HSG - 164. Memorandum of Conversation

Foreign Relations of the United States, 1969–1976
Volume XXIV, Middle East Region and Arabian Peninsula, 1969–1972; Jordan, September 1970, Document 164

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164. Memorandum of Conversation¹

Washington, September 29, 1972.

• SUBJECT
• Participation and Saudi–U.S. Oil Relations

• PARTICIPANTS
• His Excellency Ahmad Zaki Yamani, Minister of Petroleum and Mineral Resources of Saudi Arabia
• His Excellency Ibrahim al-Sowayel, Saudi Arabian Ambassador to the U.S.
• Honorable John N. Irwin, Acting Secretary
• Honorable Rodger P. Davies, Acting Assistant Secretary for NEA
• Mr. James Akins, Director, Office of Fuels and Energy
• Mr. Nicholas Veliotes, Special Assistant, U
• Mr. Francois M. Dickman, Director, NEA/ARP

Summary: Yamani saw few obstacles remaining before reaching final agreement with the oil companies on participation. He did not believe other oil producing countries could disrupt this agreement if he could show that it is fair and advantageous. Once participation is achieved, Saudi Arabia wants to invest in downstream oil operations. Otherwise, it will soon no longer be in Saudi Arabia's economic interest to increase oil exports and accumulate surplus cash reserves in depreciating currencies. He hoped the U.S. would give Saudi oil special treatment. If an early start is made, the end result would be to have a huge Saudi investment in downstream facilities in the U.S. with an obligation by the Saudis to move their oil to these facilities in future years. Not only would this assure future energy supplies to the U.S. but would also benefit the U.S. balance of payments. End Summary

"...The Minister observed that given the present growth in Saudi oil production, the Kingdom's oil revenues will soon exceed its spending capacity. There will no longer be any need to accumulate any more surplus foreign exchange to deposit in foreign banks since the appreciation of oil left under ground will be greater than the return on foreign exchange assets. This problem could be avoided if national oil companies of producer nations can go downstream. Otherwise, if no outlets for this surplus cash are available, pressures to implement a production control program would be inevitable and this would have a serious and adverse effect on the consumer..."


Source: http://history.state.gov/historicaldocuments/frus1969-76v24/d164