is contrary to the interests of the United States, it follows that a policy of procuring petroleum from sources which are geographically, socially, and politically disparate minimizes U.S. vulnerability.

The five countries indicated above have the qualities of disparity. All have a voracious appetite for revenue; access to U.S. technology is clearly of major interest; and with the exception of Canada, all would pay a substantial price in their internal affairs were they to forego income resulting from an embargo. With the possible exception of Iran and Iraq, this is not now true of the countries of the Persian Gulf.

5. With political instability a widespread phenomenon among the states of the Persian Gulf, the instability of one significant supplier tends to be destabilizing to all of the others. Thus endemic political instability in the Gulf compounds the problem of supply security.

The same observation applies to the possibility of military conflict within the region and between Gulf states. Such conflict would tend to compound itself and spread to other countries. There is no such compounding effect among the alternative sources.

Current U.S. Strategy

Current U.S. strategy for dealing with the energy/fiscal crisis emanating from the producer states is to take steps (a) to limit our dependence upon foreign supply, (b) to stimulate the discovery of additional domestic petroleum and gas reserves and (c) to encourage research into and the most efficient use of alternative fuels. Simultaneously, the U.S. is making a major diplomatic effort to encourage similar efforts on the part of other consuming states. In addition, the U.S. has committed itself to a concerted program with its allies for sharing oil in the event of an emergency.

1. A major objective is to break the political and economic power of OPEC. The principal tactic is to create a situation of consuming states’ solidarity on emergency supply arrangements and common acceptance of a significant reduction over time of their dependence upon OPEC crude. Thus a clear signal is flown to OPEC states warning them they will have to decide amongst themselves how a diminishing market for their crude will be shared. The fundamental assumption is that a mounting surplus producing capacity—unsold oil—will compel OPEC states to compete amongst themselves; with OPEC states having different circumstances and needs, the resultant divisions will bring their house down.

2. The critical difficulties facing the U.S. initiatives rest on (a) the Arab-Israeli dispute and the extent to which this may continue to be seen by other consuming states as a problem in which the U.S. is the principal actor—and thus it is U.S. policy and actions in that arena which threatens oil supply; and, (b) the very significantly different degrees of consumer states’ dependency upon OPEC oil; a severe cutback which seriously affected the U.S. might literally imperil others. Hence the unwillingness of many consumer states to identify their energy interests and issues too closely with those of the United States.

3. The forces which divide consumers and bind producers are such that a prudent U.S. policy for the international acquisition of petroleum must be so designed that it will serve our vital economic and security needs regardless of the outcome of our broader efforts with both consumers and producers.

Cohesion of consumers is less than complete. There is discord over the financial safety measures to be taken. The French continue to emphasize the differing degrees of interest of the Europeans vs. the United States. Most consumers wish to pursue a policy which they describe as avoiding all aspects of “confrontation”.

On the producer side, there is mounting evidence that Kuwait, Saudi Arabia, and Iran may be pursuing a strategy of granting substantial loans or other emoluments to key consumers in return for their less-than-active participation in U.S. energy strategy. To Europeans and Japanese, this is a seductive approach.

OPEC pricing policy since the embargo has been to ratchet up the price, and in each instance exploit the differences among the consumers in order to lessen the chance of consumer cooperation. The use of financial resources to pursue this end further is simply an extension of current policy.

The critical question is whether or not Iran and Saudi Arabia will be able to coordinate their responses to pressures from the consumers and in particular the United States. If they are not, and they compete, OPEC will be broken. Such a falling out, however, could be dangerously destabilizing in the Persian Gulf especially if it entails physical conflict.

4. Because of the hazards indicated above, the U.S. pattern of petroleum acquisition should be such as to minimize its vulnerability under any circumstances. This can be accomplished by (a) diversifying the sources to the five countries indicated, and (b) creating with those countries a convincing mutuality of interests such that the arrangements made will stand a reasonable test of surviving changes in political regimes. This can be accomplished by proceeding down two parallel “tracks” to diversify and secure U.S. petroleum sources abroad.

Track One

This approach entails the creation of a group in either the ERC or the NSC of experts on each country to:

(A) assess the oil and gas producing capabilities of each country over time,

(B) assure that the oil and gas qualities are such that they will meet U.S. import requirements,

(C) develop a careful survey of broad national economic needs with an evaluation of the particular contributions that the U.S. could make to each country’s development particularly but not exclusively in the area of energy. Because all five of these countries—Canada, Venezuela, Mexico, Nigeria and Indonesia—have limited proven oil reserves, means should be available to engage their national interests in this pursuit which could provide them with unique and privileged access to U.S. technology and markets. The implications of such findings to U.S. relations with each of the countries would transcend any other bilateral relationship the U.S. has ever attempted.

Track Two

This entails the launching of an unprecedented technological trilateral approach to the exploitation of the tar sands of Canada, Venezuela and the United States; each of the deposits presents unique problems. There are still key questions to be answered before they can be processed at reasonable capital costs; neither Canada nor Venezuela can realistically hope to master in a timely fashion the vast research and capital requirements entailed in the exploitation of these immense and untapped resources. Yet their development could unlock to the U.S., Canada and Venezuela, as well as others, huge reserves. The scale of this effort could be greater than any international research undertaking ever attempted. The benefits from a successful effort would be incalculable. The U.S. is presently the only nation which could make the necessary vital contribution. Nor need the energy resource tackled be limited to tar sands. Shale, solar power, nuclear fusion are available candidates.

This approach has a unique aspect. National sensitivities of Canada and Venezuela are met by each contributing to a common technological effort while they still retain the exclusive control over the tar sand reserves. Progress down this track in tandem with the wider ranging programs proposed in Track One would provide a powerful incentive for Canada and Venezuela to reach energy agreements with the U.S. to supply us in the interim with a major portion of their surplus crude and gas thereby giving the U.S. a near equivalent of internal supply lines.

While key emphasis would be given Canada and Venezuela, nothing need preclude attention to energy research opportunities in Mexico, Indonesia and Nigeria.

1. Source: Ford Library, National Security Adviser, Backchannel Messages, Box 4, Middle East and Africa, Outgoing 2/75. Confidential. There is no drafting information on the paper. Kissinger was traveling in the Middle East February 10–15 and it was possibly prepared for his use.