TNAG-0299-FCO40-335-Entitlement-of-Hong-Kong-to-generalized-tariffs-preferences--1971 — Page 20

CONFIDENTIAL

for oil. The OPEC countries were all agreed on the

policy of trying to raise prices though there was less

solidarity over other proposals such as for reducing

supplies.

The oil industry was not making a large return on

capital. Costs were high. Diversification of

supplies involved the use of more difficult areas e.g.

the Arctic and off-shore. We knew what escalation

on.

there was likely to be over the next five years. He

though there was a good chance that the agreement would

last.

This suggested that the Middle Eastern countries

were prepared to see the present arrangements carried

The dangers of nationalisation had been reduced.

The physical security of the oil industry had been

improved. The fact that most of the companies had

access to oil in different countries was a safeguard.

There were dangers in direct government-to-government

relations as had been demonstrated by the French

difficulties in Algeria. The ability of the companies

to cooperate would have helped Japan eg by enabling the

Government to get information from the Japanese

companies. We were looking forways of promoting

diversification.

In the short term there was little

that we could do though we could try to increase

stocks.

/

Mr Hirahara agreed generally. Japan

welcomed the OPEC arrangements as ensuring stability of

supply for the next five years, Japan imported

almost all of her oil, 90% from the Middle East. He wished to draw attention to two points: (1) Japan

imported 90% of her oil through the major companies; only 11% came from Japanese companies including those

working with foreign enterprises. Japan needed to

/increase

CONFIDENTIAL