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260. Editorial Note At the end of July 1967 Saudi Oil Minister Yamani traveled secretly to New York to meet with executives from Aramco's parent companies. "Aramco emphasizes meeting highly sensitive and Yamani anxious avoid any publicity," the Embassy reported in telegram 274, July 22. When word of the impending visit leaked to a business publication, Aramco officials denied the story. (Johnson Library, National Security File, NSC Special Committee Files, Economic [1 of 2]) Three days after the August 1 meeting with Yamani in the New York area, an Aramco executive told a Department official in Washington that the meeting had been devoted to "oil not politics." (Telegram 16312 to Jidda, August 4; ibid.) But Yamani did make an impassioned appeal to the oil companies to protect their own business interests and the position of both the United States and the moderate Arab nations: "Yamani told companies Arab/Israel struggle is cover for regional conflict between 'socialist' and conservative Arab states. At May Baghdad oil meeting, Yamani surprised find Syria and Lebanon represented. He had considered playing for time by suggesting Jordan and Sudan also be invited but in the end had felt unable to do so. Original intention meeting had been to provide for 'nationalization and confiscation' oil industry even in event Arabs won expected war. SAG efforts alone resulted in more moderate resolution." (Telegram 18475 to Jidda, August 9; ibid.) Yamani also said that the representatives of Arab states had discussed the U.S. position of support for the integrity and independence of all area states and had concluded that "effort should be made reduce USG 'to second rate power' so that significance our [U.S.] commitment to Israel would be lessened." (Ibid.)
261. Airgram From the Embassy in the United Kingdom to the Department of State/1/ A-476 London, August 3, 1967. /1/Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 2 UK. Limited Official Use. Drafted by J. McGrath (E/GEN), cleared by W. Armstrong, and approved by L. Percival. Repeated to Paris for OECD and Brussels for USEC. SUBJECT In the course of a wide range of conversations with official and trade sources about the European or more specifically UK oil outlook which is generally characterized now as probably manageable although still fraught with uncertainties, the Embassy has repeatedly heard one theme--that if the supply and tanker situation do seem manageable now and for the foreseeable future, this is in large part due to the prompt response of the US to the emergency, in the form of emergency measures and increased crude availabilities, and to the sense of urgency that the US initiatives generated among companies and governments in Western Europe. In almost every conversation, comparisons are made with 1956, and there follow expressions of gratification, frequently coupled with surprise, at the speed and effectiveness of the US response in 1967. (Questions usually are asked then about continuing and/or increased availabilities of US crude, and about prices.) Comment: We think it worth reporting these expressions because they have occurred so frequently and so spontaneously at all levels and because for a variety of reasons official and trade sources are likely to avoid public announcements on the subject. Bruce
262. Airgram From the Embassy in Germany to the Department of State/1/ A-188 Bonn, August 4, 1967. /1/Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 2 GERW. Limited Official Use. Drafted and approved by M.J. Dux (ECON). Also sent to London, Paris for OECD, Hamburg, and Beirut. SUBJECT Herr Kling of the Economics Ministry (Deputy Assistant Secretary) has confirmed information given us by the Bonn representative of Esso, A.G. to the effect that the crisis point in the German oil supply situation has been passed, and that supplies currently and for the foreseeable future are adequate for normal operations. There is, consequently, no present intention of permitting draw-downs of mandatory reserve stocks of crude oil or products. Both sources said that there have not as yet been any reported receipts of Libyan oil, although Kling pointed out that the government is not asking any questions as to the country of origin of oil entering the FRG via pipeline; it is permitting all Middle East oil to be declared as "Arab State" oil. Country of origin statistics will therefore have a permanent gap for the current year. Kling highly praised the performance of the companies during the past weeks in providing a continuing flow of crude through cooperation and organization. If the situation continued as at present, the perennial claim of the coal interests that only German coal can be relied upon as a safe form of energy will be deprived of validity. This would clear away one obstacle to the reduction of German coal production capacity and the extension of the duty-free coal import quota. Hillenbrand
263. Editorial Note On July 24, 1967, as the crisis abated, Iraq announced that it would resume shipments to all countries except the United States, United Kingdom, and West Germany. (Item for the Katzenbach report, July 27; Department of State, E Files: Lot 71 D 84, FSV Facilitative Service--1967) But the major suppliers to the United States continued to hold back due to fears of the political climate in the Arab world. When questioned, Saudi Oil Minister Yamani told U.S. officials that the U.S. position at the United Nations was making it difficult for Saudi Arabia to resume normal shipments: "Yamani said political climate needs to improve before SAG can risk lifting embargo." (Airgram A-41 from Jidda, July 26; National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 17 SAUD US) On August 9 Libyan Petroleum Minister Muusa confirmed to Embassy officials that his country had resumed direct export of oil to West Germany after the company agreed not to publicize the shipments. He explained that resumption of direct shipments to the United States and United Kingdom was still unlikely: "Indirect shipments via Canada and Ireland being encouraged, however." According to Muusa, the oil producers were unhappy that Arab Foreign Ministers had referred a decision on a proposal for a 3-month total oil boycott to all Arab states rather than just exporters. (Telegram 568 from Tripoli, August 10; ibid., PET 17-1 LIBYA) Despite the boycott, Abu Dhabi was exporting to the United Kingdom, and Bahrain was shipping to both the United States and the United Kingdom, while Shell was about to begin unrestricted production in Muscat and Oman. (Circular airgram CA-1232, August 12, 1967, ibid., PET 17-1 ARAB) On September 1 the Arab Heads of State Conference in Khartoum adopted a resolution calling for the resumption of production. Since export, not production, had been halted earlier, it was interpreted to mean that the embargo was over. For text of the resolution, see American Foreign Policy: Current Documents, 1967, pages 590-591. An item for Under Secretary Katzenbach's September 1 report notes: "The three moderate producers seem to have had to pay heavily for this and perhaps other concessions; Kuwait has agreed to an 'annual' payment of $154 million, Saudi Arabia $140 million and Libya $84 [million] to the 'victims of Zionist aggression' namely Egypt, which will get $266 million and Jordan which will get $112 million." (Department of State, E Files: Lot 71 D 84, FSV Facilitative Service--1967) When King Faisal returned from Khartoum on September 2, he announced that Saudi Arabia would resume oil shipments to all countries "without exception." (Telegram 874 from Jidda, September 2; National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 17-1 SAUD) In Libya, the oil companies were unofficially informed that the embargo was lifted that same day. (Telegram 941 from Tripoli, September 5; ibid., PET 17-1 ARAB)
264. Circular Telegram From the Department of State to Certain Posts/1/ Washington, August 25, 1967, 0343Z. /1/Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 17-1 ARAB. Confidential. Drafted by D. Newton (NEA/ARP) on August 24; cleared by L. Dinsmore (NEA/ARP), Davies, Battle, and Kelly (S/S); and approved by Rostow. Sent to Algiers, Amman, Beirut, Jidda, Kuwait, Rabat, Tehran, Tel Aviv, Tripoli, Tunis, Cairo, Dhahran, and Jerusalem, and repeated to London, Paris, and USUN. 26879. Ref: State 26123; Dhahran 146./2/ /2/Neither printed. (Ibid., POL 7 SUDAN and PET 17-1 ARAB, respectively) 1. Briefing top oil company executives of Aramco, four Aramco parents, Gulf, and Continental held August 24 at request of companies./3/ Meeting chaired by Rostow and attended by Harriman, Battle, Solomon, Davies, and representatives of USIA and Interior. /3/In attendance were G.L. Parkhurst (Standard-California), G.T. Piercy (Standard-New Jersey), H. Cash (Texaco), H.C. Moses (Mobil), I.G. Davis (Gulf), J.S. Royds (Continental Oil), L.F. Hills (Aramco), and J.W. Pendleton (Aramco). An August 23 briefing memorandum for Rostow reads: "The companies are worried over the positions of the Arab moderates and fear that the latter may be unable to stem the tide of radical Arab policies." (Memorandum from Battle to Eugene Rostow, August 23; ibid., PET 6 US) On August 9 Akins summarized the U.S. position: "Our vulnerability to Arab pressure lies in the possibility of nationalization of our oil interests in the Arab world. This would mean a loss of several billion dollars in direct investment, of thirty years effort in building an industry and of at least a billion dollars annually toward our balance of payments--the direct damage to the United Kingdom would be even more severe." (Memorandum from Akins to Bergsten (OMA), August 9; Department of State, E Files: Lot 71 D 84, FSV Facilitative Service--1967) 2. Rostow gave executives our views on current situation in Middle East, our efforts find constructive solution Arab-Israel problem, our attempts help moderate Arabs withstand pressure from radicals, and our thoughts on developments for near future./4/ /4/The briefing memorandum prepared by Battle for Rostow summed up the problem of dealing with the Arab states: "They are now forced to consider accepting conditions of life which have the effect of declaring to the whole world their impotence and their ineptitude. The pain caused by embarrassment over their exposure is still sensitive, and they seek alternatives which would eliminate their discomfiture. The signs are all too few that Arabs will see the light as we see it or will reverse their stated policies." The briefing memorandum also includes an analysis of the situation in each of the Arab states. (National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 6 US) 3. Companies made specific proposal that public USG statement be made before new Arab foreign ministers conference and summit which would provide reassurance to moderate Arab states. Executives stressed this "key moment" to make such statement. Rostow agreed give proposal full consideration. Battle pointed out many such statements drafted but it is exceedingly difficult to construct one which satisfies one side without offending other. Davies discussed aide-mémoire (State 26123)/5/ to be presented Arab foreign ministers before August 26 meeting in Khartoum. /5/Not found. 4. Executives asked how companies could help in current situation./6/ Rostow and Battle emphasized need for support in current difficulties with Congress, especially in fields foreign aid and arms supply. /6/In his briefing memorandum, Battle forwarded to Rostow a variety of development proposals which other sectors of the American business community had suggested. (National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 6 US) 5. FYI. We are considering merits backgrounder in depth for selected U.S. correspondents prior summit to provide some ammunition for moderates. End FYI. Rusk
265. Memorandum From the Assistant Secretary of State for Near Eastern and South Asian Affairs (Battle) to the Deputy Assistant Secretary of State for Near Eastern and South Asian Affairs (Rockwell)/1/ Washington, September 22, 1967. /1/Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET-NEAR E. Secret. Drafted by Sidney Sober (NEA/RA). Copies were sent to Palmer (AF) and Solomon (E). SUBJECT In considering the recent State-Defense study prepared under Ambassador Holmes,/2/ the SIG directed IRG/NEA, in cooperation with IRG/AF, to come up with a better assessment of our oil interests in the area, and whether or not the threat to these interests can be minimized. /2/Not found. I would like you to chair a small group to draft the assessment which the SIG has requested. Your group should have representation from E (which I assume will provide a major share of the input), AF and, I should think, CIA as well perhaps as EUR and INR. Your assessment should take account of scientific and technological research and development prospects, as they may affect the future for oil. Your draft should be ready by November 6, so that it may be considered by IRG/NEA (and also by IRG/AF if it wishes) in time to permit the study to be forwarded to the SIG by November 15.
266. Editorial Note During the late summer and early fall of 1967, disagreement arose among the oil producers when the Secretary General of OPEC proposed to move the organization's scheduled September meeting from Vienna to Beirut. Saudi Arabia concurred in the proposal, but Venezuela objected on the grounds that "Beirut venue would tend to inject politics into what should be strictly non-political conference." The Venezuelan Ambassador in Saudi Arabia told U.S. officials that "Venezuela has been subjected to considerable amount of Arab pressures re supporting Arab position in Israel and re participating in Arab embargo on oil shipments to US." He stated that Venezuela had made it "very clear" that it would not embargo oil shipments to the United States and that its "association with Arab states in OPEC must continue to be on strictly non-political plane." (Telegram 789 from Jidda, August 27; National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 3 OPEC) At the OPEC summit, which was held in Rome, a split between Iraq and Libya on one side and Iran and Venezuela on the other became apparent. Telegram 1506 from Rome, September 20, reported that an Iranian Embassy source confirmed that "effort was made to get non-Arab members agreement to limit their output in future to assist Arabs at appropriate time in putting pressure on West European customers. Stated that Iran flatly rejected all such suggestions as did Venezuela." Also, "In discreet manner, source implied that Iran had not and would not participate in politically motivated boycott actions and was pleased with the increase in offtake from Iran which situation since June had brought about." (Ibid.) The Embassy in Jidda reported that the Venezuelan Ambassador in Saudi Arabia believed that the prime mover behind the OPEC summit was Saudi Oil Minister Yamani who tried to make it "appear united Arab effort." The Venezuelan Ambassador described the "basic aim of Arab states as deriving sufficient extra revenue from companies to offset new subsidies to 'victims of Israeli aggression.'" (Telegram 1324 from Jidda, October 31; ibid.) In late October reports emerged in the press that Yamani was advocating the formation of an association of Arab oil exporting countries. While noting that they had not yet had the opportunity to meet with him, Embassy officials reported that "In recent months the concept that petroleum should become an instrument not only of economic policy but also of international political policy has gained strength, even though Arab efforts this summer to influence the United States and certain European countries through a partial embargo on oil proved generally ineffective." (Airgram A-180 from Jidda, October 24; ibid., PET 3 ARAB)
267. Circular Information Airgram From the Department of State to Certain Posts/1/ CA-3052 Washington, October 20, 1967, 6:11 p.m. /1/Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 3 OECD. Unclassified. Drafted by J. Stromayer (EUR/RPE) and approved by J. Oliver (E/FSE). Sent to all OECD capitals, Beirut, Tehran, and Dhahran. SUBJECT 1. The Emergency Petroleum Supply Committee (EPSC) reported to Assistant Secretary of the Interior J. Cordell Moore on October 10 that it did not foresee Free World petroleum supply difficulties or a tanker shortage through March 1968 that would require emergency action. The principal conclusions of the Committee's report are: --There will be no Free World shortage of crude oil or refining capacity in the fourth quarter of 1967 and the first quarter of 1968. --Tanker tonnage during this period will be tight but adequate to meet requirements. --The opening of Tapline, a pipeline that originates in Saudi Arabia and terminates in Lebanon, as well as the easing of destination restrictions by Arab nations, will continue to provide additional petroleum supply flexibility. --There is no need for emergency Federal action to meet Free World requirements at the present time. --No further analysis of the first quarter of 1968 is required unless there is some significant change in the present situation. The committee estimated that Free World petroleum demand in the fourth quarter of 1967, excluding the United States and Canada, will be 19,150,000 barrels per day while crude oil production is estimated at 20,230,000 barrels per day--an increase of 9.7 per cent over the third quarter. The committee estimated first quarter 1968 Free World petroleum demand at 19,500,000 barrels daily, an increase of 1.8 per cent over the fourth quarter, and crude production at levels fully adequate to meet demand. 2. The conclusions of the EPSC report are consistent with those submitted to the OECD Oil Committee by its International Industry Advisory Body on September 13, 1967. Rusk
268. Airgram From the Embassy in Lebanon to the Department of State/1/ A-605 Beirut, January 17, 1968. /1/Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967-69, PET 3 OAPEC. Limited Official Use. Drafted by R. Wright and cleared by N.K. Pratt. Also sent to Jidda, Kuwait, Tehran, Tripoli, and Dhahran, and passed to Algiers, Amman, Ankara, Brussels, Cairo, Caracas, Djakarta, Lagos, London, Paris, Rome, Tel Aviv, The Hague, USUN, Vienna, and Beirut. SUBJECT REF /2/Neither printed. (Both ibid., PET 3 ARAB) The Arab World's three leading oil producers, Saudi Arabia, Kuwait, and Libya, signed an agreement in Beirut on January 9, 1968, establishing an Organization of Arab Petroleum Exporting Countries (OAPEC), which will have its headquarters in Kuwait. We are enclosing Middle East Economic Survey's report (January 12)/3/ on the establishment of the new organization; MEES also reports the major provisions of the OAPEC charter. /3/Not printed. During the press conference that followed the signing ceremony, Saudi PetMin Yamani confirmed that neither Algeria nor the UAR would be eligible for membership in the new group, as would, on the other hand, Qatar, Abu Dhabi, and Bahrain. Yamani pointed out that the charter provision on membership states that petroleum must constitute the principal and basic source of income for member-states. Although not specifically mentioned by Yamani, Syria would also be left outside OAPEC. As for membership and the rationale for establishment of the new grouping, MEES concludes that the three charter members believed "the main responsibility for policy decisions on Arab oil should rest with those who actually produce it and are utterly dependent on this one source of revenue." As we noted in our A-557, Saudi, Kuwaiti, and Libyan frustration with Middle East oil policy decisions following the June war probably gave considerable impetus to their decision to form OAPEC. Indeed, Iraq's refusal to become a charter member of the new group substantiates this view, i.e., whereas Saudi Arabia, Kuwait, and Libya wanted to establish a more moderate group (without the likes of Syria, the UAR, and Algeria), Iraq decided not to join the new group and indicated it would prefer to coordinate its oil policy under the aegis of the Arab League, which of course includes more radical elements than the new OAPEC. The commercial and economic nature of the new organization is also worthy of note; as Yamani stated during his press conference, OAPEC will be "the EEC of the Arab oil producers" and will be empowered to conclude commercial agreements and initiate and undertake transactions and joint enterprises with regard to oil and other related economic fields. It remains to be seen what sort of commercial cooperation can be undertaken between the diverse economies of the three charter members of OAPEC. However, as MEES notes, OAPEC will "at least provide a feasible framework for the implementation, . . . of the same sort of desirable inter-Arab projects as have in the past been consistently wrecked on the rocks of regional political discord." Finally, it would be interesting to learn the reactions of company lawyers to the idea of an OAPEC court which, under the OAPEC charter, will have authority over: 1. disputes regarding interpretation of the Charter; 2. disputes which may arise between the member states regarding oil matters; and 3. disputes which, in the opinion of the OAPEC Council of Ministers, fall within the jurisdiction of the court. Risalat al betrol al-arabi (a new Arabic petroleum newsletter published in Beirut, see A-602) goes beyond MEES's interpretation of the court's functions and notes that decisions of the court on disputes between member states (2 above) will be binding. As for 3, disputes the OAPEC Council of Ministers may decide fall within the jurisdiction of the court, Risalat al betrol al-arabi interprets this to mean that the court will act as a mediator or arbitrator between the OAPEC member states and the petroleum companies. MEES believes the court may have such jurisdiction in the future, but the new oil publication is more definite on this subject. We would appreciate information obtained by other posts as to the reaction of company lawyers to the idea of an OAPEC court and OAPEC in general. Reports on discussions between the Department and company headquarters legal staffs on this subject would also provide useful background information. Porter [Continue with the next documents]
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