DECISIONMAKING FOR SOVIET OIL POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00313R000100110005-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 27
• Document Creation Date: December 21, 2016
• Document Release Date: April 22, 2009
• Sequence Number: 5
• Publication Date: June 1, 1984
• Content Type: REPORT

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Decisionmaking for
Soviet Oil Policy
Secret
SOV 84-/0076X
June 1984
COPY ~T V
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Directorate of
Intelligence
Decisionmaking for
y Soviet Oil Policy.
Analysis Division, SOVA,
welcome and may be directed to the Chief, Policy
Secret
SOV 84-10076X
June 1984
This paper was prepared by
Office of Soviet Analysis. Comments and queries are
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 Decisionmaking for
Soviet Oil Policy ~ 25X1
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Key Judgments Current Soviet oil policy reflects the leadership's awareness of the present
Information avai/ab/e near stagnation of oil production and the uncertain outlook over the
as of 3 April 1984 balance of the decade. The policy .has three basic, interrelated objectives:
was used in this report.
? Maintaining energy self-sufficiency.
? Providing the major share of hard currency earnings through exports to
the West.
? Meeting the demand for politically important exports to Eastern Europe.
The first objective is clearly most important and takes precedence in oil
policy decisions.
To meet these goals, the leadership has developed along-term strategy that
relies on increased efficiency, substitution of fuels, and conservation to
maintain-if not to increase-supply and hold down demand. Specifically,
the Soviets intend to:
? Acquire and assimilate new, more productive equipment for the oil
industry and more energy-efficient equipment for the balance of the
economy. Although they will continue to rely on imports to meet some
needs, sanctions by the United States have convinced Moscow of the need
to diversify its sources of supply and develop its own technological
capabilities.
? Improve performance throughout the oil industry by introducing new
planning indicators and procedures, using new forms of labor organiza-
tion, and reorganizing the energy production bureaucracy.
? Use traditional methods of exhortation to further their goals.
It will be very difficult, if not impossible, however, for Soviet leaders to
supply simultaneously. the oil needed to meet all three objectives. Rapidly
rising investment costs and worsening operating conditions are likely to
lead to a gradual fall in oil production. Moreover, as in the past, the Soviet
leadership is likely to overestimate the possibilities for energy conservation
and interfuel substitution, while domestic demand for oil continues to rise.
Consequently, shortfalls in. oil supply could develop that would disrupt the
domestic economy and squeeze exports.
Secret
SOV 84-] 0076X
June 1984
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Moscow's ability to meet its objectives will be constrained by the inherent
weaknesses in its planning and decisionmaking system:
? The Politburo and. the Secretariat have limited technical expertise in
energy matters, and unbiased advice on energy issues is a scarce
commodity. This situation was not helped by the death or retirement over
the.past several years of several of the members most experienced in
energy matters.
? Institutional conflicts exist between the ministries and the State Planning
Committee (Gosplan) over the setting of plan targets. Furthermore,
responsibility for implementing oil policy at the ministry level is diffused
among organizations that often have conflicting goals and frequently fail
to coordinate their efforts, leading to waste and inefficiency.
? The system of central planning. limits the willingness of the leadership to
use prices, wages, and profits to encourage more efficient energy
production and use, and to improve the structure of rewards and
incentives that discourages innovation and encourages a predisposition to
mortgage the future in pursuit of short-term benefits.
? The decisionmaking process funnels mundane decisions to the top,
diverting senior policymakers from long-term planning and often obscur-
ing emerging problems.
Soviet options are further constrained by such factors as competing
investment demands from key nonenergy sectors, the extent to which the
East European countries could absorb further cuts in oil imports, the
vagaries of the world oil market, and the USSR's own fluctuating hard
currency requirements.
Faced with these constraints, the creativity and flexibility of Soviet
decisionmakers will be strained as they try to manage the probable gap be-
tween oil supply and demand. They could try to cope with this problem by:
? Further centralizing oil policy decisionmaking at both the regional and
national levels.
? Making significant shifts in the structure of investment both within and
outside the energy sector.;
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? Adopting more authoritarian measures to reduce domestic demand.
? Risking the political and economic effects of further reducing oil exports
to Eastern Europe.
? Postponing some nonenergy import plans. 25X1
How effective these measures would be depends both on the size of any
shortfall between oil supply and demand, and on how early and accurately
the leadership perceives the problem. The historical record suggests that
the Soviets will be slow to recognize major problems that will hinder
attainment of their oil policy objectives. This tardiness could force them to
react in the future as they did in 1977; when a sharp, last-minute decision
to change oil policy was made by the Politburo to sustain growth in West
Siberian oil production. The ability of top-level leaders to rapidly mobilize
and reallocate resources in response to major problems is an important
strength of the Soviet decisionmaking system. This type of policy action
cannot be frequently repeated, however, because of the disruptive conse-
quences it carries for the rest of the economy.
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Contents
Key Judgments
iii
Preface
ix
Introduction
1
The Decisionmaking Apparatus
1
Policy Formulation
1
CPSU Secretariat
2
Presidium of the Council of Ministers
3
State Planning Committee
4
Policy Approval: The Politburo
5
Policy Implementation: The Ministry Level
6
The Decisionmaking Process in Action
6
Debate Over Oil Policy
~
Changing Oil Policy
8
Oil Policy Objectives for the 1980s
10
Energy Self-Sufficiency
10
Eastern Europe Versus Hard Currency Exports
~
11
Oil Policy for the 1980s
12
Modernization
13
Bureaucratic Measures
13
The Future Decisionmaking Environment
16
Ideological Constraints
16
Geological Constraints
1 ~
Economic Constraints
1 ~
Export Constraints
18
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It differs from
.the earlier work in its more narrow focus on oil policy and the less attention given
to identification of alternative strategies and their supporters, but provides more
detailed discussion on the effectiveness of the decisionmaking process. These
differences reflect not only the different conceptual base for the present paper, but
also the changes that have occurred in the Soviet oil and energy situation during
the past five years. Among the most important factors have been:
? The ability of the Soviets to bear the rapidly increasing costs required to
maintain and even increase the output of oil in the face of tightened US
sanctions on oil equipment.
? The death or retirement of several top leaders with considerable experience in
energy matters as well as changes in the bureaucratic structure and system of
planning indicators and incentives for oil.
? The appearance of an authoritative, long-term energy program.
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Decisionmaking for
Soviet Oil Policy
The success of Soviet oil policy and the degree to
which oil policy decisions are smoothly integrated into
the broader political and economic environment de-
pend in part on the effectiveness of the decisionmak-
ing process itself. The importance of effective deci-
sionmaking has increased as the share of oil in the
Soviet energy balance and in Soviet hard currency
earnings has grown. It became critical, however, in
the late 1970s as the leadership faced the prospect of
a decline in oil production, coupled with rapidly rising
production costs, during a period of slow economic
growth.
This paper examines the relationship between the
Soviet decisionmaking process and oil policy. It exam-
ines the bureaucratic structure and operation of deci-
sionmaking for oil policy and identifies the underlying
objectives of oil policy that influence Soviet decision-
making. It then analyzes the~impact of the decision-
making process on the implementation of Soviet oil
policy for the 1980s and reviews constraints on the
decisionmaking system and the likely responses of the
decisionmaking process to looming problems in Soviet
oil policy.
Responsibility for the formulation, approval, and im-
plementation of Soviet oil policy is distributed among
a wide range of organizations and individuals within
the party-state bureaucracy (see figure and tables 1
and 2).' They are tied together in the decisionmaking
process by a complex network that passes information
on policies and plans up and down a formal adminis-
trative hierarchy, supplemented by a set of personal
and political relationships. These relationships include
the interlocking directorate of party and government
' Oil policy is defined broadly to encompass exploration, production,
refining, distribution, and consumption of oil and oil products
officials, as well as the ties of officials to their former
organizations and regions. For example, Boris Shcher-
bina, who was the head of the Ministry of Construc-
tion of Oil and Gas Industry Enterprises (MinneJ'te-
gazstroyJ from 1973 until 1983, was party first
secretary in Tyumen' Oblast-a major center of oil
production-for 12 years prior to his appointment. In
addition, many decisionmakers at the highest levels
are supported and influenced by personal advisers and
outside specialists who have their own vested institu-
tional and career interests that tend to bias the
information they provide.
Policy Formulation
Although formal authority for the approval of oil
policy rests with the Politburo, much of the formula-
tion actually occurs in the Secretariat of the Central
Committee, the Presidium of the Council of Minis-
ters, and the State Planning Committee (Gosplan).
These organizations monitor oil policy for the Politbu-
ro, providing it with a broad spectrum of information
and serving as high-level forums for discussions and
negotiations on alternate strategies. Like the Politbu-
ro, they have a national, integrative policy perspec- 25X1
tive. At this level, however, oil policy begins to take on
a separate identity from energy policy as authoritative
spokesmen for it appear.
The Council of Ministers and Gosplan, in particular,
have ready access to a high degree of expertise on
energy matters and are continually involved in the
evaluation and adjustment of oil policy. Both organi-
zations have advisory staffs, the Referentura of the
Council of Ministers, and the State Experts' Commis-
sion of Gosplan, to which they can turn. In addition,
each has access to an extensive network of research
and design institutes, such as the Gosplan Institute of
Complex Fuel-Energy Problems (VNIIKTEP) and the
Oil Ministry's top institute, the All-Union Institute
for Petroleum Production. Two other important
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The Soviet Oil Policy Decisionmaking Hierarchy
Policy Approval
Policy Formulation
Policy
Implementation
Secretariat of the
Central Committee
Politburo of [he
Communist Party
Presidium of the State Planning
Council of Ministers Committee
State Commission
for Useful Miheral
Reserves
Ministry of the Ministry of
Petroleum Industry Petroleum Refining
and Petrochemical
Industry
Ministry of the Gas Ministry of
Industry Foreign Trade
State Committee for Ministry of
the Supply of Construction of
Petroleum Products Petroleum and Gas
Industry Enterprises
sources of information and advice are the State .
Committee for Science and Technology (GKNT) and
the USSR Academy of Sciences.
The quality and objectivity of the advice received by
top-level decisionmakers from all these sources is
subject to much variation. For instance, the head of
the Academy of Sciences, Anatoliy Aleksandrov, in
his speeches and articles; has shown himself to be a
staunch promoter of nuclear power and his advice on
energy policy presumably reflects this propensity. In
similar fashion; Guriy Marcliuk, the head of the
GKNT, has been a strong supporter of broad-based
development in Siberia, and he is probably inclined to
favor energy projects there over those in other regions.
In addition, requests for information may frequently
be contracted out, often to individuals working in
institutes affiliated with interested ministries. The
Referentura, in particular, apparently relies primarily
on such outside consultants, whose views are probably
colored by the interests of the organizations they
serve.
CPSU Secretariat. The Secretariat, supported partic-
ularly by the Heavy Industry acid Power Department
of the Central Committee headed by Vladimir Dol-
gikh, has responsibility for monitoring and coordinat-
ing oil policy for the party. Dolgikh's department used
to be known as the Heavy Industry Department. The
addition of the term "power" to the title, which was
first noted in Trud in September 1983, probably
reflects increased concern by top party leaders over
the USSR's energy policy. Although specific policy
optioris probably originate primarily in specialized
government, scientific, and academic organizations,
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Table 1
Key Decisionmakers for
Oil Policy Approval and Formulation
Konstantin Chernenko
Nikolay Tikhonov
General Secretary, CPSU
Politburo member; Chair-
man of the Council of
Ministers
the Secretariat also
may become involved in resolving conflicts over re-
source allocation and plan fulfillment between Gos-
plan and the ministries.2
Presidium oJthe Council oJ'Ministers. Within the
Presidium,
an Energy Commission was set up no later
than the mid-1970s to bring those members with a
direct interest in energy problems into frequent con-
sultation and to give direction to energy policy. The
Politburo member; First Commission probably is headed by Veniamin
Deputy Chairman of the Dymshits, the Deputy Chairman of the Council of
Council of Ministers; for-
mer party boss of Ministers, who is primarily responsible for energy
Azerbaijan questions, and includes the ministers of the energy-
ro; former Premier of Rus-
sian Republic
Candidate member Politbu-
ro; Party Secretary; head of
Central Committee Heavy
Industry and Power
Department
1-2 Vitaliy Vorotnikov Candidate member Politbu-
ro; Premier of Russian
Republic
2 Veniamin Dymshits Deputy Chairman of Coun-
cis of Ministers; Chairman To supplement the efforts of the Energy Commission,
of the State Committee for an Interdepartmental Commission on Questions of
Science and Technology; Developing the West Siberian Oil and Gas Complex,
former head of Siberian De-
partment of the Academy of also headed by Dymshits, was set up by the Council of
cil of Ministers; head of its
Energy Commission and In-
terdepartmental Commis-
sion on Questions of Devel-
oping the West Siberian Oil
and Gas Complex
Deputy Chairman of Coun-
sciences Ministers in 1981 to deal more directly with the
Vladimir Filanovskiy-
Zenkov
Deputy Chairman Council problems and needs of the USSR's principal energy-
of Ministers; Chairman producing area. For example, according to the Soviet
State Planning Committee;
former Oil Minister newspaper Sotsialisticheskaya industriya, in June
Gosplan Deputy Chairman 1983 it tasked several ministries to send representa-
for Energy Affairs tives to West Siberia to oversee improvement in the
Chief of Gosplan Petroleum construction of social infrastructure-schools, hospi-
and Gas Industry tals; housin and re rtmanded officials of the Min-
Department g- p
the Secretariat has an important role to play in the
decisionmaking process, because those options must
be coordinated with the party apparatus before being
presented for Politburo review.
production industries~il, gas, coal, and electric
power-and the energy-related machine-building and
construction industries, as well as the chairmen of
Gosplan and the GKNT.
The Energy Commission likely serves as an arena for
intensive negotiating over policy direction and alloca-
tion of resources and as the primary source of recom-
mendations for energy policy for the Council of
Ministers as a whole. In this process, its members are
faced with the difficult and sometimes inherently
contradictory task of balancing the vested interests of
their own ministries against broader national political,
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istry of Power and Electrification (Minenergo) for
endangering the production goals of the Ministry of
'Regional party organizations perform similar monitoring and
oversight functions. For example, the Party First Secretary of
Tyumen' Oblast, G. P. Bogomyakov, has been deeply involved in
the development of the West Siberian oil and gas fields.
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Table 2
Ministry-Level Organizations With
Primary Responsibility for
Implementation of Oil Policy
guidance from higher authorities (the Politburo, Sec-
Ministry of Geology Locates new reserves to support future
Ministry of Petro-
leum Industry
State Planning Committee. Gosplan, although for-
mally subordinate to the Council of Ministers, exerts
a powerful separate influence on the formulation of oil
policy through its extensive involvement in setting
plan targets and allocating resources. On the basis of
retariat, and Presidium of the Council of Ministers),
Gosplan establishes final plan targets through a proc-
ess of negotiation with the responsible ministries. This
Defines full extent of fields identified by process may require several iterations of Gosplan
the Ministry of Geology; proposes plans proposals and ministry counterproposals before agree-
for field development including appropri- ment is reached, reflecting differing objectives. In the
ate technology; and designs and maintains
facilities and equipment for drilling ex- negotiation prOCess, Gosplan attempts to set relatively
traction; initial processing, storage, and higher production targets than the ministries, which
distribution of crude oil. try to establish relatively lower plan targets to ensure
Ministry of Gas
Industry
State Commission
for Useful Mineral
Reserves (GKZ)
Ministry of Con-
struction of Oil and
Gas Industry Enter-
prises
Responsible since 1978 for offshore explo- bonuses for plan overfulfillment. Overfulfillment of
ration and production.
Confirms reserve estimates of the Ministry assigned targets has a direct effect on the size of
of Geology and approves the field develop- bonuses received by ministry and enterprise man-
ment and production plans of the Ministry agers.
of Petroleum Industry.
Primary contractor for construction of oil-
t"ield facilities and infrastructure, installa-
disputes between Gosplan and a ministry are
usually resolved in favor of the former.
development, and laying of crude and In 1981, Gosplan's role in oil policy was expanded
product pipelines. with the formation of the Gosplan West Siberian
Ministry of Petro- Responsible for primary and secondary Interdepartmental Commission, which parallels the
leum Refining and processing of crude oil into various kinds
Petrochemical In- of fuels, lubricants, and petrochemical Council of Ministers Commission created at the same
dustry feedstocks. time.' This commission is located in Tyumen', the first
State Committee for Plans and monitors the distribution, sup- USSR Gosplan group to be located outside of Mos-
the Supply of Petro- ply, and economical use of petroleum cow. Its assigned function is to act as a local project
leum Products products.
Ministry of Foreign Negotiates and supervises annual, long- manager for development of the critical oil and gas
Trade term, and spot market contracts for crude resources of the region by resolving conflicts and
oil and petroleum products; arranges for. promoting cooperation across ministerial and regional
the reexport of oil received as payment in boundaries. So far however
_.Ll_ C,.- - f ~
for the purchase of foreign technology and the Gosplan Commtsslon
. equipment, including turnkey plants. has enjoyed only limited success. It must refer most
issues back to Moscow for resolution and, thus, lacks
genuine authority to challenge the control of each
Petroleum Industry (Minnefteprom) by failing to pro-
vide adequate and reliable supplies of electricity to the
region. The effectiveness of such edicts beyond the
short term, however, remains highly questionable,
since they do not alter the long-term operational
strategy of the ministries.
ministry over its own activities in the region.
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Policy Approval: The Politburo
The Politburo, because of the breadth and complexity
of its responsibilities for all national policy, considers
oil policy most frequently within a larger context,
such as energy or economic policy. Thus, the Politbu-
ro, at its weekly meeting on 8 April 1983, examined
the draft of the new long-term Energy Program for
the USSR in which oil policy figured prominently. ~
The tendency of the Soviet system to funnel decisions
up the hierarchy, however, also requires the Politburo
to spend time on more mundane, relatively minor
aspects of oil policy. For example, only two weeks
before the 8 April session, the Politburo reviewed the
problem of improving the supply of fuel and lubri- G
cants for farm tractors. This practice is typical of the
Soviet system and has the potential to overload, and
thus weaken, the decisionmaking process. Moreover,
the time required for one of these issues to make its
way to the top of the hierarchy could cause an
unnecessary, anc) perhaps even damaging, delay.
In actual practice, Politburo actions on both major
and minor issues typically constitute largely pro for-
ma ratification of policy decisions worked out at lower
levels, rather than substantive intervention from the
top. It probably is presented with a "position paper"
that it can accept, reject, or remand for further work.
The basic outline of the long-term energy program,
for example, was apparently adopted in April 1983.
The program was finally published in March 1984, 11
months after the Politburo a roved it. In earl
August
the program was not quite ready to go public,
suggesting that it was remanded to Gosplan for
production. Similarly, the quick response by the
Soviets to shift enough resources to the Siberia-to-
Western.Europe natural gas pipeline to ensure its on-
time completion following the expansion of US sanc-
tions on 18 June 1982 almost certainly came directly
at the initiative and direction of the Politburo: On
8 July 1982 Pravda reported that the CPSU Central
Committee (CC) and the USSR Council of Ministers
had given an official blessing to "patriotic initiatives"
to overcome the effects of the embargo and that a
"decision" had been taken on measures to ensure
completion of the pipeline. This decision was. made at
least as much for political reasons as for economic
ones-future export earnings-and in the face of at
least some degree of disruption to the domestic econo-
my
In making its decisions on oil policy, the Politburo
depends on those few members whose functional and
regional responsibilities have required a considerable
involvement in energy matters to take the lead in
discussions. To its detriment, the Politburo has lost
several of its most experienced members in energy
policy issues the past few years with the death of
former Chairman of the Council of Ministers Aleksey
Kosygin in 1980 and the resignation of party secre-
tary Andrey Kirilenko in 1982.5
Those current full members of the Politburo with the
greatest responsibility for oil and energy policy in-
clude Nikolay Tikhonov, who replaced Kosygin in
1980 as Chairman of the Council of Ministers, and
his first deputy chairman since November 1982,
Geydar Aliyev. Aliyev was formerly the party boss of
the Azerbaijan Republic, which has a 'long history of
important. activity, in the oil industry:
further ironing out of contentious issues.
In some instances, however, for both economic and
political reasons, the Politburo departs from this
practice and intervenes directly to make changes in
basic policy. For example, in' late 1977 the Politburo
ordered a sharp reallocation of investment resources
to increase oil production in West Siberia when faced
with an unexpected decline in the overall growth of oil
' Brezhnev's death may also have been felt-he had begun taking a
more active leadership role in oil and energy policy in the late
1970s.~ Although former General Secretary Andropov may have
become involved in assessing requirements for energy-related for-,
~eign technology while head of the KGB, his knowledge of energy .
policy was probably limited largely to information obtained during
Politburo discussions rather than from direct responsibility in the
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Three candidate Politburo members also have signifi-
cant responsibilities or backgrounds in oil policy.
Mikhail Solomentsev, who was appointed in June
1983 to head the party's Control Committee, was for
12 years the Premier of the Russian Republic
(RSFSR), where the vast majority of the Soviet
Union's oil reserves and most of its oil refining and
petrochemical facilities are located. The newest candi-
date member, Vitaliy Vorotnikov, will also become
involved in oil policy as the new Premier of the
RSFSR. Vorotnikov's previous experience includes
serving as the First Deputy Chairman of the repub-
lic's Council of Ministers, with responsibility for
industry from 1975-79. Finally, Vladimir Dolgikh,
who was elected a candidate member of the Politburo
in May 1982, has been head of the CPSU Central
Committee's Heavy Industry Department since at
least 1976 and is often the senior party official present
at meetings and conferences concerned with energy
policy.
Newly elected Party General Secretary Konstantin
Chernenko, who has spent his career largely in party
administrative and propaganda activities, has never
had direct responsibility for oil, energy, or even
economic policy, although as a member of the Polit-
buro he must have acquired familiarity with the
issues. He is likely to rely heavily on Tikhonov, who
nominated him for General Secretary and who is
clearly a Brezhnev-era colleague, for advice on these
matters.
Policy Implementation: The Ministry Level
Primary responsibility for implementing oil policy lies
with several key ministries and other all-union bodies
organized along functional lines. They are supported
by and are dependent on various transportation, con-
struction, supply, and machine-building ministries,
most of which also serve many other clients. Although
the general areas of responsibility are fairly well
delineated, some overlap occurs. For instance, there
has been a continuing problem defining who is respon-
sible for exploratory drilling as well as balancing
exploratory and development drilling, especially in
West Siberia, between the Ministry of Geology and
the Ministry of the Petroleum Industry (MinneJPe-
prom). Similarly,
there is an inherent tension
etween t e asic tas of the Oil Ministry to maxi-
mize current production and that of the State Com-
mission for Useful Mineral Reserves (GKZ), which is
more concerned with maximizing long-term produc-
tion even if short-term production is lessened.
Ministerial assessments and recommendations of
technological and production capabilities, incorporat-
ing extensive practical and often proprietary knowl-
edge, constitute significant inputs into the decision-
making process. The policy perspective of the
ministries, however, is typically narrow; meeting their
own specific planned production goals, rather than
attempting to improve energy resources across the
board. This often leads to a lack of cooperation and
coordination among them, despite their operational
interdependence. The press is filled with examples of
supplies, machinery, and equipment not delivered on
time; supplies (including foreign equipment) lying
unused and deteriorating in the harsh Siberian envi-
ronment; poorly designed or constructed equipment
breaking~down; and chronic failure to provide ade-
quate supporting infrastructure on time. Under these
circumstances the failure of any one ministry to
achieve plan targets or to fulfill contractual obliga-
tions echoes throughout the production and supply
chain, forcing adjustments and encouraging the kinds
of inefficiencies-stockpiling of resources, duplication
of effort, and underestimation of plan targets-that
are common throughout the Soviet economy.
The Soviet decisionmaking process typically confirms,
rather than alters, the basic direction of established
policy. Considerable time is spent mechanically work-
ing through the sequence of annual planning cycles,
during which the often conflicting parochial interests
of the individual ministries must be balanced against
the broader political and economic concerns of higher
level policymaking bodies. In this environment, plan-
ning decisions tend to be cautious and incremental,
and the achievement of short-term results that bolster
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political positions and enhance career opportunities
often takes precedence over long-term planning.
Much time is also spent at higher levels making
decisions resolving organizational conflicts over re-
sourceallocation and areas of responsibility that could
be made at lower levels. The decisionmaking process
is hindered further by a system of planning indicators
and rewards that.penalize innovative behavior and
risk taking especially at the ministry and plant levels.
These characteristics reduce the ability of decision-
makers to "see the big picture" and to identify
potentially serious problems and deal with them be-
fore they reach a crisis stage. This weakness was
particularly evident in the evolution of Soviet oil
.policy in the 1970s.
Debate Over Oil Policy 6
In the late 1950s, the USSR began rapidly increasing
the share of oil and gas in energy production and
consumption, while the share of coal declined (see
table 3). Soviet enthusiasm for this strategy was
spurred by the discovery of the Volga-Urals fields
during this period, and it received a further boost in
the late 1960s by the discovery of vast oil and gas
deposits in West Siberia. By the end of this latter
period, however, at least some Soviet scientists and
officials were warning in articles that oil was not an
inexhaustible resource. They stressed the need to
reduce the use of petroleum as fuel for boilers,
reserving its use instead to more highly refined and
valuable products such as gasoline, aviation fuel,
lubricants, and petrochemical feedstocks.
During the early 1970s, this concern led to an open
debate, carried on at the highest levels, over the
proper relationship of oil and other energy resources
in the Soviet energy balance. The major issues con-
cerned the size and availability of oil reserves, the best
use for oil and gas-whether as fuel or chemical
feedstocks-the speed with which riuclear power
could be brought on line, and the best way to utilize
Siberian coal resources.
Table 3 Share tons 41'standard fue!
The Changing Soviet Produced (percentage)
Fuel Balance
1965
35.8
15.5
42.7
6.0
1970
41.1
19.1
35.4
4.4
1975
44.7
21.8
30.0
3.5
1980 (plan)
43.1
30.9
26.0
0
1980 (actual)
45.5
27.1
25.2
2.2 '
1981
44.9
28.4
24.3
2.2
1982
44.0
29.7
24.1
2.2
Source: Narodnoe khozyaistvo, /982, Moscow, 1983, p. 181, except
plan for 1980, which is derived from A. M. Nekrasov and M. G.
Pervukhin, eds., Energetika SSSR, v 1976-/980 godakh,
Moscow, 1977, p. 149.
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As a result of this debate, the leadership. decided in
the mid-1970s to alter its energy policy. The new
policy called for beginning along-term shift to greater
reliance on coal, hydroelectric power, and nuclear .
power while increasingly reserving both oil and natu-
ral gas for nonfuel uses. It also emphasized energy
conservation as an important part of energy policy. 25X1
This decision followed the approach advocated by
former Premier Kosygin, with strong support from the
then head of the GKNT, Vladimir Kirillin, and the
President of the USSR Academy of Sciences, Anato- 25X1
liy Aleksandrov. The new strategy was clearly mani-
fested in the 1976-80 Five-Year Plan (FYP).
The proposed shift in energy balance, however, proved
too ambitious. By the end of 1977, the Soviets' own 25X1
data clearly showed that the planned targets for coal
and oil would not be met, and the program for nuclear
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power continued to lag far behind schedule.' The
absolute increase. in oil production in 1977, which was
obtained primarily because the increase in production
from West Siberia exceeded the amount of production
lost from older producing regions, was the smallest
since 1972; the corresponding relative increase of 5
percent was the smallest in three decades (see table 4).
Soviet concern over this problem was openly manifest-
ed by a reduction in the publication of oil production
data on the older regions and by conflicting data from
several sources on West Siberian production. In De-
cember 1977, moreover, the Soviets, having failed to
meet their 1977 oil production target by at least 4
million metric tons (mmt), reduced the 1978 goal by 5
mmt. This action was only a prelude of things to
come. Following the dramatic slowdown in the abso-
lute growth of oil production that took place in 1979,
the Soviets lowered the target for oil production for
1980 by 24 mmt, from 630 to 606 mmt.
The decisionmaking process, with its tradition of
setting overly optimistic plan targets and its focus on
current plan fulfillment, had failed to alert the leader-
ship to the severity of impending problems. Soviet
planners, accustomed to large and relatively inexpen-
live increases in oil production, and not anticipating
the sharp slowdown in economic growth that accom-
panied the planned reduction in investment, apparent-
ly greatly miscalculated the rate at which the change
in the energy balance could take place.
Changing Oil Policy
Because of the failure to achieve the planned composi-
tional change in.energy supply, the Politburo.was
forced to depart from the normal incremental deci-
sionmaking process and quickly reassess, and alter its
energy policy only two years after it had been an-.
nounced. Brezhnev outlined the new policy at a
reviews of the
Soviet energy situation during the latter part of the 1970s are
contained in Leslie Dienes and Theodore Shabad, The Soviet
Energy System: Resource Use and Po/ides, New York, John Wiley
& Sons, 1979; the relevant chapters by Dienes and Arthur A.
Meyerhoff in Robert G. Jensen, Theodore Shabad, and Arthur W.
Wright, Soviet Natural Resources in the World Economy, Chica-
go: University of Chicago Press, 1983; and Technology and Soviet
Energy Availability, Congress of the United States, Office of
Table 4
USSR: Oil Production a
a Including gas condensate.
b Preliminary.
Estimate. The 1983 plan for West Siberian output was 372 million
tons. In his speech to the Supreme Soviet on 28 December 1983,
Gosplan Chairman Baybakov stated that "oil workers of West
Siberia reached in the current year a milestone of daily output of 1
million tons." (Pravda, 29 December 1983, p. 4.) In Sovetskaya
rossiya of 23 December 1983, however, correspondent N. Batalov
reported: "Yes, the oil workers were able to reach the `million'
milestone, but for now they did not succeed in holding the record
level of daily,output stable." Pravda reported on 19 January 1984
th"at "for the first time the oiLoutput plan" in the Tyumen' area
"was not fulfilled."
December 1977 Central Committee Plenum.e Al-
though the long-term goals remained the same, he
indicated that achieving them would have to be
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delayed. The Politburo decided to return for the next
10 years to its previous strategy of depending heavily
on the production of oil, which would increase slowly,
and of natural gas, which would grow rapidly, for
off of coal production in 1978 and the downturn that
began a year later. More broadly, the shift in re-
sources to West Siberia contributed to the further
slowdown in the growth of GNP that has character-
meeting energy needs.
The key element in this policy was West Siberia. The
planned increase in total oil production could be
achieved only if the increase in production from West
Siberia more than offset the amount of production
lost from older producing areas. The Politburo recog-
nized that the investment planned for that region was
insufficient to meet production targets and ordered a
reallocation of investment resources to West Siberia.
Drilling brigades from other areas soon began to
arrive in West.Siberia, and in May 1978 a campaign
was unleashed with great fanfare assigning high
priority for Tyumen' deliveries from plants all over
the USSR. However, as was apparent from criticisms
levied in June 1978 at a roundtable meeting of
officials and planners on West Siberian development,
there was concern that the amount reallocated was
not adequate to support critically needed exploration,
as well as development drilling and construction of
infrastructure. In addition, there was controversy over
whether to concentrate on the development of a larger
number of smaller fields with all of the logistic
problems that entailed, or to attempt to meet the
increased production needs by increasing drilling and
extraction above planned levels at the older, known
West .Siberian fields, notably the supergiant Samot-
lor. In typical Soviet fashion, the second alternative
was chosen, which guaranteed the necessary rapid
increase in production at a relatively lower cost, but
only at the price of reducing the long-run total
recoverable yield and producing a steeper rate of
decline.
The decision to shift investment to West Siberia,
coming in the middle of a five-year plan that also was
witnessing a significant slowing of growth in the
economy and in investment, meant that the availabil-
ity of resources to other sectors and regions of the
economy would be constrained. Within the energy
sector, it probably contributed to the virtual leveling
ized the Soviet economy since the late 1970s
The decision demonstrated an important strength of
the Soviet decisionmaking system. Because final au-
thority is concentrated exclusively in the Politburo, it
has the ability to rapidly mobilize and shift resources
in response to pressing problems that require reevalu-
ation and redirection of policy.
This approach, however, also has important weakness-
es. In this "crisis" decisionmaking mode, the leader-
ship does not have the luxury of weighing both the
long- and short-term costs and benefits of such sharp
changes in policy. Thus, decisions made in this fashion
are likely to require major adjustments throughout
the economy that are not easy to absorb.
Decisions of this magnitude cannot be made frequent-
ly without increasing the costs involved and reducing
the capacity of the system for absorbing additional
shocks if new problems arise. Frequent changes could
easily lead to confusion and enormous waste as lower
level managers and production units fail to master the
tasks associated with one policy shift and to gain
economies of scale before yet another set of directions
and procedures must be instituted.
25X1
The way the decision was made also contrasted
markedly with the more typical style of consensual
decisionmaking that characterized the Brezhnev era.
The new policy did not appear to enjoy universal
support, as debate over energy policy continued. In
particular, Premier Kosygin several times in the suc-
ceeding months emphasized the need for a more 25X1
balanced approach to the energy situation. Brezhnev
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responded to this lack of support through remarks to a
Komsomol Congress in April 1978 in which he de- .
fended the need for the large investment in Tyumen'
oil and gas. This irresolution probably occurred, in
part, because the decision to shift resources to West
Siberia was made too swiftly to allow for full coordi-
nation of views and, in part, because real disagree-
ment and uncertainty about the policy remained.
It was not until two years later, in 1979, that the
broad outlines of an energy policy for the 1980s
finally be an to emer e.
(this policy re-
flected general agreement among the leadership. In
essence, with one major exception, the new energy
policy represents a return to the long-term strategy
that was adopted in the 1976-80 plan of reducing
dependence on oil, while making the transition to
increasing reliance on coal and nuclear power. The
exception was the role of gas, which now would be
increasingly relied upon as the transition fuel. Previ-
ously, gas had been reserved for nonfuel uses in a
fashion similar to the policy for oil.
Soviet leaders probably. believe that the oil policy they
have adopted will prevent the development of a
production crisis such as they faced at the December
1977 plenum. After a period of uncertainty following
the decisions of that plenum, the decisionmaking
process has returned to its typical, incremental mode
of operation, with relatively little attention given to
identification of potential future problems.
Soviet oil policy for the 1980s is based on the
leadership's awareness of the current.leveling off of oil
production and, probably, an anticipated decline in
the near future.'? The resulting policy apparently is
designed to meet three basic, interrelated political and
10 The recently. published Energy Program endorsed by the Politbu-
ro calls for "securing a stable, high level of oil output," and "an
increase in liquid fuel" (including synthetic fuel), which is suffi-
ciently vague to cover a range of future situations from a slight
economic objectives during the transition to a period
of lesser dependence on oil:
? Maintaining energy self-sufficiency.
? Providing the major share of hard currency earnings
through exports to the West.
? Meeting the demand for politically important ex-
ports to Eastern Europe and other client states.
The first objective is clearly most important and takes
precedence in oil policy decisions. In making alloca-
tion decisions for oil exports to meet the other two
objectives, however, the leadership has some flexibili-
ty, depending on world market conditions and the
political and economic situation at home and in
Eastern Europe.
Energy Self-Sufficiency
Leadership commitment to the objective of energy
self-sufficiency was clearly stated in Kosygin's com-
ment to the 25th Party Congress in 1976 that the
USSR "is the only major industrial state in the world
that bases its economic development on its own fuel
and power resources." This frequently repeated senti-
ment, which is incorporated into the first ,section of
the Energy Program, fits well within the Soviet
Union's tradition of autarkic development and is a
source of popular pride and international propaganda.
External events, moreover, appear to have strength-
ened leadership commitment to this objective. The oil
supply disruptions of the 1970s that plagued the
United States and the West European countries prob-
ably heightened Soviet awareness of the dangers of
becoming dependent on foreign sources of fuel and
energy as reflected in Kosygin's comment noted
above..This point was brought home more directly by
the US efforts to apply economic sanctions following
the imposition of martial law in Poland in December
1981. The sanctions included the expansion of the list
of oil and gas equipment requiring validated export
licenses and suspension of the issuance of such li-
censes.
The Soviets responded by describing the United
States as an unreliable trading partner and proceeded
to find new suppliers of oil and gas equipment when-
ever possible. Moreover, they have also attempted to
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increase domestic capabilities in the manufacturing of
this a ui ment.
(many
people in the Soviet Government were beginning to
see the sanctions as a blessing in disguise that forced
the USSR to improve its own economy and develop its
own production facilities.
On the other hand, the Soviets recognize the contribu-
tion US technology can make to the success of their
oil policy. By mid-1983,
Soviet foreign trade organizations
were s owing an increased willingness to explore
options and enter into contracts with US suppliers for
machinery and equipment. This was true especially if
the items were unavailable from other sources. This
shift, which occurred after the easing of sanctions and
despite continued concern over future dependency,
reflects a decision that had to be approved by the
Politburo.
Similarly, the Soviet leadership was well aware of
CIA predictions of an impending downturn of Soviet
oil production." The suggestion here is not that CIA
predictions provided the leadership with new informa-
tion and thus altered its decisionmaking process,
although the predictions may have served to focus the
leadership's attention more acutely on the problem.
Rather, it is that the propaganda value alone of
proving CIA wrong and overcoming US sanctions
provided the Soviets with some additional incentives
to maintain or increase production.
CIA predictions, however, also might have had an
effect in strengthening the hand of those arguing for
increased investment in West Siberia.
Eastern Europe Versus
Hard Currency Exports 12
Because leadership commitment to the objective of
energy self-sufficiency is deeply rooted, decisions
about how to balance oil supply and demand will
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largely reflect pragmatic trade-offs between exports 25X1
that meet the other two objectives of earning hard
currency and ensuring control over Eastern Europe.
On the one hand, oil exports for hard currency,
primarily to European members of the Organization
for Economic Cooperation and Development (OECD),
have accounted for about half of Soviet hard currency
earnings from commodity trade since the mid-1970s.
On the other hand, oil exports to Eastern Europe help 25X1
tie those countries more securely into political and
economic integration with and dependence on the
Soviet Union.
The attitude of the leadership toward the relationship
between exports to Eastern Europe and hard currency
countries was exemplified in 1981 when it chose to
ease a growing Soviet hard currency trade deficit by
cutting oil deliveries to Eastern Europe for 1982 and
diverting about 100,000 barrels per day to the inter- 25X1
national market. Moscow recognized that such cuts
could risk increased political instability and worsen
economic performance in Eastern Europe." In this
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case the leadership apparently believed, however, that
the short-term effects could be contained, in part, by
making the cuts selectively rather than equally among
the East European countries-Poland, for instance,
was not affected b the cuts.
the East Europeans
must reduce oil consumption in the long term in any
event. The latter position was buttressed by Soviet
displeasure over the reexport of Soviet oil by several
East European countries. If the leadership is faced
with a greatly tightened oil supply and demand
situation later in the decade, it would be likely to
respond in a similar fashion, even though the political
risks might be greater.
Oil Policy for the 1980s
To meet its objectives, the leadership has developed a
strategy that relies on increased. productivity, substi-
tution of fuels, and conservation to maintain supply
and hold down demand. These are to be achieved
through modernization of plant and equipment and
the application of a wide range of traditional bureau-
cratic measures. To the degree that these measures
are successfully implemented, the leadership's flexi-
bility in making decisions to meet its basic oil policy
objectives will be increased. This strategy, however,
must be implemented during a period when overall
investment is growing at a historically low rate, and
the geological and environmental conditions in the
primary producing areas are making it more difficult
and far more costly to maintain oil production at or
near current levels. The impact of these factors will
reduce the flexibility of Soviet decisionmakers to meet
their oil policy objectives.
To back up its .oil policy; the leadership committed a
large proportion of investment funds to energy gener-
ally and oil particularly." The 1981-85 plan called for
a 50-percent increase in investment in the energy
sector compared with that of the previous five-year
plan. Investment in oil production alone was planned
to increase by over 60 percent, from 26 billion rubles
during 1976-80 to 43 billion rubles during 1981-85.
The latter figure represented almost one-third of the 25X1
investment allocated to the energy sector, up from 30
percent in the previous plan period, and about one-
third of the planned increment to investment in
industry as a whole.15 The pace of oil industry invest-
ment in the first two years of the 1981-85 plan
indicates that oil may account for almost one-half of
the increment in total industrial investment.
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25X1
Yet even these generous allocations by themselves will
not be adequate to guarantee Soviet policy objectives 25X1
during the 1980s.
from 1971 to 1981 the average cost of
pro ucmg ton of oil nearly tripled, from 35 to 100 _
rubles. The rate of increase in cost, moreover, is
expected to accelerate during the current decade, as
new production operations move into more difficult
areas and the quality of deposits in the older produc-
ing areas declines further. Moscow is well aware that
it cannot continue indefinitely to increase the share of
investment going to oil production. At some point
these costs must run into the limits imposed by a finite
investment budget that must accommodate other pri-
orities such as .defense, machinery, and transporta- 25X1
tion, as well as other energy sectors.
Efficiency gains, thus, are essential to the Soviet
strategy and have already been factored into produc-
tion goals. For instance, to meet 1985 oil production
targets, the 1981-85 plan calls for a more than 50-
percent improvement in efficiency of drilling opera-
tions. Similarly, the petrochemical industry plans to
obtain a 28- to 35-percent rise in labor productivity,
primarily through the introduction of new equipment.
The need for more productive equipment was bluntly
stated by two Gosplan officials writing in the October
1982 issue of the Gosplan journal. According to them,
the capacity of the Soviet petroleum machine-building
industry to produce needed equipment is much less
than the amount of~currently produced machinery
that will be required during the decade. Therefore, to
avoid a major and costly expansion~of capacity, the
gap between supply and demand for this critically
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important equipment can be closed, they argued, only
by producing new, technologically advanced and more
productive equipment.
operating enterprises, on the other hand, are rewarded
primarily for meeting current production goals and
are not anxious to risk the initial drop in production
that often accompanies a decision to introduce new
Modernization
As indicated above, the Soviets are counting on the
widespread infusion of new, more productive and
energy-efficient technologies-from industrial plants
to home appliances-to help them implement their oil
policy. To obtain the needed technology, they have
pursued a dual approach. First, they have actively
sought to import advanced technology from the West,
including entire plants, as well as a wide array of
individual items such as seismic equipment, pipes, and
pipelayers. Second, the Soviets have sought to im-
prove their own domestic production capabilities. ~
During the past few years, the Soviets appear to have
shifted toward a greater emphasis on the second
approach because of problems encountered in absorb-
ing foreign technology, difficulties in obtaining access
to Western state-of-the-art technology, and limits on
the availability of hard currency. Technology transfer,
moreover, is not a simple process, and results have
often fallen short of leadership expectations.
Soviet hopes for increased productivity through mod-
ernization are jeopardized, however, because the Sovi-
et system is not conducive to innovation. In particular,
the USSR has traditionally had problems in develop-
ing practical applications for new technology. Those
organizations responsible for implementing a policy
stressing innovation often have little incentive for
doing so. Technical institutes, for example, are re-
sponsible only for inventing and perfecting technol-
ogies but have no responsibility and receive no eco-
nomic benefit for seeing them put into use. Individual
technologies.
Such disincentives to innovate and modernize received
considerable attention in the press after Andropov
became party leader, with the General Secretary
himself calling for changes to correct these problems.
A July 1983 joint Central Committee-Council of
Ministers resolution that encourages modernization
by decentralizing some investment decisions to the
enterprise level represented a first, albeit limited,
attempt under Andropov to deal with this problem.
Moreover, none of the five ministries involved in the
experiment is directly involved in oil policy implemen-
tation, so that any potential benefit from this experi-
ment in the oil sector will be delayed.
Bureaucratic Measures
The Soviets are also relying on various kinds of
tion, and exhortative decrees and campaigns.
traditional administrative and bureaucratic measures
to implement their oil policy. These include changes 25X1
in economic indicators and planning procedures, new
types of labor organization, bureaucratic reorganiza-
Oil Minister Mal'tsev, for example, in a December
1982 article, wrote that the ministry had considerably
expanded the use of planning and incentive indicators
based on the final result, that is, tons of oil produced.
These indicators are expected to supplement and
perhaps eventually replace such indicators as number
of meters drilled, which encourage crews to drill many
shallow, unproductive wells. Meanwhile, according to
a 1982 article by one of its deputy ministers, the
Ministry for Construction of Oil and Gas Industry
Enterprises (MinneJ'tegazstroy) has adopted atwo-
year planning cycle as a supplement to five-year and
annual plans to better coordinate production of pipe
(supply) and the start of pipeline construction (de-
mand). These kinds of measures are designed to make
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decisionmaking and implementation of oil policy more
rational in economic terms, especially at lower levels
of the hierarchy.
In a different approach to the same problem, when
domestic prices for oil and gas were changed in 1982
for the first time in 15 years, they. were designed,
according to a 1981 article in Ekonomicheskaya
gazeta, to more accurately reflect actual production
costs and allegedly are to promote the substitution of
gas for oi1.16 It is not clear, however, whether the new
prices do promote substitution, given the limited
ability of individual enterprise managers to initiate
such actions without approval from central planners.
The Soviet system also lacks a mechanism for contin-
uously or even frequently adjusting prices; thus, the
new prices will rapidly lose any relationship they
might have had to real costs. More importantly,
because of the emphasis on meeting quantitative
targets regardless of cost and the virtual absence of a
profit motive for enterprise managers, prices have a
very weak influence on enterprise behavior.
The Soviets are trying to increase productivity and
conservation of resources by decentralizing some deci-
sionmaking through the use of brigade contracts. This
relatively new approach to labor organization is de-
signed to allow individual crews to negotiate a higher
monetary return for their members in return for more
rapid completion of a project. According to a.1982
article by Deputy Minister K. Smirnov, MinneJ'tegaz-
stroy planned to have 55 percent of its brigades
working under such contracts by 1985 as compared
with 36 percent in 1981.
The Soviet leadership has also tried the familiar tactic
of reorganization to solve problems of bureaucratic
inefficiency in management and decisionmaking." For
example, the State Committee for the Supply of
Petroleum Products was upgraded from Union Re-
public to All-Union status in 1982. On the basis of a
continuing stream of complaints in the press, this
"The price paid to oil-extracting enterprises for oil was raised by a
factor of 2.3 and set differentially to reflect different geological
conditions. The price for gas was set approximately 20 percent
further centralization of authority does not seem to
have done much to improve control over the distribu-
tion of these products.
Another example of this kind of bureaucratic ma-
neuver, which has potentially far-reaching implica-
tions for the management of extraction of energy
resources generally, was the creation in 1982 of the
Gosplan commission on West Siberia referred to
earlier. The Commission has as its specific goal the
breaking down of bureaucratic barriers and the set-
ting up of a, single project manager for the develop-
ment of the region. The lack of real authority given
the Commission and its consequent relative lack of
success, however, reflects the tensions and inefficien-
cies inherent in the Soviet bureaucratic decisionmak-
ing environment.
Reorganizations to improve operating efficiency have
also occurred at lower levels. Minnel'teprom, for in-
stance, restructured part of its operations in Tyumen'
Oblast in May 1982. Ministry officials indicated their
dissatisfaction with the performance of the old man-
agement by not selecting any of its officials for the
new organization.
When all else fails, the leadership frequently resorts
to exhortation, encouraging the ministries and the
"masses" to work better in pursuit of important goals.
For example, a November 1981 CC CPSU resolution,
in typical Soviet fashion, praises Minne,f?egazstroy for
its present construction efforts but then admonishes it
for a variety of sins, including failure to retool and
mechanize more rapidly and failure to improve the
quality of pipeline construction.18 The ineffectiveness
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of such exhortations is indicated by the need for this
decree only two years after a similar one was issued.
The measures being taken to resolve these problems
were outlined by the then head of the ministry, Boris
Shcherbina, in a July 1982 article in the ministry's
journal. A detailed analysis of the article
to
October 1982, however, argues forcefully that imple-
mentation of these needed measures will be onl
artial and slow at best.
the ministry will resist
changes that might improve its long-term capabilities,
and it will continue to favor tried-and-true methods
for meeting its short-term production targets.
The leadership has also been conducting an old-
fashioned Soviet-style campaign for energy conserva-
tion, led by Gosplan Deputy Chairman Lalayants.
Enterprises and individuals are constantly being re-
minded in the press of the need to conserve oil and are
showered with reports on how much fuel was saved at
this enterprise or by that driver. The campaign has.
not spared the defense sector, where, for example, the
military publishing house Voyenizdat published a
book in 1980 on fuel conservation, with special refer-
ence to military equipment.
The central authorities are also introducing new
planning norms and requirements to encourage con-
servation. ADecember 1979 Gosplan resolution set-
ting out the methodology for establishing rates of
consumption of fuel and electric power had as its
stated primary goal the establishment of "progressive
standards" to conserve these resources, distribute
them efficiently, and utilize them effectively. This .
resolution replaced a similiar one that had been on the
books for more than a decade. A joint Central
Committee-Council of Ministers resolution two years
later focused on the same theme. One of its results
was a set of regulations for monitoring and recording
consumption of energy resources that were promul-
gated in May 1982. Six months later, at a Supreme
Soviet session in November 1982, standing commit-
tees on energy were established to monitor the conser-
vation efforts of ministries and enterprise managers.19
Problems in the Search fvr Oil Substitutes:
The Program To Develop Nuclear Energy
Certainly one of the most telling examples of the
bureaucratic inefficiencies that are endemic to the
Soviet decisionmaking process can be seen in the
program to develop nuclear energy, which is an
important part of the effort to reduce oil consumption
through substitution. Problems at Atommash, the
plant designed for serial production of reactors,
apparently had become so critical by mid-1983 that
the Politburo interceded directly in the matter. Fol-
lowing discussion at a Politburo_ meeting on the
problems, Dolgikh went to Volgodonsk, where the
plant is located, and, in a speech on 19 July that was
reported in Pravda, strongly reprimanded project
managers and local party oJ~cials. Two days later,
Pravda reported the retirement of I. T. Novikov, a
deputy chairman of the Council of Ministers and the
chairman of the State Committee for Construction
~Offairs. Although this was reportedly done at
Novikov's request, the timing and handling of the
ctlfair can hardly be coincidental. While it is far from
certain that these actions will have long-term positive
results, thelact that the Politburo had to become
involved in straightening out problems at one of the
C/SSR's top priority energy projects is suggestive of
the depth of the bureaucratic inefj