CIA ANALYSIS OF EUROPEAN COMMUNITITES AND THE ENERGY CRISIS

• Document Type: CREST
• Collection: Library of Congress
• Document Number (FOIA) /ESDN (CREST): LOC-HAK-43-3-1-9
• Release Decision: RIPLIM
• Original Classification: C
• Document Page Count: 8
• Document Creation Date: January 11, 2017
• Document Release Date: May 28, 2010
• Sequence Number: 1
• Publication Date: January 11, 1974
• Content Type: MEMO

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MEMORANDUM
CONFIDENTIAL
NATIONAL SECURITY COUNCIL
MEMORANDUM FOR: GENERAL SCOWCROFT
1 f J
FROM: CHARLES-A OPER
128
INFORMATION
January 11, 1974
SUBJECT: CIA Analysis of European Communities and
the Energy Crisis
Attached at Tab A is a memorandum from Bill Colby on the European
Communities and the energy crisis. It's arnoderately interesting
review of how the energy problems fit in with a number of other issues
which concern the European Countries. If you have a chance, you might
want to glance through it. It doesn't require any response.
CONFIDENTIAL
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OCI-0421-74
11 January 1974
MEMORANDUM
SUBJECT: The European Communities and the
Energy Crisis
Note
This memorandum briefly reviews the
political cross currents in the European
Communities on 'the eve of the EC Council
meeting next week that will again address
the oil problem. As is frequently the case
in the EC, consideration of this problem,
critical though it is, has become enmeshed
p
in other community issues;-notably, the
dispute between Britain and West Germany
over the projected Regional Development Fund.
Quite apart from this complication, however,.
the member states remain far froma consensus
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on a unified approach. Many of them are
busily seeking bilateral deals. with Arab
producers. and.'all of'them are uncertain how
much cooperation they want with each other
or with the US and Japan. The EC countries
that have been invited by the President to
a conference. of consumers in Washington on
February ZZ are almost certain to attend.
but prospects are not now bright that they
will participate with a common point of
view.
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1. The Council of :4inis ters of the European Communities
(EC) meets on January 14 to resume consideration of an EC
approach to the energy crisis. The Council has failed. to
implement any of the recommendations on energy. made by the
EC leaders at the 'summit in, Copenhagen last month--at
least in part.because of the dispute between Britain and
Germany over the establishment of an EC Regional Develop-
ment Fund. The EC Commission has again called, however,'
for community solidarity and prior consultation between
members on matters concerning energy. It has also proposed
to the Council that the community respond favorably to the
US proposal for an energy action group (EAG).
2. The impasse over the Regional Fund has arisen
because Germany.--the largest potential contributor--wishes
to limit the Fund to an amount far below what the Heath
government believes it must have to demonstrate at home
that the British can receive tangible benefit from community
membership. Bonn has used the regional policy issue to sup-
port its argument that the EC must institute better control
of its spending. The Germans are also piqued that they are.
constantly being asked in effect to be "paymasters" of the
community without reciprocal demonstrations of EC solidarity
in matters of great interest to them, such as energy policy.
3." Germany is now prepared to make some concessions--
principally to provide a larger share to Britain by rede-
fining the regions eligible to draw on the Fund. However,
should this still be unacceptable to the British, London
may continue to link progress on a community approach to
the energy situation to a resolution of the regional question.
Moreover, even if the regional dispute is resolved, it is
unlikely that the Council will adopt any'farreaching energy
measures, given the differing situations the members face
and their. sharply divided counsels.
4. As a result of the Arabs' easing of delivery cut-
backs, European concern over oil shortages has greatly
declined in the past few weeks--only to be-replaced by
growing alarm over the impact of escalating prices on the
oil-import bill. While horrendous for all,-the rising costs
will have varying effects on balance of payments positions
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and rates of inflation. Thus, while the need for EC ar-
rangements on oil sharing has perhaps become less pressing,
agreement on a common energy policy may now have to cope
with the even more difficult problem of achieving agreement
on financial solidarity..
5. More important, however, the EC countries remain;
uncertain whether a national, regional, or international
.approach to the energy problem will best serve their in-
dividual and common interests. To some extent virtually
all the EC members are indulging in each approach--or
"playing in evezy game going," as one British official
frankly characterized UK policy. Those, like Britain and
France, who feel they'have strong national. cards to play--
such as promises of arms deliveries--show no inclination
to exercise restraint on bilateral arrangements while
multilateral agreements are negotiated. Those. members
who stand to lose out in a free-for-all competition empha-
size the need for enhancing the bargaining position of the
community as a whole. Meanwhile, all the members are un-
decided on the merits of an international approach--that
is, cooperation with other large consumers like the US and
Japan. Seen by some of the European governments as a threat
to an eventual role for Europe in the Middle. East, others
believe such cooperation might possibly provide a strength-
in-numbers that the community itself may not have.
6. The EC Commission, for its part, has sought to
push the community towards an international approach--
partly because this might force the Nine to forge a common
position among the=pelves, and partly because it is convinced
.that such cooperation best guarantees the filling of Europe's
long-range energy needs: The gu4delines the Commission laid
down at the Copenhagen summit called for the preparation of
.comprehensive "balance sheets". covering the community energy
situation, examination of the economic and financial reper-
cussions of the energy situation,. proposals to ensure the
orderly functioning of a common market for energy, equitable
measures to limit energy consumption, and a community program
on alternative sources of energy.
7.- The Commission has now also strongly recommended
that the EC favorably consider the EAG proposal9.' To that
t
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.end it is urging the EC member sto consult among themselves
prior to contact with the US on.EAG. The Commission position
has been somewhat strengthened by the US offer--if the EC
requests it--to extend to all the member states the Presi-
dent's invitation' to.the.me.etng of consumer countries in
Washington next month.` The US willingness to talk with the
community as an entity will also support the Commission's..
request that the members' response be' given "with one voice.".
nevertheless, it still seems doubtful that the invitees will
come to the meeting with much in the way of a joint position.
8. The French will almost certainly respond positively
to the US invitation-,-the subject being too important for
Paris to be able to. stand aside. They will nevertheless
question the usefulness of such a conference and register
their. opposition to the development of a "consumers' front
vis-a-vis the producers. Paris will probably stress that
the EAG's goals should belong-range and aimed-at research
into alternatives to oil. The risk for Paris in an EAG is
that of isolation from the more cooperation-minded members,
.since the French have put it clearly on record that they do
not intend to slow down their own negotiations with the Arabs
pending the outcome of the. President's initiative. .fin .their
usual effort to square the circle, however,.the French will
try to bring their EC partners together so that the Europeans
can face the US and Japan as a cohesive group. The "clarifi-
cations" of the US proposal that France will demand will at
least in part'be.a delaying tactic to give Paris time to
lobby for its views with the other EC members. One of France `s
main preoccupations will be to leave the door open to eventual
European cooperation arrangements with the .Arabs that do not
depend on US support.
9. The UK was among the first publicly to endorse the
EAG proposal. But it is quite clear--from its own negotia-
tions with Saudi Arabia for an oil-in-exchange-for-developments
aid deal---that London will miss no opportunity, multilateral
or bilateral, to assure its access to as much oil as possible.
.The British hope that the consumers' meeting will endorse the
OECD as the locus for most of the follow-on work, and have
also said that they. would accept immediately any, call from
OPEC . for an OECD-OPEC dialogue. Given their opportunistic
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approach, it is most unlikely that the British will permit
themselves to be committed to any.specific course of com-
munity action-in the near future. In. the longer run, as
one British' official has confided, there wil1, of course,
be a community energy policy to'which the UK will subscribe
and include its North Sea oil. But that, Whitehall knows,
is not for tomorrow.
10. Most of the smaller EC members,?and Germany, are
more sincere in their support of the EAG. Unlike.France,,
which may well argue that European participation in the
group would be meaningless without a common position,
Germany will probably have few compunctions about partici-
pating in EAG planning efforts if its EC partners continue
to block progress toward community solidarity. For this.,
reason Bonn also prefers utilizing the.OECD,'where the tra-
ditional freedom of expression for individual country views
minimizes the political repercussions of intra-EC disagree-
ments. Meanwhile, of course, Bonn pursues its own search
for bilateral arrangements with oil producers, most notably
in Iran and Saudi Arabia.
11. The long-range prospects for EC energy cooperation
.may be less.bleak than they are in the short term. It is
conceivable that balance of payments pressures could bring
about a degree of solidarity--both within the community and
internationally--that the earlier threat of real oil penury
failed to produce.. If the economic effects of the oil crisis
result in a relatively stronger position for the US, the
Europeans may seek financial support from the US. Germany,
whose payments positioh is still fa.a,:rly' promising, would 'per-
haps.find similar leverage within the EC.
12. Another inducement to future intra-community co-..
operation is perhaps contained in the talks which begin
next week on a new non-preferential trade agreement between
the EC and Iran. Although the situation is quite unclear
at present because Iran is still being courted bilaterally
by many of the EC members, the oil crisis may encourage
discussion of an oil-for-trade concessions arrangement..
~COkf11'EAN' 6 I A
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Trade is a matter that falls within the jurisdiction of
the community and not the individual members. If oil
supplies were. to become a part of the bargaining, a com-
mon EC stance on supplies and pricing would also be
required. While' the initial talks with Iran may not get
into this, the idea of establishing links between oil
and trade has long been in the minds of some European
officials and may yet come to play a role in the commun-
ity's relations with oil producers.
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