The summit of their discontent

Roy MacGregor July 9 1979

The summit of their discontent

Roy MacGregor July 9 1979

The summit of their discontent


Roy MacGregor

They met in the gaudy conference room of Tokyo’s Akasaka Palace, white doves circling above them in a ceiling painting taken from the Japanese Noh play Hagoromo. It tells the story of Hakuryu, a poor fisherman who chances upon an exquisitely naked goddess as she enjoys an earthly swim. To gain power over her, Hakuryu steals the goddess’ robe from a nearby pine tree— only to have her lure it back from him with some rather seductive choreography. It is a simple story with a straightforward message: if you get caught with your pants down, you may as well try and dance your way out of it.

That was a sentiment worthy of those who gathered in Tokyo last week for the fifth annual economic summit involving the seven major powers of the nonCommunist world. Two of the leaders— French President Valéry Giscard d’Estaing and West German Chancellor Helmut Schmidt—had been involved since the first such gathering in Rambouillet, near Paris, back in 1975. United States President Jimmy Carter and Italian Prime Minister Giulio Andreotti had attended the past couple, while the three others—Japan’s Prime Minister ' Masayoshi Ohira, British

Prime Minister Margaret Thatcher and Canada’s Joe Clark—were all new and untested.

The seven represent a mere 15 per cent of the world’s population, 583 million citizens, but they control 55 per cent of the world’s economy and consume a startling 60 per cent of its available oil. And it was because of that last figure that the Tokyo summit was unlike its predecessors in France, Puerto Rico, Britain and West Germany.

With just irony, a simultaneous meeting was under way in Geneva among the 13 members of the Organization of Petroleum Exporting Countries (OPEC) and that group’s decision to raise the price of its oil to at least $18 a barrel meant that the “very nasty storm clouds” U.S. Treasury Secretary Michael Blumenthal had forecast recently were suddenly overhead.

For both days of the summit, it rained.

Then, just before the leaders left the Versailles-inspired palace in bulletproof, bomb-proof Fleetwood Broughams, the rain stopped. With all the forced symbolism of a Japanese movie, the black cars sizzled over wet roads while the clouds began breaking overhead. And by the time the summit communiqué arrived for the press conference, there was actually some light in the sky.

It was a different statement, so unlike the one these same nations had produced three years ago in San Juan, when energy warranted a mere 30 words. This time out, the seven leaders promised to:

• Reduce oil consumption considerably. The four European nations are pledged to reach 1985 importing no more oil than in 1978 (the promise of North Sea oil should mean these nations will be less dependent on imported oil anyway). Japan, the U.S. and Canada have separate plans to conserve energy.

• Set up a reviewing agency which may permit “slight adjustments.”

• Move toward registering international oil transactions, undoubtedly hoping someday to end the profiteering that has recently had oil selling for up to $40 a barrel on the spot market in Rotterdam.

• Move toward world prices for domestic oil. Canada, for example, maintains a domestic price of only $13.75 a barrel, which is why gasoline is less than a dollar a gallon in Toronto and around $2.70 a gallon in Tokyo.

• Not stockpile oil unnecessarily, thereby creating temporary shortages and raising the price.

• Concentrate more fully on alternative energy sources, such as coal, with sym-

pathy for the environment, and nuclear power, with safety in mind.

• Try to develop new technologies through the establishment of an international energy technology group, perhaps with its own financing.

• Put “special emphasis” on helping developing nations—such as Turkey, which spends more on oil alone than it

makes on total exports—develop and exploit their own energy potential.

There were, of course, other points. The communiqué spoke of new inflation fears (tied to oil, naturally), concern over unemployment, troubles in the monetary system and worries for the developing nations. But energy so dominated the discussions that it made the leaders’ expressions of concern for the impoverished seem mere platitudes. By the end, even they were calling it the “energy summit.”

“We deplore the decisions taken by the recent OPEC conference,” the leaders said in their statement. But the price increase was hardly unanticipated. It was, however, the latest hitch in a noose that has been tightening since Iran turned sour earlier this year. Difficulties in that country have removed 1.5 million barrels of oil per day from world supplies. As well, the 60-per-cent increase in world oil prices in 1979 alone will cost industrialized countries an estimated $60 to $80 billion more this year.

If that weren’t enough to frighten the seven who went to Tokyo, there were always the thoughts of Saudi Arabian Oil Minister Sheik Ahmed Zaki Yamani who, only the week before, had pegged 1988 as the year of the energy apocalypse. Considering the summit took place just after gasoline-hungry car owners had rioted in Pennsylvania (see page 19), the warning seemed well worth heeding.

The Europeans arrived in Tokyo fresh from a European Community summit in Strasbourg, where they had agreed to hold their total oil imports at 1978 levels through 1985. What they hoped was that the other three coun-

tries would follow suit, and they made it clear that they would be persistent in their bargaining. France’s Giscard d’Estaing even sent a personal note to summit chairman Ohira requesting that energy be given top priority.

The French president also arrived with a brand-new, 27-point energysaving plan at work at home, an accusation that the Americans were not doing enough to save energy and a firm conviction that agreeing on anything less than a set of precise guidelines for reducing consumption would be “meaningless.” Thatcher was also talking tough, directing a Monday BBC interview at Jimmy Carter by saying: “Look, this is what we’re doing. Now if you don’t do your bit, then the position will still be as bad as ever.”

The tough talk caught the other three countries by surprise. “They put the heat on us,” admitted a Canadian official. Canada had originally planned to play a small part in the Tokyo drama (see box, page 15), but suddenly found itself in a vague no man’s land between the Europeans and the U.S. and Japan. The Americans, with inflation running at 13.4 per cent and with a 1978 oil import bill reaching a staggering $40 billion, knew they were edging up to a recession and that the economy, like any other North American vehicle, requires lots of energy to carry it along and eventually out of trouble. The U.S., as a member of the International Energy Agency (IEA), had already pledged to aim for a five-per-cent reduction in this year’s projected energy use. It thus was willing to abide by a short-term 1979-80 reduction in imports, but was wary of the Europeans’ keenness to work with 1985 in mind.

Japan, which imports 99.8 per cent of its oil, was particularly concerned with

the years to come, having only recently recovered its own economic stability. Ohira wanted energy conservation to be a central issue, but not necessarily to tie Japan to specific figures in reduced consumption.

The Canadians might have suspected what was to come when the first draft of the communiqué was received and the paragraph following the “energy” heading was completely blank. On the surface, Canada appeared to be in the best position of all: it is the only one of the seven with an energy surplus (3.9 per cent). The Clark government would also welcome an outside threat to which

it could point to justify the Tories’ intention to raise the domestic price of Canadian oil far faster than the current dollar-a-barrel increases due on July 1 and next Jan. 1.

“A dollar every six months is not going to be sufficient,” Finance Minister John Crosbie said in Tokyo (see box, page 14), and Clark agreed privately that “the gap is probably too large” between Canada’s $13.75 a barrel and OPEC’s new two-tier price structure (the top tier is $23.50 a barrel). Later Clark went further—“some sacrifices” would be required from consumers and industry. But though Canada would gladly raise the cost of domestic oil and agree to conservation generalities, Clark was adamantly opposed to what he called “mandatory measures.” The reason was that Canada is soon to go into a period of energy shortfalls, and the country’s net imports of 200,000 barrels a day may soon not be enough. Clark himself expressed “surprise” at the National Energy Board predictions of a seven-year valley, and he made it clear that he would not welcome a communiqué that contained precise figures such as the Europeans, particularly France, wanted.

The eventual compromise was hammered out under the tightest security net the Japanese had seen since the end of the Second World War. From behind the bulletproof glass of the palace’s Hagomoro Room, the leaders moved to their armored Cadillacs (recently purchased by the Japanese for $1 million) and then to bunkered hotels in a carefully orchestrated shuttle which involved clearing traffic in downtown To-

kyo and banning flights over the city. In all, Japanese officials said, the security operation cost $2.7 million. But the true figure was probably much higher. Fully 30,000 riot troops were stationed in Tokyo and a ground-to-air missile was rumored to be ready at the palace to fend off a kamikaze or remote-control aerial attack.

The Japanese Red Army, responsible for the 1972 Tel Aviv airport massacre, had not been heard from for two years. But letters had recently arrived from Bombay threatening a Red Army terrorist attack at the summit. Fortunately, however, the real drama was played out on paper, where the Europeans gained very little and the Americans, Japanese and Canadians gave away very little.

The final decision was to cease operating as a seven-nation unit, to allow the Europeans to stick to their Strasbourg agreement while the other three went their separate ways. Clark, who found himself far more involved than he had expected—“I played a rather active role for a newcomer,” he admitted—conceded a 1985 target. But that was only to the extent that Canada will reduce its annual rate of growth of oil consumption to one per cent with a consequent reduction of net oil imports from 1985’s projected 650,000 barrels a day to 600,000—which is still a 400,000barrel-a-day increase.

The cynical view of past summits is that they have had but two purposes— to buoy up sagging political fortunes and to inspire investment at home. This time there were certain unavoidable hammerlocks on the politicians. The oil crisis was real enough (Helmut Schmidt went so far as to say it could conceivably “lead to wars”) and recent oil price increases have given new life to inflation. Four of the seven nations present have inflation in double figures, with Canada teetering on the brink of making it five. Global recession, therefore, is a real possibility.

Immediately after the summit, Carter gave assurances that the commitments, particularly the promise to seek out alternative sources of energy, “will be binding upon us for the future.” He also volunteered the view that the summit might prove to have “a significant historical meaning for most of the people on earth.” But as he spoke, not far to his left sat political image-maker Gerald Rafshoon, his secretary of symbolism. And some among his listeners could not resist the conclusion that the well-being of the Western world may well hinge on whether Carter’s words came from his heart or from Rafshoon’s calculating mind. There is far more at stake than the re-election of the peanut farmer from Georgia.