Soviet resources policy

Sovietresourcespolicy Foreign investment, resources the tenth five-year plan

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This is the second of two papers by Daniel Papp on Soviet resources policy. The first ‘Marxism-Leninism and natural article, resources: The Soviet outlook’, was published in Resources /Jo/icy, Vol 3, No 2, June 1977, pp 134-l 48.

’ M. Pervukhin, ‘Energy resources of the USSR and their rational utilization’, translated in Soviet andfasfern European Foreign Trade, No 1 1, Spring 1975, p 91. 2 Izvestia, 8 October 1974. 3 Pravda, 26 October 1976. a Ibid. 2 March 1976. ‘See G. Kovaltsev, ‘CMEA: New stage of integration’, International Affairs, No 9, September 1976. p 77.

RESOURCES

POLICY

The USSR, covering one sixth of the world land mass, is magnificently endowed with natural resources. Soviet energy resources have been described as ‘so great that they can supply all of the needs of the developing national economy both now and in the future’. ’ Known Soviet reserves of gold, zinc, lead and copper are sufficient for 33, 36, 40, and 66 years respectively at the current rate of consumption with current extractive technology.2 New mineral wealth is continually being discovered, particularly in the north and east. The USSR is the only major industrial nation self-sufficient in energy resources, and it is similarly self-sufficient in almost all other minerals required by a developed industrial nation. It is not surprising, then, that while much of the Western world looks forward to constricted resource supply, the USSR envisages expanded resource production. Indeed, in their tenth five-year plan, Soviet leaders seek to increase the output of all major resources. While the tenth plan’s targets are nowhere near those envisioned for 1980 by Khrushchev at the 22nd Party Congress in 1961, it is clear that significantly expanded raw material production remains a primary objective of Soviet leaders (Table 1).

The tenth plan and resources: Motives and problems The Soviet leadership seeks continual expansion of its resources output for two most evident reasons. First, as Moscow powers do not hesitate to stress, the ‘creation of the material and technical base’ of communism requires expanded production. General Secretary Brezhnev, speaking to the October 1976 Central Committee plenum, emphasized that ‘the huge scope of the economy and the dynamism of its development’ called for ‘even greater quantities of new materials, fuel, energy, and metals’.3 Kosygin made similar comments when he delivered his address, ‘Basic orientation of the economic development of the USSR for 1976-80’ to the 25th CPSU Congress earlier in the year.4 Throughout Soviet society, it is accepted that without increased consumption of ‘energy bearers and raw materials’, increased economic growth is impossible.5 The Kremlin has been much less explicit about its second reason to expand resources production - increased export of resources adds

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Soviet moumes

policy

and

the tenthjive-year

plan

Table 1. Soviet resource

targets

a

Resource

Plan

Actual

1980 Current plan

Coal (tons x 1 O6 ) Electricity (kWh x 109) Oil (tons x 106)

695 1065 496 320 146

701 1038 491 289 141

800 1360 630 418 165

1975

a Sources:

Respective1 by column Pravda, February 25 1976; November Pravda,1!I 71; 14 Pravda, December 1 1975; and ‘Programme of the Communist of the Soviet presented byParty Khrushchev to theUnion’, 22nd CPSU Congress,

18 October

Gas (m3x IO’) Steel (tons x 1 O6 )

Khrushchev’s goal 1190 2850 700 700 250

1961.

6 The Economist, 5 February 1977. 7 The New York Times, 7 January 1975; Soviet News Bulletin. 1 February 1977. See also Leslie Dienes, ‘Soviet energy resources and prospects’, Current History, October 1976, pp 114-l 18. 1975; release, 2 April a TASS Ekonomicheskaia gazefa, 9 April 1975. Slzvestiia, 3 December 1975.

much-needed foreign currency to the scarce Soviet supply. Generally, prices of Soviet exports to the West follow world market prices. Increased prices and increased exports have given the USSR a hardcurrency windfall (Table 2), and there are indications that the Soviet Union intends to direct its sales to the West at the expense of its CMEA partners. The 1976-80 period will witness only a slight increase in Soviet petroleum sales to its Eastern European allies.6 Similarly, the Soviets may be re-emphasizing the use of coal as a power source to boost oil exports. ’ On rare occasions, the USSR has been quite candid about the benefits it has derived from the meteoric rise in the price of its resource exports. As TASS said when explaining the 1974 trade surplus, ‘It goes without saying that the Soviet foreign trade figures were affected by increased world market prices, specifically oil prices’.* This does not imply that the USSR faces no problems in its drive to expand resource production. Mining and ore-processing ministries have been condemned for ‘not devoting proper attention to the important problem’ of ‘fully extracting and rationally using minerals’,’ and other ministries have received similar criticism. During 1975, the Supreme Soviet approved legislation designed for the more effective use of mineral resources, but the law’s impact was limited, and individual ministries have been further chastized for their inefficiency. Increased concern for environmental protection poses another problem for Soviet planners. Both the extraction and use of resources have led to environmental degradation in the USSR, and the Kremlin is faced with the same paradox as Western powers - how can resources be extracted and used without irreparably damaging the environment? Much of the equipment used in the extractive industries is simply archaic - its average age exceeds twenty years. It is also often of poor quality, and equipment is regularly idle. These difficulties are all considerable, and are enhanced by the increasingly capital-intensive nature of Soviet extractive industries. The rate of return on capital is decreasing, and more and more investment is needed to obtain the

Table 2. Soviet oil exports and revenue a a 1971 and 1974 figures are from C. Stowell, Soviet Industrial Import Priorities, Praeger, New York, 1975, p 346; 1975 and 1976 figures are converted from The Economist, 5 February

196

Year 1971 1974 1975 1976

Annual exports to West (lo6

barrels)

229 293 352 498

Income

(106$)

458 2 490 4 000 (est) 5 500-6 000 (est)

1977.

RESOURCES

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1977

Soviet mowws

policy and the tenth jve-year

plan

same or reduced quantities of resources. Since many of the Soviet mineral and fuel reserves from which expanded production must come are in the isolated and hostile environments of the north and east, production from these sites requires larger investments in exploration, extraction, and transportation. During the ninth five-year plan about 80% of all energy used in the USSR was consumed west of the Urals.” European Russia provided 70% of its own energy during this period. By 1980, it is expected to satisfy only 60% of its own need, and by 1990, only 40%.” Development of West Siberian resources is expected to provide abundant energy. West Siberia pumped 150 million tons of oil in 1974, 180 million tons in 1975, and by 1980 is expected to produce 300 million tons, almost half the total Soviet output.‘* Even as the Soviet government is discouraging further construction of energy-intensive industries in the European USSR, it is evident that transportation of energy resources presents a major problem for Soviet planners. The problem is similar for other resources, and will increase as production moves farther north and east. Construction of the Baikal-Amur mainline will partly open up exploitation of the resources of the eastern Siberian and far eastern areas. I3 The tenth five-year plan specifically ‘takes into account the growing costs of transportation of energy resources’,i4 and will presumably give similar consideration to other resources. Exploratory costs are also higher in remote areas. Once mineral reserves are found, the introduction and upkeep of extractive machinery in isolated, hostile environments further increases resources costs. The USSR clearly faces a considerable challenge if it is to meet the projected resource production targets of its tenth plan. Soviet leaders cannot ignore the uncomfortable reality that resource production is becoming increasingly difficult.

Overcoming

“‘V. Kudinov and S. Litvak, ‘0 toplivnoenergeticheskom balanse’, Vestnik sfafisfiki, No 9. 1972, p 42. ” G.V. Ermakov. ‘Trends of the development of the nuclear power industry’, Ninth World Energy Conference, Detroit, 1974, Vol 5, p 279. l2 Ekonomicheskaia gazefa. March 1976: ibid, April 1976. ‘3SoLziet News Bulletin, 23 September 1975; N. Nekrasov, ‘Soviet Far East in the new five year plan period’, Problemy Dalnego Vosfoka, translated in Soviet News Bulletin. 3 1 May 1976. l4 /bid, 1 February 1977. “See, for example, Daniel S. Papp, ‘Soviet scarcity: The response of a socialist system’, Social Science Quarterly, Autumn 1976. 16Leonid Brezhev, On the /Jo/icy of the Soviet Union and the International Situation, Novosti, Moscow, 1973, p 33. “lzvestiia, 3 December 1975.

RESOURCES

POLICY

obstacles,

Soviet style

During recent years, Soviet efforts to overcome resource production problems have been directed at a number of traditional areas, and have also included some innovations. Traditional Soviet methods include appeals for improved efficiency, reducing non-essential consumption, seeking and new reserves.15 The outstanding innovations have been increased emphasis on joint projects with Eastern European nations, and ‘compensation agreements’ with Western powers.

September

Iiqwvved

ef$ciency

Improved efficiency has long been an objective of Soviet policy. In 1973, Brezhnev stressed that the ‘advance toward Communism’ would be accelerated if the Soviet people would ‘save every minute of working time, every gram of raw material and fuel’.i6 Brezhnev “’ and Kosygin again made appeals for improved efficiency at the 25th Congress in 1976. Even though these appeals, for example, saved ‘nine hundred thousand tons’ of ferrous metals and ‘5.7 million tons’ of fuel in 1975,” further efforts are needed, it is argued. The tenth plan aims at a 1.5% increase in product output per ton of petroleum, 3.4%/m3 of timber, and 4% per ton from metal.” During 1976, improved efficiency in electricity generation was singled out as an area of concern.5

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Soviet IPSO-

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Nomemential wns~n Whereas the Soviet efficiency drive seeks to produce more from the same quantity of raw materials, the programme to reduce nonessential consumption seeks to limit production to conserve resources. Since the abandoning in December 1973 of priority emphasis on consumer goods production, Soviet authorities have regularly declared that non-essential consumption retards the attainment of communism. It is difficult to assess the impact of this programme, but Soviet sources maintain that it is an effective method of resource conservation.

One of the major areas of emphasis is the exploitation of sea resources. For example, the tenth plan devotes funds to a resource exploration base on the Filchner Ice Shelf extending into the Weddell Sea.” More important is the continuing Soviet support for nuclear energy as a source of industrial and domestic electricity construction of the huge ‘Atommash’ plant at the confluence of the Volga and Don Rivers is proof of this support. By 1980, Atommash will supposedly be producing nuclear reactors on an assembly line basis.”

‘*TASS, 28 June 1975. I9 See Business Week, 2 August 1976. z” K. Mikulsky, ‘The international importance of the tenth five year plan’, International Affairs, No 3, March 1977, pp 29-36. ” Pravda, 22 June 1974. 22 Soviet News Bulletin, 12 January 197 7. ” ibid, 26 November

198

1976.

Traditional Soviet methods to cope with resource problems for the most part present neither ideological or political complications for the Soviet political elite. However, the more recent innovations in Soviet resource policy, involving re-emphasis of joint projects with Eastern Europe and the signing of ‘compensation agreements’ with Western governments and businesses, carry with them major implications. Generally speaking, joint ventures and compensation agreements may be viewed together. Since the USSR has found it difficult to direct the necessary capital towards increasing resource production, particularly in Siberia and the far east, Soviet leaders seek to obtain the capital in a manner reminiscent of Czarist Ministers of Finance Witte and even of Lenin himself - by attracting foreign investment. In the joint agreements, Eastern European nations invest in Soviet resource and industrial development in return for raw materials. Compensation agreements are similar, but the USSR’s trading partners are Western governments or corporations. Soviet sources have stressed that both concepts are ‘new points of the five year plan’,*’ but strictly speaking, this is not quite true. CMEA nations agreed to jointly finance the Orenberg gasline in return for natural gas at the 28th session of the CMEA Council in Sofia _during June 1974. *’ The first compensation agreement with a Western country was signed with Germany in 1970.** The tenth plan openly and frankly looks to foreign investment on an unprecedented scale to bring Soviet resource reserves into production. This does not imply that the Soviets publicly admit an inability to provide their own investment capital. Emphasizing that Soviet imports account for less than 1.5% of the USSR’s gross national product, the Kremlin maintains that it ‘purchases on external, including Western, markets, not what it cannot produce on its own, but what it is more profitable to buy than make for oneself’.23 Soviet leaders call on the longneglected ‘international division of labour’ to explain and rationalize their efforts to obtain foreign investments. Brezhnev, Kosygin, First

RESOURCES

POLICY

September

1977

Soviet mowwspoliq Table

3. Eastern

from the USSR consumption

European

oil imports

as a percentage

Rumania Yugoslavia Hungary Poland East Germany Czechoslovakia Bulgaria

of total

0 25 75 90 95 100 100

24 Pravda, 1 March 1976; Kovaltsev, op cif. Ref 5, p 75; B. Kozin, The drawing together of the socialist countries - An objective regularity’, international Affairs, No 10, October 1’976, p 19; and Soviet News Bulletin, 17 September 1976. *5 Andrzej Korbonski, ‘Detente, East-West of economic and the future trade, in Eastern Europe’, World integration Politics, No 4, July 1976, p 58 1. 26 The New York Times, 28 November 1975. 27 Financial Times, 23 June 1975. *’ Korbonski, op cif. Ref 25, p 595n.

RESOURCES

POLICY

and the

Deputy Minister of Foreign Trade Semichastnov, Minister of the Gas Industry S. Orudzhev, and others have paid homage to this principle.22~24 Joint ventures are particularly attractive to Eastern European nations because of their own limited resource bases. Table 3, for example, demonstrates their dependence on oil imports from the USSR. Since the USSR has generally provided resources at below world-market prices, Eastern European nations are understandably attracted. Through the 1960s and early 197Os, the USSR offered raw materials in exchange for Eastern European produce and consumer goods, 25 but the pattern has gradually changed in the past few years. At the 29th session of the CMEA Council, meeting in Budapest during the summer of 1975, the ‘Agreed plan of multilateral integrated activity for 1976-80’ was finalized. It planned both joint venture and barter agreements among the CMEA countries, with Soviet asbestos, natural gas, iron ore, and other resources being placed ‘at the service’ of the socialist bloc. Since then, Poland has received Soviet oil and gas for investment credits (October 1975), Hungary has signed a barter agreement, receiving oil and ‘other raw materials’ for wheat, maize, and beef (April 1976), and East Germany has promised $3.3 billion in investment in return for energy resources (May 1976). When these and other agreements are viewed together with the 9 billion ruble Orenberg gasline project, it is evident that within CMEA the joint venture concept is a significant undertaking. This by no means implies that the Eastern European countries are totally pleased with the arrangement. Rumania stressed its concern with maintaining its ‘national economic identity’ at the Budapest meeting, and other countries have quietly voiced their concern over Soviet tactics. The increase in Soviet oil prices to CMEA members in January 1975 underlined this concern. At the January 1975 CMEA meeting, the USSR negotiated passage of a new pricing mechanism for oil and certain other raw materials. Under the old method, a single five-year CMEA price was determined for a particular commodity on the basis of average prices in major world markets during the preceding five years. Soviet raw material prices were always well below world prices, at least to CMEA members. The new method, however, allowed CMEA prices to change yearly, based on the preceding five years’ world market prices. Prices of Soviet raw materials, particularly oil, shot up drastically. Oil prices for 1975 were to be determined on the basis of the 1972-74, ie post OPEC crisis, period. The rescheduling was undertaken, it was explained, so that resource prices would not ‘lose touch with reality’. In Eastern Europe, results were catastrophic. Soviet oil prices remained below world prices, but nonetheless had risen from $3.20 to $7.50 per barrel. Since the price rise took effect during the final year of a plan period, and as no-one was prepared for it, it became nearly impossible for Eastern European nations to reach national target figures. East Germany estimated that a 43% price rise was brought about by ‘higher prices for major Soviet exports’,26 and told the Russians that if the price burden was not eased, East Germany could no longer guarantee deliveries to the USSR under the 1976-80 plan.*’ The price rise was to the Eastern Europeans another instance of Soviet efforts to force price and other concessions, an effort which dated back to the 196Os.*s

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Soviet resources policy and the tenth jive-vear plan

29 Another major reason, beyond the scope of this paper, is that the CMEA countries simply have limited quantities of investment capital. So A. Pokrovsky and E. Malkov, ‘World in economic relations 1970s’. the international Affairs, No 4. April 1976. p 57. ” Soviet News Bulletin, 17 September 1976. 32 Business Week, 19 April 1976. 33The North Star talks provide an excellent example of the creativity of Soviet-Western negotiations, if both sides set their minds to a solution. Originally, the negotiations foundered on the issue of financing. The Jackson-Vanik Amendment to the 1974 US Trade Act called for Moscow to liberalize its emigration policy if it wanted US Exportimport Bank credit on most favoured nation status. For all practical purposes, this ended American credit extensions to the USSR. From the US perspective, even compensation deals became less attractive. The resumption of the North Star talks was notable in that US companies had West German, French, and British banks ready to meet Russian credit needs, which may exceed $8 billion for the whole project (see Ref 32). Similar arrangements have been made on bids for $3 billion worth of contracts on Siberian oil refineries, The general principle is that US firms would provide the expertise, while Japanese or European banks (or governments) would provide the lowinterest credit unavailable in the USA. Soviet-American compensation deals have again become plausible, with even some talk of ‘leasing deals’, by which US firms would lease equipment to various Soviet plants. (This concept apparently came up at the December 1976 meeting of the USA-USSR Trade and Economic Council. See Business Week, 13 December 1976). Regardless of the the rationale for the method used, compensation deal remains the same: ‘While USSR accelerates the the development of its natural resources [and improves its technology] its partners get the material they need’ (see Voprosy ekonomiki, in Soviet News Bulletin, 20 April 1976). 34 Karl Marx, Capital, Volume Il. George Allen, London, 197 1. pp 4533454. 35 V.I. Lenin, ‘Closing speech to the seventh Moscow Guberniia Conference, 29 October 1921’. Collected Works, Voolome 33, Progress, Moscow, 1969, p 104.

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an defence of the Soviets, one Western source has argued that Soviet investment costs in raw materials production were 3-34 times as great as the value of the equipment the USSR had been receiving from the other CMEA nations in return for raw materials. The USSR, by this view, was justified in forcing through the price mechanism restructuring, since it had in effect been paying excessive prices for inferior Eastern European equipment. Poor quality of Eastern European equipment, in turn, is one major reason why the USSR has gone beyond joint ventures within CMEA, to acquire foreign investment. 29 The tenth five-year plan is frank about seeking Western investment. In the words of one International Affairs author, Western investment is needed not only to ‘speed the development of resources’, but also to ‘introduce the latest techniques’ into the Soviet economy. 3o Under the terms of a compensation agreement, Western corporations or governments extend credits to the USSR for construction purposes. The credit is then repaid with the plant’s output. Despite some initial hesitancy stemming from political considerations, loss of technological superiority, and fear of future resource dependency, Western businessmen finally investigated the possibilities of the compensation agreements, and liked what they saw. According to Semichastnov, ‘more than fifty industrial projects’ were in progress on the basis of compensation agreements at the end of 19 7 6. 31 These included such diverse schemes as Finnish equipment for a mining complex and ore-concentration plant, French construction of a timber plant, chemical plant, and bauxite plant, German support for a polyethylene complex, and after over two years of negotiation, joint American-Japanese credit for exploring and developing the Yakuts area of Siberia.30’32 The North Star negotiations for natural gas in the Tyumen region were also reinitiated in April 1976.33

Politics, ideology, and foreign investment The Soviet drive to obtain foreign investment to exploit new resource reserves raises several political and ideological questions. Does it imply that the USSR cannot meet its own needs? How does collaboration with capitalists fit within the class struggle? Does increased CMEA integration imply Soviet hegemony over Eastern Europe? The Kremlin has been quite sensitive to these and other questions about its new policy, and has gone to some lengths to justify it ideologically. The effort to obtain foreign investment has been attributed to the Soviet desire to take advantage of the ‘international division of labour’, a phenomenon which Marx himself commented the Russians have stressed that outside upon. 34 Nonetheless, investment is desirable but not necessary. Credit, particularly from the West, it is argued, benefits both sides, and should be viewed as mutually advantageous rather than as an indication of Soviet shortcomings. The Soviet leadership is on solid ideological ground in making this argument. Lenin himself argued that certain economic developments necessitated ‘not only . . . such unpleasant things as leasing, but also he . . . this unpleasant business of trading’.35 More specifically, addressed the issue of foreign investment:

RESOURCES

POLICY

September

1977

Soviet TPSOZUWSpolicy cmd the tenth

five-yearplan

Without denationalizing anything, the worker’s state leases certain mines, forest tracts, oilfields, and so forth to foreign capitalists in order to obtain from them extra equipment and machinery that will enable us to accelerate the restoration of Soviet large-scale industry. The payment made to the concessionaires in the form of a share of the highly valuable products obtained is undoubtedly tribute, which the worker’s state pays to the world bourgeoisie; without in any way glossing this over, we must clearly realize that we stand to gain by paying this tribute, so long as it accelerates the restoration of our large-scale industry and substantially improves the conditions of the workers and peasants.36

The Soviet oracle made it abundantly clear that the key factor in

36V.I. Lenin, ‘Theses for a report on the tactics of the Russian Communist Party’, delivered to the third Congress of the International, Communist June-July Collected Works, Volume 32, 1921, Progress, Moscow, 1969, D 458. 37 V.I. Lenin, ‘Letter on oil concessions’, February 192 1. Collected Works, Vo/ume 32, op cit. Ref 36, pp 135-l 36. 38 It has recently been reported that the Czech government has cut back energy use by reducing street lighting in Prague’s suburbs, periodically reducing electricity supplied to factories, and cutting floodlighting of monuments. The reductions were necessitated by breakdown at power stations, Czech failure to develop coal reserves, and the Soviet oil price increases. See Wall Street Journal, 18 October 1976. 39 Soviet Business and Trade, 6 June 1974. 4o The Economist, 26 March 1977. ” It is believed the Soviets in particular continue to want access to modern technology, and consequently will not risk ending their access to it by defaulting. 42The Japanese Export-Import Bank refused to extend additional credits to the USSR during the last few months of 1976. The vagaries of dealing with the USSR have also presented some problems. The Kremlin is notoriously averse to supplying information needed by industrial producers, and has on occasion abruptly changed the scale of projects. In 1975 the International Paper Company was invited to bid on a $1.7 billion pulp and paper complex. It prepared its bid, but by 1976 discovered the project had been reduced to $750 million (see Business Week, 6 December 1976).

RESOURCES

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September

granting concessions was the intention of the leaders of the workers’ state. Lenin observed that if the Soviet state extracted ‘ lOOa of oil’, and by attracting foreign investment could extract ‘ lOOa and 1OOb of oil’ but had to grant a concession of ‘98b’, the Soviet state would still possess ‘ lOOa + 2b of oil’. Now, Lenin queried, were the workers who granted the concession ‘working for the capitalists or for the Soviet power?‘37 The answer was obvious, and concessions were granted. Western investment in the USSR, Moscow maintains, is therefore ideologically legitimate and in no way implies a termination of the class struggle. Similarly, since the Soviet state is a workers’ state, it is argued that CMEA’s increased integration, and more specifically Eastern European investment in the USSR, is a manifestation of not Soviet hegemony. Overlooking the socialist cooperation, economic disequilibrium in Eastern Europe caused by Soviet price increases in raw materials, and ignoring the resource shortages which have occurred in Eastern Europe, 38 the USSR maintains that CMEA is working proof of socialism’s cooperative superiority. Again, Moscow believes it has successfully answered criticism of its investment policies, at least to its own satisfaction.

The future During the past few years, joint venture and compensation agreements have played a major role in the development of Soviet resource reserves. Even with continuing Soviet emphasis on these programmes, however, their future remains uncertain. Within CMEA, the ‘growing fuel and energy requirements’ of the Eastern European nations (not to mention Soviet price hikes) are influencing them more and more to emphasize ‘their own extraction’, which in turn will play a ‘growing role in meeting their requirements in the 1976-80 period, and beyond it’.5 Kosygin himself at one time observed that the USSR cannot ‘fulfil the task of supplying everybody’ with oil and other resources.3g The future of compensation agreements is even more uncertain. The primary obstacle is the size of the Soviet and Eastern European debt to the West. In early 1977, the combined CMEA debt to the West was $48.5 billion.40 Although all the CMEA nations have written the intention of repaying debts into their respective economic plans, and although there is only limited fear in the West of a default by a CMEA member,41 money is getting much tighter.42 Even given these problems, Russian efforts to attract foreign investment will undoubtedly continue to attract numerous investors. The USSR itself has complaints against the West in the areas of duties, quotas, and Western demand for better quality goods. It must

1977

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Soviet

resourcespolicy and the tenthfive-yearplan

be remembered, though, that joint venture and compensation agreements do, just as the Soviets maintain, provide something that both sides need. It should not be assumed, however, that the USSR will provide anyone with raw materials out of charity. Soviet resources policy is motivated very much by self-interest, as Eastern Europe discovered well. This opens up numerous possibilities for the future, including that of the USSR as a potential rival, during the 198Os, of other raw material exporters. Political considerations affect Soviet policy as much as economic considerations, and Moscow will undoubtedly seek to protect its relations with the developing nations.43 Even now, the Kremlin has given notice that it intends to ‘restructure its exports, with a view to increasing the share of manufacture goods’.44

Summary

43An excellent example of Moscow’s political-economic balancing act is its effort to maintain good relations with the OPEC states while at the same time taking advantage of the world price rise in oil. ‘a Pokrovsky and Malkov, opcit, Ref 30, p 56. 45 WallStreetJournal, 6 October 1976. An even more recent CIA report, released to the public in August 1977, has on the other hand predicted a slowdown in the Soviet economic growth rate during the 1980s because of problems related to extraction of oil, coal, and other energy resources. 46 VI Lenin, ‘Interview with Lincoln Eyre, February 1920’. Collected Works, Vo/ume 42, Progress, Moscow, 1969, p 178.

202

Soviet resources are vast, and expensive to bring into production they require large exploration, capital, and manpower expenditure. The Kremlin will continue to employ both traditional methods and some innovations in its attempt to expand its resources production. Despite certain inherent difficulties, some degree of success will undoubtedly be achieved. The CIA recently reported that the USSR has ‘made progress’ in the production of raw materials and energy resources.45 National security, self-sufficiency, and Soviet control of resource sites remain high priorities in Soviet resources policy, and future decisions will be made with that in mind. In 1920, Lenin predicted: In Russia, we have wheat, flax, platinum, potash and many minerals of which the whole world stands in desperate need. The world must come to us for them in the end, Bolshevism or no Bolschevism.46 Although in certain areas he may have been over-optimistic, the tenth five-year plan and its effort to obtain foreign investment tend to bear him out. There are sources of raw materials other than the USSR, it is true, but few that are potentially more lucrative - or more uncertain and difficult. It is this paradox which will keep Soviet resources policy a subject of constant concern and interest.

RESOURCES

POLICY

September

1977