CONCLUSION
There was nothing unique about what happened to the Soviet petroleum industry prior to the Second World War. Many of the trends and practices had already been established in the pre-revolutionary years and, as we shall see, would be repeated after the Second World War ended. For that reason it is worth summarizing what happened so that in the pages ahead we can more easily note the similarities when they recur.
To sum up, foreign help was very important to the Russian petroleum industry prior to the revolution as well as before the Second World War. That includes technological assistance at the drilling, extracting, and refining stages. Nor did the Soviets refrain from seeking foreign help to facilitate the foreign marketing of their petroleum. Often that meant selling to companies like Standard Oil or Shell so they could do the distributing. In other instances, it meant joining together with a Western company to form a joint Russian-local venture not only to handle wholesale distribution overseas but also on occasion to operate retail filling stations abroad as well. The concept of trading with multinational and notorious capitalist enterprises or even creating their own multinational network evidently posed no ideological hurdle for the Soviets. Nor, for that matter, was politics much of a barrier. The Soviets abandoned their previous party line and agreed to sell their petroleum to Mussolini’s fascists and Hitler’s Nazis, even when decency, if not self-interest, should have precluded such action. The politics of ideology was seldom allowed to stand in the way of the principle of profit.
One justification for seeking foreign help was the Soviets’ periodic fear that their reserves might run out and that they were utilizing their output ineffectively. They expressed the same fears prior to the revolution, and—as we shall see—this would recur in later eras. Increased production was essential, not only because of the need to supply domestic demand but also because of the role petroleum played as an earner of foreign currency. At its peak, in 1932, petroleum accounted for 18 percent of foreign earnings. That depression year also saw the Soviet Union export more petroleum than did the United States and probably more than anyone else in the world. But to export that much, the Soviet Union had to divert 29 percent of its crude oil production from domestic use within Russia, a level not reached again until 1976.
Petroleum is indeed important as an exportable commodity, but its importance depends not only on Russia’s ability to pump oil but on prices in the world market. When crude oil prices fall, the impact on the whole Russian economy can be serious as it was in the 1930s and would be in the 1980s and 1990s. Conversely, when energy prices are high, Russia finds itself with unprecedented power. Prior to 1973, while it needed the earnings from petroleum exports to pay for its imports, the world still regarded the Soviet Union as a spoiler, a price discounter, willing if not eager to cut petroleum prices and unsettle the capitalist oil companies. After 1973, the Yom Kippur War, and the resulting Arab oil embargo, the Soviets switched tactics and, more often than not, they sought to sustain prices at a level as high as possible to enhance the country’s earning power. Profits, not politics, became the priority.
2
World War II to 1987:
Russia Looks Inward and Outward
To Hitler, Russia stood for wheat and petroleum, but Hitler’s information was at least partially dated. Once under Soviet control Russia’s grain surpluses diminished rapidly. Whereas pre-revolutionary Russia had exported 9 million tons of wheat in 1913, the most the Soviets could muster prior to the Second World War was 5 million tons in 1931, and to do that they had to starve their own people.1
But if the breadbasket of Europe was not as full as it once was, the oil wells were pumping and as attractive as ever. One of Hitler’s highest priorities was to capture the Baku fields. Although German troops did not quite reach Baku, they did attack the Grozny fields in Chechnia in the north Caucasus. Even there, however, by the time the Soviet troops were forced to retreat, the oil fields were so badly damaged that Hitler was unable to derive much benefit from them. But in the process, Hitler did manage to deny their use to the Soviets. Moreover, the Germans disrupted supply routes from Baku to the north so that the Soviets had a hard time maintaining their fuel supply. The USSR was helped to some extent by Lend-Lease oil shipments of 2.7 million tons of petroleum from the United States. Nevertheless, by the time the war ended, many Soviet oil fields had been badly damaged, so that in 1946 Soviet oil production had fallen to 22 million tons, down 30 percent from the 1940 peak of 31 million tons.2
THE VOLGA-URAL REGION
To expedite the postwar reconstruction of both the fields and the refineries, the Soviet government swallowed its pride and once again sought foreign help. They also confiscated $1 million worth of oil field equipment from Romania as a form of war reparation.3 Most of the Soviet effort was directed at reconstituting and expanding the traditional Baku area, but gradually they moved north toward the meagerly developed Volga-Ural region. Although exploration in the newer area predates the revolution, no oil was found there until 1929.4 Even then not much happened, and when the Second World War started annual output was not quite 2 million tons a year. Some major finds were made in the Volga-Ural’s Devonian geological level deposits during the war in 1944, but serious drilling work began only in 1955.5 Despite considerable drilling effort, because of the wartime damage, output in Azerbaijan in the Soviet era, especially Baku, never fully recovered. Even in 1966, the postwar peak, Soviet oil producers were unable to equal the 22.2 million tons pumped in Azerbaijan in 1940. (After the collapse of the USSR, Western companies were brought in by the government of Azerbaijan and production soon surpassed earlier output.) Fortunately as more and more new fields were discovered in the VolgaUral region, output there rose rapidly and that area soon outproduced Azerbaijan. As a result, by 1949, total output in the USSR surpassed the previous level of production (see Table 2.1).
Overall output in the Volga-Ural region continued to increase until about 1970. This included the field at Romashkino in the Tatar ASSR (Autonomous Soviet Socialist Republic). For some time this field was thought to hold the largest crude oil deposits in the world. But after 1965 the rate of increase in output per well in this region began to fall sharply.6 The response was to seek some way to enhance “secondary recovery.” As in many other parts of the world, the initial solution was to inject water into the wells to restore the pressure needed to facilitate the extraction of petroleum. But water injection was only partially successful. Occasionally it made matters worse. For a time the extra water worked and increased the petroleum yield from the well, but the Russians typically injected too much water; as a result, it often became more difficult than necessary to extract the petroleum the water was intended to flush out. Special pumps were required, and before long the workers often found themselves pumping out more water than oil.
While Soviet petroleum engineering was often very effective, there were other more advanced procedures that could have been used; but because Soviet authorities restricted contact between their technicians and foreign specialists, many production methods used in the West were not familiar or were unavailable to Soviet petroleum technicians. Moreover, even when such knowledge was available, the Ministry of the Petroleum Industry lacked the authorization to import the necessary equipment. The purchase of foreign equipment had to be approved by Gosplan, the Central Planning Agency, and foreign currency for the purchase had to be set aside by the Ministry of Foreign Trade and the Ministry of Finance. Even then, because Soviet authorities did their best to prevent onsite visits by foreign specialists, the manufacturers of that equipment could not always demonstrate how to use it properly. Thus much of what the USSR imported at the time served no useful purpose. Moreover, during the Cold War, U.S. authorities did all they could to embargo the export of advanced equipment and technology that the Soviets needed for enhanced recovery.