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America's stake in Soviet oil

By Leo GruliowLeo Gruliow, editor emeritus of The Current Digest of the Soviet Press and formerly Moscow correspondent of The Christian Science Monitor, attended the Ohio State University's Wahington seminar on Soviet Energy. / May 16, 1980



Does the United States have a stake in helping the Kremlin to alleviate a Soviet oil shortage in the next few years? That may seem a strange question at a time when Washington and Moscow confront one another as adversaries. Yet this question came up for serious discussion among nearly 100 leading defense, energy, intelligence, business, and academic specialists last week. None of them could be called "soft" on the Russians. The question was a measure of their concern over the international oil crisis.

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The discussion took place at a two-day Washington seminar held under the auspices of an Ohio State University energy research program. The seminar was convened to consider what a Soviet oil pinch would mean for the US and what the American policy should be.

The Soviet Union is the world's largest oil producer and the second largest oil exporter. The CIA contends that Soviet oil output will peak this year and decline dangerously by 1985. Experts debate whether the CIA forecast is accurate -- some previous CIA forecasts have not been borne out -- but they agree that if the biggest producer turns into a net importer of oil, it would send shock waves through the West. At best it would reduce the amount of oil available worldwide, at worst it could lead to war for the oil of the Middle East.

The irony is that the Soviet Union is credited with vast oil reserves in siberia's deep freeze and in offshore deposits that Russian Technology has difficulty in exploring, let alone tapping.

The Russians now pump almost 12 million barrels a day and export about 3 million. somewhat more than half of the exported oil goes to Eastern Europe on favorable terms, the remainder to Western Europe for hard currency.

As the CIA sees it, the Soviets have depleted old wells in the desire to expand output, while failing to prepare new wells in more difficult, outlying fields of Siberia. Shortages of high technology are part of the problem. Massive infusions of labor and investment are needed, but the aging leadership's cautious, consensus-style decision-making blocked timely adoption of policies that might turn the situation around.

Critics of the CIA's position point to recent signs of a belated change in Kremlin policy. Some even claim that it was the CIA's gloomy estimates that alerted the Kremlin to the Situation. The Russians have launched a crash program to build housing for an additional 250,000 oil workers within three years in Siberia's petroleum-rich Tyumen Province. Other steps include demands to conserve energy, a program to substitute gas and coal for the use of oil and to promote nuclear power, a price reform, and talk of setting up a central energy authority.

The CIA holds that the oil flow could drop to between eight and ten million barrels a day. Many experts consider this estimate too low, but no one, including Russians themselves, believes the Soviet oil industry can get through the '80s without some difficulties.

Even with a drop in output, the Soviet Union -- unlike all the other great industrial powers -- could remain self-sufficient in energy. But Moscow must also maintain its satellites' oil supply if it wants to keep its hold on Eastern Europe. To continue buying grain and foreign technology, the Soviet Union must also go on selling oil to the West. The oil sales yield about half of all Soviet hard-currency earnings.

For the Kremlin, therefore, a decline in the oil flow woudl present hard choices between Eastern Europe's needs, foreign trade requirements, and domestic economic slowdown. For the West, a decline in Soviet oil exports would increase the squeeze on world oil markets. Moreover, the Kremlin, if faced with unpalatable choices, might itself seek to enter the world buying market.

Washington fears that the Russians, lacking the hard currency with which to buy, might be tempted to try other means to cut into Middle Eastern oil sources. It is not an outright seizure of oil lands that Washington expects -- the Kremlin knows that such a move would bring war with the West -- but a combination of political, diplomatic, and military pressures upon shaky Middle Eastern regimes. Moscow could promise economic and military support for these, and in exchange obtain oil by barter paying with arms shipments and construction projects.

Pondering the consequences of a Soviet oil decline, analysts have been asking whether America's best interest might not lie in helping the Russians to keep up their oil flow. The Soviets have sought American technology, but Washington has cancelled some contracts in retaliation for the invasion of Afghanistan, whereupon the Russians turned to France and other suppliers.

Although America has no monopoly on oil technology, Russians regard US equipment and know-how with respect. It is too late for even a heavy influx of American technology to improve Soviet oil prospects quickly or radically, but it could help, particularly if Moscow unbent on the prickly issue of joint ventures.

All agree that first there would have to be a political settlement on Afghanistan and probably also Senate consideration of SALT II; that cooperation in Soviet oil development would not reduce the need for a buildup of American strength, particularly in the Middle East; and that american business and the American consumer would have to share in the benefits from any oil increase stemming from cooperation.

The issue is clearly not one to be resolved soon, but perhaps cooperation in oil development is where Messrs. Muskie and Gromyko should start. In the long run, it might be the salvaging of detente. The alternatives are ominous for all concerned.