216. Information Memorandum From the Assistant Secretary of Energy for International Affairs (Bergold) to Secretary of Energy Schlesinger1
SUBJECT
- SCC Meeting on Tokyo Summit Energy Proposals
Purpose
To provide the Secretary with information on the status of Tokyo Summit preparations for the SCC meeting on June 12.2
Background
The SCC, possibly chaired by the President, is tentatively scheduled to meet Tuesday afternoon, June 12, to determine the U.S. proposals and positions on energy issues to be discussed at the final pre-Summit consultations to be held in Paris June 15–16.
Since there is general agreement within the U.S. Government, as well as among our Summit partners, on the longer-term energy measures to be agreed in Tokyo, the SCC discussions will be devoted to finalizing U.S. initiatives keyed to moderating the critical short-term oil supply and price pressures on the world market. Because the near term prospects for increased OPEC production remain uncertain, the various short term measures being considered within the USG rely exclusively on demand restraint, specifically oil import limitations, and spot market price control actions. With growing concern over future oil availability and price paths, the success of the Summit is likely to be judged on the public perception of the potential effectiveness of any agreed measures. This requires that we transcend last year’s general and mild commitment made in Bonn to reduce dependence on imported oil. The President, moreover, has indicated his willingness to consider tough, new measures designed to achieve a more satisfactory world oil market balance.
In anticipation of the meeting with the President, the NSC staff has prepared the attached background paper (Tab A).3 In addition, [Page 671] Treasury (Ed Fried) has redrafted the paper you reviewed at the June 1 SCC meeting (Tab B).4
Discussion
Demand Restraint
An effective demand restraint objective will be the centerpiece of any Summit agreement. While the IEA and EC have agreed to reduce demand on the world market by 5 percent, and the IEA has recently extended this commitment to 1980, there is skepticism that these targets are meaningful. Chancellor Schmidt believes that any 1980 Summit target should be measured from an historical rather than, as in the IEA, from a projected base and should be made distinct. Following are the various proposals to meet, strengthen and make the 5 percent target less ambiguous.
—The NSC staff (particularly Henry Owen) prefers extending the 1979 target to 1980 and increasing it from 5 to 7.5 percent. His target would still be measured against pre-crisis demand projections.
—They have also proposed adding a collective oil import goal without specific national targets. This could be expressed by agreeing to hold oil imports in 1980 to a level no higher than a particular base year, such as 1977 or 1979. In volume terms, those levels would amount to 22 MMB/D or 21.5, respectively. (See attached table)5
—There is also support in the NSC and Treasury for considering specific national import targets allowing for no growth in 1980 imports over those of 1979.
Recommendation
I believe DOE should propose a commitment to extend and redefine, on a historical basis, the 5 percent demand restraint target to 1980, coupled with a group commitment to hold 1980 oil imports to 1977 levels (22 MMB/D). A strengthening of the target underlines Summit countries determination to restrain oil imports and support public efforts to dramatize the seriousness of the present crisis. It also meets Chancellor Schmidt’s concerns for a more specific target and, by using 1977 as a base year, permits each Summit country to marginally increase imports. For the U.S., this increase would be on the order of 300–400 MB/D.6
[Page 672]Triggering the IEA general allocation mechanism
Treasury, State and the NSC express considerable sympathy for formally or informally triggering the IEA general sharing mechanism to allocate oil, as a supplement to demand restraint measures. DOE has resisted triggering the allocation system although we could agree to a closer IEA monitoring of current company allocation practices if necessary to achieve support for stronger demand restraint efforts.7
Efforts to restrain spot market prices
In response to your recent conversation with French Energy Minister Giraud, we are studying the feasibility of instituting practices to curb spot market prices; the French are sending a member of Giraud’s staff to Washington to present their proposal on Tuesday, June 12. Implementation of any mutually agreed price related practices under this option are currently constrained by German opposition. Schmidt has hinted, however, that he would not stand alone in opposition to a summit consensus on this issue.
Longer-term measures
The following agreed longer term measures for Summit action require approval by the SCC:
—Coal—a commitment to increase use and production of coal and create an International Coal Advisory Board;
—Nuclear Power—a reaffirmation of the need for nuclear power coupled with increased national and international efforts in the field of nuclear safety;
—Energy Technology—a commitment to establish an International Energy Technology Group composed of experts able to assemble consortia to finance large scale projects involving new energy technologies; and
— LDC Energy Assistance—an agreement to increase efforts to assist LDCs identify and develop conventional and renewable energy sources in conjunction with the World Bank.
- Source: Library of Congress, Manuscript Division, Schlesinger Papers, Box 1, Japan. Secret. Drafted by Treat on June 8. A typed notation at the end of the memorandum reads: “Original given to JRS directly by John Treat,” and a handwritten note on the first page reads: “JRS has seen.”↩
- The Presidential Review Committee met on June 12, not the Special Coordination Committee. See Document 218.↩
- Dated June 7; attached but not printed.↩
- Not attached; it may be the paper attached to Document 213.↩
- Attached but not printed.↩
- Schlesinger wrote in the margin next to this paragraph: “not to exceed ’77.”↩
- Schlesinger underlined the phrase “IEA monitoring of current company allocation practices” and made a checkmark in the margin.↩
- Printed from a copy with this typed signature.↩