-4-

THE FACT THAT THE SUPPLY AND PRICE OF THIS VITAL STRATEGIC
COMMODITY ARE OUT OF OUR CONTROL.

SINCE 1973, AMERICA'S DEPENDENCE ON IMPORTS HAS
GROWN, NOT DIMINISHED. IN THE WINTER MONTHS OF 1977,
OIL IMPORTS FOR THE FIRST TIME REACHED A RATE OF 50
PERCENT OF OUR OIL CONSUMPTION. AND IN 1979, OPEC DEMONSTRATED
OUR HELPLESSNESS ANEW, DOUBLING PRICES AGAIN.

INTERNATIONAL CONSEQUENCES OF THE ENERGY CRISIS

IT IS QUESTIONABLE WHETHER EVEN OPEC REALIZED IN 1973
THE FULL EXTENT OF ITS BARGAINING POWER. NEVERTHELESS IT
SOON GREW USED TO IT AND TRIGGERED A GLOBAL ECONOMIC AND
POLITICAL CRISIS THAT IS STILL WITH US.

IN LESS THAN A DECADE, THE TOTAL ANNUAL OIL BILL
PAID TO OPEC BY ALL OTHER COUNTRIES HAS RISEN TO $270 BILLION,
OR OVER ONE QUARTER OF A TRILLION DOLLARS. THIS REPRESENTS
A SYSTEMATIC IMPOVERISHMENT OF THE INDUSTRIAL DEMOCRACIES.
IN ADDITION, THE ENORMOUS SURPLUS EARNINGS OF THE OIL

PRODUCERS NOW OVERHANG THE WORLD ECONOMY AND THREATEN FINANCIAL
CATASTROPHE. EVEN WHEN NOT MANIPULATED FOR POLITICAL
PURPOSES THEY ARE A FACTOR OF INSTABILITY, BECAUSE
THE WORLD'S EXISTING FINANCIAL INSTITUTIONS SIMPLY CANNOT
HANDLE SURPLUSES OF THIS MAGNITUDE INDEFINITELY. IN
UNFRIENDLY HANDS, THE COMBINED POWER TO RESTRICT PRODUCTION
AND MANIPULATE VAST FINANCIAL RESOURCES BECOMES AN EVER
MORE DANGEROUS WEAPON, A GROWING THREAT TO THE WORLD
ECONOMIC AND FINANCIAL SYSTEM. OUR ABILITY TO CONDUCT A
RESPONSIBLE FOREIGN POLICY ACCORDING TO OUR VALUES AND
OUR CHOICES IS CIRCUMSCRIBED.

IF THE CONSEQUENCES ARE SERIOUS FOR THE UNITED STATES,
THE IMPACT ON OTHER COUNTRIES EVEN MORE DEPENDENT ON
IMPORTED OIL HAS BEEN CORRESPONDINGLY GREATER. ECONOMIC
CRISIS HAS BEEN A RUDE SHOCK TO THE PEOPLE OF THE INDUSTRIAL
DEMOCRACIES, WHOSE ASPIRATIONS HAD BEEN RAISED DRAMATICALLY
BY THE PROSPERITY WHICH SINCE THE SECOND WORLD WAR HAD

-6-

COME TO BE TAKEN FOR GRANTED. FOR MOST OF THE INDUSTRIAL
DEMOCRACIES, THE POLITICAL PROBLEM OF THE POSTWAR PERIOD
HAS BEEN THE FAIR ALLOCATION OF AN EVER-INCREASING SOCIAL

PRODUCT. THE ENERGY CRISIS HAS TRANSFORMED THIS INTO AN
ALLOCATION OF SHORTAGES, THE MANAGEMENT OF A DECLINING
STANDARD OF LIVING. IN SOME COUNTRIES, POLITICAL AND
SOCIAL TENSIONS THAT WERE ALREADY AT THE MARGIN OF GOVERNMENTS'
ABILITY TO MANAGE HAVE GIVEN IMPETUS TO NONDEMOCRATIC FORCES
AND SUBJECTED DEMOCRATIC INSTITUTIONS TO SEVERE STRAIN.

THE CONSEQUENCES FOR THE COHESION OF THE DEMOCRATIC
WORLD HAVE BEEN GRAVE. ATLANTIC SOLIDARITY HAS BEEN
SEVERELY TESTED. THE OPEN ECONOMIC SYSTEM THAT ENSURED
PROSPERITY IN THE POSTWAR PERIOD HAS BEEN THREATENED BY
A VICIOUS SPIRAL OF RECESSION, SHRINKING TRADE, AND PROTECTIONIST
PRESSURES. THE ENERGY CRISIS HAS UNDERMINED THE POLITICAL
UNITY OF THE DEMOCRACIES AS SOME ALLIES, PURSUING PREFERENTIAL
ARRANGEMENTS IN ENERGY, HAVE BEEN TEMPTED TO PAY IN THE
COIN OF ALLIED COHESION. SEPARATE APPROACHES ON SUCH VITAL
ISSUES AS THE ARAB-ISRAELI DISPUTE DEMONSTRATE DISARRAY

-7-

AND COMPLICATE THE PURSUIT OF PEACE. (UNDERTAKEN FOR THE PURPOSE OF EASING THE PRESSURES IN THE MIDDLE EAST, SUCH APPROACHES, IN FACT, DO THE OPPOSITE.) BUT FOR IF ONCE THE PREMISE IS ACCEPTED THAT OIL PRODUCERS CAN IMPOSE POLITICAL TERMS, RADICAL FORCES WILL SEE TO IT THAT THE POLITICAL PRICE WILL ESCALATE WITH THE PRICE OF OIL.

THE OIL CRISIS HAS ITS MOST DEVASTATING IMPACT ON THE NATIONS OF THE DEVELOPING WORLD. THEY HAVE SUFFERED MOST FROM THE MASSIVE BALANCE OF PAYMENTS DRAIN CAUSED BY THE TENFOLD OIL PRICE RISE SINCE 1973. THE MOST SEVERE BLOW TO THE ECONOMIC DEVELOPMENT OF NEW NATIONS HAS COME NOT FROM THE "IMPERIALIST EXPLOITATION" SO FASHIONABLY ASSAILED IN INTERNATIONAL FORUMS BUT FROM AN ARBITRARY PRICE GOUGE BY THEIR THIRD WORLD BRETHREN. [THE DEVELOPING COUNTRIES DO NOT POSSESS THE MEANS, AS THE INDUSTRIAL NATIONS HAVE TO SOME EXTENT, TO PASS ON THE PRICE RISES TO OTHER NATIONS IN EXPORTS OF MANUFACTURES. THEIR HOPES OF FEEDING THEIR BURGEONING POPULATIONS DEPEND ON AGRICULTURAL MODERNIZATION,](N)

- 8 -

WHICH HAS ALWAYS RELIED ON PETROCHEMICAL FERTILIZERS. THE INCREASE IN THEIR ENERGY COSTS IN FACT FAR EXCEEDS THE TOTAL FLOW OF EXTERNAL ECONOMIC AID THEY RECEIVE. TO THE DEVELOPING NATIONS, THE CONSTANTLY RISING ENERGY COSTS REPRESENT A PERMANENT, MASSIVE AND DEVASTATING THREAT TO ASPIRATIONS FOR PROGRESS.

IN SHORT, THE ENERGY CRISIS HAS PLACED AT RISK THE ENTIRE RANGE OF THIS NATION'S OBJECTIVES IN THE WORLD. IT HAS MORTGAGED OUR OWN ECONOMY AND LEFT OUR FOREIGN POLICY SUBJECT TO UNPRECEDENTED PRESSURES; IT HAS WEAKENED THE INDUSTRIAL DEMOCRACIES ECONOMICALLY AND UNDERMINED THE POLITICAL UNITY WHICH IS THE FOUNDATION OF THE SECURITY OF FREE NATIONS. IT HAS STYMIED THE WORLD'S ECONOMIC GROWTH AND FRUSTRATED THE HOPES FOR PROGRESS OF MOST OF THE NEW NATIONS.

BY A CRUEL IRONY, EVEN THE MORE MODERATE OIL PRODUCERS ARE NOW CAUGHT UP IN AN OMINOUS VICIOUS CIRCLE. THEIR POWER OVER PRICE AND PRODUCTION IS UNDERMINING THE

-9-

STRUCTURE OF THE SOCIETIES ON WHICH THEY ULTIMATELY DEPEND FOR THEIR SECURITY AND PROGRESS. THEY HAVE A STAKE IN WESTERN STRENGTH AND STABILITY, BUT THE COLLAPSE OF THE PRO-WESTERN GOVERNMENT IN IRAN HAS TIPPED THE BALANCE WITHIN OPEC IN THE MORE RADICAL DIRECTION. OPEC'S PRICING DECISIONS ARE NOW DRIVEN BY RADICALS EAGER TO DESTROY THE INTERNATIONAL ORDER. EACH OPEC MEETING IS A STYLIZED DRAMA THAT OPENS WITH THE MODERATES OPPOSING A PRICE INCREASE; THE RADICALS THEN INSIST ON ONE; A TWO-TIERED SYSTEM IS CREATED AS A COMPROMISE; THEN OVER THE SUCCEEDING MONTHS THE LOWER TIER GRADUALLY DRIFTS UPWARD TO THE RADICALS' HIGHER PRICE. AT THE NEXT OPEC MEETING THEY GO THROUGH THE SAME PROCESS AGAIN--DEMONSTRATING THAT THE GEOPOLITICAL PRESSURES ON THE MODERATE PRODUCERS ARE NOW UNCONTAINABLE, THAT THE OBJECTIVE CONDITIONS ENABLING THEM TO PURSUE WHAT IS IN THEIR OWN LONG-TERM INTEREST--AND OURS--SIMPLY DO NOT EXIST.

-10-

[WE ARE ON A ROLLER COASTER TO DISASTER. OUR FUTURE IS NOW AT THE MERCY OF A PRECARIOUS POLITICAL STATUS QUO IN WHAT IS PROBABLY THE MOST VOLATILE, UNSTABLE AND CRISIS-PRONE REGION OF THE WORLD.]

WITH THIS AS BACKGROUND, LET ME TURN TO MY PRINCIPAL THEME: THE POLITICAL FUTURE OF THE MIDDLE EAST AND THE PERSIAN GULF, WHICH ARE TODAY THE FOCUS OF THE WORLD'S CONCERN NOT ONLY FOR ENERGY, BUT FOR THE PRECARIOUS CONDITIONS OF INTERNATIONAL SECURITY AND PEACE.

## THE MIDDLE EAST AND THE PERSIAN GULF

[THE MIDDLE EAST AND THE GULF ENCOMPASS A REGION OF PROFOUND PASSIONS, REMARKABLE PERSONALITIES AND ALMOST PERPETUAL FERMENT. ITS STARK LANDSCAPE AND VAST SKIES DRAW MAN TO INFINITY; IT IS NO ACCIDENT THAT THREE OF THE WORLD'S GREAT MONOTHEISTIC RELIGIONS HAD THEIR ORIGINS THERE--AS WELL AS SEVERAL OF THE WORLD'S RECENT WARS.]

EVEN BEYOND THE CRUCIAL CONCERN FOR OIL, IT IS A CAULDRON OF POLITICAL AND STRATEGIC CONFLICT.]

-11-

THERE ARE THREE ASPECTS TO THE REGION'S POLITICAL TURMOIL: THE IMPACT OF THE GLOBAL BALANCE OF POWER; THE CONTEST BETWEEN THE MODERATE AND THE RADICAL FORCES IN THE AREA; AND THE ARAB-ISRAELI CONFLICT. IT IS NOT POSSIBLE TO DEAL WITH THE REGION'S PROBLEMS BY ADDRESSING ONE OF THESE ASPECTS IN ISOLATION--EVEN AN ISSUE AS IMPORTANT AS THE ARAB-ISRAELI CONFLICT. THEY MUST BE UNDERSTOOD AND DEALT WITH CONCURRENTLY OR THE CHAOS WILL ONLY MULTIPLY.

FIRST, THE GLOBAL BALANCE OF POWER. HISTORY AND PERSONAL EXPERIENCE BOTH ENDOW MIDDLE EAST LEADERS WITH A HIGHLY-DEVELOPED INSTINCT FOR THE NUANCES OF THE GLOBAL BALANCE OF POWER. THEY MAY PROCLAIM THE CONVENTIONAL LITANY OF NONALIGNMENT, BUT THEY UNDERSTAND PERFECTLY WELL THAT THEIR SECURITY DEPENDS ON AN OVERALL EQUILIBRIUM OF MILITARY STRENGTH. A GLOBAL IMBALANCE OF POWER ENABLES EXPANSIONIST COUNTRIES TO BLACKMAIL THEM, TO INTERFERE WITH DIPLOMATIC EFFORTS FOR PEACE, TO SUBVERT DOMESTIC STRUCTURES, OR

-12-

IN THE FINAL ANALYSIS TO REPEAT THE PATTERN OF AFGHANISTAN: MILITARY INTERVENTION. THEY KNOW THAT THE ONLY COUNTERWEIGHT TO THESE PRESSURES IS AMERICAN POWER. [UNDERSTANDABLY, SOME LEADERS WHO CANNOT THEMSELVES CONTRIBUTE TO A GLOBAL BALANCE MIGHT WISH TO KEEP ALOOF FROM THE DAY-TO-DAY DIPLOMACY BY WHICH THE EAST-WEST CONTEST IS PLAYED OUT. THEY WOULD BE HORRIFIED, HOWEVER, IF THE WEST TOOK THEIR STATEMENTS OF SELF-RELIANCE AT FACE VALUE.]

[THUS IT IS DISTURBING THAT PROCLAMATIONS OF NON-ALIGNMENT BY MIDDLE EAST LEADERS ARE ECHOED BY assertions OF RESIGNATION IN THIS COUNTRY. WE HAVE BEEN TOLD FOR TOO LONG THAT THE PROBLEMS IN THE SO-CALLED "ARC OF CRISIS" HAVE COMPLEX SOCIO-ECONOMIC CAUSES, THAT THEY ARE NOT ESSENTIALLY MILITARY PROBLEMS, THAT NOT EVERY UPHEAVAL IS OF DIRECT CONCERN TO US, AND THAT WE DO NOT REALLY HAVE THAT MUCH INFLUENCE OVER EVENTS ANYWAY. MUCH OF THIS IS TRUE BUT IRRELEVANT; A POSTURE OF ABDICATION MAKES SUCH

-13-

PROPHECIES SELF-FULFILLING.[] THE ADMINISTRATION HAS ALREADY HAD TO REVERSE ITS POSITION IN THE PERSIAN GULF BY 180 DEGREES, FROM ANNOUNCING THAT THE AREA DID NOT NEED A POLICEMAN TO PROCLAIMING OURSELVES AS THE POLICEMAN.

THE RESPONSE TO THE CRISES IN IRAN AND AFGHANISTAN HAS ILLUMINATED THE WEST'S MILITARY VULNERABILITY. [THE PRESENT TURMOIL IN THE MIDDLE EAST HAS MANY CAUSES; BUT CENTRAL TO IT IS THE GROWING DOUBT THAT WE POSSESS EITHER THE MILITARY CAPABILITY OR THE STRATEGIC DOCTRINE TO DEFEND FRIENDLY GOVERNMENTS IN THE AREA.] THE TENDENCY IN THE FIELD OF STRATEGIC WEAPONS IS TOWARDS PARITY, WHICH INEVITABLY MEANS THAT THE MIDDLE EAST BECOMES MORE VULNERABLE TO THE GROWING SOVIET CAPACITY FOR REGIONAL INTERVENTION. OUR MILITARY BUILDUP IN THESE CATEGORIES HAS BEEN HESITANT AND AMBIVALENT--MUCH OF IT A REDESIGNATION OF EXISTING FORCES INSTEAD OF THE CREATION OF ADDITIONAL ONES. AND

-14-

THE PACE OF IT IS TOO SLOW, IN THE FACE OF THE RELENTLESS SOVIET ARMAMENT PROGRAM INCREASING AT THE RATE OF FIVE PERCENT A YEAR OVER THE LAST 18 YEARS. AMONG THE SURVIVING MODERATE REGIMES IN THE AREA, THIS HAS GENERATED A PERVASIVE SENSE OF INSECURITY THAT THREATENS TO ALTER POLITICAL ALIGNMENTS AND FURTHER UNDERMINE THE FORCES FOR RESTRAINT WITHIN OPEC.

THE MILITARY POSTURE OF THE INDUSTRIAL DEMOCRACIES IS STILL TOO MUCH INFLUENCED BY THE STRATEGIC DOCTRINE OF THE 1950'S, WHEN STRATEGIC NUCLEAR WEAPONS WERE CONSIDERED CAPABLE OF PREVENTING EVERY FORESEEABLE CHALLENGE INCLUDING ATTACKS ON SUCH REGIONS AS THE MIDDLE EAST.

OBVIOUSLY, STRATEGIC EQUIVALENCE IS THE PRECONDITION OF ALL SECURITY AND IT WILL REQUIRE MAJOR EFFORTS TO ENSURE. BUT IT MUST NOT BLIND US TO THE FACT THAT WE CAN NEVER RETURN TO THE CONDITIONS OF THE 1950'S. EVEN IF WE SUCCEED IN MAINTAINING STRATEGIC PARITY--OR ACHIEVE A SLIGHT EDGE--

-15-

ONE OF THE MOST URGENT MILITARY PROBLEMS OF THE NEXT DECADE WILL BE THE VULNERABILITY OF VITAL REGIONS SUCH AS THE MIDDLE EAST. UNLESS DETERMINED EFFORTS ARE MADE TO RESTORE THE REGIONAL MILITARY BALANCES, BY AMERICAN POWER AND AID TO ALLIES, THE PRESSURE ON COUNTRIES CLOSE TO THE SOVIET PERIPHERY IS BOUND TO INCREASE. [THE ALREADY PERVASIVE INSECURITY WILL DEEPEN.] RADICALS ALLIED WITH THE SOVIET UNION OR BACKED BY IT WILL GROW BOLDER. STATES KNOWN FOR THEIR TRADITIONAL FRIENDSHIP WITH THE WEST WILL BECOME DEMORALIZED, FRIGHTENED, ISOLATED, AND THREATENED.

THESE FEARS ARE HEIGHTENED BY THE CONTINUING COMMUNIST ASSAULT ON THE GEOPOLITICAL BALANCE. IN THE LAST FIVE YEARS, BEGINNING WITH THE COLLAPSE OF INDOCHINA AND THE FIASCO OF ANGOLA, ALMOST EVERY SIGNIFICANT CHANGE IN THE WORLD HAS BEEN PRODUCED BY SOVIET WEAPONS, SOVIET FRIENDSHIP TREATIES, SOVIET PROXY TROOPS, OR OUTRIGHT SOVIET INVASION. THE CUBAN ARMY HAS IMPOSED SOLUTIONS IN AT LEAST TWO

-16-

AFRICAN CONFLICTS, AND FROM THE HORN OF AFRICA THREATENS THE SECURITY OF MODERATE GOVERNMENTS IN THE ARABIAN PENINSULA. THERE HAVE BEEN TWO INVASIONS OF ZAIRE FROM COMMUNIST-HELD TERRITORY. MOROCCO IS UNDER PRESSURE FROM COMMUNIST-ARMED GUERRILLAS; TUNISIA HAS BEEN THREATENED BY LIBYA. [A STRONG PRO-WESTERN GOVERNMENT COLLAPSED IN IRAN, NOT AS THE DIRECT RESULT OF SOVIET PRESSURES BUT WITH CONSEQUENCES DEVASTATING TO THE REGIONAL BALANCE OF POWER.

IN SOUTHEAST ASIA THE ARMY OF COMMUNIST VIETNAM, STOCKED WITH SOVIET WEAPONS AND BACKED BY A SOVIET FRIENDSHIP TREATY, OCCUPIES CAMBODIA AND THREATENS THAILAND. THE RESULTING SENSE OF INSECURITY HAS AFFECTED THE PERCEPTIONS OF MANY KEY COUNTRIES--SLOWING DOWN THE MIDEAST PEACE PROCESS, REMOVING SOVIET INHIBITIONS TO THE POINT THAT IT FELT SAFE TO INVADE AFGHANISTAN, DRIVING TRADITIONAL FRIENDS LIKE PAKISTAN TO REJECT OUR ASSISTANCE AND TO EMBRACE NEUTRALISM.

-17-

SYMPTOMATIC IS THE LACK OF ENTHUSIASM WITH WHICH THE SO-CALLED CARTER DOCTRINE HAS BEEN RECEIVED AMONG THE NATIONS SUPPOSED TO BE PROTECTED BY IT. THE PRINCIPAL OBSTACLE IS THE PERVASIVE CONVICTION THAT WE LACK THE MEANS OR PERHAPS THE WILL TO IMPLEMENT IT. LEADERS IN THE AREA, BASED ON CENTURIES OF NATIONAL EXPERIENCE, DO NOT BELIEVE THAT THEIR COUNTRIES' SECURITY CAN BE MAINTAINED BY DECLARATIONS OF NONALIGNMENT OR OF SOLIDARITY WITH OTHER COUNTRIES EQUALLY UNABLE TO PROTECT THEMSELVES. THEIR DISSOCIATION FROM US REFLECTS, RATHER, THEIR DISMAL ASSESSMENT OF THE TREND IN THE GLOBAL BALANCE.

THESE SHIFTING STRATEGIC REALITIES ARE BOUND TO HAVE THEIR EFFECT ON THE PRICE OF OIL. EVEN WITH THE PRODUCTION CUTBACKS DICTATED BY OPEC, SOME MODERATE OIL PRODUCERS IN THE MIDDLE EAST ARE STILL PRODUCING MORE OIL THAN THEIR OWN ECONOMIC NECESSITIES WARRANT AND ABSORBING MORE REVENUES THAN THEIR DEVELOPMENT PROGRAMS REQUIRE.

-18-

THE PRESENT EXORBITANT OIL PRICE WOULD THUS BE EVEN HIGHER WERE NOT SOME OPEC COUNTRIES WILLING TO PRODUCE BEYOND THEIR PURELY ECONOMIC NEEDS--AS THE PRICE FOR WESTERN AND PARTICULARLY AMERICAN POLITICAL AND MILITARY PROTECTION. HOWEVER, [TO THE EXTENT THAT THE GLOBAL BALANCE OF POWER IS PERCEIVED TO SHIFT--] TO THE EXTENT THAT AMERICA'S CAPACITY TO DETER FOREIGN AGGRESSION OR DOMESTIC UPHEAVAL IS PERCEIVED TO DECLINE--OUR PERSUASIVENESS ON EVEN SEEMINGLY PURELY ECONOMIC DECISIONS SUCH AS THE PRICE OF OIL IS ALSO PROFOUNDLY ERODED.

FOR ALL THESE REASONS IT IS IMPERATIVE FOR THE UNITED STATES TO MOVE URGENTLY TO RESTORE ITS OVERALL MILITARY STRENGTH. THE PRESIDENT WAS CORRECT TO DECLARE OUR STRATEGIC STAKE IN THE SECURITY OF THE PERSIAN GULF. NOW THAT HE HAS DONE SO, WE HAVE A BIPARTISAN OBLIGATION TO CREATE RAPIDLY THE FORCES NEEDED TO GIVE EFFECT TO THIS INESCAPABLE COMMITMENT.

-19-

THE SECOND DIMENSION OF THE INSTABILITY IN THE MIDDLE
EAST AND THE GULF IS THE <u>CONTEST BETWEEN THE MODERATES AND</u>
<u>THE RADICALS IN THE AREA.</u> FROM PAKISTAN TO MOROCCO, THE
REGION HAS SEEN A DECADE OF TURMOIL AND UPHEAVAL.

WE ARE OFTEN TOLD THAT DOMESTIC CHANGE IS INEVITABLE
AND IRREPRESSIBLE THAT WE HAVE TO GET ON THE SIDE OF THE
FORCES OF CHANGE. THERE IS MERIT IN THESE PROPOSITIONS.

BUT WE MUST NEVER LOSE SIGHT OF A CRUCIAL DISTINCTION:

WE HAVE A VITAL STAKE IN THE NATURE OF THAT CHANGE, AND IN
THE SUCCESS OF THOSE WHO SUPPORT PEACEFUL CHANGE AND TIES
WITH THE INDUSTRIAL DEMOCRACIES. WE MUST <u>NOT</u> ATTEMPT TO
APPEASE ANTI-WESTERN RADICALS WHO ARE DRIVEN BY IDEOLOGY AND
WILL NOT BE CHARMED OUT OF THEIR HOSTILITY TO US BY PROFESSIONS
OF OUR GOODWILL. AT STAKE IN THE CONTEST BETWEEN THESE TWO
GROUPS IS, AMONG OTHER THINGS, THE WORLD'S ENERGY FUTURE.

THE DISINTEGRATION OF THE PRO-WESTERN GOVERNMENT IN
IRAN WAS THE PRINCIPAL CAUSE OF THE OIL CRISIS OF 1979:

-20-

THE LONG GAS LINES AND THE DOUBLING OF OIL PRICES THAT IS STILL WREAKING HAVOC WITH THE WORLD ECONOMY. IRAN HAS SHARPLY REDUCED ITS OIL PRODUCTION, FOR MANY REASONS: INTERNAL CHAOS, THE DEPARTURE OF FOREIGN TECHNICIANS, THE ABANDONMENT OF THE PREVIOUS GOVERNMENT'S DEVELOPMENT AND DEFENSE PROGRAMS. AND THE FALL OF THE SHAH HAS AFFECTED THE CALCULATIONS OF OTHER OPEC MEMBERS HISTORICALLY ASSOCIATED WITH US; OUR VACILLATING REACTION TO THE COLLAPSE OF A FRIEND OF FOUR DECADES AND THE SHABBY PERSONAL TREATMENT OF HIM INEVITABLY RAISED DOUBTS IN THEIR MINDS ABOUT THE VALUE OF AMERICAN FRIENDSHIP. MANY MODERATE OIL PRODUCERS IN THE AREA KNOW ONLY TOO WELL THAT THEIR DOMESTIC PRACTICES ARE NOT BETTER--IF AS GOOD--AS IRAN'S. THEY FEAR THE SAME FATE FROM A COMBINATION OF RADICAL PRESSURES AND AMERICAN DISINTEREST. NO WONDER THAT OPEC MEETINGS HAVE INCREASINGLY SEEN THE MODERATES HESITANT, ON THE DEFENSIVE, FEARFUL OF EXERTING

-21-

THEIR POWER FOR RESTRAINT. THE DEFINITION OF MODERATION HAS BECOME THE MINIMUM PRICE RADICALS WOULD ACCEPT.

L THERE IS NO DOUBT THAT THERE ARE FORCES AT WORK BEYOND OUR CAPACITY TO CHANNEL. BUT J THE ART OF POLICYMAKING IS TO IDENTIFY THE RANGE OF EFFECTIVE INFLUENCE AVAILABLE TO US. NO DOUBT WE HAVE SOMETIMES UNDERESTIMATED THAT RANGE. YOUR CHAIRMAN DESERVES GREAT CREDIT FOR INSISTING THROUGHOUT HIS PUBLIC LIFE THAT AMERICAN FOREIGN POLICY MUST BE RELATED TO AMERICAN VALUES.

THIS IS NOT ALWAYS AN EASY MATTER. THERE IS AN INEVITABLE RELUCTANCE TO UPSET THE APPARENT STABILITY IN STRATEGICALLY VITAL AREAS EVEN IF INACTION RISKS STORING UP TROUBLE FOR THE FUTURE. BUT ANOTHER OBSTACLE HAS BEEN A LACK OF UNDERSTANDING OF THE NATURE OF POLITICAL EVOLUTION. CONVENTIONAL WESTERN WISDOM HAS TAKEN IT FOR GRANTED THAT ECONOMIC DEVELOPMENT AUTOMATICALLY WOULD PRODUCE POLITICAL STABILITY, AS IT DID IN EUROPE AND JAPAN AFTER 1945.

BUT IN THOSE SOCIETIES, POLITICAL INSTITUTIONS HAD A LONG HISTORY; THE THREAT TO STABILITY WAS THE GAP BETWEEN ECONOMIC EXPECTATION AND REALITY. AS THIS GAP WAS CLOSED, THE UNDERLYING POLITICAL COHESIVENESS assertion ITSELF. IN DEVELOPING SOCIETIES, BY CONTRAST, RAPID MODERNIZATION UNDERMINES TRADITIONAL SOCIAL STRUCTURES AND PATTERNS AND THEREFORE PRODUCES POLITICAL INSTABILITY.

EVENTS IN IRAN HAVE DEFIED ALL WESTERN LIBERAL NOTIONS OF PROGRESSIVE CHANGE. THE ASSAULT ON THE SHAH'S RULE DID NOT COME FROM THOSE WHOM WESTERN PUNDITS WOULD HAVE IDENTIFIED AS THE FORCES OF "PROGRESS": SECULAR MODERNIZING SOCIALISTS OR REFORMERS. THESE EXISTED, BUT IRONICALLY THE DECISIVE ELEMENT IN IRAN TURNS OUT TO HAVE BEEN THE VERY PROCESS OF MODERNIZATION, LED AT A RAPID PACE BY A RULER WHO, [LIKE HIS FATHER,] WAS PERCEIVED FOR YEARS AS A SECULAR REFORMER IN THE MOLD OF ATATURK IN TURKEY. [THE REACTION CAME FROM GROUPS THREATENED BY SOCIAL PROGRESS, SUCH AS THE CONSERVATIVE LAND-OWNING CLERICS WHO RESISTED LAND REFORM AND OBJECTED TO]

-23-

MASS EDUCATION AND WOMEN'S RIGHTS; THEY FOUND FERTILE GROUND FOR AGITATION IN THE PEASANTS THAT MIGRATED FROM THE VILLAGES TO THE INDUSTRIAL CITIES AND FELT ROOTLESS, ISOLATED, AND RESTLESS, CUT OFF FROM THEIR TRADITIONAL FAMILY TIES. THEY ALL FOUND MORAL SUSTENANCE IN A RELIGIOUS FERVOR DIRECTED AGAINST THE SECULAR MODERNISM OF THE WEST--AND, TO SOME EXTENT, ALSO AGAINST THE MARXISM OF THE EAST. THE SHAH CLEARLY ERRED IN NOT DEVELOPING HIS COUNTRY'S POLITICAL INSTITUTIONS AS IRAN DEVELOPED ECONOMICALLY; HE FAILED TO GIVE THE NEW MIDDLE CLASS A POLITICAL STAKE IN THE SYSTEM. BUT NO ONE--INCLUDING EIGHT AMERICAN ADMINISTRATIONS--EXPECTED THAT HIS OPPOSITION WOULD BE LED BY THOSE WHO OBJECTED TO WHAT HE WAS DOING RIGHT, AS WELL AS TO WHAT HE WAS DOING WRONG.

WE HAVE THUS, FOR MOST OF THE POSTWAR PERIOD, BEEN LACKING A THEORY OF POLITICAL CHANGE. UNFORTUNATELY, WHAT HAS BEEN IMPLEMENTED IN RECENT YEARS IN THAT NAME HAS COMPOUNDED THE PROBLEM. THE NEW DISPENSATION IS THAT OUR DIFFICULTIES ARISE BECAUSE WE HAVE ALWAYS ASSOCIATED OURSELVES

WITH THE WRONG GROUPS, WITH LEADERS WHO LACK PUBLIC SUPPORT, AND THAT WE SHOULD MAKE AN EFFORT TO ALLY OURSELVES WITH THE "POPULAR WILL"--THE TEST OF WHICH PRESUMABLY IS GOVERNMENTS NOT SUBJECT TO UPHEAVAL. THIS HAS TEMPTED US INTO HECTORING AND CONTRIBUTING TO THE OVEKTHROW OF AND PRESSURING/FRIENDLY GOVERNMENTS AROUND THE WORLD.

REALITY IS MUCH MORE COMPLICATED. FIRST, IN MANY SO-CALLED "PROGRESSIVE" REGIMES, DOMESTIC ORDER IS MAINTAINED BY MORE EFFECTIVE REPRESSION; BY THIS STANDARD THE "RIGHT SIDE" BECOMES THAT WHICH IS NOT INHIBITED IN ITS REPRESSION BY ASSOCIATION WITH US, AND IS MORE SUCCESSFUL AT IT.

TOTALITARIAN FORCES HAVE BEEN INCREASINGLY EXEMPT FROM HUMAN RIGHTS STRICTURES AS CURRENTLY PRACTISED.

MORE IMPORTANTLY, OUR HUMAN RIGHTS PRESSURES CAN HAVE CONSEQUENCES EXACTLY OPPOSITE TO OUR INTENTIONS. WHAT WE CONSIDER "NORMAL"--CONSTITUTIONAL DEMOCRACY--IS IN FACT A RARITY BOTH IN THE SWEEP OF HISTORY AND ON THE BREADTH OF THE PLANET. THIS IS NO ACCIDENT. CONSTITUTIONAL

-25-

DEMOCRACY DERIVES AUTHORITY FROM AN ABSTRACTION: OBEDIENCE TO LAW. BUT CONSTITUTIONALISM CAN FUNCTION ONLY IF LAW IS BELIEVED EITHER TO REFLECT AN ABSOLUTE STANDARD OF TRUTH OR AT LEAST TO GROW OUT OF A GENERALLY ACCEPTED POLITICAL PROCESS.

IN MOST PARTS OF THE WORLD AND IN MOST PERIODS OF TIME, THESE CONDITIONS HAVE NOT EXISTED. LAW HAS BEEN THE PRODUCT OF PERSONAL AUTHORITY, NOT OF CONSTITUTIONAL ARRANGEMENTS; THE POLITICAL PROCESS HAS BEEN VIEWED AS DETERMINING WHO HAS THE RIGHT TO ISSUE ORDERS. PERSONAL AUTHORITY HAS OFTEN BEEN MITIGATED EITHER BY A CONCEPT OF RECIPROCAL OBLIGATION AS IN FEUDAL SOCIETIES, OR BY CUSTOM AS THAT OF KINGS WHO CLAIMED TO RULE BY DIVINE RIGHT. IN EACH CASE, TRADITION WAS A LIMITING FACTOR; [CERTAIN EXACTIONS WERE IMPOSSIBLE NOT BECAUSE THEY WERE FORBIDDEN BUT BECAUSE THEY HAD NO PRECEDENT. NO RULER OF EIGHTEENTH-CENTURY EUROPE COULD LEVY INCOME TAXES OR CONSCRIPT HIS SUBJECTS. AUTHORITARIANISM, IN SHORT, WAS USUALLY QUITE PRECISELY CIRCUMSCRIBED.]

-26-

IT WAS PARADOXICALLY THE EMERGENCE OF POPULAR GOVERNMENT THAT EXPANDED THE SCOPE OF WHAT AUTHORITIES COULD DEMAND.

THE PEOPLE BY DEFINITION COULD NOT OPPRESS ITSELF; HENCE ITS WISHES--AS EXPRESSED BY ELECTIVE ASSEMBLIES OR RULERS IN ITS NAME--WERE ABSOLUTE. THE GROWTH OF STATE POWER HAS GONE HAND IN HAND WITH THE EXPANSION OF POPULIST CLAIMS.

IN THIS CONTEXT, MODERN TOTALITARIANISM IS A CARICATURE, A REDUCTIO AD ABSURDUM OF DEMOCRACY; MODERN AUTHORITARIANISM--A QUITE DIFFERENT PHENOMENON--IS AN ABERRATION OF TRADITIONAL PERSONAL RULE. THIS IS WHY SOME AUTHORITARIAN GOVERNMENTS--AS IN SPAIN OR PORTUGAL OR GREECE--HAVE BEEN ABLE TO COMPLETE THE EVOLUTION INTO CONSTITUTIONAL DEMOCRACIES. NO TOTALITARIAN SYSTEM HAS EVER NAVIGATED THAT PASSAGE.

THE AMERICAN DILEMMA IS THAT IN MOST DEVELOPING COUNTRIES, AUTHORITY IS EITHER PERSONAL OR TOTALITARIAN. WHILE TOTALITARIAN STATES HOSTILE TO US ARE RULED OUT OF BOUNDS FOR OUR INTERVENTIONISM, WE HAVE RECENTLY BEEN OBSESSED WITH "REFORMING"

-27-

AUTHORITARIAN GOVERNMENTS FRIENDLY TO US. THE TRAGEDY IS THAT WE SEEM TO HAVE NO IDEA HOW TO EFFECTUATE THE DELICATE TRANSITION TO CONSTITUTIONALISM--A PROCESS THAT IN MOST OF THE WEST TOOK CENTURIES. WHAT WE DO HAVE IS A PREDILECTION FOR HARASSING FRIENDLY GOVERNMENTS, THE RESULT OF WHICH HAS BEEN TO ENCOURAGE NOT THE MODERATE CONSTITUTIONALISTS BUT THE RADICAL TOTALITARIANS WHO EMERGE IN THE FORM OF TERRORISTS OR GUERRILLAS. THE OUTCOMES HAVE BEEN DISASTROUS. WE ARE IN DANGER OF MAKING THE WORLD SAFE NOT FOR DEMOCRACY BUT FOR TOTALITARIAN RADICALISM.

A VICIOUS CIRCLE IS CREATED. WHEN TERRORISTS OR GUERRILLAS MARK A SOCIETY FOR ASSAULT, THE GOVERNMENT IS TEMPTED INTO ACTS OF REPRESSION WHICH UNDERMINE ITS AUTHORITY, AND THE CHAOS POLARIZES THE SOCIETY SO THAT THE PREMISE OF THE DEMOCRATIC PROCESS--THAT THE LOSER ACCEPTS HIS DEFEAT AND IN RETURN IS GIVEN AN OPPORTUNTIY TO WIN ON ANOTHER OCCASION--CANNOT BE REALIZED. THE VICTIMS OF TERRORIST

-28-

ATTACKS ARE OFTEN THE ABLEST AND MOST DEDICATED OFFICIALS, LEAVING IN PLACE THE CORRUPT WHOSE TRANSGRESSIONS MULTIPLY AS THEY ATTEMPT TO COMPENSATE FOR THE PERIL OF THEIR STATION BY ACCUMULATING THE MAXIMUM MATERIAL BENEFITS.

IN RECENT CRISES OF THIS SORT, THE AMERICAN TENDENCY HAS BEEN TO FORCE IMPERILED FRIENDLY COUNTRIES TO "SAVE THEMSELVES" BY ACCELERATING OUR NOTION OF REFORM. BUT ONCE MATTERS HAVE REACHED THE POINT OF CIVIL WAR--PARTICULARLY IF THE ASSAULT IS EXTERNALLY SUPPORTED--CONCESSIONS GENERALLY COMPOUND THE DISORDER BECAUSE THEY ARE SEEN AS A SIGN OF WEAKNESS. NOR, MOST OFTEN, DO THE RADICALS WHO CHALLENGE AUTHORITY BY VIOLENCE HAVE ANY INTEREST IN CONSTITUTIONAL DEMOCRACY. WHAT THEY WANT IS POWER FOR THEMSELVES, TO INSTALL THEIR OWN BRAND OF TYRANNY. THE TIME FOR CONCESSIONS IS BEFORE CIVIL DISORDERS BREAK OUT, IN ORDER TO PREEMPT THEM--A LESSON OFTEN NEGLECTED IN RECENT DECADES BUT WHICH DOES NOT ALWAYS WORK WHEN THE INSURRECTION IS INSPIRED, FINANCED AND TRAINED FROM OUTSIDE

-29-

THE COUNTRY. THE NEXT OCCASION FOR REFORM IS AFTER
TRANQUILITY HAS BEEN REESTABLISHED, BUT WESTERN INHIBITIONS
AND AUTHORITARIAN INCOMPETENCE USUALLY COMBINE TO PREVENT
THE TESTING OF THIS HYPOTHESIS. CONCESSIONS DURING A
CRISIS ONLY ENCOURAGE THE RADICALS AND ACCELERATE THE ASSAULT.

I HAVE DEDICATED SO MUCH SPACE TO THESE THEORETICAL
REFLECTIONS TO POINT OUT THAT WHILE AMERICA HAS SOMETIMES
SETTLED TOO READILY FOR THE STATUS QUO, RECENTLY THE AMERICAN
PRESSURE FOR CHANGE HAS MORE OFTEN ACCELERATED THE PROCESS
OF DOMESTIC DISINTEGRATION THAN ARRESTED IT. AND THE END
RESULT HAS BEEN BOTH MORE OPPRESSION AND GREATER INTERNATIONAL
INSTABILITY.

CONVINCED THAT OUR MODEL IS OF UNIVERSAL VALIDITY, WE
HAVE SOUGHT TO IMPLANT IT WITHOUT REGARD TO HISTORICAL
CIRCUMSTANCE OR THE LIKELY CONSEQUENCES. IN TRUTH, WE KNOW
NEXT TO NOTHING OF THE DYNAMICS OF OTHER SOCIETIES, PERHAPS
LEAST OF ALL THOSE IN THE OIL-PRODUCING AREAS; FOR ALL OUR
TINKERING WITH "REFORM," WE HAVE GIVEN LITTLE USEFUL ADVICE ON

HOW TO NAVIGATE THE TRICKY PASSAGE TO MORE LIBERTY WITHOUT WRECKING AUTHORITY AND INCREASING THE SCOPE OF TYRANNY.

HARD-PRESSED GOVERNMENTS BESET BY AN IMPLACABLE DOMESTIC ENEMY ARE OFTEN REDUCED TO PARALYSIS BY ADVICE WHICH THEY KNOW IS DANGEROUS BUT WHICH THEY DARE NOT REJECT BECAUSE THEY HAVE RELIED ON OUR SUPPORT.

THE RESULT OF THESE TENDENCIES--CONTRARY TO OUR INTENTION--HAS BEEN A SPREAD OF REGIMES HOSTILE TO US IN THE THIRD WORLD. IN MANY DEVELOPING COUNTRIES MARXISM HAS FLOURISHED, NOT BECAUSE IT FULFILLS ECONOMIC OR MORAL NECESSITIES--WHICH IT CLEARLY DOES NOT--BUT BECAUSE IT PROVIDES A RATIONALE FOR CENTRALIZED POLITICAL POWER ONCE TRADITIONAL STRUCTURES COLLAPSE. MORE RECENTLY ISLAMIC THEOCRACY HAS EMERGED AS A REACTION TO MODERNIZATION IN ALL ITS FORMS, WESTERN OR MARXIST. ITS LONG-TERM VIABILITY HAS YET TO BE DETERMINED.

IN THE FACE OF THESE ONSLAUGHTS, TRADITIONAL FRIENDS OF THE UNITED STATES, BELONGING TO NEITHER OF THESE ORIENTATIONS,

-31-

STAND BEWILDERED, UNSURE OF THEIR FUTURE AND CONFUSED ABOUT OUR PURPOSES. [ ] GOVERNMENTS THAT HAVE TRADITIONALLY RELIED ON US KNOW THAT THE VARIOUS RADICAL REGIMES, HOWEVER DIFFERENT THEIR ORIGINS AND MOTIVATIONS, ALL AGREE IN THEIR ALL-OUT OPPOSITION TO PEACEFUL EVOLUTION, WESTERN VALUES, AND THE SURVIVAL OF THE WORLD ECONOMIC SYSTEM. ] THE INEVITABLE RESULT OF RADICAL ASCENDANCY--REGARDLESS OF ITS ORIGINS--IS TO THREATEN THE SURVIVAL OF ALL PRO-WESTERN GOVERNMENTS THAT REMAIN IN THE THIRD WORLD, AND ESPECIALLY IN THE MIDDLE EAST, WITH OBVIOUS GEOPOLITICAL CONSEQUENCES.

THE IMPACT OF ENERGY IS IMMEDIATE. RADICAL COUNTRIES SEEK TO DRIVE UP THE PRICE OF OIL TO OBTAIN RESOURCES TO ACHIEVE THEIR INTERNATIONAL OBJECTIVE OF UNDERMINING AMERICAN AND WESTERN INFLUENCE. MODERATE REGIMES HAVE THE PARADOXICAL INCENTIVE TO REDUCE PRODUCTION, SINCE THEY FEAR THE DISRUPTIVE CONSEQUENCES OF THE PROCESS OF MODERNIZATION THAT DESTROYED THE SHAH. BOTH DEVELOPMENTS PUSH UP THE PRICE; TOGETHER THEY SPELL DISASTER FOR THE WEST.

-32-

THE WEST HAS SO FAR SUPPLIED NO SERIOUS ANSWER TO THIS CHALLENGE. clearly we have fully analyzed neither the dynamics of political change nor our interest in relation to it. We must be clear in our own minds what our own survival requires, the scope of change we can responsibly advocate, and what countries we must defend in our own interest even if their institutions do not meet every democratic test.

UNTIL WE HAVE THOUGHT THIS THROUGH, WE HAVE NO POSSIBILITY OF A SENSIBLE DIALOGUE WITH THE OIL-PRODUCING COUNTRIES, EVEN THOSE FRIENDLY TO US, ON EITHER OIL PRICES OR DOMESTIC REFORM.

OUR NATURAL ALLIES ARE NOT RADICAL GROUPS AND FORCES BUT THE MODERATE GROUPS WHICH AFFIRM PEACEFUL CHANGE AND SYMPATHIZE WITH WESTERN GOALS. IF THE MODERATES ARE NOT TO BE DOOMED--OR TO DISSOCIATE FROM US IN SELF-DEFENSE-- THEY MUST KNOW, FIRST OF ALL, THAT WE UNDERSTAND THE

-33-

REALITIES OF THEIR SITUATION. THEY MUST BE GIVEN REASON
FOR CONFIDENCE THAT WE ARE PREPARED TO COOPERATE WITH
THEM AND, FINALLY, TO STAND BY THEM FOR THEIR OWN
SURVIVAL, THEY MUST BE WILLING TO DEVELOP THEIR POLITICAL
INSTITUTIONS. AT THE SAME TIME, WE MUST UNDERSTAND THE
LIMITS OF OUR KNOWLEDGE, AND THE PRICE WE COULD PAY
FOR CLUMSY EXPERIMENTS. AND WE MUST KNOW CLEARLY
WHERE WE WILL DRAW OUR LINES: WHAT SECURITY INTERESTS
WE WILL NOT SACRIFICE IN THE NAME OF REFORM, AND
WHAT POSITIONS WE WILL DEFEND EVEN IF THOSE WHO MAN
THEM DO NOT MEET EVERY DEFINITION OF VIRTUE.

-34-

THE ARAB-ISRAELI CONFLICT IS WITHOUT DOUBT A PRINCIPAL FACTOR IN THE TURBULENCE OF THE MIDDLE EAST. BUT ITS SOLUTION IS CLOSELY CONNECTED WITH THE FACTORS THAT I HAVE ALREADY DESCRIBED: THE MILITARY BALANCE AND RELATIONSHIP BETWEEN MODERATES AND RADICALS IN THE AREA. IF THE SOVIET UNION EMERGES AS THE DOMINANT OUTSIDE POWER, MODERATE COUNTRIES WILL BE RELUCTANT TO SUPPORT PEACE PROCESSES THAT DISPLEASE IT. IN THE FACE OF A DOMINANT RADICALISM, EVEN MORE FRIENDS WILL DISAVOW SCHEMES THAT ARE IN FACT IN THEIR OWN BEST LONG-TERM INTEREST.

A DANGEROUS ESCAPISM HAS DEVELOPED IN THE WEST. THE ILLUSION IS WIDESPREAD THAT SOLVING THE SO-CALLED PALESTINIAN PROBLEM IS THE DEUS EX MACHINA THAT WILL DEFUSE ALL THE REGION'S OTHER TENSIONS. A WEST BANK SOLUTION IS IMPORTANT, BUT WHETHER IT CONTRIBUTES TO THE SOLUTION OF OTHER PROBLEMS DEPENDS ON THE NATURE OF THE SETTLEMENT, THE AUSPICES UNDER WHICH IT IS ACHIEVED, AND WHO BENEFITS FROM IT. THE OUTCOME

-35-

MUST NOT BE ONE THAT TEMPTS CONSTANTLY ESCALATING DEMANDS BY
RADICAL FORCES; IT MUST CREATE INCENTIVES FOR MODERATION RATHER
THAN BE SEEN AS A REWARD FOR BLACKMAIL.

I DO NOT BELIEVE THAT THE STATUS QUO ON THE WEST BANK CAN
OR SHOULD BE MAINTAINED. I DO NOT AGREE WITH ISRAEL'S POLICY
OF CONTINUING SETTLEMENTS ON THE WEST BANK DURING THE CAMP
DAVID NEGOTIATIONS. OTHER UNILATERAL STEPS TAKEN RECENTLY
SEEM TO ME ILL-ADVISED. BUT I AM NOT IMPRESSED, EITHER, BY
THE MANY FASHIONABLE PROPOSALS THAT AMOUNT TO FINDING SOME
SUBTERFUGE FOR INTRODUCING THE PLO INTO THE NEGOTIATIONS ON
THE OPTIMISTIC ASSUMPTION THAT IT WOULD THEN MODERATE ITS GOALS
AND CONTRIBUTE TO STABILITY IN THE ENTIRE REGION.

GIVEN MY ANALYSIS OF THE STRATEGIC AND IDEOLOGICAL SOURCES
OF THE TENSIONS IN THE AREA, THE PREREQUISITE TO PROGRESS IS
THAT WE SHOW THAT PRESSURES ON US ARE *NOT* THE ROAD TO SUCCESS.
A POLICY THAT IS PERCEIVED AS YIELDING TO BLACKMAIL IS BOUND
TO ACCELERATE DETERIORATION IN THE MILITARY AND GEOPOLITICAL
DIMENSIONS OF THE MIDEAST CRISIS, LEAVE OUR MODERATE FRIENDS
EVEN MORE VULNERABLE, AND COMPOUND OUR ENERGY PROBLEMS.

-36-

I HAVE CONSISTENTLY SUPPORTED THE CAMP DAVID PROCESS AND THE EGYPTIAN-ISRAELI PEACE TREATY. I HOPE THAT THE EGYPTIAN-ISRAELI AUTONOMY NEGOTIATIONS SUCCEED. BUT SHOULD THE STALEMATE PROVE UNBREAKABLE, THE SEARCH FOR ALTERNATIVES MUST AVOID ILLUSIONS.

THE PROPOSITION THAT ESTABLISHING A PLO STATE WOULD CONTRIBUTE TO THE TRANQUILITY OF THE AREA LACKS ANY FACTUAL BASIS; QUITE THE OPPOSITE IS LIKELY TO BE TRUE. I QUESTION THE OBSESSION WITH INTRODUCING THE PLO INTO THE NEGOTIATIONS NOT SIMPLY BECAUSE OF ITS REJECTION OF U.N. SECURITY COUNCIL RESOLUTION 242, BUT ABOVE ALL BECAUSE OF ITS RADICAL ANTI-AMERICAN AND ANTI-WESTERN POLICIES: ITS CLOSE AFFILIATION WITH AND OCCASIONALLY LEADERSHIP OF ALL RADICAL FORCES HOSTILE TO US IN THE MIDDLE EAST (INCLUDING THOSE IRANIANS HOLDING OUR HOSTAGES); ITS TRAINING OF TERRORISTS ON A GLOBAL BASIS; AND ITS INTIMATE COOPERATION WITH SOVIET INTELLIGENCE ORGANIZATIONS. THE PLO IN ITS PRESENT INCARNATION, BEYOND ITS IMPLACABLE ENMITY TO ISRAEL, SUPPORTS ALL FORCES ASSAULTING THE PRESENT INTERNATIONAL STRUCTURE. AS LONG AS IT PURSUES SUCH A COURSE, IT DESERVES

WESTERN OPPOSITION, NOT ENCOURAGEMENT,

THE PREVAILING THEORY IS THAT THE PLO WOULD BECOME MORE
MODERATE AFTER ITS DEMANDS WERE SATISFIED. I SEE NO EVIDENCE
FOR THIS; INDEED ALL EVIDENCE IS TO THE CONTRARY. AN INDEPENDENT
PLO STATE IN CURRENT CIRCUMSTANCES WILL HAVE EVERY INCENTIVE TO
ATTEMPT TO SUBVERT NEARBY MODERATE GOVERNMENTS, ESPECIALLY
JORDAN, IF ONLY TO ESCAPE THE INEVITABLE DEMILITARIZATION PRO-
VISIONS WITHOUT WHICH NO ISRAELI WITHDRAWAL OF ANY EXTENT IS
CONCEIVABLE.

FINALLY I SEE NO SIGN THAT SUCH A GROUP, WITH ITS IDEOLOGY
AND ITS AFFILIATIONS, IS WAITING ONLY FOR A PRETEXT TO BECOME
AGRARIAN REFORMERS IN A PACIFIST WEST BANK MINISTATE. BUT THE
LAST THING THE MIDDLE EAST NEEDS IS ANOTHER RADICAL STATE IN THE
REGION ATTACKING ALL EXISTING INSTITUTIONS. THIS IS NOT MERELY
AGAINST THE INTERESTS OF THE UNITED STATES; IT IS ALSO AGAINST
THE INTERESTS OF MODERATE ARAB STATES IN WHOSE WELL-BEING WE
HAVE A STAKE. THESE COUNTRIES UNDERSTAND THIS PERFECTLY WELL,
WHATEVER THEIR PUBLIC STATEMENTS, BUT THE FLIRTATION WITH THE
PLO COMPOUNDS THEIR VULNERABILITY.

-38-

FOR ALL THESE REASONS, NEGOTIATIONS WITH RESPECT TO THE WEST BANK DO NOT HINGE ON FINDING A GIMMICK FOR A FASHIONABLE NEGOTIATING FORUM. IF ANOTHER FORUM IS DEVELOPED, IT SHOULD PROMOTE JORDANIAN PARTICIPATION; ANY OTHER ROUTE WILL LEAD TO FAILURE. OUR EUROPEAN ALLIES MUST LEARN THAT WHEN THEY PUSH SCHEMES INCAPABLE OF REALIZATION THEY ENCOURAGE RADICALISM AND GUARANTEE STALEMATE. ALL THE INDUSTRIAL DEMOCRACIES INDEED HAVE A STAKE IN DIPLOMATIC PROGRESS; BUT IT IS SUICIDAL TO IDENTIFY PROGRESS WITH SCHEMES THAT WILL IN THE LONG RUN PROMOTE INSTABILITY.

THE EFFORT TO SOLVE THE WEST BANK ISSUE IN ONE GRAND NEGOTIATION, DEFINING ALL FRONTIERS AND ALL RELATIONSHIPS, IS ALMOST CERTAIN TO FAIL. AND A PROLONGED INCONCLUSIVE EFFORT IS BOUND, IN ITS TURN, TO COMPOUND THE TENSIONS IN THE AREA. IF THE CURRENT NEGOTIATIONS BASED ON THE CAMP DAVID AUTONOMY SCHEME DO NOT PRODUCE THE DESIRED OUTCOME, I HOPE OTHER AVENUES WILL BE ATTEMPTED, INCLUDING A JORDANIAN-ISRAELI NEGOTIATION. THESE SHOULD AIM AT THE RAPID ACHIEVEMENT OF SOME INTERIM PARTIAL STEP,

-39-

FOR EXAMPLE RETURNING ARAB-POPULATED AREAS QUICKLY TO THE JURIS-
DICTION OF JORDAN; FURTHER ISRAELI WITHDRAWALS AND FINAL BORDERS
WOULD BE THE SUBJECT OF CONTINUING NEGOTIATIONS TO WHICH ALL
PARTIES WOULD BE COMMITTED. THE RELATIONSHIP OF THE PALESTINIAN
AREAS TO JORDAN WOULD THEN BECOME AN ARAB, NOT A GENERAL INTER-
NATIONAL PROBLEM.

IT IS IN THE COMMON INTEREST THAT WE NOT CHASE ABSTRACTIONS
BUT BEGIN A PROCESS THAT CAN LEAD TO RAPID RESULTS. IN THIS
MANNER PROGRESS CAN BE MADE IN THE WEST BANK THAT CONTRIBUTES
TO POLITICAL STABILITY IN THE AREA AND CONTAINS, RATHER THAN
UNLEASHES, RADICAL PRESSURES.

RESPONSE TO THE ENERGY CRISIS

SINCE THE FIRST PRICE EXPLOSION OF 1973, WE HAVE LEARNED
THAT THE ENERGY CRISIS IS NOT A MERE PROBLEM OF TRANSITIONAL
ADJUSTMENT; IT IS A GRAVE CHALLENGE TO THE POLITICAL AND ECONOMIC
STRUCTURE OF THE FREE WORLD. THE WORLD'S POSTWAR FINANCIAL
INSTITUTIONS AND MECHANISMS OF COOPERATION WERE NEVER DESIGNED
TO HANDLE SO ABRUPT A PRICE RISE IN SO VITAL A COMMODITY OR
SUCH MASSIVE SHIFTS OF WEALTH. THE PROBLEM WILL NOT GO AWAY BY

-40-

SIMPLY LETTING INFLATION PROCEED; ON THE CONTRARY, RUNAWAY INFLATION IS PART OF THE VICIOUS CIRCLE WHICH DRIVES UP OIL PRICES. NOR CAN THE FINANCIAL IMBALANCE BE OVERCOME BY PERMITTING THE DEBT OF CONSUMERS TO EXPAND INDEFINITELY, EVEN THOUGH THIS IS WHAT HAS BEEN HAPPENING. THE GRADUAL IMPOVERISHMENT OF THE INDUSTRIALIZED WORLD IS CERTAIN TO END IN FINANCIAL CATASTROPHE, WITH GRAVE POLITICAL CONSEQUENCES. FINALLY, FOR A CONSUMER/PRODUCER DIALOGUE TO BE EFFECTIVE, CERTAIN OBJECTIVE CONDITIONS MUST BE MET, WHICH DO NOT NOW EXIST.

THERE IS NO SECRET ABOUT WHAT WE MUST DO. THE INDUSTRIAL DEMOCRACIES MUST ADOPT STRINGENT CONSERVATION MEASURES, DEVELOP NEW SUPPLIES OF OIL AND ALTERNATIVE SOURCES OF ENERGY, STRENGTHEN COLLABORATION AMONG THE CONSUMER NATIONS, ADDRESS THE PLIGHT OF THE DEVELOPING NATIONS, AND SEEK A MORE RELIABLE LONG-TERM RELATIONSHIP WITH THE PRODUCERS. THESE OBJECTIVES ARE EASY TO STATE IN THE

ABSTRACT. IT IS DEVISING PROGRAMS TO IMPLEMENT THEM WHICH HAS PROVED TO BE THE OBSTACLE. I WILL NOT GET INTO THE DOMESTIC SIDE OF THE PROBLEM HERE, EXCEPT TO POINT OUT THE DISASTROUS INTERNATIONAL POLITICAL CONSEQUENCES OF OUR CONTINUING VULNERABILITY, AND TO URGE THAT THE PROBLEM BE DEALT WITH AS A MATTER OF HIGHEST URGENCY. ASIDE FROM OUR MILITARY DEFENSE, THERE IS NO PROJECT OF MORE CENTRAL IMPORTANCE TO OUR NATIONAL SECURITY AND INDEED OUR INDEPENDENCE AS A SOVEREIGN NATION.

THE RESPONSE TO THE ENERGY CRISIS, OF COURSE, ITSELF HAS AN INTERNATIONAL DIMENSION. FOR FINALLY ITS SOLUTION DEPENDS ON OUR FORTITUDE AND BOLD LEADERSHIP. WE HAVE BEEN SUBJECTED TO POLITICAL PRESSURES, NOT ONLY IN THE 1973 EMBARGO BUT EVEN MORE RECENTLY. WE ARE NOW THREATENED BY OPEC WITH PRODUCTION CUTBACKS IF WE SEEK TO BUILD UP A STRATEGIC OIL RESERVE. BUT WE CANNOT TOLERATE BEING FORCED INTO A STATE OF PERMANENT VULNERABILITY. NO COUNTRY

HAS A RIGHT TO DEMAND THAT WE REMAIN ETERNALLY SUBJECT TO
BLACKMAIL. BUILDING A STRATEGIC OIL RESERVE IS A SOVEREIGN
DECISION OF THE UNITED STATES AND AN ESSENTIAL MATTER OF
SURVIVAL; THE ATTEMPT TO INTERFERE WITH OUR DOING IT IS
A DEMONSTRATION OF WHY IT IS ESSENTIAL. WE SHOULD FILL
OUR STRATEGIC RESERVE PROMPTLY AND ANY COUNTRY TAKING
RETALIATORY STEPS MUST KNOW THAT IT DOES SO AT THE COST
OF ITS GOOD RELATIONS WITH THE UNITED STATES.

NO AREA OF POLICY HAS BEEN MORE DISAPPOINTING THAN
CONSUMER COOPERATION. SINCE THE ESTABLISHMENT OF THE
INTERNATIONAL ENERGY AGENCY IN 1974, COOPERATION AMONG THE
INDUSTRIAL DEMOCRACIES HAS NOT BEEN ADEQUATE TO THE
CHALLENGE. INSTEAD OF BOLD CONCERTED ACTION, TOO MANY OF
THE INDUSTRIAL DEMOCRACIES HAVE PREFERRED CURRYING FAVOR
WITH THE OPEC COUNTRIES, COMPETING FOR SOME TRANSITORY
SPECIAL POSITION OR DISSOCIATING FROM OUR NEGOTIATING
EFFORTS IN THE MIDDLE EAST CONFLICT. BUT ANY SPECIAL POSITION

-43-

GAINED BY ONE COUNTRY CAN BE RAPIDLY TRANSFERRED TO ANOTHER
THAT OUTBIDS IT. SUCH A COURSE IS IN FACT AGAINST THE
INTERESTS OF THE MODERATE OIL PRODUCERS, THE CLAIMED
BENEFICIARIES. ONCE THE PRINCIPLE IS ESTABLISHED THAT
A POLITICAL PRICE CAN BE EXACTED, THE MODERATES WILL
BECOME THE TARGET OF RADICAL PRESSURES TO RAISE THE POLITICAL
PRICE. THE MODERATES CANNOT STAND FAST IF THE INDUSTRIAL
DEMOCRACIES DO NOT.

A SUBJECT IN WHICH IT IS URGENT FOR THE INDUSTRIAL
DEMOCRACIES TO DEVELOP A COMMON APPROACH IS THE PLIGHT
OF THE DEVELOPING NATIONS. THESE COUNTRIES ARE CAUGHT
IN AN IMPOSSIBLE BIND. HIGHER OIL PRICES ABSORB ALL THEIR
AID AND EXPORT EARNINGS; THE BILL FOR OTHER IMPORTS MOUNTS
BECAUSE OF THE GLOBAL INFLATION FUELED BY THE ENERGY CRISIS;
AND THEIR OWN CAPACITY TO EXPORT IS REDUCED BECAUSE OF THE
RECESSION IN THE INDUSTRIALIZED COUNTRIES WHICH IS ANOTHER
RESULT OF THE ENERGY CRISIS. THUS A REEXAMINATION OF
THE DEVELOPMENT NEEDS OF THE NEW NATIONS IS IMPERATIVE.

-44-

THE DEVASTATION OF THE DEVELOPING WORLD'S HOPE FOR PROGRESS
IS A GRIM OMEN FOR A WORLD OF PEACE.

ANOTHER SUBJECT REQUIRING URGENT ATTENTION ON A
COMMON BASIS IS THE RECYCLING OF FINANCIAL SURPLUSES. BY
1983 THE FINANCIAL CLAIMS OF THE OIL PRODUCERS ON THE OECD
COUNTRIES WILL REACH HALF A TRILLION DOLLARS. THAT AMOUNT
CANNOT BE RECYCLED BY THE COMMERCIAL BANKING SYSTEM; IT
WILL LEAD TO THE BANKRUPTCY AND INSTABILITY OF MANY DEVELOPING
NATIONS; IT WILL OVERTAX THE FINANCIAL INSTITUTIONS OF
EVEN DEVELOPED NATIONS. RECYCLING IS EASIEST PRECISELY
INTO THOSE COUNTRIES THAT NEED IT LEAST; IT WILL NOT ABATE
THE DEVASTATING IMPACT OF CURRENT PRICES ON NATIONS WHOSE
EXPORT EARNINGS AND FOREIGN ASSISTANCE ARE NOW LARGELY
ABSORBED BY PAYING FOR THEIR ENERGY BILL.

-45-

THE NEED FOR SOLIDARITY AMONG THE OIL-CONSUMING
NATIONS IS PLAIN. [ THIS HAS BEEN MY CONSISTENT URGING
SINCE 1973. ] I DO NOT ACCEPT THE PROPOSITION THAT IT IS
PROPER FOR THE PRODUCERS TO ORGANIZE BUT A CONFRONTATION
IF THE CONSUEMRS SEEK TO COOPERATE WITH EACH OTHER.

[ RESEARCH INTO ALTERNATIVE SOURCES OF ENERGY COULD BE
POOLED; MAJOR RESOURCES COULD BE ALLOCATED TO SOME JOINT
PROGRAMS TO DEVELOP ALTERNATIVE ENERGY SOURCES, WITH
CLEAR TARGET DATES, FOR THE REDUCTION OF THE COMMON
VULNERABILITY. ] ABOVE ALL, A JOINT APPROACH SHOULD BE
WORKED OUT FOR A COMPREHENSIVE DIALOGUE WITH THE PRODUCING
NATIONS.

EVENTUALLY THE SOLIDARITY OF THE INDUSTRIAL DEMOCRACIES
WILL PROVIDE THE SECURE BASIS FOR A DIALOGUE BETWEEN
CONSUMERS AND PRODUCERS. THERE IS IN FACT A CONGRUENCE OF
INTERESTS. THE CONSUMER COUNTRIES HAVE A POLITICAL STAKE
IN THE INDEPENDENCE OF THE PRODUCER NATIONS, EVEN THOSE WHOSE
DOMESTIC POLICIES ARE REPUGNANT TO US, SUCH AS IRAN.

-46-

THE PRODUCERS IN TURN HAVE A STAKE IN A STABLE AND GROWING WORLD ECONOMY, BECAUSE MANY OF THEM DEPEND ON IT FOR THEIR TECHNOLOGY, FOR THEIR DEVELOPMENT AND IN A DEEPER SENSE FOR THEIR INDEPENDENCE. BOTH TOGETHER MUST FIND MEANS TO ENABLE THE DEVELOPING NATIONS TO FULFILL THEIR ASPIRATIONS. BUT THIS CANNOT TAKE PLACE IN AN ATMOSPHERE OF CHAOS AND BLACKMAIL. THE PRODUCERS CANNOT CONTINUE THE PRACTICE OF PERIODICALLY ANNOUNCING, AS A SERIES OF UNILATERAL PROCLAMATIONS, DECISIONS AFFECTING THE ECONOMIC FUTURE OF THE ENTIRE WORLD WITHOUT ANY CONSULTATIONS OR ANY APPARENT CONCERN FOR THEIR IMPACT. THE INDUSTRIAL DEMOCRACIES MUST ENHANCE THEIR COHESION IF A CONSUMER-PRODUCER DIALOGUE IS TO GIVE EXPRESSION TO THE REALITY OF INTERDEPENDENCE.

WHOEVER IS PRESIDENT OF THE UNITED STATES NEXT YEAR HAS THE DUTY, AND THE OPPORTUNITY, TO LEAD THE WAY OUT OF THESE DILEMMAS. THE UNITED STATES IS BETTER ABLE THAN OTHERS TO REGAIN SOME MASTERY OVER EVENTS. WE HAVE

-47-

THE DOMESTIC RESOURCES, THE TECHNOLOGICAL SKILLS, AND
THE CREATIVE GENIUS TO TRANSFORM THE WORLD'S ENERGY
MARKET. THEREFORE, DECISIVE AMERICAN EFFORTS TO IMPLEMENT
AN ENERGY POLICY WOULD TRANSFORM THE INTERNATIONAL
ENVIRONMENT--REDUCING THE CARTEL'S STRANGLEHOLD ON THE
WORLD ECONOMY, RESTORING WORLD PROSPERITY, DISPELLING
THE CLOUDS OF POLITICAL DEMORALIZATION, AND STRENGTHENING
OUR SECURITY.

THUS WILL FREEDOM BE VINDICATED AND THE DEMOCRACIES
FLOURISH, TRANSFORMING CRISIS INTO HOPE.