TNAG-2227-FCO40-3199-Political-relations-between-Hong-Kong-and-Commonwealth-count-1991 — Page 51

CONFIDENTIAL

encourages supply diversity, and market can react quickly to overcome problems in any particular area, as it did in Gulf crisis. No need to beef up IEA emergency stocks

Meetings between representatives of oil producing and consuming governments to talk about the oil market only useful if they lead to better mutual understanding. Concerned that meetings proposed as follow-up to Paris seminar at beginning of July likely to encourage those who believe in government

intervention, which would be expensive and inefficient and

create friction between producers and consumers.

best allocator or resources

Market is

OTHERS' COUNTER-ARGUMENTS

FRANCE and ITALY: accept that purpose of producer-consumer

dialogue on oil should not be to discuss management of oil market. However, such meetings can help oil markets function better, by confronting long-term issues (eg investment) which the market may not sufficiently take into account

US: not all IEA countries have emergency oil stocks owned by

Governments or sufficiently under Government control that they

can be called upon in event of crisis. Demand restraint

measures used by some countries as part of IEA intervention

during Gulf crisis, can be ineffective and are no substitute

for use of stocks. Those with Government-owned stocks

(basically US, Japan, Germany) should not have to shoulder

whole burden

OUR RESPONSE

117sgij

CONFIDENTIAL