Foreign Relations of the United States, 1964–1968, Volume XXXIV, Energy Diplomacy and Global Issues

245. Circular Telegram From the Department of State to the Embassy in France¹

Washington, June 17, 1967, 5:25 p.m.

212280. CEDTO. Subj: Council Consideration of Oil Committee Report—June 20.² Ref: Paris 20251.³

1. In Council and pre-Council negotiations of decision on oil, you should bear in mind our conviction that emergency does in fact exist ultimate seriousness of which we cannot judge, but it almost certainly involves necessity for effective coordinated use free world tanker fleet and may ultimately require apportionment measures.

2. We would hope as companies provide more information on oil supply situation to officials host governments potential seriousness will be clearer to them. We are pleased to note German position seems to be moving in right direction. There also some indication Japanese movement.

3. Begin FYI. Our objectives are:

a To avoid position of demandeur while protecting U.S. interest in health free world economy and position of Anglo-American oil companies both in producing and distributing areas. We are concerned at danger of nationalization or take over both in Arab world and in European markets.

b Staying as close as possible to existing OECD plan both because it provides agreed rules and because those rules exempt U.S. from apportionment formula. End FYI.

c Establishing International Industry Advisory group as soon as possible with mandate that would permit it to advise Oil Committee on use of available tanker capacity. We think Europeans should share our concern that mere study exercise will lose us all valuable time.

d To obtain recognition that emergency exists in order to facilitate decision that will permit American companies to participate actively in International Industry Advisory group. This last objective is derived from domestic U.S. requirements and unfortunately it appears to conflict with European, especially French, interest, in avoiding action which allegedly might stimulate irrational Arab reaction. To extent OECD agrees on common approach as a precautionary measure, however, we would hope likelihood of irrational Arab reaction may decline. Moreover, supply shortfall is likely to be greater without an agreed plan of action, and impact would fall unevenly on European countries.

4. If, in your soundings of other delegations prior Council meeting, you find major opposition to setting up Industry Advisory group closely linked to C(60)83 Final,⁴ Council consideration could perhaps be kept essentially exploratory. If another country wishes delay Council meeting for short period this could be accepted. In our view both time and the information which should become available to governments are working towards adoption recommendation 3(a) in Oil Committee report although we recognize French for own reasons may continue to obstruct.

5. It is most important that Council action be based on 1960 arrangements because of allocation aspects of plan. We consider it certain that pressures for U.S. participation in allocation mechanism would be greater under approach not connected to 1960 agreements than under implementation of 1960 agreements, which are European arrangement from which U.S. is exempted. Moreover, advantage of allocating under previously agreed rules is an important one.

6. U.S. Defense Production Act and relevant provisions of Voluntary Agreement concluded pursuant thereto require that emergency situation exist which affects or threatens to affect adversely the defense mobilization interests or programs of the U.S. before U.S. companies can participate in concerted action otherwise inconsistent with anti-trust law, including participation in international industry advisory body to be set up by OECD. Since direct effect of present disruptions of oil supply falls mainly on European countries rather than on U.S., clear statement that Europeans agree emergency situation exists is highly important to support giving of authority to U.S. companies to engage in cooperative efforts. Conversely, indication that they doubt seriousness of present situation makes it nearly impossible to support conclusion that US faces emergency threatening its security interests.

7. We therefore need as clear indication as Europeans willing give that they consider present interruptions of normal petroleum supplies constitute emergency. For this purpose, following are possibilities in order of preference:

a Statement that action setting up industry advisory body is being undertaken in response to existence of emergency.

b Statement that action setting up industry advisory body is being undertaken in response to existence of supply disruption which adversely affects or threatens to affect security of OECD members.

c Implicit agreement that adverse effects or threat exists by reference to documents (such as C(60)83 Final or para 3a document contained in Paris 20158)⁵ that provide for actions by OECD in event of emergency.

8. In any of these cases, acceptability of wording to U.S. depends, at least for purposes of Tuesday Council meeting, also on explicit reference to 1960 arrangements and, of course, on provision for establishment international advisory group.

9. If other members agree on wording acceptable in terms paras (7) and (8), you may accept. If such wording provides that U.S. companies would necessarily participate in international industry advisory body, you may accept ad referendum or reserve, approval to be given when it certain U.S. companies will legally be able participate. If wording not acceptable in terms paras (7) and (8), you should seek delay or, if impossible postpone decision without giving appearance U.S. obstructionism, you should abstain.

10. We believe there will be considerable pressure on French to agree as major countries such as Germany and Italy realize that, while France might be able maintain her own supply, she is unlikely to be of any real assistance to them. If French were to abstain from Council decisions, we assume that under rules of procedure way could be found for others to implement industry advisory group and for group to be effective even without French. We prefer French abstention on decision implementing first part of OECD emergency plan to either sui generis study group idea or French multi-subgroup idea (Paris 20299)⁶ in any form which would separate out “guilty” countries (U.S. and U.K.) from all or most other OECD members.

Rusk

1. Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 1 OECD. Limited Official Use; Priority. Drafted by Percival and Rogers (EUR/RPE); cleared by Oliver (E/FSE), Patman (L/E), and Moore (Interior); and approved by Solomon. Repeated to all other OECD capitals.
2. See Document 241 regarding the drafting of this report. The report has not been found.
3. Dated June 15. (National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 1 OECD)
4. Reference is to the original OECD decision document on cooperation during an oil crisis which was agreed in 1960; see footnote 3, Document 230. Document 241 details the actual 1967 OECD proposals.
5. Dated June 13. (National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 3 OECD)
6. Dated June 16. (Ibid.)