'ALLIED INTERDEPENDENCE PROJECT' PROSPECTUS FROM THOMAS A. CALLAGHAN, JR.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80M00165A002400060003-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 202
• Document Creation Date: December 15, 2016
• Document Release Date: March 11, 2004
• Sequence Number: 3
• Publication Date: September 21, 1977
• Content Type: MF

Approved For ease 2004/03/23: CIA-RDP80M0016W 0--
THE DIRECTOR OF CENTRAL INTELLIGENCE
National Intelligence Officers
.21 September 1977
MEMORANDUM FOR: Director of Central Intelligence
VIA . Deputy to the DCI for National Intelligence
AT FROM O/D/DCI/NI
SUBJECT . "Allied Interdependence Project" Prospectus
from Thomas A. Callaghan, Jr.
1. Action required: Signature on the letter to Callaghan.
attached,
2. By date of 26 July 1977, Callaghan sent you a copy of a statement
he had made earlier that month. before the Legislation and National Security
Subcommittee of the House Government Operations Committee on NATO standard-
ization, Your reply of 10 August informed him that DDI is engaged in defining
two long-term study projects on "The Problem of Europe as a Military, Political,
and Economic Partner" and "International Transfer Issues." Your letter also
pointed out that these subjects are difficult for the U.S. intelligence
community because of their dependence on policy decisions made by Congress and
the State and Defense Departments.
3, Callaghan has now sent you a prospectus for what appears to be an
expanded project relating standardization, as a policy objective, not0 14 Z00 'dp N1-4 zcnO 1+d ~1Z0 MNO W 00 .SIN IL
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 Approved For Release 2004/03/23 : CIA-RDP80M00165A002400060003-0
Table 34.--Crude petroleum: OAPEC 1/ and OPEC 2/production capacity
(In thousands of barrels per day)
Crude
petroleum
Percent unused
Country
production
June 1976
Aug. 1976
Dec. 1976
capacity
Saudi Arabia 3/--:
11,500
25.8
23.8
20.3
Kuwait 3/--------
3,500
47.1
45.1
5.1
Libya------------:
2,500 :
19.6 :
17.6 :
16.8
Iraq-------------:
3,000 :
33.3 :
31.7 :
10.0
Abu Dhabi -------- :
2,000 :
21.5 :
19.5 :
17.5
Algeria----------:
1,000 :
-
-
Qatar ------------ :
700 :
30.0 :
25.7 :
28.6
Egypt------------:
350
8.6 :
8.6 :
2.9
Syria ------------ :
200 :
10.0 :
10.0 :
10.0
Bah-rain -----------
60
OAPEC total 4/-:
24,810
27.4
25.5
15.4
Iran----------
6,500 :
6.2 :
10.5 :
1.0
Venezuela--------:
2,700
12.6
9.6
8.1
Nigeria----------:
2,500 :
16.0 :
20.0 :
4.4
Indonesia--------:
1,700 :
12.9 :
11.2 :
7.1
Dubai ------------ :
330 :
- :
3.0 :
3.0
Gabon------------:
250 :
12.0 :
12.0 :
12.0
Ecuador----------:
200 :
55.0 :
- :
6.7
Sharjah----------:
50 :
20.0 :
20.0 :
20.0
OPEC total 4/--:
38,430
21.5
20.7
11.3
1/ OAPEC = Organization of Arab Petroleum Exporting Countries.
2/ OPEC = Organization of Petroleum Exporting Countries.
3/ Including one-half of Neutral Zone production capacity.
4/ Egypt, Syria, and Bahrain are not members of OPEC.
Source: Compiled from official statistics of the U.S. Central
Intelligence Agency.
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 Approved For Release 2004/03/23 : CIA-RDP80M00165AO02400060003-0
A-3.5
Table 35 .--Exploratory well completion 1/
Country 1970 : 1.971 : 1972 ` 1973 1974 ?
1975
North America, total---: 9,230 : 8,456 : 9,172 : 9,685 : 10,354
7,753
Canada---------------; 1,537 : 1,534 : 1,633 : 2,219 : 1,735 :
1,649
United States --------: 7,693 : 6,922 : 7,539 : 7,466 : 8,619 :
6,104
Latin America, total ---: 574 : 548 : 542 : - 488 503
495
Ecuador ------------- ? 20 : 15 ? 20 . 8 5 ?
3
Mexico ------ --------- 130 129 143 104 98
87
Venezuela ----------- 90 : 44 : 64 : 63 ? 76 :
35
Other ------?---?---- 334 : 360 : 315 ? 313 324 :
370
Europe, total--.-------: 159 : 199 : 210 : 217 243 :
296
Norway 2/ ------------? 13 : 13 ? 14 ? 13 ? 17 ?
14
United Kingdom 2/----: 39 : 22 ; 25 : 40 55 :
83
Other ---------- --- ---: 107 ; 164 : 171 ; 164 ? 171 :
199
Middle East, total-----: 72 : 48 : 81 : 65 70 :
100
United Arab Emirates-: 7 : 10 . 22 ? 8 3 :
0
Iran --_____.__._______-? 11 : 6 ? 2 : 18 27 .
26
Iraq-------?-------- 1 0 : 0 3 2
0
Kuwait---------------: 1. 2: 0: 0 0.
0
Neutral Zone -----?----- : 0 0 : 0 0 0
0
Saudi Arabia- --------- 2 2 : 6 3 4
9
Other ----------------- : 50 : 28 : 51 : 33 34 :
65
Africa, total- -__--__? 263 : 257 : 223 : 178 191 :
200
Algeria ---.-------- --: 37 25 10 13 : 9
17
Libya-----------------: 51 : 41 : 34 ; 25 32 :
36
Nigeria ---------------- ? 31 ; 55 : 61 45 51 .
33
Other----------------: 144 : 136 : 118 : 95 99 :
114
Asia-Pacific, total----: 246 : 261 : 312 : 342 338 :
288
Indonesia -------------- 84 : 135 ? 137 169 176 :
186
Other ----------------- ? 162 : 126 : 175 : 173 162 :
102
Total-------------: 10,544 : 9,769 : 10,540 : 10,975 : 11,699 :
9,132
1/ Includes oil, gas, and dry wells; includes new-field wildcats, new-pool
wildcats, deeper pool tests, shallow pool tests and extensions.
2/ North Sea.
Source: Compiled from data prepared by the American Petroleum Institute.
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Table 39.--OPEC: Minimum petroleum exports to satisfy
revenue requirements in 1980
(In millions of barrels per '!ay)
Country
Source Source
No. 1 No. 2
Source
No. 3
Algeria----------------:
0.6 : 1.0 :
2.0
Ecuador----------------:
0.1 -
Gabon------------------:
Indonesia--------------:
1.4 : -
_
Iran-------------------:
3.1 4.5
7.4
Iraq-------------------:
1.5 : 2.0 :
2.9
Kuwait-----------------:
1.0 : 1.5 :
1.04
Libya------------------:
0.6 : 1.0
1.6
Nigeria----------------:
2.3 : 1.5
Qatar------------------:
0.2
0.15
Saudi Arabia-----------:
3.2 : 5.0 :
2.3
U.A.E.-----------------:
0.6 : 1.5 :
1.19
Venezuela---------------
2.0
Total----------------:
16.6 : 18.0 :
18.58
Source: No. 1 - Journal of Energy and Development, Autumn, 1975,
p. 65.
No. 2 - Hendrik S. Houthakker, The World Price of Oil: A
Medium-Term Analysis, American Enterprise Institute
for Public Policy Research, Washington, D.C.,
October, 1976, p. 32.
No. 3 - United States Congress. Joint Committee on Atomic
Energy. Towards Project Interdependence: Energy in
the Coming Decade, 94th Congress, 1st Session,
Washington, D.C., Government Printing Office,
December, 1975, p. 111.
Note: A dash does not mean no minimum export requirement, but rather
_that the source did not indicate a figure.
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Table 40.--World crude petroleum production for 1972,
1975 and 1976; forecasts for 1980 and 1985
(In millions of barrels per day)
Country/area 1972 1975 1976 1980 1985
M_ -OPEC'.
n
United States --------- : 9.47 : 8.36 : 8.19 : 9.6-15.8 :
10.1-22.4
Canada ---------------- : 1.54 : 1.42 : 1.28 : 1.8-2.2 :
1.9-3.4
Mexico ---------------- : 0.51 : 0.81 : 0.89 : 1.0-1.5 :
1.5-2.0
North Sea ------------- : 0.04 : 0.49 : 0.59 : 3.3-4.7 :
5.7-6.0
Other ----------------- : 3.03 : 3.75 : 3.37 : 5.0-6.0 :
6.0-7.0
Total Non-OPEC------:14.59 :14.83 :14.32 : 20.7-30.2 :
25.2-40.8
Communist Bloc: :
U.S.S.R--------------- : 7.93 : 9.89 :10.49 : 11.2-13.5 :
20.0-23.0
P.R.C----------------- : 0.59 : 1.57 : 1.69 : 2.2-8.0 :
8.0-10.0
Other ----------------- : 0.38 : 0.40 : 0.48 : 0.6-1.0 :
1.0-1.5
Total Communist Bloc: 8.90 :11.86 :12.66 : 14.0-22.5 :
29.0-34.5
OPEC: S
di Arabia ---------- : 5.75 : 6.83 : 8.62 : 3.2-15.0 :
10.5-20.0
au
Iran ------------------ : 5.04 : 5.35 : 5.93 : 3.1-8.0 :
8.0-10.0
Venezuela-------------: 3.23 : 2.34 : 2.27 : 2.0-2.5 :
2.5-3.0
Kuwait ---------------- : 3.01 : 1.84 : 2.15 : 1.0-3.5 :
2.2-3.0
Iraq ------------------ : 1.45 : 2.21 : 2.13 : 1.5-5.0 :
4.0-6.0
Nigeria --------------- : 1.82 : 1.79 : 2.06 : 2.3-3.0 :
3.2-4.0
U.A.E----------------- : 1.21 : 1.69 : 1.95 : 0.6-4.0 :
2.0-6.0
Libya ----------------- : 2.24 : 1.51 : 1.92 : 0.6-3.0 :
2.2-3.0
Indonesia ------------- : 1.08 : 1.31 : 1.51 : 1.4-2.0 :
2.5-3.0
Algeria --------------- : 1.05 : 0.96 : 0.97 : 0.6-2.0 :
1.6-2.0
Qatar ----------------- : 0.48 : 0.44 : 0.48 : 0.2-0.5 :
0.3-0.7
Gabon ----------------- : 0.13 : 0.22 : 0.22 : 0.2-0.3 :
0.3-0.6
Ecuador --------------- : 0.08 : 0.16 : 0.19 : 0.2-0.3 :
0.3-0.5
Total OPEC----------:26.57 :26.65 30.40 : 16.9-49.1 :
9.6-61.8
Grand total------:50.06 :53.34 :57.38 : 51.6-101.8 :
93.8-137.1
Sources: Production data for 1972 and 1975 from the U.S. Bureau of Mines;
for 1976 from the Petroleum Economist.
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APPENDIX B
PRICE
Supply and Demand
In a free market, supply and demand determine price. The market
clearing price is the price at which supply and demand balance. On the
other hand, changes in price will affect the level of supply and demand.
The degree to which supply or demand changes in response to a given
change in price is called elasticity of supply or elasticity of demand.
Up until the large price increases at the time of the Arab oil embargo
very little study had been given to the price elasticities of crude pet-
roleum supply and demand.
It is known that there are different price elasticities associated
with demand and supply depending upon the time interval involved. Over a
short time period, even a quadrupling of prices such as occurred for crude
petroleum in 1973-74 has very little effect upon demand or supply. Demand
is locked into a consumption pattern and is relatively inelastic, that is,
houses cannot be insulated immediately, gasoline inefficient cars are used
for several more years before more efficient new ones are bought, petroleum-
fuel furnaces cannot be converted overnight, etc. Similarly new reserves
cannot be discovered immediately, nor can production be immediately in-
creased. Over longer periods, the same price changes that had little ef-
fect in the short-term may produce profound changes in both supply and de-
mand. A key unknown in forecasting future supply and demand is that no
one yet knows what will be the longer term response of supply and demand
to the 1973-74 price increase. For example, the level of demand has now
partially recovered from the initial effect of the price increase as con-
sumers have learned how to cope with the increase. Whether the rate of
growth of demand will revert to the pre-price increase rate, however,
is unknown. On the supply side, very little change in crude petroleum
(or other energy source) supply has been noted. An incubation period is
involved, and as yet, because of the long lead-times involved, very little
of the increased investment has shown up in increased crude petroleum pro-
duction (or the increased availability of other energy sources).
Marginal production is controlled by the members of OPEC. These
countries produce petroleum at levels that will maintain the agreed-upon
OPEC price. Thus, it is obvious that OPEC can set just about any price
for its crude petroleum, at least over a short time period. In order to
achieve a higher price, OPEC members could either limit production or, as
has been the case to date, set a price based on consultations within the
context of OPEC. OPEC is in a position to do this because (1) petroluem
is the world's most important energy source and the OPEC countries control
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the major shares of world crude petroleum export trade; (2) the price
elasticity of demand for petroleum is low in the short term; and (3)
the price elasticity of non-OPEC petroleum supplies and of substitute
energy sources is also low in the short term. 1/ Although the price
elasticity of demand for petroleum will almost certainly increase in
the medium term, OPEC should still have substantial power to control
prices as long as petroleum prices remain below the prevailing prices
for large-scale development of other energy sources (currently equiv-
alent to about $15 to $25 per barrel of crude petroleum). In addition
to price increases initiated by OPEC, prices could also increase in
the future because of additional costs involved with production in hos-
tile environments and inflation.
One determinant of the extent to which OPEC will raise petroleum prices
is the rate of increase in the price of goods and services imported by the
OPEC countries from petroleum-consuming (mainly OECD) countries. Inflation
rates in OECD countries 2/ have led to an erosion of the purchasing power
of some OPEC countries in recent years, as has the depreciation of the dollar,
the currency used to express petroleum prices. 3/ Stable and moderate infla-
tion rates in countries which export to OPEC would be instrumental in holding
down the level of petroleum prices. One forecaster has stated "It is no
exaggeration to say that the biggest contribution to lower prices which the
governments of the industrial countries could make would be to control their
own rate of domestically generated inflation." 4/
Transportation
To arrive at a landed price for a barrel of imported crude petroleum,
the cost of transportation must be added to the price of the barrel at the
import source. This transportation cost fluctuates according to the demand
and supply of tankers and can vary significantly between times of tanker cap-
acity surplus and shortage. Whereas it usually costs about $1.50 to $1.75
per barrel to move a barrel of Saudi Arabian crude petroleum to Europe on a
250,000 deadweight ton (DWT) vessel, the cost in today's depressed tanker
market is less than $0.50 per barrel 5/ Thus, assuming the current price for
Saudi Arabian "marker" crude petroleum, the landed price in Europe today
1/ Guy de Carmoy, Energy for Europe; Economic and Political Implications,
American Enterprise Institute for Public Policy Research, Washington, D.C.,
1977, p. 32.
2/ It is estimated that increased petroleum prices caused about 12 percent of
the inflation experienced by OECD countries in 1974. This means that there is
a slight feedback effect upon OPEC when OPEC raises petroleum prices; i.e.,
increases in petroleum prices lead to somewhat higher rates of inflation in con-
suming countries, which leads to higher export prices of goods and services
to OPEC countries.
3/ Guy de Carmoy, op. cit. p. 31.
4/ Colin Robinson, Energy Depletion and the Economics of OPEC, The Henley Centre
for Forecasting, Henley, England, 1975, p. 28, as quoted in Guy de Carmoy, op.
cit., p. 32.
5/ Oil and Gas Journal, newsletter, July 4, 1977.
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would be around $13.20 per barrel versus a possible $14.20 to $14.45 under
normal circumstances, or around 7.5 to 10 percent lower than normal.
In addition to the tanker supply and demand situation, transportation
costs also depend upon the actual size of the tanker. All other things
being equal, it costs less to transport a barrel of crude petroleum in a
large tanker than a small tanker. Under normal circumstances the cost of
transporting crude petroleum in a 200,000 DWT vessel is less than half that
for a 50,000 DWT vessel, and such cost for a 300,000 DWT vessel is approxi-
mately a third that for a 50,000 DWT vessel. This lower cost has been a
driving factor behind the push to construct superports [i.e., ports capable
of handling very large crude carriers (VLCC)J in the United States.
Because of the stricter regulations, higher crew wages and construction
costs applicable to U.S.-flag vessels, the cost of transportation in such
vessels is higher than in foreign-flag vessels of comparable size. Therefore,
.at present, 97 percent 1/of the crude petroleum imported into the United
States arrives in foreign-flag vessels. Legislation is currently under con-
sideration which would require a certain percentage (depending on the bill
under consideration) of all petroleum imports to be carried on U.S.-flag
vessels. While such legislation might increase the security of imports it
would also increase price.
The recent indications of current or future tanker fleet expansions by
the U.S.S.R., OAPEC and OPEC 2/ are causing concern not only about material
security but also about price. If crude petroleum can only be obtained from
certain sources, and these sources also control the transportation, it is
obvious these sources can not only charge almost any price for the crude pet-
roleum but also for the transportation. Refusal to use the source's vessels
could result in the supplies being unavailable.
Supply Security Impact
Most mechanisms to assure security of supply 3/ will impact price. These
mechanisms which are designed to promote domestic production, decrease consump-
tion, or limit imports, either directly or indirectly will usually result in a
price increase.
Since these supply security tools may be arbitrarily imposed it is dif-
ficult to include an effect from the use of any one or a combination of these
tools in price forecasts. However, since the import dependence of the United
States is increasing it is possible that one or more of the tools to increase
1/ Washington Star, June 8, 1977,'p. A-22.
2/ See "World Trade", Appendix C.
3/ See "Supply Security", Appendix D.
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supply security may be employed in the future. It is well to remember this
point when world price forecasts are analyzed and future U.S. prices pro-
jected.
At present and under The National Energy Plan as issued by the White
House on April 29, 1977, crude petroleum prices are controlled. It has been
stated that "price controls on oil should be retained as long as world oil
prices remain subject to arbitrary control, and domestic supplies are in-
sufficient to meet domestic needs". 1/
Under a price control plan the relationship that forecast world mar-
ginal crude petroleum prices will have to U.S. prices is wholly dependent
on the plan. In the case of The National Energy Plan it is planned that
the price of newly discovered crude petroleum would be allowed to rise over
a 3 year period to the current 1977 world crude petroleum price, adjusted to
keep pace with the domestic price level. Therefore, in this case there will
be a relationship between world and U.S. prices.
1/ Executive Office of the President, Energy Policy and Planning, The National
Energy Plan, April 29, 1977, p. 50.
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APPENDIX C
WORLD TRADE
Current
In 1975, large movements of crude petrole'?,,, in international
trade were made from the Middle East to Eur:.pe, North'America and
Japan; Indonesia to North America and Japan; West Africa to Europe
and North America; North Africa to Europe and North America; South
America to North America; and Canada to the United States.
The recent bulk of the world trade in crude petroleum was between
OPEC nations and the rest of the world. Details on OPEC exports and
destinations for 1970 and 1975 are in table C-1.
In 1975, although official OPEC data are not available on exports
by destination from Iran and Iraq, import data by source are available
from the Organization for Economic Cooperation and Development (OECD)
for its members. 1/ These data combined indicate that OPEC exports
increased significantly in 1975 over 1970 to North American, Latin
American and the Asia-Pacific nations. The largest increase was to
North American nations, principally the United States.
Table C-2 contains data on imports into the United States for
1970 and 1975. In 1970, United States imports from OPEC nations totaled
267 million barrels whereas in 1975 they had increased to 1,237 million
barrels, a 4.6 fold increase. The largest volume increases were from
Nigeria, 252 million barrels; Saudi Arabia, 224 million barrels; Indonesia,
118 million barrels; Iran, 104 million barrels and Algeria, 102 million
barrels. Thus, these five nations accounted for around 82 percent
of the United States' total increase in imports from OPEC between 1970
and 1975.
An analysis of past exports from the OPEC nations and their
destinations indicate that each OPEC nation more or less had certain
trade patterns. In the future, these established trading patterns
could change significantly because of participation, the different role
to be played by the multinational petroleum companies, the increasing
demand for petroleum by certain developing nations, the increasing
production by non-OPEC countries and possible international OPEC conflicts
owing to pricing practices and different crude petroleum qualities.
Table C-3 indicates total OPEC exports in 1970 and 1975 and the
quantities imported by the United States. Comparing tables it is
interesting to note that although OPEC supplied 50.1 percent of the
1/ Organization for Economic Cooperation and Development, 1975 Oil
Statistics, Paris, 1976, pp. 44-47.
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C-2
Table C-l.--OPEC: Crude petroleum exports: 1970 and 1975
(In million barrels)
North Latin ? Western Eastern Africa Asia : Middle
American America Europe Europe Pacific East
Algeria:
1970-------------
1975-------------
Ecuador:
1970-------------
1975-------------
Gabon:
1970-------------
1975-------------
2.6 ? 14.1 . 320.8 , 5.4 . 12.8
97.0 . 9.6 . 198.1 . 6.8 3.8 . 4.5
0.2
20.4 ? 32.9
.04 12.2 , 14.0 - , 4.3
14.3 ? 22.0 ? 36.8 ? - ? 1.8 .
25.0 . 7.4 , - : - : - .
129.1 . 45.3 , 0.8 , - - .
24.5 0.7 266.3 - 106.1
2/ 2/ . 2/ . 2/ . 2/
8.7 25.8 455.9 3.1 25.5
2/ 2/ . 2/ ? 2/ . 2/
Kuwait: :
1970-------------: 15.4 : 20.2 : 582.2 : -
1975-------------: 9.2 : 44.8 : 248.3 : 12.0
Libya: :
1970-------------: 34.3 : 34.0 : 1,137.2 : 0.4
1975-------------: 120.8 : 61.9 : 307.0 8.9
Nigeria: :
1970-------------: 59.4 : 50.8 : 270.2 : -
1975-------------: 196.7 : 85.5 : 314.0 : -
1970-------------: - : 3.5 : 87.7
1975-------------: 32.2 : 5.4 : 85.8
Saudi Arabia: :
1970-------------: 20.8 : 50.6 : 624.1
1975-------------: 117.0 : 344.7 : 1,113.1
Abu Dhabi:
1970-------------: 30.1 : 0.4
1975-------------: 42.7 : 14.2
Venezuela:
1970-------------: 271.6 : 464.4
1975-------------: 241.7 : 235.6
134.1
258.7 : 5.1
1.1 .
335.7
1/ 320.3
0.2
53.3
30.54
74.9
195.9 : - 228.3
187.8 : - , 363.0
666.8 - : 1/ 1,207.9
2/ . 2/ . 1,704.9
12.5 3/ 24.5 : 546.0
2/ . 2/ . 766.5
303.4 4/ 19.4 941.7
338.4 4/ 5.5 : 658.2
2.9 - 1,208.8
5.7 : 18.0 : - . 522.3
2.6 0.4 - 383.4
11.8 : 17.4 : - . 625.4
18.2 : 22.3 : 5/ 0.7 : 132.4
7.2 : 28.1 : 5/ 0.6 : 1/ 156.3
37.3 371.5 6/.69.9 1,174.2
40.2 : 727.2 : 6/ 66.9 : 2,409.1
2.0 80.1 7.0 1/ 253.7
5.8 172.1 : 5/ 0.9 : 499.5
0.9 3.8
1.6
888.5
537.3
Total: ?
1970---------: 492.44 : 684.3 : 4,030.3 : 8.9 : 210.8
1975---------: 2/ : 2/ : 2/ : 2/ : 2/
1/ Includes "unspecified" exports.
2/ Exports by destination not available.
3/ Includes Lebanon and Southern Yemen.
4/ Includes Southern Yemen.
5/ All to Southern Yemen.
6/ To Bahrain, Jordan and Lebanon.
1,659.6 : 121.5 : 7,351.34
2/ : 2/ : 8,691.0
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Table C--2.--United States: Imports of crude
petroleum by source, 1970 and 1975
(Quantity in thousands of barrels)
Canada----------------
Latin America, total:
Bolivia-------------
Ecuador--------------
Mexico--------------
Trinidad------------
Venezuela-----------
Other---------------
Africa, total:
Algeria-------------
Angola--------------
Egypt---------------
Gabon----------------
Libya ---------------
Nigeria
Tun.isia-------------
Other---------------
Middle East, total:
Iran Iran----------------
Iraq----------------
Kuwait--------------
Qatar----------------
Saudi Arabia--------
United Arab
Emirates----------: 60,280
Other---------------: 491
Europe, total: 6,104
Nor.way-------- ------- . 6,102
Other --------------- . 2
Far East, total: 144,041
Indonesia ----------- . 143,299
Malaysia ------------ 443
Other --------------- 299
Total-------------:1,583,265
Source: Compiled from official statistics of the U.S. Bureau of Mines.
: Quantity : Percent : Quantity : Percent
1.8 10,528 : 2.0
2.8 . 1,157 : 0.2
11.0 : 145,440 : 27.2
nil 9,011 : 1.7
32.2 44,921 : 8.4
6.6 : 2,557 : 0.5
1.7
0.1 7,679 : 1.4
1.5 -
14.5 . 237,832 : 44.5
17.2 166,403 : 31.2
0.1 267 : 0.1
0.1 -
26.6 58,760 : 11.0
7.3 . 11,618 : 2.2
0.1 149 : nil
0.3 . 10,808 : 2.0
0.4. 27,801 : 5.2
14.7 . 8,384 : 1.6
0.2
0.9
5.6 . 17,563 : 3.3
17.0 . 17,122 : 3.2
100.0 : 533,876 : 100.0
nil -
nil -
9.1 25,960 : 4.9
9.1 25,960 : 4.9
3.8
nil
0.4 -
0.4
nil
230,953
271,941
1,929
23,355
27,841
44,933
173,426
457
509,044
104,617
27,340
1,692
14,906
88,090
269,142
1,951
1,306
421,182
115,435
707
5,259
6,657
232,254
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 Approved For Release 2004/03/23 : CIA-RDP80M00165AO02400060003-0
total United States imports, this quantity only represented 3.6 percent
of the total OPEC exports. Even in 1975, when OPEC supplied 78.2 percent
of the total United States imports, this quantity still represented only
14.2 percent of the total OPEC exports. Thus, it would appear that
the United States is quite dependent on OPEC source imports, while OPEC
is not overly dependent on the United States as an export market.
In the case of individual OPEC nations, however, the situation is
different. In 1975, Algeria depended on the United States for about a
third of its total export market, as did Venezuela. For the same year
Indonesia sent almost 40 percent of its imports to the United States
and Nigeria surpassed that figure. On the other hand, the four
largest OPEC exporters in 1975 (Saudi Arabia, Iran, Iraq and Kuwait)
exported only 6.4 percent of their combined exports to the United States.
The principal possible future changes in the current world
crude petroleum trade pattern are the cessation of exports from Canada
to the United States, and the increase in exports from the Communist
Bloc, Mexico, the North Sea producers, and other traditional non-OPEC
nations. More subtle changes could occur among OPEC members owing to
price differences, quality differences, barter or exchange agreements,
etc.
In addition to future changes in sources of imports because of
price and quality differentials, new and expanded production in certain
areas may also be important. Decreasing exports from Canada to the
United States will, all other things being equal, presumably require
the United States to import the difference from other sources. Thus,
the expected increase in Mexican production could result in significantly
larger United States imports from Mexico in the future. At the same time,
the decreased Canadian exports should increase Canada's crude petroleum
self-sufficiency. It could then import less. In 1975 Canada imported
large quantities from Venezuela and the Middle East, particularly Saudi
Arabia and Iran. 1/
Increasing production from the North Sea fields could back-out
some OPEC exports to the Western European nations. The United Kingdom
and Norway (possibly even the E.E.C.) could be close to crude petroleum
self-sufficiency in the relatively near future. In 1975, both countries
imported heavily from the Middle East. Most of the imports of the
United Kingdom in 1975 came from Kuwait, Saudi Arabia and Iran, while
the latter was the major import source for Norway.
If the U.S.S.R. and the People's Republic of China develop into
significant crude petroleum exporting nations, important world trade
1/ Organization for Economic Cooperation and Development, 1975 Oil
Statistics, Paris, 1976, p. 45.
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pattern changes would occur. Even at prices comparable to those of
OPEC, new international sources of imports would be favorably looked
upon by those importing nations wishing to diversify their import
sources to become less dependent on OPEC. Exports from the People's
Republic of China could be expected to become particularly important
in the Asia-Pacific area and become an important supply source to the
many developing nations in the area. Increased exports to Japan by the
People's Republic of China would decrease.exports from the Middle East
which in 1975 supplied 78 percent of Japan's crude petroleum imports. 1/
Increased U.S.S.R. exports would probably move to the United
States and Western Europe. In both, the United States and Western
Europe U.S.S.R. exports would tend to replace imports from the Middle
East, which was the largest source of imports in 1975.
Dialogue has'already started between the.U.'S.S.R,- and the United
States and in the future could involve the Science and Technology
Agreement which is expected to be renegotiated in September 1977. 2/
The U.S.S.R. could benefit from U.S. petroleum technology as it-gets
more deeply involved in exploration and production in its frontier
areas, while the United States could benefit from a diversification in
its import sources. The U.S.S.R. also needs western credits, including
access to the U.S. Export-Import Bank. 3/ Rising exports-from the U.S.S.R.
to Western Europe is helping to accomplish this; in 1976 exports to ten
of these nations increased almost 85 percent over 1975. 4/ Japan, a log-
gical market for exports from the U.S.S.R., will probably not be a future
major market as.it did not enter into a joint Siberian crude petroleum
project. 5/ Japan has been the most important country customer for crude
petroleum from the People's Republic of China since 1973 and although
deliveries decreased in 1976 relative to 19756/ it is probable Japanese
imports will increase as the production increases in the People's Republic
of China.
a
Other Trade Factors
In addition to the future changes that may occur in so far as who
imports from whom, other changes may also occur in the world trade
pattern. Probably the most significant changes could be those that
may occur in logistics, refining and marketing. At present the OPEC.
nations effectively control crude petroleum production destined for
1/ 1975 Oil Statistics, op. 'cit. p. 45.
2/ Chemical and Engineering News, June 20, 1977, p. 18.
3/ United States Senate, Committee on Energy and Natural Resources and
the United States House of Representatives, Committee on Interstate Com-
merce, Project Iinterdependence? U.S. and World Energy Outlook Through 1980,
June 1977, p. 67.
4/ Petroleum Economist, July 1977, p. 279.
5/ United States Congress, Joint Committee on Atomic Energy, Towards
Project Interdependence: Energy in the Coming Decade, December 1975, p. 85.
6/ Petroleum Economist, July 1977, p. 260.
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world trade, while the industrial nations still maintain control of
logistics, refining and marketing. 1/ It was only a relatively short
time ago that the industrial nations also controlled the production of
OPEC crude petroleum that entered world trade. Whether or perhaps more
appropriately, how long, the industrial nations will maintain control of
the other three functions is open to conjecture.
Logistics
Logistics as it affects the petroleum industry essentially
means ocean transportation by tanker. Of the current total Free World
petroleum traded internationally, which represents two-thirds of the
Free World petroleum consumption, about 95 percent was at some point
between well and consumer moved by tanker. 2/ Tankers will remain the
main methods of moving petroleum, so that to those with the control of
the tankers goes the ability to effectively control international move-
ments of petroleum. Table D-4 indicates that Liberia, the United Kingdom
and Japan were the principal flags of the world tanker fleet tonnage at
the end of 1975. Most of the tonnage, regardless of flag, was owned by
private firms or individuals. Petroleum companies owned but about one-
third of the world's tanker tonnage. Governments owned even less, around
4 percent of the total.
It should be noted that table C-4 does not indicate the true
"control" of the world tanker tonnage. Owners often register tankers
under foreign flags of "convenience," so called because these foreign
countries specialize in providing favorable tax and other treatment of
the tanker industry. Data on "effective" nationality of world tankers
is very difficult to obtain. 3/ Table C-5 contains one estimate of the
"effective" United States-owned tanker fleet for 1974. It indicates that
the United States controlled about 27 percent of the world's tanker
fleet deadweight tonnage in 1974.
There appear to be two trends setting in which will affect the situation
just outlined:
o The U.S.S.R. is expanding its tanker fleet.
o OPEC and OAPEC have indicated they will expand their tanker fleets.
The expanded U.S.S.R. fleet will enable it to import crude petroleum
from the Middle East should it need to do so, or to export its crude
petroleum.` It could also allow the U.S.S.R. to move crude petroleum
between foreign ports in support of consuming nations, producing nations,
multinational oil companies, etc. 5/
CPEC and OAPEC have indicated they will expand their tanker fleets
as they take over more and more of the direct sales of their crude
1/ United States Senate, Committee
politics of Energy, January 1977, p.
2/
Ibid.,
p.
48.
3/
Ibid.,
p.
51.
4/
Ibid.,
pp.
52-53.
5/
Ibid.,
p.
52.
on Interior and Insular Affairs, Geo-
15.
4/
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Table C-4.--World tanker fleet tonnage at the end of 1975 1/
(In million long tons deadweight)
:Petroleum :
Flag ? company :Private :Government :Other :Total
Liberia--------:
25.6 : 63.7 :
-
:0.3
: 89-6
United Kingdom-:
21.8 : 10.7
0.2
-
: 3217
Japan----------:
4.5 : 27.3 :
-
: -
: 31.8
Norway---------:
0.5 : 25.4 :
-
:0.2
: 26.1
Greece---------:
- : 15.9 :
-
: -
: 15.9
France---------:
8.8 : 3.9 :
0.1
: -
: 12.8
United States--:
4.4 . 4.9
1.3
: 10.6
Panama---------:
4.8 : 4.0 :
-
: -
: 8.8
Other Western .
Europe-------:
13.8 : 21.5 :
0.1
:0.2
: 35.6
Other Western .
.
Hemisphere---:
6.1 . 0.2
0.2
6.5
Communist Bloc-:
- -
8.4
-
8.4
Other Eastern
Hemisphere---:
4.8 7.6
0.2
12.6
Total------:
95.1 :185.1
10.5
:0.7
:291.4
1/ 10,000 long tons deadweight and over; excludes 43.6 million
deadwight tons of combined carriers.
2/ U.S.S.R., Eastern Europe and the People's Republic of China.
Source: The British Petroleum Co. Ltd., BP Statistical Review of
the World Oil Industry; 1976, 1975,-p.14.
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Table C-5 .--Effective United States owned tanker fleet in 1974
(In million deadweight tons)
Flag Number of vessels Deadweight tonnage
Liberia--------: 411 : 36
United States--: 306 10
United Kingdom-: 84 9
Panama---------: 116 : S
All other------ 135 9
Total--------: 1,052 : 69
Source: United States Senate, Committee on Interior and
Insular Affairs, Geopolitics of Energy, January 1977, p. 51.
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petroleum to other nations from the multinational oil companies. Even
if these fleets are but a small part of the world tanker fleet they
could be used to influence future trade patterns. Presumably, a future
petroleum embargo could be even more effective than the one of 1973-
1974 if OPEC (OAPEC) had expanded control of the movements of the tankers
used to carry its exports to other nations.
Once sufficient tanker fleets are controlled by OPEC and OAPEC,
these organizations could mandate that a certain percent of their
exports move in their bottoms. Under such an arrangement these
organizations could charge just about any shipping rates desired. The
alternative to paying these rates would be doing without the crude
petroleum. Thus the future delivered price of the marginal barrel of
petroleum could be greatly influenced by OAPEC and OPEC tanker rates.
Refining
Around 85 percent of the world trade in petroleum takes place
in crude petroleum, with the balance accounted for by petroleum products.
This indicates that most of the consuming nations have decided on
refining self-sufficiency. However, for the United States in 1976, imports
of petroleum products accounted for 28 percent of total imports, or above
the world average. 1/ A large part of these product imports are from
export refining centers in the Bahamas-Caribbean area where Latin
American and Middle Eastern crude petroleum is the feedstock. World-
wide other refining export centers are in the Middle East, Eastern
Canada, Italy and Singapore. 2/
Future expansion could result in Middle East refining capacity of
5.6 million barrels per day by 1980 and 10.2 million barrels per day
by 1985. 3/ Even if all of this expansion does not come to fruition,
the trend is certain; the Middle East will be exporting more petroleum
products in the future at the expense of crude petroleum exports.
The expansion of the other refining exporting centers combined
with that of the Middle East center indicates that world trade in
petroleum products will probably increase. Along with changes in the
pattern of world movements of petroleum, it also means that refining
capacity in some consuming centers could become redundant and require-
ments for products tankers could increase. Overall, increasing petroleum
products movements could signal increasing dependence of consuming nations
on particular refining centers, especially if these refining centers
are in crude petroleum producing countries with their own tanker fleets.
1/ Federal Energy Administration, Monthly Energy Review, February 1977,
pp.6 and 8.
2/ Federal Energy Administration, Trends in Refinery Capacity and
Utilization, June,, 1975, p. 25.
3/ Geopolitics of Energy, op. cit., p. 47.
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Marketing
The multinational oil companies are the international marketers
of petroleum in international trade. They are essentially responsible
for the present global supply system which has responded admirably to
the demands that have been placed upon it. 1/ This global system was
originally sgt.up to move host country production owned by multinational
companies. It now moves production essentially owned by the producing
nations. However, this international marketing system based on market
knowledge and supported by tankers and storage facilities plus refining
capacity has been invaluable in assuring the consuming countries a steady
supply adequate to meet its requirements.
In the future as the producing nations become increasingly involved
in international marketing, and supported by growing tanker fleets
and refining capacity, supply patterns will begin to change. Exports
from a producing nation to a certain national market that in the past
may have been predicated on a knowledge of that consuming country's
market by the multinational oil companies could be changed. The reason
for these changes could range from conflicting national interests between
producing and consuming countries to a lack of market knowledge. What-
ever else can be said about the multinational oil companies' marketing
efforts, the multinational oil companies have served some purpose as a
buffer between producing and consuming nations' government.
1/ United States Congress Joint Economic Committee, Subcommittee on
Energy. Mu1tinati6nal Oil Companies and OPEC: Implications for U.S.
Policy, June 2, 3 and 8, 1976, p. 110.
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United States Imports
The level of U.S. imports has been a topic of interest since the United
States became a net importer of crude petroleum following World War II.
This interest has increased as the ratio of imports to domestic consumption
has increased from 8 percent in 1947 to an estimated 42 percent in 1976;
the ratio is forecast to be 46 percent for 1977 1/. Table D-1 contains
data on the increasing dependence on imports of the United States.
As total imports have increased in volume and as a percent-of U.S.
domestic demand, imports from the Eastern Hemisphere have increased even
faster as a percent of total imports. Table D-2 indicates that imports
from OPEC have gone from accounting for half of the 1970 U.S. imports to
over three-quarters in 1975. This increasing reliance on OPEC imports is
caused by the increasing dependence on imports in general as a source of
supply and by decreasing ability or willingness of other nations to
export. Based on production capacity and reserves, it is inevitable
that the United States will become even more dependent on OPEC exports if
it continues to increase its imports.
Mechanisms to Increase Supply Security
Because of the increasing dependence on imports considerable study has
been devoted to ways in which this dependence can be decreased. In general,
import dependence can be decreased either by decreasing petroleum consumption
or increasing crude petroleum production, or a combination of the two.
Petroleum consumption can be decreased by decreasing the use of items such
as automobiles, which use petroleum directly. Petroleum consumption can
also be decreased by substituting other energy forms such as coal. Both
of these approaches are incorporated in the National Energy Plan. 2/
There are also other ways to deal with security of supply. These include:
(1) Bilateral treaties;
(2) International commodity agreements;
(3) Sharing of available supplies;
(4)? Stockpiling;
(5) Super-tanker ports;
(6) Tanker fleets;
(7) Refining capacity.
The International Energy Agency., of which the United States-is a member,
has as one of its prime functions the development and implementation of an
International Energy Program (IEP) which will share available petroleum
1/ Federal Energy Administration, Monthly Energy Review, September 1976, p.2.
2/ Executive Office of the President, Energy Policy and Planning,
The National Energy Plan, April 29, 1977, p.50.
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Table D- L -- United States dependence
on imports: 1947 to 1977
(In thousand of barrels per day)
Ratio of imports to
demand
Imports
domestic demand
Quantity
Quantity
(Percent)
1947--:
5,451
437
8.0
1948--:
5,775
514
8.9
1949-
5,803
645
11.1
1950--:
6,507
850
13.1
1951--:
7,041
844
12.0
1952--'
7,280
952
13.1
1953--:
7,604
1,034
13.6
1954--:
7,760
1,052
13.6
1955--:
8,459
1,248
14.8
1956--:
8,779
1,436
16.4
1957--:
8,818
1,574
17.8
1958-
9,083
1,700
18.7
1959--:
9,451
1,780
18.7
1960-
9,661
1,911
19.8
1961--:
9,806
1,917
19.5
1962--:
10,234
2,082
20.3
1963-
10,551
2,130
20.2
1964--:
10,816
2,259
20.9
1965--:
11,304
2,468
21.8
1966-
11,850
2,573
21.7
1967--:
12,560
2,537
20.2
1968--:
13,393
2,837
21.2
1969-
14,137
3,166
22.4
1970--:
14,697
3,419
23.3
1971--:
15,212
3,926
25.8
1972--:
16,367
4,741
29.0
1973--:
17,308
6,256
36.1
1974--:
16,629
6,112
36.8
1975--:
16,288
5,993
36.8
1976--'
17,185
7,217
42.0
1977--:
18,039
8,324
46.1
Source: 'Federal Energy Administration,
Monthly Energy Review, September 1976, p. 2.
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Table D-2.--Imports from OPEC nations as a percentage
of U.S. imports: 1970 and 1975
Country
Percent of U.S. imports
1970
1975
Algeria-----------------
0.5
6.6
Ecuador------------------'
-
1.5
Gabon-------------------
-
0.9
Indonesia---------------
4.9
9.1
Iran---------------------'
2.2
7.3
Iraq--------------------
nil
0.1
Kuwait-------------------
2.0
0.3
Libya--------------------'
3.3 ;
5.6
Nigeria------------------'
3.2
17.0
Qatar-------------------
5.2
0.4
Saudia Arabia------------'
1.6
14.7
United Arab Emirates-----'
-
3.8
Venezuela----------------'
27.2
11.0
Total------------------'
50.1
78.3
Source: Compiled from offical statistics of the U.S.
Bureau of Mines.
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supplies at times of supply disruption. In addition, the IEP is also
concerned with conservation, alternate energy source development, stock-
piles, and long range international cooperation.
The United States has also started to implement a strategic storage plan
developed over the past 18 months. By the end of 1977 the purchase of the
first 10 million barrels of a 500 million barrel crude petroleum reserve
planned for 1982 should be completed. 1/ All of the storage sites thus
far selected are salt domes and are located at Bayou Choctaw, West Hackberry,
and Weeks Island, in Louisiana, and at Bryan Mound in Texas. 2/
Mechanisms to increase security of supply currently or recently under
consideration in the United States also include source country quotas 3/
and Generalized System of Preferences (GSP) treatment for certain OPEC
nations. 4/ Under the source country quota provisions, imports of petroleum
articles from certain Arab countries were to be limited by license to a
maximum of five percent of estimated United States consumption. GSP treat-
ment would be extended to certain OPEC nations, such as those in the Western
Hemisphere or those that did not participate in the 1973-74 embargo.
The United States has employed quotas and tariffs designed to reduce
dependence on imports. From 1959 to 1973, imports of both crude petroleum
and products were regulated by a mandatory program based on officially fixed
quotas. In 1973 the quotas were replaced by fees, which are similar, if
not identical, to tariffs 5/.
Import controls objectives
Import controls can be used for many purposes including the following: 2/
(1) The stimulation of domestic exploration for crude petroleum;
(2) The stimulation of domestic production of crude petroleum;
(3) An increase in domestic exports of petroleum products;
(4) An increase in domestic refinery capacity;
(5) An increase in imports of crude petroleum and/or petroleum products;
(6) The maintenance of given domestic prices for crude petroleum
and/or petroleum products;
(7) The maximization of domestic tax revenues on petroleum and its
products;
(8) The stimulation of substitute sources of crude petroleum,
e.g., shale;
(9) ' Achievement of environmental or other broad, social goals on
on which energy can have effect.
(10) Achievement of increased security of supply.
1/ Oil,and Gas Journal, May 23, 1977, p. 26.
2/ Ibid., p. 26.
3/ United States Senate, S.2806, 93d Congress, 1st Session, December 13,
1973, p. 59.
4/ United States Senate, 5.1706, 94th Congress, 1st Session, May 12, 1975,
and United States House of Representatives, H.R.5897, 94th Congress, 1st
Session, April 10, 1975.
5/ United States Tariff Commission, World Oil Developments and U.S. Oil
Import Policies, October 1973, pp. 92-109.
Ibid., p. ill.
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D-5
The above purposes could also be achieved by various control mechanisms
including the following 1/:
(1)
Tariffs on imports;
(2)
Quotas which place absolute limits on imports either
by quantity or value, or both;
(3)
Tariff-rate quotas;
(4)
Subsidies to producers, users, importers,.and/or
exporters;
(5)
Internal tax measures affecting participants in
petroleum ii:dustry;
the
(6)
Domestic production, procurement, and/or usage standards,
or U.S.-flag shipping requirements.
Tariffs and quotas
.Of the above five control mechanisms, tariffs and quotas have traditionally
been most specifically identified with import controls on crude petroleum
and petroleum products. A tariff affects price directly and the quantity
demanded or supplied indirectly, while a quota affects the quantity
supplied directly and price indirectly. As the market is "cleared" at
the price at which supply equals demand, the net result of both tariffs
and quotas is some predetermined price or related level of imports.
Theoretically a tariff can be devised such that were it substituted for
a quota, the same volume of imports would be generated and the same price
obtained.
Of the two, quotas are the preferable mechanism if some specific quantity
of imports is the desired policy. Tariffs allow material to enter the
country in any quantity so long as the tariff is paid. Tariffs also are
administratively less flexible than quotas as they require legislative
action. In addition tariffs are subject to conformity with GATT rules
and can run into constitutional difficulties. Quotas are subject to none
of these constraints. 2/.
Cabinet Level Task Force Report
Because of changing world' conditions and apparent difficulties with the
quota system then in effect the President created a Cabinet Level Task
Force in March 1969, to conduct a comprehensive review of the situation.
This Task Force issued its final report in February 1970. 3/ One of its-
primary concerns was security of supply to which a large part of the
report was devoted.
The majority of the Task Force preferred tariffs over quotas. Thus they
were recommending the replacement of the quotas then in effect by a tariff
system. This did not occur as the report was essentially rejected by the
President. However, about 3 years later, the quotas system was scrapped
and replaced with a series of fees. As indicated earlier, it has been
determined that the fee is similar, if not identical, to a tariff.
1/ United States Tariff Commission, op. cit., pp. 111-112.
2/ Ibid, p. 123.
3/ Cabinet Task Force on Oil Import Control, The Oil Import Question,
February 1970.
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In addition to preferring the tariff to the quota, the report expressed
the fact that "preferences for particular sources or areas of supply
should be based on an explicit security evaluation". 1/ It further
stated that Canadian and Mexican petroleum is "nearly as secure politically
and militarily as our own." 2/ The report therefore recommended that
after an initial transition phase, that there be established two tariff
rates with the lower rate applicable to supply sources in the Western
Hemisphere and the higher applicable to sources in the Eastern Hemisphere.
The initial increase in tariff on crude petroleum imports from non-preferred
sources was recommended to be $1.35 per barrel. This tariff would have
made insecure imports considerably more expensive than secure imports as
the price of imports was then about $2.50 to $3.00 per barrel landed in
the United States.
The preferential tariff rate for secure supply sources would have been
effective in 1970 because most of the crude petroleum producing nations of
the world desired to increase exports. The majority of the exporting
countries needed additional revenue to pay for imports and development
programs and, since a price increase was out of the question, the additional
revenue could only be generated by increasing quantity.
Changed circumstances
Since 1970 many changes have occurred in the world petroleum market.
The most important are:
(1) The desire of many of the crude petroleum producing-
exporting nations to limit or at least not increase
production;
(2) The increasing demand by the industrial and other nations
of the world for exports from the producing-exporting nations;
(3) The quadrupling of price and the arbitrary setting of
this price by OPEC.
Because of these chances it is doubtful that the Task Force's preferential
tariff plan would be effective today. This is not to say that security
of source of import supply is any less of a concern today in the United
States; in fact it is of much more concern. However, the changes in
circumstances from 1970 to 1977 probably make supply sharing, stock-
piling, and the use of other mechanisms preferable to a two-tier tariff
system.
To maintain the same relationship that the proposed $1.35 per barrel
rate had to the 1970 crude petroleum price, the tariff differential
today would have to be on the order of $6.50 per barrel. Thus, the price
of the imported barrel of crude petroleum would be around $20.00. This
high price would fuel inflation and act to decrease the competitiveness
of U.S. energy intensive products such as chemicals in world trade.
Canada and Venezuela, both Western Hemisphere import sources and there-
fore more secure than Eastern Hemisphere sources, have indicated an interest
1/ Cabinet Task Force on Oil Import Control, op. cit., p. 134.
2/ Ibid., p. 135.
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 Approved For Release 2004/03/23 : CIA-RDP80M00165AO02400060003-0
in decreasing exports. If a country sets an export limit, a lower
import duty will do nothing to attract additional supplies. Further,
there is every probability that such preferred sources of imports would
increase price to the point that the combination of preferred tariff and
price would equal that of tariff and price from the alternate less secure
import source. Under such circumstances there would be no incentive for
the U.S. importer to prefer the secure import supply 'source on the basis
of price.
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 Approved For Release 2004/03/23: CIA-RDP80M00165AO02400060003-0
E-1
Basic economic data and energy consumption data were collected
and projected for the countries and areas listed below. In some cases,
data collected had to.be changed (sometimes by assumption or extra-
polation) in order to keep all data comparable and assure that they
conform to the definitions of each area.
1.
United
States
2
C
d
.
ana
a
3.
Other Western Hemisphere (all countries and areas in the
Western
Hemisphere excluding the United States and Canada).
4.
France
5.
Italy
6.
West Germany
7.
United Kingdom
8.
Other Western Europe:
Countries And Areas For Which Projections Were Made
APPENDIX E
ENERGY DEMAND BACKGROUND
9.
Austria
Belgium
Denmark
Faeroe
Finland
Gibraltar
Greece
Iceland
Ireland
U.S.S.R.
Luxembourg
Malta
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
10.
People's Republic of China
11.
Eastern Europe:
Albania
Bulgaria
Czechoslovakia
East Germany
Hungary
Poland
Romania
Yugoslavia
Middle East:
Bahrain
Iran
Iraq
Israel
Jordan
Kuwait
Lebanon
Oman
Qatar
Saudi Arabia
Syria
Turkey
United Arab Republic
Yemen
Yemen, Democratic
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 Approved For Release 2004/03/23 : CIA-RDP80M00165AO02400060003-0
E-2
13. India
14. Japan
15. Other Asia:
Afghanistan Malaysia
Bangladesh Mongolia
Bruner Nepal
Burma Pakistan
Democratic Kmpuchea Philippines
Hong Kong Portuguese Timor\
Indonesia Singapore
Korea, South Sri Lanka
Korea, North Thailand
Laos Vietnam
16. Africa (all countries and areas on the continent of Africa)
Methodology
In order to project energy demand for 16 selected countries and
areas, data were gathered on the following four. variables: energy
demand in the past, gross domestic product (GDP), population, and
energy conservation measures. Other variables were also examined
(industrial production, labor force data, productivity data, etc.)
but were not used in the final projections for various reasons, usually
because of lack of available data or because such variables were
believed not to correlate as highly with energy demand.
Data collected on GDP appear in table 6 of appendix A. Growth
rates by selected countries and areas (data on "Other Western Europe"
and "Other Asia" were not gathered) are listed.
In table E-1, population data are assembled. Again, projections
were made, for 1980 and 1985 in various countries and areas. These
projections were later used in the section on projections of energy
demand.
Pages E-4 to E-13 in this appendix analyze energy demand in various
sectors (generally transportation, industry, household/commercial, and
electrical generation) of the economies of selected countries. Projec-
tions obtained in this section were later used in projections of aggre-
gate energy demand.
This appendix also analyzes factors influencing energy
demand (mainly energy/GDP elasticities and the effects of government
energy conservation measures). Projections were made which were of
use in final projections of energy demand. In section E, projections
are also made using population data and data on energy consumption
per capita (it was assumed that energy consumption per capita to 1985
will continue to increase at the 1965-73 historical rate).
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 Approved For,Release 2004/03/23 : CIA-RDP80M00165AO02400060003-0
E-3
TableE-1.--Population: 1975' population, and projections to
1980 and 1985, by selected countries and areas
(Million persons)
Country or area
1975
1980
1985
United States-----------------
213.63:
224.88 :
236.00
Canada------------------------
22.83 :
24.60 :
26.50
Other Western Hemisphere------
319.36 :
367.71 :
422.30
France------------------------
52.74 :
55.12 :
57.38
Italy-------------------------
55.81 :
57.54 :
59.51
West Germany------------------:
61.83 :
64.27 :
65.73
United Kingdom----------------:
55.96 :
57.61 :
58.77
Other Western Europe----------:
116.99 :
120.88 :
124.79
U.S.S.R.----------------------.
254.38 :
267.57 :
281.16
Eastern Europe----------------:
130.01 :
134.33 :
138.79
China-------------------------:
838.80 :
912.79 :
992.95
Middle East-------------------:
119.24 :
137.43 :
158.25
India ------------------------- -
598.10 :
667.94 :
744.83
Japan ------------------------- ?
110.95 :
116.74 :
122.65
Other Asia--------------------:
562.32 :
637.83 :
723.76
Africa------------------------:
1/
391.00 :
456.55 :
518.56
l/ 1974 data.
Source: United States International Trade Commission, based
on historical growth rates and data from the United Nations, the
World Bank, and various government sources.
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 Approved For Release 2004/03/23 : CIA-RDP80M00165AO02400060003-0
E-4
Basic Economic Projections
Table 6 in appendix A presents past and projected rates of growth
of real GDP for those countries and areas for which such data was avail-
able. Although the major data sources were official publications of the
United Nations and the OECD, a number of other data sources were con-
sulted, including government publications and national economic plans.
Population
There is no hard-and-fast correlation between population growth
and energy consumption; energy use grows faster than population due
to technological change and rising living standards. Nevertheless,
population growth is often used as a variable in forecasts of energy
consumption, since population growth does contribute to greater energy
usage (see Holdren in "Energy Conservation: Its Nature, Hidden Bene-
fits and Hidden Barriers," L. Schipper, Lawrence Berkley Lab, UCID
3725, June 1975). 1/
Population data were collected and projected for each of the
16 countries and areas covered in this study (table E-1). The data
were then used in projections of energy consumption. The principal
source of population data was the United Nations' Monthly Bulletin
of Statistics.
Sector analysis
In order to project world energy demand to 1985, data were gathered
and projected for major energy-consuming sectors in the economies of
selected countries and areas. The major sectors covered were the indus-
trial, transport, residential, commercial, and electrical generation
sectors. An analysis of energy demand by sector, with projections
by sector, was a further method of determining potential future energy
demand and of determining where energy conservation policies could be
most effective.
United States.--Energy consumption data were obtained for the
transportation, industrial, household/commercial, and electrical gen-
eration sectors of the economy. Table E-2 shows projected energy demand
in 1980 and 1985, by sector, as well as total energy demand for the
economy in those years. Energy demand is projected to increase between
2.5 and 5.1 percent per year for the 1975-80 period, and between 2.0 -
1/ Middle and Long-Term Energy Policies and Alternatives, Hearings
before the Subcommittee on Energy and Power of the Committee on Inter-
state and Foreign Commerce, House of Representatives, Ninety-Fourth
Congress, Serial No. 94-63, March 25 and 26, 1976, p. 516.
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 Approved For Release 2004/03/23 : CIA-RDP80M00165A002400060003-0
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 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
4.7 percent per year for the 1975--85 period. The electrical sector
has the higYiest potential. for increased energy consumption.
Energy demand in the U.S. transportation sector was 18.5
quadrillion BTU 1/ in 1975, accounting for 26 percent of total U.S.
energy demand. The automobile is the largest consumer of energy in
the sector and is also the principal possibility for energy conserva-
tion in the sector, In fact, the most important variable in future
U.S. energy consumption in the transportation sector is the extent
to which smaller, mere fuel-efficient automobiles will replace the
traditional large automobile. In the past, gasoline pricing and taxa-
tion policies have reinforced the apparent consumer preference for
large, powerful automobiles; hopefully, mandatory conservation measures
and pricing policies will decrease the demand for fuel-inefficient,
wasteful automobiles. Fuel economy standards for new automobiles
for 1980 and 1985 have been passed, with penalties for manufacturers
and importers that do not comply. Unfortunately, fuel efficiency read-
ings are based on E?A f uel-economy figures which are notorious for
being well above actual highway mileage (due to dynamometer testing
and other methods used by the EPA). Moreover, it still remains to
be seen whether serious attention will be given to implementing the
1980 and 1985 f uel-efficiency requirements or whether there will be
a resort to "escape clauses" in the legislation which enable the reduc-
tion of standards for various reasons. Other potential energy savings
in the automotive portion of the transportation sector would be the
abandonment of automatic transmissions and the mandatory use of radial
tires; each of these measures would save 10 percent of total automotive
fuel use. 2/ In addition, taxes could be placed on automobiles based
on weight, horsepower, or vehicle fuel efficiency.
Further energy-saving policies in the transportation sector
are increased efficiency of railroads and a greater commitment towards
efficient mass-transit systems.
Energy demand in the industrial sector was 19.0 quadrillion BTU
in 1975, accounting for 26.7 percent of total U.S. energy demand. 3/
Energy demand iri the sector could be reduced to a 1.8 percent average
annual growth rate for the 1975-85 period if proper conservation mea-
sures are taken. The Energy Policy Project of the Ford Foundation
has estimated 4/ that approximately 22 percent of industrial energy
1/ A BTU is the amount of heat necessary to raise the temperature
of one pound of water 1 degree Farenheit under standardized pressure
and temperature conditions.
2/ Middle- and Lon -Term Energy Policies and Alternatives, p. 85.
3/ Ener Perspectives 2, U.S. Department of the Interior, June
1976, p. 77.
4/ A Time to Choose, Energy Policy Project of the Ford Foundation,
Ballinger Publishing Co., Cambridge, Mass., 1974, p. 64.
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 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
use could be saved in 1985 (vis-a-vis the "historical growtht? trend)
if the following conservation measures were takent more efficient
processes in five mayor energy-intensive industries, onsite industrial
cogeneration of steam and electricity, and "usage of heat recuperators
and regenerators with direct use of fuels instead of electric resis-
tive heat." 1/ Energy efficiencies for some of the principal U.Sa
industries are generally low in comparison with many other OECD coun-
tries, 2/ thus leaving ample room for the implementation of more energy-
efficient measures. Although the United States adopted a mandatory
reporting system for some large firms and voluntary targets for large
energy-consuming industries, tax incentives for investment in energy-
efficient equipment would be desirable, 3/ as would be further emphasis
on industrial cogeneration of steam and electricity.
The household/commercial sector of the economy consumed 13.5
quadrillion BTU of energy in 1975, consisting of approximately 19.0
percent of U.S. energy consumption in that year. The principal usage
of energy in the sector is in heating and cooling of homes and commer-
cial establishments. 4/ Significant energy savings could be accomplished
by the installation of better insulation and .by increasing the effi-
ciency of heating systems. A further important variable is the number
and type of new housing units that are built, since heat (and cooling)
losses from detached single family homes are significantly greater
than losses from multifamily housing units. Another factor influencing
energy demand in the sector is the extent to which there wil be increased
usage and popularization of solar energy; however, solar energy is
not likely to be a mayor factor in reduced energy demand during the
1977-85 period.
The electricity generation sector will most likely be the sec-
tor with the highest growth rates of energy demand during the 1975-80
and 1975-85 periods. This 'is due to the increasing demand for elec-
tricity and the resulting energy losses due to the conversion of energy
into electricity. Total conversion losses are expected to increase
since electric power will continue to increase its share of total energy
consumption. 5/ The potential for efficiency increases in this sector
is somewhat limited up to 1980 because of the nature of existing utility
plants. However, by 1985, "a considerable improvement in efficiency
may be achieved. Presumably, a greater emphasis will be placed on
more efficient combined-cycle generating plants and supercritical
(temperature) steam plants that have higher capital costs but are .
more efficient in the use of fuel." 6/
1/ Ibid., p. 64.
2/ Energy Conservation in the International Energy Agency, pp, 17, 18,
3/ Ibid., p. 35.
4/ A Time to Choose, pp, 432-440.
5/ "The Present and Future of Energy Resources," by Masao Sakisaka,
in Energy, Inflation, and International Economic Relations, Atlantic
Institute Studies--I 1, Praeger Publishers, New York, 1975, p. 31.
6/ U.S. Energy Outlook, National Petroleum Council, 1972, p. 50.
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 Approved For Release 2004/C)3/23 : CIA-RDP80M00165A002400060003-0
Canada.--The residential/commercial sector was Canada's largest
energy user in 1972, with a consumption of ,47.8 million metric tons of
oil equivalent, or 30.8 percent of total Canadian primary energy consump-
tion in that year. 1/ As in the United States, the sector with the
greatest percentage increases in.energy consumption to 1985 in Canada
is the electricity-generation sector. Total energy demand in Canada,
based on sector analysis, will grow at average annual rates of between
3.7-5:0 percent during the 1972-80 period. 2/
The OECD has estimated that by 1985, Canada could save 0.2 bar-
rels of oil equivalent per day by establishing a 33 mile-per-imperial.
gallon fuel standard for automobiles, and a further 0.2 million barrels
of oil equivalent per day by revising insulation standards, retrofitting
old buildings, and by accelerating industrial conservation. 3/ Imple-
mentation of the above standards would result in a savings by 1985 of
approximately 146 million barrels of oil equivalent per year.
Some energy conservation measures have already been adopted in
the transportation sector, which accounted for 19.1 percent of total
primary energy requirements in 1975. 4/ A progressive excise tax was
recenCly:imposed on automobiles weighing over 3,500 pounds, and a tax
was pla~ed~on automotive air conditioners. 5/ It is hoped that fuel
economy standards of 8.5 km/liter (24 mpg) will be reached by 1980
and 33 mpg (11.~7km/1) will be reached by 1985. Further efficiencies
could be obtained by improvement of vehicle load factors. 6/
The industrial sector consumed 26 percent of Canada's total pri-
mary energy requirements in 1974. Energy conservation measures already
established are voluntary target and disclosure systems which include
allowances for industries that make energy-efficient changes. 7/
In the residential/commercial :sector, Canada could save.substan-
tial amounts of energy by 1985 by the implementation of measures designed
to bring about better insulation, better heating control practice, and
more energy-efficient household appliances. In fact, a new insulation
code for buildings has been established, arrangements have been made for
loans to consumers who want to implement energy savings in their homes,
and there are now minimum efficiency standards on appliances and energy-
effi.ciency 1'abeling. 8/
1/ Enemy Prospects to 1985, Volume II, OECD, Paris, 1974, pp. 17-19.
2/ U.S. International Trade Commission estimates, based on data in
Enemy Prospects to 1985.
3/ World Energy Outlook, p.20.
4/ Energy Conservation in the International Energy Agency, p. 15.
5/ World Energy Outlook, op. cit., p. 34.
6/ Energy Conservation in the International Energy Agency, p. 25.
7/ Ibid.
8/ Ibid.
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 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
France.--Data on France?s total energy requirements appear in
table E-3. The industrial sector was the largest energy consuming
sector in 1974, accounting for 27.8 percent of France's total energy
requirements. The fastest-growing sector has been that of nonenergy
uses, with annual average growth rates of 15.9 percent for the 1965-74
period and 18.5 percent for the 1965-73 pe~iod; growth in this sector
will most likely diminish from the high levels of the past. Another
sector in which growth could diminish is in the "road" section of the
transportation sector, where energy savings could be realized through
conservation measures.
Italy.- A sector breakdown of Italy's utilization of total energy
requirements is shown in table E-4. The industrial sector (including
nonenergy use) is Italy's largest energy-consuming sector, accounting
for 34.4 percent of Italy's total primary energy in 1975. 1/
West Germany.--The industrial sector is West Germany's largest
energy consumer by sector, accounting for 29.7 percent of total energy
requirements in 1974 (table E-5). -The fastest-growing sector has been
that of nonenergy uses, with annual average growth rates of 10 percent
or more during the 1965-74 periods.
United Kingdom.--Data on energ~~ consumption by sector in the United
Kingdom are shown in table E-6. The largest energy-consuming sector is
the industrial sector, which accounted for approximately 25 percent
of the United Kingdom's total energy requirements in 1974. The fasteSt-
growing major sector has been that of "non-energy uses."
Japan.--Japan's national energy conservation program includes
government and industry cooperation to set efficiency targets, loans
for energy-efficient equipment for industry at below commercial rates,
and tax incentives for smaller or lighter automobiles. Japan's Advisory
Committee on Energy projects 2/ that energy demand in Japan can be
limited to 760 million K1 (oil equivalent) by means of energy conser-
vation. This translates into an ann~ial average growth rate of 5.3
percent in energy demand for the 1973-85 period.
1/ EnerQV Conservation in the International Energy Agency, OECD,
Paris, 1976, p. 17.
2/ "Energy in Japan," Quarterly Report No. 33, The Institute of
Energy Economics, June, 1976, p. 18.
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 Approved For Release 2004/03/23 :CIA-RDP80M00165A002400060003-0
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 Approved For Release 2004/03/23: CIA-RDP8OMOO165AOO24OOO6OOO3-0
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year
'
___.-
.
-.----.____-- --
. Millions of
. tons of oil
equivalent
Percent Percent
(1)
(2)
(3)
~~+)
1965------------;
193.2
-
-
-
1966------------~
193.4 :
0.1
2.0 ~
0.05
1967------------~
193.5
0.1
2.7 ~
~ 0.04
1968------------~
201.1 :
3.9
3.5 ~
1.11
1969-------------~
207.9 :
3.4
1.4 ~
2.43
1970-----------~--~
212.5 :
2.2
2.3 ~
0.96
1971-------------~
210.4 ;
-1.0
2,5 =
-0.40
1972------------~
215.1 :
2.2
:
2.6 ~
0.85
1973------------~
223.8
4.0
5.9 ~
0.68
1974-------------~
214.8
-4.0
:
0.3 ~
-1.33
Average---------:
1.2
~
2.6
1/ From Energy Balances of OECD Countries 1960/74, Paris, OECD, l~)J6,
p.22.
2/ Based on index numbers in International Economic Report of the President,
January 1977, Appendix B, Table 5, p. 141.
Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
 Approved For Release 2004/03/23: CI~#_~~P80M00165A002400060003-0
Table E-14?--U.S.S.R.: Energy/GDP ratios, 1965-73
Year
Energy .
Energy consumption: : Real ^-DP? : Energy/GDP
percent change,
consump- :percent change: f
ratios
i
rom prev
tion 1/ from year 2/
:previous year -
ous
(2)
(3)
Million
.
:metric tons
.
of coal
.
equivalent Percent
Percent
(1) (2)
(3)
(4)
1965-----------
: 829.40
-
-
-
1966-----------
: 883.93
6.6
7.2
0.92
1967-----------
: 931.97
5.4
9.5
0.57
1968-----------
: 965.21
3.6
7.4
0.49
1969-----------
: 1,010.60
4.7
5.7
0.82
1970-----------
: 1,054.69
4.4
8.7
0.51
1971-----------
: 1,111.79
5.4
6.0
0.90
1972-----------
: 1,179.56
6.1
3.8
1.61
1973-----------
: 1,230.44
4.3
8.2
0.52
Average--------
:
5.1
7 1
1/ Statistical Yearbooks of the United Nations.
2/ U.N..Yearbook of National Accounts Statistics.
Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
E-24
Table F-15~-Middle East: Energy/GDP ratios, 1965-73
.
Energy
Energy consumption:: Tteal ~T?P:, :Energy/GDP
han
e
t
Year
g
c
consum ercent chan e:percen
ratios
p p g from previous
tion 1/ from year 2/ ~ (2) (3)
;previous year
Million
:metric tons
.
of coal
.
equivalent
Percent
Percent
(1)
(2)
(3)
(4)
1965-----------.
45.11
-
-
-
1966-----------:
47.00
4.2
8.7
0.48
1967-----------:
50.00
6.4
5.3
1.21
1968-----------:
59.00
18.0
10.1
1.78
1969-----------:
70.00
18.6
6.9
2.70
1970-----------:
84.00
20.0
7.5
2.67
1971-----------:
90.00
7.1
10.0
0.71
1972-----------:
98.00
8.9
10.0
0.89
1973-----------:
110.00
12.2
9.1
1.34
Average--------:
11.9
8.4
1/ Statistical Yearbook 1974, United Nations, New York, 1975.
2/ U.N. Yearbook of National Accounts Statistics.
Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
Table E-16.--India! Energy/GDP ratios, 1965-73
Energy
Real GJJP:
Energy
consumption:
gy/GDP
:Ener
t
h
Year
consump-
percen
c
ange
:percent change:from
ratios
revio
tion 1/
p
us
from : (2) ~ (g)
ear 2/
_
_ __
:previous year Y
Million
:metric tons
,
of coal
equivalent
Percent
Percent
(1)
(2)
(3)
(4)
1965-----------:
83.55
-
- :
1966-----------:
87.27
4.4
1.3
3.38
1967-----------:
90.04
3.2
10.0
0.32
1968-----------:
94.49
4.9
3.4
1.44
1969-----------:
101.25
7.2
5.5
1.31
1970-----------:
96.80
-4.4
4.2
-1.05
1971-----------:
101.50
4.9
2.0
2.45
1972-----------:
104.82
3.2
-1.0
-3.20
1973-----------:
107.93
3.0
3.0
1.00
Average--------;
3.3
3.6
1/ Statistical Yearbooks of the United Nations.
2/ U.N. Yearbook of National Accounts Statistics.
Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
Table E~17?--Japan: Energy/GNP ratios, 1965-74
--
Total energy Real GNP:
:Total energy requirements: :percent clic;nge
Year :requirements :percent change ?from previous
1/
from previous ~ year 2/
- -yea r ----- --------- -- -- - -
_
.
-----
Million
---
. tons of oil .
ec~i_ivalent
Percent
Percent
(1)
(2)
(3)
1965------------:
151.4
-
-
_;
1966---------~--
169.5
12.0
9.8
1967------------:
194.6
14.8
13.0
4
1-968-----------_:
216.8
11.4
13.
8
1969------------:
249.7
15.2
10.
0
9
1970-------------:
284.0
13.7
1
.
6
290
2.3
7,4
.1971-------------:
.
8
311
7'
9.0
1972------------:
.
9
7
9
9
1973------------:
336.4 :
.
.
1974------------:
334.4 :
-0.6
-1.1
Average---------:
?
9.3
9.2
l:n~: rZ;y /(.NP
:(2) (3)
1.22
1.14
0.85
1.41
.
1.26
.
0.31
.
0.81
0.80
.
0.55
1/ From I'ner~y-Balances of OFCD Countries .1960/74; Paris, UI~,CD, 1976,
p.22.
2/ Based on index numbers in International Economic Report of the President,
January 1977, Appendix B, Table 5, p. 141.
Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
 Approved For Release 2004/03/23: CIAgRQ~80M00165A002400060003-0
Table E-18 ?--Africa: Energy/GDP ratios, 1965-73
'
Year
Energy
Energy consumption: Real ~n?P: :Energy/GDP
'percent change
consump- :percent change: ratios
from previous
tion 1/ from
(2) (3)
.
year 2/
:previous year -
Million .
:metric tons
.
of coal
.
equivalent
Percent
Percent
(1)
(2)
(3)
(4)
1965-----------:
88.48
-
-
1966-----------:
92.00
4.0
3.9
1.03
1967-----------:
93.00
1.1
3.8
0.29
1968-----------:
98.00
5.4
7.3
0.74
1969-----------:
102.00
4.1
5.7
0.72
1970-----------:
109.00
6.9
7.5
0.92
1971-----------:
121.00
11.0
5.0
2.20
1972-----------:
125.00
3.3
4.8
0.69
1973-----------:
132.00
5.6
4.5
1.24
vPra s-----~
5.2
5
~
1/ Statistical Yearbook 1974,
United Nations,
,
New York, 1975.
Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
8-28
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 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
.~PPEIdDIX F
OTHER E1dERGY SOURCES
Coal is the most abundant fossil fuel. Together with lignite it
consitutes solid fuel. Tables F-1 and F-2 cover respectively recoverable
coal reserves and coal production.
Recoverable coal reserves are principally held by the United States,
Western Europe (West Germany and the United Kingdom) and the Communist
Bloc. In 1974 these holdings combined accounted for almost 90 percent
of the total recoverable coal reserves. Communist Bloc recoverable
reserves were about 1.4 times as large as those of the United States.
Coal production in 1974 was also concentrated in these same locations.
Together the United States, Western Europe and the Communist Bloc produced
almost 90 percent of the world's production. However, the Communist Bloc
produced over 3.3 times the quantity produced in the United States. The
Communist Bloc is exploiting its coal reserves more vigorously than
the United States.
One drawback to increased coal consumption is its lack of end-use
application versatility. High transportation costs dictate that its most
economical use is at or near its mining site. Further, coal is most
cost efficient in relatively large consuming plants such as those associated
with electric utilities and metal smelters. Environmental concerns
including those over strip mining also affect its use. The combustion of
coal emits more pollutants than the combustion of the other fossil fuels.
Sulfur dioxide and particulates emissions are especially heavy. Stack gas
scrubbers and precipitators can be used to reduce emissions, but add to
the cost of using coal, and the technology is far from completely
developed, so companies want to hold eff immediate investment.
However, in spite of the drawbacks of coal, it will continue to
be an important energy source. With most nations desirous of reducing
petroleum import levels, those with coal reserves will increasingly
exploit them as one means of doing so. In addition, any decrease in
expected nuclear capacity for electricity generation, which would
ordinarily be made up by expansion of petroleum based electricity
generating capacity, will at least be in part substituted for by coal
based capacity.
In spite of all of this, in certain areas and countries of the
world, such as the People's Republic of China, the U.S.S.R. and the
Communist Eastern European countries, coal will provide a significantly
lower future share of primary energy consumption. Increasing
industrialization will require other fuels for certain applications.
Because of the difficulties associated with the use of coal consider-
able research and development has been and will continue to be expended
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Table F-1.--Coal: Recoverable reserves, 1/ 1974
'
Quantity
Percent of
Area
Billion
Billion barrels
Free
'
short tons
of oil equivalent
World total
World total
United States--'
218
903
32.6
60.3
Other Western
Hemisphere---'
9
37
1.3
2.5
Western Europe-:
72
298
10.8
19.9
Africa---------'
17
70
2.5
4.7
Middle East----'
nil
nil
nil
nil
Asia-Pacific---'
46
190
6.9
12.6
communist Bloc-'
307
1,271
45.9
-
Total--------:
669
2,769
100.0
100.0
1/ Known to be recoverable with current technology under present
economic conditions.
Source: U.S. Department of the Interior, Energy Perspectives 2, June 1976,
p. 37.
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Table F-2,--Anthracite, bituminous coal, and lignite:
Production, 1950, 1960, 1970 to 1974
(million short tons)
Area
1950
1960
1970
1971
1972
1973
1974
United States--:
560
434 :
613
561
602
599
608
Other Western
Hemisphere---:
26
21
28
30
33
.
35
38
Western Europe-:
592
618
500
496
458
466 :
438
Africa---------:
33 :
48
66 :
70
70
75
78
Middle East----:
6
11
10
10
11 :
12 :
13
Asia-Pacific---:
117
189 :
240
226
234
233
247
Communist Bloc-: 664
1,578
1,861
1,991
1,930
1,984
2,029
Total--------: 1,998
2,899 :
3,317
3,385
3,339
3,404
3,450
Source: U.S. Department of the Interior, Energy Perspectives 2, June
1976, p.37.
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to obtain economically viable processes to produce synthetic crude
petroleum (syncrude) and synthetic natural gas (SNG) from coal. A
drawback is that in the conversion of one type of energy to another type
there is almost always a loss of Btu's. In essence it takes energy
to convert energy forms and at a time of energy scarcity this is wasting
energy. The synthetic fuels are discussed on page 23 of this appendix.
Aside from crude petroleum and coal, natural gas is the other
major fossil fuel that is widely used. Natural gas is easily transported
by pipeline and its combustion is the least environmentally damaging of
all of the fossil fuels.
In terms of reserves the Communist Bloc, the Middle East and
North America contained over three-quarters of the world's total in
1975 (see tables F -3 and F -4). Africa, Western Europe, Asia-Pacific
and Latin America accounted for the balance. By individual country,
the U.S.S.R., Iran, and the United States held just over 60 percent of
the reserves in 1975 (see tables F-4 and F-5). Ten countries--the three
above, plus Algeria, the Netherlands, Saudi Arabia, Canada, Nigeria,
Qatar and Venezuela--held just under 81 percent of the total.
Gross production 1/ in 1975 centered in North America, the Communist
Bloc and Western Europe which together accounted for 80 percent of the
world's total (see tables F-6 and F-7). A significant observation is
that the Middle East, with the world's second largest reserves, was but
the world's fourth largest producer. Additionally, Western Europe, ranked
but fifth in reserves, was the world?s third leading producing area and
North America with but 13 percent of the world's reserves, produced almost
44 percent of the world's production. A comparison of tables would
indicate that those areas overproducing were Western Europe, North America,
and Latin America, while those underproducing were the Communist Bloc,
the Middle East, Africa and Asia-Paci~_ic. The significance is that all
other things being equal, more rapid production means more rapid depletion
of reserves.
Perhaps of even more significance to a world deeply dependent on
energy is that only about 30 percent of the gross production in the Middle
East is marketed. Most of the production is flared (burned-off at the
production site). This means that natural gas is being produced but not
being commercially used. Flared natural gas is relatively more available
for commercial usage than reserves not yet developed. Table F-8 indicates
that only in North America, the Communist Bloc and Western Europe does
almost all of the gross production get to market.
1/ Gross production is comprised of marketed production, vented gas,
flared gas, reinjected gas and gas used to drive turbines.
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Table P'-3.--Natural gas: Reserves, leading areas, 1975
'
R
k
Reserves Percent of:
an
Area
(trillion cubic feet)
: World total : Free world
1---' Communist Bloc
750
34.6
2---' Middle East
'
619
28.5
43.6
3---
North America
285
13.1
20
1
4---' Africa
'
206
9.5
.
14
5
5---
Western Europe
140
6.5
.
g
g
6---' Asia-Pacific
90
4.2
,
6
3
7---: Latin America
80
3.6
.
S.6
Total
2,170
100.0
100.0
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 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
The United States, by itself., accounted for almost 43 percent of the
world's marketed production in 1975 (table F-8). The closest country was
the U.S.S.R. with almost 22 percent of the total. The concentration of
marketed production is these two countries is illustrated by the fact
that combined they accounted for almost 65 percent of the world's total
marketed production, while the next 8 producers combined accounted for
but about 24 percent.
The average of marketed production as a percent bf~ gross production
for the top ten producing nations in 1974 was almost 89 percent. Signifi-
cantly below this were the world's fifth, sixth and seventh largest gross
natural gas producers. Together, Iran, Venezuela and Saudi Arabia
marketed dust about 33 percent of their combined gross production. Saudi
Arabia had the lowest percent at 15, while Iran had the highest at 48
.percent.
Historically the United States has been the world's natural gas
consumption center. It had the reserves, and demand was stimulated by
low prices. In the future, Western Europe and the U.S.S.R. in particular
are forecast to increase their demands for natural gas with the result
that the United States will account for a smaller part of the world's
total consumption of this fossil fuel. Japan is also expected to
increase its natural gas consumption and together with the United States
and Western Europe form the principal future Free World demand centers.
Since demand has and is forecast to consistently outstrip production
in the latter three areas, imports are forecast to become increasingly
more important. While the bulk of the world's imports will be supplied
by pipeline wherever possible, international trade in liquified natural
gas (LNG) is expected to increase. Potentially large LNG movements are
expected to be those from the Middle East to the U.S. east and west coasts,
from Africa to the U.S, east coast, from Alaska, Brunei and Australia to
the U.S. west coast, and from Alaska, Brunei, the Middle East, Indonesia
and Australia to Japan. LNG import plans have also been made by France,
Italy, Spain and the United Kingdom. 1/
At present the following movements of LNG are taking place: 2/
(1) Alaska and Borneo to Japan;
(2) Algeria to the United States;
(3) Libya and Algeria to France, the United
Kingdom, Italy, and Spain.
About 30 LNG carriers are in service and another 40 are under construc-
tion or on order. LNG carriers and plants require huge investments. For
example,~a system (consisting of a liquefaction plant, carrier and receiving
terminal) capable of moving around 6 billion cubic meters of natural gas
per year would cost well over $1 billion. 3/
1/ Petroleum Economist, July 1976, p. 249.
2/ Hydrocarbon Processing, July 1977, p. 17.
3/ Ibid.
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 Approved For Release 2004/03/23: CIA-RDP80M00165A002400060003-0
a a~ ~
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o f ~ I l w I w .,~
~-' :y Equipment", they formulated a statement of Military and
Industrial Objectives for the Alliance, a.nd ~:eco~nmended that they be adopted
by all Allied r.ati.ons.
Their report has been widely distributed in l~~urope anal DIortli America, and lias
received many favorable official comments. ?'he entire report was read into
the zecord of the first of a series of hearings on standardization conducted
in July, 1977 by the House of Representative:;' Legis]_ation anal National
Security Subcolz m_i_ttee, chaired by REPRESEi1'LA"'IVE JACI: BROOI:S (Dem. Tex.) .
The Panel concluded their first report by indicating that their next effort
would be the preparation of an "Agenda for Political Action". They stated
that "the actio~zs that must be taken to create the needed new transatlantic
structure are political; a.nd it is to that end that priority for future
activities must be given".
National Debate Topic. .The Center believes that real progress can be made
towards Allied tncerdependence, if the idealism of youth can Le focused on
the need for Allied partnership in armaments.
Using the "multiplier effect" approach, the CenL-er sought to have the
standardization issue debated in more than 700 American colleges and universi-
ties. Each year they vote on five questions from which they select a single
national debate topic for all intramural.and intercollegiate debates, and the
regional and national debating tournaments.
For the second year in a rocs, the Center joined with NATO SECRETARY GEi~TF,Rt-sL
JOSEPH LUIS and the American Debate Comu-nunity to make the standardizaticn
question attractive to college youth still disdainful of-defense matters
because of Vietnam. DR. LUNS again agreed to make $15,000 available to
financE: expense pa9_d trips to Europe for the outstanding debate teams and
their coaches, including all four finalists in the Iv'ational Debate Tournament.
The Georgetown Center received permission to so)_icit donations to augment
NATO's grant so that many more winning teams could visit NATO facilities in
Europe, and receive NATO briefings. Officials of the North Atlantic Assembly
agreed to explore the possibility of having European Parliaments invite prize
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-7-
winners to come to theix' countries to meet university youth also interested
in Allied cooperation in armaments.
Last year the standardization question placed a poor third. This year it
p]_accd second in the closest vote in the Debate Commu~i_ty'.s h_~_story. Even
in losing, we have made the issue lcnocan to students, to their debate coaches,
and to faculties and parents.
Ideally, standardization should be debated in every counL-ry in the Alliance.
Unfortunately, ?~nly Britain, Canada and the United States have a collegiate
debating tradition, and only the United States selects a single debate topic
annually.
Several European par]_iamentarians from the North Atlantic Assembly expressed
keen interest in the debate, believing that if the standardization topic
were selected., and the winning teams came to their countries to debate the
question before European university audience::, it might be the first step
towards establishing a debating tradition across national boundaries. Some
see a debating craclition as a po;aerful countc:rwei.ght i:o the polemic tradi-
tion favored by the l~uropean communists.- In turn, the Zeaders of the
American Debate Community welcomed the possibility that one day the college
age youth of the western world might. be able to debate together the many
crucial issues of: war and peace which confroia their generation in an inter-
dependent worla..
The Center will ask the Secretary General to make seed money prizes available
once again i.n t-ze 1978-79 scholastic year. ~?e believe a standardization
question wil]. win next year. '
Allied Interdependence Information Exchange. One of the most important
functions of the Allied Interdependence Project is to bring relevant Euro-
;~e~~i official reports and documents, and art:i.c].es by leading European opinion
leaders to the attention of American policyr::=:.'~^rs, and vice versa. To date,
the Georgetown Center has provided this serv::~?-. ~~ot only for member countries
of the Alliance, but also for the European C~?: .it-y, the North Atlantic
Assembly, the Western European Union, and the ~_opean Parliament.
Because of funding constraints, this service ~::.~:~ not been thorough and com-
prehensive, nor has it been done on a formal, organized basis. It should
be. Government channels do not adequately meet this need. Establishing
this service on a large scale (and ultimately on a self-sustaining basis}
for governments, for. industry, for academia, and for the foreign policy
community, is one of the priority aims of the Allied Interdependence Projects
when funds become available for this purpose.
Other Allied Interdependence Project Activities. During the past year, the
Center, or its Allied Interdependence principals, have conducted seminars f_or
members of the North Atlantic Assembly and the Western European Union; provided
briefings for European journalists; addressed the National War College orz
"Economic Cooperation in Armaments--A Prime Item for the NATO Sununit Agenda",
and distributed copies widely to American, Canadian and European foreign and
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defense officials; taught the first course on standardization at the
Industr_ia1 College of the Armed rorces; icsti_fied before the Ho~ise of
P.epresentatives' Legfslat_;_on and National Security Subco.unittee; provided
material. for. a special st.andardizat:ioi.1 repcx t, of the llouso of l;epres nta-
tives' Europe ar.d 1?iidd.le East Subcon~rni.ttee; pr~.-,-i:i.ci.p;ated in meeti.nys of
the North Atlantic Assembly; briefed seYTeral Coi~gress:ional cot;ui~:i.ttc_e staffs
on the sta~.~.darcL-'.zation issue; a~xd trrote ari_icl.es for tl-~e IvAZ'O Rev7_e:r a.rid
other publications.
ALLIED INTEP.DEI':~NDENCE PP.OJECT IIONOGRAPII SE?'.IES. Tn its first year, the
Allied Interdep.::ndence Project ha.s succeeded in securing greater public
and political a.~areness of w~ NATO must standardize. C~'nile the Project
will continue to argue the need for standardization until finally there
is a broad-based constituency for Allied economic cooperation in armaments
on each side of the Atlantic, Project emphasis in the future will shift to
the structural aspects of hoar to cooperate. .
A series of sev~n new monographs are plannect. which will develop the con-
ceptual and structural. recormnendations contained-- in- the? original Callaghan
Report in far greater detail. Each ne~?r mono~:raph will. be complete in it-
self. But the series as a whole wi_11 present. a coherent program for
harnessing the enormous economic energy now trapped in the protected gover.~-
ment-funded markets of the western wor]_d.
The first two monographs will continue to empha~~ize Allied partnership in
.armaments. 'rhe next five will deal with cooperation in civil technology,
and open government procurement. Thus the entire series will respond t-o
the prescient v~_ew SENATOR ARTHUR VANDENBLRG expressed to his Senate
colleagues in 1949 during the North Atlantic Treaty ratification debate,
when he said:
Unless the treaty becomes far more than a purely military
alliance it will be at the mercy of the first plausible.
Soviet peace offensive.
SENATOR VAATDENBERG was right. The euphoric expectations of detente in the
early 70's almost lulled Allied nations into ignoring the massive Warsaw
Pact military build-up because the Soviet Union had declared its intentions
to be peaceful. If the ability of Allied nations to help one another in
wartime is to have credibility, then we must demonstrate an ability to work
together in peacetime. We have yet to do so. The monograph series will
show ho,r it can be done. ?
I. The Callaghan Report--Questions & Ans~,ers. Now nearing completion, this
first monograph will contain a revised and up-dated sumn?~ary of the original
report. T'ren, in question-and=answer format, it will cover every signifi-
cant aspect of the Callahan Report.
This is not a sterile exercise. Since early 1975,rLR. CALLAGHAiv has appeared
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before hundreds of government, parliamentary, rnilita.ry, industrial and
academic audiences , ems-pounding his views , and sub j ecting them to chal.lezrle
from the audience. A pattern of quest-:ions evol_vcd irliich reflected the
major interests and concerns on each side of ttze Atlantic. 'The ans~~rers
reflected a constant refinement of his :ideas as he responded to cons%ruc~1_ve
criticism.
The question-and-answer format wi"11 clarify and expand .upon points orig3_na1.7_y
made; wil]_ remove ambigui_tias; wil]_ meet objectiozLs head-o..z; and ~c?;~z1J_ lzr~lp
Europeans and North Americans have a better ur_derstandi.ng of the problems
that concern the other. It. will also make it clear that there is. no econon:i.c
reason for NATO's conventional forces to be inferior to those of the Tdarsa~
Pact.
II. STANDAP.DIZ~TT_OPI: Le D?afi Americain a 1'Europe. The October, 1976
issue of the NE.TO Review contains an article of the same title as this mon:~-
graph, which st.mrnarizes the points to be made, in this second monograph.
Too many Europeans see standardization and military trade as merely an
opportunity to se7.1 weapons and equipment to the-United?States. Too fe~~?
see the challer..ge which standardization poser to Europe to solve two very
critical problems:
First, large-scale military trade ~?rith Europe must pro-
vide American .forces with weapons :~t least equal in
quality to, and not costing more tl;.an, weapons which
could be developed and produced in the United States.
Second, a "two-way street" with Europe mea?zs there must
be one west-bound lane from Europe to North America--
not twelve separate lanes west-bound, and one lane east-
bound.
Thus, standardization.poses an American challenge to Europe; to strengtl_on
Europe's defense technology base; to improve the productivity of Europe's
defense industries; to aggregate Europe's defense market through a strong,
fully-staffed European Programme Group.
But standardizat~.on also poses a European challenge to the United States
to meet Europe half-Jay. It is not sufficient for American officials to
ask, "What have they got we can buy?" American officials should be asking:
"What policies should my government initiate which will make it a~ easy as
possible for the twelve armed European nations of. Lhe Alliance to estab a:~h
a single European defense procurement structure?"
Like the NATO Review article, the analysis of European defense industrial
weaknesses will draw almost exclusively upon European sources. In other
words, this monograph will not be an American's critique of why Europe is
not more like the Americans. Instead it will be a European assessment of
why Europe has not achieved the economic promise, and military capability,
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of its large but fragmented teclino]_ogical indusi:ri_al base.
It is intended that a European consultant wil]. par.ticipaS.e in the prep-
aration of this monograph.
III. rlaki^g_DetE~~nte a Fearless Reality. The n~;.tion.s of tl.~e ilort-h L~tlanti_c
Alliance coinpris~a i:he two most: technol.ogical'ly advanced industrial ecrnzome.;
i.n the c,;or_lcl. Yet they lack a coherent geopolitical, technological and
industrial strategy for counterinb the military build-up of the 1~Tarsaw Pact_
Asa consequence they osciJ_late betc?Jeen extremes of alarms and exertions eale ~n
frightened, and complacent neglect when not. _
The enormous i.ndustri.al resources of the west arc not properly employed for
our common def~nse,.nor are they properly employed for the solution of our
many pressing civil technological problems. het the nations of the Alliance
could achieve be-th ends, if they cooperated economically in both milii:a-ry
and civil L-echnc:logy. But the backward econa~iies of the Warsaw Pact can clo
one or the other, but not both. Azad that is the key to fashioning a cohere.t
' geopolitical, i.c~chn.ological and industrial strategy for the west.
To lay the grourdcrork for such a strategy, this monograph will first analyze
and contrast thE: quite different postwar armanent policies of Great Britain.,
Japan, the Soviet Union and the United States. Three of these countries tried
to span the ent:9.re spectrum of conventional and nuclear caeapon.s technology.
Britain, like tl.e UniL-ed Stat:a, tried to pursue autarchic weapons develop~r:ent
policies, while building a strong civil technc~]_ogical base as well. Br_itaia
finally failed, ]_eaving the weapons competition to the superpowers. Japan aas
spared heavy investment in defense technology, while the Soviet Union. ueg]_e~ted
its civil technology.
Each countr.?y pursued different military and civil technological strategies to-
wards their Allies and trading partners. Pola_ticat-economic priorities were
different, as were the political-economic results. The results demonstrate
that there is an economic benefit from military burden-sharing, and an econo~.c
cost from mil_i_tary autarchy. The military-industrial experiences of these four
countries offer po]_icy options which Europe and the United States have never
even considered.
The first two monographs will have made the case for armaments cooperation.
This monograph will argue the case for economic cooperation in all civil
technological areas between the European Community and the United States, with
priority given to the energy field. It will argue that civil techr_olog~_cal
cooperation should not be exclusive. In time it should be extended to a1I
OECD countries. OPEC participation should be sought. And, .in the spirit of
the riarsha]_1 flan offer cahich Stalin rejected, civil technological cooperation
should also be available to the Warsaw Pact.
The Soviet Union badly needs western civil technology, They can acquire it
by hard currency purchase, or Allied credits, as at present. As long as
Allied economic assistance is available to the Soviet Union in this fashion,
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there is little need for them to divert resources. from defense. AlI_ied
conventional force weaknesses might tempt them to acquire civil technology
by e~;tending Soviet dominion over ~ti'estern Europe, if (rightly or wrongly}
they were ever L-o conclude that the risks of nuclear war caer_e acceptable.
Taut they cou]_d also acquire it through technological cooperation bet4reen
NATO and the l~]arsaca Pact, chenever the Pact was prepared to reduce its
forces to a non-threateni_n.s; r_hreshold, so bout NATO and the Pact could
divert resources from military to civil technologica7_ investment.
The Cold War c?:ill go on forever unless Europe an:d North America can demon-
strate to the Soviet Union that no wedge can `>e driven betcaeen them. Allied
economic cooper.rtion in armaments is needed t~ convince L-he Soviet Union
that we cannot ~-~e out-produced; that we canno_ be blackmailed; and that
we cannot be ov,~rwhelmed by conventional force attack. But Allied partner-
ship in armaments will not be sufficient to o.tfer the Soviet Union an in-
ducement to male detente a fearless reality.
To do that, Eur;pe and North America must also cooperate to solve their
civil technologi_c~{1 problemsL-and hold out the promise of .such cooperation
to the Warsaw T'?.ct, whenever the Soviet Union is prepared. to discuss mean-
ingful reductio:ls in mankind's armaments burd~_ns.
I~~. Governme_r..t Incentives for_ High Technology Industries. _ It has been sa?.d
that everyone ~i~y entitled to his own opinion, but not his ocan set of facts.
Agreed facL-s ar?.~ hard to come by when incentives for high technology industries
are discussed. This is a somewhat emotional subject: so much so that ~,*h4t
_we do for our i_r.~.dusL-ries are called incentives; cahat they do are called su'~-
sidies; and vice versa.
This monograph cril.l first examine the role of the U:S. Government in
sponsoring and attaining trade and other economic benefits from the techno-
logical revolution. In little more than a decade the U.S. Government created
the world's largest marketplace for technology. The result was not only
superioritS' i.n defense technology, but civil technological predominance
that continues to this day in the world's technology-intensive commercial
markets. How c,Tas this done?
The monograph. will itemize U.S. Government practice in all industrial in-
centive areas, including the following:
Plant and equipment facilitization assistance
Tianuf_acturing research
Independent research & development
Government research & developL~ent .
Early markets far high technology products
Protected domestic market wzth internal competition
Technological building blocks
Competitive vendor structures
Demanding product standards
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A European consultant will concurrently exaniire the practices of Britain,
France, Germany, and the European Co~imunity iiz the same or similar areas.
The end result wi]_]_ be a comparabi_lit:y z.~,.a.lys:l.s of the incentives ialZiCi1
American and EuropeaT.i governments have provided their high technology in-
dustries over the past tcro decades. It would I?ot i~.iclude ta~,~duty or
other incentives generally available to industry, un.l.ess they had signi-
ficantly greater impact on high technology industr~_es.
Such a comparability study is a necessary first step toc?:ards removi_n~; the
technological fears that thwart the GATT non-tariff barrier negotiations
in the government procurement area. It is also a step tocrards devising
more effective government policies based upo.7 assessing what did and did
not work, and wh.y.
V. (A) An Arne;-ican Technological Investment Policy
(B) A European Technologica]_ Investment Policy
Based upon the data derived from the fourth monograph (the incentives
comparability analysis), two separate monographs tail]. be prepared, co-
ordinated in their methodology and approach, and issued at the same-time.
The Georgetown Center will prepare the American monograph; a European
consultant will prep