When U.S. and Mexican government negotiators sit down in the next two months to reopen natural gas talks that the administration quashed more than a year ago, both parties will face a different set of demands and a vista of new realities.
Newly oil-rich Mexico and its shrewd and politically nimble President Jose Lopez Portillo will be pressing again for a high yet "fair" gas price, pegged to world on prices -- and a set of terms reminding Washington again of Mexico's own self-determination. And President Portillo will again undoubtedly remind U.S. diplomats -- as he did in the weeks leading up to President Carter's Mexico visit -- that energy, trade, and immigration issues are all "linked."
The U.S. delegation, a subcabinet cluster from State, Energy and the National Security Council, will be pressing to negotiate a "fair" price, one lower than what Mexico had asked before. They will say that energy, trade and immigration issues -- the grist of major obstacles between the two countries -- are not linked. More important, however, there will be a new immediacy to complete a gas deal, a White House-mandated effort to meld the discredited "Good Neighbor" policy with emerging realities of America's new "Good Customer" policy.
A deal will likely be struck. President Lopez Portillo says, "The United States is our natural customer." And President Carter agreed during his seven hours of private talks with the Mexican president last week.
The shape the talks take is critical, because their outcome could affect Mexico's willingness to produce and sell the United States not just gas, but some of its nearly 50 billion barrels of proven oil reserves.
For Carter personally, successfully completed gas talks would deflect gathering political fire from across the political spectrum -- from Sen. Lloyd Bentsen (D-Tex.) and Rep. Jim Wright (D-Tex.) to Sen. Edward Kennedy (D-Mass) and Sen. Frank Church (D-Idaho) -- for not doing enough to bring in Mexican oil and gas. The president's own political advisers are also increasingly wary of the consequence of impressions lingering during the Iranian oil squeeze of Energy Secretary James R. Schlesinger and Carter turning back Mexican gas -- and the promise of Mexican oil -- on "technicalities."
In a somewhat cheering tone, administration officials now say that Carter's meeting with Lopez Portillo has cleared the air between the two countries. They also say the coming resumption of gas talks is another sign of improving relations.
Government-level talks on gas issues, or on oil, are somewhat rare. Such arrangements are generally left in the hands of the oil companies. Last time, the talks came a cropper.
In August 1977 a six-company consortium headed by Tenneco agreed to buy 2 billion cubic feet of gas a day from Petroleous Mexicanos, the state oil company, at a price indexed to the price of heating oil. That would have made it roughly $2.60 per thousand cubic feet.
By December 1977, Schlesinger in talks with Pemex essentially rejected the terms of the sale, arguing that it would lead to ratcheting upward the price the United States pays Canada -- about $2.16 per thousand cubic feet -- and that the price Mexico was asking was simply unfair and too high.
The Mexican pricing formula, which would have affected about 4 percent of total U.S. gas consumption had the deal been approved, was also well in excess of what Carter and Schlesinger were then prepared to offer domestic producers in the national energy plan.
Beyond that, however, there were otehr factors. U.S. intelligence reports indicated that the Mexicans had no true economic choice other than selling to the United States, and that the hundreds of miles of 48-inch pipe that would carry gas from the Reforma fields to McAllen, Tex., would pay for themselves in less than four years.
Meanwhile one of Schlesinger's top aides, Leslie J. Goldman, consulted with Sen. Adlai E. Stevenson (D-Ill.), who later introduced a measure in the Senate banning Export-Import Bank credits for the gas line.
The Mexicans were infuriated. Lopez Portillo said, "I was left hanging by my paint brush." Lesser Mexican officials vilified Schesinger in private.
Since then Schlesinger, under often heavy pressure from Congress, has said that the United States might accept a price tied to residual oil, something in the range of $2.30 to $2.60 per thousand cubic feet or above, but less than the heating oil price, now equal to about $2.95 to $3.15.
More recently, U.S. energy officials have opposed the Mexican gas deal because it could jeopardize completion of the proposed $12 billion Alaskan gas pipeline which both Carter and Schlesinger have strongly supported.
Carter's agreement to reopen the gas talks is a positive step, yet one that could quickly dissolve into failure. Also by all appearances, it is the only major proposal in the secret NSC study prepared for his Mexican visit that he acted upon.
While U.S. negotiators ponder the concessions they must make to complete the 70 miles of pipeline to hook up Mexican energy to American appetites, they may well reflect on a comment by Mexican novelist Carlos Fuentes: "Mexico is a country, not an oil well."