SOVIET OIL OUTPUT SHOWS A DECLINE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000403740010-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: January 12, 2012
• Sequence Number: 10
• Publication Date: April 3, 1985
• Content Type: OPEN SOURCE

ST"T
Declassified in Part - Sanitized Copy Approved for Release 2012/01/12 : CIA-RDP90-00965R000403740010-6
ARTICLE AITEAMM
ox PAGZ
WASHINGTON POST
3 April 1985
Soviet Oil Output
Shows a Decline
Shakeup Seen Related
By Gary Lee
Washington Post Foreign Service
. The Soviet Union, the world's largest oil
producer, is reporting its first decline in oil
i output of the postwar period. The shortfall in
planned production, in the view of -western
,analysts, may have been behind recent per-
sonnel changes, the first in Moscow since the
new Soviet leader, Mikhail Gorbachev, took
office March 11.
Last year was the first in which Soviet oil
production fell since World War II. In the first
two months of this year, the, decline acceler-.
ated. Production for January and February fell
2.4 percent below last year's levels, from
12.22 million to 11.915 million barrels a day,
according to Soviet data available in the West.
Ed A. Hewett, a Soviet economic expert at
the Brookings Institution, and other analysts
predict that the downward trend in Soviet oil
output will drag on through the end of the
1980s.
That would ' undercut Moscow's ability to
earn critically needed western hard currency,
and possibly strain relations with its Warsaw
Pact allies, who rely considerably on the So-
viets for energy.
The drop comes sharply on the heels of a
Moscow push to boost its hard currency earn-
ings by stepping up exports of oil and oil prod-
ucts to the West.
It also emerges in the midst of two other
developments that, western analysts say, may
cast a shadow over the Soviet Union's heavy
dependence on oil exports to the West: the
worldwide stagnation of oil prices and the
continued decline of oil production through-
out most of the Eastern Bloc.
Western oil exports account for more than
60 percent of the Soviet Union's foreign rev-
enue.
Flagging domestic agricultural harvests,
western analysts say,'have pressured the Sd-
viets into seeking more foreign cur-rency earnings for grain purchases. Moscow apparently blames its oil production problems on poor man-agement.In February, Oil Minister Nikolai Maltsev retired prema-
turely at age 56. Vasily Dinkov, 60, formerly gas industry minister, replaced him. Shortly thereafter, Pyotor S. Neporozhny, 74, was retired as minister of electrical power. His ministry was often cited in Soviet press for failing to pro- vide to distant, underdevelopedprovinces even the rudimentary
infrastructure, such as power lines
that would be necessary for oilexploration. The replacement of Neporozhny the first of a high-level official since Gorbachev came to power. Several other regional personnel I changes, particularly in, Tyumen province, where oil production isconcentrated, were also reported.
Kremlinologists first detected the difficulties in the mid-1970s, when production began to fall short of official Soviet targets. Last year, the production targetwas 12.48 million barrels a day but actual production was only 12.22 million. Until the end of the last decade, production levels had climbed im- pressively, Between 1970 and 1980, Soviet crude oil production rose from 7.06 to 12.06 million barrels a day.
1980, output shot up by
353,000 barrels a day. Thereafter, i~ - the increments of increase slid- from 112,000 barrels a day in 1981
to 68,000 in 1983.: In early. 1984, following a trip by a high-level Soviet delegation to oil fields, production levels rebounded, albeit briefly..... In;June they began to fall, again: Last year's production rate was
12 22 million barrels 'a day, com-
aced to 12.33 million in 1983.
P western in ence
983
Since 1977
anal sts have warned that unso his-
ticate vet technology and dril-
line methods, the stead dwtndlm
o resources
LJralsrian oil fields, and
labor force shortages in the ruASted
oil producing regions were putting
the Soviet Union on the brink of a
major oil production crisis.
"The timing was off, Hewett said
of the oft-cited reports, but it turns, out the reasons were right."
be-
He and other Soviet analysts be-
lieve that the best explanation for
the decline is that the giant Siberian
-
oil fields have begun to run dry be
s expected they
fore the Soviet
, would.
For or years, Soviet producers have
on a few major fields, mostly..
relied
in Siberia, to, provide the bulk of r
their oil.
Also, .. one U.S. diplomat said,
most lucrative oil fields hap-
"The
pen to lie in?areas of the country
most difficult: to develop due~;to
harsh climate. The fact that he
Soviets have done much toa little
exploratory drilling means .
they're now in the dark as to,wh~,e
to look for untapped resources. ''? ? '
up
The Soviets have followed
their high-level managerial shakeup
by seeking to double rig personnel
areas.
in strategic
They have predicted that oil pro-
recover this year. .to
duction will
12.6 .6 million barrels a day, 3 percent
above last year's level.
- Western analysts consider such
expectations exaggerated- .
- oil
Last winter, Moscow canceled
shipments .to some of its Western
customers.
European
But analysts were uncertain
'i whether the cutoffs, which have
occasionally in past yea
occurred rs,
because of harsh weather,. oil
were
shortfalls, or both.
Soviet oil situation
Whether the
becomes more serious depends ;on
how quickly: Moscow moves .,.to
Declassified in Part - Sanitized Copy Approved for Release 2012/01/12 : CIA-RDP90-00965R000403740010-6
 Declassified in Part - Sanitized Copy Approved for Release 2012/01/12 : CIA-RDP90-00965R000403740010-6
counter production deficiencies, and
how adeptly it develops oil substi-
tutes, in the view of analysts.. -
In recent years, the production of
natural gas has increased more rap-
idly than the: production of oil has
fallen. Western observers have
been surprised at how quickly -the
Soviet Union has tapped natural'gas
fields and laid pipeline in conjimt-
tion with its major, much-publicized
natural gas contracts with Ahe
West.
Moscow is now exploring ways to
substitute gas for oil in. domestic
use 'an l for increased exporf" io
Eastern Bloc countries, thus"allow-
king the Soviets to keep up high Iev-
els of oil exports to the West:
SOVIET OIL
PRODUCTION
(IN MILLIONS OF BARRELS PER DAY)
1960 2.96
1970 7.06
1975 9.82
1980 12.06
1981 12.17
1982 12.24
1983 12.33
1984 12.22
Jan. 1985 11.915
Feb. 1985 11.915
Sources: "Energy, Economics and Foreign
Policy in the Soviet Union" by Ed A. Hewett,
and Ekonomicheskaya Gazeta.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/12 : CIA-RDP90-00965R000403740010-6