Analyzing the overall efficiency of energy use, experts distinguish between two types of energy intensity85: the first one is the efficiency of end energy use (that is, how many items of national income are created from one item of end energy, usually electric power) and the second one is the efficiency of transforming primary energy (of various kinds) into end energy. 63 Pravda, January 27, 1978 (as cited by Goldman, 42). In June of the same year, the US and the Soviet Union signed an agreement to lend-lease supplies. Carnegie Endowment for International Peace, Reinventing Transatlantic Relations on Climate, Democracy, and Technology, The Conflict in Ethiopia Calls Into Question Authoritarian Aid, 2020 in Words: Decolonization, Mask Diplomacy, and Kung Flu, Worldwide Protests in 2020: A Year in Review, Associate Professor at the Plekhanov Russian University of Economics, Carnegie–Tsinghua Young Ambassadors Program, http://eng.globalaffairs.ru/number/n_4960, http://www.bp.com/content/dam/bp-country/en_ru/documents/publications_PDF_eng/Statistical_review_2007.pdf, http://www.beg.utexas.edu/energyecon/new-era/case_studies/Soviet_Legacy_on_Russian_Petroleum_Industry.pdf, https://ru.wikipedia.org/wiki/%D0%9D%D0%B0%D1%81%D0%B5%D0%BB%D0%B5%D0%BD%D0%B8%D0%B5_%D0%A1%D0%A1%D0%A1%D0%A0, http://www.census.gov/popest/estimates.html, http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.527.7748&rep=rep1&type=pdf, http://www.mining-enc.ru/z/zatraty-zamykayuschie, https://ru.wikipedia.org/wiki/%D0%9D%D0%B0%D1%81%D0%B5%D0%BB%D0%B5%D0%BD%D0%B8%D0%B5_%D0%A0%D0%BE%D1%81%D1%81%D0%B8%D0%B8, https://www.bp.com/content/dam/bp/pdf/energy-economics/statistical-review-2016/bp-statistical-review-of-world-energy-2016-full-report.pdf. It was a stranger to normal commercial motivation. Crude oil output in Russia amounted to 600,000 barrels in 1874 and reached 10.8 million barrels within a decade, which equaled to about a third of the USA’s output. The first wells were drilled in 1871-1872 and over 20 small oil refineries were active in 1873. In 1943-1945 mass production of the newer military equipment was carried out. The United States is a good example. This is linked to the fact that these countries mostly import final products, prices on which grow faster than prices on raw materials in the long term. Secondly, the Tyumen deposits were relatively close to the European part of Russia (and also near the extremely large Urals industrial region), much closer than the deposits around Baku and Grozny, in proximity to the state border. In theory, the resource curse is strongly associated with concentrated resources, that is, those located within a limited area, which are, due to this reason, easier to control. Technological rent apparently doesn’t cause these developments in such an over-the-top way. Le migliori offerte per RUSSO SOVIETICO WW2 GUERRA MONDIALE 2 treni CORAZZATI produzione/altri articoli NIT sono su eBay Confronta prezzi e caratteristiche di prodotti nuovi e … Thus, we can’t say that the effect of capital’s movement to the oil extraction industry started to work all at once, it started to take effect in the late 1970s, as the national leaders clearly realized that the increment of oil stock started to lag behind oil production. , The resources allocated to the defense industry grew in the late 1930 as tensions rose across Europe. This largely explains the immense pressure the oil industry experienced during the 1970s in Western Siberia, with the aim to sharply increase the output to make up for the decline in the Volga-Urals region. 9 See review of Prebisch-Singer hypothesis in: S. Yermolayev, O. Vasilyeva, A. Mishura, Phenomenon of Resource Curse in Economic Development (Moscow: Plekhanov Russian University of Economics, 2012). We can note that between 1950 and 1965, the elasticity of energy consumption by GNP growth was more than 1,82 while between 1965 and 1975 it was below 1. 114 Georgy Arbatov, Man of the System (Moscow: Vagrius, 202), 313, 315 (as cited by Slavkina, 327). By 1938, Germany’s total oil supply had risen to approximately 44 million ∴ barrels. But two factors need to be considered. We can assume that this would diminish the loyalty of these nations and make them start market reforms earlier than they did. Obviously, a change in the ruble’s real exchange rate did not correlate with the scale of changes in oil prices. These factors included some reserves, an immediate increase in working hours and a mobilization of civilian workers who were previously involved as defense subcontractors. Almost all Western Siberian wells discovered in 1961–1965 were considered unique according to the existing classification, as the recoverable oil reserves of each of them exceeded 300 million tons. In March 1942, the output of military equipment and machinery in the eastern regions reached a point which equaled production across the entire Soviet Union at the start of the war. Daniil Yergin also points at this, but in regard to the industrialization period: “The Soviet Union, without thinking, would cut the prices, when it saw an opportunity to boost profits. The following table shows the employment of Soviet workforce during the years of the war starting with 1940, a year before the war. Assisting in the war-effort was vital, for all sides, during World War Two. After World War II, efforts at first focused on resuming oil production in the Baku area, but subsequently, the extraction moved to the north to the Volga-Urals basin. This poses the question to what extent the USSR should consider such export-import connections in developing its energy sector. However, in 1980, output was 188 million tons; it fell to 135.5 million tons in 1985, and only 109 million tons in 1990.54 But what is even more important than how it was falling is the fact that it was doing so faster than the authorities expected (experts started to point toward negative trends in the mid-1960s55). 82 Shows by how many percent enery consumption rises when GNP increases by 1 percent. It made me wonder if the adoption of turretless Soviet self-propelled guns prior to 1944 might have been influenced by this situation. Nevertheless, the advocates of the second option included the ministers of the oil and gas industry and the geology minister, so this strategy won. On the whole, assuming that the Soviet economy grew at the same rate as the Japanese economy, it would still hardly be able to export considerable amounts of oil in the 1970s and 1980s. According to their estimates, the extraction industries created all net profits of the economy (270.3 trillion rubles) and also compensated for the losses carried by many other industries, such as agriculture (53.1 trillion rubles) and transportation (11.3 trillion rubles). If the output of low-cost deposits is stable and has a large share in the country’s total output, then the rise of marginal costs of the new deposits doesn’t have a remarkable effect on average production costs (that is, figures of marginal and average costs don’t go separate ways during the increase of production). Data by the Customs Revenues Department for various years (as cited by Goldman, 5-6). However, between February 1974 and August 1975, the ruble’s exchange rate climbed from 0.79 to 0.69 per dollar (but oil prices increased insignificantly from $10.11 to $11.16 per barrel). In the mid-1980s, the ratio between the average wholesale price on crude oil and the retail price of 93-octane petrol was about 1:17. As it was in 1942/43 the USSR received more aviation gasoline from the USA than it did from domestic production, Keith How did it get to that point? It is important to keep in mind that the military-industrial complex was drawing in the best resources, including the most skilled staff and material resources. The resource curse theory is not an all-inclusive doctrine, but rather a combination of many hypotheses about the effect of different factors (mechanisms) that determine the negative correlation between the growth of resource availability and the change in economic growth rates. You are leaving the website for the Carnegie-Tsinghua Center for Global Policy and entering a website for another of Carnegie's global centers. Destroying Soviet oil production was the main aim of the German 1942 offensive and the nexus of Soviet oil shipment was the rather famous city of Stalingrad. " Soviet Union's GDP is significantly lower when compared to the axis countries in Europe. Therefore, almost immediately, defense production was put to the maximum priority. In this case, only planning authorities determine to which industries and in what volumes resources should be distributed (which, in theory, was supposed to prevent Dutch disease from developing). Be it for the Axis of for the Allies, each side attached great importance to its civilian’s participation in the effort to win the war and assist the army and its advances in the different fronts. The new Urals and Volga region turned out to be a honeypot. The main part of the mobilized were women. This is why the Soviet Union had to export less and less oil as its level of economic development approached that of developed nations, especially considering the distances and the climate. also facilitated the drop in interest in energy preservation during operations.”89, However, what was even worse, energy efficient measures started to be considered economically inefficient when planning new equipment, objects, and enterprises in many sectors of the economy and in prospective developments on the whole. In this case, it would have been even more exposed to fluctuations in world oil prices (as it used a more complex scheme of determining oil price when trading with allies: first, the moving average over five years, then—over three years; this enabled the leveling out of the short-term oil price fluctuations). Until the end of the 1990s, economics mostly focused on economic factors, but currently, the emphasis has shifted to the political economy of the development of resource dependence. This policy wasn’t linked to implementing the country’s relative advantages and did not take into account fluctuations of world prices on natural resources.”103, The thing is that the USSR had been striving to stabilize the total amount of export revenues in hard currency in order to ensure more or less stable volumes of imports (see the data on wheat and other agricultural imports below). The first reason for this is that it’s impossible to measure the real scale of total rent without considering certain ways of distributing rent. To ensure the transition of the country's economy to a total war economy, the Gosplan were sent to large industrial centers and defense enterprises. 33 Robert W. Campbell, Economics of Soviet oil and gas (1968), 2—10. While there were nearly twenty years between the discovery of oil deposits in the Volga-Urals region and the start of extraction (from 1929 until the end of the 1940s), this transition only took eight years in Western Siberia (1960–1968). Tyumen. As the oil industry was the cash cow, its well-being was a priority. But the Soviet Union conducted “classic” import substitution policy without constantly increasing the requirements for the subsidized enterprises to increase exports (as in the case with most East Asian nations) and closing inefficient companies. This seems a little strange, as in 1901 Russia extracted about 250,000 barrels daily, almost on par with the United States.32 Back in 1959, coal, peat, slate, and wood accounted for almost two-thirds of the country’s total energy consumption, despite the fact that huge deposits in the Volga-Urals basin had already been discovered.33. Secondly, starting from the mid-1970s (and until the early 1980s), gas rent approximately equaled oil rent, and for many years after 1991 it was about twice as big as oil rent. The leadership of the country proved incapable of seeing the changes that were taking place in the world economy and reacting to them appropriately. This means that if the USSR came close to the the United States’ level of oil consumption while maintaining the same energy efficiency, it would have turned from being an oil exporter into an oil importer. Nevertheless, the Soviet economy turned out to be incapable of adequately reacting to the sharp growth of marginal oil production costs (which tripled in the 1970s and 1980s92) and the increase of world oil prices. 67 Gaddy Clifford. Italian state oil Company ENI Chief and Italian businessmen Enrico Mattei coined the phrase after the War. Transportation of gas demands huge capital expenditure on constructing gas pipelines and compressor stations, but the marginal cost of its extraction and transportation are relatively low. mentioned in this paper are metric tons. It can be expressed the following way: Rt = (1 – τ – τ')[PtQt – Ĉt] + τ[PtQt – Ĉt] + τ'[PtQt – Ĉt] + ρQt + εt. The Soviet Union’s previous experience and the unprecedented economic growth of Japan between 1955 and 1990, China between 1979 and 2007, and a number of other countries (mostly the East Asian tigers) showed that this was possible. But, the Soviet Union’s service sector was underdeveloped compared to the service sectors in market economies, and, obviously, for this reason, industry and agriculture received the most attention. Also, it could be noted that while the energy efficiency coefficient increased from 31 to 39 percent in the 1960s, in the 1970s it grew just a bit, from 39 percent to 42 percent. First, the revenue from selling a resource must be considered potential revenue that could have been received from selling the resource at a market price, rather than as actual revenue received from the sale. In 1918, oil exports amounted to 2 million tons (almost half of the annual production). 10. After the discovery of Western Siberian oil and gas deposits, the authorities faced the issue of choosing a strategy for exploring the region, considering both its huge prospects and, at the same time, its remoteness and lack of development. Production costs were routinely amplified for various reasons, such as the need to boost output above the optimal pace under the pressure of federal authorities, and the necessity of not using the best production resources available (the oil and gas complex, albeit to a lesser extent, also experienced the scarcity of necessary resources). When oil prices increased (and they continuously increased between 1974 and 1980), there was a temptation to boost imports even more. "A well established predictor of military victory in great power warfare is GDP (Gross Domestic Product). 42 Figures from “22th Congress of the Communist Party of the Soviet Union,” verbatim record (Moscow, 1962), vol. The share of exports in oil production had also been increasing: from 11 percent in 1954 to 25.3 percent in 1964, and finally to 35.5 percent in 1989 (see table 7).94 One could note that the Soviet Union was exporting large volumes of oil compared to output in the first few years of industrialization (1929–1933), when the share of exported oil in the total output stood at 28.5 percent. Five-year plans for the national economy of the Soviet Union, Soviet combat vehicle production during World War II, German armored fighting vehicle production during World War II, Romanian armored fighting vehicle production during World War II, "Great Patriotic War of the Soviet Union of 1941-45", "Экономика СССР в годы войны - Россия, Russia", https://en.wikipedia.org/w/index.php?title=Soviet_industry_in_World_War_II&oldid=992642119, Wikipedia articles needing factual verification from September 2019, Creative Commons Attribution-ShareAlike License. In the West, a significant share was composed of private automobile and house owners, who reacted to the changes in energy costs much faster (although industrial consumers also reacted much more swiftly). When reflecting on whether the resource curse existed in the Soviet Union, it is important to determine the meaning of this term. Unfortunately, the Soviet Union lost that opportunity. 3 Translator's note: all tons (of oil, etc.) But what does it have to do with the drop of oil prices in the 1980s? They could also dampen the economy to prevent unfortunate events on international raw material markets using stabilization funds, cautious fiscal policy, and unforeseen resource revenues to boost the development of sectors in the lower levels of the technological chain. The Soviet Union was at a disadvantage from the very beginning. For instance, in 1975, the five-year plan prescribed to extract 505 million tons of oil.3 This figure was then reduced to 487.4 million tons in the annual plans, and 491 million tons were actually extracted. The country's main economic and military industrial base was now based in the regions a bit east of the Volga, regions that were primarily in the Urals. Thanks to Lend-Lease, during the war years, the Soviet Union received about 14.8 thousand aircraft, 7.1 thousand tanks, 8.2 thousand anti-aircraft guns, a large number of cars, tractors and other vital supplies. . The oil sector workers who supported the demand were called “optimists,” and those who were against it were called “pessimists.” As Valeriy Grayfer, the last head of the Main Tyumen Oil and Gas Department (Glavtyumenneftgaz), recalled, “it was fairly dangerous to be dubbed a ‘pessimist’. That’s why technological rent doesn’t fluctuate as much as resource rent at the aggregated level. For instance, at a Politburo session in May 1984, then premier Nikolay Tikhonov said: “The oil we sell to capitalist nations mostly goes to pay for alimentary and some other goods. 34, no. Information flows were moving mostly vertically, not horizontally. In the future, USSR residents would warmly recall the Brezhnev era, when state-run shops had plenty of sausage products at subsidized prices. The nominal budget spending on defense had almost doubled from 1937 until 1940, as it rose all the way from 17% to 33%. An in-depth study of economic growth of thirty-five nations between 1870 and 1939, conducted by Christopher Blattman, Jason Hwang, and Jeffrey Williamson, concluded that nations specializing in the production of raw materials (with highly elastic prices) have a higher elasticity of the terms of trade, a smaller amount of foreign direct investment (FDI), and slower rates of economic growth. Mikhail Gorbachev, the last Soviet leader, seemed to realize that the state energy policy was one of the main causes of economic problems. In this publication, we will focus on the formation and development of the Soviet economy’s oil and gas dependence. 18 PlanEcon Report 4, nos.39-40 (October 1988), 2 (as cited by Gustafson,286). But, the Soviet Union was pursuing another goal that was, according to its leadership, just as important: the creation of a powerful military-industrial complex that was independent from the West. Each of these theories is applicable to an extent in explaining how the Soviet Union, and later Russia, have found themselves with resource dependence. Procurements of meat from abroad increased by 5.2 times: from 164.9 thousand tons in 1970 to 857.5 thousand tons in 1985. Citation error. Then, using average costs in calculating rent will significantly overstate its amount. Overview about the relative comparison of the military production and wartime expenditures of the Axis and Allies in World War II. And those who continued to get subsidies, Ukraine and Belarus, have failed to considerably raise their energy efficiency. 39 Nikolai Maltsev, Valery Igrevskiy and Yuri Vadetskiy, Oil Industry in Russia in the After-War Years (Moscow: VNIIOENG, 1996) (as cited by Valery Kryukov and Y. Shafranik, Oil and Gas Sector of Russia: the Hard Way to Diversity (Moscow, 2016), 150). 30 Daniil Yergin, Extraction: World History of the Fight for Oil, Money and Power (Moscow: DeNovo, 1999), 44. Along with this, the share of oil and petroleum products over the period between 1950 and 1980 was more than 80 percent (in the second half of the 1970s, gas exports started to grow quickly and their share in the total value of exports in 1980 amounted to 16 percent).98 According to alternative (Western) estimates, the share of energy resource exports in the total volume of their production reached 7.1 percent in 1960, 11.9 percent in 1970, 15.8 percent in 1980, and 16.7 percent in 1988.99, The hike in world oil prices was affecting the Soviet oil industry slightly differently than other oil-exporting nations. Energy saving efforts mostly failed. But the explanation may be simple: by the mid-1970s, incentives to save energy started to disappear under the influence of oil and gas abundance. Specifically, west of the Caspian Sea, with Soviet oilfields at Maikop, Grozny, and Baku, which were threatened by the Germans, but not captured, except for Maikop. Re: Middle East Oil Production in WW2 Post by EwenS » 18 Aug 2020, 15:52 I’ve just started reading Ashley Jackson’s Persian Gulf Command having just finished a couple of his other books about the Indian Ocean and Ceylon, and this thread caught my interest so I’m looking for the time to delve more deeply into oil in WW2. Statist explanations are suitable for explaining why decisionmakers at every level of managing the Soviet economy lacked motivation to raise the energy efficiency of both production and consumption. On the whole, surprising as it is, the attitude toward exports was somewhat neglectful. That’s why cheap energy supported the huge, by international standards, but very energy-intensive military and industrial complex. The increasing imports made the Soviet Union include large volumes of oil and gas (mostly oil) exports in future plans. Despite having such vast natural resource reserves, high quotas of the initial Five-year plans for the national economy of the Soviet Union required extensive exploitation of European Russia. There is a temptation to compare the economic crises caused by drops in oil prices in the late Soviet Union and modern Russia, and to try to draw lessons from the Soviet crisis in order to exit the current one. Thus, even if a material is traded below the world price, according to this calculation methodology, this doesn’t reduce the resource rent received by the country. 25 Mansoorian, Arman, “Resource Discoveries and Excessive External Borrowing,” The Economic Journal vol. If this idea had been implemented, a large part of the oil and gas rich territory would have been flooded and apparently made impossible to use by the industrial oil and gas production at the existing level of technology. (This is, of course, an exaggeration for foreign trade, but it’s still important to remember that oil and gas accounted for about four-fifths of the Soviet Union’s exports in the 1980s.). Between 1970 and 1986, the growth rates of capital investment in the oil and gas industries were considerably higher (three- to five-fold) than in the industry and the economy on average. In this case, the annual oil production growth rate of 8.8 percent doesn’t seem too big (and assumes that the energy intensity of industrial production should have grown a little). The country had successfully launched the first man into space and was competing with the United States in developing cutting-edge military technology. This is why the current generation, maximizing its current wealth, borrows much more than it would if it cared about the well-being of future generations. Prior to the mid-1950s, Soviet oil was consumed inside of the Soviet bloc. They could cure Dutch disease by conducting tough fiscal policy, temporarily providing subsidies to the agriculture and processing industries, and keeping the unforeseen resource revenues in foreign currencies in order to prevent the strengthening of the national currency. Due to the former, a Giffen good gets more expensive compared to other goods and the amount of demand for it drops. If we take the actual production costs Ĉt = Ct + εt, where ε is the excess value of production, the corrected rent will be R = PtQt – Ĉt = PtQt – Ĉt – εt. As for the resource dependence of the Russian economy, it is another topic that needs separate research. It does not mean you are an ‘enemy of the people’, but it means the end of your career. This happens due to a combination of two effects—the substitution effect and the income effect. In 1991, the Soviet Union collapsed, but the debate on the role of oil and gas dependence is still a huge issue. This led to the government getting many permanent (not temporary) expenditure commitments, which it found difficult to fulfill afterward. whether it’s subject to long-term stagnation (Prebisch-Singer thesis has to do with this problem), whether the emergence of this rent undermines the development of other activities (this is linked to Dutch disease: it’s called a disease because sharp growth of the raw materials sector undermines the growth opportunities of other sectors of the economy in the long term), which incentives it creates for economic agents regarding participation in production activity or rent-seeking activities (in various ways, from engaging in corruption to armed conflicts). One of the themes of the documentary was the massive size of Soviet armored forces compared to their German o… During World War I and the Civil War, oil production in Russia suffered a lot but then started to recover. 3 (1998): 905-915. Gas output was planned to grow fifteen-fold, from 45.3 million to 680–720 billion m3 (all of this came as part of Nikita Khrushchev’s idea that “the present generation of the Soviet people will live under Communism”). It is difficult to estimate this now. Modern theories related to the concept of the resource curse have led us to a better understanding of the mechanisms behind the negative effect of oil abundance on economic development. The people who were supposed to make decisions lacked the necessary information, whereas those who had access to the best information were not responsible for making decisions. The energy sector had been developing, first and foremost, in order to provide the military-industrial complex and heavy industry with resources and earn hard foreign currency to fund key import needs. At the peak of the development of the oil industry in 1980, the USSR’s oil export revenues amounted to $3,100 per capita, and by 1991 they had dropped by about two-thirds, to $1,050 per capita.117. It would, however, be volatility caused by a fluctuation of volumes of resources in natural deposits. The Soviet Union’s economic mechanism lacked flexibility and, thus, did not allow the country to rearrange itself in order to reap the fruit of the technological revolution that began in the 1970s in developed nations. There are alternative Western estimates of the correlation between GNP growth and energy consumption in the USSR between 1960 and 1980 (see table 4). 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