SOVIET OIL PROBLEMS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00759R000100120013-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: May 5, 2010
• Sequence Number: 13
• Publication Date: September 11, 1985
• Content Type: MISC

Sanitized Copy Approved for Release 2010/05/05: CIA-RDP87T00759R000100120013-0
StLKtI /
NIO/Econ (David Low)
Il September 1985
SOVIET OIL PROBLEMS
In a televised speech delivered at the end of his visit to West
Siberia last week, Gorbachev lashed out at Soviet geologists, implying
that they misled the leadership into believing that there were no
problems with expecting continuing increases in oil output from West
Siberia, which supplies 60 percent of Soviet oil.
-- He promised further major increased in investment in the area but
said that in terms of prospects "we had the rise, the peak, and
now we have the decline," apparently laying the groundwork for
reduced goals for future output.
-- Indeed, month-to-month-decreases in Soviet oil output have
averaged 4% or nearly 500,000 b/d through the first half of 1985
as compared with 1984 and Gorbachev's lengthy visit to West
Siberia indicates this rate of decline likely continued in July
and August.
The fall in oil production will prove a major test for Gorbachev's
economic and political leadership.
-- The problems in West Siberia go far beyond geology; many
potentially productive wells are out of service due to a lack of
equipment.
-- In essence, the difficulties go to the core of the economic
system with its competing priorities and unfulfilled plans.
-- While some outside analysts point to the out-of-service wells as
a reason for the Soviets to be optimistic about turning around
the production decline, the inability of the Soviet system to
respond to this problem many months after it was recognized
demonstrates the magnitude of the difficulties.
Owing to the failure of the Soviet system to conserve energy and
replace domestic oil with gas, the Soviets now face the prospect of a
rapid decline in hard currency earnings as shipments to Western Europe
are cut back.
SECRET
Sanitized Copy Approved for Release 2010/05/05: CIA-RDP87T00759R000100120013-0
 Sanitized Copy Approved for Release 2010/05/05: CIA-RDP87T00759R000100120013-0
SECRET
-- Press reports in Europe confirm the Petroleum Intelligence Weekly
story that many customers will be cut back from 30 to 50 percent,
representing a loss of perhaps $3 to 4 billion in annual oil
revenues or more than 10 percent of total hard currency earnings.
-- The magnitude of this decline means that the reduction in Soviet
earning power between now and 1990 which CIA recently forecast is
proceeding more rapidly than even the "worst case" estimates.
Moscow recently began pushing the countries in Eastern Europe to
increase their participation in gas development.
-- If the Soviets also go back to these countries and ask them to
take further reductions in oil deliveries, this will put even
more pressure on their political relationships.
-- These countries were hurt badly by the oil reductions that took
place earlier this year and can be expected to lobby hard against
taking any further cuts.
In any case, the Soviet-East European economic relationship seems
headed for more trouble.
Sanitized Copy Approved for Release 2010/05/05: CIA-RDP87T00759R000100120013-0