Jeronim Perović (Eds.) - Cold War Energy - A Transnational History of Soviet Oil and Gas-Palgrave Macmillan (2017)

Edited by Jeronim Perovic
Cold War Energy

Jeronim Perović
Editor
Cold War Energy

A Transnational History of Soviet Oil and Gas
Editor
Jeronim Perović
Department of History
University of Zurich
Zurich, Switzerland
ISBN 978-3-319-49531-6 ISBN 978-3-319-49532-3 (eBook)

DOI 10.1007/978-3-319-49532-3
Library of Congress Control Number: 2017930572
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PREFACE BY THE EDITOR
The history of the Cold War remains incomplete without taking into
consideration the role of Soviet energy, in particular in relation to oil and
natural gas. The various Soviet campaigns to extract natural resources in
ever-larger quantities were means to support the needs of the country’s
military as well as its energy-intensive economy. However, Soviet energy
exports also served as an important tool in Moscow’s project to integrate
the socialist states of Eastern Europe into a single economic space. With
regard to the states of the capitalist West, Soviet energy export largely served
the purpose of gaining access to technology and hard currency. While the
growing share of “red” oil and gas in European energy consumption was
viewed with suspicion in the West, Moscow too had reservations about the
prospect of the Soviet Union becoming increasingly dependent on for-
eigners for technology inputs and hard currency. During the period of
détente in the 1970s, however, trade in energy was to become the main
driver of Soviet–West European economic cooperation, eventually evolving
into the kind of East–West energy interdependence that determines rela-
tions between Russia and Europe to this day.
If anything, the Soviet Union was a rather reluctant energy power.
Considering only official statistics, the story of Soviet energy is one of
success, as oil and gas extraction and export figures rose year by year,
making the Soviet Union one of the world’s leading international energy
powers. But in actual politics, the issue of energy was more often a burden
rather than an asset. The image portrayed in the West during the Cold War
about the Soviet Union trying to use energy as a political weapon, as a way
v
vi PREFACE BY THE EDITOR
to tighten its grip over its Eastern European allies and counter American
influence in Western Europe, is at least partly misleading and in need of
revision. Also, the view that Soviet energy policy was generally driven by an
expansionist geopolitical agenda ignores the fact that the Soviet Union
repeatedly faced domestic energy shortages, and Moscow saw cooperation
with Western companies and states as a way to overcome internal economic
problems. In East–West relations, Soviet energy was at times a cause of
tension and confrontation, but much more often a political “softener.” The
Iron Curtain was a dividing line between East and West, but nowhere was
this curtain more porous than in the domain of energy flows.
This book takes a fresh look at international relations during the Cold
War, challenging some of the long-standing assumptions of East–West bloc
relations, as well as shedding new light on relations within the blocs regard-
ing the issue of energy. By bringing together a range of junior and senior
historians and specialists from Europe, Russia and the US, this book repre-
sents a pioneering endeavour to approach the role of Soviet energy during
the Cold War in a comprehensive manner, putting it into a transnational
perspective.
The research for this volume was originally undertaken for a conference
titled “Oil, Gas and Pipelines: New Perspectives on the Role of Soviet Energy
During the Cold War.” This event, which took place at the University of
Zurich on January 14–16, 2015, was organized by Jeronim Perović together
with Dunja Krempin and Felix Rehschuh from the Department of History of
the University of Zurich, and was financed by the Swiss National Science
Foundation (SNSF) and the Hochschulstiftung of the University of Zurich.
This book contains a selection of papers, which were first presented at this
international conference. The authors revised their papers based on discus-
sions during the conference, the editors’ comments and the inputs provided
by an anonymous reviewer.
The editor would like, in particular, to thank all participants of the confer-
ence who provided useful comments to the authors in preparing the resultant
chapters. They were Margarita Balmaceda, Alain Beltran, Elisabetta Bini,
Nada Boškovska, Roberto Cantoni, Nataliia Egorova, Falk Flade, Rüdiger
Graf, Jussi Hanhimäki, Per H€ogselius, Niklas Jensen-Eriksen, Suvi Kansikas,
Galina Koleva, Dunja Krempin, Giacomo Luciani, Lorenz Lüthi, Viacheslav
Nekrasov, David Painter, Tanja Penter, Felix Rehschuh, Oscar Sanchez-
Sibony, Benjamin Schenk, Hans-Henning Schr€oder, Andreas Wenger, and
Jean-Pierre Williot.
PREFACE BY THE EDITOR vii
The editor would like to thank Dunja Krempin and Felix Rehschuh for
their help in organizing this conference, and Felix Frey, Regina Klaus, Tom
Koritschan, and Markus Mirschel for their logistical support during the event.
Christopher Findlay and Tom Koritschan provided valuable help in the prep-
aration of this book. The editor would also like to thank Molly Beck,
Dhanalakshmi Jayavel, and Oliver Dyer at Palgrave Macmillan for their sup-
port during the publication process.
September 2016 Jeronim Perović

CONTENTS
The Soviet Union’s Rise as an International Energy

Power: A Short History 1
Jeronim Perović
The Bolsheviks’ Attitude Toward Oil 4
Oil in Wartime 7
The Politics of Oil Trade 9
The Soviet “Oil Offensive” 11
The Oil Shock of 1973/74 and Moscow’s Charm Offensive 14
Implications of the Soviet “Energy Crisis” for Eastern Europe 19
The Iranian Revolution and the Building of the “World’s Biggest
Pipeline” 22
“Siberian Might” and Gas for Europe 24
Structure and Overview of the Present Volume 27
Part I From World War to Cold War: Soviet Oil and Western
Reactions 45
From Crisis to Plenty: The Soviet “Oil Campaign” Under Stalin 47

Felix Rehschuh
Oil Politics and “Second Baku” in the Interwar Period 49
The Soviet Oil Complex and Its Eastern Parts During
World War II 54
ix
x CONTENTS
The Postwar Years 59

Conclusion 66
Stalin’s Oil Policy and the Iranian Crisis of 1945–1946 79

Nataliia Egorova
Introduction 79
Short Historical Overview 83
The USSR’s Growing Interest in Iranian Oil 84
The USSR Enters the Competition for Oil Resources 86
Kavtaradze’s Oil Mission in Iran 88
Continuing Soviet Struggles 90
The Development of the Iranian Crisis and the Oil Question 94
Consequences of the Iranian Crisis 97
“Red Oil” and Western Reactions: The Case of Britain 105

Niklas Jensen-Eriksen
Introduction 105
Soviet Oil Exports 107
“Patrons of the UK Oil Companies” 109
The First Round 110
The Soviets and the Board of Trade Attack 115
Dreams of an Oil Cartel 117
Oil for Ships 119
Conclusion 122
Debates at NATO and the EEC in Response to the Soviet “Oil

Offensive” in the Early 1960s 131
Roberto Cantoni
Introduction 131
The Soviet “Oil Offensive” and Western Reactions 134
The Soviet Oil Threat at the EEC 137
A Dangerous Friendship 140
Troubles of a Special Relationship 144
Conclusion 149
CONTENTS xi
Part II From Cold War to Détente: Soviet Energy and the

Expansion of East–West Trade 163
Decision-Making in the Soviet Energy Sector in Post-Stalinist

Times: The Failure of Khrushchev’s Economic Modernization
Strategy 165
Viacheslav Nekrasov
Introduction 165
Genesis of and Rationale Behind Khrushchev’s “Petrochemical
Project” 167
The “Petrochemical Project:” High Ambitions and Initial Success 170
Gosplan, Interest Groups, and the Crisis of the “Petrochemical
Project” 172
The “Gas Pause” in the Soviet Economy (1963–1964) 176
Khrushchev’s Attempt at Reconstructing His “Petrochemical Project”
(1962–1964) 178
The Export of Oil and Gas: Potentials and Problems 181
Khrushchev’s Opposition to an Accelerated Construction of Oil
and Gas Pipelines (1963–1964) 188
Conclusion 190
A Challenge to Cold War Energy Politics? The US and Italy’s

Relations with the Soviet Union, 1958–1969 201
Elisabetta Bini
Italy’s Challenge to the “Seven Sisters” 203
ENI’s Contracts with the Soviet Union 207
US Reactions to ENI’s Agreements 210
Between Bipolarism and Détente 217
Conclusion 222
Gaz de France and Soviet Natural Gas: Balancing Technological

Constraints with Political Considerations, 1950s to 1980s 231
Alain Beltran and Jean-Pierre Williot
From Technical Partnership to the Emergence of Real Interest
in Soviet Gas (1956–1969) 233
The French Gas Sector Considers Soviet Contracts as a Source
of Supply (1969–1979) 236
xii CONTENTS
Toward a New Gas Contract Between France and the USSR 241
Conclusion 246
Rise of Western Siberia and the Soviet–West German Energy

Relationship During the 1970s 253
Dunja Krempin
Introduction 253
An “Early” Siberian Strategy 254
A Soviet–German Partnership Emerges 257
The USSR Reaches Out 262
Efficiency Problems and the Soviet International Rollback 265
The “Siberian Campaign” Starts 267
The “Deal of the Century” 269
Conclusion 272
From Linkage to Economic Warfare: Energy, Soviet–American

Relations, and the End of the Cold War 283
David S. Painter
Oil and Soviet Power 285
Soviet Oil and US Policy 286
The Reagan Administration and the Siberian Natural Gas Pipeline 290
Developments on the World Oil Market 297
The Third Oil Shock and the Soviet Union 298
US Energy Policy and the End of the Cold War 302
Part III From Crisis to Collapse: Soviet Energy

and the Burden of Empire 319
Creating a Common Energy Space: The Building

of the Druzhba Oil Pipeline 321
Falk Flade
Introduction 321
The Soviet Economy After Stalin’s Death 323
CONTENTS xiii
Planning the Pipeline: The CMEA as a Communication Platform 325

Constructing the “Oil Artery” 328
Western Obstruction 331
Extending the Pipeline 334
Conclusion 337
Calculating the Burden of Empire: Soviet Oil, East–West Trade,

and the End of the Socialist Bloc 345
Suvi Kansikas
Introduction 345
CMEA Pricing and Soviet Discontent 348
EC Protectionism Creates Pressures 350
CMEA Integration: A Threat and a Possibility 353
The Soviets Push for a Change in CMEA Pricing 354
The Debt Problem, Perestroika and the Collapse of CMEA Trade 358
Conclusion 361
Drifting Apart: Soviet Energy and the Cohesion

of the Communist Bloc in the 1970s and 1980s 371
Lorenz M. Lüthi
Introduction 371
The Energy Industry in the CMEA 373
The Unfolding of the CMEA’s Energy Crisis, 1964–1981 374
Gas as a Solution to the Energy Crisis 375
Nuclear Energy and the Integration of the Electricity Grid as a
Solution to the Energy Crisis 378
The Energy Crisis and the Polish Crisis of 1981 380
The Polish Crisis, Energy Shortages, and the Debt Question 383
The Disintegration of CMEA in the 1980s 385
Conclusion 389
The Fall of the Soviet Union and the Legacies of Energy

Dependencies in Eastern Europe 401
Margarita M. Balmaceda
The Soviet–CMEA Energy Relationship: Essential Features
and Patterns 402
Legacies for Russia 405
xiv CONTENTS
Legacies for the Former CMEA States 407

Legacies for the Energy-Dependent Post-Soviet States 410
Conclusion 415
Index 421
LIST OF CONTRIBUTORS
Margarita M. Balmaceda (PhD, Princeton University) is Professor of

Diplomacy and International Relations at Seton Hall University and
Research Associate at the Harvard Ukrainian Research Institute. A specialist
on the political economy of the post-Soviet states, she is the author of,
among others, Energy Dependency, Politics and Corruption in the Former
Soviet Union (London: Routledge, 2008), The Politics of Energy Depen-
dency: Ukraine, Belarus and Lithuania Between Domestic Oligarchs and
Russian Pressure (Toronto: University of Toronto Press, 2013), and Living
the High Life in Minsk: Russian Energy Rents, Domestic Populism and
Belarus’ Impending Crisis (Budapest: Central European University Press,
2014). Under a Marie Curie Fellowship from the EU and fellowships from
Fulbright, Alexander von Humboldt and other foundations, she has
conducted extensive field research in Russia, Ukraine, Belarus, Lithuania,
and Moldova on the links between energy policies and political
development.
Alain Beltran is Director of Research at the Centre National de la

Recherche Scientifique (CNRS) and a member of the IRICE unit shared
by the Paris-Sorbonne and Panthéon-Sorbonne universities. His research
interests include the history of energy since the end of the nineteenth
century, business history, developments in major public services, and inno-
vation. He is the author of numerous books, including Les routes du gaz
(with Jean-Pierre Williot, Paris: Le Cherche Midi, 2012), L’électricité dans
la région parisienne 1878/1946 (Paris: Editions Rive Droite, 2002) and La
xv
xvi LIST OF CONTRIBUTORS
Fée et la Servante: La société française face a l’électricité (XIX-XXème siècle)

(with Patrice Carré, Paris: Editions Belin, 1991). He is also the editor of Le
pétrole et la guerre: Oil and War (Brussels: P.I.E. Peter Lang, 2012), Oil
Producing Countries and Oil Companies: From the Nineteenth Century to
the Twenty-First Century (Brussels: Peter Lang, 2011), and A Comparative
History of National Oil Companies (Brussels: P.I.E. Lang, 2010).
Elisabetta Bini is Assistant Professor of Contemporary History at the

University of Naples Federico II. She is the author of Fueling the Cold
War: Oil, Development and Consumption in the Mediterranean, 1945–
1973 (forthcoming) and La potente benzina italiana: Guerra fredda
e consumi di massa tra Italia, Stati Uniti e Terzo mondo (1945–1973)
(Roma: Carocci, 2013). She is the editor of Working for Oil: Comparative
Social Histories of Labor in Petroleum (with T. Atabaki and K. Ehsani,
New York: Palgrave Macmillan, forthcoming), Oil Shock: The Crisis of
1973 and its Economic Legacy (with F. Romero and G. Garavini, London:
I.B. Tauris, 2016), and Nuclear Italy: An International History of Italian
Nuclear Policies during the Cold War (Trieste: EUT, 2017). Her articles/
chapters include: “Back to the Future: Changes in Energy Cultures and
Patterns of Consumption in the United States, 1979–1986”, in D. Basosi,
G. Garavini, M. Trentin, eds., Countershock/Counterrevolution: Energy and
Politics in the 1980s (London, I.B. Tauris, forthcoming), “Oil for the Free
World: U.S. Public Relations as Cultural Diplomacy in Postwar Italy,”
Ricerche di storia politica, 20, 1 (2017), “Fueling Modernization Across
the Atlantic: Oil and Development in ENI’s International Policies, 1950s–
1960s,” in A. Beltran, E. Boussière, G. Garavini, eds., Europe and Energy
from the 1960s to the 1980s (Brussels: Peter Lang, 2016), 41–59,
“A Transatlantic Shock: Italy’s Energy Policies between the Mediterranean
and the EEC, 1967–1974,” Historical Social Research 39, 4 (2014),
145–64, “Selling Gasoline With a Smile: Gas Station Attendants between
the United States, Italy and the Third World, 1955–1970,” International
Labor and Working-Class History 81, 1 (2012), 69–93.
Roberto Cantoni is a post-doctoral fellow at the Centre de Recherches

Internationales (Sciences Po Paris). He specializes in the history and soci-
ology of energy. He is the author of Oil Exploration, Diplomacy, and
Security in the Early Cold War: The Enemy Underground (New York/
London: Routledge, 2017) and the co-editor of a special issue of the journal
Afrique contemporaine on “Energy policies in Africa: What Future?” (with
Marta Musso, forthcoming). He has also conducted research on the societal
LIST OF CONTRIBUTORS xvii
impacts of shale gas developments in France and Poland in the 2010s. He

currently works on the politics of epistemic vulnerability in the nuclear age.
His articles on oil exploration in Cold War Algeria and on Soviet oil trade
have appeared in History and Technology and Technology and Culture.
In 2014 he won the Society for the History of Technology’s Levinson Prize.
Nataliia Egorova is Chief Researcher at the Institute of World History of

the Russian Academy of Sciences and Head of the Institute’s Center for
Cold War Studies. Her numerous articles (published in Russia and abroad)
are devoted to American isolationism, different aspects of Soviet foreign
policy since 1945, postwar European security, as well as the historiography
of the Cold War. She is the author of Isolationism and European policy,
1933–1941 (Moscow 1995, in Russian), Postwar US-Soviet Relations in
American Historiography (Moscow 1981, in Russian), People to People
Diplomacy in the Nuclear Age: The Partisans of Peace Movement and the
Issue of Disarmament, 1955–1965 (Moscow 2016, in Russian), and editor of
Multilateral Diplomacy in the Bipolar System of International Relations
(Moscow 2013, in Russian), The Cold War and the Policy of Détente:
Problems and Discussions (Moscow 2003, in Russian), and The Cold War,
1945–1963: Historical Retrospect (Moscow 1999, in Russian).
Falk Flade is a PhD student at the Center for Interdisciplinary Polish

Studies at the European University Viadrina in Frankfurt/Oder. He holds
a Master’s degree in Slavonic Studies, East European History, and Eco-
nomics, and specializes in the history of energy cooperation between Poland
and Russia with a focus on energy infrastructures.
Niklas Jensen-Eriksen is the Casimir Ehrnrooth Professor of Business

History at the University of Helsinki. He received two Master’s degrees
from the University of Helsinki (History and Political Science) as well as a
PhD from the London School of Economics and Political Science (Eco-
nomic History). He has written widely on cartels, business-government
relations, international political economy and the economic history of the
Cold War. His publications include Hitting Them Hard? Promoting British
Export Interests in Finland, 1957–1972 (Helsinki: The Finnish Society of
Sciences and Letters, 2006), “A Stab in the Back? The British Government,
the Paper Industry and the Nordic Threat, 1956–1972,” Contemporary
British History 22, 1 (2008), 1–21, “The First Wave of the Soviet Oil
Offensive: The Anglo-American Alliance and the Flow of ‘Red Oil’ to
Finland during the 1950s,” Business History 49, 3 (2007), 348–66,
xviii LIST OF CONTRIBUTORS
“Industrial Diplomacy and Economic Integration: The Origins of

all-European Paper Cartels, 1959–72,” Journal of Contemporary History
46, 1 (2011), 179–202, and “Lost at Sea: Finnish Government, Shipping
Companies and the United Nations Embargo against China during the
1950s,” Scandinavian Journal of History 38, 5 (2013), 568–89.
Suvi Kansikas is a post-doctoral researcher at the Network of European

Studies at the University of Helsinki. She specializes in the history of
European integration and the Cold War and is particularly focused on the
economic and political history of the socialist bloc and the Council for
Mutual Economic Assistance (CMEA). She earned her doctorate in Polit-
ical History in 2012 at the University of Helsinki. She is the author of
Socialist Countries Face the European Community: Soviet-Bloc Controversies
over East-West Trade (Frankfurt am Main: Peter Lang, 2014). Her other
recent publications include “Acknowledging Economic Realities: The
CMEA Policy Change vis-a-vis the European Community,” European
Review of History: Revue européenne d’histoire 21, 2 (2014), 311–28, and
“Room to Manoeuvre? National Interests and Coalition-Building in the
CMEA, 1969–1974”, in Sari Autio-Sarasmo and Katalin Miklóssy, eds.,
Reassessing Cold War Europe (Abingdon: Routledge, 2011), 193–209.
Dunja Krempin is a PhD student at the Department of History at the

University of Zurich. Her dissertation on the development of Western
Siberian oil and gas and the Soviet energy policy during Brezhnev’s leader-
ship is part of the research project “Energy and Power: A Cultural History
from the Early Soviet Period to Contemporary Russia” at the University of
Zurich, funded by the Swiss National Science Foundation (SNSF). She is
the author of “‘The Key is in Our Hands:’ Soviet Energy Strategy during
Détente and the Global Oil Crises of the 1970s,” Historical Social Research
39, 4 (2014), 113–44 (co-authored with Jeronim Perović).
Lorenz M. L€ uthi is an Associate Professor for the History of International

Relations at the Department of History and Classical Studies at McGill
University in Montreal, Canada. He is the author of The Sino-Soviet Split:
Cold War in the Communist World (Princeton, NJ: Princeton University
Press, 2008) and the editor of The Regional Cold Wars in Europe, East Asia,
and the Middle East: Connections and Turning Points (Stanford, CA:
Stanford University Press, 2015). He has published numerous articles on
China, Vietnam, India, Germany, and Non-Alignment during the Cold
LIST OF CONTRIBUTORS xix
War. He is currently working on a large book project, entitled A History of

the Cold War without the Superpowers: Asia, the Middle East, and Europe.
Viacheslav Nekrasov is Assistant Professor at the Laboratory of Institu-

tional and Economic Research at Surgut State Pedagogical University. His
research areas include the economic history of the USSR with a focus on
decision-making processes in Soviet economic planning and mega-projects,
especially in the energy sector. He is the author of The Oil and Gas Industry
of the USSR (from the mid-1950s to the second half of the 1960s): Economic
and Institutional Aspects of Development (together with O.N. Stafeev and
E.A. Khromov, Chanty-Mansiisk: Pobeda, 2012, in Russian) and “Gosplan
SSSR and the Nizhe-Obsky GES Project (1958–1963): Lobbying, Coali-
tion of Interests, and Opportunism,” in E. G. Iasin, ed., XIII April Inter-
national Scientific Conference on Problems of Economic Development, 4 vols.
(Moscow: Higher School of Economics, 2012, in Russian), vol. 1, 360–68.
David S. Painter teaches international history at Georgetown University

in Washington, DC. His research focuses on the history of US foreign
relations, the Cold War, and the international history of oil and world
power. His books include Oil and the American Century: The Political
Economy of US Foreign Oil Policy, 1941–1954 (Baltimore: Johns Hopkins
University Press, 1986), The Cold War: An International History (London:
Routledge, 1999), and Origins of the Cold War: An International History
(co-edited with Melvyn P. Leffler, London: Routledge, 1994 and 2005).
His articles and essays on US foreign relations, the Cold War, and interna-
tional oil politics have appeared in the Cambridge History of the Cold War,
Journal of American History, Diplomatic History, Business History Review,
Cold War History, Reviews in American History, Historical Social Research,
Daedalus, Encyclopedia of American Foreign Policy, Encyclopedia of US
Foreign Relations, Oxford Companion to United States History, A Compan-
ion to post-1945 America, as well as edited works on the October 1973 War,
American Energy Policy in the 1970s, and War and the Environment.
Jeronim Perović is Professor of Eastern European History at the Depart-

ment of History of the University of Zurich. He specializes in the history of
Russia and the Soviet Union, as well as the Balkans. His articles on Soviet-
Yugoslav relations during the Cold War, Soviet and Russian energy policy,
Russian regionalism, and the history of the North Caucasus have appeared
in Journal of Contemporary History, Kritika, Journal of Cold War Studies,
xx LIST OF CONTRIBUTORS
Geopolitics, Demokratizatsiya, Jahrb€ ucher f€ur Geschichte Osteuropas, and

Osteuropa. He is the author of Der Nordkaukasus unter russischer
Herrschaft: Geschichte einer Vielv€ olkerregion zwischen Rebellion und
Anpassung (“The North Caucasus under Russian Rule: History of a
Multi-Ethnic Region between Rebellion and Adaptation,” K€oln: B€ohlau,
2015), Russian Energy Power and Foreign Relations: Implications for Con-
flict and Cooperation (co-edited with Andreas Wenger and Robert Orttung,
London: Routledge, 2009), Energy and the Transformation of Interna-
tional Relations: Toward a New Producer-Consumer Framework
(co-edited with Andreas Wenger and Robert Orttung, Oxford: Oxford
University Press, 2009), and Identities and Politics During the Putin Pres-
idency: The Foundations of Russia’s Stability (co-edited with Philipp Casula,
Stuttgart: Ibidem, 2009).
Felix Rehschuh is a PhD student in Eastern European History at the

Department of History of the University of Zurich. He is part of the
SNSF-funded project “Energy and Power: A Cultural History from
the Early Soviet Period to Contemporary Russia” at the University of
Zurich. In his dissertation, he investigates the changes and developments
of Soviet oil policy from the 1930s to the 1950s. His research interests
include Soviet and Russian energy history as well as current Russian energy
policy and Russian-European energy relations.
Jean-Pierre Williot is Professor for Contemporary History at the

Université François Rabelais in Tours, and Director of the university pro-
gram L’Équipe Alimentation (LÉA). His research interests include the
history of food and of innovation in alimentation, the history of the French
gas industry, and the history of railways. He is the author of numerous
books, including, in the field of energy history, Naissance d’un service
public: Le gaz a Paris au XIXe siècle (Paris: Editions Rive Droite, 1999).
He is also the editor of Les routes du gaz (with Alain Beltran, Paris: Le
Cherche Midi, 2012), Gaz: Deux siècles de culture gazière (with Alain
Beltran, Paris: Le Cherche Midi, 2009), L’industrie du gaz en Europe aux
XIXe et XXe siècles: L’innovation entre marchés privés et collectivités publiques
(with Serge Paquier, Bruxelles, Peter Lang, Euroclio, 2005), and Le Noir et
le Bleu, Quarante années d’histoire du Gaz de France (with Alain Beltran,
Paris: Belfond, 1992).
LIST OF ABBREVIATIONS
AAM Archivio Aldo Moro

AAN Archiwum Akt Nowych
AAPBD Akten zur Auswärtigen Politik der Bundesrepublik
Deutschland
ACS Archivio Centrale dello Stato
ADMAE Archives diplomatiques du Ministère des Affaires Étrangères
AFP CD American Foreign Policy: Current Documents
AGDF Archives of Gaz de France
AGIP Azienda Generale Italiana Petroli
AHTOTAL Archives historiques du Groupe Total
AIOC Anglo-Iranian Oil Company
AN Archives Nationales
ANIC Azienda Nazionale Idrogenazione Combustibili
APG Associated petroleum gas
ASENI Archivio storico ENI
ASMAE Archivio storico del Ministero degli affari esteri
AVPRF Arkhiv vneshnei politiki Rossiiskoi Federatsii (Foreign Policy
Archive of the Russian Federation)
BArch Bundesarchiv
bcm Billion cubic meters
BP British Petroleum
bpd Barrels per day
xxi
xxii LIST OF ABBREVIATIONS
BstU Bundesbeauftragte für die Unterlagen des

Staatssicherheitsdienstes der ehemaligen Deutschen
Demokratischen Republik (Federal Commissioner for the
Records of the State Security Service of the former German
Democratic Republic)
BT Board of Trade
BTU British thermal unit
CAB (British) Cabinet
CAMT Centre des Archives du Monde du Travail
CAP Common Agricultural Policy (of the European Community)
CC Central Committee (of the Communist Party)
CCP Common Commercial Policy (of the European Community)
CEE Central and Eastern Europe
CEEC Central and Eastern Europe Countries
CERI Centre des Recherches Internationales
CFP Compagnie française des pétroles
CIA Central Intelligence Agency
CMEA Council for Mutual Economic Assistance (also referred to as
Comecon)
CNRS Centre National de la Recherche Scientifique
CoCom Coordinating Committee on Multilateral Export Controls
Cominform Communist Information Bureau
CPSU Communist Party of the Soviet Union
CREST CIA Records Search Tool
CSCE Conference on Security and Cooperation in Europe
CWIHP Cold War International History Project
d. Delo (file)
DABA Deutsche Aussenhandelsbank (German Foreign Trade Bank)
DC Democrazia Cristiana (Christian Democratic Party)
DDEL Dwight D. Eisenhower Library
DIA Defense Intelligence Agency
DM Deutsche Mark
DPT Direction Production Transport
EC European Community
ECONAD NATO Committee of Economic Advisers
ECSC European Coal and Steel Community
EEC European Economic Community
EIA Energy Information Administration
ENI Ente Nazionale Idrocarburi
ESGC Economic Steering (General) Committee
EU European Union
EURATOM European Atomic Energy Community
f. Fond (fund)
LIST OF ABBREVIATIONS xxiii
FCC Fuel Coordination Committee

FIAT Fabbrica Italiana Automobili Torino
FO Foreign Office
FOIA Freedom of Information Act
FRG Federal Republic of Germany
FRUS Foreign Relations of the United States
GARF Gosudarstvennyi arkhiv Rossiiskoi Federatsii (State Archive of
the Russian Federation)
Gazprom Gazovaia promyshlennost’ (“Gas Industry,” in Soviet times
referring to the Gas Industry Ministry; since 1993 referring to
the Gazprom Joint Stock Company)
GDF Gaz de France
GDR German Democratic Republic
Giprotruboprovod Gosudarstvennyi institut po proektirovaniiu magistral’nykh
truboprovodov (State Institute for the Planning of Main
Pipelines)
GKO Gosudarstvennyj komitet oborony (State Defense
Committee)
Glavgaz Glavnoe upravlenie gazovoi promyshlennosti pri Sovete
Ministrov SSSR (Main Directorate of the Gas Industry at the
Council of Ministers of the USSR)
gm3 Cubic gigameter (one billion cubic meters)
Gosekonomsovet Gosudarstvennyi ekonomicheskii sovet (State Economic
Council)
Gosplan Gosudarstvennyi planovyi komitet (State Planning
Committee)
HMG Her/His Majesty’s Government
IBEC International Bank for Economic Cooperation
IEA International Energy Agency
IEMSS Institut ekonomiki mirovoi sotsialisticheskoi sistemy (Institute
for the World Socialist Economic System)
IIB International Investment Bank
IMF International Monetary Fund
IOP Interdepartmental Working Party on Oil Policy
IROM Industria Raffinazione Olii Minerali
ITMBM Italian Embassy in Moscow
JCL Jimmy Carter Library
JFKL John F. Kennedy Presidential Library
km Kilometer
km2 Square kilometer
KPdSU Kommunistische Partei der Sowjetunion (Communist Party
of the Soviet Union)
xxiv LIST OF ABBREVIATIONS
KPSS Kommunisticheskaia Partiia Sovetskogo Soiuza (Communist

Party of the Soviet Union)
kt Kilotons
kV Kilovolts
kWh Kilowatt hour
l. List (page)
ll. Listy (pages)
LATTS Laboratoire Techniques, Territoires et Sociétés
LÉA L’Équipe Alimentation
LNG Liquefied natural gas
LPG Liquefied petroleum gas
m3 Cubic meter
MAEF Ministère des Affaires Étrangères
MEGAL Mittel-Europäische Gasleitung
MFA Ministry of Foreign Affairs
MFN Most Favored Nation
mm Millimeter
Mtep Million tonne d’équivalent pétrole
MOP Ministry of Power
MW Megawatt (one million watt)
NAC North Atlantic Council
NAM Nederlandse Aardolie Maatschappij
NARA National Archives and Records Administration
Narkom Narodnyi komissar (People’s Commissar)
Narkomindel Narodnyi komissariat po inostrannym delam (People’s
Commissariat for Foreign Affairs)
Narkomneft’ Narodnyi komissariat neftiannoi promyshlennosti (People’s
Commissariat for the Oil Industry)
NATO North Atlantic Treaty Organization
NATOA Archives of the North Atlantic Treaty Organization
NEP New Economic Policy
NIOC National Iranian Oil Company
NSC National Security Council
NSW Non-Socialist World
OAPEC Organization of Arab Petroleum Exporting Countries
OCRS Organisation commune des régions sahariennes
OECD Organization for Economic Coordination and Development
OMV, ÖMV Österreichische Mineral€olverwaltung (abbreviated OMV
since 1994)
OPEC Organization of Petroleum Exporting Countries
op. Opis’ (inventory)
ORE Office of Records and Estimates
OSA Open Society Archive
LIST OF ABBREVIATIONS xxv
p. papka (folder)
PAAA-MfAA Politisches Archiv des Auswärtigen Amtes, Bestand des
Ministeriums für Auswärtige Angelegenheiten
PAAF IML Party Archive of the Armenian Branch of the Institute for
Marxism-Leninism of the Central Committee of the
Communist Party of the Soviet Union
POWE Records of the Ministry of Power (in the National Archives of
the UK)
PREM Prime Minister’s Office
RAN Rossiiskaia akademiia nauk (Russian Academy of Sciences)
RG Record Group
RGAE Rossiiskii gosudarstvennyi arkhiv ekonomiki (Russian State
Archive of the Economy)
RGANI Rossiiskii gosudarstvennyi arkhiv noveishei istorii (Russian
State Archive of Contemporary History)
RGASPI Rossiiskii gosudarstvennyi arkhiv sotsial’no-politicheskoi
istorii (Russian State Archive of Social and Political History)
RO Working Party on Russian Oil
RRL Ronald Reagan Library
RSFSR Russian Soviet Federative Socialist Republic
SAPMO-BArch Stiftung Archiv der Parteien und Massenorganisationen der
DDR im Bundesarchiv
SDECE Service de documentation extérieure et de contre-espionnage
SD State Department/Department of State (of the United States)
SHAPE Supreme Headquarters Allied Powers Europe
SNE Soiuznefteksport (Soviet Union’s oil export company)
SNK Sovet narodnykh komissarov (Council of People’s
Commissars)
SNSF Swiss National Science Foundation
SONJ Standard Oil of New Jersey
Sovnarkhoz Sovet narodnogo khoziaistva (Council of National Economy,
usually translated as Regional Economic Soviet)
SSR Soviet Socialist Republic
SSSR Soiuz Sovetskikh Sotsialisticheskikh Respublik (Union of
Soviet Socialist Republics)
SUR Soviet Union ruble
SUR/t Soviet Union ruble per ton
T Treasury
TAG Trans Austria Gasleitung
TAP Transalpine Pipeline
TCE Tons of oil equivalent
TNA The National Archives (of the United Kingdom)
TPES Total primary energy supply
xxvi LIST OF ABBREVIATIONS
TSK Tsentral’nyi komitet (Central Committee)

TSUSM Tsentral’noe Statisticheskoe Upravlenie pri Sovete Ministrov
UK United Kingdom
UN United Nations
US United States
USMBR US Embassy in Rome
USSR Union of Soviet Socialist Republics
VAC Value-added chain
VKP (b) Vsesoiuznaia Kommunisticheskaia Partiia (bol’shevikov)
(All-Union Communist Party (bolsheviks))
WAG West Austria Gasleitung
LIST OF FIGURES
Fig. 1 Map of existing and proposed Soviet pipelines (1960) 136

Fig. 1 France’s natural gas purchase 247
Fig. 2 French energy balance, 1990 (without exports, in Mtep: Million
tonne d‘équivalent pétrole/million tons of oil equivalent) 248
Fig. 3 Proposed priority axes for natural gas pipelines, December 2003 249
Fig. 1 The Druzhba pipeline in 1964 327
Fig. 1 The integrated 750-kv electricity net of the CMEA for 1990
(plan from 1976) 379
xxvii
LIST OF TABLES
Table 1 Capital investment in industry and transportation, 1952–1965

(in billion Soviet rubles, SUR) 171
Table 2 Development of the Soviet oil and gas industry, 1959–1963 175
Table 3 Fulfilment of the seven-year plan for the fuel and energy complex,
1958–1965 175
Table 4 Use of associated petroleum gas (APG), 1959–1962 177
Table 5 Efficiency of Soviet fuel exports in 1964 184
Table 6 Exports of petroleum and petroleum products from the USSR
(million tons) 185
Table 7 Production cost and capital investment for petroleum extraction,
1964 (SUR per ton) 186
Table 1 Oil imports from the Soviet Union (in 1000 tons) 324
Table 2 Crude oil scheduled for transportation in Druzhba pipeline
(in 1000 tons) 328
Table 3 Prediction of crude oil exports through the Druzhba pipeline,
1966 (in million tons) 335
xxix
The Soviet Union’s Rise as an International
Energy Power: A Short History
Jeronim Perović
In no other domain are Russia and Europe linked together as closely as in the
area of energy. Over the course of the twentieth century, energy flows between
East and West have overcome ideological barriers, wars, and sanctions. Soon
after the Bolsheviks seized power in 1917, they emulated the approach of their
Tsarist predecessors by exporting oil produced in the Caucasus to the capitalist
West in order to buy Western technology necessary for Soviet industrialization.
In the 1930s, a failed energy policy markedly decreased the Soviet Union’s
importance as an oil supplier to international markets. During World War II,
the Soviet Union even had to import fuel, particularly for aviation, from the
United States (US). Intensive efforts to develop new oil fields in the Volga-
Ural region re-established the Soviet Union’s significance on the European oil
market from the late 1950s onward.
In the frosty atmosphere of the early Cold War period, the Soviet “oil
offensive,” as it was sometimes called in the West, stirred fears of Moscow’s
growing influence over European affairs, prompting the North Atlantic
Treaty Organization (NATO) to advise its members to show restraint in
purchasing Soviet oil. In 1962, the Western Alliance even imposed an
embargo on the sale of steel pipes and pipeline technology to the Soviet
Union. Despite these measures, Western Europe’s imports of Soviet oil
increased steadily, and the embargo was lifted in 1966. Especially the global
J. Perović (*)
Department of History, University of Zurich, Zurich, Switzerland
© The Author(s) 2017 1

J. Perović (ed.), Cold War Energy,
DOI 10.1007/978-3-319-49532-3_1
2 J. PEROVIĆ
energy crises of the 1970s led many West European countries to perceive
energy supplies from the Soviet Union as more reliable than those from the
crises-ridden Middle East, allowing the Soviet Union to regain significance
as an exporter of oil, and increasingly also gas, to Europe. At that time, even
the US considered a proposal by Moscow to import Soviet gas, and several
US companies explored the option of becoming engaged in a large natural
gas project in Western Siberia.
While many in the West remained suspicious of the growing share of
Soviet oil and gas in European energy consumption, Moscow also had
reservations about the prospect of becoming too dependent on foreigners
for technology and markets. However, if Moscow wanted to meet the
growing energy demand at home, keep supplying its communist allies in
Eastern Europe, and continue to ship oil and gas in increasing volumes to
costumers in Western Europe and potentially also beyond, the Soviet Union
needed to boost domestic production. Faced with stagnating production in
existing fields and the prospect of a looming domestic energy crisis, it was
only in the late 1970s, however, that the Soviet leadership finally decided
to expand investments into energy-rich Western Siberia; apart from oil, the
Soviet Union also started to exploit the large natural gas fields in the
northern part of the Tiumen’ region. In exchange for credits, pipe steel,
and technology, some of Western Siberia’s gas was shipped directly to
Europe via a new export pipeline, marking the beginning of a historically
unprecedented expansion of energy relations and laying the foundations for
the Soviet Union’s rise to becoming Europe’s key energy supplier.
Despite the relevance of energy and Russia’s role as the most important
provider of oil and gas to Europe, surprisingly little research has thus far
been conducted on the historical trajectories leading to current interdepen-
dencies.1 While even newer studies on global aspects of the Cold War
generally have little to offer in terms of the role of energy,2 historians of
energy do not typically focus on the Cold War as such and largely exclude
the Soviet Union from their global oil histories.3 When Cold War historians
did address the energy issue, it has been nearly exclusively from a Western
perspective.4 However, no meaningful investigation of East–West energy
relations during the Cold War is possible without taking into account the
Soviet perspective. In particular, there is still very little research based on
new archival material on issues such as Soviet strategic thinking about the
development of the country’s oil and gas sector, the establishment of energy
relations within the Soviet-controlled Eastern European communist states,
or the various meanings that Soviet leaders have attached to energy as a
THE SOVIET UNION’S RISE AS AN INTERNATIONAL ENERGY POWER. . . 3
factor in their relations with Western Europe and the US. This book will
rectify some of these deficiencies.
After a brief analysis of the main trajectories in Soviet energy policy and
East–West relations from the early 1920s up to World War II, this essay
offers an overview of the Soviet Union’s rise as an international energy
power during the Cold War. It argues that Soviet decision-making in the
sphere of energy politics was influenced and conditioned by a complex
interplay of domestic, regional, and global factors: the Soviet Union
needed to produce energy in ever-larger quantities not only to fuel indus-
trialization and modernization, but also to sustain its ambitions as a great
power. The various Soviet oil and gas campaigns from Stalin to Brezhnev
were designed to support the needs of the country’s military and its energy-
intensive economy. During the Cold War, energy also served as an impor-
tant tool in Moscow’s project to integrate the socialist states of Eastern
Europe into a single “energy space” through the construction of an exten-
sive pipeline system. With regard to the capitalist states of the West, the
primary function of Soviet energy exports was to gain access to Western
technology and hard currency. This access enabled the Soviet Union not
only to finance its own energy development projects, but also to buy wheat,
and to compensate for the losses it made by providing East European allies
with energy below world market prices. Especially in smaller European
countries, such as Finland, or certain states of the Third World, energy
exports also served as a means of expanding Soviet political influence.
The Cold War certainly loomed large over each step of economic rap-
prochement between East and West, as concerns over the security implica-
tions of increased energy trade and the potential dangers resulting from
growing (inter-)dependencies repeatedly emerged in the political discourse
on both sides of the Iron Curtain. However, the story of the Soviet Union
becoming Europe’s key energy supplier is ultimately not one that followed
Cold War logic—if such a logic is understood as a competition between two
opposing political camps, each with its unique economic system and ideo-
logical belief. Rather, cooperation was ultimately driven by national eco-
nomic interests and the challenges presented by the larger regional and
global markets. If the Iron Curtain marked the symbolic—and also the
physical—line dividing East and West during the Cold War, the increasing
flow of energy through an expanding transportation infrastructure, accom-
panied by a growing amount of direct personal contact at all levels (from
engineers and scientists to ministers and heads of state), reveals a different
map of Europe. On this map, the border between East and West became
4 J. PEROVIĆ
increasingly blurred as the two parts became more and more interlinked
through shared economic interests and a common ambition to stabilize
political relations.
By tracing the long historical path leading to these transnational energy
linkages between the Soviet Union and Europe, this essay introduces some
of the key issues that will be addressed in detail in the individual chapters of
the present volume. It then presents the structure of the book, providing
short chapter summaries.5
THE BOLSHEVIKS’ ATTITUDE TOWARD OIL

The Bolsheviks were critical of the imperialists’ greed for raw materials.
However, they knew that their new state had little chance of surviving
without oil from the Caucasus, grain and coal from Ukraine, or cotton
from Turkestan. The Bolsheviks seized power in 1917 with the promise to
free the peoples of Russia from the colonial “yoke” of Tsarism. However,
when many non-Russian peoples started to invoke this right of self-
determination by opting to leave Russia, the Bolsheviks opposed the dismem-
berment of the former Tsarist Empire with every means at their disposal. The
Russian Civil War was not only a war over land and peoples; it was also a war
over resources. In the Caucasus, which was mainly inhabited by non-Russian
ethnic groups and responsible for over 97 percent of the former Russian
Empire’s oil production at the time, people were also fighting for access to
the oil fields around Groznyi and Baku.6 In an interview published in Pravda
on November 30, 1920, Iosif Stalin—at the time the People’s Commissar
(Narkom) for Nationality Affairs—was cited as saying that whoever con-
trolled the Caucasus controlled not only the country’s principal source of
raw materials and fuel, but also the trade and transportation routes between
Europe and Asia.7
Following the military conquest of the Caucasus by the Red Army, the
Bolsheviks nationalized the petroleum industry and expelled foreign entre-
preneurs from the country. By the beginning of the 1920s, however, the
revolution and the war had left their mark on the oil industry, which had to
get back on its feet as quickly as possible. Against stiff resistance from the
party, and even though he was never tired of denouncing the capitalists of
the West, Vladimir Lenin himself advocated the granting of concessions to
Western companies as an incentive for their return. At the party congress in
March 1921, Lenin appealed to fellow party members: “Without conces-
sions, we cannot hope to receive the benefits of advanced modern capitalist
technology. And without that technology, we cannot build the foundations

for our large-scale industry in sectors such as the extraction of petroleum,
which is of such extraordinary importance for the entire world economy.”8
The leader of the Russian Revolution, admitting that the new state was not
in a position to modernize with its own resources alone, strongly urged the
party members “not to make any written record” of his remarks as these were
not intended for the wider public.9 However, this emphasis on the impor-
tance of petroleum was not seen as a program for building the future of Soviet
Russia. Rather, the Bolsheviks viewed petroleum as a means to an end. Similar
to coal or peat, oil was to be used primarily as fuel for the industrialization of
the country. It also served to produce fuel for the automotive sector, whose
development had barely started, and for the aviation industry. Just as Russian
entrepreneurs had done during the Tsarist era, the Bolsheviks treated oil as an
export product to be shipped to the West—such as wheat or timber—in the
largest possible volumes in return for technology and foreign currency.
Exporting these resources meant access to the world market and the inflow
of “hundreds of millions of gold roubles,” as Lenin told the membership at
the above-mentioned party congress. Without them, the country would not
be able “to overtake advanced capitalism.”10
The drilling technology of the British firm Vickers and collaborations
with American and German structural engineers, for example, made a major
contribution to the rejuvenation and modernization of the Soviet petro-
leum industry in the Caucasus.11 By the end of the 1920s, Soviet oil
production exceeded the peak volume attained in 1901 in Tsarist times,
making the country again one of the world’s leading oil exporters.12 Simul-
taneously with the stabilization of the petroleum industry, the Bolshevist
regime started revoking the much-reviled concessions granted to foreign
companies and, again, forced them out of the country.13
To counter the growing Soviet supply of oil to world markets, Western
international energy companies, fearing to lose their dominant position,
attempted to impose a blockade. But these attempts were effectively coun-
tered by the Bolsheviks’ significantly lower prices. At the time, two-thirds of
Soviet oil was being purchased by five European countries: the United
Kingdom (UK), Italy, Germany, France, and Spain.14 By 1930, Soviet oil
represented approximately 15 percent of West European oil consumption.
In Germany, the ratio was approximately 20 percent, and in Italy it was as
high as 68 percent.15 Although some warned that the Soviet Union was, in
fact, preparing for a large-scale “oil offensive” by flooding the market with
6 J. PEROVIĆ
cheap energy to oust Western international companies,16 European gov-

ernments generally did not perceive “red oil” as a security risk. At the time,
the Soviet Union was even supplying oil to the British and French navies.17
Given the strategic importance attributed to oil by the Soviet leadership,
its members showed astonishingly little willingness to actually promote and
expand the sector in the long term. Admittedly, oil production had been
constantly increasing. By 1928, petroleum earnings already represented
14 percent of the Soviet Union’s total income in foreign currency.18 How-
ever, the petroleum sector was assigned significantly less importance than
other areas of the economy, such as the coal sector.19 Thus, while the share
of petroleum in total energy consumption in the Soviet Union rose by
8 percentage points, from approximately 11 percent in 1927/28 to approx-
imately 19 percent in 1937, the coal sector grew significantly faster; its share
in the energy mix increased by 18 percentage points from 30 percent to
47.7 percent over the same period.20 This growth was attributable not only
to the powerful coal lobby, but also to the low-priority economic planners
such as Gleb Krzhizhanovskii, head of the Soviet Union’s State Planning
Committee (Gosplan), attributed to oil in the development of the domestic
economy.21 There was a relatively widespread view at the time that petro-
leum would only have a transitory role as a resource for fuel production and
would soon be replaced by other energy carriers.22
Oil did not fit the image of modernity that the Bolsheviks were aiming for
in the early Soviet period. Rather, the development of electricity was placed
at the heart of energy policy within the bright future promised by Commu-
nism. It is telling that oil was not featured in Lenin’s famous dictum of
“Soviet power plus electrification of the entire country.”23 While electrifi-
cation would also be based on oil- and coal-fired generation plants, the
Bolsheviks were relying on the construction of large hydroelectric power
stations to an even greater degree.24 In the Bolsheviks’ worldview, hydro-
electric power plants were a much better symbol of the new Soviet era than
the oil well derricks in the petroleum-contaminated landscape around Baku.
Oil, which was also viewed as redolent of capitalism, was not the focus of
mobilization campaigns, such as those carried out for electrification, the
construction of hydroelectric power stations, or the mining of steel and coal.
Up until the outbreak of World War II, oil was barely featured in the official
propaganda of the new Soviet state.
OIL IN WARTIME
The consequences of this rather ambivalent attitude toward petroleum soon
made themselves felt. Not only did oil export earnings decline sharply at the
beginning of the 1930s following a dramatic fall in the price of oil due to the
international depression. In the beginning of 1932, even export volumes fell
because of the Soviet Union’s increasing domestic demand for oil. In 1940,
despite a poor harvest, the country earned more from sales of grain than of
oil.25 From what they had observed during World War I and from their own
experience in the Russian Civil War, the Bolsheviks were well aware that a
modern mechanized war could not be won without oil. In December 1925,
Stalin described the “petroleum question” as one of the “fundamental issues
for world powers,” which would ultimately lead to friction between impe-
rialist states.26 Two years later, in his political report to the Central Com-
mittee, he stated that it was not possible to wage war “without oil” and that
the “likely victors in the coming war” would be those who had “superiority
in terms of oil.”27 However, the Soviet leadership still did not translate that
awareness into any type of concrete strategy that placed oil at the center of a
new energy policy.
Whereas countries such as the UK, Germany, France, and the US had
begun the transition of their economies from coal to oil at the beginning of
the twentieth century and accelerated this conversion significantly during
World War I, the Soviet Union initiated this change only at the end of the
1930s. In light of increasing political tensions in Europe at this time, the
Soviet leaderships was concerned about a potential fuel shortage in the case
of war. An even bigger concern was that virtually the whole oil-producing
and -processing industry was concentrated in the Caucasus. If a foreign
power succeeded in conquering this exposed region, the Soviet Union
would be de facto cut off from its oil supply. While the Soviet leadership
had been aware of the presence of substantial deposits of petroleum in the
Volga-Ural region since the end of the 1920s, it made little effort to develop
these resources. Given the increasing apprehension about the possible
outbreak of war in the late 1930s, the focus was on boosting production
as fast as possible. In the short term, this could be achieved only by the
extraction of greater oil volumes in the Caucasus.
While Azneft’, the Soviet company operating in the area around Baku,
succeeded in increasing its production,28 the Soviet leadership was dis-
mayed by the dramatic decline in oil production from the fields in the
Groznyi region. The state oil company Grozneft’ represented 36.2 percent
8 J. PEROVIĆ
of total Soviet oil production in 1932, but by 1937, this figure had fallen to
22 percent.29 This decline was not acceptable to the party leadership, and in
spring 1940, it dismissed Fëdor Bykov, the First Secretary of the Commu-
nist Party of the Chechen-Ingush Republic. In his place, the Politburo
appointed Viktor Ivanov, who was in charge of the petroleum industry
within the Chechen-Ingush Party Bureau and thus had substantial experi-
ence. It was now his task to eliminate the problems in the republic and, in
particular, to get oil production back on track. Indeed, in mid-November
1940, he reported to the fourth plenum of the Chechen-Ingush Party
Bureau that the “malicious theory” alleging a shortage of oil in the Groznyi
region had already been rebutted by an increase in production. He claimed
that the oil-processing industry in and around Groznyi, which then
processed around one third of Soviet oil, had also stabilized its production
levels.30 That the oil production targets had been set too high from the
outset and could not be met simply because of the area’s geology (in fact, oil
production in the Groznyi region peaked at the start of the 1930s) was news
that the Soviet leadership did not wish to hear. Ultimately, however, noth-
ing could prevent the decline of Groznyi’s significance within Soviet oil
production over the subsequent years.
While the Soviet leadership’s awareness of the importance of petroleum
increased in the late 1930s, an actual shift in the energy policy paradigm
occurred only after Nazi Germany launched its attack on the Soviet Union
in June 1941. Once it became clear that one of Hitler’s aims was to cut off
the Soviet Union’s oil supply by conquering the Caucasus, Stalin ordered
entire plants to be dismantled and relocated to the Volga-Ural region. He
also ordered the move of approximately 10,000 petroleum workers from
the Caucasus region to the new production site for the fast-tracked devel-
opment of the new deposits.31 The Wehrmacht operation was a failure to
the extent that German troops did not gain control of the oil fields of
Groznyi and Baku and succeeded only in occupying the petroleum complex
at Maikop in Adygeia, which had largely been destroyed by the Soviet Army.
Because Stalin had ordered the precautionary dismantling of parts of the
facilities in Groznyi and Baku, including concreting over some drill holes
(which in some cases caused irreparable damage), and production east of the
Volga had not started up to the required extent, Soviet oil production
decreased by approximately one-third between 1940 and 1946.32 Despite
its proven major resources of fossil energy carriers, the country thus faced a
serious supply shortage during the war with Nazi Germany. Without fuel
deliveries from the US under the Lend-Lease Act, the Red Army would
have been severely restricted in deploying its mechanized units, particularly

its air force.33
The production increase changed the geography of Soviet oil produc-
tion: the Volga-Urals now became “Second Baku,” and the heightened
awareness of the economic and strategic military significance of oil also led
to a change in Moscow’s foreign policy approach in the immediate postwar
period.34 In 1946, the Soviet leadership, through covert warfare and polit-
ical pressure, not only attempted to secure concessions for the exploitation
of Iranian oil fields,35 but also seized the petroleum sector in Romania,
which was occupied by the Red Army. Romania was the second-largest oil
producer in Eastern Europe after the Soviet Union and had been the main
supplier of fuel to the German war machine.36 The Soviet Union also
temporarily took control of Austria’s oil production, which was substantial
at that time.37
On the domestic political front, oil now became part of large-scale
mobilization campaigns. The first propaganda posters calling for increased
oil production began to appear in 1941, which was around the time of the
outbreak of war with Nazi Germany.38 This reinterpretation of the status of
petroleum continued after the war. Oil was now elevated to the symbol of
general progress. In the early 1950s, oil also stood for a rising individual
standard of living, reflected in an (albeit very slow) increase in the number of
cars. Finally, the Soviet “oilman” (neftianik) was celebrated alongside the
established figures of the coal and steel worker as a symbol of the Soviet
“shock worker” and “hero of labor.”39
Oil also gained a new image in international trade: whereas as little fuss as
possible had been made of Soviet exports of oil products in the 1920s and
1930s, the Soviet Union now celebrated oil exports as a contribution to the
“beloved motherland,” in the words of a Soviet propaganda poster of 1950.40
Not only did this denote the expression of a new patriotic sentiment; it was
also the first time that the Soviet Union acknowledged oil as an integral
element of its image as an international great power.
THE POLITICS OF OIL TRADE

The accelerated development of the petroleum resources of the Volga-Ural
region meant that the decline in production from the Caucasus was suc-
cessfully offset by the end of the 1940s; it also ensured that, from the
mid-1950s, the Soviet Union was actually producing a surplus of oil,
which it was able to export in ever-increasing quantities. Another positive
10 J. PEROVIĆ
factor in the energy balance was that the Soviet Union was now able to
import oil and other raw materials not only from Romania and Austria, but
also from other East European countries, which at the time were still net
exporters of energy carriers. Only in the 1960s, with the expansion of energy-
intensive industries and through the construction of a vast export pipeline
system, did the countries of Eastern Europe become increasingly dependent
on Soviet oil and—later—gas imports.41
Soviet exports to the West were essentially directed at those countries
with which the Soviet Union had traded before the war. Italy, France, the
UK, and, following Stalin’s death in 1953, West Germany purchased oil
from the Soviet Union (although initially only in very modest quantities).
The main recipients at this stage were smaller countries, particularly Fin-
land, Sweden, and Ireland. In 1954, these three countries absorbed nearly
three-quarters of Soviet oil exports to non-communist countries.42 Over-
all, however, at the start of the 1950s, the volumes shipped to the large
European countries were too small to cause concern in the West, partic-
ularly because the Soviet leadership was anxious to present itself to its
major European customers as a reliable trading partner. Much like before
the war, the Soviet Union regarded these countries as important trading
partners and sources of hard currency income. The same did not neces-
sarily apply to the smaller European economies or the countries of the
Third World. In this case, the Soviet Union did not hesitate to use oil as a
political instrument, even as a means of exerting pressure, when the
Kremlin considered it opportune.
Oil could be highly effective as a means of political pressure in situations
of particularly high dependency. In the 1950s, for example, Finland
imported between 80 and 90 percent of its oil from the Soviet Union and
other socialist states in Eastern Europe.43 Finland, which shared a long
border and a bloody history with the Soviet Union, was interested in
good trade relationships to maintain good neighborly relations. The Finnish
government was even prepared to forego economic assistance from the
West to achieve this goal. When the Soviet Union curbed its oil exports in
1958 because it was unhappy with the composition of the new Finnish
government, the government in Helsinki decided to resign and form a new
administration. Rather than accepting the offer of economic assistance from
the US, and shipments of oil to Finland from Western energy companies
such as Shell, Finland opted to accommodate Soviet interests to achieve
better relations with its big neighbor to the east.44
Oil and politics also mixed in other parts of the world. After the exclusion
of the Yugoslav Communist Party from the Communist Information
Bureau (Cominform) in 1948, the Soviet Union imposed a blockade
against the country and resumed oil shipments only in 1954, following
the rapprochement between Khrushchev and Tito. Moscow also stopped
oil deliveries to Israel in 1956 after the Suez Crisis. In addition, the Soviet
Union interrupted oil exports to China, when Sino-Soviet relations hard-
ened in the early 1960s. Particularly in the Third World, where the Soviet
Union and the US continued the East–West conflict by vicarious means,
exports served as a weapon in the competition between the two political
systems. In the 1950s and 1960s, the Soviet Union thus supplied selected
Third World countries in Latin America, Africa, and Asia with oil and other
goods under favorable conditions and attempted to exploit this in propa-
ganda as a contribution to their “liberation” from the Western “colonial
powers.” At the same time, the Soviet Union had a measure of appeal as a
trading partner for many countries because, in contrast to the international
oil companies, it was prepared to conclude barter transactions. In the 1950s,
the Soviet partner exchanged oil for Egyptian cotton, Cuban sugar,
Uruguayan wool, and Israeli citrus fruits. Even with Finland, its most
significant European partner at the time, trade was mainly conducted
through exchanges of goods: the Finns supplied technology, ships, and
other finished products, and imported oil and other raw materials from
the Soviet Union.45
THE SOVIET “OIL OFFENSIVE”

From the mid-1950s onwards, Soiuznefteksport (SNE), the Soviet state-
owned oil export company, began to flood the European market with ever-
increasing amounts of cheap oil. Thus, the first Soviet “oil offensive,” as it
was often termed in Western discourse at the time, had started.46 By 1960,
the Soviet Union was producing more oil than Venezuela, bringing it into
the second position globally after the US.47 Exports also rose dramatically.
Whereas the Soviet Union exported a total of 3.7 million tons of oil in 1955,
it was a staggering 85.8 million tons in 1968. Approximately half of these
exports went to Western Europe.48 However, the quantities shipped to
Western Europe were still relatively modest, and the income earned by
the Soviet Union from sales of oil was too low to raise any question of
dependence, or even interdependence, in Soviet-West European energy
relations. Even in the case of Italy (which, in absolute volume terms, became
12 J. PEROVIĆ
the world’s largest purchaser of Soviet oil), Soviet oil represented only
16 percent of the country’s total oil consumption in 1959.49 Given the
high global surplus supply of oil at the time, European countries could have
easily switched to other suppliers in the event of difficulties with the Soviet
Union.
Still, from the late 1950s onwards, energy became a topic on the Western
political agenda. When the British government imposed an embargo on
imports of Soviet oil to the UK in 1959, it justified this decision with the
argument that the Soviets would use oil as a means to gain political advan-
tages. Yet British reports from the time show that this was not the main
motive. The government’s primary concern was protecting the economic
interests of domestic energy companies and keeping an unwelcome com-
petitor in the British market at a distance, particularly because the Soviet
Union was offering its products at much more favorable prices than Western
firms.50 Because Britain drew its oil supplies also from other sources at the
time (in the 1960s, the UK’s major suppliers included Saudi Arabia, Iran,
Kuwait and Libya), London was far from reluctant in 1961 to support a
secret recommendation from the NATO Council, which urged its members
“on their own responsibility to exercise caution and restraint in determining
the level of their oil imports from the Soviet bloc” in view of possible
political implications.51
The same British government was, however, less pleased when the US
strengthened its sanctions against the Soviet Union following the Berlin and
Cuba crises in 1961/62. In November 1962, Washington succeeded in
getting a secret resolution passed by the NATO Council designed to
prevent even those deliveries of large-diameter pipes to the Soviet Union
that had already been contractually agreed on.52 The aim was to torpedo
projects such as the Druzhba (“Friendship”) oil pipeline that was to trans-
port Soviet oil via the Soviet republics of Ukraine and Belorussia to Poland,
Hungary, Czechoslovakia, and the German Democratic Republic (GDR)
and, hence, to the borders of Western Europe.53 Because the provisions of
the resolution were left relatively vague, Italy and the UK refused to cancel
existing trade contracts with the Soviet Union. However, the boycott
proved to be of no strategic benefit. The oil pipeline was successfully
completed in 1964 without any major delay, not only because the Soviet
Union ramped up its own production of large-diameter pipes; companies in
non-NATO countries such as Sweden and Japan also jumped into the
breach in some cases. The major losers were West German steel companies,
which forfeited large orders for the supply of pipes to the Soviet Union
because of the boycott.54
The completion of the Druzhba oil pipeline also had impacts on energy
relations with individual West European countries, because Soviet crude oil
could now be transported to the West faster, cheaper, and in greater
quantities. Although the Federal Republic of Germany (FRG), for example,
nearly doubled its oil imports from the Soviet Union from 3.1 to 5.6 million
tons between 1965 and 1967,55 the share of Soviet oil in the country’s total
oil consumption was still less than 10 percent. Even in the case of Italy, still
remaining the largest European purchaser of Soviet petroleum, the share
did not exceed 20 percent.56 When NATO finally lifted the embargo on
pipe sales in November 1966, the debate in the West was no longer about
the possible risks for Western Europe created by “red oil.” Rather, this time
an increasing number of voices warned about a possible Soviet oil shortage
in the near future, caused by declining growth rates, increasing domestic
demand, and existing supply commitments to East European satellites.
Thus, many doubted the ability of the Soviet Union to maintain its exports
to the West at a high level in the coming years, much less to significantly
increase them.57
The exact state of the Soviet energy economy at the time could not be
determined with any degree of certainty, as Soviet statistics were thought to
be manipulated. The West had therefore to learn to observe the situation
and formulate assumptions. When the head of Gosplan, Nikolai Baibakov,
visited Iran in April 1967 to negotiate the import of Iranian oil and natural
gas in return for Soviet economic aid and technology, the British Foreign
Ministry interpreted this negotiation as an indication that the Soviet Union
was preparing for a domestic shortage of oil.58 More generally, in London,
and even more so in Washington, the prevailing view held that the Soviet
Union could be tempted to become more closely involved with oil-rich
states of the Middle East to solve its energy problems. For example, Central
Intelligence Agency (CIA) reports from the time repeatedly suggested that
in the event of a renewed outbreak of the Arab-Israeli conflict, as last
experienced in the region in June 1967, the Soviet Union might be tempted
to provide assistance to the Arabs and acquire greater influence over the
Arab oil sector in return.59
The Americans and British, who were not importing any Soviet oil,
naturally viewed the global energy situation differently than the Germans,
Italians, and French. As more and more producer countries in North Africa
and the Middle East were nationalizing their oil production and trade, the
14 J. PEROVIĆ
Western-controlled global energy companies started losing direct access to

petroleum sources—a trend that, London and Washington feared, would
undermine the security of Western energy supply. Whereas in 1952 the big
Western oil companies, the so-called “Seven Sisters,”60 still controlled
approximately 90 percent of total global oil trade, this proportion had fallen
to 75 percent by 1968.61 This controlling stake, again, declined sharply after
the energy crisis of 1973/74, which saw a further wave of nationalization of
production and trade.
For a long time, the Americans and the British perceived the Soviet
Union not as an energy power in the true sense, but rather as an adversary
and potential disruptive factor in their global oil interests. Little if any
attention was paid to the fact that in the second half of the 1960s, the
Soviet Union had started to develop new oil and natural gas reserves in
Western Siberia and Central Asia. In view of the large distances and harsh
climatic conditions in these areas, Western observers did not believe that the
Soviet Union would be able to offset the forecast decline in oil production
in the Volga-Ural region with gas and oil from other parts of the country
within the foreseeable future. They considered it more likely that Moscow
would attempt to gain more influence in the Middle East.62 This perception
persisted well into the 1970s. Not only did Western observers underesti-
mate the potential of West Siberia’s oil and gas, which became decisive
barely ten years later. In light of the large capital investment input required
and the uncertain prospects thereof, even the Soviet leadership remained,
for a long time, at odds about what role Siberian raw materials were to play
in the country’s future energy mix and exports.
THE OIL SHOCK OF 1973/74 AND MOSCOW’S

CHARM OFFENSIVE
In the early 1970s, the Europeans still did not seem to be greatly concerned
about their large reliance on Middle Eastern and North African oil. When
the US ambassador in the Netherlands, John William Middendorf, talked to
the German minister of defense, Helmut Schmidt, about the possibility of a
global energy crisis and the potential negative consequences for Europe at a
NATO meeting in The Hague in October 1970, the German minister was
surprised. Schmidt stated never to have been aware of such a risk.63 The fact
that Europe was sourcing approximately 80 percent of its oil from the
Middle East and North Africa and a further 7 percent from the Eastern
bloc at the time (that is to say, from “uncertain areas,” as the US ambassa-
dor emphasized), does not appear to have concerned Schmidt. NATO
Secretary General Manlio Brosio, an Italian, also found the ambassador’s
arguments less than convincing and asked whether this was truly a problem
for Europe or, rather, an issue for the Americans and the international oil
companies.64
Only three years later, as a result of the energy crisis of 1973/74,
Middendorf’s warning regarding Europe’s dependence on Arab oil proved
to be well founded. As a protest against the support given to Israel in the
Yom Kippur War in October 1973, the Organization of Arab Petroleum
Exporting States (OAPEC) curbed its production and ceased deliveries to
the US and the Netherlands. At the end of November, OAPEC added
Portugal, South Africa, and Rhodesia to the embargo list. This embargo,
which was lifted only in March 1974, led to a massive increase in prices and
supply shortages in numerous European countries. However, Middendorf’s
fear of the Soviet Union jeopardizing Europe’s energy supply did not
materialize. On the contrary, Soviet–West European energy relations had
become closer, and once the crisis of 1973/74 passed, Moscow was endeav-
oring to use the global oil scarcity as an opportunity for economic rap-
prochement, not only with the Europeans, but with the Americans as well.
At the time when Middendorf expressed his warning, the Europeans had
already embarked on a new chapter in their energy relations with the Soviet
Union, aimed at boosting the imports of both oil and natural gas. Austria
became the first European country to import Soviet gas in 1968. One year
later, Italy and the FRG commenced negotiations on Soviet gas imports. In
West Germany, the government, as part of its new Ostpolitik, adopted the
concept of “transformation through trade” (Wandel durch Handel).
Beyond increasing economic benefits, the intensified trade relationships
were to improve political relations as well.65 A milestone in this context
was the large German–Soviet barter deal concluded in February 1970. The
FRG supplied the Soviet Union with 2000 km of pipeline and, in return,
received Soviet natural gas. These pipelines were to be used to transport
Soviet gas from already developed fields of Western Siberia into the
European part of the country, through Czechoslovakia and up to the
West German border in Bavaria. From there, the gas was to be distributed
not only to Germany but also to France and toward Vienna and Milan. This
transaction, guaranteed with a loan from a consortium of German banks,
was to keep the German large-diameter pipe production plant of
Mannesmannr€ ohren-Werke GmbH in Mündelheim running at full capacity
16 J. PEROVIĆ
for two and a half years. It would also, in the words of the German news
magazine Der Spiegel, make up for the “rebuff” suffered by the German
steel industry following the embargo forced on its partners by the US at the
beginning of the 1960s.66
The geographical options for Soviet exports in the beginning of the
1970s were not confined to Europe. Soviet–American relations improved
after US President Richard Nixon initiated a policy of détente, which aimed
for increased trade relationships to facilitate East–West rapprochement. In
the early 1970s, it would have been quite possible for both the US and
Japan to join the list of recipients of Soviet gas. A particularly prominent
issue of Soviet–American trade negotiations was the so-called “North Star,”
a project for the construction of a pipeline from the large, but yet to be
developed, Urengoi gas field in the northern part of Western Siberia. Via a
pipeline of approximately 2400 km, the gas was to be transported near to
the Soviet sea port of Murmansk, where it would be liquefied and shipped
by tanker to the US. Another idea was to transport gas from Yakutsk in
Eastern Siberia to the Pacific coast, from where it would be shipped in liquid
form to Japan and the US West Coast.67
During a visit to the FRG in May 1973, Leonid Brezhnev, General
Secretary of the Communist Party of the Soviet Union (CPSU), was posi-
tively euphoric in discussions with his German business partners on the
question of energy relations and promised to use all his personal influence
to ensure the Soviet Union could meet the high demand for natural gas not
only of socialist countries, but also of Germany, Austria, France, and, above
all, the US. Just as he was convinced about the economic benefits of
cooperation, the Soviet leader hoped that closer energy relations would
make “people realize that the Soviet Union is not cutting itself off [from the
outside world].”68
Brezhnev’s assurances to personally advocate for this project are indica-
tive of the difficulties the development of Western Siberia contained. The
Soviet leadership had ordered the prospecting and development of Western
Siberia already in the mid-1960s, following the discovery of ever-larger oil
and gas reserves in the region. However, the development was proceeding
slowly, because the undertaking was much more complex and costly than
any of the Soviet energy projects to date. In addition, there was a wide-
spread perception among Soviet planners that a sustainable development of
Siberia required a far more comprehensive approach, which would go
beyond the mere extraction of raw materials. This included the construction
of an extensive infrastructure comprising dozens of new cities for workers
(and their families) of the petrochemical industry to allow some of the

production of raw materials to be processed locally or at least be made
usable for industry. Finally, as a particularly difficult technological challenge,
there was the question of how to transport the raw materials under Arctic
conditions across thousands of kilometers through the swamps of the
tundra and taiga.
It was to be expected that this major project would encounter strong
internal resistance because of the high costs, numerous risks, and uncer-
tainties that it involved. Baibakov, for example, one of the most influential
figures in the field of energy policy at the time, indicated serious doubts in
the mid-1960s about the project’s economic viability. He was also skeptical
of ideas proposing the construction of large export pipelines for gas trans-
port.69 While some groups opposing the development of Siberian raw
materials and the construction of pipelines feared a decline in capital invest-
ment in other regions and sectors, others were against the expansion of
economic ties with the capitalist West as this was considered strengthening
the ideological enemy. Accordingly, they warned against an excessive
dependence on Western foreign currency earnings. When the Soviet
Politburo discussed US President Nixon’s upcoming visit to the Soviet
Union in April 1972, Soviet Head of State Nikolai Podgornyi feared
that large-scale cooperation projects with the West made the Soviet Union
appear to be “planning to sell off the whole of Siberia” and technologically
helpless.70 Against this background, the West’s offer to solve the transportation
question by supplying pipes and, in the case of the “North Star” project, even
a fully constructed liquefaction plant and tanker vessels, provided Brezhnev
with policy arguments in the arm wrestle at home over the development
strategy for Western Siberia.
As the oil shortage was noticeable in all quarters and led to a boom in the
demand for gas, the crisis of 1973/74 served as a catalyst for Soviet–West
European energy relations. Gas was now viewed as a suitable substitute for
oil and for coal, the latter of which was still widely used. Although the Soviet
Union was not producing sufficient oil to fill the supply gap created by the
OAPEC boycott in the short term, the Europeans identified the large Soviet
raw material reserves as an opportunity to reduce their dependence on Arab
oil in the long term. With the world’s largest proven gas reserves, the Soviet
Union’s natural gas, alongside Dutch, Algerian, Libyan, and (later) Nor-
wegian gas, would indeed play an ever-increasing role in the European
energy mix during the 1970s and 1980s. In fact, it was the Arabs’ attitude
in the crisis of 1973/74 that finally made the Soviet Union appear as the
18 J. PEROVIĆ
lesser evil in the eyes of the Europeans in terms of the security of their
energy supply.
The Americans started from a rather different position. Because of their
own considerable fossil fuels production and oil imports, primarily from
Venezuela and Persian Gulf countries, they were not dependent on Soviet
energy, and Washington’s assessment of any possible energy cooperation
with the Soviet Union differed from the European view. Although Nixon
and his National Security Adviser, Henry Kissinger, viewed trade as a force
for improving political relations, the transactions also had to turn a profit.
Given the major investment of capital required for the implementation of
the “North Star” project, it was understandable that the Americans would
be less enthusiastic than the Soviets. The latter were dependent on Western
technology and loans for the development of Siberia, which made them
much more motivated to establish an energy partnership. This became
evident when Moscow attempted to use the 1973/74 crisis to build up
the level of confidence in Soviet-American relations required for the suc-
cessful implementation of such a large and long-term undertaking as the
“North Star” project.
The heated atmosphere of the Arab–Israeli confrontation, however,
required the Kremlin to operate extremely sensitive and balance all interests.
To keep the positive sentiments toward the Soviet Union in the Arab world,
Moscow continued to present itself as a protector of the Arabs. On
November 16, 1973, Radio Moscow hence justified the Arab boycott as a
“necessary measure of self-defense” to resist the “tanks and aircraft supplied
by the USA to Israel.”71 However, in its dealings with the US, Moscow
adopted a very different tone. In a radio broadcast for North America on the
same day, the commentator told listeners that “the energy crisis [could be]
overcome” if countries cooperated more closely with one another. He
argued for the removal of the “discriminatory measures” that continued
to obstruct trade between the US and the socialist states: “How can the US
expect to cope with its economic and energy problems when it refuses
countries rich in resources equal trade conditions?”72
The exact meaning of this had been made clear by Radio Moscow on
November 4, 1973. In a radio interview, Nikolai Nekrasov, member of the
Academy of Sciences responsible for the development of Siberia, said that the
day was approaching when “cold Siberia [would] light and heat New York,”
which was undisguised propaganda in favor of the American-Soviet gas
project.73
The Soviet charm offensive achieved little in the US. Washington did not
consider the Siberian gas project to be sufficiently profitable and showed
little enthusiasm about providing Moscow with credits. As Kissinger
explained in direct talks with Mao Zedong, the leader of the People’s
Republic of China, in November 1973: “Even if [the Soviets] were able
to produce the natural gas they have claimed, and there is still some dispute
about that, it would only amount to about five percent of our needs. And it
would take ten years to deliver. And within that ten-year period, we will
have developed domestic alternatives, including natural gas in America.
That makes it much less necessary, in fact probably unnecessary, to import
natural gas in quantities. [. . .] They want 8 billion dollars [in credits] just for
natural gas [development].”74
The Soviet offer also encountered major resistance in the US Congress
from political circles that, under the leadership of Senator Henry
M. Jackson, had from the outset argued against a more open US trade
policy toward the Soviet Union and denied the country Most Favored
Nation (MFN) status, which would have been a prerequisite to accessing
large credits.75 Finally, the deterioration in Soviet–American relations
beginning in the mid-1970s led to the definitive burial of all hopes for
implementing the energy projects. A Soviet–American energy partnership
was to remain a utopian dream, which also meant that, for the moment, the
vast potential of Siberia remained largely underused. Delays in the develop-
ment of the energy reserves of Siberia had serious consequences, in that in
the mid-1970s, there were increasing signs that the Soviet Union was,
indeed, heading toward a domestic energy crisis.
IMPLICATIONS OF THE SOVIET “ENERGY CRISIS”

FOR EASTERN EUROPE
The problems the Soviet Union was facing in the energy sector did not go
unnoticed by the CIA. Given the ever-declining growth in production in
the older fields in the Volga-Ural region and the partial development of the
fields of Western Siberia, the CIA predicted, in studies published in spring
1977, that by the mid-1980s, the Soviet Union would become a net
importer of fossil energy carriers.76
Indeed, problems in the Soviet energy sector were, at least since the
mid-1970s, real and tangible, particularly in their effect on Soviet energy
relations with Eastern Europe. Although most socialist members of the
20 J. PEROVIĆ
Council for Mutual Economic Assistance (CMEA, also referred to as

Comecon) were energy self-sufficient until the early 1960s, the buildup of
energy-intensive industries such as the petrochemical industry, actively
promoted under Nikita Khrushchev’s time as First Party Secretary, sharply
increased their dependency on Soviet raw material imports in the subse-
quent years.77 Even though Eastern Europe also imported some oil from
the Middle East (in part via the Soviet Union, which bought mostly
from Iraq, Libya, Algeria, and Egypt), the bulk was provided directly from
Soviet production. With the exception of Romania, which disposed of
significant reserves of liquid hydrocarbons and remained a net exporter of
oil until the end of the 1970s, an estimated 85 percent of oil required by
Eastern Europe was covered by Soviet production in 1970.78 The GDR,
Bulgaria, and Czechoslovakia became dependent on Soviet supplies for
more than 90 percent of their oil requirements.79
The global energy crisis of 1973/74 substantially aggravated Eastern
Europe’s energy supply situation. Pressed with the need to enhance oil
shipments to Western Europe, Moscow was increasingly less inclined to
support the economies of its East European allies with cheap energy. In the
aftermath of the global oil shock, Moscow even encouraged these states to
look for alternative sources in North Africa and the Middle East.80 Poland, for
example, which imported all of its oil from the Soviet Union, had started oil
import negotiations with Algeria, Iraq, and Iran even before the crisis. After
the Arab embargo, a Polish delegation visited Tripoli to look for additional
possibilities.81 Moreover, this was the time when several East European
countries started introducing conservation measures to save energy and
engaged in various regional energy cooperation projects.82 While the Soviet
Union ultimately stabilized its oil exports to Western Europe following the
Arab embargo, it did so in part at the expense of its allies in Eastern Europe.
According to Western estimates, they saw a cutback of Soviet oil supplies by
approximately one-third until the mid-1970s.83
Another important consequence of the global energy crisis of 1973/74
was the Soviet Union’s growing reluctance to continue delivering energy to
Eastern Europe for prices well below those of the world market. In 1975, it
revised the old formula from 1958, according to which the price for Soviet
oil was based on the average world market prices of the past five years, and
raised it to prices for the precedent year.84 Accordingly, if the Eastern
Europeans had paid 30.3 Soviet rubles (SUR; $28.4) per ton of oil in
1973, they paid 45.4 SUR ($60.4) in 1975.85
The Soviet leadership did not abandon its East European allies, as
maintaining and strengthening intra-bloc alliances remained a top political
priority for Moscow. But in confidential talks with leaders of other East
European socialist parties, Brezhnev was quite blunt in pointing out the
major investment problems his country was facing, including the challenge
of developing Siberian energy, and the inability to further subsidize its East
European allies. During a meeting with leaders of East European socialist
parties in Budapest in March 1975, including János Kádár from Hungary,
Edward Gierek from Poland, and Erich Honecker from the GDR, Brezhnev
made his point quite clear:
Today I came here, figuratively speaking, with empty pockets [. . .]. Naturally,
we are not refusing to continue to develop our cooperation. [But we] have to
state honestly that we are faced with a number of difficult problems [within
the Soviet Union]. Among them are the further improvement of the agricul-
ture, increase of production of oil, [natural] gas, and lumber, construction of
the Baikal-Amur railroad, obligations to the fraternal countries, and further
improvement of the living standards of the population. [. . .] In order to
transport [natural] gas from [Tiumen’] to the European part, to deliver it to
Bratislava or Budapest, we need huge financial and material resources. We do
not have enough pipes of our own, so we have to use currency to purchase
them abroad. [. . .] In short, there are many problems. We have thought
seriously about how to make our economy more profitable. So far, unfortu-
nately, the return of the investment has been decreasing.86
Eastern Europeans and Soviet citizens alike felt the impact of their country’s
“energy crisis” first hand. Concerned about remaining a trustworthy trading
partner, the Soviet leadership was determined to keep supplying its customers
in Western Europe with the contracted gas quantities even in harsh winters,
which meant it was prepared to deliver gas that was not actually available. The
gas supply to Soviet domestic consumers in the Ukrainian Soviet Socialist
Republic (SSR) was repeatedly cut back or even switched off altogether, so
that the West Europeans, who had no knowledge of the desperate state of
affairs in the East, would stay warm in their apartments.87 Naturally, the
Soviet media was careful not to write about such severe cutbacks; in the late
1970s; however, Soviet journals and newspapers repeatedly informed their
readers about the problems of energy production and the challenges of
developing Siberian energy.88
The Soviet energy complex did indeed enter a crisis in the mid-1970s;
yet, the CIA’s assessment ultimately proved to be incorrect. By the end of
22 J. PEROVIĆ
1977, the Soviet leadership finally ramped up its campaign for the develop-
ment of West Siberian energy, and natural gas in particular.89 In 1978,
production at Urengoi started, and at nearly the same time, the conditions
had been put in place for the construction of an export pipeline between
the new Siberian fields and Western Europe. An external event, the
Iranian Revolution of 1979, lent crucial momentum to the creation of
Soviet–European energy linkages.
THE IRANIAN REVOLUTION AND THE BUILDING

OF THE “WORLD’S B IGGEST PIPELINE”
When Brezhnev started his Siberian campaign at the end of the 1970s, the
region had long since become the Soviet Union’s most significant raw
materials production center. According to Soviet statistics, the Tiumen’
region in Western Siberia had emerged as the country’s largest oil producer
as early as 1974, and three years later, the region was also heading the
statistics for gas production.90 After the discovery of large gas fields, such as
Urengoi and Medvezhe, in the second half of the 1960s, the question was
not whether the region had sufficient fossil energy carriers, but whether
there was sufficient capital investment and manpower to develop these fields
within a reasonable period of time.
Although part of the gas produced was intended for export to Western
Europe, the main priority was supplying the domestic market. Furthermore,
the “gasification” of the country was designed to ensure sufficient oil reserves
for highly profitable sales abroad. Whereas the Soviet Union derived approx-
imately 20 percent of its foreign currency receipts from oil exports at the start
of the 1970s, higher world market prices and growing export volumes caused
this figure to rise to approximately 50 percent by the mid-1970s.91 However,
the Siberian natural reserves were so large, that part of the resource could be
freed up for export if the West was prepared to provide technical and financial
assistance. Once again, the FRG played a central role.
The FRG received Soviet gas via a pipeline through Czechoslovakia for the
first time in October 1973, and a year later, Italy started sourcing gas from
the Soviet Union via a pipeline through Austria. France imported gas from
the Soviet Union in 1976.92 During the 1970s, the countries that became the
main recipients of Soviet gas were hence essentially those that had previously
been the main customers of Soviet oil. As a result of continuing growth in
imported quantities, in 1978, Soviet gas already represented 10.7 percent of
France’s total consumption of natural gas. At the time, the equivalent figure
in West Germany was 15.9 percent, and in Italy as high as 29.5 percent.93
Given these numbers, it would thus certainly not be appropriate to speak of
there being a European dependency on Soviet natural gas or energy in
general, particularly because gas still represented only a very modest share
of the energy mix in these countries.94 This situation would only change after
the building of a large-scale pipeline used solely for exports of Siberian gas to
Europe.
The idea of building an export gas pipeline between Western Siberia and
Europe had been discussed in German–Soviet trade talks since 1977.95 By
spring 1978, the discussions had “not reached a stage” that would allow
conducting specific negotiations at the political level.96 The reason was the
FRG’s and Soviet Union’s preference for the idea of a tripartite transaction
with Iran, which had been under discussion since spring 1973. Under this
arrangement, Iran was to supply around ten billion cubic meters of gas to
the Soviet Union via a pipeline, and the Soviet Union would release the
same volume from its own production for Western Europe. The FRG was to
be the hub for the on-selling of the gas to other West European countries.97
The Soviet–Iranian pipeline was almost complete when the Shah was
toppled at the beginning of 1979 and the Islamic Republic of Iran was
declared. What the Europeans and Soviets initially perceived as a shock soon
proved to be an opportunity; the establishment of the Iranian Republic
brought the idea of a direct pipeline connection between Siberia and
Western Europe into the foreground, which essentially represented the
continuation and further extension of the project that had been discussed
with the Americans in the early 1970s. When the top leadership of the FRG
and Soviet Union met for talks in Moscow at the end of June and beginning
of July 1980, both Brezhnev and Prime Minister Aleksei Kosygin took the
opportunity to advocate for this project:
[Brezhnev:] [. . .] The reality of the situation is this: we have large reserves of

natural gas available, particularly in Western Siberia, and we would be ready to
increase our deliveries to the Federal Republic of Germany and other Western
countries. This would require the construction of a gas pipeline from northern
areas of Tiumen’ to the western border of the Soviet Union. If we built such a
pipeline, it would have to be a very big one; 40 billion cubic meters of natural
gas a year would have to flow through it, and we have included this project in
our plans for the coming years. If there is any interest in doing so, we will agree
on a collaboration for its implementation.98
24 J. PEROVIĆ
[Kosygin:] [. . .] The natural gas pipeline confronts us with major technical

and geological problems. As far as the natural gas reserves are concerned, they
are abundant. We are not building a pipeline for the short term. It will have to
remain in operation for 30 to 35 years. That is how long the resources last. It
will be the world’s biggest pipeline.99
For the Soviet Union, the natural gas pipeline deal, which was financed with
West European credit and details of which were negotiated through to
1983,100 was of major benefit: in return for natural gas, Western Europe
supplied the urgently needed steel pipes and other technical equipment.
The Soviet Union had already carried out similar projects with Western
involvement, such as the 2750 km Soiuz (“Union”) gas pipeline
constructed between 1975 and 1978 as an international partnership. That
gas pipeline, which ran from Orenburg in the South Urals to Uzhgorod on
the Ukrainian–Slovak border (from where it continued as the Transgas
pipeline through Eastern Europe to Central and Western Europe), had
also been financed with Western loans. The construction of some sections
of the route involved manpower from natural gas-importing countries
(Bulgaria, the GDR, Poland, Czechoslovakia, and Hungary).101
“SIBERIAN MIGHT” AND GAS FOR EUROPE

From the Soviet perspective, the development of West Siberian energy, and
particularly gas, was much more than an economic project. It also had an
important domestic political and social function. In the context of economic
stagnation and serious social shortcomings, the Siberian campaign,
conducted with a considerable propaganda effort, was designed to impress
upon the population the undiminished potency and dynamism of the
communist project.102 Soviet posters portrayed the development of Siberia
as the embodiment of Soviet “might” (razmakh) and fresh beginnings.103
Brezhnev regarded the campaign as a personal prestige project. In addition
to lobbying for it in talks with his West European negotiating partners, he
and other high-ranking party officials travelled to Siberia to plead the case
for the project. Brezhnev repeatedly spoke at Komsomol meetings to inspire
young people with the project, particularly because a lack of motivated and
diligent workers was one of the largest problems the campaign for the
development of Siberia was facing.104
In contrast to the previous situation, the party leadership was now facing
not only the usual opposition to the project from within the party (in this
case, mainly representatives of non-Siberian regions who feared they might

receive fewer funds), but also criticism of their energy policy expressed in
the semi-official form of specialist periodicals and newspapers. In addition,
for the first time in the late Soviet period, there was also some veiled social
criticism. In their literary works, writers such as Sergei Zalygin, Viktor
Astafev, and Valentin Rasputin were raising environmental and social policy
concerns regarding the development of Siberia. Apart from condemning the
unbridled squandering of natural resources, they criticized that the
approach taken was unsustainable and based on the exploitation of these
resources as rapidly as possible, without sufficient consideration for the
implications. In his novel Farewell to Matyora, for example (the original
Russian text Proshchanie s Materoi was first published in 1976, and a Soviet
film was produced in 1981), Rasputin outlines an apocalyptic scenario.
Because of the construction of a large hydroelectric power station, several
villages, including Matyora, are going to be submerged under a dam storage
lake. In this tale the village of Matyora symbolizes a centuries-old peasant
culture that is now under threat from the modern age.105
Despite these domestic difficulties, the Soviet leadership was determined
to portray Siberia’s economic development in a positive light. The gas
pipeline between Siberia and Western Europe was placed in the same
context as other “peace projects,” designed to symbolize international
friendship and increased prosperity. The project also became politically
explosive when US President Ronald Reagan ordered an embargo on the
supply of steel pipes to the Soviet Union in response to the declaration of
martial law in Poland at the end of 1981 (these sanctions were, in effect, an
expansion of the sanction regime which had been imposed already in
January 1980 by US President Jimmy Carter as a reaction to the Soviet
Union’s military invasion of Afghanistan in December 1979).106 In contrast
to the situation under Kennedy, however, this time the Europeans, now
including the FRG, did not follow the American decision. Nevertheless,
Chancellor Schmidt assured the Americans ahead of discussions on West
German assistance to the construction of the pipeline, that the FRG would
“never allow itself to become more than 30 percent dependent on Soviet
gas,” a limit that he said had been set “some years ago.”107
However, the transatlantic quarrel over the matter was actually oppor-
tune for Moscow. The Soviet leadership now started to make real progress
with the construction of the pipeline, with every success being systematically
exploited for propaganda purposes. Soviet media and political propaganda
portrayed those involved in building the East–West pipeline as frontline
26 J. PEROVIĆ
soldiers of labor, virtually on a par with veterans of the Great Patriotic War.
These workers also gained faster access to apartments, child care, or even a
car. In return, the workers, as highlighted in a report in Der Spiegel, were
prepared to accept a performance-based system unusual for Soviet condi-
tions. Work brigades “who worked too slowly or with an inferior level of
quality” automatically received a lower salary: “Failure meant dropping a
level in the pay scale—a hint of capitalism in the pipeline.”108
The US had already lifted its sanctions by the time the so-called Urengoi–
Uzhgorod pipeline was officially opened at the end of 1983. It was one of
six new Siberian pipelines, with a total length of approximately 20,000 km,
to be opened between 1981 and 1985.109 In addition to further consoli-
dating the Soviet Union’s leading power status as Europe’s main energy
supplier, this definitively established natural gas as the most important
component of the domestic Soviet energy mix, and Western Siberia as the
Soviet Union’s predominant raw materials power house. Through these
energy linkages, Soviet energy exports grew by 270 percent between 1970
and 1988.110 The natural gas from Urengoi, transported via the new gas
pipeline, helped to double the volume of natural gas exported to Western
Europe.111 The level of dependence of some of the larger European coun-
tries on Soviet oil and gas increased significantly, with Soviet oil and gas
representing 20–30 percent of their total consumption. Conversely, the
Soviet Union’s dependence on Western Europe also increased. At the
start of the 1980s, the Soviet Union obtained 80 percent of its foreign
currency from energy exports—which also meant that the Soviet leadership
was almost completely dependent on fossil energy carriers for the acquisi-
tion of foreign currency and, therefore, on a single export commodity.112
The collapse of oil prices in the second half of the 1980s was not the
reason for the demise of the Soviet Union. In spite of the slump in prices, at
the end of the decade exports of oil and gas still accounted for 75 percent of
foreign currency receipts.113 The Soviet Union failed because it was unable
to overcome its ongoing and fundamental systemic crisis. It was the high
income from oil exports that weakened the incentives to carry out the
reforms that were so urgently needed. Instead of reforming the agricultural
sector, for example, Moscow sought to generate funds from short-term
increases in oil exports to buy grain from abroad. In fact, one of the reasons
why the income from energy exports was so essential for the Soviet Union
specifically in the late Soviet period was that these exports enabled it to
repeatedly pay for large grain imports from abroad. With the loss of some of
that income, however, the party leadership had less financial means available
for the short-term mitigation of defects affecting every area of the economy,
or to mollify political discontent. To compound the problem, the Soviet
Union also had to divert income from commodities to fund such costly
projects as the arms race with the US and the war in Afghanistan, which
were sources of considerable losses.
The Soviet Union collapsed, but Kosygin was, nonetheless, right. The
natural gas connection between Europe and Russia was indeed a project
with long-term viability, surviving even the collapse of 1991 largely
unscathed. Today, Europe still sources its gas mainly from West Siberian
fields—in some cases even through the same transportation routes
constructed in late Soviet times. However, even the West Siberian reserves
are finite, and some of the current transportation lines are in need of repair
or unreliable. Russia has long been working to develop new deposits and has
constructed new pipelines to European destinations. As before, the question
is not whether Russia has sufficient oil and gas reserves but rather when, and
at what cost, they will be developed, and which transport routes will be
taken. In light of its high strategic significance, energy continues to be not
only an economic good, but also a highly political resource. For Europe’s
dealings with Russia, the question is not whether dependencies in the
energy domain are desirable, but how those dependencies should be man-
aged. For the coming years and decades, the Europeans will continue to be
dependent on Russian energy imports, and there will be no easy and cheap
way to circumvent this country’s major raw material basis.114
STRUCTURE AND OVERVIEW OF THE PRESENT VOLUME

The chapters collected in this book are structured into three main sections:
Part I analyzes developments from World War II until the height of the
Cold War in the early 1960s, considering the re-entry of the Soviet Union
to the international oil market and Western reactions. Part II follows the
story through the period of détente and into the 1980s, analyzing the
reasons for the expanding East–West trade from various national perspec-
tives. Part III addresses the complicated story of intra-bloc energy relations
and investigates the economic crisis and demise of Communism in Eastern
Europe as well as the legacies resulting from these processes.
In the first chapter of Part I, “From Crisis to Plenty: The Soviet ‘Oil
Campaign’ Under Stalin,” Felix Rehschuh discusses the politics of oil
during late Stalinism. The author explains the relatively slow shift in Soviet
energy policy from coal to oil from the late 1930s to the early 1950s. He
28 J. PEROVIĆ
argues that although World War II was an important factor in Moscow’s

decision to pay more attention to the oil industry and to the building up of a
second center of oil production in the Volga-Ural region, the Soviet lead-
ership apparently saw no real need to accelerate production in the eastern
parts of its country until the worsening of relations with its former Western
allies in the late 1940s. Military and defense considerations, it is argued,
played an important role in the Soviet leaders’ decision to push the Volga-
Ural oil industry, going against the formidable resistance of the so-called
“Baku lobby” that favored investment in the Caucasus oil region. Soon after
this shift, work began on the construction of a large new production center
in the Soviet heartland. Also, thanks to additional oil produced in the Volga-
Ural region, the Soviet Union was able to restart exporting oil to Western
Europe after an absence of almost 20 years from world markets.
In the next chapter, titled “Stalin’s Oil Policy and the Iranian Crisis of
1945–1946,” Nataliia Egorova analyzes Soviet interests concerning post-
war arrangements in Iran. She claims that a key driver of Soviet interests
in this part of the world was Moscow’s desire to obtain oil concessions in
the northern part of Iran, ultimately leading to serious complications with
the US and the UK, which both had political and economic interests in the
country. The author argues that during the period that came to be known as
the “Iranian Crisis,” the Soviet Union neither planned to annex the
Azerbaijani-populated northern part of Iran and join it with the Soviet
republic of Azerbaijan, nor should this crisis be considered the beginning
of the Cold War, as some historians have argued. Moscow was not inter-
ested in a confrontation with its former Western allies and ultimately pulled
its troops back from Iran in 1946, just after an agreement had been reached
with the Iranian government on the question of oil.
The third chapter in this part is Niklas Jensen-Eriksen’s “‘Red Oil’ and
Western Reactions: The Case of Britain.” When the Soviet Union
re-entered the world oil markets as a major exporter in the late 1950s,
there were mixed reactions in the West. While some feared that cheap Soviet
oil would undermine the position of major Anglo-American oil companies
in the West European market, others saw “red oil” as a potentially danger-
ous political weapon to be wielded against capitalism and the cohesion of
the Western world. This chapter explores these divergent reactions in the
British case. The UK has been seen as a leading opponent of Soviet oil
exports during the late 1950s and 1960s, and as a strong supporter of
British oil industry in the international market. However, as documents
from British archives reveal, the British government was actually deeply
divided, with strong arguments both for and against importing Soviet oil. In
the end, these divisions allowed the Soviets to score a propaganda victory,
even though the practical benefits for them turned out to be rather limited.
In the final chapter of the section, Roberto Cantoni investigates Soviet
plans to enhance oil exports to West European countries through the
building of a large pipeline system. In his chapter, “Debates at NATO and
the EEC in Response to the Soviet ‘Oil Offensive’ in the Early 1960s,” the
author argues that this caused anxiety at the European Economic Commu-
nity (EEC) and at NATO, as some of their respective members, and
especially their oil companies, feared that Moscow could use oil as a weapon
to weaken the West’s military and economic resources. On the other hand,
countries such as Italy and West Germany were willing to deal with the
Soviets to place considerable industrial orders and acquire Soviet oil. In the
early 1960s, pipelines thus became the main bone of contention, and
the battle for primacy in building them caused tensions not only between
the West and the Soviet Union, but also among the EEC and NATO
member states. To complete the pipeline system, however, the Soviets
needed considerable amounts of large-diameter steel pipes, which they
had to import from the West. Thus, the US delegation at NATO proposed
a comprehensive embargo of such large-diameter pipes to delay the system’s
construction. In 1962, the embargo was in fact enforced. This chapter
argues that the outcome of the battle for pipelines was characterized by
both technical and political considerations, and that the two aspects, in fact,
became indistinguishable. What an oil pipe was—or what it was not—as a
technological product depended on the political struggle to control or
suppress commerce with the Soviet Union.
Viacheslav Nekrasov opens Part II of this book with his chapter titled
“Decision-Making in the Soviet Energy Sector in Post-Stalinist Times: The
Failure of Khrushchev’s Economic Modernization Strategy,” analyzing
Soviet energy policies during the Khrushchev era, from the mid-1950s
until the second half of the 1960s. This was the time when, thanks to
growing oil and gas exports, the Soviet Union became increasingly
entangled with regional and global energy markets, and also emerged as a
major consumer of fossil fuels due to its own expanding heavy industries
(namely, chemical and machine-building). Moscow’s dependency on fast-
growing production rates was caused by the need to maintain both its own
economy and the economies of its socialist allies, which during the 1960s
became net importers of Soviet oil and gas; at the same time, Moscow
needed to keep energy exports to the West at a high level to remain able
30 J. PEROVIĆ
to buy technology and consumer goods in exchange for its raw materials.
This chapter argues that this expansionist economic strategy, which
depended on an ever-increasing production of energy, could not keep
pace with developments inside the Soviet Union, namely the need to
develop new energy frontiers outside the traditional productions areas in
the Caucasus and Volga-Ural regions, whose production rates were stag-
nating or declining. The Soviet Union’s energy policy predicament was
caused by bad planning and a lack of coordination among the various
organizations responsible for formulating and implementing energy policy.
Far from being able to dictate policy, Khrushchev had to deal with influen-
tial interest groups representing different sectors of the economy, some of
which were opposed to certain aspects of his policy.
Following the story, Elisabetta Bini examines, in “A Challenge to Cold
War Energy Politics? The US and Italy’s Relations with the Soviet Union,
1958–1969,” the relationship between the Italian state-owned company
Ente Nazionale Idrocarburi (National Hydrocarbon Agency, ENI) and the
Soviet Union between the late 1950s and the late 1960s. Based on corpo-
rate and state archives in Italy and the US, the author argues that ENI was
one of the first West European oil firms to establish relations with the Soviet
Union, challenging US international energy policies and oil interests in
Italy. ENI used its deals with Moscow not only to access cheap sources of
energy and, in turn, export its own petrochemical and industrial products,
but also to force American and British oil companies to meet Italy’s energy
needs. Therefore, while the agreements that ENI signed with the Soviet
Union between the late 1950s and the early 1960s challenged Cold War oil
policies, they also strengthened Italy’s position and membership inside the
North Atlantic Alliance. At the same time, once the process of détente made
relations between the blocs easier, ENI and Italy became pioneers who had
anticipated certain forms of cooperation between Western Europe and the
Soviet Union.
In another national case study, Alain Beltran and Jean-Pierre Williot
investigate the topic of “Gaz de France and Soviet Natural Gas: Balancing
Technological Constraints with Political Considerations, 1950s to 1980s,”
tracing the beginnings of cooperation between France and the Soviet Union
from first contacts in the second half of the 1950s to the signing of the first
contract of gas purchase in 1971 until the start of gas deliveries in 1976. The
authors also analyze developments in the following years, focusing on the
French reaction to the US embargo on deliveries of pipelines and pipeline
technology to the Soviet Union in 1982. Unlike Italy and West Germany,
France never became a major importer of Soviet gas, which by the end of the
1980s constituted only a small fraction in the country’s overall energy mix.
France was, however, a key European player in fostering closer ties with the
Soviet Union from the early Cold War period onwards, often going against
US and Western general interests.
The next chapter deals with the “Rise of Western Siberia and the Soviet–
West German Energy Relationship During the 1970s.” Dunja Krempin
analyzes the long path to the Soviet Union’s decision to develop Siberian
oil and gas and explains how the development of this key energy frontier was
closely connected to enhanced international cooperation. While the 1960s
and 1970s mark a period of intense internal Soviet debates on energy policy,
it was only in the late 1970s, when the rising West European interest in
Soviet energy converged with a rapid deterioration of the Soviet energy and
fuel sector, that the Brezhnev leadership finally decided to take the decisive
leap into Western Siberia, with a focus on the production of oil and gas.
Although this decision was largely based on domestic economic consider-
ations, the author argues that the prospect of increased energy exports to,
and cooperation with, West European countries and companies played a
tremendous role as well. In this context, the FRG was to be become a key
partner and the future pillar in the Soviet Union’s comprehensive energy
plans.
The final chapter in this part is David Painter’s “From Linkage to
Economic Warfare: Energy, Soviet–American Relations, and the End of
the Cold War.” The policy of détente during the late 1960s and early
1970s opened up new prospects for Western–Soviet cooperation, namely
in the area of energy. US companies were at the forefront in exploring large
investment options in the case of West Siberian gas. Due to strong US
domestic political opposition and a general worsening of US–Soviet rela-
tions in the second half of the 1970s, these projects failed. Instead, military
buildup and economic “containment,” including sanctions on pipeline
technology, were to become the driving policies during the Reagan era,
aiming at a weakening of the Soviet Union’s potential. Washington sought
in vain to obstruct the Europeans from building up their energy partnership
with Moscow. The Soviet economy had already experienced first economic
turbulences in the early 1980s, but when the price of oil fell in the
mid-1980s, the country’s foreign currency reserves dwindled and the crisis
worsened. When the Soviet Union eventually broke up in 1991, the
so-called “Reagan victory school” saw this in retrospect as a vindication of
Washington’s policy. In contrast, this chapter argues that US policies were
32 J. PEROVIĆ
not the main cause of the oil price collapse. In a longer perspective, by
choosing confrontation over cooperation, the US not only exacerbated
Cold War tensions and damaged relations with its allies, but also missed
an opportunity to set in motion processes that might have ended the Cold
War and facilitated reform in the Soviet Union without creating conditions
that led to instability and future animosity.
Part III opens with Falk Flade’s “Creating a Common Energy Space: The
Building of the Druzhba Oil Pipeline.” The rapidly growing increase of Soviet
oil and gas shipments to the energy-hungry socialist states of Eastern Europe
during the 1960s and 1970s was made possible also through the construction
of a colossal pipeline system. The first major pipeline connecting the oil fields
of the Volga-Urals—and later also Western Siberia—with the socialist allies in
the East was the Druzhba (“Friendship”) pipeline, to be followed by other
large-scale projects with illustrious names such as Bratstvo (“Brotherhood”),
Soiuz (“Union”), or Progress. As a result, the Soviet Union entered into
long-term commitments toward its satellites, which became dependent to a
considerable extent on Soviet energy imports. Based on documents from
Russian and East German archives, this chapter analyzes the history of the
planning and construction of the Druzhba pipeline. The author examines the
motivations of Moscow and the individual socialist countries to initiate this
project, he looks into the way the project was debated, planned, and exe-
cuted, and, finally, considers some of the mid- to long-term consequences
that the existence of the pipeline had for intra-bloc relations.
The aim of the next chapter by Suvi Kansikas is to add a new view on
Soviet trade relations with its allies. In “Calculating the Burden of Empire:
Soviet Oil, East–West Trade and the End of the Socialist Bloc,” the author
examines Cold War politics as a factor restraining Soviet actions vis-a-vis its
allies. Particular emphasis is put on the Soviet intra-bloc mechanisms and
the role of the CMEA in managing the relations. In order to show how
Soviet–East European relations played out, this chapter elaborates internal
CMEA discussions on economic dependency, intra-bloc cooperation, and
changing the CMEA mechanism to better suit Soviet purposes. It is argued
that even though the Soviet Union was the only major energy exporter in
the CMEA, energy was not an easy weapon to be used for exploiting or
controlling the allies. A decision to change the price system had to be made
on the multilateral CMEA forum. And it had to be implemented in a way
that would not leave the allies in economic difficulty. Soviet oil and gas
financed the economic system of the socialist bloc. However, it also fueled
the pattern of interdependency in both East-East and East–West trade.
“Drifting Apart: Soviet Energy and the Cohesion of the Communist Bloc
in the 1970s and 1980s” is the title of Lorenz Lüthi’s chapter. The author
focuses on multinational oil, gas, and electricity projects within the CMEA
that were initiated to satisfy the increasing energy needs of the socialist states
in Eastern Europe, but largely failed because of a drop in Soviet energy
deliveries during the 1980s. The Soviet Union started large-scale energy
shipments to the fraternal states in socialist Eastern Europe in the early
1960s. Given the relative scarcity of energy resources in Eastern Europe, the
dependency increased over the period from the early 1960s to the early
1980s to such a degree that the Soviet Union progressively found it difficult
to supply the quantities needed or even requested. The economic develop-
ment, and by extension the internal social peace, of the socialist countries of
Eastern Europe depended on annually increasing Soviet energy deliveries.
Subsidized Soviet supplies of energy to a certain degree formed the glue that
kept the CMEA together. Once the Soviet capabilities of increasing energy
deliveries had become exhausted in the early 1980s, the economic integra-
tion of the CMEA reversed itself until its collapse in 1991.
The final chapter of the book is written by Margarita M. Balmaceda, who
takes the analysis beyond the end of the Cold War, investigating “The Fall
of the Soviet Union and the Legacies of Energy Dependencies in Eastern
Europe.” Against the background of the energy (inter-)dependencies cre-
ated during the Soviet period between the energy-rich and energy-poor
Soviet republics, as well during the Cold War between the Soviet Union and
individual European CMEA states, this chapter focuses on the post-Soviet
impact of these legacies on each of these two groups of states. In doing so, it
focuses not only on the way they affected relations between individual
states, but also on their impact on these states’ political and economic
development after the dissolution of the communist “bloc” and the breakup
of the Soviet Union. These legacies, this chapter argues, go well beyond
energy dependency: they affected not only these states’ range of energy
options, but also Russia’s ability to use energy as a foreign policy tool. Most
importantly—as shown through the case studies of Ukraine, Belarus, and
the Baltic states—the energy legacies of the Soviet era synergized with other
characteristics of the transition period and of the external environment at
the time of the Soviet/CMEA dissolution to significantly constrain the
conditions for political and economic development of these newly indepen-
dent states after 1991.
34 J. PEROVIĆ
NOTES
1. With the prominent exception of Per H€ogselius, Red Gas: Russia
and the Origins of European Energy Dependence (New York:
Palgrave Macmillan, 2013), there is no comprehensive study on
Soviet energy from a transnational perspective based on archives in
Eastern and/or Western Europe. Other in-depth works on Soviet
gas include Thane Gustafson, Crisis Amid Plenty: The Politics of
Soviet Energy under Brezhnev and Gorbachev (Princeton, NJ:
Princeton University Press, 1989) and Jonathan Stern, Soviet
Natural Gas Development to 1990: The Implications for the
CMEA and the West (Lexington: Lexington Books, 1980), both
published before the opening of communist archives. Although
H€ogselius’ analysis covers a large timespan, it uses archival material
mostly from the late 1950s, the 1960s, and partly also from the
1970s, and it focuses exclusively on gas. His case studies include
Bavaria and Austria, and to some extent also the FRG, but
H€ogselius writes relatively little about other important West
European consumer countries such as Italy or France. The roles
of NATO, the European Economic Community, or non-European
countries like the US are treated only fleetingly, and intra-
communist bloc relations are not dealt with in any comprehensive
way. And while there is a strong literature on the story of Soviet oil,
most of this research has been written during the Cold War. Newer
studies such as Marshall Goldman, Petrostate: Putin, Power, and the
New Russia (Oxford: Oxford University Press, 2010) focus mostly
on events after the fall of the Soviet Union and cover history super-
ficially. Goldman, too, bases his work almost exclusively on second-
ary literature published before the opening of communist archives.
2. E.g., Odd Arne Westad, The Global Cold War: Third World Inter-
ventions and the Making of Our Times (Cambridge: Cambridge
University Press, 2005).
3. E.g., Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and
Power (New York: Simon & Schuster, 1991).
4. An overview of both the Western literature and newer studies in
Russian is presented in this chapter and the individual essays of the
present volume.
5. This Chapter draws on the author’s previous research, namely:
Jeronim Perović, “Russlands Aufstieg zur Energiegrossmacht:
Geschichte einer gesamteuropäischen Verflechtung,” Osteuropa

63, 7 (2013), 5–28; Jeronim Perović and Dunja Krempin, “‘The
Key is in Our Hands:’ Soviet Energy Strategy during Détente and
the Global Oil Crises of the 1970s,” Historical Social Research
39, 4 (2014), 113–44.
6. See the section on Caucasian oil production in Ferdinand
Friedensburg, Das Erd€ ol im Weltkrieg (Stuttgart: Ferdinand
Enke, 1939), 39–43.
7. “Polozhenie na Kavkaze. (Beseda s tov. Stalinym),” Pravda,
no. 269, November 30, 1920, 1.
8. Quotation translated from the German text: W. I. Lenin, Werke,
vol. 32 (Berlin: Dietz, 1982), 272.
9. Lenin, Werke, vol. 32, 272.
10. Ibid.
11. Geoffrey Jones and Clive Trebilcock, “Russian Industry and British
Business 1910–1930: Oil and Armaments,” The Journal of
European Economic History 11, 1 (1982), 61–103, here 96–7.
12. On production figures, see Goldman, Petrostate, 4–6.
13. Jones and Trebilcock, “Russian Industry and British Business,” 101.
14. A. A. Igolkin, Neftianaia promyshlennost’ SSSR (1928–1950-e
gody) (Moscow: Institut Ekonomiki RAN, 2011), 245.
15. Claudia W€ormann, Osthandel als Problem der Atlantischen Allianz:
Erfahrungen aus dem Erdgas-R€ ohren-Gesch€
aft mit der UdSSR
(Bonn: Europa Union, 1986), 27.
16. J. Trachtenberg, “The Soviet Oil Offensive,” The Living Age
21 (September 1933), 35–7 (translated article, originally published
in German in the Vienna conservative daily Neues Wiener
Tagblatt).
17. W€ ormann, Osthandel als Problem der Atlantischen Allianz, 27.
18. Goldman, Petrostate, 29.
19. A. A. Igolkin, Neftianaia politika SSSR v 1928–1940-m godakh
(Moscow: Institut Rossiiskoi Istorii RAN, 2005), 7–9.
20. Igolkin, Neftianaia promyshlennost’, 30.
21. Ibid., 27–8.
22. A. A. Igolkin, Sovetskaia neftianaia promyshlennost’ v 1921–1928
godakh (Moscow: RGGU, 1999), 127.
23. Lenin’s famous citation dates from December 22, 1920. Quote
from the German text: W. I. Lenin, Werke, vol. 31 (Berlin: Dietz,
1977), 513.
36 J. PEROVIĆ
24. On building of hydroelectric plants and power-stations in the early

Soviet period: Klaus Gestwa, Die Stalinschen Grossbauten des
Kommunismus: Sowjetische Technik- und Umweltgeschichte,
1948–1967 (München: Oldenbourg, 2010), especially 48–74. On
early Soviet economic planning and electification policy: Heiko
Haumann, Beginn der Planwirtschaft: Elektrifizierung,
Wirtschaftsplanung und gesellschaftliche Entwicklung Sowjetrusslands
1917–21 (Düsseldorf: Bertelsmann, 1974).
25. Goldman, Petrostate, 6, 30.
26. Quotation translated from the German text: J. W. Stalin, Werke,
vol. 7 (Berlin: Dietz, 1952), 142.
27. Quotation translated from the German text: J. W. Stalin, Werke,
vol. 10 (Berlin: Dietz, 1953), 137–38.
28. In 1937, Azneft’ was responsible for a total of 60 percent of Soviet
oil production: Igolkin, Neftianaia politika, 137.
29. Rossiiskii gosudarstvennyi arkhiv sotsial’no-politicheskoi istorii
(Russian State Archive of Social and Political History, RGASPI),
f. 17, op. 117, d. 87, l. 76.
30. If Grozneft’, according to Ivanov, produced about 5978 tons of oil
in June 1940, production increased to 6820 tons by October:
RGASPI, f. 17, op. 22, d. 3725, l. 2.
31. Steve LeVine, The Oil and the Glory: The Pursuit of Empire and
Fortune on the Caspian Sea (New York: Random House, 2007),
49–51.
32. Based on data from Goldman, Petrostate, 6.
33. Natalya Butenina, “Lend-Lease: The Oil Factor,” Oil of Russia
1 (2005), www.oilru.com/or/22/360. See also the document
collection contained in: http://lend-lease.airforce.ru/english/
index.htm.
34. On the rise of “Second Baku,” see Felix Rehschuh’s chapter in
this book.
35. Fernande Scheid Raine, “The Iranian Crisis of 1946 and the Ori-
gins of the Cold War,” in Melvyn P. Leffler and David S. Painter,
eds., Origins of the Cold War: An International History, 2nd edn
(London: Routledge, 2005), 93–111. On the “Iranian Crisis” of
1946, see also Nataliia Egorova’s chapter in this volume.
36. A. A. Igolkin, Sovetskaia neftianaia politika v 1940-m–1950-m
godakh (Moscow: Institut Rossiiskoi Istorii RAN, 2009), 264.
37. Walter M. Iber and Peter Ruggenthaler, “Sowjetische

Wirtschaftspolitik im besetzten Österreich: Ein Überblick,” in
Walter M. Iber and Peter Ruggenthaler, eds., Stalins
€
Wirtschaftspolitik an der sowjetischen Peripherie: Ein Uberblick auf
aischer Quellen (Innsbruck: Studien
der Basis sowjetischer und osteurop€
Verlag, 2011), 187–207.
38. The most famous propaganda poster is the one by Pavel P. Gorelyi:
“Toward 38 million tons of oil and gas in the year 1941!” (Za
38 mln. tonn nefti s gazom v 1941 godu), http://www.plakaty.ru/
plakaty/sotsialnye/za_38_mln_tonn_nefti_s_gazom_v_1941_godu/?
sphrase_id¼2534
39. The new importance attached to the neftianik is also visible from
studying contemporary propaganda posters, for instance the 1948
poster by P. Krivonogov: “Oilmen, more oil for the homeland!
Let’s fulfill the five-year-plan in four years!” (Neftianniki, bol’she
nefti Rodine! Vypolnim piatiletku v 4 goda), http://www.plakaty.ru/
plakaty/sotsialnye/neftyanniki_bolshe_nefti_rodine_vypolnim_
pyatiletku_v_4_goda/
40. This poster was made by Vassilii N. Elkin, titled “Let’s transport
more oil for the needs of our beloved homeland” (Bol’she
perevezem nefti dlia nuzhd liubimoi Rodini), http://www.
plakaty.ru/plakaty/sotsialnye/bolshe_perevezem_nefti_dlya_nuzhd_
lyubimoy_rodiny/
41. Margarita M. Balmaceda, “Der Weg in die Abhängigkeit:
Ostmitteleuropa am Energietropf der UdSSR,” Osteuropa
54, 9–10 (2004), 162–79; John P. Hardt, “Soviet Energy Policy
in Eastern Europe,” in Sarah M. Terry, ed., Soviet Policy in Eastern
Europe: An Overview (New Haven, CT: Yale University Press,
1984), 189–220; William M. Reisinger, Energy and the Soviet
Bloc: Alliance Politics after Stalin (Ithaca: Cornell University
Press, 1992).
42. Jennifer I. Considine and William A. Kerr, The Russian Oil Econ-
omy (Cheltenham: Edward Elgar Publishing, 2002), 64.
43. Niklas Jensen-Eriksen, “The First Wave of the Soviet Oil Offensive:
The Anglo-American Alliance and the Flow of ‘Red Oil’ to Finland
during the 1950s,” Business History 49, 3 (2007), 348–66, here
354.
44. Jensen-Eriksen, “The First Wave,” 358–9.
38 J. PEROVIĆ
45. Niklas Jensen-Eriksen, “The Cold War in Energy Markets: British

Efforts to Contain Soviet Oil Exports to Non-Communist Coun-
tries, 1950–1965,” in Alain Beltran, ed., Le pétrole et la guerre: Oil
and War (Brussels: Peter Lang, 2012), 191–207, here 201.
46. For example Harold Lubell, The Soviet Oil Offensive and Inter-
Bloc Economic Competition (Santa Monica, CA: RAND
Corporation, 1961).
47. Jensen-Eriksen, “The Cold War in Energy Markets,” 196–7.
48. Robert E. Ebel, Communist Trade in Oil and Gas: An Evaluation
of the Future Export Capabilities of the Soviet Bloc (New York:
Praeger, 1970), 39.
49. Pier Angelo Toninelli, “Energy Supply and Economic Develop-
ment in Italy: The Role of State Owned Companies,” in Alain
Beltran, ed., A Comparative History of National Oil Companies
(Brussels: Peter Lang, 2010), 125.
50. This becomes evident from discussions within the British govern-
ment on the utility of the embargo in the mid-1960s: Anita
L. Burdett, ed., Oil Resources in Eastern Europe and the Caucasus:
British Documents 1885–1978, 8 vols. (Cambridge: Cambridge
University Press, 2012), vol. 8, especially part 1.2.
51. As quoted in Burdett, Oil Resources, vol. 8, 283.
52. W€ ormann, Osthandel als Problem der Atlantischen Allianz, 31. On
internal British discussions on Soviet energy in the early 1960s, see
the chapter by Niklas Jensen-Eriksen in this book.
53. On the building of this pipeline, see Falk Flade’s chapter in this
volume.
54. Christian Th. Müller, “Der Erdgas-R€ohren-Konflikt 1981/82,” in
€
Bernd Greiner et al., eds., Okonomie im Kalten Krieg (Hamburg:
Hamburger Edition, 2010), 501–20, here 505. On internal West-
ern embargo discussions about the Druzhba oil pipeline, see the
chapter by Roberto Cantoni in this volume.
55. Burdett, Oil Resources, vol. 8, 116.
56. In 1966, West Germany’s share was 7.5 percent, Italy’s 19 percent:
Burdett, Oil Resources, vol. 8, 59.
57. This is evident from secret US and British position papers: Burdett,
Oil Resources, vol. 8, 113; “National Intelligence Estimate,”
Washington, DC, November 14, 1970, in Foreign Relations of the
United States (FRUS), 1969–1976, vol. 36: Energy Crisis, 1969–1974
(Washington, D.C.: Government Printing Office, 2011), 136–51,

especially 142–46.
58. Burdett, Oil Resources, vol. 8, 80.
59. See, for example, “Prospects for US Access to World Oil Over the
Next 15 Years or So,” contained in the “Memorandum Prepared in
the Central Intelligence Agency,” Washington, DC, August 28,
1969, in FRUS, 1969–1976, vol. 36, 25–35, especially 26. The
assumption that the Soviet Union might be tempted to expand into
the Middle East to secure oil imports, was also debated in Western
publications at the time. For example by Robert Hunter, The Soviet
Dilemma in the Middle East, Part II: Oil and the Persian Gulf
(London: Institute for Strategic Studies, 1969), 5.
60. At the time, the “Seven Sisters” included the following Western
companies: Standard Oil of New Jersey, Royal Dutch Shell, Gulf,
Texaco, Standard Oil of California, Mobil, and British Petroleum.
61. “Memorandum Prepared in the Central Intelligence Agency,”
Washington, D.C., August 28, 1969, 26.
62. “National Intelligence Estimate, Washington,” Washington, DC,
November 14, 1970, 142–6.
63. “Telegram from the Embassy in the Netherlands to the Depart-
ment of State,” The Hague, October 20, 1970, in FRUS,
1969–1976, vol. 36, 134–35, here 134.
64. Ibid.
65. Cf. Werner D. Lippert, The Economic Diplomacy of Ostpolitik:
Origins of NATO’s Energy Dilemma (New York: Berghahn
Books, 2011).
66. “R€ohren-Kredit: Salto am Trapez,” Der Spiegel 7 (1970), 34.
67. A short description of these two projects is contained in: “Memo-
randum from the President’s Special Consultant for Energy
(DiBona) to the President’s Assistant for National Security Affairs
(Kissinger),” Washington, DC, March 19, 1973, in FRUS,
1969–1976, vol. 36, 441–3.
68. Quote from the German language record of talks between German
Chancellor Willy Brandt und Leonid Brezhnev held on May 20,
1973, in Akten zur Ausw€ artigen Politik der Bundesrepublik
Deutschland (AAPBD) 1973, 3 vols. (München: Oldenbourg,
2004), vol. 2, 758–65, here 761.
69. H€ogselius, Red Gas, 41.
40 J. PEROVIĆ
70. The Diary of Anatoly S. Chernyaev 1972, ed. Svetlana Savranskaya,

transl. Anna Melyakova (Washington, DC: National Security
Archive, 2012), entry of April 8, 1972, 11, http://nsarchive.
gwu.edu/NSAEBB/NSAEBB379
71. Quote from Burdett, Oil Resources, vol. 8, 407.
72. Ibid., 407–8.
73. Ibid., 408.
74. “Memorandum of Conversation between Mao Zedong and Henry
Kissinger,” November 12, 1973, History and Public Policy Pro-
gram Digital Archive, Gerald R. Ford Presidential Library,
National Security Adviser Trip Briefing Books and Cables for
President Ford, 1974–1976 (Box 19), 19, http://digitalarchive.
wilsoncenter.org/document/118069
75. On US policy toward the Soviet Union and US-Soviet energy
relations, see the chapter by David Painter in this book.
76. “The International Energy Situation: Outlook to 1985” was
released on April 18, 1977, and “Prospects for Soviet Oil Produc-
tion” on April 25, 1977; in the months to follow, the CIA would
publish several other studies on the Soviet Union’s energy situa-
tion: The Soviet Oil Situation: An Evaluation of CIA Analyses of
Soviet Oil Production: Staff Report of the Senate Select Committee on
the Intelligence United States Senate (Washington, DC: Govern-
ment Printing Office, 1978), 1.
77. On energy during the Khrushchev period, see Viacheslav Nekrasov’s
chapter in this volume.
78. “Memorandum from the President’s Special Consultant for
Energy,” Washington, DC, March 19, 1973, in FRUS,
1969–1976, vol. 36, 142.
79. Report on “Soviet Oil Supplies to East and West Europe,” British
Embassy, Bonn, March 18, 1974, in Burdett, Oil Resources, vol.
8, 451–85, here 466.
80. “National Intelligence Estimate,” Washington, DC, December 5,
1973, in FRUS, 1969–1976, vol. 36, 741.
81. According to a report by the British Embassy in Warsaw,
December 21, 1973, in Burdett, Oil Resources, vol. 8, 430.
82. British government report, December 4, 1973, in Burdett, Oil
Resources, vol. 8, 420–23, here 422; Jochen Bethkenhagen, Die
Energiewirtschaft in den kleineren Mitgliedstaaten des Rates f€ ur
gegenseitige Wirtschaftshilfe: Entwicklungstendenzen in den achtziger
Jahren, Beiträge zur Strukturforschung 113 (Berlin: Duncker &

Humblot, 1990), 18–19. On the energy crisis in the Comecon
area and reginal cooperation efforts, see also the chapter by Lorenz
Lüthi in this volume.
83. “The Energy Situation in Comecon Countries in 1976,” July 20,
1976, in Burdett, Oil Resources, vol. 8, 621–66, here 624.
84. See the chapter by Suvi Kansikas in this volume.
85. “The Energy Situation in Comecon Countries in 1976,” July 20,
1976, 624.
86. “Record of Conversation of Brezhnev with Leaders of Fraternal
Parties of Socialist Countries,” March 18, 1975.
87. H€ogselius, Red Gas, 159–62.
88. E.g. “Izkat’ novye klady,” Pravda, no. 222, August 10, 1977, 2.
89. Important to the development of West Siberian gas was the deci-
sion taken by the Communist Party of the Soviet Union at its
plenary session in December 1977. Cf. Brezhnev’s speech in the
Tiumen’ region on January 4, 1978 in front of oil and gas workers:
L. I. Brezhnev, Leninskim kursom, vol. 7 (Moscow: Politizdat,
1979), 201–2. On the Siberian gas campaign, see also Dunja
Krempin’s chapter in this volume.
90. G. Iu. Koleva, “Strategiia razvitiia sapadno-sibirskogo neftegazogo
kompleksa, 1960–1980-e gg.,” Vestnik tomskogo gosudarstvennogo
universiteta (Tomsk: Tomskii gosudarstvennyi universitet, 2007),
95–102, here 97–8.
91. Considine and Kerr, The Russian Oil Economy, 138.
92. Boyce I. Greer and Jeremy L. Russell, “European Reliance on
Soviet Gas Exports: The Yamburg-Urengoi Natural Gas Project,”
The Energy Journal 3, 3 (1982), 15–37, here 24–5. At the time,
Italy imported the Soviet gas that France had contracted, but did
not actually import. In return, the French would import equal
amounts of Dutch gas. Only in 1980 did Gaz de France start
imports of Soviet gas: H€ogselius, Red Gas, 132. On Italy’s and
France’s energy relations with the Soviet Union, see the respective
chapters by Elisabetta Bini and Alain Beltran and Jean-Pierre
Williot in this book.
93. Greer and Russell, European Reliance, 25.
94. Ibid.
95. AAPBD 1981, 3 vols. (München: Oldenbourg, 2012), vol. 1, 74,
note 10.
42 J. PEROVIĆ
96. Quote from the German language records of intergovernmental

discussions between the FRG and the Soviet Union on May 6,
1978: AAPBD 1978, 2 vols. (München: Oldenbourg, 2009), vol.
1., 689, including note 16.
97. This is evident from the record of talks between German Chancel-
lor Brandt and Soviet Ambassador Valentin Falin on March 23,
1973: AAPBD 1973, vol. 1, 418, including note 11.
98. Quote from the German language record of intragovernmental
talks between the FRG and the Soviet Union in Moscow on July
1, 1980: AAPBD 1980, 2 vols. (München: Oldenbourg, 2011),
vol. 2, 1045.
99. AAPBD 1980, vol. 2, 1047.
100. W€ ormann, Osthandel als Problem der Atlantischen Allianz,
99–102.
101. Ibid.
102. Gustafson, Crisis Amid Plenty, especially 137–81. On social prob-
lems in connection with Siberia’s development: Jan Ake
Dellenbrant, “Sibirien als Gegenstand der sowjetischen
Regionalpolitik,” in Gert Leptin, ed., Sibirien: Ein russisches und
sowjetisches Problem (Berlin: A. Spitz, 1986), 75–88.
103. The slogan “Siberian might” (Sibirskii razmakh) served as the
headline of an article in Literaturnaia Gazeta on May 1, 1978
on the development of Western Siberia, which was, according to
the article, to encompass a total of 24 individual projects, forming a
comprehensive “scientific program”: “Sibirskii Razmakh,”
Literaturnaia Gazeta, May 1, 1978, 10. From then on, the slogan
was used in Soviet media, including posters: “Siberian might” was
the title of a propaganda poster from 1980 designed by Boris
A. Parmeev: http://www.plakaty.ru/catalog/16/1564
104. Brezhnev, for example, dedicated a large part of his speech on April
23, 1978 to the development of Western Siberia, on the occasion
of the eighteenth session of the Komsomol youth organization:
Brezhnev, Leninskim kursom, 287–8. In a speech held on March
27, 1979, he thanked about 15,000 “volunteers” of the Komso-
mol, who, in response to an inquiry by the party, agreed to join a
workers’ brigade bound for Western Siberia: Brezhnev, Leninskim
kursom, 640–1.
105. For an early English version of the novel: Valentin Rasputin, Fare-
well to Matyora: A Novel (New York: Macmillan, 1979). For further
reading: Geoffrey A. Hosking, “Sibirien und der Norden – sie sind

unsere Hoffnung, sie stehen für uns ein,” in Leptin, Sibirien, 75–88.
106. W€ ormann, Osthandel als Problem der Atlantischen Allianz, espe-
cially 129–70.
107. Quote from the German language record of talks between German
Chancellor Schmidt with US Vice President George Bush und US
Secretary of State Alexander Haig on May 22, 1981 in
Washington, D.C.: AAPBD 1981, in 3 vols. (München:
Oldenbourg, 2012), vol. 2, 825–9, here 827.
108. “Etwas Kapitalismus,” Der Spiegel 12 (1983), 184–85, here 184.
109. H€ogselius, Red Gas, 197; Müller, Der Erdgas-R€ ohren-
Konflikt, 509.
110. Gustafson, Crisis Amid Plenty, 55.
111. Nadeja M. Victor and David G. Victor, “Bypassing Ukraine:
Exporting Gas to Poland and Germany,” in David M. Victor
et al., eds., Natural Gas and Geopolitics: From 1970 to 2040
(Cambridge: Cambridge University Press, 2006), 122–68, here 134.
112. Gustafson, Crisis Amid Plenty, 55–6.
113. Ibid., 56.
114. On the legacies after the breakup of the Soviet Union with regard
to Russia’s energy relationship with Eastern Europe and former
Soviet republics, see Margarita Balmaceda’s chapter in this volume.
PART I
From World War to Cold War: Soviet Oil

and Western Reactions
From Crisis to Plenty: The Soviet “Oil
Campaign” Under Stalin
Felix Rehschuh
For the majority of the Cold War, the Soviet Union was one of the world’s
major oil producers. It not only kept up with oil production in the United
States (US) or Arab countries, but even partly outstripped its competitors.
Indeed, during the late 1970s, Soviet levels of extraction exceeded that of all
other countries, making the communist state the world’s largest oil pro-
ducer until its collapse in 1991. Such a development was, however, far from
foreseeable in the early Soviet period. While the US and some European
states began to switch from coal to oil in the immediate aftermath of World
War I, Bolshevik leaders largely ignored this new trend. They were focused
instead on the construction of giant hydropower stations and the increase in
coal production, as they believed global oil reserves to be limited. World
War II would prove them wrong. Their neglect of the oil industry, which
was almost exclusively concentrated in the exposed Caucasus region, there-
fore came at a high price. In mechanized warfare, access to oil resources
proved decisive in winning or losing a war.
Soviet leaders began to give some thought to the status of the oil industry
toward the late 1930s, but it was only after their territories were attacked by
Nazi Germany that Moscow came to recognize the tactical importance of
oil. Given the German advance toward Baku and the Caucasian oil fields,
Stalin ordered that those parts of the oil industry be relocated to the region
F. Rehschuh (*)

DOI 10.1007/978-3-319-49532-3_2
48 F. REHSCHUH
between the Volga and the Urals in order to build up a new oil-producing
center. In a reference to what was then the main oil-producing center of the
Soviet Union, the Volga-Ural region was soon to be called the “Second
Baku.”1 Oil deposits had been discovered there decades earlier, and a
number of geologists had hinted at the possibility of finding considerable
amounts of oil in this area. Until World War II, however, the area’s
exploration and development had remained largely neglected. As a conse-
quence, the Soviets relied on shipments of petroleum and equipment from
their Western allies to supplement their own limited production and fuel
their war machine, especially their air force. While advancing westwards
during 1943/44, the Red Army occupied parts of Austria and Romania—a
move that was partly driven by the ambition to control these countries’ oil
production and reserves. Following the traumatic experience of World
War II, in 1946 Stalin publicly declared that a priority postwar goal was to
achieve some kind of economic autarky: never again should the Soviet
Union’s defense depend on external assistance.
While oil was thus firmly on the Soviet energy policy radar with regard to
both its domestic and its foreign policy strategies, it was not until the late
1940s and the deterioration of East–West relations that Moscow decided to
prioritize the development of its most promising eastern oil province, the
so-called “Second Baku.” Nevertheless, a few more years passed before the
Soviet Union officially abandoned its coal-centered energy policy during the
late 1950s and entered the “age of oil.”2 By the end of the 1950s, with
production expanding in the Volga-Ural region, the Soviet Union was not
only able to satisfy the needs of its own growing industry (and also those of
its allies), but had also started to export increasing amounts of oil to Western
Europe in exchange for technology and food.
This chapter sets out to explain the relatively slow development of Soviet
energy policy between the late 1930s and the early 1950s, and the reasons
why oil production came to be prioritized over coal. While the history of
Soviet oil politics preoccupied observers in the East3 and the West4 during
most of the Cold War, interest in such topics faded rapidly after the
dissolution of the Soviet Union, especially outside of Russia. Although
some valuable Russian interpretations of early Soviet oil policy prior to
1945 have been published,5 along with promising attempts to analyze
various aspects of post-Stalinist developments,6 the reinterpretation of
events based on declassified archival materials is still in its infancy; moreover,
these sources mostly deal with economic questions. In the case of the late
Stalinist era after World War II, in particular, there is an almost complete
FROM CRISIS TO PLENTY: THE SOVIET “OIL CAMPAIGN” UNDER STALIN 49
absence of any new research, except for studies dealing with specific regional
developments.7 However, even these newer Russian-language studies are
largely neglected outside the former Soviet Union, not least due to a lack of
translations or a dearth of Russian-language skills. Recent Western studies
focusing on current Russian energy policy discuss those historical roots
largely based on Western literature written during the Cold War.8 As a
consequence, the assessment of Stalin’s energy policy has not greatly
changed since the end of the Cold War. A steady growth in oil production,
especially in the eastern regions of the USSR, and continuity in the Krem-
lin’s energy policy priorities during Stalin’s rule are still regarded as its main
characteristics.9
Although World War II influenced the Soviet leadership’s decision to pay
more attention to the oil industry and to build up a second center of oil
production in the Volga-Ural region, this chapter argues that the Soviet
leadership did not prioritize oil production in these parts of the country
until relations with its former Western allies deteriorated in the late 1940s.
Thus, it is likely that military and defense considerations also contributed to
the Soviet leaders’ decision to focus on the Volga-Ural oil industry and
increase overall investment in a region that later became key to the country’s
oil production.
OIL POLITICS AND “SECOND BAKU” IN THE INTERWAR PERIOD

When the German Wehrmacht attacked the Soviet Union in June 1941, the
invader not only caught the Red Army largely unprepared. More seriously,
the Soviet Union had not yet established major fuel supply lines, and the
entire oil industry was incapable of undergoing a rapid restructuring to a war
footing. Several Soviet tank and mechanized armor divisions had to aban-
don their vehicles due to the lack of petroleum.10 To understand the
circumstances that led to the critical shortage of petroleum products during
and after World War II in the Soviet Union, it is necessary to begin with an
examination of Bolshevik energy policies during the interwar period. At the
turn of the century, Tsarist Russia was the world’s leading oil producer, but
continuous labor unrest in Baku and the revolution of 1905 dealt heavy
blows to the Caucasian oil industry, leaving two-thirds of oil wells destroyed
by fires set by rioting workers and causing thousands of casualties.11 But the
region remained in turmoil thereafter. The tense atmosphere caused inves-
tors and employees to leave; many were conscripted into the Russian army
or joined the Bolsheviks during the Russian Civil War. When the Red Army
50 F. REHSCHUH
finally occupied the Caucasian oil fields in 1920, large parts of the industry
lay in ruins, most workers were gone, and the production had been set back
by around thirty years.12 Nevertheless, until the mid-1930s, Soviet planners
largely underestimated the potential of Soviet oil resources and they also
miscalculated their own future needs. Investments in oil were far lower in
comparison to other, more prestigious sectors of the economy, such as coal,
steel, or electricity. Little was done for the development of the Caucasian oil
industry apart from repairing the huge damages suffered during revolution
and war.13 In official statements, Stalin stressed on several occasions the
importance of oil. But in actual energy politics, his government emphasized
the development of coal, peat, and especially hydropower, which in the
minds of the communist planners would pave the way to socialism.14
As in the earlier Tsarist period, oil was not considered a fuel for domestic
purposes. Instead, it was to be exported to developed countries in the West
in order for the Soviet Union to buy modern machinery and other goods
urgently needed for Soviet industrialization. In an article dated January 30,
1927, the leading party newspaper Pravda summed up Soviet energy policy
and the role of oil as follows: “It is hardly necessary to say that the possibility
of an increasing oil production [. . .] should by no means change the
perspective of the Soviet oil industry as a predominantly exporting industry.
The [Soviet] oil industry cannot and must not return into the position of a
fuel industry.”15 Oil was perceived as too expensive and rare to compete
with solid fuels. Some leading Bolsheviks even demanded that coal mining
be increased in the eastern regions and that petroleum products be
substituted, whenever possible, with coal. Specifically, this was to happen
in the Volga-Urals in order to strengthen industrialization in this part of the
country.16 Many of the Soviet leaders concerned with economic questions
during that time perceived the term “black gold” in a similar fashion to the
early American oil drillers: “[I]t is just the thing that will give us a perma-
nent inflow of gold, which is necessary for the fastest conversion of the
industry and the fastest industrialization of the country.”17
While the situation within the petroleum industry was characterized by
relatively low levels of investment and a limited interest in a further expan-
sion of oil production, some Soviet geologists were convinced as early as the
1920s that the Volga-Ural region contained potentially large petroleum
deposits. Even though Ivan Gubkin (1871–1939), a famous Soviet oil
geologist often celebrated as the founder of Soviet oil geology, was one of
the earliest and strongest supporters of intensified oil exploration works in
this area, many of his colleagues remained skeptical. Even if there were
indeed giant oil fields, they feared the fields would be too deep to explore,
the costs would be too high, and—probably most importantly—the risks of
failing and having to bear the consequences were too great.18
In the late 1920s, owing to these doubts the Geological Committee
came to the nearly unanimous conclusion that any further exploration in
the Volga basin was likely to be counterproductive, even though the
endeavor had previously been authorized by the Supreme Soviet of the
National Economy. The State Planning Committee (Gosplan) subsequently
stopped additional investments. Accordingly, the primary focus of oil pro-
duction remained the Caucasus. Gubkin lost his influence within the oil
industry for several years.19 Notwithstanding first successful results and the
fact that a few oil wells were already operating in the Volga region, large
parts of the area’s material and staff were ordered back to the Caucasus.
Once it had transpired that the now largely underfunded new eastern oil
area could not bring about the expected breakthrough and very little
progress could be reported back to Moscow, even the local political elite,
previously excited about the forecast wealth deep under their feet, became
increasingly pessimistic. In 1931, several geologists even recommended that
further exploration in the east be stopped in favor of a focus on the already
exploited oil fields around Baku.20
Two events likely prevented the complete withdrawal of oil investments
from the Volga-Urals. First, the Great Depression, which caused a global
economic crisis, led to a dramatic collapse of oil prices. The rapid increase in
American oil production and the simultaneous sharp decline in demand for
fuel caused by the global recession created a surplus so high that it devalued
crude oil within the US by more than 95 percent. It was not until the
mid-1930s and following an intervention of the US government that world
market prices stabilized and partly recovered.21 Although other regions
were less affected, the average value of Soviet petroleum exports fell more
than 50 percent during the early 1930s, and ever larger amounts of oil were
needed to generate the same value in foreign currency, which was urgently
needed to modernize the economy.22 Second, due to the Red Army’s
mechanization and enlargement as well as the ongoing motorization of
the whole economy, and especially the agricultural sector, domestic petro-
leum demands were growing fast, which reduced the surpluses available for
export. Gasoline consumption alone rose from 77,000 tons in 1928 to three
million tons in 1940, and Soviet tractors were not even responsible for this
increase—they were mostly running on kerosene.23 It soon became clear
that even if current energy priorities were maintained and all oil exports
52 F. REHSCHUH
were cancelled, the Soviet Union would remain short of oil in the near
future. Valerian Kuybyshev, head of Gosplan at that time and one of the
most influential Soviet politicians, demonstrated in his report to the XVII
party congress in 1934 that the second five-year plan would have to double
oil production and even triple the refining capacity to avoid an acute lack of
fuel. As the most urgent countermeasures, he advocated the immediate
redistribution of budgetary funds to the Volga-Urals and accelerating the
buildup of the refining industry.24
The Peoples’ Commissar (Narkom) of Soviet Heavy Industry, Grigorii
Ordzhonikidze, held a similar opinion in his subsequent report on the
Soviet economy’s reconstruction, although he preferred to focus on the
old Caucasian oil regions.25 In his report to the XVII party congress,
however, even Stalin criticized the “absence of proper attention to the
question of organizing a new oil center in areas of the Urals, Bashkiria,
and the Emba” as one of the main shortcomings of Soviet industry.26
Nevertheless, the final resolution on the second five-year plan accounted
for a targeted increase of refining capacity, whereas the Volga-Urals were
mentioned only briefly.27
Although the XVII party congress led to a modest increase of invest-
ments for oil exploration and production in the Volga-Urals, that interest
was not sustained. A few years later, funding for several oil trusts in the
region was lowered again, notwithstanding rising production rates. Espe-
cially in Bashkiria, until then the most promising area within the “Second
Baku,” archival documents from the late 1930s show a clear reduction of
investment in geological explorations and exploratory drillings.28 Through-
out the interwar period, the share of the Volga-Urals in exploratory drilling,
for example, was a mere 8 percent.29 Furthermore, the eastern oil industry
suffered from constantly changing investment allocation decisions within
Gosplan. Shifts in resources took place not only back and forth between the
old Caucasian trusts and new trusts in the Volga-Urals, but also within the
region itself and between different industries within the entire oil and gas
complex. In particular, the construction of additional refining capacity
absorbed an increasing share of total investments.30 Because of its prefer-
ence for coal, the Soviet leadership simultaneously spent vast sums on the
establishment of a coal liquefaction base, believing that this form of energy
diversification was more sustainable than reliance on oil alone—following
the example set by Hitler’s government in its quest for autarky.31 But while
Germany lacked any substantial oil deposits and had good reason to rely on
liquefied coal, which was more than ten times more expensive than
equivalent petroleum products, the oil-rich Soviet Union would have been
better off pursuing conventional investments in oil extraction. As a conse-
quence, the oil refining capacity grew by nearly 50 percent in the second half
of the 1930s, while oil production increased by just below 20 percent.32
Like most other branches of the Soviet economy, the petroleum industry
meanwhile suffered from two further developments in the late 1930s. First,
in the looming shadow of the foreseeable war, increased funds were allo-
cated to the arms industry and the Red Army. This further reduced invest-
ments in the exploration and development of new oil fields. Second, even
though there are no exact figures, thousands of oilmen—primarily specialists,
technicians, managers, and other qualified personnel—were purged during
the Stalinist repression of 1937/38, and could not be replaced easily.33 As the
oilman Nikolai Baibakov, who launched an impressive career within the
Soviet administration just a few years later, recounted: “No one in the oil
industry was safe from slander, discrediting, and denunciation, especially if
one was standing in the way of the career of someone else.”34 And as the
example of Groznyi demonstrates, political considerations prevailed over
scientific rationality in energy policy decision-making: when the oil produc-
tion rate decreased dramatically during the late 1930s, the Soviet leadership
ignored rational explanations of exhausted oil fields and blamed hostile
agitators for the decline. Instead of reducing local investments and focusing
on other regions, “enemies of the people” were said to have spread “harmful
‘theories’ about the absence of oil in Groznyi,” which led to inefficient
decisions and therefore to the decline in oil production.35 As a result of this
political climate, large parts of the regional oil industry leadership were
replaced; some were probably even executed. Supported by instant measures
to improve funding, as well as the provision of technical equipment and staff
urgently required for the promising oil-bearing areas of the East, greater
results were demanded of the successors to the “subversive” oilmen, and
many delivered the expected “results” by manipulating their figures.36
Although the Groznyi oil district and its leadership experienced the
greatest change, other regions suffered as well. What began as harmless
conflicts between leading engineers and their subordinates sometimes esca-
lated into accusations of “anti-Soviet agitation,” which frequently had
negative repercussions for the person accused.37 Several oil trusts, especially
in eastern regions, were hit hard by the imprisonment of their technical elite.
Lacking any stable local educational establishment, these areas suffered
from a lack of engineers and technical staff; many were sent there from
the old Caucasian oil-producing areas.38 As Alec Nove points out, it is not
54 F. REHSCHUH
hard to imagine the psychological effects of the purges on those who

survived. In a climate of fear, rather than taking initiative and tackling the
problems on the ground through innovation and change, people sought to
adhere strictly to orders from superiors, even if they were completely
counterproductive.39 Accordingly, the oil industry’s growth rates rapidly
decreased after the purges, while consumption reached ever higher record
levels.40 During the first half of the third five-year plan, oil exports eventu-
ally had to be reduced to a minimum to avoid negative consequences to
Soviet economic growth. On the eve of World War II, the Soviet Union
was able to process most of its drilled oil into valuable petrochemicals—an
accomplishment never reached before—but simultaneously for the first
time suffered from a lack of liquid fuel.
THE SOVIET OIL COMPLEX AND ITS EASTERN PARTS DURING

WORLD WAR II
As Soviet domestic consumption increased during the second half of the
1930s, exports declined dramatically. The situation was even worse than
expected: a leading Gosplan economist, Andrei Panov, warned in a letter to
a colleague in late 1940 that there would be a serious lack of liquid fuel in
the USSR in the following year without an immediate reduction in wastage
and usage of more than two million tons of petroleum products per year. He
claimed that this shortage would be caused not only by the growth of the
Soviet economy, but also by the annexation of the Baltic states.41 Unlike the
Soviet leadership and many of his colleagues, Panov seems not to have been
convinced by the official expectation of a rapid increase in oil production:
the third five-year plan, officially announced in spring 1939, expected nearly
80 percent growth in annual oil production until 1942.42 By comparison,
during the preceding second five-year plan launched in 1932, Soviet oil
production had risen by 33 percent, despite even higher expectations. Only
during the late 1920s and early 1930s was the industry able to cope with
ever-higher growth rates facilitated by high investments and foreign assis-
tance in connection with the New Economic Policy (NEP).43 Nevertheless,
despite these huge and largely unrealistic targets, internal Gosplan docu-
ments show that at least the economic planners still preferred an economy
primarily based on solid fuel: drafts of a 15-year prognosis and long-term
guide for the Soviet economy written in mid-1941, although interrupted by
the war and never realized, estimated that the Soviet energy mix would soon
encompass an increasing share of peat, oil shale, and natural gas, as against
an unchanging (and already very low) share of petroleum.44 In fact, due to
the developments shown above, the Soviet oil industry was nearly stagnat-
ing in absolute terms on the eve of the Second World War, and the share of
oil in total energy consumption was declining further.
To avoid, or at least delay, a German attack, Stalin ensured the punctual
delivery of raw materials requested by Hitler as part of the Molotov–
Ribbentrop Pact of 1939, while the German government, whenever possi-
ble, delayed or postponed the delivery of the goods it was exchanging in the
barter deal, which mostly consisted of advanced armament and industrial
equipment.45 US economist Robert Campbell holds that while the Soviet
Union continued to ship vast quantities of refined and semi-finished petrol
products to Germany, the USSR became a net importer of oil. In particular,
American oil companies were more than willing to send oil to the Soviets to
enlarge their profits—even though they must have been aware that these oil
imports were mostly forwarded to the German Wehrmacht.46
Hoping to appease Hitler further, Stalin did not stop delivering raw
materials to his future enemy until the very end—in fact, the last supply
trains reached Germany in the early morning hours of June 22, 1941, just
before German armed forces started their invasion of the Soviet Union.
Soviet oil and grain supplies during the first half of 1941 did indeed help to
supply the Wehrmacht and thus prepare it for war in the East.47 However,
not all of the oil was exported or used up; the Soviet leadership had begun to
stockpile increasing amounts of oil supplies as a precaution for war. While
there is no doubt the Soviet Union was caught by surprise when the
Germans attacked, Moscow had taken some contingency measures to pre-
pare for a confrontation.48 Nevertheless, once the war started, the
stockpiled oil reserves proved insufficient and were quickly exhausted. The
situation was further worsened by a lack of supply lines and inadequate
transportation capacities; the fuel supply situation of the Soviet economy
and for countless military units was disastrous at the beginning of the war.49
Despite these severe repercussions, the Baku oil district increased its oil
production in 1941. However, as thousands of oilmen were recruited to
fight, the production of equipment was nearly closed down, and parts of the
machinery had to be handed over to the defense and armament industry, it
soon became clear that Baku was unable to continue production on such a
high level. The oil produced at Baku would not suffice to win the war.50 To
make matters worse, Hitler made no secret of his aim to seize the Caucasian
oil wells. After the German offensive had been halted and repulsed in the
56 F. REHSCHUH
Battle of Moscow in early 1942, the Wehrmacht concentrated its efforts on

the southwestern oil fields.51 Although German troops never reached Baku,
their advance towards the Caucasus did affect the Soviet oil branch in several
ways: first, investments in the Caucasian oil industry were reduced to a
minimum, and in case the Germans might take control, oil wells of minor
importance were shut down and concreted over. The latter action, in
particular, set back oil production by years.52 Second, the Soviet Union’s
State Defense Committee (GKO) decided to evacuate personnel and
machinery from Baku. Huge parts of the remaining drilling equipment,
pipelines that were not usable during the war, and several refineries were
dismantled and moved to safer grounds. First to benefit from this decision
was the only other region within the Soviet Union known for its vast oil
reserves—“Second Baku.”53
When the Wehrmacht reached the Volga in the summer of 1942—until
then the main transport route for Caucasian petrochemicals on the way to
the northern industrial centers—the fuel supply became more complicated.
It was now too risky to ship oil from Baku up the Volga River within sight of
the Germans, who would have been able to snatch this low-hanging fruit. In
addition to costly detours through Kazakhstan and Siberia to bring fuel to
its consumers, oil tanks near the Caucasian wellheads were overflowing as a
result of the lack of transport capacity; additional oil wells had to be taken
out of service.54 Members of the GKO saw their previous decision substan-
tiated, which made them order further equipment transfers to the “Second
Baku.” From then on, “all possible steps to accelerate and increase oil
production in the eastern oil regions” had to be taken, including “mass
propaganda work” that would explain to all workers “the importance and
significance for the country and the front of the transfer of [. . .] equipment
and staff.”55
While the evacuation order was a heavy blow to the Caucasian oil
industry, the Volga-Ural industry saw its fortunes change, even though its
output was nowhere near sufficient to compensate for the collapse of the
former.56 In 1943, Soviet oil production reached its lowest point since the
late 1920s at a mere 18 million tons—a decline of almost 50 percent in
comparison to 1941.57 Evidence for the damage to Baku’s oil wells can be
seen in the fact that the Caucasian oil industry failed to achieve its former
production peak until the collapse of the Soviet Union. But for the first time
since its discovery, creating a mighty oil base in the eastern part of the
country was—not only rhetorically—both a reality and high priority in the
USSR’s economic planning.
In addition to Soviet efforts, foreign assistance was invaluable for the

development of “Second Baku,” especially for its refining capacity: the
Lend-Lease arrangement, initiated in March 1941 by the US to assist Allied
forces in their war with Germany, was extended eastwards shortly after the
Soviet Union joined the Anti-Hitler coalition during the second half of
1941. Thereafter, weapons and defense-related equipment were sent by the
Western Allies to support Soviet resistance against German aggression.58
Although petroleum-related equipment made up only a small share of these
aid deliveries, it consisted of modern exploration and drilling instruments,
oil storage tanks, and pipes and compressors that were no longer being
produced, having been halted in favor of armament. Perhaps even more
importantly, six entire refining facilities, urgently needed to process Volga-
Ural oil, were disassembled in the US and shipped to the USSR, along with
further refining equipment.59 Up to this point, Soviet engineers had expe-
rienced immense difficulties in producing valuable petrochemicals in the
region, owing to the extraordinarily high sulfur content and the lack of
appropriate technology. Even during the late 1930s, they had tried to buy
the necessary equipment from American companies, but the latter were
often uninterested in such sales.60 To handle this problem, Soviet oilmen
had already begun to mix the nearly sulfur-free Caucasian crudes with those
from “Second Baku.” But this required a lot of time, energy, and transpor-
tation capacity, which were all in scarce supply during the war.61 Although
managing the high sulfur content of Volga-Ural oil was not entirely possible
for Soviet petro-scientists until the 1960s, there is no doubt that the
additional refining capacity and further equipment greatly supported the
Soviet oil production. In response, even though oil extraction declined
drastically during the Great Patriotic War, the Soviets managed to signifi-
cantly increase the production of petrochemicals like gas, diesel, and motor
oil, which would have a decisive impact on the outcome of war.62
Volga-Ural oil production continuously expanded during the war. Nev-
ertheless, it was still not as successful as expected. Lack of infrastructure,
poor working conditions, and temperatures far below what the Baku oilmen
were familiar with slowed-down progress, and the evacuated equipment was
often unsuitable for the geographical and geological conditions in the new
region.63 While Soviet planners proudly and publicly announced that the
share of “Second Baku” in total oil production had grown from 6 percent to
almost 15 percent in only four years, unpublished production figures tell a
different story: the output grew only slightly faster than in other eastern
regions of the USSR, contributing a mere 0.9 million tons of additional oil
58 F. REHSCHUH
per year. The pretended extraordinary increase was first and foremost a
consequence of Baku’s fast decline, which accounted for the loss of more
than 11 million tons of crude oil in 1945.64 Unsurprisingly, the decision to
evacuate the Caucasian oil industry is still criticized, especially by
Azerbaijani historians.65 Nevertheless, the high amount of fuel lost due to
Baku’s production decline and ever-growing demands by the Red Army in
its battles with the Germans forced Soviet decision-makers to find suitable
alternatives for oil. They launched a campaign that extended the synthetic
fuel industry, which had only been established a few years earlier. More
importantly, however, the same campaign laid the foundation for the
country’s natural gas industry, hence marking the beginning of the rise of
another fossil fuel that would increasingly influence Soviet energy policy
two decades later.66
There is no doubt that Soviet leaders learned a lesson about the impor-
tance of oil during the Great Patriotic War. While they had gradually
decreased investments in oil production in the years before, the trend was
reversed during the war—even though the funding considered not of vital
significance for the Caucasian industry was cut.67 Already in 1942, the GKO
rated the extension of oil production in the eastern part of the Soviet Union
one of the most important military, economic, and political factors in
shoring up the Soviet defense against the German aggressor.68 Even Stalin,
who had shown little interest in oil production before the war, now inter-
fered and exerted his influence to support further development. According
to Baibakov, who was appointed head of the Peoples’ Commissariat for the
Oil Industry (Narkomneft’) in November 1944 and was probably the most
influential oilman during the war and thereafter, Stalin personally ensured
that his industrial branch received everything necessary to fuel the country,
praising petroleum as the “soul of military equipment.”69
Even on a social level, the changes were extensive: compared to coal
miners and steel workers, oilmen had previously had a modest reputation;
now they were publicly celebrated as “warriors at the oil front.”70 During
the war and thereafter, they increasingly became part of common Soviet
mass-mobilization campaigns to improve the collective effort. “Everything
for the front,” Stalin’s maxim of the Great Patriotic War, also implied
producing more oil, and “the more fuel we will have, the closer victory
will be,” as a Soviet propaganda poster of 1941 proclaimed.71 The Second
World War hence triggered a radical policy change: for the first time, Soviet
leaders treated oil as a strategic resource, ending a trend of largely
neglecting the need for additional oil. Beyond this, Soviet leaders
recognized that Caucasian oil production alone was not enough to feed the
growing needs of an expanding industry; consequently, advanced develop-
ment in other oil regions was now possible.
THE POSTWAR YEARS

After the war, it soon became apparent that Soviet planners were not
reverting to old habits, but continuing the new oil policy. The share of
investments in the petroleum industry continued to grow, with an alloca-
tion of more than 15 percent of Soviet industrial funding to the further
development of urgently needed fuel.72 Indeed, after almost four years of
war, private oil consumption was at a minimum, and the end of hostilities
led to an initial decrease in the large need of oil for the country’s war
machinery. Still, the Soviet economy and the Red Army continued to
require huge quantities of petrochemicals. While the share of oil in the
Soviet fuel structure reached an all-time low of 15 percent (compared to
the already meager 19 percent of the last prewar year), large quantities of
imported petrochemicals were required to satisfy the most urgent needs.
The shortages were especially noticeable in light fuel oils, primarily aviation
gasoline, and kerosene.73 The Soviet-occupied territories in Eastern
Europe—mainly those in the eastern part of Austria and Romania—proved
extremely valuable in this regard. Soon after the Japanese capitulation, the
USSR’s Western Allies drastically reduced their economic aid shipments to
the Soviet Union, which had involved huge quantities of precisely those
petrochemicals that were now missing.74 The Austrian and Romanian oil
industries, which were ranked second and third after the Soviet Union in
European oil output during the war and had served as the Third Reich’s
primary fuel base until its capitulation, were soon designated as sources to
compensate for the Soviet shortages, even though they also suffered from a
lack of fuel. Until the mid-1950s, the Soviet Union remained dependent on
petroleum imports largely provided by Austria and Romania.75
However, more important for the weakened oil economy was another
factor caused by the occupation of foreign oil fields: contrary to their Soviet
counterparts, they had been mainly developed in cooperation with or even
by Western oil companies. The operators thus had full access to Western
technology throughout the interwar period, independently of hard currency
earnings from foreign trade or political priorities. In the early twentieth
century, Romania in particular, the country where the world’s most inno-
vative development equipment and petroleum geology were used, was
60 F. REHSCHUH
considered a technological pioneer of the global petroleum industry. Fur-

thermore, the Austrian and Romanian oil industries were funded
irrespective of current politics. In the interwar period and partly thereafter,
the equipment used had been influenced mostly by market mechanisms, as
opposed to whatever the planned economy produced.76 Immediately after
the Red Army took over these countries during the later war years, Soviet oil
specialists began to confiscate more and more of their oil equipment. It was
sent to the USSR, where it was shared between the Baku and Volga-Ural oil
industries. In particular, the lack of pipes, which became increasingly critical
during the Great Patriotic War, was to be compensated with booty from the
former enemy, regardless of ownership or possible consequences.77 The
confiscation of former British, American, or French property previously
seized by the Germans (or their allies) in Romania and other East
European countries caused tensions between the West and Moscow.78
This additional equipment, described later as reparations, considerably
supported the rehabilitation and postwar growth of the Soviet oil industry.
It might also have provided some kind of limited compensation for the
frequent underfunding of the oil industry in previous decades.79 Neverthe-
less, Stalin was careful not to depend on foreign resources for the Soviet
Union’s industrial base, even if these resources were taken from allied or
occupied countries. In his renowned speech at a meeting of voters in
Moscow in February 1946, he emphasized that an upswing in the Soviet
economy to a level that protected against any future contingencies was a
most urgent postwar necessity. According to Stalin, the upswing had to be
based on tripling the production of steel, coal, pig iron, and, last but not
least, oil.80 The latter was to play an important role—as Pravda stated,
referring to the earlier wartime maxim mentioned above: “The more oil we
have, the closer the Soviet economy is to a new prosperity.”81
More oil was indeed urgently needed, not just because of economic and
military needs. As early as 1944, the Soviet leadership decided to resume
exporting small amounts of petroleum despite the domestic lack of fuel. The
liberated East European countries and Soviet-friendly governments
installed soon after simply could not survive without oil; neither could the
recovery of agriculture and basic transportation in these countries be
neglected. More and more refined petrochemicals thus went to neighboring
countries that lacked a petroleum base of their own, such as Poland,
Bulgaria, and Czechoslovakia.82 Soviet oil was even provided to the Finnish
government, which asked for immediate help in late 1944, despite enor-
mous reparation debts negotiated in the armistice a few months earlier.83
Although there was little oil in the USSR immediately after the war, other
goods of foreign trade were even rarer, and while the US still complied with
old Lend-Lease contractual agreements, the Soviet Union needed to pay for
any new requirements. Limited barter trade with West European countries
was hence revived to gain access to urgently needed technology and equip-
ment; owing to a lack of other tradable goods, the Soviet government had
to export additional amounts of oil.84 As mentioned above, the USSR
remained a net importer of petrochemicals until the mid-1950s, but simul-
taneously, it was also exporting these liquid fuels in increasing volumes.
The Soviet economy and society had been suffering deprivations for too
long. The needs of the armed forces reduced civil consumption of petro-
chemicals during the war by half; private supply and fuel for transportation
were reduced to the bare minimum. In the agricultural sector, tractors and
trucks were re-equipped with attachments that enabled wood and peat
gasification, although they were highly inefficient and therefore had to be
deactivated as soon as possible after the war.85 For ideological reasons,
private consumption in the Soviet Union was fundamentally less oriented
towards oil than in the West: personal ownership of cars was considered
undesirable, and was even restricted until the late 1960s. Instead, the
government preferred to produce buses for public transportation, in addi-
tion to industrial trucks and tractors.86 Although there was practically no
private consumption, and a non-fuel petrochemical industry had yet to be
built, Soviet economic planners intended to increase the production of
vehicles drastically to satisfy the country’s postwar needs. The planned
annual output of motor vehicles was more than double the prewar produc-
tion rates, reaching half a million cars, trucks, and buses by 1950; the tractor
stock was to grow at least by 50 percent.87 In 1950, civilian gasoline
requirements thus soon climbed to three times the levels of 1937.88
While total investment in oil field development and the industry as a
whole continued to grow, there is in contrast no indication that the Volga-
Urals gained a special prominence in the immediate postwar era. On the
contrary, as early as the later war years, the rudiments of a “back to the
Caucasus” campaign became apparent. Influential party cadres from Baku
lobbied intensively for prioritizing the restoration of Caucasian oil wells,
“without opposing the task to develop new oil-bearing areas in the East.” As
First Secretary of the Azerbaijan Communist Party Mir Dzhafar Bagirov
concluded, however, “it is impossible to ignore that the new areas cannot
provide in the foreseeable future” a production increase equivalent to the
surplus that a “restoration of the prewar level of oil production in the Baku
area” would bring.89 These arguments did bear fruit. According to
62 F. REHSCHUH
Baibakov, many workers as well as equipment previously evacuated were to

return to the Baku area to quickly re-establish the Caucasian oil production
and refining capacity.90 Investments were also redirected, and soon the oil
fields around Baku obtained more than one-third of the sector’s total
investments (excluding construction and recovery funding).91 Admittedly,
total funding was increased year by year, and the Volga-Urals received
additional funds, too. Nevertheless, neither the economic plan for 1945
nor the fourth five-year plan announced in 1946, both of which attributed
special importance to the further development of the oil industry, focused
primarily on a specific region. Although most parts of the Volga-Urals are
named, they are mentioned alongside other oil-producing regions in the
Soviet Union, such as Kazakhstan, Uzbekistan, and even Sakhalin, where
only small volumes were extracted.92 Considering that large parts of the
country were destroyed, it is unsurprising that its western regions were the
first priority. Soviet planners accordingly concentrated on the reconstruc-
tion and recovery of the oil industry as a whole, and did not give special
preference to any one area. The production growth rates determined by
Gosplan until 1950 reflect this as well: while oil production in the Russian
Soviet Federative Socialist Republic (RSFSR) was expected to grow by a
factor of more than 2.5, the Volga-Urals were to increase their output by
the slightly lower factor of 2.4.93
As a consequence, investments and the number of workers grew faster in
many other regions, even in the USSR’s eastern parts, and the share of
funding allocated to “Second Baku” declined in the immediate postwar
period.94 Instead, production areas in the northern Caucasus and the
Turkmen Soviet Socialist Republic (SSR), in particular, were extremely
well-financed, considering their share in total oil production. Foreign
observers even predicted that the latter region, which had attracted largely
negligible interest within the Soviet petroleum industry until the Second
World War, might become a “Third Baku,” based on the efforts to improve
production rates there (which the Soviet leadership had neither planned nor
did it ever realized it).95 By contrast, while the Bashkir Autonomous SSR
situated in the Volga-Urals increased its share in oil production from a mere
7 percent in 1945 to at least 10 percent in 1946, even as the share of
investments experienced an equivalent growth, this share of funding was
reduced again in the following year. Hence, the annual growth rate declined
in the ensuing period.96 Against the background of a lack of key infrastruc-
ture and poor working conditions, this reduction of investments slightly
contradicts the notion that the government intended to spearhead the
growth of the region’s industry. Furthermore, more than 50 percent of
investments in exploratory drilling were allocated to the Caucasus, leaving

less than one fifth to “Second Baku”—one might have expected more,
given that such drilling was a matter of urgency in a region where large
resources were known to exist, but had not yet been explored.97
It therefore appears that Soviet planners were far from certain about the
potential oil wealth of the Volga-Urals. At the very least, there were doubts
that this region on its own could supply sufficient fuel for the postwar Soviet
Union. Wherever the government saw the chance to improve its precarious
fuel supply situation, it set its priorities accordingly. In Estonia, for instance,
around 40 percent of immediate postwar investments were allocated to the
oil shale industry, which previously had been of only local importance. This
was the case even though oil shale used as fuel could hardly compete with oil
and coal, and high subsidies were required over the following decades to
sustain the economic viability of this enterprise.98 Apparently, the prewar
guideline of securing an independent oil and coal base in every economic
region of the USSR to avoid problems of transportation was still valid in
view of the terrible state of the postwar infrastructure.99 Although recovery
was the most urgent goal of the immediate postwar years, several known oil
deposits in the Baku and Groznyi region were left aside to explore new,
more promising areas. In many cases, the old deposits were too exhausted
and the wells too damaged to restore their production; due to a general
shortage of technology and equipment, drilling deeper or offshore, as many
geologists recommended, was only partly a practicable solution.100 Conse-
quently, oil production especially in Azerbaijan recovered only slowly;
despite several successes, such as the world’s first offshore oil city
constructed after 1947, located 55 km off the Azerbaijani coast in the
Caspian Sea, Baku’s oil industry did not re-attain its production rates of
1941 until after the Soviet era. Instead, production costs rose continuously
in comparison to other oil regions, especially “Second Baku.”101
In 1946, the decision to split the former Narkomneft’* into two separate
ministries (one for the southern and western regions, one for the eastern
regions) at first seemed to enhance the status of the eastern regions.102 But
the appointments of Nikolai Baibakov, former Narkom of the whole
branch, as Minister of the Petroleum Industry of Southern and Western
*
On March 15, 1946, almost two weeks before several ministries were split up into eastern
and western counterparts, the people’s commissariats were renamed ministries. To avoid
confusion, the author will use the terms “Narkomneft’” and “Narkom” for the period until
the division.
64 F. REHSCHUH
Regions, and his former deputy Mikhail Evseenko as his counterpart in the
eastern regions, already hinted at the leadership’s priorities.103 Although
Baibakov had previously promoted the idea of oil development in the
Volga-Urals even before the war, proclaiming in 1939 that the “Soviet
people is aware of and considering the huge political, economic, and defense
significance of ‘Second Baku,’”104 he nonetheless did not appear optimistic
about achieving swift progress. Baibakov admits in his memoirs that when
Stalin publicly announced the need to produce 60 million tons of oil, he
himself was quite skeptical about reaching these production rates, even
though Stalin gave no particular timeframe or deadline to meet.105
Although Soviet propaganda posters already referred to the USSR as “the
world’s richest country according to known oil resources”106 in reference to
the deposits in the Volga-Urals, the most influential person in the oil
industry seemed to have other priorities. And while large parts of the
equipment-producing industry were still located in the Caucasus and equiv-
alent infrastructure in the Urals had yet to be built, dividing the
Narkomneft’ proved to be a challenge for the ministry responsible beyond
the Volga river. Until a supply base had been completed, development of
the eastern regions largely depended on resources provided by the Cauca-
sian oil industry.107 Although both ministries agreed that an improvement
in the production of equipment and steel pipes was the most pressing issue
after the war, the distribution was clearly disadvantageous to the eastern
regions, as Evseenko complained in a letter to Lavrentii Beria in the summer
of 1946.108 The decision to divide the ministry was indeed rescinded a few
years later, but by this point, in December 1948, the equipment base in the
East (already under construction in 1946) had already begun limited
operations.
Consequently, the eastern oil industry made only little progress in 1946/
47, considering the fact that the amount of funding and workers had been
drastically increased. Although the Caucasian oil industry recovered only
slowly before 1948, more than half of the additional oil production was still
generated around Baku and Groznyi, though in comparison with many
other regions, a greater number of oil wells were required to extract the
same amount of petroleum.109 It appears that Soviet leaders soon became
weary of this development and felt obliged to exercise their authority.
Leading oilmen must have finally realized “Second Baku’s” potential, or
at least felt certain enough to gamble on it.
In a joint letter to Stalin, written in July 1947, both ministers of the oil
industry and Lavrentii Beria, then at the height of his career and in charge of
supervising the petroleum sector, called for extensive investments, primarily

in the eastern regions. According to them, these additional resources would
increase production by five million tons a year until 1950.110 The letter
classifies only two small Caucasian oil trusts (tresty, as the Soviet oil compa-
nies were called) as “most promising,” whereas the majority of the trusts
listed were situated east of the Volga.111 Shortly thereafter, the government
decided to allocate additional investments to the oil industry, more than half
of which it assigned to the construction of equipment, pipe facilities, and
urgently needed living space for workers in the eastern regions.112 Follow-
ing this decision, it soon became apparent that despite high investments and
intense efforts, Baku could not return to its prewar production quotas as
quickly as projected. Other regions improved their production much
quicker, notwithstanding all the negative circumstances such as missing
infrastructure, or lack of staff and equipment.113
In summer 1949, a special committee started to prepare a ten-year plan
for the further development of the oil industry. It was composed of several
high-ranking politicians such as Lavrentii Beria, Anastas Mikoian, Georgii
Malenkov, Lazar Kaganovich, and leading oil industry decision-makers.
Their measures were to be implemented only a year later, and the goals
were ambitious: until the end of the decade, oil production was to increase
to 90 million tons, and the share of light petrochemicals such as gasoline or
aviation fuel was to reach more than 60 percent. They further envisaged
rapid improvements in infrastructure construction and refining capacity.114
The committee soon concluded that only one region was able to guarantee
these improvements, a region already known for almost two decades and
widely neglected (except during the war): “Second Baku.”115 Significantly,
the document ordering the preparation of this ten-year plan notes the
reasoning behind the decision to improve oil production as fast as possible:
in addition to the often-proclaimed upswing in the industry and for the first
time since the Great Patriotic War, “the consolidation of the country’s
defensibility” is mentioned as “one of the most important governmental
tasks.”116 In view of the expected rapid increase of fuel consumption, the
state reserve of petrochemicals was to be simultaneously increased to appro-
priate levels.117 Thus, defense and strategic considerations seem to have
prompted the decision to accelerate oil production and to focus on “Second
Baku.” This resolution not only implied an unprecedented increase in
funding for the oil industry, which soon represented around 7 percent of
the Soviet budget. At the same time, the share of investments dedicated to
the Volga-Urals was significantly raised year by year, accounting for nearly
66 F. REHSCHUH
half of total funding in 1955, while less than 10 percent was left for the Baku
district.118 For the first time in Soviet history, the often-announced peace-
time efforts to increase oil production in the “Second Baku” passed from
rhetoric to reality. And the decision soon bore fruits; just a few years later,
“Second Baku” produced more oil than all other regions together.119
The discovery of large Devonian oil deposits in the Volga-Urals may have
been a reason for the new government-launched campaign to increase the
Soviet Union’s oil production and petrochemical base. In particular, in
summer 1948 the gigantic Romashkino oil field in the Tatar Autonomous
SSR was discovered; later, it turned out to be the world’s largest-known oil
field. But economic oil field development was only ordered a month after
the initiation of the ten-year plan, and it still took until 1952 for
Romashkino to produce noticeable amounts of oil.120 Additionally, the
increase of production expected during the 1950s was quite low in the
Tatar Autonomous SSR in comparison to other Volga-Ural regions.121 It is
therefore not likely that Soviet leaders felt compelled to further push
“Second Baku” just because of Romashkino. Instead, it seems more prob-
able that external circumstances, especially the severe crisis over Berlin in
1948, the foundation of NATO in 1949, and the consolidation of the
opposing blocs during the same period, contributed at least in part to the
new Soviet quest for oil. The USSR appeared to be preparing for an
upcoming conflict that lasted for more than four decades: the Cold War.
CONCLUSION
It took more than two decades and one disastrous war to convince Soviet
leaders and planners that despite their preference for coal as the basis of
rapid industrialization, there was no way to avoid the production and use of
petrochemicals in the long term. Several people kept urging the immediate
development of an oil base in the eastern part of the country, especially in
the Volga-Urals. Even Stalin and members of his inner circle repeatedly
criticized the lack of efforts in changing the prevailing situation during the
1930s, but it seems that most Soviet leaders and planners had different
priorities in the interwar years. Only little had been done, and the Soviet
economy and Red Army thus suffered from severe petroleum shortages
during World War II. The campaign launched immediately after the Ger-
man invasion to solve the problem was characterized by fear of losing the
Caucasian oil industry and the precautionary destruction of equipment that
might be helpful to the occupying forces in case the Germans reached Baku.
Owing to these circumstances, huge parts of the investments and materials

expended on the Volga-Ural oil industry were thus unorganized and inef-
fective. The damage done to the established oil-production region was far
greater than the benefits achieved in the new one.
Postwar Soviet planners thereafter concentrated mainly on traditional
oil-producing regions, expecting that restoring prewar production and
further increases might be easier there. But this proved harder than imag-
ined, and the recovery of the oil industry proceeded only slowly immediately
after World War II. Despite a new awareness of the advantages of oil and the
high priority now attributed to the petroleum industry within the USSR,
little progress was made in the first postwar years. Accordingly, Western
observers still recognized the oil industry as the Achilles’ heel of the postwar
Soviet Union in a possible upcoming war against the US.122 Many even
thought that Stalin’s goal was to gain control of Middle Eastern countries
and their newly developed oil wells to compensate for the Soviet economy’s
deficits.123
They were mistaken, at least in respect of the latter point. Soviet leaders
had learned the lesson of the Great Patriotic War: a secure petroleum supply
is one of the most important prerequisites to keep the country’s economy
sufficiently supplied during a war. As tensions rose between the blocs in the
late 1940s and another war appeared possible, they launched an oil cam-
paign that exceeded all previous campaigns in scale. The shift of investments
from the traditional Caucasian oil fields toward the Volga-Urals marked the
beginning of ever-larger production rates and constituted the base for
Soviet economic growth during the next decades. Although “Second
Baku’s” relevance began to decline during the 1970s as Soviet planners
looked further east toward Siberia, the following upswing in oil production
laid the foundations for Soviet energy autarky and intensified energy trade.
This left its mark on the USSR’s and its predecessor’s foreign politics
throughout the twentieth century, and continues to influence Russian
politics until today.
NOTES
1. Though it is not clear who originally coined the term “Second
Baku,” it became popular in the late 1930s after the Soviet news-
paper Pravda and leading Bolsheviks began using it. According to
Iurii Evdoshenko, the term “Second Baku” originally was a sug-
gestion by Ivan Gubkin, even though he does not offer any further
68 F. REHSCHUH
information: Yury Yevdoshenko, “Russia’s Oldest Oil Producing

Field Marks 65th Anniversary/Stareishee rossiiskoe
mestorozhdenie otmechaet 65-letie,” Oil & Gas Eurasia
8 (2008), 3–43. Similarly, when oil production in the Volga-
Urals began to decline twenty years later, Western Siberia was
labeled “Third Baku.”
2. See Alec Nove, An Economic History of the USSR, 1917–1991, 3rd
edn (London: Penguin, 1992), 362.
3. Among several others, see the collection of Vasilii A. Dinkov, ed.,
Neft’ SSSR, 1917–1987 gg. (Moscow: Nedra, 1987), as well as the
studies by Aleksandr A. Keller, Neftianaia i gazovaia
promyshlennost’ SSSR v poslevoennye gody (Kratkii obzor za
1946–1956 gg.) (Moscow: Gostoptekhizdat, 1958) and Stepan
M. Lisichkin, Ocherki razvitiia neftedobyvaiushchei promyshlennosti
SSSR (Moscow: Izdatel’stvo Akademii Nauk SSSR, 1958).
4. See the significant studies by Robert W. Campbell, The Economics
of Soviet Oil and Gas (Baltimore: Hopkins, 1968), Marshall
I. Goldman, The Enigma of Soviet Petroleum: Half-full or Half-
empty? (London: Allen & Unwin, 1980), Robert E. Ebel, The
Petroleum Industry of the Soviet Union (Arlington, VA: Royer &
Roger, 1961), Demitri B. Shimkin, The Soviet Mineral-Fuels Indus-
tries, 1928–1958 (Washington, DC: Government Printing Office,
1961), or the German-language studies by Yury Napuch, Die
Sowjetunion, das Erd€ ol und die Ursachen des Kalten Krieges,
Europäische Hochschulschriften, Reihe 3, Geschichte und ihre
Hilfswissenschaften, vol. 300 (Frankfurt a.M.: Peter Lang, 1986)
and Juri Semjonow, Erd€ ol aus dem Osten: Die Geschichte der Erd€ol-
und Erdgasindustrie in der Sowjetunion (Düsseldorf: Econ, 1973).
5. The most important of these are the extensive publications by
Russian historian Aleksandr Igolkin, especially Aleksandr
A. Igolkin, Neftianaia promyshlennost’ SSSR (1928–1950-e gg.)
(Moscow: Institut Ekonomiki RAN, 2011), and the recent mono-
graph by Andrei K. Sokolov, Neftianoe khoziaistvo, 1921–1945 gg.
(Moscow: Institut rossiiskoi istorii RAN, 2013).
6. Among others, for the Khrushchev era, see Viacheslav L. Nekrasov,
Oleg N. Stafeev, and Evgenii A. Khromov, Neftegazovyi kompleks
SSSR (vtoraia polovina 1950-kh – pervaia polovina 1960-kh gg.):
Ekonomicheskie i institutsional’nye aspekty razvitiia (Khanty-
Mansiisk: Novosti Iurgy, 2012). For the later Brezhnev era, see
Mariia V. Slavkina, Triumf i tragediia: Razvitiia neftegazovogo

kompleksa SSSR v 1960–1980-e gody (Moscow: Nauka, 2002).
7. See, for example, the extensive study on the regional situation
within the Volga-Urals by Vladimir N. Kuriatnikov, Stanovlenie
neftianogo kompleksa v ural’skom i povolzhskom regionakh (30–50-
e gg. XX veka), 2 vols. (Samara: Samarskii Gosudarstvennyi
Tekhnicheskii Universitet, 2008).
8. Among others, see Jennifer I. Considine and William A. Kerr, The
Russian Oil Economy (Northampton, MA: Edward Elgar, 2002);
or the study by Marshall I. Goldman, Petrostate: Putin, Power, and
the New Russia (Oxford: Oxford University Press, 2008). Note-
worthy is furthermore the outstanding monograph by Daniel
Yergin, The Prize: The Epic Quest for Oil, Money, and Power, rev.
edn (New York: Free Press, 2009), even though Russian and Soviet
oil policies are included only insofar as they are connected to global
oil developments.
9. For instance in Considine and Kerr, Russian Oil Economy, 45–55;
or in Aleksandr A. Igolkin, “Politika tsveta nefti,” Neft‘ Rossii
14, 12 (2007), http://www.oilru.com/nr/176/4073
10. Bogdan Musial, Stalins Beutezug: Die Pl€ underung Deutschlands
und der Aufstieg der Sowjetunion zur Weltmacht (Berlin:
Propyläen, 2010), 90.
11. Yergin, Prize, 113–5.
12. See John D. Grace, Russian Oil Supply: Performance and Prospects
(Oxford: Oxford University Press, 2005), 8; Iain F. Elliot, The
Soviet Energy Balance: Natural Gas, Other Fossil Fuels, and Alter-
native Power Sources (New York: Praeger, 1974), 71.
13. See Considine and Kerr, Russian Oil Economy, 34–7; and Igolkin,
Neftianaia promyshlennost’, 10–18.
14. Igolkin, Neftianaia promyshlennost’, 28–30.
15. A. Chubarov, “Uspekhi i zadachi neftianoi promyshlennosti,”
Pravda, no. 24, January 30, 1927, 1.
f. 57, op. 2, d. 2, l. 13.
17. RGASPI, f. 57, op. 2, d. 2, ll. 300–1.
18. Edgar W. Owen, Trek of the Oil Finders: A History of Exploration
for Petroleum (Tulsa, OK: American Association of Petroleum
Geologists, 1975), 1365.
70 F. REHSCHUH
19. Semjonow, Erd€ ol aus dem Osten, 196–7.

20. Igolkin, Neftianaia promyshlennost’, 189; Sokolov, Neftianoe
khoziaistvo, 121. For local developments see, for example, Olga
A. Romanovskaia, “Pervoe desiatiletie permskoi nefti (1929–1939
gg.),” in Vagit Ju Alekperov, ed., Neft’ Strany Sovetov: Problemy
istorii neftianoi promyshlennosti SSSR (1917–1991 gg.) (Moscow:
Drevlekhranilishche 2005), 351–65, especially 360.
22. Goldman, Petrostate, 28–30.
23. Aleksandr A. Igolkin, “Osobennosti razvitiia neftianoi
promyshlennosti SSSR v gody pervykh piatiletok (1928–1940
gg.),” in Alekperov, Neft’ Strany Sovetov, 107–8.
24. Walerian W. Kuibyschew, “Der zweite Fünfjahrplan,” in
Kommunistische Partei der Sowjetunion (KPdSU), ed., Der
Sozialismus siegt: Berichte und Reden auf dem 17. Parteitag der
KPdSU (B). Januar/Februar 1934 (Zürich: Ring-Verlag, [1934]),
499, 515–16.
25. Grigori Ordshonikidze, “Die Vollendung der Rekonstruktion der
gesamten Volkswirtschaft,” in KPdSU, ed., Der Sozialismus siegt,
632–4.
26. Joseph V. Stalin, Works, vol 13: July 1930 – January 1934
(Moscow: Foreign Language Publishing House, 1954), 321.
27. Institut Marksa-Engel’sa-Lenina-Stalina pri TsK KPSS, ed.,
Kommunisticheskaia Partiia Sovetskogo Soiuza v rezoliutsiiakh i
resheniiakh s”ezdoy, konferentsii i plenumov TsK, 1898–1953:
Chast’ II, 1925–1953, 6th edn (Moscow: Gosudarstvennoe
izdatel’stvo politicheskoi literatury, 1953), 757–9.
28. Gosudarstvennyi arkhiv Rossiiskoi Federatsii (State Archive of the
Russian Federation, GARF), f. 5446, op. 24a, d. 1623, ll. 73–64.
See also Kuriatnikov, Stanovlenie neftianogo kompleksa, vol. 2, 330.
29. Shimkin, Mineral-Fuels Industries, 36.
30. Considine and Kerr, Russian Oil Economy, 36.
31. Aleksandr A. Igolkin, “Sovetskaia energeticheskaia strategiia i
neftianaia promyshlennost’ v 1940 – pervoi polovine 1941 g.,” in
Iu. A. Petrov, ed., Ekonomicheskaia istoriia: Ezhegodnik 2007
(Moscow: ROSSPEN 2008), 342–4.
32. GARF, f. 5446, op. 24a, d. 1647, ll. 6–5.
33. Nove, Economic History, 238–39; Sokolov, Neftianoe khoziaistvo,
132–8.
34. Nikolai K. Baibakov, Ot Stalina do El’tsina (Moscow: GazOil,

1998), 117.
35. GARF, f. P5446, op. 24, d. 1095, ll. 101, 92.
36. Jeronim Perović, “Russlands Aufstieg zur Energiegrossmacht:
Geschichte einer gesamteuropäischen Verflechtung,” Osteuropa
63, 7 (2013), 5–28, especially 9; see also Sokolov, Neftianoe
khoziaistvo, 86–91, 132–4.
37. See, for example, Kuriatnikov, Stanovlenie neftianogo kompleksa,
vol. 2, 244.
38. Ibid., 279.
39. Nove, Economic History, 239.
40. Igolkin, Neftianaia promyshlennost’, 23–4.
41. Rossiiskii gosudarstvennyi arkhiv ekonomiki (Russian State Archive
of the Economy, RGAE), f. 4372, op. 92, d. 292, l. 186.
42. “Rezoliutsiia XVIII s”ezda VKP (b) 20 marta 1939 g.: Tretii
piatiletnyi plan razvitiia narodnogo khoziaistva SSSR
(1938–1942),” in K. U. Chernenko and M. S. Smirtiukov, eds.,
Resheniia partii i pravitel’stva po khoziaistvennym voprosam:
Sbornik dokumentov za 50 let, 1929–1940 gody, vol. 2 (Moscow:
izdatel’stvo politicheskoi literatury, 1968), 682.
43. For official production rates see RGAE, f. 1562, op. 41, d. 65, l. 27.
For the developments within the Soviet oil sector during NEP, see
Geoffrey Jones and Clive Trebilcock, “Russian Industry and British
Business 1910–1930: Oil and Armaments,” The Journal of
European Economic History 11, 1 (1982), 93–101; Sokolov,
Neftianoe khoziaistvo, 39–42.
44. See Igolkin, Energeticheskaia strategiia, 345–6.
45. See Heinrich Schwendemann, Die wirtschaftliche Zusammenarbeit
zwischen dem Deutschen Reich und der Sowjetunion von 1939 bis
1941: Alternative zu Hitlers Ostprogramm?, Quellen und Studien
zur Geschichte Osteuropas 31 (Berlin: Akademie Verlag, 1993);
Edward E. Ericson, Feeding the German Eagle: Soviet Economic Aid
to Nazi Germany, 1933–1941 (New York: Praeger, 1999).
46. Campbell, Economics of Soviet Oil, 225. However, Campbell fails to
provide evidence for this claim and official Soviet statistics do not
confirm it, but evidently the Soviet Union imported growing
amounts of oil from American oil companies as well as from Roma-
nia, causing a dispute with Germany. See Oscar Sanchez-Sibony,
Red Globalization: The Political Economy of the Soviet Cold War
72 F. REHSCHUH
from Stalin to Khrushchev, New Studies in European History

(Cambridge: Cambridge University Press, 2014), 60; Napuch,
Sowjetunion, Erd€ ol und Ursachen des Kalten Krieges, 35–6, 44.
47. Schwendemann, Wirtschaftliche Zusammenarbeit, 342–52.
German deliveries to the Soviet Union also helped to some extent,
but current research usually holds that the economic cooperation
was primarily to the Germans’ advantage. See Ericson, Feeding the
German Eagle.
48. Robert E. Ebel, Communist Trade in Oil and Gas: An Evaluation
of the Future Export Capability of the Soviet Bloc, Praeger Special
Studies in International Economics and Development (New York:
Praeger 1970), 23–4.
49. Nove, Economic History, 277.
50. Solomon M. Schwarz, Labor in the Soviet Union (New York:
Praeger 1952), 74; Demitri B. Shimkin, Minerals: A Key to Soviet
Power (Cambridge: Harvard University Press, 1953), 38–45;
Baibakov, Ot Stalina do El’tsina, 58–62.
51. Geoffrey Roberts, Stalins Kriege: Vom Zweiten Weltkrieg bis zum
Kalten Krieg (Düsseldorf: Patmos, 2008), 140.
52. Steve LeVine, The Oil and the Glory: The Pursuit of Empire and
Fortune on the Caspian Sea (New York: Random House, 2007),
49–50.
53. Andrei K. Sokolov, “V godinu tiazhkikh ispytanii: Vklad
otechestvennoi neftianoi promyshlennosti v pobedu nad
fashizmom v Velikoi Otechestvennoi voine,” Neft’ Rossii
12, 5 (2005), http://www.oilru.com/nr/144/3002
54. Nove, Economic History, 280; Nikolai K. Baibakow, Sache des
Lebens: Aufzeichnungen eines Erd€ olarbeiters (Berlin: Dietz,
1985), 83.
55. Party Archive of the Armenian Branch of the Institute for Marxism-
Leninism of the Central Committee of the Communist Party of the
Soviet Union (PAAF IML), f. 1, op. 103, d. 81, ll. 156–159, as
quoted in Chapai Sultanov, “Sozdanie ‘Vtorogo Baku’ v gody
Vtoroi Mirovoi voiny, za schet razrusheniia bakinskikh
neftepromyslov, bylo strategicheskoi oshibkoi GKO SSSR,” in
Vystoiali by SSSR i Evropa protiv fashizma, v sluchae poteri bakinskoi
nefti? K 60-letiiu pobedy (Baku: Nafta-Press, 2005), http://
sultanov.azeriland.com/ussr/ussr_1/page_11.html
56. GARF, f. 5446, op. 49a, d. 829, l. 182.
57. RGAE, f. 1562, op. 33, d. 2310, l. 60.

58. The Lend-Lease Act, officially called “An Act to Promote the
Defense of the United States,” was enacted on March 11, 1941
to help Allied forces, and especially the British, without American
participation in the war. It enabled the US president to “sell,
transfer title to, exchange, lease, lend, or otherwise dispose of, to
any such government [whose defense the President deems vital to
the defense of the United States] any defense article.” Pub. L. No.
77–11, H.R. 1776, 55 Stat. 31, March 11, 1941.
59. Natalya V. Butenina, “Lend-Lease: The Oil Factor,” Oil of Russia
12, 1 (2005), http://www.oilru.com/or/22/360
Even though other Lend-Lease deliveries such as petroleum prod-
ucts, trucks, other transportation equipment, and even food and
clothes did indeed have an effect on Soviet war efforts and were
partly connected to the oil industry or found their way into it, they
are largely negligible in terms of the further development of the oil
industry and will not be considered further. For a detailed study on
Lend-Lease deliveries, see Robert H. Jones, The Roads to Russia:
United States Lend-Lease to the Soviet Union (Norman, OK: Uni-
versity of Oklahoma Press, 1969); or Natalya V. Butenina, Lend-
liz: Sdelka veka (Moscow: Gosudarstvennyi universitet vysshaia
shkola ekonomiki, 2004).
60. Igolkin, Neftianaia promyshlennost’, 157–8, 260; Antony
C. Sutton, Western Technology and Soviet Economic Development,
1917 to 1965, vol. 3: 1945–1965 (Stanford, CA: Hoover Institution
Press, 1973), 134–5.
61. Paul Zieber, Die sowjetische Erd€ olwirtschaft: Analyse eines
sowjetischen Industriezweiges (Hamburg: Cram, De Gruyter &
Co, 1962), 170.
62. Elliot, Soviet Energy Balance, 74–5.
63. Ebel, Communist Trade, 26–7; Sultanov, Sozdanie ‘Vtorogo Baku,’
http://sultanov.azeriland.com/ussr/ussr_1/page_11.html
64. Sokolov, Neftianoe khoziaistvo, 239–47.
65. Sultanov, Sozdanie ‘Vtorogo Baku,’ http://sultanov.azeriland.
com/ussr/ussr_1/page_11.html
66. Sokolov, Neftianoe khoziaistvo, 256–7.
67. Zieber, Sowjetische Erd€ olwirtschaft, 37.
68. K. U. Chernenko and M.S. Smirtiukov, eds., Resheniia partii i
pravitel’stva po khoziaistvennym voprosam: Sbornik dokumentov za
74 F. REHSCHUH
50 let, vol. 3 (Moscow: Izdatel’stvo politicheskoi literatury, 1968),

72–3.
69. Baibakov, Ot Stalina do El’tsina, 79–82; see also Sokolov,
Neftianoe khoziaistvo, 239–41.
70. “Sovetskii Azerbaidzhan-frontu,” Pravda, no. 297, October
24, 1942, 3.
71. “Chem bol’she goriuchego budet u nas, tem blizhe pobedy
reshitel’nyi chas,” designed by Sh. A. Mirzojanc in 1941, http://
www.neftepro.ru/photo/11-0-122-3
72. Zieber, Sowjetische Erd€ olwirtschaft, 37.
73. Campbell, Economics of Soviet Oil, 162–3; Theodore Shabad, Basic
Industrial Resources of the USSR (New York: Columbia University
Press, 1969), 6.
74. Bruce W. Jentleson, Pipeline Politics: The Complex Political Econ-
omy of East–West Energy Trade (Ithaca, NY: Cornell University
Press, 1986), 52–53.
75. Robert W. Campbell, “The Soviet Union,” in Gerard J. Mangone,
ed., Energy Policies of the World, vol. 2: Indonesia, the North Sea
Countries, the Soviet Union (New York: Elsevier North-Holland,
1979), 227–30.
76. Owen, Trek of the Oil Finders, 1524; Grace, Russian Oil Supply,
8–9.
77. GARF, f. 5446, op. 46a, d. 1148; GARF, f. 5446, op. 46a, d. 1064
l. 156. See also Campbell, “The Soviet Union,” 227–30; Walter
M. Iber and Peter Ruggenthaler, “Stalins Wirtschaftspolitik an der
sowjetischen Peripherie: Vorgehensweisen und Handlungsmuster,” in
Walter M. Iber and Peter Ruggenthaler, eds., Stalins Wirtschaftspolitik
€
an der sowjetischen Peripherie: Ein Uberblick auf der Basis sowjetischer
und osteurop€ aischer Quellen (Innsbruck: Studien Verlag, 2011),
349–74.
78. Iber and Ruggenthaler, “Stalins Wirtschaftspolitik,” 360–2.
79. Sutton, Western Technology, vol. 3, 17–18, 37–8.
80. J. W. Stalin, Werke, vol. 15, 2nd edn (Dortmund: Verlag Roter
Morgen, 1976), 357–8.
81. “Bol’she nefti—blizhe novyi rastsvet narodnogo khoziaistva,”
Pravda, no. 40, February 16, 1946, 2.
82. John P. Hardt, “Soviet Energy Policy in Eastern Europe,” in Sarah
M. Terry, ed., Soviet policy in Eastern Europe: An Overview (New
Haven: Yale University Press, 1984), 190–1; Igolkin, Politika

tsveta nefti.
83. N. Ia. Komarov, Gosudarstvennyi Komitet Oborony postanovliaet....:
Dokumenty: Vospominaniia: Kommentarii (Moscow: Voennoe
izdatel’stvo, 1990), 396–8. These early deliveries emerged as a
starting point for prosperous economic relations between Finland
and the USSR, which lasted throughout the Cold War. During the
1950s, Finland became the only non-communist country that was
entirely dependent on Soviet oil, which most Western countries
were extremely skeptical about. See Niklas Jensen-Eriksen, “The
First Wave of the Soviet Oil Offensive: The Anglo-American Alli-
ance and the Flow of ‘Red Oil’ to Finland During the 1950s,”
Business History 49, 3 (2007), 348–66.
84. Goldman, Enigma of Soviet Petroleum, 67–8.
85. Shimkin, Minerals, 195–6, 212–13.
86. Imogene Edwards, “The Passenger Car Industries of Eastern
Europe: A Brief Survey,” in Economic Developments in Countries
of Eastern Europe: A Compendium of Papers: Submitted to the
Subcommittee on Foreign Economic Policy of the Joint Economic
Committee, ed. Congress of the United States (91th Congress,
2nd Session Joint Committee Print) (Washington, DC: Govern-
87. Chernenko and Smirtiukov, Resheniia partii i pravitel’stva,
vol. 3, 264. For prewar production see Igolkin, Osobennosti
razvitiia, 107.
88. Shimkin, Minerals, 213.
89. GARF, f. 5446, op. 47a, d. 1032, l. 85.
90. Baibakov, Sache des Lebens, 154–5.
91. GARF, f. 5446, op. 51a, d. 1226, l. 99.
92. Chernenko and Smirtiukov, Resheniia partii i pravitel’stva,
vol. 3, 229–30, 260–1.
93. Ibid., 289–90.
94. RGAE, f. 8627, op. 10, d. 803, ll. 7–8; Lisichkin, Ocherki, 190–2.
95. Herbert Grund, Die Energiewirtschaft der Sowjetunion, Deutsches
Institut für Wirtschaftsforschung 18 (Berlin: Duncker & Humblot,
1952), 33; GARF, f. 5446, op. 51a, d. 1226, ll. 102–99.
96. GARF, f. 5446, op. 51a, d. 1226, ll. 102–99.
76 F. REHSCHUH
97. Campbell, Economics of Soviet Oil, 128–9; A. D. Budkov and L. A.

Budkov, “Piatiletka vosstanovleniia (1946–1950 gg.),” in Dinkov,
ed., Neft’ SSSR, 60.
98. See Olaf Mertelsmann, “Die Arbeiter des estnischen
Ölschieferbeckens—eine Industrieregion des Stalinismus,”
ur soziale Bewegungen 37, 1 (2007),
Mitteilungsblatt des Instituts f€
114–21.
99. RGAE, f. 4372, op. 42, l. 371, l. 23.
100. Semjonow, Erd€ ol aus dem Osten, 212.
101. Heinrich Hassmann, Erd€ ol in der Sowjetunion: Geschichte—
Gebiete—Probleme (Hamburg: Industrieverlag von Hernhaussen
K.G., 1951), 88; Levine, Oil and Glory, 50–1; Shabad, Basic
Industrial Resources, 148–9.
102. Considine and Kerr, Russian Oil Economy, 48.
103. GARF, f. 7523, op. 35, d. 13a, ll. 115–18.
104. Nikolai K. Baibakov, Vtoroe Baku (Moscow: OGIS, 1939), 39.
105. Nikolai K. Baibakov, Neftianoi front (Moscow: Gazoil Press,
2006), 80–1.
106. Poster “SSSR—bogateishaia strana v mire po nefti,” designed by
M. Raximov in 1946, http://www.neftepro.ru/photo/11-0-157-3
107. GARF, f. 5446, op. 48, d. 333, ll. 21–19.
108. GARF, f. 5446, op. 49a, d. 829, ll. 182–179; RGAE, f. 8627,
op. 9, d. 383, ll. 14–46; see also Napuch, Sowjetunion, Erd€ ol und
Ursachen des Kalten Krieges, 334–5.
109. GARF, f. 5446, op. 51a, d. 1226, l. 102. For productivity of oil
wells see Campbell, Economics of Soviet Oil, 134–35.
110. GARF, f. 5446, op. 49a, d. 829, ll. 169–163.
111. Ibid., l. 168.
112. GARF, f. 5446, op. 49a, d. 828, ll. 224–219.
113. Shimkin, Mineral Fuels Industries, 90.
114. GARF, f. 5446, op. 51a, d. 1466, ll. 181–175.
115. Ibid., ll. 167–66.
116. Ibid., l. 181.
117. Ibid.
118. Lisichkin, Ocherki razvitiia, 191; Ebel, Petroleum Industry, 20–1.
119. Campbell, Economics of Soviet Oil, 124.
120. See GARF, f. 5446, op. 51a, d. 1445, ll. 64–55. On the
Romashkino oil field see Grace, Russian Oil Supply, 22–4.
121. GARF, f. 5446, op. 51a, d. 1466, l. 166.
122. Hassmann, Erd€ ol in der Sowjetunion, 130; Central Intelligence

Agency (CIA) Freedom of Information Act (FOIA) Electronic
Reading Room, Office of Reports and Estimates (ORE) 24–49,
“The USSR Petroleum Industry,” January 5, 1950.
123. Among others, see Walter J. Levy, “Middle Eastern Oil as an
Objective of World Power: Lecture given at the National War
College, Washington, D.C., 22 January 1947,” in Melvin Conant,
ed., Oil Strategy and Politics, 1941–1981 (Boulder, CO: Westview
Press, 1982), 60–61; for further reading: Jamil Hasanli, “Der
Kampf um das Erd€ol im Nahen und Mittleren Osten,” in Iber
and Ruggenthaler, eds., Stalins Wirtschaftspolitik, 314.
Stalin’s Oil Policy and the Iranian Crisis
of 1945–1946
Nataliia Egorova
INTRODUCTION
Since the start of declassification of secret archival holdings in former Soviet
archives beginning in the 1990s, the study of international events in Iran in
the last years of World War II and the early postwar years has advanced
considerably. But despite obvious progress in the study of the Iranian Crisis
of 1945–1946, researchers have not yet come to firm conclusions about its
place in the history of the Cold War, and the goals and motives of Soviet
policy toward Iran.
Works that appeared before the opening of archives in the 1980s shared a
methodology of “post revisionist” synthesis (Bruce Kuniholm, Barry Rubin,
David Alvaris, Mark Lytle, and some others) arguing that the causes of the
Cold War were not to be found in the great powers’ contradictions in
Europe (given their opposing sociopolitical systems), but in their colliding
national interests and political ambitions in the Middle East of the early
postwar years. Although they recognized the influence of communist ide-
ology, these authors rejected attempts to explain the events in Iran with
traditional answers such as “Soviet expansionism” or the “defensive reac-
tion” of the United Kingdom (UK) and the United States (US). Instead,
N. Egorova (*)
Center for Cold War Studies, Institute of World History, Russian Academy of
Sciences, Moscow, Russia

DOI 10.1007/978-3-319-49532-3_3
80 N. EGOROVA
they analyzed the deeper motives of each country’s conduct during the
Iranian Crisis.1 Using documents available at that time, they successfully
advanced the study of US and British foreign policy in the Middle East,
and particularly of those countries’ relations with Iran and Turkey in the
1940s. As emphasized by Kuniholm, the US, which after World War II
aspired to strengthen its leading role in global affairs, considered Iran to be
not only a source of oil, but also a “buffer between the Soviet Union and US
interests in the Middle East,”2 with oil crucially influencing US policy on
Iran.3
Researchers of the 1980s hence attempted to overcome the Western-
centric interpretation of the origin of the Cold War by focusing on the
influence of Iranian and Turkish leaders. With regard to the actions of the
Union of Soviet Socialist Republics (USSR) in the Middle East, they were
interested in the factors that guided Soviet leaders in shaping a policy on
Iran: were their main motivations the security of their country’s borders and
the southern oil fields in Baku, or did Moscow have aggressive intentions?
These questions were difficult to answer without access to documents from
the Soviet archives.
In addition to ideological constraints, this lack of archival access also
prevented Soviet historians from studying the deeper causes and the course
of the Iranian Crisis. Authors were forced to adhere to the official interpre-
tation, according to which the Soviet Union had not intervened in Iran’s
internal affairs. According to this narrative, Moscow only provided moral
support to the national liberation movement in Iranian Azerbaijan and
Iranian Kurdistan, while British and American “imperialist circles,” with
the help of reactionary Iranian authorities, used the Iranian issue as a
pretense for international tension and attacks on the Soviet Union.
After the end of the Cold War, access to selected Soviet archival holdings
as well as the opening of archives in some of the former Soviet republics
(especially those of Azerbaijan and Georgia) significantly improved research
possibilities and thus the understanding of Soviet motives and goals in Iran
during and after the final stage of World War II. Most scholars today do not
doubt that one of the main reasons for the delay of the withdrawal of Soviet
troops from Iran (after the Allies’ scheduled deadline of March 2, 1946) was
the USSR’s interest in obtaining an oil concession in the northern parts of
Iran and thereby consolidating the Soviet sphere of influence over the
Middle East region—which ultimately led to the international Iranian
Crisis.4
STALIN’S OIL POLICY AND THE IRANIAN CRISIS OF 1945–1946 81
Azerbaijani historian Jamil Hasanli, in his seminal study on the Iranian

Crisis, goes even further and claims that the USSR was not only interested in
oil in northern Iran, but also in acquiring territory. Mainly on the basis of
documents from Azerbaijani archives, Hasanli argues that the Azerbaijan’s
Party leadership favored Iranian Azerbaijan joining Soviet Azerbaijan. Based
on new material discovered by Hasanli, he agrees with the group of
researchers claiming that the origins of the Cold War were closely tied to
the events of 1944–1946 in Iran and Turkey.
There is yet another point of view in contemporary historiography about
the origins of the Cold War, situated halfway between the two previous
conceptions. Kristen Blake, for example, claims that the events in Iran in
1945–1946 were a “case study” where “Cold War ramifications were also
manifested outside Europe.”5 But much like the “post revisionists,” she also
accounts for the role of Iranians in the development of Cold War rivalry
between the US and USSR in Iran.
To which extent do interpretations contained in works on the Iranian
Crisis shortly published after the opening of former Soviet archives corre-
spond to the main tendencies in the recent historiography on the Cold War?
An integral feature of works that appeared in the 2000s is the expansion of
the concept of a “new Cold War history.” This new approach is demon-
strated namely in the Cambridge History of the Cold War, which is a
comprehensive analysis of the causes and consequences of the global con-
frontation drawing on new methods and insights.6 In studying “new Cold
War history” as international history (looking, for example, not only at the
decisive role of superpowers, but also at other countries, including the Third
World), the editors of the three-volume work determine the place and
importance of the Cold War in close connection with fundamental processes
of the twentieth century. Such an approach enables the researcher better to
understand global postwar changes and their impact on the beginning and
the end of the Cold War.7
The same idea, albeit different in form, is developed by the authors and
editors of the seminal Oxford Handbook of the Cold War, which consists of
separate essays that revise traditional methodological approaches.8 In gen-
eral, the authors seek to overcome the narrow bipolar approach of super-
power confrontation in the study of the Cold War through the synthesis of
national, international, and global research.
Although more and more historians are studying the Cold War as a
global and transnational phenomenon in a larger historical timeframe,
there is a danger of blurring the subject of the Cold War, when, according
82 N. EGOROVA
to Federico Romero, “the traditional paradigm of highly specific bipolar

conflict (where realist-based on security rivalry or pivoted on the projection
of ideological and socio-economical models) is superseded by a complex
fabric of disparate interactions (local, national, transnational and global)
with multiple actors operating in many interesting fields, and assorted
interpretive paradigms often mixed together.”9
New approaches devote special attention to the Third World. Apart from
studying the efforts of the superpowers to subsume these countries to their
spheres of influence, they focus on the social, political, and economic
development in the Third World and the impacts of these countries’ policies
on the international situation. Studying the Iranian Crisis of 1945–1946
with new methods and declassified documents reveals the geopolitical and
economic reasons that caused more contradictions among former allies in
the coalition against Hitler, and the role of Iranian elites in choosing a
pro-American foreign policy in the postwar years.
At the same time, expanding the geographical scope of historiography
and rejecting Western-centrist tendencies does not mean that we should
abandon our assessment that the European continent was indeed at the
center of a global bipolar confrontation. As Romero points out:
“Provincialising Europe is an epistemological necessity for global and inter-
national history, but hardly a scholarly strategy applicable to a conflict
spawned in and about Europe, pivoted on the continent’s destiny, and
eventually solved where it had its deepest and more relevant roots.”10
Against this background, developments in the Middle East leading to the
Iranian Crisis of 1946 did play a role in aggravating Cold War tensions, and
the Soviet desire to gain access to Iranian oil was a crucial factor.
This chapter sets out to explain this story, investigating the causes,
progress, and consequences of the Iranian Crisis based largely on Russian
archival material, published document collections, and new historiography.
Three main arguments are put forward. First, Soviet intentions to gain
access to oil resources in the north of Iran played a considerable role in
the escalation of the Iranian Crisis. Second, I argue that the Kremlin had no
plans for Iranian Azerbaijan joining the Soviet Union. And third, despite its
significant contribution to the birth of the postwar confrontation, the
Iranian Crisis should not be considered the beginning of the Cold War.
SHORT HISTORICAL OVERVIEW

To understand Soviet policy in Iran in the 1940s better, it is worth taking a
look at some historical facts that show Moscow’s traditional interest in
strengthening relations with Iran as its close neighbor,11 and the rivalry
with the British in this region, which goes back to the days of the Russian
Empire. There have been many wars in the long history of Russian–Iranian
relations. A decisive factor for the division of Iran between the Russian and
British empires was the Anglo-Russian convention of 1907. This document
not only delineated spheres of influence in Central Asia for both empires,
but also divided Iran into three zones: a Russian one in the north, a British
one in the south, and a neutral zone in the center.
The first attempts to conclude a bilateral agreement on oil concessions
with Iran were made by Tsarist Russia in 1916. After the revolution of
1917, Soviet Russia experienced some periodic complications with Iranian
authorities because of foreign companies’ thirst for oil exploration and
production rights in the northern provinces of Iran. In 1921, the Moscow
Treaty was signed, according to which all the property of Russian industri-
alists and concessionaires, totaling 582 million gold rubles, was donated to
Iran. Soviet Russia also refused the petroleum, ore, and other concessions of
Tsarist Russia.12 Nevertheless, under the treaty’s thirteenth article, the
Iranian government agreed not to transfer concessions or property, which
had belonged to Tsarist Russia and were handed over to Iran, to third
parties.
In 1922, however, the Iranian government breached the contract and
granted the US Sinclair Oil Corporation a concession for oil exploration and
exploitation in the northern Caspian provinces. In 1937, the same rights
were also granted to the Delaware Company in the region of Khorasan and
Gorgan. History repeated itself in 1939 with a subsidiary company of Royal
Dutch Shell. It was only after strong protests by the Soviet government,
which was concerned about the security of its southern borders (because the
territory of concessions ran along the USSR’s borders near Baku), that all
three concessions were canceled.
The Soviet Union became interested in Iranian oil in the mid-1920s
because the oil could add significantly to the fields in Soviet Azerbaijan and
ensure the security of Baku, which was at that time the center of the Soviet
oil industry. As a result, the joint stock company Kavir-Hurian Ltd. was
officially registered on June 1, 1926.13 Of this company, 65 percent
belonged to the Soviet Union, 20 percent belonged to the previous
84 N. EGOROVA
Russian owner Akakii M. Khoshtaria, and the rest belonged to the Iranian
elite.14
However, the USSR had no financial capacity in the prewar period to
participate in the development of north Iran’s oil. At first, the Kavir-Hurian
company was financed by Azneft’, the largest trust of the Soviet oil syndi-
cate. But it soon became apparent that additional funds were necessary. To
that end, the Soviets tried to attract French capital, but without any success.
Overall, the Soviet government had spent about 600,000 rubles by 1928 to
establish the necessary infrastructure for oil production in the north of Iran.
By the beginning of World War II, Iran had become a leading oil power
in the Middle East, and its oil resources were controlled by the
Anglo-Iranian Oil Company (AIOC) on the basis of a concession con-
cluded in 1903. However, five northern provinces of Iran (Iranian
Azerbaijan, Mazendaran, Gilan, Gorgan, and Astrabad) that had previously
been under the Russian Empire’s influence were not included in the zone of
the AIOC’s activity.
THE USSR’S GROWING INTEREST IN IRANIAN OIL

The introduction of Soviet and British troops to Iran in August 1941—
actually to the zones of influence established by the Anglo-Russian conven-
tion of 1907—marked the beginning of military cooperation within the
anti-Hitler coalition and laid the foundation for the conclusion of the
Tripartite Treaty of Alliance between the USSR, the UK, and Iran on
January 29, 1942. Besides a shared will to achieve the military strategic
objectives, the UK and the Soviet Union both pursued their specific
national interests by deploying their troops. For the Soviet Union, in
addition to protecting Baku’s oil fields, strengthening its influence in
Iran’s northern provinces was no less important. The USSR did so by
supporting autonomist tendencies among the large ethnic Azerbaijani com-
munity in northern Iran.
Still, Soviet oil interests were equally important. In a diplomatic note of
August 30, 1941, Moscow called on Iran to assist the Soviet representatives
in the development of the oil business with the Kavir-Hurian company. The
presence of Soviet troops in northern Iran stimulated the USSR’s interest,
both for scientific purposes and for reasons of state, in studying the natural
resources of this region, especially the oil fields, more actively. According to
the directives of Stalin’s leadership in 1942–1943, several expeditions
conducted their work in north-eastern Iran. They were sent by the Academy
of Sciences of the USSR as well as by the headquarters of engineering troops

of the Central Asian Military District and the Transcaucasian Front. Their
reports contained information about the significant reserves of coal, iron,
rare metals, and oil in northern Iran, which were needed for the develop-
ment of the USSR’s Central Asian republics.15
As the People’s Commissar for the Oil Industry Ivan Sedin noted in a
letter to the Deputy of the Commissar for Foreign Affairs Vladimir
Dekanozov on January 25, 1944, “during July–September 1943, oil geol-
ogists of the People’s Commissariat for Oil Industry [Narkomneft’]
conducted geological explorations in northern Iran to assess the prospects
of its oil potential.” Based on preliminary data, the results of this exploration
showed a “promising oil potential of northern Iran (Gilan, Mazandaran,
and Gorgan) as a huge oil province, which joins the oil-bearing regions of
Soviet Azerbaijan and the Turkmen Soviet Socialist Republic.” Sedin later
requested authorization to conduct further geological surveys.16 The do-
cument, which was finally sent to Ivan Sadchikov, head of the Middle East
Department of the People’s Commissariat for Foreign Affairs
(Narkomindel), contains a strange note by Sergei Kavtaradze, a deputy of
the commissar for foreign affairs responsible for the Middle East: “It is none
of the People’s Commissariat’s business. We can only say our opinion.”17
Nevertheless, all correspondence with the Soviet embassy in Tehran about
geological explorations in northern Iran is preserved in the Foreign Policy
Archive of the Russian Federation (AVPRF). This leads me to conclude that
as early as World War II, Iranian oil became a vital topic for Soviet foreign
policy. As openly stated in a memorandum of Soviet experts on the results of
the oil-bearing geological exploration of northern Iran (Gorgan,
Mazandaran, Gilan), conducting further industrial intelligence on the
750-km2 territory required large investments; also, local sovereignty over
this territory was to be delimited for the sake of the Soviet oil’s intelligence
and extraction, “thus falling already within the sphere of special state and
diplomatic decisions.”18 Among the tools that could accelerate oil explora-
tion, the documents’ authors mentioned the presence of Kavir-Hurian Ltd.
in Iran, which was to be subordinated to the Narkomneft’, and access to
documents of the AIOC.
On the whole, we can conclude that in consolidating the Soviet sphere of
influence in Iran, the oil fields of northern Iran played a role no less
important than the USSR’s security on its southern flank. This was partic-
ularly the case when two American oil companies, Standard Vacuum and
86 N. EGOROVA
Sinclair Oil, and the British Shell company began talks in Tehran on oil
concessions in southern Iran.
THE USSR ENTERS THE COMPETITION FOR OIL RESOURCES

In March 1944, the Narkomindel, together with the People’s Commissariat
of Foreign Trade, started its work on a Soviet–Iranian oil agreement. The
archival documents reveal that the person in charge on behalf of the Soviet
leadership in preparing the oil concession in northern Iran was Lavrentii
Beria, who occupied several important positions (People’s Commissar of
Internal Affairs, and deputy to the chairman of the Council of People’s
Commissars [SNK], a position held by Stalin). When Beria received the
package of documents with plans for a mixed Soviet–Iranian oil stock
company on March 11, 1944, he demanded many amendments in favor
of the USSR. By March 14, a new version of the project stipulated that the
Iranian government grant the Soviet–Iranian oil company (which was to be
founded in Moscow) an oil concession for the next ninety-nine years.19 The
new proposal thus requested far more influence for the concessionaire, that
is, the Soviet Union, and the granting of concessions over large parts of
northern Iran. On March 17, the project developers also supported Beria’s
idea to dissolve the Kavir-Hurian Ltd. once the new Soviet–Iranian oil
company was established, provided that the Iranian Majlis (parliament)
approved the agreement between this company and Iran.20
A memorandum sent on May 11, 1944 from Kavtaradze to Viacheslav
Molotov (who at the time was not only the commissar for foreign affairs,
but also the first deputy chairman of the SNK) shows that by that time, the
plan for getting the oil concession was essentially in place. Kavtaradze wrote:
“Given the fact that the British and the Americans are working actively in
Iran toward getting a concession in the Iranian oil fields, we also need to
start implementing our plans to obtain an oil concession in the north of
Iran.”21 To make those plans seem less official, he suggested entrusting the
preliminary negotiations to the Soviet embassy and trade mission in Tehran.
The Soviet leadership prepared very carefully for the negotiations with
the Iranian government. They paid considerable attention to the activities of
the oil policies of the US and UK and were trying to learn more about the
upcoming bilateral Anglo-American conference on oil issues, which was to
be held in Washington in July 1944. On July 17, 1944, Beria sent the next
proposal about this question to Molotov: “It is desirable to assign any of our
employees currently in the USA to get immediate information on current
issues of international oil affairs and the forthcoming Anglo-American talks

on oil. Subsequently, it may be necessary to have someone in the United
States [assigned for such duties—N.E.] permanently.”22 Beria suggested
temporarily using Amazasp Arutiunian, a member of the Soviet delegation
at the United Nations (UN) Monetary and Financial Conference in
Bretton-Woods and a representative of the Narkomindel, for this purpose.
Molotov approved Beria’s proposal and signed the attached cipher tele-
grams. In the first telegram, addressed to Arutiunian, he was tasked to use
his stay in Bretton Woods and Washington “for getting information and
gathering published as well as government agencies’ materials on current
issues of US oil policy, particularly on issues related to the upcoming
renewal of the Anglo-American talks on oil.” The Soviet leaders wanted
information about the time and place of the conference, its program, and
the plans and intentions of the delegations. Moreover, Arutiunian was asked
to hold private talks with influential personalities such as the US Secretary of
the Treasury Henry Morgenthau, Secretary of the Interior Harold Ickes
(who had also been the director of US global oil reserves since 1943), and
some others. At the same time, Molotov demanded that he pay special
attention in private conversations to “the Anglo-American contradictions,
the essence of which we are very interested in.”23 In the telegram to the
Soviet ambassador in Washington, Molotov emphasized: “Arutiunian has
been charged with an important task on the issue of oil, provide him with
the necessary facilities and assistance, as well as the payment of expenses.”24
The Washington conference finished on August 8, 1944 with the signing
of a special agreement by the US and UK that envisaged further joint
actions in the field of oil policy. Following Molotov’s instructions, Beria
on August 16 sent an analytical report to Stalin and Molotov. Beria’s report
is very important for understanding the Soviet Union’s postwar aims in Iran
and world oil policy, because it contained a highly detailed supplement on
“[w]orld oil production and the share of the US and England in it.” The
data used were from the journal Oil Weekly, which stated that the US was
the leader in world oil extraction (with a share of 80 percent), while the
UK’s share was only 14.6 percent.25 On the basis of these figures and the
speech by Ickes in October 1943 about maximizing savings of American oil
resources and making wider use of foreign oil, Beria came to the conclusion
that the US was prepared for further expansion of American capital beyond
its frontiers.
In general, the document covered world oil extraction and its reserves,
US oil policy, oil extraction in the Middle East, and Anglo-American oil
88 N. EGOROVA
negotiations. Beria emphasized in particular that “the Britons and perhaps

the Americans carry out secret work to counteract the transfer of the oil
fields of northern Iran to the Soviet Union for their exploitation.” This led
him to propose “to set out vigorously to negotiate with the Iranians the
obtaining of a concession in northern Iran.” As the wording illustrates, the
prepared draft of a concession treaty with the Iranians was based on
the terms of the Anglo-Iranian concession treaty for oil field development
in the south of Iran.
Beria then proposed that a decision be made on whether the USSR
should participate in Anglo-American negotiations: “We consider that our
participation in these negotiations will be very useful for us in general, and
will give us favorable conditions for the protection of the USSR’s interests in
[. . .] international affairs.”26 Despite Beria’s responsibility for oil policy,
there is no doubt that Stalin himself stood behind all principal decisions
concerning Soviet relations with Iran and the USSR’s intentions to gain
access to the world’s oil reserves.
The Soviet Union’s yearning for an oil concession in northern provinces
of Iran hence reflected not only interests of security and a “sphere of
influence,” but political leaders’ desire to participate in the postwar compe-
tition for the right to possess new oil fields in the Middle East on par with
other great powers.
KAVTARADZE’S OIL MISSION IN IRAN

The SNK had its final draft resolution on the oil concession ready by August
28, 1944. The beginning of the draft approved the government’s commis-
sion that was to carry out the negotiations with the Iranian government. It
was headed by Kavtaradze, who was directly involved in preparing proposals
for the oil concession.27 The other part of the document tackled the
agreement’s details. The future company, called “Soviet–Iranian Oil,”
which, as stipulated in the agreement, was to have its headquarters in
Moscow, was granted exclusive rights for the exploration, production, and
refining of oil. The concession’s territory included the northern parts of the
following provinces: Iranian Azerbaijan, Mazandaran, Gorgan, Khorasan,
and the district of Kavir-Hurian—a total area of 210,000 km2. However,
during the first eight years, the area the concessionaire was allowed to select
for exploration and production was not to exceed 150,000 km2. The
concession was established for 60 years, and after ratification of the agree-
ment, Kavir-Hurian Ltd. had to be liquidated.28
Comparing the draft with the AIOC’s agreement, the authors noted that
while the AIOC offered 20 percent of net profit to Iran, the USSR offered
15 percent. Other differences were in favor of the USSR, although the area
the AIOC finally selected for exploitation was 160,000 km2, as opposed to
the USSR’s selection of 150,000 km2.29 On August 31, 1944, the SNK
approved the decision on negotiations with the Iranian government.
An oil concession for the next 60 years that granted exclusive exploration
and production rights on a territory of 150,000 km2 offered the Soviet
Union great advantages for its geostrategic interests and ambitions to
extend its sphere of influence in Iran. As for its Western Allies, they under-
stood this prospect perfectly—and tried to prevent it. Moreover, a growth
of Soviet influence in northern Iran would help to prevent a Western
presence on the USSR’s southern borders.
On September 9, 1944, the Soviet commission finally flew to Iran.
Interestingly enough, the commission members did not inform Prime
Minister Mohammad Sa’ed about the purpose of their visit during the
first two weeks of their stay. Instead, they claimed to be acquainting
themselves with the activities of Kavir-Hurian Ltd. Even after studying the
situation in the north and concluding that it was time to begin negotiating
with Sa’ed, the commission members tried to conceal the fact that the draft
of an agreement on a Soviet oil concession had been already prepared.30
After difficult negotiations, Sa’ed’s cabinet officially rejected the USSR’s
request on October 11, 1944, declaring that all negotiations about conces-
sions were to be postponed until the end of the war, when the global
economic outlook would become clearer. Kavtaradze’s mission ended in
failure. The Iranian Majlis (where most representatives had no sympathies
for the USSR) adopted a law on December 2 that banned prime ministers
from negotiating with foreign countries and companies on oil concessions.
An information letter from the Soviet embassy in Tehran acknowledged
that the Majlis “had been able to provide strong resistance to our first
attempt to expand economic interests (a rejection of the concession).”31
Despite their oil companies’ dissatisfaction, the US and the UK respected
Iran’s decision to suspend all negotiations until the end of the war, because
this foiled the quite predictable plans of their Soviet ally. The negotiations
on oil concessions uncovered a new trend in Iran’s foreign policy, which
intended to use the US as a counterweight to the traditional influence of the
UK and the USSR in the country. The US embassy in Tehran worked
closely with Sa’ed, advising him on tactics for rejecting the Soviet request.32
90 N. EGOROVA
Analyzing the real reasons for the rejection of their request, Soviet
diplomats thought they were due to fears about Iranian “reactionaries”
supported by the Western Allies: “The provision of a Soviet oil concession
in the north of Iran, i.e., in the most populated and economically most
important areas, will significantly enhance and strengthen our position and
our influence in Iran.”33 The document further states that Kavtaradze
stayed in Iran until December 7, 1944. During his long visit, and together
with the new Soviet ambassador, Мikhail Maksimov, he tried to implement
Moscow’s directives to pressure the government of Sa’ed, who finally had to
resign. According to a directive of December 5, they issued a statement
demanding that the new Prime Minister Morteza Gholi Bayat review the
“wrong decision of the Majlis.”34
Between November 1944 and January 1945, this Soviet policy led to an
exchange of rather harsh diplomatic notes between the Western Allies and
the USSR. The Americans and the British accused Soviet leaders of inter-
vening in Iran’s internal affairs, while Soviet diplomats underlined the
Western Allies’ unfriendly position on Soviet–Iranian negotiations.
Since Iran occupied such an important strategic position in the Middle
East, the regional events of 1944 and the Soviet efforts to get an oil
concession became the catalysts that revealed the Allies’ competing inter-
ests. Another feature of the imminent international Iranian Crisis was
Moscow’s active use of the People’s Party of Iran (the Tudeh) to realize
foreign policy aims. The nucleus of this party consisted of former commu-
nists who had been released from Iranian prisons in 1941. Although the
Iranian Crisis was mainly caused by geopolitics and the beginning struggle
for oil resources, Soviet political activity in Iran also carried an ideological
dimension, which increased the suspicion and distrust of its Anglo-
American allies.
CONTINUING SOVIET STRUGGLES

In hindsight, granting the Soviet Union a concession for the exploration
and commercial development of northern Iranian oil appears to have been a
core of Soviet–Iranian relations during the early postwar years. But deciding
on this issue involved other problems, which aggravated the situation in Iran
to a critical point: the withdrawal of Soviet troops, the development of the
movement for national autonomy in Iranian Azerbaijan, and Iranian
Kurdistan.
At a meeting in Moscow on February 26, 1945, Iranian Ambassador

Majid Ahi and Molotov once again addressed the question of an oil con-
cession. Ahi recalled that the Majlis had ruled that any provision of conces-
sions would have to wait until after the war, and proposed the idea of
establishing a joint Soviet–Iranian society for oil exploration and production
in northern Iran. However, as became apparent during their conversation,
he was not going to be more precise. Frustrated, Molotov said that “such a
proposal cannot serve as the basis for any negotiations,” and insisted that the
USSR be given an oil concession.35
Judging by the response of Mohammad Reza Shah Pahlavi to one of the
Majlis’ deputies from a northern province of Gilan, who presented him with
another Soviet request for an oil concession in April 1945, the Iranian
authorities made any future negotiations strictly conditional on the estab-
lishment of a Soviet–Iranian joint stock company.36 At that time, however,
the Soviet leadership considered the establishment of such a company to be
a manifestly discriminatory act in comparison to the rights granted in the
south to its main rival in Iran—the UK.
Based on archival documents, we may conclude that in defending Soviet
economic and geopolitical interests in the Middle East, Stalin and the Soviet
leadership banked on a stronger presence of Soviet troops in the north of
Iran. This is proven by the reaction of the Narkomindel to the Iranian
foreign minister’s address on May 19, 1945 to the USSR, the US, and the
UK demanding they withdraw their troops earlier.37 In a memorandum to
Molotov on May 25, Kavtaradze set forth the motives that guided Soviet
diplomacy on an early withdrawal from Iran: “The withdrawal of Soviet
troops from Iran will lead, undoubtedly, to the strengthening of reaction in
the country and to the inevitable defeat of democratic institutions [. . .].
Reactionary pro-British elements will direct every effort and use all means to
eliminate our influence and the results of our work in Iran. Therefore, I
would consider it correct to delay the withdrawal of our troops from Iran
and make it possible to ensure our interests after their withdrawal (mainly by
acquiring the oil concession and, in the extreme case, by creating a joint
stock company in which we would hold an overwhelming majority).”38
Equally important was the Soviet support for the national liberation
movement in northern Iran, which had its own historical roots and forms.
Why did the Soviet leadership consider it so important to strengthen the
USSR’s influence in Iranian Azerbaijan? Ethnicity was one of the main
reasons. During World War II, contacts between representatives of ethnic
Azerbaijani groups in Iran and the Soviet Republic of Azerbaijan intensified
92 N. EGOROVA
considerably, because of various economic and other forms of assistance,

not to mention the fact that Allied supplies to the USSR in the framework of
the Lend-Lease program during World War II were carried through the
territories of northern Iran. However, it is necessary to take into account
that the area of the proposed oil concession included the greater part of
Iranian Azerbaijan, together with the main city Tabriz.
Jamil Hasanli’s work, which is widely based on documents from
Azerbaijani archives, accounts very convincingly for the importance of the
ethnic factor in the USSR’s policy toward Iranian Azerbaijan. In this
respect, a prominent role was played by the first secretary of the Central
Committee (CC) of the Azerbaijan Communist Party, Mir Dzhafar
Bagirov. According to a document cited by Hasanli, the Azerbaijan Com-
munist Party on June 11, 1945 prepared a draft resolution for the CPSU’s
CC titled “On the organization of a movement for separation from Iran in
South Azerbaijan and other northern provinces.”39 Nevertheless, the
Politburo’s resolution of July 6, 1945 was titled “About measures for the
organization of a separatist movement in South Azerbaijan and other
provinces of northern Iran.”40
Unlike Hasanli and some others who hold that the Kremlin sought to
include Iranian Azerbaijan in the Soviet Union, I do not believe that the
Soviet leadership was referring to a secession of Iranian Azerbaijan when
speaking about a separatist movement. Relying on a number of other
documents and when accounting for the overall international situation
1945–1946, it seems highly probable that the Kremlin supported the
separatist movement in order for it to obtain territorial autonomy within
the Iranian state. On June 7, 1945, for example, Kavtaradze wrote to
Molotov: “In spite of the fact that we are interested in propaganda of
national identity of the Iranian population and Soviet Azerbaijan, I think
it is inappropriate and fraught with undesirable consequences for us to
rename Iranian Azerbaijan to South Azerbaijan. There is no doubt that
this can be used by the British [. . .] and other reactionary elements in their
anti-Soviet activities in Iran.”41
Another indication in support of this view is found in Molotov’s records
of his conversations with Feliks Chuev. Regarding the USSR’s territorial
claims in Turkey and Iran after the war, Molotov acknowledged the pres-
ence of nationalism in the Kremlin’s policy. On Iran, he said: “Azerbaijan
aspired to increase its republic’s size almost by double at the expense
of Iran. We started working on this issue—nobody supports it.” Noting
the revival of Stalin’s imperial ambitions after World War II and the
impossibility of their implementation in the international conditions after

the war, Molotov stated referring to the Western Allies: “We should be very
careful. However, we frightened them—greatly frightened them.”42
Hasanli’s above-mentioned citation of a Politburo document dated
July 6, 1945 mentions the beginning of preparatory work for a “national-
autonomous region of Azerbaijan within the Iranian state”. There is no
doubt that the autonomy of Iranian Azerbaijan within the territory of Iran
would not only have strengthened the USSR’s political influence in Iran and
the Middle East, but also helped to secure the desired outcome for a question
that was of supreme importance for the Soviet Union: the oil question.
Soviet plans on Iranian oil were implemented rapidly. Already on June
21, 1945, a decree of the State Defense Committee (“On oil exploration in
northern Iran”) was adopted.43 It approved the committee’s decision to
proceed with exploration and drilling operations in northern Iran.44
In another draft resolution of the SNK sent on October 30 to Beria and
Malenkov, the USSR’s trade delegates in Iran were requested “to finish the
construction of oil storage facilities in Tabriz [the capital of Iranian
Azerbaijan] in the first quarter of 1946. Besides that, small reservoirs should
be built in other cities (Rezaye, Khoy, Maragha); this work is to be finished
before 1 February 1946.”45 First, this shows that autonomy for Iranian
Azerbaijan would benefit the aim of commercial oil production, and second,
that it was necessary to hurry up and consolidate the Soviet sphere of
influence before the withdrawal of troops. After the end of the war with
Japan, the date for withdrawal was set for March 2, 1946.
The Azerbaijan Democratic Party, headed by Jafar Pishevari, was
founded on September 6, 1945 to guide the separatist movement in
Iranian Azerbaijan. Pishevari, who had gathered experience in party and
government work in Soviet Azerbaijan since the 1920s, and national leaders
of Soviet Azerbaijan worked to ensure that Iranian Azerbaijan aimed at
joining Soviet Azerbaijan as the ultimate goal of the national liberation
struggle.46 Nevertheless, the Azerbaijan Democratic Party claimed that its
main priorities were national and cultural autonomy, and an increase in the
number of delegates from Iranian Azerbaijan in the Iranian Majlis (up to
one third of all delegates).
The diplomatic correspondence between the Iranian Foreign Ministry
and the Narkomindel shows that Soviet–Iranian relations became consider-
ably more complicated in November 1945, due to the events in the north-
ern provinces and the delayed withdrawal of Soviet troops. These two
questions were very closely linked. The military command of Soviet troops
94 N. EGOROVA
in Iran found various pretenses to delay the Iranian troops that had been
sent from Tehran to suppress the rebellious provinces. The withdrawal of
Soviet troops from Iran then became particularly acute for all players in the
ensuing Iranian Crisis.
THE DEVELOPMENT OF THE IRANIAN CRISIS AND THE OIL

QUESTION
The conference of foreign ministers in Moscow in December 1945 became
an important milestone in the escalation of the Iranian Crisis. As the issue
remained unresolved at the conference, it was possible to propose its
discussion at the UN. The internal political crisis in Iran became an inter-
national concern and was the first problem addressed by the newly
established UN Security Council on January 19, 1946.
The Soviet leadership disapproved of this development for two reasons.
First, it relied on Iran not daring to come up with such an initiative because
of the presence of Soviet troops. Second, it was confident that good rela-
tions with the UN and the UK could be preserved. On January 24, 1946,
Andrei Vyshinskii sent a letter to the chairman of the Security Council that
rejected all Iranian accusations about Soviet interference in Iran’s internal
affairs and emphasized they were subject to the bilateral relations between
the two neighboring countries, to be settled through bilateral talks.47 The
USSR’s Western Allies hesitated as well, fearing that a confrontation with
the Soviet Union over Iran could undermine the strength of the UN. At a
meeting on January 30, after speeches by Vyshinskii and Sayyed Hasan
Taqizadeh (the head of the Iranian delegation, who reiterated his immuta-
ble position on the withdrawal of Soviet troops), the Security Council’s
resolution merely noted the parties’ willingness to negotiate and requested
follow-up information about any progress.
Without a doubt, the firm position of the US in the Security Council
contributed to the settlement of the Iranian Crisis. But no less important
were the Soviet–Iranian negotiations during the Iranian delegation’s official
visit to Moscow from February 19 to March 5, 1946, which was headed by
the new Prime Minister Ahmad Qavam os-Saltaneh. The main topics of
the bilateral negotiations were the situation in Iranian Azerbaijan and the
withdrawal of Soviet troops. Nevertheless, during all these discussions, the
fundamental question of greatest concern to the Soviet government
remained the same—the USSR’s access to north Iranian oil.
Archival documents reveal the dramatic unfolding of Moscow’s negoti-

ating tactics. S. Sychev, the head of the Middle East department, reported to
Molotov the first results of the Soviet-Iranian talks: “Qavam stipulates the
withdrawal of Soviet troops from Iran” as the main prerequisite for the
resolution of all other issues. “I think that we need to seek an immediate
settlement of both the petroleum and Azerbaijan issue—that is, before the
withdrawal of our troops, because negotiating these issues after the with-
drawal would be even more difficult.”48 Sychev agreed with Qavam that it
was better to decide on the oil question with a new Majlis, but he simulta-
neously underlined that Iranian proposals about Azerbaijan were unaccept-
able, as they limited the role of regional people’s councils and denied the
right to use Azerbaijani and other languages. Sychev’s suggested that the
Soviet Union should insist on solving the oil and Azerbaijan questions
“before the withdrawal of our troops from Iran.” He also assumed that
the Soviet consent on the founding a joint Soviet-Iranian oil company (with
a controlling stake in Moscow’s hands) would ease the position of Qavam
and provide a satisfactory solution of the oil issue by a new composition of
the Majlis.49
During subsequent negotiations, the Soviet proposal for an oil conces-
sion was replaced by a compromise—a mixed Soviet–Iranian oil company,
with the Soviet Union owning 51 percent of the shares and Iran 49 percent.
Despite progress on the oil question, relations remained tense. The with-
drawal of Soviet troops seemed to be an empty promise after new military
units and weapons arrived in Tabriz in the first half of March and moved to
the southern and southeastern borders of Iranian Azerbaijan, where about
30,000 Iranian troops were positioned.50
The Security Council received a letter on March 18, 1946 from the new
Iranian representative at the UN, Hussein Ala, who complained about the
continued presence of Soviet troops and demanded that Iran be included
again in the council’s agenda on March 25. Starting from March 19, Soviet
representative Andrei Gromyko went to great lengths to prevent a debate
on Iran, insisting that the issue should be resolved through bilateral nego-
tiations. On March 25, the Soviet press published that Soviet troops had
begun to withdraw from Mashhad, Shahroudi, and Semnan on March 2; all
remaining soldiers were to be withdrawn starting on March 24. But this
time, the representatives of the US and UK strongly supported Iran’s
request for the Security Council to discuss USSR’s military presence in
Iran. On March 26 the meeting of the Security Council devoted to the
Iranian question took place. Gromyko again insisted on removing this
96 N. EGOROVA
question from the agenda. As a result of the discussions, a special commis-

sion including the representatives of the US, USSR and France was set up to
decide on the procedure of the further consideration of the Iranian ques-
tion. However, the UN Security Council, in its voting on the Iranian
question on March 27, 1946, rejected Gromyko’s motion. Stating that
the bilateral negotiations were ongoing, Gromyko responded he could
not partake in debates on the Iranian question and left the Security Council
meeting. This was the first instance of such kind of behavior in the newly
established UN and created a precedent for the many controversial discus-
sions and deadlocks within the Security Council for the years to come.
On April 4, 1946, the exchange of letters between the new Soviet
Ambassador Sadchikov and Qavam took finally place. They determined
the withdrawal of Soviet troops within a six-week period from March
24, and established a joint stock oil company. On the same day, April
4, the Soviet embassy in Tehran received a letter from Qavam about
Azerbaijan. It contained Iran’s consent to resolving the situation in
Iranian Azerbaijan on the basis of Moscow’s negotiations. On May 9, the
withdrawal of Soviet troops and supplies from Iran was completed;51 the
Iranian Crisis had been settled.
However, the withdrawal significantly complicated the situation of the
Azerbaijan Democratic Party. Stalin sent a personal letter on May 8, 1946 to
Pishevari, who considered himself “deceived” by Soviet actions. Stalin’s
statements in this extraordinary document52 give every reason to believe
that it was only after obtaining the oil agreement from Qavam’s cabinet that
the main goal of Soviet diplomacy—a Soviet–Iranian agreement on oil—
was implemented. Specifically, these considerations, besides providing a
realistic assessment of the unfavorable international situation, could explain
the following: when Qavam (supposedly because of the election campaign)
announced on November 21 that the government would deploy troops in
all provinces, including Iranian Azerbaijan, the Soviet Union limited its
reaction to “friendly warnings” and a recommendation to refrain from
such plans.53 Once the government troops entered Iranian Azerbaijan on
December 11, 1946, the national democratic movement was drowned in
blood. During the movement of the government troops on the territory of
Iranian Azerbaijan (together with gangs, disguised as gendarmes) a massacre
of and terror against supporters of the Democratic Party of Azerbaijan
began. Prisons were overcrowded. Hundreds of officers and soldiers of the
Azerbaijani National Army were executed by the verdicts of courts-martial.
According to some sources, thousands of people were killed without trial.
8000 died from hunger and thirst during their exile to the south of Iran.54
Education in the Azerbaijani language and the issuing of Azerbaijani publi-
cations were forbidden. On December 20, 1946, the government army
occupied the entire Iranian Azerbaijan. By this time, Pishevari and some
other leaders of the Democratic Party of Azerbaijan, as well as more than
5000 refugees, had sought refuge in the Soviet Union.
After the defeat of the democratic movement in Iranian Azerbaijan, the
Soviet leadership had hoped for the fulfilment of Qavam’s agreement on the
establishment of a mixed Soviet–Iranian oil company. Qavam, however,
who was eager to strengthen cooperation with the United States, claimed in
August 1947 that he had withdrawn from the oil agreement signed on April
4, 1946. The Soviet diplomatic reply underlined that the refusal of the
Iranian government to submit the Soviet–Iranian agreement on oil to the
Majlis was in violation of this agreement. However, on October 22, 1947,
the Majlis announced the denunciation of the Soviet–Iranian oil agreement
of April 4, 1946 referring to a law passed on December 2, 1944, which
banned the granting of oil concessions to foreigners. The Soviet govern-
ment lodged a strong protest against the violation of the agreement and
described the Iranian government’s actions as hostile. Despite the Soviet
protest, the Iranian government would never return to the issue of the
bilateral agreement on northern Iranian oil.
The Soviet Union thus could not strengthen its influence in Iran, and,
because of the events in Iranian Azerbaijan, its image was seriously damaged
in the eyes of the democratic forces.
CONSEQUENCES OF THE IRANIAN CRISIS

In spite of the final withdrawal of Soviet troops from Iran by May 9, 1946
and the resolution of the Iranian Crisis, the US and UK were in favor of
keeping Iran on the Security Council’s agenda, where it remained until
1948. This caused confusion in the Soviet Ministry of Foreign Affairs (as the
Narkomindel was called since 1946), as can be read from an information
note dated August 28, 1947 and prepared by the Ministry: “So, what is the
outcome of this story? Iran, on its own initiative, took its complaint back
from the Security Council; Soviet troops left Iran about a year and a half
ago; finally, about one year has passed since the democratic movement in
Azerbaijan was harshly suppressed, but the notorious ‘Iranian issue,’ con-
trary to common sense, for some reason still continues to be on the agenda
of the Security Council.”55 In retrospect, one of the reasons is obvious: by
98 N. EGOROVA
that time, the frontlines in the Cold War had already been drawn—and its
first battles had started.
Even though it would be wrong to consider the Iranian Crisis the
beginning of the Cold War, its consequences reached far beyond the
regional framework. The Iranian Crisis led to irreversible geopolitical
changes in the Middle East: the US gradually took over the role, which
the UK had played in the past; and the origins of the Truman Doctrine were
rooted not only in the events in Greece and Turkey, but also in the Iranian
Crisis.
However, the specifics of this crisis were determined by geopolitics. It is
the most striking example of the struggle for spheres of influence among the
great powers within the still existing anti-Hitler coalition. Historians who
believe the origins of the Cold War to be dominated by geopolitics usually
refer to the Iranian Crisis, although they do not consider it the starting point
of the Cold War.
We should also take into consideration that the potential for cooperation
had not yet been exhausted between 1945 and 1946, despite increasing
disagreements among the Allies and the revival of ideological clichés in the
utterances of public figures and in the propaganda. In 1945 and 1946,
the postwar peace settlement was still very much in the making; images of
the new enemy had not yet been formed; and in the folding of the Yalta–
Potsdam system of international relations the confrontation between the
USSR and the US as its centerline had not yet manifested itself. All this took
shape in 1947 and 1948, and was associated with the Truman Doctrine, the
Marshall Plan, the formation of bloc politics, and the founding of the
Cominform (Communist Information Bureau56).
With regard to the Soviet policy on oil, the leadership continued to
collect information not only about the world’s oil extraction in 1945,57
but also about the petroleum industry in occupied countries such as Austria
and Romania.58 It did so while simultaneously negotiating for an oil con-
cession. As for Romania, which was part of the Soviet sphere of influence in
Eastern Europe, a special commission was sent to Bucharest in June 1945
“to negotiate with the government of the Romanian Kingdom the estab-
lishment of a Soviet–Romanian joint company for the exploration, produc-
tion, refining, and marketing of oil and petrochemicals.”59
Beria’s letter of July 10, 1945 to Stalin and Molotov is an equally
eloquent testimony of the Soviet leadership’s wish to be aware of postwar
global oil politics, and especially to have information about the US’s par-
ticipation in it. Referring to TASS news agency reports about the
assignment of 13 attachés on oil questions to American embassies in differ-

ent countries, Beria underlined that “the US government attachés are of
exceptional importance for international oil policy.” They provided the US
government with the most accurate information about the world’s oil
economy, which gave the country the opportunity to become a leader of
know-how in global oil policy. As Beria wrote: “Given the growing influ-
ence of the USSR on issues of oil policy, I consider it necessary [. . .] to
provide the Soviet government with timely and complete information on
international oil issues. For this purpose, it is desirable to deploy qualified
petroleum engineers as attaché advisers on oil issues in some of the USSR’s
embassies abroad.”60 Beria proposed that these advisers be sent first to the
embassies in Washington and Tehran and to the Allied Control Commis-
sions in Romania, Austria, and Hungary. Molotov approved the proposal
and wrote a directive to Dekanozov to clarify which positions the Soviet
advisers should occupy on oil issues in foreign countries and to choose
suitable candidates in agreement with the CC of the Party.61
The documents mentioned above thus show that despite the failure in
Iran,62 the Soviet leadership remained interested in global oil politics and
access to foreign sources of oil. This interest was not only caused by the
urgent need to restore its war-shattered economy. The USSR’s entry into
the international arena as a superpower (after the victory over Nazi
Germany and militarist Japan) required solutions to the new challenges,
that had emerged together with scientific and technological development,
the growth of its armed forces, Stalin’s new shipbuilding program, and the
country’s gain in influence over Eastern Europe. Hence the Soviet Union
began to simultaneously and rapidly develop its own oil fields in
1945–1946. As the documents from Beria’s special folder63 show, the first
of these oil fields was to be the Voivozh oil and gas field near Ukhta in the
Komi Autonomous Soviet Socialist Republic. Because the Ukhta oil refinery
was run by the Ministry of the Interior (which was headed by Beria),
considerable human, technical, and financial resources for the development
of the Voivozh deposits were immediately allocated. Thus, the Soviet
struggle for oil continued.
NOTES
1. Bruce R. Kuniholm, The Origins of the Cold War in the Near East:
Great Powers Conflict and Diplomacy in Iran, Turkey and Greece
(Princeton, NJ: Princeton University Press, 1980); Barry Rubin, The
100 N. EGOROVA
Great Powers in the Middle East, 1941–1947: The Road to the Cold
War (London: Routledge, 1980); David J. Alvarez, Bureaucracy
and Cold War Diplomacy: The United States and Turkey,
1943–1946 (Thessaloniki: Institute for Balkan Studies, 1980);
Stephen L. McFarland, “A Peripheral View of the Origins of the
Cold War: The Crises in Iran, 1941–1947,” Diplomatic History 4, 4
(1980), 333–51; Fraser J. Harbutt, The Iron Curtain: Churchill,
America, and the Cold War (New York: Oxford University Press,
1986); Mark H. Lytle, The Origins of the Iranian–American Alli-
ance, 1941–1953 (New York: Holmes & Meier, 1987); Richard
W. Cottam, Iran and the United States: A Cold War Case Study
(Pittsburgh, PA: University of Pittsburgh Press, 1988); James
F. Goode, The United States and Iran, 1946–1951: The Diplomacy
of Neglect (London: Palgrave Macmillan, 1989).
2. Kuniholm, Great Powers Conflict, 185.
3. Lytle, Iranian-American Alliance, 64.
4. See Valerii Iungbliud, “Iranskaia politika Moskvy i Vashingtona,”
chap. 3.2.2., in Vstrechnymi kursami: Politika SSSR i SSHA na
balkanakh, blizhnem i srednem vostoke v 1939–1947 gg. (Kirov:
Viatskii gosudarstvennyi gumanitarnyi universitet, 2014), 383–98;
Ilya V. Gaiduk, Divided Together: The United States and the Soviet
Union in the United Nations, 1945–1965 (Stanford: Stanford Uni-
versity Press, 2012); Rashid Khalidi, Sowing Crisis: The Cold War
and American Dominance in the Middle East (Boston: Beacon Press,
2009); Jamil Hasanli, At the Dawn of the Cold War: The Soviet–
American Crisis over Iranian Azerbaijan, 1941–1946 (Lanham:
Rowman & Littlefield Publishers, 2006); Natalia I. Yegorova, The
“Iranian Crisis” of 1945–1946: A View from the Russian Archives,
Cold War International History Project (CWIHP) Working Papers,
Working Paper 15 (Washington, DC: Woodrow Wilson
Center, 1996).
5. Kristen Blake, The U.S.–Soviet Confrontation in Iran, 1945–1962: A
Case in the Annals of the Cold War (Lanham: University Press of
America, 2009), 2.
6. Melving P. Leffler and Odd A. Westad, eds., The Cambridge History
of the Cold War, 3 vols. (Cambridge: Cambridge University Press,
2010). Naturally, there also other studies following this approach,
for example: Odd A. Westad, The Global Cold War: Third World
Interventions and the Making of Our Times (Cambridge: Cambridge

7. Leffler and Westad, Cambridge History of the Cold War, vol. 1, 11,
17, 18.
8. Richard H. Immerman and Petra Goedde, eds., The Oxford Hand-
book of the Cold War (Oxford: Oxford University Press, 2013).
9. Federico Romero, “Cold War Historiography at the Crossroads,”
Cold War History 14, 4 (2014), 687.
10. Romero, “Cold War Historiography at the Crossroads,” 701.
11. It was called Persia until 1935, but I will use the modern name, Iran.
12. Leonid V. Alekseev, Sovetskii Soiuz i Iran (Moscow: Institut
mezhdunarodnykh otnoshenii, 1963), 11.
13. Kavir is a region with a rich oil field; Hurian is a desert in the
southeast of Iran.
14. “Doroga na Tegeran: Chast’ tret’ia,” Rosbalt news agency, last
modified January 16, 2011, http://www.rosbalt.ru/main/2011/
01/16/808995.html.
15. Arkhiv vneshnei politiki Rossiiskoi Federatsii (Foreign Policy
Archive of the Russian Federation, AVPRF), f. 094,
op. 30, p. 347, d. 48, l. 159 (back side), “To the Academician-
Secretary of the Soviet Academy of Sciences N. Bruevich,” April
12, 1944; AVPRF, f. 094, op. 30, p. 347, d. 48, l. 158, P. Volgin
and N. Bruevich to V. Dekanozov, May 5, 1944; AVPRF, f. 094,
op. 30, p. 347, d. 48, l. 182, Trust of Special Geological Maps
(Spetsgeo) to the People’s Commissariat for Foreign Affairs
(Narkomindel), August 5, 1944.
16. AVPRF, f. 094, op. 30, p. 347a, d. 48, l. 1, I. Sedin to
V. Dekanozov, deputy of the Narkomindel, January 25, 1944.
17. Ibid.
18. AVPRF, f. 094, op. 30, p. 347a, d. 48, l. 102, Soviet Embassy in Iran
to S. Kavtaradze, February 22, 1944.
19. AVPRF, f. 094, op. 30, p. 347a, d. 48, ll. 130, 133, 134, Kumykin,
Kavtaradze, Romashkin, Mai and Frei to the SNK deputy chairman
L. Beria and the SNK deputy chairman A. Mikoian, March
14, 1944.
20. AVPRF, f. 094, op. 30, p. 347a, d. 48, ll. 153–4.
21. AVPRF, f. 094, op. 30, p. 347a, d. 48, l. 162, S. Kataradze to
V. Molotov, May 11, 1944.
102 N. EGOROVA

Russian Federation, GARF), f. 9401 (special folder of Molotov),
op. 2, d. 69, l. 326, L. Beria to V. Molotov, July 17, 1944.
23. GARF, f. 9401, op. 2, d. 68, l. 327.
24. Ibid., l. 328.
25. AVPRF, f. 06, op. 6, p. 37, d. 461, l. 13, L. Beria to V. Molotov,
August 16, 1944; see the same document in GARF, f. 9401 (special
folder of Stalin), op. 2, d. 64, l. 151.
26. AVPRF, f. 06, op. 6, p. 37, d. 461, ll. 17–18, L. Beria to V. Molotov,
August 16, 1944.
27. The commission also included Nikolai Baibakov, deputy at
Narkomneft’. After his return to Moscow, he was promoted to
commissar (1944–8). During his term, the USSR’s oil production
increased considerably when the largest oil fields in the Volga-Urals
were developed.
28. AVPRF, f. 06, op. 6, p. 37, d. 461, ll. 7–8, S. Kavtaradze to
V. Molotov, “Draft resolution of the Council of People’s Commis-
sars of the USSR,” August 28, 1944.
29. AVPRF, f. 06, op. 6, p. 37, d. 461, ll.10–12.
30. AVPRF, f. 094, op. 30, p.347a, d. 48, l. 201, I. Sadchikov to
I. Sedin, September 29, 1944.
f. 17, op. 128, d. 817, l. 29 (back side), Malyshev to the CC of the
All-Union Communist Party (bolsheviks), “About the situation in
the country,” February 19, 1945.
32. Foreign Relations of the United States (FRUS): Diplomatic Papers,
1944, vol. 5 (Washington, DC: Government Printing Office, 1965),
455.
33. AVPRF, f. 094, op. 31g, p. 357, d. 2, l. 2, “Information on the
question of providing the USSR with an oil concession in the North
of Iran,” June 28, 1945.
34. AVPRF, f. 094, op. 31g, p. 357, d. 2, l. 4.
35. AVPRF, f. 06, op. 7, p. 33, d. 464, l. 2, from V. Molotov’s diary,
February 26, 1945.
36. AVPRF, f. 06, op. 7, p. 33, d. 461, l. 8, from the diary of
M. Maximov, Soviet ambassador in Iran, April 11, 1945.
37. The US had withdrawn its troops from Iran by January 1, 1946, the
UK by March 2, 1946.
38. AVPRF, f. 06, op. 7, p. 33, d. 466, l. 4, S. Kavtaradze to V. Molotov,

May 25, 1945.
39. Jamil P. Hasanli, SSSR-Iran: Azerbaidzhanskii krizis i nachalo
kholodnoi voiny, 1941–1946 gg. (Moscow: Geroi Otechestva,
2006), 89.
40. Hasanli, Azerbaidzhanskii krizis, 91.
41. AVPRF, f. 06, op. 7, p. 33, d. 476, l. 6, S. Kavtaradze to V. Molotov,
June 7, 1945.
42. Feliks I. Chuev, Molotov: Poluderzhavnyi vlastelin (Moscow:
OLMA-Press, 1999), 149–50.
43. Hasanli, Azerbaidzhanskii krizis, 89–91.
44. AVPRF, f. 094, op. 31g, p. 357, d. 2, l. 7, “Information on the
question of providing the USSR with an oil concession in the north
of Iran,” June 28, 1945.
45. AVPRF, f. 06, op. 7, p. 33, d. 471, l. 1, “Draft resolution of the
Council of People’s Commissars of the USSR,” October 1945.
46. Hasanli, Azerbaidzhanskii krizis, 97–8.
47. AVPRF, f. 07, op. 11a, p. 42, d. 2, ll. 1–3, “Iranian question at the
Security Council.”
48. AVPRF, f. 094, op. 37, p. 357a, d. 8, l. 6, S. Sychev to V. Molotov,
February 25, 1946.
49. AVPRF, f. 094, op. 37, p. 357a, d. 8, l. 7.
50. See AVPRF, f. 06, op. 8, p. 35, d. 551, l. 27, M. Bagirov and
I. Maslennikov to I. Stalin and V. Molotov, telegram of March
13, 1946.
51. AVPRF, f. 094, op. 37, p. 357a, d. 11, l. 29, S. Shtemenko to
S. Lozovskii, May 10, 1946.
52. Translation into English of Stalin’s letter to Pishevari, which the
author of this chapter discovered in the AVPRF. See Yegorova, The
“Iranian Crisis” of 1945–1946, 23–4.
53. AVPRF, f. 06, op. 8, p. 34, d. 543, l. 16, Report of Hussein Ala,
Iranian ambassador in the US and Iran’s representative in the Secu-
rity Council, to the chairman of the UN Security Council,
J. Johnson, December 5, 1946.
54. See Hasanli, Azerbaidzhanskii krizis, 453.
55. AVPRF, f. 07, op. 11a, p. 42, d. 2, l. 12, “Iranian question in the
Security Council,” August 28, 1947.
56. The Cominform was funded in September 1947 and included all
East European communist parties, as well as the Italian and French
104 N. EGOROVA
communist parties, under Soviet leadership. The Yugoslav Commu-

nist Party was excluded from the Cominform in June 1948.
57. GARF, f. 9401, op. 2, d. 95, ll. 98–102, L. Beria to I. Stalin, April
19, 1945.
58. GARF, f. 9401, op. 2, d. 95, ll. 15–17, L. Beria to I. Stalin,
V. Molotov, G. Malenkov, and A. Mikoian, “Petroleum industry
in Austria,” April 11, 1945.
59. GARF, f. 9401, op. 2, d. 96, l. 210, A. Mikoian and L. Beria to
I. Stalin, “Draft resolution of the Council of People’s Commissars
about the sending of a commission to Romania to negotiate with the
government of Romania the establishment of a Soviet-Romanian oil
company,” June 1945.
60. GARF, f. 9401, op. 2, d. 97, ll. 321–2, L. Beria to I. Stalin and
V. Molotov, July 10, 1945.
61. Ibid., l. 322a.
62. After Iran’s refusal to fulfill the agreement on establishing a new
joint stock company, the old Kavir-Hurian Ltd. continued its slug-
gish existence until 1951, when Mohammad Mossadegh’s govern-
ment nationalized the oil deposits of Iran.
63. GARF, f. 9401, op. 2, dd. 144–7, 150, 152.
“Red Oil” and Western Reactions: The Case
of Britain
Niklas Jensen-Eriksen
INTRODUCTION
When the Soviet Union re-entered world oil markets as a major exporter in
the late 1950s, it was regarded by some in the West as a welcome additional
supplier of cheap energy. Others saw it, however, as a dangerous competitor
who was undermining the position of major Anglo-American oil companies
and possibly trying to use oil as a political weapon against its capitalist
enemies.
Soviet offers also sparked a long and bitter conflict within Whitehall,
between the Board of Trade, the government department responsible for
trade and industrial policies, and the Ministry of Power, which was respon-
sible for energy policy. These departments identified closely with the inter-
ests of particular pressure groups and promoted the goals of these groups
within the administration. Local manufacturing industries sought to gain
access to cheap Soviet fuel. The opponents of such deals argued, however,
that imports of “red oil”, as it was occasionally called, would endanger the
role of the United Kingdom (UK) as an international oil power and its
relations with the United States (US), and at the same time undermine the
N. Jensen-Eriksen (*)
Department of Philosophy, History, Culture and Art Studies, University of
Helsinki, Helsinki, Finland

DOI 10.1007/978-3-319-49532-3_4
106 N. JENSEN-ERIKSEN
health of the UK’s coal industry. In short, there were severe tensions
between local interests of oil-consuming industries and wider domestic
and international considerations. The oil companies and their supporters
managed to stop Soviet oil from entering the UK in substantial quantities,
but the archival records nevertheless show that the influence of the oil
industry was diminishing. It had been taken for granted that a decline in
international oil prices would have a negative effect on British balance of
payments, but by the early 1960s, the Treasury officials began to question
this proposition.
These divisions went largely unnoticed in the early writings on Soviet
attempts to sell oil to the UK market. In April 1959, the government
imposed an almost total embargo on imports of oil from the Soviet
Union. The embargo was only lifted in the early 1970s. Peter R. Odell, a
well-known expert in international energy policy, argued that “Britain [. . .]
continued for long to refuse to accept the advantages of Soviet oil [. . .]
partly because of its interests in the ownership of two of the international
major oil companies, but mainly because of the unwillingness to act against
a NATO [North Atlantic Treaty Organization] policy strongly supported
by the United States.”1 In fact, the UK had played a key role in the
formulation of NATO’s resolution of 1962, which urged members to
exercise caution when buying Soviet oil. The Foreign Office and the Min-
istry of Power had also supported subsidiaries of British oil companies
abroad when local governments had prevented them from importing oil
from their own sources and forced them to distribute Soviet oil.2 The UK
became known “as a firm opponent of Soviet oil.”3
Bruce W. Jentleson, the author of an important book on the East–West
energy trade, divided the European countries into two discrete groups:
“consumer” and “producer” nations. The former (for example, Italy)
were willing to buy inexpensive Soviet oil, while the latter (for example,
France and the Netherlands) saw this as a threat to their own energy
interests. The UK belonged to the latter group because British Petroleum
(BP) and Royal Dutch Shell, an Anglo-Dutch group, played crucial roles in
the world oil trade. Jentleson did recognize that the UK had somewhat
conflicting interests, being both an oil power and a prospective seller of
ships and energy equipment to the Soviets, but only substantial economic
difficulties in 1963 persuaded the British to consider a temporary change in
policy.4
There is evidence to suggest there was usually little doubt regarding the
nature of British policy towards Soviet oil sales. The Foreign Office pointed
“RED OIL” AND WESTERN REACTIONS: THE CASE OF BRITAIN 107
out in February 1962 that “the admission of Soviet oil in commercial

quantities carries the risk of disrupting abroad and in the United Kingdom
the well organised, integrated United Kingdom oil industry, whose profit-
able operations are of value and concern to H.M.G [Her Majesty’s
Government].”5 When Anastas Mikoian, the first deputy prime minister
of the Union of Soviet Socialist Republics (USSR), pressed the British to
buy Soviet oil in May 1961, Reginald Maudling, the president of the Board
of Trade, explained British policy in clear terms to the public: “We have a
surplus of oil [from the sterling area], why should we buy something we
don’t want?”6 At the same time The Times observed that “when British oil
companies and sterling area sources of oil can supply in general all, and
more, of the United Kingdom’s needs of petroleum products neither the
Ministry of Power or the Board of Trade—the two Ministries immediately
concerned—nor the Treasury can be enthusiastic about encouraging the
sale of Russian oil.”7
This sounds simple, but the reality was very different. At the end of the
1950s and into the early 1960s, UK government departments produced a
vast amount of letters, minutes, and memoranda on the question of pro-
spective oil imports from the Soviet Union. What outsiders and later
scholars did not know was that Maudling did not believe in the policy
that he was defending, and the Board of Trade was in reality eager to import
Soviet oil. For several years, the departments were engaged in a bitter fight
within Whitehall over the British policy regarding oil imports. But why did
this issue create this bitter and long-lasting conflict within the government?
How much influence did the oil industry have on government policy?
By exploring the controversial discussions on Soviet oil in the case of the
UK, this chapter will contribute to the emerging literature on Cold War
energy politics, and at the same time expand our knowledge on postwar
British business-government relations in the oil industry. This analysis is
largely based on internal British government documents that were pro-
duced during the conflict over Soviet oil. Most of these files have received
little attention from scholars so far.
SOVIET OIL EXPORTS

Imperial Russia and the interwar Soviet Union had sold substantial quanti-
ties of oil to the UK and to many other West European countries, but the
production of the Soviet Union immediately after World War II did not
even cover its domestic needs. In the early 1950s, the Soviets returned to
the world markets. In the beginning, their overall market share was small,
but by the end of the decade, the communist superpower had become “a
force to be reckoned with in the international petroleum field,” as the US
Central Intelligence Agency (CIA) observed.8 In 1959, Soviet oil was
already being exported to thirty non-communist and eleven communist
countries. Three-quarters of the exports were sold to Western Europe.9
As far as the major oil companies were concerned, the Soviet expansion
occurred at a particularly unwelcome moment. The supply of oil was
growing faster than demand, as independent producers from the Middle
East and Venezuela, among others, were pushing more oil into the market.
The oil industry magazine Petroleum Press Service observed in May 1959
that “competition between suppliers is now sharper than at any time in the
post-war period, and inevitably leads to price reductions.”10 Furthermore,
the Soviets were ready to cut prices drastically in order to gain market
shares.11 The established Western oil giants responded to increased com-
petition by cutting the officially posted prices, which reduced the revenue of
oil producing countries. The latter were furious, and in September 1960,
Kuwait, Saudi Arabia, Iran, Iraq, and Venezuela set up the Organization of
the Petroleum Exporting Countries (OPEC).12
Standard Oil of New Jersey took the leading role in efforts to contain
Soviet oil exports. The president of the company, Monroe J. “Jack”
Rathbone, explained to the British Chancellor of the Exchequer, Selwyn
Lloyd, in June 1961 that the problem of Soviet oil exports “could only be
met by a delaying action.”13 The major British oil companies agreed; Shell
and BP explained to the British government in July 1961 that they hoped
that the growth of world demand, and in particular an increase in consump-
tion in the Soviet Union, might alleviate the problem in the long run. The
next three years would be difficult for the companies, with 1962 the worst
of all, but after that the situation might get better. If the British bought
Soviet oil, “the price structure would collapse and the companies only
recoup themselves by lowering the price of Middle East crude.” This, BP
and Shell warned, “could lead to serious political consequences and a
disruption of supplies.” After they had achieved all this, the Soviets would
“be free to raise their prices or withdraw entirely from the market with
disastrous consequences.”14
“PATRONS OF THE UK OIL COMPANIES”

William Wallace has argued that in the interdepartmental debates in White-
hall, the home civil servants “easily equate the national interest in any
specific instance with the interests of the industries their Department spon-
sors or of the domestic constituency with which they deal.”15 The Ministry
of Power, which was responsible for the government’s relations with the oil
industry and with the nationalized coal industries, and the Board of Trade,
which was in charge of relations with most other industries, certainly
showed strong symptoms of that kind of behavior.
The officials of the Ministry of Power regarded themselves “as patrons
of the U.K. oil companies,”16 and argued explicitly—on a number of
occasions—that the interests of the British government and the oil com-
panies were inseparable in practice. When other departments refused to
let the ministry consult with Shell and BP over a new proposal under
consideration in an interdepartmental committee in 1961, there was
considerable disquiet. K. L. Stock, the head of the Petroleum Division
of the Ministry of Power, complained bitterly: “I find it difficult to see
where there is any major divergence between the British oil companies’
interest in survival and H.M.G.’s interest in remaining an international oil
supplier. I strongly recommend that we dig our toes in firmly on consulting
the two British companies.”17
The department took it for granted that the protection of the interests of
British oil companies was vital for the UK in general. Stock explained to
Board of Trade officials in July 1958 that the “oil companies’ finances
played a big part in the economic life of this country. Their business in
world markets outside the U.K. was greatly to the advantage of our balance
of payments and it was a U.K. interest that world oil prices should be stable.
A Russian attempt to get into the markets by price-cutting could wreck
world oil prices and this would have a bad effect on our balance of pay-
ments.”18
What applied to foreign markets also applied to the British market. The
Soviets could only gain a firm foothold in the British market by price-
cutting, and this kind of behavior was highly undesirable, from the point
of view of the ministry, since it would diminish the profits of British oil
companies and undermine efforts to get them to expand UK refinery
capacity. The impact might be lessened if BP and Shell were to buy Soviet
oil, but the companies had no desire to do this; not only because they had
plentiful supplies of their own—they and the ministry both feared that
purchasing Soviet oil would hurt British government relations with Middle
Eastern countries and with US oil companies, and would undermine efforts
to contain the expansion of Soviet oil exports into foreign countries.19 The
ministry therefore felt that “it was to our advantage to pursue a policy of
maximum containment of Russian oil, to the extent of taking none our-
selves, with a view to keeping European prices as high as possible.”20 It was
also questionable whether it was wise to increase the revenues of the Soviets
at the expense of the Anglo-American oil companies. The British and US oil
majors were spending over £200 million a year on British goods and
services, and a part of the royalties paid to the producing countries was
also spent in the UK.21
However, the ministry was initially more concerned about the probable
impact of Soviet imports on the British coal industry, or at least this is what it
told outsiders.22 At first, the Soviets would mainly sell fuel oil, which would
replace British coal. The increased consumption of fuel oil in the UK was
already strongly reducing the demand for coal, and imports of cheap Soviet
fuel oil would accelerate this trend.23 The government had begun to
subsidize operations of the National Coal Board in order to protect the
country against unemployment; it had also banned imports of US and
Polish coal.24
THE FIRST ROUND

At the end of 1957, Associated Portland Cement Ltd. contacted the British
licensing authorities and informed them of its willingness to buy 300,000
tons of fuel oil a year from the Soviets. In March 1958 a license was granted,
and the company additionally received assurances that it would be allowed
to continue to do so in the following years. From the point of view of the
Ministry of Power, the company’s application was unwelcome because it
reduced demand for domestic coal. However, the company had particularly
valid technical and commercial grounds for its decision to rely on Soviet oil,
and was also strongly supported by the sponsoring department for the
cement industry, the Ministry of Works. Hence, the Ministry of Power
concluded that it could not prevent the deal.25 However, it did decide not
to back down when a potentially more dangerous proposal emerged in
May 1958.
A group of businessmen, led by J. B. Scott, the sales director of an
electrical equipment manufacturing company and also the chairman of the
Soviet section of the London Chamber of Commerce, contacted the Board
of Trade and enquired whether the UK government would accept in

principle the formation of a British company that would distribute Soviet
oil products to the country. Scott and his colleagues were not going to set
up the company themselves, but the head of the Soviet oil export agency
had asked them to find someone who would be interested in doing so.26
The officials at the Ministry of Power had no desire to allow Soviet oil to
enter the British market, and hence strongly opposed Scott’s proposal.27
However, the ministry suspected that other departments might welcome an
increase in British–Soviet trade. The department could argue that it was
politically dangerous for the British to rely on Soviet supplies of such an
important commodity, or that imports of Soviet oil would hurt the British
coal industry. However, the officials at the ministry recognized that the first
of these arguments would not make an impression on the Treasury, Board
of Trade or the Foreign Office, as the Soviets would probably supply only a
small part of the total British requirements. Bernard Gottlieb, head of the
General Branch at the Petroleum Division of the Ministry, suspected that
the second argument would not make a stronger impact because “anything
which savoured of the protection for the coal industry will be unwelcome to
these all-out proponents of free trade.” He did suspect that the ministers
might be more willing to defend employment in the coal industry,28 since
the miners and their representatives were already putting heavy pressure on
the government to reduce imports of fuel oil from other sources.29
The departments mentioned by Gottlieb did feel that the government
should, in general, support the removal of trade restrictions. In practice,
however, they considered what the actual effects of the liberalization of
trade would be on British economic interests.30 The attitude of the Board of
Trade, which emerged as the leading supporter of Soviet oil imports, was
not based on any simplistic belief in “free trade”, but rather on a desire to
support the British manufacturing companies. Importing cheap energy
would reduce the production costs of British industrial companies and
hence make them more competitive in the world markets. At the same
time, purchases of Soviet oil would open up new, profitable trading oppor-
tunities for British companies. The Soviets were eager to buy substantial
quantities of industrial equipment from the West in order to modernize
their economy. However, the communist superpower was short of hard
currency and, because it also favored bilateral trade, the British could only
expect to sell more to the Soviets if they bought more Soviet goods
themselves. Otherwise, the orders would go to countries such as Sweden
and West Germany, which had agreed to take Soviet oil. Furthermore, oil
seemed to be the only field of trade where the British government could
actively support Soviet exports. Most other Soviet exports had been placed
on Open General Licenses, which gave the Soviets considerable freedom to
sell their products to the UK, although their ability to attract customers was
weak. The Board of Trade was not suggesting that the British should import
unlimited amounts of Soviet oil. Instead, those purchases should be limited
in such a way as to preclude any danger of Britain becoming overly depen-
dent on Soviet sources.31
Not everyone in Whitehall had clear-cut views on whether or not the
British should import Soviet oil. The Treasury was always meticulously
looking for ways of improving the state of the British balance of payments,
but in this case, it was ready to admit that this was “not necessarily the
decisive, or even the most important, single factor.”32 This was because it
proved difficult to determine whether there was a clear advantage in
importing. The position of the British oil companies in the nationalistic-
minded producing countries had deteriorated, and this persuaded the Trea-
sury to consider “whether our main interest in oil generally is still as a
producer rather than as a consumer.”33 The British economy benefited
from the operations of BP and Shell in various ways, but the companies
also had to pay royalties and taxes to the producing countries. A formula
developed in 1960 by Jack Downie, a senior economic adviser at the
Economic Section of the Treasury, implied that high prices benefited the
UK so long as the producing countries did not take more than 65 percent of
the profits from oil. In Venezuela, the government share was already close
to this level, and other countries might soon follow suit.34
The oil-producing countries did use some of their earnings in the UK,
but the Soviets repeatedly argued that they would be willing to spend all of
their additional sterling proceeds on British goods. After considering these
and the other issues involved, the Treasury concluded in 1960 that there
would be a small negative effect on the British balance of payments if the
embargo were to be lifted. In the following year, it calculated that the lifting
of the embargo would probably have no measurable impact, while in 1962,
it estimated that there would be a small gain if a small quantity of oil were
imported. However, these calculations were partly based on a number of
uncertain assumptions, and they did not include indirect effects, which were
difficult to gauge. Hence, it was easy for anyone who was unhappy with the
conclusions to challenge them. The Ministry of Power certainly did not miss
this opportunity in 1962, when the balance of payments predictions favored
imports of Soviet oil.35
As a result of the vagueness of the balance of payments predictions, the

Treasury ended up occupying “an intermediate position” between
the Board of Trade and the Ministry of Power.36 The Treasury was not
the only department to be confused. The Bank of England found in March
1961 that the economic “arguments for and against are, so far as we can
judge, numerous, complicated and evenly balanced.”37 However, the
mere fact that the Treasury did not come out strongly in favor of the
British oil companies was something of a defeat for the Ministry of Power.
The latter took for granted that, from the point of view of the balance of
payments, the government should support the British oil companies. The
department itself had no doubts, and continued to be “adamantly”
opposed to imports of Soviet oil.38
The Foreign Office was the second important “uncommitted” depart-
ment. It tended to produce complex assessments of the political implica-
tions of Soviet oil exports. Many US observers had warned that it was
politically dangerous for Western countries to rely on Soviet supplies, but
the Foreign Office was not totally convinced by this line of reasoning. While
the Foreign Office did believe that the Soviets were trying to bind under-
developed and neutral countries to themselves, it saw Soviet motives regard-
ing Western Europe as being largely driven by economic interests: Moscow
hoped to earn hard currency in order to buy necessary goods and equip-
ment.39 If the UK did not become unduly dependent on Soviet oil, the
Foreign Office believed that it would be relatively safe to buy it. The
department also professed a desire to promote Anglo-Soviet political and
trade relations, but ultimately tended to underline more the need to avoid
friction in British relations with the US, the Middle Eastern oil-producing
companies, and the major oil companies.40
The Ministry of Power dismissed claims that there was real demand for
Soviet oil in the UK. According to the ministry, the only industries to
express interest in Soviet fuel were those that hoped to promote their
exports to the UK. The energy needs of the UK industries were already
“fully met at fair and reasonable price.”41 The Board of Trade, in turn,
implied that there was demand, but that the major oil companies were
keeping Soviet oil out of the British market. These companies were the
only ones who had adequate facilities to import and handle substantial
quantities of Soviet oil. Associated Portland Cement had only managed to
buy Soviet oil because it happened to have its own waterside unloading
facilities, and hence did not have to rely on the major oil companies. Few
companies had similar advantages, and hence, the entry of a new actor in the
oil import business was welcome.42
Neither the Board of Trade nor the Ministry of Power was willing to give
in. “It became clear that there was no possibility of reconciling the views of
these two Departments,” a Treasury civil servant observed after he had
attended an inconclusive interdepartmental meeting in December 1958.43
The Treasury officials themselves held mixed views. Some suspected that the
Board of Trade could not limit imports, and that a decision to accept Scott’s
proposal would be “the first step towards complete freedom to import
Soviet oil.”44 Others believed that a limit could be imposed. There were
similar disagreements on other issues, including whether it was more impor-
tant for the government to defend the interests of the coal and oil industries
than those of oil consumers and British exporters of manufactured goods.
The Treasury officials finally decided to recommend to the Chancellor of
the Exchequer that he should support the reasoning of the Ministry of
Power, but it is clear from the minutes that the decision could have gone
either way.45 Nevertheless, an interdepartmental committee of officials
endorsed the Treasury’s conclusion, despite objections from the Board of
Trade.46 By this time the latter had raised the stakes even higher by
proposing that the British should offer to buy two million tons of Soviet
fuel oil in exchange for increased British exports to the Soviet Union.47 This
quantity would represent roughly a fifth of the UK’s total consumption,
excluding power stations whose fuel needs were covered by government
contracts.48
The major oil companies managed to deliver what was probably the final
blow to the Board of Trade plan to allow Soviet oil into the country by
making it clear “they saw the greatest danger in the proposal to import
Russian oil and even if H.M.G. decided that it was in the national interest to
take some, they would have nothing to do with it.”49 “The consequence of
this is that there is no prospect of building up a Trade Agreement with
Russia based on our undertaking to buy a given quantity of Russian oil,”
A. W. France, under-secretary to the Treasury, concluded. Without the
cooperation of the established oil companies, only small quantities of Soviet
oil could be distributed in the UK.50
An ad hoc meeting of key ministers in April 1959, led by Prime Minister
Harold Macmillan, eventually concluded, as the officials had done earlier,
that “at any rate for the time being the possibility of a purchase of Soviet oil
should be ruled out, in view of the repercussions which this would have on
the United Kingdom oil industry.”51 This decision meant that there would
be at least a temporary embargo on imports of oil from the Soviet Union.

There were a few exceptions: British companies could still buy some special
products which were consumed in small quantities, for example lubrication
oil, from the Soviet Union; and the Associated Portland Cement Company
could continue to buy fuel oil for five years because it had earlier received
British government assurances that trade would not be cut off during this
period.52
The Ministry of Power had won a battle, but not the whole war. During
the next four years, the departments clashed repeatedly in the meeting
rooms of Whitehall over the oil import policy. Both the Board of Trade
and the Ministry of Power strongly defended their arguments and tried to
win over the two influential departments, the Treasury and the Foreign
Office, which did not yet hold strong views on the issue. Frequent Cabinet
reshuffles had little impact on these struggles, which suggests that the
departmental policies reflected the views of the officials, not those of indi-
vidual politicians.
THE SOVIETS AND THE BOARD OF TRADE ATTACK

The Soviets were told about the new policy during the negotiations of the
Anglo-Soviet Five-Year Trade Agreement in the spring of 1959, but this
had little impact on these eager sellers. From this point onwards, there was
“continued pressure at all levels from Soviet Ministers and officials seeking
some modification of our policy.” The Soviets were not only trying to earn
more revenue: throughout the Cold War, they deeply resented the restric-
tions on trade imposed by the Western Alliance. The Soviets had therefore
done their best to undermine the activities of organizations such as the
CoCom, the joint Western export control system, which limited the flow of
strategic materials and technology to the Soviet Union. In the case of the
CoCom, as well as in the case of oil, there were companies and businessmen
in the West that were eager to trade with the Soviets. The UK’s govern-
mental departments received many enquiries from British industrial com-
panies willing to buy Soviet oil for their own consumption, or to arrange
barter deals in order to facilitate their exports to the Soviet Union.53
The Board of Trade, the department tasked with handling the govern-
ment’s relations with British manufacturing industries, import licensing
arrangements, and trade negotiations with the Soviets, had to defend the
government’s oil import policy against all of these demands. Because the
Board of Trade itself would have liked to allow imports of Soviet oil, it is no
surprise that it regarded the whole situation as highly unsatisfactory. In

February 1960, the department contacted the Treasury and pointed out
that the annual review of the long-term Anglo-Soviet trade agreement was
approaching, and that it would be useful to take a fresh look at the oil
import issue in advance.54
A Working Party on Russian Oil was duly set up, which ultimately
recommended no change in policy. Both the Ministry of Power and the
Board of Trade presented their earlier arguments, although in somewhat
more refined forms. The Foreign Office came out in favor of the embargo,
expressing concerns about the impact that imports of Soviet oil would have
on British relations with Middle Eastern countries and with the US. The
Treasury had difficulties in formulating any clear-cut conclusions regarding
the probable effect of Soviet oil imports on the balance of payments, and
eventually concluded vaguely that the continued exclusion of Soviet oil
might be a better option.55 The chairman of the committee, Sir Denis
Rickett, who was a senior Treasury official, was initially in favor of relaxing
import restrictions. However, he gradually came to the conclusion that this
would cause unwelcome damage to the coal industry while undermining
efforts to maintain oil prices and limit Soviet oil exports to the international
markets. On the other hand, Rickett recognized that these arguments were
“essentially transitional.” The Soviets were already gaining ground in for-
eign markets, regardless of British actions. In the domestic field, he argued,
the government should not “maintain the coal industry permanently at an
uneconomic level.”56 It thus came as no surprise that officials decided that
the issue should be considered again later.57
The conclusions of the working party were endorsed, firstly by the
interdepartmental Economic Steering Committee, and then individually
by each of the ministers whose departments had been involved in the
deliberations.58 As the Board of Trade had expected, the Soviets pressured
British negotiators on oil imports during the trade talks, and even threat-
ened to break off negotiations. The British refused to give in, but Rickett
predicted that “this is an issue on which they will continue to press us.”59
The Board of Trade also came under pressure from those British
manufacturing companies that were anxious to increase exports to the
Soviet Union, and hence supported the purchases of Soviet oil. For exam-
ple, the textile company Courtaulds warned that “if this complete embargo
on Russian oil products is continued, contracts which would otherwise have
come our way, may pass into hands of foreign competitors.”60
The following year, as the second annual review of the Anglo-Soviet

trade agreement was approaching, the question of oil imports was again
considered at the suggestion of the Board of Trade.61 The departments
maintained their previous positions, and hence the Board of Trade officials
quickly conceded the position.62 Maudling, the president of the Board of
Trade, resisted longer. He was about to head off to Moscow to open both a
large British trade fair and the second official annual review of the Anglo-
Soviet trade agreement. It was not difficult to predict he would come under
severe pressure from the Soviet government and also from many of the 2000
British businessmen who were expected to arrive in Moscow, and whose
ability to find customers depended largely on whether the Soviets could
increase their sterling earnings. Maudling toyed with the idea of challenging
the agreed interdepartmental view in the Cabinet Economic Policy com-
mittee, but eventually rejected the notion.63
DREAMS OF AN OIL CARTEL

The Ministry of Power had scored yet another victory, but as the Soviet oil
exports continued to grow at a fast pace, some Foreign Office ministers and
senior officials began to suspect that the British government could not keep
Soviet oil out of the UK forever. The British were, they felt, in effect “sitting
on a volcano.” Therefore, they should “work out a course of action before
our hands are forced by events which might be far from our liking.”64 Senior
Treasury officials came to similar conclusions. Sir Frank Lee, the Joint
Permanent Secretary of the Treasury, who had earlier been the Permanent
Secretary of the Board of Trade, wrote in April 1961: “I do not believe that
we can or should continue our present policy indefinitely; sooner or later, I
think, some sort of sharing arrangement will have to be accepted by the oil
companies of the West.”65 Sir Frank’s choice of words was revealing,
because the Treasury and Foreign Office did not simply shift their support
to the Board of Trade, but rather began to consider seriously whether the
British could reach some sort of “accommodation” with the Soviets. The
term “accommodation” was a euphemism for an international market-
sharing and price agreement. There was, of course, a much simpler word
for this kind of association, a label that Maudling did not hesitate to use in
his memoirs, as did a number of officials in their memos and meetings:
“cartel”.66
A senior Bank of England official, Jasper St. John Rootham, was one of
the most influential early converts to the idea of accommodation, and his
arguments made an impression on the Treasury’s thinking. Rootham

pointed out in March 1961 that if it was still accepted that it was advanta-
geous for the UK to keep international oil prices up, the Soviet oil should be
integrated to the world trade in a way that would do minimum damage to
prices. According to Rootham, the best way to do this was to conclude some
sort of an agreement with the Soviets.67 It was clear from the start that there
were formidable obstacles that would make it difficult to form a cartel. The
US government and oil companies would probably refuse to participate in
such an arrangement with their Cold War enemies, and without the involve-
ment of the huge US companies, no cartel could be set up. Furthermore, if
the US companies joined the cartel, they would violate anti-trust legislation,
unless the Department of Justice granted them a waiver.68 Such an agree-
ment, which covered the UK market, might have gone against the British
Restrictive Trade Practices Act (1956), but this did not particularly disturb
Whitehall. In certain cases, restrictive trade practices offered convenient
solutions to trade policy problems, and therefore officials and ministers
were inclined to support them.69
When Mikoian told Maudling in Moscow in May 1961 that the Soviets
wanted to get as high a price for their oil as possible, and could therefore
agree with the British oil companies “on the ways and means of disposing of
Soviet oil,” the cartel builders in Whitehall became seriously excited.
Mikoian pointed out that the Soviets had recently concluded an agreement
with De Beers of South Africa about the exclusive sale of diamonds to the
world markets.70
For decades the oil companies had done their best to limit competition in
the UK market and promote “stability,”71 but they were nevertheless not
thrilled about the Soviet proposal; they had tried this method before. After
the revolution in 1917, the new Bolshevik government had confiscated oil
properties owned by Western companies. In response, the latter set up a
joint alliance, Front Uni, which was supposed to strengthen their position,
but in practice soon collapsed when individual members tried to buy cheap
oil from the new rulers of Russia. In 1929, the leading British marketing
companies and the Soviets concluded an agreement intended to regulate
sales of Soviet oil to the UK, but the treaty failed to do so. It was the increase
in domestic Soviet consumption that eventually led to the decline in exports
to the UK.72
If “accommodation” had not worked then, the prospects were now even
worse. When the idea of “accommodation” was explained to BP and Shell
in July 1961, the companies argued fiercely against any arrangement that
involved them taking Soviet oil, although they did not entirely rule out a
small deal. For example, they reiterated their previous concerns about the
drastic impact such an alliance would have on relations with Middle Eastern
countries and the US. The companies said that they might not be able to
resist the Soviet expansion forever, but a delay could at least help them to
gain better terms in any possible settlement.73
The outbreak of the Berlin Crisis in the summer of 1961 made it even less
likely that a US–British–Soviet agreement would be concluded in the near
future, but there was so much interest in this option within Whitehall that
Rickett’s working party was resurrected in order to develop the concept
further in the utmost secrecy.74 The results were, to put it mildly, disap-
pointing. The Ministry of Power was particularly good at identifying the
disadvantages, but the other departments had to recognize that there were
indeed a number of practical objections and obstacles to the planned
“accommodation.” It simply did not seem likely that the Americans could
be persuaded to accept the arrangement, given their negative attitude
towards Soviet oil exports to the West and the tensions between the two
superpowers. Furthermore, the cartel could not be formed without the
involvement of the main non-Western producing countries, which were
gradually strengthening their position in the international oil trade. These
nations could take over the new organization and downgrade Anglo-
American oil companies to “little more than carriers of oil,” as the Ministry
of Power warned. This was probably the main reason why the British
companies were so opposed to the idea of “accommodation.” They had
set up cartels before, but this time, it was conceivable that any arrangements
might be dominated by foreign governments, not companies. The British
officials eventually decided to postpone any efforts to build a cartel to an
unspecified later date.75
OIL FOR SHIPS

The planned “accommodation” with the Soviets fell through, but the Board
of Trade remained convinced that it would eventually win the war over oil
imports. Richard Powell, the Permanent Secretary of the department,
declared in an internal memo in the summer of 1962 that “the day will
certainly come when Russian oil is imported into this country.”76 The
department had in fact begun to consider how the necessary import licenses
could be distributed. For tactical reasons, the Ministry of Power was not
consulted on these consultations, in a move that was highly unusual and
thus annoyed those members of the Board of Trade who were in charge of
practical licensing arrangements. After all, Powell’s department lacked the
necessary expertise in this field and hence tended to rely on the advice of the
Ministry of Power for these kinds of practical matters.77
At the end of 1962, a new option emerged: the Soviets seemed willing to
exchange oil for British ships. When this issue was taken up at cabinet level
in early 1963, the president of the Board of Trade, Frederick Erroll, painted
an uplifting picture of orders worth £30 million, and possibly substantially
more, which the British shipbuilders could receive from the Soviets if only
the British would grant them licenses in exchange to sell at least one million
tons of fuel oil, worth £4 million, to the UK market. In this way, the British
shipyards, which were in the midst of a deep economic crisis, would receive
orders, and other industries cheap fuel. Furthermore, there was no reason to
think that Britain would become unduly dependent on the energy imports
from its Cold War opponent. By 1962, British fuel oil consumption had
risen to 21.5 million tons, and was expected to grow still more.78
The proposal sounded too good to be true. But was it in fact true? The
answer of the Ministry of Power was “no.” The Soviets had made some
promising overtures, but they had also complained that British prices were
substantially higher than those of their main Western competitors. It was
not self-evident that the Soviets were interested in tying up ship and oil
contracts. After all, they could buy cheaper ships from other countries. The
departments could not even agree on who had initially suggested the idea of
the exchange deal. The Board of Trade and the Ministry of Transport had
originally implied that it was the Soviets, but the Ministry of Power pointed
the finger at these two departments. The truth was probably somewhere in
the middle. The Soviets had claimed for years in general terms that they
were prepared to place more orders in the UK if the British would buy their
oil in exchange. After the Soviets had shown an interest in British ships, the
Board of Trade began to develop a concrete deal with the communist
bureaucrats.79
Theoretically, the plan certainly had benefits. In December 1962, there
were 19,000 unemployed shipbuilders in the UK; without new orders,
another 15,000 were expected to lose their jobs by the end of 1963. The
growth in unemployment was starting to become a political embarrassment
for the government. Soviet orders worth £30 million would create employ-
ment for 20,000 men in struggling areas of the UK, which sounded impres-
sive, although the Ministry of Power argued that importing two million tons
of Soviet fuel oil could cost the British coal industry 9000 to 10,000 jobs.80
The Board of Trade received strong support from the Ministry of Trans-
port, but neither the officials nor the cabinet’s Economic Policy Committee
managed to reach an agreement.81 The divisions between the departments
were evident in the cabinet meetings, but the ministers eventually decided
to give a cautious green light to Soviet imports by concluding that “if firm
proposals were made by the Soviet Government for the placing of substan-
tial shipbuilding orders in the United Kingdom in exchange for the impor-
tation of a limited quota of Soviet fuel oil, these proposals should be
considered on their merits.” This cautious statement reflected Prime Min-
ister Macmillan’s concerns as to whether, if the British were to enter into
negotiations with the Soviets without first getting a specific undertaking,
the latter were indeed serious about reaching an agreement. If the British
found that there were no orders to be won, they would have antagonized
their allies needlessly.82
Macmillan’s fear was justified, but his method of eliminating the risk was
ineffective. A statement regarding the cabinet’s decision was made in par-
liament, and hence the change in policy was announced to the whole world.
The UK government, which had argued for years that the British did not
need Soviet oil, was now seen to be willing to allow it into the country if the
terms were attractive enough. However, the orders for ships did not mate-
rialize. The Soviets claimed that they had never linked prospective oil and
ship deals together, and were not interested in doing so now.83 The only
winner was the Soviet Union, which had managed to show the world that
the second most important opponent of Soviet oil exports in the world was
now willing to buy its oil. The Board of Trade had caused damage to the
embargo, which it had resented for so long, but had not managed to acquire
any material benefits for those industries whose interests it had been seeking
to promote. The fact that the department had claimed there were “solid
prospects”84 of a “ships for oil” deal may have had a negative impact on its
reputation when it emerged that this had not in fact been the case.
Although the “ships for oil” deal fell through, the Cabinet decision of
1963 was in theory an important precedent for British policy regarding
Soviet oil. In practice, it had little impact on actual British import policy, as
Soviet oil was kept out of the country. In 1964, the Soviets continued to
press the British to grant them oil import licenses, but the Soviets then lost
interest on the whole issue.85 This reflected wider changes in Soviet oil
export capabilities. During the mid-1960s, the Soviet oil offensive began to
lose steam rapidly. Production in the Soviet Union increased, but so did its
domestic consumption. Hence, the Soviets could no longer offer oil at
knock-down prices to all consumers. Its exports did grow, but so did those
of many other oil producers. The Soviet market share in Western Europe
stabilized at around 8 percent.86 The prediction that had been made by the
British oil companies in 1961 proved to be correct: time solved the problem
of Soviet oil.
Some British consumers still showed an interest in Soviet supplies, but
pressure on the government to remove the embargo declined at the same
pace at which the Soviet prices increased. The embargo was officially
removed in 1973, just before the global oil crisis broke out; but by this
time, the embargo had already been weakened as some companies, includ-
ing Imperial Chemical Industries and the Soviet-owned Nafta (UK), had
received licenses to import small amounts of Soviet oil.87
CONCLUSION
The story described in this chapter provides some insights into relations
between the British government and the corporate sector and also into the
formulation of energy policy. A number of scholars have argued that Britain
was so dependent on income generated from the domestic oil industry
during the early Cold War period that this encouraged the government to
offer strong support to the country’s oil industry against foreign threats. For
example, Steve Marsh, writing on British and US policies towards Iran
during the early 1950s, argues: “Government and oil industry were locked
in a symbiotic relationship that the oil majors exploited to advance their
particular commercial concerns, often embroiling their national govern-
ments in their quest for competitive advantage.”88
However, if we want to get a more balanced view on the relations
between the British government and oil companies, we also have to con-
sider events in the domestic UK market and look at the formulation of
government policy in cases where the oil industry’s interests were in conflict
with other British economic interests. This makes the relationship between
the government and the oil industry appear less “symbiotic.” The Board of
Trade rushed to support manufacturing industries, while the Treasury
began to doubt the crucial significance of the oil industry to the country’s
balance of payments already in the early 1960s, when it became clear that
host governments in Middle East and South America were taking an
increasing portion of the oil revenue. The Foreign Office might have been
willing to support British oil interests in the Middle East, but in the British
home market, it was hard to adopt a clear-cut position.
If Soviet oil had been imported into the UK on a substantial scale, there
would have been a number of direct and indirect effects on the country’s
economy and its international relations. These would have had uneven
consequences throughout the British society. It is therefore hard to disagree
with the Bank of England and the Treasury, which felt that it was difficult to
estimate which course of action would be most advantageous for the UK as
a whole. However, neither the Board of Trade nor the Ministry of Power
were in any doubt as to what the policy should look like. Although they
were officially departments of Her Majesty’s Government, their behavior
more closely resembled the actions of non-governmental special interest
groups. In a way, the Whitehall struggle over Soviet fuel oil was a proxy war
between two important economic groups: the British oil industry and the
oil-consuming industries. Whitehall supporters of British oil-producing and
-manufacturing industries identified so closely with the interests of their
clients that they refused to let the matter drop so long as there was a
possibility that cheap Soviet oil could be allowed into the UK.
It is possible that similar conflicts occurred in other European countries,
although the scholarly literature on these issues is still limited.89 Soviet oil
exports grew fast during the late 1950s and early 1960s and disrupted
existing trading patterns. The Soviets were trying to acquire market shares
by offering oil at cheap prices. Their main competitors, the major Anglo-
American oil companies, regarded the Soviets as a commercial and—to
some degree—also a political threat, but many consumers naturally wel-
comed the opportunity to buy inexpensive energy. The British case shows
that the Soviets could exploit these diverging interests quite skillfully to
undermine anti-Soviet policies. It is possible that they did the same in other
countries. European economies were growing fast and needed cheap
energy, but French and Dutch companies, in particular, controlled substan-
tial crude oil reserves of their own. In addition, many countries had ailing
coal industries. The British case also shows that large oil companies still had
substantial influence. They had loyal friends within the government machin-
ery and also controlled distribution networks. Without the cooperation of
Shell and BP, it was hard to allow an opening of the market to significant
quantities of Soviet oil imports to the UK.
NOTES
1. Peter R. Odell, Oil and World Power, 8th edn (Harmondsworth:
Penguin, 1986), 61.
2. For the efforts of the British to defend their interests in foreign oil
markets, see Niklas Jensen-Eriksen, “The First Wave of the Soviet
Oil Offensive: The Anglo-American Alliance and the Flow of ‘Red
Oil’ to Finland during the 1950s,” Business History 49, 3 (2007),
348–66; Niklas Jensen-Eriksen, “The Cold War in Energy Markets:
British Efforts to Contain Soviet Oil Exports to Non-Communist
Countries, 1950–1965,” in Alain Beltran, ed., Le pétrole et la
guerre—Oil and War (Brussels: Peter Lang, 2012), 191–208.
3. The National Archives of the UK (TNA), Records of the Foreign
Office (FO)371/158054, Economic Relations—Supplies (UES)
1038/32, P. Male, “Oil in Soviet Union,” July 13, 1961.
4. Bruce W. Jentleson, Pipeline Politics: The Complex Political Economy
of East-West Energy Trade, Cornell Studies in Political Economy
(Ithaca, NY: Cornell University Press, 1986), 39, 91, 119–22, 219.
5. TNA, Records of the Ministry of Power (POWE)61/94,
E. Melville, FO to A. Mackay, Treasury (T), February 1, 1962
(copy for the Ministry of Power [MOP]).
6. “Mr. Mikoyan’s oil hint to Britain,” The Times, May 23, 1961.
7. “Oil from Russia,” The Times, May 25, 1961.
8. CIA, “Middle East Oil,” NIE 30–60, November 22, 1960, quoted
in Daniel Yergin, The Prize: The Epic Quest for Oil, Money and Power
(London: Simon & Schuster, 1993), 515.
9. “Russian Export Statistics,” Petroleum Press Service, September
1960, 329.
10. “Surplus capacity,” Petroleum Press Service, May 1959, 166.
11. “Russia’s Rising Oil Exports,” Petroleum Press Service, April 1960,
125; TNA, POWE33/2443, MOP, “Russian oil imports,” May 19,
1960.
13. TNA, Treasury (T)236/6441, A. Mackay, “Russian oil,” June 14,
1961.
14. TNA, T236/6441, G. Walker, “Note of a meeting with the Minis-
ter of Power and representatives of Shell and British Petroleum
(B.P.), 6th July 1961,” July 10, 1961.
15. William Wallace, The Foreign Policy Process in Britain (London:
Allen & Unwin, 1977), 50.
16. TNA, POWE33/2074, Minute by B. Gottlieb, January 21, 1958.
17. TNA, POWE61/20, K. Stock, “Working Party on Russian Oil
[RO],” September 12, 1961.
18. TNA, POWE33/2443, MOP, “Russian oil in the United Kingdom:

Note of a Meeting at the Ministry of Power on 3rd July, 1958,”
July 29, 1958.
19. TNA, POWE33/2443, MOP, “Russian oil,” March 19, 1959.
20. TNA, T298/203, Working Party on Russian Oil Meeting (62)4,
March 2, 1962.
21. TNA, POWE33/2443, B. Gottlieb, MOP, to C. Campbell, Board
of Trade (BT), October 17, 1958.
22. TNA, T236/5642, A. Mackay, “Working Party on Russian Oil,”
March 24, 1960.
23. TNA, POWE33/2443, B. Gottlieb, MOP, to C. Campbell, BT,
October 17, 1958; MOP, “Russian oil,” March 19, 1959.
24. TNA, T277/973, RO (60)5, April 28, 1960 (MOP comments on
RO [60]4); Neil K. Buxton, The Economic Development of the British
Coal Industry: From Industrial Revolution to Present Day (London:
Batsford Academic, 1978), 238–9.
25. TNA, POWE33/1869, P. Mills, Minister of Power, to D. Eccles,
BT, February 20, 1958 (copy); POWE33/1869. B. Gottlieb, “Pro-
posal by Associated Portland Cement, Ltd. to import Russian Oil,”
December 6, 1957; POWE33/2443. Minute by B. Gottlieb,
December 17, 1959.
26. TNA, POWE33/2443, D. Byrne, BT, to D. le Butt, MOP, May 5,
1958.
27. TNA, POWE33/2443, BT, “Imports of oil from the U.S.S.R.,”
November 25, 1958.
28. TNA, POWE33/2443, Minute by B. Gottlieb, June 30, 1958.
29. TNA, POWE33/2443, A. Powell, MOP, to P. Thornton, BT,
January 23, 1959.
30. See, for example, the memoranda in TNA, T277/973. This
reflected the general British attitude towards trade restrictions.
Alan S. Milward and George Brennan, Britain’s Place in the
World: A Historical Enquiry into Import Controls 1945–60,
Routledge Explorations in Economic History (London:
Routledge, 1996).
31. TNA, POWE33/2443, “Imports of Soviet oil into the United
Kingdom,” December 10, 1958 (Memo on an interdepartmental
meeting); POWE33/2443. BT, “Imports of oil from the U.S.S.R.,”
November 25, 1958; T236/5642. BT, “Draft paper by Board of
Trade. Import of Soviet oil,” January 1959; T277/973, RO (60)1,

“Import policy for Soviet oil,” March 15, 1960.
32. TNA, T236/6237, P. Milner-Barry, T, to M. Platt, MOP, February
20, 1961.
33. TNA, T236/6237, P. Milner-Barry, T, to D. Rickett, T, October
31, 1960.
34. TNA, T236/6237, “Oil problems,” Minutes of a meeting held in
P. Milner-Barry’s room, December 16, 1960.
35. TNA, T298/203, RO (62)2, February 2, 1962.
36. TNA, T236/6441, D. Rickett, “Russian oil,” June 19, 1961.
37. TNA, T236/6237, J. Rootham, Bank of England, to A. Mackay, T,
March 15, 1961.
38. TNA, T236/6237, P. Milner-Barry, “Russian oil,” April 4, 1961.
39. TNA, FO371/150062, UES10310/8, “Soviet Bloc Oil Exports,”
August 4, 1960.
40. TNA, T236/6237, P. Reilly, FO, to P. Milner-Barry, T, March 2,
1961.
41. TNA, POWE33/2443, A. Powell, MOP, to P. Thornton, BT,
January 23, 1959.
42. TNA, T236/5642, BT, “Draft paper by Board of Trade: Import of
Soviet oil,” January 1959.
43. TNA, T236/5642, “Soviet oil,” January 7, 1959.
44. Ibid.
45. TNA, T236/5642, Minutes by A. France, January 8 and February 9,
1959; F. Glaves-Smith, January 8 and February 9, 1959; K. Weston,
January 9 and February 11, 1959; M. Stevenson, January 9, 1959;
F. Winter, January 14, 1959; D. Rickett, February 11, 1959.
46. TNA, T236/5642, GEN679, “Anglo-Russian Trade Agreement,”
February 16, 1959; CAB130/160, GEN679/1, “An Anglo-Russian
Trade Agreement: Report by Officials,” February 13, 1959.
47. TNA, T236/5642, A. Taylor, “Soviet oil,” February 11, 1959.
48. TNA, T277/1047, RO (60)2, March 29, 1960.
49. TNA, T236/5642, Draft minute from the Chancellor of the Exche-
quer to the Prime Minister, February 19, 1959.
50. TNA, T236/5642, A. France to R. Makins, “Anglo-Soviet Trade,”
February 19, 1959.
51. TNA, CAB130/160, GEN679/3, Minutes of a meeting held in the
Prime Minister’s room, April 8, 1959.
52. TNA, POWE33/2443, B. Gottlieb, MOP, to P. Thornton, BT,

April 24, 1959; POWE61/95, “Associated Portland Cement
Manufacturers: Refusal of licenses to import oil from Russia,” 1964.
53. TNA, T277/973, RO (60)1, “Import policy for Soviet oil,” March
15, 1960. The literature on CoCom is vast, see for example Alan
P. Dobson, US Economic Statecraft for Survival 1933–1991: Of
Sanctions, Embargoes and Economic Warfare (London: Routledge,
2002); Ian Jackson, The Economic Cold War: America, Britain and
East–West Trade, 1948–1963 (Houndmills, UK: Palgrave
Macmillan, 2001).
54. TNA, T236/5642, R. Powell, BT, to F. Lee, February 29, 1960.
55. TNA, T277/1047, RO (60)2, March 29, 1960; T277/973. RO
(60)1, “Import Policy for Soviet oil,” March 15, 1960; RO (60)2,
“Note by the Board of Trade,” March 24, 1960; RO (60)5, April
28, 1960 (MOP comments on RO [60]4); T236/5642, RO (60)8,
“Report of the Working Party on Russian Oil,” May 19, 1960;
J. Downie, “Russian oil,” March 28, 1960.
56. TNA, T236/6236, D. Rickett, “Russian oil,” May 17, 1960.
57. TNA, T236/6441, “Russian oil,” Draft minute for the Economic
Policy Committee, April 12, 1961.
58. TNA, T236/6237, Minutes by D. Rickett, June 1 and 2, 1960.
59. TNA, T236/6237, “Anglo-Russian Trade Talks,” Minute by
D. Ricket, June 21, 1960.
60. TNA, POWE33/2443, C. Kearton, managing director, to F. Erroll,
Minister of State, BT, June 8, 1960.
61. TNA, T236/6237, G. Andrew, BT, to D. Rickett, T, February 13,
1961.
62. TNA, T236/6237, G. Andrew, BT, to D. Rickett, T, March 10,
1961.
63. TNA, T236/6237, G. Andrew, BT, to D. Rickett, T, February 13,
1961; T236/6441. F. Lee, “Russian oil: Draft memorandum for the
E.P.C.,” April 20, 1961; A. Mackay, “Russian oil,” April 26, 1961;
A. Mackay, T, to P. Milner-Barry, T, “Draft. Economic Policy
Committee. Trade Negotiations with the U.S.S.R.,” May 3, 1961.
64. TNA, T236/6441, A. Mackay, “Russian oil,” May 3, 1961. “Sit on
this volcano” was the exact expression which Mackay wrote down
after hearing the views of the Foreign Office; FO371/158054,
UES1038/24, Minute by F. Mason, June 6, 1961.
65. TNA, T236/6237, “Russian oil,” F. Lee, April 7, 1961.
66. Reginald Maudling, Memoirs (London: Sidgwick & Jackson, 1978),

140; TNA, POWE61/20, RO (61)3, September 6, 1961; BT,
“Russian Oil,” July 26, 1961; POWE61/94. A. Powell, “Russian
Oil,” June 6, 1961.
67. TNA, T236/6237, A. Mackay, “U.K. imports of Russian oil,”
March 8, 1961.
68. TNA, POWE33/2443, MOP, “Russian oil imports,” May 19,
1960.
69. See Niklas Jensen-Eriksen, “A Stab in the Back? The British Gov-
ernment, the Paper Industry and the Nordic Threat, 1956–1972,”
Contemporary British History 22, 1 (2008), 1–21; Niklas Jensen-
Eriksen, “Industrial Diplomacy and Economic Integration: The
Origins of All-European Paper Cartels, 1959–72,” Journal of Con-
temporary History 46, 1 (2011), 179–202.
70. TNA, T236/6441, “Record of Meeting between the President of
the Board of Trade and Mr. Mikoyan.” The Soviets had actively
participated in a number of international cartels. See Debora L. Spar,
The Cooperative Edge: The Internal Politics of International Cartels,
Cornell Studies in Political Economy (Ithaca, NY: Cornell Univer-
sity Press, 1994); Elina Kuorelahti, “Cartel conquistadors: Banks,
Governments and Nordic Timber Industry 1928–1932” (paper,
fifteenth annual conference of the European Business History Asso-
ciation, Athens, August 24–26, 2011).
71. See for example Carlo Morelli, “The Anglo-Iranian Oil Company
1945–1954: Government-Business Relationship in Conflict?,”
Dundee Discussion Papers in Economics 166 (Dundee: University
of Dundee, 2004).
72. Stephen Howarth, A Century in Oil: The “Shell” Transport and
Trading Company (London: Weidenfeld & Nicolson, 1997),
149–50; James H. Bamberg, The History of the British Petroleum
Company: The Anglo-Iranian Years, 1928–1954, vol. 2 (Cambridge:
Cambridge University Press, 1994), 112–13.
73. TNA, T236/6441, G. Walker, Note of the meeting on July 6, 1961,
July 10, 1961.
74. TNA, T236/6442, D. Reilly, FO, to H. Caccia, Washington, DC,
July 21, 1961.
75. TNA, T236/6442, A. Mackay, “Russian oil,” December 11, 1961;
A. Mackay, “Working Party on Russian oil,” December 18, 1961;
POWE61/20, RO (61)2, August 18, 1961 (quote); POWE61/20,
RO (61)1, “An accommodation with the Russians: Paper by the

Ministry of Power,” August 17, 1961; T298/202, RO (62)8,
“Working Party on Russian oil: United Kingdom Imports of
Russian Fuel Oil: Report—Final Revise,” April 26, 1962.
76. TNA, BT258/1481, “Russian oil,” July 5, 1962.
77. TNA, BT258/1481, “Division of a Quota for Russian Oil,” June
25, 1962; Minute by C. Baylis, June 20, 1962 and A. Burgess, May
18, 1962; TNA, BT258/1481, “Working Party on the Allocation of
Possible Russian Oil Imports. Note of a Meeting,” [1962].
78. TNA, Cabinet (CAB)134/1886, Economic Steering (General)
Committee(ESGC)(62)21, “Possible Imports of Russian Fuel Oil:
Note by the Secretaries,” November 1, 1962; CAB129/112, C(63)
12, “Sales of British ships in exchange for imports of Russian oil:
(Note by the officials),” [1963].
79. TNA, Prime Minister’s Office (PREM)11/5147, “Soviet Oil for
Ships—Report of Mr. Harold Wilson’s Speech on Saturday 20th
July,” July 24, 1963; CAB134/1693, E.A.(62)35th Meeting,
December 19, 1962; POWE61/95, MOP, “Economic Policy
Committee: Russian Oil,” [MOP], January 24, 1963; “Economic
Policy Committee: Possible imports of Russian oil,” E.A.(62)115
and E.A.(62)118, [MOP], November 6, 1962; A Minute by Sir
Dennis Proctor, March 11, 1963; Telegram no. 14 from Trevelyan,
Moscow, to FO, January 4, 1963.
80. TNA, CAB129/112, C(63)12, “Sales of British ships in exchange
for imports of Russian oil. (Note by the officials),” [1963].
81. TNA, BT11/5978, A. Welch, “Russian oil,” December 10, 1962;
CAB21/5883. B. Trend, “Possible Imports of Russian Fuel Oil,”
February 6, 1963; P. Carey, BT, to D. Mitchell, T, February 1, 1963
(copy for the Cabinet Office).
82. TNA, CAB128/37, C.C.(63)10, February 7, 1963.
83. TNA, CAB21/5883, “Russian Oil for British Ships: Note of a
Meeting in the Chancellor of the Exchequer’s Room on 12th
March, 1963”; Telegram no. 341 from Trevelyan, Moscow, to
FO, March 5, 1963; PREM11/5147, “Soviet Oil for Ships—
Report of Mr. Harold Wilson’s Speech on Saturday 20th July,”
July 24, 1963; W. Plowden, BT, to P. de Zuluetta, 10 Downing
Street, August 14, 1963.
84. TNA, CAB129/112, C(62)12, “Sales of British ships in exchange
for imports of Russian oil: (Note by the officials).”
85. TNA: POWE63/129, Fuel Coordination Committee (FCC)(66)

43, “Russian Oil,” October 31, 1966; Interdepartmental Working
Party on Oil Policy (IOP)(69)41, “Embargo on Soviet oil,” Novem-
ber 4, 1969.
86. TNA: POWE63/129. “Draft: Embargo on Imports of Oil from
Rumania and other Eastern European Countries,” February 22,
1972; Bennett H. Wall, Growth in a Changing Environment: A
History of Standard Oil Company (New Jersey) 1950–1972 and
Exxon Corporation, 1972–1975 (New York: McGraw-Hill, 1988),
350–1.
87. Arthur J. Klinghoffer, The Soviet Union & International Oil Politics
(New York: Columbia University Press, 1977), 220; TNA,
POWE63/328, “Imports of Oil from the Soviet Union. Note by
Petroleum Division,” February 1973.
88. Steve Marsh, “Anglo-American Crude Diplomacy: Multinational
Oil and the Iranian Oil Crisis, 1951–53,” Contemporary British
History 21, 1 (2007), 26.
89. However, see Roberto Cantoni’s chapter in this volume.
Debates at NATO and the EEC in Response
to the Soviet “Oil Offensive” in the Early
1960s
Roberto Cantoni
INTRODUCTION
By the late 1950s, Soviet oil exports to Western Europe and plans to
increase them through the construction of a colossal pipeline system were
causing concern at the European Economic Community (EEC) and the
North Atlantic Treaty Organization (NATO). Member states within both
organizations, as well as some Western oil companies, feared Moscow could
use oil as a weapon to weaken the West both militarily and economically.
Between 1955 and 1965, Soviet oil production rose spectacularly from
71 to 243 million tons.1 The new production capacities had significant
implications for Western security and economy, as they created conditions
to boost the production of the Soviet Union’s heavy industries and fuel its
military apparatus. The Soviet Union also increased its exports. Over ten
years, exports expanded from 5.2 percent to 26.4 percent of total Soviet
production, and oil exports to non-communist countries escalated from 3.8
million tons in 1955 to a stunning 35.5 million tons in 1965.2 This bonanza
would not have been possible without an immense prospecting effort. It
bore its finest fruit in the Volga-Ural region, where a number of large
R. Cantoni (*)
CERI, Sciences Po Paris, France

DOI 10.1007/978-3-319-49532-3_5
132 R. CANTONI
oilfields were discovered throughout the 1950s. Not only could the Soviets
now produce large amounts of oil, they could also offer prices international
companies could not match in normal market conditions without accepting
to decrease their profits.3
In 1958, however, the Soviet Union’s ability to transport oil was
constrained by its overloaded railway network, which carried around 60 per-
cent of its overall amount (compared to 5 percent in the United States
[US]). The Soviets aimed to meet 35 percent of their oil transportation
requirements with a new pipeline system that would connect new oilfields to
the Union’s western periphery. Besides relieving the railway network, the
system would reduce the demand for tankers. In addition, the pipeline
could easily be connected to seaport terminals where the Soviet Navy’s
vessels were moored.4 Nevertheless, the Soviets needed Western technolo-
gies and industrial capabilities to build the pipeline system, especially regard-
ing large-diameter pipes and pipeline equipment. Drafting a strategy to
maintain the Soviet Union’s dependence and counter its technological
development became the main discussion topic among members of
NATO’s Committee of Economic Advisers.
Historians of technology have long recognized the importance of social,
political, and economic factors in defining what a technological artifact is.5
This chapter enriches these analyses by showing, on the one hand, the
crucial role of oil pipes in international relations during the Cold War. On
the other, it underlines that the Cold War discussions in the late 1950s and
early 1960s shaped the very definition of what oil pipes are. In particular, the
actual understanding of their sizes and functions was negotiated in the
measures that NATO implemented to face the Soviet threat.
This study also refines our understanding of the role of pipelines in
political history, which has been emphasized by historian Timothy Mitchell
and by geographer Andrew Barry. Mitchell has highlighted, among other
things, the importance of Middle Eastern pipelines and refineries as sites of
intense political struggle. As we will see, unlike in Mitchell’s case, in my
story no physical attack or sabotage action was carried out towards pipelines;
however, political struggle did take place at a more abstract level, both
strategic and diplomatic.
Besides being sites of conflict, pipelines as material artifacts are also active
agents of politics, as Barry demonstrated in his study of the Baku–Tbilisi–
Ceyhan oil pipeline from the Caspian Sea to the Mediterranean, which was
built in the second half of the 2000s.6 Barry convincingly argued that
DEBATES AT NATO AND THE EEC IN RESPONSE TO THE SOVIET “OIL. . . 133
political disputes regarding pipelines revolve around objects that are

entangled in ever growing quantities of information about their perfor-
mance, origins, and impact. In line with Barry’s approach, I demonstrate
that pipes as political devices were the central element of NATO’s debate on
Soviet oil exports and technological capabilities: not only the military or civil
relevance of some kind of pipes over others, but also estimates on industrial
production, technologies used for pipe manufacturing, and paths followed
by pipelines, critically shaped the debate at the Atlantic Alliance.
Moving from the history of technology and political science to the
history of energy, this chapter follows up on the work of historian Per
H€ogselius on Euro-Soviet gas trade from the late 1960s onwards, and
aims to extend his narrative back in time to the early 1960s: a time when
oil, not gas, was the main commodity that was traded between the Soviet
Union and Western Europe. Finally, my work also aims to build on the
transnational framework of Angela Stent’s seminal monograph on West
German–Soviet relations. Stent’s book extensively covered the embargo
from West Germany’s point of view, but could not take into account
contemporary archival sources due to its early publication date.7
In the following, I will first examine the global consequences of the
Soviet oil offensive, including national political reactions to it. I will then
move to the core of the chapter, the debates at the EEC and NATO about
the possibility of stemming the Soviet oil trade by enacting a supranational
regulation framework, and to place under embargo certain sensitive West-
ern technologies that the Soviets might use for building their pipeline.
Throughout the debates, French and Italian administrations at the EEC,
and US and UK administrations at NATO, held conflicting points of view.
They corresponded to markedly different perceptions of the rights and
wrongs of Soviet trade and were dictated by national political agendas. As
I argue, the EEC and NATO discussions not only differed in the scope of
their results, but also in the underlying discourses leading to those results: in
the European case, the rationale was essentially economic; in the Atlantic
case, it was more broadly military-strategic. The actors also differed because
of their weight in the debate: whereas the US was the hegemonic power at
NATO with a decisive impact on decision-making, France’s attempts to
impose its oil strategy onto the European Community had to face obstacles,
and ultimately failed.
134 R. CANTONI
THE SOVIET “OIL OFFENSIVE” AND WESTERN REACTIONS

The Soviet oil trade met with different international reactions. But almost all
of them had in common the image of Soviet oil as a major threat for West
European energy, economy, and security. Indeed, in most contemporary
documents of the US State Department (SD), the phrase “Soviet oil offen-
sive” was conceived to describe Soviet oil trade: a description, which soon
became widely used in other Western sources. Regarding Soviet oil exports,
while the American government firmly refused to allow them into the
United States, European positions were more differentiated, depending
on each country’s trading activity with the USSR. In terms of Soviet
exports, the top three West European countries in 1957 (the United
Kingdom, West Germany, and France) imported merchandise worth
756, 286, and 268 million rubles, respectively. Exports to Italy amounted
to 117 million rubles. However, Italy was the only country among these
with a negative balance of trade.8
In Britain, Harold Macmillan’s government implemented an embargo
on Soviet oil in 1959, but serious divergences remained between the
governmental departments, notably between the Board of Trade and the
Ministry of Power: the latter was in favor of an embargo, the former against
one.9 In France, Victor de Metz, president of the Compagnie française des
pétroles (CFP), feared that Soviet trade could expand to the entire EEC,
thus jeopardizing French plans to market their newly found African oil in
Europe. De Metz thus hoped to counter the “red oil flood” with an alliance
between Arab producers and Western oil majors.10 A number of
oil-producing Arab countries turned their noses up to the Soviet export
strategy, but their heavy dependence on the USSR’s economy and technical
expertise prevented them from taking any retaliatory measures.11
The situation was different for Italy and West Germany, which were
deeply involved in trading with the USSR. In the case of West Germany,
this applied specifically to Germany’s Ruhr steel producers, who were on
good terms with a number of Soviet firms. Commercial exchanges also
existed between Soviet firms and many large Italian industrial enterprises,
such as the car manufacturer FIAT (Fabbrica Italiana Automobili Torino).
At the end of 1959, the Italian public oil company Ente Nazionale
Idrocarburi (ENI) was negotiating the terms for a massive oil-for-technol-
ogy supply contract with the Soviet Union. This materialized in 1960,
causing a scandal in the Western industrial and political world: for four
years, the Soviet state-run company Soiuznefteksport (SNE) would provide
ENI with 12 million tons of crude and fuel oil in exchange for synthetic
rubber, steel pipes, and pipeline equipment.12 Two months before the
Italian contract came into force, West German firms also signed an
important barter contract with the Soviets (in view of the coal supplies
available to Germany, it was perceived as less threatening; Italy had no
such supplies). Among German exports to the USSR were chemical and
extractive industry plants, iron, and steel products, ships, and large-diameter
pipes; imports included Soviet crude oil and petrol products.13
ENI’s trade with the Soviets soon brought the Italian company to the
attention of international organizations. The US press, as well as the reports
of the US National Security Council and SD, highlighted the dangers
arising from the dependency on Soviet oil: in their narrative, the Russians
might decide suddenly to interrupt their deliveries in retaliation for unfa-
vorable political decisions by Western governments.14 The US view failed to
note that that the USSR was highly dependent on Western technology and
that any disruption of oil supplies would have a serious impact on the
country’s industrial development.
US anxieties were also clearly expressed in two documents by the
Senate in 1961 and 1962.15 In the first study, titled Soviet Oil in the Cold
War, authors Halford Hoskins (a senior specialist in international relations)
and Leon Herman (an analyst of Soviet economics) warned that a spread of
the Italian business attitude across Western Europe would cause more
countries to obtain some of their supplies from the USSR instead of from
the majors, and decrease the revenues of international companies. They
maintained this would not only damage US, but also British, Dutch, and
French interests, since the British and Dutch were both partners in Royal
Dutch-Shell, the British ran British Petroleum (BP), the French ran CFP,
and all of these countries were already exporting their oil to Europe.16 In
Problems Raised by the Soviet Oil Offensive, Hoskins warned that ENI’s
policy was intended to eliminate as many foreign companies from the Italian
market as possible.17
ENI’s further plans to build a pipeline for the Soviets between the USSR
and East Germany, and another one to connect Italy’s Adriatic seaport of
Trieste to Vienna, did not appease Western governments. The first threat
was defused through international diplomatic pressure. France and the US
had been promptly informed by their secret services about the Italian–Soviet
agreement regarding the East German pipeline project.18 The implementa-
tion of ENI’s project was depicted as a dangerous threat: an oil terminal in
East Germany would sooner or later be connected to West Germany and
136 R. CANTONI
thus initiate a Soviet oil invasion. Via the Italian ambassador in Paris, the SD
was able to stop the project, and the agreement was not signed.19 ENI only
supplied certain items of pumping and auxiliary equipment, while the plan
to provide technical assistance with installing the pipelines was dropped.20
As a NATO report argues further, the Soviets could easily link the
Trieste—Vienna pipeline to Bratislava, where they planned to build
the pipeline system’s Czechoslovak terminal (Fig. 1).21 The short distance
between Vienna and Bratislava made the project a threat for the majors’
supplies of Middle Eastern oil.22 By linking the Soviet pipeline to ENI’s
planned pipeline, Soviet oil could be piped to the Mediterranean and then
exported by tanker to areas already supplied by Anglo-American majors in
Southern Europe. This would further increase the Soviet quantities deliv-
ered by tankers through the Black Sea.23
However, the Trieste—Vienna pipeline was not approved until 1963. A
number of other majors besides ENI were included in laying the “Transal-
pine Pipeline.” It was commissioned in 1967, whereas the extension to
Vienna became operational only in 1970.
Fig. 1 Map of existing and proposed Soviet pipelines (1960) (Source: AHTOTAL,
Fonds Total-CFP, b. 92.26/31, excerpt from the Journal des Carburants,
November 20, 1960)
The importance of pipelines in Europe during the late 1950s is also

attested to by the intra-European battles for primacy in pipeline building,
in which a project sponsored by CFP and a number of Anglo-American
majors competed against one devised by ENI.24 Both projects aimed to
connect oil terminals in the Mediterranean to highly industrialized or
industrializing areas in Central Europe (western and southern Germany).
It goes without saying that this further confrontation did nothing to assuage
relations between ENI and its competitors. On the contrary, it added to the
tensions already appearing in the EEC, where France’s attempts to priori-
tize its African crude were threatened by Italian relabeled Soviet oil.
THE SOVIET OIL THREAT AT THE EEC

The EEC’s foundation in 1957 required France to open its national market
to oil from the Common Market. After taking the initial steps, France made
any further opening conditional upon progress within the Community in
drafting a European energy policy. French oil administrators wanted the
European authorities to assure them on a point they deemed fundamental: a
common definition of the origin of products. Without that, nothing would
prevent Italy from re-exporting its Soviet oil to the Common Market, since
it would then be relabeled as Italian.25
In the autumn of 1959, the French government asked EEC members to
adopt measures to protect the Common Market for crude oil. In practice,
France was asking its European partners to prioritize the sale of Saharan
crude within the EEC.26 From a political point of view, the French system
envisioned the creation of a protectionist zone within the Common Market,
which would provide enough reasons for non-EEC governments to
retaliate by discriminating against the EEC’s oil exports and applying duties
on them.27 At the first EEC meeting on oil issues the French proposal was
presented by the vice president of the European Commission, Robert
Marjolin. Unsurprisingly, it met with Dutch, Italian and German opposi-
tion, but also with criticism from outside the community: the US argued
against it in “very energetic terms,” labeling the French plan as contrary to
the rules of the General Agreement on Tariffs and Trade and to the liberal
policy that the EEC claimed to support.28
After talks with the leaders of US majors and the British government, the
SD urged the French foreign minister to drop his government’s project.
Collaboration with Anglo-American majors, the SD suggested, would
ensure conditions were satisfactory to France—and the French
138 R. CANTONI
administrators acquiesced.29 It is telling that US pressure managed to

modify the French stance on European policies. This can only be explained
if we consider the transnational challenges faced by French firms in the
Middle East and in France, where even in the late 1950s, respect for their oil
deals continuously depended on Anglo-American goodwill. In any case, by
early 1960, the question of preferential treatment for Algerian oil had been
mothballed. While French companies continued to press the Common
Market to make room for their oil, it was now the Soviet oil offensive that
took central stage within the community’s oil debates.30
Unlike coal or nuclear energy (administered through the High Authority
of the European Coal and Steel Community [ECSC] and EURATOM
[European Atomic Energy Community], respectively), in the late 1950s,
hydrocarbons were the only major form of energy management not regu-
lated by a West European institution.31 Following the discoveries of African
oil, the Soviet oil offensive, and the surplus of oil on the market, it became
necessary to devise a common hydrocarbon policy. An EEC working group
of high officials chaired by Marjolin was set up in April 1960,32 following a
memorandum on the coordination of energy policies devised by an inter-
executive group formed by representatives of the three European energy
commissions (the ECSC, the European Commission—the EEC’s executive
body—, and EURATOM).
The battle against Soviet oil was also waged at the European parliament,
where the French Gaullist deputy, Christian de la Malène, once again
highlighted the problem of Soviet oil exports and prompted the Commis-
sion to set up periodical exchanges of data on imports of oil products from
all origins. In the statistics eventually provided by the Commission for the
first five months of 1960, Italy’s position as the largest importer of Soviet oil
was striking; Italy’s imports were three times larger than West Germany’s
and four times larger than France’s.33
French lobbying efforts against Soviet oil imports were aimed at aligning
the EEC with the majors. On October 11, 1960, the very day the ENI–SNE
agreement was signed, Diego Guicciardi, the distressed president of Shell
Italy, declared his intention to raise the alarm with Italian representatives at
the EEC, since ENI’s deals threatened to nullify the very common policy of
collaboration the EEC was trying to establish.34 In November 1960, Jersey
Standard’s president Monroe Rathbone solicited the SD to make represen-
tations to the Italian government.35 He was later joined in his protest by
Gordon Reed of Texas Gulf and Arnold Hofland of Shell. Reed submitted
several recommendations to the US Congress as well as to federal petroleum
committees and the SD, while Hofland intervened with the British and
Dutch governments and contacted the US Embassy in Paris.36 Unlike in the
papers of the US government, Western military security does not seem to
have played a significant role in the companies’ documents.
The EEC inter-executive working group eventually submitted its pro-
posals to the general secretariat of the Council of the European Commu-
nities in January 1961. The proposal aimed at harmonizing energy policies
and safeguarding provisions in case the energy market deteriorated.37 The
former amounted to a renunciation of the right to take decisions on energy
matters before consultation with other EEC countries and the Commission
itself. The second set of provisions, to be introduced over a period of three
to five years, included import quotas for coal, crude and oil products,
custom duties on imported coal and fuel oil, and community-funded sub-
sidies for coal production.38 Although Italy acknowledged the need for a
common energy policy, it did not adhere to the inter-executive proposals,
which it deemed dictated by the majors’ vested interests.39
In April 1961, the group of EEC oil experts met in Brussels to discuss a
survey they had previously submitted to country members for collecting
statistics on their oil regulations. A serious problem emerged regarding
re-exports. In addition to relabeling and re-exporting problems, a country
member could have Soviet oil refined on its behalf in refineries located in
another member country. The situation was further complicated by the lack
of precise data on re-exports, which made it impossible to determine to
what extent supply security was at risk.40 In addition, Italy’s commitment to
Soviet oil also raised anxieties in the Common Market’s industrial environ-
ment: cheap oil implied lower production costs in many Italian industrial
sectors, giving Italy an advantage over its competitors in Europe.41
In view of the July 1961 meeting of oil experts, the European Commis-
sion eventually prepared a draft that limited Soviet imports, taking effect
retroactively from January 1961. Each country would commit to limit its
annual imports from the Eastern bloc to the level of 1960. If a member state
wanted to import beyond that volume, it would have to consult its EEC
partners and the commission three months before taking up negotiations
for additional purchases. The French Fuels Director Maurice Leblond
criticized that the flexibility given to states increasing their Soviet oil quotas
was far too generous. Nothing would oblige them to conform to the advice
received from partners and the Commission. Leblond proposed that a
global EEC quota be established for Soviet oil that could be imported
140 R. CANTONI
into the Community, which would then be distributed according to coun-

tries’ consumptions levels.42
Notwithstanding French opposition, Marjolin proposed to present the
pilot study to the Commission and to submit it as a proposal to the EEC’s
Council. The Commission reached an agreement: countries had to first
consult the Council members before concluding trade agreements with
third parties. In April 1962, the Council assigned the working group the
task of devising a detailed study of the energy market and the guiding policy
principles within the Common Market.43 Two months later, the group
submitted a Memorandum on Energy Policy. Among other provisions, it
proposed a quota system for Soviet crude oil and petrol products across the
European Community. Such a legitimation-with-restrictions meant that
requiring operators would be assigned shares of the available Soviet quotas,
lowering the Italian share. ENI battened down the hatches by suggesting
the Italian delegation would try to obtain adequate guarantees for a quota,
or reject the proposal altogether.44
ENI’s president, Enrico Mattei, knew that Italy’s resistance to the quota
system at the EEC could not continue forever. He thus attempted to
negotiate a further agreement with the Soviets and sent an ENI executive
officer, Giuseppe Ratti, to Moscow in September 1962.45 Two days after
Ratti’s return to Italy, the Commission proposed the quota system and sent
it to national governments for approval.46 ENI was skating on thin ice, but
had an advantage: it was able to act much faster than the European bureau-
cratic machine. In the months following June 1962, the policy devised in
the inter-executive group’s memorandum was reshaped, modified, and
amended to accommodate each member’s interests, but no agreement
could be reached within a short time, especially due to Italy’s obstruction-
ism. Only in April 1964 was a protocol of agreement on energy policy
approved by a special council of ministers, far too late to stop the new
Italian-Soviet agreement, which was signed in November 1963. The first
to act against the “Soviet threat” was therefore NATO. Besides oil exports,
the main bone of contention in this case was the trade in Western techno-
logical artifacts for use in the Soviet pipeline system.47
A DANGEROUS FRIENDSHIP
The projects for the Soviet pipeline system, and especially its European
branch, Druzhba (“Friendship”), triggered frantic debate at NATO from
the early 1960s onward. Due to the imminent threat, the North Atlantic
Alliance placed Western technologies capable of speeding up pipeline

construction under strict surveillance. Throughout the long NATO debate
over the US proposal for an embargo on large-diameter pipes and exports
of pipeline equipment to the USSR, the administrations in the US and UK
held conflicting points of view, which corresponded to two markedly
different perceptions of the Soviet threat. The two governments fought
their battle through industrial estimates as well as through the mobilization
of their military and intelligence agents. During and because of this debate,
the nature of what constituted a “pipe” artifact changed, and its final status
as technological artifact was ultimately the result of negotiation.
Throughout the 1960s, the NATO Committee of Economic Advisers
(ECONAD), operating under the North Atlantic Council’s (NAC) author-
ity, discussed a number of oil-related issues, including assessments of
Russian oil production, exports, and reserves, NATO countries’ imports
of oil from communist countries, and pipeline issues. In July 1960,
ECONAD met to examine the impact of Soviet oil on world markets.48
In the same month, it implemented a measure of overt surveillance by
obliging NATO members to prepare statistics on their trade with the Soviet
bloc, and proposed a common policy to be outlined for Western
oil-supplying countries in the face of the Soviet “oil threat.”49 An Ad Hoc
Study Group on Soviet Oil Policy was then established.50 NATO’s need for
such an assessment became even more urgent after the founding in
September of the Organization of Petroleum Exporting Countries
(OPEC), which generated fears that the USSR might conclude an agree-
ment with the new organization. From September onwards, the study
group debated a common policy to curtail these dangers. The national
delegations generally abided by the recommendations issued by their
national oil companies.
The collaboration within the study group of national enterprises with
their NATO delegations was expected. But these contacts also reveal the
network of acquaintances between the oil industry and top-ranking person-
alities in national administrations. US majors such as Standard of New
Jersey, Standard of New York, and Texaco lobbied the SD. BP and Shell
also had frequent exchanges with the Foreign Office, and as historian Niklas
Jensen-Eriksen has emphasized, when the Joint Intelligence Bureau at the
British Ministry of Defense was asked to draft a memorandum on Soviet oil
exports in 1958, the Ministry of Power asked Shell to collect material for it.51
CFP worked closely with the French Foreign Ministry, to the point where
it bluntly suggested tactics the government could pursue; and ENI had
142 R. CANTONI
frequent contacts with the study group’s Italian delegation, which consisted
of two officials from the Ministry of Industry, and was led by the general
director of energy sources.52
NATO’s study group met for the first time two months after the signa-
ture of the 1960 ENI–SNE agreement. The group members were asked to
provide data on current and planned Soviet oil imports into their countries
and of their exports to the USSR, the conditions under which such trade
took place, and the destination of imported oil.53 A draft report by the study
group was ready by May 1961. The delegates came to the conclusion that
restrictive measures had to be undertaken and implemented by all members
at the same time.54 The NATO delegates’ ambitions to reform oil trading
between East and West were taking oil geopolitics to a new level, making
the Alliance the international forum for conflicts that had so far unfolded
through national representatives.
Based on the results of this group, the US delegate to NATO, Alfred
Reifman, suggested an embargo on Western large-diameter pipes and pipe-
line equipment.55 Historian Angela Stent comments that the embargo,
“more than any other single incident, highlighted the USA’s primary role
both in the establishment of the East–West trade agenda and in the polit-
icization of specific economic issues.”56 But the embargo also marked a
turning point in that it transformed pipes from freely tradable to embargoed
merchandise, much like uranium radically changed its status from a simple
radioactive mineral to the principal fuel of nuclear warfare since the 1940s,
as argued by historian Gabrielle Hecht.57 Similarly, large-diameter pipes
were regarded as having a military significance they had not had before the
1960s.
It is difficult to assess to what extent American responses reflected
genuine military concerns, rather than the disguised commercial interests
of US oil majors. At NATO debates on the embargo, these interests were
never enunciated, but their presence lingered in the discussions, and they
are revealed by the constant contacts that the US representatives had with
officers from US oil companies. It is probably safe to say that these two
preoccupations dovetailed subtly, as both aimed at preventing the building
of a Soviet pipeline.
In light of Reifman’s proposition, ECONAD decided to establish a
further group of experts who would be responsible for analyzing large-
diameter pipe supplies. It was not until this second study group had
presented its results that a final examination of the study group’s report
on Soviet oil policy was undertaken. The new Study Group on Soviet Oil
and Gas Pipelines was formed in Washington, and when its final report
reached ECONAD in September, the findings closely reflected the US
viewpoint.58 At a meeting of the study group, US General Major Francis
Piggott, Assistant Chief of Staff (Intelligence) at the Supreme Headquarters
Allied Powers Europe (SHAPE), urged that the pipeline’s construction be
delayed to prevent supplying the Soviet Navy. He argued that unlike the
Soviet railway lines, which ran north to south, the planned pipelines would
run east to west, so that the flow of oil in that direction would make it easier
for the Soviets to supply their military machine in Eastern Europe.59
According to the study group’s report, the Soviets were not producing
40-inch pipes, and there seemed to be no evidence they were progressing
rapidly enough to build large-capacity tube mills or steel rolling mills
capable of producing steel plates wide enough to enable single-weld
40-inch pipes to be manufactured. Soviet industries were also reportedly
unable to build gas turbines, electric motors, or other equipment required
for 40-inch lines. As for auxiliary equipment, they were in need of Western
technology because corrosion was a major problem in their pipes and
equipment due to the high sulfur content of their oil. An embargo, the
report’s compilers concluded, would therefore be effective in delaying the
Druzhba’s completion.60
A secret ECONAD memorandum reveals that NATO military authori-
ties were especially worried about the Soviet warships docked along the
Baltic and Pacific coasts. Once the Soviet railway and naval units were
relieved of transporting oil, they could be used to carry logistically critical
goods such as ammunition and food. Moreover, if the Russians managed to
develop a system on par with the NATO military network in Western
Europe, support for their troops in any European campaign would be
materially improved.61
The USSR had already been importing large-diameter pipes from abroad
for a few years. NATO members had not prevented these kinds of exports
ever since the NATO Coordinating Committee on Multilateral Export
Controls (CoCom) had reduced restrictions on pipe and oil equipment
exports to the Soviet bloc in 1958, since there had been little Soviet demand
for large-diameter pipes. Most of the equipment used in the exploration,
refining, production, and transportation of oil had previously been
embargoed or highly restrained in shipments to countries of the Soviet
bloc under the CoCom agreement.62 As a consequence of the new
CoCom policy, by the spring of 1961, new Soviet orders for large-diameter
144 R. CANTONI
pipes and pipeline equipment had been placed, or were being negotiated
with West Germany, Italy, Sweden, and Japan.
Although it was impossible to evaluate the extent to which the USSR
would erode its “pipe gap” thanks to these imports, they still appeared to be
a bottleneck to the government’s plans.63 It was precisely the ease with
which the Soviets could acquire foreign technology that had driven the US
to propose the embargo. The request, however, triggered a British reaction
during ECONAD meetings. The British delegate contended that a ban not
only posed difficulties for the exporting industries of member countries. It
would either be ineffective or would only postpone a growth of oil exports
until the Eastern bloc countries had arranged to produce the necessary
equipment themselves. In fact, he argued, it would push the Russians to
increase their production facilities.64 Despite the amount and quality of
details about Soviet pipelines contained in the American report, it was by
no means welcomed with unconditional acceptance. For the embargo to be
enforced, it needed the agreement of the ECONAD members—and this
was far from being the case.
TROUBLES OF A SPECIAL RELATIONSHIP

Material from the NATO archives suggests that delegates from several
European countries were unconvinced by the study group’s report; discus-
sions soon became heated at ECONAD. The British delegation replied with
its own data, which contradicted the information available to the Americans
and maintained its negative stance.65 The predominantly military nature of
the pipeline was asserted by the Americans and denied by the British.
London maintained that the embargo would have to include all possible
materials and any equipment potentially usable in the construction and
installation of pipelines.66 But these materials included items of general
use such as valves and earth-moving equipment.
The British government was not the only one alarmed by the embargo
proposal. Representatives of other countries that had large stakes in the sale
of large-diameter pipes and pipeline equipment to the Soviets were not at all
convinced that an embargo was a desirable solution. To reassure his NATO
allies, the US representative at ECONAD felt compelled in early 1962 to
clarify that the proposal was not intended to prevent fulfillment of existing
contracts. This statement relieved the Italians and Germans—though such
relief turned out to be only temporary—and won general approval for the
embargo from the Belgian, French, Dutch, Portuguese and Turkish

authorities.
The German position, however, was more complex: large sectors of the
German parliament as well as industrial circles opposed the embargo, while
the ruling Christian Democratic government would not detach itself from
the US position. The government thus hesitated, and its experts initially
tried to deploy a technical argument to defuse the commercial danger. They
affirmed that they were in favor of an embargo on oil pipes, but not on gas
pipes (gas was not seen as a strategic item, and in fact it was only from the
late 1960s onwards that gas purchases would gradually acquire greater
importance in the East–West trade), and that the technical characteristics
of pipes provided by German firms meant they were intended to be used for
gas.67 It is significant that in the meetings following the German statement,
this aspect was not mentioned further, which might be interpreted as
evidence of the German government’s strict allegiance to—and dependence
on—US policy.68 In any case, due to ontological uncertainty on these
technical points, it became clear that the definition of “large-diameter
pipes” as technological devices was subject to ongoing negotiations, and
was still in a somewhat fluid state.
As far as other NATO members were concerned, the French support for
an embargo was not surprising since France, like most other NATO coun-
tries, had no interest in selling pipes to the Soviets, and on the contrary had a
vital interest in impeding Soviet oil from reaching European markets. Italy’s
support for the embargo—albeit lukewarm—was unexpected, especially in
light of ENI’s business interests in the Soviet Union. The rationale for such
a stance can be found in the fact that during the embargo discussion, the
Italian government was sabotaging the study group on Soviet Oil Policy
through its firm opposition to any effective measure that would force a
reduction of Soviet imports. Any strong opposition to another embargo, the
practical consequences of which were economically less problematic for
Italy than a stop of oil imports, would be most embarrassing to the Italian
authorities. It would also be pointless, since British hostility and German
ambiguity were currently preventing the project from being realized.
As for the British opposition to the embargo, it is less immediately
explicable, since both Shell and BP would benefit from it. Notwithstanding
the importance of the oil industry in British economic interests, by early
1960, the Treasury doubted this would be of crucial significance to the
country’s balance of payments. Many British manufacturing companies
were involved in trade with the Soviet Union, and after the oil embargo,
146 R. CANTONI
they rejected any further moves that might antagonize the superpower. The
British reaction to the US embargo proposal was immediate, and clarified
that the “special relationship” between the UK and the US would not go as
far as to jeopardize Britain’s Soviet trade.69
In order to respond on a par to the American summoning of Piggott, the
British invoked the help of the economic adviser to the UK Joint Intelli-
gence Bureau, Edward Radice, who stressed British preference for a focus
on technical and economic analysis, rather than on strategic/military
aspects. Experience in applying economic measures for the latter had proved
that these would never be as effective as hoped, because “economic systems
[were] much more flexible than is generally supposed.” As for the 40-inch
pipes, Radice maintained that the gap between Soviet needs, and current
and scheduled supplies was rather small, and the Soviets could cover it if
they faced an embargo on large-diameter pipe imports. They might increase
their production of 40-inch pipes for example, or use smaller diameters
while doubling the lines of such pipes if necessary; or they could adjust their
priorities and delay the switch from coal to gas in their industrial apparatus,
thereby making more pipes available for oil.70
The crux of the British position was the argument regarding the usage
flexibility of Soviet pipes. Oil and gas pipes produced in Europe could be
distinguished by metallurgical properties, because they were defined by the
amount of pressure needed for the intended material’s transportation
(higher pressure for gas pipes than for oil pipes). The British had intelligence
that the Soviets were planning to manufacture oil and gas pipes that would
operate at similar pressures, hence Soviet pipes lacked a usage distinction.
London maintained that this flexibility, along with Soviet production and
imports, would make the embargo ineffective.71 Ultimately, the argument
relied on estimates of Soviet industrial capabilities and on the nature of
Soviet pipes, both of which were largely open to speculation. To a certain
extent, the trump card in Britain’s hand was the nebulosity of actual Soviet
industrial might.72
As no agreement could be accomplished, the embargo proposal finally
reached the NAC in the spring of 1962. Thirteen out of fifteen countries (all
except the UK and Norway) agreed to adopt the council’s recommenda-
tions, leaving the selection of items to be put under the embargo to
CoCom.73 In April, the NAC also reached agreement about its policy on
Soviet oil imports. The approved study group recommendations were
extremely modest in scope, and merely concluded: “Reliance must be

placed on the discretion of each NATO member to exercise caution and
restraint.” The issue of large-diameter pipes and exports of pipeline equip-
ment was instead deferred until an agreement could be found on the
embargo proposal. In this case though, British opposition proved insur-
mountable and, by the late summer of 1962, had led to a deadlock.74
A further group of experts from France, Germany, Italy, the UK, and the
US was therefore set up to re-examine the question. By early October, the
group had drawn up its definitive report. The various delegations still
differed over their estimates of Soviet needs for large-diameter pipes. How-
ever, all delegations agreed that the Soviets would indeed be short of
40-inch pipes. Unless Moscow could make up for these deficits with further
imports from the “free world,” the pipeline system might be delayed for a
period varying from eight months to over two years (as for pipeline equip-
ment, lack of information ruled out any final decisions). When the experts’
draft was debated at ECONAD, its members agreed to submit it to the
NAC with the recommendation that member countries should, “under
their own responsibility” and “to the extent possible,” stop deliveries of
large-diameter pipes (over 19 inches) to the Soviet bloc under existing
contracts, and prevent new contracts for such deliveries. It was decided
that the Council would monitor the situation. In the end, however, and
contrary to what the US representative at ECONAD had stated in early
1962, the provision covered existing contracts.75
In late October 1962, a solution to the pipe embargo appeared in sight.
Britain’s officials finally acquiesced to ECONAD’s draft proposal if the sales
embargo did not apply to the UK.76 The Council finally approved the
embargo on November 21, 1962, but its enforcement only caused further
trouble. This was especially true for West Germany, where Konrad
Adenauer’s government almost toppled in March 1963 due to the opposi-
tion to the embargo on the part of iron and steel companies and large
sections of the parliament.77
The oddity of Britain’s position is highlighted by an episode that
occurred in April 1963, when the US government informed NATO Secre-
tary General Dirk Stikker that the British firm, South Durham Steel, was
negotiating the sale of large-diameter pipes to the Soviets. Although the UK
had not accepted the embargo, the Americans warned this would place
serious strain on the provision. In response to the news, US diplomats
contacted their British counterparts to settle the matter.78
148 R. CANTONI
According to NATO sources, this and other similar attempts to break the
embargo did not succeed.79 Maintaining that the embargo was successful,
the NAC noted the furious reaction of Soviet Prime Minister Nikita Khru-
shchev in a television speech on February 27, 1963, where he vehemently
attacked this measure. The Soviets additionally complained to Germany,
and their media extensively covered the blockade. However, other sources
do not seem to agree with this assessment. On the contrary, the embargo
seems to have had only limited success: the construction of the pipeline
system was indeed delayed, but by only one year, with construction ending
in 1964 instead of 1963. Eventually, the NATO embargo—which was lifted
in 1966—was unable to stop Soviet oil exports to Western Europe as these
continued to increase throughout the 1960s. By 1970, SNE had been
exporting to whatever country gave it an opportunity to do so.80
Energy expert and former Central Intelligence Agency (CIA) officer
Robert Ebel contended that Sweden, which was not a NATO member,
continued to deal with the Soviets. Small amounts of pipes were also
delivered to the USSR by Italy and Germany, adding up to 1.1 million
tons, which was sufficient to lay 4000 km of pipeline, and represented
roughly 40 percent of the estimated Soviet demand for 40-inch pipes. In
addition, to vitiate the embargo and manufacture more 40-inch pipes,
production in a number of Soviet pipe mills was switched from small-
diameter to large-diameter pipes. All in all, therefore, the embargo seems
not to have affected the production of 40-inch pipes as much as that of
smaller diameters.81
About four years after the embargo had entered into force, the
ECONAD itself recognized the embargo’s implications for the Soviet
Union, adding that “[T]he result of the embargo has been to greatly
stimulate the growth of Soviet production of pipe. To be sure, this produc-
tion, though rapidly expanding, still leaves much to be desired where quality
is concerned; but the Soviet Union is already able to use its own
manufacturing capacity to implement any project which would be impor-
tant either from the strategic viewpoint, or from that of its economic
policy.”82
The embargo lasted until November 1966, when the French and West
German governments requested its cancellation, arguing that its scope had
been reached, and that the Soviet rolling mills had by then recovered their
backlog.83
CONCLUSION
Were the American and most West European diplomats really acting in the
interest of Europe’s security when they tried to limit Soviet oil exports?
Historian Geir Lundestad disagrees, and maintains that the US was more
interested in perpetuating Europe’s dependence on American companies.84
His claim, I believe, has a grain of truth in it, but does not explain the whole
picture. On the one hand, strong economic interests were the elephant in
the room at NATO discussions on trade restrictions with the Soviets: the
plans and lobbying efforts of oil companies, whether American or
European, could not be invoked in the Alliance’s discussions, but were
obviously a strong factor. On the other hand, US military circles appeared
genuinely concerned by the military implications of the Soviet Union’s oil
strategy, and such anxiety may have been increased by nebulous and partial
information on Soviet industrial capabilities sieved through the Iron
Curtain.
There is little doubt that the pipe embargo represents a successful
attempt by the US to alter the East–West trade policies of its European
allies. Furthermore, the pipeline issue might have been part of a larger
strategy. As noted by Stent, the US government was aware that most of
its European allies were opposed to an embargo. Insistence on having it
passed at NATO might have been a matter of principle underlining the
prerogative of the US in making final decisions on the extent and form of
the NATO members’ relations to the Soviet Union, and indeed the com-
munist bloc.85
As for the effective repercussions of the embargo on the Soviet effort, as
mentioned NATO expectations as they appear from archive documents
were to delay the completion of Druzhba by a period between eight months
and two years. So, whereas the intended goal of jeopardizing the Soviet
pipeline plans was not achieved to the maximum extent envisioned, the final
outcome was still not a complete failure, as the minimum objective pursued
by the Alliance was reached.
In analyzing the debate that took place at NATO, we saw the emergence
of two opposed and incompatible attitudes: on one side, the US delegation
urged other country members to make Western military security the para-
mount consideration. On the other side, the British stressed the economic
reasons underlying their opposition to an embargo. In the end, the Amer-
ican standpoint prevailed, and most NATO members sided with the US,
either as a result of American pressure (Germany, Italy) or by conviction
150 R. CANTONI
(France), and even though some of them may not have been convinced an
embargo was the best decision. The price to pay for the American govern-
ment was a temporary disturbance of its special relationship with the
UK. The British government did not endorse the embargo: a decision
that was to cause some embarrassment to that administration in a near
future. What is most interesting in the NATO discussion over the blockade
is the role of technological artifacts. Beyond the Anglo-American debate
about security versus economy, the discourse revolved around steel pipes
and industrial estimates of the enemy’s capabilities.
For the Americans, an oil pipe was essentially any object that could carry
oil, regardless of its size or technical characteristics. They tried to establish
this all-encompassing definition in the debate to block any sort of pipe
exports to the USSR. Essentially, they adopted a prescriptive principle that
stretched the definition of an oil pipe to include as many types of steel pipe
as possible, and to magnify the potential effect of European exports. The
British endorsed this argument, but used it to substantiate their counter-
argument: because Soviet pipes were undistinguishable in their use of oil
and gas, the actual pipe gap suffered by the Soviets would be much smaller
than maintained by the Americans, and ultimately insignificant.
Eventually, the NAC’s prioritization of strategic over economic issues
ensured that most NATO members were on board with the US proposal,
even though it was significantly watered down in the course of negotiations.
While countries with existing contracts with the USSR were left to deal with
the consequences of the embargo on their own, decisions were delegated at
the discretion of each country, and the UK obtained what appeared to be an
informal concession of a monopoly on technological exports to the Soviet
Union—a decision that, surprisingly, does not seem to have generated
much protest among other members of the Alliance.
As for the debate at the EEC, the French position of defending its African
oil on the Common Market clashed not only with Italy’s position, but also
with Dutch interests within Shell and Anglo-American companies’ interests.
Therefore, French influence did not ultimately result in shaping the debate
with the effect of formulating a strong Common Market policy in the short
term. The two transnational debates were triggered and defined by the same
cause of drafting a strategy on Soviet oil exports (including the Druzhba
pipeline), and they revolved to a significant extent around discourses of
Western economic security. But they were also marked by a number of
differences. Considering the objectives and scope of NATO’s activities, it is
not surprising that the military aspect of the Soviet pipeline system played a
much more significant role for the Atlantic Alliance than for the EEC.
Moreover, the EEC—unlike NATO—was not subject to the hegemonic
influence of a single country, which made finding a common line much
harder. Ultimately, the French administration could not impose its point of
view of Algerian and Soviet oil on the EEC, whereas the US managed to
impose its embargo proposal.
NOTES
1. John A. Berry, “Oil and Soviet Policy in the Middle East,” Middle
East Journal 26 (1972), 149–61, here 150. Source reported: Econ-
omist Intelligence Unit, Quarterly Economic Review, “USSR Annual
Supplement—1971,” 10; Robert E. Ebel, Communist Trade in Oil
and Gas (New York: Praeger, 1970), 40; D. L. Spencer, “The Role
of Oil in Soviet Foreign Economic Policy,” American Journal of
Economy and Society 25 (1966), 91–107, here 98.
2. Ebel, Communist Trade, 40, 44.
3. To exemplify, in 1957 the Soviet oil barrel on the international
market sold at $2.06, compared to $2.79 for Middle Eastern oil
and to $2.92 for Venezuelan oil; and in the next years Soviet price to
West European countries further decreased to as little as $1 per
barrel in the case of an Italian-Russian agreement signed in 1960.
Ebel, Communist Trade, 40, 44, 61. Ebel’s data are sourced from
various annual statistical trade handbooks issues by the Ministry of
Trade of the USSR; Halford L. Hoskins, and Leon M. Herman,
Soviet Oil in the Cold War (US Senate, Committee on the Judiciary,
Committee Print, Washington, DC: Government Printing Office,
1961), 5.
4. Archives of the North Atlantic Treaty Organization (NATOA),
AC/127-D/68, “Report by the Ad Hoc Study Group on Soviet
Oil Policy to Econad,” confidential, May 23, 1961, 8–12.
5. Trevor J. Pinch and Wiebe E. Bijker, “The Social Construction of
Facts and Artifacts: Or How the Sociology of Science and the
Sociology of Technology Might Benefit Each Other,” Social Studies
of Science 14, 3 (1984), 399–441; Gabrielle Hecht, The Radiance of
France: Nuclear Power and National Identity after World War II
(Cambridge, MA: MIT Press, 1998); Michael T. Allen and Gabrielle
Hecht, eds., Technologies of Power: Essays in Honor of Thomas Parke
Hughes and Agatha Chipley Hughes (Cambridge, MA: MIT Press,
152 R. CANTONI
2001); Dolores L. Augustine, Red Prometheus: Engineering and

Dictatorship in East Germany, 1945–1990 (Cambridge, MA: MIT
Press, 2007). See also: John Krige, American Hegemony and the
Postwar Reconstruction of Science in Europe (Cambridge, MA:
MIT Press, 2006).
6. Timothy Mitchell, “Carbon Democracy,” Economy and Society
38, 3 (2009), 399–432; Timothy Mitchell, Carbon Democracy:
Political Power in the Age of Oil (New York: Verso, 2011); Andrew
Barry, Material Politics: Disputes along the Pipeline (Chichester:
Wiley-Blackwell, 2013).
7. Per H€ ogselius, Red Gas: Russia and the Origins of Europe’s Energy
Dependence (New York: Palgrave Macmillan, 2013); Angela Stent,
From Embargo to Ostpolitik: The Political Economy of West Germany-
Soviet relations, 1955–1980 (Cambridge: Cambridge University
Press, 1981).
8. The equivalence in 1957 was 1 rouble ¼ $4 (http://www.cbr.ru/
currency_base/OldVal.aspx), so the figures reported correspond to
$3.02 billion for the UK, $1.14 billion for West Germany, $1.07
billion for France, and $468 million for Italy; Bruna Bagnato, Prove
di Ostpolitik: Politica ed economia nella strategia italiana verso
l’Unione Sovietica, 1958–1963 (Firenze: Olschki, 2003), 97. See
also Elisabetta Bini’s chapter in this book.
9. Niklas Jensen-Eriksen, “The Cold War in Energy Markets: British
Efforts to Contain Soviet Oil Exports to Non-Communist Coun-
tries, 1950–1965,” in Alain Beltran, ed., Le pétrole et la guerre—Oil
and War (Brussels: Peter Lang, 2012), 204. See also Niklas Jensen-
Eriksen’s chapter in this book.
10. Emmanuel Catta, Victor De Metz: De la CFP au Groupe Total (Paris:
Total Edition Presse, 1990), 289. See also Alain Beltran and Jean-
Pierre Williot’s chapter in this book.
11. On Soviet aid to Arab countries see NATOA, AC/89-WP, “Sub-
Committee on Soviet Economic Policy—The Economic Offensive
of the Sino-Soviet Bloc, Note by the Chairman,” confidential,
July 6, 1960, 67; NATOA, AC/89-WP/76 (Revised 1), “Sub-
Committee on Soviet Economic Policy—The Economic Offensive
of the Sino-Soviet Bloc (1st July, 1960–31st December, 1960),”
May 12, 1961; Archives Nationales (AN), b. 19900317/8, f. 1,
subfolder Afrique 1957/77 (FOIA n 111,382), Note du Service
de documentation extérieure et de contre-espionnage (SDECE,
henceforth), “Pénétration italienne (ENI) et soviétique dans le

domaine pétrolier en Afrique,” secret, August 30, 1960.
12. Archivio storico del Ministero degli affari esteri (ASMAE),
Telegrammi ordinari, Russia (Ambasciata Mosca), 1960, vol.
59 arrivo (lug-dic), n. 36,288, L. Pietromarchi, Italian Embassy in
Moscow (ITMBM), to Ministry of Foreign Affairs (MFA),
“Contratto ENI-FINSIDER,” October 3, 1960; ASMAE,
Telegrammi ordinari, Russia (Ambasciata Mosca), 1960, vol.
59 arrivo (lug-dic), n. 37331, L. Pietromarchi, ITMBM to MFA,
“Importazione petrolio,” October 11, 1960.
13. ASMAE, Telegrammi ordinari, Russia (Ambasciata Mosca), 1961,
vol. 55 arrivo (gen-giu), n. 13, L. Pietromarchi, ITMBM to MFA,
“Stampa sovietica,” January 2, 1961; Stent, From Embargo to
Ostpolitik, 97.
14. “Italy Oil Deal With Soviet Weakens Her Ties to West,” New York
Times, November 11, 1960; The National Archives of the United
Kingdom (TNA), FO 371/153362 and RT 1532/17P, P. Male,
Foreign Office (FO) to J. Gwynn, Ministry of Power (MOP).
15. Hoskins and Herman, Soviet Oil; Halford L. Hoskins, Problems
Raised by the Soviet Oil Offensive (US Senate, Committee on the
Judiciary, Committee Print, Washington: US Government Printing
Office, 1962).
16. Hoskins and Herman, Soviet Oil, 6.
17. Hoskins, Problems, 11.
18. Archivio Storico ENI (ASENI), Fondo ENI, Estero, Rapporti
commerciali con l’estero, box 2, folder 7E6, L. Pietromarchi,
ITMBM to E. Mattei, ENI, November 25, 1959; ASENI, Fondo
ENI, Estero, Rapporti commerciali con l’estero, b. 2, f. 7E6,
E. Mattei, ENI to L. Pietromarchi, ITMBM, December 28, 1959;
AN, b. 19900317/13, f. 1, subfolder Italie 1955/1979 (FOIA n
111,382), Note SDECE, “L’activité de l’Ente Nazionale
Idrocarburi (mai 1958–septembre 1959),” secret, October
23, 1959, 5; National Archives and Records Administration
(NARA), CIA Current Intelligence Weekly Summary, “Italian Oil
Combine May Build Pipeline for USSR,” confidential, January
28, 1960, 11; NARA, Foreign Service Dispatch, Central Decimal
File, 1960–1963, Record Group (RG) 59, box 2694, file
865.2553/1–2660, Embassy of the United States in Rome
154 R. CANTONI
(USMBR) to Department of State (SD), confidential, January

26, 1960.
19. NARA, Central Decimal File, 1960–1963, RG 59, b. 2694,
f. 865.2553/2–660, “Italian Government Guaranteed Credit for
Soviet Pipeline Project,” memorandum of conversation, confiden-
tial, February 6, 1960.
20. NARA, Central Decimal File, 1960–1963, RG 59, b. 2694,
f. 865.25553/3–160, Zellerbach, USMBR to SD, limited official
use, March 1, 1960; AN, b. 19900317/13, f. 1, subfolder Italie
1955/1979 (FOIA n 111,382), Note SDECE, “L’activité de
l’Ente Nazionale Idrocarburi (octobre 1959–octobre 1960),”
secret, October 18, 1960, 15.
21. NATOA, AC/127-WP/56 (Revised), “ECONAD, Sino-Soviet
Bloc Oil on World Markets, Note by the Economic Service,” con-
fidential, July 11, 1960, 2.
22. TNA, FO 371/153362, RT 1532/6D, A. Jarratt, MOP to
J. Fearnley, FO, June 17, 1960, 10.
23. ASENI, Rassegna stampa estera 1961, n. 39, para 370, Neue Z€ urcher
Zeitung, June 11, 1961.
24. I named this shift of focus “the midstream shift.” In the oil industry
jargon, the upstream sector includes oil exploration and extraction;
the midstream sector includes transport and sales of crude oil; the
downstream sector includes refining and distribution of oil and oil
products. See Roberto Cantoni, Oil Exploration, Diplomacy,
and Security in the Early Cold War: The Enemy Underground
(New York/London: Routledge, 2017), ch. 4.
25. Armelle Demagny, “France and the Project for a Community Oil
Policy. From the Signature of the Treaty of Rome to the First Oil
Shock,” in Alain Beltran, ed., A Comparative History of National Oil
Companies (Brussels: Peter Lang, 2010), 310.
26. Archives diplomatiques du Ministère des Affaires Étrangères
(ADMAE), DE-CE Papiers Dirécteur Olivier Wormser N. 85,
microfilm P10747, pétrole dossier général 54–66, O. Wormser,
Director of Economic and Financial Affairs, to W. Harpham, Eco-
nomic Minister at the British Embassy of France, November
29, 1959; “Recherche de protection pour le pétrole saharien,”
Petroleum Press Service, January 1960, 9.
27. “Recherche,” Petroleum Press Service, 10.
28. Quoted from ADMAE, MAEF, DE-CE Papiers Dirécteur Olivier

Wormser N. 85, microfilm P10747, pétrole dossier général 54–66,
O. Wormser to H. Alphand, French Ambassador in Washington,
DC, December 2, 1959 (own translation); Archives historiques du
Groupe Total (AHTOTAL), Fonds Total-CFP, b. 92.26/7,
f. Écoulement du pétrole saharien, “Note sur la réunion,”
December 9, 1959.
29. ADMAE, MAEF, DE-CE Papiers Dirécteur Olivier Wormser N. 85,
microfilm P10747, pétrole dossier général 54–66, O. Wormser to
J. Jeanneney, Minister of Industry, December 12, 1959, 2.
30. AHTOTAL, Fonds Total-CFP, b. 92.26/7, f. Sahara—Politique
algérienne concernant le Sahara, “Observations au sujet de la note
du 18 avril,” L. de Laboulaye, CFP to F. de Baecque, Organisation
commune des régions sahariennes (OCRS), May 2, 1961.
31. Demagny, “France and the Project,” 305.
32. A similar group was also created at the Organization for European
Economic Cooperation (OECD). AN, b. 19800118/3
CEE/Hydrocarbures, 1960–2, f. Politique vis-a-vis des pays de
l’Est (FOIA n 111,382), “Considérations sur les problèmes posés
par les pétroles russes a l’économie européenne,” unsigned, April
8, 1960.
33. AN, b. 19800118/3 CEE/Hydrocarbures, 1960–2, f. Politique
vis-a-vis des pays de l’Est, FOIA n 111,382, “Note
d’information—Assemblée Parlementaire européenne,” Council of
European Communities, General Secretary, October 7, 1960.
34. ASENI, Fondo ENI, Presidenza Eugenio Cefis, b. 24, f. CB8,
Unsigned note, October 11, 1960. Guicciardi had coordinated his
action with Esso Italiana’s President, Vincenzo Cazzaniga.
35. ASENI, Fondo ENI, Estero, Rapporti commerciali con l’estero,
b. 2, f. 7E2, “Accordo italo-sovietico,” November 23, 1960;
ASENI, b. 2, f. 7E2, Ruffolo to Ratti, translation of a circular sent
by Standard Oil of New Jersey to their affiliates on November 3,
1960 and December 6, 1960.
36. AN, b. 19900317/13, f. 1, subfolder Italie 1955/1979 (FOIA n
111,382), Note SDECE, “Derniers développements de l’activité de
Mattei—Réactions qu’elle suscite,” secret, August 18, 1961, 3.
37. In January 1958, a unified secretariat was created for the councils of
the three European communities. It was led by the ECSC’s general
156 R. CANTONI
secretariat already in office and named “General Secretariat of the

Council of the European Communities.”
38. ASENI, Fondo ENI, Relazioni esterne, b. 29, f. 2A89, “Note au
Conseil Special de Ministres—Propositions de premières mesures en
vue d’une coordination des politiques énergétiques,” very secret,
January 1961.
39. ASENI, Fondo ENI, Estero, Rapporti commerciali con l’estero,
b. 2, f. 7E2, Memorandum, G. Ruffolo, ENI to Sig. Giorgi and
Sig. Carbone, Italian representatives at NATO Ad Hoc Study Group
on Soviet Oil Policy, December 29, 1960.
40. AN b. 19800118/3 CEE/Hydrocarbures, 1960–2, f. Politique
vis-a-vis des pays de l’Est, EEC Commission—General Direction
of Economic and Financial Affairs (FOIA n 111 382), “Groupe
d’experts pétroliers—Importations de pétrole brut et de produits
raffinés en provenance des Pays de l’Est dans la Communauté,”
confidential, April 27, 1961.
41. ASENI, Rassegna stampa estera 1961, n. 31, Politique étrangère
6 (1960), April 28, 1961.
42. AN, b. 19,800,118/3 CEE/Hydrocarbures, 1960–2, f. Politique
vis-a-vis des pays de l’Est, Direction des Carburants (FOIA n
111 382, “Note pour le Comité Interministériel—Politique de la
C.E.E. vis-a-vis du pétrole des Pays de l’Est,” June 27, 1961.
43. AHTOTAL, Fonds Total-CFP, b. 90.4/350 Ingérence russe
dans l’industrie pétrolière, f. III, subfolder Organismes officiels—
Réactions du monde occidental, “Bulletin quotidien n. 1025,” Europe,
July 11, 1961; AHTOTAL, Fonds Total-CFP, b. 86.12/20, Bobin,
“La politique énergétique de la Communauté Européenne—
Chronologie 1952–1970,” [1970]; Nigel J. Lucas, Energy and the
European Communities (London: Europa Publications, 1977), 35.
44. ASENI, Fondo ENI, Presidenza Raffaele Girotti, b. 264, f. 482E,
“CEE—Contingentamento importazioni di petrolio dall’ URSS,”
unsigned, June 27, 1962.
45. ASENI, Fondo ENI, Presidenza Raffaele Girotti, b. 264, f. 482E,
G. Ratti, “Missione a Mosca (4–6 Settembre 1962),” September 7,
1962; ASENI, b. 264, f. 482E, G. Ratti, Promemoria riservato al
Dr. Cefis, “Operazione in abbinamento ENI-URSS,” November 8,
1962.
46. AHTOTAL, b. 19800118/3 CEE/Hydrocarbures, 1960–2,
f. Politique vis-a-vis des pays de l’Est, “Projet d’accord pour la
coordination des importations de pétrole brut et de produits

pétroliers en provenance des Pays de l’Est dans la Communauté,”
unsigned, September 7, 1962; AHTOTAL, Fonds Total-CFP,
b. 90.4/328 Vincent Labouret, f. La politique énergétique de
l’Europe, “La Commission de la C.E.E. et le régime pétrolier
français,” September 25, 1962.
47. Lucas, Energy, 36.
48. NATOA, AC/127-WP/56 (Revised), “ECONAD, Sino-Soviet
Bloc Oil on World Markets, Note by the Economic Service,” con-
fidential, July 11, 1960, 1; “Dix millions de tonnes de pétrole
exportées par le bloc soviétique,” Petroleum Press Service, March
1959, 111–12.
49. NATOA, AC/127-R/53, “ECONAD, Meeting held at the Perma-
nent Headquarters on 21 July 1960, Decision Sheet,” confidential,
July 22, 1960, 1.
50. NATOA, AC/127-WP/64, “ECONAD, Study Group on Soviet
Oil Policy, Note by the Chairman,” confidential, September
23, 1960, 1, 3. On the Ad Hoc Study Group, see Bagnato, Prove
di Ostpolitik, 380–91.
51. Niklas Jensen-Eriksen, “British government, business and the Soviet
Cold War oil offensive, 1957–1964” (paper presented at the six-
teenth annual conference of the European Business History Associ-
ation, Paris, August 30–September 1, 2012). Sources: TNA, FO
371/153362, RT 1532/10, “Relations between Signor Mattei and
the Western Oil Group,” secret, A. Clarke, British Embassy in Rome
to P. Gore-Booth, FO, August 11, 1960; TNA, POWE33/2443,
J. Jenkins, “Note on Soviet Bloc oil exports to the Free World,”
September 16, 1958; TNA, POWE33/2443, Minute by A. Powell,
May 19, 1960.
52. AHTOTAL, Fonds Total-CFP, b. 92.26/31, f. Pétrole soviétique:
Notes de M. de Laboulaye, “Note pour M. Granier de Lilliac,”
confidential, November 18, 1960; ASENI, Fondo ENI, Estero,
Rapporti commerciali con l’estero, b. 2, f. 7E2, “Memorandum,”
ENI (Ruffolo) to Italian delegation to NATO (Giorgi and
Carbone), December 29, 1960.
53. NATOA, AC/127(O)R/1, “Econad, Ad Hoc Study Group on
Soviet Oil Policy, Meeting held at the Permanent Headquarters,
9 December 1960, Decision Sheet,” confidential, December
21, 1960, 2.
158 R. CANTONI
54. NATOA, AC/127(O)-WP/2 (Revised), “Ad Hoc Study Group on

Soviet Oil Policy, Draft Report to the Econad,” confidential, March
28, 1961; NATOA, AC/127-D/68, 2–6.
55. NATOA, AC/127-D/83, “ECONAD, Soviet oil and gas pipelines,
Note by the Secretary,” secret, October [2/3], 1961, 5; NATOA,
AC/127-R/71, “ECONAD, Meeting held at the Permanent
Headquarters, on 20 July 1961, Decision Sheet,” confidential,
August 4, 1961, 5.
56. Stent, From Embargo to Ostpolitik, 93.
57. Gabrielle Hecht, Being Nuclear: Africans and the Global Uranium
Trade (Cambridge, MA: MIT Press, 2012).
58. Quoted from NATOA, AC/127-D/68, 6.
59. NATOA, AC/127-D/83, “ECONAD, Soviet oil and gas pipelines,
Note by the Secretary,” secret, October [2/3], 1961, 5. The iden-
tity of the military representative is not specified in this document,
but revealed by other documentation.
60. NATOA, AC/127-D/83, 7–14.
61. NATOA, AC/127-WP/85, “ECONAD, Soviet Oil and Gas Pipe-
lines, Standing Group views,” secret, April 9, 1962, 1.
62. “Les exportations aux pays communistes sont rendues plus faciles,”
Petroleum Press Service, September 1958, 347.
63. NATOA, AC/127-D/68, “ECONAD, Report by the Ad Hoc
Study Group on Soviet Oil Policy to ECONAD,” confidential,
May 23, 1961, 6–8.
nent Headquarters, on 20 July 1961, Decision Sheet,” confidential,
August 4, 1961, 4. I could not retrieve the name of the British
delegate in the NATO archives. On the issue of pipeline technolo-
gies, the discussion was not limited to NATO. As mentioned in the
section of the EEC debate, oil companies did not stand idly by;
indeed the suggestion of an embargo probably came from a number
of US majors. This is argued in 1963 by the World Petroleum review:
Boris Rachkov, “Oil, Trade, and Politics,” International Affairs
12 (1966), 14–20. Source reported: World Petroleum, May 1963,
29.
65. NATOA, AC/127-D/83/1, “ECONAD, Soviet oil and gas pipe-
lines, Note by the Secretary,” secret, October 17, 1961, 3–4.

nent Headquarters on 19 October 1961,” secret, October
28, 1961, 5.
67. The impact factors specified by the Soviets for temperatures of
40 C and +20 C seemed to indicate that this pipe was intended
for gas. Such qualitative requirements, which according to the Ger-
man representative were responsible for a substantial increase in the
cost of pipes, was “pointless in the case of an oil pipe since only at
temperatures above 15 C was oil sufficiently fluid for conveyance by
pipeline.” NATOA, AC/127-R/87, “ECONAD, Meeting held at
the Permanent Headquarters on 22 March 1962, Decision Sheet,”
secret, March 29, 1962, 12. The impact factor is the ratio of a
dynamic force to its static weight. William R. Whidden, Buried
Flexible Steel Pipe: Design and Structural Analysis (Reston, VA:
American Society of Civil Engineers, 2009), 185; NATOA, AC/
127-R/86, “ECONAD, Meeting held at the Permanent Headquar-
ters on 8 March 1962,” secret, March 13, 1962, 1.
68. Stent, “The Pipe Embargo: 1962–1963,” ch. 5 in Stent, From
Embargo to Ostpolitik.
69. Jensen-Eriksen, “Cold War;” Sources reported: TNA, “Russian oil,”
T236/6237, F. Lee, April 7, 1961; TNA, T236/6441, G. Walker,
“Note of the meeting on 6 July 1961,” July 10, 1961. The “special
relationship” is a phrase coined by Winston Churchill in 1946, and
used to describe the exceptionally close political, diplomatic, cul-
tural, economic, military and historical relations between the UK
and US. David Reynolds, “A ‘Special Relationship’? America, Brit-
ain and the International Order Since the Second World War,”
International Affairs 62, 1 (1985/86), 1–20.
70. The quote and figures are from NATOA, AC/127-R/87, 6.
71. Ibid.
72. This tactic can be assimilated to some extent to the production of
ignorance exemplified by Robert Proctor’s work on agnotology and
“cancer wars.” Robert Proctor, The Cancer Wars: How Politics
Shapes What We Know and Don’t Know About Cancer (New York:
Basic Books, 1995).
73. NATOA, C-M(62)51, “Soviet Pipeline System—Note by the
Chairman of ECONAD,” secret, May 2, 1962; NATOA, C-R(62)
26, “Summary record of a meeting of the Council, held at the
160 R. CANTONI
Permanent Headquarters on 17 May 1962,” secret, May 23, 1962,

11–12.
74. Quoted from NATOA, C-M(62)47, “Annual Political Appraisal,
Report by the Secretary General,” secret, April 17, 1962, 9;
NATOA, AC/127-D/82 (Revised), “ECONAD, Soviet Bloc
Activities in the World Oil Market, Note by the Chairman,” confi-
dential, October 21, 1961, 6; NATOA, C-R(62)40, “Summary
record of a meeting of the Council, held at the Permanent Head-
quarters on 8 August 1962,” secret, August 21, 1962, 9–11.
75. An analysis of the disregard for the “existing contracts” clause would
exceed the scope of this paper. Suffice it to say that it caused serious
trouble to West Germany’s and Italy’s trade relations with the
Soviets. NATOA, AC/127-D/107, “ECONAD, Soviet Pipeline
System, Draft Report to the Council, Note by the Secretary,” secret,
October 19, 1962, 4–5; NATOA, C-M(62)104, “Soviet Pipeline
System, Report by ECONAD,” secret, October 29, 1962, 6–7. See
also Bagnato, Prove di Ostpolitik, 405–07. Quotes are from:
NATOA, AC/127-D/107/1, 2. On consequences of disrespecting
the clause see Roberto Cantoni, “What’s in a Pipe? NATO’s Con-
frontation on the 1962 Large-Diameter Pipe Embargo,” Technology
and Culture 58, 1 (2017), 67–96.
76. NATOA, Annex to AC/127-R/99, “Soviet Pipeline System, State-
ment of the United Kingdom Position,” secret, November 6, 1962,
1–2.
77. NATOA, C-R(63)14, “Summary record of a meeting of the Coun-
cil, held at the Permanent Headquarters on 20 March 1963,” secret,
March 27, 1963, 23.
78. NATOA, C-R(63)21, “Summary record of a meeting of the Coun-
cil, held at the Permanent Headquarters on 24 April 1963,” secret,
May 2, 1963, 8; NATOA, AC/127-WP/188/1, “ECONAD, Sale
of large diameter pipe to Soviet Bloc countries—Addendum to the
note by the French Delegation circulated as AC/127-WP/188,”
secret, October 6, 1966, secret.
79. NATOA, C-R(63)21, 9.
80. NATOA, AC/127-D/220, “ECONAD: Sale of large-diameter
pipe to Soviet Bloc countries—Note forwarded by the Delegations
of France and of the Federal Republic of Germany,” confidential,
August 29, 1966, 1; Jonathan P. Stern, Soviet Oil and Gas Exports to
the West: Commercial Transactions or Security Threat? (Aldershot:

Gower, 1987), 27, 30.
81. Ebel, Communist Trade, 184–5, 231. Source reported: “Lessons of
an Ill-Fated Embargo,” Vneshniaia Torgovlia, December 12, 1966,
50–1.
82. NATOA, AC/127-D/220, 2.
83. Ibid. See also NATOA AC/127-WP/188 (September 19, 1966),
AC/127-R/185 (September 19, 1966), AC/127-WP/190
(September 21, 1966), AC/127-WP/192 (October 4, 1966),
AC/127-R/194 (January 30, 1967).
84. Geir Lundestad, The United States and Western Europe since 1945
(Oxford: Oxford University Press, 2009).
85. This thesis is defended in: Stent, From Embargo to Ostpolitik, 103.
PART II
From Cold War to Détente: Soviet Energy

and the Expansion of East–West Trade
Decision-Making in the Soviet Energy
Sector in Post-Stalinist Times: The Failure
of Khrushchev’s Economic Modernization
Strategy
Viacheslav Nekrasov
INTRODUCTION
In the post-Stalinist period of the Cold War, energy was a top priority for
the Soviet Union’s political leadership and economic planners. The new
party leader, Nikita Khrushchev, came to see the country’s oil and gas
resources and chemical materials as significant assets for modernizing the
Soviet economy and raising the people’s standard of living.
This chapter was prepared with support from the Grants Council of the President of
the Russian Federation (project MD-6912.2015.6, “The Soviet Union and
modernization challenges of the 1960s: In search of a new foreign economic
policy”), the Russian Humanity Fund (project 14-31-01295, “Gosplan and the
planning practices of the Soviet economy [. . .]: Reforms, institutions, and key
players”), and the German Historical Institute in Moscow (project: “The presidium
of the Central Committee of the CPSU and Gosplan, 1955–1966: An evolution of
economic decision-making mechanisms”).
V. Nekrasov (*)
Surgut State Pedagogical University, Surgut, Russia

DOI 10.1007/978-3-319-49532-3_6
166 V. NEKRASOV
This chapter examines the Soviet Union’s energy policy during the
Khrushchev period from the mid-1950s to the mid-1960s, and seeks to
explain why the Soviet leaders’ quest for an effective strategy for achieving
these goals largely failed. The analysis focuses mainly on Khrushchev’s
“petrochemical project,” a complex endeavor involving various institutional
and economic measures that aimed to leverage the country’s hydrocarbon
resources and chemical materials for the modernization of the economy,
and thus to raise the population’s standard of living and progress toward a
“bright communist future.” Based on a large amount of both published and
unpublished material, this chapter investigates the evolution of Soviet
energy policy during the Khrushchev years. It seeks to explain Khrushchev’s
specific choices of priorities within the area of energy policy, and asks why
his policies faced obstacles and were ultimately not implemented the way he
envisioned.
This chapter argues that a key factor in understanding Soviet energy
policy-making was the institutional setup of the Soviet economy. Far from
being able to dictate policy, Khrushchev had to deal with influential interest
and lobby groups representing different sectors of the economy, some of
which were opposed to certain aspects of Khrushchev’s “petrochemical
project.” Especially the State Planning Committee of the Soviet Union
(Gosplan), where the various sectoral and regional economic interests
were represented and coordinated, was unwilling—or proved at times
simply incapable—to carry out the plans accordingly.
Given the significance of the institutional setup, an important goal of this
chapter is to analyze the complex mechanisms of economic policy decision-
making, especially in the sphere of energy policy, and to provide insights
into the various “mentalities” that prevailed among the top political lead-
ership and the Soviet bureaucracy regarding economic strategy. This chap-
ter examines the structure of key interest groups and their influence on
policy-making, as well as the nature of in-fighting among these groups over
allocation of rents to the different branches of the economy. This chapter
also looks into the issue of oil and gas production and exports, and eluci-
dates the diverse positions within the Soviet political and economic elite on
this topic.
The extensive published resources used in this chapter include the typed
transcripts of the XX, XXI, XXII, and XXIII congresses of the Communist
Party of the Soviet Union (CPSU), which provide insights into energy
policy priorities and problems and the views of political leaders and bureau-
crats. Active use has been made of recently released archival documents on
DECISION-MAKING IN THE SOVIET ENERGY SECTOR IN POST-STALINIST. . . 167
the activities of the top-level political institutions and leaders. Particularly

noteworthy is the publication of draft minutes of the meetings of the pre-
sidium of the CPSU Central Committee (CC) in the years 1954–1964,
prepared by Vladimir Malin, head of the general department of the CC,
and also the publication of documents on the party and state activities of
Khrushchev as first secretary of the CPSU CC and chairman of the Union of
Soviet Socialist Republics (USSR) Council of Ministers.
The most comprehensive body of source materials for this research
consists of documents held in the archives of the highest-level political
and state institutions. Unpublished archival sources on the topic were
located and selected from four archives of the Russian Federation: most of
the factual material came from the records of the Russian State Archive of
Contemporary History (RGANI), consisting primarily of documents from
the presidium of the CPSU CC, the secretariat and structures of the CC,
and the personal records of Khrushchev and Leonid Brezhnev. The research
also draws on documents in the Russian State Archive of the Economy
(RGAE), in particular the holdings of Gosplan, the State Economic Com-
mission, the State Economic Council (Gosekonomsovet), the National
Chemicals Committee, the State Committee for the Oil Industry, the
Ministry of Electric Power Stations, and the Ministry of the Petroleum
Industry. Also used were the records of the CPSU CC located in the
Russian State Archive of Social and Political History (RGASPI), as well as
material from the State Archive of the Russian Federation (GARF)
containing documents of the Soviet Council of Ministers, the Supreme
Soviet of National Economy, and the Economic Council of the Russian
Soviet Federative Socialist Republic (RSFSR). Most of these materials are
introduced here for the first time as primary sources for the study of Soviet
energy policies during the Khrushchev area.
GENESIS OF AND RATIONALE BEHIND KHRUSHCHEV’S

“PETROCHEMICAL PROJECT”
In the immediate period following Stalin’s death, there was no consensus
among the Soviet Union’s so-called “collective leadership” (which in the
mid-1950s consisted of Khrushchev, Georgii Malenkov, and Viacheslav
Molotov) as to the priorities for the development of the country’s fuel
and energy complex. Conflicts within the party’s leadership over the direc-
tion of the country energy policy resulted mainly from the administrative
168 V. NEKRASOV
setup within the highest circles of power, as members of the presidium of

the CC in charge of the various sectors of the economy tended to engage in
inter-departmental in-fighting, using their influence to secure preferential
treatment for their particular sector.1
In terms of the priority given to particular sectors and departments, Lazar
Kaganovich, Malenkov, and Maksim Saburov believed the traditional focus
on the coal industry and hydroelectricity should be maintained. Mikhail
Pervukhin wanted greater diversity in the fuel mix, with increased reliance
on petroleum, gas, hydropower, and local coal reserves, and advocated the
introduction of highly efficient equipment and infrastructure to reduce total
fuel consumption. Khrushchev believed that it was necessary to boost the
production of oil and gas resources, chemical materials, and thermal elec-
tricity in the economy.2 As a result of Khrushchev’s consolidation of power
in 1956/57, the “petrochemical project” became dominant.
After World War II, the petrochemical sector entered a “golden age,”
with a boom in the development of the petrochemical industry, typical for
industrial countries on both sides of the Iron Curtain.3 Resources and
efforts were focused on building up the chemical industry, so that in the
countries in question, the pace of growth in this industry was 2.5 times
higher than the growth of the gross domestic product.4 The ХХ Congress
of the Communist Party (February 1956) marked a structural shift toward
the chemical and oil and gas industries. Khrushchev regarded the produc-
tion of oil, natural gas, and chemical materials as being of great significance
for further growth in the output of consumer goods.5 It is clear, however,
that, at least initially, the chemical and oil and gas industries were seen as just
one of a number of priority heavy industrial sectors, along with the coal
industry and metallurgy. It was the structural crisis in the Soviet economy in
late 1956 and early 1957, accompanied by a shortage of metals, coal, raw
materials, and chemical materials that necessitated a rethinking of priorities
and an increased focus on the petrochemical industry.6
In the second half of 1957, Khrushchev, now firmly established as the
undisputed leader of the party, proposed to refrain from implementing the
sixth five-year plan (1956–1960), and instead switching to seven-year plans.
According to Khrushchev himself, the change to seven-year planning was
directly related to the Soviet leadership’s intention to intensify the devel-
opment of the most progressive sectors of the economy.7 On October
10, 1957, the presidium of the CC adopted the resolution “On fundamen-
tal directions in the formulation and compilation of the USSR’s five-year
economic development plan.” The text of the resolution identified the need
“to devote special attention to rapid growth and development of the

chemical industry [. . .] and focus on decisively increasing oil extraction
and the use of gas in the economy.”8
In March 1958, Khrushchev became chairman of the Council of Minis-
ters and he immediately proposed a growth and development program for
the chemical industry.9 He presented the chemical industry as his personal
program for the technological and institutional modernization of the econ-
omy. Hydrocarbon raw materials were seen as an inexhaustible resource for
the growth and development of the chemical industry.10
What, precisely, drove Khrushchev to favor his “petrochemical project”?
From the typed transcripts of the March and May plenary sessions of the CC
in 1958, we can derive four main motives guiding Khrushchev’s decision to
prioritize the chemical industry for economic development11: the first had
to do with ideology: the development of the chemical industry enabled
Khrushchev to resolve the “Marxist contradiction,” that is, maintaining the
leading role of heavy industry and also addressing social prosperity issues in
the Soviet economy, while at the same time avoiding Malenkov’s “anti-
Marxist” errors in advocating a similar pace of development for both the
heavy and the light industry.12
The second reason was Khrushchev’s focus on social prosperity:
Khrushchev was genuinely concerned with the quality of people’s lives and
wanted the Soviet standard of living to become “no lower than that of the
most advanced Western countries and America.”13 He was seeking the
material and financial resources needed in order to build a communist
“state of universal prosperity.”14 In this regard he saw the chemical industry
as a vehicle for creating additional resources of synthetic raw materials for
light industry and agriculture, lowering prices for consumer goods, meeting
the population’s needs for textiles, clothing, and footwear, and accordingly
raising the level of prosperity among the general population.15 In other
words, Khrushchev saw chemical technologies and materials as a form of
“free lunch,” delivering a rapid rise in prosperity at relatively little cost.16
The third reason was related to scientific and technological progress, as
well as structural problems in the economy: a recurring theme in
Khrushchev’s speeches and interventions was the idea that a further devel-
opment of chemical production capacity would allow costly metals and
natural agricultural raw materials to be replaced with synthetic products,
accelerating the pace of technical progress in all sectors of the economy and
making it possible to address the structural problems in the Soviet economy—
thus reducing the shortage of metals, the immense waste caused by burning
170 V. NEKRASOV
huge volumes of associated petroleum gas (APG), and the need to improve
the fuel balance in the economy.17
The last factor was economic cooperation and external trade policy:
Khrushchev believed that the successful implementation of the program
for developing the chemical industry would stimulate cooperation with the
socialist and capitalist countries in the fields of trade as well as science and
technology. He was particularly focused on cooperation with the United
States (US), the Federal Republic of Germany (FRG), and the United
Kingdom (UK), arguing that in this way, they would “play their part” in
“building Communism.”
THE “PETROCHEMICAL PROJECT:” HIGH AMBITIONS

AND INITIAL SUCCESS
The goals set for implementing Khrushchev’s “petrochemical project” were

ambitious. The program for the development of the chemical industry
provided for the construction of 140 new enterprises and the reconstruction
of a further 130 existing plants between 1959 and 1965. The total capital
investment for the construction of chemical industry enterprises, mechan-
ical engineering for chemical purposes, and related scientific and research
was 100 billion Soviet rubles (SUR).18
Directives approved by the XXI Congress of the Communist Party
established new industrial and energy policy priorities. The total volume of
the chemical production output was to increase approximately threefold
between 1959 and 1965. The “Guideline figures for the USSR’s economic
development 1959–1965” stated that “further development of the produc-
tion of polymer materials is to take place on a new raw materials basis. It is
intended to create a powerful, multi-faceted synthetic materials industry based
on the use of associated gas from petroleum production and natural gas.”19
According to these directives, the share of natural gas in the fuel balance
was to be increased from 31 to 51 percent, with the share of coal reduced
from 60 to 43 percent. Petroleum extraction was to be increased, reaching
230–240 million tons in 1965, and natural gas production was to rise to
150 billion m3.20
These new strategic adjustments for the development of the oil and gas
complex and the chemical industry were underpinned by the allocation
of capital investment spending in the economy, with planned capital invest-
ments of a total of between 1940 and 1970 billion SUR for 1959–1965,
broken down as follows (Table 1):
Table 1 Capital investment in industry and transportation, 1952–1965 (in billion

Soviet rubles, SUR)
Sector 1952–1958, 1959–1965
billion SUR
Billion SUR As % of total As % of
capital investment 1952–1958
Fuel and energy 208.5 370–380 19.1–19.3 177.4–182.2

of which:
Oil and gas 72.2 170–173 8.7–8.8 235–240
Coal 61.2 75–78 3.8–4.0 122–127
Electricity 75.1 125–129 6.4–6.5 166–172
Chemical industry 19.9 100–105 5.1–5.3 502–528
Ferrous metallurgy 40.8 100 5.1 245
Mechanical engineering 65.5 118 6.0 180
Construction 61.5 110–112 5.6–5.7 179–182
Transport and infrastructure 107.4 209–214 10.7–10.8 195–199
of which: railways 59.3 110–115 5.6–5.8 185–194
Source: Institut marksizma-leninizma pri TSK KPSS, KPSS v rezoliutsiiakh i resheniiakh s”ezdov, konferentsii i
plenumov TSK, vol. 9, 1956–1960 (Мoscow: Gospolitizdat, 1985), 367–8
According to Gosplan figures for 1959–1965, in new prices, a total of

3.5 billion SUR was invested in the development of the petroleum industry,
with a further 4.1 billion SUR invested in related sectors (petroleum-related
mechanical engineering, transport, metallurgy, chemistry). A total of around
1.8 billion SUR was invested in the development of the petroleum-refining
industry.21 The total capital investment in the petroleum and petroleum-
refining sector therefore amounted to 9.4 billion SUR.
By the beginning of the 1960s, some tangible results had been achieved
from Khrushchev’s project for the accelerated development of the chemical
industry and the oil and gas complex.22 According to Gosplan figures, by
1963, a total of 28 new chemical enterprises had been built, and 195 large-
scale chemical production plants at existing enterprises had come into oper-
ation. New centers of the chemical- and petroleum-refining industries had
been created in the Baltic and Volga regions, Siberia, and Central Asia.23 In
1963, the country’s petroleum-refining capacity had increased by a factor of
3.2 over 1954 levels. The proportion of chemical production processed from
petroleum and gas resources had increased from 10.7 percent in 1958 to
172 V. NEKRASOV
16 percent in 1963.24 Within the economy as a whole, greater use was being
made of polymer materials, particularly in mechanical engineering, electrical
engineering, and the textile industry.
In the 1959–1963 period, petroleum extraction rose from 113.2 million
tons to 205 million tons, crossing the psychological barrier of 200 million tons,
and natural gas production increased from 29.8 billion m3 to 91 billion m3.25
The end of the 1950s and beginning of the 1960s witnessed significant
progress with the harnessing of the hydrocarbon reserves of the Volga-Ural
region and Central Asia.26
Given these impressive statistical figures, the upshot was that at the XXII
Congress of the Communist Party, Khrushchev proudly reported that oil
and gas resources now accounted for 42 percent in country’s fuel balance,
and production of plastic and chemical fibers had more than doubled. Total
savings of three billion SUR had been achieved over the six-year period due
to the transition to cheaper energy sources, and the use of natural and
petroleum gas had led to a decrease in production costs and the conserva-
tion of a large volume of natural resources.27 The allocation of capital
investment spending defined the priorities for a structural transformation
of the economy in the 1960s, and new intersectoral complexes were begin-
ning to form in the economy. In the 1970s and 1980s, these would become
the nucleus of the economy’s leading sectors.
GOSPLAN, INTEREST GROUPS, AND THE CRISIS

OF THE “PETROCHEMICAL PROJECT”
Already in the early 1960s, however, the development of the chemical

industry and the oil and gas complex encountered a series of infrastructural
and institutional problems. The transcripts of the meeting of the presidium
of the CC on May 31, 1962 contain a note “on the chemical industry–
under-fulfilment, a sorry situation.”28
The failures in the chemical industry development program were a blow
to Khrushchev’s pride, since he had been convinced that all the previous
shortcomings of Gosplan’s performance had been successfully eliminated,
and planning practices had been improved with the preparation of the
seven-year plan.29 At the meeting of the CC presidium, Khrushchev
demanded that the Council of Ministers and Gosplan focus primarily on
the chemical industry and on introducing the use of chemical materials in
the economy.30
Khrushchev attributed the failures to the development strategy for the

chemical industry and the oil and gas complex not being fully thought
through.31 He accused Gosplan of being overly conservative, and of being
unable to implement the development program for the chemical industry
successfully. Gosplan was the target of renewed criticism in 1961 and 1962
for failures in the implementation of plans for the development of the
chemical industry. The CC presidium demanded better economic planning,
underlying that “Gosplan was [. . .] uncontrolled.”32
In November 1962, in the presidium of the CC, Khrushchev referred to
Gosplan and Gosekonomsovet as “Cerberus”-like monsters, waiting to
“tear apart anyone who dared to lay a finger on the steel production trend
figure, not realizing that in so doing, they are destroying our economy.”33
In the meeting of the presidium of the Council of Ministers held on
December 4, 1962, Khrushchev accused Gosplan Chairman Vladimir
Novikov of allowing capital investment to be reallocated from the chemical
industry to metallurgy.34 In December 1960, the presidium of the CC
resolved to cut back steel production at the end of the seven-year period
from 96 million tons to 86–91 million tons, and to reallocate the capital
expenditure funds thus released to the production development of mineral
fertilizers and pesticides for the agricultural sector.35 However, Gosplan
failed to execute this instruction, and Novikov was dismissed from his
position as chairman.36 In his place, the presidium of CC appointed the
former minister for non-ferrous metallurgy, Pëtr Lomako.37
Why was this direct instruction from the presidium of the CC and from
the chairman of the Council of Ministers not carried out? According to
Khrushchev, the failures in the petrochemical development project were
caused by Gosplan’s organizational structure, which had proved incapable
of coordinating plans for the development of the heavy industry. At a
meeting of the CC on March 2, 1963, Khrushchev described the problem
as follows: Gosplan, he said, “was not the single, unified structure that it
should be, a planning body, but a structure composed of representatives of
different departments, and accordingly, they all tried to grab for themselves
as much as they could. And it turns out that the heavy metallurgists were the
strongest—and they grabbed the most. I don’t blame them for that. They
were sincerely doing their best to protect their own department. But people
should not have been thinking about grabbing resources, but about how to
ensure the proper planning of the development of all departments.”38
Rather than being a coherent, monolithic organization, Gosplan was an
aggregation of sectoral interest groups, who were frequently inclined to
174 V. NEKRASOV
make partisan decisions that ran counter to the interests of the economy as a
whole.39 The Gosplan machinery was thus sufficiently independent as a
government structure to indulge in “opportunistic” interactions with the
CC, the Council of Ministers, and the ministries and Regional Economy
Soviets (Sovnarkhoz, sing.).40
Khrushchev identified the existence of a “metallurgy lobby” within the
Soviet economy, comprising the ferrous and nonferrous metallurgy sectors
of Gosplan, the State Committee for Ferrous and Non-Ferrous Metallurgy,
the Central Urals, Kemerovo, and Krasnoiarsk Sovnarkhozes, the Ukrainian
Soviet Socialist Republic (SSR), and the Council of Ministers of the Kazakh
SSR.41 Archival sources confirm that between 1957 and 1962, the “metal-
lurgy lobby” did indeed manage to reallocate material resources and capital
investment funding away from hydroelectric power generation, the oil and
gas industry, and the chemical industry toward metallurgy.42 In 1960–1961,
the “metallurgy lobby” put forward a plan for the production of 100 million
tons of steel per annum. They received “partial support” in the presidium of
the CC, but generally speaking, the members of the presidium were unable
to withstand the forces of the sector ministers and interest groups in the
economy.43
Khrushchev’s characterization of Gosplan’s performance is also supported
by the statistics of the State Committee for Chemistry. In 1959–1962, only
3.83 billion SUR were allocated to the development of the chemical industry,
far less than the planned figure of 4.54 billion SUR. In 1962, Gosplan
allocated 1.3 billion SUR to development of the chemical industry, 180 mil-
lion SUR less than the seven-year plan envisioned.44 The trend in key
indicators for the oil and gas industry in 1959–1963 indicates low efficiency
in the development of the oil and gas industry (Table 2).
It is particularly striking to note that between 1959 and 1963, the
guideline figures for the seven-year plan were achieved only in the case of
petroleum extraction. In fact, the petroleum industry was, according to
official statistics, the only branch among the sectors of the fuel and energy
complex that was able to fulfill the seven-year plan figures (Table 3).
It is noteworthy to mention that Gosekonomsovet and Gosplan adjusted
the indicators for development of the oil and gas industry in 1962–1965 on
several occasions: the petroleum extraction figure was increased to
245, 247, and even 255 million tons, while the natural gas production
figure was decreased from 145 to 141 billion m3.45 In June 1964, the
chairman of the State Committee for the Petroleum Extraction Industry,
Nikolai Baibakov, reported that in 1965, petroleum extraction “while
Table 2 Development of the Soviet oil and gas industry, 1959–1963
Objective of Actual Difference Difference

seven-year figures in percent
plan
Cumulative petroleum extraction, 813 836 23 2.83

million tons
Cumulative production of natural 377 312 65 17.24
and associated petroleum gas, billion m3
Drilling, million m 51 41.3 9.7 19.02
of which exploratory drilling 29 22 7 24.14
Growth in industrial reserves:
Petroleum, million tons 2624 2411 213 8.12
Natural gas, billion m3 1989 1452 537 26.99
Capital investment in petroleum industry, 4786 4504 282 5.89
million SUR
Source: RGAE, f. 184, op. 1, d. 56, l. 106; RGAE, f. 9571, op. 7, d. 163, ll. 10–11, 13–15, 17, 18, 21, 24–6,
28, 29, 32, 33, 36, 37, 39, 40, 44–6, 49–51; RGAE, f. 9571, op. 7, d. 469, ll. 30–1
Table 3 Fulfilment of the seven-year plan for the fuel and energy complex,
1958–1965
1958 Planned target 1965
Petroleum extraction, million tons 113 230–240 242.9

Natural gas production, billion m3 28 150 127.7
Coal extraction, million tons 496 600–612 577.7
Electricity generation, billion kWh 235 500–520 506.7
Source: Institut marksizma-leninizma pri TSK KPSS, KPSS v rezoliutsiiakh i resheniiakh s”ezdov, konferentsii i
plenumov TSK, vol. 9, 1956–1960 (Мoscow: Gospolitizdat, 1985), 299–303; Tsentral’noe Statisticheskoe
Upravlenie pri Sovete Ministrov SSSR (TSUSM), Narodnoe khoziaistvo SSSR v 1959g. (Moscow:
Gosstatizdat, 1960), 176–93; TSUSM, Narodnoe khoziaistvo SSSR v 1965g. (Moscow: Gosstatizdat,
1966), 169–81
reaching a figure of [. . .] 240 million tons, will be 7 million tons lower than
the levels set by adjustments to the guideline figures, and gas production in
1965 will be 128 billion m3, 22 billion m3 less than the figure provided for
in the seven-year plan.”46
In real terms, therefore, the adjusted seven-year plan was not fulfilled in
the oil and gas complex either, which showed increasing signs of crisis due
to three main reasons: a decentralization of the administration of the oil and
gas industry; errors made in planning the development of the sector; and the
176 V. NEKRASOV
influence of interest groups regarding the allocation of capital investment

expenditure.47
However, a more fundamental cause of the crisis affecting Khrushchev’s
“petrochemical project” was the fact that the ideological motivation and
capital investment policy was not backed up by rational technical and
economic evidence to gauge the efficiency performance of the new energy
resources and chemical materials. Gosplan and Gosekonomsovet lacked a
clear perspective for the development of the fuel balance in the USSR
economy and concerning the formulation of the best available options for
the development of energy resources in different economic areas of the
Soviet Union.48
According to Russian historian Sergei Bakanov, decisions on the use of
coal or oil and gas resources often reflected pressure applied by sector
interest groups, rather than being based on rational arguments.49 State-
ments by Soviet Minister of Energy and Electrification Pëtr Neporozhnii
confirm that Gosplan and the CC conceptualized the long-term prospects
of Soviet energy development only in most general terms.50
THE “GAS PAUSE” IN THE SOVIET ECONOMY (1963–1964)

One of the manifestations of the crisis in Khrushchev’s “petrochemical
project” was the so-called “gas pause” of 1963/64. On May 21, 1963, in
a speech to Gosplan officials, the Supreme Council of the Soviet Economy
and state committees, Khrushchev sharply criticized Minister of the Gas
Industry Aleksei Kortunov. This criticism was prompted by the fact that
Khrushchev, as chairman of the Council of Ministers, had not been notified
that Gosplan and Gazprom (were planning the construction of a Bukhara–
Moscow gas pipeline. Khrushchev went so far as to refer to the construction
of this pipeline as a “really stupid idea,” and told the planners and ministers
present that “right now we are being reckless in our use of our natural gas
riches. Some time ago I said that our gas must be put to the service of
Communism, and at that time we were making good use of it. But now they
want to burn gas unnecessarily, at the wrong time and in the wrong place.”
Khrushchev yet again emphasized the point that natural gas was a raw
material for the chemical industry, which would soon take over metallurgy
as the leading sector.51
This marked the beginning of a “gas pause” in the Soviet economy.
During this time, an increasing rate of consumption of natural gas was
regarded as incompatible with—and even harmful to—state interests, and
the construction of a number of gas pipelines and the exploitation of new

reserves was suspended.
The heads of different state committees on the chemical and gas indus-
tries and government planners attempted to oppose this decision. Deputy
Chairmen of the Supreme Soviet of the Soviet Economy Sergei
Tikhomorov and Vartan Kalamkarov, as well as the chairmen of the state
committees on the chemical industry, gas industry, and geology, Baibakov,
Kortunov, and Aleksandr Sidorenko, sent a memorandum to Khrushchev.
The ministers stated that the USSR’s potential reserves of natural gas were
approximately 60 trillion m3, which did allow for an increase in the con-
sumption of natural gas. Kortunov argued that the needs of the chemical
industry should be met primarily with APG, while natural gas should be
used to supply gas to city populations and industry.52
At a meeting of the CC on the chemical industry on July 31, 1963 and a
meeting of Sovnarkhoz chairmen in the Supreme Soviet of the National
Economy on August 2, 1963, Khrushchev firmed up his position regarding
the use of natural gas and APG within the Soviet economy. In his view,
Gosplan and Gazprom’s natural gas policy of connecting large numbers of
consumers up to an ever-larger network of gas pipelines was irrational. He
pointed out that “prospected reserves provide capacity for no more than
20 years. [. . .] 20 years will pass, and we will find there’s no more gas.”53
Khrushchev expressed the view that Gazprom should concentrate its
resources on increasing natural gas reserves, limiting consumption, and
developing an efficient use of APG.
As chairman of the Council of Ministers, Khrushchev regularly criticized
Gosplan and its departments for an improvident attitude toward the APG
resource, 40 percent of which was simply burned off at the oil fields.54 The
“oil and gas ministers” regularly gave promises to Khrushchev to resolve the
problem of the use of APG.55 The utilization coefficient of the resource was
0.62 in 1959, and the planned coefficient for 1960 was 0.69 (Table 4).56
Table 4 Use of associated petroleum gas (APG), 1959–1962
1959 1960 1961 1962 1959–1962

3
Total APG generated, billion m 11.3 13.8 14.9 17.5 57.5
Total APG used, billion m3 6.5 7.7 8.6 10.0 32.8
Losses, billion m3 4.8 6.1 6.3 7.5 24.7
Use of APG, percentage 57.7 55.7 57.7 57.2 57.0
Source: RGAE, f. 4372, op. 65, d. 342, l. 44

178 V. NEKRASOV
Still, the situation remained critical: at the end of the 1960s, the APG
utilization level was 60–63 percent, and a meagre 6 percent in East Siberian
oil fields.57 In the summer of 1963, Khrushchev instructed the Supreme
Soviet of the National Economy and Gosplan to address the use of natural
gas and APG, calling for an increased use of APG and the use of natural gas
solely as raw material for the chemical industry, with limits on its use for
energy generation and household supply.58 In spite of support from Kosygin
and Dmitrii Ustinov as first deputy chairmen of the Council of Ministers, the
planners and ministers were unable to convince Khrushchev to change his
mind. Khrushchev also continued to criticize Gosplan for failures in imple-
mentation of the program for the production of polymer materials.59
The “gas pause” was Khrushchev’s response to failures in the develop-
ment of the chemical and gas industries and the pressure from increasingly
strong interest groups, which focused on using the rent revenue from
petroleum exports and the country’s gold and foreign exchange reserves
for the purchase of technology and other equipment from abroad that was
in short supply, particularly steel pipes for the oil and gas industry.60 Against
the background of this strong domestic opposition, Khrushchev attempted
to revive his “petrochemical project.”
KHRUSHCHEV’S ATTEMPT AT RECONSTRUCTING HIS

“PETROCHEMICAL PROJECT” (1962–1964)
In response to the crisis his “petrochemical project” was facing, Khrushchev
looked for new ideas and mechanisms for its successful implementation.
Between 1962 and 1964, he undertook a further attempt to change the
prevailing economic planning practices, particularly the allocation of capital
investment expenditure. He noted that the main threat to the economy was
the practice of “resource grabbing” (rvachestvo) by the various ministries
and Gosplan.61 Khrushchev had a certain amount of understanding for this
attitude on the part of individual republics, but sharply criticized Gosplan
not only for being unable to block these practices, but also for actually
promoting them. Khrushchev saw “resource grabbing” as a feature
inherited from the “personality cult,” that is, Stalin’s own approach to
planning, which the government now needed to overcome in order to
restructure the economy.62
In March 1963, Khrushchev initiated the creation of a Supreme Soviet
for the National Economy to limit the involvement of interest groups in the
allocation of capital investment expenditure.63 In 1963 and 1964, he orga-

nized a series of meetings with industry and research leaders, at which he
criticized the bureaucracy, but also appealed to the officials’ sense of civic
duty, patriotic sentiments, and responsibility for the development of new
sectors of the economy, particularly the oil, gas, and chemical industries.64
In meetings of the presidium of the CC and the presidium of the Council of
Ministers toward the end of 1963 and the beginning of 1964, Khrushchev
called for higher production rates of the industry and making the Soviet
economy more competitive.65
At the same time, he was preparing another plenum of the CC on the
chemical industry.66 In the middle of March 1963, Khrushchev made visits
to a number of chemical industry complexes, and afterwards sent a memo-
randum to the CC presidium proposing more extensive use of oil and gas as
raw materials for the chemical industry, including resources from newly
discovered deposits in Western Siberia: “With our huge deposits of gas
and oil, we must make use of this raw material and make it a source of this
country’s wealth. We could even become exporters of mineral fertilizers and
other chemical products based on oil and gas as raw materials on a larger
scale than many European countries, not to mention Asian countries. This
might enable us to become a competitor with the West.”67 Khrushchev
believed that Gosplan and the State Committee on the Chemical Industry
were able to ensure “that we can enter the capitalist market and show them
what we can do.”68
Between 1963 and 1964, the chemical industry became not only a high
priority for Khrushchev, but also the “locomotive” of scientific and techni-
cal progress, the base for a state characterized by “communist prosperity”
and communist ideology.69 In December 1963, the plenum of the CC
adopted a six-year development program for the chemical industry for
1964–1970, as a result of which 42 billion SUR were allocated for the
construction of chemical industry enterprises, related mechanical engineer-
ing enterprises, and for scientific research.70
The new development program for the chemical industry consisted of
four principal elements. First, a structural economic policy: when discussing
the new development program, Khrushchev proposed to accelerate the
development of the chemical industry by slowing down the pace of growth
of traditional industrial sectors—a radical proposition at the time.71 He
drew attention to the experience of the US, which had “temporarily closed
down blast furnaces, open-hearth furnaces and rolling mills, while pushing
180 V. NEKRASOV
ahead in the chemical sector. [. . .] If they decided to close down new plants,
apparently there must have been a benefit in doing so.”72
At a meeting of the presidium of the CC on November 10, 1963,
Khrushchev formulated his strategy as follows: “I can’t put it in numbers,
but it seems to me that at the moment, the plan we are putting together may
recognize the importance of the chemical industry, but doesn’t take a
revolutionary approach toward that sector. As far as I am concerned,
comrades, we should put our economy on hold for three years, even
metallurgy, if there is no other alternative, and for those three years put
those capital investment funds into the chemical industry. After three years,
the chemical enterprises we have built will enable us to accumulate capital,
and then we will be able to come back to those other sectors.”73 This
strategy represented the furthest extension of Khrushchev’s earlier pro-
posals for the reallocation of capital investments and rent revenue from
metallurgy to the chemical industry.
The second key element of the new development program for the
chemical industry was the development of new oil and gas fields: as early
as November 1962, attendees at the plenum of the CC had been told of a
number of promising new discoveries of gas and oil deposits in the
Mangashlyk and Tiumen’ oblasts and in Eastern Siberia.74 The new
development program of the chemical industry for 1964–1970 included
the exploration of new petroleum and gas deposits and increased the
production and processing of oil and gas.75
A third element was the focus on external trade policy and a strategy for
the use of resource rent revenues. Khrushchev’s idea was to purchase only
the most modern infrastructure for the chemical industry and licenses from
Western and socialist countries. He suggested making use of gold and
foreign exchange reserves and rent revenues from petroleum for this pur-
pose,76 which was “the only correct and promising course of action.”77 At a
meeting of the CC in March 1963, he unabashedly called for the theft of
licenses, and stated that “what we can’t steal, we will have to buy. That’s
what the whole world is doing.” Khrushchev singled out the Japanese
experience for a special mention: “[T]he Japanese paved their way to
success with theft and purchases, mainly with theft, because the most
cunning thieves of patents are the Japanese.”78 The main countries he
envisaged as more significant cooperation partners and sources for purchas-
ing new infrastructure were Belgium, France, the FRG, UK, Italy, Japan,
and the Netherlands, “so that we don’t have to invent or go right back to
square one, but can buy up modern machinery and take that as our own
baseline for further development here.”79
Lastly, the new program focused on Soviet scientific and technical lead-
ership institutions. For Khrushchev, the development of the chemical indus-
try and scientific research became a question of the USSR’s leadership in
science and technology.80 At a plenum of the CC in November 1962, he
argued for the prioritization of the chemical industry. Opposing the
“Cerberus”-like monsters within Gosplan, Khrushchev argued that “there
was a time when the state’s power was determined by the amount of metal it
could produce. And that was the right yardstick for its time. But today,
when other materials that compete with metal have been created, that
yardstick is no longer adequate. It is now chemistry that provides us with
cheaper, stronger, and more easily accessible materials.”81
In December 1963, Khrushchev linked the Soviet Union’s prospect of
becoming the leading industrial power directly to the potential of the
chemical industry. He agreed with researchers’ views that the existing
forms of planning were not appropriate for the development of chemical
science and research.82 At a meeting of the CC presidium on December
23, 1963, he proposed the setting up of a chemistry research agency,
“which would look at all the ideas coming from scientific researchers,
without any predefined priorities and on the basis of scientists’ opinions,
narrow them down, and put all the viable ideas immediately into practice.”
Khrushchev’s suggestion even included a budget proposal and detailed
instructions for these ideas.83
An examination of archival documents shows that Khrushchev continued
his quest for new development practices for the chemical sector and the oil
and gas complex right up until his removal from power in October 1964.84
At this point, essentially, the new program ended before it had begun.
THE EXPORT OF OIL AND GAS: POTENTIALS AND PROBLEMS

In view of the increasing openness of the Soviet economy, a fundamental
structural change took place both in international commerce in general, and
in the USSR’s foreign trade in particular, in the second half of the 1950s and
first half of the 1960s.85 The key concept of Khrushchev’s foreign policy was
the principle of “peaceful coexistence” and economic competition between
capitalism and socialism.86 Under Khrushchev, hydrocarbon resources and
chemical materials were to play a major part in attaining the “main eco-
nomic objective [. . .], to catch up with and overtake the most advanced
182 V. NEKRASOV
capitalist countries in the shortest possible time in terms of per capita

production.”87
At the same time, the Soviet leadership sought new instruments for
stimulating foreign trade and international cooperation.88 As the Soviet
Union’s gold stocks provided only limited opportunities for the import of
equipment and materials needed for the modernization of the economy,
ideas to make use of resource rents from oil exports were being increasingly
discussed. At a meeting of the presidium of the CC on December 3, 1961,
Gosplan Chairman Novikov explained that it is “better to sell foreign
currency products [valiutnye tovary] (which are more profitable), than
gold.”89 Evidently, it was during this period that the idea of exporting
petroleum and natural gas as a major source of income and capital accumu-
lation formed in the minds of the top political leadership.90
However, it appears that the Council of Ministers and Gosplan differed as
to whether it was the sale of crude oil or petroleum products that was most
beneficial to the country. This issue was put on the agenda on August
1, 1963 at a meeting of the presidium of the CC. Summarizing the content
of these discussions at a meeting of the Supreme Council of the Soviet
Economy on the following day, Khrushchev noted that “we are still using
oil in a primitive way, and sell mainly crude oil across the border, although
we know that it would be more profitable to sell petroleum products; but
we are not in a position to do this. We need to aim our policy at refining as
much oil as possible and trade with petroleum products, and not with crude
oil.”91 And it is most likely that the chairman of the Council of Ministers did
indeed demand of the Supreme Council of the Soviet Economy and
Gosplan to stick to this course and increase the export of petroleum and
chemical products, rather than raw materials. With this policy, Khrushchev,
in fact, continued his strategy to develop the chemical industry and improve
the competitiveness of Soviet exports—a policy he would follow until his
removal from power.
Against this background, it is necessary to provide a more specific idea of
the structure of the Soviet export of oil and petrol products, and also look
into the position of Gosplan regarding the export of raw materials. The
reports prepared between 1964 and 1967 by Gosplan, the Ministry of
Foreign Trade, the Ministry of the Petroleum Extraction Industry, the
Ministry of the Petroleum Refining and Petrochemical Industry, and mar-
keting organizations constitute an invaluable source for the analysis of
Soviet petroleum exports.
According to a Gosplan report of April 11, 1967 on the USSR’s foreign

trade performance, the country accounted on a global scale for over 17 per-
cent of coal exports, over 15 percent of coke exports, more than 7 percent of
petroleum exports, and 10 percent of the main petrol products (petrol,
kerosene, diesel fuel, and fuel oil). The total export value of these product
groups in 1965 reached 1.2 billion SUR. Petrol products represented approx-
imately 18 percent of the USSR’s exports, and 28 percent of its total exports
of raw materials and semi-finished goods. However, according to Gosplan,
goods in the “fuel” category had generally a relatively low export efficiency
rating due to the cyclical nature of the trade in raw materials—which was
chronically unfavorable to exporters—and the high cost and capital-intensive
nature of their production in the USSR (Table 5).92
The largest item in this resource group were petrol products, with
exports of more than 836 million SUR (69.6 percent of export income) in
1965. From 1959 to 1965, Soviet exports of petroleum and petrol products
increased from 16.7 to 63.5 million tons, reaching 26.1 percent of total
petroleum extraction and taking the leading position among all fuels
exported (Table 6).
In the middle of the 1960s, the Soviet share in global petroleum exports
was 6.1 percent. In the first half of the 1960s, petroleum exports to the
capitalist West increased to 21 million tons (corresponding to a growth factor
of 2.3). Exports to socialist countries, primarily members of the Council for
Mutual Economic Assistance (CMEA), increased to 22.4 million tons (that
is, by a factor of 2.5).93 The average annual export growth rate was 19.5
percent; in particular, exports to capitalist countries grew by 18.5 percent and
exports to socialist countries by 20.5 percent. Exports as a proportion of the
USSR’s total extraction rose from 12 percent in 1960 to 17.9 percent in 1964
(not including oil used for the production of petrol products intended for
export). Nevertheless, in comparison with the principal petroleum exporting
countries, the proportion of exported natural resource extractions remained
relatively low. For example, the share of exports compared to total produc-
tion was 70 percent in Venezuela, 75 percent in Iran, 84 percent in Saudi
Arabia, 90 percent in Kuwait, and 97 percent in Iraq.
Gosplan experts noted that the petroleum volumes earmarked for supply
to East European socialist countries even exceeded the domestic require-
ments of those states, as evidenced by the increasing quantities of re-exports
of petrol products from socialist to capitalist countries. In 1965, for exam-
ple, East European countries (GDR, Poland, Czechoslovakia, Hungary,
and Bulgaria) exported 2.6 million tons of petrol products to capitalist
184 V. NEKRASOV
Table 5 Efficiency of Soviet fuel exports in 1964
Efficiency (percentage)
Production Production cost including Economic costs (excluding costs

cost transport expenses in related sectors)
Average Socialist Capitalist Average Socialist Capitalist

countries countries countries countries
Total 199 101 105 79 57 70 45

Coal 78 55 57 51 47 49 43
Coke 108 86 96 61 83 93 59
Petroleum 302 127 167 91 58 76 42
A-90 petrol 36 36 – 36 23 – 23
A-76 petrol 121 85 123 49 56 82 33
Diesel 203 135 191 120 69 92 61
Mazut oil 126 75 90 69 37 44 33

Notes:
1. According to estimates by Gosplan specialists, data on Soviet export efficiency are approximate due to
inaccuracy of wholesale prices, and the lack of reliable information on net costs and on relative capital intensity,
in particular in related sectors of the petroleum industry. (See: RGAE, f. 4372, op. 81, d. 2387, l. 2.)
2. Missing data is indicated with a dash
markets, compared to 1.5 million tons in 1961. Moreover, the sales of

petrol products were generally carried out by parties contracting with the
Soviet oil export company Soiuznefteksport (SNE), but at lower prices than
those charged by SNE. This implied a foreign-exchange loss for the USSR.94
According to Gosplan calculations, the overall foreign-exchange effi-
ciency of petroleum exports was 127 percent in 1964. Considering only
economic cost (without related sectoral costs), that figure was 58 percent on
average—42 percent in trade with the capitalist countries, and 76 percent
when doing business with the socialist countries. In terms of economic
costs, Gosplan attributed the relatively low foreign-exchange efficiency of
petroleum exports to economic, technological, and transportation-related
factors, which will be discussed below. The following table demonstrates
that the investments needed to achieve an increase in petroleum production
were very high in comparison to actual production costs (Table 7).
The relative capital investment for increasing petroleum extraction in
1964 across the sector was 81.5 SUR per ton (SUR/t) of petroleum,
Table 6 Exports of petroleum and petroleum products from the USSR (million
tons)
Year Petroleum Petrol products Petroleum-equivalent exports
1958 9.1 7.6 16.7

1959 12.7 10.3 23.0
1960 17.8 14.1 31.9
1961 23.4 17.8 41.2
1962 26.3 18.4 44.7
1963 30.2 20.38 50.8
1964 36.7 19.09 55.79
1965 43.4 20.08 63.48
Increase 1959–1965 34.3 12.48 46.78
Source: RGAE, f. 4372, op. 81, d. 2389, ll. 180–1

Note: Data in the fourth column present the sum of oil and oil products in oil equivalent tons. These are
reference data, as indicated in the original source
although the relative investment cost varied significantly according to spe-

cific petroleum extraction areas.
The capital intensity of petroleum extraction per SUR of foreign-
exchange receipts was very high, averaging 6.5 SUR. Another significant
factor was the cost of transportation. In the first half of the 1960s, the
construction of a pipeline network had only just begun, and most of the
petroleum was carried by train. Petroleum from the Tatarin field, for
example, was transported to Novorossiisk and Tuapse over a distance of
1700–2500 km, at a delivery cost of 6.8–9.9 SUR/t, and to Baltic ports
(1600–2300 km) at a cost of 6–9.1 SUR/t. Sectoral average costs for the
transportation of petroleum from the extraction area to the shipping port in
1965 were 4.3 SUR/t.95
The cost-efficiency of petroleum exports was also affected by the higher
levels of salt, water, and mechanical impurities contained in the exported
petroleum. The salt content reached 70–80 mg per liter, and in some
instances exceeded 100 mg per liter. The share of water and mechanical
impurities in Soviet oil reached 2 percent, whereas the petroleum supplied
by the USSR’s competitors was virtually free of any impurities. All of this led
to lower export prices for Soviet petroleum.96
Another factor that significantly restricted the export of petroleum and
natural gas was the shortage of fuel within the Soviet economy. Due to the
way in which the fuel and energy industry within the Soviet economy had
been developed, around 90 percent of all fossil fuel resources were located
186 V. NEKRASOV
Table 7 Production cost and capital investment for petroleum extraction, 1964
(SUR per ton)
1964
Production Relative investment cost Reduced

cost for increasing petroleum extraction costs (15%)
Average production cost 4.30 81.50 16.53

across sector
Kuybyshevneft’ 2.58 111.94 19.22
Tatneft’ 2.45 25.77 6.32
Bashneft’ 3.38 47.90 10.57
Grozneft’ 5.01 33.53 9.48
in the eastern part of the USSR. At the same time, more than 80 percent of
the country’s total demand for fuel was related to enterprises located in the
European part of the USSR and the Urals. This physical distance between
centers of production and consumption required transporting the fuel over
long distances, a phenomenon which was further exaggerated by Soviet
economic policy. As more and more fuel resources from the European part
of the USSR, including the Urals, were exported, domestic demand in this
area had to be met with more supplies from the East. Gosplan noted the
high relative costs and additional economic costs these developments
implied.
The inefficiency of exporting raw material resources was closely linked to
that of the use of resource rent revenue in the Soviet economy. The
literature on the subject states that in the period after World War II, the
resource rent revenue from the extraction of hydrocarbons began to play a
significant role, and that increased oil and gas rent income, particularly after
the development of West Siberian deposits in the 1970s, fundamentally
changed the Soviet economy and led to a dependence on rent revenues.97
The authors in question point out that the entire Soviet system was founded
on the assumption that an inexhaustible flow of rent revenue would be
available to nourish it.98 At the beginning of the 1960s, however, the
volume of petroleum rent revenue in the Soviet economy was still not
very significant, and in 1965, it stood at just 836 million SUR. According
to calculations by Clifford Gaddy and Barry Ickes, the volume of rent
revenue in the Soviet economy in the first half of the 1960s was no more
than $10 billion per annum.99
In the mid-1960s, Gosplan was thus skeptical about the need to increase
petroleum exports. In 1964, Gosplan noted that efforts to increase petro-
leum exports from 40.5 million tons in 1965 to 70 million tons in 1970
would create major difficulties for the Soviet economy.100 Given the rela-
tively low prices for oil on the world market and the USSR’s significantly
higher extraction and transport costs in comparison with its principal com-
petitors (at the time, namely countries of the Persian Gulf and in North
Africa), and also the growing deficit in the fuel balance of the European
regions of the USSR, Gosplan specialists advised against boosting petro-
leum export volumes.101
It was against this background, in the first half of the 1960s, that the
export of natural gas in large volumes was considered for the first time
(up to this time, the Soviet Union had only exported modest amounts of gas
from deposits in Western Ukraine to Czechoslovakia).102 Gosplan believed
that the export of natural gas could be profitable in view of the efficiency of
importing products to the USSR for foreign exchange proceeds from gas
sales, at an export price at the western border of the USSR of 16–18 foreign
exchange SUR per 1000 m3.103
Exporting natural gas in large volumes was virtually impossible at this
time, since the country lacked not only a developed gas pipeline system, but
also the steel pipes required for its construction. In the mid-1960s,
Gazprom developed the first large-scale project for the transportation of
natural gas from the newly discovered large fields in Timano-Pechorsk and
Western Siberia to European socialist and capitalist countries (Czechoslo-
vakia, Austria, Italy, and France).104 This project required the availability of
a resource base providing a production volume of 225 billion m3 of natural
gas, the construction of gas pipeline systems, the increased production of
large-diameter pipes (1020–2500 mm), and also the purchase of such pipes
from abroad.105
It has to be noted, however, that it was only after Khrushchev’s removal
from power in autumn 1964 that the new Soviet leadership lifted the
restrictions on the development of the gas industry and allowed Minister
of the Gas Industry Kortunov to start implementing his strategy of promot-
ing large-scale projects for harnessing gigantic gas deposits and creating
ultra-high-capacity transport systems for natural gas.106
188 V. NEKRASOV
KHRUSHCHEV’S OPPOSITION TO AN ACCELERATED

CONSTRUCTION OF OIL AND GAS PIPELINES (1963–1964)
Why did Khrushchev, who generally supported an expansion of oil and gas
exports, oppose an accelerated construction of oil and gas pipelines in
1963–1964? In a memorandum to the presidium of the CC dated October
15, 1963, he criticized that the speed and proposed volume at which
planners and gas officials wanted to build new oil and gas pipelines seemed
to ignore the production capacities of the Soviet tubing industry. In partic-
ular, he pointed out that Gazprom was lobbying Gosplan and the Ministry
of Foreign Trade for the purchase of large quantities of pipes from abroad,
particularly from Japan.107
Khrushchev’s annoyance was directed at Soviet foreign trade, and, in
particular, the practice of using petrol rent revenues for the import of
equipment and raw materials.108 As he had remarked previously, Khru-
shchev did not want the Soviet Union to become a mere supplier of raw
materials to world markets. He criticized that raw materials and semi-
finished goods were exported to capitalist countries, where they were
processed into finished products and sold at prices three or four times
higher. Khrushchev argued that “if we export metal, it should be as a
package that can be sold as a product, not merely for processing by capitalist
enterprises to convert that metal into product status.”109 Having consid-
ered Khrushchev’s memorandum, the presidium of the CC created the
“Kosygin Commission,” which in 1963/64 addressed the efficiency of
exports and imports of equipment and raw materials.110
But Khrushchev’s main criticism was levelled at the purchases of metal and
large-diameter pipes from petroleum sales. Gosplan and Gazprom were
forging ahead with the urgent construction of oil and gas pipelines,
irrespective of the shortage of tubing, forcing the Ministry of Foreign Trade
to buy additional tubes from Sweden, the FRG, and Japan. Khrushchev
argued that “there is little sense in such an approach, because we can make
the tubing for gas and oil pipelines ourselves. If we don’t have the required
capacity at the moment, then we can quickly develop it. And if we really did
have to import, it would be better value to purchase steel sheets—because we
are paying big money for all this.”111
Although Khrushchev acknowledged the importance of oil and gas
pipelines for the country’s economic development, time pressure for him
was not reason enough to start purchasing large-diameter pipes from cap-
italist countries. He proposed instead postponing the construction of
pipelines, arguing that only industrially backward countries were buying

pipes, because of deficiencies in their own metallurgical industries.112 He
pointed out explicitly that Gosplan and the State Committee on Ferrous
and Non-Ferrous Metals were submitting annual plans with a metal deficit
and requests for the purchase of metal abroad, otherwise the plan would not
be fulfilled.113
Commenting on a possible sale of ten million tons of oil to Japan,
Khrushchev was at first “in favor of selling petroleum for 300 mill. doll.,
as the Japanese are requesting. But I would have thought that for those
300 mill. doll. it would be better not to purchase pipes from Japan, but for
example equipment for petroleum distillation plants, or to buy mineral
fertilizer production plants, or factories for the production of synthetic
products, plastic products, or electronic equipment factories.”114
In fact, at the time, a large contract for the purchase of steel pipes had
been placed with the FRG. In 1962, the West German commercial groups
had decided, under pressure from the US and the North Atlantic Treaty
Organization (NATO), to place an embargo on supplying steel pipes to the
USSR; but Japan, which was not formally a part of NATO, claimed the
freedom to act as it saw fit in the matter. Nevertheless, Khrushchev unex-
pectedly launched a vehement criticism of such a transaction.115 He
maintained that oil rent revenue, gold, and foreign currency reserves should
be spent on purchasing high-tech equipment, particularly technology that
was not available in the USSR, which would make it possible to raise the
technological level of the Soviet economy.
Russian historian Mikhail Lipkin rightly points out that “in formulating
the idea of importing foreign equipment and developing the required
capability in the USSR, Khrushchev was expressing dissatisfaction both
with the non-rational nature of some purchases and with the excessive
dependence on the FRG in this matter. [. . .] And the development of
cooperation with Japan was clearly one of the requisites for the diversifica-
tion of imports of state-of-the-art equipment into the USSR.”116 In the
above-mentioned memorandum, written in March 1963, Khrushchev
stated that “we have to look at what [kind of] equipment we do not make
here. There are some types of equipment that we do not make at all, and
where we are completely dependent on [the German steel company] Krupp.
That is a completely unacceptable state of affairs.”117
Similarly, this document completes the overall picture of the activities of
interest groups in the struggle for capital investment funding and rent
revenue in the Soviet economy. The “gas faction” came out on the side of
190 V. NEKRASOV
the “metallurgists” against the “chemists” in the fight for oil rent revenue,
lobbying for the decisions their interests required. And since in the first half
of the 1960s there was no rent revenue from gas, the “gas faction” actively
competed for the allocation of the rent from oil exports; but as early as the
first half of the 1960s, the situation changed, with Gazprom gaining a
resource of its own following the discovery of huge natural gas deposits.
Accordingly, in 1966/67, after Khrushchev had been removed from power
and the Western sanctions were lifted, the Ministry of Gas Industry nego-
tiated with the West German groups Mannesmann, Thyssen, and Hoesch
over a possible exchange of large-diameter pipes for supplies of Soviet
natural gas and their participation in the construction of oil and gas pipelines
in countries of Eastern and Central Europe.118
In sum, Khrushchev’s criticism represented, on the one hand, a contin-
uation of the “gas pause” in the Soviet economy, intended to allocate more
funding to his “petrochemical project.” On the other hand, it was a clear
attempt to intervene in the battle between the interest groups vying for a
share of rent revenue, in which the stronger “metallurgists” were defeating
the weaker “chemists,” an attempt to create a more rational system for the
administration of resource rent revenue, and to reallocate resources
between interest groups. If one accepts the underlying assumption that
leaders who control the distribution of rent revenue use it for the produc-
tion of those items that will increase their own prestige or credibility, it was
perfectly logical that Khrushchev would endeavor to reallocate rent revenue
from metallurgy to the petrochemical industry.
CONCLUSION
The story of Khrushchev’s “petrochemical project” provides an excellent
example of a reformer’s quest for an effective strategy in resolving a
country’s technological and socioeconomic problems. Khrushchev’s
approach was an out-and-out emulation strategy,119 an attempt to match
the production and use of oil and gas resources and chemical materials in the
leading capitalist countries. Like all reformers, however, Khrushchev faced
the problems involved in the implementation of such a strategy: a deficit of
knowledge and the infeasibility of centralized planning for a fast-paced,
high-tech industry; incompetence and opportunism on the part of those
putting plans into practice; the struggle between interest groups for rent
revenue, and the general sluggishness of the Soviet economic model. In the
terminology of institutional analysis, Khrushchev and the Soviet planners
and ministers were unable to resolve the “competency problem.” However,

the new Soviet leadership, first and foremost Aleksei Kosygin, made no
honest attempt to resolve this “problem” and subjected Khrushchev’s
project to critical review.
As a result, in the second half of the 1960s, the Soviet leaders did not
devote the same attention as before to the chemical industry, and gave
priority to intensifying the extraction of oil and natural gas, with a com-
mensurate increase in the production and imports of equipment for the
petrochemical industry, including large-diameter pipes.120 By the begin-
ning of the 1970s, in the opinion of Russian scholar Nikolai Fedorenko, the
level of attention paid to the chemical industry had fallen to its lowest point
since 1958.121
NOTES
of the Economy, RGAE), f. 9573, op. 1, d. 596, l. 130. This lack of
consensus on the reconstruction of the rail transport system led to
conflict in the presidium of the CC and the Council of Ministers, for
example: Viacheslav Nekrasov, “Neftegazovyi kompleks SSSR vo
vtoroi polovine 1950-x–pervoi polovine 1960-x gg.:
Institutsional’nye aspekty razvitiia,” Ekonomicheskaia istoriia:
Ezhegodnik (2009), 212–50, here 212–13.
2. Andrei A. Fursenko et al., eds., Prezidium TSK KPSS 1954–1964:
Chernovye protokol’nye zapisi zasedanii, stenogrammy,
postanovleniia, vol. 1: Chernovye protokol’nye zapisi zasedanii,
stenogrammy, postanovleniia (Moscow: ROSSPEN, 2003), 633;
Rossiiskii gosudarstvennyi arkhiv noveishei istorii (Russian State
Archive of Contemporary History, RGANI), f. 2, op. 1, d. 198,
ll. 43–4; RGANI, f. 2, op. 1, d. 312, l. 79; “Doklad Pervogo
sekretaria TS KPSS tov. N. S. Khrushcheva,” February 14, 1956,
in Kommunisticheskaia Partiia Sovetskogo Soiuza (KPSS), XX
s”ezd Kummunisticheskoi partii Sovetskogo Soiuza, 14–25 fevralia
1956 goda: Stenograficheskii otchet, 2 vols. (Moscow: Gospolitizdat,
1956), vol. 1, 9–120, here 48, 50; “Rech’ tov. Pervukhina M. G.,”
February 22, 1956, in KPSS, XX s”ezd Kummunisticheskoi partii,
vol. 2, 115–33, here 120–1; “Rech’ tov. Saburova M. Z.,”
February 22, 1956, in KPSS, XX s”ezd Kommunisticheskoi partii,
vol. 2, 188–203, here 198–9; “Rech’ tov. Kuz’mina I. I.,”
192 V. NEKRASOV
February 3, 1959, in KPSS, Vneocherednoi XXI s”ezd

Kommunisticheskoi partii Sovetskogo Soiuza, 27 ianvaria–5 fevralia
1959 goda: Stenograficheskii otchet, 2 vols. (Moscow: Gospolitizdat,
1959), vol. 2, 197–207, here 204–5.
3. Stefan Houpt, Pedro Lains, and Lennart Sch€on, “Sectoral Devel-
opments, 1945–2000,” in Stephen N. Broadberry and Kevin
H. O’Rourke, eds., The Cambridge Economic History of Modern
Europe, vol. 2: 1870 to the Present (Cambridge: Cambridge Uni-
versity Press, 2010), 332–59, here 343–5.
4. Alfred D. Chandler, Shaping the Industrial Century: The Remark-
able Story of the Evolution of the Modern Chemical and Pharmaceu-
tical Industries (Cambridge, MA: Harvard University Press, 2009),
22–7, 45–50.
5. “Doklad Pervogo sekretaria,” in KPSS, XX s”ezd
Kommunisticheskoi partii, vol. 1, 48.
6. Fursenko et al., eds., Prezidium TSK KPSS 1954–1964, vol. 1, 214;
RGAE, f. 4372, op. 76, d. 139, ll. 75–81; RGAE, f. 9573,
op. 1, d. 956, ll. 100–1.
7. In his memoirs, Sergei Khrushchev recalls that his father Nikita
Khrushchev asserted the need to prioritize the development of the
chemical industry in the beginning of 1957 after a talk with Nikolai
N. Semënov, director of the Institute of Chemical Physics at the
Russian Academy of Sciences (RAN). Semënov convinced Khru-
shchev that it was necessary to change priorities from the metallurgy
to the chemical industry. Sergei Khrushchev, Nikita Khrushchev:
Reformator (Moscow: Vremia, 2010), 537–44.
Prezidium TSK KPSS 1954–1964: Chernovye protokol’nye zapisi
zasedanii, stenogrammy, postanovleniia, vol. 2: Postanovleniia,
1954–1958 (Moscow: ROSSPEN, 2006), 695.
9. RGANI, f. 2, op. 1, d. 301, ll. 67–8, 70; RGANI, f. 2, op. 1, d. 305,
l. 1.
10. RGANI, f. 2, op. 1, d. 312, ll. 74–7.
11. In the years from 1958 to 1964, there were two special “chemical”
plenary sessions of the CC (in May 1958 and December 1963),
and five plenary sessions of the CC at which significant attention
was given to the chemical industry (in March 1958, June 1959,
July 1960, November 1962, and February 1964).
12. RGANI, f. 2, op. 1, d. 301, l. 68; RGANI, f. 2, op. 1, d. 312,

ll. 6, 48; Fursenko et al., eds., Prezidium TSK KPSS 1954–1964,
vol. 2, 40.
13. RGANI, f. 52, op. 1, d. 233, l. 50.
14. RGANI, f. 52, op. 1, d. 170, ll. 4, 15, 38, 43, 45.
15. RGANI, f. 2, op. 1, d. 312, l. 59.
16. For further reading: Francis Spufford, Red Plenty (London: Faber
and Faber, 2010).
17. RGANI, f. 2, op. 1, d. 312, ll. 49, 56, 63, 68, 74, 77, 78, 79;
Fursenko et al., eds., Prezidium TSK KPSS 1954–1964, vol.
1, 48–9.
18. RGANI, f. 2, op. 1, d. 312, ll. 89, 100–1.
19. KPSS, Vneocherednoi XXI s”ezd, vol. 1, 27; vol. 2, 478–9.
20. Ibid.
21. In comparison, from 1959 to 1965, funds were allocated as follows
(in billion SUR): 6.3 to the development of the entire mechanical
engineering industry [mashinostroenie], 7.4 to the coal industry,
2.5 to the light industry, and 3.5 to agriculture. RGAE, f. 4372,
op. 81, d. 2389, l. 181.
22. RGANI, f. 2, op. 1, d. 455, ll. 45–9.
23. RGAE, f. 399, op. 1, d. 1084, ll. 14–15, 20, 21; RGANI, f. 2,
op. 1, d. 662, ll. 2–3.
24. A. N. Efimov et al., eds., Ekonomicheskaia entsiklopediia:
Promyshlennost’ i stroitel’stvo, 3 vols. (Moscow: Sovetskaia
entsiklopediia, 1964), vol. 3, 665.
25. RGAE, f. 4372, op. 65, d. 342, ll. 10–12, 42–3.
26. Viacheslav L. Nekrasov, Oleg N. Stafeev, and Evgenyi
A. Khromov, Neftegazovyi kompleks SSSR (vtoraia polovina 1950-
kh–pervaia polovina 1960-kh gg.): Ekonomicheskie i
institutsional’nye aspekty razvitiia (Khanty-Mansiisk: Novosti
Iugry, 2012), 55–70; Per H€ogselius, Red Gas: Russia and the
Origins of European Dependence (New York: Palgrave Macmillan,
2013), 13–23.
27. KPSS, XXII s”ezd Kummunisticheskoi partii Sovetskogo Soiuza,
17–31 oktiabria 1961 goda: Stenograficheskii otchet, 3 vols. (Мoscow:
Gospolitizdat, 1961), vol. 1, 56.
28. Fursenko et al., eds., eds., Prezidium TSK KPSS 1954–1964, vol.
1, 557.
29. RGANI, f. 52, op. 1, d. 170, l. 1.
194 V. NEKRASOV
30. Fursenko et al., eds., Prezidium TSK KPSS 1954–1964, vol. 1, 565.
31. RGANI, f. 52, op. 1, d. 233, ll. 4–5; RGANI, f. 52, op. 1, d. 338,
l. 91. Khrushchev’s speech in a meeting of the presidium of the
Council of Ministers on December 4, 1962 reveals his resentment:
“Now look how much I talked about chemicals [. . .] There is no
correct, scientifically valid insight into the economic development
and requirements of these materials. This is why we are inertially
making more cars, but fewer tires, and people get cars not because
they need a car, but because they need tires. What’s smart about
that? It is a fact, comrades, don’t gawk at me. And so they created a
commission, instructed Kosygin two times. He didn’t reach an
understanding of the issue, either. We made a shitty decision; I
think that there is also a lot of shit in the plan that we are deciding
upon. But there is no alternative, we have to realize this right now,
this is the moment to develop, learn more deeply and add correc-
tions on the go, [the moment] not to be afraid. The plan is a wreck,
and its completion has to be the process of its fulfillment. This
makes more sense than, for example, before.” RGANI, f. 52,
op. 1, d. 266, l. 35.
32. Fursenko et al., eds., Prezidium TSK KPSS 1954–1964, vol. 1, 612,
679–80.
33. RGANI, f. 2, op. 1, d. 596, ll. 127–8, 221–2.
34. RGANI, f. 52, op. 1, d. 266, l. 32–4.
35. Fursenko et al., eds., Prezidium TSK KPSS 1954–1964, vol.
1, 451–2.
36. Vladimir N. Novikov, “V gody rukovodstva N. S. Khrushcheva,”
Voprosi istorii 2 (1989), 114.
37. M. Kollakov, Sovetskii minister iz knigi Ginnessa: Sbornik
materialov k stoletiiu so dnia rozhdeniia P. F. Lomako (Saint Peters-
burg: Vita Nova, 2004).
38. RGANI, f. 52, op. 1, d. 257, ll. 2–3; Sergei Khrushchev,
Reformator, 540–1.
39. I. P. Bardin and V. I. Veits, eds., Razvitie proizvoditel’nykh sil
Vostochnoi Sibiri: Raionnye i mezhraionnye kompleksnye problemy:
Trudy konferentsii po razvitiiu proizvoditel’nykh sil Vostochnoi Sibiri
(18–26 avgusta 1958 g.) (Мoscow: Izdatel’stvo akademii nauk
SSSR, 1960), 159.
ll. 74–5; RGANI, f. 52, op. 1, d. 267, ll. 8, 52; Rossiiskii
gosudarstvennyi arkhiv sotsial’no-politicheskoi istorii (Russian

State Archive of Social and Political History, RGASPI), f. 17,
op. 165, d. 149, l. 69; RGAE, f. 9573, op. 1, d. 596, ll. 116–17,
129, 130.
RGANI, f. 52, op. 1, d. 266, l. 34.
42. RGAE, f. 7964, op. 11, d. 1990, l. 176.
43. RGANI, f. 52, op. 1, d. 233, l. 5–6; RGANI, f. 52, op. 1, d. 266,
l. 42; RGANI, f. 52, op. 1, d. 337, l. 84; RGANI, f. 52,
op. 1, d. 338, l. 11; RGANI, f. 52, op. 1, d. 257, l. 2–3; Nikita
S. Khrushchev, Dva tsveta vremeni: Dokumenty iz lichnogo fonda
N. S. Khrushcheva, 2 vols. (Moscow: Mezhdunarodnyi fond
“Demokratiia”, 2009), vol. 2, 710; KPSS, XXII s”ezd
Kummunisticheskoi partii, vol. 1, 59.
44. RGAE, f. 173, op. 1, d. 350, l. 5.
45. RGAE, f. 7, op. 3, d. 847, ll. 17, 19; RGAE, f. 7, op. 3, d. 1167,
l. 7; RGAE, f. 4372, op. 64, d. 85, l. 239.
46. RGAE, f. 184, op. 1, d. 56, l. 109.
47. Nekrasov, “Neftegazovyi kompleks SSSR,” 225–33.
48. RGAE, f. 7, op. 4, d. 2, ll. 15, 58, 356–7; RGANI, f. 2,
op. 1, d. 590, ll. 223–4; RGANI, f. 5, op. 59, d. 65, l. 69.
49. Sergei A. Bakanov, “Ugol’naia promyshlennost’ Urala: Zhiznennyi
tsikl otrasli ot zarozheniia do upadka” (PhD diss., Cheliabinsk
State University, 2012), 226–7.
50. Pëtr S. Neporozhnii, Energetika strany glazami ministra: Dnevniki
1935–1985 gg. (Мoscow: Energoatomizdat, 2000), 58–9.
51. RGANI, f. 52, op. 1, d. 266, ll. 27–8.
52. RGANI, f. 52, op. 1, d. 233, ll. 30–1; RGAE, f. 9571,
op. 7, d. 467, ll. 273–4.
53. RGANI, f. 52, op. 1, d. 338, l. 44.
54. RGANI, f. 2, op. 1, d. 312, ll. 76–8. According to Gosplan, more
than 7 billion m3 APG worth 80 million SUR were lost every day.
RGAE, f. 4372, op. 81, d. 2389, l. 182.
55. RGANI, f. 2, op. 1, d. 313, ll. 40–2. At a meeting of the Supreme
Soviet of the National Economy in May 1963, the Chairman of the
National Chemicals Committee Nikolai Baibakov assured Khru-
shchev that ordering additional pipelines for the oil industry would
raise the use of APG up to a degree of 75 percent between 1964
196 V. NEKRASOV
and 1965, and up to 100 percent by 1970. RGANI, f. 52,

op. 1, d. 338, l. 44.
Russian Federation, GARF) f. 403, op. 9, d. 1017, l. 61.
57. RGAE, f. 70, op. 1, d. 2683, l. 189ob.
l. 95.
RGANI, f. 52, op. 1, d. 361, l. 101.
ll. 4, 86–7; RGAE, f. 4372, op. 58, d. 434, ll. 134–6; Khrushchev,
Dva tsveta vremeni, vol. 2, 733–4.
790–1; RGANI, f. 2, op. 1, d. 603, l. 28; RGANI, f. 52,
op. 1, d. 266, ll. 32–4, 43; RGANI, f. 52, op. 1, d. 267, l. 49;
RGANI, f. 52, op. 1, d. 337, ll. 153, 162–3; RGANI, f. 52,
op. 1, d. 338, ll. 32–3, 82, 84.
62. RGANI, f. 2, op. 1, d. 590, l. 218; Fursenko et al., eds., Prezidium
TSK KPSS 1954–1964, vol. 1, 611.
l. 79.
64. RGANI, f. 52, op. 1, d. 233, ll. 5, 31; RGANI, f. 52, op. 1, d. 338,
ll. 36, 94; Andrei N. Artizov et al., Nikita S. Khrushchev, 1964:
Stenogrammy plenuma TSK KPSS i drugie dokumenty (Мoscow:
Mezhdunarodnyi fond “Demokratiia”, 2007), 246.
l. 90; Artizov et al., Nikita S. Khrushchev, 732–40, 745–6.
ll. 11, 80; RGANI, f. 52, op. 1, d. 257, ll. 1–133; Fursenko et al.,
eds., Prezidium TSK KPSS 1954–1964, vol. 1, 766.
67. Khrushchev, Dva tsveta vremeni, vol. 2, 719, 722.
68. Ibid.
69. RGANI, f. 2, op. 1, d. 671, l. 23.
70. Ibid., l. 178.
71. Ibid., ll. 29–30.
72. RGANI, f. 52, op. 1, d. 338, l. 34.
766; RGANI, f.52, op. 1, d. 233, l. 5; RGANI, f. 52, op.1, d. 218,
l. 72; RGANI, f. 2, op. 1, d. 590, l. 222.
74. RGANI, f. 2, op. 1, d. 602, ll. 24–5.

75. RGANI, f. 2, op. 1, d. 671, l. 178.
76. RGANI, f. 52, op. 1, d. 338, l. 37.
77. Artizov et al., Nikita S. Khrushchev, 745.
78. RGANI, f. 52, op. 1, d. 257, ll. 60–1.
79. Khrushchev, Dva tsveta vremeni, vol. 2, 721, 723.
80. RGANI, f. 2, op. 1, d. 671, ll. 23–24, 30, 173, 177.
ll. 127–8; RGANI, f. 52, op. 1, d. 233, l. 5.
82. Vsesoiuznyi institut nauchnoi i tekhnicheskoi informatsii,
Vsesoiuznoe soveshchanie nauchnykh rabotnikov v Kremle, 12–14
iiunia 1961 g. (Moscow: Proizvodstvenno-izdatel’skii kombinat
VINITI, 1961), 120–1.
RGANI, f. 2, op. 1, d. 671, ll. 173, 177, 178.
84. RGANI, f. 52, op. 1, d. 266, ll. 42, 51; Fursenko et al., eds.,
Prezidium TSK KPSS 1954–1964, vol. 1, 855, 858; Artizov et al.,
Nikita S. Khrushchev, 745.
85. Oscar Sanchez-Sibony, Red Globalization: The Political Economy of
the Soviet Cold War from Stalin to Khrushchev (New York: Cam-
bridge University Press, 2014), 92–3.
86. RGANI, f. 52, op. 1, d. 170, ll. 40–1.
87. RGANI, f. 2, op. 1, d. 312, l. 28.
88. Mikhail A. Lipkin, Sovetskii Soiuz i evropeiskaia integratsiia:
Seredina 1940-kh – seredina 1960-kh godov (Moscow: Institut
vseobshchei istorii RAN, 2011), 167–82.
89. Fursenko et al., eds., Prezidium TSK KPSS 1954–1964, vol. 1, 530.
90. RGAE, f. 4372, op. 81, d. 823, ll. 16, 228.
91. RGANI, f. 52, op. 1, d. 338, l. 94. We do not have at our disposal a
protocol or transcript of this meeting, but Khrushchev briefly
summarized the content of this discussion.
92. RGAE, f. 4372, op. 81, d. 2387, l. 131.
93. RGAE, f. 4372, op. 81, d. 2389, ll. 205–6.
94. RGAE, f. 4372, op. 81, d. 2389, ll. 206–7; RGAE, f. 4372,
op. 81, d. 2387, l. 134.
95. In 1960, the cost of pumping oil and petrol products through
pipelines was on average 2.3 times lower than transporting them
by rail: Efimov et al., eds., Ekonomicheskaia entsiklopediia, vol.
2, 91.
198 V. NEKRASOV
96. RGAE, f. 4372, op. 81, d. 2387, l. 133.

97. Clifford G. Gaddy and Barry W. Ickes, “Russia’s Dependence on
Resources,” in Michael Alexeev and Shlomo Weber, eds., The
Oxford Handbook of the Russian Economy (Oxford: Oxford Uni-
versity Press, 2013), 309–49, here 309–10.
98. For example: Robert Allen, Ot fermy k fabrike: Novaia
interpretatsiia sovetskoi promyshlennoi revolutsii (Moscow:
Rossiiskaia politicheskaia entsiklopediia, 2013), 266; Iurii
P. Bokarev, SSSR i stanovlenie postindustrial’nogo obshchestva na
Zapade: 1970–1980-e gody (Moscow: Nauka, 2006), 340; Egor
Gaidar, Gibel’ imperii: Uroki dlia sovremennoi Rossii (Мoscow:
Corpus, 2012), 141; S. Guriev and K. Sonin, “Ekonomika
‘resursnogo proklatiia,’” Voprosy ekonomiki 4 (2008), 6.
99. In US dollars of 2011. See the graph in: Gaddy and Ickes, “Russia’s
Dependence,” 315. However, these analyses do not provide any
detailed examples of the distribution of rent revenue in the Soviet
economy. In particular, neither Gaddy and Ickes nor Gaidar have
explored in any depth the issue of precisely how the institutions
distributing oil and gas rent revenue in the Soviet economy oper-
ated. They merely describe the general system of the administration
of rent revenues, and the interest groups claiming a share of
resource rent.
100. RGAE, f. 4372, op. 81, d. 823, ll. 9, 16.
101. RGAE, f. 4372, op. 81, d. 2387, l. 134.
102. At the beginning of the 1960s, the share of natural gas in the Soviet
export was so small that it was not even reflected in foreign trade
statistics: Tsentral’noe statisticheskoe upravlenie pri Sovete
Ministrov SSSR, Narodnoe khoziaistvo SSSR v 1960 godu:
Statisticheskii ezhegodnik (Moscow: Gosudarstvennoe
statisticheskoe izdatel’stvo, 1961), 745.
103. RGAE, f. 4372, op. 81, d. 2389, l. 187.
104. RGAE, f. 4372, op. 66, d. 1254, ll. 192–3.
105. Ibid., ll. 212–21.
106. Viacheslav L. Nekrasov, “Energeticheskaia politika SSSR v
1961–1974gg.” (PhD diss., Tomsk State University, 2007), 24–5.
107. RGANI, f. 52, op. 1, d. 361, ll. 40–1.
108. The reason for Khrushchev’s criticism was an announcement by
the TASS news agency that Japan was ready to build pipelines in
the USSR in exchange for oil.
109. Khrushchev, Dva tsveta vremeni, vol. 2, 732–3.

110. RGAE, f. 4372, op. 81, d. 823, ll. 8–18.
111. RGANI, f. 52, op. 1, d. 361, l. 40.
112. In the first half of the 1960s, the Soviet Union produced 60–90
million tons of steel and 40–60 million tons of rolled steel. A. N.
Efimov et al., eds., Ekonomicheskaia entsiklopediia, vol. 3, 795–6.
113. RGANI, f. 52, op. 1, d. 253, ll. 1–3.
114. Khrushchev, Dva tsveta vremeni, vol. 2, 732–3.
115. Mikhail A. Lipkin, “Mezhdu FRG i Iaponiei: SSSR v poiskakh
strategicheskogo partnerstva v seredine 1950-kh – pervoi polovine
1970-kh godov,” Novyi istoricheskii vestnik 4 (2015), 77–101.
116. Ibid., 85.
117. Khrushchev, Dva tsveta vremeni, vol. 2, 722.
118. RGANI, f. 5, op. 59, d. 77, ll. 46–52.
119. Erik S. Reinert, How Rich Countries Got Rich . . . and Why Poor
Countries Stay Poor (New York: Carroll & Graf, 2007).
120. KPSS, XXIII s”ezd Kummunisticheskoi partii Sovetskogo Soiuza,
29 marta–8 aprelia 1966 goda: Stenograficheskii otchet, 2 vols.
(Moscow: Gospolitizdat, 1966), vol. 2, 25.
121. RGANI, f. 80, op. 1, d. 322, l. 74.
A Challenge to Cold War Energy Politics?
The US and Italy’s Relations
with the Soviet Union, 1958–1969
Elisabetta Bini
On November 11, 1960, the New York Times devoted a long article to the
trade agreement recently signed between Italy’s state-owned oil company,
the Ente Nazionale Idrocarburi (National Hydrocarbon Agency, ENI), and
the Soviet government, according to which Italy would import crude oil in
exchange for synthetic rubber and pipeline material. The article pointed out
with concern that the “long-term transaction [. . .] has implications that go
considerably beyond purely economic considerations. It almost certainly has
a significant bearing on Italy’s position regarding the security of the Western
World.”1 According to the journalist, at stake was not only the low price of
Soviet crude and its importance for the international oil market and rela-
tions with the Middle East, but also—and more importantly—the Soviet
Union’s intention of “establish[ing] itself as a large-scale supplier of oil to
Europe through a pipeline system paid for in oil.”2 In the following days,
the New York Times continued to report on Soviet deals with individual
West European countries, arguing that the Soviet Union was trying to
“force its oil in any way possible on the Free World markets” by promoting
price competition on the world market and, in particular, in Western
Europe.3 In this framework, the deal with Italy would allow Soviet oil to
E. Bini (*)
University of Naples, Federico II, Naples, Italy

DOI 10.1007/978-3-319-49532-3_7
202 E. BINI
reach the Common Market, while the pipes and pumps provided by Italian
industries would “link the Soviet oil fields and Czechoslovakia right up to
the border of free Western Europe.”4
The articles published in the New York Times were part of a more general
debate about the meaning and effects that Italy’s oil relations with the
Union of Soviet Socialist Republics (USSR) might have on the Atlantic
Alliance and the Cold War itself. Indeed, between the late 1950s and the
early 1960s, the US administration—particularly the State Department—as
well as international oil companies increasingly opposed Italy’s oil deals with
the Soviet Union, which they viewed as a threat to the North Atlantic
Treaty Organization’s (NATO’s) stability and security, as a challenge to
the control oil majors had over international oil resources, and, in particular,
as an expression of a growing divergence between the United States
(US) and Italy. While the US worried about all West European countries
signing agreements with the USSR, it was particularly concerned with Italy.
Through its state-owned oil company ENI, Italy was one of the first
countries to sign an oil deal with the USSR and one of the most aggressive
ones in pursuing its oil interests, through ENI’s President Enrico Mattei.
Given the country’s strategic position in the Mediterranean, the strength of
its Communist party, and its chronic political instability, the US adminis-
tration feared that Italy could easily become a tool for Soviet penetration of
the Western bloc.
This chapter examines the relations Italy and ENI established with the
USSR between 1958 and 1969, and US interpretations and reactions to
them. Based on corporate and government archives in the US and Italy, it
argues that with its agreements, Italy—through ENI—challenged US
energy policies and oil interests in Italy and Western Europe. Given the
country’s lack of autonomous energy resources and its strong dependence
on international oil companies, Italy used the deals with the USSR to access
cheap sources of energy and export its petrochemical and steel products at a
time when the country was experiencing great industrial growth. While the
first agreement was signed in 1958, the most important treaty between ENI
and the USSR was ratified in 1960, when the two countries agreed to
exchange crude oil for synthetic rubber and material the Soviets could use
to build a pipeline linking their oil fields with Western Europe. The US
administration and international oil companies reacted immediately by
putting the Italian government under pressure, challenging ENI’s activities
in oil-producing countries and, eventually, placing an embargo on the sale
of pipeline material to the USSR by NATO members. One of the arguments
A CHALLENGE TO COLD WAR ENERGY POLITICS? THE US AND ITALY’S. . . 203
of this chapter is that ENI and Italy transformed the tensions that accom-
panied the signing of the Italian-Soviet agreements into a tool to force
American and British oil companies and the US government to meet Italy’s
energy needs by providing cheap oil, and to recognize ENI as a legitimate
international actor. Therefore, while the deals undoubtedly challenged
Cold War oil policies, particularly US oil interests, they also strengthened
Italy’s position and membership inside the Atlantic Alliance.
By the mid-1960s, the process of détente replaced many of the tensions
that accompanied the signing of the Italian–Soviet oil deals with various
forms of economic cooperation between the blocs. Italy, in collaboration
with other West European countries, increased its exchanges with the USSR
in a context characterized by the growing power of the Organization of
Petroleum Exporting Countries (OPEC) and of oil producers in general.
Especially in the aftermath of the Six-Day War of 1967, the Italian govern-
ment encouraged ENI to diversify the country’s sources of energy by
importing natural gas from the USSR, as well as from other European
countries. The contracts the oil company signed in 1967 and 1969
transformed the geography of Italy’s energy relations, and strengthened
the country’s international role, while at the same time paving the way for
the establishment of stronger forms of European integration and depen-
dence on Soviet gas. While Italy emerged as a more autonomous actor in
the energy field, the US administration recognized the importance Soviet
energy resources had for the European market, and endorsed growing
forms of exchange between the two blocs as a sign of détente. By the
early 1970s, therefore, the US was mainly concerned not about Soviet–
West European energy relations, but rather about oil producers’ growing
political and economic power on the international oil market, a concern that
only increased with the impact of the 1973 “oil shock.”5
ITALY’S CHALLENGE TO THE “SEVEN SISTERS”

As a country that lacks natural resources, Italy’s national history has been
characterized by a constant effort to develop autonomous sources of energy,
by building hydroelectric power plants, and by searching for hydrocarbons
at home and abroad. The Fascist regime made the achievement of Italy’s
energy independence from abroad part and parcel of its political and eco-
nomic program through the establishment of the state-owned company
Azienda Generale Italiana Petroli (General Italian Oil Company, AGIP).
During World War II, most of AGIP’s refineries, pipelines, and drilling
204 E. BINI
equipment were either destroyed or heavily damaged. With the landing of

the Allies in Sicily in the summer of 1943 and the division of Italy into two
parts, the country’s provisional government, with the support of the US, the
UK, and international oil companies, promoted the liquidation of AGIP.
Their main concern was that a state-owned oil company might hinder the
economic interests of foreign oil firms operating in Italy, as it had done in
the interwar period and during the war, when their properties had been
nationalized. As a result of these pressures, in 1945 AGIP reopened its
offices in Rome under the direction of Arnaldo Petretti, who reassured
the Allies that the company would not pursue an autarkic policy but rather
become fully integrated in the international economy. According to the US
administration, as well as American oil companies, Italy—like other West
European countries—was to become a market for the oil US firms extracted
in the Middle East. Using American economic aid and technology, it was
supposed to substitute oil for coal as the main source of its industrial
production, thereby becoming dependent on a resource controlled by the
US. At the same time, its position at the center of the Mediterranean would
secure Italy the role of “Europe’s refinery,” transforming the country into a
crucial link between oil producers and oil consumers in an international
market largely dominated by the so-called “Seven Sisters.”6
As the war was coming to an end, however, the Central Economic
Commission of the Comitato di Liberazione Nazionale Alta Italia (National
Committee for the Liberation of Northern Italy), an organization invested
with the powers of government in the northern part of Italy, nominated
Enrico Mattei as special administrator of AGIP Alta Italia with the task of
supervising the company’s activities in the region. The Central Commis-
sion’s choice was not fortuitous: Mattei was close to Milan’s industrial
world and was well known for his economic and financial abilities. In
1946, he was among the founders of the Democrazia Cristiana (Christian
Democratic Party, DC) and, with the support of the so-called “left-wing
DC,” convinced the Italian government that AGIP should remain a state-
owned company, promote Italy’s economic reconstruction, and ensure the
country’s autonomy from US and British oil companies by extracting oil
and natural gas in Italy. In 1953, after several years of intense debate, the
Italian government incorporated AGIP into ENI. The new agency drew
together a wide number of state-owned entities into a single holding and
provided Mattei with a basis for expansion across Italy and beyond.7
During the 1950s and 1960s, ENI tried to establish a more autonomous
position, both domestically and internationally, by searching for different
sources of oil than those provided by American and British companies. It

established a monopoly on the exploration of hydrocarbons in the Po Valley
and developed a national oil and gas industry, promoting the idea that the
state—rather than private firms—should have a crucial role in assuring
Italy’s economic growth and the well-being of its citizens. The US State
Department, along with the American embassy in Rome—led in the first
half of the 1950s by one of the US’s fiercest anti-Communists, Clare
Boothe Luce—adopted an extremely critical view of ENI and Mattei,
defining its policies as an expression of Communism, of Italy’s subservience
to the Soviet Union, as anti-American, or as pure folly.8
ENI also pursued independent relations with oil-producing countries in
the Middle East and North Africa and, increasingly, in other parts of the
world, redefining the rules of the international oil market and, in particular,
the so-called “fifty–fifty rule.” The company signed a series of contracts with
oil producers, which assigned them wider control over their resources. What
came to be known as the “Mattei formula” recognized producers as part-
ners in the exploration, production and—at times—distribution of oil and
natural gas, through the establishment of mixed companies between ENI
and oil-producing states. According to the contracts, ENI would be respon-
sible for searching for hydrocarbons. Only in case of success would oil
producers work side by side with ENI in developing their energy resources,
by participating in the management of the mixed companies and having
workers trained by ENI in Italy.9
Mattei’s and ENI’s efforts to define an autonomous policy took place in
the context of the Suez Crisis, which highlighted the vulnerability of Italy,
and of Western Europe in general, to the international oil market. During
and after the crisis, Mattei pointed out that oil producers represented both a
threat and an economic resource for the countries that relied on their
products. As he stated in 1957, at the International Congress on Hydro-
carbons, “the Suez Crisis has highlighted the fundamental importance of
this energy resource and the need to assure its free flow, at convenient
prices, to consumer countries.”10 According to him, oil consumers
(by which he meant particularly those in Western Europe) should have a
larger role in determining oil policies and prices and challenge the forms of
monopolistic power pursued by international oil companies, thus assuring a
constant and relatively cheap flow of oil across the Mediterranean. At the
same time, he pointed out that countries undergoing decolonization
should have the right to control their natural resources and that Italy, as a
country that had lost its colonies after World War II, should have a special
206 E. BINI
role to play in promoting the development and independence of producing

countries.11
Mattei’s policies were also guided by strong resentment against the
“Seven Sisters.” Indeed, following the 1953 coup in Iran, the main inter-
national oil companies (namely British Petroleum, Gulf Oil, Shell, the
Compagnie Française des Pétroles, Aramco, Standard Oil (N.J.), Standard
Oil of New York, and Texaco) had established a consortium in charge of
operating and managing Iran’s oil resources on behalf of the National
Iranian Oil Company (NIOC). When, in 1953, the British intervened to
block ENI’s agreement with NIOC and, the following year, the “Seven
Sisters” refused ENI participation in the consortium, Mattei looked for
ways to acquire autonomous sources of energy while at the same time
pursuing a more aggressive international oil policy.12
While ENI signed a deal with Egypt in 1955, the first contract to introduce
the “Mattei formula” was ratified in 1957 between ENI, the Iranian govern-
ment, and NIOC. The agreement spurred a strong reaction on the part of the
American and British governments as well as international oil companies. The
Eisenhower administration advanced various interpretations of how the US
should respond to ENI’s activities in the Middle East. Whereas the Oper-
ations Coordinating Board pointed out that the Italian–Iranian agreement
challenged American oil interests, increased Italy’s political instability, and
allowed Mattei to influence Italian politics, Secretary of State John Foster
Dulles and President Dwight D. Eisenhower took a more cautious stance.
They highlighted the economic rather than political nature of Mattei’s
approach, while at the same time pointing out that one of the conse-
quences of ENI’s contract might be to push oil producers to pursue a
more autonomous policy, and view ENI as a tool to promote the exploi-
tation of their oil resources. Shortly after the signing of the deal, the State
Department asked US Ambassador James Zellerbach to talk with mem-
bers of the Italian government, particularly with Foreign Minister
Giuseppe Pella and President of the Republic Giovanni Gronchi. The aim
was to limit Mattei’s activities by involving the Italian government in
American Middle Eastern politics, recognizing its ambition to play a greater
role in the Mediterranean, and trying to find a shared approach to Italy’s
need for oil imports. In the context of the creation of a new government,
several Italian politicians pushed the US to reach an agreement, which
would have allowed them to keep ENI’s activities more firmly under
control. However, while US oil companies refused to sign any deal with
ENI and continued to challenge its activities in producing countries such as
Libya, the American government worried that by intervening in Italian oil

politics, it might strengthen—rather than weaken—Mattei’s position. It
would take the establishment of an oil agreement with the USSR to push
the US to come to terms with ENI’s policies and requests.13
ENI’S CONTRACTS WITH THE SOVIET UNION

At the end of 1958, ENI turned to the Soviet Union to obtain large
quantities of cheap oil. The company’s decision to sign a deal with the
Soviets was tied to practical considerations. Indeed, the price of Soviet crude
was much lower than that of any other country or oil company. Further-
more, the firm was looking for an outlet for its chemical products. At the
same time, Mattei wanted to use the agreement to retaliate against US and
British oil companies’ discrimination against ENI, and push them to rec-
ognize the company’s international role. With the signing of the contracts,
Italian imports of Soviet oil increased rapidly: whereas until 1956, the Soviet
Union had provided only 1 percent of the country’s crude imports, by the
following year, this figure had increased to 3 percent; in 1960, the year the
most important agreement was ratified, it stood at 14 percent.14
ENI’s relations with the Soviet Union were linked to, and made possible
by, a deep transformation in Italian politics. In the mid-1950s, the leader-
ship of the DC passed into the hands of representatives of the so-called “left-
wing DC,” who aimed at securing a more autonomous role for Italy inside
NATO—what came to be known as “neo-Atlanticism.” Prime Minister and
Minister of Foreign Affairs Amintore Fanfani endorsed Italy’s role as a
mediator between the Atlantic Alliance and decolonizing countries (espe-
cially in the Mediterranean) and as a promoter of détente between the
Eastern and Western blocs. He was strongly supported by Gronchi, also a
representative of the “left-wing DC” who, along with members of the
Italian government, fully supported Mattei’s policies in the Middle East,
North Africa, and the Soviet Union.15
With the election of Fanfani, the Italian government nominated a new
ambassador to Moscow, Luca Pietromarchi, who played a key role in
strengthening economic and political ties between Italy and the Soviet
Union during the 1960s. A few months before he took office, the two
countries signed a bilateral agreement that regulated their economic rela-
tions for the following four years. The deal was the first of a long series and
allowed Soviet industries to import industrial equipment, chemical
208 E. BINI
products, cables, and silk from Italy in exchange for wood, wheat, fur, iron,
and crude oil. Some of Italy’s main industrial firms, such as FIAT (Fabbrica
Italiana Automobili Torino) and Olivetti, immediately took advantage of
these agreements, considering the opportunities offered by the Soviet mar-
ket in the context of Nikita Khrushchev’s plan to increase private consump-
tion.16 Following a series of meetings between Italian and Soviet
representatives, ENI signed its first deal with the Soviet Union in August
1958. Just a few weeks earlier, President of AGIP (and Vice President of
ENI) Marcello Boldrini had met with the Soviet ambassador in Rome and
had asked to send a delegation to Moscow in order to discuss the agree-
ment. Giuseppe Ratti, who was responsible for ENI’s marketing operations
(and was a de-facto “ambassador” of ENI in the Soviet Union, and later
China) visited the Soviet Union and obtained a standard contract from
Soiuznefteksport (Soviet Oil Export Company, SNE).17
The deal was ratified in December 1958, when Mattei stopped in Mos-
cow on his way to China, and after SNE President Evgenii Gurov returned
to Moscow from Rome, where he met with ENI representatives. Mattei
signed a contract to import 15,000 tons of crude at a price of $13.80 per ton
(the equivalent of $1.90 per barrel, a much lower price than that usually
paid for Arab oil). The majority of the oil was “Ural,” a type that was
particularly suitable for Italy’s petrochemical industry. The contract intro-
duced a barter method that “swapped” crude oil for other ENI products
and was later also used in subsequent supply contracts. Based on these initial
contacts, at the beginning of 1959, ENI Vice President Eugenio Cefis and
Ratti returned to Moscow to negotiate a new agreement. The idea was to
sign a deal that would allow Italy to receive 800,000 tons of crude at $13.60
per ton in exchange for synthetic rubber produced by the chemical firm
Azienda Nazionale Idrogenazione Combustibili (ANIC) in Ravenna, an
affiliate of ENI. The company would thus create an outlet for its products
and, by doing so, assure the rapid growth of its petrochemical industry.18
While the Soviets were enthusiastic to provide ENI with crude oil (even
accepting a lower price in case ENI requested higher quantities), they were
uneasy about importing rubber from Italy. At the beginning of 1959, the
first 8000 tons of synthetic rubber from ANIC, Europrene, reached the
Soviet Union. But from the very beginning, Europrene was problematic for
the Soviets. They had no experience treating it and caused several accidents,
which the Soviets attributed to the bad quality of Italian rubber. The Soviet
Union refused ANIC’s offer to send its technicians, while it took several
months for Soviet technicians to visit Italy, with the result that the entire
deal seemed to be in jeopardy. Discussions between ENI and the Soviets

continued throughout 1959: while the Soviet Union offered to sell ENI
larger quantities of crude (up to one million tons per year), ENI pushed the
Soviets to increase the amount of Italian products they imported. The
Soviets, however, became more enthusiastic when ENI started offering
steel pipes and other equipment needed to build pipelines, which were
crucial for the Druzhba (“Friendship”) pipeline linking the Volga Ural
Basin and West Siberian oil fields to Eastern Europe. In December 1959,
Mattei thus signed a new agreement, which included the provision of
16 million tons of crude at a price of $1.26 per barrel, in exchange for an
entire pipeline (provided by the Italian steel firm Finsider, based in the
southern city of Taranto) and 50,000 tons of synthetic rubber.19
What came to be known as the “pipeline operation” (operazione
oleodotto) was based on an unequal relationship between ENI and the Soviet
Union. Indeed, the price the Italian firm accepted for its products was much
lower than either expected or initially proposed. This was also due to
Finsider’s weak position, since it was selling products that still had to be
fabricated in a new plant, which relied on American technology that had not
yet been used.20 Once again, relations between ENI and the Soviet Union
proved to be problematic from the very beginning: while ENI provided less
products (especially pipes) than initially expected, the Soviets delayed their
shipments of crude to Italy, or sent shipmens of smaller quantities and
poor quality. In March 1960, Giorgio Kovacs, director of the Industria
Raffinazione Olii Minerali (IROM), lamented that the crude received in
Marghera was full of salt and posed a risk to the refining plants.21
In October 1960, Mattei and the Soviet minister for foreign trade,
Nikolai Patolichev, signed another, more important, agreement. The deal
was facilitated by a visit of Gronchi to Moscow early in the same year, while
in Italy members of the Communist Party prepared the ground for the
contract. The Soviet Union agreed to supply Italy with 12 million tons of
crude oil over a period of four years, in exchange for 50,000 tons of
synthetic rubber; 240,000 tons of steel pipes for oil pipelines, supplied by
Finsider; and pumps, shutters, and compressors for oil pipelines. Russian
crude oil was valued at $0.06 per barrel, compared with the official price of
$1.59, allowing ENI to lower the price of the gasoline it sold to Italian
consumers by 2 liras.22
As a result of the 1960 agreement, 14 percent of Italy’s oil imports now
came from the Soviet Union, an increase of 10 percent over previous years.
While the earlier agreements had already been based on a barter deal
210 E. BINI
between Soviet oil and Italian products, the 1960 deal created a market for
Italian chemical and mechanical products. In 1960, Italy thus became the
largest West European buyer of Soviet crude: it imported 4.7 million tons of
crude, compared to the 2000 tons that were sent to West Germany, the
785 tons exported to France and the 605 tons shipped to Austria. The crude
Italy imported was used not only by ENI, but also by other smaller refin-
eries, such as Anonima Petroli Italiani and even Raffinerie Siciliane Oli
Minerali Petrolio, which was closely linked to Standard Oil (of New Jersey,
SONJ) and refined oil for other West European countries such as France.
Thanks to the contract, the Soviet Union acquired enough material to build
the Druzhba pipeline, while ENI started the construction of another pipe-
line connecting Ravenna to Vienna, through Trieste, and eventually to
Bratislava on the Austrian–Czechoslovak border.23
US REACTIONS TO ENI’S AGREEMENTS

Not surprisingly, the agreements between Italy and the Soviet Union led to
strong negative reactions in the US and in West European countries.
Already in December 1958, the CIA reported on Mattei’s trip to Moscow
(and China), stating that, “the current visit to Peiping of Enrico Mattei [. . .]
further underscores Rome’s intention to expand economic relations with
the Sino-Soviet bloc as well as with the Middle East and other areas.”24 That
same month, during a meeting with Fanfani, Zellerbach criticized the
Italian prime minister for allowing Mattei to travel to the USSR and
China during the Berlin Crisis.25 The most vehement reactions, though,
came in 1960, as Mattei and ENI were discussing the new deal with the
Soviet Union. The CIA highlighted the significance of ENI’s policies for US
interests in Western Europe and the Middle East. It argued that the agree-
ment “might pave the way for future deals with the bloc, involving pipeline
construction and Italian offers of drilling equipment and technical assistance
in return for oil.”26 According to the CIA, ENI might encourage the Italian
government to create a monopoly on the import of crude to Italy, thus
excluding foreign oil companies. The agency, though, also recognized the
political importance of ENI’s agreement, which partly resulted from
Mattei’s willingness to “establish himself as a peer of the international oil
companies.” As it pointed out, “[his] sense of frustration in his dealings with
the international oil companies may be leading him into deeper involvement
with the bloc than he would otherwise, as a good Christian Democrat, be
inclined to go.”27
After the October 1960 agreement had been signed, the State Depart-
ment became particularly concerned about ENI’s and Mattei’s intentions.
A confidential report stated: “The ambition of Enrico Mattei [. . .] threatens
to bring Italy into a dangerous position of subservience to the Iron Curtain
bloc [. . .] We stand in danger of a still much greater deal in line with which
Italy would become a prime instrument for Russia for the penetration of
European markets with Russian oil.”28 Just a few days later, Assistant
Secretary of State David Kohler set up a meeting with Italian Ambassador
Manlio Brosio, during which he “formally expressed the concern of the
United States Government over the implications of the proposed tanker-
wheat barter agreement [. . .] as a particularly ominous development in the
Soviet economic offensive.”29 US fears increased even more when, late in
1960, news spread that Mattei was planning another trip to China.30
American reactions to the Italian–Soviet agreement were part of much
wider concerns over increased economic relations between Western Europe
and the USSR, which involved other countries as well—in particular, the
Federal Republic of Germany (FRG). For the US government, the “Soviet
offensive” might create economic dependence on Soviet oil, which could be
used as a political tool to ensure Western Europe’s subservience to Soviet
policies. Furthermore, it could contribute to decreasing the technological
gap between the Eastern and Western blocs and enhance the image and
prestige of the USSR as a commercial partner and a promoter of interna-
tional forms of economic cooperation. While the US was worried about
several West European countries, it was particularly concerned about Italy,
given the rapid increase in oil imports, its growing dependence on Soviet
products, and the forcefulness with which ENI, with the support of several
members of the Italian government, approached the USSR. Furthermore,
at the end of 1960, ENI was one of the main supporters of the idea that
Soviet oil should reach West European markets through a pipeline, built
with large-diameter pipes supplied by the Italian steel company Finsider.
For the US, a pipeline might have important military and strategic conse-
quences, since it would allow the Red Army to fuel its units without having
to rely on train tracks or trucks. The State Department thus pressured
Ambassador Manlio Brosio to push the Italian government to stop the
pipeline agreement, which was never implemented.31
The US administration was not only concerned about the effects Soviet
oil imports might have on Western Europe or NATO. It also worried that
the Soviet Union might use its agreements with ENI to refine Soviet crude
in the countries where the Italian company was building refineries, namely
212 E. BINI
Ghana, Tanganyika, Morocco, and Tunisia.32 As noted in one of the reports

the American embassy in Rome sent to the State Department, in addition to
wanting to sell its oil to as many countries as possible, “the USSR may
consider that anything which bolsters ENI’s competitive position limits
the activity of the major Western oil companies and is thus a blow at free
world objectives.”33 Against the background of the recent creation of
OPEC and a perceived weakening of the position of the “Seven Sisters”
on the international oil market, the US administration was also concerned
that the Soviet Union might become a member of OPEC, which “would
give the Soviets an extremely advantageous position in influencing Middle
Eastern governments and this could lead to deterioration of relations
between those governments and the Western oil companies.”34 Finally,
oil imports from the Soviet Union might damage North Africa’s growing
oil industry by making it more difficult for oil producers to sell their crude
to West European countries and, in turn, encourage the spread of oil
nationalism.35
Arab oil producers, for their part, reacted to the ENI–Soviet agreement
by criticizing the decrease of the price of Arab crude on the international oil
market. During the Fourth Arab Petroleum Congress, held in Beirut in
1962, Emile Bustani—Chairman of the Lebanese committee—critiqued
ENI’s policies and argued: “I am an Arab in the Arab world, I want my
oil to be at the highest price. For heaven’s sake, you Italians, as our friends,
the friends of the Arabs, do not hurt your interests and ours together.”36
Enrico Bonomi, who represented ENI, tried to reply by pointing out that
the contracts between ENI and oil producers might provide an answer to
the concerns raised by Bustani.37
American oil firms, particularly SONJ, pushed the State Department to
intervene. Company representatives sent a note to all affiliates pointing out
that ENI’s deal with the Soviet Union challenged the stability of the
international oil market. In a meeting between Undersecretary of State
Livingston Merchant and SONJ representatives, William Carlisle, the
company’s government relations counsel, “expressed his hope that the
Department would see fit to convey to the Italian Government the view
that the Italians had already gone as far as they should with the Soviets.”38
The State Department, however, maintained a cautious stance and refused,
for the time being, to intervene directly in Italian oil politics. While it
continued to criticize the Italian government informally, it pressured
NATO to place an embargo on the sale of pipes to the USSR. Indeed, in
the summer of 1960, NATO’s Committee of Economic Advisers had
created a study group to examine the consequences the “Soviet offensive”

had on the Atlantic Alliance. The report, published in 1961, pointed out
that the Soviet effort to build a pipeline to Western Europe had clear
military implications, but it also noted that the USSR lacked the technology
for building large-diameter pipes. Furthermore, it highlighted the impor-
tance for all NATO members of following a common oil policy toward the
Eastern bloc, and criticized Italy for lacking the proper administrative tools
needed to calculate and control the amount of oil it imported from the
USSR. The Italian government replied by emphasizing the need to adopt a
less critical stance on Soviet oil policies and continued to oppose the work of
the study group. Yet, unlike the UK or the FRG, it endorsed the US
embargo proposal to avoid any further tensions with its allies on an issue
that was much less relevant for the Italian economy than that of Soviet oil
imports. Once the report had been submitted, and after a long debate
among the national delegations, the North Atlantic Council in November
1962 finally recommended, “to the extent possible,” that NATO members
stop delivering large-diameter pipes to the USSR and avoid signing new
agreements. While the embargo delayed the construction of the pipeline, it
did not prevent the USSR from continuing to export its oil to Western
Europe.39
In 1961, ENI renewed its deal with the Soviet Union for another four
years, providing the Soviets with equipment for its chemical industry, oil
tankers, steel, and rubber, in exchange for oil as well as coal, wheat, and
lumber. The deal increased trade between ENI and the Soviet Union by
more than 20 percent and allowed the Soviets to build a modern tanker
fleet, transport oil to their satellites, and—thanks to the import of chemical
plants—meet the goals of the seven-year plan. In 1961, the Soviet Union
received its first six tankers from Italy, with a capacity of 48,000 tons each,
despite criticism on the part of Italian Foreign Minister Antonio Segni, who
wanted to avoid upsetting the US.40
Prime Minister Fanfani, for his part, continued to support Italy’s import
of Soviet crude, as part of a more general policy of détente with the Eastern
bloc, a position that he hoped would assure him the support of the Italian
Socialist Party, necessary to create a center-left government. The issue of
Soviet–Italian energy relations was discussed during Fanfani’s official visit
to Washington in June 1961. While the US administration remained
critical of Italy’s dependence on Soviet oil, it also asked all NATO mem-
bers to adopt a common economic policy toward the communist bloc.
The Italian prime minister, for his part, criticized the NATO report,
214 E. BINI
arguing that it “seeks unjustly to have interests of major international

petroleum companies prevail over those of ENI, which represents Italian
national interests,” and that ENI’s activities should be seen in the context
of Western Europe’s economic relations with the USSR. He also
highlighted the importance of accounting for Italy’s wider strategy to
access cheap sources of oil from the Middle East and North Africa, and
emphasized Mattei’s willingness to visit the US and meet with President
John F. Kennedy.41
ENI’s agreements with the Soviet Union (and China) pushed the US to
find an agreement with Mattei, given the repercussions Soviet oil imports—
and ENI’s relations with China—might have for NATO and Italy’s political
stability, and the risk that some of the funds from Soviet oil imports might
be used to strengthen the Italian Communist Party.42 In March 1961,
W. Averell Harriman, Kennedy’s foreign policy advisor, visited Italy and
met with Gronchi and Fanfani. He asked permission to hold a private
meeting with Mattei, pointing out that “it was his understanding that
Mr. Mattei was a good patriot, but that he mingled a little too much in
internal politics.”43 During what was the first talk between Mattei and a
representative of the American government, ENI’s president denounced
the various forms of discrimination practiced by American oil companies
against smaller competitors like ENI, stating that they had pushed him to
establish a deal with the Soviet Union. Furthermore, he argued that the US
did not understand how farsighted Mattei’s policy in the oil-producing
world and the Soviet Union was. To face the Soviet oil threat, he pointed
out that oil companies “should be working together with Mattei to see what
could be done to face up this situation.”44
This was a strategy Mattei had already adopted. Indeed, ENI’s president
took advantage of the Cold War to pursue his own interests (and those of
ENI and Italy): he presented himself to the US as a champion of anti-
Communism, he dealt with the Soviets by arguing that he was anti-
American, and he portrayed himself to oil producers as a representative of
an independent oil company. In his meetings with members of the US
business and political world, Mattei constantly argued that ENI’s policies
aimed at securing the friendship of oil-producing countries. In a speech he
gave in 1959 at a meeting of the Centro Italiano di Studi per la
Riconciliazione Internazionale, an institute funded by the US, Mattei
presented his policies as part of a Cold War effort to counter the Soviet
Union. He argued that the West should guarantee that “the
underdeveloped countries not in the Communist camp can improve their

conditions whilst remaining within the Western political and economic
sphere.”45
Furthermore, Mattei emphasized the fact that ENI could become a tool
for Western powers to penetrate Communist or anti-Western countries.
During a meeting held in 1959 between Clemente Brigante-Colonna,
foreign operations adviser for ENI, and representatives of the American
embassy in Rome, Colonna explained the meaning of the recent visit by a
Chinese delegation to ENI’s plants, which followed Mattei’s trip to China.
He argued that ENI’s policies were in line with those of the US. Not only
could the agreements reduce China’s “technical dependence on Russia,”
but ENI could be “an instrument of Western penetration into areas where
other members of the Western Alliance are in varying degrees persona non
grata, commercially and politically.” He continued by stating that the
Chinese would be interested in opening up to the West “because of their
pressing development needs and their desire to lessen their technical depen-
dence on the USSR as well as their disillusionment with much of the Soviet
equipment which has been sent to China.” As such, ENI was to be seen “as
an instrument of Western, not anti-Western policy.”46
The aim for the US administration therefore became to secure an alliance
with Mattei. As Director of the CIA Allen Dulles put it during a meeting
with the secretary of the interior, held in June 1961, “he had always felt that
the United States had lost an opportunity to have Mattei as a friend but
perhaps he still could be cultivated.”47 The need for the US to find an
agreement with Mattei was further intensified by Fanfani’s visit to Moscow
in the summer of 1961 and, maybe most importantly, by the creation of the
first center-left government in March 1962. The State Department, SONJ
representatives, and the American embassy in Rome started discussing the
best way to approach Mattei just a few weeks before ENI’s president
officially asked to meet with Kennedy. Secretary of State Dean Rusk worried
that Mattei’s “objective is ultimate withdrawal of Italy from NATO,” but
was reassured by US Ambassador Frederick Reinhardt, who pointed out
that ENI’s president was “well informed and realistic on problems posed by
USSR and Communist China.”48 In an exchange of telegrams, Reinhardt
argued that “given the psychological problem of Mattei personality, a
helpful first step would be accord him some recognition, on theory that
this might facilitate subsequent efforts by our oil companies to reach some
accommodation with him or at least assuage his sense of damaged ego
sufficiently to minimize future polemics.”49 He continued by suggesting
216 E. BINI
that the US administration establish contacts with the Italian government

only after talks between Vice President of SONJ William R. Stott and Mattei
had taken place, since “[a]n official US approach to Italian govt seeking
specific limitation on oil imports [. . .] coming before inter-company nego-
tiations had revealed a basis for agreement and before US had ‘recognized’
Mattei, would surely appear to Mattei as an attempt to bludgeon him into
an agreement unfavorable to his interests [. . .]. We would not expect Mattei
to back down immediately and openly [. . .] from positions he has long
espoused, or from his existing contracts to purchase Soviet crude, but the
availability of alternative sources of low-priced crude [. . .] should in itself
operate against any increase in ENI’s purchases of Soviet crude and might
even lead to a commitment in that sense.”50
During a meeting held in Washington, Under Secretary of State for
Economic and Agricultural Affairs George Ball, with the support of Special
Assistant to the President Arthur M. Schlesinger Jr., highlighted the need to
find an agreement with Mattei and allow Italy to overcome its chronic
search for energy autonomy. SONJ and the State Department finally agreed
that US and Italian officials or government representatives should not be
involved and the talks should remain private. In April 1962, shortly after
ENI manager Vincenzo Russo had met with State Department representa-
tives to express Mattei’s willingness to meet with Kennedy, Stott, and
Under Secretary of State for Political Affairs George C. McGhee agreed to
offer ENI large supplies of crude oil and natural gas in exchange for a
willingness not to “increase further the present average daily rate of impor-
tation of Soviet crude oil into Italy.”51
A few weeks later, ENI and SONJ reached an agreement on the man-
agement of STANIC, a joint company owned by SONJ and ANIC, one of
ENI’s affiliates, which had been the cause of a great deal of tension between
the two firms. Most importantly, in May 1962, Mattei met with Reinhardt
and Ball at the American embassy in Rome and laid the groundwork for an
easing of tensions between the US and ENI. In the usual fashion, he
presented himself and ENI as victims of the international “oil cartel.” As
the report sent by the embassy put it, “Mattei repeated over and over that all
he wanted was to be treated like a human being by the big oil companies
[. . .]. He said that everywhere that he had tried to get a fair share of the
market the oil companies had fought him.”52 In Mattei’s view, the US
should consider ENI a tool to fight Communism, since “Castro had
approached him to come in and handle the petroleum situation in Cuba.”
As the State Department reported, “[t]he Italian Foreign Ministry had told
him to stay out so he never replied to Castro’s approach. As a result, the

Czechoslovaks had moved in and taken over. He felt it might have been in
the interest of the US and the West if he had gone in, adding, ‘After all, we
too are of the West.’”53 In that same meeting, Mattei denied that ENI was
helping the Soviet Union by importing its crude, while at the same time
refusing to answer a question about the company’s involvement in a pipe-
line construction between Trieste and Bratislava, which would have offered
the Soviets easy access to West European markets.54
In 1963 (after Mattei’s death, but in line with the relations that ENI’s
president and the Italian government had established with the US), SONJ
and ENI finally signed an agreement according to which the US oil company
would provide ENI with crude oil and natural gas extracted in Libya in
exchange for services and equipment, such as pipelines and the transport and
the refining of crude in the refinery of Ingolstadt, Bavaria.55 The contract
provided ENI with 25 percent of its requirements (80 million barrels of
crude for five years) and considerably reduced Italy’s dependence on Soviet
oil, while at the same time allowing SONJ to find an outlet for the oil and
natural gas it extracted in Libya. As a telegram sent from the American
embassy in Rome to the State Department put it, the deal was “understood
to have preempted purchase by ENI of comparable amount Soviet crude
which Soviet negotiators recently in Rome attempted to sell.”56 It was
followed by another deal, signed in 1964 by ENI and Gulf, which assured
delivery of 12.5 million tons of oil from Kuwait to the Italian company. In
1965, an agreement between ENI, Esso International Inc., and Mediterra-
nean Standard Oil Co. set the terms for the import to Italy of three million
cubic meters of Libyan natural gas per year, starting in 1969.57
BETWEEN BIPOLARISM AND DÉTENTE

The signing of these agreements between ENI and US firms transformed
Italy into a net importer of the crude international oil companies extracted
in North Africa and the Middle East. However, the politics of détente
pursued by the American administration and by the Soviet government
opened up new possibilities for Italian industries. Indeed, with the signing
of the Partial Nuclear Test Ban Treaty and the announcement of Kennedy’s
Strategy of Peace in 1963, the two superpowers encouraged economic
relations between the blocs. As a result, in the first half of the 1960s, the
volume of trade between the US and the Soviet Union increased rapidly,
while the flow of energy from the Soviet Union to West European countries
218 E. BINI
came to be considered a sign of political cooperation rather than a threat. In

this context, the 1962 NATO embargo was lifted; in 1965, the US admin-
istration officially approved FIAT’s proposal to build a car factory in Russia
and, after a visit by the company’s General Manager Vittorio Valletta to the
US, supported it by approving an Ex-Im Bank loan for the export of
American equipment.58
Despite the establishment of new economic relations with the Soviet
Union, the US administration remained cautious in the field of energy; in
particular, the CIA continued to keep a close eye on ENI’s activities. In a
special report prepared in 1964, the CIA pointed out that even after
Mattei’s death, “ENI [. . .] has continued its wide-ranging domestic and
international activities” and that “the new leadership has proved just as
dynamic as Mattei’s.” Although its profits were falling and the relationship
between the company and Italian politicians had changed in several impor-
tant ways, the CIA argued that the company was “continuing Mattei’s
policy of aggressively seeking new sources of cheap oil in any part of the
world.” One of ENI’s most important achievements remained its agree-
ments with the USSR, which also included talks about “plans for ENI to
construct a refinery in the USSR [. . . The] capacity of the refinery would be
about 18 million tons, making it the largest in the world.”59 Indeed, in
1963, the company had renewed its agreement with the USSR, purchasing
4.2 million tons of Soviet crude per year until 1970.
In order to reduce Italy’s dependence on American crude and meet the
needs of a growing domestic market, ENI began investing heavily in the field
of natural gas in the mid-1960s. ENI had started considering the possibility of
buying Soviet gas already in 1960, after the USSR made the expansion of its
gas industry part of its seven-year plan. The company’s strategy was in many
ways a natural outcome of its long history and success in the natural gas
industry. Indeed, given its problems in the oil field, from the 1940s onwards,
ENI had developed a strong domestic gas sector, extracting methane across
Italy. However, until 1964, when the USSR signed an agreement with
Czechoslovakia to build the Bratstvo (“Brotherhood”) pipeline, which
would transport Soviet gas all the way to Bratislava, the issue of transport
had pushed ENI to import natural gas from North Africa, particularly Algeria
and Libya, rather than the USSR.60
Once the Soviet–Czechoslovak agreement had been announced, ENI
approached SNE asking to receive five million cubic meters of natural gas
for 15 years in exchange for industrial equipment and a payment in cash.
The following year, ENI sent a delegation to the USSR to study the details
of the agreement. But even though the Soviets considered Italy to be one of
their most important customers, the two sides disagreed over the exact
route the pipeline should take. With the initial support of the Soviets, ENI
advanced the idea that the Ukrainian gas fields should reach Italy (and West
European markets) through Hungary and Yugoslavia, rather than Czecho-
slovakia and Austria. Thanks to what came to be known as the
“Trans-European pipeline,” northern Italy would become the main entry
point for Soviet gas into Western Europe. In 1966, Premier Aleksei Kosygin
endorsed Soviet negotiations with ENI in a move that, as Per H€ogselius has
argued, “for the first time officially stated [the USSR’s] ambition to export
natural gas to the capitalist world, formulating a role for itself as a player on
the Western European natural gas market.”61 However, the Austrian oil
company Österreichische Mineral€olverwaltung (ÖMV), along with several
German and Austrian steel industries, immediately challenged the Italian
project and pushed the USSR to approve the building of a pipeline that
would reach West European markets through Czechoslovakia and Austria.
After a long series of debates, an agreement was finally reached in 1968,
when Austria and the USSR decided to connect the Bratstvo pipeline to the
ÖMV grid, with the possibility of including Italy in the agreement. ENI and
the Italian government had been unable and partly unwilling to push
forward their initial proposal because of mutual tensions, financial problems,
and the complex challenge for Finsider of producing the large-diameter
pipes required by the Soviets. Nevertheless, the agreement signed between
Austria and the USSR undermined Italy’s prospects of becoming the main
protagonist of Soviet–West European energy relations.62
In the second half of the 1960s, a series of changes in the international oil
market, and also in the relationship between Arab oil producers and oil
consumers, transformed Italy’s relations with the USSR and also, in part,
those with the US. The Six-Day War of 1967, in particular, had a deep and
lasting effect on Italian energy policies, and reconfigured the geography of
West European energy supplies. The closing of the Suez Canal and the Arab
oil embargo had particularly detrimental effects on the Italian economy,
given its strong dependence on the oil provided by American firms through
the Persian Gulf. The response of the Italian government was multifaceted:
while some supported the idea that the European Economic Community
(EEC) should pursue a common energy policy and become more autono-
mous by investing in nuclear power, others pointed out that the EEC
should seek to redefine economic, political, and military relations between
220 E. BINI
the Eastern and Western blocs and in the Mediterranean to assure a con-
stant and stable flow of oil to Europe.63
The main protagonist of Italy’s international policy in Europe was Aldo
Moro, who served as foreign minister between 1969 and 1974. Moro aimed
to establish a clearer international role for the EEC, in a context character-
ized by a profound transformation of the Cold War. He believed that the
EEC should pursue a common energy policy in order to assure access to
secure sources of oil and gas for European actors, and to avoid the
destabilizing effects of oil nationalism. Moro fully endorsed a closer com-
mercial relationship between Italy and the USSR. He repeatedly visited
Moscow, officially approved the agreements between ENI and the Soviets,
and highlighted the importance of the Conference on Security and Coop-
eration in Europe (CSCE) in overcoming bipolarism and strengthening
relations between the Eastern bloc and Western Europe.64
In the late 1960s, the Italian government assigned ENI the important
task of providing the country with enough energy resources to meet its
needs. ENI strengthened its relationship with countries and companies that
did not rely on the Suez Canal to transport their oil, and established a series
of deals with Libya, Algeria, Saudi Arabia, Iraq, and the USSR, while at the
same time trying to diversify its sources of energy. ENI signed two impor-
tant agreements with the USSR—in 1967 and 1969—that set the terms of
Italian–Soviet energy relations for years to come. The two deals were the
outcomes of a long series of meetings and debates between Italian and
Soviet representatives, which also—indirectly—involved the US and British
governments as well as other European producing countries, such as the
Netherlands.65
Despite pressure from Shell and SONJ, in August 1967, ENI signed an
agreement with the USSR according to which Italy would import 1.2
billion m3 of gas in 1971, a quantity that was to increase steadily to 6 billion
m3 until 1975 and then remain stable until 1990. Once again, it was agreed
that ENI would provide the USSR with large-diameter steel pipes, valves,
and cables needed for the extraction of natural gas and to build pipelines,
while Italian financial institutes such as the Istituto Mobiliare Italiano and
Mediobanca would offer credit allowances.66 The Italian government offi-
cially supported the deal while at the same time making sure that it could be
leveraged for a stronger role in the international energy market. Once again,
it used the threat of increased Italian reliance on Soviet energy resources to
obtain more advantages from the US and producing countries. During a
meeting held in 1967 between Foreign Minister Fanfani and US President
Lyndon B. Johnson’s national security adviser, Walt W. Rostow, Fanfani

played producers off against each other. He “asked to point out to the
Dutch Italy’s desire not to depend solely on Soviet natural gas” and went on
to argue that “Rostow should [. . .] try to convince the Dutch to offer us a
better deal, in order to be more competitive with Soviet prices.”67
The US administration, however, was well aware of the limits of Italian
energy policies. In a secret report, the CIA pointed out that the 1967
agreement would have strengthened the position of the Soviets on the
West European markets. Nonetheless, the USSR was still unable to distrib-
ute its natural gas effectively across the Iron Curtain. The agency thus
argued reassuringly that Italy would have to continue to import most of
its gas from Libya, Algeria, and the Netherlands. To be sure, in the early
1970s, ENI signed a deal with the Netherlands and contributed to building
the longest gas pipeline in Western Europe, which connected the Dutch
fields to the West German, Swiss, and Italian markets. The following year, it
inked a deal with the Libyan government according to which it would build
a petrochemical plant and a refinery in the North African country, and, in
turn, obtain new exploration permits. In 1973, after a long series of nego-
tiations the Italian company signed an agreement with the Algerian firm
Sonatrach, which established a mixed company in charge of building a
pipeline (Transmed) linking Algeria to Sicily through Tunisia.68
By the end of the 1960s, however, several international changes had
completely transformed economic and energy relations between the two
blocs. Indeed, despite the fact that the Soviet invasion of Czechoslovakia in
1968 increased tensions between the US and the USSR, the two super-
powers promoted détente in a more forceful way, allowing Western Europe
to pursue a more autonomous policy. Between the late 1960s and the early
1970s, most governments supported the efforts of their oil and gas compa-
nies to sign contracts with the USSR, and established themselves as inde-
pendent actors on the international energy market in ways that had not been
possible until then. This shift went hand in hand with the growing vulner-
ability of the “Seven Sisters,” the strengthening of Arab oil producers, and
the inability of the US to provide Western Europe with cheap oil and natural
gas. In this context, the US administration started considering Soviet energy
resources an important element of international stability, and even approved
the signing of a series of agreements between American independent oil
companies and the USSR.69
ENI and the USSR signed another, more important contract in 1969,
which included the import of 100 billion m3 of natural gas over a twenty-
222 E. BINI
year period (6 billion m3 for the first year, at a fixed price of $12 per m3), in
exchange for plants and machinery to be used in the Soviet automobile,
chemical, and petrochemical industries, as well as uranium enrichment
technology. According to the agreement, the first supplies were to be
provided on January 1, 1973, with volumes increasing steadily each year
from 1.2 billion m3 in 1973 to 4 billion m3 in 1975 and 6 billion m3 in
1976, at which level they were to remain until 1993. However, ENI still
faced the problem of transporting Soviet natural gas from the Austrian–
Czechoslovak border to Italy, while the USSR continued to negotiate
bilateral agreements with several West European countries to assure a
more consistent flow of Soviet gas and, thus, a return on the capital and
technology invested to build the pipeline. It took another four years
before the pipeline connecting the Austrian–Czechoslovak border to the
Italian border in Tarvisio was finally inaugurated in May 1974.70
The CIA noted the importance of the deal, which it defined as “a
multinational East–West joint venture of unprecedented magnitude and
duration,” and “an important Soviet breakthrough into the Western natural
gas market.” According to the agency, the significance of the Soviet–Italian
deal lay not only in the amount of natural gas that the Soviets would sell to
Western Europe in exchange for pipelines, but—most importantly—in the
fact that it involved most of the EEC countries, including Italy, the FRG,
France, and Austria.71 In other words, Western Europe had acquired an
importance and role it had not previously had, and was redefining interna-
tional energy relations in ways that the US could no longer control.
CONCLUSION
Between the late 1950s and the late 1960s, the Italian government, and in
particular the state-owned oil company ENI, sought to overcome the
country’s chronic need for energy resources and dependence on interna-
tional oil companies by signing a series of contracts with the USSR. This
story of Italian–Soviet relations sheds new light on the history of Cold War
energy politics by highlighting the specific role of a relatively small country
such as Italy in challenging US oil policies not only in the Mediterranean,
but also vis-a-vis the Eastern bloc. As I have argued, Italy was one of the first
West European countries to establish an agreement with the USSR for the
import of crude oil in exchange for synthetic rubber, oil tankers, and large-
diameter steel pipes. It did so by approaching East–West relations in a rather
bold way: whereas the Italian government had already presented itself as a
supporter of détente in the late 1950s and argued that Italy should have an
important role in facilitating economic and political relations between the
two blocs, ENI’s President Enrico Mattei challenged the oil majors and the
rules of the international oil market by striking some of the first deals with
the USSR and China. By doing so, through the activities, visions, and
interests of individual politicians and industrialists, Italy paved the way for
the establishment of exchanges between the Soviets and West European
countries, and for many years remained one of the USSR’s most important
clients.
However, in the early 1960s, the Cold War shaped Italy’s relations with
the USSR in several crucial ways. As highlighted in this chapter, ENI’s deals
with the Soviets were accompanied by an intense debate about Italy’s
position in the Atlantic Alliance and the future of the country’s political
stability and economic growth. Whereas American oil companies pushed
the US administration to intervene and pressure the Italian government to
put an end to the flow of Soviet oil to Italy, the State Department and the
US embassy adopted a more cautious stance. In the process, they gained a
better understanding of Italian politics and of ENI’s domestic and interna-
tional position. By the time they reached an agreement in 1963, they had
recognized ENI as a legitimate international actor, as well as the importance
of providing the Italian market with large quantities of cheap oil, and
acknowledged the relevance of the center-left government coalition for
the country’s stability.
During the second half of the 1960s, in the context of détente, Italy
strengthened its relations with the USSR and became one of the first clients
of Soviet natural gas. Rome also became one of the main advocates for the
construction of a pipeline connecting the Ukrainian gas fields with the West
European markets. In many ways, ENI and the Italian government thus
anticipated some of the changes that characterized international energy
relations in the late 1960s and early 1970s; namely, that as a result of
détente and of oil producers’ growing power, Western Europe would
become increasingly dependent on Soviet energy resources and more fully
integrated through a system of infrastructures. In this context, the forms of
bipolarism that had characterized US–Italian relations in the early 1960s
were replaced by a growing emphasis on oil producers’ growing use of the
“oil weapon,” and on the importance for Europe of establishing its role in a
multipolar world.
224 E. BINI
NOTES
1. J. H. Carmical, “Italy Arranges Soviet Oil Deal,” New York Times,
November 11, 1960.
2. Ibid.
3. J. H. Carmical, “Goal for Soviet Oil,” New York Times, November
12, 1960.
4. Austin C. Wehrwein, “Rathbone Assails Russian Oil Deals,”
New York Times, November 15, 1960.
5. Ethan Kapstein, The Insecure Alliance: Energy Crises and Western
Politics Since 1944 (New York: Oxford University Press, 1990);
Frank B€ osch and Rüdiger Graf, eds., “The Energy Crises of the
1970s: Anticipations and Reactions in the Industrialized World,”
special issue, Historical Social Research 39, 4 (2014); Elisabetta Bini,
Giuliano Garavini, and Federico Romero, eds., Pivotal Year: The
1973 Oil Shock and its Global Significance (London: I.B. Tauris,
forthcoming).
6. Archivio storico ENI (ASENI), Fondo ENI, Direzione Affari
Societari, binder 11, folder 405E; Daniele Pozzi, Dai gatti selvaggi
al cane a sei zampe: Tecnologia, conoscenza e organizzazione
nell’Agip e nell’Eni di Enrico Mattei (Venice: Marsilio, 2009);
Elisabetta Bini, La potente benzina italiana: Guerra fredda e consumi
di massa tra Italia, Stati Uniti e Terzo mondo (1945–1973) (Rome:
Carocci, 2013).
7. Angelo Pressenda and Marcella Sarale, L’ENI da Mattei a Cefis: La
politica del petrolio tra mito e realt a (Turin: Einaudi, 1978);
Marcello Colitti, Energia e sviluppo in Italia: La vicenda di Enrico
Mattei (Bari: De Donato, 1979); Giulio Sapelli and Francesca
Carnevali, Uno sviluppo tra politica e strategia: ENI (1953–1985)
(Milan: FrancoAngeli, 1992); Giorgio Galli, La sfida perduta:
Biografia politica di Enrico Mattei (Milan: Bompiani, 1976); Nico
Perrone, Enrico Mattei (Bologna: Il Mulino, 2001); Silvio Labbate,
Il governo dell’energia: L’Italia dal petrolio al nucleare (1945–1975)
(Florence: Le Monnier, 2010).
8. Elisabetta Bini, “Fueling Modernization from the Atlantic to the
Third World: Oil and Economic Development in ENI’s Interna-
tional Policies, 1950s–1960s,” in Alain Beltran, Eric Boussière, and
Giuliano Garavini, eds., Europe and Energy from the 1960s to the
1980s (Brussels: Peter Lang), 41–59.
9. Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power
(New York: Simon & Schuster, 1991); Leonardo Maugeri, L’arma
del petrolio: Questione petrolifera globale, guerra fredda e politica
italiana nella vicenda di Enrico Mattei (Florence: Loggia dè
Lanzi, 1994).
10. Alberto Tonini, Il sogno proibito: Mattei, il petrolio arabo e le “sette
sorelle” (Florence: Edizioni Polistampa, 2003); “L’ENI e il problema
italiano dell’energia,” Il Gatto Selvatico, September 1957, 9; Bruna
Bagnato, Petrolio e politica: Mattei in Marocco (Florence: Edizioni
Polistampa, 2004).
11. Marcello Colitti, ENI: Cronache dall’interno di un’azienda (Milan:
Egea, 2008); Enrico Mattei, Scritti e discorsi, 1945–1962 (Milan:
Rizzoli, 2012).
12. Massimo Bucarelli, “All’origine della politica energetica dell’Eni in
Iran: Enrico Mattei e i negoziati per gli accordi petroliferi del 1957,”
Nuova Rivista Storica 2 (2010), 465–99; Steve Marsh, Anglo-
American Relations and Cold War Oil (New York: Palgrave Mac-
millan, 2003); Ervand Abrahamian, The Coup: 1953, the CIA, and
the Roots of Modern US–Iranian Relations (Cambridge: Cambridge
13. “Telegram from the Embassy in Italy to the Department of State
(SD),” March 18, 1957, in Foreign Relations of the United States
(FRUS), 1955–1957, vol. 12: Near East Region; Iran; Iraq
(Washington, DC: Government Printing Office, 1991), 920–1;
“Report Prepared by the Operations Coordinating Board,”
September 3, 1957, in FRUS, 1955–1957, vol. 27: Western Europe
and Canada (Washington, DC: Government Printing Office,
1992), 420–4; “Memorandum of a Conversation, SD,” September
25, 1957, in FRUS, 1955–1957, vol. 12, 945–6; “Despatch From
the Embassy in Italy to the SD,” March 7, 1958, FRUS, 1958–1960,
vol. 7, part 2: Western Europe (Washington, DC: Government
Printing Office, 1993), 445–8; National Archives and Records
Administration (NARA), College Park, RG59, Bureau of Economic
Affairs, Office of International Resources, Fuels and Energy Divi-
sion, Records Relating to Fuels and Energy, 1953–64, Box 35. On
the deal with Iran: Ilaria Tremolada, La via italiana al petrolio:
L’ENI di Enrico Mattei e l’Iran (1945–1962) (Milan:
L’Ornitorinco, 2011); Rosario Milano, L’ENI e l’Iran
(1962–1970) (Naples: Giannini Editore, 2013); Georg Meyr,
226 E. BINI
“Enrico Mattei e la politica neoatlantica dell’Italia, nella percezione

degli Stati Uniti d’America,” in Massimo de Leonardis, ed., Il
Mediterraneo nella politica estera italiana del secondo dopoguerra
(Bologna: Il Mulino, 2003), 157–69; Leopoldo Nuti, Gli Stati
Uniti e l’apertura a sinistra: Importanza e limiti della presenza
americana in Italia (Rome: Laterza, 1999).
14. “Memorandum of Conversation: Petroleum as a Factor in
US-Italian Relations,” January 16, 1958, in FRUS, 1958–1960,
vol. 7, part 2, 434–8; NARA, RG 59, General Records of the SD,
Central Decimal File 1955–1959, box 4826; Oscar Sanchez-Sibony,
Red Globalization: The Political Economy of the Soviet Cold War from
Stalin to Khrushchev (Cambridge: Cambridge University
Press, 2014).
15. Nuti, Gli Stati Uniti e l’apertura a sinistra, 106–88; Alessandro
Brogi, “Ike and Italy: The Eisenhower Administration and Italy’s
‘Neo-Atlanticist’ Agenda,” Journal of Cold War Studies 4, 3 (2002),
5–35; Agostino Giovagnoli and Luciano Tosi, eds., Amintore
Fanfani e la politica estera italiana (Venice: Marsilio, 2010).
16. Bruna Bagnato, Prove di Ostpolitik: Politica ed economia nella
strategia italiana verso l’Unione Sovietica, 1958–1963 (Florence:
Leo S. Olschki, 2003); Bruna Bagnato, ed., I diari di Luca
Pietromarchi, ambasciatore italiano a Mosca (1958–1961), Studi
Fondazione Luigi Enaudi 41 (Florence: Leo S. Olschki, 2002).
17. ASENI, Fondo ENI, Rapporti commerciali con l’estero, b. 2,
f. 7DA; Ekaterina Snegur, “Questioni amministrative della
collaborazione russo-italiana nel settore metanifero (1958–1969)”
(PhD diss., University of Rome La Sapienza, 2013).
18. Pozzi, Dai gatti selvaggi al cane a sei zampe, 440–54; ASENI,
Fondo ENI, Presidenza, Mattei, Viaggi, b. 36, f. 41.
19. ASENI, Fondo ENI, Direzione Estero, b. 2, f. 7DA; Il Gatto
Selvatico, 1959.
20. Pozzi, Dai gatti selvaggi al cane a sei zampe, 446; ASENI, Fondo
ENI, Direzione Estero, b. 57, f. 187E.
21. “Missione a Mosca,” February 1–5, 1960, in ASENI, Fondo ENI,
Direzione Estero, b. 2, f. 7DA.
22. Bagnato, Prove di Ostpolitik.
23. ASENI, ENI, Direzione Estero, b. 57, f. 187E.
24. CIA Bulletin, December 20, 1958, NARA, CIA Records Search
Tool (CREST).
25. “Airgram from the Embassy in Italy to the SD,” December 20,
1958, in FRUS, 1958–1960, vol. 7, part 2, 503–6.
26. CIA, “Italian Oil Combine May Build Pipeline for USSR,” Current
Intelligence Weekly Summary, January 28, 1960, NARA, CREST.
27. CIA Weekly Summary, July 14, 1960, NARA, CREST.
28. November 3, 1960, Dwight D. Eisenhower Library (DDEL), White
House Office, Office of the Staff Secretary, Records, 1952–61,
International Series, Box 8.
29. Italian–Soviet Barter Agreement, November 9, 1960, DDEL, White
House Office, Office of the Staff Secretary, Records, 1952–61,
International Series, Box 8.
30. Guido Samarani, “Enrico Mattei e la Cina,” in Davide Guarnieri,
ed., Enrico Mattei: Il comandante partigiano, l’uomo politico, il
manager di stato (Pisa: BFS edizioni, 2007), 91–98.
31. Nuti, Gli Stati Uniti e l’apertura a sinistra, 391–409; Roberto
Cantoni, “What’s in a Pipe? Technopolitical Debate Over the
Ontology of Oil Pipes at NATO (1960–1962), Technology and
Culture (forthcoming).
32. SD, Memorandum of Conversation, December 8, 1960, in NARA,
RG59, Bureau of Economic Affairs, Office of International
Resources, Fuels and Energy Division, Records Relating to Fuels
and Energy, 1953–64, Box 23.
33. US Embassy in Rome (USMBR) to SD, November 9, 1961, NARA,
RG59, Central Decimal File, 1960–63, Box 2695.
34. “Soviet Oil Offensive,” February 6, 1961, 1, NARA, RG59, Bureau
of Economic Affairs, Office of International Resources, Fuels and
Energy Division, Records Relating to Fuels and Energy,
1953–1964, Box 36.
35. M. H. Kannenberg to Jacques, February 6, 1961, NARA, RG59,
Bureau of Economic Affairs, Office of International Resources,
Fuels and Energy Division, Records Relating to Fuels and Energy,
1953–1964, Box 36.
36. Ibid.
37. “Soviet Denies its Oil Exports Threaten Western Economies,”
New York Times, July 19, 1962.
38. “Memorandum of Conversation,” November 3, 1960, in FRUS,
1958–60, vol. 7, part 2, 620–24.
39. Cantoni, “What’s in a Pipe?”; Bagnato, Prove di Ostpolitik.
40. CIA Weekly Summary, March 2, 1961, NARA, CREST.
228 E. BINI
41. Note, ASENI, Fondo ENI, Direzione Estero, b. 2, f. 7DA; USMBR

to Secretary of State, December 30, 1961, NARA, RG59, Central
Decimal File, 1960–63, Box 2695; Adriana Castagnoli, La guerra
fredda economica: Italia e Stati Uniti, 1947–1989 (Rome:
Laterza, 2015).
42. “The Outlook for Italy,” April 10, 1961, John F. Kennedy Presi-
dential Library (JFKL), Papers of Arthur M. Schlesinger Jr., White
House Files, Box WH-12.
43. “Memorandum of Conversation,” March 9, 1961, JFKL, Papers of
President Kennedy, National Security Files, Countries, Box 120.
44. “Memorandum of Conversation,” March 10, 1961, JFKL, Papers of
President Kennedy, National Security Files, Countries, Box 120;
Nico Perrone, Obiettivo Mattei: Petrolio, Stati Uniti e politica
dell’ENI (Rome: Gamberetti editrice, 1995), 167–72.
45. Enrico Mattei, International Oil Problems (Rome: ENI, 1959), 6.
46. “Memorandum of Conversation,” April 18, 1959, NARA, RG59,
Bureau of Economic Affairs, Office of International Resources,
Fuels and Energy Division, Records Relating to Fuels and Energy,
1953–1964, Box 22.
47. “Memorandum for the Record,” June 30, 1961, NARA, CREST.
48. USMBR to SD, March 9, 1962, NARA, RG59, Central Decimal
File, 1960–63, Box 2695; “Memorandum of Conversation,” March
17, 1962, in FRUS, 1961–1963, vol. 8: National Security Policy
(Washington, DC: Government Printing Office, 1996), 830–3.
49. USMBR to the Secretary of State, 25 April 1962, Declassified
Documents Reference System.
50. Ibid.
51. Dean Rusk to the USMBR, April 23, 1962, Declassified Documents
Reference System.
52. Memorandum of Conversation, May 22, 1962, Declassified Docu-
ments Reference System.
53. Ibid.
54. Castagnoli, La guerra fredda economica, 88–95.
55. Mattei died in an airplane crash on October 27, 1962. His airplane
was sabotaged and crashed on its way from Catania to Milan.
Although there have been various investigations, the instigators of
Mattei’s death are still unknown. See Benito Li Vigni, Il caso Mattei:
Un giallo italiano (Rome: Editori Riuniti, 2003); Giorgio Galli,
Enrico Mattei: Petrolio e complotto italiano (Milan: Baldini Castoldi

Dalai, 2005).
56. USMBR to SD, March 20, 1963, JFKL, Papers of President Ken-
nedy, National Security Files, Countries, Box 120A.
57. ASENI, Fondo ENI, Presidenza, Raffaele Girotti, b. 76, f. 3369;
“Italians Explain Deal with Esso,” New York Times, April 27, 1963.
58. Per H€ ogselius, Red Gas: Russia and the Origins of European Energy
Dependence (London: Palgrave Macmillan, 2013); Castagnoli, La
guerra fredda economica, 126–8; Valentina Fava, “La Fiat e la
AutoVAZ di Togliatti: Alla ricerca del fordismo perduto,”
Storicamente 9 (2013), doi:10.1473/stor433.
59. CIA, Special Report: Recent Activities of Italy’s State Petroleum
Corporation, April 17, 1964, The Lyndon Baines Johnson Library,
Papers of Lyndon Baines Johnson, President 1963–1969, National
Security File, Country File, Italy, box 196.
61. Ibid., 42.
62. Marcello Boldrini to Soiuznefteksport, November 3, 1964, ASENI,
Fondo ENI, b. 264, f. 482E; Eugenio Cefis to Soviet Ambassador in
Rome, August 11, 1965, ASENI, Fondo ENI, b. 264, f. 482E;
Alessio Zanardo, Dall’autarchia all’austerity: Ceto politico e cultura
d’impresa nell’industria nazionale del metano (1940–1973) (Rome:
Aracne, 2012).
63. Federico Romero and Antonio Varsori, eds., Nazione,
interdipendenza, integrazione: Le relazioni internazionali dell’Italia
(1917–1989), vol. 1 (Rome: Carocci, 2001); Agostino Giovagnoli
and Silvio Pons, eds., L’Italia repubblicana nella crisi degli anni
Settanta, vol. 1: Tra guerra fredda e distensione (Soveria Mannelli:
Rubbettino, 2003), 271–98; Daniele Caviglia and Massimiliano
Cricco, La diplomazia italiana e gli equilibri mediterranei: La
politica mediorientale dell’Italia dalla guerra dei Sei giorni al
conflitto dello Yom Kippur (1967–1973) (Soveria Mannelli:
Rubbettino, 2006); Francesco Perfetti et al., eds., Aldo Moro
nell’Italia contemporanea (Florence: Le Lettere, 2011), 585–606;
Alfonso Alfonsi, ed., Aldo Moro nella dimensione internazionale:
Dalla memoria alla storia (Milan: FrancoAngeli, 2013).
64. Archivio Centrale dello Stato (ACS, in Rome), Archivio Aldo Moro
(AAM), b. 94; Elisabetta Bini, “Reshaping Transatlantic Energy
Relations: Italy, the United States, and Arab Producers during the
230 E. BINI
1970s,” in Antonio Varsori, ed., Italy in the International Context

(1968–1981) (Basingstoke: Palgrave Macmillan, forthcoming).
65. Silvio Labbate, “L’Italia e l’ENI di fronte alle crisi petrolifere degli
anni Settanta,” Nuova Rivista Storica 4 (2014), 477–554.
66. ASENI, Fondo ENI, Struttura organizzativa, Presidenza, b. 264,
f. 482F.
67. ACS, AAM, b. 94.
68. ASENI, Fondo ENI, Presidenza, Raffaele Girotti, b. 76, f. 3369;
ASENI, Fondo ENI, Struttura organizzativa, Presidenza, b. 262,
f. 4819. “Appunto sull’importazione di gas naturale dall’URSS in
Italia,” October 14, 1966, ASENI, Fondo ENI, b. 264, f. 482E;
USMBR to SD, July 8, 1966, NARA, RG59, Central Foreign Policy
Files, 1964–66, Economic, box 1017. Arturo Varvelli, L’Italia e
l’ascesa di Gheddafi: La cacciata degli italiani, le armi e il petrolio
(Milan: Baldini Castoldi Dalai, 2009); Rosario Milano, “L’ENI e
l’Algeria (1963–1973),” in I. Garzia, L. Monzali, and F. Imperato,
eds., Aldo Moro, l’Italia repubblicana e i popoli del Mediterraneo
(Nardò: Besa, 2013), 498–533; Mark H. Hayes, “The Transmed
and Maghreb Projects: Gas to Europe from North Africa,” in David
G. Victor, Amy M. Jaffe, and Mark H. Hayes, eds., Natural Gas and
Geopolitics: From 1970 to 2040 (Cambridge: Cambridge University
Press, 2006), 49–90.
69. Kapstein, The Insecure Alliance, 152–76.
70. Giuseppe Ratti to Eugenio Cefis, January 14, 1971, ASENI, Fondo
ENI, b. 264, f. 482E; ACS, AAM, b. 159; H€ogselius, Red Gas,
125–9.
71. CIA, Soviet Natural Gas Deals with Western Europe, undated,
NARA, CREST.
Gaz de France and Soviet Natural Gas:
Balancing Technological Constraints
with Political Considerations, 1950s to 1980s
Alain Beltran and Jean-Pierre Williot
On its establishment in 1946 by the French government, the energy com-

pany Gaz de France (GDF) inherited a disparate complex of local opera-
tions. Some 600 distributors, almost all running at a loss, received supplies
from 458 gas works that were between twenty and sixty years old. The
coking plants had been built in the period between the two world wars and
they provided approximately 8 percent of gas production; the gas works
supplied the rest. Not all of the distribution networks were in good condi-
tion, judging by the 11 percent gas losses in the pipelines. At this time the
transport pipelines did not even remotely resemble a national gas network.
The huge transformation achieved over a period of around twenty years
is all the more spectacular in the light of these modest beginnings. By as
early as 1951, only two-thirds of these gas works were still in operation,
thanks to the development of interurban networks and the increasing scale
of gas production in coking plants. The years between 1952 and 1957 saw a
A. Beltran (*)
Centre National de la Recherche Scientifique, Université Panthéon-Sorbonne,
Paris, France
J.-P. Williot
Department of History and Archeology, Université François Rabelais, Tours,
France

DOI 10.1007/978-3-319-49532-3_8
232 A. BELTRAN AND J.-P. WILLIOT
fourfold increase in the use of petrol products for gas production. The first
transport network, linking the coking plants in eastern France, the Sarre
region, and Luxembourg to the Paris region, became operational in 1949.
By 1963, only 60 gas works remained as the French national gas network
entered a new era.
The turning point marking the beginning of this new phase came in 1958
with the start of production in France’s own Lacq gas field, a large natural
gas field discovered seven years earlier in the region of Aquitaine. The
changeover to natural gas became the key objective of national develop-
ment in a country that was already well equipped with electrical infrastruc-
ture, and had not yet abandoned its coal mines. Growing demand required
that there should be an expansion of the distribution and transport net-
works. As it became clear that domestic gas production would not be
sufficient to meet the fast-growing need for gas, GDF gradually expanded
its international ties in order to seek new sources of gas—and it is in this
context that the Soviet Union, with its rich deposits of natural gas, soon
emerged on the French radar as well.
The first gas contract that GDF concluded with its Soviet counterpart in
1971 was the latest in a series of international contracts that the company
signed, beginning in the 1960s. The first was with Algeria (in 1965; initially,
Algerian gas was shipped to France in the form of liquefied natural gas, or
LNG); this was followed by an agreement with the Netherlands, and finally
with Norway (in the 1970s).
Apart from recognizing the Soviet Union’s potential as a supplier of
natural gas, and the economic benefits to both sides of establishing an
energy partnership, there were other, more political issues that determined
the nature and extent of French–Soviet energy relations. It was clear that
exchanges in the form of technical inspections and visits by delegations of
experts also constituted a basis for establishing sound political ties at gov-
ernment level, a policy aim pursued by General Charles de Gaulle and
continued by Georges Pompidou from as early as 1969. Moreover, by
forging permanent links, as an essential requirement for the fulfillment of
contracts using land-based gas pipelines, the establishment of gas networks
created a favorable climate for long-term technical and economic
partnerships.
When examining the history of French–Soviet gas relations during the
Cold War, it is important to take into consideration these issues as well as
the international changes that were taking place within the European
energy market over the same period, such as the development of
GAZ DE FRANCE AND SOVIET NATURAL GAS: BALANCING TECHNOLOGICAL. . . 233
infrastructure connecting the countries more closely. The situation became

strained especially in the early 1980s when US President Roland Reagan,
fearing that Western Europe might grow overdependent on Soviet energy,
tried to block European cooperation on construction of a large export
pipeline transporting West Siberian gas directly to West Germany and
from there to other European countries, including France.
The history of French–Soviet gas relations from the 1950s to the 1980s
can be split into three distinct phases: the first phase corresponds to the
entry into operation of a new gas supply network in France during the
1950s and 1960s, when Soviet gas supplies were simply a future possibility.
The second comprises the 1970s, which saw the concrete establishment of
the energy partnership between France and the Union of Soviet Socialist
Republics (USSR), with the signing of the first contract and design of the
required infrastructure across the European continent. The third phase
comprises the issues arising during the 1980s, which extended beyond the
national context as energy supply relations became an instrument of geo-
political maneuvering in Europe.
FROM TECHNICAL PARTNERSHIP TO THE EMERGENCE OF REAL

INTEREST IN SOVIET GAS (1956–1969)
Purchasing gas from the Soviet Union was considered a feasible option from
1967 onwards. However, there had already been contacts between French
and Soviet gas experts before. In the spring of 1956, a French technical
delegation spent considerable time in the USSR and produced a detailed
report on the country’s gas industry. Based on visits to gas works in
Moscow, Kiev, and Leningrad, and a tour of four coking plants (Moscow,
Leningrad, Zhdanov, and Iasinovska), the document contained a compre-
hensive survey of infrastructure and gas production, transport, and distri-
bution issues. The French experts’ fact-finding mission also included visits
to a shale gas production center in the Republic of Estonia, gas liquefaction
plants in Moscow, and the Dashava–Kiev–Moscow, Kohtla–Järve–Lenin-
grad, and Kohtla–Järve–Tallinn pipelines. Documents attached as annexes
to the report supplemented the relatively detailed analysis undertaken dur-
ing their journey: photographs of gas works and production plants, ground
plans, diagrams, gas prices, and collective agreements between the admin-
istration and the Kiev local committee in charge of the Dashava–Kiev feeder
line.1
At that time, the main reason for their visit was to gather information on
gas liquefaction. GDF had embarked on the new technical approach of
LNG, and the same experts who had travelled the length and breadth of
the Soviet empire had visited the United States (US) and United Kingdom
(UK) the previous year with the same aim. The discovery of the huge Hassi
R’Mel gas field in Algeria had not yet occurred—this godsend did not arrive
until six months later, in November 1956. The exchange of information at
this stage was motivated by the increasing level of reciprocal interest
between Western and Soviet parties concerning the future growth of the
Soviet Union’s gas industry.2
In 1960, another mission set off to the USSR, this time producing a
voluminous report on gas transport.3 Three senior executives of GDF
(including René Fort, deputy director of Production and Transport) and
one from Société Nationale des Gaz du Sud-Ouest met their Soviet coun-
terparts from Glavgaz (Glavnoe upravlenie gazovoi promyshlennosti), the
Soviet Union’s main directorate responsible for managing the country’s gas
industry. The Soviet committee members included the Head of Glavgaz,
Aleksei Kortunov, and several of his deputies—the directors of infrastruc-
ture, construction, operations, and the head of the steel welding group of
enterprises. Besides discussions on the state of the transport network, the
delegation took part in a lecture on gas issues and exchanges of ideas on gas
deposits in the Moscow region, as well as several rounds of talks and site
visits on pipeline welding, duct sizing, and underground storage issues.
Visits to the Ukrainian Gas Research Institute (Kiev) and a compression
station and number of meetings at the All-Union Gas Scientific Research
Institute provided a detailed overview of the gas situation in Ukraine. The
visit concluded in Rostov with similar visits to a pipeline laying site and
compression station.
There was nothing unusual about these missions. As part of developing
relations for mutual collaboration, French gas experts had undertaken
similar trips to other countries in which the gas industry was switching to
new technologies. In 1966, when the discovery of the gigantic Urengoi field
in Western Siberia opened up new possibilities for gas production and
export, the Western engineers discussing the technological challenges
included French experts from Sofregaz, a company specializing in the
transfer of engineering. Conversely, Soviet leader Nikita Khrushchev’s trip
to France in March 1960 included a visit to Lacq; later, Kortunov, in his
function as the new minister of the Soviet gas industry, came to France as
the head of a Soviet delegation in 1966.4
The technical bonds formed in this way were also linked inextricably with
the economic prospects that the people’s democracies of Eastern Europe
offered following the initiation of détente between the two blocs. As early as
1967, a mission to Czechoslovakia was planned for the spring of 1968, to be
devoted to the principles of market analysis and the technical and economic
aspects of gas transport; another mission was to visit Romania to investigate
the operation of gas pipelines and compression stations, along with
gas-metering technology. Bilateral cooperation agreements were signed
with Romania in May 1965, with Hungary in January 1966, with Czech-
oslovakia in April the same year, and with Poland in July 1966. This
cooperation was to involve systematic exchanges of documentation, joint
analyses, engineer visits, and mutual assistance for the admission of the
parties to various international or national scientific, technical, or education
bodies. GDF assigned specific tasks to its engineers: they were to inspect
compression stations in Romania and investigate gas allocation in the
Hungarian transport network. Some of these tasks related to the acquisition
of technical know-how that had already been developed in the host coun-
tries, for example in Poland or at the Bechovice Fuels Institute in Czecho-
slovakia, and aimed to tap into the experience gained with the use of steel in
gas distribution networks.5
There were two aspects underlying this policy of technical partnerships.
First, these exchanges were developed in a new context characterized by the
transformation of the gas network in France after the discovery of the Lacq
field (1951) and the growth of the transport network, beginning with a link
to the Netherlands (1959). In just a few years, the structure of the French
gas industry had been changed completely. The introduction of new trans-
port technologies required the synthesis of as much information as possible,
as well as an increased exchange of information. The decade from the
mid-1950s to 1965 was marked by closer relations among French and
Soviet scientists and engineers, leading to the establishment of a transna-
tional network of technical cooperation.
GDF needed to gain expertise about a number of issues, including: the
mechanisms of gas movements over long distances; how to adapt gas
pipeline materials to increasing diameters and higher pressures; and how
to coordinate the changeover to natural gas. This change in technology was
a major nationwide undertaking. There were a total of 17,552 gas con-
sumers (both firms and local utilities) in 1951; 20,782 in 1970; and 30,736
in 1980. Over a period of thirty years, the average annual growth rate was
1.8 percent for domestic consumers, 4.12 percent for industrial users, and
8.96 percent for the services sector (commercial buildings, offices). Whereas
three-quarters of sales served the domestic market in 1950, the share of
industrial consumers was 52 percent in 1980, and of the services sector
13 percent. Gas sales increased from the equivalent of 31.6 million kWh of
energy in 1950 to 1.4 billion kWh in 1980. The total length of the transport
network also continued to increase, quadrupling during the decade of the
1970s.6 This growth was based on the integration of the national network
with a cross-border system, and with the deployment of the Lacq network
being followed by grid extensions to the Netherlands and to Algeria via the
LNG supply chain. Soviet gas offered a further opportunity.
Second, France’s interest taken in the USSR’s resources has to be seen in
the context of General de Gaulle’s policy of bilateralism. His journey to the
Soviet Union in 1966 marked a turning point in the diplomacy of the Fifth
Republic. In particular, it resulted in an agreement on scientific, technical,
and economic cooperation and the establishment of the so-called “Big
Commission” charged with promoting its effective implementation. This
was followed up, during the visit to France of Soviet Prime Minister Aleksei
Kosygin in December 1966, by the establishment of a bilateral Chamber of
Commerce, known as the “Little Commission,” which was structured into
working groups. As early as 1967, France was fully aware of the Soviet
Union’s intention to export its gas. The implementation of an arrangement
for the supply of gas to France by the USSR featured among the topics
slated for discussion in talks held in July 1967, December 1968, and July
1969. Even though the partnerships envisioned the USSR receiving indus-
trial benefits in return through the provision of foreign currency and tech-
nology transfers, monitored by the Coordinating Committee for
Multilateral Export Controls (CoCom), the finalization of a gas contract
took considerable time. Several initial discussions faltered because of the
excessively low gas price offered by France to its Soviet partner.7
THE FRENCH GAS SECTOR CONSIDERS SOVIET CONTRACTS

AS A S OURCE OF S UPPLY (1969–1979)
In the early 1970s, GDF was importing some 68 percent of its natural gas
purchases for distribution. The gas consumed represented 6.3 percent of
France’s primary energy consumption. While this growing dependence on
foreign sources went hand in hand with a significant general increase in
demand for natural gas over the past years, gas still accounted for a relatively
small share of the national energy mix. At this stage, there were only two
supply sources: the Netherlands contributed 82 percent of the gas pur-
chased from abroad, with Algeria supplying the remainder.8
By this time, the USSR had already become an important participant in
the global natural gas market, if only on the basis of its gigantic proven
reserves. These were estimated at 9300 billion m3, or 25 percent of total
global reserves, which was just ahead of the US (7790 billion m3, 21 per-
cent) and Iran (3030 billion m3, 8 percent). There had been a spectacular
increase in production, from 48 billion m3 in 1960 to 177 billion m3 in
1970. Capacity continued to increase, with proven reserves rising to 25,750
billion m3 (35 percent of the world total) and production approaching
400 billion m3 in 1980.9
The USSR signed its first export contract with Austria in 1966, for the
supply of 1.5 billion m3 per year, but the opening of the Bratstvo (“Broth-
erhood”) gas pipeline in 1968, which conveyed gas from the Ukrainian SSR
to Czechoslovakia, seemed to mark an initial step toward creating a future
gas grid covering socialist Central Europe.
But at the end of 1969, when Soiuznefteksport (SNE), the Soviet oil
export company, signed a contract with Italy’s national energy company
Ente Nazionale Idrocarburi (ENI) to supply an average of six billion cubic
meters per year for twenty years, starting as early as 1973, and after the
conclusion of long-term agreements with Germany’s Ruhrgas AG for large
quantities of gas shipments in 1970 and again in 1973, the switch to
Western Europe as the emerging destination of Soviet gas exports became
a reality.10 France did not became part of the new structure until a few
months later. In contrast to Italy and Germany, where the negotiations had
not involved a government actor, the transaction in France had a political
dimension, which brought a wider range of issues into the picture. President
Pompidou was fully convinced of the benefits of a partnership with the
USSR. As early as September 1969, he had said: “I again insist on the need
for faster progress toward our participation in the supplies of Russian gas
resulting from the gas pipeline negotiated between the Russians and the
Germans. I believe we should talk directly to the Russians before involving
the Germans in the discussion [. . .] we need to move quickly. We have to be
on a level footing with the Germans.”11
In spite of these instructions, the same concerns were still present in the
comments that a presidential adviser made on March 29, 1970: “We need
to finalize the gas deal [. . .]. The conclusion of an agreement with the USSR
would appear to be extremely important from the political point of view.
This transaction is seen here as a test. If the result is negative, I fear that the
effect would be most unfortunate, and not only in the economic sphere.”12
The president’s request was repeated in April 1970: “I want the matter to
be finalized before my journey to the USSR.”13 This visit took place from
October 6 to 13, 1970. The commitment to the transaction could be seen
in the light of Pompidou’s vision of France as an industrial power, and the
growth in the energy sector, of which he had become directly aware as the
negotiator of the Evian agreements in March 1962. This had resulted, in
particular, in the first contract for the supply of Algerian gas, and as prime
minister, when the first contract for the supply of Dutch gas was signed on
February 24, 1966.
However, the substantive basis for the relationship lay elsewhere. Pom-
pidou would certainly have been aware of the content of the discussions that
had taken place between French Minister of Foreign Affairs Michel Debré
and his Soviet counterpart, Minister of Foreign Trade Nikolai Patolichev, in
July 1967, during which the issue of the import of Soviet gas had been
identified as a matter of the highest priority for the USSR.14
Pompidou was firmly convinced that the gas deal could lend weight to a
wider French–Soviet political strategy, and would at the same time enhance
France’s position within the European Community. GDF was more
reserved with regard to the use of long gas pipelines, which, due to the
need for exchange systems between countries involved in gas transactions,
necessitated negotiations that were sometimes difficult. As Jean Bertrand
Raimond recounts, it was only much later, towards 1976, that the Ministry
of Industry, on the basis of its own calculations, came to support a contrac-
tual relationship. It was hoped that this would result in a more competitive
gas price.15 However, the policy adopted incorporated De Gaulle’s and
Pompidou’s strategy of détente, which was perceived as a structural neces-
sity. In return for imports of Soviet gas, the USSR was to receive the
infrastructure, pipelines, and gas industry equipment required for the pro-
duction and transportation of gas. These benefits for French technology and
industry were viewed as outweighing the concessions that GDF had to
accept in order to guarantee the availability of resources.
The first contract for the supply of Soviet gas to France was finally signed
on August 6, 1971. It was for the purchase of 2.5 billion m3 per year, for
twenty years, deliverable from 1976 at Bratislava. This decision had some
major technical impacts. In the first instance, GDF had to conduct negoti-
ations with Dutch company Nederlandse Aardolie Maatschappij (NAM),
ENI, and Ruhrgas to arrange the exchange of Soviet gas for Dutch gas from
Drenthe.
More particularly, it was going to be necessary to build a network of gas
pipelines across Europe, marking the start of gas supply integration on a
continental scale. This requirement was the origin of the construction of the
Mittel-Europäische Gasleitung (MEGAL) pipeline system, operated by the
Mittel-Europäische Gasleitungsgesellschaft. In February 1973, agreements
were signed in Paris for the transport of Soviet gas in a network that was to
cross Austria, Italy, and Germany. The Trans Austria Gasleitung (TAG)
supplied Czechoslovakia, Austria, and Italy from 1974 onward, with gas
pipelines of 950 mm in diameter in the Austrian section and 850 mm in the
Italian section. Another network, built in Austria by West Austria
Gasleitung (WAG), a subsidiary of the Österreichische Mineral€olverwaltung
(ÖMV, abbreviated OMV since 1994), GDF, and Ruhrgas, resulted in a
strategic position for Austria’s gas infrastructure. MEGAL laid pipelines in
the heart of Europe, leading to Germany, Austria, and France. The agree-
ment, which linked Ruhrgas and GDF in particular from July 1975 onward,
compensated for the delays occurring in another project to link Monfalcone
(Italy) with Munich.16
The MEGAL network is a good example of the complex corporate
linkages between European gas operators. MEGAL was a subsidiary of
Ruhrgas (50 percent), GDF (43 percent), ÖMV (5 percent), and Stiching
Metal (2 percent), established in 1975 with its registered office in Essen.
With the support of a holding company, MEGAL FinCo, which belonged
to the same shareholders, MEGAL in 1977 became the intermediary for
accumulating the capital required for construction of the pipelines. The
structure operated under a system of royalties paid by gas companies
according to their contracted transport capacity.17
Almost as soon as the grid was in place, new prospects began to emerge.
In 1974, the trend towards an increasingly uniform European gas market
was further accentuated by the agreements negotiated between GDF,
ÖMV, SNAM, and Austria Ferngas on exchanges of Algerian and Soviet
gas, as a way of streamlining gas transit operations. At the end of that year, it
became clear that there was potential to ramp up the supply quantities of
Soviet gas. During his visit to the presidential residence at Rambouillet on
December 4–6, 1974, CPSU General Secretary Leonid Brezhnev had
assured President Giscard d’Estaing that if new resources became available
in the USSR, GDF would be able to increase its gas import volumes beyond
the 4 gm3 envisaged in 1980.18
As the first deliveries of Soviet gas arrived in France in 1976, the possi-
bility of increased volumes became a reality as a result of new discoveries and
the USSR’s need for capital equipment that would have to be funded with
foreign currency. In the following year, GDF embarked on discussions with
SNE with a view to tying the gas price to the fuel oil prices, and extending
the first five-year contract. The context at the time favored efforts to find
new supply sources that could secure supply in France in the face of the
technical difficulties arising at the LNG terminal in Algeria.19
This was the key turning point towards the creation of links extending
the European grid of gas transport networks. In 1979, for example, GDF
and Ruhrgas agreed on the need to explore this new project, whereby
Europe can offer to buy the gas and supply the infrastructure and services
needed for implementation of the project. Ruhrgas responded positively,
and it became clear that Belgium, the Netherlands, and Sweden were also
interested in this project. Ruhrgas and GDF suggested a cooperation
arrangement with Benelux.20
There were two possible routes. One was either along the border
between Austria and Hungary, or along the border between Czechoslova-
kia and Germany. The other was a northern pipeline route, running across
the two Germanies or connecting East and West via the Baltic Sea. Having
formed these understandings, the main European gas actors saw the agree-
ments reached as “creating a framework conducive to undertaking a further
project for the purchase of Soviet gas, if the USSR decides to go ahead with
it.”21
At a time when the harnessing of the Iranian gas resources was starting to
look less likely with the incipient revolution, and supply from the North Sea
fields under Norwegian control had barely started, boosting links with the
USSR became the most credible option for growth in the European gas
market.
Further issues were quick to emerge as latent implications of these closer
relations with the USSR: the level of Europe’s energy supply dependence,
and the substantial infrastructure investments that had to be funded. In
France, the political and diplomatic issues became more pressing as gas was
no longer a negligible source of energy. By 1979, it represented 12 percent
of the country’s primary energy consumption. Natural gas made up 84 per-
cent of total gas purchases, with Soviet gas representing 14 percent of these
imports.22
TOWARD A NEW GAS CONTRACT BETWEEN FRANCE

AND THE USSR
The two oil shocks during the 1970s had a relatively severe impact on
France, as a country importing almost three-quarters of its energy—oil in
particular, but also natural gas and coal. At this time only one-quarter of its
energy was generated within the country, mainly in the form of hydroelec-
tricity. The government responded to the 1973/74 oil shock in two main
ways—through the development of a very substantial nuclear power
program and with energy-saving measures, including campaigns to
increase public awareness of the situation. Natural gas was still seen as a
“filler” (énergie de bouclage), designated to make up for the shortfall in the
energy budget once oil and coal supply requirements had been met and
the level of primary and secondary energy generation had been set. Rather
than talking of a long-term gas policy, it is therefore more accurate to
conceive of the process as a series of adaptations to the needs of the moment.
Accordingly, as France entered the 1980s, and in an attempt to supple-
ment the declining production of the Lacq gas field, it was receiving gas
from the Soviet Union, but also from Algeria and the Netherlands. How-
ever, when the USSR’s position as a gas supplier was further strengthened
by the start of production at Urengoi in 1978, Moscow announced it was
prepared to enter into new negotiations with a view to increasing supply
volumes in return for Western infrastructure and currency. In 1979, French
state company GDF indicated that it preferred not to enter into a contract
on its own, and that there were other European actors interested in this
possibility, such as Ruhrgas in Germany, as well as other companies in
Belgium, the Netherlands, and Sweden. Following negotiations, an alloca-
tion plan was formulated, under which 42 percent of the volume of gas to be
purchased from the Soviet Union was to go to Ruhrgas, 28 percent to GDF,
15 percent to the Belgium operator Distrigaz, and 15 percent to Gasunie in
the Netherlands.23
For the transport route, a decision was still required between the options
of a northern or southern pipeline. In the same year, 1979 the Shah of Iran
was overthrown in favor of a theocracy that terminated all the agreements
concluded by the previous regime. Iranian gas was supposed to come
onstream in 1981, but it became increasingly evident that there was little
likelihood of this resource becoming a reality.24 Accordingly, it was neces-
sary to resume negotiations with the Soviets, who had largely met their
commitments: “Overall, we are receiving the annual volumes promised,
with shortfalls in winter being balanced out with extra supplies in summer.”25
The price of gas from the USSR had increased by 10 percent, however,
making it less competitive.
Specific discussions on a new contract with the Soviets started in 1981, a
year of major changes in France, which was marked by the arrival of a
socialist coalition administration. The negotiations proceeded at a slower
pace than expected, however, reflecting changes in the context : “This is a
project on a gigantic scale, and the volumes of gas involved could raise fears
of European dependence on USSR exceeding the acceptable threshold.”26
The GDF negotiators nonetheless believed they had to choose the lesser
of two evils, since the objective remained the diversification of gas supply
sources between Western countries and countries of the Third World and
the communist bloc. A French decision not to buy gas from the USSR
would not have any impact on the nuclear energy program (that had been
accelerated in 1974), the oil program (where the strategy was to buy less,
find long-term contracts, and diversify, particularly towards North Sea
sources), or the coal program (with quantities reducing with every
passing year).
“The choice before us is between importing gas from the USSR or fuel
oil from the OPEC countries, if they see fit to sell to us. Since we have a very
high level of energy dependence on the OPEC countries, but so far only
minimal dependence on the USSR, buying gas from the Soviet Union
means higher diversification.”27 This was the credo espoused by the GDF
buyers, and they endeavored to convince the French government accord-
ingly. The situation from a purely gas-related perspective was that the
proportion of gas in the energy mix in France was low in comparison with
the country’s main neighbors, and if France decided not to buy from the
USSR, other countries would do so, leading to an even lower ratio of gas in
France’s total energy consumption.
Nor were the French greatly preoccupied with the danger of a potential
cessation of energy supplies from the Soviet Union, as they had already
experienced such a termination in the case of Algeria, which during the
global oil shock of 1973/74—that is, at the worst possible time—was
unable to supply natural gas to France. It was argued that, as in the case
of Algeria, France would then be able to invoke solidarity between
importing countries, and would be able to develop various precautionary
measures such as back-up reserves (for three to six months, in any event
enough to get through a winter), and make increased use of contracts with
industrial users allowing an interruptible supply. Finally, as noted by the
minister of industry himself, it was necessary to plan ahead for the winters of
1984 and 1985, which it would be difficult to get through without new
natural gas resources. By 1990, following an instruction from the French
Ministry of Industry, GDF wanted to store one year’s worth of gas reserves
in order to be prepared for the eventuality of a default by its main supplier
and supply interruptions affecting the second-line supplier.
Indeed, because of its nuclear program and the former predominance of
coal, France was not one of the biggest gas consumers among European
countries. If events were left to take their course, in the absence of fresh
discoveries, the share of natural gas in the French energy mix would become
negligible due to the decline in the Lacq gas field (the only significant
French domestic gas resource, as has already been noted), and the fields
of Groningen and probably also those in the North Sea, not to mention the
lack of supply from Iran. Nevertheless, the use of natural gas was an effective
way to reduce the country’s dependence on members of the Organization
of Petroleum Exporting Countries (OPEC), still with only a low level of
dependence on the USSR (less than 5 percent of the total energy budget).
The Soviets also viewed their gas exports as a form of cooperation
between East and West, and hence as a component of political détente.
They needed such cooperation, given that 70 percent of their income from
gas sales was earmarked for infrastructure development, and European
involvement would enable them to accelerate the process of bringing Sibe-
rian gas onstream.28 In this context, France, as a major exporter of
gas-related technologies, was not only an essential partner, but also a way
to achieve political and social stability in Eastern Europe.
Hence there was a mutual interest in continued trade: French wanted to
buy Soviet gas, and the USSR needed to sell it to gain access to better
technology and precious Western currency (mainly US dollars). A new
contract was therefore signed on January 18, 1982 by Pierre Delaporte
for the French side and Yurii Baranovskii representing the Soviet Union.29
The negotiations had focused on quantities and, of course, the price (since
the gas price had to be competitive with respect to other forms of energy, in
line with the so-called “netback” principle). The contract was of the stan-
dard “take or pay” type, requiring payment even if the party did not take
delivery. The financial agreements had been signed with a group of banks
led by Crédit Lyonnais and Deutsche Bank. The commercial agreements
involved several European companies, including the Mannesmann–Creusot
Loire consortium, AEG, Thomson, and Nuovo Pignone. The final price was
$5.50 per million BTU (British thermal unit30).31
This further contract, which followed other agreements between the

USSR and Western European countries, was a source of major irritation
to the administration of US President Ronald Reagan. The US was afraid of
European overdependence on the USSR and argued strongly that they
should seek alternatives: Norwegian, that is, North Sea, gas; US coal; or
nuclear fuel. They even offered to assist with exploration efforts in the
North Sea and facilitate agreements on LNG with Nigeria, Algeria, or
Cameroon.32 US General Electric promptly refused to supply turbines for
the compression stations required for gas transport. This diplomatic and
economic offensive failed to convince the Europeans, since all the US
suggestions were too expensive or too remote in time, whereas Soviet gas
was reasonably accessible, and available immediately.
On May 14, 1982, in an address to an audience of industrialists in
Hamburg, French President François Mitterrand noted with regard to the
US sanctions: “We are not at war with the USSR; an economic blockade is
an act of war, and indeed one that is bound to fail except as the first phase of
a successful war—it is pointless in isolation.”33
The G7 meeting in Versailles in June 1982 took place in a somewhat icy
atmosphere between the US and European delegations. The conflict
became more acute with Washington’s decision on July 18, 1982 to extend
its technology embargo on exports to the USSR to all foreign activities
using a US license (as was the case for some areas of the gas industry). The
Europeans did not change their attitude, and eventually, on November
13, 1982, Ronald Reagan, in an attempt to avoid quarreling with the
Europeans (in the final analysis, the US sanctions affected Europe more
than the USSR), announced the lifting of the embargo on supplies for the
gas pipelines. Nonetheless, the US media continued to criticize the position
of the Europeans, claiming that they had made themselves dependent on
the USSR and also negotiated a bad deal, as claimed in a leading business
newspaper: “By refusing to follow President Reagan, the European coun-
tries have lost their best chance of drawing out of a losing market. The prices
of energy will decrease for the entire world as a result of the collapse of the
OPEC cartel, except for those European countries which have quantities of
high-priced gas on their hands.”34
It is true that by this time, the landscape had changed fundamentally
since the signing of the contract in January 1982: three years later, the
French did indeed request a renegotiation of the agreement. Deliveries were
to start in 1984, even if the polemic exchanges with the US were far from
over. Fresh negotiations duly started in 1985 at the request of the French.
The latter did not present a united front, however: GDF, as a business
enterprise, wanted to be able to buy gas according to the country’s require-
ments, whereas the position of the Ministry of External Trade was instead
focused on restoring equilibrium to the trade balance between the USSR
and France (following the discrepancy created by the massive purchases of
gas).
As already noted, France feared that a shortage of gas could cause difficult
winters in 1984 and 1985. In fact, the gas consumption forecast for 1990
was 25 percent down on the forecast figures, and GDF ended up with gas
surpluses for 1983 and 1984, as gas consumption had fallen in Europe for
three successive years. There were also changes in many of the factors
involved—the US dollar and its fluctuations (the dollar exchange rate had
shot upwards in 1984 and 1985); competition between different forms of
energy; and the rigidity of the gas sector (with contracts generally being
signed for 20-year terms)—meaning that the circumstances were no longer
the same as when the contract was originally signed.
In this changed context, GDF called for greater flexibility in the contracts
(including those of 1972 and 1974), which it saw as too rigid with regard to
the supply quantities. In addition, the gas price had been partly tied to the
crude oil price, but this was now plummeting (in what some were calling a
“counter oil shock”). The price per barrel was now an average of $25 rather
than the expected $40 figure. The 1982 contract therefore had to be
renegotiated, they argued, with regard to both the quantities of gas,
which were too high, and the excessively high prices (the aim being to
secure a price per million BTU of less than $5). To compound the situation,
supplier countries Norway, Algeria, and the Netherlands had already
agreed—in June 1985—to review their price schedules. In related develop-
ments, Italy had delayed the signing of a contract with the USSR by two
years (in particular, because of the events in Poland), and had secured a very
attractive price of $3.6 per million BTU, and Germany had done the same.
All these arguments strengthened the French position, particularly since all
gas contracts included renegotiation clauses.
In these potentially difficult negotiations, the French Ministry of External
Relations backed the position of the management of GDF, arguing that the
gas price in fact had nothing to do with the trade balance. It claimed that gas
did not come under the purview of the nineteenth session of the “Big
Commission” which had been set up in the 1960s in order to regulate
trade between the two countries. The position was that a renegotiation of
the Franco-Soviet contract should meet two objectives: to reduce the
quantities of purchases by GDF, which required lesser volumes; and, as a

consequence, to restore equilibrium in the trade balance between the two
countries. Specifically, GDF sought a price reduction of 10 percent, with a
corresponding reduction in the quantities to be supplied by the Soviets. On
June 6, 1985, an agreement was finally signed between GDF and SNE that
specified lower purchase volumes (purchases in 1986 were ultimately 10 bil-
lion kWh less than in 1985) and a price reduction representing savings of
almost one billion francs for GDF. The final price was $3.5 per million
BTU, which was relatively close to the price negotiated by other European
natural gas importing countries.35
In addition, it was no longer appropriate to tie gas prices to fuel oil prices,
since gas had to be competitive. And, finally, the contracts of 1972 and
1974 were renegotiated on the same basis. These changes to the contract
enabled GDF to balance its accounts a little better than before—a much-
needed development, after the signing of the contract with Algeria at the
beginning of Mitterrand’s term of office had put the books firmly in the red.
The Soviets, for their part, having faced difficulties with extracting their
crude oil, leading to a severe decline in the sector, could not afford to lose
such precious markets as the Western countries. And the agreement of 1985
did indeed mark a stabilization in the gas contracts between the USSR and
Europe, which was to last through until the early 1990s.
CONCLUSION
By way of conclusion, we would like to illustrate the position adopted by
France and its national gas company in their dealings with the Soviet Union
during the Cold War through a series of graphs. They show that in spite of
the international crises during the period—of which there was certainly no
shortage—the Europeans and Soviets managed to find a domain of mutual
understanding around gas-related trade transactions; and these were far
from trivial in scope, since they involved long-term contracts and extremely
significant fixed infrastructure. While the relationship can be seen as based
on constraint, in fact there were constraints on both sides: the Europeans
were obliged to buy (“take or pay” contract), but the Soviets had to provide
gas in sufficient quantities and of consistent quality.
It should be noted that there were no defaults by either party over the
entire period, as Moscow would never use the “energy weapon” in order to
cut off supply to its West European clients (such a policy would not be
characteristic of Russian behavior towards Ukraine and other former Soviet
republics until after the collapse of the Soviet Union). Gas purchasing actors
regarded the Soviets as reliable suppliers offering reasonable prices. In fact,
contrary to what the Americans might have thought, the French—and the
West Europeans in general—do not seem to have considered natural gas a
source of strategic importance during much of the Cold War. The situation
was quite different from the issues arising in connection with the Soviet
Union’s role as an oil supplier, even though the role of natural gas increased
over the same period and the USSR became an indispensable supplier. It is
nonetheless worth repeating that natural gas was a complementary form of
energy, and offered advantages for both of the two blocs.
It is clear from the first graph (Fig. 1), which shows French purchases of
natural gas from 1947 to 1989, that Paris, having failed to discover new
reserves similar to the Lacq gas field, successfully diversified its supply
sources between Norway and the Netherlands (both countries in the West-
ern bloc), Algeria (a Third World country and not the easiest of negotiating
partners),36 and the USSR. The fact that gas resources are relatively widely
distributed around the world, whereas petroleum deposits are concentrated
in the Middle East, favored this sensible policy.
The next graph (Fig. 2), showing the French energy balance in 1990,
confirms the minor strategic significance of gas contracts with the USSR.
Natural gas imports covered only 10 percent of the country’s energy needs,
350000
300000
250000
Divers/Others
Millions kWh
200000 NORVÈGE/NORWAY
URSS/USSR
150000
PAYS-BAS/NETHERLANDS
100000 ALGÉRIE/Algeria
France
50000
0
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
Fig. 1 France’s natural gas purchase (Based on data from Gaz de France, Annuaire
statistique, 1990)
Producon naonale énergies

fossiles
11% 5%
7% Energies renouvelables
(électricité hydraulique et
thermique)
Electricité nucléaire
29%
Importaons charbon
33%
Importaons gaz naturel
10% 5%
Importaons pétrole
Fig. 2 French energy balance, 1990 (without exports, in Mtep: million tonne
d‘équivalent pétrole/million tons of oil equivalent) (Source: Statistics for the year
1990, French Ministry of Industry)
and, accordingly, the contribution of Soviet gas to this balance was only 3 to
4 percent—in other words, a negligible figure, and no comparison with the
significance of Saudi Arabia or Iraq in the oil sector, for example.
Finally, the map of gas transport networks (see Fig. 3) underlines the
extent to which the barrier of the Iron Curtain remained completely invis-
ible in this specific sector; natural gas is a textbook example of a cross-border
commodity. There are some striking differences when this picture is com-
pared to the oil pipelines in NATO and Warsaw Pact countries, with
exchange axes running both north–south and east–west, not to mention
lines to facilitate transactions between consumer countries. The gas network
actually follows a commercial and technical logic, with only very limited
involvement of political issues. It is difficult to say whether the gas network
facilitated or accelerated an understanding between East and West, but it is
clear that it did not reflect Cold War tensions in the way one frequently finds
with regard to oil issues.
Fig. 3 Proposed priority axes for natural gas pipelines, December 2003 (Source:
Union française des pétroles, rapport 2004)
NOTES
1. Archives Nationales (AN), Centre des Archives du Monde du Tra-
vail (CAMT), Gaz de France, 2011 020-8040; Mission to the
USSR, April/May 1956.
2. For more about this dynamic, see Per H€ogselius, Red Gas: Russia
and the Origins of European Energy Dependence (New York: Pal-
grave Macmillan, 2013), 13.
3. CAMT, Gaz de France, 2011 020-8040; Mission to the USSR,
June 16–July 3, 1960.
4. Archives of Gaz de France (AGDF), “Le Gaz de France et la coop-
ération internationale,” Report of Jean Kec, director of foreign
relations of the executive board, October 1967, 13.
5. AGDF, “Le Gaz de France et la coopération internationale,” 22.

6. Data from AGDF, Annuaire statistique, 1985, internal distribution,
June 1986.
7. Marie-Pierre Rey, “Georges Pompidou, l’Union soviétique et
l’Europe,” in Georges Pompidou et l’Europe, ed. Association Georges
Pompidou (Brussels: Complexe, 1995), 160.
8. Statistics from M. Valais, P. Boisserpe, and J.-L. Gadon, L’industrie
du gaz dans le monde, 4th ed., Publications de l’Institut français du
pétrole (Paris: Technip, 1982), 224.
9. Ibid.
10. On energy relations of Italy and the FRG with the Soviet Union, see
the chapters by Elisabetta Bini and Dunja Krempin in this book.
11. AN, 5AG2/1017, Note of G. Pompidou about a note from
G. Gaucher to B. Esambert, September 2, 1969.
12. AN, 5AG2/1017, Anonymous note addressed to H. Alphand, gen-
eral secretary of the Foreign Ministry, March 29, 1970.
13. AN, 5AG2/1017, “Problème de l’achat de gaz soviétique,” anon-
ymous note of the Foreign Ministry, April 15, 1970.
14. AN, 5AG2/1017, Note to G. Pompidou, July 19, 1969.
15. Testimony of Jean Bernard Raimond at the symposium Georges
Pompidou and Europe, in Association Georges Pompidou, Pompi-
dou et l’Europe, 175. The author was a technical advisor to the prime
minister (1968–1969) and the French president (1970–1973).
16. For further reading, see Jacqueline Boucher and Yves Smeers, “Gas
Trade in the European Community during the 1970s: A Model
Analysis,” Energy Economics 7, 2 (1985), 102–16; Bijan Mossavar-
Rahmani, Øystein Noreng, and Gregory F. Treverton, Natural Gas
in Western Europe: Structure, Strategies, and Politics, Harvard Inter-
national Energy Studies 3 (Cambridge, MA: Energy and Environ-
mental Policy Center, Harvard University, 1987); see also Alain
Beltran and Jean-Pierre Williot, Les routes du gaz: Histoire du trans-
port de gaz naturel en France (Paris: Cherche midi, 2012), 116.
17. For corresponding literature on MEGAL, see Beltran and Williot,
Les routes du gaz, 116.
18. AGDF, Direction Production Transport (DPT), Blois, 881218,
“Réunion des chefs de groupes gaziers,” February 26/27, 1981.
19. The LNG terminal of Skikda was temporary closed due difficulties in
the compressors.
20. AGDF, DPT, Blois, 881218, “Réunion des chefs de groupes

gaziers,” March 1/2, 1979, 4.
21. Ibid., 5.
22. AGDF, Annuaire statistique.
gaziers,” March 1/2, 1979, 4.
24. AGDF, DPT, Blois, 881218, Strasbourg, “Réunion des chefs de
groupes gaziers,” October 18/19, 1979, 3.
25. AGDF, DPT, Blois, 881218, Lyon, “Réunion des chefs de groupes
gaziers,” July 6/7, 1980, 3.
gaziers,” February 26/27, 1981, 5.
27. Ibid.
29. Véronique Poisson, “The Renegotiation of the 1982 Gas Contract
between France and the USSR,” Soviet and Eastern Foreign Trade
24, 2 (1988), 26–37.
30. One million BTU correspond to approximately 300 kWh.
31. Poisson, “Renegotiation,” 31.
32. “La degradation des rapports avec les Etats-Unis inquiète les
dirigeants européens,” Le Monde, July 21, 1982; Wall Street Jour-
nal, March 16, 1983.
33. Le Monde, May 16, 1982.
34. Wall Street Journal, March 16, 1983.
35. Poisson, “Renegotiation,” 36.
36. Algeria nationalized the entire gas industry in 1971.
Rise of Western Siberia and the Soviet–West
German Energy Relationship During
the 1970s
Dunja Krempin
INTRODUCTION
By the late 1980s, the Soviet Union had become an energy superpower, and
natural gas accounted for the main share in the country’s energy mix. This
marked the end of long-lasting political discussions about the direction of
the Soviet Union’s energy strategy, especially regarding the exploitation of
Western Siberia’s massive gas resources. The vast oil and gas fields in the
northern part of Western Siberia had already been discovered in the 1960s.
However, it took almost twenty years and intense discussions until the
political leadership decided to take the great leap into Western Siberia. It
was the combination of rising West European interest in Soviet energy and a
rapidly worsening state of affairs in the Soviet energy and fuel sector that
spurred Moscow to launch a comprehensive program to develop Western
Siberia and its gigantic gas resources in the northern part of the Tiumen’
region.
During the party’s XXV congress in 1976, Leonid Brezhnev, first secre-
tary of the Communist Party of the Soviet Union (CPSU), announced the
D. Krempin (*)

DOI 10.1007/978-3-319-49532-3_9
254 D. KREMPIN
start of a large-scale industrialization campaign of Western Siberia, which

was also to include the exploitation of natural resources. It took another two
years until the launch of a large “Siberian campaign” in spring 1978, with
the development of the Tiumen’ gas industry as one of the campaign’s key
projects. This project was accompanied by a media campaign that rallied the
political and economic elite behind the Siberian cause and mobilized men
and women to work in Siberia’s developing industries. The media campaign
aimed at changing the perception of Siberia as a colonial periphery by
reinterpreting the country’s North (sever) and presenting a new image of a
modernizing Siberia.
To no small extent, the development of West Siberian energy was also
facilitated by expanding economic relations between East and West, which
began during détente in the late 1960s. Among the West European coun-
tries, the Federal Republic of Germany (FRG) became the Soviet Union’s
most important trading partner in the sphere of energy. The contracts
between the FRG and the Union of Soviet Socialist Republics (USSR) in
the 1970s and early 1980s—including the construction of a large gas export
pipeline from Western Siberia to Europe—not only changed the overall
energy relationship between East and West in a fundamental way. These
developments also transformed Western Siberia from a remote and largely
empty swampland to a region of global economic significance.
This chapter analyzes Soviet energy policy during the 1970s and looks
into the long and arduous path that led to the Soviet leadership’s decision to
develop Western Siberia. Although this decision was largely based on
domestic economic considerations, the prospect of increased energy exports
to, and cooperation with, West European countries and companies played a
tremendous role as well. In this context, West Germany became a key
facilitator and emerged as the future pillar of the Soviet Union’s compre-
hensive energy plans.
AN “EARLY” SIBERIAN STRATEGY

Until the mid-1960s, Western Siberia was a remote area dominated by
forestry, agriculture and fishing. Although Soviet geologists had already in
the 1930s predicted potentially significant deposits of various mineral
resources in Siberia, including oil and gas, the political leadership did not
prioritize the systematic geological exploration of the territory.1 The region
only gradually came into focus once growth in production in other
oil-producing regions, most notably in the Volga-Urals, began to slow
RISE OF WESTERN SIBERIA AND THE SOVIET–WEST GERMAN ENERGY. . . 255
during the 1960s. The Soviet Union ran the risk of not being able to meet
increasing domestic demand for oil and at the same time fulfill its export
obligations toward the members of the Council for Mutual Economic
Assistance (CMEA) as well as its West European clients. General Secretary
Brezhnev himself underlined the importance of turning to other production
areas. In a speech in November 1965, he pointed out that more investment
was to be allocated in the framework of the ongoing five-year plan for the
development of Siberia.2
As far as the development of Siberian oil and gas was concerned, the head of
the Soviet Union’s Gas Industry Ministry, Aleksei Kortunov, supported this
policy. At a Komsomol meeting in Tiumen’ in 1966, he remarked: “You have
read that in the United States [US], in Canada, the most ambitious, the most
rapacious [. . .] matters are done in exactly these sectors. But in our country,
these resources serve the people; they are directed toward the strengthening of
our country [. . .]. Concerning the production of oil and gas, we are taking a
leading place. Only the US is ahead of us, but we will surely catch up.”3
In his speech, Kortunov also envisioned various directions that the fight
for oil and gas might take on the front line (perednyi krai) of Western
Siberia. His plan was to develop the North with its vast and unsettled land
while using the land’s own resources against the frightening cold. He
conceived of Western Siberia as a “training camp” for young specialists of
the Siberian oil and gas industry. In the future, new resource bases were to
be located even further east. Future specialists were to be taken from cadres
of the region to form a group of pioneers, which were to discover oil and gas
riches in Siberia’s yet to be explored eastern territories.4
Kortunov’s assessment about the potential of West Siberian oil and gas
was shared by many lobbyists on the Siberian home front, which consisted
of the regional party committee and Siberian geologists and scientists.5 Yet
the move toward the east was met with concerns from several members of
the national political and economic establishment. Among the key partici-
pants in the discussions on the development of Western Siberia were the
chairman of the Council of Ministers, Aleksei Kosygin, the chairman of the
State Planning Committee (Gosplan), Nikolai Baibakov, one of Brezhnev’s
favorite advisors on oil and gas, and representatives from the State Com-
mittee for Science and Technology, which was an important institution
advising the country’s leadership for energy matters.
Although Soviet experts did not doubt the crucial role that oil and gas
was to play in the country’s energy mix, they were as yet unsure about the
future role of Siberian oil and gas,6 the extraction of which was thought to
256 D. KREMPIN
be too expensive due to the region’s geographical remoteness and harsh

climate. In January 1968, Kosygin and Baibakov visited Western Siberia in
the company of several other ministers. Kosygin met with local workers and
representatives of local party committees, and delivered a speech about the
general state of the Soviet economy and international affairs. On this
occasion, Kosygin mentioned that the region’s oil could pay for wheat
purchases abroad.7 Regional geological cadres interpreted the visit as
proof of the political leadership’s interest in the region.8
However, the growing interest of the political leadership did not imply it
was actually about to engage in any comprehensive energy development
projects in Western Siberia. Although the Council of Ministers declared in
1969 that the region constituted a “large basis for the production of oil and
gas” (krupnaia neftedobyvaiushchaia baza),9 it had not yet gained any
extraordinary status among Soviet oil and gas regions. Although the Soviet
planners did envision the development of more prospective fields in Western
Siberia’s Tiumen’ region, Soviet decision-makers also intended to develop
oil and gas regions in the Kazakh Soviet Socialist Republic (SSR) such as
Mangyshlak, or closer to the center, for example in the Komi Autonomous
SSR. They thought these fields were of similar size as the Tiumen’ fields—
mistakenly, as it turned out. This was a setback for Tiumen’s resources:
although an impressive 113 oil fields had been discovered in the Tiumen’
region by 1973, only 19 took up production by 1975.10
During a meeting in February 1971, Brezhnev again stressed the impor-
tance of West Siberian energy for the Soviet economy, describing it as an
outstanding chance to develop the economy and acquire urgently needed
foreign currency.11 To implement these ideas, the political leadership had to
find a way to overcome previous failures in building the region’s infrastruc-
ture. Already during Kosygin’s trip in January 1968, the region’s structural
problems had become clear, with the prime minister himself noting the
workers’ difficult living conditions and the lack of infrastructure. Shortly
after the trip, construction units arrived in Tiumen’ to improve the situa-
tion. However, their efforts were not much more than a drop in a bucket;
the region’s entire infrastructure remained underdeveloped. In order to
improve the situation, the Ministry for the Construction of Oil and Gas
Enterprises was established in 1972. This institution was to oversee all
further construction tasks for the building of energy production infrastruc-
ture, including pipelines and storage facilities.12 Boris Shcherbina, former
first secretary of the Tiumen’ party committee, was appointed to head the
new ministry. But despite these measures, the problems largely remained
unsolved. Eventually, the political leadership realized that it had neither the
financial means nor the technological skills to develop Western Siberia on its
own. This was the time when Moscow, profiting from the détente initiated
in the late 1960s, turned more and more toward the West to foster inter-
national energy projects and obtain the necessary credits and technology.
A SOVIET–GERMAN PARTNERSHIP EMERGES

It was in this context that the FRG emerged as the key trading partner of the
USSR. Since the 1950s, the USSR’s strategy had been to increase oil
exports and earn “petrodollars,” which enabled the country to purchase
scarce goods such as wheat or meat, as well as those technologies it was
unable to produce itself.13 International conflicts like the Suez crisis of 1956
or the Six-Day War of 1967 demonstrated to Western countries the danger
of relying almost exclusively on Arab oil. Of all West European states,
Austria was the first country to diversify by importing modest amounts of
Soviet gas in 1968 via an extended leg of the Bratstvo (“Brotherhood”)
pipeline running from the Soviet Union to Czechoslovakia. The Soviet
treaty with Austria was followed by treaties with Italy in 1969, the FRG in
1970, and France in 1972.14
Germany held a special place in the Soviet Union’s external relations.
Having been the USSR’s most important European trading partner before
World War II,15 an intensification of economic cooperation, which had
collapsed during the war and resumed only slowly ever since, was in the
interest of both sides. At the same time, the unsettled Berlin question and
relations between the FRG and the Soviet-controlled German Democratic
Republic (GDR) were major stumbling blocks that not only prevented the
normalization of Soviet–West German relations, but also caused repeated
tensions between the two superpowers. As long as the Berlin question was
not settled, it was difficult for Soviet-FRG economic relations to take off.
At the same time, political leaders and entrepreneurs from West Germany
were well aware that cooperation with the Soviet Union might help them
tackle domestic economic problems. The steel and machine-building com-
panies, in particular, were hoping that an internationalization of their
activities would provide a way to overcome the recession.16 Moreover,
West Germany was under the same pressure as other countries that had to
cope with the decline of their domestic energy resources in a time of rising
energy demand. West German coal production had been declining since the
late 1950s, while cheap oil and coal imports were booming, temporarily
258 D. KREMPIN
washing away worries about future energy shortages.17 But the total con-
sumption of energy, including the demand for natural gas, kept rising,18
calling for efficient solutions. Because of the conflict over Berlin, the FRG
was excluded from Soviet foreign trade planning until the mid-1960s,19 and
the FRG “lost years in trading with the Soviets.”20
The easing of political tensions during détente was thus a most welcome
opportunity, as it also paved the way for economic rapprochement. As early
as 1968, the West Germans invited Soviet Minister of Foreign Trade Nikolai
Patolichev to visit one of the biggest industrial fairs, the Hannover Messe,
seeing this as an opportunity for mutual acquaintance and talks about
possible extensions of economic relations. But the Soviets rejected the
German offer. At this time, a real improvement in trade still seemed to be
an unlikely distant prospect in view of the unresolved political questions.
This, however, was about to change.
The Soviet Union emerged as an especially attractive partner for gas
trade. The West viewed Soviet energy as a welcome addition to existing
energy resources and as an opportunity to reduce its dependency on Arab
imports. Bavaria, the first of the German federal states to show interest in
Soviet gas, wanted to replace some of its coal imports from northern
Germany and sought an alternative to expensive Dutch or Algerian gas.
At this stage, however, discussions between the FRG and Soviet Union were
held only informally.21 After cancelling a deal with Algeria, the Bavarian
minister for economy and finances, Otto Schedl, joined trade negotiations
between Austria, Italy, and the Soviet Union on the import of Soviet gas.
The deal envisaged building a gas pipeline along the exiting Transalpine
(oil) Pipeline (TAP) to Linz, the Austrian center of the chemical industry
close to the Bavarian border, and from there via Tyrol to the Italian market,
and possibly to Bavaria.22 However, at this stage Bavaria was ultimately left
out of the Soviet–Austrian and Soviet–Italian deals because the Soviets
doubted that the German federal government would officially support
Bavaria’s participation, and therefore excluded the possibility of Bavarian
involvement.23
A common way of doing business with the Soviet Union was through
so-called “compensation deals,” which also became a topic of significant
interest among West German politicians and entrepreneurs. At that time,
however, many members of the West German political establishment,
including representatives of the Konrad Adenauer and Ludwig Erhard
governments, still questioned whether closer relations between the USSR
and the FRG were advisable. Besides the halfhearted talks with the
Bavarians, the Soviets tried to gain better insight into the functioning of the
German energy market by studying the experience of other international
companies (namely the Dutch ones) in establishing themselves in the
German gas market. This policy continued during the congress of the
International Gas Union in summer 1967. The event was attended by a
Soviet delegation headed by Deputy for International Affairs Aleksei
Sorokin of Glavgaz (Glavnoe upravlenie gazovoi promyshlennosti pri
Sovete Ministrov SSSR—Main Directorate of the Gas Industry at the
Council of Ministers of the USSR).24 In January 1969, Patolichev visited
an exhibition on export goods in Berlin, but the meeting passed without
discussion of political topics.25 It was some three months later, during
Patolichev’s visit of the industrial fair in Hannover in April 1969, that the
Soviet representative in direct talks with German Minister of Economics
Karl Schiller proposed an extension of the Druzhba (“Friendship”) oil
pipeline to West Germany.26
While the Soviets thus showed increasing interest in energy cooperation
with the FRG, sensitive topics—from the Germans’ point of view—
remained unsettled, including the question of the degree of dependency
and other unresolved political issues. With regard to natural gas imports, the
German Ministry of Economics held the view that a Soviet share of less than
20 percent in total German domestic gas consumption was justifiable and
would not threaten Germany’s supply security.27 At the same time, the
country did not want to go it alone. To secure unobstructed deliveries of
Soviet natural gas, Germany wanted other West European countries such as
Austria, Italy, France, or Switzerland to participate in a comprehensive
European supply system relying on Soviet gas imports. Although German
Assistant Secretary of State (Ministerialdirektor) Axel Herbst would have
preferred a lower percentage of imported Soviet gas in the country’s energy
mix, he nevertheless supported a compensation deal with the Soviet Union.
According to one report, gas demand would rise from 8 billion cubic meters
(bcm) in 196928 to 26 bcm in 1975, and it appeared viable to import gas
from the Soviet Union to supply Bavaria and industrial agglomerations such
as the Rhine-Main area.29 Moreover, the Ministry of Economics decided
not to deal with the gas trade in the framework of purely economic com-
pensation deals, but to link the conclusion of economic deals to the suc-
cessful conclusion of a broad economic agreement.30
Meanwhile, Brezhnev, during a Moscow machinery exhibition in May
1969, visited the German pavilion for the first time since the chemistry
exhibition in 1965.31 The Soviets, too, showed increasing interest in
260 D. KREMPIN
pursuing gas compensation deals with the FRG. German Ambassador to the
Soviet Union Helmut Allardt and Kosygin agreed in July 1969 that the
negotiations had taken a positive turn. Kosygin made it clear that the
conclusion of large compensation deals would amount to a “revolution”
in bilateral relations on a scale that not even the Americans had managed to
achieve yet in their bilateral relations with the Soviet Union.32
Finally, on February 1, 1970, the breakthrough was achieved when
representatives of the West German energy industry signed a large contract
on the delivery of Soviet gas.33 The contract obliged the Soviet Union to
deliver gas to the West German company Ruhrgas AG from October 1973
for at least twenty years; a separate contract regulated the delivery of large-
diameter pipes worth 1.2 billion Deutsche Mark from Mannesmann and
Thyssen to the Soviet Union.34 There were obviously both economic and
political reasons for the economic rapprochement: besides benefitting the
economies of both countries, the discussion leading up to the conclusion of
the agreement paved the way for improvement of the overall political
climate.35 In fact, the FRG’s high hopes for resolving the crucial political
question over Berlin was finally met with the signing of the Four Power
Agreement in 1971. Shortly afterwards, in 1972, the FRG and GDR signed
an agreement de facto recognizing each other as sovereign states, and
thereby easing their previously tense relations.
Not everybody was equally happy with the precise terms of the commer-
cial deal signed on February 1, 1970. German Assistant Secretary of State
Herbst, for example, described the signing of the contract with unusually
low credit interest rates as ill-considered.36 French partners, in particular,
criticized the credit’s duration of ten years, the low interest rates, and the
unequal redemption rates.37 Still, this contract represented a major break-
through and was in fact only the first step in a program of energy cooper-
ation that was about to expand. Already in the months following the deal,
the two sides explored further possibilities: during a meeting in September
1970, Kosygin asked how the geological works in Germany were proceed-
ing. Schiller, the German minister, admitted that the progress made thus far
was unsatisfactory, but mentioned that the Netherlands had just found huge
reserves of gas, which the Germans could import. Kosygin hinted at the
high price of Dutch gas and added that Norway would also have problems
developing its resources, which were huge, but difficult to access. But
Kosygin had to admit that the Soviets themselves were encountering tech-
nological problems in the development of their own production in Siberia.
Once in place, their gas power stations would work efficiently, but
transporting the gas from northern Siberia to industrial regions with large-
diameter pipelines was a technical challenge.38
In January 1971, several high-ranking German representatives led by Otto
Wolff von Amerongen, the chairman of the Committee on East European
Economic Relations, met with their Soviet counterparts in Moscow. Talks
were held with Vladimir Kirillin, the head of the State Committee for Science
and Technology, as well as Patolichev, Baibakov, and Kosygin—the most
influential figures when it came to the Soviet Union’s energy policy.
Patolichev reassured the Germans that they were welcome and that the
applications of German companies to open representations in Moscow
would be approved. Although several German firms were interested in the
USSR’s natural resources, Kosygin insisted that his government was not
interested in importing more consumer goods; the Soviet industry, he
claimed, was increasing its own capacity; at most, the Germans would be
offered a part in modernizing Soviet factories.39
Kosygin’s reasoning reflected Moscow’s fear of becoming too dependent
on foreign technologies and manufactured products, while the Soviet
Union had problems exporting its own goods, apart from raw materials.
The German representatives signaled their appreciation of this viewpoint by
offering the Soviets a greater presence at industrial fairs and expositions in
Germany, while the latter offered closer contacts to end consumers. The
Germans were astounded at Kosygin’s detailed knowledge of almost all the
areas under discussion and considered the meeting to have been a demon-
stration of goodwill. Given the political circumstances, the open and con-
structive discussions were indeed a great success. At the same time, the
Germans in general seemed to be warming to the idea of closer cooperation
with the Soviet Union, as evidenced by the publication of a 15-page
portrayal of Brezhnev in the news magazine Der Spiegel in 1971. Despite
his ambivalent consolidation of power and the cult that Brezhnev
established around himself, he seemed to be the first Soviet leader capable
of handling international affairs in a pragmatic way: his striving for peace in
foreign affairs, appropriate and open-minded behavior at international
meetings, a passion for travel and fast cars, his appointment of a consume-
orientated and moderate leadership, freezing of the military budget (with
the Chinese border remaining the only security threat) seemed to appease
European concerns.40
However, Brezhnev’s openness to cooperation with the West met with
internal opposition. Already during the first phase of rapprochement with
the Germans, Soviet officials mentioned that the gas deal had become a
262 D. KREMPIN
political test for the Soviet Union.41 As Nikolai Podgornyi, president of the
Supreme Soviet, explained during a meeting with Brezhnev and other high-
ranking members of the party in April 1972, he feared that the Soviet Union
“intends to sell Siberia.” He also insisted that by concluding such deals, the
Soviet Union would “look technically helpless.”42 But these worries fell on
deaf ears. During the same meeting, Baibakov explained that with the
exception of wood and cellulose, the Soviet Union had nothing else to
trade in exchange for foreign currencies, and that the capitalist countries
(here referring to the US and Japan) were mostly interested in oil and gas.43
In fact, in the months and years to come, the Soviet Union would pursue
further large energy deals: in July 1972, representatives of the German
corporations Mannesmann AG, Thyssen Stahlunion, and Ruhrgas AG
signed a second agreement on additional gas deliveries worth 10 billion
Deutsche Mark for a timespan of twenty years, including the delivery of
large-diameter pipes worth 1.2 million Deutsche Mark and a contract for a
loan amounting to 1 million Deutsche Mark between Deutsche Bank and
the Soviet Foreign Trade Bank (Vneshtorgbank).44 In a conversation
with Patolichev in July 1972, German Chancellor Willy Brandt mentioned
the advances in economic, political, and cultural cooperation that supported
the “cooperative co-existence.” He mentioned that the compensation
scheme that was part of the so-called “gas-for-pipe deals” could also be
implemented in other commercial deals.45
THE USSR REACHES OUT

The Soviets were not only looking for economic partners in Western
Europe. Détente also opened up the possibility for more intense trade
negotiations with the US. In 1972, the US and the Soviet Union signed a
trade agreement that had been supported by lobbyists in the US Congress
since the late 1960s. The Soviets hoped to engage on a large energy deal
with the US in the framework of the so-called “North Star” project, which
envisioned the transportation of gas from the gigantic West Siberian
Urengoi field to a harbor at the Barents Sea, after which it was to be
liquefied and shipped to the US West Coast.46 The supply of gas, 20 bcm
per year, was to reach the US in 1980 and to flow for a timespan of twenty-
five years.
The global oil crisis of 1973/74 was an unwelcome episode for the Soviet
Union, which had to occupy two seemingly contradictory positions during
the crisis: its rapprochement with the West during détente, and its self-
declared role as the protector of Third World countries, including its Arab
allies.47 Although the Soviet Union paid lip service to supporting the Arab
“oil weapon” against the US and other Western states, Moscow tried to
bring about a peaceful settlement of the conflict in order not to harm its
relations with the US. In any case, the Soviet Union did not benefit from
this tactical approach. Due to strong opposition in the US Congress and a
perceived failure of détente, the Soviet Union in 1974 was denied Most
Favored Nation (MFN) status, which severely complicated the conclusion
of major economic projects, since these depended on substantial loans that
could only be granted with the approval of Congress. In reaction to this
decision, the USSR cancelled the trade agreement with the US.
Ultimately, the Congress’ decision brought the “North Star” project to a
halt. In 1976, it was halfheartedly recast as a project with partial European
involvement, but later shelved for good in favor of an exclusively European
pipeline project.48 The US also leveraged its dominant position in trilateral
projects with Japan on the exploitation of various resources in Eastern
Siberia and Sakhalin.49 As the US withdrew and the Japanese were not
willing to act without US support, the projects experienced a major setback;
in 1975, the Soviet Union and Japan only signed a minor formal agreement
on the development of Sakhalin’s resources.50
Therefore, cooperation with Western Europe became even more impor-
tant. Already at a preparatory meeting in April 1973, Brezhnev underlined
the importance of accepting offers for compensation projects from the West
and using the current political climate for the USSR’s own advantage. He
criticized numerous comrades for their disapproving view of these projects
and their attempts to delay them with bureaucracy, arguing that this was a
unique chance for cooperation.51 It was during his trip to West Germany in
May 1973 that Brezhnev pursued precisely this course: he attracted public
attention, and he used the opportunity to declare the end of “the past thirty
years of bad will,” offering instead a joint exploitation of the “vast Siberian
resources.”52 In his view, “all of Europe was waiting [for gas],” and partners
had to think “on a large scale.” He outlined that 8500 km of pipelines had
already been built, but that the Soviet Union urgently needed partners to
fulfill its obligations toward the CMEA and Western Europe. Brezhnev
therefore offered the West Germans joint projects for the exploitation of
West Siberian resources in long-lasting contracts of up to forty years, with a
volume of 250 bcm of gas per year.53
264 D. KREMPIN
During Brezhnev’s visit, a trilateral gas deal with Iran and West Germany
was also discussed.54 Germany was interested in buying gas from Iran and
proposed a trilateral agreement (IGAT II project). Gas was to be
transported from Iran to the Soviet Union, and an equivalent amount of
gas from the Soviet Union to Western Europe. The cost of this pipeline was
estimated at about $600 million, one-third of which was to be covered by
the Soviets, two-thirds by the Germans. In talks with Brandt, Soviet Deputy
Prime Minister Vladimir Novikov referred to other projects for developing
Soviet raw materials and resources. In the beginning, the terms of the deal
remained vague, as Iran had not yet fixed the amount of gas ready for
export.55
By the mid-1970s, negotiations had become tougher. On the one hand,
West German representatives made the extension of East–West cooperation
conditional on adherence to political treaties such as the Four Power
Agreement of Berlin.56 On the other hand, the Soviets distinguished them-
selves by clever tactical negotiating: the Soviet Union even considered
importing Iranian gas and then reselling it to whomever it wished.57 That
would have meant excluding the Germans as the main partner from the
deal, which was unacceptable for the FRG.
At the same time, the FRG was looking for alternatives to Soviet gas. One
option foresaw gas deliveries from Iran to the Turkish port of Iskenderun
(the Iskenderun project), where it would be liquefied and transported
further to Western Europe.58 In the end, however, the Soviet Union was
the more attractive alternative, offering finished goods, energy, and raw
materials,59 and in 1974 a third “gas-for-pipe” deal was concluded between
Ruhrgas AG and the Soviet Union over the delivery of 60 bcm of Soviet gas
over a timespan of twenty years, which indicated that both sides wished to
increase their bilateral trade.60 The negotiations on a trilateral deal went
smoothly, too. When, in November 1975, an agreement on the IGAT II
project was finally reached, the contract stipulated construction of a pipeline
from south Iranian gas fields to the Soviet Union and the delivery of 10.9
bcm per year to Western Europe over a timespan of twenty years.61 This
showed that the West Germans had increasing confidence in the reliability
of the Soviet Union as a trading partner.62
EFFICIENCY PROBLEMS AND THE SOVIET INTERNATIONAL

ROLLBACK
By the mid-1970s, the Soviet Union was engulfed by an internal discussion
on its economic future and the future of the country’s energy sector. More
and more experts doubted the “great perspectives” and the expected life-
time of Soviet natural resources—even for the newly developed West Sibe-
rian oil fields.63
In fact, the political leadership appears to have had significant differences
about the future prospects of the country. In a speech in October 1974, for
example, Brezhnev emphasized the country’s “uncounted riches and inex-
haustible opportunities” that would “allow us to look to the future without
danger.” Only three weeks later, Kosygin refuted this viewpoint by pointing
out that Soviet resources were exhaustible and therefore should be used in
the “most rational way.”64 This wording became more and more important
during the 1970s, as many experts called for a rational usage of natural
resources. The decree “On measures of the full extraction of oil from the
subsurface” of the Central Committee (CC) and the Council of Ministers,
designed to deal with such issues, was enacted in August 1976.65
Western states were sure that the USSR’s need for foreign technology
was based on the inadequacy of its own technologies and that its future
prospects depended on how the country would cope with this shortcoming,
rather than on the amount of its natural resources.66 The situation in the oil
and natural gas sectors became more tense, particularly because the geo-
logical exploration works had been neglected since the end of the 1960s.
Moscow’s fears of a setback for its oil and gas industry were realized when
the Volga-Ural oil and gas fields peaked in the middle of the 1970s.67 The
leadership was well aware that energy shortages would curb the economic
development of the whole country. Brezhnev wanted to avoid such a
development to accomplish his social welfare policy.68 Moreover, the
already concluded trade agreements with Western countries forced the
Soviets to expand their production of fuel and energy, which they tried to
achieve in particular with the still unexploited raw materials of Siberia.
Therefore, at the XXV party congress in February/March 1976, Brezh-
nev announced a campaign that aimed not only to exploit natural resources,
but to achieve the overall industrialization of Siberia through various energy
and infrastructure projects.69 To this end, the government considered
introducing complex programs, designed to broadly industrialize and
develop the country’s eastern parts.70 For Western Siberia, this meant that
266 D. KREMPIN
processing industries for rubber and plastic, or energy-intensive industries,

were to be located in the same area as the oil and gas extraction industry.
The general secretary’s speech indicated that the overall development of
Siberia—and not only the oil and gas sector—was to be given priority.
However, not everybody was in support of Brezhnev’s policy at the time.
Kosygin, for one, was opposed to Brezhnev’s ambitions regarding the oil
and gas development of Western Siberia and supported a more balanced
approach that included the further development of coal and nuclear energy.
In his speech during the XXV party congress, he claimed that scientific and
technical progress would play a special role in the tenth five-year plan and
would determine the prospects of long-term economic development. He
believed these prospects were based on the accelerated development of the
nuclear energy sector and the construction of hydroelectric power plants as
well as power stations fueled by cheap coal. Oil, however, was mentioned
only in passing by Kosygin.71 This reflected the opinion of numerous Soviet
experts, who in 1976 pointed out that the leading production regions of the
Soviet Union’s oil industry would see decreasing production rates during
the tenth five-year plan. This shortfall would be more distinct in some
regions, since they were lagging behind their planned targets. Hopes of
increasing production output with middle-sized and smaller fields were
futile due to the limited resources and lack of time.
In summer 1977, the Executive Committee (prezidium) of the Council
of Ministers commissioned a study on the possibility of intensifying geo-
logical investigation on potential gas fields in the European part of the
country72 and therefore the feasibility of exploiting resources in that part
of the country. On September 26, 1977, an emergency meeting on the oil
industry revealed the tense situation in which the Soviet energy sector
found itself—none of the goals had been met so far. The production units
within the traditional oil and gas regions lagged behind in particular.
Nationwide, for example, only 53.5 percent of targets for geological
works had been met, for example; in Western Siberia, the quota was
50.5 percent; and in the republic of Komi, a mere 7.9 percent.73
This assessment was clearly confirmed by a CIA report made public in
1977, according to which shortfalls in Soviet oil production were the result
of favoring current output, instead of defining long-term goals. Without any
changes, the report estimated that oil production would peak already in the
late 1970s or early 1980s. Due to growing domestic energy demand, the
report even predicted that the Soviet Union would have to find ways of
conserving huge amounts of energy, or otherwise meeting rising energy
demand with oil imports from abroad. The analysts further anticipated a
huge lack of workforce in the 1980s caused by the sharp drop in birth rates
since the 1960s. Of all the Soviet republics, only the Central Asian republics
had a growing population and thus relatively large labor force, but these
were not considered to be easily willing to move to the northern industrial
regions.74
Already at the CC’s plenary meeting in December 1977, Brezhnev
announced a new energy strategy declaring oil to be the centerpiece of
Soviet energy policy and called for intensified extraction of Tiumen’ oil and
gas fields75 while cutting back steel production.76 This was yet another very
clear indication of Siberia’s political and economic importance for the future
direction of the country’s energy policy. In fact, this time, Brezhnev threw
his full personal weight behind the Siberian project.
THE “SIBERIAN CAMPAIGN” STARTS

At the end of March 1978, Brezhnev visited Siberia to emphasize his
military, economic, and strategic aims in the region. Kosygin, whose plans
were thwarted after the December plenary meeting, had undertaken a
similar visit to Orenburg just a few days before, together with Baibakov,
Veniamin Dymshits, the deputy chairman of the Council of Ministers, and
other representatives of the council of ministers. The next day, Kosygin and
his companions visited Nizhnevartovsk and Surgut before continuing to
Tiumen’ on the same day.77 In Tiumen’ and Tomsk, they met with repre-
sentatives of the local party committee and of the oil and gas industry.78
From March 25 to 27, the group visited the Krasnoiarsk region.79 Their
route showed quite clearly that Kosygin’s main interest was in the Siberian
oil and gas industry. More important for propaganda matters, however, was
the much-publicized visit that Brezhnev undertook shortly afterwards. In
fact, the same day that Kosygin returned from Siberia, Brezhnev departed.
Brezhnev’s trip was followed by the media to a greater extent than
Kosygin’s and regularly mentioned in the headlines of the Pravda80 and
in the television program Vremia (“Time”).81 Brezhnev’s attention was
focused on economic and military projects in the region, the oil and gas
industry in Tiumen’, the petrochemical industry in Omsk, agriculture in
Novosibirsk, machine building, the energy sector and metallurgy in
Krasnoiarsk, and the nonferrous metallurgy, cellulose, and paper industry,
chemical industry, and hydroelectric energy reserves in Irkutsk. He visited
military bases in Novosibirsk, Chita, Khabarovsk, and Vladivostok.
268 D. KREMPIN
Meetings with local party committees, members of the Komsomol, and

young soldiers working on the Baikal-Amur Mainline showcased his mobi-
lization efforts. He was accompanied by Minister of Defense Dmitrii Usti-
nov, further confirming the journey’s emphasis on military aspects.
Siberia’s economic development was only one item on Brezhnev’s
agenda. A Pravda article on the Soviet–Chinese border relations82 hints at
the fact that the governments wanted to show strong Soviet military pres-
ence in Siberia to frighten the “foolish Khazars.”83 A Soviet film titled
Always With the People, a portrayal of Brezhnev’s trip to Siberia, reinforced
this impression. Although the visit was later portrayed as a milestone in
Western Siberia’s development in a speech delivered by Gennadii
Bogomiakov, the first secretary of the Tiumen’ party committee, on the
occasion of the XXVI party congress in 1981,84 he earlier complained that
the secretary general had not even left the train and listened to his speech
about the Tiumen’ oil industry with an absent mind.85 To others,
Brezhnev’s trip seemed like an attempt to “imitate leadership by handling
the ‘most important matter of the country.’”86 Anatolii Cherniaev, who
would later become Mikhail Gorbachev’s principal foreign policy advisor,
considered Brezhnev’s trip a “pure television farce.”87
Still, Brezhnev’s talk at the CC’s plenary meeting in December 1977,
together with his trip to Siberia in spring 1978, can be considered the
starting point of a large campaign to develop Siberia. The media would
now frequently cover the campaign and discuss the difficulty of handling the
massive development and technological challenges. It was only then that the
Siberian branch of the Academy of Sciences, which had been active in
Western Siberia’s development for years, gained a supervisory position in
the planning and development of the region.88 This was pushed forward by
renowned academics such as Aleksei Trofimuk and Abel Aganbegian, who,
among others, had been supporters of “Siberian might” for years.89 At the
eighteenth Komsomol congress in April 1978, Brezhnev emphasized that
from the beginning of the offensive on Western Siberia the aim was to
produce by skills and not by numbers, “by means of up-to-date technology
and techniques.”90
However, because the alarming situation in the oil and gas sector did not
change during 1978, Kosygin continued to express his preference for a
balanced approach. The “Proposals from a scientist group to Gosplan’s
project for the economic and social development in 1979 concerning the
fuel and energy complex” of September 1978 revealed the uncertainty of
success in fulfilling the whole tenth five-year plan launched in 1976 in all
areas of the fuel and energy sector, as well as in the coal industries. Only the
targets for natural gas were met, while oil production was still suffering from
a lack of technological innovation. Even the coal industry had to face the
results of extensive exploitation that could not be masked any longer. The
author of these proposals could not help noting the “widening gap between
the Soviet Union and the US.”91
THE “DEAL OF THE CENTURY”

Still, if West Siberian energy was to be exploited to the full, Moscow knew
only too well that it needed to cooperate with the West in order to gain
access to the necessary technology. After the failure of “North Start” and
other projects with US participation, the Soviet leadership was forced once
again to seek opportunities for international collaboration. In April 1978, a
West German governmental group discussed a compensation deal in the
Tomsk region (proposed by the Soviet Union already in 1976), which
envisioned building a new refinery in the region with German investment
and technological aid. In return, Moscow would feed the refinery at least
ten million tons of crude oil per year for an entire decade. But the German
negotiators opposed the deal under these circumstances as they deemed
such oil volumes unrealistic. They stipulated reducing the amount of crude
oil intended for the refinery and proposed additional deliveries of chemical,
primary, and secondary energy resources such as refined oil, gas, uranium,
and fuel.92 Moreover, the governmental group reported that the Soviet
Union was currently developing West Siberian gas more intensively, and
that its transportation was likely to depend on Western technologies. The
Soviet dependence on technology and expertise from the West was the
reason why unofficial talks on other, even greater gas deliveries, were already
on the way.93
Negotiations on a joint development of gas resources from northern
Tiumen’ were mentioned on the political level in May 1978.94 In a con-
versation between Helmut Schmidt and Brezhnev at the beginning of May,
the latter stated that the Soviet Union strongly welcomed cooperation in
developing different industries, in particular oil and natural gas.95 In
December 1978, Ambassador Hans-Georg Wieck reported from Moscow
that the natural gas reserves discovered in the Tiumen’ region were bigger
than expected and that the Soviet Union would offer more oil and gas to the
Germans in other compensation deals.96 Not even the 1979 revolution in
Iran, and the following failure of the IGAT II project or the harsh Western
270 D. KREMPIN
criticism of the Soviet invasion of Afghanistan97 in the same year, could stop
international energy cooperation, as the incentives resulting from the pos-
itive developments in Siberia were simply too strong. By 1979, both the
FRG and the Soviet Union acknowledged that trade between the two
countries was developing well; and both expressed the wish to intensify
cooperation further in several areas: development of deposits in the conti-
nental shelf, a new, unspecified gas project, as well as coal, electricity, and
nuclear energy projects.98
Economic cooperation even seemed to be more important than political
disagreements concerning Afghanistan and Iran. On the one hand, the Soviet
Union was about to announce a shift from oil to gas for the upcoming
five-year plan, especially to gas from northern Tiumen’. This shift was caused
by increasing difficulties in exploiting domestic resources in older oil and gas
fields. On the other hand, the price of crude oil rose from $13 per barrel to
$34 per barrel after the 1979 oil crisis.99 Once again, the Europeans were
made acutely aware of their dependency on oil, and Soviet gas provided an
alternative.
Negotiations on credit arrangements started in the beginning of 1980.
The Soviets were again playing Western firms off against each other while
seeking the most profitable credit arrangements.100 In May, Chancellor
Schmidt confirmed talks on a new gas-for-pipe deal, but, in addition to
gas projects, the FRG was interested in other energy projects as well. As a
note from the Ministry of Economy to the chancellery explained, several
questions had to be answered first. German firms had to agree on the
structure of the consortium and the share of gas that each of them would
receive. The Soviet leadership, on the other hand, was demanding assur-
ances, with guarantees supplied by customer countries. It explained to
Ambassador Wieck that there must be no disruption by embargos. Similar
remarks were made to Friedrich Wilhelm Christians, the chairman of
the Deutsche Bank, who assumed that this reasoning was motivated by
internal Soviet struggles: a majority within the Soviet government, in favor
of intensified Soviet–German economic relations, wanted such assurances
in order convince the minority that was opposed to such international
agreements.101
During governmental talks with Schmidt and German Foreign Minister
Hans-Dietrich Genscher in July 1980 in Moscow, Brezhnev announced the
USSR’s interest in extending gas exports to Western Europe and in building
a pipeline from the northern part of Siberia to Western Europe. It would
deliver 40 bcm per year and was already included in the next five-year plan.
According to Kosygin, the pipeline was to have a planned capacity of 50 bcm,

but only 10 bcm were to be used to pay for the pipeline (“compensation
gas”), while the remaining 40 bcm were considered “traded gas.”102
Initially, Moscow focused on developing the Yamburg gas field beyond the
Arctic Circle, but this idea vanished during 1980 due to a lack of sufficient
infrastructure.103 The project then focused on the exploitation of the
Urengoi gas field,104 which until then had been exploited by the Soviet
Union alone. During the meeting, Kosygin added that the pipeline was not
just a short-term “boom” project, but a project aimed at building the world’s
largest pipeline during the next thirty to thirty-five years. The amount of gas
delivered to Europe would almost double. The chancellor noted that France,
Austria, Italy, and even the Netherlands, despite its own reserves, were also
interested in buying Soviet gas. Questions of pricing, loan interest rates, and
the pipeline’s route, as well as the precise composition of the Western
consortium of companies, were yet to be solved.105 However, Kosygin
underlined the short timeframe in which the negotiations had been con-
cluded. The two resulting treaties would not just be “economic” documents,
but “political documents,” the “most important in the world.”106
On November 20, 1981, Ruhrgas and Soiuzgazeksport signed an agree-
ment on an additional delivery of 10.5 bcm per year.107 Work on the project
was to begin in 1984. It would raise the share of Soviet gas in total domestic
German gas consumption to 30 percent.108 The plans foresaw a 5000 km
route for this large-diameter pipeline running through Czechoslovakia
before splitting into two, with one line continuing to West Germany and
the Benelux states and the second to Austria and Italy109 at a cost of
20 billion Deutsche Mark. This was the largest East–West industrial deal
concluded during the Cold War.110
This so-called “deal of the century” now could not even be stopped by a
US embargo that came into force after the Soviet intervention in Poland in
late December 1981. The US imposed sanctions on all technological export
goods for the oil and gas industry that could be used as components for the
pipeline production of European machinery firms. In spring 1982, the US
demanded that loans to the Soviets be restricted. When the European
governments did not react, Washington expanded sanctions to include
European license holders and subsidiaries. When these measures met with
protest from European firms, governments, and American firms alike, the
US had to abolish the sanctions in November 1982.111
German and Soviet representatives welcomed the project. The German
Foreign Office regarded trade with the Soviets as a “stabilizing element.”
272 D. KREMPIN
Schmidt and Genscher pointed out that gas-for-pipe deals “created depen-
dencies, delayed the Soviet expansionary impulse, and [. . .] consolidated the
Soviet loyalty to agreements.”112 The Soviet ambassador in the FRG,
Vladimir Semënov, praised the project as “immense.”113 For the Soviet
Union, the project meant more than just the “deal of the century and a
matter of peace.”114 After signing the contract, Brezhnev stressed that the
USSR was no “friend of autarky.”115
To nobody’s surprise, Brezhnev declared gas the “winner of the eleventh
and twelfth five-year plans.” Brezhnev had finally realized his political
ambitions, his “favorite foreign policy child:”116 détente, and a pipeline to
Western Europe. At the XXVI party congress in 1981, Brezhnev announced
that a rapid increase of Siberian natural gas production was a top economic
and political priority. He thought the West Siberian fields to be unique in
scale. The largest of them, Urengoi, could not only cover the USSR’s
energy needs, but also ensure exports to capitalist countries for years to
come. The support of natural gas and oil in Western Siberia had to be made
the most important component of the energy programs of the eleventh and
even the twelfth five-year plan, he argued.117 This ambition would be
pursued even after Brezhnev’s death in 1982. Although the struggle for
an efficient energy strategy went on, the share of natural gas in Soviet energy
production continued to rise throughout the 1980s until 1990, when it
finally accounted for the main share in the Soviet energy mix.118
CONCLUSION
The development of Western Siberia’s oil and gas industry made the Soviet
Union a global player on the international energy market. Although initial
announcements had already been made during the 1960s concerning the
region’s great potential for domestic economic development and for mak-
ing the Soviet Union the global energy power, leaving behind the US in the
race for resources, it was not anticipated that the project would become
such a success. The Soviet leadership publicly praised the country’s great
future, but the political leaders and experts remained undecided about the
energy strategy and they were well aware of the technological gap between
the Soviet Union and Western companies. International cooperation on the
oil and gas market as a means of achieving détente was thought to be the
country’s way out of its frustrating energy situation. At the same time, it was
a chance for European countries to resolve their own energy and economic
crises. But the Soviet Union’s export obligations to Western countries as
well as CMEA countries put even more pressure on the political leadership.
During the 1970s, the industry’s inefficiency became obvious and even
necessitated a possible return to the coal and nuclear strategy favored by
some of the leading party members of the country. Although the decision-
making process in Soviet energy policy remains opaque due to a lack of
comprehensive access to archival sources, one can conclude that the “Sibe-
rian campaign” was a project officially led by the general secretary. Despite
his poor health, but in order to underline his continuing ability to rule,119
he took a leading part in an attempt to foster the development of Western
Siberia and its resources, while hoping to kill several birds with one stone:
mobilization of technological development to cope with problems of the
Soviet North and the mobilization of Siberia’s population and oil and gas
specialists as a desperately needed workforce, and the realization of inter-
national projects in Western Siberia that would ultimately pave the way for a
long-desired rapprochement with the West by building the “biggest pipe-
line in the world.”120 It was the final realization of the Western Siberian
project that made gas the number one energy resource in the Soviet Union.
Furthermore, it firmly established the Soviet Union, and later the Russian
Federation, as a global energy power. The West Siberian project further led
to long-term dependencies between Western Europe and Russia.
All in all, international cooperation played a significant role, and it was
the FRG that was to become the Soviet Union’s most important trading
partner. The FRG may have profited more than any other country, includ-
ing the US and other Western countries, from détente both in political and
economic terms. One of the main aspirations of the West German political
establishment, the improvement of economic relations with the Soviet
Union in the late 1960s provided a basis for solving the country’s long-
lasting political conflict with both the Soviet Union and the GDR in the
early 1970s. And, again, this facilitated the extension of economic relations
in the later 1970s, which benefited the German industry. While meeting the
economic interests of both sides, it is no surprise that the Soviet Union and
the FRG in particular agreed on such an important and extensive long-term
energy relationship.
NOTES
1. Marina V. Komgort, Zapadno-Sibirskaia neftegazonosnaia
provintsiia: Istoriia otkrytiia (Tiumen’: Vektor Buk, 2008), 16–59.
274 D. KREMPIN
2. Sergei Kudriashov, ed., General’nyi sekretar’ L. I. Brezhnev

1964–1982: Spetsial’noe izdanie (Moscow: Vestnik Arkhiva
Prezidenta, 2006), 53.
3. D. A. Smorodinskov and V. N. Klepnikov, eds., Neft’ i gaz Tiumeni
v dokumentakh, vol. 2: 1966–1970 (Sverdlovsk: Sredne-Uralskoe
knizhnoe izdatel’stvo, 1973), 20.
4. Neft’ i gaz Tiumeni, vol. 2, 20–1.
5. Han-Ku Chung, Interest Representation in Soviet Policymaking: A
Case Study of a West Siberian Energy Coalition (Boulder, CO:
Westview Press, 1987), 64–5, 83–95.
6. Thane Gustafson, Crisis Amid Plenty: The Politics of Soviet Energy
under Brezhnev and Gorbachev (Princeton, NJ: Princeton University
Press, 1989), 22, 26.
7. Tchurilov, Lifeblood of Empire, 65–73.
8. Neft’ i gaz Tiumeni, vol. 2, 135–8.
9. Ibid., 215.
10. Jennifer I. Considine and William A. Kerr, The Russian Oil Econ-
omy (Northampton, MA: Edward Elgar, 2002), 118.
11. Kudriashov, Ed., General’nyi sekretar’ L. I. Brezhnev, 103.
12. A document states these as the tasks of the gas ministry up until
then: Gosudarstvennyi arkhiv Rossiiskoi Federatsii (State Archive
of the Russian Federation, GARF), f. 5446, op. 107, d. 719, l. 24,
25ob. However, a German scholar claims that ministries continued
to delegate tasks to other ministries, after which construction tasks,
including the building of transportation infrastructure and hous-
ing, were divided among various ministries and institutions.
Helmut Klüter, Die territorialen Produktionskomplexe in Sibirien
(Hamburg: Weltarchiv, 1991), 130–3.
13. M. V. Slavkina, Triumf i tragediia: Razvitie neftegazogo kompleksa
SSSR v 1960–1980-e gody (Moscow: Nauka, 2002), 134–60.
14. Per H€ ogselius, Red Gas: Russia and the Origins of European Energy
Dependence (New York: Palgrave Macmillan, 2013), 135.
15. Marshal I. Goldman, Détente and Dollars: Doing Business with the
Soviets (New York: Basic Books, 1975), 14–15.
16. Hubert Bonin, “Business Interests versus Geopolitics: The Case of
the Siberian Pipeline in the 1980s,” Business History 49, 2 (March
2007), 235–54, here 237.
17. Werner Abelshauser, Deutsche Wirtschaftsgeschichte: Von 1945 bis
zur Gegenwart (Munich: C.H. Beck, 2011), 202–5.
18. The total consumption of energy rose from 264.6 million tons of
coal equivalent (TCE) in 1965 to a preliminary peak of 408.2
million TCE in 1979. Consumption of oil rose from 108 million
TCE in 1965 to 206.8 million TCE in 1979, while gas consump-
tion rose from 3.3 million TCE in 1965 to 65.3 million TCE in
1979. Klaus H. Dahl, “Erdgas in Deutschland: Entwicklung und
Bedeutung unter Berücksichtigung der Versorgungssicherheit
und des energiepolitischen Ordnungsrahmens sowie des
Umweltschutzes” (PhD diss., Clausthal University of Technology,
1998), 10.
19. H€ ogselius, Red Gas, 67.
20. “Planmässig unterbrochen,” Der Spiegel 43 (1966), 29.
21. Akten zur Ausw€ artigen Politik der Bundesrepublik Deutschland
(AAPBD) 1969, 2 vols. (Munich: Oldenbourg, 2000), vol. 1, 454.
22. H€ ogselius, Red Gas, 77.
23. Ibid., 86.
24. Ibid., 81.
25. AAPBD 1969, vol. 1, 454.
26. Angela Stent, Wandel durch Handel: Die politisch-wirtschaftlichen
Beziehungen zwischen der Bundesrepublik Deutschland und der
Sowjetunion (Cologne: Wissenschaft und Politik, 1983), 142.
27. AAPBD 1969, vol. 1, 740–2.
28. This number consisted of 6.5 bcm of gas from own production and
1.5 bcm from Dutch production. AAPBD 1969, vol. 1, 741.
29. In 1965, gas accounted for just 2 percent of German energy
production. At the same time, Austria and Italy were using far
more gas. H€ogselius, Red Gas, 68.
30. AAPBD 1969, vol. 1, 740–2, here 742.
31. AAPBD 1969, vol. 2, 854.
32. Ibid., 854–5.
33. The deliveries were scheduled to start in 1972 and were to be
extended for five or six years. AAPBD 1969, vol. 2, 858.
34. Falk Illing, Energiepolitik in Deutschland: Die energiepolitischen
Massnahmen der Bundesregierung 1949–2013 (Baden-Baden:
Nomos, 2012), 150.
35. Stent, Wandel durch Handel, 143–4.
36. AAPBD 1970, 3 vols. (Munich: Oldenbourg, 2001), vol. 1, 86–88.
37. “Salto am Trapez,” Der Spiegel 7 (1970), 34.
276 D. KREMPIN
38. The Soviets finally wanted to cope with problems of air pollution in
areas containing other natural energy sources, e.g. in the Kuznetsk
Coal Basin (Kuzbass). AAPBD 1970, vol. 2, 1645.
40. “Leonid Breschnew—Kann man ihm trauen?,” Der Spiegel
51 (1971), 86–100.
41. AAPBD 1969, vol. 2, 857.
42. The Diary of Anatoly S. Chernyaev 1972, ed. Svetlana Savranskaya,
transl. Anna Melyakova (Washington, DC: National Security
Archive, 2012), entry of April 8, 1972, 11, http://nsarchive.
gwu.edu/NSAEBB/NSAEBB379
43. Ibid.
44. AAPBD 1972, 3 vols. (Munich: Oldenbourg, 2003), vol.
2, 913–14.
45. Ibid.
46. Jonathan P. Stern, “Soviet Natural Gas in the World Economy,” in
Robert G. Jensen et al., eds., Soviet Natural Resources in the World
Economy (Chicago: University of Chicago Press, 1983), 363–84,
here 375–6; see also: Joseph T. Kosnik, Natural Gas Imports from
the Soviet Union: Financing the North Star Joint Venture Project
(New York: Praeger, 1975).
47. For further reading, see Jeronim Perović and Dunja Krempin,
“‘The Key is in Our Hands:’ Soviet Energy Strategy during
Détente and the Global Oil Crises of the 1970s,” Historical Social
Research 39, 4 (2014), 113–44.
48. Stern, “Soviet Natural Gas in the World Economy,” 376.
49. Arthur Jay Klinghoffer, The Soviet Union and International Oil
Politics (New York: Columbia University Press, 1977), 247–8.
50. Klinghoffer, Soviet Union and International Oil Politics, 250.
51. General‘nyi sekretar L. I. Brezhnev, 133.
52. “Greifen sie zu!,” Der Spiegel 22 (1973), 23–4, here 23.
53. AAPBD 1973, 3 vols. (Munich Oldenbourg, 2004), vol. 2, 721.
54. AAPBD 1973, vol. 2, 759–60. But the deal had been discussed
even earlier. In October 1972, representatives of the German
economy had discussed a trilateral deal on oil with involvement of
the Soviet Union in Teheran. During a visit of German industrial
representatives in Iran in spring 1973, the talks focused on a
trilateral deal on gas. In: AAPBD 1973, vol. 1, 418.
55. First, Iran mentioned 25 bcm, 15 bcm of which was to be delivered

to Europe and 10 bcm to the Soviet Union; then, it even referred
to 30 or 40 bcm. The decision on whether the gas would be
delivered continuously to Western Europe or, alternatively, an
equivalent amount of Soviet gas would be delivered, was post-
poned. AAPBD 1974, 2 vols. (Munich: Oldenbourg, 2005), vol.
1, 66–7.
56. AAPBD 1974, vol. 1, 247–9.
57. Ibid., 302. See also Antony J. Blinken, Ally Versus Ally: America,
Europe, and the Siberian Pipeline Crisis (New York: Praeger,
1987), 38.
58. According to a note from the German Ministry of the Economy
from March 1974, a subsidiary of ENI, Gaz de France, and
German Ruhrgas AG had formed a consortium that anticipated
a possible delivery of Iranian gas to Western Europe. Moreover,
the Austrian Mineral€olverwaltung AG and Swissgas were also
interested in receiving Iranian gas. The consortium considered
two alternative projects: delivery of Iranian gas to Iskenderun in
Turkey via pipeline, from where it would be shipped to Western
Europe after liquefaction, or a pipeline from Iran via Turkey,
Greece, and Yugoslavia. The project provided for delivery of
40 bcm of gas per year. AAPBD 1974, vol. 1, 305–6.
59. AAPBD 1974, vol. 2, 1356.
60. Ibid., 1394.
61. Stern, “Soviet Natural Gas in the World Economy,” 375.
63. Gustafson, Crisis Amid Plenty, 88.
64. Marshall I. Goldman, The Enigma of Soviet Petroleum: Half-Full or
Half Empty? (London: George Allen & Unwin, 1980), 168.
of the Economy (Russian State Archive of the Economy, RGAE),
f. 9840, op. 12, d. 1120, ll. 27–32.
66. “Soviet Oil Production Problems,” February 1974, in Anita. L. P.
Burdett, ed., Oil Resources in Eastern Europe and the Caucasus:
British Documents 1885–1978, 8 vols. (Cambridge: Cambridge
University Press, 2012), vol. 8, 445–50.
67. Slavkina, Trijumf i tragediia, 53.
68. Leonid I. Brezhnev, Leninskim kursom: Rechi i stati, vol. 5 (Mos-
cow: Izdatel’stvo politicheskoi literatury, 1976), 450–1.
278 D. KREMPIN
69. Leonid I. Breschnew, Auf dem Wege Lenins: Reden und Aufs€ atze,
9 vols. (Berlin: Dietz, 1971–1984), vol. 5, 549.
70. Klüter, Die territorialen Produktionskomplexe in Sibirien, 9. See
€
also Johanna Roos, Sibirien zwischen Okonomie und Politik: Zur
Erschliessung der Energietr€ ager Erd€ ol und Erdgas (Cologne:
Wissenschaft und Politik, 1984).
71. Aleksei N. Kossygin, Ausgew€ ahlte Reden und Aufs€ atze 1939–1976
(Berlin: Staatsverlag der Deutschen Demokratischen Republik,
1977), 487–538, here 506–7, 521.
72. RGAE, f. 4372, op. 67, d. 1114, l. 58.
73. Ibid., ll. 107–9.
74. “ER 77-10,436 U, July 1977, Soviet Economic Problems and
Prospects,” in CIA’s Analysis of the Soviet Union, 1947–1991,
ed. Gerald K. Haines and Robert E. Leggett, https://www.cia.
gov/library/center-for-the-study-of-intelligence/csi-publications/
books-and-monographs/cias-analysis-of-the-soviet-union-1947-
1991
75. Chung, Interest Representation in Soviet Policymaking, 40.
76. George W. Breslauer, Khrushchev and Brezhnev as Leaders: Build-
ing Authority in Soviet Politics (London: Allen & Unwin, 1982),
230–2.
77. “Poezdka tov. A. N. Kosygina,” Pravda, no. 82, March 23, 1978,
2.
78. “Prebyvanie A. N. Kosygina v Tiumeni i Tomske,” Pravda,
no. 84, March 25, 1978, 2.
79. “Poezdka tov. A. N. Kosygina,” Izvestiia, no. 74, March
28, 1978, 2.
80. “Prebyvanie tovarishcha L. I. Brezhneva v Tiumeni,” Pravda,
no. 90, March 31, 1978, 1; “Prebyvanie tovarishcha L. I.
Brezhneva v Chite,” Pravda, no. 94, April 4, 1978, 1; “Pribytie
tovarishcha L. I. Brezhneva v Chabarovsk,” Pravda, no. 96, April
6, 1978, 1; “Poseshchenie L. I. Brezhnevym tikhookeanskogo
flota,” Pravda, no. 98, April 8, 1978, 1.
81. Dnevniki A. S. Cherniaeva: Sovetskaia politika 1972–1991 gg.—
vzgliad iznutri, 1978 g., Project of the National Security Archives,
Washington, DC, 10, http://nsarchive.gwu.edu/rus/text_files/
Chernyaev/1978.pdf
82. “Real’nosti i vymysly—K voprosu o sovetsko-kitaiskom

pogranichnom uregulirovanii,” Pravda, no. 91, April 1, 1978, 4.
83. Dnevniki A. S. Cherniaeva, 10.
84. “Rech tovarishcha G. P. Bogomiakova,” Pravda, no. 58, February
27, 1981, 7–8, here 7.
85. Tchurilov, Lifeblood of Empire, 196–7.
86. Dnevniki A. S. Cherniaeva, 10.
87. Ibid.
88. A. A. Trofimuk, O rabote sibirskogo otdeleniia AN SSSR po
kooperatsii nauchnykh issledovanii v regione i ispol’sovaniiu ikh
resultatov v narodnom khoziastve strany: Osnovnye napravleniia
organisatsionnoe soprovozhdenie i effektivnost’ rabot po programme
“Sibir” (Novosibirsk: IEOPP SO AN SSSR, 1988), 4.
89. The campaign was called “Siberian might,” referring to a headline
of an article in Literaturnaia gazeta in 1978: “Sibirskii razmakh,”
Literaturnaia gazeta, May 1, 1978, 10.
90. L. I. Brezhnev, Speech at the 18th Congress of the All-Union
Leninists Young Communists League, April 25, 1978 (Moscow:
Novosti Press Agency Publishing House, 1978), 12; see also
Rossiiskii gosudarstvennyi arkhiv sotsial’no-politicheskoi istorii
f. M-1, op. 65, d. 238, l. 30.
91. This comment was made in reference to the level of labor electri-
fication in Soviet production. See RGAE, f. 9480, op. 12, d. 760,
ll. 193–205, here l. 194.
92. AAPBD 1978, 2 vols. (Munich: Oldenbourg, 2009), vol. 1, 646.
93. Ibid., vol. 1, 689.
94. Ibid., vol. 1, 689.
95. Ibid., vol. 1, 646.
97. Ibid., vol. 2, 1975.
98. AAPBD 1980, 2 vols. (Munich: Oldenbourg, 2011), vol.
1, 801–02.
€
99. See also Stefan G€obel, Die Olpreiskrisen der 1970er Jahre:
Auswirkungen auf die Wirtschaft von Industriestaaten am Beispiel
der Bundesrepublik Deutschland, der Vereinigten Staaten, Japans,
Grossbritanniens und Frankreichs (Berlin: Logos, 2013), 41.
280 D. KREMPIN
100. Blinken, Ally Versus Ally, 37–38. See also Thane Gustafson, Soviet
Negotiation Strategy: The East-West Gas Pipeline Deal 1980–1984
(Santa Monica, CA: Rand Corp., 1985).
101. AAPBD 1980, vol. 2, 1045.
102. Ibid., vol. 2, 1045–50.
103. Blinken, Ally Versus Ally, 31.
104. Thane Gustafson, The Soviet Gas Campaign: Politics and Policy in
Soviet Decisionmaking (Santa Monica, CA: Rand Corp., 1983),
48–9.
105. AAPBD 1980, vol. 2, 1047.
106. Annual Soviet gas deliveries in 1980 amounted to 26.5 bcm; the
Federal Republic of Germany received 11.5 bcm, Italy 7.4 bcm,
France 4.2 bcm, Austria 2.6 bcm, and Finland 1.5 bcm. AAPBD
1980, vol. 2, 1047.
108. “Schnell festgezurrt,” Der Spiegel 47 (1980), 129.
109. “Diskret geklärt,” Der Spiegel 26 (1980), 29.
110. “Der unverziehene Strang nach Osten,” Der Spiegel 12 (1982),
32–41, here 32.
111. Christian Th. Müller, “Der Erdgas-R€ohren-Konflikt 1981/1982,”
€
in Bernd Greiner, ed., Okonomie im Kalten Krieg (Hamburg:
Edition, 2010), 501–20, here 512–18. See also David Painter’s
chapter in this book.
112. “Gilt nicht mehr,” Der Spiegel 13 (1980), 129.
113. Juri Semjonow, Erd€ ol aus dem Osten: Die Geschichte der Erd€
ol- und
Erdgasindustrie in der Sowjetunion (Düsseldorf: Econ, 1973), 74.
114. S. Klepikov and V. Linnik, “‘Sdel’ka veka’ i delo mira,” Pravda,
no. 179, June 28, 1982, 6.
115. AAPBD 1981, vol. 3, 1841.
116. Valentin M. Falin, Politische Erinnerungen (Munich: Droemer
Knaur, 1993), 274.
117. Breschnew, Auf dem Wege Lenins, vol. 8, 766.
118. Katharina Preuss-Neudorf, “Die Erdgaswirtschaft in Russland:
Merkmale, Probleme und Perspektiven unter besonderer
Berücksichtigung der Integration der russischen und der
europäischen Erdgaswirtschaft” (PhD diss., University of Cologne,
1996), 20.
119. Vladislav M. Zubok, A Failed Empire: The Soviet Union in the Cold
War from Stalin to Gorbachev (Chapel Hill: University of North
Carolina Press, 2007), 229, 241.
120. AAPBD 1980, vol. 2, 1047.
From Linkage to Economic Warfare: Energy,
Soviet–American Relations, and the End
of the Cold War
David S. Painter
The end of the Cold War was one of the most important events in the
twentieth century. Understanding why the Cold War ended is deeply
intertwined with understanding the nature and dynamics of the conflict
and central to assessing the wisdom and effectiveness of Western, and
especially United States (US), policies toward the Soviet Union. Most
studies focus on such issues as the arms race, competition in the Third
World, and the ideological and economic rivalry between the two systems.
Very few examine the role of oil, and energy in general.1 This lack of
attention is surprising because energy resources were potentially an impor-
tant element in the power position of the Soviet Union. In addition, oil and
natural gas exports accounted for around 80 percent of the Soviet Union’s
hard currency earnings, and the drop in oil prices by two-thirds in real terms
between 1980 and 1986 followed by a decline in Soviet oil production
beginning in 1989 played an important role in the collapse of the Soviet
system.2
D.S. Painter (*)

Department of History, Georgetown University, Washington, DC, USA

DOI 10.1007/978-3-319-49532-3_10
284 D.S. PAINTER
One of the few writers to examine the role of energy in the end of the
Cold War, conservative journalist Peter Schweizer, claims that the Reagan
administration orchestrated the oil price collapse and that US export con-
trols limiting Soviet access to Western credits and oil and gas technology
and equipment hindered Soviet gas exports and cost them billions of dollars
in export earnings.3 Based largely on interviews with former Reagan admin-
istration officials and selected quotations from US documents, some of
which are unavailable to other analysts, Schweizer’s work is a key text for
the so-called “Reagan Victory School,” which claims that the US military
buildup and political and economic offensive of the early 1980s forced the
Soviet Union into a corner from which there was no escape save surrender.
Victory School advocates usually focus on the US military buildup, espe-
cially on the Strategic Defense Initiative (popularly known as Star Wars),
US support for anti-communist insurgents in Afghanistan, Angola, and
Nicaragua, and Reagan’s anti-communist rhetoric, but the Reagan
administration’s anti-Soviet energy strategy is an integral part of the overall
Victory School argument.4 Although popular among US politicians, pun-
dits, and large sections of the general public, the Reagan Victory School has
found limited scholarly support.
Drawing on recently declassified documents from the Carter and Reagan
libraries and the Central Intelligence Agency (CIA), documents published
in the Foreign Relations of the United States series, and selected secondary
sources, this chapter examines US efforts to influence Soviet energy devel-
opments during the 1970s and 1980s. It argues that during the 1970s, the
US sought to implement a strategy that would link US trade with the Soviet
Union to changes in Soviet foreign policy.5 US dominance in oil and gas
equipment and technology and the Soviet Union’s need for credits seemed
to offer the US a golden opportunity to influence Soviet policy. However,
this policy failed because the Soviets were able to acquire the equipment,
technology, and credit they needed from other Western countries.
After the Soviet intervention in Afghanistan, US policy shifted to denying
oil and gas technology and equipment to the Soviet Union as a means of
weakening its economy, limiting its military power, and undermining Com-
munism. The Reagan administration continued this policy, and in 1982
tried to prevent Western companies from supplying equipment and tech-
nology for the construction of a natural gas pipeline from Western Siberia to
Western Europe. This policy also failed because US allies refused to
cooperate.
FROM LINKAGE TO ECONOMIC WARFARE: ENERGY, SOVIET–AMERICAN. . . 285
Finally, this chapter argues that Saudi Arabia decided to increase oil
production in fall 1985 not because of US lobbying but because its previous
policy of cutting production to maintain prices was not working and was
costing the kingdom billions of dollars in revenue. The resulting collapse in
oil prices had a devastating impact on the Soviet economy and contributed
significantly to the demise of the Soviet system, but this outcome stemmed
from changes in global oil markets and the Soviet Union’s ongoing internal
crisis rather than from US economic warfare.
OIL AND SOVIET POWER

From 1898 to 1901, the Russian Empire was the world’s leading oil
producer; by 1921, however, production had plummeted to 77,336
barrels per day (bpd) from a peak of around 240,725 bpd in 1901 due to
the destruction and disruption caused by years of war and revolution.6 Oil
production, which was concentrated in the Baku region of Azerbaijan and
nearby areas in the Caucasus, recovered rapidly, and by the early 1930s, the
Soviet Union was the world’s second-largest producer, well behind the US
and slightly ahead of Venezuela, and had re-entered world markets.
Between 1939 and 1941, the Soviets sold oil to Nazi Germany to gain
time to rebuild their defenses.
Although production was sufficient for most wartime needs, a lack of
refinery capacity and advanced technology made the Soviets dependent on
US Lend-Lease assistance for specialty products, especially high-octane
aviation gasoline. Overproduction, competing demands for manpower
and materials, and wartime damage caused production to fall from around
663,425 bpd in 1941 to around 424,528 bpd in 1945.7 Production recov-
ered slowly after the war, and until the mid-1950s, the Soviet Union was a
net importer of oil and refined products, mostly from Romania and Austria.
Shortages of oil products, especially aviation gasoline, were a significant
weakness in Soviet military capability during the decade following the war.8
During the 1950s, the Soviets developed the rich deposits of the Volga-
Ural region. By 1960, the Soviet Union was once again the second-leading
oil producer in the world and had resumed large-scale oil exports. Between
1960 and 1970, Soviet oil production rose from just under 3 million bpd to
around 7.1 million bpd. As production in these fields began to level off,
even richer fields were found in the West Siberian Basin. Soviet oil produc-
tion rose to 12.1 million bpd in 1980, and in the mid-1970s, the Soviet
Union surpassed the US as the world’s leading oil producer. The Soviets
286 D.S. PAINTER
also found several gigantic natural gas fields in Western Siberia, giving them
around 27 percent of the world’s proven natural gas reserves by 1980.
Although gas production took longer to develop, the Soviet Union over-
took the US as the world’s top natural gas producer in the mid-1980s.9
The Soviet Union benefitted from the oil price increases in the 1970s.
World oil prices rose from $1.80 a barrel in current dollars in 1970 to
$36.83 a barrel in 1980. Soviet oil exports rose from 1.9 million bpd in
1970 to 3.2 million bpd in 1978. Most of the exports went to Eastern
Europe—42 percent in 1970 and 47 percent in 1978—but Soviet oil
exports to hard currency markets also increased, from 620,000 bpd in
1970 to 1.1 million bpd in 1978. Soviet hard currency earnings from oil
exports doubled in 1973 and again in 1974 and continued to increase for
the rest of the decade. By 1976, oil exports were responsible for around half
of the Soviet Union’s hard currency earnings and energy exports for almost
80 percent.10 Their rapid rise allowed the Soviets to import large amounts
of Western grain and machinery during the 1970s. Higher oil revenues may
have made it possible for the Soviets to afford increased involvement in the
Third World in the 1970s. This involvement, along with the dynamics of
the arms race, gave rise to concerns about Soviet “geopolitical momentum”
and helped bring about the demise of détente.11
Energy exports to Eastern Europe, of which oil was the most important
by the 1970s, were a key element in Soviet efforts to maintain its sphere in
Eastern Europe. Except for Romania, Eastern Europe lacked significant
indigenous oil reserves and depended on the Soviets for almost all its oil
needs. Soviet deliveries of oil and natural gas were a critical energy source for
most countries in the region, as the share of coal in total energy consump-
tion declined during the 1960s and 1970s in every country except Romania.
Oil imports from the Soviet Union as a percentage of total energy con-
sumption in the region rose from 11.3 percent in 1970 to 15 percent in
1977.12
SOVIET OIL AND US POLICY

Soviet energy performance and prospects had important implications for US
and Western interests because of their overall impact on the Soviet economy
and their implications for Soviet choices in allocating resources among the
competing objectives of defense, consumption, and investment.
US President Richard Nixon and his Assistant for National Security
Affairs Henry Kissinger saw US economic and technological strength as
an important source of leverage. Aware that the Soviets wanted, and

needed, trade with the US much more than the US needed trade with the
Soviet Union, they hoped to link Soviet desires for access to Western
equipment, technology, and credit to changes in Soviet policies. Soviet
needs for Western oil and gas equipment and technology to develop their
energy sector seemed to present an excellent opportunity for a policy of
linkage.13
The Soviets seemed genuinely interested in expanding trade with the US
for political as well as economic reasons. For a time, there was even the
possibility that US companies might partner with the Soviet Union to
participate in the development of Soviet natural gas fields in Siberia. There
were discussions between US and Japanese companies and the Soviet
government about deals that envisaged US and Japanese companies pro-
viding equipment, technology, and financing to build pipelines, Liquefied
Natural Gas (LNG) liquefaction facilities, and LNG tankers in return for
long-term contracts to provide natural gas to markets in the US and Japan.
Although high-ranking Soviet officials, including General Secretary Leonid
Brezhnev and Chairman of the Council of Ministers Aleksei Kosygin,
lobbied for these projects in conversations with US leaders, little came of
these efforts, mainly because of the higher cost of Soviet LNG gas in
comparison to US domestic alternatives.14
Many people in the US viewed trade with the Soviet Union as trading
with the enemy, sentiments that increased as détente began to falter after
the October 1973 Arab–Israeli War. The Soviets made it clear that they
wanted Most Favored Nation (MFN) status and access to US government
financing and credit guarantees. Opponents of détente, such as Senator
Henry M. Jackson, Democrat from Washington, joined with human rights
activists to append amendments to the Trade Act of 1974, which denied
MFN status and export credits to non-market economies that restricted the
free emigration of their citizens, language that targeted the Soviet Union.
The legislation allowed the president to grant waivers, which were regularly
given to China, but not to the Soviet Union.15
These amendments undercut Nixon and Kissinger’s plans to link trade
with the Soviets with changes in Soviet foreign policy. In addition, the
Soviets were able to obtain much of what they needed from other Western
countries. Nevertheless, US–Soviet trade grew in the 1970s, as did the level
of overall Western trade with the Soviet Union. Oil and gas equipment and
steel pipe were an important part of this trade. Between 1972 and 1977, the
Soviets ordered more than $3.1 billion worth of Western oil and gas
288 D.S. PAINTER
equipment and $4.1 billion worth of steel pipe. The US portion of these
sales was more than $550 million.16
In 1977, the CIA produced a number of studies that predicted that
Soviet oil production would peak in 1980 and decline sharply thereafter
due to declining production in existing fields, declining success in finding
new fields, outdated exploration and production equipment and technol-
ogy, and formidable transportation and technical problems. The CIA
argued that it would be difficult for the Soviets to avert an energy crisis by
the mid-1980s. The Soviet Union used oil mostly in industry, not trans-
portation. This meant that natural gas, coal, and nuclear power could be
substituted for oil; so, in the long run, the Soviets could try to develop
natural gas, coal, and nuclear power as alternatives to oil. The CIA did not
think this would happen quickly enough to avoid an oil crisis. Reducing oil
exports to the West would decimate hard currency earnings; reducing
domestic oil consumption through conservation and/or fuel switching
would be time-consuming, expensive, and disruptive. Reducing oil exports
to Eastern Europe and other clients could lead to economic and political
unrest, since shortfalls would force them to buy oil on the world market in
hard currency at higher prices or reduce consumption.17
US President Jimmy Carter’s National Security Advisor Zbigniew
Brzezinski and his staff at the National Security Council (NSC) seized on
these studies to argue that Soviet oil problems provided a unique opportu-
nity for the US to pressure the Soviet Union. Admitting the US had limited
leverage “in the current context,” they argued that US leverage would
increase as Soviet oil problems worsened. The Soviets would need vast
amounts of Western equipment and technology to stave off or slow the
expected decline in oil production. The Soviets needed rotary drills to drill
deeper wells through harder rocks (because their turbo drills were not well
suited for such conditions), high-capacity submersible pumps and other
equipment, and chemicals to enhance recovery from existing wells. They
also needed Western exploration technology and Western offshore technol-
ogy. Although the Soviets could get most of what they needed from other
Western countries, the US was the leading producer of most of the equip-
ment and technology the Soviets needed. Either the Soviets changed their
policies, or the US would deny them critical technology that they needed.18
Proponents of a less confrontational policy led by Secretary of State
Cyrus Vance, Secretary of the Treasury Michael Blumenthal, and Secretary
of Commerce Juanita Kreps were skeptical about the possibilities of using
economic leverage to force the Soviets to make political concessions. They
argued that the CIA underestimated the ability of the Soviet system to deal
with the threat of declining oil production. They also noted that Defense
Intelligence Agency (DIA) analysts believed the CIA’s analysis to be flawed
and that the Soviets would be able to meet their oil production goals in the
1980s. Even if the CIA analysis proved to be correct, they did not believe it
would necessarily or even probably give the US significant leverage over
Soviet policy.19
Brzezinski and his NSC colleagues refused to give up. Harvard political
scientist Samuel Huntington, who served as coordinator of security plan-
ning at the NSC from 1977 to 1978, argued that US dominance in oil and
gas equipment and technology needed by the Soviets gave the US unprece-
dented leverage. To be able to exercise this leverage, control over US
economic relations with the Soviets should be centralized in the White
House, and oil and gas equipment and technology should be subject to
export controls. Huntington also recommended that the US work to gain
the support of its allies for this new economic diplomacy.20
Brzezinski gained the president’s support in July 1978, when Carter, in
response to a series of Soviet trials of Jewish dissidents, approved new
policies on trade with the Soviet Union that re-established export controls
on oil production equipment and technology and made it harder for US
companies to export computers to the Soviet Union. In addition, Carter
took steps to set up centralized NSC control over licensing of sensitive
exports to the Soviet Union.21
Soon after Carter’s decision, however, the Department of Commerce
approved a request by Dresser Industries of Texas for an export license for a
drill bit factory in the Soviet Union. Opposition from Brzezinski and
conservatives in Congress forced Carter to reconsider the case, and the
Department of Defense asked J. Fred Bucy of the Defense Science Board,
executive vice president of Texas Instruments and author of a controversial
1976 report on technology transfer, to study the issue. Bucy’s report
opposed the sale, arguing that deep well drilling technology and rock drill
bit manufacture were “critical” technologies, wholly concentrated in the
US. They were “very significant to national security in the broadest terms,”
because they contributed to the overall Soviet economy even though they
were not linked directly to Soviet military capabilities. He also argued that
that two other components of the deal, electron beam welding and tungsten
carbide inserts for the drill bits, had military applications. The Department
of Defense rejected Bucy’s recommendations, however, pointing out that
the technology in question was available from other countries and did not
290 D.S. PAINTER
have direct military applications. Carter approved the Dresser licenses in

September, and over the next 15 months that Carter administration granted
over 100 applications by US companies for licenses to export oil and gas
equipment and technology to the Soviet Union.22
Despite this setback, the NSC did not give up. The Comprehensive Net
Assessment 1978 prepared by the NSC staff in early 1979 argued that the
US should move decisively “to take advantage of the Soviet Union’s current
and prospective economic weaknesses,” especially in the energy sector.
“The situation,” the NSC argued, was “now ripe for exploitation.” The
US should offer to cooperate with the Soviets to develop their energy
resources in exchange for the Soviets adopting more accommodating pol-
icies in the Middle East and Africa.23 The State Department remained
unconvinced, pointing out that it was unlikely that the Soviets would alter
policies such as support for national liberation movements to obtain West-
ern economic favors. US economic leverage was also weakened by the
reluctance of the other OECD nations to cooperate with the US on the
issue.24
External events decided the issue. Following the Soviet intervention in
Afghanistan in late December 1979, the Carter administration imposed a
series of sanctions on the Soviet Union, including tight restrictions on the
sale of oil and gas technology. Adopting the view that any equipment or
technology that helped the Soviet economy or improved its industrial base
contributed to Soviet military potential, the new restrictions made it very
difficult for the Soviets to acquire oil and gas equipment and technology
from US companies. A CIA report on the sanctions warned that the
effectiveness of the restrictions was dependent on how long they stayed in
place and whether the US could convince its allies to join it in restricting
sales to the Soviet Union. Rather than joining the United States in cutting
trade with the Soviet Union, the major European countries increased their
exports to the Soviet Union, often taking the place of US firms forced to
give up their contracts.25
THE REAGAN ADMINISTRATION AND THE SIBERIAN NATURAL GAS

PIPELINE
As the 1980s began, Soviet leaders faced complex and costly energy prob-
lems that threatened to absorb much of their attention and resources for the
rest of the decade. In addition, a run of three successive poor harvests led to
a surge in grain and food imports. Transportation and materials bottlenecks

and dwindling productivity gains also undermined industrial growth
sharply. The Soviets needed imports from the West to raise the productivity
of their key industries, including oil and gas and machine building, and to
reduce shortages of grain and high-quality steel. The Western goods the
Soviets could buy with oil and gas export earnings were especially valuable
to the Soviet economy because they were more productive than comparable
Soviet goods and filled important gaps in supplies. CIA analysts worried that
some Western technology could help the Soviets keep pace with the tech-
nological improvement of Western weapons systems and reduce the cost
and improve the quality of their weapons systems.26
In December 1977, the Soviet leadership had decided to focus on oil
investment in Western Siberia. This strategy soon ran into difficulties,
however. The cost of developing the fields and the necessary transportation
infrastructure drained scarce capital from other sectors of the economy. The
share of energy in total industrial investment, excluding investment in
transportation (notably pipelines), rose from 28.7 percent in 1970 to 31.7
percent in 1980. In order to increase production rapidly, moreover, the
Soviets neglected exploration in favor of development drilling and
overproduced existing fields through water injection and other techniques
that damaged the long-term health of the fields.27
The Soviets also decided to increase natural gas production and exports.
During the first half of the 1980s, they began work on a large-diameter
pipeline to supply markets in Eastern and Western Europe. This massive
project involved the construction of a 5000 km pipeline with a projected
cost of around $14 billion. Natural gas exports to Western Europe could
earn much-needed hard currency that would help cover the massive cost of
building the pipelines and help finance Western equipment and technology
needed for the oil industry. At the same time, the Soviets were also building
an extensive network of long-distance gas pipelines to serve their internal
market. Substituting natural gas for oil in domestic markets and in Eastern
Europe would free up more oil for export to hard currency markets. In
addition, the East European nations that the pipeline crossed would receive
natural gas in lieu of a transit fee, thereby reducing some of Moscow’s
burden in supporting the economies of its East European clients.28
To build the pipelines, the Soviets needed high-quality large-diameter
pipe from Western suppliers, pipe-laying equipment, and high-capacity
turbines for compressors to push the gas over the long distances involved.
292 D.S. PAINTER
West European governments and banks, as well as Japanese banks, would

supply most of the financing for the project.
Reagan administration officials, especially CIA Director William Casey
and Secretary of Defense Caspar Weinberger, believed that anything that
helped the Soviet economy ultimately strengthened Soviet military power.
Convinced that imports of Western equipment and technology were crucial
to the Soviet economy, they argued that the US should deny the Soviets
access to Western oil and gas equipment, technology, and credit. They
focused on blocking the Siberian gas pipeline project, which was the best
prospect the Soviets had for securing substantial hard currency earnings.29
Pipeline opponents also argued that the Soviets would be able to exert
political pressure because of the vital role Soviet natural gas would play in
Western European economies. While they did not believe that the Soviets
would use gas exports as a blunt instrument to pressure Western Europe
since they needed the revenues, Western Europe would be vulnerable due
to the huge financial investment in the project by Western banks,
reinforcing European tendencies toward neutralism. Finally, pipeline oppo-
nents claimed that other energy sources, such as LNG from Algerian and
Nigeria, natural gas from Norway, and increased coal imports from the US
were less risky and less expensive.30
Although he shared their concerns about the pipeline, Secretary of State
Alexander M. Haig believed that the pipeline project was too far advanced
to stop. In addition, Haig pointed out that the alternatives proposed by
embargo advocates were unrealistic and impractical. Even if environmental
and political problems could be overcome, US port facilities were inade-
quate for exporting increased volumes of coal. In addition, the Norwegians
had not agreed to increase their natural gas production, and Norwegian
natural gas was more expensive than Soviet gas. Given the project’s eco-
nomic importance to Western Europe, Haig argued that trying to block the
pipeline would do more harm than good. Although the US was a world
leader in most aspects of oil and gas technology, the Soviets could obtain the
technology they needed from other countries. Joined by Secretary of Com-
merce Malcolm Baldridge, Secretary of the Treasury Donald Regan, US
Trade Representative William Brock, and Office of Management and the
Budget Director David Stockman, Haig argued that instead of trying to
block sales of equipment, which US allies would oppose and could under-
mine, the US should focus on tightening controls over the transfer of oil and
gas technology to the Soviet Union that would allow the Soviets to replicate
Western equipment.31
West European governments and companies argued that the pipeline’s

benefits outweighed its costs. Gas consumption was growing in Western
Europe, and increased natural gas imports from the Soviet Union would
help make up for the expected decline in Dutch gas shipments and Soviet oil
exports. In addition, at this time the Europeans viewed the Soviet Union as
a more reliable source of supply than Middle East producers. Access to
Middle East oil had been threatened in 1956, 1967, and 1973, and Iran,
Libya, and Algeria had all cancelled natural gas contracts in the past. In
contrast, the Soviets had continued to deliver oil to Western Europe during
the 1967 and 1973/74 Arab oil embargoes. By 1979, energy imports from
the Soviet Union made up around 6.1 percent of total energy requirements
in West Germany, 4.7 percent in France, and 9.9 percent in Italy. The
Europeans also argued that the project would not appreciably increase
their overall dependency on the Soviets for energy supplies due to declining
oil imports from the Soviet Union. They could protect themselves from
supply interruptions by building up strategic reserves and fuel substitution
capacity and by not becoming overly dependent on any single supplier.32
The Europeans expected major economic benefits from the project.
Western Europe was suffering from widespread unemployment, and sales
of large-diameter pipe, compressors, and related equipment would generate
thousands of jobs and billions of dollars in revenues. In addition, they
expected the Soviets to spend a large portion of their earnings from gas
sales in Western Europe. The project involved a large number of European
companies, and for many of these companies, there were no other markets
of comparable size. Moreover, European firms had already signed a number
of contracts, and the contracts contained cancellation penalties.33
Beyond these economic concerns, the Europeans wanted to preserve
détente in Europe and to avoid exacerbating East–West tensions. Some
Europeans suspected that the US opposed the pipeline because it reduced
US leverage over Western Europe by providing an East–West economic link
that supported European détente. Most West European governments
believed that economic and other ties with the Soviet Union would mod-
erate Soviet behavior by creating mutual interdependence. In their view,
European détente had been successful, especially in opening Eastern
Europe to Western influence, and they wanted to maintain this access.34
Concerned that unilateral sanctions would harm US business without
limiting Soviet access to Western oil and gas technology and equipment, US
President Ronald Reagan initially hesitated to take action, though he may
have approved a CIA plan to sabotage the pipeline.35 Pipeline opponents
294 D.S. PAINTER
continued to press for action. In late October Casey sent Reagan a CIA
study that emphasized dependence on Western equipment and technology.
A month later he sent the president a Special National Intelligence Estimate
on how trade with the West strengthened Soviet military. The estimate
concluded that “short of comprehensive trade restrictions, a Western
embargo on oil and gas equipment would have the greatest impact” on
the Soviets.36
Events in Poland provided Reagan with an opportunity to act. On
December 12, 1981, with political authority deteriorating and unrest
spreading and a Warsaw Pact intervention apparently imminent, Polish
Prime Minister General Wojciech Jaruzelski, who was also defense minister
and first secretary of the Communist Party, declared a state of siege and
ordered the arrest of more than 5000 opposition leaders, including the
leaders of the independent trade union Solidarity.37
The US and its North Atlantic Treaty Organization (NATO) allies had
issued several warnings against a Soviet military intervention in Poland.
Although the Soviets refrained from direct intervention, the Reagan admin-
istration, ignoring years of NATO contingency planning and agreements on
how to respond to Soviet actions in Poland, unilaterally imposed a number
of economic sanctions on the Soviet Union, including suspension of sales of
oil and gas technology and licenses for various high-technology exports.38
The restrictions affected around sixty US companies. Officials at the Com-
merce Department interpreted the restrictions as being retroactive, thus
requiring US firms to break existing contracts with the Soviets, their sub-
sidiaries in Europe, and European firms. The affected US companies
protested, and the Europeans rejected the US interpretation.39
Casey and Weinberger stepped up their campaign against the Siberian
natural gas pipeline. Weinberger argued that events in Poland provided an
opportunity to rally European behind US policy and that it was “time to
mount a major effort to dismantle the project.” He favored extending
sanctions to the subsidiaries of US firms in other countries. Casey believed
that the US should focus on convincing its allies to limit government and
government-guaranteed and subsidized credits to the Soviets. Casey also
argued that the US and its allies should be working to increase the avail-
ability of oil and gas in their own countries in order to limit dependence on
Soviet oil and gas.40
Reagan decided to defer decision on the question of applying US sanc-
tions to foreign companies pending a State Department mission to Europe
to discuss restrictions on credits. After hearing a briefing on the Soviet
economy in March 1982, Reagan wrote in his diary: “They are in very
bad shape and if we can cut off their credit they’ll have to yell ‘Uncle’ or
starve.”41 Harvard professor Richard Pipes, who was the Soviet specialist at
the NSC in 1981–82, warned there was “virtually no chance” that the
Europeans would agree to effective credit controls and that relaxing or
ending sanctions would have a “catastrophic” impact on US credibility. As
negotiations with the Europeans dragged on, Reagan grew impatient. The
Soviet Union was “on the ropes economically,” he exclaimed at an NSC
meeting on May 24, and “this is the time to punish them.” Casey continued
to argue for tougher action against the Soviets to delay the pipeline, saying
credit restrictions by themselves were inadequate. The State Department
conceded that if talks with the Europeans on credit restrictions failed, the
US should make the sanctions applicable to US subsidiaries abroad and
foreign companies using US licenses.42
Talks with the allies revealed little enthusiasm for credit restrictions,
leading pipeline opponents to conclude that it was time to switch from
persuasion to coercion.43 At a NSC meeting Assistant for National Security
William Clark scheduled to take advantage of Haig’s absence—he was
meeting with the Soviet foreign minister in New York—Reagan decided
to extend the sanctions against the Soviet Union to include equipment
produced by subsidiaries of US companies abroad and equipment produced
abroad under licenses issued by US companies. Angered that the situation in
Poland had not improved and convinced that the Soviets were vulnerable,
Reagan declared that the US had to take a strong stand.44
The major Western European nations protested the US action as an
illegal attempt to impose extraterritorial trade sanctions and rejected the
US argument that the proposed pipeline could provide the Soviets with a
means of applying economic pressure on Western Europe. The announce-
ment on July 30, 1982 of a large new US grain deal with the Soviets further
infuriated the Europeans. Not convinced by arguments that grains sales
absorbed hard currency while selling the Soviets oil and gas equipment
helped them earn hard currency, the British, German, French, and
Italian governments instructed their firms to honor their contracts with
the Soviet Union. British Prime Minister Margaret Thatcher was especially
upset, publicly stating that the US action left her “deeply wounded by a
friend.”45 Privately, she told Weinberger that she “desperately needed some
face-saving solution.”46
As shipments of pipeline equipment started on their way to the Soviet
Union, the US retaliated by announcing that companies violating the US
296 D.S. PAINTER
sanctions would be denied access to all US goods, services, and technology,

and would subject to fines up to $100,000. By October, the US govern-
ment had cited 12 European firms for defying the embargo. In response, the
Europeans threatened retaliatory trade measures.47
The State Department warned that the tensions created by the sanctions,
especially the retroactive and extraterritorial aspects, were creating “a new
and formidable barrier” to the achievement of basic US objectives. George
P. Shultz, who had replaced Haig as secretary of state in June, was especially
concerned about negotiations on the deployment of intermediate-range
nuclear missiles in Europe. Arguing that continuation of the sanctions
would damage US interests, the State Department proposed relaxing the
sanctions in exchange for a broader consensus on trade with the Soviet
Union, including strengthening controls on the export of advanced tech-
nology, and monitoring export credits to the Soviet Union.48
Although Reagan remained determined to “punish” the Soviets, he too
began looking for a face-saving solution. The CIA pointed out it that the
sanctions would not prevent the Soviets from completing the pipeline,
raising concerns that if the sanctions were still in place when the pipeline
was completed it would magnify the appearance of failure. Rather than
trying to halt exports of oil and gas equipment, pipeline opponents decided
to shift their focus to getting the Europeans to limit their purchases of
Soviet gas and to tighten controls on credit and advanced technology
exports.49
The change in focus allowed the State Department to negotiate an
agreement with US allies to withdraw the extended trade sanctions in return
for promises of increased vigilance in trade matters. The Europeans also
agreed not to sign or approve any new gas contracts with the Soviets while
they and the US conducted a study on alternatives to Soviet gas; improved
enforcement of controls over export of advanced technologies, especially in
the oil and gas sector; and changes in officially-backed export credit prac-
tices to include “substantially higher rates” to the Soviet Union, larger
down payments, and shortened maturities. Reagan announced the lifting
of the sanctions on November 13, 1982.50
Worried that even without building a second pipeline, the Soviets would
have the capacity to supply up to 85 percent of European natural gas
demand, sanctions supporters tried to salvage something from the reversal
by convincing the Europeans to limit Soviet gas imports to no more than
30 percent of total European gas supplies. The Europeans agreed to a May
1983 International Energy Agency (IEA) communiqué that called on
member states to avoid “undue dependence” on any single supplier, but

they refused to agree to any binding ceiling or to single out the Soviet
Union. Reflecting a long-standing and independent commitment by
European governments not to become dependent on any single supplier,
the communiqué also called on member states to diversity sources of energy
imports by developing indigenous natural gas resources in North America
and the North Sea.51
Meanwhile, angered by US actions, the Soviet leadership made comple-
tion of the pipeline a top priority. Although the Soviets announced in
January 1984 that the first shipment of gas from Siberia had arrived in
France, the gas traveled through the already existing pipeline system not
the new line. The new line opened in late 1985. The US embargo caused
some delays and increased costs, but it failed to prevent natural gas sales to
Western Europe from becoming an important source of hard currency
earning for the Soviet Union. Western Europe bought less Soviet gas than
originally projected because energy use had fallen due to slower economic
growth. As a result, earnings, while significant, were less than originally
projected.52 Earnings were also smaller because the price of Soviet natural
gas was linked to the price of oil, and world oil prices dropped dramatically
between 1980 and 1986.
DEVELOPMENTS ON THE WORLD OIL MARKET

During the 1970s, world oil prices skyrocketed—from $1.80 a barrel in
1970 to $36.83 in 1980.53 Over time, higher prices led to increases in
supply and decreases in demand. In addition, after the first oil shock in
1973/74, the OECD nations launched a coordinated campaign to protect
themselves from further disruptions in supply. The campaign focused on
reducing oil consumption through greater efficiency and conservation,
replacing oil with other energy sources, particularly in electricity generation,
and reducing oil imports from the members of the Organization of the
Petroleum Exporting Countries (OPEC), and especially from the Middle
East, by increasing oil production elsewhere.54
Although these efforts lagged due to a drop in real prices for oil between
1974 and 1978, the second oil shock revived them. Between 1979 and
1985, oil consumption in the non-communist world fell from 51.6 to 46.3
million bpd. Over the same period, non-OPEC oil production, mainly from
Alaska, the North Sea, and Mexico, increased from 17.7 to 22.6 million
bpd. The result was a 10.2 million bpd drop in demand for OPEC oil.55
298 D.S. PAINTER
These changes in the world oil economy put enormous pressure on oil
producers. After peaking in the fourth quarter of 1980 at $38.60 per barrel,
the average spot price of a barrel of light crude oil fell to $34.17 in 1981,
$31.76 in 1982, $28.67 in 1983, to a range around $27 in 1984–1985. The
drop in prices hit Saudi Arabia especially hard. For almost five years, the
Saudis attempted to stabilize prices around $29 a barrel by cutting back
their production, but other OPEC producers failed to reduce their produc-
tion, and the Saudis lost market share even as prices dropped sharply. Saudi
production fell from an average of 10.27 million bpd in 1980 to around 2.2
million bpd in August 1985, and Saudi revenues fell from $113.2 billion in
1981 to $25.9 billion in 1985, forcing the kingdom to cut back many
government programs and draw down its foreign-exchange reserves. Low
oil production levels also meant less associated gas production, threatening
the Saudi petrochemical industry, which used natural gas as its main feed-
stock.56
In September 1985, the Saudis decided to regain their position as the
leading OPEC producer, stem the drop in oil revenues, and ensure a long-
term market for their oil by increasing production. An added bonus was that
lower prices also hurt Iran, which was engaged in a bloody war with Iraq
and threatened Saudi Arabia and other Gulf producers, who were providing
economic assistance to Iraq. Rather than selling oil at a fixed price, they
would be paid based on what refined products sold for in the marketplace
minus a fixed profit for the refiner.57 The new “netback” system put a
premium on volume rather than price and led to a collapse of world oil
prices, which fell to around $17 a barrel in the first quarter of 1986 and $11
in the second quarter.58
THE THIRD OIL SHOCK AND THE SOVIET UNION

The collapse in world oil prices decimated Soviet hard currency earnings.
According to a 1990 estimate by the CIA, hard currency oil export earnings,
which had reached approximately $15.6 billion in 1983, fell to around
$6.96 billion in 1986. Low oil prices also took a toll on hard currency
earnings from gas sales, which dropped sharply in 1986–87 despite a
40 percent increase in export volume. Initially, the decline in the price of
oil was, in part, offset by the rise in the value of the dollar against other
major Western currencies. This enhanced the Soviet Union’s foreign pur-
chasing power because Soviet oil and gas exports were priced in dollars
while most of their hard currency purchases were made in Western Europe
and Japan in non-dollar currencies. The depreciation of the dollar begin-

ning in the mid-1980s, on the other hand, eroded the purchasing power of
Soviet energy revenues.59
The drop in oil prices also hurt Soviet weapons exports, since many of
their best customers were oil exporters. According to a CIA estimate,
around 5 percent of Soviet hard currency earnings and 10 percent of Soviet
oil exports were derived from re-exported Middle East oil, obtained mostly
in exchange for Soviet arms. Soviet exports of arms and military goods to
non-socialist countries denominated in hard currencies fell from $9.18
billion in 1984 to $7.49 billion in 1985. Although sales recovered in
1987 to $10.4 billion and rose to $11.8 billion by 1989, actual Soviet
gains were probably less, because significant portions of the sales were on
credit. As a result, Third World debt to the Soviet Union grew from $34.8
billion in 1985 to $67.4 billion by the end of 1989. In 1990, the value of
Soviet arms sales fell sharply to $9.4 billion.60
The decline in earnings presented the new Soviet government of Mikhail
Gorbachev, who took power in March 1985, with difficult choices. Gorba-
chev initially planned to hold energy investment steady and use oil and gas
earnings to finance the modernization of Soviet industry and improve living
standards. Instead he had to increase energy investment and import more
Western equipment and technology to keep production from falling and to
maintain exports. This necessitated cutting imports of machinery and equip-
ment for the modernization program as well as imports of grain and
consumer goods. Similarly, devoting additional domestic resources to oil
production and to the manufacture of oil field equipment reduced the
availability of funds for plant construction and improved equipment in
other industries. The alternative, letting oil and gas production and exports
decline, would reduce hard currency earnings, which would result in
reduced imports of Western machinery and technology, high-quality
goods for worker incentives, and food and grain.61
To make matters worse, oil and gas exploration and production costs
were increasing. The natural aging and depletion of existing oil fields,
exacerbated by continuing overproduction, limited the potential for growth
in production. New fields were deeper, less productive, geologically more
complex, and generally in remote areas lacking in infrastructure and with
harsh environments. To maintain, much less increase, energy production
would require so much investment that other economic objectives could be
jeopardized. While there were good prospects for finding major new oil
fields in the North Caspian Basin and in the Barents Sea, both areas
300 D.S. PAINTER
presented complex and costly technological challenges requiring Western

technology and equipment. Even if the Soviets overcame these problems,
production would be slow to come on line and would not fully offset
declines in output from the West Siberian and Volga-Ural regions.62
Although conservation could cut domestic oil use, and thus free up oil for
export, prospects for conservation were dim. The Soviet economy was a
“glutton for energy,” using around one standard unit of fuel to produce the
equivalent of $1 in national production, compared to 0.8 standard unit for
the US and 0.4 standard unit for Japan. Some of the difference was due to
the country’s climate, which required more energy for heating. Some was
due to the dominance of heavy, energy-intensive industry in the Soviet
economy, which accounted for around 35 percent of national output as
compared to 12 percent in the US economy. In addition, demand for oil
products, especially gasoline and diesel fuel, for transportation and agricul-
ture was growing; demand for non-energy oil products such as lubricants
and plastics was also increasing. Despite some success in substituting natural
gas for fuel oil in power plants, fuel oil consumption in other plants
increased between 1981 and 1985 due to problems with coal supply,
canceling out the gains.63
Moreover, in the Soviet system, prices did not reflect the true opportu-
nity cost of energy resources and thus encouraged “grossly uneconomic
production and consumption.”64 Although waste was pervasive in both
factories and households, industrial use accounted for most of Soviet oil
consumption, and reducing this demand required not only high prices, but
also investment in more efficient machinery. Significant efficiency gains
would also require substantially higher energy prices that reflected changing
demand and extraction costs, and, most importantly, radical changes in the
economic system to ensure that higher prices led to energy conservation.65
Cutting exports to Eastern Europe ran the risk of bringing down living
standards and fomenting popular discontent, which could further under-
mine support for the region’s regimes. Eastern Europe depended on Soviet
oil for more than 90 percent of its oil imports and about 80 percent of its oil
consumption. Around 8 percent of Soviet exports went to Cuba and
Vietnam, while around 40,000 barrels a day went to Afghanistan, Angola,
Ethiopia, Mozambique, Nicaragua, and South Yemen as part of economic
aid. These countries did not have the hard currency to buy oil elsewhere.66
Although the prospects for increasing natural gas production were very
good, to do so would require a massive expansion of the natural gas pipeline
network and storage facilities, and the costly conversion of customers from
oil to gas. Expanding coal production and nuclear power were not good
options. Coal reserves were concentrated in Siberia, and using them would
require sizable investment in technology for using low-quality coal and
transmitting electricity over long distances. Reviving nuclear power after
the Chernobyl disaster of 1986 would require investment in safety and an
intensive public relations effort to restore public acceptance of nuclear
energy.67
Soviet oil production, oil exports, and hard currency earnings from oil
exports declined in 1985, but the Soviets restored oil production levels in
1986 by pouring huge additional amounts of money, workers, and equip-
ment into Western Siberia. Due to a slight increase in oil prices in 1987, hard
currency export earnings increased from $6.96 billion in 1986 to almost
$10.3 billion in 1987. Prices fell again in 1988, however, and earnings from
hard currency exports dipped to around $9.77 billion in 1988, even though
the volume of oil exported increased from 3.92 million bpd in 1987 to 4.09
million bpd in 1988. Revenues from sales to Eastern Europe also fell because
prices were pegged to world crude oil prices for the previous year.68
By 1989, energy-associated problems had become a major barrier to
Gorbachev’s plans. There was no easy way out. If he continued to allow
energy to soak up a growing share of investment resources, his moderniza-
tion and consumer welfare goals would be unachievable. At the same time,
energy shortages and declining hard currency earnings, which would result
from failure to maintain production and exports, would be equally devas-
tating to his reform plans. Cutting domestic consumption to increase
exports risked starving the domestic economy of needed energy, and there
were already complaints about domestic fuel shortages. Cutting exports to
Eastern Europe carried the risk of political unrest.
Labor and political unrest, shortages of equipment, and general eco-
nomic disruption due to the uneven impact of Gorbachev’s economic
reforms, combined with the natural depletion of fields, led to a decline in
oil production—to 12.254 million bpd in 1989, 11.523 million bpd in
1990, and 10.431 million bpd in 1991. In addition, the mounting violence
between Azerbaijan and Armenia over Karabakh contributed to shortages in
oil equipment, most of which came from Baku.69
Falling oil output undermined the domestic economy and the Soviet
Union’s ability to service its growing foreign debt. At the same time, the
general decline in domestic output led to an increase in demand for imports
to ease critical shortages and bottlenecks, and in 1989, Gorbachev
attempted to rekindle economic growth by increasing imports of machinery
302 D.S. PAINTER
and equipment. The devolution of trading rights from the government to

enterprises in April 1989 also led to an increase in imports as the central
government lost control over imports.70 By 1990, the Soviet Union’s
balance of payments problem had become acute, and the central govern-
ment’s ability to pay its international debts declined sharply. In 1991, the
international trade sector of the Soviet economy collapsed.71
US ENERGY POLICY AND THE END OF THE COLD WAR

For a brief period in the 1970s and early 1980s, it appeared that its rich oil
and gas resources might enable the Soviet Union to modernize its economy.
Although higher oil prices allowed the Soviets to import large amounts of
Western grain and machinery, the windfall revenues gave the illusion of
continued viability to a system that was already in serious trouble and thus
diverted attention from the need to reform. When the Soviet Union finally
had a government interested in reform, oil prices collapsed and revenues
from oil and gas exports declined, depriving Gorbachev of the resources that
might have made a gradual reform of the Soviet system possible.
What role, if any, did US policies play in this outcome? US efforts to link
trade with the Soviets to changes in Soviet foreign policy in the 1970s failed
because the Soviets were able to acquire the equipment, technology, and
credit they needed from other Western countries. Despite claims by Reagan
Victory School advocates, US efforts to block the construction of the
Siberian gas pipeline did not have a significant impact. Although US policies
caused some delays and imposed some costs, natural gas sales became a
major source of foreign exchange earnings for the Soviet Union. Victory
School advocates overstate the costs by comparing actual volumes and
revenues to their earlier exaggerated projections about the pipeline. They
also attribute the outcome to US policies and ignore changes in economic
conditions and independent decisions by European governments. More-
over, US efforts to block the pipeline damaged US relations with its West
European allies and hindered efforts to craft effective controls on strategic
exports.72
The collapse in oil prices in the mid-1980s had a devastating impact on
the Soviet economy, but claims that the Saudi decision in September 1985
to increase oil production and thereby drive down prices was the result of
US lobbying cannot be verified on the basis of the currently available
documentary record. Almost all of the information we have comes from
Schweizer’s work, which recounts alleged conversations with high Saudi
officials, including King Fahd, during which President Reagan, Secretary of

Defense Weinberger, and CIA Director Casey urged the Saudis to cut oil
prices. Most records of these meetings are still classified, and the few that are
available do not mention oil prices. Schweizer says that Casey, who often
met with Saudi leaders to secure funding for anti-Soviet insurgents in
Afghanistan and Nicaragua, did most of the lobbying. In contrast, the
chief of the CIA’s Near East and South Asia Division in the Directorate of
Operations from 1979 to 1984 stated at a conference in Moscow in
November 2007 that he had accompanied Casey on all his visits to Saudi
Arabia and never heard him mention oil prices.73 Other accounts of US–
Saudi relations in the 1980s make no mention of discussions about oil
prices.74
Reagan administration officials made extensive efforts to assure Saudi
Arabia of US friendship through arms sales and personal and public decla-
rations of support for the Saudi regime. With the fate of the Shah of Iran in
mind, Reagan, Haig, Casey, and Weinberger made it clear from the outset
that they would not permit the Saudi monarchy to be overthrown, a policy
that conservative journalist William Safire labeled the “Reagan Corollary” to
the Carter Doctrine.75 There is no evidence linking these expressions of
support to oil prices as opposed to maintaining Western access to Saudi oil, a
US policy priority since World War II. Although Weinberger later claimed
“one of the reasons we were selling the Saudis all those arms was to get
lower prices,” the US already had a long history of arms sales to Saudi
Arabia.76
Saudi decisions on pricing and production levels were calculated to max-
imize and protect their income over the long run. The Saudis preferred prices
that would discourage the development of alternative sources of oil and
alternatives to oil and not harm Western economies, where they had signif-
icant investments. These interests aligned them more with the oil-importing
countries than with the other major oil-exporting countries.77 The Saudis
decided to increase production in the fall of 1985 because they had grown
tired of cutting back their production in a futile effort to maintain higher oil
prices while other producers, including other OPEC members, were increas-
ing their production. As a result of both lower prices and lower exports, Saudi
Arabia’s oil income plummeted, forcing the kingdom to take action. Thus,
even if US officials encouraged the Saudis to lower prices, the Saudis had very
good reasons—apart from US lobbying—to take the steps they did.78
304 D.S. PAINTER
Schweizer also claims that the economic pressures caused by falling oil
prices were a key factor behind Gorbachev’s efforts to improve relations
with the West and end the Cold War.79 This argument echoes Reagan’s
own views. Reagan actually believed that the changes in Soviet policy under
Gorbachev were the result of his earlier hardline policies.80
Economic constraints were a factor in Gorbachev’s calculations, but
there is little evidence that they were the result of US policies.81 In the
late 1980s, the CIA believed that Gorbachev’s goal in improving relations
with the West was to gain breathing space and access to Western technology
to modernize the Soviet economy and rebuild Soviet military power.82 The
dominant strong scholarly consensus, however, argues that Gorbachev and
the new generation of Soviet leaders that emerged in the 1980s had already
concluded that the policies of their predecessors were counterproductive
and that continued conflict threatened their goal of overcoming the disas-
trous legacy of Stalinism, reforming their economy, and revitalizing their
society. Gorbachev believed that a certain degree of openness and democ-
racy was necessary to achieve these goals. Ending the Cold War was central
to Gorbachev’s plans. A less confrontational relationship with the US and
the West in general, Gorbachev and his allies hoped, would permit a drastic
reduction in military spending and allow the Soviet Union to devote greater
attention and resources to internal reform and renewal.83
While Gorbachev succeeded in ending the Cold War, he was unable to
transform Communism into social democracy or preserve the Soviet Union.
In the end, the Soviet Union was unable to escape the legacy of economic
backwardness it had inherited from its Tsarist predecessor; the unforgiving
realities of geology and geography, which, among other injustices, located
its oil and gas reserves far from the main centers of population, production,
and consumption; and the inherent contradictions of the Soviet system. The
Soviet Union’s energy resources were not able to overcome these problems
and indeed often reflected and exacerbated them. The Soviet system finally
collapsed when the piecemeal economic reforms Gorbachev instituted led
to economic chaos and to the defection of a large portion of the Soviet elite,
whose continued privileges were threatened by political reforms. In addi-
tion, democratization and self-determination proved incompatible with
empire, putting an end not only to the Soviet sphere in Eastern Europe,
but also to one of the last of the great multinational empires.84
Acknowledgments I would like to thank Harley Balzer, Christopher Findlay,

Mario Daniels, Tom Koritschan, Victor McFarland, Jeronim Perović, Anand
Toprani, and James Graham Wilson for their very helpful comments and sugges-
tions. I began work on this topic while a fellow at the Norwegian Nobel Institute,
and I am pleased to thank Geir Lundestad, Olav Njølstad, and the Institute for their
support.
NOTES
1. David S. Painter and Thomas S. Blanton, “The End of the Cold
War,” in Jean-Christophe Agnew and Roy Rozenzweig, eds., A
Companion to Post-1945 America (Malden, MA: Blackwell Publish-
ing, 2002), 479–500.
2. Gas prices were linked to oil prices. Studies that examine oil include
Yegor Gaidar, “The Soviet Collapse: Grain and Oil,” American
Enterprise Institute, April 2007, http://www/aei.org/wp-con-
tent/uploads/2011/10/2007040419_Gaidar.pdf; Yegor Gaidar,
Collapse of an Empire: Lessons for Modern Russia, transl. Antonina
W. Bouis (Washington, DC: Brookings Institution Press, 2007);
Stephen Kotkin, Armageddon Averted: The Soviet Collapse,
1970–2000 (Oxford: Oxford University Press, 2001), 10–27; Doug-
las Reynolds, “Soviet Economic Decline: Did an Oil Crisis Cause the
Transition in the Soviet Union,” Journal of Energy and Development
24, 1 (1998), 65–82; “Cheaper Oil: Many Winners, a Few Bad
Losers,” Economist, October 25, 2014, 16.
3. Peter Schweizer, Victory: The Reagan Administration’s Secret Strat-
egy that Hastened the Collapse of the Soviet Union (New York: Atlan-
tic Monthly Press, 1994); Peter Schweizer, Reagan’s War: The Epic
Story of His Forty-Year Struggle and Final Triumph Over Commu-
nism (New York: Doubleday, 2002), 238–41.
4. In addition to Schweizer, see Roger W. Robinson, Jr., “Reagan’s
Soviet Economic Take-Down Strategy: Financial and Energy Ele-
ments,” in Douglas E. Streusand, ed., The Grand Strategy that Won
the Cold War: Architecture of Triumph (Lanham, MD: Lexington
Books, 2016), 159–74. Robinson’s account is based on his experi-
ences on the NSC staff, 1982–1985.
306 D.S. PAINTER
5. Michael Mastanduno, Economic Containment: CoCom and the Pol-

itics of East-West Trade (Ithaca, NY: Cornell University Press,
1992), 52–7, 143–56.
6. For an overview of the oil industry in Russia, see Vagit Alekperov,
Oil of Russia: Past, Present, and Future (Minneapolis, MN: East
View Press, 2011; production calculated from figures in Marshall
I. Goldman, The Enigma of Soviet Petroleum: Half-Empty or Half-
Full (London: George Allen & Unwin, 1980), 15, 22. On Soviet oil
policy in the 1930s and 1940s, see also Felix Rehschuh’s chapter in
this book. Tons converted to barrels at the rate of 1 metric ton ¼
7.33 barrels.
7. Alekperov, Oil of Russia, 263–77. Production in 1941 and 1945
calculated from DeGolyer and MacNaughton, Twentieth Century
Petroleum Statistics: Historical Data (Dallas, TX: DeGolyer and
MacNaughton, 2005), 7. Alekperov gives higher figures.
8. David S. Painter, “Oil, Resources, and the Cold War, 1945–1965,”
in Melvyn P. Leffler and Odd Arne Westad, eds., Cambridge History
of the Cold War, vol. 1: Origins (Cambridge: Cambridge University
Press, 2010), 489–90, 505; Central Intelligence Group, Petroleum
Resources Within the USSR, Office of Records and Estimates (ORE)
4/1, June 16, 1947; CIA, The USSR Petroleum Industry, ORE
24–49, January 5, 1950; and CIA, Flow of Petroleum in the Soviet
Bloc European Satellites, 1952, CIA/RR IM-375, July 13, 1953, in
CIA Electronic Reading Room (hereafter CIA Documents).
9. Figures for 1960 calculated from DeGolyer and MacNaughton,
Twentieth Century Petroleum Statistics, 7; figures for 1970 and
1980 from BP Statistical Review of World Energy 2015, http://
www.bp.com/content/dam/bp/pdf/energy-economics/statistical-
review-2016/bp-statistical-review-of-world-energy-2016-full-report.
pdf. Alekperov, Oil of Russia, 286, 299, provides higher figures; Per
H€ ogselius, Red Gas: Russia and the Origins of European Energy
Dependence (New York: Palgrave Macmillan, 2013). See also the
chapter by Dunja Krempin in this book.
10. In 2014 dollars, oil prices rose from $10.97 in 1960 to $105.81 in
1980; BP Statistical Review of World Energy 2015; CIA, Soviet
Energy Policy Toward Eastern Europe: A Research Paper, June
1980, CIA Documents; Goldman, The Enigma of Soviet Petroleum,
6–7, 9, 91–2. The Soviets also earned hard currency through arms
sales to oil producing countries.
11. David S. Painter, The Cold War: An International History (London:

Routledge, 1999), 77–94.
12. CIA, Soviet Energy Policy Toward Eastern Europe, CIA Documents.
13. Raymond Garthoff, Détente and Confrontation: American-Soviet
Relations from Nixon to Reagan (Washington, DC: Brookings
Institution, 1994), 102–6; Henry A. Kissinger, The White House
Years (Boston: Little, Brown and Company, 1979), 152–3, 840;
Bruce Jentleson, Pipeline Politics: The Complex Political Economy of
East-West Energy Trade (Ithaca, NY: Cornell University Press,
1986), 136–9; Mastanduno, Economic Containment, 52–7,
143–56; Foreign Relations of the United States (FRUS),
1969–1974, vol. 36: Energy Crisis, 1969–1974 (Washington, DC:
Government Printing Office, 2011), doc. 61.
14. FRUS, 1969–1976, vol. 36, docs. 174, 196, 205; FRUS, 1969–1976,
vol. 13: Soviet Union, October 1970–October 1971 (Washington,
DC: Government Printing Office, 2011), doc. 153; FRUS,
1969–1976, vol. 15: Soviet Union, June 1972–August 1974
(Washington, DC: Government Printing Office, 2011), doc. 69;
Jeronim Perović and Dunja Krempin, “‘The Key is in Our Hands:’
Soviet Energy Strategy during Détente and the Global Oil Crises of
the 1970s,” Historical Social Research 39, 4 (2014), 113–44, here
123–8; Jentleson, Pipeline Politics, 139–42.
15. Garthoff, Détente and Confrontation, 401, 461, 507–12; Jentleson,
Pipeline Politics, 142–9; Mastanduno, Economic Containment,
149–50; Robert G. Kauffman, Henry M. Jackson: A Life in Politics
(Seattle: University of Washington Press, 2000), 266–86.
16. FRUS, 1969–1976, vol. 16: Soviet Union, August 1974–December
1976 (Washington, DC: Government Printing Office, 2012), doc.
69; CIA, Soviet Economic Dependence on the West, SOV 82-10012,
January 1982, CIA Documents, Reagan Collection; Mastanduno,
Economic Containment, 158.
17. CIA, The Impending Soviet Oil Crisis, ER 77-10147 U, March
1977; The International Energy Situation: Outlook to 1985, ER
77-10240U, April 1977; CIA, Prospects for Soviet Oil Production,
ER 77-10425, April 1977; CIA, Prospects for Soviet Oil Production:
A Supplemental Analysis, ER-10270, July 1977; CIA, Soviet Eco-
nomic Problems and Prospects, ER 77-10436U, July 1977, CIA
Documents; US Congress, Senate, The Soviet Oil Situation: An
Evaluation of CIA Analyses of Soviet Oil Production, Staff Report
308 D.S. PAINTER
of the Senate Select Committee on Intelligence (Washington, DC:

Government Printing Office, 1978); Roger Stern, “Oil Scarcity
Ideology in US Foreign Policy, 1908–1997,” Security Studies
25, 2 (2016), 242–3. The CIA revised its estimate in late 1983,
noting that Soviet proved oil reserves were probably about twice as
large as it previously believed and that in late 1977, the Soviet
leadership began an intensive, high priority effort to develop West
Siberian oil and gas. CIA, Soviet Energy Prospects into the 1990s, NIE
11-7-83, December 14, 1983, CIA Records Search Tool (CREST).
18. CIA, Soviet Oil Prospects, CIA, The Value to the USSR of Economic
Relations with the US and the West, ER M 77-10525, August 1977,
CIA Documents, Princeton Collection; the conclusions are in FRUS
1977–1980, vol. 6: Soviet Union (Washington, DC: Government
Printing Office, 2012), docs. 40 and 46; Military Assistant to
Brzezinski, Weekly Report, September 22, 1977; Brzezinski to the
President, NSC Weekly Report #31, October 7, 1977, both in
Jimmy Carter Library (hereafter JCL); Olav Njølstad, Peacekeeper
and Troublemaker: The Containment Policy of Jimmy Carter,
1977–1978 (Oslo: Norwegian Institute for Defence Studies,
1995), 265–78.
19. FRUS 1977–1980, vol. 6, doc. 46; State-Treasury Assessment of
CIA’s Prognosis for Soviet Oil Production, attached to Tarnoff to
Brzezinski, December 27, 1977, NLC-6-79-3-29-5, JCL; on the
DIA’s position, see The Energy Outlook, February 29, 1980,
NLC-12-59-2-10-1, JCL.
20. Odom to Brzezinski, June 23, 1978, NLC-6-79-7-14-7; Odom to
Brzezinski, June 29, 1978, NLC-6-79-7-17-4; Eckland (CIA) to
Odom, July 13, 1978, NLC-12-42-1-3-8; CIA, Foreign Availability
of Petroleum Production and Exploration Equipment, August
30, 1978, NLC-12-42-1-19-1, all in JCL; oral history interview of
Brzezinski’s military assistant, William E. Odom, in the Carter Pres-
idency Project at the Miller Center, http://millercenter.org/presi
dent/carter/oralhistory/zbigniew-brzezinski; Njølstad, Peacekeeper
and Troublemaker, 269–71; Samuel P. Huntington, “Trade, Tech-
nology, and Leverage: Economic Diplomacy,” Foreign Policy
32 (1978), 63–80; Jim Hoagland, “A Carefully Primed Soviet Bear
Trap,” Washington Post, August 20, 1978, A1, A4.
21. Garthoff, Détente and Confrontation, 674; Jentleson, Pipeline Poli-
tics, 152.
22. Jentleson, Pipeline Politics, 152–8; Mastanduno, Economic Contain-

ment, 186–219, 203–8; William Greider, “US Should Help Russia
Alleviate Its Oil Crisis,” Washington Post, August 13, 1978, C8;
Rowland Evans and Robert Novak, “Confusing Signals on Trade
with Russia,” Washington Post, August 16, 1978, A15; William
Safire, “I’m the President,” New York Times, June 29, 1978, A25;
FRUS 1977–1980, vol. 6, docs. 140 and 141; US Congress, Senate,
Committee on Governmental Affairs, Transfer of Technology and the
Dresser Industries Export Licensing Actions, 95th Congress, 2nd
Session, October 3, 1978.
23. Comprehensive Net Assessment 1978, undated, Brzezinski Collec-
tion, Subject File, Box 42, Weekly Reports, 91–101, JCL; the CIA
also maintained its position on Soviet energy problems, CIA, The
Energy Outlook and the Implications for the USSR and Eastern
Europe, ER 80-10102, February 1980, CIA Documents; FRUS
1974–1980, vol. 37: Energy Crisis, 1974–1980 (Washington, DC:
Government Printing Office, 2012), docs. 231, 262.
24. Tarnoff, Memorandum for Brzezinski, May 1, 1979, Brzezinski
Collection, Subject File, Box 20, Alpha Channel (misc.) [5/79-8/
79], JCL.
25. FRUS, 1977–1980, vol. 6, docs. 250, 252, 257; Jentleson, Pipeline
Politics, 161–3; Mastanduno, Economic Containment, 220–29; On
the US reaction to the Soviet intervention, see Garthoff, Détente and
Confrontation, 1046–75.
26. FRUS 1981–1988, vol. 3: Soviet Union, January 1981–January 1983
(Washington, DC: Government Printing Office, 2012), doc. 102;
CIA, Dependence of Soviet Military Power on Economic Relations
with the West, SNIE 3/11-4-81, November 17, 1981, CIA Docu-
ments, Reagan Collection; CIA, The Soviet Economic Predicament
and East–West Economic Relations, SOV 82-10001, January 1982;
and CIA, Soviet Economic Dependence on the West, SOV 82-10012,
January 1982, both in CIA Documents, Princeton Collection.
27. Thane Gustafson, Crisis Amid Plenty: The Politics of Soviet Energy
Under Brezhnev and Gorbachev (Princeton, NJ: Princeton Univer-
sity Press, 1989), 25–9, 35–46, 107–16; CIA, Economics of the
Siberia-to Europe-Gas Pipeline, ER 81-10346, September 1981,
CIA Documents; CIA, Samotlor Oilfield: Prospects for a Fading
Supergiant, GI 83-10196J, September 1983; CIA, Soviet Energy
310 D.S. PAINTER
Prospects into the 1980s, NIE 11-7-83, 14 December 1983, both in

CREST.
28. Gustafson, Crisis Amid Plenty, 29–35; US Congress, Senate, Com-
mittee on Banking, Housing, and Urban Affairs, Proposed Trans-
Siberian Natural Gas Pipeline, 97th Congress, 1st Session,
November 12, 1981, 165–67; CIA, Outlook for the Siberia-to-West-
ern Europe Natural Gas Pipeline, SOV 82-10120, August 1982;
CIA, USSR-Western Europe: Implications of the Siberia-to-Europe
Gas Pipeline, ER 81-10085, March 1983; both in CIA Documents;
Jentleson, Pipeline Politics, 163–9; H€ogselius, Red Gas, 179; David
R. Stone, “CMEA’s International Investment Bank and the Crisis of
Developed Socialism,” Journal of Cold War Studies 10, 3 (Summer
2008), 48–77.
29. FRUS 1981–1988, vol. 3, docs. 68 and 70; Weinberger to the
Assistant to the President for National Security Affairs, July
8, 1981, Margaret Thatcher Foundation, http://www.
margaretthatcher.org/archive (hereafter Thatcher Archives); Casey
to the President, July 9, 1981, with attachment “CIA Memorandum
on Siberian Pipeline,” July 8, 1981, CIA Documents, Reagan Col-
lection; Jentleson, Pipeline Politics, 174–79; Mastanduno, Economic
Containment, 233–40.
30. See the testimony of Assistant Secretary of Defense Richard Perle in
Proposed Trans-Siberian Natural Gas Pipeline, 113–18; US Depart-
ment of State, American Foreign Policy: Current Documents (AFP
CD) 1982 (Washington, DC: Government Printing Office, 1983),
443.
31. FRUS 1981–1988, vol. 3, docs. 68, 70; Alexander M. Haig, Jr.,
Caveat: Realism, Reagan, and Foreign Policy (New York: Macmillan
Publishing Company, 1984), 252–4; Energy in Soviet Policy,
166–78; Bjørn Vidar Lerøen, Troll: Gas for Generations (Oslo:
A/S Norske Shell and Statoil, 1996), 77–82; Antony J. Blinken,
Ally Versus Ally: America, Europe, and the Siberian Pipeline Crisis
(New York: Praeger, 1987), 95–6; Jentleson, Pipeline Politics,
185–88; Mastanduno, Economic Containment, 240–3.
32. Angela Stent, Soviet Energy and Western Europe (New York:
Praeger, 1982), 20–1; CIA, USSR–Western Europe: Implications of
the Siberia-to-Europe Gas Pipeline, March 1981; CIA, Economics of
the Siberia-to-Europe Gas Pipeline, September 1981, both in CIA
Documents; Proposed Trans-Siberian Natural Gas Pipeline,

167–70; H€ogselius, Red Gas, 190–5.
33. FRUS 1981–1988, vol. 3, doc. 213; Jentleson, Pipeline Politics,
181–5; CIA, USSR-Western Europe: Implications of the Siberia-to-
Europe Gas Pipeline; CIA, The Soviet Gas Pipeline in Perspective,
SNIE 3-11/2-82, September 21, 1982, both in CIA Documents.
190–2; Mastanduno, Economic Containment, 248–9.
35. FRUS 1981–1988, vol. 3, docs. 68, 71, 94; According to the mem-
oirs of Thomas C. Reed, a friend and supporter of President Reagan
who served as special assistant for national security affairs,
1982–1983, the United States secretly altered software illegally
obtained by the Soviets for use in the pipeline, which resulted in a
massive explosion that destroyed a segment of the pipeline in
October 1982. There is no independent evidence corroborating
Reed’s account; Thomas C. Reed, At the Abyss: An Insider’s History
of the Cold War (New York: Random House, 2004), 266–9; see
National Security Archive, “Update: Agent Farewell and the Sibe-
rian Pipeline Explosion,” https://nsarchive.wordpress.com/2013/
04/26/agent-farewell-and-the-siberian-pipeline-explosion. Given
that Reed inaccurately describes the location of the pipeline, his
account should be treated with caution. For an alternative explana-
tion, see Anatoly Medetsky, “KGB Veteran Denies CIA Caused ’82
Blast,” Moscow Times, March 18, 2004, 4.
36. FRUS 1981–1988, vol. 3, docs. 98, 102, 105.
37. Raymond L. Garthoff, The Great Transition: American-Soviet Rela-
tions and the End of the Cold War (Washington, DC: Brookings
Institution, 1994), 546–7.
38. Garthoff, Great Transition, 547–9; AFP CD 1981, 636–7; Andrea
Chiampan, “‘Those European Chicken Littles’: Reagan, NATO,
and the Polish Crisis, 1981–82,” International History Review
37, 4 (2015), 682–9.
39. Haig to Reagan, January 29, 1982; Thatcher to Reagan, January
29, 1982, both in Thatcher Archives; Margaret Thatcher, The
Downing Street Years (New York: HarperCollins, 1993), 253–5;
Jentleson, Pipeline Politics, 204–6; Blinken, Ally Versus Ally, 96–8;
Haig, Caveat, 254–6.
312 D.S. PAINTER
40. FRUS 1981–1988, vol. 3, docs. 139, 141, 145, 152; Casey to the
President, March 25, 1982, with attachment “DCI Remarks to the
President’s Economic Policy Advisory Board, March 18, 1982, CIA
Documents, Reagan Collection; CIA, “Western Alternatives to
Soviet Natural Gas: Prospects and Implications,” attached to Direc-
tor of Soviet Analysis to Deputy Director of Intelligence, May
20, 1982; Casey to McMahon, May 17, 1982, CIA Documents,
Reagan Collection.
41. Ronald Reagan, The Reagan Diaries, ed. Douglas Brinkley
(New York: Harper Collins, 2007), 75.
42. FRUS 1981–1988, vol. 3, docs. 146, 152, 172, 174; CIA, The Soviet
Bloc Financial Problem as a Source of Western Influence, NIC M
82-10004, April 1982, CIA Documents, Reagan Collection;
Schweizer, Victory, 102; Mastanduno, Economic Containment,
253–5.
43. Henry R. Nau, The Myth of America’s Decline: Leading the World
Economy into the 1990s (New York: Oxford University Press, 1990),
309–12, Nau was on the NSC staff 1981–1983.
44. Minutes of NSC Meeting, June 18, 1982, www.thereaganfiles.com
(hereafter Reagan Files); Reagan, Reagan Diaries, 137–9; Haig,
Caveat, 312–14; Reagan’s decision was released as National Security
Decision Directive 41 on June 22, 1982: http://www.reagan.utexas.
edu/archives/reference/Scanned%20NSDDS/NSDD41.pdf; AFP
CD 1982, 436–41; Telegram, Paris 3921, July 13, 1982, folder
“USSR-Economy (5/10),” Jack F. Matlock, Jr. Files, RRL. Dis-
agreement over sanctions was a factor in Reagan’s dismissal of Haig
on June 25.
45. Jentleson, Pipeline Politics, 196; FRUS 1981–1988, vol. 3, doc. 190;
Thatcher to Reagan, June 25, 1982, Thatcher MSS, Churchill
Archive Centre, THCR 3/1/22 Part 2 f38 (T138/82); Thatcher,
TV Interview for BBC, September 1, 1983, Thatcher Archives;
Thatcher, Downing Street Years, 256; Mastanduno, Economic Con-
tainment, 255–58. For the text of the European Common Market
statement on the embargo, see US Congress, Senate, Committee on
Foreign Relations, Economic Relations with the Soviet Union, 97th
Congress, 2nd Session, August 12 and 13, 1982, 176–7; see also
“Europe Protests Reagan Sanctions on Pipeline Sales;” and “Text of
Common Market Statement on Embargo,” New York Times,
August 13, 1982, A1, A15; “Europeans Protest US Pipeline Sanc-

tions,” Washington Post, August 13, 1982, A1.
46. Weinberger, Memorandum for Clark and Shultz, September
9, 1982, Thatcher Archives.
195–6; Mastanduno, Economic Containment, 258–9; Blinken, Ally
Versus Ally, 106–7; Garthoff, Great Transition, 549–50.
48. Dan Morgan, “Position is Contrary to Thinking in Administration,”
Washington Post, July 24, 1982, A1, A10; Memo, L. Paul Bremer III
to David E. Pickford, Sept. 14,1982, folder “NSC 0006/22 Sept.
82 [1/4],” Executive Secretariat: Meeting files; Minutes, Senior
Interdepartmental Group—International Economic Policy, Sept.
16, 1982, folder NSC 0006/22 Sept 1982 [2/4], Executive Secre-
tariat Meeting Files, both in RRL; FRUS 1981–1988, vol. 3, doc.
212; Minutes of NSC Meeting, September 21, 1982, Reagan Files;
SIG-IEP Meeting, September 16, 1982, on Pipeline Issues,
September 17, 1982, CREST; Blinken, Ally Versus Ally, 107–10;
George P. Schultz, Turmoil and Triumph: My Years as Secretary of
State (New York: Scribner, 1993), 136–43; AFP CD 1982, 446–7.
49. FRUS 1981–1988, vol. 3, docs. 213, 214, 223; Reagan, Reagan
Diaries, 156, 163; CIA, Outlook for the Siberian-to-Western Europe
Natural Gas Pipeline, August 1982; CIA, The Soviet Gas Pipeline in
Perspective; Casey to MacFarlane, October 18, 1982, both in CIA
Documents, Reagan Collection. In January 1987, the Reagan
administration lifted controls on the export of drilling equipment
to the Soviet Union, admitting that they had failed due to wide-
spread foreign availability of like products; Anne Swardson, “U.S.
Lifts Control on Export of Drilling Gear to Soviets,” Washington
Post, January 16, 1987, A1.
50. FRUS 1981–1988, vol. 3, docs. 231, 232, 246; AFP CD 1982,
446–7; Mastanduno, Economic Containment, 260–2: Nau, Myth of
America’s Decline, 315–16; Jentleson, Pipeline Politics, 197–8.
51. FRUS 1981–1988, vol. 3, docs. 223, 226; Robinson, “Reagan’s
Economic Strategy,” 167–9; William F. Martin, Memorandum for
the File, undated, http://www.wpainc.com; Paul Lewis, “Eco-
nomic Parley Will Seek to Settle Disputes,” New York Times, May
9, 1983, A1, D3; Steven R. Weizman, U.S. Depicts Allies as Wary
on Soviet,” New York Times, May 28, 1983, 45; Jentleson, Pipeline
Politics, 198–203; Lerøen, Troll, 80–3.
314 D.S. PAINTER
52. Jentleson, Pipeline Politics, 199–203, 211–14; Gustafson, Crisis

Amid Plenty, 152, 156–7, 202–8; H€ogselius, Red Gas, 197; CIA,
The Role of Western Equipment in Soviet Oil and Gas Development,
SOV 84-10153X, September 1984; Soviet Energy Data Resource
Handbook: A Reference Aid, SOV-90-10021, May 1990, 7, both
in CIA Documents.
53. BP Statistical Review of World Energy 2015. In 2014 dollars, the
increase was from $10.97 to $105.81.
54. Edward T. Dowling and Francis G. Hilton, “Oil in the 1980s: An
OECD Perspective,” in Siamack Shojai and Bernard S. Katz, eds.,
The Oil Market in the 1980s: A Decade of Decline (New York:
Praeger, 1992), 72–3; see also Francesco Petrini, “Countershocked?
The Oil Majors and the Price Slump of the 1980s,” paper presented
at the conference, “Countershock/Counterrevolution: Energy and
Politics in the 1980s,” Ca’Foscari University, Venice,
November 2015.
55. Dowling and Hilton, “Oil in the 1980s,” 75.
56. Ian Skeet, OPEC: Twenty-five Years of Prices and Politics (Cam-
bridge: Cambridge University Press, 1988), 194–212, 241; CIA,
“Threat Outlook: Lower Oil Prices: Impact on the Soviet Union,”
February 13, 1985; CIA, Saudi Arabia, Kuwait, UAE: Asset Man-
agement in Austere Times, GI 85-10099, April 1985; CIA, OPEC:
Narrowing Options in a Softening Oil Market, GI 85-10165, June
1985; CIA, The Saudi Oil Offensive, GI M 86-20084, March
31, 1986, all in CREST. The Energy Information Administration
(EIA) of the US Department of Energy puts Saudi production in
August 1985 at 2.34 million bpd; EIA, Historical Monthly Energy,
1973–1992 (Washington, DC: Energy Information Administration,
1992), 309.
57. Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power
(New York: Simon & Schuster, 1991), 745–51; Skeet, OPEC,
215–21.
58. CIA, The Saudi Oil Offensive, March 31, 1986; CIA, Saudi Arabia’s
Oil Policy: Implications for the United States, GI M 86-20186,
August 8, 1986; both in CREST; Dowling and Hilton, “Oil in the
1980s,” 74.
59. CIA, “Threat Outlook: Lower Oil Prices: Impact on the Soviet
Union,” February 13, 1985, CREST; CIA, Soviet Energy Data
Resource Handbook, 7; CIA, Implications of the Decline in Soviet
Hard Currency Earnings, NIE 11-23-86, September 1986, CIA

Documents; Alan Smith, Russia and the World Economy: Problems
of Integration (London: Routledge, 1993), 81, 139, gives slightly
different figures.
60. Smith, Russia and the World Economy, 91, 147–8. According to CIA
figures, Soviet arms sales were $4.9 billion in 1985 and increased to
an average of $7.3 billion in 1986–87, CIA, USSR: Coping with the
Decline in Hard Currency Revenues, SOV 88-10014X, April 1988,
CIA Documents.
61. CIA, Implications of an Oil Price Decline, SNIE 3–85, August 1985;
CIA, USSR: Implications of Reduced Oil Exports, September
4, 1985; Hoffman to Meyer, “Soviet Oil: Gorbachev’s Alterna-
tives,” October 2, 1985; all in CREST; CIA, Soviet Oil Production
Through 1990: Hard Choices Ahead, SOV 86-10051, November
1986; CIA, Soviet Energy Data Resource Handbook, 17, both in
CIA Documents.
62. CIA, Soviet Oil Production Through 1990, November 1986; CIA,
The Soviet Energy Plight: Runaway Investment or Energy Shortfalls,
SOV 89-10002, January 1989; CIA, The North Caspian Basin:
Salvation for Soviet Oil Production: A Research Paper, SOV
89-10028X, April 1989, CIA Documents. Thane Gustafson,
Wheel of Fortune: The Battle for Oil and Power in Russia (Cam-
bridge, MA: Harvard University Press, 2012), 30–62, provides an
incisive analysis of the problems facing the Soviet oil industry in the
1980s.
63. CIA, The Soviet Energy Plight, January 1989, CIA, Soviet Oil Pro-
duction Through 1990, November 1986; both in CIA Documents.
64. CIA, The Soviet Energy Plight, January 1989, CIA Documents.
The Soviet Energy Plight, January 1989, CIA Documents; CIA,
USSR: Investment Trade-Offs Between Energy Production and Con-
servation, 1986–95, SOV 87-10059, October 1987, CREST.
Gustafson, Crisis Amid Plenty, 227–62, provides a detailed analysis
of the potential for conservation.
The Soviet Energy Plight, January 1989, CIA Documents.
67. CIA, The Soviet Energy Plight, January 1989, CIA Documents. On
the impact of Chernobyl, see Vladislav M. Zubok, Failed Empire:
316 D.S. PAINTER
The Soviet Union in the Cold War from Stalin to Gorbachev, (Chapel
Hill: University of North Carolina Press, 2007), 287–91.
68. CIA, USSR: Facing the Dilemma of Hard Currency Shortages, SOV
86-10027X, May 1986, CREST; CIA, Soviet Energy Data Resource
Handbook, May 1990, 7; CIA, USSR: Coping with the Decline in
Hard Currency Revenues, April 1988, CIA Documents; Smith,
Russia and the World Economy, 81, 91.
69. BP Statistical Review of World Energy 2015; “Oil Outlook Dims for
the Soviet Union,” Oil and Gas Journal, January 16, 1989; “Soviet
Oil, Gas Industry Languishes,” Oil and Gas Journal, May 15, 1989;
“USSR Warned Oil Flow Could Drop Sharply,” Oil and Gas Jour-
nal, July 3, 1989; “USSR’s Oil Output Slide Continuing in 1990,”
Oil and Gas Journal, May 21, 1990.
70. Smith, Russia and the World Economy, 156–76; Marshall
I. Goldman, “Soviet Economy Heads for a Crash,” Wall Street
Journal, June 27, 1990, A10.
71. Anders Åslund, “The Demise of the Soviet Economic System,”
International Politics 48, 4 (2011), 552–8; CIA, Beyond Perestroika:
The Soviet Economy in Crisis, DDB 1900-164.91, June 1991, CIA
Documents; Gaidar, Collapse of an Empire, 220–49. Gaidar provides
a wealth of information on economic conditions in the Soviet Union
in the 1980s, but his account is episodic rather than systematic.
72. Robinson, “Reagan’s Soviet Economic Take-Down Strategy,” 169;
CIA, The Soviet Energy Plight, January 1989; Jentleson, Pipeline
Politics, 212–14.
73. Author’s notes from the conference “Energy in International
Relations (1945–1991),” MGIMO University, Moscow, November
22–23, 2007.
74. Rachel Bronson, Thicker than Oil: America’s Uneasy Partnership
with Saudi Arabia (New York: Oxford University Press, 2006),
168–90; Bob Woodward, Veil: The Secret Wars of the CIA,
1981–1987 (New York: Simon & Schuster, 1987); Jonathan Mar-
shall, “Saudi Arabia and the Reagan Doctrine,” Middle East Report
155 (1988), http://www.merip.org/mer/mer155.
75. AFP CD 1981, 659, 809, 812–13, 816, 818, 820, 823–4;
Schweizer, Victory, 29–32; William Safire, “The Reagan Corollary,”
New York Times, October 4, 1981, E19.
76. Schweizer, Reagan’s War, 240.
77. CIA, Saudi Arabia: Perspectives on Oil Policy, NIC M 81-10013,

November 1981, CREST. Even during the 1973/74 embargo and
oil production cutbacks, the Saudis had tried to limit price increases;
see David S. Painter, “Oil and the October War,” in Asaf Siniver,
ed., The Yom Kippur War: Politics, Diplomacy, Legacy (New York:
Oxford University Press, 2013), 184–5.
78. Weinberger admitted that the Saudi move was taken for internal
reasons, but argues that the Saudis knew they had US support;
Schweizer, Victory, 242.
79. Gaidar, Collapse of an Empire, 168–70, makes a similar argument.
80. David S. Painter, “A Partial History of the Cold War,” Cold War
History 6, 4 (2006), 527–34, here 532. James Graham Wilson, The
Triumph of Improvisation: Gorbachev’s Adaptability, Reagan’s
Engagement, and the End of the Cold War (Ithaca, NY: Cornell
University Press, 2014) notes that George Shultz shared this view.
81. On the role of economic constraints, see William Wohlforth, “No
One Loves a Realist Explanation,” International Politics
48, 4 (2011), 441–59, which summarizes the arguments he and
his co-authors have made over the years.
82. See, for example, the November 24, 1987 memorandum,
“Gorbachev’s Gameplan: The Long View,” from CIA Deputy
Director Robert Gates to President Reagan, reprinted in Svetlana
Savranskaya and Thomas S. Blanton, eds., Masterpieces of History:
The Peaceful End of the Cold War (Budapest: Central European
University Press, 2010), 261–3. Some scholars still subscribe to
this view, and some add that Gorbachev never genuinely embraced
democracy, despite having multiple opportunities to do so.
83. In addition to the works cited in Painter and Blanton, “The End of
the Cold War,” see Melvyn P. Leffler, For the Soul of Mankind: The
United States, the Soviet Union, and the Cold War (New York: Hill
& Wang, 2007), 338–450; Zubok, Failed Empire, 265–335;
Kotkin, Armageddon Averted, 2–3, 31–85; and Archie Brown,
“The Gorbachev Revolution and the End of the Cold War,” in
Melvyn P. Leffler and Odd Arne Westad, eds., Cambridge History
of the Cold War, vol. 3: Endings (Cambridge: Cambridge University
Press, 2010), 244–66.
318 D.S. PAINTER
84. Mark Harrison, “Coercion, Compliance, and the Collapse of the

Soviet Command Economy,” Economic History Review
55, 3 (2002), 397–433; Åslund, “Demise of the Soviet Economic
System;” David Kotz and Fred Weir, Revolution From Above: The
Demise of the Soviet System (London: Routledge, 2002); Alex
Pravda, “The Collapse of the Soviet Union, 1990–1991,” in Cam-
bridge History of the Cold War, vol. 3, 356–77. For a longer per-
spective, see Dominic Lieven, Empire: The Russian Empire and its
Rivals (New Haven, CT: Yale University Press, 2000).
PART III
From Crisis to Collapse: Soviet Energy

and the Burden of Empire
Creating a Common Energy Space: The
Building of the Druzhba Oil Pipeline
Falk Flade
INTRODUCTION
Following the example of the Soviet Union, the young socialist command
economies of the Central and Eastern Europe Countries (CEEC) started to
build up energy-intensive industries after World War II. This industrializa-
tion drive led to a rapid increase in energy demand, which could no longer
be met by domestic brown or hard coal deposits. Whereas most of the
CEEC were net exporters of energy before World War II, the picture
changed fundamentally over the following two decades. This paradigm
shift was made possible with the construction of a colossal pipeline system
transporting Soviet oil and gas from fields in the Volga-Ural and Western
Siberia regions as far west as to the Oder and Danube rivers. At the
beginning of the 1960s, the Druzhba (“Friendship”) pipeline came into
being, to be followed by other large-scale projects with illustrious names
such as Bratstvo (“Brotherhood”), Soiuz (“Union”), or Progress. These
pipelines were frequently expanded in order to increase the network’s
transport capabilities, which had far-reaching consequences for all sides
involved. The Soviet Union thus entered into long-term commitments
F. Flade (*)
Center for Interdisciplinary Polish Studies, European University Viadrina,
Frankfurt/Oder, Germany

DOI 10.1007/978-3-319-49532-3_11
322 F. FLADE
towards its satellites, which became, in turn, heavily dependent on Soviet

energy imports.
This chapter analyzes the history of the Druzhba pipeline, the first major
pipeline project transporting large amounts of Soviet oil to Eastern Europe.
Why did Moscow initiate this project, and what motivated the individual
socialist countries of the CEEC area to take part in this endeavor? How did
the participants organize the planning and construction process? And how
did the existence of this pipeline affect intra-bloc relations?
Soviet energy was an important factor in holding the socialist bloc
together. Nevertheless, despite its significance for intra-bloc relations,
energy aspects have remained largely underresearched topics in the histori-
ography of the Cold War. As early as the 1970s, during a time of political
détente and economic reconciliation, scholars started to turn their attention
to economic issues, including the Council for Mutual Economic Assistance
(CMEA), which was heavily engaged in the planning process of the
Druzhba pipeline. Scholars from both the West and the East paid attention
to this specific project.1 In the 1980s, the focus of research shifted to the
Soviet and East European energy sector itself. Scholars from the United
States (US), in particular, were interested in the oil crisis and its impact on
transnational energy relations in the Eastern bloc and between the Soviet
Union and Western Europe. One of the basic assumptions at the time was
that the Soviet Union was suffering from its own energy crisis, with a
potentially significant impact on the economic stability of communist East-
ern Europe. It was in this context that scholars also wrote about the
Druzhba pipeline as one of the bloc’s main energy arteries.2 From the
early 2000s, scholars—including historians—started paying attention to
energy issues again, which was largely due to increased oil prices and
Russia’s claim to great-power status.3
Nevertheless, no profound analysis has so far been produced on the
planning and building of the Druzhba pipeline as such. So far, the existing
research has only scratched the surface, mostly repeating some of the well-
known facts from works written during the Cold War. Thanks to the
opening of communist archives in the CEEC and the declassification of
large amounts of material, it is possible to study this important energy
project in detail. This analysis is based on documents issued by governmen-
tal key stakeholders in the project, the Soviet Union (namely the Soviet
Ministry of Oil Industry and the various national state planning committees
or councils), the Polish People’s Republic (hereafter Poland), and the
German Democratic Republic (GDR). This chapter follows a chronological
CREATING A COMMON ENERGY SPACE: THE BUILDING OF THE DRUZHBA OIL. . . 323
structure, explaining the various steps of the planning and building process
and analyzing the consequences of the Druzhba project for the communist
states of Eastern Europe.
THE SOVIET ECONOMY AFTER STALIN’S DEATH

Stalin’s death and the denouncement of his regime’s crimes at the XX
Congress of the Communist Party of the Union of the Soviet Socialist
Republics (USSR) in February 1956 were extremely important for the
whole of Eastern Europe, including from an economic point of view. On
the one hand, the Soviet Union gradually dampened its policy of—more or
less—openly exploiting other economies under its influence, which was
accelerated by uprisings in the GDR, Poland, and Hungary. On the other
hand, representatives of East European satellite states became more coura-
geous in expressing their own interests and needs. This led to more intense
discussions about the economic policy in general and the revitalization of
international organizations such as the CMEA. The satellites’ push for
economic autarky provided leeway for a more cooperative approach. As a
consequence, the CMEA established a whole range of new commissions
within its framework. They focused on topics such as specialization of
production or the increase of foreign trade between socialist countries.
Following the global trend, policy-makers in Eastern Europe turned their
attention towards the use of oil for streamlining existing or establish new
industries. Due to its high energy density, versatility, and uncomplicated
transportability, oil became a promising energy source in Eastern
Europe, too.
But while the Soviet Union was able to make use of its own enormous
fossil energy reserves, other socialist countries in Eastern Europe, with the
exception of Romania, had nothing comparable at their disposal. Neverthe-
less, in July 1958, the V Congress of the Socialist Party of the GDR decided
to move from domestic lignite to Soviet crude oil in its chemical industry.4
Until then, the chemical industry in the GDR and Czechoslovakia had
largely been based on domestic brown coal production. This decision points
to another economic trend at the end of the 1950s that accelerated the need
for crude oil in Eastern Europe: the so-called “chemicalization of the
national economy.” As part of this bloc-wide policy, the construction of
refineries in Bratislava, Schwedt, Płock, Százhalombatta, and Novopolotsk
started almost simultaneously. Another aspect was the intensified applica-
tion of fertilizers in agriculture and the mechanization of farming. In a letter
324 F. FLADE
to Iosif Kuz’min, chairman of the State Planning Committee (Gosplan), the

chairman of the German State Planning Committee, Bruno Leuschner,
justified the chemicalization program in his country at the beginning of
1959 as follows: “The socialist transformation of the agriculture demands a
fast mechanization of the work in the LPGs [Landwirtschaftliche
Produktionsgenossenschaft; collectivized farms in East Germany] and
therefore an increase in fuel supply. Likewise, there is a rising demand due
to growing utilization of diesel locomotives in transport, as well as for our
merchant and fishing fleet. Due to this fact, there is an urgent need to
substantially raise the production of fuel in the GDR.”5
The attractiveness of chemicalization is probably best expressed by the
words of the leader of the Communist Party of the Soviet Union (CPSU)
Nikita Khrushchev some years later. In a speech at the plenary session of the
Central Committee (CC) on the subject of “The accelerated development
of the chemical industry—the most important requirement for the upturn
of agricultural production and the raising of people’s welfare,” he came to
the following conclusion: “If Vladimir Il’ich Lenin was alive today, he
would probably phrase it like this: Communism—that is Soviet power plus
the electrification of the whole country plus the chemicalization of the
national economy.”6
Such was the economic situation during the second half of the 1950s. As
a consequence, socialist planners predicted a rapid rise in crude oil imports.
In 1957, bilateral agreements foresaw the following volumes of oil imports
from the Soviet Union to its socialist partners in Eastern Europe. From
1965 onward, the numbers were based on predictions (in thousands of
tons). In reality, these predictions proved to be unreliable and had to be
adjusted upwards (Table 1).
Table 1 Oil imports 1960 1965 1970 1975

from the Soviet Union
(in million tons) Czechoslovakia 1.495 3 5 5
GDR 1.880 5.5 7.5 10
Poland 0.59 3.1 5.3 7.5
Hungary 0.8 2.5 2.5 3
Source: “Protokol zasedaniia rabochei gruppy Komissii po temam no. 10 i

15 plana rabot, prokhodivshego s 1 po 8 fevralia 1957 g. v g. Bukareste,”
Bucharest, February 1957, RGAE, f. 561, op. 11c, d. 43, l. 12
PLANNING THE PIPELINE: THE CMEA AS A COMMUNICATION

PLATFORM
In May 1956, government representatives of socialist states met at the
seventh CMEA session in Berlin. Its purpose was to coordinate the devel-
opment of national oil and gas industries until 1960. This item included a
whole range of topics, such as an increase in oil drilling efforts, the mod-
ernization of existing refineries, and the better coordination of oil shipments
of Soviet crude oil to Czechoslovakia, the GDR, Hungary, and Poland. Due
to their high level of industrialization, Czechoslovakia and the GDR were
especially in need of additional oil imports.7 A newly established Commission
for Economic and Scientific-Technical Cooperation in the Field of Oil and
Gas Industry was charged with developing accurate predictions and dealing
with questions of transporting Soviet crude oil to socialist countries.8 Inter-
national experts suggested specific measures. Among other steps, countries
had to expand not only their national tank wagon and tanker fleets, but also
transshipment facilities and oil stores at border stations. Moreover, the time
for filling up tank wagons was to be reduced; the commission even proposed
penalties for the late return of such tank wagons. The commission concluded
that, in general, the existing oil transportation network had some fundamen-
tal deficiencies. Solutions for handling the rapidly growing volumes were
urgently needed. Experts predicted that the existing transport infrastructures
would reach their capacity limits as early as 1960. Thus, in the summer of
1957, the commission proposed the construction of a long-distance crude oil
pipeline.9
In his memoirs, Henryk Różański confirmed this picture. From 1954 to
1959, Różański was the CMEA’s deputy secretary in Moscow. There is no
question that he had intimate knowledge of internal procedures. According
to him, the very first incentive for rethinking the transportation of crude oil
came from the Polish Ministry of Transport. Its vice minister requested that
Różański in Moscow assess the amounts of Soviet iron ore and crude oil
scheduled for transportation to the GDR in order to draw up long-term
transportation plans. Knowledge about these vast amounts shipped from
east to west on the main transportation arteries crucially affected the invest-
ment and freightage planning of the Polish Ministry of Transport. Never-
theless, Różański’s information request allegedly came as a big surprise to
Gosplan when it was discovered that the projected quantities for crude oil
would by far exceed existing transportation capacities. In response, Soviet
Oil Minister Nikolai Baibakov supposedly established a group of experts.
326 F. FLADE
To solve the problem, the experts suggested constructing a long-distance

crude oil pipeline.10 This group may have been identical with the CMEA
commission mentioned above.
In June 1958, the ninth CMEA session in Bucharest officially assigned its
Standing Commission for Oil and Gas Industry to specify plans for the
construction of a long-distance oil pipeline. Mihai Florescu, the commis-
sion’s chairman, established a special task group consisting of experts from
all interested countries. Furthermore, the Standing Commission for Metal-
lurgy as well as the Standing Commission for Transportation were involved.
The aim was to formulate a precise recommendation for the construction of
such a pipeline in the upcoming months and to present it at the next CMEA
session.11 As a first step, the task group collected data on crude oil require-
ments of particular countries, on possible main characteristics of the future
pipeline (capacity, route), on the probable beginning of construction work,
on the possible provision of equipment and material (especially pipes and
pumps), and on conditions for participation. All this information was col-
lected under the umbrella of the Soviet State Institute for the Planning of
Main Pipelines (Giprotruboprovod)12 in close cooperation with other pro-
ject institutes from Czechoslovakia (Chemoprojekt), the GDR (IZ B€ohlen),
Poland (Naftoprojekt), and Hungary (Védterv).13 The result was the
so-called “general scheme,” which was presented in spring 1959. Already
in December 1958, the tenth CMEA Session in Prague advised the con-
struction of the Druzhba pipeline.
The “general scheme” projected the transportation of crude oil from the
Romashkino oil field near Al’met’evsk in the Tatar Autonomous Soviet
Socialist Republic (SSR) straight through the western part of the Soviet
Union to Mozyr’. Here, the route would split into a northern and a
southern line. At Brest and Uzhgorod, the pipelines would cross the Soviet
border to Poland and Czechoslovakia, and continue to the GDR and
Hungary (Fig. 1).
Nevertheless, other routes and refinery locations were also discussed. The
main controversy was the point of bifurcation, which, according to various
plans, was to be located in Central Poland, Białystok, Uzhgorod, or Brati-
slava.14 Moreover, the villages of Müllrose near Frankfurt/Oder and Malkinia
near Ostrów Mazowiecka were temporarily designed as the German and
Polish refinery locations, respectively.
The “general scheme” contained calculations on investment efficiency,
comparing the estimated costs of oil transportation per pipeline with other
means of transportation. The experts concluded that the cost of delivering
Fig. 1 The Druzhba pipeline in 1964 (Source: author’s own drawing based on a
map created by the Leibniz Institute of European History, http://www.ieg-maps.
uni-mainz.de)
one ton of crude oil would amount to 1 kopeck on the northern and 0.91
on the southern route, compared to 3.2–3.5 kopecks by rail. Hence,
pipeline transport was three times cheaper than railway transport.15
According to the “general scheme,” the following quantities of crude oil
where scheduled to be pumped through the Druzhba pipeline after its
planned opening in the years 1962–64 (Table 2). To ship these amounts,
the whole northern line had to be made from pipes with a diameter of
529 mm. In such a case, however, the capacity could merely cover the needs
of Poland’s and the GDR’s oil import needs until 1967. Afterwards, it
would be necessary to construct a second pipeline. As early as April 1959,
a commission of Gosplan experts criticized this inadequate solution. Nev-
ertheless, the commission had to accept that production facilities for large-
diameter pipes in Poland and the GDR were rather insufficient and turned
to the CMEA’s Standing Commission for Metallurgy and Foreign Trade to
search for additional ways of providing pipes.16 A solution was found in less
than two months; however, it was proposed not by the Standing Commis-
sion for Metallurgy and Foreign Trade, but by the special Pipeline Con-
struction Working Group of the Standing Commission for the Oil and Gas
Industry. At its next meeting in Warsaw in Mai 1959, the working group’s
328 F. FLADE
Table 2 Crude oil 1962 1963 1964 1965 1966 1967

scheduled for
transportation in Czechoslovakia 2.7 3.9 4.2 5.3 6 6
Druzhba pipeline GDR – – 2 4 4 5.2
Poland ... – 2 2 2 2
(in million tons)
Hungary – ... – 0.8 0.8 0.8
Source: “General’naia skhema/osnovnye polozheniia stroitel’stva

nefteprovodov,” April 1959, RGAE, f. 561, op. 13c, d. 35, l. 16
Polish delegation proposed to expand the diameter for the Mozyr’–Płock-

section from 529 to 630 millimeters. This new capacity would be able to
cover the needs of Poland and the GDR until 1971 and would ensure that
the total requirement of the German refinery in Schwedt in its final expan-
sion was secured.17 The new production capacities to deliver bigger pipes
were built at the pipe factory at Bitterfeld. In Poland, the steelworks Batory
and Ferrum were responsible for supplying the construction work for the
Druzhba pipeline.
CONSTRUCTING THE “OIL ARTERY”

Construction on the “oil artery”—as the Druzhba pipeline was enthusias-
tically called—started in 1960,18 with every country being responsible for
the construction work carried out on its own territory. Nevertheless, trilat-
eral contracts between the Soviet Union, Poland, and the GDR (December
18, 1959), as well as between the Soviet Union, Czechoslovakia, and
Hungary (December 19, 1959), specified that workers from Eastern
Europe were to participate in construction work in the Soviet Union itself.
As stated in the contracts, participation had to correspond to the share of
scheduled crude oil imports. The GDR’s construction share, for example, was
over 50 percent for the section Mozyr’ (bifurcation point)–Płock (location of
the Polish refinery), and 100 percent for the section between Płock and the
western border of Poland—although the section on its own territory was only
27 km long. GDR representatives had hoped to avoid these participation
shares, but conceded after pressure from the Polish side.19 In addition, the
GDR had to extend a loan to Poland in January 1961 for financing the supply
of pipes, machinery, and construction material; the agreement also specified
transit charges.20
For the construction work itself, the participating countries relied upon
Soviet assistance. The Soviet Union deployed special-purpose machines for
excavation, isolation, and welding; it trained the experts designated by the

construction partners and provided assistance from its own experts at con-
struction sites in the Soviet Union.21 To this end, even the process of
obtaining a visa had to be accelerated. The Soviet assistance concerned
the above-mentioned refineries as well, which were apparently based on
the same Soviet construction plans.22 But the search for technical expertise
was not limited to the Soviet Union. The Polish planning institute
Naftoprojekt also invited offers from enterprises such as Ruhrpumpen or
Phillips Petroleum from the other side of the Iron Curtain.23
Problems continued to arise regarding the supply of technical compo-
nents from the domestic production of every involved country. To lower the
construction costs, every participant was responsible for delivering certain
special parts of the required material and machinery for all the other partic-
ipating nations. Nevertheless, importers frequently complained about late
delivery or bad quality. From the start, however, the main concern was the
supply of pipes—a matter that concerned all countries.
A case in point was the GDR’s production: at a meeting of the already
mentioned Pipeline Construction Working Group in June 1962, the other
delegations accused the GDR of late pipe delivery, which had the potential
to delay the completion of the whole project. In response, the GDR
delegation attached a rectification to the meeting record explaining why
supplies were late: because of the irregular delivery of steel plate from the
Soviet Union to the GDR’s pipe factories.24 Already in April 1962, the
representative of the German State Planning Committee in the Soviet
Union had pointed out to Gosplan that the delivery of steel plate was
overdue. Even the Soviet minister of foreign trade, Nikolai Patolichev,
was consulted. Nevertheless, no improvement was achieved.25 As a result,
the GDR was forced to buy some 7000 tons of steel plate from the Federal
Republic of Germany (FGR) to ensure that its Bitterfeld pipe factory
operated at capacity.26 Late delivery was only one aspect of the supply
problems. Another source of trouble was quality. The head of the Bitterfeld
pipe factory complained: “As you know, the VEB [Volkseigener Betrieb;
publicly owned company] Rohrwerke Bitterfeld received considerable
amounts of steel plate [. . .] from the Soviet Union for the construction of
the international long-distance pipeline Soviet Union–Poland–GDR. Since
pipe production started, there have been constant complaints concerning
the thickness of steel plates from the Soviet Union, which were inconsistent
with GOST-requirements [Gosudarstvennyj Standart; set of technical stan-
dards in the Soviet Union]. So far, the problem has been solved by using the
330 F. FLADE
insufficient steel plate with a required strength of 8–9 mm for the produc-
tion of pipes with a thinner wall thickness. Meanwhile, the share of steel
plate below the minimum thickness tolerance has risen sharply to some 30%
of total supply.”27
The Soviet Union’s decisive clout in the bargaining process becomes
visible in the case of the Kuibyshev–Mozyr’-section. The tenth CMEA
session, held in December 1958, advised interested countries that they
had to clarify their potential participation in the construction of the
Kuibyshev–Mozyr’-section, too. This demand met with widespread disap-
proval from the representatives of the smaller countries. The GDR, like
Poland, rejected any such participation. Poland’s Deputy Prime Minister
Eugeniusz Szyr argued that such an additional burden could lead to the
opening being postponed for several years if smaller countries had to invest
their limited resources in Soviet sections, too.28 Czechoslovakia had initially
completely refused to take part in such an endeavor, but “after long talks
accepted its moral duty to help the Soviet Union.”29
At the fifth meeting of the Standing Commission for Oil and Gas
Industry in February 1959, the Soviet representative, Vartan Kalamkarov,
warned that the opening date of the whole pipeline had to be postponed to
the end of 1963 because the Soviet Union could not manage to deliver all
the pipes and material in time. As an alternative, he proposed using rail
shuttles to bridge the gap.30 For other commission members, especially the
GDR, it was crucial that oil shipments should begin as planned at the
beginning of 1963. Otherwise, the newly constructed refinery in Schwedt
would stand idle for several months. This worsened the bargaining position
of the GDR, which lobbied strongly for an opening date at the beginning of
1963.31 At a meeting in June 1959, the Soviet Union made clear that it
expected the oil-importing countries to participate. Czechoslovakia and the
GDR were each supposed to deliver 300 km of pipes, Poland 160 km, and
Hungary 40 km. Additionally, it was expected that equipment and
machines would be supplied.32 The Soviet Union might have strengthened
its bargaining position by postponing the construction of one of its own
refineries in Mozyr’. Nevertheless, the construction process was seriously
and unexpectedly interrupted for different reasons.
WESTERN OBSTRUCTION
On November 21, 1962, in light of the Berlin and Cuba missile crises, the
North Atlantic Council decided to ban the export of large-diameter pipes
from its member states to the Soviet Union.33 While other North Atlantic
Treaty Organization (NATO) countries managed to evade the US initia-
tive, the FRG had to stick to the embargo due to its limited scope of action
regarding foreign affairs at that time.34 This decision affected shipping
contracts between the German pipe producers Mannesmann, Hoesch, and
Phoenix-Rheinrohr with the Soviet foreign trade organization
Promsyr’eimport for 163,000 tons of steel pipes with a diameter of
40 inches.35
The embargo explicitly targeted the Druzhba pipeline, which was then
under construction. A US State Department memorandum entitled “Esti-
mated Impact of Western Economic Sanctions against the Sino-Soviet
Bloc” from July 1961 stated several strategic and economic reasons why
this pipeline project threatened US interests.36 In light of the Berlin crisis,
the US authors argued, the pipeline would significantly tilt the military
equilibrium in the region toward Soviet dominance in strategic and logisti-
cal matters. Among other things, fuel depots could be built up undetected.
The transportation capacities thus freed up could be used for the haulage of
other strategic goods. Finally, the Soviet Union could use the pipeline to
export more crude oil to Western Europe and thus expand its economic
leverage with NATO countries, especially the FRG and Italy. The minimum
goal of the embargo was thus to delay the construction work for as long as
possible.37
The assumption that the Druzhba pipeline would be used to supply
Warsaw Pact forces was no figment of the imagination. In fact, such plans
existed from the very beginning. The head of the above-mentioned plan-
ning institute Giprotruboprovod recommended consultations with military
specialists on the transportation of diesel and kerosene through the
Druzhba pipeline as early as 1958.38 Apparently, the Czechoslovak govern-
ment was especially interested in such a solution and proposed an
unscheduled meeting of the Pipeline Construction Working Group, which
was held in Prague in June 1960. At this meeting, the question of how to
use the pipeline for the transportation of refined oil products in case of war
must have been discussed. In the instruction for the Soviet representative,
Gosplan stated that the Soviet Union would be willing to pump fuel
through the Druzhba pipeline to Uzhgorod “in case of need.” Moreover,
332 F. FLADE
the Soviet representative was authorized to pass on material explaining how

to clean crude oil pipelines for the shipping of refined oil products.39 In
addition, the Gosplan’s delegate instruction mentioned “product pipelines
of special purpose” running parallel to the Soviet section of the Druzhba
pipeline to supply Red Army forces in Transcarpathia.
Otakar Šimůnek, head of the Czechoslovak State Planning Committee
until 1962, put it even more explicitly. In a letter to Georgii Sidorovich, a
major-general of Red Army tank forces and member of the Soviet Council
of Ministers, he explained Czechoslovakia’s interest in these questions as
follows: “The oil industry of Czechoslovakia (Záluží and Bratislava) could
become the target of an enemy attack. In case of a loss of production, there
should be a way to ensure readiness for action of our own troops and the
allied troops acting on our territory. For this purpose, the use of the pipeline
currently under construction seems to be sensible.”40
Whether the Druzhba pipeline would indeed have been able to transport
fuel instead of crude oil “in case of need” remains unclear. But it did
facilitate the supply of national refineries, which in turn were able to easily
produce the needed fuel. At least, this was the case at the GDR refinery in
Schwedt, which produced fuel to supply the troops of the National People’s
Army and branches of the Red Army based in the GDR. In September
1966, at the request of the East German Ministry of Defense, the general
staff of the Red Army delegated a commission to Schwedt. The refinery had
problems refining the standard fuel TS-1, which “massively hampered the
supply of military devices.”41 The problems were caused by non-contractual
deliveries consisting of a mixture of oil from several oil fields with diverging
chemical structures from the Soviet Union itself.
The two examples, from Czechoslovakia and the GDR, show that the
supply of Warsaw Pact forces was indeed related to the Druzhba pipeline.
Hence, at least one of the Western suspicions concerning the pipeline was
justified. Furthermore, the assessment that pipe supplies were the weakest
point of the Soviet project was also accurate. In fact, large-diameter pipes
had been the Achilles’ heel of the current Soviet seven-year plan itself. The
ambitious plans for extension of the Soviet pipeline network, with the
Druzhba pipeline as one of its main arteries, made pipe imports from
the West inevitable. Domestic pipe production was by no means able to
meet increasing demand. This Soviet approach was made possible only after
the revision of the embargo list in 1958 by the Coordinating Committee on
Multilateral Export Controls (CoCom). At that time, export restrictions on
oil drilling, processing, and transport equipment were lifted. This is why the
Soviet Union could import some 870,000 tons of large-diameter pipes from
the FRG, Italy, Sweden, and Japan between 1958 and 1962. Around
80 percent of these imports came from the FRG.42
The Soviets responded angrily to the pipe embargo enforced by the
US. In a speech published in the Pravda newspaper in February 1963,
Khrushchev expressed the Soviet point of view as follows: “Of course,
anything one pleases can be regarded as strategic material, even a button,
because it can be sewn onto a soldier’s pants. A soldier will not wear pants
without buttons, since otherwise he would have to hold them up with his
hands. And then what can he do with his weapon? If one reasons thus, then
buttons also are a particularly strategic material. But if buttons really had
such great importance and we could find no substitute for them, then I am
sure that our soldiers would even learn to keep their pants up with their
teeth, so that their hands would be free to hold weapons.”43
The capitalist West, as embodied by the FRG, was blamed for the
unilateral annulment of signed contracts. As a reaction, the Soviet Union
took up the production of large-diameter pipes itself. Production started
already in March 1963 in Cheliabinsk. Facilities in Novomoskovsk, Zhda-
nov (now Mariupol’), and Khartsiz’k joined in later.44 Although the Soviets
were able to produce their own large-diameter pipes, they did not, in terms
of quantity and quality, always meet their expectations.45
The embargo particularly affected the section between Kuibyshev (now
Samara) and Unecha on the Russian–Belarusian border, which had to be
constructed with 40-inch pipes.46 This section had a total length of
1275 km. By January 1, 1963, 466 km of large-diameter pipes had been
delivered. The remainder of 809 km had to be provided by the FRG
(650 km) and domestic production (159 km).47 Due to the supply shortage
created by the FRG, the opening of this section had to be postponed from
the fourth quarter of 1963 to the third quarter of 1964. To comply with
current export obligations, the Soviet Union had to find alternative ways to
ship crude oil scheduled for delivery in the beginning of 1964. The amounts
in question for Poland and the GDR were 1.17 and 2.97 million tons for
1963, respectively. The Soviet Ministry of Gas Industry (Gazprom) pro-
posed shipping these quantities by rail to the pumping station in Brodi, in
the western part of Ukraine, where the oil could be delivered through the
already existing sections via Mozyr’ and Brest to Poland and the GDR. This
proposal by Gazprom minister Aleksei Kortunov was met with disapproval
by Vartan Kalamkarov and other Gosplan members. They feared it would
cost up to ten million rubles of additional expenditure for the period of nine
334 F. FLADE
months. The Gosplan group, in turn, proposed to use the pipeline for oil
products from Kuibyshev to Briansk on the section Michurinsk–Unecha,
which ran almost parallel to unfinished Druzhba sections. In this way, the
huge cost of rail transportation could be avoided.48 In response, Gazprom
instructed its in-house institute Giprotruboprovod to conduct a technical
and economic analysis of Gosplan’s proposal. Unsurprisingly,
Giprotruboprovod reached the conclusion that this proposal would not
pay off. The shipment of 3.3 million tons of crude oil for export there
would have required the translocation of 3 million tons of white oil products
on railroads.49 In the end, the representatives from Gazprom and Gosplan
agreed to concentrate construction efforts on the section Kuibyshev–
Unecha to meet their export obligations at least in the second half of
1964, and not to use the parallel line for oil products. Aleksei Kortunov
and Gazprom had thus prevailed in the discussion.50
EXTENDING THE PIPELINE

The Druzhba pipeline could not go into operation as planned due to
construction delays in the Soviet section, which only entered service in
October 1964.51 No large delays were reported in other sections. The Czech-
oslovak section went into service as planned in 1962.52 The opening cere-
mony for the northern section took place in December 1963 in Warsaw.53 At
a formal meeting in summer 1963, representatives of the countries involved
were able to share their first experiences regarding the southern branch’s
operation. Aleksei Sorokin from Gazprom acknowledged the “brotherly”
cooperation of the socialist states as well as the political and economic signif-
icance of the 5500 km Druzhba pipeline, which outclassed similar projects.54
It took several years, however, for the Druzhba pipeline to reach its full
capacity. Even in 1966, the annual throughput amounted only to 17.6
million instead of 26 million tons as planned.55 To improve the operational
work of individual pipeline sections, a central dispatching headquarters was
established in Moscow with suboffices at border stations in Adamowo,
Budkovce, and Fényeslitke. Regular meetings were held once per quarter.56
In order to run these and all the other pumping stations, construction work
also included the building of settlements next to the pipeline; in the Soviet
section alone, houses for some 3000 workers were built.57
Nevertheless, the project also had its critics. In a letter to Mikhail Lesechko,
a group of Soviet experts complained that the agreements failed to specify
penalties for late completion of construction. Due to such delays, even in
1966, some of the crude oil was shipped via rail or sea to importing countries
such as the GDR and Hungary, because the section between Płock and
Schwedt had not yet reached the planned capacity, and because Czechoslo-
vakia and Hungary quarreled about the use of the pipeline. This led to
increasing costs for the Soviet Union itself.58
Such problems were of minor importance compared to the CMEA
countries’ inexhaustible thirst for more energy. This development was
taken into consideration by the “general scheme” of 1959, which had
already scheduled a second line to ship ever-increasing amounts of crude
oil to Czechoslovakia, the GDR, Poland, and Hungary. Therefore, planning
for the second line started as early as 1966. Gosplan’s division for the
coordination of the Soviet national economy with socialist countries
predicted the following amounts of crude oil exports through the extended
Druzhba pipeline (Table 3). Compared to earlier predictions, the increase
was considerable and showed the significant rise of Soviet export obligations
towards its socialist partner countries.
The planning and construction of the second line was approached analo-
gously to the first one. Gosplan issued a respective “general scheme” in
November 1966; and bilateral agreements between the Soviet Union and
importing countries were signed in 1968 and 1969. This time, however,
sanctions were designated to ensure the scheme’s punctual implementation.59
Already in November 1972, the Százhalombatta refinery received the first
oil shipments; Schwedt got the second line’s first oil in May 1973.60 In an
innovative move, the Hungarian refinery and the newly constructed petro-
chemical facility in Leninváros (now Tiszaújváros) were supplied directly
from Soviet Uzhgorod through a direct branch. This solution also aimed at
avoiding further quarrels of the kind seen between Czechoslovakia and
Hungary over the first branch.
Table 3 Prediction of 1975 1980

crude oil exports through
the Druzhba pipeline, Czechoslovakia 14.5 18.5
1966 (in million tons) GDR 14 18
Poland 11 15
Hungary 7 12
Source: A. Sorokin to P. Galonskiy, “Zamechaniia k proektu pis’ma

Gosplana SSSR zamestiteliu predsedatelia Soveta Ministrov SSSR
M. Lesechko po voprosu rasshireniia nefteprovoda ‘Druzhba’,”
February 1, 1967, RGAE, f. 4372, op. 81, d. 2429, ll. 44–5
336 F. FLADE
To make sure the Soviet Union could meet its growing export obliga-
tions, it constructed pipeline connections to the booming oil regions in
Western Siberia. In 1974, such a connection between Al’met’evsk and
Nefteiugansk went onstream. Neighboring Surgut was linked to the
Druzhba system by Soviet and Polish construction units, too.61 In addition,
Gosplan considered importing Iranian crude oil in order to exploit the full
capacity of the second line. Once more, Giprotruboprovod was entrusted
with the technical and economic research. Two possible routes were taken
into account: one running from the west of the Caspian Sea via Astara at the
Soviet–Iranian border to Mozyr’, another one on the eastern shore of the
Caspian Sea to Gur’ev (now Atyrau).62 Nevertheless, Gosplan itself deemed
the onshore transport from southern Iran to the Soviet Union unrealistic.
Therefore, transportation by sea across the Persian Gulf to Odessa, and
alternatively up the Danube, to refineries at Budapest and Bratislava was
recommended.63
The building of another link between the Adria and Druzhba pipelines
was decided in an agreement between Yugoslavia, Hungary, and Czecho-
slovakia in February 1974. A branch was to connect the refineries in
Százhalombatta and Bratislava with the oil terminal at Omishal’ on the
island of Krk. In this way, it would be possible to feed crude oil from the
Middle East into the Druzhba network as well as to supply Yugoslavia with
Soviet oil.64
Finally, planners contemplated extending the Druzhba pipeline further
westward through the Iron Curtain. Given its geographic proximity, linking
the Bratislava refinery to the nearby Austrian refinery in Schwechat would
have been a fairly low-cost project.65 Austria would have thereby strength-
ened its status as an energy hub between Eastern and Western Europe.
Another idea was to extend the Druzhba pipeline from Schwedt to the
northern part of the FRG. Such an offer was probably made by representa-
tives of the Mannesmann enterprise to the Soviet delegate Aleksei Kortunov
at the Tenth International Gas Congress in Hamburg in 1967. In his report,
Kortunov characterized these offers as “serious suggestions, which deserve
thorough analysis on the part of the Soviet Union.”66 Nevertheless, those
plans never came true.
CONCLUSION
Despite all the minor problems related to the construction and exploitation
of the Druzhba pipeline, its political and economic significance is beyond
doubt. Especially for energy-importing countries such as Czechoslovakia,
the GDR, Hungary, and Poland, economic factors were certainly in the
foreground. That is not to say that politics did not use this project to
celebrate socialist brotherhood. The choice of druzhba (“friendship”) as
the pipeline’s official name indicates that propagandistic aspects were also
taken into account. Moreover, the naming implies a kind of relationship
that was believed to exceed solely material considerations. But the mere
need for ever-increasing energy imports, especially crude oil, made this
project an attractive endeavor for industrialized nations such as Czechoslo-
vakia and the GDR as well as for industrializing ones like Poland and
Hungary. The further extension of the Druzhba pipeline and the realization
of other comparable or even larger projects—namely the Bratstvo, Soiuz,
and Progress pipelines—indicate that Soviet energy sources were seen as
profitable by the importing countries of the CEEC area. This became even
more important after the oil-price shocks and the considerable price
increases on global markets in 1973/74 and again after 1979. Due to an
elaborate mechanism to calculate oil prices in the internal bloc trade, these
price explosions reached Eastern Europe only with a delay of about three to
five years. When they hit the region in the first half of the 1980s, they hit it
hard. Unlike their Western counterparts, socialist economies were unable to
react to the price developments by improving their energy efficiency.
Accounting only for oil prices does not yet reveal the whole picture, how-
ever. Due to the highly complicated mechanisms of socialist foreign trade
and the inconvertibility of East European currencies, the calculation of net
benefits is a tricky problem. A great number of Western experts have
struggled with this task for several years and have not yet reached a clear
conclusion.67
For the Soviet Union, the Druzhba pipeline was the beginning of long-
term oil supply to its East European allies, which continues until today.68 As
a result, the Soviet Union undertook a commitment toward its satellites,
who in a fundamental way became dependent on Soviet energy imports.
The extent to which this dependence was consciously caused by the Soviet
leadership is hard to tell; it is very difficult to gain access to valid archive
material about political and strategic considerations of the Soviet political
leadership. At the time, energy dependence, which is a pivotal issue in
338 F. FLADE
current debates, was presumably of secondary importance to the Moscow-

devoted leaderships in Eastern Europe. In addition, the supposedly weak
satellites found ways to enforce their positions in a multifaceted bargaining
process.69 And because of vast domestic deposits of brown and hard coal, oil
played a minor role in the energy balances of these states—at least during
the Druzhba’s construction.
Starting already in the late 1960s, supplying East European “energy
addicts” was to become a constant burden for the Soviet Union throughout
the 1970s and 1980s, even though price-setting had been adjusted in favor
of the exporter in 1975.70 Its own need of foreign currency to import grain
and technology rendered oil shipments to Western Europe increasingly
important for the Soviet Union. Nevertheless, it could not afford to neglect
the supply of its socialist partners: the political consequences of economic
crises might have been too serious. The Polish crisis of 1981 illustrates that
the measure of emergency subsidies for its neighbors was repeatedly applied
by the Soviet Union—although Moscow showed an increasing unwilling-
ness to do so.71 The construction of the Druzhba and other pipelines led to
mutual dependence, rather than a one-sided advantage of the exporter. This
statement applies not only to the asymmetrical relationship between the
Soviet Union and its East European partners; it is even more relevant today.
NOTES
1. Western studies: Alexander Uschakow, Der Rat f€ ur gegenseitige
Wirtschaftshilfe, COMECON, Dokumente zum Ostrecht
2 (Cologne: Wissenschaft und Politik, 1962), 38–43; Rolf C. Ribi,
Das Comecon: Eine Untersuchung u€ber die Problematik der
wirtschaftlichen Integration sozialistischer L€ ander (Zurich:
Polygraphischer Verlag, 1970), 402–6; Jochen Bethkenhagen,
“Die Zusammenarbeit der RGW-Länder auf dem Energiesektor,”
Osteuropa Wirtschaft 22, 2 (1977), 63–80; Dieter Mentz and
Joachim Pfeffer, Die rechtliche Regelung der internationalen
Energiebeziehungen der RGW-L€ ander (Munich: Saur, 1982),
162–4. Studies published in Eastern Europe: Kornijenko, A., “Die
Erd€olleitung ‘Druschba’ in Betrieb,” Aussenhandel 7 (1973),
13–14; Elizaveta Boltalina, “Iarkii primer bratskogo
sotrudnichestva,” in Ekonomicheskoe Sotrudnichestvo Stran-Chlenov
3 (1975), 68–70; Margot Hegemann, Kurze Geschichte des RGW
(Berlin: Deutscher Verlag der Wissenschaften, 1980), 130–9;
Katarzyna Żukrowska, Wsp olne inwestycje krajow RWPG, ich

efektywność i znaczenia dla społeczno-gospodarczego rozwoju tych
krajow (Warszawa: Polski Instytut Spraw Mie˛dzynarodowych,
1981), 16–17.
2. John P. Hardt, “Soviet Energy Policy in Eastern Europe” in Sarah
Meiklejohn Terry, ed., Soviet Policy in Eastern Europe (New Haven,
CT: Yale University Press, 1984), 189–220; Bruce W. Jentleson,
Pipeline Politics: The Complex Political Economy of East–West Energy
Trade (Ithaca, NY: Cornell University Press, 1986); Thane
Gustafson, Crisis Amid Plenty: The Politics of Soviet Energy Under
Brezhnev and Gorbachev (Princeton, NJ: Princeton University Press,
1989); John Kramer, The Energy Gap in Eastern Europe (Lexington,
MA: Lexington Books, 1990); William M. Reisinger, Energy and the
Soviet Bloc: Alliance Politics after Stalin (Ithaca, NY: Cornell Uni-
versity Press, 1992).
3. Margarita M. Balmaceda, “Der Weg in die Abhängigkeit:
Ostmitteleuropa am Energietropf der UdSSR,” Osteuropa
54, 9–10 (2004), 162–79; Tomasz Młynarski, Bezpieczeństwo
energetyczne w pierwszej dekadzie XXI wieku: Mozaika interes ow i
geostrategii (Kraków: Wydawnictwo Uniwersytetu Jagiellońskiego,
2011); Jarosław Ćwiek-Karpowicz, Polityka energetyczna Rosji—
szanse i wyzwania dla Polski i Unii Europejskiej, PISM Reports
(Warszawa: Polski Instytut Spraw Mie˛dzynarodowych, 2011),
http://www.pism.pl/files/?id_plik¼8135
4. Boltalina, “Iarkii primer,” 68.
5. Furthermore, there was also an inner-German aspect: “In 1958,
there were 48 cars per 1000 inhabitants in West Germany; in the
GDR, there were 7 cars for 1000 inhabitants. Through this pro-
gram, we want to achieve a substantial rise of the car stock.”
“Entwurf eines Briefes des Genossen Leuschner an den Genossen
Kusmin,” undated, Bundesarchiv (BArch), DE/1/3999, 10.
6. “Kommunismus ist auch Sowjetmacht plus Chemisierung. Aus der
Rede N. S. Chruschtschows auf dem ZK-Plenum der
Kommunistischen Partei der Sowjetunion,” Neues Deutschland,
December 10, 1963, 5.
7. Sekretariat Soveta Ekonomicheskoi Vzaimopomoshchi, “Protokol
7 zasedaniia sessii SEV ot 18–25 maia 1956 g., Berlin: Prilozhenie
no. 4 k postanovleniiu Soveta ob uviazke plana razvitiia neftianoi i
340 F. FLADE
gazovoi promyshlennosti stran-uchastnikov SEV na 1956–1960

gg.,” 1956, Rossiiskii gosudarstvennyi arkhiv ekonomiki (Russian
State Archive of the Economy, RGAE), f. 561, op. 1 s, d. 23,
ll. 153–6.
8. This commission dealt with a whole range of subjects related to the
transportation of crude oil from the Soviet Union to its socialist
partners, such as construction of pipelines and oil depots, sea and
river transport, reduction of oil losses during transportation, and
extension of border transshipment capacities.
9. “Protokol no. 2 zasedaniia Komissii po ekonomicheskomu i
nauchno-tekhnicheskomu sotrudnichestvu v oblasti neftianoi i
gazovoi promyshlennosti,” Bucharest, June 5, 1957, RGAE,
f. 561, op. 11 s, d. 39, ll. 22–7.
10. Henryk Różański, Spojrzenie na RWPG: Wspomnienia, dokumenty,
refleksje: 1949–1988 (Warszawa: Państ. Wydaw. Naukowe, 1990),
84–5.
11. “Kopiia pis’ma Zamestitelia Predstavitelia GDR v SEV t. Opitz v
Sekretariat SEV s predlozheniem Predstavitelia GDR v SEV
t. Leuschnera po voprosu, sviazannomu so stroitel’stvom
nefteprovoda,” July 25, 1958, RGAE, f. 4372, op. 77, d. 302,
ll. 231–2.
12. Giprotruboprovod (Gosudarstvennyi institut po proektirovaniiu
magistral’nykh truboprovodov) was administered by Glavgaz
(Glavnoe upravlenie gazovoi promyshlennosti pri Sovete
Ministrov SSSR).
13. “Doklad o stroitel’stve magistral’nykh nefteprovodov dlia
perekachki nefti iz SSSR v strany-uchastnitsy SEV (sekretno),”
RGAE, f. 4372, op. 77, d. 302, ll. 245–59.
14. “Exposé zur Erd€olleitung, Ingenieurtechnische Zentralstelle
B€ ohlen,” August 7, 1958, BArch, DE/1/30089 (unnumbered).
15. “General’naia skhema/osnovnye polozheniia stroitel’stva
nefteprovodov,” April 1959, RGAE, f. 561, op. 13 s, d. 35, l. 99.
16. “Postanovlenie Soveta techniko-ekonomicheskoi ekspertizy
Gosplana SSSR po general’noi skheme nefteprovodov iz SSSR v
Vengriiu, GDR, Pol’shu i Chekhoslovakiiu,” April 25, 1959,
RGAE, f. 4372, op. 77, d. 926, ll. 10–11.
17. “Bericht zur Tagung und zum Protokoll der ständigen Arbeitsgruppe
‘Bau der Erd€olfernleitung’ in Warschau vom 25.-27.5.1959,” Berlin,
June 1, 1959, BArch, DE/1/27578, 119.
18. The construction at some sections started later: Mozyr’–Schwedt in

1961, Mozyr’–żvov in 1963, Šahi–Százhalombatta in 1964.
19. “Information an das Politbüro des ZK der SED,” Berlin, October
31, 1958, BArch, DE/1/22009 (unnumbered).
20. Printed version of the “Abkommen zwischen der Regierung der
DDR und der Regierung der VRP vom 18. Januar 1961 über den
Bau und die Finanzierung der Erd€olfernleitung aus der Union der
SU in die VRP und DDR,” Mentz and Pfeffer, Rechtliche Regelung,
637–45.
21. “Referat w sprawie budowy magistral rurocia˛gów naftowych dla
transportu ropy naftowej z ZSRR do krajów uczestników RWPG,
tajne,” Archiwum Akt Nowych (AAN), 290/59/32, 26.
22. “Abkommen über Leistung technischer Hilfe beim Bau eines
Erd€ olverarbeitungswerkes durch die UdSSR an die DDR,” BArch,
DE/1/21937, 6.
23. “Information über den Stand der Zusammenarbeit beim Bau der
gemeinsamen Erd€olfernleitung und beim Bau der Erd€olwerke,”
Berlin, December 6, 1958, BArch, DE/1/19994, 94.
24. “Protokoll der Tagung der Ständigen Arbeitsgruppe zum Thema
44a der Ständigen Kommission für Erd€ol- und Erdgasindustrie des
RGW,” Prague, June 23, 1962, BArch, DE/1/49075, 45.
25. Thyrolf to T. Bobyrev, Moscow, April 4, 1962, BArch, DE/1/
49075, 187–8.
26. K. Mewis to B. Leuschner (strictly confidential), Berlin, June
5, 1962, BArch, DC/20/10195, 23.
27. Dumke to Mogk, “Reklamation von Blechen 14 HGS,
7x1964x5000mm,” September 11, 1962, DE/1/49075, 83.
28. “Information über das Ergebnis der ersten Beratung der
Arbeitsgruppe Erd€olleitung,” December 11, 1958, BArch, DE/1/
19994, 158.
29. S. Skachov to A. Mikoian, June 25, 1959, RGAE, f. 4372,
op. 77, d. 786, l. 345.
30. “Bericht über den Stand der Vorbereitungen zum Bau der
Erd€ olfernleitungen aus der SU in die interessierten Länder des
RGW,” Berlin, February 23, 1959, BArch, DE/1/3999, 36–7.
31. A possible solution for the GDR dilemma was proposed at the
twelfth CMEA session in 1962. It suggested transporting the oil
over the southern route to Hněvice in northwestern Czechoslova-
kia, and using tank wagons from there to reach the GDR’s refineries.
342 F. FLADE
See N. Siluanov to V. Novikov, “Spravka o sostoyanii stroitel’stva

nefteprovoda ‘Druzhba’,” April 4, 1962, RGAE, f. 4372,
op. 80, d. 424, l. 196.
32. “Bericht über die 3-seitigen Regierungsverhandlungen UdSSR,
VRP und DDR zur Vorbereitung eines 3-seitigen Abkommens
über den gemeinsamen Bau der Erd€olfernleitung in Moskau vom
17.–19.6.1959,” Berlin, June 25, 1959, BArch, DE/1/13815, 2.
33. See the chapter by Roberto Cantoni in this volume.
34. Angela Stent, From Embargo to Ostpolitik: The Political Economy of
West German–Soviet relations, 1955–1980 (Cambridge: Cambridge
University Press, 1981), 94.
35. Armin Scheufler, “Das R€ohrenembargo von 1962/63: Zur
Geschichte der deutsch-sowjetischen Wirtschaftsbeziehungen in
der späten Adenauerzeit,” (PhD diss., Justus Liebig University
Giessen, 1996), 196.
36. Jentleson, Pipeline Politics, 97–98.
37. The embargo was thought to have the potential to delay completion
by between eight months and two years. See Jentleson, Pipeline
Politics, 98.
38. “Pis’mo Glavgazu SSSR po voprosu stroitel’stva nefteprovodov na
territorii Chekhoslovatskoi Respubliki,” September 18, 1958,
RGAE, f. 4372, op. 77, d. 302, l. 237.
39. V. Kalamkarov to V. Novikov, June 9, 1960, RGAE, f. 4372,
op. 79, d. 443, l. 111.
40. O. Šimůnek to G. Sidorovich, undated, RGAE, f. 4372,
op. 79, d. 443, ll. 139–40.
41. M. Kuz’min to N. Baibakov, “Po voprosu kachestva nefti,
postavliaemoi na eksport po nefteprovodu ‘Druzhba’,” December
6, 1966, RGAE, f. 4372, op. 81, d. 1813, ll. 45–6.
42. Jentleson, Pipeline Politics, 88.
43. Reprinted in: Stent, From Embargo to Ostpolitik, 93.
44. A. Sorokina, “Kopiia protokola soveshchaniia po obmenu opytom
ekspluatatsii nefteprovoda ‘Druzhba’ spetsialistov Gazproma SSSR,
Ministerstva khimicheskoi promyshlennosti ChSSR, Ministerstva
tiazheloi promyshlennosti VHR s uchastiem Ministerstva
khimicheskoi promyshlennosti PNR i Soveta narodnogo khoziaistva
GDR,” July 1963, RGAE, f. 561, op. 12, d. 79, l. 21.
45. Jentleson, Pipeline Politics, 124.
46. Nevertheless, the necessary redirection of resources into domestic

pipe production had repercussions for the production of smaller
pipes. Negative effects on the construction of the gas pipeline
Bukhara–Ural, which had been prioritized by decree of the Soviet
Council of Ministers on March 6, 1963, were to be kept to a
minimum.
47. A. Kortunov to Council of Ministers, “O perenesenii na 1964 god
sroka vvoda v deistvie chasti nefteprovoda ‘Druzhba’,” April
5, 1963, Gosudarstvennyi arkhiv Rossiiskoi Federatsii (State Archive
of the Russian Federation, GARF), f. 5446, op. 98, d. 624, l. 93.
48. P. Lomako, V. Kalamkarov, and A. Etmekdzhiisan to the Supreme
Soviet of the National Economy, “O perenesenii na 1964 god sroka
vvoda v deistvie chasti nefteprovoda ‘Druzhba’,” September
2, 1963, GARF, f. 5446, op. 98, d. 624, l. 106.
49. N. Tichonov, V. Kalamkarov, A. Etmekdzhiisan, A. Kortunov, and
S. Kuvykin to the Supreme Soviet of the National Economy, “O
perenesenii na 1964 god sroka vvoda v deistvie chasti nefteprovoda
‘Druzhba’,” September 10, 1963, GARF, f. 5446, op. 98, d. 624,
l. 120.
50. Ibid., l. 138.
51. A. Kortunov to A. Kosygin, “O zavershenii stroitel’stva
nefteprovoda ‘Druzhba’,” November 6, 1964, GARF, f. 5446,
op. 98, d. 625, l. 53.
52. RGAE, f. 561, op. 12, d. 79, ll. 5–13.
53. J. Cyrankiewicz to W. Stoph, “Einladung zur feierlichen Er€offnung
des polnischen Abschnittes der Erd€ olleitung ‘Freundschaft’,”
December 18, 1963, BArch, DC/20/7366, 1949.
54. RGAE, f. 561, op. 12, d. 79, ll. 14–15.
55. K. Mazurov to N. Baibakov, “Zapiska komiteta po material’no-
tekhnicheskomu snabzheniiu o neudovletvoritel’nom ispol’zovanii
moshchnosti nefteprovoda ‘Druzhba’,” May 11, 1966, RGAE,
f. 4372, op. 81, d. 1813, ll. 47–8.
56. Boltalina, “Iarkii primer,” 68–70.
57. Ministerstvo neftianoi promyshlennosti, “Otchet Upravleniia
magistral’nykh nefteprovodov ‘Druzhba’ po osnovnoi deiatel’nosti
za 1970 god,” RGAE, d. 70, op. 1, d. 3150, ll. 63–5.
58. A. Riabenko, A. Kortunov and Suloev to M. Lesechko, “O
soobrazheniiakh, kotorye sledovalo by Sovetskoi storone obsudit’ s
zainteresovannymi stranami SEV po voprosu rasshireniia
344 F. FLADE
nefteprovoda Druzhba,” December 28, 1966, RGAE, f. 4372,

op. 81, d. 1813, ll, 32–3.
59. RGAE, f. 4372, op. 81, d. 1813, l. 35.
60. Hegemann, Kurze Geschichte des RGW, 264.
61. Żukrowska, RWPG, 16.
62. P. Galonskii to A. Kortunov, January 3, 1967, RGAE, f. 4372,
op. 81, d. 2429, l. 1.
63. V. Kalamkarov to P. Galonskii, January 12, 1967, RGAE, f. 4372,
op. 81, d. 2429, ll. 41–2.
64. Roland Sch€onfeld, “Gemeinsame Investitionen im RGW und die
Beteiligung der südosteuropäischen Mitgliedsländer,” in Roland
Sch€onfeld and Franz-Lothar Altmann, eds., RGW-Integration und
udosteuropa (Munich: R. Oldenburg, 1984), 113–14.
S€
65. Ribi, Das Comecon, 406.
66. A. Kortunov to N. Baibakov, June 27, 1967, RGAE, f. 4372,
op. 81, d. 2429, ll. 125–6.
67. See, for example, Michael Marrese and Jan Vanous, Soviet Subsidi-
zation of Trade with Eastern Europe: A Soviet Perspective, Research
Series 53 (Berkeley: Institute of International Studies, University of
California, 1983).
68. In 2009, Russia exported more than 21 percent of its overall crude
oil exports via the Druzhba pipeline. In the same year, Poland
received 94 percent, Slovakia 99 percent, the Czech Republic
around two thirds, and Hungary almost 90 percent of their oil
imports through this pipeline.
69. Gerd Herzog, Schw€ ache als St€
arke: Bargaining Power im RGW,
Arbeitspapiere des Osteuropa-Instituts der Freien Universität Berlin
17, 1998, http://edocs.fu-berlin.de/docs/servlets/MCRFileNode
Servlet/FUDOCS_derivate_000000000584/AP17.pdf (accessed
July 2, 2015).
70. See the chapter by Suvi Kansikas in this book.
71. See the chapter by Lorenz Lüthi in this book.
Calculating the Burden of Empire: Soviet Oil,
East–West Trade, and the End
of the Socialist Bloc
Suvi Kansikas
Everyone knows that it is more expedient to export machinery and

equipment than raw materials. And furthermore, we export our raw
materials without any refinement, that is, the cheapest kind of products.
We lose a lot from this.1
CPSU General Secretary Leonid Brezhnev, April 1973
INTRODUCTION
In February 1975, the executive committee of the Council for Mutual
Economic Assistance (CMEA) decided—acting on a Soviet request—to
change its foreign trade price formation mechanism with immediate effect.
This was one year before the end of the five-year plan (1971–1976).
Although such major changes before the end of the plan period were
unusual, in the aftermath of the October 1973 oil crisis, this seemed like a
reasonable policy for the Soviet leadership to pursue. With skyrocketing
S. Kansikas (*)
Department of Political and Economic Studies, University of Helsinki, Helsinki,
Finland

DOI 10.1007/978-3-319-49532-3_12
346 S. KANSIKAS
world market prices for oil, the existing price system, in place since 1958,
had become highly unfavorable to the Soviet Union as the main energy
exporter in the CMEA area. While the fixed-price system had brought the
Soviet Union considerable profits in the 1950s—some estimates show an
extra gain of around $17 billion during the 1950s—the tables were turned
in the 1960s.2
By 1975, Soviet economists and policy-makers were discontent with
CMEA pricing and had already been pushing for the price change for a
decade. In the late 1960s, the Soviet leadership even tried to introduce this
change for the new five-year plan of 1971, but the effort failed. Given the
huge power asymmetry in Soviet–East European relations, it is crucial to
analyze why the Soviet Union was unable to use its power position and
modify the pricing system.
In this chapter, Cold War politics and the ensuing need to safeguard bloc
coherence is seen as a key factor restraining Soviet actions vis-a-vis its allies.
This study is the first one to set the intra-CMEA trading system into a Cold
War framework and analyzes the ways in which the trade created intra-bloc
rivalry.3 It is argued here that, on the one hand, Soviet oil and gas financed
the economic system of the socialist bloc. On the other hand, however,
energy resources also fueled the pattern of interdependency in both East–
East and East–West trade. The extent of interdependency created through
the energy trade during the 1970s became clear in the mid-1980s, when
socialist countries ran into economic difficulties just as the world market
price for oil began to plummet. By the late 1980s, Soviet allies had become
hugely indebted to Western creditors, and the Soviet Union was now both
unwilling and unable to assist them economically. The empire had become a
liability.4
The central institutions that held together the socialist bloc, such as
ideology and mutual trade, were challenged by centrifugal forces resulting
from trading with, and later lending from, capitalist countries. The Soviet
Union had initially wanted to increase intra-CMEA trade to secure the
necessary imports of consumer goods and manufactures from East
European producers. But as détente opened more trade prospects in the
West, and, in particular, created the possibility to earn hard currency from
energy exports, Moscow began to push its allies to find alternative sources of
energy. To finance the growing volumes of these imports, the East
Europeans needed to increase their exports to the West.
The issue was problematic not just because of the prospect risk of
ideological degradation, but also for economic reasons. The allies’ options
CALCULATING THE BURDEN OF EMPIRE: SOVIET OIL, EAST–WEST TRADE. . . 347
for earning hard currency with which raw material could be bought from
other sources were suddenly diminishing. Their major West European trade
partners, the members of the European Community (EC), started to imple-
ment new trade policies. The EC’s Common Agricultural Policy (CAP) and
Common Commercial Policy (CCP) launched in the 1960s would soon
restrict East European exports into the Common Market. This had political
implications: the CMEA and its members did not acknowledge that Brussels
had authority over EC member states’ trade policy. Until they did, they
were unable to negotiate new trade agreements, while the existing ones
would nonetheless soon expire.
Records of the CMEA Executive Committee meetings show that the
1975 price change was tightly connected to the socialist countries’ relations
with the EC. At this very time, the EC was planning to increase protectionist
measures in trade with non-members, which would limit the CMEA coun-
tries’ access to its markets. The Soviet leadership needed its allies to first
secure their exports to the Common Market before it could push for the
price change and, in effect, demand a higher price for its oil deliveries.5
Even though the Soviet Union was the only major oil exporter in the
CMEA, energy was not an easy weapon to be used in exploiting or control-
ling the allies.6 Soviet intra-bloc and international trade politics became
entangled due to the fact that one central item—Soviet oil—was in high
demand in both the socialist and the capitalist markets. This entwinement
was echoed in CMEA discussions as well. While the Soviet Union intensi-
fied its efforts to change the mechanism of energy price formation and the
composition of its trade, the East European allies pushed to change the
council’s policy on the outside world, particularly the EC. In the Cold War
context, these issues were of crucial importance for foreign policy. A deci-
sion to change the price system could only be made via the multilateral
CMEA forum and had to consider constraints created by global
developments.
The essay starts by analyzing the CMEA’s negotiations on price change at
the turn of the 1970s, which is an important time period due to several
simultaneous, albeit not clearly interrelated developments: the post-Bretton
Woods development of finance capitalism; détente, which gave a boost to
East–West trade; the first oil crisis in 1973/74, which showed the socialist
bloc’s exposure to world market fluctuations; and the failed attempt at
socialist integration, which consequently led to the socialist countries’
decision to turn to import-led growth, an economic model of moderniza-
tion based on credits.7
348 S. KANSIKAS
It is argued here that the Soviet leadership continued to subsidize its allies
via cheap oil deliveries only as long as it considered the alliance to be its
number one priority. This ceased to be the case at the end of the 1980s. In a
radical change of priorities, the Soviet leadership no longer considered the
East European part of its empire to be paramount—not if harmonious inter-
bloc relations constituted an obstacle to a rapprochement with the West,
nor if they came at the expense of the wellbeing of Soviet society.8 The
dissolution of the Soviet bloc in late 1989 can partly be explained by the
Soviet Union’s decision—due to the external shock created by a drop in oil
export revenues—no longer to support its alliance.
CMEA PRICING AND SOVIET DISCONTENT

In 1953, the year the Korean War ended, as much as 80 per cent of all
CMEA members’ trade was conducted within the organization. By the
mid-1960s, however, traditional trade ties with Western Europe had been
resumed, and the share of non-CMEA trade partners had grown to about
one-third.9 The composition of CMEA trade nonetheless remained the
same: the Soviet Union exported raw materials, and the allies paid for
them in the form of manufactured goods, machinery and agricultural
produce.
Soviet discontent with unfavorable raw material prices was openly stated
by an authority on CMEA issues: Oleg Bogomolov, the director of a think
tank run by the Soviet Academy of Sciences, the Institute for the World
Socialist Economic System (Institut ekonomiki mirovoi sotsialisticheskoi
sistemy, IEMSS). He authored an article in the spring 1966 issue of
Mirovaia ekonomika i mezhdunarodnye otnosheniia (“World Economics
and International Relations”), in which he quantified Soviet trade losses
with CMEA partners. The problem went beyond a mere shortage of mate-
rials or high consumption rates. Bogomolov pointed to three main prob-
lems that aggravated the situation for the Soviet Union: the high costs of
raw material extraction, the lack of incentives on the allies’ part to compen-
sate the USSR for these high costs, and the relative unprofitability of exports
of raw materials.10
Bogomolov pointed out that the only net exporters of raw materials in
the CMEA were the Soviet Union and Mongolia; the countries with the
largest imports were the GDR, Czechoslovakia, and Hungary. The prices
they paid for Soviet raw materials were too low, given the low quality of the
machinery with which the energy exporting countries were reimbursed. The
Soviet Union had, according to Bogomolov’s account, even been forced to

forego some of its national interests to meet the raw material requirements
of its allies in the negotiations for the 1966–70 national plans. He was
adamant that this problem be rectified before the next five-year plan, due
to begin in 1971.11
The rules of the game needed to be changed. The Soviet Union wanted
either a major increase in the prices paid for its raw material exports, or
much greater Czechoslovak and German participation in the investment
effort. For too long, the terms of trade had been working in favor of the
richer countries. They needed to start benefiting the “underdeveloped and
exploited” USSR.12
This was not merely an academic debate. The IEMSS was charged with
giving expert advice to the leadership, and its research therefore had con-
crete practical relevance for Soviet decision-making. The institute’s most
important task was to deliver forecasts and prognoses for the CC of the
CPSU.13 The institute had an in-house party cell that supervised the work
carried out by the research staff to ensure the fulfillment of goals set by the
Communist Party.14
Thus, the institute gave policy-makers advice on issues related to intra-
bloc and East–West economic and political relations. Special emphasis was
always placed on the Soviet Union’s and the CMEA’s position on global
developments.15 One indicator of the IEMSS’s influence on policy-making
is that just a few months after Bogomolov’s article, the Ministry of Foreign
Trade’s journal Vneshnaia Torgovlia (“Foreign Trade”) was echoing his
arguments.16
The Soviet leadership consequently came to the conclusion that it would
have to revise its commercial relations with CMEA allies. By the 1960s, the
Soviet Union was in effect already subsidizing its allies by exporting “hard”
goods, its raw materials, and importing “soft” and invariably low-quality
goods, such as machinery, from its allies. The Soviet Union began to push
for a revision of the terms of trade, demanding that its allies also export their
surplus raw materials, and urging them to improve the quality of the
finished goods they exported. The Soviet Union also wanted its allies to
make direct investments on Soviet territory, which would cover at least
some of the production costs of raw material extraction in return for
additional exports of raw materials.17 These objectives were to be achieved
through a reform within the CMEA.
Another of Bogomolov’s proposals was reform, or a new integration
phase. He argued that a general long-term plan should be negotiated for
350 S. KANSIKAS
international specialization and coordination of national plans within the

CMEA. The advice Bogomolov had given was soon taken further by two
other Soviet authors on economic affairs, V. Ladygin and Iu. Shiriaev. Their
recommendation, proposed in the form of a clear ultimatum, was that the
Soviet Union start producing the very same machines it currently imported
from Eastern Europe in case the price mechanism could not be rectified.18
This, obviously, would deal a heavy blow to the allies’ economies.
While this proposal was an economically rational one, it did not take into
consideration the political realities of Soviet–East European relations. From
the Soviet point of view, for Moscow and its allies, the choice of trading
partners could not be based exclusively on economic considerations,
because larger political issues were at stake. As the leader of the socialist
bloc, the Soviet Union needed to consider the coherence and prosperity of
the entire bloc and thus evaluate the effects of bilateral trade flows on the
whole alliance. Such punitive action could, in fact, indirectly weaken the
allies’ economic and political ties with Moscow. The worrying scenario was
that the Soviets’ allies might push to increase their trade relations with, and
thus dependence on, the Western markets. In setting the parameters of
CMEA trade, therefore, the Soviet leadership had to perform a balancing
act between its own interests and the obligation to safeguard bloc coherence
vis-a-vis the West.
EC PROTECTIONISM CREATES PRESSURES

Within the socialist bloc, integration with the global economy was consid-
ered crucial, particularly by countries with small economies such as Hun-
gary, Czechoslovakia, and Poland, which had a limited domestic market and
few supplies of domestic raw materials. Since they were not self-sufficient in
raw materials, they were highly dependent on foreign trade.
Traditional trade ties between the eastern and western parts of Europe,
which had been reduced to a minimum at the beginning of the Cold War,
resumed after Stalin’s death and were already booming by the mid-1960s.
Trade was conducted through agreements negotiated between East and
West European governments. These agreements contained lists of quotas
that defined the maximum quantity of goods to be traded in a given year.
They also included price clauses, accompanied by agreements on payments,
since the socialist countries traded on the basis of a nonconvertible currency.
For the CMEA states, these agreements provided crucial access to Western
markets that allowed them to purchase necessary high-tech and consump-
tion goods. In most cases, however, the maximum quantities of the quotas
were not reached because East European economies were unable to pro-
duce saleable produce to be imported and lacked foreign currency to make
purchases in the West. There were obstacles for the West, too: West
European importers had to obtain import licenses, arrange export credits,
or enter into barter arrangements for most of the commodities.19
Even so, the West’s interest in continuing trade agreements with the
CMEA countries should not be underestimated. Because of the socialist
state monopoly on foreign trade, the only way to access Eastern markets was
through government-to-government agreements. Also, the planned econ-
omy model made them quite stable and thus profitable trade partners.20
Most importantly, the Soviet Union was becoming an interesting alternative
source of energy.21
As détente eased East-West relations, Soviet foreign policy started to
change. Due to increased demand in the West, the Soviet Union gained
other profitable markets for its energy besides the market covered by the
CMEA. Therefore, it sought to revise the terms of trade on which it
supplied its allies with raw materials. Moreover, it started to push CMEA
partners to find alternative sources of energy. In fact, the allies themselves
also wanted to reduce their dependency on Soviet raw materials, hoping this
would allow them to loosen the strict coordination of economic planning
and trade more freely with the West.
The problem was, of course, that the new Soviet goals contradicted the
old ones: if the allies were to buy their energy from other sources, they would
need to increase their hard currency exports, that is trade with the
non-socialist world. But where would the Soviet Union get the much-
needed manufactured goods if its allies turned to trade with the West? And
how could they ensure this trend would not weaken ties within the bloc?
Increased collaboration with the West was a problematic topic. On the
one hand, the Soviet leadership wanted to increase trade with the West; on
the other hand, it needed to control the foreign trade policies of CMEA
members. The situation, as they soon were forced to acknowledge, was
influenced by developments outside their bloc, and processes outside their
control required that the intra-CMEA trade policy be adjusted. In the late
1960s, access to the EC market was becoming much harder for the
Soviet allies. The integration process in the EC was advancing rapidly: the
CAP was launched in 1965, and in June 1968, the EC established its
Customs Union ahead of schedule. The implementation of its CCP was
to start in 1970. The CCP transferred authority over the member states’
foreign trade policy to the community. This meant the socialist countries
352 S. KANSIKAS
were no longer able to negotiate customs duties and other protective

measures on a bilateral basis with their EC partners.22
The Hungarian case is exemplary of the problems the East Europeans
would face: as Prime Minister Jenő Fock pointed out in April 1968,
Hungary’s foreign trade with the non-socialist world already amounted to
a third of its total foreign trade. A considerable portion of its exports
consisted of agricultural and food products. The EC was planning to put
up institutional obstacles to curtail this trade and ultimately allow the
current trade agreements with Hungary to expire.23 Poland and Czecho-
slovakia had similar shares and production structures, and they shared
Hungary’s worries.
The EC’s common external tariffs would only be imposed on products
and industries the member states wished to protect, such as agricultural and
manufactured goods. These were exactly the type of goods the East
Europeans wanted to export, and they would have to face import quotas
and higher customs duties. On the other hand, the CCP did not restrict the
import of raw materials that were in high demand: energy. Therefore, the
main Soviet export items—oil and gas—remained untouched by Western
Europe’s protectionist policies.
The problem was not merely about economic cost; the socialist countries
also faced a political barrier hindering their access to the EC market: in order
to be able to continue trading with EC member states, the socialist coun-
tries would first need to acknowledge the EC’s supranational authority in
trade policy. It was necessary to establish diplomatic relations. This action
would, however, breach the policy of non-recognition, to which the CMEA
and its member states had adhered from the start.
The political impasse created by larger Cold War constraints touched
upon the core problem the socialist countries had been trying to solve for
years: the structure of intra-bloc trade and the CMEA’s role in the foreign
policy of its member states. The EC’s new trade policy caused extra trouble
and needed to be dealt with first. The Soviet Union could not succeed in
pushing its allies to diversify their energy sources as long as their main
sources of hard currency were uncertain.
Depending on their foreign trade structure, members of the CMEA were
affected to different degrees by the EC’s policies. On most issues, the bloc
was divided between the resource-rich Soviet Union and resource-poor
Eastern Europe. The EC was, to a certain extent, able to take advantage
of the contradictions and drive a wedge between the members of the
socialist bloc. However, inasmuch as the West was interested in importing

more Soviet oil and gas, it also had to restrain its actions vis-a-vis the CMEA.
CMEA INTEGRATION: A THREAT AND A POSSIBILITY

Foreign trade was at the core of debates at the turn of the 1970s, when the
CMEA launched the Comprehensive Program, its new integration phase.
The partly intertwined issues of foreign trade pricing, the structure and
direction of trade, and the need for a bloc-level foreign trade policy were
intensely debated during these talks. The Comprehensive Program was
finally adopted in the summer of 1971. The discussions had revealed the
differences between the member states; there were several positions on the
questions of whom to trade with, how to organize foreign trade, and how
best to use the CMEA’s machinery toward this end. Any attempt to alter the
CMEA preferences or policies touched directly upon the core question:
should bloc-level political and ideological considerations be given priority in
the member states’ national economies, or should their economic needs be
included in the external policy of the whole bloc?
A clear external impetus for CMEA integration was the pressure of
protectionist EC policies on the socialist countries’ exports and foreign
trade policies. As a way to counteract the EC’s CCP, the CMEA began
discussing the advisability of a similar common trade policy.24 There was
also an internal push factor for integration: the deteriorating economic
performance of the member states. Signs of decreasing growth rates had
started to appear since the early 1960s. The Comprehensive Program was
intended to give a boost to economic growth.25
For the CMEA members with smaller economies, integration contained
many dangers because the Soviet Union had decisive economic and political
weight was the dominant power within the organization. First, tighter
economic integration could lead to deeper political integration and
further reduce the already limited independence of the smaller CMEA
members. Despite the importance they attributed to further integration,
the East Europeans adhered firmly to their sovereignty in national economic
policy.26
In promoting economic integration, the Soviets aimed to increase intra-
CMEA cooperation to ensure proper payment of its exports, to overcome
investment deficits, and to ensure that the burden of raw material produc-
tion would be shared by the customers.27 Its leaders were constantly
complaining about the structure and volume of their trade with other
354 S. KANSIKAS
CMEA states. Trying to correct the trade flows, they often pressured their
allies in negotiations.28
As the negotiations for the Comprehensive Program continued, how-
ever, the East Europeans began voicing dissenting ideas. The Soviet lead-
ership was forced to acknowledge that its allies’ needs differed considerably
from its own. More industrialized countries such as Czechoslovakia, the
GDR, Hungary, or Poland were interested in production specialization,
deeming it profitable in terms of exports and investment costs. CMEA
mechanisms were to be used for maximizing the member states’ benefits
from trade and cooperation.29
Expanding foreign trade relations, especially with the capitalist world,
nonetheless posed both structural and political problems. This form of
trade, based on hard currency, had to be planned separately from bilaterally
balanced trade. Politically, the EC’s increasing authority and prestige was
becoming a challenge to the unity of the bloc and the Soviets’ role in it. The
EC was becoming a prospective and attractive trade partner for some
CMEA countries; many of them had strong economic motives to take up
negotiations. Securing the bloc’s internal economic policy became crucial
for the Soviet Union to ensure that none of its allies unilaterally breached
the policy of nonrecognition of the EC. The high politics of the Cold War
thus made a dramatic entry to intra-CMEA trade policy discussions at the
turn of the 1970s.
THE SOVIETS PUSH FOR A CHANGE IN CMEA PRICING

The CMEA member states had started negotiations on the Comprehensive
Program in the spring of 1969. In July 1970, there were still many issues on
which no united position had been found. The pricing system was one of
them. Bulgaria, for example, was asking for benefits for its agrarian pro-
ducers. It wanted the CMEA program to include wide-ranging support
measures such as raising the prices for agricultural products. It argued in
favor of an agricultural fund similar to the one the EC had set up.30
Negotiations on prices for the next five-year plan (1971–1975) became
one of the main focuses of the CMEA session in July 1970. This issue
divided the member states—as was the case with most other revisions of
CMEA procedures,—but this time along unusual lines. The Soviet Union
advocated a significant change in the pricing system, which had previously
been based on average world prices over the preceding five years. It wanted
to revise the prices paid for its raw materials, particularly oil, which were
rising on the world market. It received Poland’s support,31 which so far had
mostly pushed for liberalization measures the Soviet leadership had
opposed. Poland’s reasoning for supporting the Soviet proposal was related
to the prices of one of its major export items: coal.32 Nevertheless, the
opposition from a majority of CMEA members made it clear that the issue
would not be settled in line with the Soviet requests. One could argue that
Poland’s support might also have been a tactical move to gain some political
capital for pushing through its other interests.
In July 1970, everyone else wanted to keep the old system. The Soviet
Union was opposed even by the GDR, which was otherwise a loyal ally. In
his report to the SED Politburo, the East German representative, Gerhard
Weiss, said he had argued that maintaining the current system was in the
GDR’s economic interest: “[A]ny change would lead to significant negative
effects for our economy.”33
The issue clearly highlighted the diversity of national interests amongst
CMEA members. Even the GDR, which was politically dependent on the
Soviet Union, had come to oppose Soviet goals: political loyalties were
overruled by economic needs.
The Comprehensive Program, the socialist community’s long-term eco-
nomic plan, was finally adopted at the CMEA’s twenty-fifth session in
Bucharest in the summer of 1971. The Program was a hundred-page report
on practically all aspects of economic life. Nevertheless, many issues were
left unresolved, and it was possible to regard it as a compromise solution.
The mechanisms and measures of integration, for instance, were still quite
ambiguously formulated and needed more specification in the years to
come. On relations with the outside world, particularly the EC, the program
was rather evasive. With regard to pricing, the program stated only that
“[b]efore the end of 1972, the CMEA member countries shall, according
to a coordinated program, make a comprehensive study of questions related
to the improvement of the system of foreign trade pricing.”34
Since it was not yet possible to protect the CMEA countries’ economic
relations through a common trade policy, changing the foreign trade pric-
ing system had to be postponed as well. The year 1972, which the Com-
prehensive Program had set as a deadline for the working group on foreign
trade pricing, ended without results. None of the minutes of the executive
committee’s meeting from that year show any progress.
This lack of progress agitated the Soviet leadership. At the plenary
session of the CPSU’s CC in April 1973, Brezhnev noted some positive
development in CMEA affairs such as the increase of its international
356 S. KANSIKAS
authority: Cuba had joined in 1972, and Finland—as the first market
economy country—was about to sign a cooperation agreement.35 Iraq
had also announced its interest in cooperating with the CMEA.36
Still, Brezhnev went on to criticize the CMEA at length. The Soviet
leadership was not satisfied with its work—progress in industrial integration
and other economic fields was too slow. The main concern was that the
Soviet Union was not receiving enough economic benefits from CMEA
cooperation. According to Brezhnev, the Comprehensive Program had set
out ten projects to be established on the territory of the Soviet Union, but
only one of these was actually being developed. This was clearly not enough,
and CMEA cooperation would have to be improved.37
In September 1973, less than half a year after the CMEA had been
reprimanded by Brezhnev, the executive committee convened for a meet-
ing in Moscow. Pricing was again on the agenda. Representatives of all the
member states, with the exception of the Soviet Union, emphasized the
need to continue using the foreign trade price mechanism in force since
the Bucharest session in July 1958. Furthermore, Bulgaria again requested
that prices for agrarian products be considered separately as a special
issue—a topic it had brought up on several occasions before.38
After a lengthy discussion, the executive committee decided to dissolve
the existing CMEA working group on prices and instead established a new
independent organ, the regular meetings of the directors of the national
pricing offices. It also directed the Standing Commission on Foreign Trade
to prepare an analysis on how to improve the price system. The Soviet
representative, Mikhail Lesechko, made it very clear that he only accepted
the decision because all others were in favor of the agreement. But he did
not hide his disappointment with the decision and eventually demanded
that rules be set out for the new organ. He required that the work of this
new organ be bound by all resolutions and materials already accepted by the
executive committee.39 Lesechko sought to tie the new body to CMEA
mechanisms, probably to retain control over its work. The result was,
however, that CMEA pricing would not be a regular issue on the executive
committee’s agenda during 1974, because it was already being tackled by
two other bodies. Moreover, the CMEA’s economic technocrats were now
in charge of the task instead of party officials from the member states.
During 1974, the CMEA also made progress on the other front
concerning its relations with the EC. It had in fact established the first
unofficial contact with the EC in August 1973. With a mandate from the
member states, CMEA Secretary Nikolai Fadeev made a private visit to
Denmark, the presiding chair of the EC’s Council of Ministers. Fadeev was
charged with finding out whether the EC was indeed interested in opening
a dialog, preferably on a government-to-government level.40
It took over a year and another approach by the CMEA towards the EC
before the road was cleared for a meeting of the two organizations. In
September 1974, Fadeev invited the president of the EC commission,
François-Xavier Ortoli, to begin preliminary talks with the CMEA in Mos-
cow. He underlined the CMEA’s openness to establish a contact with the
EC. Eventually he received a positive reply.41
The meeting took place in Moscow February 2–4, 1975. On the EC side,
the delegation was led by the general director for foreign relations, Edmund
Wellenstein; the CMEA delegation was led by the director of the foreign
trade department, Viacheslav Moiseenko. Although the CMEA had been
preparing for this meeting since 1969, the parties did not get past discussing
procedural issues regarding possible next negotiations. Their demands and
goals were too diverse.42 The executive committee meeting that had taken
place two weeks in advance of the CMEA–EC meeting had not even
discussed the EC delegation’s visit. What it did deliberate, however, was
the Soviets’ request to change prices within the CMEA. They wanted to
raise most, if not all, of the prices at which they exported raw materials to
CMEA partners.43
This was in fact what the executive committee ultimately decided to do,
and the changes took effect immediately. This meant that during 1975, the
price of Soviet crude petroleum would more than double. According to
contemporary analysts of CMEA affairs, what was surprising was not so
much the decision itself, but its timing. It came a year earlier than expected:
so far, the established rule had been that prices were fixed for the entire
period of the five-year plan.44
The decision entailed two significant changes in the Bucharest formula.
First, the method of selecting the years to be used as reference points was
modified. Second, the period of validity of the prices was shortened. From
1975 onwards, the five-year average of prices for a particular commodity
would be valid for one year only. This attainment notwithstanding, the price
change did not diminish the Soviet requirement for its customers to con-
tribute their share of the costs of raw material extraction before it would
consent to increase its deliveries.45
358 S. KANSIKAS
THE DEBT PROBLEM, PERESTROIKA AND THE COLLAPSE

OF CMEA TRADE
In April 1973, in his address to the plenary session of the CPSU’s CC cited
above, Brezhnev had underlined problems integral to Cold War trade
politics. This was the first time these problems had been brought into the
open in such a forum and in such detail: the Soviet leader’s report was aimed
not only at the Soviet party members, but also at the numerous represen-
tatives of fraternal countries present at the plenary session in Moscow. He
addressed many problems in trade relations between the socialist countries
themselves, as well as between members of the two opposing Cold War
blocs. As Brezhnev noted, in a globalizing world economy, these issues were
becoming interlinked.46
In his report, Brezhnev made two remarks that reveal a lot about Soviet
considerations on international trade and the country’s role in the global
market. Firstly, he quite blatantly admitted that the Soviet Union and its
allies were unable to finance all the projects they needed. Cooperation with
the West in the form of so-called compensation deals47 might allow them to
construct important projects on the basis of foreign loans and equipment.
He strongly advocated an increase of foreign trade with the non-socialist
world, which, according to him, might prove to be a means of inducing
economic growth in the Soviet Union and the CMEA member states: “We
can save much time and energy if we import the necessary equipment and if
we use the experience of the world. These are the reasons why we are
interested in advancing foreign economic relations.”48
Another acknowledgement in Brezhnev’s report was that as the leader of
the socialist bloc, the Soviet Union could not concentrate solely on pursu-
ing its national interests. Brezhnev stated that there was a crucial foreign
policy aspect to the Soviet role as a bloc leader: “If our partners cannot solve
their problems in economic cooperation with the Soviet Union, they are
forced to increase their relations with the West. This is why the significance
of economic questions in our relations with the socialist countries will
continue to increase.”49
These two quotes on Soviet foreign trade policy considerations show that
by 1973, the Soviet Union had come to accept its allies’ dependency on the
capitalist market and their commitment to continue trading with the West.
The Soviet leadership also understood that the dependency of the allies on
Soviet energy was a double-edged sword. If they were to remain tied to
intra-bloc trade, the allies could continue to request economic assistance
from the Soviet Union. The unintended consequences of the push for the
allies to diversify their trade relations were a simultaneous weakening of
links holding the bloc together and, for Moscow’s allies, a greater depen-
dence on, and later indebtedness to, the Western partners.
The strength of the Soviet alliance was tested in the beginning of the
1980s when Poland neared insolvency as a result of its strategy of import-led
growth. As records of the CPSU CC Politburo discussions in 1980 and
1981 show, the Soviet Union not only gave Poland economic assistance in
the form of increased oil deliveries and, even more concretely, money, but it
also pleaded with the other CMEA members to join efforts to help Poland
in its distress.
The CPSU CC Politburo session on October 31, 1980 discussed the
Polish economic situation based on information from the Polish United
Workers’ Party. As Brezhnev noted, Poland’s economy was “directly
dependent on the West,” because all imports crucial to the functioning of
its domestic market were already obtained on credit. The Polish feared that
these credits might not be extended if the country stopped servicing the
foreign debt, which was already approaching $500 million. The Polish
comrades thus requested Soviet assistance worth $150 million.50
Despite its own economic problems, the Soviet Union felt obliged to
provide this aid to its ally, but it did not have the resources to do so on its
own. Brezhnev therefore turned to his comrades to ask for a helping hand.
Even though the Soviet Union would “assume the main burden in this
matter,” the allies would be asked to contribute as well: “We propose to
reduce oil shipments somewhat to a number of countries in the socialist
commonwealth. This oil will be sold on the capitalist market, and the hard
currency revenues will be transmitted to Poland in the name of the
corresponding countries. This will enable Poland to alleviate its critical
financial situation and to purchase certain vitally necessary products and
other goods.”51
Consequently, the CPSU Politburo decided to reduce oil shipments to
Hungary, Bulgaria, the GDR, and Czechoslovakia on November 28, 1980
to provide additional aid to Poland.52 Nonetheless, Poland’s economy
continued to deteriorate. By March 1981, Poland’s debt to Western
creditors had risen to $23 billion, its critical imports to $9.5 billion, its
debt payoffs to $1.5 billion, and the amount of assistance requested from
the Soviet Union to $700 million.53 To help its allies, the Soviet Union
decided to sell Poland 13 million tons of oil originally intended for other
markets at a price per barrel that was 80 rubles below the world market
360 S. KANSIKAS
price. Although the decision was not questioned in the Soviet Politburo,
one member noted that “[w]e could have sold all this oil for hard currency,
and our earnings would have been enormous.”54
By late 1981, the Soviet leadership had come to view this brotherly aid
more critically. This was largely due to the Polish leadership’s indecisiveness
on taking harsher measures against the Solidarity movement, but also
because Poland did not seem to make all necessary efforts to improve the
functioning of its economy. The Polish industry was not even close to
fulfilling its plans, while at the same time the country’s request for assistance
had already reached $1.5 billion. As Politburo member Konstantin Rusakov
concluded, the quantity of goods delivered to Poland should not exceed the
level delivered the previous year, because even those amounts could be met
“only by drawing on state reserves or at the expense of deliveries to the
internal market.” The Politburo echoed Rusakov’s stance: “We must be
concerned above all with our own country and about the strengthening of
the Soviet Union. That is our main line.”55
The consensus on providing economic aid to the allies prevailed through
the first part of the 1980s. One of the Politburo members who had
discussed the critical economic situation during the Polish crisis was Mikhail
Gorbachev, who took office as general secretary of the CPSU in March
1985, and who became the first leader of the Soviet Union to question the
need to hold on to the Soviet Union’s European outer empire at any cost.
By the end of the decade, the willingness to continue privileging Eastern
Europe at the cost of the USSR’s economic interests was gone. In January
1987, the CPSU Politburo for the first time suggested that it was not in the
Soviet interest to be held responsible for what was happening in Eastern
Europe.56 A year later, Gorbachev complained that a number of socialist
countries had gone into debt and that they kept living off subsidies provided
at the expense of the Soviet Union. This system of exploitation needed to
come to an end: “It has become unbearably hard for us to conduct business
as we have been doing in previous decades. The comprehensive program is
dead.”57
As a result of the fourfold drop in oil prices, a simultaneously diminishing
oil output, and the increasing burdens of empire, the Soviet Union was both
unable and unwilling to continue subsidizing its allies. As Gorbachev con-
cluded in a Politburo session in March 1988, in relations with the CMEA,
“we must first take care of our own people.”58
CONCLUSION
This chapter has focused on the issue—addressed by Valerie Bunce as early
as 1985—at what point in time the Eastern European part of the Soviet
Union’s empire turned from an asset into a liability.59 Since the mid-1960s
Soviet economists and planners had been reporting to the leadership that
the country was incurring significant losses in foreign trade with CMEA
partners. But the Soviet Union continued to provide economic assistance to
its allies for two more decades, even though the amounts involved had
become unbearable considering the poor state of its own economy.
One of the problems, which had been debated in Soviet economic
journals since the mid-1960s, was the composition of its foreign trade:
exports to its allies in Eastern Europe consisted of raw materials, particularly
oil and gas, which were referred to in socialist terminology as “hard goods.”
In return, it received manufactured products, “soft goods,” usually of
sub-par quality. As Soviet raw materials could have been sold on Western
markets for hard currency, its trade with CMEA partners was unsatisfactory.
Another problem was the price formation mechanism in intra-CMEA trade;
and the third was that the allies did not share the costs of raw material
extraction.
The terms of intra-bloc trade left the Soviet Union unable to reap all
benefits from its Western trade. As it was not selling its raw materials to the
West, it could not acquire hard currency with which to import required
technology, manufactured goods, licenses, and the like. The losses were
considered not just in absolute terms, they were also relative. While the
Soviet Union had to restrain itself when it came to imports from the West,
its allies were at the same time growing increasingly dependent on them. To
alter the situation, the Soviet leadership had sought to change the CMEA
price mechanism since the 1960s; it only succeeded in doing so in 1975.
While the first oil crisis in 1973/74—and the rise in oil prices several
times over—finally sealed the Soviet determination to switch to a new
pricing formula, its first effort to change the CMEA price mechanism had
been frustrated by its allies’ objections. The allies were able to oppose Soviet
aims for a while because the Soviet leadership remained hesitant to push for
a change even at the expense of its own interests. Even after the Soviet
efforts had finally succeeded, its allies were at the same time given a green
light to increase their trade with Western partners.
Despite Soviet counter-arguments, the East Europeans had even lobbied
to include establishing contacts with the EC on the CMEA agenda. The
362 S. KANSIKAS
Soviet leadership was against any rapprochement, but since the allies’
predicament was growing worse in the face of growing EC protectionism
and it installed higher prices for its energy exports, it ultimately accepted to
opening up to the EC as a compromise. Due to the failure of the simulta-
neous effort at CMEA integration, the socialist countries de facto opted for
a growth strategy based on foreign imports rather than modernization
based on their own strength.
Instead of gaining a stronger position within its bloc, the Soviet Union
ended up observing its allies grow indebted to Western creditors. By 1988,
the total volume of the socialist countries’ debt to the West had reached a
staggering $206 billion.60 The Polish Crisis of 1980–1981 was the last in
which the Soviet leadership decided to assist an ally in overcoming its
economic distress. By the late 1980s, all of the socialist countries were
facing economic turmoil, and intra-CMEA trade was consequently on the
verge of collapse. As CPSU Politburo discussions show, the Soviet leaders
had by then already started to think about saving their own country first,
even at the cost of letting the empire go.61
Negotiations within the CMEA shed more light on the debate about the
so-called “energy weapon” and Moscow’s ability to use its raw materials
trade as a tool of foreign policy. The CMEA price change of 1975, intended
to boost Soviet economic growth, had failed. In fact, there was no real
energy weapon to be used to pressure the allies into obedience. The Soviet
Union was just as dependent on its allies buying its resources as they were on
the bloc leader selling them cheap oil. The East Europeans resorted to
Soviet help because it was economically beneficial for them, and the Soviet
Union continued to assist its partners because it felt obliged to support its
alliance. As Eastern Europe became indebted to the West, it dragged the
Soviet Union down with it.
In studying the dissolution of the Soviet Union and its bloc, it is neces-
sary to consider multiple intertwined internal and external pressures. The
economic collapse, as this analysis has shown, was a result of the socialist
countries’ unproductive domestic and regional economic policies and their
systemic inability to adapt to the developments of the global economy. East
European and Western leaders alike believed that the Soviet Union would
continue to subsidize its allies and help them survive the economic difficul-
ties resulting from indebtedness to Western creditors. It seems that when
the Soviet leadership finally reassessed its alliance policies during the Gor-
bachev era, the conclusions drawn and the measures taken were too meager
and they came too late to save the Soviet economy from collapsing. If there
is one thing the CMEA failure should teach Moscow leaders today, it is that
keeping together an economically nonviable empire—and relying on export
earnings from as volatile a commodity as oil—comes at a very high price.
NOTES
1. Rossiiskii gosudarstvennyi arkhiv noveishei istorii (Russian State
Archive of Contemporary History, RGANI), f. 2, op. 3, d. 292,
l. 54, Aprel’skii Plenum Tsentral’nogo Komiteta KPSS-a, L. I.
Brezhnev, “O mezhdunarodnoi deiatel’nosti TsK KPSS po
osushchesvleniu reshenii XXIV s”ezda partii,” 1973. All quotes
from archival sources are the author’s translations.
2. Ivan Berend, An Economic History of Twentieth-Century Europe:
Economic Regimes from Laissez-Faire to Globalization (Cambridge:
Cambridge University Press, 2006), 166–8. Intra-CMEA trade was
based on bilateral agreements and administratively set prices; its
pricing system was unique in international trade. In 1950, all prices
had been fixed to world price levels of that year and remained
unchanged until 1957. In 1958, the CMEA adopted the so-called
“Bucharest formula;” henceforth, prices were adjusted every fifth
year to the average of the world market prices of the previous five
years. Those prices then remained unchanged for five years through-
out the whole CMEA.
3. For instance, a 1996 study by Randall Stone, which is still considered
a good source on intra-bloc trade, does not discuss East–West trade
at all. Randall W. Stone, Satellites and Commissars: Strategy and
Conflict in the Politics of Soviet-Bloc Trade (Princeton: Princeton
4. Valerie Bunce, “The Empire Strikes Back: The Transformation of
the Eastern Bloc from a Soviet Asset to a Soviet Liability,” Interna-
tional Organization 39, 1 (1985), 1–46.
5. The two organizations met for the first time in February 1975, but
official relations between the CMEA and the EC were established
only in 1988.
6. For more discussion of the energy weapon, see Margarita
Balmaceda, The Politics of Energy Dependency: Ukraine, Belarus
and Lithuania Between Domestic Oligarchs and Russian Pressure
(Toronto: University of Toronto Press, 2013) and Per H€ogselius,
364 S. KANSIKAS
Red Gas: Russia and the Origins of Europe’s Energy Dependence

(New York: Palgrave Macmillan, 2013).
7. E.g., in the GDR, where this decision was officially referred to as
“the unity of social and economic policy.” Charles Maier, Dissolu-
tion: The Crisis of Communism and the End of East Germany
(Princeton: Princeton University Press, 1997), 60.
8. According to eyewitnesses, only 5–7 percent of the Politburo’s
meeting time was devoted to Eastern Europe even during the crucial
year 1989. “Dialogue: The Musgrove Conference, May 1–3, 1998,”
in Svetlana Savranskaya et al., eds., Masterpieces of History: The
Peaceful End of the Cold War in Europe, 1989 (Budapest: Central
European University Press, 2010), 155.
9. The discontinuation of East–West trade due to the onset of the Cold
War can be seen as an anomaly in the economic history of twentieth
century Europe. In 1938, mutual trade between what would
become the CMEA countries had accounted for only 13 percent
of their overall commerce. Robert Bideleux and Ian Jeffries, A
History of Eastern Europe: Crisis and Change (London: Routledge,
1998), 539–40.
10. Open Society Archive (OSA), Records of Radio Free Europe, HU
OSA 300-8-3-15904, “USSR Exploited by Comecon? Part I,” June
2, 1966, http://hdl.handle.net/10891/osa:67c8d132-ebfd-47b6-
a05b-7e69cb57d388. The Bogomolov article was analyzed by
Radio Free Europe, which was monitoring Soviet and Eastern
European affairs. Major studies on the CMEA such as Michael
Kaser’s Comecon: Integration Problems of the Planned Economies
(New York: Oxford University Press, 1967) or Jozef van Brabant’s
Regional Price Formation in Eastern Europe: Theory and Practice of
Trade Pricing (Dordrecht: Kluwer, 1987) do not refer to
Bogomolov’s article.
11. OSA, “USSR Exploited by Comecon? Part I.”
12. Ibid. One theme in intra-CMEA trade discussions was the extent to
which the Soviet Union in fact forced the Eastern Europeans sell
their products to the eastern market. There would nonetheless have
been problems in selling to the West as their products were not
competitive enough. Thus, the East European exporters received
better prices for their produce by selling them to the Soviet market.
For more on Soviet–Eastern European bargaining, see Stone, Satel-
lites and Commissars.
13. The institute’s archive contains a collection entitled “Scientific doc-

umentation, including reports and analytic notes, prepared by
request of the Central Committee of the CPSU, the Council of
Ministers, Gosplan, the CMEA, ministries and state committees,”
Archive of the Russian Academy of Sciences (Arkhiv Rossiiskoi
Akademii Nauk), Moscow.
14. On the party’s guidance of the institute’s activities, see the fond
2287, opis’ 1 of the IEMSS at the Central Archive of Socio-Political
History of Moscow (Tsentral’nyi arkhiv obshchestvenno-
politicheskoi istorii Moskvy).
15. Although it has not been possible to verify whether these reports
actually reached the Politburo level of the Soviet decision-making
process, the covering notes of the reports do indicate that they were
commissioned by high-level officials.
16. OSA, Records of Radio Free Europe, HU OSA 300-8-3-15957,
“USSR Exploited by Comecon? Part III,” January 18, 1967,
http://hdl.handle.net/10891/osa:914dad12-511e-42d1-916f-
263a411085b2.
17. Stone, Satellites and Commissars, 38–9. The price the USSR was
actually willing to pay—or ended up paying—to keep its empire
together is difficult to estimate. In 1983, Marrese and Vanous
published their calculations on the volume of subsidies from the
Soviet Union to its Eastern European allies: Michael Marrese and
Jan Vanous, Soviet Subsidization of Trade with Eastern Europe: A
Soviet Perspective (Berkeley: University of California, 1983). For
further debate on the Soviet subsidization of Eastern Europe, see,
e.g. Bunce, “The Empire Strikes Back.”
“USSR Exploited by Comecon? Part II,” July 3, 1966, http://hdl.
handle.net/10891/osa:e624dc1f-5ebb-44c7-b61c-b548430fc30c.
In the article, “Shiriaev” is written “Shirayev.”
19. Philip Hanson, The Rise and Fall of the Soviet Economy: An Economic
History of the USSR from 1945 (London: Longman, 2003), 60–3;
Peter van Ham, The EC, Eastern Europe and European Unity:
Discord, Collaboration and Integration since 1947 (London: Pinter,
1995), 87–8.
20. Angela Romano, “Untying Cold War Knots: The EEC and Eastern
Europe in the Long 1970s,” Cold War History 14, 2 (2014), 164–5.
21. H€ogselius, Red Gas.
366 S. KANSIKAS
22. The EC twice postponed the implementation of its CCP vis-a-vis the
socialist bloc, in 1969 and in 1972. Romano, “Untying Cold War
Knots,” 164–5.
23. OSA, Records of Radio Free Europe, HU OSA 300-8-3-3662, “A
few current problems of Hungarian economic policy,” May 8, 1968
(Remarks on Jenő Fock’s radio and TV statement on April 23,
1968), http://hdl.handle.net/10891/osa:7152ae85-a16f-4bad-
b95a-40c936e71486.
24. Suvi Kansikas, “A Frustrated Start for CMEA Integration,” chap.
3 in Suvi Kansikas, The Socialist Countries Face the European Com-
munity: Soviet-Bloc Controversies over East-West Trade (Frankfurt am
Main: Peter Lang, 2014).
25. Stone, “The Comprehensive Program,” chap. 6 in Satellites and
Commissars.
26. Lee K. Metcalf, The Council of Mutual Economic Assistance: The
Failure of Reform, East European Monographs 485 (New York:
Columbia University Press, 1997). See esp. chap. 4, “The Issue of
Supra-National Planning.”
“Moscow’s Efforts to Rig Comecon Prices,” April 20, 1972,
http://hdl.handle.net/10891/osa:7cfbe7d6-b961-464c-99db-
62fe0e3325e4.
28. Stone, Satellites and Commissars, 38–9; Peter Marsh, “The Integra-
tion Process in Eastern Europe 1968 to 1975,” Journal of Common
Market Studies 14, 4 (1975), 312, fn. 1.
29. OSA, Records of Radio Free Europe, HU OSA 300-8-3-16090, “Pres-
sure for ‘Integration’ within CMEA,” June 19, 1970, http://hdl.
handle.net/10891/osa:5400eafb-5681-4691-b561-22bc9b369b52.
30. Stiftung Archiv der Parteien und Massenorganisationen der DDR
im Bundesarchiv (SAPMO-BArch), DY 30/3453, “Information
über die 48. Sitzung des Exekutivkomitees des Rates für
Gegenseitige Wirtschaftshilfe (21.-24.7.1970 Moskau),” G. Weiss
to SED Politburo, July 31, 1970.
31. SAPMO-BArch, DY 30/3453, Weiss to SED Politburo, July
31, 1970.
32. Stone, Satellites and Commissars, 120.
33. SAPMO-BArch, DY 30/3453, Weiss to SED Politburo, July
31, 1970.
34. “Comprehensive Programme for the Further Extension and

Improvement of Cooperation and the Development of Socialist
Economic Integration by the CMEA Member-Countries,” in The
Multilateral Economic Co-Operation of Socialist States: A Collection
of Documents (Moscow: Progress, 1977), 85.
35. For more information about Finnish–CMEA cooperation, see Suvi
Kansikas, “Balancing between Moscow and Brussels: Finland’s Inte-
gration Policy towards the EC and its Political Constraints,” in Poul
Villaume et al., eds., Northern Europe in the Cold War, 1965–1990:
East–West Interactions of Trade, Culture and Security (Helsinki:
Kikimora, 2016), 81–103.
36. RGANI, f. 2, op. 3, d. 292, l. 19, Brezhnev, O mezhdunarodnoi
deiatel’nosti.
37. Ibid., ll. 19–20.
38. SAPMO-BArch, DY 30/13862, “Information über die 64. Sitzung
des Exekutivkomitees des Rates für Gegenseitige Wirtschaftshilfe
(Moskau 25.-28.9.1973),” G. Weiss to SED Politburo, October
2, 1973.
39. SAPMO-BArch, DY 30/13862, Weiss to SED Politburo, October
2, 1973.
of the Economy, RGAE), f. 302, op. 2, d. 1160, ll. 15–19, “Zapisi
besedi sekretariia SEV Fadeeva N.V. s Ispolnitel’nym Sekretarem
EEK OON Stanovnikom Ia. 1.4.1974,” A. Popov, Moscow, April
9, 1974.
41. Angela Romano, “Behind Closed Doors: Contacts Between EEC
and CMEA in the Early 70s,” in Carla Meneguzzi Rostagni, ed., The
Helsinki Process: A Historical Reappraisal (Padova: Cedam, 2005),
118.
42. SAPMO-BArch, DY 30/IV.2/2.036/59, H. Tschanter
(Arbeitsgruppe RGW) to P. Verner (Politburo), February 13, 1975.
43. SAPMO-BArch, DY 30/13864, “Information über die 70. Sitzung
des Exekutivkomitees des Rates für Gegenseitige Wirtschaftshilfe
(Moskau 21.-23.1.1975),” G. Weiss to SED Politburo, January
24, 1975. The 1975 meeting led to an unofficial compromise that
allowed East–West trade to continue without granting formal
mutual recognition. On the political level, the two continued to
neglect one another, while trade continued with tariffs and quotas
set unanimously by the EC and through scientific-technical
368 S. KANSIKAS
cooperation. After this settlement with the EC had been reached,

the Soviet leadership instantly pushed for the price change that in
their view was long overdue. Suvi Kansikas, “The CMEA Concedes
to Economic Realities,” chap. 7 in Kansikas, The Socialist Countries
Face the European Community.
44. OSA, Records of Radio Free Europe, Harry Trend, “Some effects of
COMECON’s revised price system,” February 20, 1975, http://
osaarchivum.org/files/holdings/300/8/3/text/126-5-315.shtml.
The numbers were calculated from Czechoslovak-Soviet agreements,
which indicated a price rise from about 15 to 38 roubles per metric ton.
45. Ibid.
46. RGANI, f. 2, op. 3, d. 292, ll. 19–20; 52–62, Brezhnev, O
mezhdunarodnoi deiatel’nosti.
47. In an effort to avoid raising foreign loans, the Soviet Union launched
a new way of doing business. They turned to compensation deals, in
which Western investments were paid off with a share of the produce
of the plant or construction in question.
48. RGANI, f. 2, op. 3, d. 292, l. 53, Brezhnev, O mezhdunarodnoi
deiatel’nosti.
49. Ibid., l. 20.
50. “Session of the CPSU CC Politburo,” October 31, 1980, in Mark
Kramer, ed., Soviet Deliberations During the Polish Crisis,
1980–1981, Special Working Paper No. 1 (Washington, DC:
Woodrow Wilson Center for International Scholars, 1999), 55–8,
https://www.wilsoncenter.org/sites/default/files/ACF56F.PDF.
51. “Leonid Brezhnev to Erich Honecker,” November 4, 1980, in
Kramer, ed., Soviet Deliberations, 60–1.
52. The Soviets aimed to collect at least $465 million. “Session of the
CPSU CC Politburo,” October 29, 1981, in Kramer, ed., Soviet
Deliberations, 149, fn. 251.
53. “Session of the CPSU CC Politburo,” March 26, 1981, in Kramer,
ed., Soviet Deliberations, 90.
54. Ibid.
55. “Session of the CPSU CC Politburo,” December 10, 1981, in
Kramer, Soviet Deliberations, 165.
56. “Notes of CC CPSU Politburo Session, January 29, 1987,” in
Savranskaya et al., eds., Masterpieces of History, 241.
57. “Notes of CC CPSU Politburo Session, March 10, 1988,” in
Savranskaya et al., eds., Masterpieces of History, 265.
58. Ibid.
59. Bunce, “The Empire Strikes Back.”
60. Gaidar, Collapse of an Empire, 127. Gaidar refers to a document in
the State Archive of the Russian Federation (Gosudarstvennyi arkhiv
Rossiiskoi Federatsii, GARF), dated July 13, 1989.
61. On this argument, see also Lorenz Lüthi’s chapter in this book.
Drifting Apart: Soviet Energy and
the Cohesion of the Communist Bloc
in the 1970s and 1980s
Lorenz M. Lüthi
INTRODUCTION
Throughout most of the Cold War, the socialist states of Eastern Europe
were highly dependent on subsidized energy supplied by the Soviet Union.
Their rapid economic development after World War II, the adoption of the
energy-hungry Soviet economic model, and the relative scarcity of their
own energy resources increased their reliance on energy deliveries to such a
degree that the Soviet Union found it progressively difficult to supply the
quantities needed.1 Nevertheless, the economic development—and, by
extension, the social peace and financial health—of the socialist East
European countries depended on annually increasing Soviet energy deliv-
eries. To a certain degree, energy formed the glue that held the Council of
Mutual Economic Assistance (CMEA) together. The exhaustion of the
Soviet capability to satisfy the ever-increasing needs in Eastern Europe in
the early 1980s, together with unrelated concurrent problems, helped to
trigger the economic disintegration of the CMEA.
L.M. Lüthi (*)

Department of History and Classical Studies, McGill University, Montréal,
Canada

DOI 10.1007/978-3-319-49532-3_13
372 L.M. LÜTHI
Given that many archival documents in Russia, particularly for the 1970s
and early 1980s, remain inaccessible, the story told here relies on party and
government papers from the former German Democratic Republic (GDR;
East Germany). They mainly consist of reports from official CMEA meet-
ings, internal assessments, and conversations between Soviet and East
German officials. The East German archives provide us with not only a
detailed window into the situation of the GDR but also information about
other socialist states in Eastern Europe, particularly Poland, Hungary,
and—to a lesser degree—Czechoslovakia. Coincidentally, these states
formed the region that received the lion’s share of Soviet energy deliveries.
During the whole period of its existence, the CMEA suffered from an
endemic energy crisis that was related to the lopsided distribution of energy
resources within the organization’s territorial expanse. The problem was
related to recurrent Soviet production shortages and transmission bottle-
necks in all of the CMEA. By the late 1960s, this endemic crisis began to
turn into an acute crunch. The main reasons for this development were the
slowing of Soviet oil production growth and the ever-increasing energy
demands in Eastern Europe. The construction of the joint Soiuz (“Union”)
gas pipeline, completed in 1979, addressed some of these shortages. The
establishment of an integrated high-voltage electricity grid during the 1980s
was supposed to help CMEA countries to switch from fossil fuel—burning
electricity plants to nuclear power stations. However, the ambitious electricity
program was far from complete when the socialist world, and with it the
CMEA, collapsed in 1989–91.
The following pages focus mainly on multinational oil, gas, and electricity
projects within the CMEA. Coal supplies and bilateral energy projects
receive attention only when they matter to the overall story of CMEA
energy politics. Unlike oil, gas, and electricity, coal was not transported
through a dedicated and specially constructed delivery system (pipelines or
high voltage lines), but mostly by train on existing, multipurpose railroad
networks. Still, coal mattered to the cohesiveness of the CMEA in certain
periods, as, for example, during the Polish crisis in the early 1980s. Further-
more, the CMEA member states often concluded bilateral energy projects
outside of the organization’s structures; these projects will receive attention
only when they mattered to multinational projects. Many of CMEA’s
multinational projects in fact emerged in the wake of bilateral projects or
arose from their shortcomings.
DRIFTING APART: SOVIET ENERGY AND THE COHESION OF THE COMMUNIST. . . 373
THE ENERGY INDUSTRY IN THE CMEA

Although some East European countries had their own oil, anthracite/hard
coal, or lignite/soft coal production capacities, none of them could meet
their own energy needs.2 In some cases, East European socialist states were
able to provide surpluses to each other; Poland, for example, provided East
Germany with anthracite/hard coal for heavy industrial production. This
did not, however, reduce their overall dependency on Soviet energy. In the
period between 1970 and 1977, for example, most of the East European
CMEA members imported between one-quarter and three-quarters of their
national energy needs. In each case, at least two-thirds of the imported
energy originated in the Soviet Union.3 Due to the lack of economic
integration with the Non-Socialist World (NSW)—which was partially
enforced by the Cold War division of the world and partially self-chosen—
and due to the competitive energy pricing there, the world market did not
form a significant source of energy supplies for most East European socialist
states, except in cases of emergency.
The lopsided nature of energy production within the CMEA required
the Soviet Union to step in. For unrelated reasons, the Soviet energy
industry was developing rapidly anyway. In the 1930s, it had primarily
focused on the development of oil production, with gas joining in during
the 1950s and nuclear energy in the 1960s. Soviet oil production had
originally focused on the Caucasus and the Volga-Ural region and only
moved to oil fields in Western Siberia in the 1960s, before going into
decline in the 1980s.4 This decline was caused by the exhaustion of existing
oil fields and the delay of new exploration in remote Artic regions.5 In
comparison, the Soviet Union did not begin to develop its gas industry,
which was initially concentrated in eastern Ukraine, until the 1950s.6 Once
gas production west of the Urals stagnated in the 1970s, its focus shifted to
the area east of that mountain range. Despite the concurrent decline in oil
production, the Soviet Union continued to increase gas production in the
1980s.7 Finally, the civilian nuclear energy program emerged with a
ten-year lag behind gas production; the first nuclear power plant began
producing electricity for the grid in 1964. Its reactors, relatively small in
output (100 MW), soon gave way to increasingly powerful nuclear reac-
tors—with outputs reaching first 440 MW, then 1000 MW, and finally
1500 MW—over the following quarter of a century. Eventually, the
1000-MW reactors (such as the one in Chernobyl) became the standard
374 L.M. LÜTHI
model for nuclear energy production in the Soviet Union and, by extension,
in all of the CMEA.8
Energy was a central point of discussion throughout the CMEA’s exis-
tence from 1949 to 1991. Originally, though, the organization’s creation
had been a Soviet “stopgap” measure in the emerging Cold War. Iosif
Stalin’s refusal to let socialist Eastern Europe participate in the Marshall
Plan forced Moscow to implement its own economic scheme for the recon-
struction and economic development of the war-torn region.9 Proposals for
multinational solutions to energy problems appeared on the agenda as early
as the organization’s first meeting in April 1949.10 The fifth session of the
CMEA council in June 1954 discussed the creation of an integrated elec-
tricity grid, but no decisions were taken.11 In December of 1955, all
members promised to increase their national energy production in order
to remove bottlenecks in mutual supplies.12 The seventh CMEA council
session in May 1956 eventually adopted concrete measures; Poland was
tasked with developing plans and capabilities to deliver coal to the other
“people’s democracies” in socialist Eastern Europe.13
As the energy needs of the socialist states continued to increase in the
second half of the 1950s,14 the CMEA faced the problem of preventing the
emergence of future supply bottlenecks. The ninth CMEA council session
in June 1958 discussed plans for an oil pipeline from the Soviet Union to
Poland, Czechoslovakia, and East Germany.15 The following council meet-
ing in late 1958 finally decided on the construction, within five to seven
years, of an oil pipeline from the Volga region to Mazyr (Belarus), where it
split into a northern arm—via Brest to Poland and East Germany—and a
southern arm—leading to Ushgorod, where it split again into branches to
Czechoslovakia and Hungary. Connected to the domestic Soviet oil pipe-
line system, the international Druzhba (“Friendship”) oil pipeline started
operation in 1963.16
THE UNFOLDING OF THE CMEA’S ENERGY CRISIS, 1964–1981

The Druzhba oil pipeline did not solve the CMEA’s energy problems. As
early as 1964, the overall available energy within the CMEA (oil, gas, and
coal) covered only 96 percent of its members’ needs.17 By early 1965, the
amount of Soviet energy deliveries to other CMEA members equaled
shortfalls in meeting its own consumption needs.18 This unfavorable devel-
opment stemmed from structural problems that had emerged in the Soviet
energy sector. Oil fields designated to cover the increased demand were in
remote locations and further away from Europe. A shortage of Czechoslo-

vak pipes delayed the diameter enlargement of existing pipelines, and at
times even the extension of the pipeline network itself.19 By mid-1969, the
problems had worsened even further just as coal production in the Soviet
Union and Poland started to level off without any prospect for growth in the
future.20
In mid-1972, Soviet Chairman of the Council of Ministers Aleksei
Kosygin told his East German counterpart Willi Stoph that his government
was negotiating the purchase of oil from Iraq to replace the unexpected
shortfalls in its own deliveries to East European CMEA countries.21 The
Soviet Union bought the Middle Eastern substitute at somewhat lower
than the prevailing world market prices; in turn, the East European recipients
agreed to accept a lower-quality product and to pay for some of the additional
transportation costs.22 In reality, however, Moscow was footing most of the
bill for the 14 million tons of annual Iraqi oil deliveries to its CMEA partners
since it used Western currency to purchase the oil in the first place and even
supplied technological aid to the Middle Eastern country.23
Nevertheless, the Iraqi episode amounted merely to a stopgap measure to
fix larger problems within the CMEA. Soviet capacity bottlenecks, the
removal of which would have solved the energy crisis, were not the only
problem. As Kosygin had announced already in April 1969, the unrealisti-
cally low pricing for all goods traded within CMEA distorted balances
of trade and led to wasteful consumption in all East European member
states.24 Subsequently, Moscow examined requests for future energy deliv-
eries more closely and in some cases even rejected those that lacked suffi-
cient justification.25 But the East European CMEA partners fiercely resisted
any agreement on price adjustments; the discussions over this issue would
continue into the 1980s.26
GAS AS A SOLUTION TO THE ENERGY CRISIS

After the discovery of the geographically well-situated Orenburg gas field in
the southern Ural mountain range in the 1960s,27 the CMEA started to
focus on the construction of an international gas pipeline. At the twenty-
seventh CMEA council session, held in early June 1973, Kosygin officially
invited Czechoslovakia, Poland, Hungary, Bulgaria, and the GDR to con-
struct jointly the nearly 3000 km long Soiuz gas pipeline from the Orenburg
gas field to the western border of the Soviet Union, where it connected to
existing East European gas networks. The Soviet leader recommended
376 L.M. LÜTHI
importing material (mostly pipes) and construction machines worth

800 million Soviet rubles (SUR) from the NSW. The convertible funds
necessary for these expenses were to be raised by the International Invest-
ment Bank (IIB) of the CMEA. Kosygin envisioned a five-year period of
construction (1975–1980).28
As early as mid-1973, it was clear that the planned gas pipeline would
only be yet another stopgap-measure—the reserves of the Orenburg gas
field were estimated to last only for 12 years. Soon, the still incomplete
Soiuz gas pipeline had to be connected to another pipeline (the construc-
tion of which had not started yet) to the Tiumen’ gas field in Western
Siberia, over 1000 km further northeast.29 The lack of long-term prospects
for the Orenburg gas fields reflected a general trend in the development of
the Soviet gas industry. Gas production increasingly moved further east,
which required the rapid expansion of the existing internal pipeline network
in the gigantic country as well.30
As Kosygin had warned when proposing the project in June 1973, the
construction of the Soiuz gas pipeline also posed major financial and tech-
nical challenges for the CMEA.31 The organization seemed to be ready for
such a task, however. In view of unrelated plans for greater economic
integration, it had decided to establish the IIB in April 1969. Jointly
operated by all CMEA members, the bank was in charge of funding industry
and infrastructure projects that involved more than one member country.32
As described in further detail below, the IIB’s main task in the 1970s turned
out to be funding the Soiuz pipeline. It almost went bankrupt over the
project.
The general agreement, signed on June 21, 1974 in Sofia, governed the
pipeline’s joint construction and financing, the management of machine
and material purchases, the coordination of construction, the ultimate
Soviet ownership [sic!] of the gas pipeline, and other related infrastructure
on Soviet territory. The project was to be completed by the third quarter of
1978. It required the acquisition of much of the necessary technology—
construction machines, pipes, and related equipment—from the NSW.33
The Soviet Union thereby could benefit from its past political and techno-
logical experience in building a similar pipeline (Transgaz) that already
supplied gas to Western Europe.34
The construction of the Soiuz gas pipeline progressed according to plan.
By February 1976, 10 percent of the pipeline (270 km) had been laid.35
Almost exactly a year later, construction stood at 45 percent (1200 km)36;
and by March 1, 1978, 86 percent had been built, equaling 2300 of the
2677 km planned. The construction of related infrastructure, such as

condenser stations, for example, advanced in parallel.37 The Soiuz gas
pipeline went into operation on January 1, 1979—with a delay of only a
few months.38 In the first year, it delivered 8.8 billion m3 of gas; by the end
of the year, the pipeline was scheduled to reach its full delivery capacity,
rated at an annual 15.5 billion m3.39
All countries participating in the Soiuz project had been aware from
the very beginning that the final price tag for the gas pipeline was dependent
on changing world market prices for the machines and materials bought
on Western credits with fluctuating interest rates.40 In July 1975, the IIB
and the five East European CMEA members participating in the Soiuz
project signed a credit agreement governing all finances for the following
12 years. The projected final sum amounted to 430 million transfer rubles
($2.4 billion), and would be paid out in installments over four years
(1975–1978). Interest rates for the transfer ruble credits stood at 2 percent
with the final repayment scheduled for 1990; interest rates for dollar loans
were dependent on floating world market rates, with the final repayment
scheduled for 1987.41 East German documents from 1981 suggest that the
cost projections seemed to have been accurate.42
The actual stumbling bloc for the project, however, was whether or not
the IIB would be able to raise the dollar loans in the NSW. West German
banks that had experience in financing previous Soviet pipelines (Transgaz)
wondered how the socialist countries would ever be able to repay old and
new debt, particularly given that another member of the socialist world, the
Democratic People’s Republic of Korea (North Korea), had zero interna-
tional creditworthiness in 1975.43 Once the credit agreement mentioned
above had been signed in July of that year, IIB representatives in charge of
negotiating actual loan agreements quickly realized that Western banks had
assessed the creditworthiness of each CMEA member in a graduated man-
ner. The Soviet Union received a good rating; Poland, the GDR, Czecho-
slovakia, and Hungary were considered average; but Bulgaria and Romania
had no creditworthiness left. Although international financial markets
treated the IIB as a Soviet bank, this credit assessment raised red flags
about the bank’s overall long-term creditworthiness.44 Moreover, price
surges of up to 60 percent of some of the components bought in the
NSW increased the demand for additional dollar credits.45 In early 1976,
West European banks and the IIB negotiated on a $600 million loan with a
term of five years and an interest rate between 6.875 and 7 percent.46 The
sheer size of the Soiuz project, in comparison to other multinational CMEA
378 L.M. LÜTHI
infrastructure projects, tied over 80 percent of IIB credits to the pipeline

project, as an internal report warned in August 1976. The long term-nature
of IIB credits to CMEA members implied that the bank would not be able
to balance its portfolio for a very long time.47
Indeed, in spring 1977, the IIB warned that Cold War politics—the
decline of détente—were beginning to complicate its efforts to raise
money on Western credit markets. Although the bank had been able to
raise loans worth more than $1 billion for the Soiuz project by then, it
believed that raising the remaining $1.3 billion would be “extraordinarily
difficult.” The IIB thus wanted all five East European socialist states to repay
those credits, which they had received for terms of 12 years, earlier than
originally scheduled. Unsurprisingly, the five states concerned insisted on
the validity of the 1975 credit agreement, declaring the issue a problem for
the IIB to solve on its own.48 By mid-year, injury came to insult. Bulgaria
was “de facto bankrupt” in its economic relations with the NSW and
required additional Soviet financial and economic aid.49 The IIB under-
stood that Bulgaria’s difficulties raised additional concerns in the interna-
tional banking industry about the general creditworthiness of CMEA
members, including the Soviet Union.50
When the construction of the Soiuz gas pipeline entered its final year in
early 1978, the financial situation of the IIB had not improved.51 In March,
the bank simply announced that the five East European socialist countries
had to repay their dollar loans by 1984—three years earlier than agreed
upon in 1975.52 Yet again, they refused to do so.53 Until late 1980, when
the Polish debt crisis erupted (see below), the IIB somehow managed to
keep juggling assets, caught between a tight NSW credit market and its
members’ unwillingness to repay their dollar loans earlier.54
NUCLEAR ENERGY AND THE INTEGRATION OF THE ELECTRICITY

GRID AS A SOLUTION TO THE ENERGY CRISIS
Apart from the multinational Soiuz gas pipeline project, the CMEA also
envisioned constructing an integrated electricity grid and using nuclear
energy to address the CMEA-wide energy crisis. As early as 1954, the
organization had discussed the unification of electric power networks, but
seemingly without taking any decision.55 Fifteen years later, Kosygin raised
the topic again at the twenty-third extraordinary CMEA council session.
The Soviet premier was convinced that nuclear energy would eventually
solve the acute energy problems, and that it would do so on the cheap.56
The Soviet Union hoped that any increase of electricity production in
CMEA countries in the 1980s would come exclusively from nuclear energy,
with no new power plant generating electricity on the basis of fossil fuels
necessary to be built.57 The twenty-sixth CMEA council session in July
1972 approved cooperation among member states in developing a unified
electricity supply system and introduced plans for thermal (fossil-fueled),
hydro, and nuclear electricity power plants.58 Working out the final plan for
the grid question would take yet another four years.
The thirtieth CMEA council session in July 1976 eventually adopted the
so-called “general scheme.”59 The 60-page-long document analyzed the
causes of the energy crisis (the lopsided geographical distribution of fossil
fuels within the CMEA) and advocated the construction of a unified 750-kV
grid with nuclear and other electricity power plants in various countries. The
general scheme envisaged power plant construction close to centers of
consumption (see Fig. 1). Upon its planned completion date in 1990, the
scheme would have significantly increased the share of nuclear power in the
overall mix of the CMEA’s energy consumption. Eastern European CMEA
Fig. 1 The integrated 750-kV electricity net of the CMEA for 1990 (plan from
1976) (Source: “Addendum no. 3,” no date [July 1976], BArch, DC 20/22109, 41)
380 L.M. LÜTHI
countries (except for Romania, but including Yugoslavia) were estimated to

produce 61.4 percent of its electricity with coal, 8.1 percent with oil, 3.7
percent with gas, 6.0 percent with hydro power (mostly in Yugoslavia), and
the remaining 20.8 percent with nuclear energy. In a first step until 1980,
two trunk lines were supposed to be built: one from existing power plants
(both thermal and nuclear) in the western part of the Soviet Union (includ-
ing the nuclear power plant in Chernobyl) to Hungary and from there, with
lower voltage, in a star-shaped pattern to Czechoslovakia, Yugoslavia, and
the GDR; and the other from southern Ukraine via Romania to Bulgaria.
The construction of additional power lines would follow over the course of
the 1980s. By the early 1990s, the completed 750-kV grid was supposed to
form a giant distorted figure eight that would be superimposed on the
western Soviet Union and Eastern Europe. The upper loop (3740 km)
would run from western Ukraine to Poland, the GDR, Czechoslovakia,
Hungary, and then back to western Ukraine; the lower loop (3670 km)
would lead from western Ukraine to southern Ukraine, through Romania
to Bulgaria, Yugoslavia, Hungary, and then back to western Ukraine. Much
of the electricity, however, would still originate in the Soviet Union, but
some would also be generated in yet-to-be-built power plants in Eastern
Europe.60
Eventually, the thirty-first CMEA council session approved in mid-1978—
two years after adopting the “general scheme”—a tentative joint program for
the construction of nuclear energy plants. It envisioned Soviet technical
support to all East European CMEA members and a joint production of
components.61 The following year, the pressing need to speed up the nuclear
program became obvious. During a visit to Czechoslovakia in early June,
Brezhnev warned that the Soviet Union could not guarantee continued oil
deliveries; Soviet production levels were dependent on declining reserves.62
The thirty-second CMEA council session at the end of the month thus
approved a long-term raw material program, which envisioned the accelerated
construction of nuclear and hydro power plants.63 By mid-1979, the seven
countries involved in the project had agreed on the mutual delivery of com-
ponents for nuclear power plants.64
THE ENERGY CRISIS AND THE POLISH CRISIS OF 1981

With the end of détente and the return of the Cold War in the early 1980s,
the Soviet Union had to deal with a range of economic problems—at home,
within the CMEA, and on a global scale. First, from 1979 to 1982, the
country faced four consecutive harvest failures. Not only did this circum-
stance necessitate additional food imports from the NSW on hard currency
basis, but it also led to negative ripple effects throughout the Soviet econ-
omy.65 This crisis occurred at a time when Soviet oil production—and with
it an important generator of hard currency—was on the verge of decline.66
Second, as will be shown below, the Polish crisis additionally affected the
CMEA’s economic health and overall cohesiveness. And third, a confluence
of international developments further exacerbated the situation. The
Islamic revolution in Iran in 1979 cut substantial Persian gas deliveries,
which were supposed to free up Soviet gas supplies to Eastern and Western
Europe, to the Soviet Caucasus region.67 The war between Iran and Iraq
that started in the fall of 1980 terminated oil and gas deliveries from both
countries to the Soviet Union.68 And following the Soviet intervention in
Afghanistan in late 1979, credit markets in the NSW virtually dried up for all
CMEA countries.69 East German observers in early 1981 expected interest
rates of a least 15 percent for new loans.70
By the late summer of 1981, one East European leader after another
visited Brezhnev on Crimea for their annual meetings, at a time when the
Soviet Union had reached a breaking point in its relations with the other
CMEA members. Reviewing the dire economic situation in the Soviet
Union, Brezhnev told East German leader Erich Honecker on August 3,
1981 that the Soviet Union would not be able to deliver the long-promised
amounts of oil and gas.71 Moreover, Brezhnev demanded the emergency
delivery of 300,000 tons of potatoes to the Soviet Union; the GDR even-
tually delivered even 410,000 tons by late October.72 In a letter to
Honecker from August 23, 1981, Brezhnev announced that the Soviet
Union was forced to divert oil deliveries intended for CMEA countries to
the NSW in exchange for food imports.73 The East German Politburo
discussed on September 1, 1981 what the estimated cut of 20 percent in
Soviet oil, gas, and coal deliveries for the next five years meant for the
country.74 In a letter to Brezhnev, Honecker claimed that the announced
cuts “undermined the fundamental pillars of the existence of the German
Democratic Republic.”75 Nevertheless, Brezhnev remained unmoved when
it came to the principle of energy cuts.76 Moscow eventually agreed to
reduce oil deliveries by roughly 10 percent, from 19 million tons to 17 mil-
lion tons per year.77
The Soviet Union, however, treated its socialist friends in a graduated
manner. Czechoslovakia had to adjust to a similar cut of oil deliveries.78
However, when Bulgaria’s Todor Zhivkov visited Crimea only days after
382 L.M. LÜTHI
Honecker, Brezhnev did not touch on economic issues or announced cuts

in energy deliveries.79 And in mid-August, Brezhnev even announced an
increase in economic support to the Polish leaders.80 By November, Czech-
oslovakia, Hungary, and Bulgaria had heeded Soviet appeals to reduce
voluntarily their requests for energy imports from the Soviet Union.81
To make things even worse, the Polish crisis had a severe impact on the
CMEA, and particularly East Germany. Increasing labor unrest in the
second half of the 1970s had damaged not only overall productivity in
that country, but also its economic relations with the socialist world on
two different levels. First, over the course of the 1970s, the Polish develop-
ment of coal mines and coke production facilities had failed to keep up with
increasing domestic and CMEA demand.82 Second, Poland’s transporta-
tion infrastructure, particularly the railroad network, was outdated and
incapable of handling increased industrial traffic.83
As early as the period of 1976–1978, Poland had delivered, on average,
10 percent less than the contractually agreed amounts of anthracite/hard
coal to the GDR.84 East Berlin managed to use Moscow as leverage in a
trilateral energy agreement through which the Soviet Union would
re-export Polish anthracite/hard coal to East Germany.85 Still, the GDR
was forced to buy additional amounts in the NSW for hard currency.86 In
July 1979, the daily deliveries from Poland slumped, in some cases as low as
to 38 percent.87 The strikes that began all over Poland on June 1, 1980
threw the country’s economy further into turmoil.88 Displaced railroad cars
jammed the country’s rail lines; coal exports of any kind to the NSW and
CMEA countries decreased even more.89 After resuming deliveries in late
1980, Poland refused to supply coal for a week in mid-December since it
needed all energy resources for itself.90 Responding to East Berlin’s com-
plaints, Warsaw retorted that the GDR was the only CMEA country left to
receive Polish coal at all.91 In December 1980, Poland planned a daily
production of 188 kilotons (kt), of which 165 kt were earmarked for its
own consumption, 15.5 kt were sold to the NSW to earn hard currency, and
7.5 kt were left to be exported to the CMEA, mostly the GDR.92 For several
reasons, the Soviet Union was unable to fill the sudden gap; it suffered
from acute energy shortages itself, had not received coal from Poland, had
failed to obtain oil or gas from Iran or Iraq as a result of their war against
each other, and was falling behind its own production schedules for coal
and oil.93
To extract coal from Poland, the GDR used economic warfare against its
CMEA neighbor to the east. In a meeting in early 1981, Honecker
announced to his Polish counterpart Stanisław Kania that his country had
decided to reduce raw material deliveries to Poland in the future, in retal-
iation for shortfalls in energy deliveries.94 Warsaw reassured East Berlin that
deliveries to the GDR were a top priority,95 even if it claimed it might be
forced to import coal for domestic consumption in 1981.96 Still, Poland
neither delivered at the agreed rate, nor was it able to honor its delivery
agreements later on in the year. By August 1981, the GDR assessed
that Poland had overfulfilled its annual coal deliveries to the NSW by
20 percent during the first half of the year while, at the same time, it had
failed to fulfil its annual supplies to CMEA partners by a similar rate.97 By
mid-October 1981, Poland announced to the GDR it would not honor its
contractual delivery obligations for the running year.98 After the introduc-
tion of martial law in mid-December, Warsaw even informed East Berlin
that it would deliver only 12.5 percent of the agreed amount in the first
quarter of 1982.99
THE POLISH CRISIS, ENERGY SHORTAGES, AND THE DEBT

QUESTION
Poland’s visible economic collapse over the course of 1980–81 was a top
priority in energy-related discussions at the CMEA-level from late 1980
onward. In early November of 1980, Brezhnev announced to all member
countries that the organization had to help the struggling country with
economic and financial aid to stamp out what he considered a counter-
revolution. To Honecker, he proposed that oil deliveries to the GDR be
reduced by 600–650 kt (approximately 3 percent of annual Soviet deliver-
ies); this amount of oil instead was supposed to be sold to the NSW to raise
hard currency funds for Poland.100 Honecker quickly agreed to a one-time
cut of 500 kt, although he claimed that the reduction of Soviet oil deliveries
on top of Poland’s concurrent failure to deliver coal for two months was a
major blow to the GDR economy.101
The Polish crisis also had a major impact on the financial health of the
CMEA. As mentioned above, the vast majority of the IIB’s resources had
been invested in the Soiuz gas pipeline project in the second half of the
1970s. In parallel to the IIB debt crisis, East European countries had
amassed hard-currency debts in the NSW which were, at an individual
level, often much greater than their collective dollar debt to the IIB.
Although much of the debt towards the NSW was not the result of
384 L.M. LÜTHI
energy-related expenses (in the case of the GDR, the latter amounted to
only 1 percent of the $7.7 billion debt by 1979),102 the NSW and the IIB
hard-currency debt crises became intertwined in the early 1980s.
In the summer of 1980, in the wake of strikes, the Polish Central Bank
announced to its Soviet counterpart that it was no longer able to serve the
interest payments of its $20 billion debt in the NSW, let alone to repay the
actual loans.103 In comparison, Poland had a relatively low debt of $1 billion
to CMEA financial institutions, $440 million of which were with the IIB.
Virtually all of it was related to the Soiuz project.104 On December
30, 1980, Poland failed to pay $27.5 million in interests and $32.5 million
of the scheduled debt repayment to the IIB.105 To insure its own liquidity,
the bank was forced to raise an emergency short-term credit of $32.5
million in the NSW markets—at an interest rate of 20.5 percent.106 In
March, after Poland’s debt to the NSW had reached $25 billion, the IIB
informed its members that it did not expect Poland to honor its dollar
obligations toward the CMEA bank. Thus, Polish debt to the CMEA
would increase to $660 million by late 1981 alone. In the light of tight
NSW credit markets, the IIB proposed that all member countries collec-
tively raise $700–$800 million to save the bank.107
During the debt rescheduling talks with more than 400 NSW banks in
April 1981, the 15 Western countries involved demanded that Poland
undertake an analogous rescheduling of its debt with CMEA countries.108
Nevertheless, by July, the NSW banks were offering to defer 95 percent of
the 1981 debt repayment for another four years, without demanding any
corresponding action by CMEA countries.109 The offer, however, con-
firmed Poland’s lack of credit in the NSW, which now made it even more
difficult for the IIB to raise funds and solve its own liquidity problems.110
Only after Poland had introduced martial law and was facing the danger of
credit boycott by the NSW did the GDR propose deferring the repayment
of Poland’s ruble and dollar debt to the IIB until 1985.111 But East
Germany itself balked when the IIB subsequently proposed—in view of its
own liquidity problems—that CMEA countries receiving gas through the
Soiuz pipeline should sell some of it to the NSW to help repay Poland’s
dollar debt.112 Luckily for Poland, martial law did not impede the signing of
the debt rescheduling agreement with the NSW in April 1982.113
With the IIB liquidity problem still unsolved, the Soviet Union and the
GDR tried to address Poland’s dollar debt to the CMEA bank once more in
October 1982.114 But for years, all CMEA members continued to play a
game of “chicken” with each other and with the IIB, hoping or deluding
themselves that the bank would not collapse. By 1982, however, Poland
had failed to service $315 million in annual financial obligations (interests
plus scheduled debt repayments). The IIB even expected the country to
postpone payments until 1985, increasing its arrears to $600 million or
more. The Soviet Union notified all CMEA countries in early 1983 it was
no longer willing to carry the burden of the IIB alone.115
But again, nothing happened, even after the IIB warned in October 1983
that the credit boycott of the NSW, together with the need to refinance an
unusually large number of dollar loans in 1984 and 1985, would break the
bank.116 In April 1984, the IIB decided that Poland simply had to repay its
debt, since the bank was unable to refinance itself in the NSW.117 Warsaw
responded three months later, however, with a request to reschedule its
ruble and dollar debt for another ten years.118 Eventually, the members of
the IIB agreed in October 1984 to what the NSW banks had done two and
a half years before. Still, by this point in time, the IIB had to strike a more
comprehensive deal; Poland’s complete debt (and not only the repayment
for 1981) was rescheduled for a duration of ten years (and not just four).119
Luckily, with the start of East–West rapprochement in 1985, the IIB was
able to refinance itself in the NSW on better conditions again.120 The
liquidity crisis and danger of bankruptcy had passed. But the Soiuz project
still cast a long shadow over the IIB.
THE DISINTEGRATION OF CMEA IN THE 1980S

The CMEA thus was facing multiple crises by the second half of 1981.
Soviet energy supplies were leveling off. Moscow diverted energy deliveries
to the NSW to satisfy its own dire economic needs. Its remaining resources
were redistributed according to specific needs within the CMEA. In addi-
tion, Poland’s economic collapse disrupted coal supplies to CMEA partners,
and interest payments and debt repayments toward the IIB. To make
matters worse, virtually every CMEA country—particularly the Soviet
Union, Poland, and the GDR—faced a major NSW debt problem—trig-
gered almost exclusively by factors unrelated to energy, such as ambitious
industrial development programs and imports of consumer goods from the
NSW.121
The economic disintegration of CMEA started in the wake of Brezhnev’s
individual talks with all East European leaders on Crimea in the late summer
of 1981. Against the background of the Soviet Union’s economic inability
to maintain its empire in Eastern Europe, Hungary and Poland applied for
386 L.M. LÜTHI
membership in the International Monetary Fund (IMF) in early November

1981.122 For ideological reasons, Stalin had decided in the late 1940s
that the Soviet Union and its East European satellites would not participate
in the international organization.123 Romania, which had started to resist
CMEA integration in the 1960s, had joined the IMF in December 1972.124
The prospective Hungarian and Polish membership in the IMF implied the
financial opening of two more CMEA countries towards the NSW.
Hungary’s and Poland’s requests to accede to the IMF were not directly
related to energy issues. In fact, Hungary had pondered the step for 10–15
years, but decided to do so only at short notice on October 29, 1981,
without even consulting with the Soviet Union.125 The decision was
spurred by the country’s need for credit at a cheaper rate than was available
at the time on the open NSW markets. In any event, 50 percent of
Hungary’s trade was already with the NSW.126 However, as the GDR
observed, this step contradicted a CMEA decision taken in May 1973—
half a year after Romania’s accession to the IMF in late 1972—not to seek
membership in capitalist monetary institutions.127 Unlike Hungary, Poland
had only considered joining the IMF in early 1981, during the negotiations
with NSW banks to reschedule its foreign debt.128 In a media statement in
November, Warsaw was completely open about its reasons: its membership
in the IMF was supposed to transcend the artificial economic division of the
world since the onset of the Cold War in the late 1940s.129 East Germany
rightly observed that the Hungarian and Polish steps pushed the CMEA
towards greater disintegration.130
That the Soviet Union allowed Hungary and Poland to join the capitalist
monetary system in late 1981 was a testimony to its own weakness. A little
more than a year before, during their annual Crimea meeting in mid-August
1980, Brezhnev had criticized Honecker for pursuing an economic policy
based on NSW debt that would lead, in fact, to economic integration with
the Federal Republic of Germany (FRG; West Germany) and the concur-
rent “disintegration from the USSR.”131 In response, Honecker did not shy
away from blaming the comrades in Moscow for this development, since the
Soviet Union was “not in a position to fulfill the raw material needs of the
GDR. This leaves the GDR only with the possibility of covering its missing
raw material needs in the NSW.”132 Faced with the announcement of the
possible 20 percent cut in Soviet energy supplies and with unreliable Polish
coal deliveries in the fall of 1981, the GDR decided to reduce its loyalty to
the CMEA as well. Unlike Hungary and Poland, however, East Germany
for ideological reasons did not believe it could join the IMF.133
The GDR pursued the solution of its own problems by turning to its
capitalist enemy-brother, West Germany, while concurrently thinking about
austerity. Assessing its own ballooning debt with the NSW in mid-August
1981, the GDR recognized that it was projected to reach 24.6 billion
Deutsche Mark (DM; $13.67 billion) by the end of the year.134 Honecker
decided to embark on “strictest savings” in the economy while pursuing a
policy of being “flexible towards the Western countries.”135 He thereby
benefitted from Brezhnev’s decision to give him the green light during the
meeting on Crimea to accept a proposal by West Germany’s Chancellor
Helmut Schmidt to meet bilaterally.136 Schmidt visited the GDR from
December 11–13, 1981, immediately before the introduction of martial
law in Poland. Discussions centered on East–West relations in general and
the idea, raised by Honecker, of an economic framework agreement between
the GDR and the European Community (EC), which the GDR would sign
despite its membership in the CMEA.137 In fact, two days before Schmidt
travelled to the GDR, he had received Wolfgang Vogel, an East German
lawyer, who had proposed the establishment of a similar bilateral GDR–FRG
framework agreement, encompassing a joint economic commission along the
lines of the Soviet–GDR model.138 After Schmidt’s departure from the GDR
on December 13, the East German leaders believed the visit had opened
many opportunities in the West and marked the beginning of a new phase in
relations with the FRG, including the possibility of a long-term trade agree-
ment.139 But none of these ideas were able to solve the debt crisis in the short
term. Neither NSW credit markets nor Soviet banks were willing to finance
East Germany’s red-ink-spilling economy.140 The German Foreign Trade
Bank (Deutsche Aussenhandelsbank, DABA) warned in mid-January 1982
that the GDR would soon follow the Polish example and become incapable
of servicing its NSW debt.141 By March, the bank started to prepare the
paperwork for an emergency bankruptcy.142
At the same time, the GDR leaders continued to pursue—unsuccessfully,
as it turned out—the idea of an economic framework agreement with
the FRG designed to raise DM 4 billion ($1.78 billion) in exchange for
concessions in economic affairs and human contacts.143 However, the
GDR also realized over the summer that the Schmidt government might
fall soon.144 Without a solution in sight, Honecker travelled in August 1982
to Crimea to demand an increase of Soviet energy and raw material deliv-
eries. He returned only with Brezhnev’s requests for more food assistance in
his hands.145
388 L.M. LÜTHI
The new West German government under Helmut Kohl, voted into
office in early October 1982, did not pursue the framework agreement.
Locked into an internal struggle over control of policy toward East Ger-
many, it provided the GDR with a DM one billion loan in mid-1983 at
virtually no political costs.146 Another DM 950 million loan followed in the
late spring of 1984.147 In a June 1984 meeting with Konstantin Cher-
nenko, Brezhnev’s indirect successor, Honecker once more raised the
issue of reversing the 1981 Soviet oil cuts. The new man in the Kremlin,
however, warned the GDR not to get involved too closely with the
“revanchist” FRG. But at that point, Moscow’s energy leverage over its
minion had vanished, and with it East Berlin’s esteem for its impotent
master.148
Given the decline in Soviet oil production in the 1980s, the superpower’s
inability to deliver more oil continued throughout the 1980s. A GDR
assessment of the overall health of the CMEA economic area in mid-1982
revealed that the economic development of its member countries was
stagnating.149 The CMEA repeatedly called for energy saving programs in
subsequent years to counter the stagnation.150 Given the general decline
of Soviet power in the late 1980s, Moscow also tried to reduce the volume
of its oil supplies to the GDR in late 1988 and early 1989—both times
without success, after facing East Germany’s panicky resistance.151 In gen-
eral, the Soviet Union was willing to compensate its inability to supply oil
with increases in gas deliveries. East European socialist countries, in turn,
had to contribute money and labor to pipeline construction in the Soviet
Union.152
By 1983, the Soviet Union envisioned that the production of electricity
(including nuclear energy) in the CMEA would be significantly accelerated
until 2000.153 But the integrated electricity grid and the joint nuclear power
program suffered from delays over the course of the 1980s. In October
1981, the Soviet energy ministry announced that Soviet nuclear power
plants would go online soon in the western part of the Soviet Union, but
criticized the slow development of the 750-kV lines in Eastern Europe.154
A month later, the Soviet government had to renege on earlier promises
to provide all participating CMEA countries with control systems for
nuclear power plants due to production bottlenecks.155 Eventually, by
early 1983, the 750-kV section from the Soviet Union to Poland became
operational.156 In December 1985, the CMEA reconfirmed its strategy of
using nuclear energy to solve its energy problems.157 The Chernobyl disas-
ter on April 26, 1986, which involved a plant essential to the integrated
grid, did not shake the CMEA’s nuclear convictions.158 Anyway, the joint
program had already fallen so far behind schedule by 1987 that it had to be
extended for another decade until 2000.159
By 1988, the Soviet domestic reform spirit reached the CMEA as well.
The Soviet Union now heavily criticized the general lack of integration and
functionality of the whole organization. At the forty-fourth CMEA council
session in early July, Soviet representatives criticized that most members
were neither fulfilling their obligations nor implementing the council’s
decisions.160 Moscow was obviously losing patience. Instead of
implementing ambitious, integrated plans, it now pushed to create a free
market within the CMEA that would help resolve problems by itself.161
This new approach followed a CMEA agreement with its long-time capi-
talist enemy, the EC, to establish formal relations in late June 1988.162 But
none of these last-minute changes had any impact on the CMEA. Within a
period of only three years, the organization and its ambitious energy plans
would become history.
CONCLUSION
Even though the Soviet Union had become the world’s largest oil and gas
producer by 1980, it was unable to satisfy its own energy needs and those of
its empire in Eastern Europe.163 In many respects, it was the victim of its
own Cold War policies. The disintegration of the socialist countries from
the global economy forced the Soviet Union to assume the lead in their
economic development. Although they benefited from the Soviet “solidar-
ity” by way of subsidized energy deliveries, they showed little mutual
solidarity themselves in times of crisis. This system of de facto transfers of
economic assets worked as long as the Soviet Union was able to supply the
resources, while keeping its own economy at an operational minimum.
Once economic problems simultaneously hit the core and the periphery of
the Soviet empire, the whole house collapsed.
The energy sector was partially responsible for the long-term develop-
ment of Soviet economic imperialism and its eventual decline. However,
problems in the energy sector did not directly cause the collapse of the
Soviet empire in the 1980s. On the contrary, energy was an important pillar
that kept the house standing for a long time. Economic waste and
misallocation, characteristics inherent to the Soviet model, had led to a
debt crisis in the socialist world by the late 1970s and early 1980s that
taxed the ability of that pillar to carry additional weight past its technical
390 L.M. LÜTHI
specifications. Once the pillar started to crack, its ultimate collapse—and, as

a consequence, the downfall of the whole house it was supposed to prop
up—was just a matter of time.
NOTES
1. The development of East German energy consumption from the
late 1940s to the early 1970s serves as a good example, see Claire
P. Doblin, “German Democratic Republic Energy Demand Data,”
International Institute for Applied Systems Analysis Research Mem-
orandum RM-76-43 (1976), 17–18.
2. I. Dudinskii, “The Problems of Fuels and Raw Materials in the
Comecon Countries, and the Ways to Solve it,” American Review
of Soviet and Eastern European Foreign Trade 2, 5 (1966), 19–39.
3. George W. Hoffman, “Energy Dependence and Policy Options in
Eastern Europe,” in Robert G. Jensen et al., eds., Soviet Natural
Resources in the World Economy (Chicago: University of Chicago
Press, 1983), 660.
4. Arthur A. Meyerhoff, “Soviet Petroleum: History, Technology,
Geology, Reserves, Potential and Policy,” in Jensen et al., eds.,
Soviet Natural Resources, 306–15; United States, Department of
Energy, National Energy Information Center, Annual Energy Review
(Washington, DC: Government Printing Office, 2009), 314.
5. “Dear Comrade Honecker,” March 3, 1982, Bundesarchiv
(BArch), DY 30/11357, 62–3.
6. Meyerhoff, “Soviet Petroleum,” 308, 310, 314.
7. Jonathan P. Stern, “Soviet Natural Gas in the World Economy,” in
Jensen et al., eds., Soviet Natural Resources, 363–384.
8. Paul R. Josephson, Red Atom: Russia’s Nuclear Program from
Stalin to Today (Pittsburgh: University of Pittsburgh Press,
2005), 20–46.
9. Morroe Berger, “How the Molotov Plan Works,” The Antioch
Review 8, 1 (1948), 17–25; Geoffrey Roberts, “Moscow and the
Marshall Plan,” Europe-Asia Studies 46, 8 (1994), 1371–86.
10. “Protocol no. 2/1,” undated [April 1949], BArch, DC
20/22080, 1–5.
11. “Protocol no. 1/5,” undated [June 24–25, 1954], BArch, DC
20/22084, 3.
12. “Protocol no. 1/6,” undated [December 1955], Stiftung Archiv

der Parteien und Massenorganisationen der DDR im Bundesarchiv
(SAPMO-BArch), DY 30/3402, 6.
13. “Protocol no. 1/7,” undated [May 1956], BArch, DC 20/22086,
5–6.
14. “Protocol,” undated [March 1957], SAPMO-BArch, DY
30/3464, 87–91; “Information,” June 27, 1957, SAPMO-
BArch, DY 30/3404, 24–33.
15. “Protocol,” undated [June 1958], Politisches Archiv des
Auswärtigen Amtes, Bestand des Ministeriums für Auswärtige
Angelegenheiten (PAAA-MfAA), Wirtschaftspolitische Abteilung,
A 18836, 157.
16. “Druzhba Pipeline,” Pipelines International, September 2009,
http://pipelinesinternational.com/news/druzhba_pipeline/008045;
For more background information, see Jan S. Prybyla, “Eastern
Europe and Soviet Oil,” Journal of Industrial Economics,
13, 2 (1965), 154–67. On the construction of the Druzhba pipe-
line, see also the chapter of Falk Flade in this book.
17. “Information,” undated [July 14, 1964], PAAA-MfAA,
Wirtschaftspolitische Abteilung, A 18862, 6.
18. “Information,” January 26, 1965, SAPMO-BArch, DY 30/3428,
1–2.
19. “Transcript of a Talk between Comrade Walter Ulbricht and
Comrade L. I. Brezhnev in the CC of the CPSU in Moscow on
10 September 1966 (second part),” undated, SAPMO-BArch, DY
30/3518, 116–17.
20. “Transcript,” July 8, 1969, BArch, DC 20/4499, 141–7.
21. “Conception,” July 17, 1972, BArch, DE 1/58575, 1–2.
22. “On the oil supplies from the USSR to the GDR,” undated [early
1973?], BArch, DY 30/J IV 2/2 J/4517, 1–3.
23. “Information,” February 2, 1973, BArch, DE 1/58575, 3.
24. “Presentation by Comrade Kosygin,” undated [April 23–26,
1969], SAPMO-BArch, DY 30/3413, 43–47.
25. See for example: “Brief information,” June 29, 1973, BArch, DY
30/J IV 2/2J/4782, 2.
26. For the first instance in which it occurs in the documents, see
“Report,” June 26, 1968, BArch, DN 1/27985, 1–5. On the
issue of pricing, see also the chapter by Suvi Kansikas in this book.
392 L.M. LÜTHI
27. United States Congress, Office of Technology Assessment, Tech-

nology and Soviet Energy Availability (Washington, DC: Govern-
28. “Proposal,” June 7, 1973, BArch, DE 1/55121, 1–5.
29. “Brief information,” June 29, 1973, BArch, DY 30/J IV 2/2J/
4782, 1–7.
30. “Information,” undated [January 26, 1972], BArch, DE
1/58575, 4.
31. “Speech,” undated [June 5, 1973?], BArch, DC 20/22126, 91.
32. “Decision,” undated [April 23–6, 1969], SAPMO-BArch, DY
30/3415, 96.
33. “General Agreement,” June 21, 1974, SAPMO-BArch, DY 30/IV
B 2/20/455, 19–27.
34. “On the Gas-Pipes-Agreement,” undated [February 1, 1970],
PAAA-MfAA, Abteilung Sowjetunion, C 1205/73, 104–106.
35. “Information,” February 11, 1976, BArch, DN 10/1158, 1.
36. “Report,” February 23, 1977, SAPMO-BArch, DY 30/3217, 261.
37. “Dear Comrade Stoph,” March 21, 1978, BArch, DC 20/4323,
5–9.
38. “Final Bill,” undated [June 1979], BArch, DN 10/70, 16.
39. “Information,” February 8, 1979, BArch, DN 10/1158, 1–5a.
40. “Protocol,” June 21, 1974, SAPMO-BArch, DY 30/IV B 2/20/
455, 28–35.
41. “Agreement no. MH/01,” July 10, 1975, BArch, DN 10/3060,
1–11, and annexes.
42. “Protocol,” June 1981, BArch, DN 10/1158, 1–5.
43. “Information,” April 8, 1975, Bundesbeauftragte für die
Unterlagen des Staatssicherheitsdienstes der ehemaligen
Deutschen Demokratischen Republik (The Federal Commissioner
for the Documents of the State Security Service of the former
German Democratic Republic; hereafter: BstU), MfS HA XVIII,
2777, 66.
44. “Information,” November 27, 1975, BStU, MfS HA XVIII, 2812,
12–15.
45. “Information,” January 27, 1976, BArch, DC 20/17143, 128.
46. “Record Western loan for Comecon,” Guardian, February
18, 1976, 14.
47. “Report,” August 25, 1976, BArch, DN 10/70, 1–11.
48. “Transcript,” March 19, 1977, BArch, DC 20/4323, 34–8.
49. “Information,” August 15, 1977, SAPMO-BArch, DY 30/IV

2/2.036/65, 124–30.
50. “Information,” August 18, 1977, BStU, MfS HA XVIII, 2813, 11.
51. “Information,” February 16, 1978, BArch, DC 20/I/4/4023,
122.
52. “Information,” March 21, 1978, BArch, DC 20/4323, 3–4.
53. “Report,” April 26, 1978, BArch, DN 10/1158, 1–6.
54. Unfortunately, I was unable to find any information on how the
IIB solved this problem.
55. “Protocol no. 1/5,” undated [June 24–5, 1954], BArch, DC
20/22084, 3.
56. “Presentation by Comrade Kosygin,” undated [April 1969],
SAPMO-BArch, DY 30/3413, 22.
57. “Information,” undated [January 26–7, 1972], BArch, DE
1/58575, 1–5.
58. “Protocol,” undated [July 10–12, 1972], BArch, DC 20/22105,
12.
59. “Protocol,” undated [July 7–9, 1976], BArch, DC 20/22109,
40–1.
60. “Addendum no. 3,” undated [July 1976], BArch, DC 20/22109,
1–3, 1–60.
61. “Program,” undated [June 21–3, 1977], BArch, DC 20/22110,
1–7.
62. “Information,” June 29, 1978, SAPMO-BArch, DY 30/IV
2/2.036/68, 161–163.
63. “Long-term Target Program of Collaboration,” undated [June
1978], BArch, DC 20/22111, 4–5.
64. “Report,” June 28, 1979, BArch, DC 20/5135, 3.
65. “Information,” September 10, 1982, SAPMO-BArch, DY 30/IV
2/2.036/82, 73; “Telegram vd 547/81,” undated [November
1981], SAPMO-BArch, DY 30/12371, 64–7.
66. “Information,” November 10, 1980, SAPMO-BArch, DY 30/IV
2/2.036/76, 131–2.
67. See several documents in: National Archives of the United King-
dom, FCO 8/3371.
68. “Information,” December 18, 1980, SAPMO-BArch, DY 30/IV
2/2.036/76, 157–60.
394 L.M. LÜTHI
69. “Information,” January 25, 1980, BStU, MfS HA XVIII, 2813,

22; “Report,” November 2, 1981, BStU, MfS AIM 15827/89,
vol. 4, 5–10.
70. “Assessment of the Situation on the Capitalist Money and Credit
Markets,” March 2, 1981, BArch, DN 10/3493, 4.
71. “Transcript,” August 3, 1981, SAPMO-BArch, DY 30/11853,
2–4.
72. “Dear Comrade Leonid Ilyich,” August 20, 1981, SAPMO-
BArch, DY 30/14018, 124; “Final information,” October
26, 1981, SAPMO-BArch, DY 30/250, 1.
73. “Dear Comrade Erich Honecker,” August 27, 1981, SAPMO-
BArch, DY 30/14018, 126–8.
74. [No title], undated [September 1, 1981], SAPMO-BArch, DY
30/25759, 35–7.
75. “Dear Leonid Ilyich,” September 4, 1981, SAPMO-BArch, DY
30/J IV 2/2/1909, 11–13.
76. “Dear Comrade Leonid Ilyich,” October 2, 1981, SAPMO-
BArch, DY 30/14018, 141–3.
77. “Transcript,” October 21, 1981, SAPMO-BArch, DY 30/2379,
52–85.
78. “Note,” September 30, 1981, SAPMO-BArch, DY 30/IV
2/2.036/79, 119–20.
79. “BCP Politburo Resolution and Information on the Conversation
of the Bulgarian Head of State (Todor Zhivkov) with the Secretary
General of the CC CPSU (Leonid I. Brezhnev) in Crimea
(7 August 1981),” August 9, 1981, http://php.isn.ethz.ch/collec
tions/colltopic.cfm?id¼16054&.
80. “Information,” undated [August 14, 1981], SAPMO-BArch, DY,
83–91.
81. Mentioned in “[No title],” November 19, 1981, SAPMO-BArch,
DY 30/14018, 148.
82. “Information,” April 12, 1979, BArch, DC 20/5133, 73–8.
83. “Information,” undated [June 17, 1979], SAPMO-BArch, DY
30/IV 2/2.036/72, 187–9.
84. “Stenographic Transcript,” undated, BArch, DC 20/5133, 37–8.
85. “On the import,” undated [1979?], BArch, DE 1/58564, 1–2.
86. “Dear Comrade Dr. Günter Mittag,” February 12, 1979,
SAPMO-BArch, DY 30/IV 2/2.036/71, 140–3.
87. “Information,” undated, SAPMO-BArch, DY 30/IV 2/2.036/

72, 187–9.
88. “Telegram vvs b 7/3—t—40/80,” August 21, 1980, BArch, DC
20/13014, 107–11.
89. “Economic Consequences of the Strike Known as of Today,”
undated [September 30, 1980], SAPMO-BArch, DY 30/J IV
2/2A/2351, 158–61.
90. “Telegram vd 75/80,” December 16, 1980, BArch, DC
20/13014, 197.
91. “Telephone Instruction,” undated [December 18, 1980], BArch,
DC 20/13014, 193–4; “Telegram vvs b 7/3–93/80,” December
18, 1980, BArch, DC 20/13014, 192.
92. “Flash telegram from Warsaw,” December 18, 1980, BArch, DC
20/13014, 195.
2/2.036/76, 157–60.
94. “Dear Comrade Kania,” January 12, 1981, SAPMO-BArch, DY
30/J IV 2/2/1874, 5–7.
95. “Dear Comrade Honecker,” January 16, 1981, SAPMO-BArch,
DY 30/IV 2/2.035/45, 2–8.
96. “Summary,” February 18, 1981, SAPMO-BArch, DY 30/IV
2/2.035/45, 79–84.
97. “Information,” August 12, 1981, SAPMO-BArch, DY 30/IV
2/2.036/79, 69–71.
98. “Information,” October 21, 1981, BArch, DC 20/5136, 84–9.
99. “Information,” December 23, 1981, BArch, DC 20/5136, 55–9.
100. “Dear Erich,” November 4, 1980, SAPMO-BArch, DY
30/13973, 3–4.
101. “Dear Leonid Ilyich,” November 5, 1980, SAPMO-BArch, DY
30/13973, 21–22.
102. “Liabilities,” undated [January 1979?], BArch, DE 1/58666, 1–3.
103. “Financial-political problems of IIB and IBEC [International Bank
for Economic Cooperation] Moscow,” September 29, 1980,
BStU, MfS HA XVIII 2815, 7–8. IBEC was the original bank to
the CMEA, established in the early 1960s to undertake clearings of
accounts.
104. “Obligations,” undated [January 1981?], BStU, MfS HA XVIII,
2846, 7.
396 L.M. LÜTHI
105. “Dear Comrade Stoph,” February 16, 1981, BArch, DC

20/4850, 91–2.
106. “Information,” undated [January 1981?], BStU, MfS HA XVIII,
2846, 2–3.
107. “The position,” March 17, 1981, BStU, MfS HA XVIII, 2846,
9–10.
108. “Dear Comrade Stoph,” April 27, 1981, BArch, DC 20/4850,
86–90.
109. “Dear Comrade Stoph,” July 30, 1981, BArch, DC 20/5136,
163–4.
110. “Information,” December 5, 1981, BStU, MfS HA XVIII 2815,
23–25.
111. “Information,” January 21, 1982, SAPMO-BArch, DY 30/IV
2/2.036/81, 15–19; “Decision,” February 11, 1982, SAPMO-
BArch, DY 30/J IV 2/2A/2459, 81–4.
112. “Dear Comrade Stoph,” March 19, 1982, BArch, DC 20/4850,
77–9.
113. “Dear Comrade Dr. Mittag,” April 7, 1982, BStU, MfS-HA XVIII
13329, 30–2.
114. “Dear Comrade Stoph,” October 21, 1982, BArch, DC 20/4850,
70–1.
2/2.036/83, 18–24.
14–17.
117. “Dear Comrade Stoph,” April 23, 1984, BArch, DC 20/4851,
100–5.
118. “Dear Comrade Stoph,” July 26, 1984, BArch, DC 20/4851,
98–9.
86–91.
120. “Dear Comrade Mittag,” October 5, 1985, BStU, MfS HA XVIII
2807, 4–11.
121. Krzystof Czerkawski and Don Hank, “The Indebtedness of Social-
ist Countries to the West,” Eastern European Economics
21, 1 (1982), 77–90.
122. “Hungary Applies to Join IMF,” Boston Globe, November 5, 1981,
1; “Poland Applies to Join World Bank and IMF,” Chicago Tri-
bune, November 11, 1981, A2.
123. Vladislav M. Zubok, A Failed Empire: The Soviet Union in the Cold
War From Stalin to Gorbachev (Chapel Hill: University of North
Carolina, 2007), 51.
124. “Romania Joins IMF, First in Soviet Bloc,” Washington Post,
December 7, 1972, E1.
125. [No title], November 20, 1981, BStU, MfS HA XVIII, 16067,
51, 53.
126. “Information,” November 17, 1981, BStU, MfS HA XVIII,
16067, 64.
127. “Statement,” November 12, 1981, SAPMO-BArch, DY 30/IV
2/2.036/80, 71.
128. “Information,” November 17, 1981, BStU, MfS HA XVIII,
16067, 65.
129. “ADN-Information,” November 13, 1981, SAPMO-BArch, DY
30/IV 2/2.036/80, 84–5.
130. “Information,” November 16, 1981, SAPMO-BArch, DY 30/IV
2/2.036/80, 74.
131. “Information,” August 25, 1980, BStU, MfS HA XVIII, 18843,
21.
24–5.
133. “Statement,” November 12, 1981, SAPMO-BArch, DY 30/IV
2/2.036/80, 71.
30–5.
135. [No title], December 12, 1981, SAPMO-BArch, DY 30/25759,
47–48.
136. “Dear Mister Federal Chancellor,” undated [late August 1981],
SAPMO-BArch, DY 30/J IV 2/2A/2420, 15–18.
137. “Memory Protocol,” undated [December 1981], SAPMO-BArch,
DY 30/2408, 3–18.
138. “Conversation with the F[ederal] C[hancellor] of 12/9/1981,”
December 11, 1981, SAPMO-BArch, DY 30/2407, 60–5.
139. “On the assessment (draft),” December 30, 1981, SAPMO-
BArch, DY 30/IV 2/2.035/86, 12–22.
140. “Information,” January 22, 1982, BStU, MfS AIM 15827/89,
vol. 5, 19–22; “Information,” March 3, 1982, SAPMO-BArch,
DY 30/J IV 2/2/1936, 159.
398 L.M. LÜTHI
141. “Information,” January 16, 1982, BStU, MfS-HA XVIII 13329,

9–11.
142. “What needed to be decided if the GDR wants to achieve the
refinancing of its credit volume?,” undated, BStU, MfS-HA
XVIII 13329, 26–9.
143. “Mister H. Steinebach, GDR-Berlin; Mister K. Wienand,
Windeck/FRG,” February 17, 1982, BStU, MfS AG BKK
3, 157–165; [No title], March 11, 1982, BStU, MfS AG BKK
3, 177–182. For exchange rate, see http://www.history.ucsb.
edu/faculty/marcuse/projects/currency.htm
144. “Information,” June 22, 1982, SAPMO-BArch, DY 30/IV
2/2.035/86, 116–40.
145. “Transcript,” August 11, 1982, SAPMO-BArch, DY 30/11854,
1–48.
146. Holger Bahl, Als Banker zwischen Ost und West: Zürich als
afte (Zurich: Orell Füssli,
Drehscheibe für deutsch-deutsche Gesch€
2002), 106–17.
147. “Information,” July 17, 1984, BStU, MfS ZAIG, 21462, 36–7.
148. “Transcript,” June 15, 1984, SAPMO-BArch, DY 30/IV
2/2.035/58, 55, 60–5.
149. “On the economic development,” July 13, 1982, SAPMO-BArch,
DY 30/IV 2/2.036/82, 3–6.
150. See for example: “Dear comrade Honecker,” December 8, 1982,
BArch, DY 30/11357, 96–111; “Addendum no. 5,” undated,
BArch, DC 20/22116, 1–3; “Protocol,” undated [October
29–31, 1984], BArch, DC 20/22118, 12; “Addendum no. 6,”
undated [June 25–7, 1985], BArch, DC 20/22119, 1–5.
151. “Information,” September 16, 1988, SAPMO-BArch, DY 30/IV
2/2.039/294, 214–43; “Information,” January 12, 1989,
SAPMO-BArch, DY 30/IV 2/2.039/283, 89.
152. Mentioned in “Dear comrade Honecker,” December 8, 1982,
BArch, DY 30/11357, 96–110.
153. “Transcript,” undated, SAPMO-BArch, DY 30/J IV 2/2A/2560,
46–7.
154. “Information,” October 16, 1981, SAPMO-BArch, DY 30/IV
2/2.036/79, 164.
2/2.036/80, 178–9.

2/2.036/83, 19.
157. “Addendum no. 3,” undated, BArch, DC 20/22120, 11.
158. “Information,” undated [May 20–2, 1986], BArch, DC 20/I/4/
5817, 138–43.
159. Mentioned in “Report,” undated [October 13–14, 1987], BArch,
DC 20/5352, 145.
160. “Report,” undated [July 5–7, 1988], SAPMO-BArch, DY 30/IV
2/2.039/291, 160–214.
161. “On the establishment,” undated [July 5–7, 1988], SAPMO-
BArch, DY 30/IV 2/2.039/291, 267–9.
162. “Position paper COMECON—EEC,” undated, BArch, DC
20/5331, 91–2.
163. United States Congress, Technology and Soviet Energy Availability,
19.
The Fall of the Soviet Union and the Legacies
of Energy Dependencies in Eastern Europe
Margarita M. Balmaceda
Against the background of the (inter)dependencies between energy-rich

and energy-poor Soviet republics created during the Soviet period, as well as
during the Cold War between the Soviet Union and individual European
states of the Council for Mutual Economic Assistance (CMEA), this chapter
analyzes the post-Soviet impact of these legacies on the two groups of states.
In doing so, it focuses not only on their effects on relations between
individual states, but also on the way they influenced the political and
economic development of these states after the dissolution of the commu-
nist bloc and the breakup of the Soviet Union. This chapter argues that
these legacies go well beyond energy dependency. They have affected not
only these states’ range of energy options, but also Russia’s ability to use
energy as a tool of foreign policy. As the case studies of Ukraine and Belarus
demonstrate, Soviet-period energy legacies combined with other character-
istics of the transition period and of the external environment at the time of
the Soviet/CMEA dissolution, significantly constraining the conditions for
political and economic development of these newly independent states
after 1991.
M.M. Balmaceda (*)

School of Diplomacy and International Relations, Seton Hall University,
South Orange, NJ, USA
Harvard Ukrainian Research Institute, Harvard University, Cambridge, MA, USA

DOI 10.1007/978-3-319-49532-3_14
402 M.M. BALMACEDA
This chapter tackles this issue by reviewing the essential features of the
Soviet–CMEA1 energy relationship as a system. It then focuses on the
legacies of this system for the CMEA states, the post-Soviet republics, and
Russia itself, allowing us to get a better sense of the path dependencies that
limited both the Central and Eastern Europe (CEE) states’ range of energy
options in the post-1991 period and Russia’s ability use energy as a foreign
policy tool in the post-Soviet period.
While much was published on CMEA energy relations in the 1980s and
early 1990s,2 these publications did not, for obvious reasons, enjoy the
benefit of hindsight, nor could they assess the way in which the legacies of
the system affected its participants. More recent work on the region’s
energy politics has mainly concentrated on individual states, not on the
legacies of the CMEA as a system. In particular, recent work on Russia
has discussed the possible impact of Soviet-period property relations3 and
oil production legacies,4 as well as of heating and electricity distribution
networks,5 yet has largely avoided the question of the CMEA’s impacts
per se.
THE SOVIET–CMEA ENERGY RELATIONSHIP: ESSENTIAL

FEATURES AND PATTERNS
In order to understand the legacies of the Soviet/CMEA energy system,
it is useful to first review some of its defining features and patterns.
Among the central features of this system were a strong connection between
transit and energy dependency, the overwhelmingly bilateral nature of
relationships, use of barter-type arrangements, and limits to the use of
energy for political goals.
A first pattern was the strong synergy between the use of CMEA states as
transit routes for energy exports to West European markets and their
increased level of energy dependency. The expansion of gas supplies to
CMEA states dovetailed conveniently with the expansion of Soviet gas
exports to Western Europe, as most of the pipelines used to transport gas
to Eastern Europe were simultaneously used to transit gas to Western
Europe. CMEA states were involved in this process not only as transit states,
but also as participants in the building of the pipelines themselves. Pipelines
such as Bratstvo (“Brotherhood”), Orenburg, and Yamburg (Urengoi-
Uzhgorod) transported gas from Siberian fields to Europe and were central
for Soviet exports to Western Europe. In exchange for their participation in
THE FALL OF THE SOVIET UNION AND THE LEGACIES OF ENERGY. . . 403
the building of these pipelines, CMEA states often received increased

gas supplies. But these contracts also sealed their substantial energy depen-
dence on the Soviet Union as the nearly exclusive supplier of natural
resources, especially gas. With the exception of Romania, the CMEA states
grew increasingly dependent on gas imports, with the share of imported gas
rising from 19.1 percent of total gas consumption in 1970 to 77 percent in
1989.6
A second pattern concerned the overwhelmingly bilateral nature of
relationships. The Hungarian revolution of 1956 forced the post-Stalin
Soviet leadership to realize that maintaining power in Eastern Europe by
sheer force and economic plundering was far from optimal. Moscow sought
a more institutionalized relationship with its satellites, which it aimed to
achieve by fostering interdependence through “a complex web of political,
military, economic, and social ties,”7 including the Warsaw Pact (created in
1955) and the CMEA (created in 1949, but dormant until 1956), as well as
by building strong structural ties between these economies and that of
the USSR.
Yet CMEA energy cooperation remained largely a bilateral affair. The
first joint energy projects involving the USSR and its CMEA partners were
bilateral by design. Although CMEA cooperation was especially successful
in the electricity sector, it faced major hurdles: CMEA members where
often at odds on how to collaborate multilaterally within the organization,
leading to an almost complete lack of joint projects between 1963 and
1971. Oil-rich Romania in particular maintained a cautious distance from
many CMEA energy projects. Similarly, Poland resisted repeated Soviet
pressure to build a nuclear power plant in a reflection of its leadership’s
uneasiness about the degree of Soviet influence. Given these—not always
positive—attitudes, supplying Warsaw Pact allies with subsidized energy
was not only a way to keep them dependent on the USSR, but also intended
to make their leaders develop a more positive view of their relationship with
the USSR. CMEA pricing rules included a degree of flexibility that allowed
both for price bargaining and for the USSR to discriminate against individ-
ual CMEA member states in its bilateral dealings. This allowed the USSR to
use energy prices as a tool for its alliance management strategy—a strategy
encompassing a variety of other elements, including the use of military force
under certain circumstances.
This did not mean, however, that the Soviet use of energy to pursue
policy goals vis-a-vis specific CMEA states was always successful. Indeed,
any attempt at using energy subsidies as a means to reward alliance loyalty
404 M.M. BALMACEDA
faced severe limitations, as there was no real energy “stick” to balance the
“carrot.” The need to keep East European regimes afloat after political
crises reduced the scope for energy-based sanctions; indeed, “after a polit-
ical crisis in an East European country, the Soviet Union was constrained to
use its energy and other resources to bail out that troubled East European
regime,”8 regardless of its degree of loyalty. In the context of a heavily
propagandized competition with the United States (US), the economic
collapse of any of these states would have been seen as a failure of the
Soviet/CMEA system as a whole.9
A third key element concerned the type of trade arrangements used.
Much of Soviet–CMEA energy trade was organized through barter
arrangements of three types: payback agreements, merchandise barter, and
gas-for-transit. Payback agreements involved the use of oil and gas supplies
to pay back CMEA states for construction services (this was the case with
the Druzhba, Orenburg, and Yamburg pipelines). Though the actual coop-
eration forms and division of labor differed from project to project, in
general, each CMEA participant “assumed complete responsibility for a
section of the pipeline”10 and was paid back in the form of gas or oil
deliveries from the respective fields. Yet there is much evidence that East
European states were not satisfied with these types of agreements, which
made collaboration with the USSR more costly and less convenient. Mer-
chandise barter, with the CMEA states supplying industrial and consumer
goods not readily available in the USSR, played an important role in energy
trade. This barter often involved “soft goods”—goods that were subpar by
Western quality standards, with little chance of being sold for hard currency
on international markets, as opposed to “hard goods,” which could be sold
at world market prices—whose sale prices to the USSR were usually set
above world market prices. In other cases, deliveries were covered by
payment in the form of transit services.
Several conclusions emerge from this brief overview. First of all, although
not imposed by the USSR outright, some of the long-term shifts in the
energy situation of the East European states (the growing role of natural
gas, for example) were the result of Soviet strategies that were aimed first
and foremost not at Eastern Europe, but at increasing exports to Western
Europe, and that were also designed to deal with Soviet domestic energy
issues such as the increasing costs of oil production. Second, despite the
stated Soviet intention to develop multilateral, CMEA-coordinated pro-
jects, relationships remained largely bilateral. Third, while energy trade
played an important role in what William M. Reisinger calls “alliance
management,”11 this did not simply mean that Moscow could easily use
hydrocarbon supplies to prod allies toward desired behavior. Flexibility in
pricing was used in a variety of ways: to reward the most loyal allies, but also
to help less supportive regimes in times of crisis. However, it was not easy to
use energy to force non-collaborative allies into compliance.
What were the effects of this system beyond 1991? These legacies created
patterns and path dependencies that continued to limit the range of energy
choices of East European states after 1991. They also affected (and some-
times limited) Russia’s ability to play a role in these countries’ energy sectors
and to use energy as a tool of foreign policy, and they affected the possibilities
open to private and semi-private Russian energy players in the region. The
next three sections focus on the legacies of the Soviet/CMEA energy system
for each of the three main types of players involved: Russia, the former CMEA
states, and the new post-Soviet states.
LEGACIES FOR RUSSIA

While the CMEA energy system had important effects for the states depen-
dent on Soviet—mainly Russian—energy, it also had important effects on
Russia itself, effects which, in turn, help us understand the further legacies of
the system on CMEA and post-Soviet states. These main legacies for Russia
have to do with the type of energy development strategies that were
pursued, the levels of energy efficiency built into the system, the types of
energy mixes it encouraged, and the trade arrangements that were
privileged. While acknowledging these multiple effects, we focus here on
those that proved most consequential for the CMEA and post-Soviet states:
the impact of systemic inefficiencies, energy mixes, trade arrangements, and
the relationship between energy exports income and systemic reform. This
does not imply, however, that legacies alone can explain all aspects of the
current Russian energy system.12
An important characteristic of Soviet energy development was its empha-
sis on increasing short-term supply at almost any cost, an emphasis related to
the (illusory) belief in the availability of plentiful and inexpensive supplies.
The emphasis on increasing supplies, as opposed to reducing consumption
or making the system more efficient, affected the system as a whole. Central
planning exacerbated these inefficiencies by grossly distorting price signals.
It created the illusion of “inexpensive” energy through low energy prices
that did not cover the full costs of production, which kept transmitting the
wrong signals and discouraging energy-saving measures. Moreover,
406 M.M. BALMACEDA
calculating energy production (especially coal) in terms of volume rather

than caloric value or thermal units—which mirrored the overall system of
physical planning—encouraged production for production’s sake and did
little to stimulate improvements in quality.13 Because it promoted lack of
transparency in energy pricing, it affected the CMEA and post-Soviet states
as well (see below).
The mix of energy sources used in Russia today, itself an important Soviet
legacy, continues to affect the relationship with CEE. It affects the level of
effort required for the Russian economy to change from reliance on one
type of energy to another, and hence its ability to supply and juggle
domestic, East European, and West European markets. In other words,
decisions about the domestic energy mix have a significant impact on what
types of fuels will be available for export, and at what price. The case of
natural gas provides an important example: its significant role in Russia’s
energy balance and its key role in the country’s energy-industrial complex as
a whole (as it accounts for the operation of a large percentage of the
country’s power stations) means less of the gas produced in Russia is
available for export.
Furthermore, factors related to the energy mix also affect the role of
domestic actors in foreign relations. A case in point is Gazprom. The
company’s significant role not only as an employer, but also as a domestic
supplier—intrinsically related to the significant role of natural gas in Russia’s
energy mix—, have given it increased political weight. This political weight
also affects its relationship with the state, where it has used this domestic
role to accrue informal points that could later be converted into advantages
in other areas, ultimately also affecting post-Soviet Russia’s ability to use
energy exports as a foreign-policy tool.14
The Soviet period also left its mark on trade and institutional arrange-
ments. Hydrocarbon exports were centrally controlled by foreign trade
organizations that specialized in a particular fuel (Soiuzgazeksport, for
example, dealt with gas) and were supervised by the Ministry of Foreign
Trade. In the case of gas, this created the legacy of a monopolist company
dealing with exports, which lived on in the form of Gazprom and its export
division, Gazeksport. This gas monopolist was bequeathed an impressive
infrastructure—Gazprom inherited not only a system of exploration, pro-
duction, and a vast pipeline network, but also less tangible assets such as
profitable long-term contracts with Western Europe, contractual relation-
ships with former CMEA states, and a highly experienced export division.
Barter trade, a central part of the CMEA system, also had consequences
for Russia. As barter trade continued to flourish in the Russian energy sector
and in exports to post-Soviet states, particularly in the early 1990s, it
rendered the energy trade and the respective financial flows largely
non-transparent. Trade arrangements, prices, and even trade flows them-
selves were thus hard to document. The consequence was the spreading of
semi-legal and illegal deals throughout the energy sector, from tax evasion
to asset-stripping. This became especially clear in 2001–2002 with the
unearthing of scandals surrounding Gazprom’s dealings for the benefit of
the gas trading company ITERA.
By helping to cushion the effects of untenable economic conditions, high
prices on the world’s oil and gas markets allowed the Soviet Union to delay
much-needed reforms. This connection has proved strong in the post-
Soviet period as well, when calls for the reform and de-monopolization of
the gas sector have been delayed by fears that they may negatively affect the
sector’s ability to continuously generate high revenue. This legacy affects
Russia’s energy relationship with CEE in two ways: first, because reform is
ultimately necessary for the Russian energy sector to become fully compet-
itive; and second, because one of the most significant obstacles to the CEE
states’ ability to access better energy—especially natural gas—prices has
been the continuing lack of competition in the Russian energy export
market itself. The central role of revenue raised from energy exports for
the Soviet Union not only held reforms hostage to the ups and downs of the
sector, but also kept the CEE states largely hostage to the fact that supplies
from their largest source country were monopolized by a single company.
LEGACIES FOR THE FORMER CMEA STATES

Despite having gained full political sovereignty after 1989, the CEE states
continued to be affected by Soviet and CMEA energy policies—that is, by
decisions made in Moscow, the legacies of which consisted first and fore-
most of energy resource development policies, the dependency relationships
built into the system and the types of energy mixes it favored, infrastructural
legacies, and institutional trade arrangements.
The Soviet regime sought to use energy supplies as means of managing
relations with its Warsaw Pact and CMEA allies. Despite the problems this
approach caused, political interest created an important motivation to sup-
ply gas and oil to the CEE at low prices, creating enormous incentives for
408 M.M. BALMACEDA
the individual states in this region to become more and more dependent on
Soviet energy.
The lack of price competition characteristic of centrally planned econo-
mies left little space for real demand-and-supply competition between
various energy sources. Competition was additionally limited by the
regional energy companies’ monopoly on supply decisions in the areas
under their authority.15 Although there were significant changes in the
energy mix of most CMEA states, such as the greatly increased use of gas
from the 1970s onward, more often than not these changes were the result
not of real competition between fuel types, but of changing Soviet supply
and export patterns. In fact, the development of each CMEA country’s
particular energy mix was determined not only by their own stocks of
natural resources and the concrete policies followed by the leadership of
the country in question, but also by changes in Soviet energy export
priorities. In particular, two of Moscow’s initiatives had a large impact on
CMEA states’ energy mixes: the early 1970s initiative to substitute some of
the oil exported to CMEA partners by gas, so that more oil would be
available for export to Western Europe, and the building of pipelines to
export gas to Western Europe, which created incentives for the further
domestic gasification of the CEE states.
The energy roles that had evolved during the CMEA period could not be
undone overnight. In particular, the development of oil and gas pipelines
involved high sunk costs—initial investment costs recoverable only after a
project had operated successfully for years. These costs make it impossible
for a government to suddenly change its energy mix after a full-fledged
pipeline system is in place—certainly not as fast as CMEA arrangements
dissolved. The pipeline system, which had been created largely to serve the
export needs of the USSR, could not, once it was in place, be easily and
quickly reshaped nor retooled for use in a reversed direction. In addition, as
the pipeline system serving CEE countries developed in parallel to their
development into industrialized economies, the new energy mix patterns
became a central aspect of their economic growth (especially in the cases of
East Germany, Poland, Bulgaria, and the Slovak parts of Czechoslovakia).
As a result, most former CMEA states, though gas-poor, have dispropor-
tionately high levels of gas in their energy mix. High reliance on gas came
together with a set of expectations (piped-in gas supplies, reliable and
affordable residential gas heating) that have become part of the population’s
definition of welfare and, thus, limit the government’s freedom of action in
energy policies. These social aspects have many of their roots in the
communist period, as—with the exception of Nicolae Ceaușescu’s

Romania—reliable residential energy supplies were part of a minimal “social
contract” between the regimes and the population.
In other countries in the region, the continued high use of coal (despite
declines in its use in countries such as the Czech Republic) marks another
Soviet legacy. During the European Union’s (EU) accession talks, where
environmental standards were part of the admission criteria, concerns over
pollution due to heavy coal use had important foreign-policy implications.16
Additionally, greater reliance on coal means lower energy efficiency,
because electricity generation from coal has a relatively low thermal effi-
ciency. Finally, since coal mining is vital for the survival of some regional
economies (in Poland and the Czech Republic, for example), the domestic
and social implications of reducing coal production can lead to a strong
mobilization of interest groups against such changes.
A further legacy of the CMEA energy system is the building up of a
significant nuclear power sector in most of these countries—albeit of ques-
tionable safety. During the CMEA period, all East European member states
(apart from Poland) built nuclear power plants. Although the percentage of
domestically-produced nuclear energy in their total primary energy supply
(TPES) varied (in 1999, it ranged from 0 percent in Poland and 8.9 percent
in the Czech Republic to 19 percent in Slovakia),17 this share grew contin-
uously in the 1970s and 1980s. Even in cases where the percentage of
nuclear power in the TPES was low, it must be kept in mind that a number
of CMEA states imported electricity from the Soviet Union, and much of
this electricity was produced in nuclear power plants.
For former CMEA states, a key infrastructural legacy concerns emer-
gency oil and gas stocks. Most West European countries considered it
important to have reliable systems of oil and gas stocks for emergency use
in case of unforeseen disruptions to safeguard their energy security, and as a
way of gaining bargaining leverage vis-a-vis suppliers. Most of the CMEA
states, in contrast, did not have well-developed systems of gas and oil
storage facilities. Oil was usually imported from the USSR—the very idea
that it might be necessary to maintain a high level of oil stocks to bargain for
better prices or ward against a possible crisis “was not seen as appropriate”
within a CMEA context.18
In addition, the CMEA energy supply system distorted these countries’
economies. As long as the USSR was willing to accept “soft,”
non-competitive goods as payment for energy exports, the plentiful supplies
of Soviet energy acquired through soft terms of trade largely shielded
410 M.M. BALMACEDA
CMEA members from competitive world markets.19 Hence, entire econo-

mies in CEE were geared toward the production of non-competitive goods,
making their adaptation to competitive world markets even more difficult.
In a sense, the very same characteristics that had made the system “success-
ful” before 1989 and kept the Soviet alliance together created the difficulties
these countries faced in the new international environment after 1989.
LEGACIES FOR THE ENERGY-DEPENDENT POST-SOVIET STATES

If the Soviet/CMEA system left behind important legacies for Russia and
the other CMEA states, these legacies were even more marked in the case of
energy-dependent post-Soviet states, whose dependency on the energy
supply system was heightened not only by their smaller stock of domestic
energy resources, but also by their limited influence in policy-making. For
them, the legacies of the Soviet/CMEA energy system encompassed an
even broader range of areas than for the CMEA states, starting with the
decisions on what type of resources were to be developed.
If Moscow-based institutions had a limited say on the hydrocarbon
production policies of the CMEA states, they exercised much stronger
control over the energy development policies of the union republics
(Ukraine and Belarus, for example). In particular, decisions made in Mos-
cow affected the republics’ medium-term energy prospects through the
issue of which energy resources would or would not be developed, and
how this development would take place. Ukraine, for example, turned, in
the space of a few decades, from a net energy exporter and supplier of the
USSR’s second oldest long-distance gas pipeline (inaugurated in 194820) to
a net importer of energy. As stated by Leslie Dienes, “no other region or
republic has seen its energy position change so rapidly for the worse than
Ukraine.”21
Ukraine’s large-scale coal and gas production helped it remain a net
energy exporter until the late 1960s. By 1988, however, its energy deficit
amounted to 42 percent of consumption. This was mainly caused by the
predatory exploitation methods used to develop its energy deposits, which
were common throughout the USSR. Since union-wide plans from the late
1960s until the late 1980s called for large energy supplies—especially gas—
to be transferred from Ukraine to other Soviet republics and foreign states,
Ukrainian gas and oil fields started to deplete quickly during the 1970s.
In addition, once the decision to shift energy production to the east had
been made, difficulties and delays in getting West Siberian gas and oil fields
into production were, according to Dienes, “instrumental in heavy over-

working and premature peaking” of Ukrainian gas and oil reserves.22 This
overexploitation of Ukrainian deposits was to have significant implications,
foreshadowing Ukraine’s later energy dependency on Russia. By the late
1980s, such policies caused the marginal cost of fuel supplies from Ukraine
to rank among the highest in the former USSR. High marginal costs were
also a characteristic of Ukraine’s coal production, implying that using
domestic coal to offset Ukraine’s energy dependency was possible only in
a system that did not fully take into account economic cost considerations.
By 1991, most of Ukraine’s coal was being produced at a heavy loss.23
Thus, the level of dependency of individual Soviet republics on energy
supplies from the energy-producing regions of the Soviet Union grew
significantly between 1945 and 1991, both due to the change in energy
mixes—with increased reliance on fuels not available locally—and as a result
of the depletion and reduced domestic production of oil and gas (as in the
case of Ukraine). Paradoxically, the more the Soviet Union became active in
energy exports, the more republics such as Ukraine, Belarus, and Lithuania
became energy dependent.
One of the most important legacies left by the Soviet energy system for
the post-Soviet states is infrastructure. Its most obvious component to this
day are pipelines, which were centered in Moscow and planned according to
the supply needs of the Soviet Union and the Russian Federation, its largest
republic, in particular. This resulted in a largely hub-and-spoke system,
where energy-poor republics such as Ukraine and Belarus had little direct
access to supplies from other energy-rich union republics besides the
Russian Federation such as Turkmenistan, Uzbekistan, and Azerbaijan. As
a result, Russia retained an inordinate level of power after 1991 not only as
supplier to these states, but also as a gatekeeper for supplies from other
areas—a power it used in a variety of ways in the post-1991 period. These
infrastructural legacies have greatly limited the energy supply options open
to these states after 1991. Although some post-Soviet energy-dependent
states, such as Lithuania, already started to build network connections to
Western Europe with help from the EU in the 1990s, the task was enor-
mous. Gaining access to new suppliers, for example Norway, was tied to the
overwhelming costs of building new pipelines. During the economic crisis
following the Soviet Union’s dissolution, these costs would have been
exacerbated by the social cost of higher energy prices.
Yet infrastructural legacies go far beyond transportation. If the building
of a system for oil and gas reserves was deemed unnecessary by most CMEA
412 M.M. BALMACEDA
members, this was even more the case for post-Soviet states. Where large
storage capacities did exist (Ukraine’s gas storage facilities, for example, are
some of the largest in Europe), they were built during the Soviet period not
as a means to guarantee the republic’s supply security, but to “park” gas for
further transit to Western Europe.
The post-Soviet states also inherited from the Soviet system infrastruc-
tural objects originally built as part of a union-wide energy system but
which, with the demise of the USSR, were left in their territories. For
example, Ukraine, Belarus, and Lithuania inherited a well-developed oil
refinery system, but these refineries could only work profitably as part of a
larger, former Soviet market that could guarantee regular crude oil supplies
from Russia and access to sales markets throughout the area. A key post-
1991 effect was the keen interest of Russian oil companies in acquiring this
infrastructure. Since a refinery’s profitability depends directly on the degree
to which its production capacity is used, the end of stable oil supplies from
Russia led to a virtual paralysis of the sector in Belarus, Ukraine, and
Lithuania. Such vulnerability also makes embargos on crude oil supply
(like the one imposed by Russia on Ukraine in the winter of 1994) an
especially effective means of exerting influence, whether for political or
economic goals. By 1999, such dependence on former union-wide supply
and sale markets and the disastrous effects of their dissolution made coun-
tries such as Ukraine especially receptive to Russian oil companies’ offers to
take over refineries in debt-for-shares deals. By 2002, most Ukrainian
refineries had come under the control of Russian oil companies; by late
2014, only two of the country’s six refineries were working. In the case of
Belarus, the key role of domestic refineries, in synergy with specific policies
pursued by the regime of Aleksandr Lukashenka, served to establish a highly
profitable relationship between Minsk and Moscow, largely based on the
Belarusian export of Russian oil refined in situ.24
In a manner similar to the case of the CMEA economies, artificially low
energy prices sheltered the economies of the energy-dependent Soviet
republics from the hard constraints of resource scarcity. The effect was
more significant in this case, however, because Soviet republics were far
less engaged with foreign markets and thus had less of an incentive to
produce internationally competitive products. In particular, former Soviet
states such as Ukraine and Belarus found themselves in a path dependency
that encouraged them to continue living according to a model of develop-
ment based on the availability of plentiful energy resources at low domestic
prices, while in reality being energy-poor states.
The legacy of an energy trade system based on artificial prices and barter
carried with it a number of problems. The persistence of barter in many
areas of energy trade after 1991 helped maintain a non-transparent envi-
ronment prone to rent-seeking. Barter practices made it more difficult to
establish the price paid for gas actually supplied, and opened the door to
misunderstandings and mutual accusations of stealing (or undersupplying)
gas from the common pipeline, as was repeatedly the case between Ukraine
and Russia. While barter was often a response to a lack of liquidity in the
market, it led to further demonetization of the energy sector and loss of
investments.
Supplied with inexpensive and plentiful fuel, the energy-dependent
Soviet republics were encouraged to develop energy-intensive industries
and to gear their economies toward a gas-based economy that largely suited
the needs of the Soviet energy export system, which created enormous
incentives to rely more and more on energy from other parts of the
USSR. In contrast to the CMEA states, here the importance of bargaining
between both sides was much more limited, with most key energy decisions
made on the basis of central planning decisions extended to the various
republics.
Another set of Soviet legacies relates to cultural and mental frameworks
regarding energy. Instead of looking at energy from a national perspective,
most economic elites in Ukraine and Belarus, for example, continued to
consider energy in Soviet Union-wide terms. They continued to see energy
inputs as basically unlimited, and continued to behave as if they lived in an
energy-rich state. Only gradually did they come to realize their countries’
poverty in energy. The second issue concerns what could be called “Soviet
energy culture.” In the same way as cheap and plentiful energy supplies
served as a bonding agent that—however inefficiently—kept the Soviet
economy together, expectations of cheap and plentiful electricity and
piped-in residential heating supplies became part of the Soviet population’s
cultural definition of welfare, and part of a minimal “social contract”
between the regime and its citizens, turning household consumers into
carriers of Soviet energy culture. As the role of ideology faded, it was this
expectation of energy-related welfare, blending into the general anticipation
of rising living standards, that became integral to the very legitimacy of
Soviet power. Even after the demise of the Soviet system, being able to
provide such services was widely perceived as a central element of the new
states’ legitimacy, with the effect that any problems with such supplies were
interpreted by the population—or instrumentalized by the opposition—as
414 M.M. BALMACEDA
serious breaches of the social contract between the state and its citizens. As
shown in the “Stop Benzin” protests in Belarus in 2011 and also the 2015
Armenian protests against residential electricity price increases, these lega-
cies also boost the ability of energy issues to mobilize broad segments of the
population in ways few other issues have been able to.25
This contributed to a situation where, for the post-Soviet states (and
especially for countries such as Belarus lacking strong and widely influential
elites articulating more identity-based sources of legitimation), the conti-
nuous provision and expansion of residential energy services, especially to the
countryside, became an important legitimation element for both the states
themselves and for their leaders.26 Implied in this unspoken social contract
was the expectation of continued affordable energy prices, which, in the case
of the Soviet legacy, could be achieved by the cross-subsidization of resi-
dential consumption by industrial consumers. Thus, a growing emphasis on
the absolute importance of low energy prices began to take shape; the rise of
such expectations to a central societal value was facilitated by the economic
crisis and high inflation in the early 1990s, which reduced household
incomes and would have made hypothetical cost-covering, inflation-
indexed energy prices even less affordable for the average household. This
had important effects in both the short and medium term: an excessive focus
on sustaining low energy prices in the short term served to exclude some
policy options from the discussion and made others much more attractive.
Low residential prices insulated consumers from the worst effects of energy
dependency on Russia and “made diversification policies, more expensive in
the short term, hard to sell politically.”27
The impact of Soviet energy legacies went beyond energy and the
economy and also affected the structure of political relationships and polit-
ical development in these states. First among these was the indirect impact
of energy relationships on the vertical and horizontal value-added chains
(VACs) that had developed around them. Important VACs were created
along the chain of energy supplies—both vertical VACs, which processed a
specific commodity further, and horizontal VACs, related to one
commodity’s role in the production of other products (such as in the case
of natural gas, where natural gas by-products are used as feedstock for
chemical industries, metallurgy, and fertilizers). Once in place, VACs set
off path dependencies affecting suppliers, markets, and interest groups alike.
In fact, it was the economic sectors most closely related to energy VACs,
which served as the basis for the rise of some of the richest “oligarchs” in
these countries, such as Renat Akhmetov in Ukraine (metallurgy) and

Bronislovas Lubys in Lithuania (fertilizers).
More generally, Soviet energy legacies synergized with other character-
istics and the external environment of the transition period. Thwarted or
partially delayed economic reforms and Russia’s strive for continued influ-
ence in the other post-Soviet states not only led to the preservation of barter
and other murky multiple pricing schemes for energy. They also set the
conditions for the political and economic development of newly indepen-
dent states after 1991. In particular, this synergy led to unique “rent swamps
of the post-Soviet transition” that would significantly affect the incentives
for elite behavior and their role in state-building after 1991.28 Some of these
legacies—discussed in detail above—were: first, the emphasis on low resi-
dential energy prices, which indirectly prevented transparency in the energy
trade; second, the fact that prices did not mean much in the planned
economy system, which led to unclear and non-transparent bookkeeping;
third, the practice of large energy companies taking over important social
functions from the state and being compensated with informal privileges,
which further reduced the possibility of transparent pricing; and fourth, the
weakening of republican-level state institutions through the policies of the
Soviet period, which limited the possibilities for governmental oversight and
effective governance in the energy area after 1991.
Taken together, these factors contributed to a situation where energy
trade became one of the most corrupt areas of the economy and set into
motion institutional dynamics whereby some powerful economic actors had
only limited interest in increasing transparency in energy trade, especially
vis-a-vis Russia as the main supplier, and where sustaining energy depen-
dency became a profitable political and economic business. While the story
of those profitable post-1991 “rents of energy dependency” is told else-
where,29 it is important to understand their roots in the pre-1991 system.
CONCLUSION
As we have seen from the example of trade arrangements and their legacies,
the actual legacies of the CMEA/Soviet energy system were often more
complex than appears at first glance. Some of the legacies of the Soviet/
CMEA system (such as the impact of barter and lack of price transparency)
affected all participants in the system, regardless of whether they were
suppliers or importers, a constituent republic of the USSR itself, or part of
the more lax CMEA framework. Other legacies, such as the long-term
416 M.M. BALMACEDA
impact of the system on energy development policies in the specific states,

differed according to the role of each group of states in the overall system,
with the energy-dependent Soviet republics being most immediately
influenced by centralized decisions. For these states in particular, the lega-
cies of the Soviet/CMEA energy system go well beyond its most obvious
elements of energy supply infrastructures and energy dependencies. Every
aspect of energy trade—be it the modalities of trade used, the approach to
energy scarcity, or the very scale at which energy issues were conceptualized—
continued to affect these states well beyond the system’s demise.
Similarly, while most analyses of Soviet legacies, for example of the barter
trading system, have focused on the development of uncompetitive econo-
mies, perhaps their most important effects would not be seen until later, and
in a more indirect manner: they contributed to the opaqueness of energy
trade, with attendant impacts on governance issues. Some of the effects of
these legacies were not immediate or direct. Instead, they were “activated”
later through their interaction with new factors and developments, such as
the swift change in property relations at the time of the Soviet/CMEA
dissolution. In a sense, what made the system “successful” before 1989 and
kept the Soviet alliance together was also the source of difficulties these
countries faced in the international environment after 1989.
Recent trends and developments have confirmed the importance of
legacies from the CMEA period, as well as their limits. Undoubtedly, the
reality of existing pipelines on the ground made geographic diversification
options that involved new and costly infrastructure (such as a gas pipeline
from Norway) less attractive in comparison to the status quo. More funda-
mentally, CMEA legacies affected the position of these states between
Russia and the West by bringing an uncomfortable reality check to the
hopes associated with membership in the EU and the North Atlantic Treaty
Organization (NATO). For states such as Lithuania, Latvia, and Estonia,
the impact of EU membership was weakened by the structural limitation of
their isolation from the rest of the EU in terms of energy infrastructure
through the mid-2000s.
But—are pipelines destiny? A few factors prompt us to qualify our
answer. First, the type of geographical-source diversification that can be
constrained by the “steel logic” of pipelines is only one part of the question:
no less important are the organization and governance of energy trade even
when the energy originates from a single country (“contractual diversifica-
tion”).30 Second, although the EU’s Third Energy Package (2007) requir-
ing the separation (“unbundling”) of energy production, transportation,
and retail in EU states was able to weaken Gazprom’s ability to control the
entire natural gas marketing process, it could not physically undo the
physical reality of preexisting gas pipeline networks. Similarly, if the “steel
logic” of preexisting pipelines limited geographic diversification by
highlighting the high relative price of building new pipelines to access
new suppliers, the example of Russia’s massive investments in projects
such as the Nord Stream (gas) pipeline and the Baltic Pipeline System
(oil) to move away from sole reliance on CMEA-period export pipelines
transiting Ukraine tells us that overcoming such structural legacies is possi-
ble given the political will and the ability to command the necessary eco-
nomic resources.
Especially following Russia’s armed intervention in 2014–2015,
Ukraine’s attempts to secure gas supplies from Slovakia and Hungary
through reverse supplies of Russian gas purchased by these states highlight
the interconnection between these two types of legacy-related logics (that
is, the logics of seemingly static infrastructure and of more modifiable
contractual regulations with destination clauses and the resale of Russian
gas). Attempts at contractual diversification such as seen in this case are
limited both by the infrastructural legacies and by the governance realities
affecting whether the leadership of countries such as Slovakia and Hungary
will support such proposals. When looking at the legacies of the CMEA
period as a whole, it becomes clear that these legacies include ways of
dealing with energy as well as the most obvious elements of physical
infrastructure.
These legacies bring both opportunities and constraints to Russia’s abil-
ity to use energy as a political tool vis-a-vis these states. On the one hand,
Russia’s role as a (near-) monopolistic supplier of oil and gas was given
permanence by the “steel logic” of pipeline infrastructures. On the other
hand, the importance of oil and gas in Russia’s own domestic economic and
political system—partly as a result of CMEA-related impulses—carries
important consequences. For example, Gazprom’s domestic political
weight as employer, supplier, and investor forced the company to “juggle”
markets and commitments within the country, the CMEA, and Western
Europe. More broadly, post-Soviet Russian energy actors use energy for a
variety of domestic purposes, which entail both intended and unintended
consequences also affecting the use of energy as a means of external political
leverage.
418 M.M. BALMACEDA
NOTES
1. CMEA members were the USSR, Bulgaria, Cuba, Czechoslovakia,
the GDR, Hungary, Mongolia, Poland, Romania, and Vietnam. In
this chapter, the term “CMEA countries” is meant in the narrower
sense of east European CMEA members, excluding Cuba, Mongolia
and Vietnam. In reference to the pre-1991 period, I use the term
“Eastern Europe” to refer to Bulgaria, Czechoslovakia, the GDR,
Hungary and Poland, because it is the historical term used in refer-
ence to this period. I use the term “Central and Eastern Europe”
(CEE) to refer to the Czech Republic, Hungary, Poland and Slova-
kia, as well as to Ukraine, Belarus and the Baltic states after 1989/
1991.
2. See, for example, John P. Hardt, “Soviet Energy Policy in Eastern
Europe,” in Sarah M. Terry, ed., Soviet Policy in Eastern Europe
(New Haven, CT: Yale University Press, 1984); John M. Kramer,
The Energy Gap in Eastern Europe (Lexington, MA: Lexington
Books, 1990); William M. Reisinger, Energy and the Soviet Bloc:
Alliance Politics After Stalin (Ithaca: Cornell University Press,
1992); Leslie Dienes, Istvan Dobozi, and Marian Radetzki, Energy
and Economic Reform in the Former Soviet Union: Implications for
Production, Consumption and Exports (New York: St. Martin
Press, 1994).
3. See Timothy Frye, “The Limits of Legacies: Property Rights in
Russian Energy,” in Mark Bessinger and Stephen Kotkin, eds.,
Historical Legacies of Communism in Russia and Eastern Europe
(Cambridge: Cambridge University Press, 2014), 90–110.
4. Thane Gustafson, Wheel of Fortune: The Battle for Oil and Power in
Russia (Cambridge, MA: Belknap Press of Harvard University
Press, 2012).
5. Stephen J. Collier, Post-Soviet Social: Neoliberalism, Social Moder-
nity, Biopolitics (Princeton, NJ: Princeton University Press, 2011).
6. Data for 1989 from the PlanEcon energy database as quoted in
Reisinger, Energy and the Soviet Bloc, 19; data for 1970 from Vienna
Institute of Comparative Economic Studies, COMECON Data
1989 (New York: Greenwood Press, 1990), 398–403.
7. Reisinger, Energy and the Soviet Bloc, 21.
8. Ibid., 70.
9. For a discussion of the impact of reputation and prestige on the

formation and maintenance of alliances in the Cold War, see
Christopher P. Carney, “International Patron-Client Relationships:
A Conceptual Framework,” Studies in Comparative International
Development 24, 2 (1989), 42–55, here 48–51; and Hope
M. Harrison, Driving the Soviets up the Wall: Soviet-East German
Relations, 1953–1961 (Princeton, NJ: Princeton University Press,
2003), 3.
10. Reisinger, Energy and the Soviet Bloc, 53.
11. Ibid., 84.
12. In analyzing property relations in the Russian energy sector, Frye
notes that the impact of Soviet legacies is not sufficient to explain
trends in this sector, in particular the widely differing privatization
experiences in the oil and gas sectors. See Frye, “The Limits of
Legacies,” 90–1.
13. See Ihor Karp, “Energy Sector of Ukraine: Problems and the Ways
of their Solving,” National Security and Defense 14, 2 (2001),
69–70, here 70.
14. See Margarita M. Balmaceda, The Politics of Energy Dependency:
Ukraine, Belarus and Lithuania Between Domestic Oligarchs and
Russian Pressure (Toronto: University of Toronto Press, 2013),
70–2.
15. See Javier Estrada, Arild Moe and Kare Dahl Martinsen, The Devel-
opment of European Gas Markets: Environmental, Economic and
Political Perspectives (Chichester, UK: John Wiley & Sons, 1995),
168.
16. On this topic, see Margarita M. Balmaceda, EU Energy Policy and
Future European Energy Markets: Challenges and Consequences for
the CE States, Untersuchungen des FKKS 27/2002 (Mannheim:
Universität Mannheim, 2002).
17. International Energy Agency (IEA), Energy Balances of Non-OECD
Countries (Paris: Organization for Economic Cooperation and
Development (OECD), 2001); IEA, Energy Balances of OECD
Countries, 1998–1999 (Paris: OECD, 2001).
18. IEA, Oil Supply Security: The Emergency Response Potential of IEA
Countries in 2000 (Paris: OECD, 2001), 149.
19. Kramer, Energy Gap, 132.
20. Per H€ ogselius, Red Gas: Russia and the Origins of Europe’s Energy
Dependence (New York: Palgrave Macmillan, 2013), 13.
420 M.M. BALMACEDA
21. Leslie Dienes, “Energy, Minerals, and Economic Policy,” in I. S.

Koropeckyi, ed., The Ukrainian Economy: Achievements, Problems,
Challenges (Cambridge, MA: Harvard Ukrainian Research Institute,
1992), 129.
22. Dienes et al., Energy and Economic Reform, 98.
23. This section is based on Margarita M. Balmaceda, “The Legacy of
the Common Soviet Energy Past: Path Dependencies and Energy
Networks,” chap. 2 in Balmaceda, The Politics of Energy Dependency.
24. See Margarita M. Balmaceda, Living the High Life in Minsk: Russian
Energy Rents, Domestic Populism and Belarus’ Impending Crisis
(Budapest: Central European University Press, 2014).
25. On the “Stop Benzin” protests in Belarus as one of the few success-
ful mass mobilizations in the authoritarian regime of Aleksandr
Lukashenka, see Balmaceda, Living the High Life, 173.
26. See Margarita M. Balmaceda, “Energy Policy in Belarus: Authori-
tarian Resilience, Social Contracts, and Patronage in a Post-Soviet
Environment,” Eurasian Geography and Economics 55, 4 (2014),
514–36.
27. Balmaceda, Politics of Energy Dependency, 272.
28. See Margarita M. Balmaceda, “Between Structures and Actors:
‘Elite Original Sin’ and External Conditions: National and Private
Interests in Ukraine’s post-Independence Foreign Economic Pol-
icy,” unpublished paper, presented at the symposium “Independent
Ukraine 1991 to 2011: Change and Continuity in Ukraine’s For-
eign Policy,” Harvard Ukrainian Research Institute, April 23, 2012,
6–17.
29. See Balmaceda, Politics of Energy Dependency, 3–41.
30. On the differences between geographical and contractual diversifi-
cation: Ibid., 31–2.
INDEX
A Beria, Lavrentii, 64, 65, 86–8, 93, 99,

Adenauer, Konrad, 147, 258 101n19, 102n22, 102n25,
Aganbegian, Abel, 268 102n26, 104n57–60
Akhmetov, Renat, 415 Blake, Kristen, 81
Ala, Hussein, 95, 103n53 Blumenthal, Michael, 288
Allardt, Helmut, 260 Bogomiakov, Gennadii, 268
Alvaris, David, 79 Bogomolov, Oleg, 348–50, 364n10
Arutiunian, Amazasp, 87 Boldrini, Marcello, 208, 229n62
Astafev, Viktor, 25 Bonomi, Enrico, 212
Boothe Luce, Clare, 205
Brandt, Willy, 39n68, 42n97, 262, 264
B Brezhnev, Leonid, 3, 16, 17, 21–4, 31,
Bagirov, Mir Dzhafar, 61, 92 39n68, 41n89, 42n104, 167, 239,
Baibakov, Nikolai, 13, 17, 53, 58, 62–4, 253, 255, 256, 259, 261–70, 272,
102n27, 174, 177, 195n55, 255, 287, 345, 355, 356, 358, 359,
256, 261, 262, 267, 325, 342n41, 363n1, 380–3, 385–8
343n55, 344n66 Brigante-Colonna, Clemente, 215
Bakanov, Sergei, 176 Brock, William, 292
Baldridge, Malcolm, 292 Brosio, Manlio, 15, 211
Ball, George, 216 Brzezinski, Zbigniew, 288, 289,
Baranovskii, Yurii, 243 308n18–20, 309n24
Barry, Andrew, 132, 133 Bucy, J. Fred, 289
Bayat, Morteza Gholi, 90 Bunce, Valerie, 361
Note: Page numbers with “n” denote endnotes.

DOI 10.1007/978-3-319-49532-3
422 INDEX
Bush, George, 43n107 F

Bustani, Emile, 212 Fadeev, Nikolai, 357
Bykov, Fëdor, 8 Fahd bin Abdulaziz Al Saud, (King of
Saudi Arabia), 303
Falin, Valentin, 42n97
C Fanfani, Amintore, 207, 210, 213–15,
Campbell, Robert, 55, 71n46 220, 221
Carlisle, William, 212 Fedorenko, Nikolai, 191
Carter, Jimmy, 25, 284, 288–90 Florescu, Mihai, 326
Casey, William, 292, 294, 295, 303, Fock, Jenő, 352, 366n23
310n29, 312n40, 313n49 Fort, René, 234
Castro, Fidel, 216, 217 France, A. W., 111, 126n45, 126n50
Cazzaniga, Vincenzo, 155n34
Ceaușescu, Nicolae, 409
Cefis, Eugenio, 155n34, 156n45, 208, G
229n62, 230n70 Gaddy, Clifford G., 186, 198n99
Chernenko, Konstantin, 388 Gaidar, Egor/Yegor, 198n99, 316n71
Cherniaev, Anatolii, 268 Genscher, Hans-Dietrich, 270, 272
Christians, Friedrich Wilhelm, 270 Gierek, Edward, 21
Chuev, Feliks I., 92 Goldman, Marshall I., 34n1
Clark, William, 295 Gorbachev, Mikhail, 268, 299, 301,
302, 304, 317n82, 360, 362
Gottlieb, Bernard, 111, 124n16,
D 125n21, 125n23, 125n25,
de Gaulle, Charles, 232, 236, 238 125n28, 127n52
Debré, Michel, 238 Gromyko, Andrei, 95, 96
Dekanozov, Vladimir, 85, 99, 101n15, Gronchi, Giovanni, 206, 207, 209,
101n16 214
Delaporte, Pierre, 243 Gubkin, Ivan, 50, 51, 67n1
d’Estaing, Giscard, 239 Guicciardi, Diego, 138, 155n34
Dienes, Leslie, 410, 411 Gurov, Evgenii, 208
Downie, Jack, 112
Dulles, Allen, 215
Dymshits, Veniamin, 267 H
Haig, Alexander M., 43n107, 292, 295,
296, 303, 311n39, 312n44
E Harriman, Avarell W., 214
Ebel, Robert, 148 Hasanli, Jamil, 77n123, 81, 92, 93
Erhard, Ludwig, 258 Hecht, Gabrielle, 142
Erroll, Frederick, 120, 127n60 Herbst, Axel, 259, 260
Evdoshenko, Iurii, 67n1 Herman, Leon, 135, 151n3, 153n15
Evseenko, Mikhail, 64 Hitler, Adolf, 8, 52, 55, 82
INDEX 423
Hofland, Arnold, 138, 139 Kohler, David, 211

ogselius, Per, 34n1, 133, 219
H€ Kortunov, Aleksei, 176, 177, 187, 234,
Honecker, Erich, 21, 381–3, 386–8 255, 333, 334, 336, 343n47,
Hoskins, Halford, 135, 151n3, 343n49, 343n51, 343n58,
153n15 344n62, 344n66
Huntington, Samuel, 289 Kosygin, Aleksei, 23, 24, 27, 178, 191,
194n31, 219, 236, 255, 256, 260,
261, 265–8, 271, 287, 343n51,
I 375, 376, 378
Ickes, Barry W., 186, 198n99 Kovacs, Giorgio, 209
Ickes, Harold, 87 Kreps, Juanita, 288
Igolkin, Aleksandr, 68n5 Krzhizhanovskii, Gleb, 6
Ivanov, Viktor, 8, 36n30 Kuniholm, Bruce, 79, 80
Kuybyshev, Valerian, 52
Kuz’min, Iosif, 324, 342n41
J
Jackson, Henry M., 19, 287
Jaruzelski, Wojciech, 294 L
Jentleson, Bruce W., 106 Ladygin, V., 350
Johnson, Lyndon B., 221, 229n59 Leblond, Maurice, 139
Lee, Frank, 117, 127n54, 127n63,
159n69
K Lenin, Vladimir, 4, 5, 324
Kádár, János, 21 Lesechko, Mikhail, 334, 343n58, 356
Kaganovich, Lazar, 65, 168 Leuschner, Bruno, 324, 341n26
Kalamkarov, Vartan, 177, 330, 333, Lipkin, Mikhail, 189
342n39, 343n48, 343n49, 344n63 Lloyd, Selwyn, 108
Kavtaradze, Sergei, 85, 86, 88–92, Lomako, Pëtr, 173, 343n48
101n18, 101n19, 102n28, Lubys, Bronislovas, 415
103n38, 103n41 Lundestad, Geir, 149
Kennedy, John F., 25, 214–17, 228n43, Lytle, Mark, 79
228n44
Khoshtaria, Akakii M., 84
Khrushchev, Nikita, 11, 20, 29, 30, M
40n77, 68n6, 165–74, 176–82, Macmillan, Harold, 114, 121, 134
187–91, 191n2, 192n7, 194n31, Maksimov, Mikhail, 90
197n91, 198n108, 208, 234, 324, Malène, Christian de la, 138
333 Malenkov, Georgii, 65, 93, 104n58,
Khrushchev, Sergei, 192n7 167–9
Kirillin, Vladimir, 261 Malin, Vladimir, 167
Kissinger, Henry, 18, 19, 286, 287, Mao, Zedong, 19
307n13 Marjolin, Robert, 137, 138, 140
Kohl, Helmut, 388 Marsh, Steve, 122
424 INDEX
Mattei, Enrico, 140, 153n18, 202, 204– Patolichev, Nikolai, 209, 238, 258, 259,
11, 214–18, 223, 228n55 261, 262, 329
Maudling, Reginald, 107, 117, 118, Pella, Giuseppe, 206
128n66 Pervukhin, Mikhail, 168
McGhee, George C., 216 Pietromarchi, Luca, 153n12, 153n13,
Medvezhe, Vadim, 22 153n18, 207
Merchant, Livingston, 212 Piggott, Francis, 143, 146
Metz, Victor de, 134 Pipes, Richard, 295
Middendorf, John William, 14, 15 Pishevari, Jafar, 93, 96, 97, 103n52
Mikoian, Anastas, 65, 101n19, 104n59, Podgornyi, Nikolai, 17, 262
107, 118, 341n29 Pompidou, Georges, 232, 237, 238,
Mitchell, Timothy, 129n81, 132 250n11, 250n14, 250n15
Mitterrand, François, 244, 246 Powell, Richard, 119, 120, 127n54
Moiseenko, Viacheslav, 357
Molotov, Viacheslav, 55, 86, 87, 91–3,
95, 98, 99, 101n21, 102n22, Q
102n25, 102n26, 102n28, Qavam os-Saltaneh, Ahmad, 94–7
103n38, 103n41, 103n48,
103n50, 104n58, 104n60, 167
Morgenthau, Henry, 87 R
Moro, Aldo, 220 Radice, Edward, 146
Mossadegh, Mohammad, 104n62 Raimond, Jean Bertrand, 238, 250n15
Rasputin, Valentin, 25, 42n105
Rathbone, Monroe J., 108, 138
N Ratti, Giuseppe, 140, 155n35, 156n45,
Nekrasov, Nikolai, 18 208, 230n70
Neporozhnii, Pëtr, 176 Reagan, Ronald, 25, 31, 233, 244, 284,
Nixon, Richard, 16–18, 286, 287 290–6, 303, 304, 311n35,
Nove, Alec, 53 311n39, 312n44, 312n45,
Novikov, Vladimir, 173, 182, 194n36, 313n49, 317n82
264, 342n39 Reed, Gordon, 138
Regan, Donald, 292
Reifman, Alfred, 142
O Reinhardt, Frederick, 215, 216
Odell, Peter R., 106 Reisinger, William M., 404
Ordzhonikidze, Grigorii, 52 Rickett, Denis, 116, 119, 126n33,
Ortoli, François-Xavier, 357 126n36, 126n45, 127n56,
127n58, 127n61–3
Różański, Henryk, 325
P Romero, Federico, 82
Pahlavi, Reza Shah, 91 Rootham, Jasper St. John, 117, 118,
Panov, Andrei, 54 126n37
INDEX 425
Rostow, Walt W., 221 Stott, William R., 216

Rubin, Barry, 79 Sychev, S., 95, 103n48
Rusakov, Konstantin, 360 Szyr, Eugeniusz, 330
Rusk, Dean, 215, 228n51
Russo, Vincenzo, 216
T
Taqizadeh, Sayyed Hasan, 94
S Thatcher, Margaret, 295, 311n39,
Saburov, Maksim, 168, 191n2 312n45
Sadchikov, Ivan, 85, 96, 102n30 Tikhomorov, Sergei, 177
Sa’ed, Mohammad, 89, 90 Tito, Josip Broz, 11
Schedl, Otto, 258 Trofimuk, Aleksei, 268
Schiller, Karl, 259, 260
Schlesinger, Arthur M., 216, 228n42
Schmidt, Helmut, 14, 15, 25, 43n107, U
269, 270, 272, 387 Ustinov, Dmitrii, 178
Schweizer, Peter, 284, 302–4, 305n4
Scott, J. B., 110, 111, 114
Sedin, Ivan, 85, 101n16, 102n30 V
Segni, Antonio, 213 Valletta, Vittorio, 218
Semënov, Nikolai N., 192n7 Vance, Cyrus, 288
Semënov, Vladimir, 272 Vogel, Wolfgang, 387
Shcherbina, Boris, 256 Vyshinskii, Andrei, 94
Shiriaev, Iu., 350, 365n18
Shultz, George P., 296, 313n46, 317n80
Sidorenko, Aleksandr, 177 W
Sidorovich, Georgii, 332, 342n40 Wallace, Wiliam, 109
Šimůnek, Otakar, 332, 342n40 Weinberger, Caspar, 292, 294, 295,
Sorokin, Aleksei, 259, 334 303, 310n29, 313n46, 317n78
Stalin, Iosif, 3, 4, 7, 8, 10, 27, 47–67, Weiss, Gerhard, 355, 366n30,
79, 84, 86, 87, 88, 91, 92, 96, 98, 366n31, 367n33, 367n38,
99, 103n50, 103n52, 104n57–60, 367n39, 367n43
167, 178, 323, 350, 374, 386 Wellenstein, Edmund, 357
Stent, Angela, 133, 142, 149 Wieck, Hans-Georg, 269, 270
Stikker, Dirk, 147 Wolff von Amerongen, Otto, 261
Stock, K. L., 109, 124n17
Stockman, David, 292
Stone, Randall, 363n3 Z
Stoph, Willi, 343n53, 375, 392n37, Zalygin, Sergei, 25
396n105, 396n108, 396n109, Zellerbach, James, 154n20, 206, 210
396n112, 396n114, 396n116–19 Zhivkov, Todor, 381, 394n79

Jeronim Perović (Eds.) - Cold War Energy - A Transnational History of Soviet Oil and Gas-Palgrave Macmillan (2017)

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Edited by Jeronim Perovic

Cold War Energy

Cold War Energy

ISBN 978-3-319-49531-6 ISBN 978-3-319-49532-3 (eBook)

Library of Congress Control Number: 2017930572

© The Editor(s) (if applicable) and The Author(s) 2017

Cover illustration: © Jeronim Perović 2016

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

September 2016 Jeronim Perović

The Soviet Union’s Rise as an International Energy

From Crisis to Plenty: The Soviet “Oil Campaign” Under Stalin 47

The Postwar Years 59

Stalin’s Oil Policy and the Iranian Crisis of 1945–1946 79

“Red Oil” and Western Reactions: The Case of Britain 105

Debates at NATO and the EEC in Response to the Soviet “Oil

Part II From Cold War to Détente: Soviet Energy and the

Decision-Making in the Soviet Energy Sector in Post-Stalinist

A Challenge to Cold War Energy Politics? The US and Italy’s

Gaz de France and Soviet Natural Gas: Balancing Technological

Rise of Western Siberia and the Soviet–West German Energy

From Linkage to Economic Warfare: Energy, Soviet–American

Part III From Crisis to Collapse: Soviet Energy

Creating a Common Energy Space: The Building

Planning the Pipeline: The CMEA as a Communication Platform 325

Calculating the Burden of Empire: Soviet Oil, East–West Trade,

Drifting Apart: Soviet Energy and the Cohesion

The Fall of the Soviet Union and the Legacies of Energy

Legacies for the Former CMEA States 407

Margarita M. Balmaceda (PhD, Princeton University) is Professor of

Alain Beltran is Director of Research at the Centre National de la

Fée et la Servante: La société française face a l’électricité (XIX-XXème siècle)

Elisabetta Bini is Assistant Professor of Contemporary History at the

Roberto Cantoni is a post-doctoral fellow at the Centre de Recherches

impacts of shale gas developments in France and Poland in the 2010s. He

Nataliia Egorova is Chief Researcher at the Institute of World History of

Falk Flade is a PhD student at the Center for Interdisciplinary Polish

Niklas Jensen-Eriksen is the Casimir Ehrnrooth Professor of Business

“Industrial Diplomacy and Economic Integration: The Origins of

Suvi Kansikas is a post-doctoral researcher at the Network of European

Dunja Krempin is a PhD student at the Department of History at the

Lorenz M. L€ uthi is an Associate Professor for the History of International

War. He is currently working on a large book project, entitled A History of

Viacheslav Nekrasov is Assistant Professor at the Laboratory of Institu-

David S. Painter teaches international history at Georgetown University

Jeronim Perović is Professor of Eastern European History at the Depart-

Geopolitics, Demokratizatsiya, Jahrb€ ucher f€ur Geschichte Osteuropas, and

Felix Rehschuh is a PhD student in Eastern European History at the

Jean-Pierre Williot is Professor for Contemporary History at the

AAM Archivio Aldo Moro

BstU Bundesbeauftragte für die Unterlagen des

FCC Fuel Coordination Committee

KPSS Kommunisticheskaia Partiia Sovetskogo Soiuza (Communist

TSK Tsentral’nyi komitet (Central Committee)

Fig. 1 Map of existing and proposed Soviet pipelines (1960) 136

Table 1 Capital investment in industry and transportation, 1952–1965

© The Author(s) 2017 1

THE BOLSHEVIKS’ ATTITUDE TOWARD OIL

technology. And without that technology, we cannot build the foundations

cheap energy to oust Western international companies,16 European gov-

have been severely restricted in deploying its mechanized units, particularly

THE POLITICS OF OIL TRADE

THE SOVIET “OIL OFFENSIVE”