43. Memorandum of Conversation1
SUBJECT
- Energy
PARTICIPANTS
- The Honorable Henry A. Kissinger, Secretary of State
- Deputy Secretary Ingersoll
- Assistant Secretary Enders
Kissinger: I still don’t understand how we got into this mess with Treasury. I thought this problem had been worked out with Simon’s people.
Enders: I don’t understand it either. Did you talk to the President about it?
Kissinger: Never mind the President. I know what he knows. He knows what I told him. Now how did this happen? Did you not tell me what Bennett’s objections to the floor price were?
Enders: Yes I did. I thought we had worked it out. You had better ask Parsky.
Kissinger: I’m not talking to Parsky.
Enders: I was careful in Paris to put both the floor price and common tariff concept on the table, and this is the approach I took in my backgrounder with the press. Parsky, in his talks with the press, chose to emphasize the differences between the two approaches. I have the feeling that when he got back Simon told him he’d been had.2
[Page 147]Kissinger: But I don’t understand their concept. If this approach is successful and the price falls, we will have worked to get low prices for the Europeans. Is that what they want?
Enders: I’m not sure they know what they want.
Kissinger: But they keep talking about $4–5 oil prices. How can the market get alternative sources in that range?
Enders: It can’t.
Kissinger: The price will never break below $6 unless we have alternative sources. Either we protect them alone and give Europe a gift or we do it by an international agreement.
Ingersoll: Bill expects the cartel to collapse and prices to fall.
Kissinger: I don’t believe that. If the cartel doesn’t collapse we’ll soon be up to 60% and OPEC will be charging $25.
Enders: Bill believes we can do the same thing through the common tariff.
Kissinger: But Congress just legislated against the god damn tariff, didn’t it?
Enders: Yes, the Treasury proposal is just not credible.
Ingersoll: He has not accepted the fact . . .
Kissinger: Is Bill back in town?
Enders: Yes, we appeared before Dingell’s committee together on Monday.3 We both agreed in our statements on the need for some protection and indicated that the President would have to decide later on the mechanism to be used.
Kissinger: I don’t care how we do it. That doesn’t make any difference.
Enders: What reaction did you get from Faisal?
Kissinger: He has no problems with the concept.4 However, the press just doesn’t understand. They keep asking whether I have obtained agreement from the producers to our floor price proposal.
I personally think we will be able to get a floor price within a year. If we do, we don’t need agreement with the producers and we could tell them to go screw themselves.
Now where do we stand? The Germans, French and British are ready to go along with a protected price.
Enders: They’re ready to accept the concept?
[Page 148]Kissinger: Giscard said he could agree to a price below $7. The British want $8.
Enders: Then the Japanese are the only major problem. They seem ready to go along with a protected price as long as they have assurances on participation.
Kissinger: Well why not let them buy in?
Enders: Your second tier lets them do that.
Kissinger: Are you discussing this with Treasury?
Enders: We haven’t gotten anywhere in your absence.
Kissinger: Do they know I’m totally displeased with their actions?
Enders: They have been very docile while you were away, but I think they are ready to get on board now.
Kissinger: How do they explain the Newsweek interviews?5
Enders: Well they said they gave them.
Kissinger: Do they think it helps for them to admit it?
Enders: I don’t know, but I think they are ready to go along with us.
Kissinger: Who gave the information to Joe Kraft on the PANAM thing?6
Enders: Treasury has been pushing it.
Kissinger: Well I was mildly favorable but I did not get a chance to study it in detail.
Next, in the IEA. You will continue to push for a floor price agreement. I will tell the French next week that we are ready to go to a meeting if they are prepared to go along with the floor price.
Enders: Should we try to set a level now or should we leave it flexible?
Kissinger: I think we ought to try for a range of $6 to $8. I would like you to draft a letter for me to Schmidt.
Enders: I take it you didn’t like the other we sent you.
Kissinger: I was not ready, I thought it was premature. Schmidt is hipped about the danger of bank failures because of Arab maneuvering. He doesn’t want to hear from us that there is no problem, he is convinced there is one. Every time he talks to Simon, Simon tells him there is no problem. Schmidt told me this doesn’t help if a German [Page 149] bank fails. All he wants from us is some kind of contingency plan. He is sending someone over to discuss it.
Enders: Who is he sending? Dr. Hiss? He is pretty good.
I think you should send a letter to Miki too.
Kissinger: OK, you draft it.
One more article about you in the papers, Enders and you are through. Now I’m serious about that.
Enders: Do you have any openings in Africa?
Kissinger: You know Bob, in my years here I have made one improvement. The press used to be masochistic. They used to say all the people I appointed were bad, that was wrong. Now they say all of the people I appoint are good, and that is equally inaccurate.
But Enders will you stop making inflammatory statements about economic blockade being like nuclear warfare?
Enders: Yes.
Kissinger: Next.
Enders: I’ll try to work out an economic structure with Zarb for the floor price so that we’ll have protection when prices drop below the trigger level.
But on the international side we’ll need letters to the Japanese and Germans.
Kissinger: OK, we’ll do the letters. Tell them I’m ready to go along with the meeting if they’re ready to agree on a floor price. Emphasize two basic ideas: the importance of massive alternatives soon and the range of the floor price.
I talked with Giscard about Davignon’s attendance at the meeting. He is agreeable to have him there as a member of the OECD Delegation.
Enders: We can’t go along with that. OPEC will be there along with the UN and the OECD as observers. If we go without the IEA it signals that we are ready to drift back.
Kissinger: I’m never ready to drift back. Why should we give up our strongest assets? Tom, you deal with EUR on this. I want you to make clear that we won’t go along.
Who is this Renner?
Ingersoll: He’s one of Hartman’s people in Brussels.7
Kissinger: Well send him an instruction that we don’t accept the French idea.
Enders: Do you want to send a letter to Sauvagnargues?
[Page 150]Kissinger: Yes, but clear it with Hartman.
Enders: I’ll do that. Is there anything else?
Kissinger: No.
Enders: What about our strategy on the Hill? Did you discuss this with the President this morning?
Kissinger: No.
Enders: I think we need to move quickly.
[Omitted here is discussion unrelated to energy.]
[Kissinger]: OK, I think I would like to talk without the note taker in the room.
(Note taker left at 4:10.)
- Source: National Archives, RG 59, Central Foreign Policy Files, P860115–0948. Secret; Sensitive; Nodis. Drafted by Lawrence R. Raicht (EB/ORF/FSE). The meeting was held in the Secretary’s office.↩
- At the February 5–7 IEA Governing Board meeting in Paris, Enders presented the price floor plan as an “administration proposal,” whereas Parsky reportedly “denied” that it was “more than the State Department position.” (The Washington Post, February 13, 1975, p. A19) The text of Enders’s statements to the Board on February 5 and 6 are in telegrams 3210 and 3338 from USOECD Paris, February 6 and 7, respectively. (National Archives, RG 59, Central Foreign Policy Files D750043–1095, D750045–0740) According to their joint report on the meeting: “Canada, Netherlands, Switzerland, Denmark favored a floor price approach. Britain said the trend of their government discussions is towards the floor price. All of these countries but Canada would be interested in a low floor (i.e. $5–$7 a barrel); Canada might want a higher figure after the Athabasca tar sands bailout. Italy, Germany and Japan expressed serious reservations about the floor price on grounds of general economic policy, although Germany recognized that some coordinated action by the consumers is necessary, and Japan said it would not rule out the floor price if it were accompanied by assurances of access to energy within the group.” (Telegram 3453 from USOECD Paris, February 7; Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, Box 4, France—State Department Telegrams to SECSTATE–NODIS (2))↩
- February 17. Representative John D. Dingell, Jr. (D–MI) was Chairman of the House Committee on Energy and Commerce.↩
- No memorandum of conversation has been found of the February 15 meeting between Kissinger and King Faisal.↩
- Kissinger is presumably referring to the February 10 issue of Newsweek. The cover story is entitled “All About the New Oil Money.”↩
- Syndicated columnist Joseph Kraft wrote about questions raised within the government about an Iranian loan to Pan American Airlines. The Washington Post, February 18, 1975, p. A15.↩
- John C. Renner was in the Office of Trade Policy, Bureau of Economic and Business Affairs.↩