RECENT DEVELOPMENTS IN THE RUMANIAN OIL INDUSTRY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00926A001200030015-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 100
• Document Creation Date: December 22, 2016
• Document Release Date: October 5, 2012
• Sequence Number: 15
• Publication Date: June 9, 1949
• Content Type: REPORT

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- - -CLAs$i`k -~r~~.~;.: 50X1-HUM
' CEN~AL INTELLIGt'~ ~~. ~1GEN%'t REPOR
INF'ORi~IATION =APO
COUNTRY Romania
SUBJECT Reoent Developments in the Rumanian ~h~. `~~ciu~~a_~
PLACE
ACQUIRED
DATE
ACQUIRED
THIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NATIONAL DEFENSE
OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE ACT 50
U. S. C.. 31 AND 32, AS AM ENyE D. ITS TRANSMISSION OR THE REVELATION
OF ITS CONTENTS IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PRO-
HIBITED BY LAW. REPRODUCTION OF THIS FORM IS PROHIBITED.
50X1-HUM
DATE DISTR. ~' Jun :~~9
NO. OF ENCLS.
(LISTED BELOW)
SUPPLEMENT TO 50X1-HUM
REPORT N0.
THIS IS UNEVALUATED INFORMATION
50X1-HUM
series of studies, entitled Re~en~G
eve opments in the Rumanian Oil Industry9 7'h~5
series covers the folloxing sTxb~e;;tso`
- (a} Capital Interests in the Rumanian Oil Industry
(b~. Obliga.tions under the Az?misti-::e Agreer~~~,nt
Vic} Sovr?ompetrol
(d~ The ,Appropriation of German Interests
(e) The Soviet Monopoly stic Policy
(f, The Rumanian Contributions Sharesg Royalties9 anal Oil Field Concessions
(g} The Soviet Contribution ~'
~~
(h) The Policy toward Private Capitals During ~or1d ~'ar III After tha
Armistices and Mox~e~tary Stabili.2ation
(i) Socialization and its Aftermath
(~) Prospects for the Rumanian Oil Inciustr-ys Oil Reserves Divergent; Interes
nd Outlook
(1~) The Convention for the Establishment cf Sovrompet~ro3.
~:~} ~sentia"1 FiglZres~
end.?~
CLASSIFlO~/11 fU5 OPFICI,~LS ONLY
ARMY
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:IBS. OfflCJAU CNIi ~~Q~~AI
RECENT DEVELOPMENTS
IN THE
ROMANIAN .PETROLEUM INDUSTRY
u~s.~ O~nn~s o~tr COt~DE!~?IAl
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~~~~ ~~Q ~.1LD~~~~
A~ ~~1~ 50X1-HUM
C O N T E N T S
I.
Capital Interests in the Romanian Oil Industry
3
II.
Obligations under the Arffii.stice Agreement
g
III.
SOVROMPETROL
17
IV.
The Appropriation of German Interests
23
V.
The Russian Monopolistic Policy
29
VI.
The Romanian Contribution
Shares
34
Royalties
3?
Oil field Concessions
42
VII.
The Russian Contribution
48
VIII. The Policy towards
During the War
Private Capital
53
After the Armistice
The Monetary Stabilization
IX. Socialization and its Aftermath
X. Prospects for the Romanian Oil Industry
57
60
68
Oil reserves
73
Divergent Interests
79
Outlook
85
Annex I The Convention for the Establishment
of Sovrompetrol
89
Annex II: Essential figures
97
U ~ S. t~~F~ClAtS 0l~.~'
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tONFlDEN11A1'
3 -
u s. a~F~nat~
CAPITAL INTERESTS IN THE ROBdANIAN OIL INDUSTRY
Anybody who seeks to understand the recent history of Romania as
well as her political evolution during the last thirty years should
without fail also make a study of foreign interests in her oil industry,
because it would be hard to find a better and more sensitive seismograph
to measure the changing and swaying of the political balance in Europe.
Until 1916, Romania was part of the German Lebensraum and one of
the intermediary points on their way to fulfill the policy of Drang Hach
Osten. Germany's economy was at that time in a state of over-capitali-
za.tion and she needed outlets for both industrial output and financial
means. Romania with her undeveloped economy due to almost 400 years
of Turkish occupation offered ideal opportunities to the German industry
and finance. They helped her rapid economic evolution and, in point of
fact, controlled it to a very great extent. Although around 1914 the
German share of capital invested in Romania industry was only 23.7 per-
cent, German financial interests exercised an influence out of all
proportion to this figure: the most powerful German banks, The Deutsche
Bank and the Diskonto-Gesellschaft, were represented on no fewer than
1/.8 of the Board of Directors of the most important Romanian corporations,
and 75 percent of the Romanian pre-war external loans was covered by
Berlin,
The 404 mil. gold lei invested capital in the oil industry before
the First ~'dorld War was divided among:
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4M1l}O~P'`iJ~A~liI4~
s.
German Interests
27.34
Dutch
24.25
British
23.64
Romanian
8.10
U. S. A.
6.19
French
5.07
Italian
1.g5~
Other
3.56`
The provisions of Article 264 of the Versailles Treaty referring
to German assets abroad were applied also directly or indirectly in
Romania. They were frozen from the beginning and a small part was
expropriated by the Romanian Government; it was not until 1930 that
the few remaining assets were restituted. Meanwhile, the foreign
capital, because of lack of Rumanian capital, acquired the bulk of the
German interests and, in this way, increased its investments and interests
in this country. Apart from the lack of capital, the accumulation grocess,
due to the inherent conditions of her post war economy, was a very slow
one; thus, the Romanian Government was even obliged to practice a policy
of encouragement of the penetration of foreign capital. The peak of her
effort was reached with the monetary stabilization which expressly created.
very favorable conditions of high rentability for foreign investments.
? Unhappily, this effort was coupled with the outbreak of the world's
greatest depression. As did many other countries, Romania, also changed
her attitude after this and followed the general trend of autarchic and
protectionist policies.
2
U. S 4FFIQALS 01~~~
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As a result of all these changes, post-v~ar capital participations
in the oil industry was obviously a different one. Thus, for instance,
the German investments fell from 27.34 percent to 9.18 percent. The
volume of exchange of goods or trade relations or trade between the two
countries increased again after the conclusion of the great economic
agreement of 1935. Compelled by her need to rearm, Romania passed
increased orders to German industry. This tendency was substantially
encouraged by the new German long term credit and financing policy
practised throughout the Balkan countries. Hence, Germany disposed of
steadily increasing assets on the Romanian market which helped her to
acquire holdings in the oil industry. At the end of 1937, the Germans
possessed a share of 1.64 percent and a year later one of 2.18 percent
in this branch of industry. After the application of the provisions of
the new mining law, foreign capital was interested in the then twelve
billions of stabilized lei invested in the oil industry, in the following
proportions:
British 31.z5~
Romanian 29.65
French 14.34 ,
Dutch 8.42%
U. S. A. 8.12
Belgian 3.2b~
German 2.18
Other 2.780
The Germans assiduously continued their penetration during the
following years. They worked especially through the intermission of
the Allgemeine 9Varenfinanz m.g.H., Berlin, Preussische B~~gwerks-und,.
~1 S 4~?~C~Al~
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i~.s. ~FFau~u ~, COI~II~NTIM
Hutten A.G., Gute Hoffnungs-Hutte A.G., Deutsche Petroleum A.G., Sudost-
Chemie Agaur, later on, of the Continentals Oel A.G., etc. Most of their
later acquisitions were made from the French and Belgian capital which,
after the Munich agreement, started to liquidate and leave the East and
Southeast of Europe to the Germans.
But this capital infiltration was also accomplished along different
lines. In March 1939, owing to German pressure, Romania signed the
famous Ptohlthat Agreement. It provided for long economic collaboration
between the two countries which had as its goal the transformation of
the Romanian economy for German war aims. It also provided inter alia
for the establishment of joint Romanian-German corporations for explor-
ation, exploitation and marketing in the oil industry.
The change in Anglo-French policy temporarily thwarted the appli-
cation of these provisions. After the change of the political regime
in September 1940 and the cession of one-third of the Romanian territory,
the military occupation of 8omania by German troops followed. Their
first target was the occupation of the oil lands and the taking of
military measures for their protection against bombardment or acts of
sabotage. Simultaneously, Romania signed both the Anti-Comintern Paet
and an agreement for ten years' economic collaboration. The latter
provided, among other things, for a greater participation of German
capital in the Romanian oil industry, orientation of some pipe-lines
towards Ilanubian harbours and the granting of substantial credits to
the oil industry.
In 191+1 a common drilling and exploration plan was drawn up
CQ1~1t3~.H?~U-t
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LOtIfIDEMT1Ai
through the intermission of the two State companies: A.C.E.X. and
Continentale Oel. But previously the two governments had agreed upon
a set of special conditions for exchanging armaments for oil at 1939
prices, known since as the ~~Oel Paktn.
The results of this collaboration are remarkably well expressed
in terms of capital participation: it rose from 2.18 percent in 1939
to 11 percent in January 1941, and the Germans already controlled
twelve important oil companies. The returns of the capital census of
March 1942 showed that out of 8.043 mil. lei oil share capital of which
had been taken a census, the Germans actually held 1.19'7 mil. lei, e.g.,
approximately 15 percent. Therefore, during an interval of six years,
the German participation had risen from 0.18 percent to 15 percent.
This rapid penetration was achieved equally by manoevering increases
in capital, by amalgamations, by setting up new firms, as well as by
acquisition of stock outside Romania from foreign holders. This trend
continued, and by the conclusion of the armistice in 194G., the German
participation was higher than the figure mentioned.
As for the oil export, this was bound by the stipulations of the
Oel Pakt and disposed of in proportion to the initial unpreparedness
for war of Romania and the increasing need for arms in the fight
against Russia. Also most of the surplus oil found its way directly
.~ or indirectly to Germany. Many endeavours to send more oil products
to hard currency countries were thwarted by the Germans either through
their monopoly of transportation in Europe during the war or by granting
some credits or disponsibilities in foreign currency to Rommania. All
.~
f~ ~ ~ r~~~, acs +~.~~
cor~~t~
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e ZONflDE1gIN
in all, almost three-fourths of the Romanian oil export after 1940 went
to Germany or German controlled areas.
This over simplified presentation of German penetration was neces-
sary to enable a better understanding of the following phase: the
Russian penetration which followed after the Armistice with Romania,
(23rd of August 191,1,,) .
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OBLIGATIONS UNDER THE ARMISTICE AGREEMENT
According to the Soviet policy in all the "satellite" countries
? and later on in Germany of implementing the armistice agreements with
reparation provisions in such a way that they could not be changed,
thus assuming a mortgage on the future peace settlements, the
Armistice with Romania stipulated the obligation of reparation pay-
meats to Russian but was silent concerning both the other allied and
foreign interests and the technical conditions of the payment.
Moreover, Article 10 obliged the Romanian government, among other
things, to ensure to the Soviet High Command, in case of need, the use
on Romanian territory of industrial and transportation enterprises
(....), stores of fuel, fuel oil and other materials and services in
accordance with instructions issued by the Allied (Soviet) High
Command. During the last four months of 1944, in accordance with
this article, approximately one-fifth of the corresponding production
was taken. In 1945 they raised this to almost ten percent of the oil
production, but the demands for 1946 and 194'l fell below 100,000 tons
annually. Needless to say, these quantities of oil have neither been
paid for nor credited to the reparation payment; not even those taken
after the cessation of hostilities in Europe.
? Article 11 provided. that, for losses caused to Russia by military
operations and by occupation of Soviet territory, Rommania is obliged
to make compensation to the amount of 300,000,000 U. S. dollars,
payable in six years in commodities; such as, oi
t.`~~ ~~~f~I~LS 0l~1.~' -~-
l products, grain,
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~ ~ ~~~ ~~~
- ~c~IDENT~1
timber, river craft, machinery, etc.
The fulfillment conditions of this
clause were agreed upon by a
separate agreement between the Russian and the
Romanian governments,
signed on 16th of January 1945. By this, the reparation
to be paid by
r? this former enemy became a purely Russo-Romanian matter and was, there-
fore, withdrawn from the inter-allied. commitments toward the "sattelites".
This Convention foresaw the
of oil as reparations:
delivery of the following quantities
1945
1,715,800 tons
1946
1,722,000 tons
1947
1,703,000 tons
1948
1,649,000 tons
1949
1,703,000 tons
1950
1,703,000 tons
to 100 (figurative movement ~ipwards) e.g.a. quantity of
10.2 tons oil products, which represents roughly more than forty percent
of the entire Romanian production for the same period of time. This had
to be delivered at the Soviet border and for the purpose of the repara-
tion settlement credited at 1938 world prices plus an increase of ten
percent.
For the first two years, this obligation has been fulfilled in the
following way:
Delivered in 19/.,.1,.;
Delivered in 1945:
Delivered in 1946:
For 1947 and
194-8, the total deliveries
/18,000
2,542,000
1,780,000
amounted approximately to: i
~~~ !~
~, S ~~'KI~tiS 01~~` -
4,740,000
00 000
s,z4o,oo0
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~3~F~C~ ~,~.~
- 11 -
CONFlDENIUN
In June 1948, Moscow agreed to reduce by one-half the oil
deliveries still due from Romania as reparation for the last two
years (August 1948 - August 1950). According to the announcement
made on that occasion, there will be delivered not 3,406,000 tons,
but only half this quantity:
Consequently, the total oil deliveries under Article 11 of the
Armistice will amount to:
If to this are added also the oil delivered to the Soviet
troops and authorities in Romania, under Article 10, as well as
an appropimate amount taken as war booty or ttwithout forms" (as
the ordinary looting used to be called), the total and actual oil
deliveries to Russian will be not less than:
Granting that the planned oil production for 1949 and 1950 will
be an average of four million to/year (which is very doubtful
1703.000
9,943,000
indeed), this quantity represents nearly half of the Romanian oil
production from September 1944 to September 1950, which is taken
by the Russians without any kind of compensation.
However, besides the quantitative aspects, the oil deliveries
present another aspect which is more striking: that of the prices.
The Armistice Agreement fixed the oil prices at the 1938 level
plus ten percent. According to this provision, Romania had to
deliver oil products to the value of ~I50,000,000.00
in installments of X21,000,000.00 to ~y26,000,000.00 yearly. This
clause was inserted with the obvious intention of extorting greater
amount of reparation, For, at the time of the signing of the Con-
~Cention, world prices for some oil-products were already 150 percent
t~iDE~T1111!
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wni-riUM
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~~~~
above the 1938 level. The index of oil prices on Gulf Coast Bulk
Market evaluated for fuel oil from 100 in 1938 to 172.5 in June
1946, 246.4 in June 1947, and 372.1 in June 1948.
Taking for basis these indexes and calculating tkhe real value
of the oil products delivered to Russia, we arrive at the following
results:
1944-45
Delivered for approximately
X40,600,000.00
1946
Delivered for approximately
.41,300,000.00
1947-48
Delivered for approximately
117.900.000.00
~199,~00,000.00
As for the last delivery of 1,700,000.00 tons, let us
consider hypothetically that the prices in 1949-50 will be not
higher than those of end of 1948, which, of course, is not true
at all. In such a case, their value will be 70.100.000.00
X269,900,000.00
The value of the oil quantities delivered under Article 10,
calculated pro rata temporis and according to the same indexes
is nearly 20 600.000.00
Total 290,500,000.00
In other words, Russian received oil products to the value
of two hundred percent more than was due to her. Yet, this figure has no
pretention of being anything but a suggestion, as the exact quanti-
ties of each oil product delivered to Russian is not known. Nonetheless,
it is a knor~n fact that far greater quantities of more expensive products
have been delivered and, thus, the delivery schedule agreed upon in
January 1945 has not been respected. Consequently, an increase of ten
to fifteen percent in the above indicated figure would bring it nearer
to the actual value of the oil deliveries.
~~ ~F~
CONFlDENTUiL
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1~?.~i. Qf~#t~~l.a
But, besides this, mention must also be made of the collection
of alleged war booty and trophies, which give an example of the
Russian policy of stripping not only Romania, but all the countries
under Russian occupation. Through the Armistice Agreement, Romania
has been obliged to hand over to the Allied (Soviet) High Command at
trophies all war material belonging to Germany and her satellites
located on Romanian territory. Besides this, the Russians seized in
the fall of 191+4 various valuable materials and installations as war
booty, although a great part of them were anything but war materials.
However, the definition of war material has been a matter for Soviet
concern alone and no inter-allied control was allowed. For these
appropriations, the definition given to it in practice since the
Hague Convention has been very much extended by the Russians. During
later inter-allied. debates on this subject in view of peace settlements
for Austria and Germany, the Russians declared that everything which
helped the nazis to wage war against Russia is to be hreated as war
booty. This is indeed a very broad definition and the policy practiced
in the Russian area showed that war booty and war trophies were actually
everything that was of any value.
One of the best examples of this principle is undoubtedly the
Romanian oil. industry which was considered by the Russians as one of
the foremost sources of energy that helped in waging the anti-Russian
war.
For the huge drilling programme started curing the war, for the
period 1942-44, around 185,000 tons of oil materials, installations,
and machinery were necessary. Germany actually delivered at least
sixty-five percent of this amount, so~ha~~'i,i ,~~i try was able
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- 1C~IfND~NIiAi
to work, from this point of view, under good conditions. At the con-
clusion of the Armistice, the oil companies disposed together of almost
80,000 tons of such materials. The Russians took over, as war trophies
or reparations, exactly sixty percent of this quantity, including all
? the then available pipes and tubes. Their exact value cannot be esti-
mated. However, to replace them by imports from foreign countries,
some 125,000,000 tons of oil products to the value of roughly seventeen
to nineteen million dollars at 1945 world prices were necessary. It
happened that not less than half of those materials and machines belonged
to oil concerns oxned by Russia's xar allies: Great Britain and U. S. A.
Thus, for instance, the biggest Amerian concern in Romania, nRomano-
Americana", which is the property of Standard Oil, was stripped of at
least 7,000 tons of materials. By far, greater quantity xaa looted from
the companies belonging to the Ango-Saxon Company. During the Yalta
Conference, the British Delegation filed a protest aginst the Russian
interpretatior_ and way of action, but did nothing further in the matter.
Both U. S. A. and United kingdom delegations protested again during the
Potsdam Conference and, finally, it was agreed that two Inter Lllied
expert commissions be established in Romania for the purpose of dis-
cussing the restitution or compensation of this allied ownership. They
met several times in 1945 and 1946 and xere disbanded later on, in 1947,
!, on U. S. A. initiative, since they were not able to bring about any kind
of understanding.
14Toreover, by the Convention of January 1945, which implemented the
Armistice Agreement, the Russians obtained that yet another great
- quantity of oil materials be delivered. by Romania as reparation. In
this xay, almost the entire production by the steel industry has also
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~~7[.J ~~
_ +~aoortw
been practically monopolized by the Russians. Late in i94$ some
arrangements were made and a somewhat reduced proportion of the steel
industry capacity was freed to produce tubes and other kinds of materials
for inland necessities.
This looting as well as the blocking of the production capacity of
the Romanian (later on, also, of that of all the Czechoslovakian and
Polish) industries of oil materials show clearly how great was and still
is the Russian need for such materials for the reconstruction of their
war-damaged oil industry as well as the incapacity of their own industry
to produce such materials in sufficient quantities.
The Romanian oil companies felt the complete lack of such materials
most sharply, as it hampered all kins of drilling activity and the re-
placement of. old installations. Thus, it rendered them entirely dependent
on the Russians for their exploration and exploitation activities. For
the reconstruction of her likewise war-damaged oil industry, Romania
needed yearly some 50,000 tons of such materials over a period of several
years. If it was confined to the normal exploitation necessities, at
least 15,000 to 17,000 tons of materials were needed yearly, ~e.g., the
equivalent of nearly 420,000 to 450,000 tons of oil products, to be
exported. However, no quantity has been made available for such purposes.
Up to the beginning of 1947, only some ?,000 tons materials have been ~
imported, mainly from Czechoslovakia, and covered partly by deliveries
of gold. By the new Economic Agreement of February 194?, Russian pro-
mixed to supply Romania with 20,000 tons of steel which had to be used
mainly for manufacturing oil pipes in Romania. But this promise did
not take concrete shape until the end of 194?. What was obtained
1!~ ~R ~~~~~~~ ~~~~r
conFlU~~-~
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~M'~~i~-~-~t
later on was used mainly for the needs of the State owned joint oil
corporation, which will be discussed later on.
C~1DEN1U~
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- 1? - I I ~ux~-HUM
iu1l~/~Cy'rrp r
Before any negotiations for peace settlement with Southeastern
Europe were initiated., which would have given to those countries the
primarily necessary freedom of economic orientation, Russian bound
their export capacity (or what remained after deduction of the repara-
tion payment) by all kinds of economic agreements. By this method, the
economy of these countries has been incorporated in the post war itStalin
Five-Years Plane and thus helped towards the success of the Russian
Planning and, implicitly, substantially tovla.rds her reconstruction. It
was already obvious at that time that, owing to the grave scarcity of
goods and tremendous needs of Russia in both consumption and capital
goods, she would never lessen her grip on those economies. The network
of such economic agreements had been perfected throughout that area
before the end of 1945.
The first in the roar was Romania: afar reaching corimercial agree-
merit had been signed as early as I~ay 8, 1945. The contingents of mer-
chandise provided to be exported to Russian were equivalent to a monopoly
over the Romanian economy. After.thi~s agreement, the oil surpluses were
completely in Russian hands and, therefore, this item which previously
constituted half of the Romanian export and enabled this country to get,
in exchange, hard currency, capital goods and materials for the oil
industry, disappeared. completely.
However, more important than this agreement was the, Protocol signed
in Moscow on the same day and establishing the conditions of a long
u. s c~~~s aar t'~t~~~!~~~
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~. t~t~ ~~t~~ tJ.'
lg 50X1-HUM
t'O~tDF~r~~
economic collaboration between the two countries. It has been concluded
fora period of five years with successive prolongation after. Among
other things, it was agreed to establish joint Soviet-Romanian Corpora-
tions for the exploitation of various branches of the Romanian economy.
Both States committed themselves to contribute equally to their establish-
went and endowment.
As for the oil, the establishment of such a joint corporation under
the name of SOVROT~IPETROL was likewise provided for the exploration,
exploitation, treatment and marketing of oil and oil products, with an
open door for private individuals, companies or associations, to parti-
cipate in or join this corporation. The Romanian State contributed to
its endowment with concessions on new oil lands, preference in pro-
specting lands not hitherto worked and also with at least fifty percent
of the crude oil reverting on due to the State by the private companies
under the title of royalties and mining taxes. The Russian government
promised to contribute the necessary equipment "as and when required for
the development of the company, in accordance with the specified programme".
Both governments had an equal number of votes in its management, with the
stipulation that the Managing Director should be nominated by the Soviet
Government. In other words, this joint corporation had to be kept going
with the Romanian oil lands and oil, the Russians promising to bring in
their contribution "as and when required" but, nonetheless, they took over
the management. It is, of course, no longer necessary to underline or
demonstrate the real Russian intention behind this joint corporation:
to acquire freely the Romanian oil also after 1950, when the reparation
u s. o~~~s owtr ~apFIDE~'~l14~
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i7~~~~~~~~~
payments will cease. For no one would believe that the Romanian oil
industry so badly needed Russian management and advice. From the very
beginning of this industry, the exploitation, treatment and marketing
of oil have been done solely by private companies and they have done
a good fob.
The Protocol of P~1ay $, 1945, provided that, within a month, the
two governments will conclude a separate agreement for setting out the
legal, financial and technical conditions regarding the organization
and working of the joint corporation. Hence, on July 17, 1945, a
"Convention for the foundation of the Sovrompetrol Company for explo-
ration, exploitation, refining and marketing of crude oil and oil
products" was signed in Bucharest. The initial idea agreed upon on
~~ay 8th has in many respects suffered fundamental changes:
(a) Sovrompetrol has to function as a Romanian private juridical
entity of the type of a limited company and shall be treated by the
Romanian laws as a Romanian corporation. Its main office shall be in
Bucharest and its duration unlimited.
(b) The two governments charged separate State or private organ-
izations to carry out the establishing and financing of the joint
corporation. The Soviet government gave this in charge of the two
main oil organizations of the Soviet Republic: The Unions "Ucrneft"
"Sojusnefexport'~ and the Romanian government in that of the two piggest
purely Romanian oil companies in which the State held, through inter-
mission of some other State companies and. entities, the majority of
the shares: Creditul Ittiinier and Redeventa. ti~hereas the Soviet
organizations had to fulfill simply an administrative mandate, the
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~~
20
~H~~ C~ 50X1-HUM
t~
Romanian government, from a legal point of view, expropriated the
two companies and then charged them to act as State proxies, as the
private share holders have never been asked to agree to such a mandate.
(c) The company's capital is of five billion lei, paid or covered
by the contracting parties in equal shares:
The Soviet Party through:
Installations, casing and material for exploration and
exploitation of oil in value of 740 Mil. lei, estimated at average
prices in Romania during the first half of 1939;
Shares of eleven Romanian oil companies, evaluated at 1,7b0
It4i1. lei.
The Romanian Party through:
Shares or assets of twenty-five Romanian oil companies;
Fifty percent of the new prospected areas and all thoses
ceded or which will be ceded to any of the twenty-five Romanian com-
panies forming the Romanian group, evaluated at 1939 prices by a joint
commission of experts, arbitrated, in case of necessity, by the two
governments;
Fifty percent of the yearly royalties due to the Romanian
State until the contributions of the two parties shall become equal.
The crude oil shall be estimated also at 1939 prices. Each founder
shall receive an equal number of shares
that are nominal and trans-
,
ferable only by authorization of the respective government.
The founders were obliged to cover entirely their subscriptions
by August 1948 and, within a further two years, e.g. by August 1950,
to transform into assets (installations, oil lands, etc.) the contri-
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50X1-HUM
butions represented by the shares of the eleven respective twenty-
five oil companies. Both these dates were, for later developments,
of a significant importance, as the Romanian State was forced to pro-
ceed between December 1947 and June 194$, with a view to complying with
this obligation, to the socialization of all the oil companies still
working as free private enterprises. This, as well as some other
transformations, operated during this period in the Romanian oil industry,
legislation, etc, are there is no doubt, the consequences of the obli-
gations assumed by the Romanian State through the Sovrompetrol Charter.
Furthermore, this is one of the most striking, and for the Romanian
industry, most onerous, provisions of this Convention; whereas the
Russian group was granted a delay of five years to pay off its sub-
scription, the Romanian State was committed to put freely at the dis-
posal of the Sovrompetrol its royalties and the specified oil lands
for immediate exploitation for an unspecified period. Hence, its
endowment during the time when it was still in the process of being
constituted was solely a Romanian charge.
(d) Further rights vested in this joint corporation were very
great indeed and aimed visibly from that time on at the creation of a
monopoly in the entire Romanian oil industry in Russia's favor. Thus,
for instance, the right to prospect, explore and exploit liquid bitumen
has been extended to all concessions of oil lands in the fuf~ure, for the
Sovrompetrol has the preference or the option on equal terms at such
auctions.
In spite of the fact that since 1940 all pipe-lines have become
monopoly, this joint corporation was granted the right to own and build
Ct~NFlDENT1At
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her own pipe-line network.
(e) Last but far from least, there was bestowed on her the
right to use exclusively and unquestionably all the foreign currency
which will result from her exports for purchasing oil materials, equip-
went, etc. Therefore, whereas the production of all the other oil
companies was disposed of at fixed and uneconomic prices (as will be
shown later), either to be exported to Russia or used within the
country, this provision amounted to the practical creation of a mono-
poly on oil export and import machines and drilling materials in favor
of the Sovrompetrol.
(f) Finally, it has been agreed that its management will be
carried out by a Board of Directors, composed of an equal number of
Soviet and Romanian members; the Chairman and the Deputy NIa.nager will
be Romanians, the Vice Chairman and the General Nfanager, Russians.
The Sovrompetrol's Charter, which developed further the principles
written in the Convention, specified that, whereas the Chairman has
but nominal and presiding attributions, all the executive functions
and ultimate decisions are entrusted to the General bia:nger, who has
"unlimited rights as to administration and direction of all interests,
goods and operations of the corporation, other than those to alienate
her assets". For these purposes, he needs no special mandate from
the General Assembly..
FIDENTU-
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- 23 - oux~i-h~M
~:'~ ~F1A. t ~ ~
COgflUElIIUI
THE APPROPRIATION OF GERMAN INTERESTS
In comparison with the provisions of the ~'rotocol of i~~tay 8; 194.5,
the Convention of July 17, 1945 brings a novation also in that both
parties contribute to the Sovrompetrol with shares and/or assets of
Romanian oil companies. But Russian never previously held any kind
of interest or participation in the Romanian oil industry. hThere
then do these oil shares come from?
Article 8 of the Ar~aistice Agreement obliged the Romanian govern-
went not to permit the export or expropriation of any form of property
belonging to Germany, Hungary or their nations, or to persons residing
in their territories or in territories occupied by them, without the
permission of the Allied (Soviet) High Command and, also, to maintain
this property according to conditions prescribed by the Allied (Soviet)
High Command.
V'rith a view to fulfilling these obligations, the Romanian govern-
ment established, by Law Number 91 of February I0, 1945, an institution
to supervise enemy assets, known commonly since as CASBI. All holders,
administrators of such, but especially of German, goods, rights, and
interests were obligated to declare and register them with CASBI. Yet,
before CASBI was established, the Soviet government sent to Romania
sundry commissions of experts to inquire into and search the archives
of the State .Administration and the oil companies, in order to identify
the German assets. This investigation lasted until sometime in 1945?
However, the result of their first searches was known to the Soviet
u. s. o~c~uus aa~ ~QNflDENi'IAt
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_..r1 r ~^ ~u~ i -hUM
government by June 1945. They indicated important German interests in
the Romanian oil industry and this influenced the Russians to change
their initial plans of two months earlier and determined them also to
include the German assets in the joint corporation as a Soviet contri-
bution. By letters addressed to the Romanian government before the
signing of the Sovrompetrol Convention, the Soviet High Command com-
municated to the former that ~~the Soviet Government has transferred
the German assets in the specified Romanian oil corporations to cover
the losses and damages of war inflicted on Russia by Germanys. The
Romanian Government was ordered to act accordingly, e.g. to operate,
by law, the transfer of this kind of interest into Soviet patrimony,
represented by the State Union ~~Ucrneftn. The order was carried out
by law Number 573 of July 18, 1945, in which there was included the
list of the oil shares considered henceforth as Soviet property.
They .are:
Oil Comp.
Total Capital Soviet Share
in Mill. of lei
Concordia
1,470
755.8
Colombia
380
325
Petrol Bloc
470
285.5
I.R.D.P.
600
115.5
Continentale Oel
100
100
Further Six smaller comp.
339
170
3,359
1,759.8
By means of this initial appropriation of German assets, as some
others followed later on, the Russians covered exactly their due con-
tribution in oil shares. The remaining thirty .percent of their con-
v ~ v~aus at-
~~~.~ ~~~
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~~~~~ oux~i-NUM
. ~ri>~. ~~'~~~ +v ice. i
tribution had to be covered by installations, equipment, etc., but
not before August 1948 or even 1950. And yet, the Russians needed
to bring back to Romania only a small part of the looted oil materials
to cover this obligation, too.
Consequently, the Russian participation in the Sovrompetrol eon-
silts of lootings and expropriated German assets which amounted to
nothing else than purely Romanian or, what is worse, allied property.
But, this assertion needs a little further explanation.
The first point refers to the legal status of the Romanian oil
shares during the war. In spite of the wish to avoid discussing too
many details or particular technicalities, this subject must, however,
be gone into, to reveal another important aspect of the Russian oil
dealings in Romania,
As has been mentioned at the beginning, the Germans tried before
and all during the war to acquire as many as possible of the Romanian
governments tried, by legal and administrative measures, to call a
halt to this penetration. Thus, for instance, as early as July 11,
19l~0, it was decreed that all oil shares had changed to be from
bearer to nominal shares and that, in the future, the capital of any
and all oil companies had to be represented by nominal shares. By
this means, the State tried to control the transfer of shares and to
/?~ thwart the "too zealous German collaboration" in the oil industry,
inasmuch as each transfer had;~to.be approved by a Special State
Commission. Despite its war alliance with Germany, the nationalistic
regime which followed after January 19L,1 has followed up the pre-
viously established principle in this respect, improved and imple-
0 S OfF1aAlS Olll ~QNFlDEMTIAL+
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- 26 -
~~~ ~~`~ta ~~~
mented its application and, furthermore, on March 25, 1947-, decreed
the obligation to nominalize all the shares of the Romanian commercial
and industrial companies. Failure to comply with this obligation within
a limited term was penalized with the expropriation of the shares in the
favour of the State. However, the State rarely made use of this pro-
vision. The foreign holders were granted several terms to comply with
this obligation. But, for various reasons, not all the Romanian economic
representations in European capitals have been in the position to proceed
with or finish the formalities for nominalization of the Romanian shares
abroad.
On December 17, 1940, the German government concluded 4rith the
French government then in power an agreement according to which the
fortrer i~a,s enabled to acquire, on the French market, oil and other kinds
of shares belonging to foreign corporations and to credit these acqui-
sitions to the reparation settlements. By February 191,1, the Germans
acquired on the French and Belgian markets over two million of Romanian
shares, especially those of Concordia and Colombia, both purely French
and Belgian companies.
In order to facilitate the administration of its by now so extended
oil interests in Europe, the German government established early in 1941
a short of joint stock holding, under the name of~"Continefitale Oel G.P.
B.H." and soon afterv~ards founded a branch in Romania. In ~iay, the same
year, the German government started to put pressure on the Romanian
government to authorize the nominalization of tY~e so acquired. oil shares
in the name of this State corporation. However, the latter, startled by
by the already too advanced German penetration, took a different view of
n, s. o~~~s oar ~C4~IfIDE1~IM
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t~~F~t?~tCS ~~~~,~ -
27 -
this economic collaboration and stubbornly opposed the alienation of
the national wealth. Moreover, it refused not only the nominalization
of the acquired shares, but actually forbade the payment of dividends
to all bearer shares. Furthermore, the State subrogated many rights
of the General Assemblies of important corporations for the duration
of the war.
To these measures, the Germans reacted with political pressure.
The effect was, in this respect, null. Therefore, they deposited the
material titles, stripped of any juridicial rights, with the Deutsche
Bank, Berlin and waited. so that, after their military victory in Europe,
they could also settle this problem. The more than two million shares
were found, in 1945, by the U'. S. A. Military Government in South
Germany and, later on, restituted to the French and Belgian governments.
Thus, there are now two series of shares and holders for the same com-
panies: the old ones and the duplicates issued in 1945 by the Romanian
government and handed over to the Russians. It is certainly very
difficult to predict how (if ever) this conflict will be settled.
For the time being, it is worthwhile to stress again here that
actually the bulk of the shares with which the Russians contributed to
the capital of the Sovronpetrol have been simply, and disregarding the
Condon Declaration of January 6, 1943, re-expropriated. from their Allies.
The second exp].a.nation refers to the post-war inter-allied policy
regarding the reparations. In this connection, it might be recollected
that at the time the Russians decided to appropriate the German External
Assets (or what they afteravards wanted to consider and interpret as such),
no reparation policy was yet agreed upon. The provisions of the Yalta
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u s. o~aats oar - 28
Conference stated, it is true, that Russian would be compensated out
of appropriate German assets and current production, but this was a
mere promise and it had to be worked out, later on, by an Inter-Allied
Commission. This met in bRoscow, in May 1945, and closed the discussions
in mid-July of the same year, without agreeing on any of the items of
its agenda, as have most of the allied meetings since. The delegations
decided to report the failure to their governments. This took place
before the opening of the Potsdam Conference, and a decision on this
matter: was taken during its last day, August 1st. Therefore, the
Russians took the German assets in Romania as an advance payment and
faced their allies again with a fait accompli.
u. s. ~~m~ts o~~ Cg~~,~iDENTH1l
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THE RUSSIAN ~iOPdOPOLISTIC POLICY
2g
CONFIDE~ITUW u s. oF~a~~s o~~.
The Convention for the establishment of the Sovrompetrol as
well as its Charter and Statutes have been subject to repeated
modifications. The latter were agreed upon on August 10, 1945, and
ratified by the Romanian government five days later. A first modi-
fication was brought about on October 24th of the same. year, when
exemptions for taxes and fees owed by this corporation for her
activities were granted.
On January 2$, 194.6, the Charter and Statutes were republished
in the Official Gazette, because when they were first published, some
errors and omissions passed undetected. However, it is obvious that
three months were not necessary for checking some printing errors.
Actually, this opportunity had been taken to make some new modifi-
cations within the Statutes and, undoubtedly, to the benefit of the
Sovrompetrol.
By a new law of f~iarch 30, 1946, new advantages of fiscal and of
other orders were granted to this corporation.
On July 30th, the same year, the constituting Soviet and Romanian
groups agreed upon some new modifications and agreed on a new partition
of the shares among the companies forming the Romanian group.
Another point is that the object of this corporation has been
broadened by including in it also the right to exploit and market not
only petroleum, but in addition any kind of solid bitumens and gases,
under the same conditions and with the same privileges granted for the
u: s. o~mA~s a~~ tt~flDE6C~!
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- 30
initial object.
Yet, the most important decision was taken with regard to the
status of this joint corporation. It will be recollected that, a
year earlier, it was agreed that Savronpetrol shall be treated, by
the Romanian laws as R
a
omanian corporation. Also, that all her
decisions had to be ratified by the Romanian government by a law or
decree to confer on them the necessary power for application within
the Romanian territory. On this occasion, the General Assembly
decided that, inasmuch as Savronpetrol has been established by an
international agreement, which it considers binding in every respect,
the General Assemblies can take any kind of decisions regarding its
administration, etc., without it being necessary that they shall be
ratified by decree by the Romanian government. Henceforth, the
Savronpetrol enjoyed fully the status of an extra-territorial cor-
poration. This decision has been agreed to and complied with by the
Romanian government which has exempted it since from any authority and,
especially, from that of the I~~ining Department.
Therefore, the following privileges, etc., must be understood as
mere results of direct negotiations between this international corpor-
ation and the Romanian State.
after the economic negotiations held in &Toscow, in February 197,
a ~'rotocol was signed between the two. governments providing new advantages
and privileges bestowed on Sovronpetrol, which enjoyed by them a complete
extra-territorial status.
Finally, an adcitional Protocol to the initial Convention was signed
in Adoscovf, on February 18, 191+8, imposing new charges upon the Romanian
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u s. o~r~cia~s ow~r ~Ot1Fll~~T~~r
State and modifying the contributions initially agreed upon. Iti?eedless
to say, they were solely to the Russian benefit.
These modifications as well as those brought about indirectly, e.g.,
by ways of laws, decrees, decisions or simply factual maneoverings, which
bear some influence on the status of this joint corporation, will be
shortly discussed. or simply mentioned in the following pages.
In this place the fiscal privileges granted to the Sovrompetrol will
be mentioned.
As is shown by the context of the initial Charter, attached at the
end of this paper, no exoneration of taxes, fees, etc. were, initially,
granted to it. On the contrary, it was provided that Sovrompetrol shall
be treated as a Romanian juridical entity, according to the Romanian laws.
By a decree in :~i:~nisters Council, of October 24, 1945, it was exempted
from any kind of taxes and f ees dur at her establishment and registration
as a corporation, for the shares which will be issued, for the contri-
butions in money and in kind received, as weld. as for all those due at the
fusion, absorbtion or liquidation of any of the oil corporations which
were mentioned in the lists of contributions of both sides.
By a law of ~~?.arch 30, 1946, new privileges have been granted. to her;
the shares attributed to the founeer members and the goods imported until
.August 1948, as a contribution to Sovrompetrol, were completely exempted.
This provision was inserted for the benefit of Russia..alone, inasmuch as
she was obliged to contribute with materials, etc. ;y'oreover, in cases
when the imported materials will not be used to cover the Russian contri-
bution but for drilling or exploit.:~tion ~,vorks done by the Sovrompetrol
wit_z or on account of any of the companies within the Soviet or Romanian
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~I~j- OEf1GAlS Olil~
C aw
group, they, too, will be exempted from taxation. This provision enabled
Russian to bring in freely some material that was used to improve and
strengthen solely the two big Soviet companies: Concordia and Colombia,
erith a view to doing smaller drilling and exploitation work on thei r
account and for Russian benefit.
The same exemptions have been granted for the royalties and oil
land concessions contributed by the Romanian group. Soon afterwards
(April 1st, 19/+7} the Sovrompetrol was exempted of any taxation due for
treatment and. refining of crude oil, belonging ~o producers who do not
have their own refineries. By this, the competition of the private
companies has been excluded (as they are not in a postion.to refine at
lower prices) and the basis for a gradual. refining monopoly for the
the Sovrompetrol has been thus set up.
All these exemptions made sensitive holes in the budget which,
anyhow, after 1945, was nurtured mainly from expropriations and ruth-
less exploitation of the working class.
In addition to the preference, on equal terms, at any auction,
granted to the Sovrompetrol by the Charter, a later legal provision of
June 3, lgl,.g, extended it irr the sense that, at any other auctions, all
Soviet-~tomanian corporations were exonerated from the obligation to
deposit the guarantee of ten percent of the value of the auctioned
contracts and no one was obliged to guarantee the correct execution of
the work done for the State administration or companies. Yet, at the
same time, the most draconic measures were taken against private cor-
porations which, on the con+rary, were compelled. to make and increase
the deposits for the same guarantees. This measure caused the practical
exclusion of the private enterprises from auch contracts and so a
~? ~i. ~~ ~' l~r~~.a ~.~~d-.~
CONFlDENTIA-
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monopoly for State orders has been created for the benefit of the
Soviet-Romanian corporations.
Later on, by a lair of August 1l~, 194g, the Soviet trade and
industrial corporations in Romania ~vere also extended the same exoner-
ations.
1~ S. AFfKIALS ONL` C~Ir~~~~t
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~.~~~~ ~~
3y. _
,~ONFlDEMTIM
1.. Shares. Among the oil companies contributed by the Romanian
group to the capital of the Sovrompetrol, only Creditul R4inier and
Redeventa, with a total capital of
had any great importance in the Romanian oil industry. As mentioned
already, the State owned the majority of the shares and backed in
many respects both of them, especially after the new Oil I,aw (19/.2}
had been promulgated. The remaining twenty-three companies were all
small undertakings. Their total capital was of 580 IKil.
1;680 Nli.l.
Together with the two others, they represented what can be called the
purely Romanian oil companies. They too have been encouraged by the
State. Nevertheless, their assets surpassed by far their capital.
None of these companies were asked, before the Romanian govern-
ment committed them to the Sovrompetrol, to agree to th~:s joining and,
thus, they and their share holders have not given up, legally, either
their independence or their ownership rights. Therefore, with a view
to compelling them to join the Russo-Romanian holding, it was necessary
for the State to use some extra-le-gal measures and ways. They were
applied gradually.
By the decision of the extraordinary General Assembly of the
Sevrompetrol of July 30, 19.6, the Romanian group was broadened by
including in it one of the companies which .were on the Romanian list;
Socop. It is necessary to indicate that this was a small company with
a capital of only 20 million lei and owned entirely by Creditul P,~inier,
CCN~iffDE~l~lul
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e.g. by the State. Simultaneously with the raising in rank, Socop was
empowered, exclusively, with the mandate of acquiring the shares of the
other twenty-three companies, as well as with that of bringing into the
Sovrompetrol the royalties and oil land concessions which formed the
Romanian contribution. To help and speed up the fulfillment of the
first mandate, it was decided that each of the twenty-three companies
might bring their shares to the Sovrompetrol direct and receive, in
exchange, shares of the latter.
But, at this opportunity, the General Assembly voted also for the
modification of the voting procedure which is worthy of mention. Firstly,
it was decided to redistribute the shares among the Romanian founder-
members in this way:
Socop holds 1.4 million Sovrompetrol shares;
Creditul &iinier 0.7 million Sovrompetrol shares and
Redeventa 0.4 million Sovrompetrol shares.
Then, it was stipulated that any of these three Romanian founders,
as well as any of the other contributing companies has the right to
participate and vote in each of the General Assemblies held at any time
until August 1948, independently of the others. This modification had
its reason in the fact that the majority of the Romanian companies were
not willing to join the Sovrompetrol. To cut short long and troublesome
struggles with them, the procedure has been simplified in this way.
moreover, for holding a General Assembly, which by then had the
right to take any kind of decision which was valid without its ratifi-
cation through a law by the Romanian government, it was necessary that
only seventy-five percent of the shares be represented and that two-
thirds of them agree. The participation of Soco th r ore, ensured
~~a ~~~~~
i~ S ~'F1~~t~ ~ t~~~~'~
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 r_nv.~ ~ ~~ lpq
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~, p~ ~~~ ~t~F10~N~Al
the gathering of the required seventy-five percent of the shares. .for
holding valid General Assemblies. After~rards, any kind of decisions
could be taken with only fifty percent of the total number of the shares,
which actually was nothing but the Russian participation itself.
The transfer of oil shares at, at that time, still regulated by the
restricting legislation of 191+0-L;2 and, consequently, subject to formal-
ities and Arevious authorization. To simplify the way for the target of
Socop and, at the same time, to avoid the granting of a new term to some
foreign holders who had not as yet nominalized their shares, the govern-
went promulgated the law of 23 December 1946, by which the transfer of
shares of any kind was exempted from previous authorization. But not
the acquisitions by aliens, which had still to be authorized by the
Economic Department.
By a new law of 29 December 1946, the transfer of oil shares to
aliens was specifically restricted and the Mining Department was em-
powered to decide in each case. But, actually, this restriction did not
apply, as will be seen later on, to the Russians who, with the complicity
of the P~~ining Minister, have been able to acquire unrestrictedly further
oi} shares.
.~ new stock of legislative measures was taken with a view to facili-
tating the merging of the oil companies. This concentration was encouraged
by the Oil LaPr of 194.2? On 15 August 194.5, it was forbidden and, by Law
937 of December 23, 1946, (the coincidence of dates clearly show the
tactics), allov~ed anew with the goal of speeding up their adherence to
absorption by Sovrompetrol.
With this help, Socop was able to .acquire the desired oil shares.
This happened especially between August and December 1 7, e.g., during
. ~~
t
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 ~nx~_HiJM
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~, ~F~a,~s o~.~; ~~~~~~r~~~
the period when most of the oil companies were badly hit by the
monetary stabilization and the subsidiary financial measures. No.
wonder, then, that many were forced to liquidate or that their shares
were sold at prices which, in some cases, were even below ten percent
of their nominal value.
Pushed by the same peculiar need for legality, so common to the
Soviet type of political regime, the Romanian government homologated,
by a law of Tu2arch 19, 191+8, all the acquisitions of oil shares made
legally by Socop up to December 1947?
Finally, by the Socialization law, the rest of the shares, as well
as the assets of the oil companies, have been appropriated by the State.
For only by help of this law, the Romanian government has been put in
the position to fulfill both the obligations assumed through the Sov-
rompetrol Charter (the transformation of the shares into corresponding
assets) and to comply with the Russian plans for complete domination
of the Romanian oil industry.
2. Royalties. According to the Romanian Tdining I,aw, the private
oil corporations are obliged to pay a part of the rent for oil lands
conceded to them by the State, in oil. This quantity of oil reverting
to the State is called royalty. Besides this, they have to pay some of
the mining taxes in oil, in proportion to their production. Therefore,
their quantam varies according to the production within a year.
The share of oil belonging to the State was, during the last years,
approximately, the following:
`' ~ o~cucs uncr c am`
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~C)1 t !~
'~tLJ ~~
- C~IHDENTUL
In percentage of
Year Royalties ~4ininin~ Taxes Total the Production
in to of crude oil
1941 201.952 157.034 55$.9$6 10.02
1942 3$6.116 161.561 547.677 9.67
1943 1) 341.751 149.727 491.47$ 9.33
1944 155.100 101.500 z56.6o0 7.z$
1945 264.4$0 134.560 399.040 $.60
1946 23$.600 121.597 360.197 $.59
1947 167.900 110.490 27$.390 7.31
(1) Figures for 19L+4-1947 are estimates calculated by inference.
The intial Charter of the joint corporation provided that fifty
percent of the yearly royalties were due to Sovrompetrol by the Romanian
government, until such time as the contributions of the contracting
parties shall beccome equal. According to Soviet estimates, the Romanian
contribution was considered inferior to theirs and they pressed the
Romanian government to compensate the difference. This was done by Law
262 of Mary 30, 1946, when the Romanian State agreed to contribute to
the Capital of Sovrompetrol with seventy-five percent of all royalties
and mining taxes due to it and this again, for an unlimited period of time.
Finally, through the Protocol signed in P~oscow, the 1$th of February 194$,
the contribution in royalties (including mining taxes) was raised again
from seventy-five to one hundred percent and was due from January 1, 194$
until August 1, 1949.
Consequent]y,the quantities of oil put at the disposal of the Russo-
Romanian company by the Romanian government were the following:
For the period October 1944 -April 1, 1946, 50;'0 was due
190,000 tons
For the period April 1946 - January 1, 194$, 75 was due
433,500 tons
For the Period January 194$ -August 1949 1001 is due or
approximately
x$0.000 tons
1,003,500 tons
~. ~, t~~A~.S 0~.~'
CONFlDEN~i~~
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1 50X1-HUM
Ghat is the value of this quantity of crude oil or,
otherwise expressed,how much of the Romanian participation
has been redeemed by the contribution in oil ?
According to the Sovrompetrol Charter,the oil brought in
had to be calculated at prices current in Romania during
the first half of 1939? Yet,at that time -as well as later
on- there were in effect four different kinds of prices
inland prices without taxes,
with taxes and fens added ;
export prices at the refinery,
f.o.b.Giurgiu harbour.
The diff erenee between the lowest and the highest was
from 600 lei/tone to 1,150 lei/tone. There can be no doubt
that all this quantity of oil has been accounted at the low-
est priee,that is not higher than 600 lei/tone. This gives
an amount of nearly Lei 60o Millions
to be deducted from the Romanian obligation.
However,if the State itself had disposed,as
usual,of this quantity,-by selling it abroad
without Russian guardianship,it would have
received an amount of some Lei 1,150 "
a difference in Russian benefit of " 450 "
But, let us take a more realistic
hypothesis : that the State would have
exported these quantities of oil in-
stead of giving them to Sovrompetrol.
According to index prices on Gulf Cost
Bulk I~'Iarket,their respective prices
woul d have been
417 "
492.7 ?
th.erefore,a difference of 441 millions 1,041 "
lei which is almost the same as in the
first hypothesis. In other owrds,the Romanian State cove-
red the obligation with more than 180% than it has been
for the second "
433,500 "
for the last one
380, o00 "
for the first instalment of lgo,ooo tons 131.3 "
c r/e~d i~tje d `wi/t~ ha. i
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- ue~t~p~'N~~.
U. f. OFFK1AlS 011LY
According to a rough estimate,the quantity of oil rev-
erting to the State as royalties and mining taxes for the
period between August 1944 and August 1949 could be not
higher than approximately 1,5 to 1,550,000 tons. Therefore,
after deduction of the contribution paid ina oil,a surplus
of some 500,000 tons would remain for the State to dispose
of as it saw Pit.
In actual fact,however,long before the founding of the
Sovrompetrol,this remaining quantity of oil had been al-
located to Russia by a decree in the P~Iinisters Council of
January 25,1945,as part of the reparations due under art.
11 of the Armistice Agreement. The decree approved that a
quantity of 550,000 tons of crude oil be given to Russia,
either directly or through a third party. This quantity had
to be covered out of available royalties,mfning taxes paid
in oil,etc.still outstanding or which would be due to the
State for the fiscal years 1944/5 and 1945/6..
Consequently,all the State receipts in oil for the
period from 1944 until August 1949 have been put at Rus-
sian disposal,either as reparations or to endow the point
c orporati on.
It would,of eourse,be of great interest to know in
what way they will be disposed of in the future. Judging
by some facts and elements which enable us to make a reas-
onably fair estimate,the ~obable fate of these receipts
is not a very bright one Prom the point of view of future
State budgets:
After the monetary stabilisation a special law was pas-
sed permitting oil companies to pay in advance in cash for
concessions of oil fields made to them in 1946 and 194?.
Actually,this law was .rather a homologation of some dealings
with ~x~ fields concessions,for Which both the price
and the value of due royalties and mining taxes Were dep-
osited before the stabilisation. After it,these amounts
shrank to only insignificant percentages of their real
value. Notwithstanding,only Sovrompetrol and tkie Russian
corporations benefited from this,for since 1946 only these
~,` S. Q~f1~~
'^-~~DENTU~
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~~~? A '~ 50X1-H U M
companies have been granted oil field concessions.
Certainly,such dealings -which are equivalent to the
State's renunciation of its rights- lessened the quantity
of oil reverting as royalties and,as a consequence,the
quantity required to be contributed to Sovrompetrol became
smaller. In view of counter-balancing this loss,the Romanian
G?vernment expropriated, without any compensation, all par-
ticipation rights over oil production due to physical or
juridical persons, as well as those rights granted by the
mining and oil lags in favour of the surfae? owners of ex-
ploited oil fields.
rurthermore, according to t'he new Constitution of April
1948 and the following socialization law, all mining and oil
resources belong to the State which alone has the right to
exploit them through the intermission of State corporations.'
~~ Other considerations put aside, this measure created
since rather a confused situation. In the past,the amount of
royalties was determined by the activities of the private
companies and by their competion at auctions for oil field
concessions. After the socialization of oil resources and
introduction of a State economy of the Soviet t~rpe,sueh a
competition could only take place between Sovrompetrol,the
State owned companies and the Russian oil corporations run
by them independently of Sovrompetrol. It does not require
great wisdom to foresee that the Romanian Government will
not be able,through its own companies,to compete with Sov-
rompetrol should the opportunity arise. Even less can it
compete with any Russian owned corporation,since this would
be tantamount to hostility to Soviet Union.' Therefore,the
State will establish by law what royalties and taxes must
be paid by itself to itself. As for the Russian interests
-within or outside Sovrompetrol- they will be satisfied
according to purely political conveniences.
3 gF~ALS ~
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 ~nx~ -HUM
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"CONFlDENiIAt
3) Oil fields concessions.
.According to the factual situation at the time of the
Armistice conclusion; the total concessions of fields gra~t-
ted to oil companies on State and pr~.vate lands was
132,400 Nectars
Proportion of these fields brought into
Sovrompetrol,as assets
- By the Soviet groupl) 21,854 "
or 16f of the total.
- By the Roman i an group 7 ~6~2 "
or 6~. Remainder ~ 102,'924 "
or 78j which comprise by far the richest fields and were
in the hands of the other private companies. Their capital
was controlled almost exclusively by British and American
concerns.
Judging from drilling x~~ activities, their importan-
c e was as follows
Of a total drilling,in 1g44,of 147;000 meters
the companies belonging to the Soviet group
executed 29~ or 48;7?6 "
and the Romanian group 5~ or 7,307 "
Of a production of crude oil,in 1944,of 3;525,000 tons
the companies forming the Soviet group
tf
owned 2g a or 1;041, 557
and those vaithin the Romanian group 8f or 284,877 "
These figures show,a_pproximately,the initial strength
a
of both groups and,together,that of Sovrompetrol. In order
to balance the two groups,the Charter stipulated that the
Romanian group would ~cx~ contribute Frith the State royal-
ties and mining taxes already discussed and,also, new oil
1) In the Soviet group are included also the former Italian
oil companies which were given to Russia by the ,Peace
Treaty with Italy,on account of the repay ations,but are
not as yet included in the Sovrompetrol.
(ONFlDENilA4
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 50X1-HUM
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fields. The latter obligation was s twofold one to bring
in a number of f ie lds as 'a dowry and, also , to grant in the
future to this point corporation preference at the conces-
sion of new oil fields.
Concerning the former obligation, the Ron~nian State
brought into the Sovrompetrol fourteen oil fields of an un-
~. specified ~na~~ area,located in four different districts.
But their value seemed not to be a very important one.In
fact, at that time,ffi~xmiamm~e~~. ~~ ema~~~mma
mi~x~~ it was not known for certain whether seven of
them definitely contain?d oil deposits. Two more were as-
sumed to have a certain value,since they were located near
concessions on areas owned and already successfully pros-
p ected or even exploited by private companies. On two more,
located in the district of Bacau,all activity ceased long
years ago owing to the poverty of the soil.
Using the same tactics as they did with t'he royalties,
t'he Russians asked -by degrees- that some of these lands
b e excluded, new ones included, other changed (which amounts
to the same thing),until they estimated that the Romanian
contribution balanced the Russian one.' The first change
happened in February 19.7, when three new fields were in-
cluded. The second was agreed to through the Protocol sig-
ned in NIoscow,on February 18, 1948. It provided,inter alia,
that eleven oil fields be excluded from the Romanian contri-
bution and replaced by eight areas with a surface of 28o Nec-
tars,located within rich and prospected areas. Especially
those located at Boldesti in the district of Prahova,have
a considerable value,as this still has the richest wells
in Prahova and, in fact, in almost the whole of Romania. Af-
ter this last ehange,the Romanian contribution has the com-
position shower in the attached list.
In exeha.nge for the excluded lands,the Romanian Govern-
ment has been obliged to piv vide new oil shares and crude
oil to the value of 14o millions lei. It was further agreed
that,if even these shares and crude oil should be estimated
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 r_nv.~-HU~q
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_C A tDET R
L a I~{.J ~Iri~
i
by Russian experts as insufficient to replace the value of
the excluded lands, this new difference will be covered
later by a bi-partite understanding.
And yet,the excluded fields have to be kept at the dis-
posal of Sovrompetrol which, at any time, can ask that
these be contributed by the Romanian group. In other words,
Sovrompetrol still holds some rights over them.
This last agreement illustrates indubitably, the Rus-
sian t aetie s to extend its monopoly,st ep by step. The con-
tributed oil fields have to be -according to t:he Charter-
valued by Russian and Romanian experts in equal number. If
they disagree, the two Governments will settle the matter.
On such occasions, the Romanian Government must, of course,
yield. By this method, t'he Russians might succeed in obtain-
ing, as a further contribution in Sovrompetrol, an impor-
tant share of the socialized oil fields and assets.
As for the concessions of new oil fields, a sort of
monopoly was very soon created in favour of some State
companies which none the less were working for Sovrompetrol.
These are A.C.E.X. and Socop.
A.C.E.X.is a State owned Commercial Administration,es-
tablished in January 1939,for the purpose of complimenting
private initiative in prospecting work, namely in those
areas of possible oil resources whie'h would be considered
by private companies as uneconomic. Nevertheless this Ad-
ministration was established out of the necessity to cor-
rect the progressive decline of the oil production, a sour-
ce which was at that time of a great importance for the
purpose of achieving the armament programme. Its importance
increased after 1941 when a common prospecting programme
was agreed upon by the German and Romanian Governments,
whose fulfillment was given into the charge of A.C.E.X.and
Continentals Oel A.G.
Until 1946 its activities were confined solely to pros-
pecting and exploration of oil fields. These were,after-
wards, conceded at auctions to private companies for
a t tt~~t~ ~.Y CONfIDENTUL+
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- 45
:~ ~1 ?~~
~r~ v~~'
valuation and exploitation.
By Law 771 of April 4, 1g46,the powers of A.C.E.X.were
increased, e.g.it had henceforth the right to exploit oil
fields too. That meant that the State will no longer pass
prospected areas over to Zr ivate companies but will reserve
them for exploitation or concede them directly to Sovrom-
pet rol. From this time on, no new concessions have been gran-
ted to any private corporation.
By Law 309 of August 13, 1947, a new sort of monopoly
was established over oil areas this time to the benefit
of Socop, to whom the State has been bound to grant "until
the Romanian contribution to the capital of Sovrompetrol
is completely-covered", all its exploitation rights on any
kind of mining property which belong or will belong to the
St at e,a.s well as all withdrawn, redeemed, lost, cancelled
or abandoned concessions previously granted to private com-
panies. These rights had to be the object of direct agreem-
ents between the State and Socop, with exclusion of any
competition and without being obliged to fulfill the f or-
malities provided by the Oil Law (such as public annd~unce-
ments, public auctions, etc.) At the same time, Sovrompe-
trol was empowered to chose from these areas and rights
now belonging to Socop all those which it wig estimated
as the best. Furthermore, the pri ce of the so-chosen fields
or rights were, afterwards, regardless of that at which
they had been conceded to Socop, estimated and fixed by the
Soviet-Romanian Experts Commission.
By the same law, the Socop was granted 750 of all min-
ing properties declared exploitable and belonging to the
State,loeated in the new oil area in the district Arad
(ylestern Transylvania}. The price of these concessions was
also arranged between the Mining Department and Socop.
Shortly before the promulgation of this law, new con-
cessions on ?ight isolated fields which were granted some
years ago,among others,to the British concern Astra Romana,
~ ~~ o~~A~ ot~~
.,..
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:~.~. Qf f 1t1A1~ Qi~.1
coNFlDE9~
were distributed among Sovrompetrol, A.C.E.X., Creditul 1bTi-
nier and Sonametan. The latter -a State corporation too,like
the other three, having the monopoly on urethan gas exploit-
ation- had already been compelled a year earlier to hand
over to Sovrompetrol some of its gas resources located in
`Transylvania..
At the end of 1947,the Sovrompetrol was, in addition,
granted the exclusive right of exploitation of new areas si-
tuated in Banat,with a surf ace of 25,000 hectares.
In March and June 1948, same other concessions were given
t o Sovrompetrol and the two Russian companies, Concordia and
Colombia, on three fields of 64 hectares, located in the dis-
trict of Buzau, for oil and gas exploitation.
x
To sum up, the Romanian contribution to the capital and
endowment of Sovrompetrol has approximately the following
picture (figures in millions of lei)
- the shares of Creditul 1Ufinier and P,edeventza
1, loo
- the shares of the other 23 companies
580
- new shares and oil to be contributed,accor-
ding to Protocol of February 18,1948
140
1,820
alties and mining taxes contributed
_
- ro
_ 6OO
.
y
2,420
- the remainder required to complete the total
of 2,500 millions lei which is the Romanian
contribution,that is
80
is considered to be the value of fall the ~ 2,500
oil fields contributed already (and mean-
while exploited by Sovrompetrol) by the
Romanian State I
Yet, this estimate is too optimistic, for its real value
is far greater. In 1945 Creditul P~Zinier increased its capi-
t al,by re-evaluation, from 700 to 1,565 millions lei. There-
fore, t'he contributed oil shares are worth
'F~F~.#a . ,.
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 5X1-HUM
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- "'[6NFlDENiIAi
exactly
plus those agreed upon in 1948
As indicated above,the royalties are worth
To this must also be added the payment of
approximately 4 millions ~$,paid by the Ro-
manian State to Sovrompetrol as "compen-
sation" for los$ of past profits due to in-
adequate oil prices and for replacement of
depreciated equipment, etc. ~t present of-
ficial rate, this amount represents a fur-
t her
Hence, the Romanian contribution amounts
at, at least, 4,326 millions lei,besides the
oil fields which are,alone,worth a great
number of additional millions of lei.
~ ~ ?~F~; amt CONfiDENTI~I
2,545
140
2,685
1, 041
3,726
4,326
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 tinx~ _NUM
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~~~'.
~ v~ r
CON~IDEN~UUr
THE RIISSIAN CONTRIBUTION.
~Pe saw earlier the way in which the Russians appropria-
ted -before the Sovrompetrol Charter had been drafted- the
German assets that, afterwards, constituted 70~ of the Sov-
iet contr~abution to the capital of this joint corporation.
Yet the amount and distribution of these assets has subst an-
tially changed since. Conceding to a Russian request, made
because it was suspected that there were German assets and
interests still hidden in the oil industry, the Dining 1~Iin-
ister ordered, in September 1945, that all the oil companies
once more declare the initial distribution of their shares
according to nationality of shareholders,at the date of the
Armistice Agreement, and ~~ also any changes that had mean-
while occured. Actually, new German interests have been un-
covered. The German title of ownership on some of them was,
from the point of view of Romanian law, very controversial
indeed. However, since the Russians criteria had to be
obeyed,all of these new assets were han dad over to the
Union "Ucrneft" at dif~@erent times, in 1946 and 1947.
The ft>arst transfer was undertaken on February 22,1946
when,under law 85, the list of t'he German interests in the
eleven oil companies initially appropriated by Russia on
July 1945,was amended and enlarged as follows
Appropriated on
July 11,1945
Changes on
February 22,1946
Com an
in million
lei
Concordia
755.8
804.7
Colombia
325
975
Petrol Bloc
285.5
285.6
I.R. D. P.
115.5
100.7
Continentale
Oel
loo
--
59
59.1
Explora
The remaining five
119
companies unchanged 119
1,759.8
2,344
~`s. o~'itlAC~ c~.~
C0NFlDF1R~~1.
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 5X1-HUM
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OFFIt~?
`:`~` cO1~D~TUU~.
?
The capital of Colombia was increased,in May 1945,from
38o to 1,14o million lei, by re-evaluation of the company's
assets and,in this way,the Russian share was increased by
65o million lei without their being obliged to pay anything
for the increase in value of their participation.
Continentals Oel was a "Gesellschaft mit beschrankter
Haftungn,e.g.with limited responsibility and,therefore,had
no shares. For that reason it was excluded from the Russian
contribution in the Sovrompetrol. Nevertheless, this company
disposed of very important assets. Thus, the total of its
investments, merchandise, materials and paper assets, in
September 1944, amounted to nt~t less ~k than 1,560 .million
lei which means over fifteen times its capital. True,these
assets were count er-balanced by creditor liabilities of
1,47o million lei but -according to the Russian definition
of 'asset"- they were simply cancelled. A1so,Continentale
Oel was connected with the German Office for Petroleum Stu-
dies "Vifo" which had a certain technical importance in the
Romanian oil industry. Both these companies have been mer-
ged in the "Administration of Russian Goods and ~~.terests
in Romaniat',a huge holding trust of the Soviet Union, in
addition to the various joint corporations,and is run by
the Russian Commercial Representation in Romania -according
to orders from Moscow- on a complete extraterritorial basis.
As for the other companies, the amount of German in-
terests has been revise d,according to results of later in-
quiries into the nationality of their shareholders. However,
not all of these new appropriations belonged legally to
Germans.
after this last modification, Russia held nearly 25f
of the whole share capital of the Romanian oil industry
and took third place- after the British and Romanian in-
~erests- in the list of shareholders. That represented al-
most loo more than the Germans legally owned or controlled.
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5~ CONFlp~p~~
Until end of 1947, the Russian interests have been ex-
tended by acquisition of new participations in other compa-
nies. After the peace treaty went into effect, the Russians
also took over the Italian interests and investments in the
Romanian economy. In the oil in dustry,these were represented
b
the c
nies Prahova
Petrolina and Xenia
If all these
y
ompa
,
.
new acquisitions are added to the former, it necessarly re-
sults that the Russians owned,in 1948, approximately 30~ c~
the then share capital of the Romanian oil industry. A de-
t ailed situation of these interests is given in the attached
list.
Before going into other details, it is necessary to stress
that the monetary stabilisation and the following legislation
ordering the computation of private capital hadn't touched
the Russian interests. V~hereas many companies lowered their
share capital or,even,were forced to liquidate, the Russian
holdings kept their pre-war nominal value,and,of course the
capital of Sovrompetrol remained the same, e.g.5,ooo mil-
lions lei.
After 1945,part of the Russian participations were
brought into Sovrompetrol to cover the Russian contribution.
That occured on different occasions. In 1t2arch 1947 {after
the same famous Moscow agreement of February the same year)
five Soviet-controlled companies - Explora, lt2eotica, Buna
Sperantza, Transpetrol and Internova- were merged into Sov-
rompetrol. The last-named was an oil ,arketing company,es-
tablished in 194o with German participation,and has done
very successful business since,as its profit of 420 in
1941 demonstrates. Not all the capital of these companies
belonged to the Germans and therefore has been initially
transfered to Russia ; the rest of it has in the meantime
been acquired by the latter, according to a policy of~sepa-
ration of the interests by whole companies.
Under the Protocol of February 18, 1948 signed in Mos-
cow it was agreed to further include in the Russian contri-
b ution part of the shares of Naphta Romana and also the
~Q~~~
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:~:
4~ilY
51 -
CQNFlDE~alvt
pipe line Copaceni-Ploesti,both acquired subsequently.Unti1
1947, 4o?fo of the capital of the latter was owned by Rede-
ventza which is since 1945 a State cordpany.
Therefore, the Russian contribution thus far gives the
following picture (figures in million lei)
- list of the shares as of February 22,1946 2,344
- additional shares acquired in the four
companies merged in rlarch 1947 plus the
company Internova 14,4
- additional shares acquired in t'he capital
of Sardep 6.66
- Naphta Romana and pipe line f3opaceni-Ploesti 39.6._
2,404.7
still to be covered
2,500
Let us remember that,aceording to the original Charter
of Sovrompetrol, theRussian group was obligated to contri-
bute to the capital of this point corporation with 70~ oil
shares and 300 (74o million pre-war lei) in equipment and
installations. After subsequent modifications, the Russians
that succeded in covering actually 96% of their obligations
with Romanian oil shares e.g.with Romanian assets appropri-
ated, acquired or. transferred. to them mostly as a result
of or by misinterpreting inter-allied agreements, such as
the Potsdam Agreement and the Peace Treaty.
As for the remaining 4~,it is very probable that it has
been meanwhile covered also with oil shares,as the Russians
own -besides their contribution to Sovrompetrol- some ad-
ditional 841 million lei participations in Romanian oil
firms.
In this way,they succeed in escaping fulfillment of
their obligation to contribute the material and machinery.
Actually,these tactics are the consequence alone of the
tremendous difficulties encountered by the Russian oil
indtn try itself and of the shortcomings of the Russian oil
t~s: o~cu-ts +~~ CA~tFIDENTU~:
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~~~~~.,
equipment industry which is not able to keep in step with
the requirements of the ambitious plans for reconstruction
of the oil industry in the Caucasus. This has recently been
proved again by t'he open criticism begun in the Soviet press
against these shortcomings -which is used to serve purpo-
ses other than a mere self-flagelation- and earlier, by mo-
nopolizing both Romanian and Czechoslovakian capacities
of production of pipes and oil equipment for Russian needs.
The Sovrompetrol Charter provided that the two groups
were obliged to transform tie oil shares,no later than
August 1950, into installations, oil fields, machinery,
equipment,etc.e.g.assets of a corresponding value. What are
the prospects of Russian contribution from this viewpoint ?
The balance sheets of the Russian owned companies
closed in December 19+1+ showed as assets,the following
Investments
24 billion lei ,
Merchandise and materials
g
n
Paper assets
2
rT
34 ,t
o r some 3.5 billions of pre-war lei. Consequently,they will
be able to transform the contributed shares into assets
and still remain with a substantial amount of investments
and materials as assets for the rest of the oil companies
which are managed separately by their Commercial Repres-
entati on in Romania.
x
In summarizing up the Soviet contribution,it is evident
that Sovrompetrol is nothing less a disguised Russian pene-
tration. This corporation was formed solely with Romanian
assets and is working only with Romanian means. The Rus-
sians contributed to it actually their "capital of expe-
riences' which is the "know-how" in exploiting and marketing
- and the method for constructingf'progressive socialism".
With the exception of the latter the Germans promised the
same.
~`s: o~atits o~.r ~~N~IDENTIA~
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~~~' _ 53 _
~t~~~ ~~
,~,,. CUUtlFAEl~lla~
THE POLICY TO~ffABDS PRIVATE CAPITAL.
1) During the war.
The policy of encouraging foreign capital to invest in
th? Romanian economy,practised until late in 193o,was coup-
led with the freedom of transferring the profits into foreign
countries. During the Depression,and until 1935, the pro-
fits of foreign investments were frozen. ~~hen later they
were freed for use within Romania,the majority of these ac-
cumulated profits preferred surer investments in real pro-
perty to that of industry. This vacuum -enlarged by the
steadily increasing industrialization,caused also by the
urgent need to arm- was to a great extent covered by State
capital,accumulated through means of increased taxation.
During the period 1936 to~? 1940, special attention was
given to a policy aiming at both increasing the pro duction
and directing oil exports towards markets which could pay
either in hard currency or in capital goods and the raw
materials necessary for their production.
The private companies were not only associated in this
policy but,actually,their initiative towards this goal was
encouraged,by leaving to their free disposition a fair
share of the so-earned hard currency. In the administration
of capital, managing of investments,etc.,they were not res-
tricted. No profit control was practised during this period
of time. That helped the oil companies to increase their
sinking-funds and accordingly amortize their investments
(whieh,in 1935,were already amortized for 61% of their
value). ~
After September 194o,there was introduced a nationalis-
tic policy aiming inter alia,at expropriating Jewish as-
set~ and recuperation of foreign investments. Yet this po-
~v ~ ~a ~-~
cowFlO~"-
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licy started simultaneously with the German penetration.
The latter tried not only to monopolize the production
(which actually occured,as far as oil Was concerned,through
the conclusion of the Oel Pakt) but,equally,to get s strong
foothold in the capital of the oil companies through acqui-
sition of oil shares. In spite of the fact that~a they ap-
proved,and even promised - according to records of secret
conversation held in the summer of 194o,between them an d
Antonescu,through the medium of the German Legation in
Buc'harest,and afterwards,between the latter and Hitler and
Goring in Vienna- to help by keeping aloof from the process
of expropriation oY Jewish assets and recuperation from
foreign in.vestments,the Germans steadily followed this po-
licy of penetration. For this reason, it is still difficult
to differentiate and say to what extent the measures taken
in controlling foreign interests during the war were due to
the nationalistic policy itself and 'how far they were aimed
at protecting them against German penetration.
~'~mong these measures were the appointment of adminis-
trators of control and supervision, the nomin~lization of
all oil shares in the name of their holders as of August
8.1940 (the beginning of the racial policy initiated by ex-
King Carol II) and,la'st but not least,the modification of
the Petroleum Law in July 1942. Under the latter the State
openly tried to protect native oil companies,and to en-
courage,f acilitate and speed up their concentration into
strong 'holdings,through amalgamation.
However, due t o political pressure as wall as to the mi-
litary events of that time,only a minor part of these goals
and endeavourings were realized up to September 1944. Yet
many of these and other legislative and administrative
measures -which bore the stamp,equally,of the war economy
and the nationalistic policy- created rather a state of
confusion in many. respect s. Settlement was postpondd until
after the war. However,the Armistice,as well as the Russian
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~~~~ huts Ear - 55 C~~IAENT
occupation thwarted these plans,and -as formerly mentioned-
it thus offered the Russians more legalistic pretexts to
justify their de facto monopoly.
The old policy of increasing the oil pro duet ion was con-
tinued all during the war and -under the ,then prevailing
circumstances- everything possible was done towards this
goal. This is evident from the Pact that drilling activities
in 1942 and 1943 came very close to the unprecedented peak
of 1937?
Export prices
on a certain
quantity of oil pm duets were
Germans only partially res-
bound by the Oel Pakt. But the
pected their obligations under this agreement. The armament
prices were rapidly increased and were not in proportion to
those of the oil products. According to a conservative cal-
culation, Romania paid at least 30% more for the German ar-
maments than had been agreed under the Oel Pakt. This caused
a critical loss to the Romanian economy and weakened her
war effort. ~Jith the view of compensating for the low ex-
port prices and the financing of the war, the inland prices
were kept at a high level. All in a11, the State disposed
of and directed most of the oil exports according to war
necessities,and also controlled the prices.
It is obvious that all these measures and restrictions
in many respects altered the pre-war eondittions in which pr i-
vate capital operated. The policy of high taxation to finance
the war hampered the oil companies in making the pre-war
high profits. Nevetheless, their balance-sheets s'howed,all
during t'he war,profits of at least 12~o to 2ojo,not to men-
tion some trading companies that realized conjecture prices.
But the high texas did not permit them to divert substantial
shares of their profits into redemption funds and thus to
continue the pre-war policy of speed amortization of their
investments.
Despite the fact that the State itself was obliged to
~??~,ts ~ '~NFlDENIUIl~
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- 5 - ~
~~~~~~ ~ 6
~~~~r
~~~
finance its exports to Germany through the National Bank,
the private companies -owing to some satisfactory arran-
gements- did not too heavily feel this financial dependence.
The real difficulties started only after August lst,1943,e.
g.the first and subsequent bombardments of the Romanian oil
fields by the Allied Air Force.The reservoirs and some of
the installations have been,to a certain extent,preserved,
as a result of the protection walls built up earlier by the
Germans. In the main,the refineries were badly damaged or ~ffi
some were even completel~r destroyed (it would appear that
thay were the main target).
As,on one hand,neither the companiest own funds nor the
credits granted them by the State were sufficient to recon-
struct and repair the damages,and,on the other hand,the vo-
lume of new damages caused by subsequent bombardments ~
not been foreseen,there was created in vecember 1943,through
State initiative,a common fund for reconstruction of the oil
industry. To this,the State contributed 25~ (mainly bit rai-
sing the oil priced for domestic consumption),the oil com-
panies a further 25/0 (in proportion to their daily produc-
tion) and the remaining 50~ was to be covered by the German
Government. The State overpaid its share. The oil companies
complied only for the first year,and from Germany there was
little realized.
The total damages amounted to some 25 billion lei (1944
value).Credits to help the reconstruction programme were
granted by the State,both before and after the Armistice,
to an amount totalling 9.2 billion lei. Of the remaining
more[ than 60o damages,no compensation has as yet been liven,
notwithstanding the fact that after September 1944,the Bulk
of the credits granted went mainly to Romanian. and Russian
corporations to assist,primarily,in this reconstruction.
To summarize, due to the subsequent calamity which oc-
cured -the bombardment of the oil fields- the private com-
panies were necessarily compelled to act in accord. This
.`~~; ~1A~S ~~.Y ~~-~~iI~T1AL~
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situation therefore provoked the need for greate~3 interven-
tion by the State into private business as well as placing
upon the latter a greater financial dependency with regard
to public credit. The Armistice thus found private capital
already greatly weakened and dependent upon the State.'
2) Aftor the Armistice.
The greatest piro blem created under the obligations of
t'he Armistice Agreement was to find v~rays and means to finance
the reparations paid to Russia.' The public means were al-
ready weakened and,shortly aftervaards,completely collapsed.
A scapegoat had to be found, and for this role private ca-
pital was selected. FTence,the period after September 1944
could be called that of the policy of "robbing private ca-
pital".
kith the view of coping with t'he tremendous reparations
payments pretended due them by the Russians,the oil prices
at the refineries have since been kept very low and the do-
mestic prices high. They were fixed by law and modified at
infrequent intervals. The payment for the delivered oil
products had been made by the Finance Niinistry,and the too
numerous formalities and procedures required,continuously
increased the period of payment to more than that of 45
days originally stipulated. To this was also added the ad-
ditional handicap of the Russian habit not to deliver docu-
ments of acknowledgements for the oil deliveries,which was
another reason for further delays. In the meantir~.e,rapid
inflation was quickly diminishing the purchasing power of
the amounts due to the oil companies. I~oreover,despite the
fact that it was the practice of the State to withhold
funds due to the oil companies for oil deliveries, it refu-
sed to permit the taxes owed by the companies to be deduc -
t ed from the amo~annts owed them by the St at e, as at this
time,the State Treasury was in serous need of the receipt
of immediate funds for fulfilling the ~~paration penalties.
~~.Ss~Y~ f ~M~ ~~~
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The oil industry was by far the most important as well as
the most certain source of taxation. Therefore the combi-
n ati on o f low prices and high t axa.t i on, hid~x~h~xffiz~x~i~~
~ the long terms
of payment and the monetary inflation hit the oil companies
very hard and rapidly consumed their assets.
New losses have been inflicted by the double price policy
being practised by the State, in which prices for oil pro-
ducts were raised 80~ while those for oil materials and
needed services for the oil companies were raised to more
than 300.
Thisw policy resulted in a peculiar situation. Since
discrimination between Romanian and foreign capital was
hardly possible all investors had to be treated similarly.
Thus,British, United States and French interests found them-
selves in the paradoxical position,after September 1944,of
having to pay substantial reparations to their ally-Russia
Balance sheets of the oil companies for 1945 and 1946
show only losses. Funds of the oil industry were so limited
that beginning with 1945, most of the companies even had to
borrow the money necessary for emolument payments. Credits
became scarcer every day and after the nationalization of
the National Bank and t'he inauguration of t'he policy of di-
rected credits, these were granted only by approval of the
Finance Ministry. After the stabilization, the national
credit fund became very small indeed -owing to deflation
and expropriation policies- and absolutely controlled by
the State. Thus,the private oil companies could neither ac-
cumulate nor borrow necessary funds with which to acquire
the materials or equipment and to compete for t'he acquisi-
tion of new oil fields. Their competition has little by
little been made impossible,and thus a vaccum was slowly
created into which the Russians entered without any hin-
drance.
And yet, t'he inroads into the private sector of the
t~-1~~D~
~~~~.s ~~ ~~ ~~
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 r_nv.~ ~ ~~ ~pq
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?
economy have not been limited solely to those financial as-
pects State control and political int?rference completed
the job.
The Mining It~2inistry appointed various Control Adminis-
trators over the larger corporations whose duty it was to
supervise the production and distribution of oil products
as well as their management. To those firms which had German
participation, or belonged to persons considered to be ex-
enemies,or which were located within areas occupied by Ger-
m an troops in September 1944, there were appointed CASBI
Administrators who actually received orders directly from
the Soviet Control Commission. They were appointed or re-
moved only by order of the Soviet authorities.
Means of transportation belonging to private companies
were subject to Russian. expropriation as were those owned
by the State. No discrimination was made between Romanian
and foreign corporations or interests.
Furthermore,in some parts of the oil fielder regions,local
Committees for the application of the agrarian reform took
possession of oil fields that were -in many cases- paid for
and owned by foreign corporations for the purpose of their
redistribution as agricultural lands.
However,the most important tool"in Russian hands has been
the Communist Party. This helped in the expropriation of
foreign and private interests through the medium of Syndi-
cates and Factory committees. They did,for Russian purposes,
a perfect job up until late in 1947,when they became useless
and were actually abolished. The Syndicates helped primarily
t o weaken the big foreign companies,by cha~ng the specialists
(as they were not "democratstt),by inroads into the adminis-
tration or thwarting plans for fulfillment of their conser-
vative production programmes.
Another means to exercizing pressure upon these companies
was the workers incessant demands for pay increase. They
were,no doubt, justified to a considerable extent by reduced
o,'s:`s e~~ CONFlDEIiT0114
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e~, ~. 61tFiClAI$ 6lll~ _ eo -
~~f
purchasing power of wages, caused by inflation,below 50% of
that of 1938. But the Gavernmentts price policy rendered im-
possible continuous increases in wages and salaries. Quite
grequent "sponta.neaus" strikes as well as the obligation of
the employers to pay salaried absence from work,who were sum-
moned to be present at manifestations of Soviet-Romanian
friendship,or in demonstrations of protest against both Fas-
cism and capitalistic Imperialism,inflicted upon them fur-
ther financial losses.
3) The Monetary Stabilization (August 15,1947)
The open stripping of private capital practised con-
comitantly with the monetary stabilization is nothing more
than the result of the conditions prevailing in the Romanian
economy since the armistice and this alleged stabilization
was merely the inavoidable readjustment of a community that
has overspent. The way to it has been long and carefully pre-
pared by the Russian reparation policy.
As all the rest,the petroleum industry has also been
strongly 'hit by the enforcement of Law 303 of August 27,
1947. This law ordered the recalculation -within ten days-
of all the assets of private corporations for the pe riod of
January 1933 until December 1~4q~,aecording to coefficients
of exchange and regulations which were very unf avourable
for the undertakings. This is not the place to enter into
the technical details of this law. Yet,mention must be made
of the fact that the coefficients differed and have been
repeatedly changed according to the interests and purposes
of the State. For instance,the exchange rate of old lei into
stabilized lei was 20,000 : 1. Hovoever,that applied to un-
paid rents for fields used by the oil companies as well as
unpaid taxes, fees, fines,ete.were recalculated,retroacti-
vely,at the rate of 3,000 1.
The law specified that the minus differences stated
CON~IDENTUIL
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61 CnMFd9FMda~
after the computation, had to be -until sometime in 19'+9- aic
either covered by the shareholders or the companny's capital
was proportionally lowered if contrary,the undertakings
would be liquidated by law. The shortage which followed
after stabilization was established,h?wever,made impossible
the covering of the differences As for the pr ocess of re-
ducing thecapital,the socialization -which followed ten
months later- rendered it futile. Needless to say,this
piecemeal recalculation of the private assets actually ob-
literated most of the funds and investments of the private
companies,yet the Soviet goods and interests were completely
exempted from complying with the provisions of this law.
A further law provided the compulsory cessation of all
eta foreign monetary funds and of the deposits in foreign
countries also the creation of a State monopoly on all
such means, present and future. The~dil companies were damaged
not only by the practice of a low official rate of exchange
but also by cutting them off from all their business rela-
tions and their foreign credit sources. Needless to say that
these provisions did not apply to any of the Russian com-
panies or interests in Romania. As for Sovrompetrol -and
other such joint corporations- there has already been ex-
plained the privileged position created for it by the Char-
ter,inasmueh as this company had the right to dispose freely
of all its foreign funds obtaindd through the export of oil
products.
The price policy has not been basically changed since
the stabilization,and its objective was still the same
the expropriation of private capital.
The Romanian Government currently is practising a three-
f old price policy
a) .Prices for oil products at the refineries were fixed
after the stabilisation and have remained unchanged since.
They are from 25of to 3ooJ higher than those of 1938 and,
o~tcus~-~r CAN~IDEHTU~t
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thus,a little higher than current world prices. As a
direct result of the high transportation tariffs practised
ever since,prices for domestic consumption are from 400% to
500% and even higher over those of 1938. In comparison with
post-stabilization level of wages and salaries (mostly below
that of 1938),they are,without any doubt,m_uch too high. The
gen eral pauperization compelled the State to overburden with
taxes on the domestic consumption and,particularly,the pro-
ducts of prima necessity. But these high taxes on oil pro-
ducts for home consumption demonstrate, at the same time,how
unprofitable this branch of the Romanian economy is since
it became a Russian monopoly. By such means,~the State tries
to compensate -at least,in part- the low prices paid for oil
deliveries to Russia and to accumulate funds for new invest-
ments in oil industry. The first,and last,list of price re-
duction oP October 1948 for some articles of domestic con-
sumption did not include any oil products.
b) Export prices to countries other than Russia
The initial export prices fixed in August 1947 were,two
months later,drastically reduced by 68~o,with the view of
bringing them down to the world price level. This meant,
fir~tly,a recognition of the failure of the monetary stabi-
lization programme,inasmuch as it was by this step publicly
admitted that the IISA $ is not 150 lei worth -as had been
fixed by the official rate of exchange- but actually 252 lei.
It demonstrated also that the barter trade system is not a
paramount remedy for the Soviet type of economy,as we are
told every day.
Besides the official price reduction,the Government
created a Fund for Exchange Equalisation,which is nurtured
b y special revenues,and by which weans the export prices of
Romanian products could be adjusted -when necessary- accor-
ding to level existing in the foreign markets.
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~?~b,~ ~r sO~1DE1~11A1
e) Export prices to Russia are twofold those applied
to oil paid as reparation,a.nd those practised for commercial
exports.' The former are figured,sinee January 1945, on the
basis of international oil prices of 1938 plus lob. Yet,this
rise of lof was overwhelmingly annulled since by the penalty
interests of 5~ per month or 60~ per annum,paid for late de-
liveries of other goods. presently,these prices are not
'higher than approximately one-third of those practised in Ro-
mania in 1947.
Those practised for commercial exports are expressed by
so-called "basical prices",a formula which attempts to sug-
gest that a sort of magical yardstick -has been discovered to
measure the value of the economic goods in an absolute and
constant relation to each other, disregarding the variations
of prices or evolution of economic neeessities,an d of the
law of supply and demand. ~~hen compared with present. prices
in practice in Europe and in the ~lediteranean area,they
show that Romanian export to Russia is at least 30;~ cheaper
(that applies especially to timber lumber and oil produets).~
No price fluctuation is allowed or practised. Only the kinds
and quantities of goods intercli~nged are altered solely ac-
cording to Russian necessities and initiative. Consequently,
this barter agreement 'has not even the advantage of the Oel
Pakt,for this latter provided,at least,that petroleum pro-
ducts shall be exchanged for armament.
The Soviet Government granted to Romania,in 1948,a credit
in goods with quarterly paid interests of 5`~. This means
that the prices for goods bought recently by Romania for 15
~' million ~ from Russia are 5f more expensive than even those
'?basical prices'. Therefore,the ~~ices paid by Russia for
Romanian oil in commercial export appears to be not much
higher than that paid far oil as reparation.
~~' ~~~"~' ~'~~ CONfIDENTi~~
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~t~ ~ ~r ~~
Besides 'tFie legislative measures taken against private
capital,such as expropriation by a completely uneconomic
price policy, the ~.imiting of its profit to a maximum 7j~o,etc.
during the ten months between the stabilization and the socia-
lization, there were also applied a series of measures which
predicted and paved the way for the socialization.- ~e confine
ourselves however only to underlining at this point the ex-
cessive taxation, the deeper State control and aui~horitative
interference in the operations of the private oil companies
as well as the sequestration of their tools and working ~
equipment .
6Vhen,in October 1947,the present Finance 1Vlinister retur-
ned from l~~oscow -where he received new instructions- a wave
of unprecedented and ruthless fiscal policy was inaugurated.
This began ti'l7.th a law under which the Finance Ministry was
empowered to recalculate the taxes due and and even those al-
ready paid for the past year or longer, and to compel the
private companies to disburse the difference without delay.
By this method,the Finance Department proposed to combat and
uncover past fiscal evasions. And this,in addition to the
disproportionate reealculati on coefficients for taxes due,
ordered by the stabilization law.
Some taxes and fees have been raised anew and a comple-
mentary tax was decreed on profits from trading and industri-
al activities. All taxes are payable monthly. If not paid on
time,they are raised from lo~~ to 3o;o and if three months or
more ~ overdue,heavy fines are applied. As a result of
the price policy and the scarcity of money and credits which
? f ollowed after the stabilization,a significant proportion
of private corporations have not been able to fulfill the
new fiscal burdens and have been either sequestrated or
liquidated or,on their own initiative,have requested juridi-
cal liquidation. ~Tith this result,the law attained its
first goal. The second was to create the excuse for with-
holding proper compensation for socialization,and which will
~~~: was v CON~IDENTU~
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- 65 _
~s ~ ~~F !~D~~~~~~
be further discussed below.
Yet,this new fiscal policy was not applied to Sovrom-
petrol and any other Russian companies and interests in Ro-
mania. More than that, in March 1g48,the Government decreed
that this category of corporations would b e taxed tha same
as State undertakings, e.g.very low and -with the view of
protecting them from any fiscal annoyances- there was bes-
towed upon them the privilege of being taxed provisionally
until they would be in a position to close their fiscal
balance sheets.
Besides the guardianship of the Syndicates,the authority
of the IlTining Department and the encroachments of the Price
control and Fiscal authorities,etc.,there was established,
in June 1947,by the State the so-called "Industrial Centra-
les" into vrhich the oil companies were forcefully grouped.
By their me dium,the I!~iining Department controlled, directed
and supervised the production but actually they were the
organizational frame for the coming socialization.
Late in December 194.7 there was instituted the State
"Committee for Petroleum Co-ordination" which was charged
particularly with the distribution of oil products in home
consumption;mm~ this is tantamount to applying new measures
for its lowering and,thus,inereasing the quantities for ex-
port.
Finally, in February 1g4c3,there was founded the State
corporation "Petrolex" in which there has been vested ever
since the exclusive monopoly for oil export.
Concomitantly with this set of throttling legalistic
S` and administrative measures,there had ~~~ earlier been di-
rect attacks delivered against foreign interests. On Decem-
ber 12,1947,"Antra Romana",the biggest oil concern in Roma-
nia and the not less important "Unirea",controlling together
nearly 40;/0 of the entire oil production and owned by the
Royal Dutch Shell Co. ,were put under State control. This
step was officially justified by the reason ghat these com-
~r~~ ~~
(ONFlDENTIAL
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 r_nv.~ ~ I~pq
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"~ ~ ~cUtE.p~ _ ~~AD~NTUii
panics "sabotaged" the State petroleum policy,practised oil
theft,showed deficits caused by bad management,etc.
As is well known,the expression "sabotage's is very dear
t o every Soviet-type of economy. For it has- in its present
stage of limitlessness and close metaphysical meaning- elas-
tic facilities for covering up bureaucratic incompetence and
the shortcomings of an inefficient Soviet economy. As for
this particular case,the absurdity of this assertion can be
demonstrated by the evident fact that at that time and there-
after,the St ate petroleum policy had no other goal save to
help the extent ion of the Russian monopoly and the creation
of a f ramework for the coming socialization.
The last reason may need no comment but to the second
one must be added the remark that oil theft is neither sur-
prising nor for the first time being practised in Romania.
This is an old policy applied by foreign capital every~there
and one of the consequences of the competition and struggle
for oil resources. Actually,it is no less than an est ablished
feature of the "oil morale",and the Russian policy is still
worse.
Going back to the foreign interests and the measures
taken in December 1947,it is noteworthy to also mention that
the accusation of sabotage was based mainly on the fact that
the foreign corporations had not accomplished the objectives
of drilling and production fixed for them far 1947? Maxey of
these quotas were -from both technical and economic view-
point- unattainable and would have resulted in inflicting
losses to private companies,unless they had not adopted a
socialistic method of economic calculation and,consequently,
the unavoidable losses covered by public funds.
Previously,the ~:~Iining Department gave to Astra the
choise to either enter into partnership with Sovrompetrol
for the exploitation of some isolated areas consolidated
long ago under its name (of which mention was made above)
or to lose all rights to those areas. The company refused
and its rights were,as a result,cancelled.
u. s. o~~aus aar caN~IDEM1Al
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~. Oar -
pEN?IAI
In theme appointed "Administrator of Supervision" there
was vested certain powers that unabled him not only to veto
decisions taken by the General Assembly and the Board of Di-
rectors,but actually to nullify their rights and even to dis-
. miss board directors.
Approximately the same time,the Law for organization of
the Geological Institute of ~?omania was modified and,among
other novations,there was also included the provision under
which the private oil companies were required to submit
their detailed prospecting research and plans to this Ins-
titute and to other State authorities. This was tantamount
to depriving them of their exclusive right to the results
of their exploratory work and investments.
In December 1g47,the State ordered a census of the en-
tire private sector of the national economy which clearly
heralded the future socialization,for on the returns of this
census have been based further factual measures taken since.
Then,all the refineries but one,situated in the district of
Bacau have been closed. In April 1948,a11 oil and gas indus~
tries were ordered to bring together all their working tools,
equipment, materials, transportation, even to merge their
oil fields and administrations,according to a rationalization
plan worked out by the Dining Department. The production
_ itself was concentrated on eight exploitation blocks,head?d
by the larger corporations,in collaboration with and under
the supervision of the Industrial Centrales. The 1st of
June of the same year,all machinery, materials, tools,etc.
belonging to oil companies were blocked and put at the dis-
? posal of the Mining Department which had the right to use
them,freely and without compensation,for State production
programmes. This action was deliberately taken only with
the purpose of freezing these assets before their soeiali-
zation,which folowed ten days later.
~"~~ ?~~ :ONFIDFN~
.~
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~ONFlDENIIAI
SOCIALIZATION AND ITS AFTERP~IATH.
The Law of June 11,1948 socialized,firstly,all subsoil
wealth and resources and then,among others,32 oil and ~
urethan gas companies, including all their assets and rights,
all subsidiary undertaltings as well as those ~~~ permanent-
ly required by the companies' activities. Their shares and
participations passed into the State patrimony.
Fror,1 socialization there was,of course,excepted every-
thing that belonged to ~x t'he Russians,e.g.none of their
shares, assets, oil fields concessions, refineries,etc.were
affected by the provisions of this law.
As for the liabilities of the socialized corporations,
the State assumed theoretically the responsabilities of all
their obligations. However, it reserved for itself the right
to discriminate and annul, during the coming six months,all
liabilities constituted in favour of the owners themselves
and any alien.
For abetter understanding of this provision,it is nec-
essary to underline that many oil corporations were financed
by silent partners, either in the form of shares acquired
by new subscriptions or by credits granted through foreign
banks for acquisition of equipment or machinery abroad. The
amount of such liabilities was - despite war transformati ons-
not too insignificant. In 1936,for instance,76?~0 of the eapi-
t al invested in the Romanian petroleum industry belonged to
foreigners and this interests were only partially represen-
ted by shares the remaining part was registered in credit
accounts. Then there were the untran,sferred dividends for
the past years,etc. The State enabled itself to cancell all
these liabilities of the socialized companies, without com-
pensation, if it so wished.
From the remaining obligations there must be further
deducted debts not registered as passive, undiscovered fis-
t~s; o~o+~s o~~ CONFID~NTIA4
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?
cal evasions during past years, creditor liabilities as well
as those amounts which would be considered as damage done to
the company as a result of poor or inefficient management.
Thee reasons were ideal for the State to justify its cancel-
lation of practically all the liabilities of the socialized
corporations. However,the last one deserves a special stres-
sing as during the last few years g ivate companies have
been gradually deprived of their right of free management.
The Socialization Law also provided that,in the future,
the right to begin new undertakings and grant concessions of
any kind would belong exclusively to the State. ~Jith this,
the Soviet system was completely introduced in Romania.
So much regarding the Socialization law. It would,of
eourse,be of particular interest to know what happened to
the compensation due on the socialized goods and interests.
~~gtith a view of indemnifying the owners and shareholders,the
State established a "Fund for the Nationalized Industry",
nurtured wl.tll the profits collected by the socialized under-
takings,now under State management. They had to be gradu ally
compensated out of this fund. Its operation was governed by
the provisions e.f a later decree and according to which the
funds was to be administrated as an Autonomous Public Ins-
titution. Yet,two subsequent measures ~?z~~#x~~~ rendered
the original provision caducous.
~'ithin the Budget for 194g,there was appropriated an
amount of only loo million lei for such purposes,in compa-
rison with ~ value of many billions lei which were worth
the socialized goods and interests. Furthermore, by a law
of February lo, 1949, it was decreed that the entire profit
of all the socialized companies must be paid to the Finance
Ministry for its use for definite purposes,but which did not
include increasing the amount of the fund.
But appropriation of substantial amounts for compensatory
purposes became superfluous by then as, during the second
half of 1947, the companies were overburdened with huge
rntdFlDENf1AU
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~, ~ ? - 70 -
-. _ _.,,,~,,, uar CONflDE
?
fines for"past fiscal evasionsn,bad man agement,etc.which
reduced the obligation for compensation to diminishing fi-
gures.
What was the picture with regard to capital interests
in the Romanian petroleum industry after the socialization ?
The State already contributed into Sovrompetrol with
the total capital of 25 companies,that is lei 2.5 billions
Then it owned also tf~e total capital
of 18 socialized companies in value of "
7.5
"
It further owned,together with the
Russian Administration,in the capital
of eleven companies a share of
1.6
~'
Total Romanian capital
11.6
The Russians contributed to the
capital of Sovrompetrol with
2?~+
"
as showed in chap.VIT.
They own furthermore capital shares of
o.8
f'
in several other companies,run by their
"Administration of Soviet Goods and In-
~erests in Romania"
Total Russian eapit al 3.2
Total capital in the whole oil industry: _14_8 '~
This estimate is,however,not quite a ublished their
curate,as not all the corporations have recalculated an d
computed ~h~xx capital after the stabilisation. Therefore,
this estimate includes,unfortunately,both old and actuali-
zed capital.The Soviet share is neraly 30~ of the total
capital.~v~~e real inf luence exerted over the production
is not proportionate to these capital interests, but far
greater.
~',s for the socialized group,it has gone during the last
year through a series of changes. After removing the re-
maining part of mere nominal private competition,the new
oil policy noes is triving to rationalize and concentrate
the exploitation within big units of production and admi-
nistration.
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 tinx~_NiJM
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~~~~tt:: ~~ ~ . ,
From the management point of view,the companies are con-
centrated in the two Industrial Centrales and these,in turn,
are direct organs of the 11Tining T~Iinistry. The latter has
meanwhile been reorganized three times in view of abetter
adaptation for for its new functions. For,the I~Zining Depart-
went changed from a purely administrative and governing
Department to a simple executive unit which carries out in
detail the mining and oil policy instituted by the Government
and the St ate Planning Board ( established in July 1848) .
From the exploitation point of view,the concentration
proceeds somewhat slower. Some of the socialized undertakings
have been liquidated or merged with other corporations thus
forming larger units. A f ew installations were dismantled,
removed and distributed for use where the necessity was
greater and more urgent, not to mention equipment,tools,etc.
t~rhich~re inventoz3ed long before socializati on and are now
centrally distributed. The petroleum industry seems to have
experienced an acute scarcity of such materials and equip-
ment,as all such materials which were still in private pos-
session and inventoried in the eensus of
December 19-7 and the subsequent ones,were sequestrated and
put at the disposal of the Industrial Centrales. But their
quantity was little indeed. A further step was taken in
January 1g49,when custom taxes on import of oil equipment
were reduced by rjo`no e. g.their prices were reduced:,by 25f to
30~. These are expected to arrive only from free European
countries.
The exploitation units (the socialized companies) are
managed in accordance with State plans and treated rather
like Autonomous Public Administrations. They are managed
by a Director tivith absolute poVJers,appointed by the N~ining
1~inistry. From the financial viewpoint,thea have budgetary
autonomy and are put under the contro 1 of the Finance De-
partment. For the exact fulfillment of the production plan,
these units are under the authority of and responsible to
~~s. `OF~I ONl1~ ~~~IDE~l~'
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the Mining Ministry.' Finally,they cannot declare bankruptcy.
The trading a.nd the d3.stribution in domestic consumption
has been monopolized and concentrated ever since June 1948,
in the holding company "Competrol". This State organ took
over the assets and branches of the former co~ipanies Dis-
tributzia, A ragas and Unirea.
The petroleum industry is financed by pu~Iic means and
through the State budget in other words, a complete socia-
listic system. Following abolishing market standards, the
profits are calculated according to State directions and,.
therefore,are considered the same as fiscal revenues.' These
are deposited monthly in specific State Banks, supervised by
the Finance P.~Iinistry. Necessities are covered through these
banks on order of the Finance Department and after previous
a.uthori~ation has been given by the State Planning Board.~0ut
of the total credits in the amount of 35 billion lei granted
in 1948 for productive works, 25~ was spent for the petroleuun
industry. At the beginning of 1949, new credits of 3.5 bil-
lion lei were granted for accomplishing the "structural re-
building of the refineries't,for which purpose some ~a~#-
dismanteling~ had begun earlier in 1948.
Judging on the basis of the present existing situation,
concentration within the Romanian oil industry became a mere
necessity. The administrative set-up seems to have already
reached its peak. As for the tech~aieal concentration,nothing
can be pre dicted,as final Russiar_ plans are unknown. In any
case,such a process should and would be seriously hampered
and delayed by the critical scarcity of necessary equipment
and machinery.
~. a~a~us ta~~ CON~IDENTI~I~
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_ 73 _
PROSPECTS FOR THE ROMANIAN PETROLEUM INDIISTRY.
1) Oil reserves.
The best ~~e~~~ (and almost the only) yardsl~ick for
appraising the prospeet~ of a country's oil industry is its
oil reserves and their geological condition.' If these elem-
ents are known,a fairly accurate prediction can be made as
to the length of the pro duetion period as well as to its
rentability and productivity. The oil products are inter-
national items and their prices are mostly dictated by the
quotations of the Gulf Coast Bulk Market. Theref ore,they
cannot be sold or bartered at a price level higher that
these ceiling prices. Hence,the more costly the exploitation
of certain oil fields will be, the lesser will be the profit
of the petroleum industry itself and also the incomes and
revenues of the national economy.
If these standards are applied to the Romanian oil in-
dustry, it necessarly results that its prospects are not
very brught, for the hitherto available estimates regarding
her oil resources are not too optimistic. In 1935,the Head
of the Geological Institute estimated that all the oil re-
serves amounted,at that time, to approximately 61 millions
tons and that at a yearly extraction rate of 8 million tons
(the average level of 1935/6) the oil reserves would be ex-
hausted by 1942. But the continoes rise in oil production
since the First World PTar did not predispose the Romanian
Government and the oil industry to pessimistic outlooks.
The prediction was received with varied feelings and the
activity continued. Only afterwards, during the years fol-
lowing,when there was an alarming decline in the extraction
rate (from 8.6 million tons in 1936,it dropped to 5.8 mil-
lion tons in 19~+o),their attitude was somewhat reversed and
many pessimistic opinions have since been expressed on this
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~~ 5.OfflCt=a ~?
- 7~-
matter.- 7~
A latter -and probably more ob~eetive - study estimated
the oil reserves,at the beginning of 1938,as fo~ws
Of 7,53o hectares known reserves,only 1,900
? were still intact,and approximately 1,200
were considered as practicable reserves. ____-.,.
Therefore the total sure reserves were 3,100
hectares,of which an average ratio of lo,ooo
tons per hectare represented a petroleum re-
serve of 31,000,000 tons.
The probable or potential reserves,
located in proximity to areas of sure
reserves (almost entirely located in the
districts of Prahova and Dambovitza),some c 6,200
hectares with an average of half of the
sure reserves,e.g.5,ooo tons per hec-
tare,in oil 31,000,000 tons
Total sure and potential reserves 62,000,000 "
To t'hese,there should also be ad-
ded the possible reserves within an
area of nearly 22,500
hectares,located between the rivers
Buzau and Dambovitza with a possible
value equivalent to maximum 3,500
hectares sure reserves,in oil 35,000,000 tons
Total 97,000,000 f~
According to some very broad in-
duct ions, there should be some addi-
? tional 200,000
hectares,located alonside the sub-
carpathian region from Buzau north-
wards to Moldavia and Bucovina. By
analogy with the oil fields from
Galitzia,they might be estimated at loo,ooo,ooo tons
But their extraction would be so
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~~~~ ~ ,
- 75 -
expensive and risky that it would not be worthwhile,under
any circumstances,to begin any egperime ntal prospecting.
Until the end of the last war,nothing was known about
possible oil areas in Oltenia and Transylvania. Yet,the Rus-
sians,in 1946,insisted on their being gramted prospecting
rights over wide areas located in VPestern Transylvania. As
the results are unknown thus far,their demand a.nd particular
interest seems to be based rather on the assumption that the
Hungarian geological structures are extended deeply into
4~estern Transylvania and,therefore,that those areas might
have a similar value.
The extraction from 1938 until 1948 totalied nearly
55,000,000 tons oil. In view of the fact that since the Ar-
mistice Agreement only the sure fields have been exploited
-due to lack of equipment and tools- and that exploration ac-
tivities have been reduced considerably during recent years,
t'he amount mentioned above could be deducted almost solely
from the sure reserves. Consequently the latter should hav?
shrunk in 1948 to 6.5 or 7 million tons.
At that time, sure reserves were divided among the named
oil companies,as follows :
Antra Romany
2.5 million tons
Concordia
T.o
~'
Romany Americana
o.6
'~
Creditul I~~inier
o?~5
"
Steaua Romany
0.45
"
Unirea
o,y.5
t,
Colombia
o?4
tt
Prahova,Petrolina,X'enia
o.4
"
All the other companies
o.4
t'
6 7
n
At the time when the Soeializati on Law was passed,the
Russians controlled the assets and reserves of Concordia,
Colombia, the~? three former Italian companies as well as some
other small undertakings,totaling nearly 2 million tons sure
reserves. To this,is further added the reserve of o.5 mil.
lion tons belonging to Creditul Tu'Iinier which was one of thy.
coNFlDElmI
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~F
Romanian founder-members of Sovrompetrol. Therefore out of
same 6.? million tons of sure oil reserves the Russians con-
trolled almost 40%.
As for the potential oil fields, it appears that since
? 1946,the most desirable ones have already been concessioned
to Sovrompetrol and to other Russian controlled corporations
and,therefore,are also under?JRussian control. Those remaining
after the socialization went under State ownership, and it
is within the realm of possibility that they might be brought
into the Sovrompetrol orhit,as a further Romanian contribu-
tion or be jointly exploited in the future, as certain re-
cent occurrences seem to be leading towards this eventual
development.
Concerning possible reserves, Russian attention is fo-
cused -as previously mentioned- on those located in Western
Transylvania. The oil fields in the district of Bacau have
been excluded from the Romanian contribution in Sovrompetrol,
wh.ieh is an indication that the Russians are satisfied that
poor soil is there and, a.t the present time, too expensive
for exploitation. None of the possible oil fields in Oltenia
have been prospected or concessioned, eif~her to Sovrompetrol
or to any of the State companies, and therefore, they don't
seem to be of any spec i~rl value .
As far as those located in Bucovina are concerned, during
their first invasion in 1940 of this province,the Russians
started extensive prospecting within that area. But the re-
sults are not as yet known. Nevertheless, the attention paid
b y the Romanian State during recent months to certain areas
located in the NE part of Moldavia (especially in the dis-
trict of Botosani),as well as the fact that in the Economic
Plan for 1949 some funds were appropriated with the view of
continuing exploration and exploitation works on those areas,
could mean that some resources have been discovered there.
In any event,aceording to informations published in the
Romanian press,there has already been discovered some re-
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~~ ~: ~`01~~~~ ~ ~,y, C~~ID~NTIl4!
sources of urethan gas. If all this is true, then it might
b e assumed that the Galitzian structures are extended into
northern P~Ioldavia. Notwithstanding this information, it
would be not advisable to draw hasty conclusions, all the
more as,for the time being,neither Sovrompetrol nor any Rus-
sian-controlled companjt~ is interested in these projects
but they are carried out. only by the Romanian State. And
this means that no prospects for attracting profits appear
to be in view.
x
x x
?
What are the logical conclusions which might be deduced
from this .picture `?
First,that evidently,as a consequence of their reckless
exploitation,the sure resources are nearly exhausted.
Second,the present oil field situation,corroborated with
the steadily declining production figures from 1937 onwards,
demonstrate a rapid retrogression of the Romanian petroleum
industry. This is mainly due to the fact that for so many
years new investments were avoided. The most elementary
proof is the gradual decrease of exploratory activity since
1943.
It requires no great effort to understand that for
keeping the production at a satisfactory level,there should
b e started great exploratory drilling works on a large scale,
for which purpose large investments are necessary. And yet,
there is no certainty that the results will be in propor-
tion to the investments. In addition, the exploitation of
still available sure and of the probable resources become
more expensive ,as the wells must be drilled deeper and
deeper. FoZ? both of these reasons,oil production should ina-
voidably become more expensive,and therefore,the profits
of the undertaking ~~x~$ and,equally,the State sources of
taxation will,accordingly,shrink.
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I~'~~~~~r~ ~~~
- 7s -
But the downward trend in the drilling activity is only
one feature. An equally important result of the lack of new
investments is that m~~~x~~ a major part of the machinery
and equipment for oil refinery is is outworn and obsolete.
Due to policies and events since 1939,the Romanian petrole um
industry remained completely outside the tremendous techni-
cal progress made by other countries.
In 1939,the refining capacity of Romania was 3~ that of
the whole world in 1947, it shrank to 2%. The successive
bombardments from 1943 to 1944 reduced it from 26,600 tons
a day to 17,600 tons a day in 1847. Yet,the operating capa-
city of the cracking installations is,presently,less than
6,000 tons a day and able to refine at the most but half of
the crude oil ~ oduction. n2oreover,a great part of these
installations are old and badly in need of replacement ;
some of them were hastily and inadequately repaired after
1945. Especially the primitive and insufficient valorisation
of cracking gas ensues a great loss. The same is true,yet
to a. far greater degree,with regard to the refining capacity
for lubricants, of which only 4~ works with modern Machinery
and according to advanced methods.
Owing to the a.ge of the installations,the refining pzo -
cess is,comparatively,very expensive and wastefully uses
raw material and many products are of an inferior quality.
For their partial replacement and modernization there are
necessary at least 4o to 5o millions dollars,which would
amount to the counter-value of nearly two-thirds of the
present yearly crude oil pro duction.
To sum up,the Romanian petroleum industry is at the pre-
sent time at a critical crossroad and compelled to pay for
past errors and squanderings. To restore and bring it up to
date,large investments are urgently needed.Nevertheless,even
if they were obtained and,also,a more conservative policy
practised, a. substantial increase in the production could not
b e expected before several years hence.
v s: o~x~ats pat CONFlDENTIAb
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- ?9 -
CQNFlDEIITUU
2 ) Divergent Interests .
Any atte;apt at a forecast about t'he future of the Roma-
nian petroleum industry must first be based mn the under-
standing that, at the present time,there are three groups
of interests within it,eaeh of them 'having different objec-
tives.
a ) The 'tAdmini strat ion of Soviet Goods and Interest s
in Romaniat'h~ participations in several oil companies to-
taling in value more than Soo million leis to which are as-
sets corresponding to afar greater amount. This Adminis-
tration is interested znx~ci~~ solely in making the highest
profits possible and will,obviously,avoid any type of ex-
pense or investments which do not promise a high and quick
profit. These assets and interests are operated -as already
meni~ioned- on a complete extraterritorial basis,and there-
fore, the Romanian State does not have the right to inter-
f ere with their activities. Thus,the Romanian economy cannot
expect to reveive any benefit whatsoever from their activi-
ties,for threefold reasons
- their profits are transferred to Russia or other
countries and thus,this part of the natztonal income is not
used in investments for further increase productive capacity
and subsequent employment ~~:~ opportunities ;
- they are used for acquiring
same prpose and,in this case,its
Jingly reduced ;
goods in Romania for the
export capacity is accor-
- the profits of Russian undertakings and participations
are practically exempt from taxation, as they are taxed not
higher than those of Public Economic Administrations.
b) SOVRO?~lIPETROL represents the second category of
interests.
This joint company is, since July 1946 -and according to
the proclamation of its General Assembly at that time - an
a~~: a~~s a+~.~
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"International Corporation",enjoying all the privileges per-
taining to such a status. Among these are the formerly men-
tioned exemptions and exonerations and some other ?'diploma-
tic immunitiest'.~ Its goods, interests and own organization
are actually treated not as those belonging to a Romanian
corporation -as its original Charter provided- but extra-
territorial.- (As a matter of fact, since socialization,no
standard has been available, for there are now only State
Economic Administrations). The Romanian State has in this
corporation only the rights of ~ partner, subject to the
decisions of the General Assembly. The Romanian Government
does not exercise any kind of control over this corporation,
as it is not subject to the authority of either the Plan-
ning Board or of the P~2ining Department.
Sovrompetrol is accustomed to negociating its more
important issues and arbitrating its differences with the
Romanian Government via Pd2oscow. In this way,it subsequently
acquired substantial privileges from the Romanian State.
Among them were the amendments of the Charter of 1g47,which
enable Sovrompetrol to freely dispose of the amounts of
foreign currency obtained for its exports, and also have
payment on its profits made in the same type of currency.
These provisions have a far greater importance than a~x
would appear at first glance.
First of all, they affect the import capacity of Romania.
After deducting the ~t~~x~axga~x~~x~~ quantities o f
oil products due for reparations and those sent to Russia
as commercial export, as well as the minimum required for
domestic consumption, not much remains for export to other
countries. This remaining small surplus of oil pro duets is
the only important item which the Romanian economy is able
t o barter for capital goods,at the present time. If this
quantity is shared with Sovrompetrol, its requiring capa-
city is accordingly reduced.
The unrestrained disposition ovdr the am?~unts in free
~ 'o~a~us O~t~ C~~FlpEHTU~
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 tinu~ -HUM
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~FtDtn~tr+~.
currency obtained from its exports means that Sovrompetrol
has been granted a de facto monopoly over the future of the
Romanian petroleum industry. This assertion needs further
explanation. The quantity of oil products exported by Sov-
rompetrol represents a major part of the only available
means for acquiring oil field and refinery equipment from
foreign countries which are either not supiblied by Russia
nor produced in Romania. For,these are the primary neces-
sities of the Romanian oil industry,and fulfillment of which
would help it out of its present crisis. Therefore, those
who possess such equipment are in a position to perform
drilling activities and improve refining capacity,and thus,
to obtain a greater share of the oil production.- And Russia
worked quite efficiently towards this goal.
So,for instance,besides the marketing of all the royal-
ties and taxes paid in oil which reverted to the Romanian
State for the last five years, Sovrompetrol succeded in
being granted, in 1947, a special free contingent of oil
for export in exchange of equipment. In spring of 1948,this
corporation concluded an agreement with the Italian FIAT
with the view of obtaining oil field and refinery equipment
against a new special contingent of Romanian oil. It is,'cer-
tainly,difficult to ascertain whether all these imported
materials are actually left in Romania. However,there is
no doubt that those brought in are utilized only in impro-
ving the working means and in broadening the strength and
monopoly of Sovrompetrol over, and at the expensem of the
socialized sector.
Therefore, the State-owned oil undertakings are actual-
ly dependent,to a large extent, on Sovrompetrol aid to e-
nable them to continue ths,~ee~ctivities, as the pa> ductive
capacity of the domestic n ustry is,on one han d, still oc-
cupied ~ at least SoJ~ with orders for reparation payments
to Russia, and on the other hand, it is not sufficiently
developed to produce specialized equipment and machinery.
~ S:'OFfIAALS OIL~i ~~b~~~i~~
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Thus, the impact of Sovrompetrol over the Romanian
petroleum industry is actually far beyond the nearly 40 0
of its domestic production now controlled by it. Conse-
quently, there is no exaggeration whatsoever in the state-
ment that the entire socialized sector is dependent on,
and directed according to, plans concocted in ~2oscow.
As for profits made by Sovrompetrol, Russia is entit-
led to half of them and, naturally, interested in their
increas~~g. The limits of the profits of this joint cor-
poration are elastic however, inasmuch as new privileges
or exemptions granted ~ it are sure ways for their in-
creasing.
The way on which Russia dispose of her share of the
profits is almost indifferent for the Romanian economy
if it is disposed of abroad in the form of free currency,
this means an irrevocable loss if it is used to acquire
capital goods to be sent -hypothetically- to Romania,they
would increase, under present circumstances only the So-
viet Economic Empire.
In conclusion : the manner in which Sovrompetrol is
organized and functions means a mortgage upon the future
of the Romanian petroleum industry, and equally, upon
Romanian oil exports. This corporations intends only to
continue the Russian monopoly on Romanian wealth after
reparation payments have been paid in full.
c) Finally the third group of interests is that re-
presented by the Romanian economy. After all the previous
explanations, it is not difficult at all to agree that
its interests are completely opposite to those of the Rus-
sians',represented either in the "Extraterritorial Goods
and Interests{' or in the "Internati oval Corporation".
As any other national economy, so should the Romanian
be interested, first and foremost, in obtaining the
highest national income possible, in realizing the optimum
u. s. o~~s ?~Y (UI~IDENTUIi.
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'~1QEHRA!
in its distribution, and equally, a favourable balance of
payments. However, none of these goals have been achieved
since the end of 1844. On the contrary, the Russian oc-
cupation and the groeth of Communism has been in Romania,
as everywhere else, accompanied by a persistent deterio-
ration of the economic conditions.
A comparison might help to better understand this re-
t rogression. The national income per capita was in 1938
83 IIS Dollars and in 1945 only 44 Dollars. During the
following two years it dropped still further, inasmuch as
the total national income itself was not much higher than
30~ of that of 1938.
The State budget for 1935/6 derived 28f of its total
revenues from the oil industry. This Figure did not in-
clude the import taxes on oil equipment, taxes on the
incomes of personnel working in this industry, etc. The
Yirst budget after the monetary stabilization (1947/8)
garnered only 4?~o to 5 0 of its revenues from the petroleum
field. Finally, under the Plan's Budget of 1949 less than
2f of its revenues are derived from the entire mining in-
dustry.
During the pre-war period of 1933 to 1938, the exports
of oil products covered between 42~ to 55to of the value
of total exports. Despite the steadily decreasing quan-
tities of oil products exported since, not less than
62.5f of the value of the total exports from 194o were
covered by this product. During the war years which fol-
lowed, the respective proportion was constantly over 500.
A comparison between this and the situation existing
during post-war years is,indeed,most difficult, as pro-
portions expressed in percentages would only lead to
confusion. Therefore, it is better to quote absolute
figures. While in 1943 there were exported 2,800,000
tons of oil products, in 1945 only 55,000 tons were
sent abroad as commercial exports (e.g.not as repara-
tions), of which not more than 3,000 tons were sent to
u s. oFf~i ow~r COI~IDEN'Mt
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. ~. ~~~~~
countries other than Russia. In 1946, some 480,000 tons
were in all exported of this quantity nearly four-
fifths were sent to Russia. In 1947, the figure was some-
what higher than that of the preceding year ; however,
most of it was sdnt to Russia, or else bartered or mar-
keted by Sovrompetrol. In 1948, the Romanian State agreed
to send to Poland and Israel several tens of thousand
tans of oil products.
These figures clearly demonstrate that during the
reparation period the petroleum ceased to be an
export asset and a source of income to the Romanian eco-
nomy. But more than that, it seems that it became more
of a burden to it, as the amount of credits for invest-
ments recently granted to this industrial branch are far
higher than all t'he incomes which it returns to the
Treasury.
Notwithstanding the rpime financial needs, it is of
vital necessity to the Romanian economy that there be
instituted and followed a conservative policy with res-
pect to the remaining oil resources Then, there must
be followed and achieved an extensive exploratory dril-
ling programme over a long period of time. The greatest
part of the existing obsolete installations must also
be replaced, and in this manner, the costly and wasteful
process of refining be removed and brought up to Sate.
Finally, extensive action must-be started with the view
of reducing the domestic consumption of oil products by
replacing them with methane gas and coal. This would re-
~~~ adjust the home consumption on anew basis, and cre-
ate a surplus for export.
This set of measures might be regarded and advocated
as the future policy which would enable the petroleum
industry to recover Prom its present critical situation.
Taken as a whole, all the suggested measures require a
v. s. o~,us aar
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 ~nv~ ui iM
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f orethought and conservative policy,in addition to im-
portant investments. Is such a policy possible and appli-
cable in Romania of to-day 4
3) outlook.
An answer might be found in the Economic Plan for
1948. But perusal of this Plan is not of much help, as
it is couched in extremely vague terms, and does not in-
clude reliable information for a clear forecast Por the
petroleum industry. For instance, it proposes a rise in
production of 13.7Jo and an increase in the drilling ac-
tivity of 48.2~~ over than of 1948. , of which one-third
will be dedicated to exploratory operations. Then,it an-
nounees.that 40~ of the total credits for investments
will be spent in replacing existing equipment. For this
purpose, the domestic steel indus try gill increase its
production by 132% over that of 1948. No definite figures
are given and, therefore, it is very difficult to under-
stand (not to mention trusting) much of this roundabout
way of expressing social progress in percentages. There
are, perhaps, important reasons for the existing political
regime not wanting to reveal the "happiness" of the Ro-
manian people. Yet, more recent[ news from th.e Romanian
press inform the reader that 'tthe proposed levels of pro-
duction have been reached and surpassed in every sector,
due to the efforts of the working class and the adequate
measures taken by its Communist leadershiptt. The success
of the First Economic Plan, therefore, seems by now to
be definitely assured. But has a Socialist plan -in the
Soviet era and area- ever failed ?
Notwithstanding this method of presenting plans and
achievements, the Romanian press also officially announ-
ces that the results achieved by Sovrompetrol during the
First Quarter are more encouraging than that of the en-
u s. oFF~; p~ CON~IDENTUL
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 r r~~iw _LJI IIVI
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`~~~~~.~ ~ X86 -
~~~~~~~ ~
tine remaining oil industry. This assertion is is none
the less most important inasmuch as it confirms previous
assumptions regarding the of Soviet monopoly over the en-
tire oil industry,through the medium of Sovrompetro.l.
The substitution of petroleum in domestic consumption
seems to make interesting progress the netyvork of gas
lines has been extended or completed, some industries
have replaced oil with gas combustion and new resources
are being explored. Judging by information appearing in
the Romanian press, it would appear that a gas era has
already started in that country, and the domestic con-
sumption will be very soon, to a large extent, be based
on gas. All this is, indubitably, very beneficial.
However, two facts must be born in mind in connection
with this progress. The first is that the rapid substi-
tution of gas cannot be credited to the present political
regime. This programme of substitution ha.d already begun
at the end of 19+0, and was due entirely to the Gerrlan
insistence a.nd their policy of increasing the surplus of
oil exports. The Germans helped in this switching from
oil to coal combustion on a number of locomotives, and
they delivered, until the summer of 1g44, a great quan-
tity of ge.s pipes and necessary installations. The dril-
ling of gas wells and the laying of pipes network were
started and speeded up throughout the war. Since the
Armistice, the latter have only been ~~p~~~ continued
and completed. Therefore, no new investments have been
made towards this goal during the Russian occupation.
The second fait refers to the cui prodest of this
substitution, e.g.whet'her the export surplus created
through the decrease and substitution in oil products for
d~rame consumption will accrue to the benefit of the Ro-
manian economy. Judging by the previous explana.tiona, it
is difficult to believe that this surplus will be used
freely or solely in the real interests of the Romanian
economy.
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~ ~~e ~~
- ~~IDENJ1At
Concerning the urgently needed investments, to fore-
eyuoted facts a.nd conclusions might be added the follo~~ng:
substantial investments are needed not only in the oil
industry alone but also in the entire Romanian econcmy.
The speeding up oz" the industrialization process is the
sole solution to both mitigating the growing ruxal over-
population and the decrease in oil export. However owing
to the economic system now in effect in Romania -which
does not differ from the Soviet system- and to the Russian
reparation and monopolistic policy, the investment rate
is very low indeed, and drained out solely by strangling
the purchasing power of wages paid to the working class,
by means of high prices and taxation. An increase in the
investment rate can be achieved only by a new lowering of
the existence minimum. Possibilities of transforming it
into capital goods by acquisitions in foreign countries
are -for reasons already gone into- very limited.
Prognostications about the Romanian petroleum indus-
try cannot be made as yet, as its future will depend en-
tirely upon the Russian attitudes and policies to be ap-
plied during the coming year. For,according to article
4 B, par ,4 of the Sovrompetrol Charter, the oil shares
contributed by the Romanian State must 3~e transformed,
until August 1950, into correspon~i.ng assets. And the
respective provision has been drafted in such a way as
t o enable Russia to underestimate shares and assets, to
exclude part of them, and ask for their replacement
through new assets. MoreoveP, the burden of constituting
the company's reserve funds lies, obviously, upon the
Romanian group. This period of transformation and com-
putation will be ~ critical indeed for the Romanian oil
industry,inasmuch as Russia will decide upon the nomi-
nal co-existence of the two separate sectors - the so-
cialized petroleum industry and Sovrompetrol- or the
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iu s. ~ - COWHD~NIU1
forceful merging of both under~a the control of Sovrom-
petrol. The difference between these two hypothesises
is, actually, not very great for the oil industry itself
and the Romanian economy. However, from a political
point of view, the difference is of far-reaching signi-
f icance,
May 1949.
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A N N E X I.
THE C QDTVE?~TTI ON
for
THE ESTAF3LISHl~'IENT OF
~p~IpEN11M
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W~~? ^~~----
C O N V E N T I O N
between the Government of USSR and the government of
the Kingdom of Romania
regarding the creation of a Soviet-Romanian company
for the exploration, exploitation, refining and
marketing of crude oil and oil products.
In the execution of the agreement of economic col-
laboration between the USSR and the Romanian Kingdom,
and of the protocol included in that agreement ,both sig-
ned in ~~ioscow on Mai 8,19-5
and especially in executing the clauses regarding the
creation of a Soviet-Romanian company for the explot~ation,
exploitation, refining and marketing of crude oil and
its products,
the two signatories of the above mentioned agreement
and protocol, legally represented at the drawing up of
the present convention as follows
The Government of USSR by the Beputy Commissar for
Foreign Trade of the USSR, Alexie Dimitrievich Cruticov;
and the Royal Government of Romania, by the PJlini st er
of Mines and Oil, Engineer Tudor Ioneseu,
have established the following
Article 1 - Foundation.
The Government of the USSR and the Royal Government
establish by this present convention ~ organization
the companies or the groups which will constitute the
Soviet-Romanian company for exploration, exploitation,
refining and marketing of crude oil and its products as
follows
On behalf of USSR, Obiedinienie "Ucrneft" and Vseso-
jusnoe Obiedinienie "Sojusneftexport" .
On behalf of Romania, the Limited Company Creditul
Pliinier and the Limited Company Redeventza,and eventually
other companies (see annex) or gaups possessing shares
of Romanian companies. ~~~~D~~~,
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- ~NfIDENTU~~
The above mentioned organizations and companies or
groups will be given the necessary rights by the respec-
tive Governments in accordance with previous domestic
agreements as to enable them to conforming in every res-
pect with the conditions provided in the present conven-
tion.
Theref ore, the two Governments mutually guarantee the
carrying out -by median of the above mentioned organiza-
tions, companies or groups- of the conditions of consti-
tuting and financing the Soviet-F.omanian company.
Article 2 - Status,Duration,Loeation.
The Soviet-Romanian company for exploration, exploi-
tation, refining and marketing of crude oil and its pro-
duct s will have the st a.tus o f a Romanian private j uri di-
cal entity of the type of a limited company, existing in
the relevant Romanian laws.
In the course of its activity, The Soviet-Romanian
company will have the same rights as any other company
with Romanian capital.
The duration of the company is unlimited.
The main office of the company will be in Bucharest.
Article 3 - Purpose.
The purpose of the company will be the prospecting,
exploring, exploiting, refining and marketing of liquid
bitumen on areas belonging to the Romanian State or on
areas belonging to private persons, directly or together
with other companies or persons, as well a.s the refining
and marketing of ~~~ liquid bitumen products.
Article 4 - Social Capital.
I.- The company will have a social capital of 5,000
million lei and will be covered equally by the two
trotting parties mentioned in article 1.
~: ~ '0~~lCI>rAIS~ C~4`~ .fit
(ON~1DF~
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o~ ~cu~s rn,~r - ~~~
The contributions of the two parties will be covered
as indicated below :
A.-The contribution of the Soviet party
a) Installations, and necessary material for explo-
ration and exploitation of oil in a total value of 740
million lei,according to a list decided upon by
the two contracting parties and approved by tl~e
two governments.
The evaluation of the installations, equipment
and materials will be made on the basis of average
prices in effect in Romania during the First Hallf
of 1939 ?
b) The shares of the oil companies mentioned in Annex
I,in value of 1,76o million lei.
B.- The contribution of the Romanian party
a) shares or assets of the Romanian oil companies
mentioned in Annex II, at their nominal value.
b) ~xgt~z~ 5of of oil fields accruing to the Roma
nian State as a result of prospecting of new areas,
as well as those fields which belong -in accordance
with article 95 of the Petroleum Law- to the com-
panies forming the Romanian group in the Soviet-
Romanian company (see annexed list).
The above mentioned fields will be brought as a
contributionby the Romanian group into the Soviet-
Romanian company, according to an agreement to be
concluded between the two groups.
The estimate of the oil fields contributed by the
Romanian group will be made in accordance with
average prices in effect in Romania during the
first six months of 1939,by a committee of experts,
in which the two contracting partis will be repre-
sented by an equal number of members. In case of
non-agreement,the committee will sent the matter
COHfIDEMTU-
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?
for arbitration to the Romanian Government which shall
take a decision in agreement with the Government of USSR.
c) 50~ of the royalties reverting to the Romanian
State until the contributions of the contracting
parties become equal.
The crude oil shall be estimated according to
average prices in effect in Romaniag during the
First Half of 1939 ?
2.- The capital subscribed by each founder-member
shall be fully covered within three years from the date
of the establishment of the company.
3.- ~Pithin two more years from the end of the first
term of ti?ree years granted for the covering of the sub-
scribed capital,the two founder-memebers of the company
are obliged to transform into assets (equipment, oil
fields, etc.)those contributions represented by oil shares
4.- The difference between the estimate of the con-
tributions and their real value,namely
a) between the nominal value of the shares and the
value of the assets by which these shares shall
be replaced within the mentioned term ;
b) between the estimate value of investments (equip-
ment, royalties, oil fields,etc) at average pri-
ces from the First Quarter of 1939, and their
commercial value at the time of their transfer
t o the company,
shall constitute the reserve of the company and taxed -
according to provisions of Romanian law- as capital and
not as profit, a.s it cannot be regarded or used as a pro-
fit.
As for the transformation of the shares, it is agreed
that the assets corresponding to the shares eontributed
or which will be contributed ~x~x>~~~x~ as a Roma-
nian contribution (point b) above),shall be estimated
~ . s . ~~~a o~ 1~'~D~i'tll~t:
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/p~ r tc
at the nominal value of the respective shares.
The difference between this estimate and the real
value of the shares shall be computed at the end of the
five-years period mentioned in article 4,points 2 and 3,
and also accounted as a reserve fund.
In case when,a.fter this computatio~}bn,~~i~~~~~ence
will result between the value of assets ~ in exchange
of share, by one of the contracting parties, they[ group
possessing the smaller amount of aae~~ assets shall have
the choiee either to cover the difference with similar
goods,estimated according to the same norms - or will
oblige the other group to withdraw the difference, in or-
der to equalize the two contributions.
This equalization shall be operated,when necessary,
according to previous agreements concluded between the
Soviet and the Romanian group.
Article 5 - Rights of the Company.-
1. The Soviet-Romanian company will be granted by
the Romanian State rights of prospecting, explo
as well as concessions for exploitation of liquid bitumen
in accordance with the laws in efect.
2. The Soviet-Romanian company shall be preferred,on
equal terms, at auctions where several offers will be
made for the same rights.
3. Besides the mining rights granted by the Romanian
State, the Soviet-Romanian company is entitled to exploit
also rights of private owners,according to agreements
which it will conclude with them and t o provisions of
laws in effect in Romania..
4. The Sovidt-Romanian company is entitled to lay
the necessary pipe lines network for carrying the crude
oil within the oil fields and from these to the refine-
ries.
CONflDEMfIAI
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 Declassified in Part - Sanitized Copy Approved for Release 2012/10/05: CIA-RDP80-00926A001200030015~ 1 .n
5. After the obligation of contributing the royalties
for the purpose of covering the Romanian capital share
mill cease, the Soviet-Romanian company n~i-1 shall be en-
titled to buy and refine those royalties reverting to the
Romanian State for oil extracted on the company's own
fields, as well as on fields belonging to companies
whose shares or assets were contributed into the Soviet-
Romanian company.
6. The company shall be granted the most favourable
t erms,in e~feet for oil companies,for buying and selling
of foreign exchange with the National Bank of Romania.
7. The company will also be given the most favourable
terms granted to oil companies by the Romanian State for
premiums on their imports and exports.
8. The Romanian authorities shall grant,without any
difficulty,to the Soviet-Romanian company the amounts in
foreign exchange resulting from its exports paid in such
such currency,which are needed by the company for acqui-
ring from abroad the equipment and materials necessary
for its operations.
Article 6 - Shares of the Company.
Each f ounder-member will receive an equal number of
shares .
The company's shares will be nominal.
They may be transferred- only by authorization of the
respective Government.
Article 7 - Administration,Liquidation.
1. The company'a management will be carried out in
accordance with provisions of the commercial code a.nd
laws in effect in Romania,with the exception specified
in the following paragraph.
The Board of Directors will be composed of an
equal number of members, representing the Soviet and
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 Declassified in Part -Sanitized Copy Approved for Release 2012/10/05 :CIA-RDP80-00926A001200030015-1 SUM
?
A N N E X II.
ES-SENTIA L
FIGURES.
~ Declassified in Part -Sanitized Copy Approved for Release 2012/10/05 :CIA-RDP80-00926A001200030015-1
 Declassified in Part - Sanitized Copy Approved for Release 2012/10/05: CIA-RDP80-00926A001200030015-1 SUM
THE ACTI~1'ITY
of the
ROb'I~TI~T PETROLEUP~T INDUBTRY
during the last decade.
Drilling
for
explo-
ration
Tons
oil per
drilled
meter
Extrac-
tion
Home
consump-
tion
Export.
in l,ooo m.
in l,ooo tons
1936
32g.o
26.5
8,704
8,043
1,545
6,885
7
394.5
18;1
7,153
6,656
1,621
5,568
8
43
2880
23.0
6,610
6,217
1,674
4,495
g
22
255.4
24.4
6,240
5,821
1,784
4,178
1940
28
241.5
24.7
5,815
5,46g
1,862
3,528
1
37
253.0
22.0
5,453
5,271
1,811
3,683
2
47
344.0
16.8
5,665
5,260
2,097
2,947
3
45
341.5
15.4
5,273
4,91'+
2,007
2,798
4
31
147.0
23.8
3,525
3,080
1,108
2,116
1845
25
160.0
29.0
4,640
4,764ij
1,393
3,158
6
12
135.0
31.0
4,193
y . .
~
4,250
1,600
2,400
7
164.0
23.2
.
3,810
18482)
119
320.0
4,5003)
1) The difference results from refining a quantity of more than
800,000 tons crude oil, brought in Romania by the Russians, since
end of 1944, from Hungary and ~ustr~a.
2) Planed.
3} Actual extraction estimated at approximately 3.9 million tons.
~J? . qaL~
~ Declassified in Part - Sanitized Copy Approved for Release 2012/10/05: CIA-RDP80-00926A001200030015-1
 i ~
sr?. Declassified in Part -Sanitized Copy Approved for Release 2012/10/05 :CIA-RDP80-00926A001200030015-1
~r i~ Uh~K~A~i
PRODUCTION OF CRUDE OIL SINCE 136
Produc- Les s than that of ~ the year
Year tion
1tonsooo 1936 - 1937 198 1939 ? lg4o ? 1841 1 42
- 1943. 1944 .1945 1846
1936 8,704 -? -- -- -- -- --
'' 7 7,153 17.82 --
8 6,603 24.06 7.60 -' '- -- --
g 6,240 28.31 13.77 5.60 -- --- ~ __ _- -- -- -- --
1940 5,815 33.19 15.37 9.13 4.88 -- _- -- -- -- -- --
1 5,453 37.35 23.77 17.42 12.62 6.23 -- -- __- -- -_ -_
2 5,665 34.81 20.80 14.2o g.22 2.58 ~ 3.88 -- -- -- -- --
3 5,273 39.42 26.28 20.73 15.5o g.32 3.30 6.92 -- -- -- --
4 3,525 59.50 50.72 46.62 43.51 39.38 35.36 37.78 33.15 -- -- --
1945 4,640 46.68 33 b o 28.73 25.64 20.20 14.81 18.10 12:1o t 3.~6 -- --
6 4,193 51.80 41.38 36.50 32.80 27.go 24.84 25,00 20.47 ? 18.95 9:63 --
7 3,810 56.23 46.74 42.30 38.94 34.48 30.13 32.:75 27.74 -~ 8.og 17.89 g.14
1948 4,5001)
1) Planed?
~~m~~~-
~~ th~~ ~~
~.
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 Declassified in Part - Sanitized Copy Approved for Release 2012/10/05: CIA-RDP80-00926A001200030015-
RUSSIAN HOLDINGS
in
ROIl4ANIAT? OIL COPIIPAPtTES.
(Figures in million lei)
Company
Capital of German Trans- Later Total Contri- Still in
the holding ferred Russian Russian buted Russian
company in to the acquir- holding to Sov- posses-
Sept. Russi- ings rompe- sion
1944 ans trol
Concordia
1,470.0
755.8
804.7
--
804.7
804.7
Colombia
1,140.0
325.0
325.0
650.0
975.0
975.0
I.R.D.P.
600.0
100.3
100.7
--
100.7
100.7
Petrol B loc
470.0
285,5
285.6
67.3
352.9
285.6
Sarpetrol
70.0
34.8
34.8
34.9
70.0
34.9
Continentals Oel
loo.o
loo.o
loo.o
--
loo.o
--
Explora
60.0
59.1
59.1
0.9
60.0
60.0
Sardep
50 .'0
43.3
43.3
6.7
50 . o
50.0
Meotica
26.0
21.3
21.3
4.7
26.0
26.0
Bursa Sperantza
15.0
14.9
15.0-
--
15.0
15.0
Transpetrol
8.0
4.4
4.4
3.6
8.0
8.0
Doicesti
loo.0
36.E
36.1
--
36.1
Moldonaphta
22.0
0.9
9.8
12.2
22.0
Europetrol
4.0
3.1
3.1
0.8
3.9
Romano-Belgiana
60.0
15.0
15.0
--
15.0
Internova
5.0
1.g
l.g
3.1
5.0
5.0
Naphta Romana
42.1
--
--
29.6
29.6
29.6
Pipe-line Copaceni
Ploesti
10.0
--
Fanto Ga~~.ia
5.0
5.0
5.0
5.0
Prahova
330.0
330.0
trolina
~)
P
168.0
165.0
l
e
acu i r~
5 0 . o
~~c~
43.5
__
Italo-Romanal)
12.5
12.5
Petrol Latina 1)
7.4
7.4
67.4
35.1
loo.o
36.1
22.0
3.9
15.0
5.0
330.0
165.0
43,5
4,825.0 1,806;5 1,864.8 823.8 3,247.3 2,404.5 842.9
1) Former Italian companies.
u. s. OFfFOALg ON~Ip '~N~~~
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