Foreign Relations of the United States, 1977–1980, Volume IX, Arab-Israeli Dispute, August 1978–December 1980, Second, Revised Edition

407. Memorandum of Conversation¹

Washington, October 8, 1980, 9:33–10 a.m.

SUBJECT

• Summary of the President’s Meeting on Oil Negotiations with Israel

PARTICIPANTS

• President Jimmy Carter
• Vice President Walter F. Mondale
• Secretary of State Edmund Muskie
• Secretary of Energy Charles Duncan
• Dr. Zbigniew Brzezinski, Assistant to the President for National Security Affairs
• Stuart Eizenstat, Assistant to the President for Domestic Affairs and Policy
• Alfred Moses, Special Advisor to the President
• Richard Cooper, Under Secretary of State for Economic Affairs
• Ambassador Henry Owen, Ambassador-at-Large, Special Representative of the President for International Economic Summits
• Deane Hinton, Assistant Secretary of State for Economic and Business Affairs
• Les Goldmann, Assistant Secretary of Energy for International Affairs
• Robert Hunter, Staff Member, National Security Council (notetaker)
• Rutherford Poats, Staff Member, National Security Council
• David Korn, Director of Israel/Arab-Israel Affairs, Department of State

Les Goldmann began by outlining a position on which agreement with Israel could be reached today: 1) that the Memorandum of Agreement (MOA) could be activated if Israel were paying for oil more than the average of the top 20% of U.S. imports; 2) we would drop the spot market test; and 3) we would change our position that there would be a “strong presumption” for activation if Israel lost either of its two main suppliers (Egypt and Mexico), to a position in which triggering would be automatic under this circumstance. At the end of negotiations yesterday, our position was that Israel would have to pay a price equivalent to the top 15% of U.S. imports; it would have to buy 66% of its oil on the spot market; and the Mexican/Egyptian case would only lead to a “strong presumption” of activation. Secretaries Muskie and Duncan are seeing Minister Modai at 10:30 this morning.² We have the following options: 1) We could move to the top 20% on price and shift the spot market requirement to 60%. This would not cost us much. If Israel were paying the equivalent of the top 20%, then it would have to be buying heavily in the spot market. And we would keep the strong presumption position. 2) If we want to shift to an automatic trigger, then we could permit triggering for a 90-day period if either Egypt or Mexico were lost, at the end of which Israel would have to meet the price test of 20%.

The President asked whether the Israelis would be likely to accept a U.S. proposal for 20/60 and automatic triggering if it lost one of the two main suppliers?

Les Goldmann said that there was a good chance.

Deane Hinton said that he doubted it.

Ambassador Owen asked whether this would be so if the spot market test were dropped.

Deane Hinton said that that would probably do it. But this is hard to judge—this had been a wild and discursive negotiation. Modai sees the “strong presumption” position as very tough, because of the Egyptian connection. Modai sees this as a backward step, whereas in fact it is an advance over the MOA. We could not see what would happen until we tried such a position.

Dr. Brzezinski asked whether Israel had adjusted its position in the negotiations.

Deane Hinton said they had. They had raised the level on the price criterion, and accepted it in principle, whereas before they had taken the position that either price or percentage of spot market purchases should be enough to trigger. That is an advance, since our analysis says it would be easier for Israel to satisfy the spot market test than the price criterion.

Les Goldmann said that a logical evolution of our negotiation position would be to go to 20/60 while retaining “strong presumption.”

Al Moses said that if we have the 20/60 figures, then Israel would probably get automatic triggering anyway if it lost Egypt as a supplier.

The President said that wouldn’t be so if it could get cheaper oil elsewhere. He doesn’t want us to be supplying Israel with oil if it could get it from Egypt and other countries. Why should we move in to do so? He had agreed with Begin—and Sadat was involved—that if Israel lost its supplies, then we would guarantee that it would have oil. Subsequently, Israel put in the price element. He agrees that there is legitimacy in this position, if it would mean that Israel were being charged an exorbitant price—say even $60 a barrel. That would be punitive, and we would supply oil at a reasonable price. But Israel has moved far beyond the original agreement. He favors a reasonable position. With the 20/60 formula, the question of automatic triggering would not be significant, from our perspective.

Ambassador Owen asked what we would lose.

Les Goldmann replied that the problem lies in getting independent criteria. Israel gets 40% now on the spot market. If it lost Egypt, that could raise the figure to 65%. But what price would that be at? No one knows for sure. We could get into the position of subsidizing Israeli imports. Israel is looking for an easier trigger.

The President said that he wants to avoid an Israeli self-imposed triggering, that it might use to get out of having to use the spot market, or relying upon Egypt and Mexico.

Stu Eizenstat said that with the 20/60 formula, and the 90-day automatic triggering provision, then the Israelis could not have a self-inflicted shortage.

Under Secretary Cooper underlined that the automatic triggering would be only for a limited period. (The President said he understood).

Deane Hinton said we need a way to deal with Israeli decisions on this: how can that be written down? We aren’t talking about political steps: Modai gave the example of adding a single settler leading to a cut-off of oil from Egypt.

Al Moses suggested separating economic from political factors in the triggering here.

Deane Hinton said that the agreement needs a little ambiguity. We need an escape if there is Israeli behavior on oil purchasing that would lead to self-imposed triggering. It shouldn’t be automatic.

The President said that a verbal assurance from Secretary Duncan on this point should suffice. The language should stay in. Modai should be told that the case of a settler, or a breakdown in the autonomy negotiations, wouldn’t be involved. If Israel were to attack Egypt, or try to take back the Sinai—or something gross—and Egypt stopped supplying oil, then there would be a prohibition. All events can’t be spelled out in a document.

Ambassador Owen asked about the impact in the Gulf of a 20/60 formula with a 90-day provision for automatic triggering.

Secretary Duncan said that the subtleties of a formula were not that important. His overriding consideration is that, if there were a triggering in which Israel were getting U.S. oil, then in Saudi Arabia and other Gulf countries there would be a devastating reaction. It would have an immediate and dramatic impact.

The President noted that Israel would be permitted to trigger the agreement (under certain circumstances), and this was said a year ago.

Secretary Duncan said that this was his judgment.

The President said that the agreement with Israel had been publicized.

Secretary Duncan said that Modai is going on a speaking tour of the United States beginning today. He (Duncan) hopes that Modai will leave Washington with a good feeling. If we go to the 20/60 formula, then we should try to hold with “strong presumption.” Goldmann may be right that we should try to get more room on the spot market criterion, and later leave it out. But he (Duncan) would hate to leave the spot-market criterion out of the agreement. This is a supply agreement, though Israel has turned it into a price agreement. This is his intuition.

Ambassador Owen asked about the 90-day provision.

Secretary Duncan said that if the difference lies in whether Modai walks out of the meeting today feeling bad, then it is good. He (Duncan) suggests the following tactics: we should move to 20/60, and hold the line on “strong presumption.” If that does not work, then we could have the two staffs work out various options, then discuss it again with Modai when he gets back.

Ambassador Owen asked whether we should introduce the idea of the 90-day period.

Secretary Duncan said we should, as one option, if this would make possible a good meeting today. But he hopes we will not have to do it.

Secretary Muskie asked for an explanation of “strong presumption.”

Secretary Duncan said that if Israel lost either Egypt or Mexico as a supplier, then there would be a “strong presumption” that the MOA would be triggered.

Ambassador Owen said that this is our existing position.

Secretary Duncan said that there is another possibility: that Mexican sales to Israel could be expanded. He has had some success here, stressing collective international efforts. On the 90 days, it means that if either Mexico or Egypt fell out, then there would be automatic triggering. After 90 days, then Israel must show that it meets either the 20% on price or the 60% on the spot market.

Ambassador Owen said that the word should be “and”: Israel would have to meet both tests.

The President said it should be both, since Israel could meet the 60% spot market test by itself.

Secretary Duncan said that if the Saudis get OPEC price unity, then there will be a movement towards price unification. If that is achieved, then there will be few market swings, and Israel could hit the 20% price formula easily.

Stu Eizenstat said he agreed that we should not enter an agreement that would permit triggering now. But there are advantages in getting an agreement now. If the difference is a 90-day automatic provision, with reversion afterwards to 20/60, then we should do it. There is a history to this: OPEC knows of the MOA. Our provisions are not easy ones to meet. There would be a 90-day grace period for Israel in an emergency. It would be good to get an agreement, and put this behind us, not to extend it. Modai is going on a 12-day speaking tour, and he shouldn’t go without an agreement.

Ambassador Owen said that we should not just say we will work up alternatives, but try to close a deal.

Stu Eizenstat said that we should do so, even if we can’t get total agreement because of other problems.

Secretary Duncan said that there are other issues to be decided, like how long this agreement should last.

Stu Eizenstat said that the other problems could be managed. We should be able to announce major decisions, and that we have a conceptual agreement.

Deane Hinton said that he has prepared two possible press statements. One says that there has been progress on some issues; the other says that there has been substantial agreement, subject to review.

Ambassador Owen said that our decision seems to come down to this: we would go with 20/60, and with “strong presumption.” If that does not work, we have a choice between a) Duncan’s options approach, with the 90-day formula being one such option; or b) as Stu said, trying to nail down the 90-day provision.

The President said that the overriding objective is that Israel should feel that, if it has a serious supply problem, we will step in. This should not just be loss of supply, but also if the price is exorbitant. We must prevent Israel from self-triggering, however—it would rather rely on the U.S. than on the spot market or on Egypt. We will not let that happen. 20/60 is mandatory to prevent that. The 90-day provision, to be followed by the 20/60 test, is all right.

Al Moses said it would help if Modai could get this position today.

Ambassador Owen asked how we should conduct the talks with Modai.

The President said our negotiators need to be tougher.

Secretary Muskie said that there are two ways to go at the 10:30 meeting with Modai—to have the negotiators meet, or to do it at the Cabinet level, then send it to the negotiators, and then back to himself and Duncan if need be.

The President said that they should work out the details. The negotiators should tell Muskie and Duncan what not to do when they see Modai, so that he (Modai) can’t slip anything in. This is an old Israeli tactic. If they get something in a side conversation that they like, then it becomes binding—even if it was said by Warren Harding. They say: “Warren said. . .” (laughter)

Secretary Muskie said that he will make Modai feel good, and Duncan can be tough (laughter).

The President said that he has the responsibility to see that Egypt does not turn off the oil for frivolous reasons. Sadat won’t do it; but a successor might. We need to guarantee Israel’s oil. The position he has outlined is as forthcoming as it can be; we will go no further, even if the Israelis go home.

Secretary Cooper raised the phrase “reasons beyond Israel’s control,” even under the automatic provision ((note: in Israel’s meeting the criteria on Egypt and Mexico)).

The President said he agreed that one settler wouldn’t be construed as “Israel’s control.” Muskie can explain this to Modai.

Les Goldmann said that we want to limit this to oil actions on Israel’s part.

The President said yes. We don’t want Sadat to think that Israel has to agree on points in the autonomy talks for it to get oil. He wishes the team good luck; they should call him if need be. He thinks it will be ok.

(The meeting ended at 10:00 a.m.).

1. Source: Carter Library, National Security Affairs, Staff Material, Office, Presidential Advisory Board, Box 86, Sensitive XX: 10/1–15/80. Secret. The meeting took place in the Cabinet Room.
2. No memorandum of conversation of this meeting has been found. According to an October 8 memorandum from Owen to Carter, Modai “started pressing for further concessions, but he was told by our negotiators that this was the bottom line.” (Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Country Chron File, Box 22, Israel: 5–11/80) The resulting Agreement on Contingency Implementing Arrangements for the U.S.-Israeli Memorandum of Agreement on Oil Supply was signed October 17. A summary of this agreement is in telegram 276577 to multiple posts, October 17. (National Archives, RG 59, Central Foreign Policy File, D800494–0954)