War, Oil, and Peace in the Middle East

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A FEW weeks ago, while George Bush and James Baker were attending a funeral in Japan, Soviet Foreign Minister Eduard Shevardnadze made a 10-day tour of the Middle East. He was welcomed in Israel, whose government is discussing with the Soviet Union steps toward reestablishment of diplomatic relations. In a major address in Cairo during his trip, Mr. Shevardnadze detailed his government's position on a United Nations-sponsored Middle East peace conference, which includes a Soviet offer to act as a guarantor of Israeli national security after conclusion of an agreement. Soviet Premier Mikhail Gorbachev, he said, had decided to give the Arab-Israeli conflict a priority position on his political agenda, and saw the conflict as a major barrier to progress on US-Soviet disarmament.

President Bush's response was to grumble that the Soviet Union had a ``limited role'' to play in the arena of Middle East peace. This is consistent with past US foreign policy: Nixon-Kissinger excluded the Soviets from the shuttle diplomacy of the mid-1970s, Jimmy Carter saw no reason to invite the USSR to Camp David, and it was a Russian offer to reflag three Kuwaiti tankers that persuaded Ronald Reagan to rush American ships to the Persian Gulf.

Through the years, this negativism about Soviet involvement in resolving the Arab-Israeli conflict has derived from a larger view of the Russians as mischief-makers in the region - armorers of the ``radical'' Arab states, funders of terrorism, and a potential threat to Western strategic interests in Gulf oil reserves. Truly, an ``evil empire.'' Contrarians suggested to several US administrations that one way to modify Soviet behavior might be to get them involved in the peace process, but to no avail - the prevailing view was that they simply had no business there.

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In the last year of the Reagan administration, a series of summit meetings with the new Soviet leader managed to advance US thinking beyond the ``evil empire'' stage in several areas, including disarmament and human rights. Nevertheless, on the all-important matter of Middle East peace, as reflected by Mr. Bush's comments on Shevardnadze's recent proposals, the official American view remains that this is simply not a Russian concern. For some reason, the White House seems to have missed the fact that the USSR has the same interest, the same ``business'' there that Western nations have - oil. It's quite simple, really. The Union of Soviet Socialist Republics, the world's largest oil producer, is slowly running out of oil.

Significant signs of depletion in Soviet oil reserves appeared in 1976, when the rate of gain in oil production declined below 6 percent for the first time in over a decade. The event did not slip by the CIA, which shortly thereafter issued the first of two controversial reports on the subject, calling official Soviet targets for oil production into the 1980s ``optimistic.'' Several months later, Western energy analysts quoted in the respected Oil and Gas Journal concluded that, ``like the US, it seems the Soviet Union has found most of the `easy' oil.'' The Journal predicted that while Soviet natural gas production would continue to rise in future years, oil production would actually begin to decline in the 1980s. The CIA's second report on this subject, in 1977, projected that in the 1980s, the USSR would become a ``substantial'' importer of oil. THROUGH the early '80s, a ferocious debate broke out within the Soviet government on the need to adopt new, more realistic oil production targets. Production actually rose in this period, but the Oil Ministry argued that the new fields being discovered in western Siberia, which produces two-thirds of all Soviet oil, were diminishing in size. More important, the cost of extracting that oil was rising, rendering many of the new finds uneconomical to exploit. The Ministry of Geology and certain senior Communist Party officials, pointing to the rising production figures, were unconvinced.

In 1985, the Soviet Union suffered its first absolute production decline in 40 years, but the wrong lessons were learned. The 27th Communist Party Congress in early 1986 did indeed lower oil production targets for 1990; the ``boosters'' in the government prevailed, however. Huge amounts of capital, equipment, and manpower were rushed to the Tyumen oil fields, the richest in western Siberia, to increase production at any cost. Crude and condensate production levels rose steadily in 1986, '87, and '88, but it was the most expensive oil in Soviet history, drilled at a time when world oil prices were collapsing.

Products related to crude oil account for about 33.5 percent of all Soviet exports, and in the last few years, profits on those sales plummeted. In late 1988 Sovietskaya Rossiya, the organ of the Communist Party's Central Committee, noted sourly that the metal, cement, and other resources being ``sucked into the gigantic oil funnel ... are badly needed in other areas of the economy and for improving the nation's living standards.''

Soviet natural gas production and profits have risen steadily through this period. In the near future, however, increasing amounts of gas may be required for domestic energy production. The Chernobyl catastrophe showed the Kremlin the hidden costs of nuclear energy, as did the Armenian earthquake. The Soviets are closing the Armenian nuclear power plant and converting it to a gas-fueled thermal power unit.

What does all this have to do with the Middle East peace process? Predictably, many in the Soviet government are now calling for an end to the irrational expenditure of money and resources to maintain artificially high oil production levels and greater investment in energy conservation. The official newspaper Izvestia recently noted that the USSR uses two to three times as much primary energy resources as the US per unit of gross national product. But at the same time, the Soviets are looking for markets in which to purchase oil, co-produce it, or both, more cheaply than they can produce it at home.

And where are they looking? Not surprisingly, the Soviets have a new interest in the Middle East, the region with 55 percent of the world's proven oil reserves. Last month, they signed a protocol with South Yemen for economic and technical cooperation in petroleum production, and Soviet trade delegations have been sighted elsewhere in the Gulf. In the past couple of years, Soviet efforts to reestablish diplomatic relations with Saudi Arabia have been positively feverish. It may not be unreasonable to suggest that the Soviet withdrawal from Afghanistan and the effort to mend relations with Iran are related to Middle East oil. Indeed, the Soviet offer to lease and reflag ships to Kuwait may have been partly motivated by a desire to habituate the countries of the area to the sight of the hammer and sickle on the stern of oil tankers. THE point is that the Soviet Union has every ``business'' to be in the Middle East. It has, in fact, the same direct stake in the stability and prosperity of the region that Japan, Europe, and the United States have. They need a reliable source of oil. The dilemma for the Russians, however, is: How are they going to pay for it? Fuel exports generate much of the Soviets' precious foreign-currency reserves. When energy is being imported rather than exported, where will they get the billions in hard currency needed to pay the oil bill?

In the next few years, the Soviet Union will be strongly tempted to trade arms for Middle East oil. Advanced arms. And on a scale that beggars what we have seen in the past.

The question is, will this be done in the context of an acceleration of the ongoing arms race in the region, with the US providing more and better weapons to the Israelis, and the Soviets doing the same for the Arabs? Or will the Bush administration do the wise thing and co-opt the Soviets into the peace process, and thus provide a framework within which the arms race can be controlled and moderated?

For reasons that have little to do with the substantive issues of the Arab-Israeli conflict, and a great deal to do with internal developments in the Soviet Union, the Soviets are likely to be working very hard in the coming months and years to extend their influence in the Middle East. American official attitudes toward the Soviet role in the resolution of that conflict may in large part determine whether that influence is one for good, or for ``evil.''

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