NATIONAL SECURITY DECISION DIRECTIVE - 87 COMPREHENSIVE U.S. ENERGY SECURITY POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP10M02313R000100900003-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 25
• Document Creation Date: December 22, 2016
• Document Release Date: March 13, 2012
• Sequence Number: 3
• Publication Date: March 30, 1983
• Content Type: REGULATION

Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
EXECUTIV SECRETARIAT
Routing Slip.
.
w
5 DDI /
ACTION
DDC1
EXDIFt
D/ICS
.
_l._
b DDA
IN DATE INITIAL
8 DDS&T 9 Chn1NIC
10 GC M A D B E D 23 JAN 91
11 IG
12 COMA
1 13 D/EEC)
t14 D,/Pers
15 D/OEA
16 C/PAD/OEA
SA/IA I
20
18 A0/DCI
ExecutivpbSesretary
Dot.
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
TO.
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA RDP1 OM02313R000100900003-8
TS 830094/1
COPY I
No. NSDD 87
COPY #11 (CIA)
Attach: TS 830094/2
NATIONAL SECURITY Copy# 1
COUNCIL
INFORMATION
Notice
The attached document contains classified National Security Council
Information. It is to be read and discussed only by persons authorized by
law.
Your signature acknowledges you are such a person and you promise you
will show or discuss information contained in the document only with
persons who are authorized by law to have access to this document.
Persons handling this document acknowledge he or she knows and
understands the security law relating thereto and will cooperate fully with
any lawful investigation by the United States Government into any
unauthorized disclosure of classified information contained herein.
Access List
DATE NAME
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000106900003-8
 UNCLASSIFIED when blank-TOP SECRET when attached to Top Secret Document-Automatically downgraded or declassi-
fied when filled in form is detached from controlled document.
CONTROL AND COVER SHEET FOR TOP SECRET DOCUMENT
DOCUMENT DESCRIPTION
REGISTRY
SOURCE
WHITE HOUSE
CIA CONTROL NO.
TS 830094/1
DOC. NO. SYS II 90126
DATE DOCUMENT RECEIVED
DOC. DATE 30Mar83
6April83
COPY NO. 1
LOGGED BY
NUMBER OF PAGES
TSCO, ER
NUMBER OF ATTACHMENTS
TS 830094/2 - 20 pages
ATTENTION: This form will be placed on top of and attached to each Top Secret document received by the Central Intelligence Agency
or classified Top Secret within the ;CIA and will remain attached to the document until such time as it is downgraded, destroyed, or
transmitted outside of CIA. Access to Top Secret matter is limited to Top Secret Control personnel and those individuals whose official
duties relate to the matter. Top Secret Control Officers who receive and/or release the attached Top Secret material will sign this form
and indicate period of custody in the left-hand columns provided. Each individual who sees the Top Secret document will sign and
indicate the date of handling in the right-hand columns.
REFERRED TO
RECEIVED
RELEASED
SEEN BY
OFFICE
SIGNATURE
DATE
TIME
DATE
TIME
SIGNATURE
OFFICE/DIV.
DATE
ER
NOTICE OF DETACHMENT: When this form is detached from Top Secret material it shall be completed in the appropriate spaces below
and transmitted to Central Top Secret Control for record.
DOWNGRADED
DESTROYED
DISPATCHED (OUTSIDE CIA)
TO
BY (Signature)
TO
BY (Signature)
WITNESSED BY (Signature)
BY (Signature)
OFFICE
DATE
OFFICE
DATE
OFFICE
DATE
F6ORM 26
.73 use PIIVIOUI IoITIONS.
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
TOP SECRET
TOP SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
UNCLASSIFIED when blank-TOP SECRET when attached to Top Secret Document-Automatically downgraded or declassi-
fied when filled in form is detached from controlled document.
CONTROL AND COVER SHEET FOR TOP SECRET DOCUMENT
DOCUMENT DESCRIPTION
REGISTRY
SOURCE
WHITE HOUSE
CIA CONTROL NO.
TS 830094/2
DOC. NO. SYS I I 90126
DATE DOCUMENT RECEIVED
DOC. DATE 30Mar83
6A r83
COPY NO. 1
LOGGED BY
NUMBER OF PAGES 20
TSCO/ER
NUMBER OF ATTACHMENTS
ATTENTION: This form will be placed on top of and attached to each Top Secret document received by the Central Intelligence Agency
or classified Top Secret within the CIA and will remain attached to the document until such time as it is downgraded, destroyed, or
transmitted outside of CIA. Access to Top Secret matter is limited to Top Secret Control personnel and those individuals whose official
duties relate to the matter. Top Secret Control Officers who receive and/or release the attached Top Secret material will sign this form
and indicate period of custody in the left-hand columns provided. Each individual who sees the Top Secret document will sign and
indicate the date of handling in the right-hand columns.
REFERRED TO
RECEIVED
RELEASED
SEEN BY
OFFICE
SIGNATURE
DATE
TIME
DATE
TIME
SIGNATURE
OFFICE/DIV.
DATE
ER
NOTICE OF DETACHMENT: When this form is detached from Top Secret material it shall be completed in the appropriate spaces below
and transmitted to Central Top Secret Control for record.
DOWNGRADED
DESTROYED
DISPATCHED (OUTSIDE CIA)
TO
BY (Signature)
TO
BY (Signature)
WITNESSED BY (Signature)
BY (Signature)
OFFICE
DATE
OFFICE
DATE
OFFICE
DATE
FORM
8.73 26 USE PSEVIOUS EDITIONS.
TOP SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
TOP SECRET
TOP SECRET
March 30, 1983
MEMORANDUM FOR THE VICE PRESIDENT
THE SECRETARY OF STATE
THE SECRETARY OF THE TREASURY
THE SECRETARY OF DEFENSE
THE SECRETARY OF INTERIOR
THE SECRETARY OF AGRICULTURE
THE SECRETARY OF COMMERCE
THE SECRETARY OF ENERGY
THE DIRECTOR, OFFICE OF
MANAGEMENT AND BUDGET
THE DIRECTOR OF CENTRAL INTELLIGENCE
THE UNITED STATES TRADE REPRESENTATIVE
THE CHAIRMAN, COUNCIL OF
ECONOMIC ADVISORS
THE CHAIRMAN, JOINT CHIEFS OF STAFF
THE ADMINISTRATOR, AGENCY FOR
INTERNATIONAL DEVELOPMENT
SYSTEM II
90126
SUBJECT: National Security Decision Directive - 87
Comprehensive U.S. Energy Security Policy (S)
The President has signed the attached National Security Decision
Directive, setting out Comprehensive U.S. Energy Security Policy
for Energy Emergencies. The NSDD concludes the comprehensive
phase of the interagency work done under National Security Study
Directive-9, but also directs a series of continuing studies to
exercise U.S. energy security contingency planning. Those
studies, their deadlines, and the Cabinet Councils in which they
will be considered are indicated in the text of the NSDD, and
are also attached as a separate list at the end of the NSDD.
Cabinet Officers are directed to ensure that these studies are
completed on schedule. The National Security Council staff will
continue to provide central supervision over the timely submission
and consideration of these studies. (TS)
TS 830094/1
Attachment COPY
Tab A - National Security Decision Directive (NSDD-87)
TOP SECRET
Declassify on: OADR
COPY.._ OF /s Up!
rnv FCRET 04
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
1UL' SLURLI
March 30, 1983
NATIONAL SECURITY DECISION DIRECTIVE 87
Comprehensive U.S. Energy Security Policy (S)
SYSTEM II
90126
Within the guidelines of U.S. National Security Strategy
(NSDD-32), this directive establishes a comprehensive U.S.
energy security policy integrating the economic, foreign policy
and national security interests of the United States to anti-
cipate, prepare for, and respond to energy emergencies in the
1980s. (C)
The Administration's approach to a comprehensive energy security
policy rests on three fundamental principles:
-- Primary reliance on the domestic and international
marketplace both before and, to the extent possible,
during an energy emergency.
Preparedness to enhance energy supplies in an emer-
gency.
Provision of energy supplies for defense and broader
national security purposes under all circumstances,
both emergency and non-emergency. (C)
To implement these principles, Administration policies seek
-- to improve the functioning of the domestic and inter-
national marketplace before an emergency, so that the
marketplace will operate with maximum efficiency once
an emergency occurs.
to affect supply side factors in an emergency without
controlling overall market price, supply and demand.
to ensure that the U.S. and its allies can acquire the
necessary fuel supplies to meet Western security needs
under all circumstances. (C)
TOP SECRET
TnD ccrP cT
uLPYI _0F
(/A
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
2
TOP SECRET
TOP SECRET
NSSD-9 initiated a process of energy emergency planning activ-
ities in four areas:
1. Projections of world (OECD, Communist countries and
LDCs) energy supply, demand and trade in the 1980s and
beyond to the year 2000.
2. Assessment of the sources and consequences of poten-
tial disruptions to world energy supplies.
3. Analysis of U.S. policy responses to the economic
effects of potential disruptions, including policies
existing before an emergency to deter the disruption
and to ensure the most efficient operation of the
marketplace once a disruption occurs.
4. Analysis of U.S. policy responses to the military
effects of potential disruptions, including policies
to ensure that U.S. and allied defense agencies can
meet defense requirements in an emergency under both
non-mobilization and mobilization circumstances. (S)
The conclusions reached in each of these areas are set out
below. They provide a .sound foundation and future guidelines
for continuing interagency work on U.S. energy security policy.
(C)
The Administration's energy security policy seeks to preserve
maximum decision-making flexibility for dealing with emergencies
when they occur. Since all the circumstances we are likely to
face cannot be known until the emergency occurs, it would be
unwise to lock the U.S. government into specific preconceived
responses before an emergency. At the same time, it is impera-
tive that the agencies anticipate, before the emergency, all
conceivable circumstances which we may have to face and develop
the necessary information, analysis and policy choices that
policymakers will need to make rapid and well-informed decisions
in an emergency. (C)
I therefore direct the responsible agencies to continue the
planning activities initiated under NSSD-9 and to conduct all of
their energy emergency planning, research and operational
activities within the guidelines set out in this directive. (C)
PYOFC LS
TOP SECRET
CM
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
3
TOP SECRET
TOP SECRET
I. Projections of Supply and Demand
The success of long-term forecasts in predicting outcomes in the
world energy market has been minimal. Projections remain
vulnerable to assumptions about highly uncertain variables such
as economic growth, energy prices and the response of supply and
demand to changes in prices. Thus, Administration planning
should project a range of plausible supply and demand forecasts
based on varying assumptions about key variables and drawing
critically on available forecasts in the private and public
sectors. This range should be updated periodically using the
same methodology of avoiding a single or consensus forecast. (S)
Most recent private and public sector forecasts of long-term
supply and demand project the following range of possibilities:
Free World energy consumption will rise at an average
annual rate through the 1980s of between 2.2-2.4%,
based on an annual rate of growth of GNP ranging from
2.6-3.2%.
Natural gas consumption will grow between 2.3-2.6% per
year through the year 2000, with Europe more than
doubling its imports of natural gas from the Soviet
Union and Africa.
Coal consumption will increase in a range from 3.2-3.9%
per year through the year 2000, with coal trade
increasing between Western Europe and its principal
suppliers in the U.S. and Australia.
While coal and nuclear power will meet most of the
projected growth in energy demand, oil will continue
to provide between 40-50% of the Free World's total
energy needs through the 1980s and 1990s, ranging from
48-53 mbd in 1990.
The Free World will remain dependent on OPEC oil for
roughly half of its oil requirements through the
1990s, ranging from 23-29 mbd.
NATO countries (including the U.S.) will continue to
depend on Persian Gulf oil, in the aggregate, for
about 40% of their total oil imports in 1990, with
individual country dependencies ranging from 25% to
60% of total oil imports.
World oil supplies will increase less than 1% annually
through 1990 with non-OPEC productive capacity fully
utilized except during periods of excessive oil market
weakness. (C)
TOP SECRET
TOP SECRET
0ZI
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
TOP SECRET
_.. 0 r'', ~4- r, i ' -'~'
I , e ~LUKL I
A critical examination of the assumptions in these forecasts suggests
a need for a wider range of possible outcomes. Accordingly, current
Administration-planning is based on a high GNP growth rate through the
1980s of 4% per year and a low growth rate of 2% per year. These
assumptions yield a plausible range of free world oil consumption for
1990 of 48-55 mbd. At the upper end of this range, consumption will
be pushing against available capacity, raising prices to $40 per
barrel or higher in constant 1980 dollars. (S)
II. Potential Disruptions: Sources and Consequences
Oil Disruption Analysis
Since 1950, oil supplies from major exporting countries have been
interrupted on 13 occasions. Hence, the probability of some sort of
disruption occurring in the 1980s and 1990s is quite high. We cannot
pinpoint with any accuracy where, when, or how severe such a disruption
might be. All things considered, we believe the most secure sources
of oil among the oil exporting developing nations are Mexico, Venezuela,
and Indonesia. Saudi Arabia, the United Arab Emirates, and Nigeria
would come next, not necessarily in that order. The least secure
sources are Iraq, Iran, and in the near-term Kuwait, the latter,
because of the external threats posed by Iran and Iraq. (TS)
Given estimates of oil export capacity and low and high levels of
consumption, we have examined five possible classes of disruptions of
oil export capacity. These include a Class I disruption (16-17 mb/d),
Class II disruption (11 mb/d), Class III disruption (7 mb/d), Class IV
disruption (4 mb/d), and a Class V disruption (2.million b/d). Dis-
ruptions of capacity need not equate with disruptions of supply given
the existence of surplus capacity.
? Surplus export capacity in world oil markets is projected at
6-9 million b/d through 1985. The availability of this
capacity in an emergency assumes that producers with surplus
capacity will use that capacity (5-6 million b/d of current
surplus capacity is located in the Persian Gulf) and that
other producers will operate at or near capacity. Thus, the
availability of this capacity represents an upper bound on
potential oil supply to offset disruptions in the short-term.
? Projected surplus capacity would enable the world market to
absorb a 2-4 mbd disruption -- Class IV and V -- through
1985.
? A Class III disruption in 1985 involving a 7 million b/d
reduction in capacity in the Persian Gulf, however, would
eliminate most, if not all, of this excess capacity.
? Major disruptions -- Class I and II -- would cause a net oil
supply shortfall. Closure of the Strait of Hormuz would
cause a 17 million b/d loss in export capacity resulting in
a net oil shortfall on the order of 8-10 million b/d. A
Class II disruption, such as a cut-off of supplies from
^r _.__ 0E7
TOP SECRET
t \`r SECRET Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
W' L
Saudi Arabia, would lead to a 11 million b/d loss in capacity,
resulting in a net shortfall of between 2-5 million b/d. (S)
If oil demand increases, especially toward the upper range we
have projected, a gradual erosion of excess export capacity later
in the decade would leave the world oil market increasingly
vulnerable to supply disruptions by 1990:
? Oil demand at the high end of the forecasting range (55
mb/d) would leave the market vulnerable to even a Class
V disruption. Only if demand approximates the low end
of the range (48 mb/d) would the market be protected
from Class IV or V disruptions.
? A major disruption in the Persian Gulf -- Class III --
involving the loss of 7 million b/d capacity would,
however, eliminate most surplus export capacity even
under a low demand scenario.
? A Class I disruption would cause a net supply short-fall
on the order of 9-16 million b/d. (S)
Near Term Oil Market Outlook
The Iranian invasion of Iraq and the repeated threats by the
Khomeini regime against other Persian Gulf countries raise the
distinct possibility that much of the present surplus in production
capacity could be quickly eroded by unpredictable events. Most
forecasts expect oil demand will approximate 45-46 million b/d in
1983. With available capacity of 53-54 million b/d, surplus
capacity should approximate 8 million b/d, an amount theoretically
sufficient to withstand Class III, IV and Class V disruptions.
However, since some 5-6 mbd of this surplus capacity is located
in the Persian Gulf, violence in this area could quickly eliminate
this surplus with consequences for actual and expected oil
prices. (C)
Economic growth patterns will play a key role in determining the
level of oil demand in the months ahead. If the world remains in
an economic slump, oil consumption would probably continue to
decline. A sharp economic recovery in 1983, however, could add
as much as 1 million b/d to oil demand. Restocking by private
companies could add an additional demand. Under these circum-
stances oil demand could rise to about 47 million b/d or above,
reducing surplus production capacity to 7 million b/d or less.
(C)
The escalation of the Iran-Iraq war could cause a loss of 4
million b/d in production capacity from the two countries. The
market would still have sufficient surplus capacity to offset an
additional 3 million b/d disruption. The reduced capacity
cushion, however, suggests that oil prices would rise more
sharply in the event of further disruptions associated with an
escalation of the Iran-Iraq conflict:
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
TOP SECRET
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
6
TOP SECRET
li Li UkLI
? Iranian intentions toward Persian Gulf supporters of Iraq
could lead to attacks against key oil installations in these
countries, resulting in a Class III disruption or larger with
severe price pressures.
? Even short of such attacks, fears of Iranian reprisal,
together with other factors, might influence the Saudis and
Kuwait to keep production at or below present levels, effec-
tively removing about 5 million b/d in surplus capacity from
the market and, again, creating upward price pressures. (S)
Regardless of developments in the Iran-Iraq war, a Class I or Class II
disruption would result in a significant net supply shortfall under any
reasonable assumptions about supply and demand. (S)
Barring such unpredictable supply interruptions, the present oil glut
may continue. The possibility of a sizeable oil price decline is
growing. There are substantial positive effects that would accompany
such a a decline: lower inflation, higher OECD growth, lower priced
fuel and manufacturing imports in the developing countries, higher
exports from developing countries to faster growing OECD markets, etc.
(S)
On the other hand, lower oil prices could lead to increased economic
and possibly political instability in oil exporting countries, heightened
uncertainty in international financial markets and, if sustained,
consequences for the production and development of.alternative fuels.
Administration planning should continue to examine the likely duration
and consequences of oil price declines and consider alternatives for
coping with the various consequences. (S)
Gas Disruption Analysis
Based on expected levels of gas consumption and imports, gas supply
disruptions do not appear to pose a major threat to the United States,
Japan or Western Europe in the next 5-6 years. Beginning in the late
1980s, however, growing dependence on imported gas could pose problems
for Western Europe if the Soviet pipeline project proceeds and if
measures are not taken to limit vulnerability. By 1990, gas supplies
from the Soviet Union, Algeria and Libya could provide as much as 40%
of total gas demand in Western Europe. While a simultaneous cut-off of
supplies from all three sources is unlikely, Algeria and Libya could
seek to exploit a Soviet cut-off to demand higher prices. (TS)
Coal Disruption Analysis
Coal supplies to Western Europe and Japan are relatively invulnerable
to catastropic disruption. Over the longer term, however, growing
reliance on steam coal imports may require greater consideration being
given to assessment of choke-points in steam coal trade, protection of
sea lanes for coal trade, adequacy of stocks in Western Europe and
Japan, and flexibility in inter-fuel substitutions. (S)
TOP SECRET
L
ls-
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
TOP SECRET
9 ULL)1 L
Microeconomic Impacts of Disruption
The price effects of Class I, II and III disruptions under differing
assumptions are substantial. In a Class I disruption in 1990, these
effects range from a price increase of 653% under assumptions of high
consumption and low response capability to an increase of 50% under
assumptions of low consumption and high response capability. In a
Class III disruption in 1990, using the same respective assumptions,
the price effects range from 100% to no increase.
? Potential price increases are larger in the later years of
this decade as less excess productive capacity is available
to offset supply losses.
? The higher the level of predisruption consumption, the
greater the price effects.
? The lower the demand elasticity, the lower the private stock
draw, and the lower the supply response by surplus capacity
producers, the greater the price increase. (S)
Our analysis also shows the effects of supply disruptions on oil
consumption. The closure of the Persian Gulf in 1990 would bring about
a significant decline in U.S. and Free World consumption as a result of
price-induced demand restraint. The decline in U.S. consumption could
range from 1.9 million b/d in the low demand case to 4.7 million b/d in
the high demand case, depending on the size of the demand response and
stock behavior. The range in decline of Free World oil consumption is
from 6 million b/d to 12.2 million b/d. (S)
Macroeconomic Impacts
Because of inadequacies in many existing models, the macroeconomic
impacts of supply disruptions are difficult to measure. Some models
fail to account for recent structural changes in energy use; others,
while accounting for the changes, exaggerate the adjustment occurring
in the short term. Administration planning should proceed on an urgent
basis to develop an improved understanding of macroeconomic effects and
practical methods for quantifying these effects, as has been done in
the case of microeconomic effects. This effort should include a
systematic evaluation of existing models and experimentation with other
models. It should be co-chaired by DOE and NSC, with Treasury, CEA,
OMB, OPD, and other interested agencies participating and result in
recommendations to the CCNRE for decisions on policy and legislative
actions no later than July 31, 1983. (S)
Although it is not now possible to quantify the macroeconomic effects
of disruptions, Class I, II and possibly III disruptions would have
substantial detrimental effects on the U.S. and world economies. As a
result of the large price increases and wealth transfer associated with
these disruptions, it is likely that these effects would be characterized
by large inflationary pressures, significant unemployment, substantial
deepening of the worldwide economic recession, and increasing debt
burdens on poorer oil importers. (S)
TOP SECRET
TOP SECRET
cry
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
8
TOP SECRET
710.0 SECRET
Political Impacts
As evidenced during the 1973 and 1979 disruptions, the U.S. and its
allies are likely to be subjected to internal as well as external
pressures in the event of a future disruption, both from domestic
consumers seeking intervention to secure their energy needs and from
oil producing countries seeking to extract political and economic
concessions. These pressures represent a threat to the Administra-
tion's policy of relying primarily on the domestic and international
marketplace and increase the urgency of planning designed to ensure
that the marketplace operates not only efficiently, but acceptably.
C)
Military Impacts
Under conditions prevailing at the time, which included price and
allocation controls, and cumbersome DOD procurement regulations,
supply disruptions in 1973 and 1979 caused significant degradation
of U.S. combat readiness despite exceptional efforts to secure fuel
even at prevailing market prices. (C)
In 1973, operational and training activity was curtailed and severe
conservation restraints were imposed. To supplement these measures,
there were numerous incursions into war reserves in the United
States and overseas. The Defense Production Act was invoked, giving
DOD priority fuel deliveries. Further assistance was secured from
the Voluntary Allocation Program under the amended Economic Stabili-
zation Act and from allocation under the Emergency Petroleum
Allocation Act of 1973. These measures and subsequent stabilization
of the market alleviated the DOD shortage. (S)
In 1979, operational activities had already been reduced to minimum
levels. Hence, to maintain essential operations during this disrup-
tion, a drawdown of war reserves was required. There was a reluctance
to invoke the Defense Production Act. DOD representations to U.S.
oil companies at the highest level eventually succeeded in securing
assistance without invoking the Defense Production Act. (S)
In both 1973 and 1979, U.S. price and allocation controls exacerbated
the problem of availability and contributed to DOD procurement
difficulties. DOD efforts were also impeded by growing supplier
dissatisfaction with cumbersome DOD procurement regulations,
especially in 1979. (U)
III. Policy Responses to Economic Effects
Policies to Deter Disruptions of Energy Supplies
Energy security continues to be a major objective of U.S. foreign
policy. U.S. efforts to deter major oil supply disruptions in the
future and to reduce the magnitude of those which may occur are
directed primarily toward the prevention of such disruptions at
their source, the oil exporting countries, and toward the develop-
ment of a united front with other major energy consuming countries.
More specific-ally, we seek to: (S)
TOP SECRET
JUP
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
TOP SECRET
Maintain strong and continued cooperation with other
major energy consuming countries through the
International Energy Agency and other mechanisms, as
appropriate, to reduce panic, minimize economic
dislocations and assure that individual countries do not
suffer unacceptable harm as a result of a shortfall in
oil supplies. Credible cooperation among consumers will
deter politically motivated supply interruptions by
producing countries. (C)
Develop and maintain positive political, economic and
security relations with certain key producing countries
to demonstrate that their interests are not served by oil
supply disruptions, to develop economic relations that
reinforce the production and exchange of oil, manufactured
goods and financial assets, and to assist these countries,
as appropriate, in their defense against outside
aggression and internal unrest. (S)
Advance the peace process between Israel and the Arab
states and assist in the resolution of other area
conflicts. (C)
Deter Soviet, Soviet proxy, or other radical intervention
in the Persian Gulf and other major oil producing regions.
(S)
Possible new policy initiatives which have been identified as
warranting further study include:
-- Seek an increase in IEA oil stockpiling requirements from
90 to 120 days of net imports.
-- Enter into competitive long-term contracts for the
purchase of oil for the SPR in order to encourage pro-
ducing countries to increase and maintain productive
capacity and to foster reliable supply relationships.
-- Consider actions to foster a more favorable investment
climate for energy resource exploration and development
in non-oil-exporting LDCs. (S)
Policies to Improve the Marketplace and Enhance Supplies in an
Emergency
A. The principle underlying U.S. energy policy during both
"normal" and, to the extent possible, emergency circumstances
is reliance on the market. Application of this principle has
several implications for energy emergency preparedness:
TOP SECRET
TOP SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
10
TOP SECRET
TOP SEut .. ?
1. Remaining regulations limiting the flexibility of U.S. energy
markets should be removed.
a. Natural gas markets should be deregulated.
b. Restrictions on exports should be reviewed. (C)
2. The primary mechanism to protect against the worst effects of
sharp price increases or curtailed supplies in an emergency
is maintenance of stockpiles. The Administration should
refrain from adopting or signaling measures before an emer-
gency that discourage private stockpiling and should continue
to buildup and maintain the Strategic Petroleum Reserve as a
key priority of energy emergency preparedness policy. (C)
3. The Strategic Petroleum Reserve will be used to protect vital
national interests (e.g., national security, foreign policy,
the economy). Its actual use will be determined at the time
of an emergency, but Administration planning should actively
simulate its use under varying assumptions to deal with the
disruption scenarios developed in this study. DOE should
complete this simulation work no later than June 30, 1983,
and submit a summary to the CCNRE for review. (C)
4. The United States strongly supports the IEA and reaffirms its
commitment to participate in the Agreement on an
International Energy Program, but seeks.to encourage over
time greater use of markets and supply-enhancing measures in
the operation of the Emergency Sharing System and other IEA
programs, both before and during emergencies. The United
States is prepared to consult and cooperate with IEA partners
toward these ends, especially to foster market pricing of
energy supplies, to increase stock levels and to exchange
information on national use of stocks. (S)
5. Measures which facilitate the functioning of domestic and
international markets should be developed.
a. The Federal Government should continue to develop in
advance an integrated/coordinated emergency public
information plan.
b. The Administration should closely monitor and analyze
the possible effects during disruptions of any
inflexibilities that may develop in international
markets by virtue of direct and indirect government
involvement in crude oil purchases, the existence of
state monopolies, national price controls and allocation
systems, and other restrictive national policies. (C)
TOP SECRET
TOP SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
11
TOP SECRET
6. The greatest possible efforts should be taken to
preclude future application of price controls or
allocations during a supply disruption. This is
necessary to repair the damage done by previous
controls and to enhance private incentives to
stockpile, develop resources, and invest in energy
efficient capital stock. (C)
7. The U.S. should intensity its efforts to foster
efficient development and use of Western energy
resources, especially to protect against Western
European vulnerability to gas supply disruptions in
the late 1980s. U.S. efforts should entail:
a. Encouragement of the development by Western
European countries of the Norwegian Troll gas
field.
b. Strong support for the International Energy
Agency natural gas security study.
c. Aggressive pursuit of the energy studies called
for in the Summary of Conclusions recently
concluded by the Western allies. (C)
B. Further review should be done on various collateral
issues.
1. Monetary or fiscal policy measures might be used to
mitigate the adverse income effects of an oil supply
disruption. Administration planning should conduct
an analysis of the effects of these measures on the
disruption circumstances investigated in this study
and present this analysis to the Cabinet for review.
This analysis should be co-chaired by DOE and the
Department of Treasury and be submitted to the CCNRE
and the CCEA for review and recommendations no later
than December 31, 1983. (C)
2. Various self-help measures should be investigated
further, including those which might be useful to
state and local governments such as the use of
futures markets to hedge against price shocks. (C)
Ljc ~)Uirt
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
~, ti F? iY ? 12.
TOP SECRET 'tt
IV. Policy Responses to Military Effects
The essential energy needs of United States defense forces will be met
so that, during a disruption emergency, defense readiness is maintained
and the capability to sustain combat operations is not degraded. To
the extent that we can limit the impact of an energy disruption on that
portion of the domestic industrial base that provides material and
service support to the military (particularly industrial and transporta-
tion assets), DOD and its contractors can meet their respective needs
by drawing on the marketplace as normal participants. The thrust of
U.S. policy, therfore, is to ensure that in the context of a free
market approach, Defense can be an effective competitor in the market-
place with stand-by authorities available to improve competitive
capability during a crisis and to supplement market processes, if
ultimately deemed necessary by the President or his designate. This
policy implies:
-- Defense energy consumers will pay the prevailing market
price.
-- Should market procurement, by paying the prevailing price,
not prove adequate to meet defense needs, the authority for
appropriate non-market measures will be available to the
President or his designate for implementation as the situation
may demand.
Thorough pre-crisis planning and exercising will be used as a
means to acquaint both government and private sector decision-
makers with the use of the marketplace to meet defense needs
in a crisis (assuming the DPA has not been invoked), and the
possible use and effects of various non-market measures, if
these should be required by the situation at the time.
Because of the military's first reliance on overseas sources
for its overseas consumption of fuel products and because of
the important security contributions of foreign friends and
allies, the international, as well as domestic, aspects of
energy emergencies are an integral part of U.S. energy
emergency preparedness policy. (S)
A. Non-Crisis Market Circumstances
1. DOD should participate in the U.S. domestic marketplace on a
competitive basis with comemrcial buyers. The DOD should
continue to develop regulatory and legislative measures which
will remove obstacles to its ability to participate in the
market on a competitive basis. More specifically, the
following obstacles have been identified as being worthy of
particular emphasis:
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
13
TOP SECRET
a. Eliminate the requirement to obtain cost data in the
procurement of petroleum products. Procurement pricing
should be based exclusively on sales market data.
b. Increase the small purchase threshold for petroleum
products from $25,000 to $100,000. (C)
2. To the maximum degree possible, consistent with security
requirements, the private sector should be brought into a
planning partnership with responsible government agencies
prior to the outset of an emergency. DOE and DOD should
co-chair a study, with Justice participating, that analyzes
the issues and develops legislative options concerning
conflict-of-interest, antitrust and Federal Advisory Act
constraints on the participation of industry representatives
in pre-crisis planning to meet defense fuel needs in a
disruption, including the use of National Defense Executive
Reserves, Voluntary Agreements and Advisory Committees.
Proposals should be submitted (through the SIG-IEP) to the
NSC for decision no later than May 31, 1983. (C)
B. Meeting Domestic DOD Requirements in Disruption Circumstances
Assuming No Mobilization
1. Existing DOD policies to access the domestic market during
a disruption include:
a. Intensifying procurement actions through resoliciting
bids to find able and willing suppliers and waiving/
modifying non-essential socioeconomic or other
regulations which may impede effective procurement in
an emergency.
b. DOD/DOE jaw-boning with industry to optimize voluntary
supply responses.
c. Bidding for SPR oil if drawdowns are being made.
d. Possible use of the Defense Production Act to assure
DOD and its contractors of priority access at competi-
tive prices to supplies in the marketplace. (S)
DOD, with assistance from DOE, should further examine the
modalities for applying these policies and the authority needed to
make them effective. If necessary, proposals including required
legislation, should be submitted no. later than June 30, 1983
through the SIG-IEP to the NSC for decision. Specifically,
TOP SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
14
TOP SECRET
Top SECci
a. Legislation to permit the waiver of procurement
regulations during disruptions should be submitted
to Congress with DOD's 1983 legislative program.
b. Procedures to implement the Defense Production Act
should be improved to increase responsiveness to
permit refiners to pass along their DPA order to
their suppliers when necessary to obtain supplies
for a DPA product order. (S)
2. During crises, effective private sector involvement in
planning activities is also important. DOE and DOD
should include an analysis and recommendations on
constraints on private sector participation in planning
during crises as part of their co-chaired effort
discussed above in IV A 2. (S)
3. The authority to use non-market measures in national
security emergencies is necessary to give responsible
policymakers flexibility to deal with circumstances
that can be judged only as they arise. These measures
should be used only when they are clearly necessary to
achieve essential national security objectives and not
as an automatic response to all national security
emergencies. DOD and DOE should conduct a further
analysis to determine how DOD will obtain its essential
energy requirements in the domestic market and to
acquaint decision-makers with those situations which
may call for implementation of certain of the standy-by
measures which are within the policy framework of this
Decision Directive. This analysis should:
a. Investigate, as thoroughly as the data will allow, the
detailed impact of the disruptions identified in NSSD-9
on the domestic marketplace and DOD's access to needed
supplies in this marketplace.
b. Determine the budgetary, legislative and other
requirements to ensure that DOD can meet its needs
in the marketplace under the projected disruption
circumstances, should decision-makers decide
against authorizing the use of non-market measures.
c. Further evaluate the adequacy of existing authori-
ties to use individual non-market measures if
needed.
X'
TOP SECRET
Tor) Q flPFT
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
TOP SECRET tOP SECRET
d. Determine if other measures should be authorized under
certain circumstances for potential use by decision-
makers.
DOE should provide full support to DOD on the above analysis.
OMB, CEA and other agencies will be full participants in
this analysis. Emphasis will be on enabling DOD to operate
more effectively'in the marketplace to meet its needs while
ensuring that measures are adequate and available to
supplement market processes if ultimately deemed necessary
by the President or his designate. The possibly strong
budgetary impact of DOD paying market prices must be
included. This work should be completed and forwarded
(through SIG-IEP) to the NSC for decision no later than
September 30, 1983 (S)
C. Meeting Overseas U.S., Allied and Friendly Nation Military
Energy Requirements Assuming No Mobilization
For cost-effectiveness reasons, DOD normally acquires fuel for
overseas use from suppliers located close to the immediate defense
user. Hence, DOD must be able to procure effectively and at market
prices in these foreign markets which are not subject to U.S.
law/regulations and may not reflect the priorities of U.S. domestic
energy policy. Failure to acquire needed products from foreign
suppliers will result in the triggering of various international
agreements (i.e., NATO, Host Nation Support) to obtain supplies
overseas or in the transportation of supplies from the U.S. with a
concomittant increase in domestic demand for fuel and transportation
assets. (S)
One of the principal concerns of U.S. coalition security policy is
the adequacy of fuel supplies for the military components of key
allies and friendly nations. Each coalition member will be expected
to provide for its own wartime logistics support. Nevertheless, the
possibility that the U.S. may be called upon to respond to military
fuel shortages of coalition partners in some situations threatening
national security is accepted as a problem which must not be ignored.
(S)
1. Existing Policies: The U.S. commitment to participation in
the NATO Senior Civil Emergency Planning Committee, the
Joint U.S.-South Korean Petroleum Committee, along with
on-going bilateral discussions, constitute the basis with
which to deal with problems of meeting U.S. overseas and
allied military requirements. Yet to be addressed are the
levels and methods for more effective U.S. participation in
these fora. DOE should chair this continuing analysis,
working with DOD and State to better define U.S. participation
with special attention to the following key issues:
TOP SECRET
Tpr fPE CA
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP1 OM02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
TOP SECRET -16-
a. The relationship between the IEA and NATO oil sharing
plans under various scenarios.
b. The relationship of IEA and NATO planning to relations
with key non-IEA, non-NATO countries.
c. Analysis'and options concerning antitrust defense for
participation in the NATO Wartime Oil Organization and
related activities (this particular part of the study
should be done under the auspices of the DOE and DOD
co-chaired group under Part IV A 2).
The analysis and recommendations in this section should be
completed and forwarded (through SIG-IEP) to the NSC for
decision no later than July 31, 1983. (S)
2. DOD should chair further interagency analysis to determine
how it might respond to threatened cut-backs in deliveries
to U.S. forces and stocks overseas.
a. DOD should provide information to DOE concerning its
peacetime overseas product requirements and traditional
overseas suppliers.
b. DOE should examine the behavior of overseas supply
systems in meeting U.S. military needs abroad during
various disruption scenarios. This analysis should
include the inpact of disruptions on the domestic and
other requirements of DOD's traditional overseas
suppliers. Emphasis should be on potential shortfalls
and prices.
c. Options for U.S. response to identified problems should
be jointly examined by DOE, OMB, DOD and State.
Options should focus on pre-crisis preparations and
include crisis intervention measures such as political
jaw-boning and transportation of supplies from CONUS as
means to forestall or compensate for possible delivery
cut-backs.
d. As a part of this analysis, meeting allied and friendly
nation military requirements should be addressed, to
include potential shortfalls, and means to overcome
problems.
The analysis and recommendations in this section should be
completed and forwarded (through the SIG-IEP) to the NSC for
decision no later than December 31, 1983. (S)
TOP SECRET
10
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
t C.l r L;* L Lfl - .
TOP SECRET -17-
D. Economic/Financial Viability of Key U.S. Allies and Friendly
Nations.
Although measures may be successful in assuring the provision of
adequate supplies to the Armed Forces of U.S. allies and friends, for
some of these allies and friends the impact of a major energy emergency
may impose severe strain on their economic and financial well-being.
This can have deleterious effects on U.S. security interests. United
States policy is to seek to minimize such effects since they can
significantly burden U.S. defense resources at the potential expense
of other security priorities. As a first step, the United States
should encourage its allies and friends to take actions and develop
plans to minimize these effects. However, there may arise a need for
possible U.S. steps to assist friends and allies. The means and
costs of such steps are not well defined. State, with assistance
from DOD, should continue to chair the study of the general macro-micro
economic and security implications of energy shortages for key U.S.
allies and friendly nations. As a first step, this examination
should include at least the following key countries: Turkey, Israel,
Portugal (others to be decided in conjunction with State). Primary
issues to be addressed include:
1. The degree of economic vulnerability to energy disruptions.
2. Adequacy of local measures to deal with this vulnerability,
including pre-crisis measures which the foreign nation
could adopt to decrease the impact of an emergency.
3. Possible U.S. or international policy alternatives, including
at least a discussion of limited economic and security
assistance, to address the identified vulnerabilities and
to deal with their consequences in a crisis.
The analysis and recommendations in this section should be
completed and forwarded (through the SIG-IEP) to the NSC for
decision no later than December 31, 1983. (S)
E. Energy Emergency Preparedness for Mobilization and War
Energy emergency circumstances which occur in conjunction with
defense-related civilian economic mobilization introduce problems
and considerations of a nature and magnitude which are distinct
from those expected to prevail during an energy emergency in a
non-mobilization situation. Emergency Mobilization Preparedness
policy is enunciated in National Security Decision Directive 47.
The potential impacts of an energy emergency during mobilization
and/or armed conflict must receive additional attention. Accordingly,
the Emergency Mobilization Planning Board is directed to establish
TOP SECRET
Tn P SFIPST
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
1UP orE..i
TOP SECRET -18-
an Energy Emergency Preparedness Working Group chaired by DOE with
participation of DOD, NSC, OMB, Treasury, State, FEMA, and other
agencies as appropriate. This group shall develop a plan of action
within 150 days of the signing of this directive, or no later than
June 30, 1983, including; but not limited to those issues identified
below:
1. An examination of the adequacy of existing energy
policies and procedures for use during mobilization
and wartime including the Defense Production Act,
participation in the NATO Wartime Oil Organization,
and Host Nation Support commitments from allies and
friendly nations.
2. A review of worldwide requirements of U.S. military
forces, including approaches to meet these require-
ments in various theaters of potential conflict.
3. An analysis of the requirements of defense-related
industries, transportation services, and other
domestic sector security components during surge,
mobilization, and war-time circumstances, quantifying
these requirements and identifying the means for
meeting them.
4. Measures to assure that allied and friendly nation
military requirements are met. (TS)
The Energy Emergency Preparedness Working Group shall, as a first
order of business, examine the disruption scenarios developed in
NSSD-9 and consider in each scenario additional energy requirements
imposed by mobilization to deal with the following situations:
1. A Middle East conflict.
2. A conflict in Europe, Asia or both.
3. A Middle East conflict and conflicts in Europe, Asia, or
both. (TS)
Particular attention should be devoted to those measures which might
be undertaken prior to or during an energy supply disruption so as to
assure that the United States' capability to subsequently mobilize and
fight a war will not be significantly degraded or impaired. (S)
~-rr 4 : r? t
/r - /Sr COR
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
~E~R~T
SYSTEM II
90126
SCHEDULE OF FOLLOW-UP STUDIES
1. Macroeconomic Impacts (See p. 7 of NSDD)
DOE and NSC, Co-Chair CCNRE
CCNRE Working Group July 31, 1983
2. SPR Drawdown Simulations (See p. 10 of NSDD)
DOE, Chair CCNRE
June 30, 1983
3. Monetary and Fiscal Policy Responses (See p. 11 of NSDD)
DOE and Treasury, Co-Chair CCNRE and CCEA
December 31, 1983
4. Legislation to Facilitate Private Sector Participation in
Pre-Crisis and Crisis Planning for Meeting Defense Needs
(See p. 13 of NSDD)
DOE and DOD, Co-Chair SIG-IEP
May 31, 1983
5. Improving Existing DOD Policies to Access Domestic Market
in a Crisis (See p. 13 of NSDD)
DOD, Chair SIG-IEP
June 30, 1983
SECRET
Declassify on: OADR
C/A
SFCRET
iS
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
 Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8
i.IieI
L -t
SECRET
6. Studies on Meeting DOD Needs in Domestic Market During a Crisis
(See p. 14 of NSDD)
DOE and DOD, Co-Chair SIG-IEP
September 30, 1983
7. Improving Existing DOD Policies to Access Foreign Markets in
a Crisis (See pp. 15-16 of NSDD)
DOE, Chair SIG-IEP
July 31, 1983
8. Studies on Meeting DOD Needs in Foreign Markets During a Crisis
(See p. 16 of NSDD)
DOD, Chair SIG-IEP
December 31, 1983
9. Studies of Viability of Allied and Friendly Nations in a Crisis
(See p. 17 of NSDD)
State, Chair SIG-IEP
December 31, 1983
10. Studies on Meeting DOD Needs in Mobilization and War (See pp. 17-18
of NSDD)
DOE, Chair EMPB
Energy Emergency June 30, 1983
Preparedness Working Group
cFr.RET
Declassified in Part - Sanitized Copy Approved for Release 2012/03/13: CIA-RDP10M02313R000100900003-8