Monday, May 19, 2008

Cold War Oil Politics

The U.S. and the Soviet Union;
Richard Heinberg, a professor from Santa Rosa, California argues that a newly declassified CIA document shows that the U.S. used oil prices as leverage against the economy of the Soviet Union:

"The Memorandum predicts an impending peak in Soviet oil production 'not later than the early 1980s' (the actual peak occurred in 1987 at 12.6 million barrels per day, following a preliminary peak in 1983 of 12.5 Mb/d). 'During the next decade,' the unnamed authors of the document conclude, 'the USSR may well find itself not only unable to supply oil to Eastern Europe and the West on the present scale, but also having to compete for OPEC oil for its own use.' The Memorandum predicts that the oil peak will have important economic impacts: 'When oil production stops growing, and perhaps even before, profound repercussions will be felt on the domestic economy of the USSR and on its international economic relations.'"

"...Soon after assuming office in 1981, the Reagan Administration abandoned the established policy of pursuing d├ętente with the Soviet Union and instead instituted a massive arms buildup; it also fomented proxy wars in areas of Soviet influence, while denying the Soviets desperately needed oil equipment and technology. Then, in the mid-1980s, Washington persuaded Saudi Arabia to flood the world market with cheap oil. Throughout the last decade of its existence, the USSR pumped and sold its oil at the maximum possible rate in order to earn foreign exchange income with which to keep up in the arms race and prosecute its war in Afghanistan. Yet with markets awash with cheap Saudi oil, the Soviets were earning less even as they pumped more. Two years after their oil production peaked, the economy of the USSR crumbled and its government collapsed.
As noted in April - In a radically altered world— where Russia is transformed from battered Cold War loser to arrogant broker of Eurasian energy, and the United States is forced to compete with the emerging “Chindia” juggernaut—the only route to survival on a shrinking planet, lies through international cooperation.