Technology and Soviet Energy Availability

November 1981

NTIS order #PB82-133455
Library of Congress Catalog Card Number 81-600166

For sale by the Superintendent of Documents,

U.S. Government Printing Office, Washington, D.C. 20402
Foreword

This assessment was undertaken in response to requests from the House

Committee on Foreign Affairs; the Senate Committee on Banking, Housing, and

Urban Affairs; and the House Committee on Science and Technology to examine

the contribution of American and other Western technology and equipment to

Soviet energy availability in the present decade.

In November 1979, OTA published an assessment of Technology and EastWest Trade. Among the conclusions of that work was the suggestion that the

United States enjoys significant technological advantages over the U.S.S.R. in

petroleum equipment and computers, two areas that have been accorded high

priority in Soviet economic planning. It therefore appeared that these technologies might offer the United States opportunities to use export controls for

purposes of exercising political leverage over the Soviet Union.

The present study addresses in detail the significance of American petroleum equipment and technology to the U.S.S.R. and the resulting options for

U.S. policy. However, the scope of this assessment is far broader. It examines

the problems and opportunities that confront the U.S.S.R. in its five primary

energy industries—oil, gas, coal, nuclear, and electric power. It discusses plausible prospects for these industries in the next 10 years; identifies the equipment

and technology most important to the U.S.S.R. in these areas; evaluates the extent to which the United States is the sole or preferred supplier of such items;

and analyzes the implications for both the entire Soviet bloc and the Western

alliance of either providing or withholding Western equipment and technology.

OTA is grateful for the assistance of its project advisory panel chaired by

Sen. Clifford Case, as well as for the advice of numerous reviewers in agencies of

the U.S. Government, academia, and industry. However, it should be understood that OTA assumes full responsibility for its report, which does not necessarily represent the views of individual members of the advisory panel.

Director

///
Technology and Soviet Energy Availability

Advisory Panel

Clifford Case, Chairman

Curtis, Mallet-Prevost, Colt&Mosle

E. C. Broun, Jr. Stanley Lewand

Hughes Tool Co. Chase Manhattan Bank

Robert Campbell

Indiana University

Leslie Dienes

University of Kansas

John Garrett

Gulf Oil Exploration and Production

Marshall Goldman

Wellesley College and Harvard

University

Gregory Grossman

University of California at Berkeley

Robert Jackson

Dresser Industries

Richard Nehring

The Rand Corp.

Richard Pipes (until January 1981)

Harvard University

Dankwart Rustow

City University of New York

Henry Sweatt

Honeywell

Allen S. Whiting

University of Michigan

iv
. .. .

Technology and Soviet Energy Availability

Project Staff

Lionel S. Johns, Assistant Director, OTA

Energy, Materials, and International Security Division

Peter Sharfman, Program Manager

International Security and Commerce Program

Ronnie Goldberg, Project Director

Martha Caldwell Mildred Turnbull*

Administrative Staff

Helena Hassell Dorothy Richroath Jackie Robinson

Battelle Columbus Laboratories

L. W. Bergman& Co.

EG&G Corp.

William McHenry and Seymour Goodman,

University of Virginia

Thane Gustafson

Edward Hewett

Project Contractors

Eric Anthony Jones

Angela Stent

Stephen Sternheimer

Williams Brothers Engineering

Thomas A. Wolf, Center for Science and

Technology Policy, New York University

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling Kathie S. Boss Debra M. Datcher Joe Henson

● OT,4 contractor

v
Acknowledgments

This report was prepared by the staff of the International Security and Commerce Program of the Office of Technology Assessment. The staff wishes to acknowledge the contribution of OTA's contractors in the collection, analysis, and preparation of material for the report;

and to thank the following individuals and Government agencies for their generous assistance:

Central Intelligence Agency

Department of Commerce

Centrally Planned Economies Project,

Wharton Econometric Forecasting

Associates, Inc.

Michael Hammett

John Hardt

M. K. Horn,

Cities Service Co.

William Kelly

Yuri Ksander and Charles Cooke,

Engineering Societies Commission

on Energy

Paul Langer

Theodore Shabad

Jonathan Stern

Myron Uretsky

Rafail Vitebsky

Joseph Yager

Conversions (except where otherwise noted)

1 million tons standard fuel X 4.582 = million barrels of oil

1 million metric tons hard coal X 5,051 = million barrels of oil

1 million metric tons of hard coal X 0,6859 = million metric tons of oil

1 million tons of standard fuel = 0.9091 million metric tons hard coal

1 million metric tons of oil X 7.33 = million barrels oil equivalent

1 million barrels oil equivalent per day X 365 ÷ 7.33 = million tons oil equivalent

1 billion cubic meters natural gas X 0.8123 = million tons oil equivalent

1 billion cubic meters natural gas X 5.982 = million barrels oil equivalent

1 billion cubic feet X 23.01 = million metric tons oil equivalent

1 cubic meter = 264.172 American gallons

1 cubic foot = 0.0283168 cubic meters

1 American barrel = 42 American gallons

Abbreviations

million metric tons — mmt

billion cubic meters – bcm

million barrels per day — mbd

million barrels of oil equivalent — mboe

million barrels of oil equivalent per day — mbdoe

British thermal unit – Btu

kilowatt-hour – kWh

Megawatts – MW

VI
Contents

Chapter Page

1. Summary :Issues and Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. The Soviet Oil and Gas Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3. The Soviet Coal Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

4. The Soviet Nuclear Power Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

5. The Soviet Electric Power Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

6. Western Energy Equipment and Technology Trade With the U.S.S.R. . . . . . . . . . . . 169

7. The Prospects for Energy Conservation in the U.S.S.R. . . . . . . . . . . . . . . . . . . . . . . . 227

8. Energy and the Soviet Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249

9. East European Energy Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283

10. The Soviet Bloc and World Energy Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313

11. Japanese-Soviet Energy Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

12. West European-Soviet Energy Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

13. Soviet Energy Availability and U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399

Vll
CHAPTER 1

Summary:

Issues and Findings
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

PRINCIPAL FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Energy and the State of the Soviet Economy . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Soviet Energy Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The Energy Situation of Eastern Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Soviet Energy Production in the 1980’s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Contribution of Western Equipment and Technology to Soviet

Energy Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

The Prospects for Energy Conservation and Substitution in the U.S.S.R. . . . 11

The Foreign Availability of Western Technology and Equipment. . . . . . . . . . 11

The Policies of America’s Allies Toward Soviet Energy Development . . . . . . 12

FOUR ALTERNATIVE U.S. POLICY PERSPECTIVES.. . . . . . . . . . . . 13

TABLE

Table No. Page

1. 1985 Soviet Oil Production Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

FIGURE

Figure No. Page

l. Soviet Primary Energy Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
CHAPTER 1

Summary: Issues and Findings

INTRODUCTION

The Soviet Union occupies the largest

span of territory in the world and is abundantly endowed with energy resources. It is

the world largest oil producer and a major

exporter of both oil and gas. Despite this enviable position, however, controversy has

arisen in the past few years over whether the

U.S.S.R. itself, or the Soviet bloc as a whole,

may face an energy shortage during the present decade.

This possibility has provoked a debate

among U.S. policy makers over whether it is

in the best interest of the United States to

assist the Soviet Union in its energy development. Those who favor such a policy believe it is justified to bolster American exports; to increase the world’s total available

supply of energy; to obviate extensive Communist pressure on world energy markets;

and/or to reduce the likelihood that the

U.S.S.R. would intervene in the Middle East

to acquire oil it could no longer produce in

sufficient quantities at home.

Adherents of the opposing view contend

that to assist in the development of Soviet

energy resources would be to help strengthen the economy of an adversary and/or that

such assistance may convey direct or indirect military benefits, either: 1) because it

might lead to the transfer of dual-use technologies that have military application; 2)

because oil itself is a strategic commodity; or

3) because it could enhance the U. S. S. R. ’s

ability to exert “energy leverage” over West

European nations if it placed the Soviet

Union in a position to threaten to withhold

energy exports.

Both of these perspectives entail certain

unstated assumptions. Primary among these

is the assumption that it is in the power of

the United States to significantly affect the

outcome of Soviet energy development in the

near or midterm. Thus, focusing on the issue

of whether or not the United States should

assist the U.S.S.R. in its energy development tends to lead to the neglect of more

basic questions. Among these is the issue of

what course Soviet energy production will

take if present policies—in both the West

and the U.S.S.R. itself—remain unchanged.

This is a controversial question in the West,

and perhaps within the U.S.S.R. as well.

Moreover, there are the central issues of

whether, how, and to what extent the United

States, either itself or in concert with its

Western allies, could affect the energy future

of the Soviet Union.

This study, undertaken at the request of

the House Committee on Foreign Affairs;

the Senate Committee on Banking, Housing,

and Urban Affairs; and the House Committee on Science and Technology, was designed

to investigate the latter set of technical

issues so that the policy debate might be

placed on a firmer footing. Specifically, it addresses the following questions:

First, what opportunities and problems

confront the U.S.S.R. in its five primary

energy industries—oil, gas, coal, nuclear,

and electric power—and what are plausible

prospects for these industries in the present

decade?

Second, what equipment and technology

are most needed by the U.S.S.R. in these

areas; of this, how much has been or is likely

to be purchased from the West; and to what

extent is the United States the sole or preferred supplier of such items?

Third, given the evidence regarding the

previous two questions, how much difference

could the West as a whole and/or the United

States alone make to Soviet energy avail3
4 . Technology and Soviet Energy Availability

ability by 1990; and what are the implications of either providing or withholding

such assistance for both the entire Soviet

bloc and for the West?

As will become clear, the U.S.S.R. faces

both problems and opportunities in the years

ahead. On the one hand, the Soviet Union is

the world’s largest oil producer and it has

the world’s most extensive gas reserves. It

has the advantage of long experience with a

large and complex petroleum industry, and

it also has vast yet-to-be- explored territories

that may contain energy resources. On the

other hand, the development of these resources is constrained by two important and

interrelated problems.

The first is the cost of energy exploitation.

A diminishing proportion of Soviet oil and

coal reserves are located in readily accessible

areas. As older deposits are depleted, the

U.S.S.R. must look to increasingly remote

and difficult areas for proven reserves or

promising sites for new discoveries. While

proven gas reserves are more than ample,

production is constrained by the pipeline

capacity available to transport the gas. Construction of new pipelines—in this case

across Siberia—is time-consuming and expensive since most of the pipe and other

equipment must be purchased from the

West. In short, the development and installation of technology and infrastructure

to exploit the Soviet Union’s remaining

energy will take some time.

The time required for this exploitation and

the severity of the problem itself will be affected by the second constraint on Soviet

energy development. This arises from the

nature of the Soviet economy—the rigidities

introduced by the system of central planning

and the problems caused by price and incentive structures that inhibit efficiency and

productivity in both the energy sector and

its supporting industries. While nonmarket

economies such as that of the U.S.S.R. do

have the advantage of allowing maximum

marshaling of resources in priority sectors,

there is an important sense in which the major inhibitor of Soviet energy development is

the Soviet economic system, which not only

produces conditions under which domestic

solutions to energy industry problems become more difficult, but which also limits the

extent to which the U.S.S.R. is willing or

able to turn to the West for assistance.

PRINCIPAL FINDINGS

ENERGY AND THE STATE OF

THE SOVIET ECONOMY

The rate of Soviet economic growth over

the past quarter century has generally declined, and Western experts are virtually

unanimous in predicting a continued slowing

in the near term. To the extent that this economic slowdown signifies stagnation or decline in the rate of growth of per capita consumption in the U. S. S. R.—i.e., in the improvement of living standards for the Soviet

populace—it may create political difficulties

for the Soviet leadership.

Easily accessible and abundant energy

played an important role in generating high

growth rates in the past. The U.S.S.R. now

faces the possibility of a plateau or even

decline in oil output. The latter would certainly cause Soviet economic growth to slow

even more, although the magnitude of such a

slowdown is difficult to calculate. The impact of falling energy supplies will depend on

a system of complex interrelationships in the

economy and on Soviet policy regarding the

composition of future energy balances and

foreign trade patterns. Every policy option

carries with it some costs and benefits to the

Soviet economy.

If the U.S.S.R. is able to maintain levels of

energy production close to the “best” cases

posited here (stable or slightly increased oil

production, and large increases in gas output), the Soviet economy could continue to
grow at the modest rate of the past 5 years;

to supply Eastern Europe with energy at

1980 levels; and to increase the amount of oil

and/or gas available for export to the West

for hard currency. Under “worst” case assumptions, Soviet economic growth would

slow considerably, and the ability of the

U.S.S.R. to increase its real nonenergy imports from the West would be seriously impaired. This would negatively affect the

overall growth prospects for East-West

trade and would place further strains on the

Soviet economy. Actual conditions will probably fall between these extremes.

In constructing best and worst case scenarios for 1990, OTA assumed that Western

assistance in the development of Soviet energy resources would have its greatest quantitative impact on production after 1985.

With extensive Western assistance in energy (particularly gas) development, Soviet

hard currency earnings could rise substantially by the end of the decade. In the worst

case scenario, with little or no Western

assistance, Soviet exports of energy for hard

currency would disappear by 1990.

If these cases are indeed close to the range

of plausible outcomes, it appears that the

simultaneous maintenance of a politically

feasible rate of economic growth in the

U. S. S. R., the further expansion of real

energy exports to Eastern Europe after 1985,

and a reasonably high rate of growth of

East-West trade may hinge importantly on

whether or not the West plays a significant

part in developing Soviet gas resources in

the 1980’s.

SOVIET ENERGY POLICY

Despite the centralized nature of the

Soviet system, policymaking takes place in a

political context in which individuals and

groups compete for resources and influence.

There is ample evidence of debates over the

relative priority that should be accorded different energy sectors. While the decisions

made have naturally reflected the choices of

the Communist party and its ruling executive committee (Politburo), a number of state

Ch. l—Summary: Issues and Findings ● 5

Planning and administrative organizations,

and ministerial, regional, and scientific

groups also play identifiable roles in the formulation of energy policy, and are critical to

the implementation of policy once formulated.

At one time, Soviet leaders placed some

stress on the importance of the coal industry, and there were indications that it would

receive priority in investment. This may at

least partly have been due to the influence of

the late Premier Kosygin, an advocate of

coal development. The current Five Year

Plan (FYP) indicates that this is no longer

the case. Emphasis has now been placed on

gas production and, to a lesser extent, on development of the nuclear industry. However,

the energy debates of the past few years suggest that competition for resources among

energy sectors may well reappear, particularly when the impending change in the

aging Soviet leadership takes place.

THE ENERGY SITUATION OF

EASTERN EUROPE

While Eastern Europe is much less dependent on imported energy than is Western

Europe, these nations are constrained by

geologic conditions that offer only limited

prospects for increased domestic energy production, relatively energy-intensive economies, and limited ability to increase hard

currency exports to pay for energy on world

markets, In the past, heavily subsidized exports of Soviet oil have been crucial to East

European economic development. If this

subsidy were abruptly removed, the impact

on Eastern Europe as a whole would be disastrous. The U.S.S.R. does appear to be beginning a transition, however; it has already

announced that its oil exports to Eastern

Europe will remain at 1980 levels, and it

seems to be increasing the level of exports of

gas priced at world market rates.

If the countries of Eastern Europe succeed in their plans for increased domestic

production of coal and nuclear power (plans

that may well engender growing environmental concerns) and for energy conservation and substitution measures, and if the
6 . Technology and Soviet Energy Availability

U.S.S.R. continues its oil exports at 1980

levels, Eastern Europe could make it to the

end of the decade without a major energydriven crisis. In the more likely case that

these programs are only moderately successful, there will be pressure on the U.S.S.R. to

increase its energy exports to Eastern

Europe. In the absence of such assistance

from the Soviet Union, pressure for economic reform within Eastern Europe could

be expected to grow.

However, it is a mistake to think of Eastern Europe as a monolith. The situations of

the six countries examined in this study

vary significantly, and range from that of

Romania, which appears to be facing the

most difficult economic prospects even assuming a number of “optimistic” developments with respect to its energy situation, to

Hungary, which would seem to be best able

to withstand even a number of “worst case”

conditions. The case of Poland is also noteworthy. Polish coal production has allowed it

to be Eastern Europe’s sole net energy exporter. To the extent that the present political and economic difficulties in Poland constrain coal output, the adverse repercussions

on the energy situation of the region as a

whole could be significant.

SOVIET ENERGY PRODUCTION

IN THE 1980’S

Figure 1 summarizes Soviet primary energy production over the past 30 years and

Soviet plans for 1985. The pattern exhibited

here shows that for many years the bulk of

energy output was in coal. The rate of

growth in coal production began to decline in

the 1960’s, when oil overtook it as the predominant fuel. Coal production is now virtually stagnant, and the rate of growth in oil

has markedly declined from that of the previous two decades. The fuel of the future is

clearly gas, production of which, according

to the U. S. S.R.’s own projections, will nearly

equal that of oil in energy value by 1985. The

following sections examine in more detail the

current state of and prospects for Soviet

energy industries in the present decade.

Oil

Projections of Soviet oil production in

1985 span an enormous range (see table 1).

The Central Intelligence Agency’s (CIA)

most recent forecast maintains that output

could decline by nearly 17 percent, while increases of roughly the same magnitude have

been foreseen by the British Economist Intelligence Unit. The U.S.S.R. itself in its current FYP envisages slightly increase production, and the U.S. Defense Intelligence

Agency endorses the feasibility of the Soviet

target. The disparities among forecasts for

1990 are even more striking. CIA believes

production will decline more than 40 percent

from 1980 levels, while others contend that

the Soviet oil industry could actually produce 25 percent more oil in 1990 than it did

in 1980.

These predictions are all based on different interpretations of fragmentary Soviet information, different subjective evaluations

of Soviet oil industry practice, and different

judgments about the future of the Soviet

economy and its capabilities. OTA does not

believe that it is a useful exercise to attempt

to determine which, if any, of these predictions is “correct.” Indeed, given the poor record of forecasters even of U.S. production, it

seems foolish to attempt to assert with any

degree of assurance the outcome of complex

processes in the U.S.S.R. 10 years hence.

OTA has instead attempted to identify

plausible best and worst cases for Soviet oil

production. These are not predictions; they

are intended solely to provide a context

within which the range of possible outcomes

for Soviet energy availability in this decade

can be discussed. OTA finds the upper range

of the U. S. S. R.’s own target—which sets a

goal of modest growth by 1985—to be a notunreasonable best case. On the other hand,

given that many things can simultaneously

go wrong in the Soviet oil industry, it is reasonable to base discussion of worst case outcomes on the upper end of the CIA range.

For 1990, even using best and worst case

projections as a basis for analysis is a highly

tenuous exercise. OTA has chosen as a best
Ch. l—Summary Issues and Findings ● 7

1,650

1,600

1,550

1,500

1,450

1,400

1,350

1,300

1,250

1,200

1,150

1,100

1,050

1.000

950

900

850

800

750

700

650

600

550

500

450

400

350

300

250

200

150

100

50

0

Figure 1 .—Soviet Primary Energy Production (1950-80)

632.5

37.4

4.7

128.3

30.6

Misc. fuels 33.6 33.1

27.4

520

3 2 8

30.6

111

1950 1960 1970 1980 1985

(plan)’
8 ● Technology and Soviet Energy Availability

Table 1 .— 1985 Soviet Oil Production Forecastsa

Million tons Million barrels per day Date of forecast

1.500-55 0 10-11 April 1981

2.560-61 0 112-12.2 June 1981

3 600 12 1979

4.605-655 . .. 121-13.1 1979

5.612-71 3 12.3 -14.3 1978

6.620-64 5 12.5 -12.9 1980

7 620-64 5 12.5 -12,9 August 1981

8 650-670 13-13.5 1979

9 70 0 14 1980

aSoviet 011 production in 1980 was 603 million tons.

SOURCES

1 CIA, as reported in Joseph A Licari Linkages Between Soviet Energy and

Growth Prospects for the 1980’s. paper presented at the 1981 NATO Economlcs Directorate Colloquium, Apr. 8-10, 1981 These numbers replace the

1977 estimates of 400 to 500 mmt.

2 OECD, Committee for Energy Policy, ‘Energy Prospects of the U S S R and

Eastern Europe, ” June 26, 1981

3 Robert Ebel, “Energy Demand in the Soviet Bloc and the PRC,” June 1979

4 Leslie Dienes and Theodore Shabad, The .Soviet Energy .System (Washington,

D C V H Winston, 1979), table 53, p 252

5 Herbert L Sawyer, “The Soviet Energy Sector Problems and Prospects, ” Harvard University, January 1978, quoted in George W Hoffman, “Energy Projections —Oil, Natural Gas and Coal In the U S S R and Eastern Europe, Energy

Policy, pp. 232.24 1

6 Soviet Eleventh FYP target

7 U S. Defense Intelligence Agency, “Allocation of Resources in the Soviet

Union and China— 1981 Statement of Maj. Gen. Richard X Larkln before the

Joint Economic Committee, Subcommittee on International Trade, Finance,

and Security Economics, Sept. 3 1981

8 Jeremy Russell, Shell 011

9 David Wilson, Soviet 0il and Gas to 1980, Economist Intelligence Unit Special

Report No 90. This report was published just after the Soviet plan target was

released In a foreword, the author reasserts his belief that 011 production of

700 mmt IS achievable and attributes the lower Soviet plan to an apparent decision to divert resources from 011 to gas production

case hypothesis oil production remaining

stable at the Soviets’ own 1985 production

target, and as a worst case, production declining, but remaining at a level above the 40

percent drop forecast by CIA.

Gas

Given the problems in the oil industry,

and the fact that it is possible—indeed likely–that oil production will not rise greatly,

gas is the key to the Soviet energy future in

this decade. This is the energy sector with by

far the best performance record in the past 5

years, and it appears to have been given priority in investment in the present FYP.

Proven Soviet gas reserves are tremendous; they may be likened to the oil reserves

of Saudi Arabia. Gas, therefore, has a good

potential for replacing oil both in Soviet

domestic consumption and as a hard currency earning export. Gains in gas output could

more than compensate for the apparent

slowing of growth in oil production. The exPhoto credit TASS from SOVFOTO

Coal-loaded trains leave Karaganda

tent to which the U.S.S.R. can capitalize on

its gas potential will depend on its ability to

substitute gas for oil. This in turn rests on

two factors: its ability to convert to gas in

boiler and industrial applications, and its

ability to add to the gas pipeline network.

The rate of construction of new pipelines,

both for domestic use and for export, will be

the most important parameter in determining the extent to which Soviet gas can be utilized.

Coal

High-quality, easily accessible Soviet coal

reserves have become depleted, and the volume of coal output in the last several years

has actually declined. Even the relatively

modest coal production targets in the
Ch. l—Summary Issues and Findings • 9

Eleventh FYP seem excessively optimistic,

and gains in overall coal production will be

offset to some degree by the fact that the

quality of much of the new coal being mined

is low, In fact, the quantity of coal mined

could increase at the same time as the total

energy derived from it (its standard fuel

equivalent) actually declined.

The difficulties facing the Soviet coal industry are compounded by the fact that a

number of problems must be addressed simultaneously if production is to increase

meaningfully. These problems include low

labor productivity, lagging additions to mine

capacity, insufficient quality and quantity of

mining equipment, insufficient coal transport capacity, and inability to use the lowquality Siberian coals that are making up an

increasing share of production. Massive investment in the coal industry would be required to achieve gains in most or all of these

areas, and even then success in terms of

dramatic production increases could not be

assured. This point underlines the relative

cost effectiveness of relying on gas, rather

than coal, as a substitute fuel.

Nuclear

Soviet nuclear power production has increased greatly in the past 5 years, and the

U.S.S.R. is committed to an ambitious nuclear program. It foresees nuclear energy contributing as much as 14 percent of electricity

production by 1985, and perhaps 33 percent

by 1990. But Soviet targets for installed

nuclear capacity, while attainable in principle, are probably overly optimistic.

More than in any other energy industry,

progress here will depend on the efficiency

and production capacity of equipment manufacturers. The growth of Soviet nuclear

power will not be constrained by lack of

know-how, nor is it likely to be inhibited by

the kind of safety and environmental concerns so prevalent in the West. Very little is

known about available Soviet uranium supplies, but it is probably safe to assume that

these are adequate to support the nuclear

growth that the Soviets themselves envisage, even given the competing claims of the

military sector. Thus, the critical variable for

the success of the Soviet nuclear power program will be the ability of support industries

to construct nuclear power stations and of

reactor and other equipment manufacturers

to deliver on time and in sufficient quantities.

Electricity

To a great extent, the performance of the

electric power industry in the present decade

will be tied to the success of the nuclear program. Should planned additions to installed

nuclear capacity fall seriously behind schedule—not an unlikely eventuality—fossil-fired

generation will be called upon to cover the

shortfalls. This prospect raises potential difficulties. Although, on the face of it, the industry appears to be sufficiently flexible, the

extent to which fossil-fuel capacity can serve

as a buffer for nuclear capacity is limited, to

an unknown extent, by the degree to which

low-quality Siberian coal can be utilized and

absorbed by the electric power system, and

by Soviet ability to complete the Unified

Power System, which eventually will link all

of the nation’s regional electricity grids.

The fate of the grid will be tied to the future

of long-distance electricity transmission.

The U.S.S.R. has amassed great experience

in power transmission, including long-distance, high-voltage (250 to 1,000 kV) direct

current transmission. However, Soviet power engineering is moving into a relatively

new field—ultrahigh voltage transmission

(over 1,000 kV)–which, at least initially, will

entail high investment and operating costs.

Despite these problems, the evidence suggests that the U.S.S.R. will have sufficient

reserve capacity in its power generation

system in the 1980’s and will be able to compensate for some shortfalls in nuclear capacity—provided that the necessary fuel supplies are available. Given the problems of the

coal industry, however, meeting the latter

condition cannot be taken for granted-unless gas can be used much more extensively.
10 ● Technology and Soviet Energy Availability

THE CONTRIBUTION OF

WESTERN EQUIPMENT AND

TECHNOLOGY TO SOVIET

ENERGY INDUSTRIES

Oil and Gas

There is no question that Soviet oil production has been assisted by American and

other Western technology and equipment,

although the impact of this assistance is

impossible to quantify. In 1979, the Soviet

Union devoted approximately 22 percent of

its trade with its major Western trading

partners (some $3.4 billion) to energy-related

technology and equipment. The vast majority of these purchases—about $2.7 billion—

was destined for the Soviet oil and gas sector

(and most of this was for pipe and pipeline

equipment). Western exports in the past

have helped to compensate for shortfalls in

the production of Soviet domestically produced equipment, and for the fact that the

quality of equipment is usually inferior to

that which can be obtained in the West.

It is also true, however, that the impact of

Western assistance has been lessened by at

least two important factors. First, whether

for lack of hard currency, a lack of perceived

need, or a fear of dependence on the West,

the U.S.S.R. has never imported massive

amounts of oilfield equipment. Second, imported equipment and technology is usually

less productive in the U.S.S.R. than it would

be in Western nations. This may be due to a

combination of factors. The Soviet Union

has not often allowed hands-on training by

Western suppliers to be carried out in the

field, and suppliers themselves may be unwilling to meet Soviet conditions for the supply of spare parts, maintenance, or training

services. In addition, Soviet maintenance

and production practices are often not conducive to prolonging the useful life and promoting the efficiency of imported equipment.

The one area in which Soviet petroleum

equipment and technology purchases might

be described as “massive” is large diameter

pipe and other equipment (compressor stations and pipelaying equipment) for the construction and operation of gas pipelines.

There is no evidence that reliance on the

West in this area will lessen in the present

decade. Indeed, given the crucial importance

of increased gas production and gas exports

to the short- and medium-term Soviet energy

future, there is reason to believe that such

dependence will increase.

There is no doubt that the Soviet petroleum industry will benefit from continued–

and increased—infusion of Western equipment and technology imports. But the expenditures of hard currency and the extent

of the hands-on Western involvement necessary to make such imports maximally effective would be unprecedented Soviet behavior. With the possible exception of gas pipeline construction, there is little evidence that

the U.S.S.R. is ready to make such changes.

Other Energy Sectors

In the past, the U.S.S.R, has been virtually self-sufficient in coal, nuclear, and electric

power technology and equipment. Purchases

in these areas have been small and spotty

and appear to have been intended to compensate for specific deficiencies in the quantity

or quality of domestic equipment, rather

than to acquire new technological know-how.

Should the U.S.S.R. decide to reverse past

practice and begin purchasing significant

amounts of equipment in these areas, these

purchases might consist of surface mining

equipment, complete nuclear reactors and/or

plants, and computers. Although every energy sector could profit from more extensive

computerization and from the availability of

Western (especially American) computer

hardware and software, this would be of particular benefit to the electric power industry

for management and control of the Unified

Power System.
Ch. 1—Summary Issues and Findings • 11

THE PROSPECTS FOR

ENERGY CONSERVATION AND

SUBSTITUTION IN THE U.S.S.R.

Conservation should be an extremely

promising policy for the U.S.S.R. It could be

accomplished both through a centralized

“high-investment” strategy –i.e., through

industrial modernization—and through a

‘‘low-investment or housekeeping strategy— i.e., improving the efficiency of operation of equipment already in place.

Despite evidence of interest in conservation, emphasis to date has been on producing, not saving, energy. To the extent that

the latter has been accorded official attention, stress has been on exhortation to industry and individual consumers to conserve, a

strategy which is unlikely to produce major

results quickly because of weaknesses in the

price structure, the prevailing incentive

system, the enforcement mechanism, and

the ways in which consumption is monitored

and measured. In short, the U.S.S.R. has accomplished major energy savings, and opportunities for more still exist. But rigidities

in the political and economic structure have

prevented Soviet policy makers from taking

full advantage of them. The situation may

be ameliorated somewhat by an increase in

energy prices scheduled for 1982, but the extent of the impact of such a reform on energy

consumption cannot at this stage be predicted.

In addition to policies that result in overall energy savings, the U.S.S.R. is interested

in lowering domestic oil consumption in

order to free oil for highly lucrative export to

world markets. This can be accomplished by

substituting other fuels for oil in domestic

use. Opportunities for substitution with coal

are severely constrained both by the difficulties besetting coal production and by environmental concerns. Gas is the most promising alternative fuel but, as noted, the extent to which it can be utilized domestically

is limited by the internal gas pipeline network, expansion of which will encounter the

same difficulties as expansion of pipelines

for gas exports.

THE FOREIGN AVAILABILITY

OF WESTERN TECHNOLOGY

AND EQUIPMENT

The Concept of Foreign Availability

The Export Administration Act of 1979

contains the provision that decisions regarding the control of U.S. equipment and technology should be affected by the availability

of similar or equivalent items in other countries. It is left to the Department of Commerce to establish the capacity to gather and

assess the information upon which determination of “foreign availability” will be

made. There remain serious conceptual and

practical problems that must be resolved

before “foreign availability” can become a

viable criterion for export licensing decisions. As of this writing, these problems

have yet to be taken up in a comprehensive

or systematic manner by either Congress or

the Department of Commerce.

There is no commonly accepted definition

of “foreign availability, ” nor is there a central repository of information, or system for

gathering such information, in place. OTA's

own judgments of the foreign availability

of items of energy-related technology and

equipment must, therefore, be understood to

be highly generalized. The term as it is used

here denotes the existence in Western Europe and/or Japan of items with similar technical parameters and capabilities as those

available from firms in the United States.

Oil and Gas Equipment and

Technology

The United States is not the predominant

supplier of most petroleum-related items imported by the U.S.S.R. OTA has identified

numerous foreign firms which supply oil and

gas equipment to the Soviet Union, reinforcing the theme of the international nature of

the petroleum industry. Technology devel-
12 ● Technology and Soviet Energy Availability

oped in the United States is quickly diffused

throughout the world through an extensive

network of subsidiaries, affiliates, and

licensees.

There are a few items of oil and gas equipment and technology that are solely available from the United States, and a few others

for which the United States is generally considered a preferred supplier. With the exception of advanced computers, however, the

U.S.S.R. is either not purchasing these

items, is on its way to acquiring the capacity

to produce them itself, or has demonstrated

that they are not essential to its petroleum

industry. The United States continues to

represent the ultimate in quality for some

equipment, but the extent of that lead is diminishing, and the U.S.S.R. can and does obtain most of what it needs for continued development of its oil and gas resources from

outside the United States. This is particularly true of what appears to be the most crucial

import for this decade—large diameter pipe

and pipeline equipment. The Soviet Union

procures these items from Japan, West Germany, Italy, and France. Indeed, the United

States does not produce the large diameter

pipe that constitutes the U.S.S.R.’s single

most important energy-related import.

Other Equipment and Technology

As noted above, if the U.S.S.R. reversed

its present policy and began to import more

extensively in its other energy sectors, one

area that might receive particular attention

is coal surface mining. The United States is a

world leader in this field, and should the

Soviet Union seek large amounts of the best

and largest capacity surface mining equipment, it would be likely to turn to the

American firms.

THE POLICIES OF AMERICA’S

ALLIES TOWARD SOVIET

ENERGY DEVELOPMENT

OTA examined the energy relations (including trade in both energy-related equipment and technology and in fuel itself) between the U.S.S.R. and five of America’s

principal allies—Japan, West Germany,

France, Italy, and Great Britain. With the

exception of Britain, trade with the Soviet

Union has generally been more important for

all of these nations than it has for the United

States. While all cooperate in controlling the

export to the Soviet Union of equipment and

technology with direct military relevance, it

is nevertheless true that these nations are

far more inclined than is the United States

to consider trade with the U.S.S.R. a desirable element in their foreign policy and commerce, and to eschew the use of export controls for political purposes.

Although trade with the U.S.S.R. makes

up only a small portion of the overall trade of

these countries, in 1979 energy-related exports constituted nearly one-half of Japanese, one-third of Italian, approximately onequarter of West German and French, and

about 10 percent of British exports to the

U.S.S.R. The comparable figure for the

United States was 7 percent. In absolute

amounts, this translates into more than $1

billion worth of energy-related exports in

1979 for Japan, nearly that amount for West

Germany, and almost one-half billion each

for France and Italy. (This rank order has

changed markedly in the past 5 years, with

Japan overtaking West Germany as the

U.S.S.R.’s major Western trading partner.)

Most of these exports were destined for the

Soviet petroleum industry, and an important

part of this trade was in the large diameter

steel pipe used in the U.S.S.R. for gas pipelines. Indeed, West German steel corporations are among the most vociferous in promoting such trade with the U.S.S.R. There is

evidence that employment in several of West

Germany’s largest steel firms might be seriously affected by the loss of the Soviet

market.

These nations also import energy from the

Soviet Union. The most important Soviet

energy commodity for Western Europe now

and for Japan in the future is gas. In 1979,

about 24 percent of Italy’s and about 16 percent of West Germany’s total gas require-
Ch. 1—Summary. Issues and Findings ● 13 —

ments came from the U.S.S.R. These figures

may be interpreted in several different ways,

however. Italy, which had the highest reliance on Soviet energy, purchased about 10

percent of all the primary energy it used

from the U.S.S.R. The comparable figures

for West Germany, France, the United Kingdom, and Japan respectively were 6,5, 1, and

2 percent. In no country examined in this

study did Soviet energy constitute more

than 9 percent of 1979 total energy imports.

But although overall “dependence” on the

U.S.S.R. is low, some countries might face

significant disruptions if Soviet gas became

unavailable.

The most important and controversial example of West European (and possibly Japanese) energy cooperation with the U.S.S.R.

is the proposed new pipeline, which will

carry gas from West Siberia to as many as

10 West European nations. (This pipeline

was originally planned to carry gas from the

Yamburg field. The U.S.S.R. has now decided to delay development of that field and

concentrate instead on further development

of the Urengoy field, both for incremental

domestic needs and export commitments. )

The scale of this project guarantees that it .

will raise the level of East-West energy interdependence in qualitative as well as quantitative terms.

Barring unexpected political or economic

developments-probably even in the face of

active diplomacy on the part of the United

States–the gas pipeline project is likely to

proceed. West Germany, France, and Italy

all look to Siberia as a way to increase and

diversify energy supplies while at the same

time increasing energy equipment and technology exports. The latter consideration

may also be important for Japan. Moreover,

the pipeline project has political implications

for each of the participants, and these too

are important motives for proceeding. West

Germany, for instance, has a vital interest in

providing the U.S.S.R. with incentives to

moderate its behavior in Europe and to help

to foster improved relations with East Germany. Japan looks to its trade and energy

relations with the U.S.S.R. as an important

counterweight to its growing relationship

with the Peoples Republic of China.

If the West Siberian Pipeline is developed

as currently envisaged, West Germany,

France, and Italy will certainly become more

dependent on Soviet gas, although this gas

will to some extent replace the Soviet oil

they presently import. In any case, dependence on the U.S.S.R. would still be significantly smaller than dependence on

OPEC. A cutoff of Soviet gas would impact

each country differently (each, mindful of the

risks entailed in the deal, has made different

contingency arrangements), but none would

be immune from hardship, particularly in the

context of a tightened world oil market or

other energy crisis. Each of the three would

benefit from the development of more effective contingency plans, allowing for substitution of alternative energy supplies in

the event of Soviet shortfalls, and thereby

diminishing the opportunities for the

U.S.S.R. to make use of any sort of “gas

weapon” to exert political pressure on its gas

customers. The most effective contingency

planning would be that undertaken by West

European nations as a bloc–but as yet there

are no serious prospects that this will occur

in any formal sense.

FOUR ALTERNATIVE U.S. POLICY PERSPECTIVES

Suggestions for U.S. policy regarding

Soviet energy development can be categorized around four alternative strategies. This

section briefly sets out the basic tenets espoused by adherents of these strategies and

indicates OTA findings with respect to

each.

1 . The embargo perspective seeks to

severely curtail or eliminate the ability of
14 ● Technology and Soviet Energy Availability

U.S. firms to sell energy-related (especially

petroleum) equipment and technology to the

U. S. S. R., either because these items may

have direct military relevance or because oil

and gas are considered to be strategic commodities. In this connection, it is often

asserted that helping the U.S.S.R. to develop

these resources is helping bolster the economy of an adversary nation.

OTA found that very few items of oil and

gas technology and equipment could be diverted to direct military applications. Computers are the most important exception

here, and these are already subject to both

U.S. and multilateral export controls. Exercise of this policy option, justified by the inherent importance of petroleum, would be

tantamount to pursuing a policy of economic

warfare against the U.S.S.R. The United

States attempted this after World War II. It

formally abandoned the effort in 1969, in

recognition of the facts that the United

States was sole supplier of few of the items

sought by the U.S.S.R. from the West, and

that United States allies were not willing to

participate in such restrictive policies. The

unenthusiastic response of Western Europe

and, to a lesser extent, Japan to President

Carter’s post-Afghanistan technology embargo against the U.S.S.R. indicates that

this attitude has probably not changed. It is

possible to posit circumstances under which

the United States could persuade its allies to

reverse their own policies, but this would

likely take a dramatic change in the political

climate as well as a major policy initiative on

the part of the United States. The latter

might have to include concrete suggestions

for energy supply alternatives to Soviet gas.

2. The linkage perspective most closely

describes present U.S. policy toward trade

with the U.S.S.R. Linkage is a policy that

seeks to use the prospect of expansion or

curtailment of trade as a “carrot”’ or “stick”

to exact policy concessions from the trading

partner. This perspective accommodates a

number of different opinions as to how and

under what circumstances linkage should be

attempted, but in one form or another it has

influenced U.S. trading policy with the

U.S.S.R. since at least the Nixon era.

There is no unambiguous evidence regarding the effects, if any, that linkage vis-a-vis

the Soviet Union has ever had on Soviet domestic or foreign policies; thus, no final

determination of its success or failure can be

made. In the case of petroleum equipment

and technology, the effectiveness of a linkage policy would be limited by the fact that

the United States is the sole supplier of very

few items crucial to the Soviet oil and gas industry, and in those cases in which it is a

preferred supplier (e.g., pipelaying equipment), the U.S.S.R. has available alternatives that, albeit second-best choices, could

produce the desired results. The limitation of

linkage are well illustrated by the fact that

the import most crucial to Soviet energy development in the present decade—large diameter pipe—is not produced in the United

States.

3. The energy cooperation perspective assumes both that American technology and

equipment could make a significant positive

contribution toward increasing Soviet energy availability in the present decade and

that such a development would be in the interests of the United States in that it would

help to reduce Western dependence on

OPEC and relieve pressure on world energy

markets.

OTA’s findings suggest that although

American technology and equipment have

assisted the Soviet petroleum industry, the

United States is not the only–indeed, perhaps not even the most important–Western

nation to provide such assistance. For

United States exports to make more of a difference, not only would the United States

have to be willing to sell massive amounts of

equipment and technology to the U.S.S.R.

on attractive terms—probably involving export credits—but the U.S.S.R. would itself

have to be willing to purchase in large

amounts, to utilize the imported items in a

more efficient manner, and to allow the

United States and other Western firms to
Summary Issues and Findings ● 1 5

“\

provide greater hands-on training and to participate more fully in Soviet energy projects.

4. The commercial perspective rests either

on the belief that trade and politics should

remain separate and/or on the judgment that

regardless of the export control policy it

adopts, the United States is unlikely to be

able to significantly affect the U.S.S.R.

selling nonmilitarily relevant items to the

U.S.S.R.

Such a policy might allow significant sales

for individual firms, but, unless it were accompanied by the extension of official export

credits, it is highly unlikely that it would

result in enough trade to have any direct impact on the overall foreign trade or competitive position of the United States. On the

other hand, the lack of pronounced economic

gains resulting from such a policy could be

at least partially outweighed by potential

political benefits derived from removing the

issue of Soviet energy from the arena of conflict between the United States and its allies.

Photo credit TASS from SOVFOTO

U S pipelaying equipment used in the construction

of the Northern Liqhts gas pipeline
CHAPTER 2

The Soviet Oil and

Gas Industry

CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . 19

LOCATION OF MAJOR

PETROLEUM REGIONS . . . . . . . . . 20

West Siberia . . . . . . . . . . . . . . . . . . . . . . . 20

Volga-Urals. . . . . . ., . . . . . , . . . ., , , ., , 25

The Caspian Basin and North Caucasus. 26

Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Central Asia . . . . . . . . . . . . . . . . . . . . . . . 27

Komi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Page

Sakhalin . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . 30

EXPLORATION. . . . . . . . . . . . . . . . . . . 31

Introduction . . . . . . . . . . . . . . . . . . . . . . . 31

The Exploration Process . . . . . . . . . . . . . 31

Evaluation of Exploration Efforts . . . . . 32

The Contribution of Western Equipment

and Technology to Exploration. . . . 35

Summary and Conclusions. . . . . . . . . . . . 37
Page

DRILLING. . . . . . . . . . . . . . . . . . . . . . . . 38

Introduction . . . . . . . . . . . . . . . . . . . . . . . 38

The Drilling Process . . . . . . . . . . . . . . . . . 38

Soviet Drilling Equipment and practice. 39

The Contribution of Western Equipment

and Technology to Drilling. . . . . . . . . . 46

Summary and Conclusions. . . . . . . . . . . . 47

PRODUCTION . . . . . . . . . . . . . . . . . . . . 48

Introduction . . . . . . . . . . . . . . . . . . . . . . . 48

The Production Process. . . . . . . . . . . . . . 48

Soviet Equipment and Practice. . . . . . . . 51

The Contribution of Western Technology

and Equipmentto Production . . . . . . . 53

Summary and Conclusions. . . . . . . . . . . . 55

TRANSPORTATION OF OIL AND

GAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Introduction . . . . . . . . . . . . . . . . . . . . . . . 55

Transportation of Oil and Gas by

Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . 56

Soviet Oil Pipelines. . . . . . . . . . . . . . . . . . 57

Gas Pipelines . . . . . . . . . . . . . . . . . . . . . . 60

The Role of Western Pipeline Equipment

and Technology. . . . . . . . . . . . . . . . . . . 62

Summary and Conclusions. . . . . . . . . . . . 64

REFINING . . . . . . . . . . . . . . . . . . . . . . . 64

Introduction . . . . . . . . . . . . . . . . . . . . . . . 64

The Soviet Oil Refining Industry . . . . . . 64

The Soviet Gas-Processing Industry . . . 67

Western Technology in the Soviet

Refining Industry . . . . . . . . . . . . . . . . . 67

Summary and Conclusions. . . . . . . . . . . . 68

OFFSHORE . . . . . . . . . . . . . . . . . . . . . . . 68

Introduction . . . . . . . . . . . . . . . . . . . . . . . 68

Offshore Exploration and Production . . . 68

The Soviet Offshore Industry . . . . . . . . . 69

The Contribution of Western Offshore

Technology . . . . . . . . . . . . . . . . . . . . . . 70

Summary and Conclusions. . . . . . . . . . . 70

THE PROSPECTS FOR SOVIET OIL

PRODUCTION IN 1985. . . . . . . . . . . 70

Soviet Oil Reserves. . . . . . . . . . . . . . . . . . 71

Soviet Oil Production Capabilities . . . . . 73

Page

THE PROSPECTS FOR SOVIET OIL

PRODUCTION IN 1990. . . . . . . . . . . 74

THE PROSPECTS FOR SOVIET GAS

PRODUCTION, 1985 AND 1990... 75

SUMMARY AND CONCLUSION . . . . 76

LIST OF TABLES

Table No. Page

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

Russian and Soviet Oil and Gas

Production, Selected Years. . . . . . . .

The Growing Importance of West

Siberian Oil Production. . . . . . . . . . .

Production of Gas in Tyumen

Oblast. . . . . . . . . . . . . . . . . . . . . . . . .

Oil Production in the Volga-Urals

Region . . . . . . . . . . . . . . . . . . . . . . . .

Oil Production in the Caspian

Region . . . . . . . . . . . . . . . . . . . . . . . .

Gas Production in Central Asia . . . .

Oil Production in Komi . . . . . . . . . . .

Natural Gas Production in Komi . . .

Average Bit Runs . . . . . . . . . . . . . . .

Drilling for Oil and Gas. . . . . . . . . . .

Waterflooding . . . . . . . . . . . . . . . . . .

Transport of Oil and Oil Products . .

Length of Oil and Oil Product

Pipelines. . . . . . . . . . . . . . . . . . . . . . .

Diameters and Capacity of Oil

Pipelines. . . . . . . . . . . . . . . . . . . . . . .

Length and Diameters of Gas Trunk

Pipelines. . . . . . . . . . . . . . . . . . . . . . .

Soviet Oil Production Forecasts,

1985 . . . . . . . . . . . . . . . . . . . . . . . . . .

Soviet Natural Gas Production

20

20

24

25

27

28

29

29

42

44

52

57

58

58

60

Estimates, 1985-90 . . . . . . . . . . . . . . 75

LIST OF FIGURES

Figure No. Page

2. Major Petroleum Basins, Oilfields,

and Gasfields . . . . . . . . . . . . . . . . . . . . 21

3. Major Oil Pipelines . . . . . . . . . . . . . . . 59

4. Major Gas Pipelines . . . . . . . . . . . . . . 61

5. Soviet Oil Refinery Sites. . . . . . . . . . . 65
CHAPTER 2

The Soviet Oil and Gas Industry

In 1980, the Soviet Union was both the

world’s largest producer of oil and its largest

gas exporter. It is ironic, therefore, that

much of the discussion of Soviet energy that

has taken place in the West centered until

recently on a debate over the continued

viability of Soviet energy independence, at

least in the present decade. This debate was

occasioned by the 1977 Central Intelligence

Agency (CIA) projection that Soviet oil production would peak and begin to decline

sharply by the early 1980’s. It is by now

clear that this outcome is unlikely. The rate

of growth of Soviet oil production has slowed

markedly, but output does not appear to

have peaked. Indeed, the CIA has revised its

forecast, pushing back the anticipated

decline until after 1985. The focus of interest

has now shifted from oil to gas–and from

the potential consequences of a Soviet oil

shortage to the implications, both for the

U.S.S.R. and the West, of an abundance of

Soviet gas.

This chapter attempts to elucidate the

grounds of past controversies and illuminate

present uncertainties. It examines the present condition of, and potential for, the Soviet

oil and gas industries, with special emphasis

on the impact of the West on oil and gas production. After a brief historical introduction

it surveys the U.S.S.R. oil- and gas-producing regions. It then describes the state of

each industry sector—exploration, drilling,

production, transportation of oil and gas,

refining, and offshore activities—including

the past and potential contributions of

Western equipment and technology. Finally,

it summarizes the controversy over the

future of Soviet oil production and posits

plausible best and worst case estimates of oil

and gas output for 1985 and 1990.

INTRODUCTION

The Russian oil industry is one of the

world’s oldest. When Baku, the historical

center of the industry, was ceded to Russia

by Persia in 1813, oil was already being produced from shallow hand-dug pits. Development of these sites near the Caspian Sea

languished until after 1862, when production

began to rise, aided by the introduction of

drilling ( 1869), the end of the state monopoly

on production ( 1872), and an influx of foreign

entrepreneurs, such as Robert and Ludwig

Nobel (1873). Russian oil production peaked

in 1901 at nearly 12 million metric tons per

year (mmt/yr) (240,000 barrels per day (bd)

or 0.24 million barrels per day (mbd) (see

table 2) and then dropped rapidly. This drop

was due to a number of factors, including

labor unrest surrounding the 1905 revolution.

Although drilling technology was introduced at about the same time in the United

States and in Russia, the Russians soon fell

behind. In 1901, the Russians relied on

wooden drilling tools that could achieve well

depths up to 300 ft. In contrast, European

concerns using metal drilling technology

could drill wells of over 1,800 ft; in 1909,

rotary drills in the United States were

reaching depths of 2,400 ft.

19
20 . Technology and Soviet Energy A Availability

Table 2.— Russian and Soviet Oil and Gas

Production, Selected Years

(million tons, billion cubic meters)

Oil Gas

—

—

—

—

—

Oil production fell precipitously after the

Bolshevik Revolution and the resulting confiscation and nationalization of the oilfields.

Soon, however, the new Soviet Government

began to open these fields to foreign technology and investment, By 1927, with prodigious Soviet effort and the help of American, French, Japanese, German, and British

firms, production surpassed the 1901 level

By 1932, with production at 22.4 mmt (0.45

mbd), petroleum exports accounted for 18

percent of Soviet hard currency receipts. It

was at this point that foreign involvement

was curtailed.

The year 1940 marked the beginning of

another temporary drop in Soviet oil production. During the course of World War II,

many oilfields were destroyed, and postwar

recovery was slow. Indeed, this recovery was

only accomplished with a second infusion of

imported equipment and technology, technology that helped to create the present

modern, nationwide industry.

The first important oil discoveries outside

of Baku had been made around 1932 in the

Volga-Urals region. The war, as well as a

shortage of drilling equipment, delayed further exploration and development in this

area, but as the oilfields around Baku peaked

and began to decline in the early 1950’s, the

Soviet industry shifted its emphasis northeastward to the Volga-Urals. By 1955, drilling activities were concentrated there, and

the rate of oil production again began to

climb sharply.

The pattern has repeated itself. As the

Volga-Urals fields peaked in the 1970’s, the

Soviets were able to offset declining production by bringing new discoveries online,

this time in West Siberia. The first discovery

in West Siberia was made in 1960. As table 3

shows, by 1970 its fields accounted for

almost 10 percent; 6 years later, over onethird; and now more than one-half of total

Soviet oil production. It is appropriate,

therefore, to begin this chapter’s survey of

major oil-producing regions with West

Siberia.

Table 3.—The Growing Importance of West Siberian

Oil Production (million tons)

West Siberia

as a share of

Year U.S.S.R. West Siberia U.S.S.R. (O/. )

1965 . 242.9 1,0 0.4

1970 . 353.0 31.4 9.8

197 5 490.8 148,0 30.2

1976 . . . . . . 519.7 181,7 35,0

1977 .. . 545.8 218.0 39.9

1978 . . . . . . . 571.4 254.0 44.5

1979 . 586 284 48,5

1980a, .. . 640 315 49,2

198 0

b

. 603 312 51.7

1985 (plan) 620-645 385-395 61-62

aOriginal FYP target

bActual production

SOURCE Wilson op. cit. pp. 56 Soviet Geography April 1981 p 273

LOCATION OF MAJOR PETROLEUM REGIONS2

WEST SIBERIA the Ural mountains on the west and the CenThe West Siberian lowlands lie between tral Siberian Platform on the east (see fig. 2).

The petroleum-producing regions are found

Throughout this report, “petroleum” is taken to mean in the Tyumen province (oblast) and part of

both oil and gas. the adjacent Tomsk oblast. This area pre-

22 ● Technology and Soviet Energy Availability

sents formidable natural obstacles to oil and

gas exploration and production. The terrain

is extremely flat, and most of the area is

a vast swamp, interspersed with sluggish

streams and occasional dry ground. The

Vasyugan swamp on the left bank of the

Middle Ob River alone covers 100,000

square miles (mi2), equivalent in area to New

York, New Jersey, and Pennsylvania combined. Other swamps and bogs abound.

Western Siberia typically has 6 to 8

months each year of below-freezing temperatures. At high water in the Ob system

there are 19,000 miles of navigable rivers,

but the Ob is blocked for 190 to 210 days per

year with ice 30 to 60 inches thick. The shipping season thus lasts only about 5 months.

In addition, much of the area is underlain by

permanently frozen subsoil (permafrost) that

impedes drainage, stunts plant roots, and

makes forestry, farming, stock raising, mining, oil drilling, excavation, pipelaying, and

most construction activities difficult and expensive,

The map in figure 2 shows few towns of

significance in this area; names on Soviet

maps often represent mere riverside clearings with a few houses. Large areas are

unsettled, virtually inaccessible in summer

because of swamps and mosquitoes. In these

inhospitable surroundings lies one of the

world’s largest oil- and gas-producing regions. Here the Soviet Union produced more

than one-half of its oil in 1980—312 mmt,

about 6.24 mbd—and here too lie the enormous gasfields on which the future of the

Soviet gas industry rests.

oil

Oil was first discovered in West Siberia in

1960 near Shaim on the Konda river, a

tributary of the Ob. By 1969, after an intensive exploration effort, 59 fields had been

identified in the Middle Ob River region.

These included nine large fields (defined as

having recoverable reserves of 50 to 100

mmt or 366 million to 733 million barrels

(bbl) each); nine giant fields (with recoverable

reserves of 100 to 500 mmt or 733 to 3,665

million bbl); and the supergiant Samotlor.

“Supergiant” is a designation for fields having recoverable reserves of more than 500

million tons. In this case, the Soviets broke

their own self-imposed silence regarding the

size of reserves, reporting that Samotlor, the

largest oilfield in the U. S. S. R., contains

“about 2 billion recoverable tons’ (14.7

billion bbl) of oil.’

Soviet planners have concentrated on

West Siberian development in an effort to

maximize production, and Samotlor has

dominated Soviet oil production in the past 5

years. In 1980, Samotlor alone yielded 150

million tons (3 mbd), approximately onequarter of total oil production for the year.

Another way of describing the contribution

of this field is through its contribution to incremental output. During the Ninth Five

Year Plan (FYP) (1971-75), Samotlor provided over 65 percent4 of the production increase of West Siberia, and over half of the

growth in oil output for the entire U.S.S.R.

Much of the controversy over the future of

Soviet oil production rests on the question of

how long output at Samotlor can be maintained, and whether there is a sufficient

number of small deposits to replace it once it

does decline. The first billion tons of oil had

been recovered from Samotlor by July 1981.

At the current rate of production, the field is

expected to give out by the late 1980’s.

The Soviets are anticipating the inevitable

peaking and decline of Samotlor, whenever

that may be, by developing a number of

smaller West Siberian fields. There is no

question that there are many deposits, both

in the Ob Valley and in the more remote area

of the West Siberian plain, which will be

brought into production. One problem with

developing such fields, however, is the provision of infrastructure, both to accommodate

oilfield workers and to transport the oil

itself.

‘Souetskaya Rossiya, Feb. 28, 1970, quoted in Leslie

Dienes and Theodore Shabad, The ,Yot)iet Erzerg>’ S?’stern. Resourc~ Use and Policies (Washington, D. C.: V. H. Winston &

Sons, 1979), p. 58.

41~icnes and Shabad gi~re a figure of 66 percent; Ila~id

Wrilson, in So[ict Oil and (;u.s fo 1.990 (I,ondon: The k:conomist Intelligence Unit 1,td, N ovemher 1980), p. 9 estimates

78 pcrcen t.
Ch. 2—The .Soviet 0il and Gas Industry ● 23 —

Photo credit Oil and Gas Journal

Oil rig near Surgut in West Siberia’s Middle Ob region
24 ● Technology and Soviet Energy Availability

The pervasive permafrost conditions in

Siberia require special, difficult, and expensive construction techniques. For this reason, railroad and road construction has been

kept to a minimum. The railroad reached

Surgut, for instance, only in 1975, 10 years

after the start of oil production there. Hard

surfaced roads are largely confined to the

area around Surgut and Nizhnevartovsk. It

has been estimated that 1 mile of surfaced

road in this region costs between 500,000

and 1 million rubles compared to 100,000 to

150,000 rubles in the European part of the

U.S.S.R.

The Soviets employ the “work-shift”

method in West Siberia; crews are shuttled

by helicopter from base cities like Surgut or

Nizhnevartovsk to isolated drilling sites

where they live in dormitories for the period

of their shift.5 This is not very different from

industry practice in the West in difficult

areas such as the North Slope, but the obvious disadvantages of this life have required substantial bonuses and incentive

schemes to attract workers. Nevertheless,

there are still labor shortages and very high

rates of labor turnover. As the deposits

being worked move farther east, new base

cities, or at least permanent settlements, will

be required.

Gas

The gasfields of West Siberia extend for

over 1,000 miles from the Yamal Peninsula

in the north deep into the Tyumen oblast.

Production in the area did not begin in any

substantial amount until after 1970, by

which time pipelines had been constructed to

transport the gas. The location of the Tyumen fields is shown in figure 2 while table 4

summarizes production from deposits that

are already online. The Tyumen fields are immensely important to the Soviet gas industry. The increase in production of natural

gas at Tyumen between 1975 and 1980

(about 120 billion cubic meters (bcm))

amounted to more than 82 percent of the increase for the entire country (146 bcm), and

5 Ibid , pp. 59-60.

Table 4.—Production of Gas in Tyumen Oblast

(billion cubic meters)

1981 1985

1975 1979 1980 (plan) (plan)

Medvezhe . . . . 29.9 71 70 70 NA

Vyngapur . . . . NA 13 15 15 NA

Urengoy . . . . . NA 26 53 88 250

Others. . . . . . . . . . . 3.6 2 2 NA NA

Casinghead gas. . . . . . . . 2.2 11 14 17 NA

Total gas production. . . 35.7 123 156 190 330-370

NA = not available

NOTE Totals may not add due to rounding

SOURCE Soviet Geography April 1981, p 276

1985 plans call for production here to nearly

double.

Gas extraction in West Siberia began in

1963 with a group of small gas deposits on

the left bank of the lower reaches of small

gas deposits on the left bank of the lower

reaches of the Ob River. Three years later,

the world’s largest gasfield was discovered

at Urengoy. Urengoy is one of several supergiant fields (i.e., fields containing reserves

larger than 1 trillion cubic meters) in this

region, and it is the focus of development for

the present FYP. Other large fields include

Medvezhye, which began producing in 1972,

and Yamburg, for which the controversial

planned pipeline to Western Europe was

originally named. The gas for this pipeline,

at least initially, will now come from

Urengov.

The West Siberian gas industry has been

beset with problems that have caused Urengoy to underfill its plan targets. These have

nothing to do with the reserves, which make

the field the largest single concentration of

gas in the world, but rather are the result of

inadequate infrastructure. This rests in part

on the difficult conditions described in the

previous section, exacerbated by the northern location of most of the gasfields, and also

in part on the fact that the development of

gas has generally lagged behind that of West

Siberian oil because alternative sources of

supply were already available from Central

Asia. 6 But there is also evidence of planning

failures in the gas industry.7

—. . . ——.— 6See Jonathan P. Stern, S’{){ i< I t ,1”(J t u m / (1’u \ /hJ ( ~à(~l(~pm (Ill t

((J 1!)!M) ( I.exington, ill ass.: 1,(IX ington llo(~ks, 19X()), pp f]~)-[;.

7

Ibid., pp. 13-14.
Ch. 2—The Soviet Oil and Gas Industry ● 25

Photo credit 0il and Gas Journal

Gas treatment facility in the Medvezhye field

One large problem, for instance, has been

delays in construction of gas-processing

plants. These are necessary to treat the gas

before it can be transported, Transportation

itself can only be accomplished after the installation of pipelines and the compressor

stations that move the gas through the pipe.

This sequence has not always been wellplanned. Even with the entire infrastructure

in place, there are reports of compressor stations remaining idle because gas is being

sent in quantities insufficient to justify their

operation. In addition, there are large shortfalls in the construction of housing, medical

facilities, places of entertainment, etc., for

gasfield workers; and poor organization at

drilling sites that has led to difficulties in

moving rigs from one location to another and

to accidents and blowouts. These problems

will have to be solved before West Siberia

tremendous gas potential is fully realized.

VOLGA-URALS

The Volga-Urals region lies in the far more

accessible and temperate European portion

of the U. S. S. R., between the Volga River and

the western edge of the Ural mountains. Its

major petroleum producing areas are found

in the Tatar and Bashkir Republics, and

Kuybyshev, Perm, and Orenburg oblasts.

These provinces together formed the

U.S.S.R.’s most important oil-producing

region until the late 1970’s. Volga-Urals production peaked in 1975 and was exceeded by

West Siberia in 1977. It is now in decline (see

table 5). But even today, the Volga-Urals accounts for about one-third of Soviet oil production and is the third largest oil-producing

province of the world.

The climate of the Volga-Urals is similar

to that of the Canadian plains, and the extreme conditions that hamper the extraction

and transportation of petroleum in West

Siberia do not pertain there. In fact, except

for some areas of the Perm oblast, the VolgaUrals deposits are readily accessible by road,

rail, the Volga and Kama rivers, and close to

major petroleum-using industrial centers. In

addition, a large part of the Soviet refining

industry is located in the region, although

since the decline of the Volga-Urals fields

these refineries use oil brought in by pipeline

from West Siberia.

Oil

As was noted above, concentration on

Volga-Urals oil did not begin until after

World War II when development was fostered by the movement of heavy industry

into the region. The giant Romashkino field

in the Tatar Republic was discovered in

1948. Other large fields were found in

Bashkir Republic and in Kuybyshev oblast.

Between 1956 and 1958, these three provTable 5.—Oil Production in the Volga-Urals Region

(million tons)

1980

annual

1975 1976 1977 1978 1979 plan

Tatar Republic . . .103.7 1000 97.8 97.2 85.8 83

Bashkir Republic . 40.3 40.2 40.1 39.6 39.7 38

Kuybyshev . . 34.8 33 31 27 25 25

Perm . . . . 22.3 23.5 24 24 24 22

Orenburg . . . 13.9 12.6 12.8 12 12 10

Udmurt Republic . 3.7 4.4 5.5 6.5 7,4 8

Volgograd . . . NA NA NA NA NA N A

Saratov . . 88877 7

Tota l 2267 221.7 219.2 213.0 201.0 193

NA = not available

SOURCE Wilson op. cit. p. 15.
26 . Technology and Soviet Energy Availability

inces became the first, second, and third

largest producers in the Soviet Union, a

situation that persisted into the late 1970’s.

Even now, the Volga-Urals is important to

Soviet oil industry planners, who hope to

slow the region’s decline by allocating

resources to open new smaller and deeper deposits and by applying tertiary recovery

methods in existing deposits.

Gas

Gas production in the Volga-Urals is centered at Orenburg in the Orenburg oblast.8

Discovered in 1966, Orenburg is of special

importance to the Soviet gas industry, for it

is the latest supergiant deposit to be located

in the more temperate European part of the

country. Its gas is therefore more easily accessible to industrial users. But only part of

Orenburg’s gas goes to domestic consumers.

The rest is now being transported to Eastern

Europe through the 1,700 mile (2,750 km)

Orenburg or “Soyuz” pipeline. This pipeline

stretches from Orenburg to the Czechoslovakian border at Uzhgorod where it connects with the existing Brotherhood or

“Bratstvo” pipeline system. Orenburg was

built as a joint Council for Mutual Economic

Assistance (CMEA) project, with East European countries supplying labor and materials in return for eventual repayment in

gas deliveries. When it reaches full capacity,

the Orenurg-Uzhgorod line is scheduled to

carry 28 bcm/yr of gas, nearly all of it to be

exported; 15.5 bcm of this will be divided

between Czechoslovakia, East Germany,

Hungary, and Poland, and the rest sold in

Western Europe. 9 Bulgaria and Romania

shares are being delivered in another pipeline

from the Ukraine.

The advantages of Orenburg’s favorable

location have to some extent been offset by

the technical obstacles posed by the fact

that its gas contains both condensate and

corrosive sulfur. These must be removed in

‘See W’ilson. op. cit., pp. 21 -22; Stern, op cit., p, 31; and

I)ienes and Shahacl, op. cit., pp. 77-79.

“1’jach I+;ast I+~uropwn countr~ will recei~re 2.8 bcm, except

Romania which will receiie 1.5 hcm.

gas-processing plants before the gas can be

transported. There are three processing complexes at Orenburg, two for treatment of gas

used domestically and one that processes

gas for the pipeline. Production is obviously

linked to the capacity of these plants, as well

as to the capacities of the pipelines that

carry the gas to both domestic and foreign

consumers. Construction delays occurred in

both of these areas. In addition, housing,

transport, and equipment shortages hampered exploration and drilling activities.

Meanwhile, Orenburg is providing valuable

experience in dealing with sulfurous gas, and

reserves explored to date are sufficient to

maintain 1979 production rates (48 bcm/yr)

until the year 2000.

An additional major source of gas, also sulfurous, has now been discovered southwest

of Orenburg at Karachaganak. This field is

expected to be developed to replace any

decline in Orenburg production.

THE CASPIAN BASIN AND

NORTH CAUCASUS

As noted above, the first Russian oil was

produced in the Baku district near the Caspian Sea. These sites are now part of an oilproducing region that spans the North

Caucasus, Georgia, Azerbaidzhan Republic,

Kazakhstan, and part of Turkmen Republic.

At Baku, oil is being produced offshore in

the Caspian Sea. Together these areas form

an oil province of over 1 million km3, containing hundreds of oilfields.

Oil

The importance of the Caspian basin oilfields has been steadily diminishing. Indeed,

many of the older fields, producing since the

turn of the century, are now virtually depleted. The Soviets have attempted to stem

the decline through offshore development,

deeper drilling, and use of water injection

and enhanced recovery techniques, but

nevertheless, production has continued to

fall.’” Table 6 chronicles this decline during

‘(’tt’ilson, Op. cit., p. 17.
Ch. 2— The Soviet 0il and Gas Industry . 27

Table 6.—Oil Production in the Caspian Region

(million tons)

1980a

(annual 1985

1975 1979 plan) 1980 (plan)

Azerbaidzhan . . . . 17.2 14 19.7 14 NA

Kazakhstan . . . . . 23.9 18 26.9 18.4 23

Turkmen Republic. . 156 95 18.6 8 6

Total . ., . . . . 56.7 41.5 65.2 40.4 N A

aEstimate from Wilson, op. cit., p. 17

NA = not avaiIable

SOURCE Soviet Geography April 1981 p 273

the last FYP period. The shortfall of 25 mmt

(500,000 bd) between the 1980 plan and actual production figures is a significant portion of the shortfall of 37 mmt (743,000 bd)

from the original national 1980 plan (640

mmt or 12.8 mbd planned; 603 mmt or 12.1

mbd actual production. ) The entire Caspian

region produced less than 7 percent of the

country’s oil in 1980; it is not expected to

resume a major producing role.

Gas

The gasfields of the North Caucasus have

declined in much the same fashion as the

area’s oilfields. Two important groups of deposits at Stavropol and Krasnodar began

producing in the late 1950’s. These fields

peaked in 1968, and the rate of depletion

since then has been very high. Between 1970

and 1975, output fell by 5 bcm/yr at

Stavropol and 16 bcm/yr at Krasnodar. The

two deposits combined now produce less

than 20 bcm of gas and appear to be declining at an ever-increasing rate. 11

UKRAINE

Oil

Ukrainian crude oil is of high quality (i.e.,

it is low in tar, paraffin, and other pollutants

and has a high yield of light distillates) and is

located close to consumers in the European

U.S.S.R. But the Ukraine’s oil industry is

beset with depleting reserves, new oil being

found primarily at great depths and under

difficult geologic conditions, ” Ukrainian oil

11Stern, op CL(., pp .{()-) I

\f Il+(In, (Ip (it , p. 2.). 1 )I(In(I\ and StIal Md, op (’it , p ,; :].

production peaked in 1972 at 14.5 mmt

(0.291 mbd), and while the Tenth FYP called

for a decline to 8.6 mmt (0.173 mbd) by 1980,

production was 8.3 mmt (0.167 mbd) in 1979

and 7.7 mmt (0.154 mbd) in 1980, The

Ukraine has never contributed more than 4

percent of Soviet oil production, and its importance is not expected to increase.

Gas

In contrast, between 1960 and 1975, the

Ukraine was the major Soviet gas-producing

region, its output largely sustained by the

giant Shebelinka field, which came onstream

in 1956 and was supplying 68 percent of

Ukrainian gas by 1965. The Ukraine also has

a number of smaller deposits. However,

these were not able to stave off decline once

Shebelinka peaked in 1972. Now, like the

North Caucasus, the Ukraine’s gas production is in absolute decline, and output declined from 68.7 bcm in 1975 to 51 bcm in

1980, There are indications that the Soviets

will continue to invest in the Ukrainian fields

in order to maintain production in the accessible west of the country for as long as

possible, Western analysts disagree, however, over the potential of the area. On one

hand, new deposits have been announced at

Shebelinka, in the Black Sea, and in the

Dnepropetrovsk oblast.13 On the other hand,

a downturn in economic indicators over the

last plan period–e.g., production costs

doubled and labor productivity fell–together with the continued declines in production, have led others to conclude that the

region will become increasingly less important in the future as rapid declines persist.

Indeed, the 1981 annual plan foresees a production decline to 47 bcm.14

CENTRAL ASIA

Gas

The Central Asian desert is a gas-, rather

than oil-, producing region, with vast fields
28 . Technology and Soviet Energy Availability

lying near the Iran and Afghanistan borders

in the Uzbek and Turkmen Republics. Central Asian gas has been important in the

U.S.S.R. since the mid-1960’s when the giant

Gazli deposit in Uzbekistan was brought

online. In 1965, Gazli alone produced 12 percent of Soviet gas. Since Gazli peaked in

1971, the region has declined in relative importance, but as table 7 demonstrates, production there has remained stable, largely

through the development of sulfurous gas

reserves. The sulfur is being recovered at the

Mubarek gas-processing complex and the

gas then transmitted into a pipeline system

that extends from Central Asia to Central

Russia. Before the beginning of development

of these sulfurous reserves, it was thought

that the level of output might not be maintained much longer. ’5

Gas production in Turkmenistan rose very

rapidly in the early 1970’s, but the rate of increase now appears to have leveled off. This

republic includes the giant Shatlyk deposit,

one of the 10 largest in the world, which

alone accounts for nearly one-half of the

area’s production. Shatlyk is now producing

at full capacity, and as table 7 indicates, output for the republic as a whole is increasing

slowly. It is expected to rise to over 80 bcm

as a result of the development of the newly

discovered Dauletabad (Sovetabad) field. ”

Thus, Central Asian gas may continue to replenish the southern supplies depleted by

the exhaustion of the North Caucasus

fields. 17

Table 7.—Gas Production in Central Asia

(billion cubic meters)

KOMI

The Komi Republic lies in the TimanPechora region, north of the Volga-Urals, on

the edge of the Barents Sea. It is an area of

taiga forest and tundra, technically part of

the European U. S. S. R., but having a climate

similar to that of West Siberia. Nevertheless, this area of 250,000 km2 lies 1,000

km west of Tyumen and is thus significantly

closer than Siberia to centers of energy consumption. Komi is one of the Soviet Union’s

older oil and gas regions; its first commercial

oil was produced in 1930. It is also virtually

the only such older region that is not now in

decline.

Oil

Komi’s first commercial oil was produced

near Ukhta in the southwest part of the region, although yields were negligible until

the development of three large fields (West

Tebuk, Dzhyer, and Pashnya) between 1962

and 1970. This development caused Komi oil

production to rise sevenfold between 1960

and 1970, from 0.806 to 5.6 mmt (from 0.016

to 0.113 mbd).

Exploration efforts then shifted northward. There development of two large fields,

Usinsk and Vozey, began in 1973, and production continued to rise. Table 8, which

shows Komi oil production over the Tenth

FYP period, reflects this growth in output.

However, Komi failed to meet its 1980 FYP

target. The shortfall appears to have been

due to such difficulties as early loss of reservoir pressure and infrastructure problems.

The latter included construction of a railway

branch line, for as in West Siberia, the

development of the region is hampered by

lack of roads.

While output is continuing to increase in

Komi, the long-term prospects for the region

seem to rest on exploration activities currently centered further north at the mouth

1‘Kon]i liquid hydroc.art)ons” include a sul)stantia] amount

( )f gas CO( )ndensate, ( )il (1u t pu t data for the region t hc~refore

oft en i ncludc condc*n sa t e. Th c 1970 figure for oil plus conden -

sat e is 7,6 million tons. 1 1) id,, p. 5 h.

“1 l)id., pp. 55-6; \$’ ilson, op. c-it., p. 22.
Ch. 2— The Soviet 0il and Gas Industry ● 29

SOVFOTO

Oilfield equipment installation in the Komitaiga

Table 8 .—Oil Production in Komi

(million tons, oil and gas condensate)

1975, . . . . . . . . . . ., ., . . ., ... 11

1979, . . . . . . . . . . . . . . . . . . . . . . . . .......19

1980 . . . . . . . . .......21

1985(plan). . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . ..26a

aEstimate

SOURCE Soviet Geography April 1981 p 273

of the Pechora river, and offshore in the

Barents Sea. This activity is currently being

supported by a settlement of some 20,000

people, but the high expectations of the

Soviets may perhaps be evidenced by reported plans for building a new town for

60,000 people in an area presently occupied

mainly by tundra-dwelling reindeer herders.20

‘l )ienesan[i ShalJa{i. (}p. cit.,p. 56.

Gas

Komi became an important producer of

gas after the giant Vuktyl gas and gas condensate deposit came online in 1968. Vuktyl,

which lies 120 miles east of Ukhta on the

right bank of the Pechora River, accounts for

most of the region’s natural gas production.

As table 9 shows, this was scheduled to

amount to some 22 bcm in 1980, but actual

Table 9.— Natural Gas Production in Komi

(billion cubic meters)

1975 . ., 18.5

197 6 .18.9

1977 . ..::,::::::””,., ,,, ..”:.... ..’, :.:: ::, :,18, 9

1978 ,, .. ..19

1979 (plan). . . ....,..19

1980 (plan).. ,, ..,,.,,22

SOURCE Wilson op cit p 22
30 ● Technology and Soviet Energy Availability

output reached only 18 bcm. The outlook is

for a gradual decline in the 1980’s.

The development of Vuktyl led to the construction of another major gas pipeline, the

Northern Lights, which ultimately became a

system of pipelines carrying vast flows of

gas from West Siberia. The Northern Lights

system was carrying 70 bcm in 1981 and is

being expanded to a capacity of 90 bcm. It

stretches westward across the European

U. S. S. R., intersecting with the MoscowLeningrad line at Torzhok and going on

through Minsk to the Czechoslovakian

border at Uzhgorod. The 1980 Northern

Lights traffic included 18 bcm/yr of gas from

Komi (most of it from Vuktyl) and over 50

bcm from West Siberia.21

The Komi region is rich in other gas deposits, but aside from the further development of Vuktyl, its future is uncertain. This

is due both to the fact that much of Komi’s

gas lies in very deep reserves, and to the lack

of infrastructure in this harsh, hitherto untouched, territory. Soviet long-term plans

called for production to rise to 40 bcm by

1990. This suggests that newly discovered

fields are expected to be brought onstream,

but also that Komi will be depended on for

only a fraction of the amount of gas that is

slated to come from West Siberia. 22

SAKHALIN

Sakhalin is a Far Eastern island situated

between the Sea of Okhotsk and the Sea of

Japan. It lies close both to the Pacific coast

of Siberia and to the Japanese northern

island of Hokkaido. Commercial oil production in Sakhalin began in 1921 when the

island was under Japanese military occupation. Onshore production amounted to only

about 3 mmt (0.06 mbd) in 1978, and offshore exploration has yet to be completed.

The major importance of Sakhalin lies in its

potential. Through Soviet-Japanese cooperation, it is hoped that Sakhalin may produce

21I bid., p. 86.

“I bid., p. 87.

enough oil both to export to Japan and to

supply some of the needs of the Soviet Far

East, presently calculated at about 15

mmt/yr (0.301 mbd).23 The Sakhalin project

is discussed in detail in chapter 11.

SUMMARY

The center of Soviet oil production has

moved progressively eastward over the last

century. Once in the European portion of the

U.S.S.R.–Baku on the Caspian Sea, and

then the Volga-Urals region—the focus of

this production now lies in West Siberia.

This shift has meant that, increasingly, oil

must be extracted far from major population

and industrial centers and transported long

distances to consumers. Moreover, conditions in West Siberia are harsh, the costs of

extracting the oil higher, and erecting the infrastructure necessary to find, produce, and

transport it concomitantly more difficult

and expensive than in older producing regions. These factors affect the rapidity with

which Siberian oil can be exploited. For these

reasons, the Soviets continue to devote significant resources to slowing the decline and

prolonging the productive life of the more

westerly fields, particularly in the VolgaUrals region. A small contribution to this effort to maximize the production of relatively

more accessible oil is made by Komi, which is

the only producing area in the European part

of the U.S.S.R. not yet in decline.

Similarly, the future of Soviet gas production lies in the less hospitable eastern regions. In the case of gas, however, significant contributions to production increases

may be expected from the Volga-Urals, i.e.,

from Orenburg. Some production can still be

maintained in older deposits in the Ukraine

and North Caucasus, although this is becoming increasingly expensive, and there is disagreement over how long it can continue. In

addition, Central Asian gasfields can contribute substantially to the gas available in

the southern part of the country.

“Wilson, op. cit., p. 24.
Ch. 2—The Soviet 01/ and Gas Industry ● 31

EXPLORATION

Having briefly surveyed the major oil- and

gas-producing areas of the U. S. S. R., this

chapter now examines the manner in which

oil and gas are discovered, produced, and

transported in the Soviet Union. For the purposes of this analysis, the oil and gas industry has been divided into six segments

or phases—exploration, drilling, production

and enhanced recovery, transportation of oil

and gas, refining, and offshore activities.

Each of these segments will be discussed in

terms of current Soviet practice, technological requirements, and the degree to which

the U.S.S.R. has in the past or could beneficially in the future utilize Western technology.

INTRODUCTION

In order for oil and gas production to be

sustained over the long term, additions must

be made to reserves that compensate for the

petroleum taken out of the ground. To

replace the reserves produced during the

Tenth FYP period (1976-80) the U.S.S.R.

would have had to add to reserves, both from

new finds and additions to existing fields, an

additional 2.9 billion tons of oil (21.1 billion

bbl). This estimate exceeds estimated gross

discoveries during 1971-75 by about 50 percent. ” Yet official emphasis in the U.S.S.R.

in the last 15 years appears to have been

largely on production from known deposits,

rather than on exploration for and preparation of new areas. It has, therefore, been

common in the Western literature to find the

U.S.S.R. criticized for neglect of exploration

efforts.25 It could be argued that, until relatively recently, any lag in Soviet exploration activities was caused by the fact that

discoveries such as Samotlor made extensive

exploration efforts unnecessary, at least

from a short-term perspective. For the past

decade, however, it is more likely that the

progress of Soviet oil and gas exploration —— . .—. —— —

‘‘c 1A, “ f’rospwts for So~iet oil [production: A Supplemental Anal~sis,” .JuIJ 1977, p. !23,

‘‘(;oldman, op. cit., p, 121 ; Robert J!’. Campbell, ‘1’renff.s in

(h r .S~)I IIC! ()/1 un{i (;as In(lu.str) ( Baltimore: ,Johns I ]opkins

[Jni~ersit~ [’ress, 19’76), pp. 9- 10; CIA, op. cit.. pp. 1, 5.

has been impeded by a general lack of availability y of appropriate equipment.

Exploration for oil and gas in the Soviet

Union seems to be handicapped by a lag, not

in knowledge, but in its application. The

U.S.S.R. has relatively few personnel skilled

in advanced exploration techniques, and inadequate stocks of technologically advanced

equipment. Some of these problems could

certainly be remedied in the short run

through purchases of foreign equipment and

technology. However, given the leadtimes

necessary to develop new fields, it may be

too late for such purchases—which might

enable the U.S.S.R. to explore at greater

depths and in more difficult terrain—to

much affect production prospects for the

1980’s.

This section describes the methods by

which exploration takes place; evaluates, to

the degree that this is possible, the Soviet

state of the art in these methods; and

discusses the past and potential contribution of Western technology in this area.

More attention is paid here to exploration for

oil than for gas. This is a reflection of the

fact that gas reserves in the U.S.S.R. are

commonly acknowledged to be more than

sufficient to sustain planned increases in

production. This is not the case with oil

reserves, the present extent and future prospects of which are matters of some controversy.

THE EXPLORATION PROCESS

Exploration for both oil and gas generally

takes place in three phases: regional surveys

that identify promising geological conditions

for the presence of hydrocarbons; detailed

geophysical surveys that evaluate specific

areas in the regions identified in phase one;

and exploratory drilling to test the findings

of the first two phases.

Regional Surveys

Regional surveys are conducted in an effort to outline areas that might contain thick
32 Ž Technology and Soviet Energy Availability

sediments of hydrocarbons in structural

traps. This is done with instruments or sensors, usually mounted in aircraft, which

measure from the air changes in the magnetic fields and variations in the Earth’s

gravity. Sometimes, overflights of prospective areas are supplemented by ground-level

measurements. Recently, both the United

States and the U.S.S.R. have experimented

with satellite surveys.

Detailed Surveys

The principle method of conducting a

detailed analysis of an area is by seismic

survey. Either an explosive or a device that

vibrates the Earth is used to generate sound

waves, which are reflected and refracted by

the underground geological formations. The

echoes are detected by seismographs or

geophones, and recorded on magnetic tape.

The result is a two-dimensional view of the

subsurface structures. Seismic surveys produce large quantities of information that

must be processed on large computers in

order to generate these maps of underground

geology, but minicomputers are now used to

preprocess the data before it is passed on to

a data processing center.

Drilling

Once a promising prospective area is

located, the next step is exploratory drilling.

Indeed, despite the sophistication of much

geophysical seismic work, drilling remains

the only means of positively verifying the

presence or absence of hydrocarbons in

structures. Exploratory drilling utilizes the

same technology and equipment as does production drilling, although decisions as to the

number, location, and depth of the wells will

naturally differ depending on whether or not

they are being drilled for exploratory purposes. Drilling technology itself is discussed

in a later section of this chapter.

EVALUATION OF

EXPLORATION EFFORTS

The success of exploratory activities is

determined by additions to reserves–the

amount of oil and gas found. In the case of

the U. S. S. R., where oil reserves are a state

secret, it is obviously difficult to evaluate

the adequacy of exploration technology and

equipment. The best that can be presented

here are some qualitative impressions.

Exploration Technology

The U.S.S.R. is believed to possess adequate domestic capabilities for regional surveys, but its detailed seismic work may be

inhibited by equipment that Western

observers describe as bulky, difficult to

transport, and of comparatively low quality.

In general, the U.S.S.R. produces detailed

survey equipment inferior in accuracy and

capability to Western models. (For example,

American experts who have examined Soviet

geophone cables have found that they introduce extraneous “noise” into the data, a

problem that makes results more difficult to

interpret. 26) These models appear to have

been adequate in the past, but as the

U.S.S.R. is driven to explore for oil at increasing depths, the need for greater quantities of higher quality seismic equipment

will grow. The capabilities of the Soviet

seismic equipment manufacturers to meet

such a need is uncertain.

In the United States, a shift to the collection of seismic information by digital means

began in 1962 and was essentially complete

10 years later (half of the crews had switched

by 1968; 80 percent by 1972). In the

U. S. S. R., roughly 40 percent of collection

work is still done by traditional analog

methods. Analog methods provide highquality results, but these cannot easily be

subjected to further processing, and they are

far less efficient than digital methods. Consequently, the amount of work that can be

done is smaller and the results are much less

sophisticated.

As important to the success of detailed

survey efforts is the quality and availability

of computer facilities. Geophysical exploration is extremely computer intensive, and

Soviet planners seem to be aware of the im-
Ch. 2— The Soviet 0il and Gas Industry • 33

portance of making available both minicomputers to produce a rough picture of the

geology of the area and large computers to

further refine it. In each of these areas, the

U.S.S.R. remains at least several years behind the West. However, it must be noted

that most of the large oil discoveries in the

world were made with seismic technology

available by 1960. There is, therefore, no necessary correlation between state-of-the-art

equipment and the size of potential finds.

Two philosophies for the processing of

seismic information have emerged in the

United States. In the first, a substantial

amount of processing is done in the field at

locally based minicomputer-equipped computer centers. The second uses centralized

computer centers with large “numbercrunching’ high-speed (and often state-ofthe-art) computers. The former philosophy

has been mostly pursued by the independent

geophysical contractors in the United

States, while a combination of both has been

employed by the major or oil companies.

The Soviets have followed both paths.

Thus, a small number of field systems utilizing minicomputers began to be introduced

in the 1970’s. By 1978, the Minister of Oil

noted that second- and third-generation

processing systems were being introduced, ”

and 22 systems were to be added by 1980.

Some of these systems must be operated by

highly skilled crews, which are in short supply. In addition, problems have arisen in

coordinating the production and supply of

spare parts and services for the minicomputers.

The Soviets clearly wish to increase minicomputer use. A program has been initiated

to this end by encouraging the Ministries of

Oil and Geology, Minpribor (Ministry of Instrument Making, Automation Equipment,

and Control Systems), and the U.S.S.R.

Academy of Sciences to work together on

“N. A. Maltsev, “From 1$’ell-site LO Ministry, ” Ekorzomicheska)’a gazet% No. 32, 1978, p. 15; V. Knayzev, “Gas

Under 13arkhany, ” Tr-ud, June 3, 1980, p. 1.

minicomputer standardization and production. 28

The Soviet capability to process digital seismic information using “numbercrunchers also lags considerably behind

that of the United States. Until the mid1970’s the development of advanced geophysical techniques in the U.S.S.R. was

made more difficult by an undeveloped computer base in general: only one high-speed

computer model was known to be serially

produced.

Although this machine was almost the

equivalent of Western computers in speed

when it first appeared in 1964, limited

peripherals, -

a small core size, and very -

limited software degraded its performance

significantly. 29 The other machines that were

available were not well-suited for geophysical processing. For example, programs

that take 45 minutes to run on a secondgeneration Soviet computer would take less

than 2 minutes on a ‘modestly high-speed

U.S. model.”) Furthermore, hundreds of the

Soviet machines are needed just to process

the data from one oilfield.31 There is evidence

that a special processor for geophysical data

has been developed, but it is doubtful that it

has appeared in any quantities.32

Although third-generation Soviet computers started appearing in 1972, the fastest,

most powerful models were delayed until the

late 1970’s. In 1977, there were 18 processing centers for geophysical data in the

Ministry of Oil.33 Financing for computer-

“Priht)r\! i .si.stcm> upra I ‘lc’fli~’a, No. 3, 1979, pp. 44-4!5; ().

A. []otapo~, ‘‘Th(’ Prohlem of Prowssing I ,arge hlass(’s of (ideological and ( koph? sical I )a t:1 and Jf’ajs t o .Sf)lie It, in S. 11.

(lure~’ich, Pd., }folo,qraph” II a?l(i ()/)t/I)IuI /)rl)(~ISS/ll< f)/” lt/form a tio n in (i{IoloAr” I! a It(/ (; (’( Jp h \I \ I [’ <, ord~~r of I,(~nin 1’h}’sicalTwhnical Institute imeni A F’. ,Joff~’e, llos~.ow,” 1979.

“’(leorge Rudins, ‘‘Soliet Computers: :1 1 I istoric’al Surk’ey, ” Sfjr i(~/ C ‘)~)(]rff(~ti(i 1{(~{ II(I( . .Januar} 1970. pp. 6-4-I.

“’AYot. siali.s ti~h(~kcl Ja in[lrl v tn jIa, Ilar. 7, 1978, p. 2.

‘1 I’otapoI, op cit. B~Raz[tec]ochna Y,a ~co[%~z>!k@ No. 77, 1977, PP. 27-33.

] ‘0, \l, R~’nski~, 4‘ Automation of Economic Planning Calculations—The hlost Important Directions in the ASU —

Neft !‘ b.’tionomiku tleft)’anoi ]Irorrl?’.v)ti(’rlr lo.st>f,” 1977.
34 ● Technology and Soviet Energy Availability

related expenditures in the Ministry of

Geology was substantially increased for

1975-80, but by the late 1970’s, work was

just beginning on using large computers for

geophysical processing.34 Thus, it is possible

that between the two Ministries, the Soviets

really only began to do a sizable amount of

digital processing using large computers in

the past few years.

Activity Levels

Soviet economic planning places heavy

emphasis on attaining output targets. The

practical consequence of this for oil and gas

exploration efforts has been that those

ministries charged with exploration—the

Ministry of Geology and the Ministries of

Oil and Gas–tend to focus on fulfilling their

FYP targets, even when such relatively

short-term considerations may be at odds

with the maximization of oil production over

the longest period of time. Those drilling

teams and equipment devoted to exploration

are unavailable for the drilling of producing

wells—wells that yield petroleum that

counts toward the fulfillment of output targets. Therefore, it may be more attractive to

drill appraisal wells close to already producing regions than exploratory wells in remote

areas. Moreover, the fact that drilling targets are expressed in terms of meters drilled,

rather than oil or gas found, creates disincentives for deep drilling that is slower and

more difficult than drilling a greater number

of shallower wells.

At least partly as a consequence of systemic factors such as these, the number of

meters drilled in exploratory wells actually

declined between 1967 and 1975,35 from 5.8

million to 5.4 million meters. Whereas in

1964 and 1965 Soviet oil output increased by

13.6 mmt for every million meters drilled, in

1976 this figure fell to 5.6 mmt.36 This is a

— 34Potapol, op. cit.

“>Campbell, Trends ..., op. cit., pp. 10-1 1; see als o

Goldman, op. cit., p. 122.

“(; oldman, op. cit., 122,

reflection of the fact that no giant oil discoveries in the U.S.S.R. have been reported

since the early 1970’s.

Moreover, drilling targets have been consistently underfulfilled. In West Siberia, for

instance, only about 80 percent of the

planned volume of exploratory drilling was

carried out in 1974, and drillers failed to

fulfill their plans in each of the 5 years from

1971 to 1975.37 During these years, large

finds compensated for the level of exploratory effort and further encouraged the devotion of larger shares of drilling efforts to

development rather than exploration. Rigs

engaged in development drilling are about

four times more productive than those used

for exploration. This is because depths are

shallower; the infrastructure is better; and

less time is needed to move between locations.38

The Tenth FYP (1976-80) obviously recognized the need to step up exploratory activities. It called for efforts to find additional

reserves in Siberia, Central Asia, and Kazakhstan, as well as offshore and in traditional producing areas. Total drilling targets

were also raised significantly. In West

Siberia alone a more than threefold increase

was called for.39 Given past performance, the

likelihood of meeting such a target is at least

questionable, but even a 10 percent increase

in exploratory drilling would represent a significant investment in exploration activities

that have hitherto been stagnant.’” Moreover, there is evidence that exploration

teams have been moving further and further

away from the established centers of the industry into more remote areas of Siberia and

the Arctic Circle.41

‘-W’ilson, op. cit., p. 45.

‘“CI .4, op. cit., p. 23.

“’Ibid.

“

)Robert W. Campell, “Implications for the Soviet Economy of Soviet Energy Prospects, A CA’S Bulletim 20(1),

spring, 1978, p. 40.

‘l See W’ilson, op. cit., pp. 44-50,
Ch. 2—The Soviet Oil and Gas Industry ● 35

THE CONTRIBUTION OF

WESTERN EQUIPMENT AND

TECHNOLOGY TO

EXPLORATION

The U.S.S.R. has been virtually self-sufficient in regional survey equipment. In the

area of detailed survey work, it has purchased geophones from the West, but not in

very large numbers. Nor has it ordered the

replacement parts for these geophones that

U.S. industry experts assert must certainly

be required. This leads to the inference that

at least this Western equipment may now be

inoperable or unreliable.

By far the largest contribution of the

West to Soviet exploration activities, however, has been in the area of computers and

related software and equipment. In general,

the indirect reliance of the Soviets on U.S.

computer developments has been large.42 Oil

and gas exploration has benefited both directly and indirectly from this dependence.

The advantage of Western computing

equipment is that it can be purchased in

complete ready-to-use sets. The Soviets have

made major purchases of collection- and

processing-related geophysical equipment,

from firms, mostly in the United States. The

American firm Geosource has completed a

$5 million to $6 million deal that included

outfitting three complete digital crews with

24 off-the-road exploration vehicles, a portable field recording unit, eight remote processing minicomputer centers, and processors

used in conjunction with the minicomputer

system. 43 An option for six more crews, including 49 additional vehicles, was exercised

by the Soviets as part of a $13 million sale

for 1978 delivery .44 The post-Afghanistan

technology embargo has now put further

42“See Seymour ~:. ( ;oodman, ‘‘Soviet Computing and Technolog~ Tra ns ter: .,4 n ( )Y’erl’iew, 11’orl(i P()/itic.s, vol. I(XXI,

No. 4, ,Ju IJ, 1979, pp. 539-570; and N. C. Da~i~ and S. 1?.

(~oodtnan, “’[’he Soyit’t Illoc Unified S~’stem of (’omputt’rt, ” (’f~mpu ~~ n,~ .$//r/ Ic\,\, 10]. 10, No. 2, ,Jun~ 191’8, pp.

9:1- 122.

“.Yc)[ict ll(i.sinfs~ an(l I’ra(ic, hla~r 25, 19’7’7, pp. 1, 3, and

Nlar, 2, 197’7, p. 10.

“I hid,, Aug. :], 1977, p. 1,

such sales in limbo, and automated display

equipment and geophysical equipment, including five more minicomputer systems,

sold in 1979 for $9 million45 have not yet been

delivered. Even without this sale, a significant number of the estimated 300 digital collection crews in the U.S.S.R. have been outfitted with equipment supplied, not only by

the United States but also by West Germany and France. However, the latter are

almost all based on American equipment;

Hungarian and East German systems are

also available to the U. S. S. R., but these tend

to be inferior to, and more costly than, those

produced in the West. In addition, the

U.S.S.R. has purchased a fully equipped

French exploration ship, and has had other

ships outfitted in the West.

Through these purchases, the Soviets

have acquired advanced Western techniques. According to industry sources, there

are as many as 30 to 35 U.S. minicomputer

systems in the U.S.S.R. that have been

specially designed for geophysical work.

These include simple 16-bit dedicated array

processors.46 At least some of the U.S.

minicomputer systems were shipped with

software packages and Geosource trained 80

Soviet operators in the United States. This

firm also installed the systems in the

U.S.S.R. and gave extensive field training

there.

As a result of these sales the Soviets are in

some places using seismic techniques that

were current in the United States about

1975. Present practice in the United States

has moved far ahead of this level. In the

United States array processors are now outfitted with programmable microprocessors

that increase throughput by a factor of five.

Main and secondary storage sizes have been

increased substantially. The Soviets had not

as of 1980 mastered multichannel techniques, which enhance the exploration of

those deep structures that lack shallower exJ ,(;e~fj~ur~e 1 IIC,., 1,97$1,4 nn Ual Rc’port, p. ~.

~1’/l n arra }’ processor is a computer designed t o handle t’ery

computer-in tens i~’ e calculations I)y simultanwwsl~’ manipulating large mat ric’es of numbers, and is trer?r useful for

seismic applications.
36 ● Technology and Soviet Energy Availability

pressions. 47 They only began serial production of their own array processors in 1980.4

”

Although geophysical array processor designs may have been available, it is unlikely

that a nonmilitary sector could have acquired them.

Again, however, any correlation between

state-of-the-art seismic equipment and significant oil production increases has yet to

be demonstrated. Thus, although the Western minicomputer systems that have been

sold do not represent the state-of-the-art, it

is not clear that the latest equipment is vital

to the U.S.S.R. On the other hand, the magnitude of these sales implies that U.S. computer technology has played a significant

role in aiding the Soviets to collect and process digital seismic data efficiently. This has

proven true in the area of large “numbercrunchers” as well.

An indirect dependence on U.S. large computer technology is evident in the thirdgeneration Soviet- and East European-made

Ryad computers that gradually became

available in the 1970’s. These are essentially

functional duplicates of IBM models. The

Soviets pursued this course in order to

minimize risk and design decisions, to acquire the ability to tap the great body of

software available in the West, and to use

Western secondary storage and peripheral

devices.” But it took the U.S.S.R. almost as

long to duplicate these models as it took

IBM to develop them. The first, small

models did not begin to appear until 1972.

Thus, the gradual improvement in Soviet

seismic data processing capability between

1972 and 1980 can be equated to that of

some of the major U.S. oil companies between 1965 and 1973—with the exception of

array processors.

The delivery of large U.S. computers for

geophysical processing began in the early

1970’s, soon after the 1969 Export Administration Act lifted more stringent export

‘-Ttd Agres, “U.S. Builds Soliet W’ar llachine, ” Industrial

K{~.s~’iIrch un(i l)(~[t~lc)[>r~zc’rlt, ,July 1980 p. 3.

“.S0{ if~t Bu,sin{j,s.v an[i Trade>, Aug. 1, 1979, p. 5.

“’I)aI’is and (;oodman, op. cit,

control guidelines. so Several large computers

were purchased from Xerox in 1973, and between 1975 and 1980 the Soviets purchased

at least six major U.S. computers from CDC

and IBM. CDC supplied a computer for the

Ministry of Geology’s All-Union Research

Institute; another was to be used for the

processing of offshore drilling information

on Sakhalin; and two were for processing

centers in Irkutsk and Tyumen.51 Two IBM

computers have been sold, one for use in the

construction of offshore drilling rigs and the

processing of information for offshore exploration, and one to the Ministry of Oil.52

An export license for the latter sale was held

back until IBM agreed to scale down the array processors that were to be included.53

This also happened with other purchases described above.54 These computer sales have

all included software, supplied by both

French and American companies.55

The U.S.S.R. has never sent appreciable

amounts of seismic data to the West for

processing, although it has sent small

batches, apparently to test-check its own

software. Its reluctance to send data seems

to stem from a combination of secrecy, pride,

and a reluctance to use hard currency for

services.

Although the Soviets have obtained U.S.

computers and Western software, and may

therefore be able to do some sophisticated

processing, it seems that they have so far

been unable to implement some of the most

advanced algorithms. This is a reflection of a

much larger Soviet difficulty in software

development, an area in which the U.S.S.R.

has been notoriously weak. The reasons for

this weakness are largely systemic. The

Soviet economy is simply not structured to

facilitate—indeed, even to allow—the close

‘[’See office of Technology Assessment, Technology and

East- Wrest Trade (Washington, D. C.: U.S. Government Printing Office, 1979).

1’.S[~[i{~t Bu.~ine.s,s IIn(i Tra(ic, Julv 21, 1975, p. 2: hlar, 15,

1978, p. 1; ,June 6, 1979, p. 2.

“JL~Oi’i<lt Bu.sirze.s,s un(]Trade, I)ec. 7, 1977, pp. 1-2,

“’LS(j[ict Bli.sine,s.s an(i Tr-a(i<, Aug. 11, 1979, p. 7.

‘X’.?c)(ict Biisines,s an~i Tru(ic, ,June 6, 1979, p. 2.

‘‘Lf’(){iet Bu.sinc,s,s ar?~i ‘1’rafie, NoIr. 1 (), 1976, p. 1: Nokr. 8,

1978, p. 3.
Ch. 2—The Soviet Oil and Gas Industry ● 37

and constant interaction between users and

suppliers which is necessary to the implementation of appropriate software. Scientists, designers, and theoreticians are unable

to communicate directly with systems users.

Moreover, these users have little or no incentive to risk even temporary productivity or

output declines in order to assimilate innovations.

The software problem is pervasive and has

been felt in the seismic exploration area. One

Soviet author, for instance, has asserted

that “a number of important and necessary

algorithms for the processing of geological

and geophysical data are often not realized

in practice."56 Many of these applications are

based on the use of sophisticated multiplefunction array processors and very large

capacity disks (in the range of 300 MBytes

or more), which have not been made available to the Soviets primarily because of their

importance in military applications.

The need for large capacity disks stems

from the large size of data sets that are now

being collected at high sampling rates. Very

thin structures, usually found in small fields,

may be missed at lower sampling rates, but

it is difficult or impossible to split up the

data sets taken at higher rates (such as 0.5

milliseconds) onto separate disks for processing. The Soviets have so far only been

able to master the production of small quantities of 100 MByte disks (with oxides from

West Germany), but these have been of poor

quality. An emerging technology in the

United States is acoustic holography (threedimensional wave analysis), which allows the

geophysicist to “see” structures three dimensionally. Large capacity disks are indispensable for this application.

Array processors are used in conjunction

with large computers as well as with minicomputers. They are critical for offshore exploration, which yields roughly 50 times the

data of onshore operations. Permafrost also

presents massive complications and requirements for processing power. Since analog

“I(; urt~~r ich, op. cit.

methods are still used extensively in the

U. S. S. R., the overall throughput for seismic

exploration is much slower than in the

United States, and the computing power in

use in the United States is still far greater.

For example, a single oil company in the

United States uses 10 large dedicated mainframes, 30 array processors, and over

twenty-five 300 MByte disks. As Soviet

hydrocarbons become harder to find, the

more advanced computer-related technologies will become more important.

Given the fact that the Soviets have been

very slow to introduce digital seismic equipment, the paucity of suitable computers until very recently, and the volume of Western

sales, it is clear that Western equipment,

especially U.S. computers and associated

hardware, has filled an important gap in

Soviet ability to process geophysical information. Large U.S. computers are located in

all the major oil-producing areas—the Far

East, Eastern and Western Siberia, in Baltic

and Caspian Sea offshore drilling—as well as

in Moscow.

SUMMARY AND CONCLUSIONS

The Soviet Union has expressed its intention to reverse past neglect of exploration activities. In this effort, it will face difficulties

associated with the fact that it has insufficient quantities of seismic equipment, that

this equipment is not up to Western standards, and that prevailing incentive systems

tend to work against the allocation of resources to exploration. These problems will

inhibit the U.S.S.R. in its attempts to survey

more territory, in harsh terrain, and to prospect for oil at increasing depths. But it is not

clear that improved seismic equipment alone

would necessarily lead in the end to higher

oil production. The number of giant oil discoveries remaining and the environments in

which they most likely exist (both subjects

of controversy among Western geologists)

are at least as important in determining the

success of exploration activities as the

availability of the technology and equipment

to identify them.
38 ● Technology and Soviet Energy Availability

The Soviet Union has relied on the West,

and particularly on the United States, for

assistance in developing the computers and

computer-related equipment necessary to

sophisticated seismic work. Although the

Western equipment in the U.S.S.R. does not

represent the state-of-the-art, such equipment has not been necessary in the past to

locate major oil deposits. The U.S.S.R. is

still seeking Western aid in this area, but it

is unlikely that it will feel pressured to turn

to the West in the 1980’s to the same degree

that it did in the previous decade. In the near

term, Soviet ability to explore for new reserves is likely to hinge at least as much on

the number of field crews it can deploy, the

availability of highly skilled personnel, and

its ability to assemble integrated sets of

equipment for data collection in the field.

In the United States, experience has

shown that computer techniques have allowed production declines to slow. In the

U.S.S.R. such techniques might improve the

efficiency of exploratory activities (i.e., the

success rate), and thus, as the decade proceeds, advanced computer systems and software could similarly help to sustain production. Although it appears that the U.S.S.R.

is moving ahead with the development of its

own systems, systemic problems may delay

their development and introduction. If this

is the case, there will be significant pressure

to acquire such systems from the West,

probably toward the end of the decade. The

Soviets may seek high-density, fast-transfer

secondary memory devices, programmable

array processors, integrated sets of equipment for data collection, and information

display devices. The prime motivating factor

for hardware purchases may be to get working software. If such items are unavailable,

and if past practice continues, the U.S.S.R.

will likely do without or use what is available, albeit in a suboptimal, more expensive

manner, after significant delays.

DRILLING

INTRODUCTION

It is common in the West for energy experts to be critical of drilling practices in the

U.S.S.R. It has been asserted that the inferior quality of Soviet-made drilling equipment will hinder progress in drilling unless

“quantum improvements” are made; and

that weaknesses exist in all elements of

Soviet drilling technology and in the organization and supply of drilling operations.57 In part, these evaluations rest on the

fact that the U.S.S.R. has chosen a different–and demonstrably less efficient–

technological path in its drilling operations

from that pursued in the West, and on the

unevenness of Soviet industrial standards

and production which creates obstacles for

drilling teams.

This section describes the methods by

which oil and gas wells are drilled, evaluates

““~ 1A, op. cit., p. 21; (’ampbell, T’rends ; op. cit., p. 19.

the Soviet state-of-the-art in these methods,

and discusses the past and potential contribution of Western technology to Soviet

drilling. It must be noted that this discussion rests on incomplete and sometimes inconsistent data. Recent information on the

annual number of meters drilled or drill bits

produced is difficult to obtain from Soviet

sources, but it is also surprisingly difficult to

acquire similar figures for the United States.

The data provided here have been verified to

the degree that this was possible, but should

not be considered conclusive beyond an indication of orders of magnitude.

THE DRILLING PROCESS

Oil and gas wells are drilled with a bit, i.e.,

a tool that bites into the earth and progressively deepens the bore hole. In the earliest

days of the petroleum industry, hand digging was replaced by a system utilizing a

chisel-shaped bit that traveled up and down
Ch. 2—The Soviet Oil and Gas Industry . 39

on the end of a rope and simply pounded the

well deeper. Today, technology has progressed to the point where sophisticated

metals and alloys are used to create a wide

array of precision tools, designed specifically

for different types of rock and drilling conditions.

Equally important developments have

taken place in the other technologies and

equipment necessary for drilling. The ropes

by which drill bits were raised and lowered in

the well have evolved into drill pipe (still

sometimes referred to as drill “string”) made

of high-quality steel; the muddy water that

was pumped into the well to cool the bit and

help to flush up debris has been replaced by

“drilling mud” that is a chemically designed

mixture of water and/or finely divided material such as special clays, barites, and

chemicals. Drilling rigs—the hoists and derricks from which the drill pipe and bit are

suspended and which support, raise and

lower them—have developed into large,

heavy-duty structures capable of bearing

and hoisting weights of several hundred

tons. Wooden stakes, inserted into the well

to prevent it collapsing, have disappeared in

favor of tubular steel casings that are

cemented in with special oil-well cement to

prevent corrosion and leakage and to reinforce the structure; a safety device called a

blowout preventer may be attached to this

casing at the surface of the well to prevent

sudden explosive escapes of gas or liquid

caused by high pressures. Finally, sophisticated electronic “well logging” instruments are now available. These are lowered

into the well on cables and measure the density and permeability of the geological structure surrounding the well, allowing geologists to estimate the quantity and recoverability of potential reserves.

In the West, the most commonly used

drilling technique employs a rotary drill.

This is a system in which both the hollow

drill pipe and the bit are rotated at the surface of the well by a rotary table, Drilling

mud is pumped down the pipe and out

through fluid courses in the bit, and this

fluid conveys the rock cuttings to the surface where they can be examined for early

traces of oil. With this method, the bit usually remains in the hole until it becomes too

dull to be effective. At that point, the drill

pipe and bit are drawn up together and the

bit replaced. During the drilling process additional lengths of pipe may be added while

the bit remains in the ground. A variety of

drill bit designs make rotary drilling effective in both soft and hard rock formations.

SOVIET DRILLING EQUIPMENT

AND PRACTICE

Turbodrilling

Although the Soviet Union originally employed rotary drilling techniques, it proved

unable to produce sufficient quantities of the

high-quality pipe necessary to withstand the

torque applied in rotary methods. ” Use of

low-quality pipe leads to pipe breakage and

the consequent loss of drilling time in

retrieving the remaining pipe and bit from

the borehole. To overcome these problems,

the Soviet Union developed the turbodrill.

The turbodrill is a series of multistage turbine sections through which the drilling mud

or fluid is passed. The turbine is placed at

the end of the drill pipe, just above the bit,

and the power required to rotate the turbine

is provided by the fluid. The need to turn the

entire drill string is thus eliminated, and far

less stress or torque is applied to the pipe,

which is either not rotated at all or is rotated

only very slowly.

The turbodrill is a major Soviet engineering feat, one that was achieved at a time (the

late 1940’s) that Western engineers were trying and failing to resolve the problems associated with the turbine concept. This system

has enabled Soviet drilling teams to dig farther and deeper than would otherwise have

been possible given the stress on the drill

pipe entailed in the rotary method. The turbodrill works particularly well in soft rock

—

“q(’ampbell, op. cit., p. 21.
40 ● Technology and Soviet Energy Availability

formations and is well-suited to directional

drilling, a technique which allows the bit to

be oriented at the bottom of the borehole in a

predetermined direction. Directional drilling

has been particularly useful to the Soviets in

offshore Caspian drilling.59 At one time,

about 86 percent of Soviet drilling was done

by turbodrill; this may now have fallen to

about 80 percent.60

But the turbodrill is not without drawbacks, and it is responsible for much of the

criticism leveled at the performance of the

Soviet oil and gas industry. The efficient use

of turbodrills requires high capacity rig mud

pumps, the best of which are produced in the

United States. Soviet mud pumps are greatly inferior to these. More importantly, turbodrills operate at three to four times the

speed of rotary drills (120 to 600 rpm v. 30 to

150 rpm), a fact that promotes more rapid

wearing of the drill bit, especially in hard

rock. Replacing the bit is a time-consuming

process, as the bit and drill string must be

withdrawn from the ground. As well depths

increase, time loss becomes even more of a

problem. Thus, drilling in the U.S.S.R. takes

longer than elsewhere in the world. Soviet

drilling teams are said to devote an average

of only about 15 percent of their time to actually drilling; the remainder is spent withdrawing and reinserting the drill string and

replacing the drill bit.61

Other problems associated with the turbodrill are the fact that it cannot be used

under high-stress conditions; that it requires

more frequent maintenance when operated

in high temperature formations; and that its

efficiency deteriorates when it is used with

certain drilling muds.62

Given these problems, several options are

open to the Soviets. A turbodrill could be

designed that would operate at lower

““V. 1. Mishchevich, “1)rilling operations in the U.S.S.R.

for 60 Years,”’ Neft?’ano?’e khozj’a?’.vt{ c), No. 10, 1977, pp.

24-30.

‘(’Goldman, op. cit., p. 42.

‘“ I bid., p. 41.

‘“R. N’. Campbell, The l?conomic.s of ,So[’iet oil and Gas

(F3altimore: Johns Hopkins University Press, 1968), pp.

106-114.

speeds and withstand higher bit weight; the

quality–and hence the longevity–of the

drill bits could be improved; or rotary drilling could be substituted, at least for deeper

wells. Each of these would entail basic improvements in Soviet drilling equipment and

technology, a subject that is discussed in

more detail below. However, it must be

noted that there is no evidence to suggest

that the U.S.S.R. plans a wholesale replacement of turbo with rotary drilling.

Although rotary drilling has been introduced in those areas where local conditions provide a particularly strong rationale

(e.g., in areas with deep wells and high

temperatures), this has been the exception

rather than the rule. Not only do the problems that initially led to the development of

the turbodrill persist, but much of the existing stock of ground equipment would

have to be replaced to be compatible with

rotary drills. Moreover, the U.S.S.R. has a

significant amount of pride invested in

turbodrilling. In short, it seems more likely

that the Soviets will push for incremental improvements in their existing equipment

rather than replace it with essentially

Western technology.

Drill Bits

Contradictory reports have appeared in

the West over both the number and the

quality of Soviet domestically produced drill

bits. In 1977, the CIA estimated that the

U.S.S.R. was producing 1 million rock drill

bits annually, compared with only about

400,000 in the entire rest of the world.63 This

may be contrasted with a more recent report

that cites Soviet production figures of

421,000 in 1970; 352,000 in 1975; and approximately 400,000 in 1980.64 Part of the

discrepancy here lies in the fact that the CIA

figure is for rock bits “of all types, ” i.e.,

those used for other purposes than oil and

gas drilling. Similarly, the latter figures are

for one type of drill bit only–rolling cutter

rock bits. These, it is true, are used in the

“’CIA, op. cit., p. 26.

“W’ilson, op. cit., p. 60.
Ch. 2— The Soviet Oil and Gas Industry • 41

vast majority of Soviet oil and gas drilling—

96 percent of development and 88 percent of

exploratory drilling; nevertheless the output

figure is somewhat understated.

It has been claimed that these output

figures may be misleading, not only because

the quality of the bits produced is so poor (a

matter discussed below), but also because

the U.S.S.R. may not produce a sufficient

variety of bits to allow the sophisticated

matching of drilling equipment to drilling

conditions that is standard practice in the

West. In this connection, it has been claimed

that “a typical Soviet factory produces

255,000 bits a year, but only two models. In

the United States, a typical factory produces

only 70,000. In part this is because production is frequently interrupted to allow the

firm to tool up for the 600 models it offers."65

If this is meant to imply that only a few

types of drilling bits are available in the

U. S. S. R., it is clearly misleading. There is

evidence that between 1971 and 1975, 35

new types of bit were produced in the Soviet

Union, and that during the last FYP period,

more than 30 new models were developed, including 20 models of a bit made from

ultrahard alloys, designed to drill to depths

of 4,000 to 5,000 m and to operate at a faster

rate of penetration than conventional rock

bits.66 Whether this variety is sufficient to

maximize efficient bit use is another matter,

however.

The number of bits or of models available

may be less important than the quality of

the bits produced. Quality is clearly an issue

that has troubled Soviet planners, and may

have been one of the chief motives for the import of a facility for the production of

tungsten-carbide drill bits from Dresser Industries in the United States (see below).

Whereas the majority of drill bits produced

and used in the West are “journal bearing, ”

the U.S.S.R. continues to employ an older

technology, i.e., most of the bits used are

‘ ( ;ol(lman. op. [’it,, p. 41

‘‘11’ilw)n. op. (’it,, p 6[).

“roller-bearing’ models. The chief difference

between these two designs is that roller bearings contain a number of small rotating elements, whereas the more technologically advanced journal bearing appears simpler, consisting mainly of two close-fitting parts.

Journal bearing bits offer a larger surface

area and they tend to be longer lived than

roller bearing bits. The fact that the majority of the bits to be produced in the Dresser

plant are roller bearing suggests that the

U.S.S.R. may find these more suitable for

use with the turbodrill.

Soviet efforts to improve the quality of

domestically designed drill bits have centered in at least three areas: development of

natural and synthetic diamond bit technologies; improvement of roller bearing designs; and work with hard alloy based and

coated bits.

Natural diamond bits have been in use in

the U.S.S.R. for some 25 years, but their

utility has been limited by both economic

and technical considerations. Natural diamond bits are costly to produce. In addition,

they are prone to failure under the high

vibrations that are a byproduct of turbodrilling. On the other hand, diamond bits reportedly last longer than other models, and

may therefore be better suited to deep drilling. The U.S.S.R. is now testing synthetic

diamond bits that could be produced more

cheaply than natural ones.67

The Soviet literature also records efforts

to improve roller bearing technology. In

1979, the Minister of the Oil Industry reported that Soviet research institutes had

developed 122 varieties of new bits suitable

for both low- and high-speed drilling, and

that 75 of these were being put into production. 68 There are already indications of improved results with such new bits, including

‘ Camphell, Trends , op. cit.; 1). I)adshel “An 1 nlportan L Reserlre for I)wp I)rillin~, ” t’\. shka, ()(’t. 20, 1978, p. !?:

l’. J’, 1)(’tro~, ( “1’htI I )rill[’r~ of (’hecheno 1 ngusht’ti~’a in t h(’

St ruggl~~ for ‘l’tw>hni~’al I)rogr(Js\, ” JJ’(’ff )’(J) IOJ’(” /i IIOJ)’O )’.i (( ‘(), N(), 1 (), 19’7’7, pp. 67-70.

‘“N ~~ . h!alt SOY , “h’(~w Irront it>rs of th(’ (1. S,S. R. oil 1 ndu St r>’, ” ,1’(’ft \’a)/OJ’(” k ho: }’(1 }’ \ / { ‘(), No. 9, 1979, pp. 5-10.
42 ● Technology and Soviet Energy Availability

a report of 20 percent improvement in average meters drilled per bit.69

In addition to new designs, the U.S.S.R. is

also developing more durable materials for

its bits. Since 1977, about 30 percent of all

bits produced have had hard alloy teeth in

their rock-crushing elements, and as of 1979,

factories were reportedly beginning to produce bit parts from steels that had undergone electroslag and vacuum arc remelting.70

These are processes that remove impurities

from the molten metal.

The most promising results have come

from bits incorporating new superhard

alloys that have a high resistance to wear.

Claims for one bit utilizing such an alloy include the assertion that it can replace 40 to

70 conventional or two to three diamond

bits, and that individual models have lasted

over 1,100 m in production and 500 m in exploratory drilling. These bits are expensive

to produce and have been found to be most

cost effective at depths of 2,000 to 5,500 m.

When used with turbodrills, it is claimed

that they can reduce operating costs between 27 and 51 percent, largely because of

reductions in downtime. Such bits are reprocessed to recover the alloy.”

In the final analysis, however, the real test

of improved bit quality is the number of

meters drilled each year in both development

(producing) and exploratory wells. Soviet

statistics show a marked improvement in

drill bit productivity over the past 10 years

which, as table 10 indicates, more than

doubled between 1970 and 1978. Whether

the U.S.S.R. can achieve the extremely ambitious target of raising this productivity a

further 2.6 times by 1985 seems more problematic, given past performance. In general,

bit productivity has been higher in Western

Siberia than in the country as a whole because wells there are drilled into formations

““XI, Ahramson and V. Pozdnj’ako~, ‘‘The Series 1 A N Bits

Ar(> Also h~ffecti~rc’ for Tuhine Ih-illing, ” .l’eftl’unik, No. 9,

1977, pp. 10-11.

‘(I\’. 1. Pa\lo\r, K, A. Kuzn~’tsok, and N. P. Umanchik, “oil

Industrjr Machine Building,” h’hinzi(>}lt’.~koj’(” i r[~~ftjp(ltlolr(>

mash i~)n~).s tr~)}’enij’c No. 11, 1977, pp. 18-22: hlaltse~”, op. cit.

‘l)adashe~’, op. cit.; Pral(lu ( Jkruin}’, Jan. 13, 1980, p. 2.

Table 10.—Average Bit Runs (meters per bit)

1970 1975 1978 1980a 1985a

Development drilling . . . . . 33.7 54.2 76.1 77.2 198.5b

Exploratory drilling . . 19.8 26.6 28.1 33.6 —

aPlan.

b

pledge in Trud, June 6.1980

SOURCE Soviet data reported in Wilson, op. clt., p 59

that are softer than those encountered elsewhere. However, as depths increase, hard

rock is encountered even in these deposits. It

is significant, therefore, that bit productivity here has grown in spite of increasing

average well depths. In other regions of the

U. S. S. R., such productivity declined as wells

got deeper.72 Whether these trends will continue in the face of the probability that new

finds in Western Siberia are likely to come at

everincreasing depths remains to be seen.

Drilling Mud

Both rotary and turbodrill equipment require lubrication with drilling fluid or mud.

It is important to use muds that are chemically appropriate, i.e., which will not react

with the underground rock formations in

such a way that the formations are damaged

or oil and gas zones overlooked. Scientifically designed muds are known in the U. S. S. R.,

and their production was slated to increase

during the Tenth FYP as a number of new

compounds became available. However, Soviet practice with respect to the use of these

fluids is uneven. Western experts have

observed cases of drilling crews simply using

water mixed with local clay when proper

chemical muds were in short supply.

Whether or not this practice is widespread or

confined mainly to remote exploration sites

is unknown, but it is certain that it can cause

damage to subsurface strata. Moreover, the

careless reuse of poor mud—apparently a

practice more common in the U.S.S.R. than

elsewhere in the world—can inhibit the effectiveness of well logging equipment. Used

mud, unless properly treated and processed,

7

2Wilson, op. cit. p. 59.
Ch. 2— The Soviet Oil and Gas Industry ● 43

contains oil, gas, or rock from previously

drilled sites, thus distorting the data

gathered from the present site.

Drill Pipe

Soviet difficulties in producing adequate

quantities of high-quality drill pipe are welldocumented in both Western and Soviet literature. At its most general level, this problem is part of a set of difficulties common to

the entire Soviet civilian economy: an incentive structure that emphasizes quantity over

quality, combined with a complex array of

infrastructural problems that leads to shortages of the materials, workers, and equipment necessary to fulfill production targets.

The result is often pipe with defective

threads and joints that cannot withstand extreme temperatures and fail to protect pipes

from corrosion and paraffin buildup.73 Poor

quality pipe can cause the drill string to

break, dropping the bit and other parts into

the well and requiring time consuming

“fishing expeditions’ to recover them. Wells

then remain idle while replacement parts—

which are not always available—are sought.

Soviet drill pipe seems to be adequate for

wells down to about 2,500 m, but the weight

and stress on the string at greater depths

lead to frequent pipe failures. This has obvious implications for the average well

depths achievable in the U.S.S.R.–an issue

made all the more important by the fact that

new finds are likely to be made at deeper

levels. There is ample evidence that the

Soviets are able to drill very deep wells–

8,700 m and greater74 -and the average

depth of wells75 has been increasing. For

development wells the average grew from

1,772 m in 1970 to 1,994 in 1978; and for exploration wells from 1,928 m in 1960 to 2,775

in 1975. The average depth of exploration

wells has now stabilized (it was 2,797 in

“N, Safyullin, “W’here Metal ‘Flies ’,” I%a~dG Feb, 28,

1978, p. 2.

‘S(XI ‘‘Transf(’r of ‘1’et’hnt)lf)g~ and the 1 )ressw 1 ndustrit+

I’;xpf)rt I ,ic’ensing Act ions, h(’arin~ Ix’for[’ the l)ermanent

Sulxonlnlit t~~t~ on I ntrest igat ion~ (Jt the (’ommit t e(I on ( ;oJIIrn n~(’n t al )1 ffa i r<, [I. S Sena t (’, ( )It, ~1, 1 WH, pp. 1 7;], 1 ‘7S.

\\’ i]w)n, op. c’i L,, p, ,“)~).

1978), but it is impossible to determine

whether this is the result of an inability to

drill deeper or a decision that deeper wells

are not necessary. In any case, Soviet ability

to provide enough quality equipment (including both bits and pipe) to quickly and efficiently drill a large number of deep wells

has been questioned. In 1977, CIA estimated

that on average it took Soviet drillers more

than a year to drill 3,000 m,76 while in the

West this could be accomplished in one-half

to one-quarter of that time.

It is difficult to evaluate these figures.

While deep drilling claims a great deal of attention because of its cost and complexity, in

1981 only about 1 percent (some 800) of the

wells drilled in the United States will be

deeper than 4,840 m. In 1979, the average

depth of a United States exploration well

was 1,811 m and of a development well 1,361

m. The key question is not the depth at

which technology allows one to drill, but

rather the depth at which resources will be

found. Moreover, most “deep” drilling is for

gas–economic oil finds are generally made

at shallower depths. Generalizations about

the relation of Soviet deep drilling capabilities to oil production prospects should,

therefore, be made with extreme care.

Rigs and Hoisting Equipment”

The U.S.S.R. has produced about 500 oil

drilling rigs per year over the past 30 years,

but output has been declining since 1975,

from 544 rigs in that year to 505 in 1978.

Similarly, the size of the Soviet “rig park”

has declined. In 1970, 2,083 rigs were operating in the U. S. S. R., 1,124 of them belonging to the Ministry of Oil; in 1978, the

total had declined to 1,915, of which 1,013

belonged to the Ministry of Oil. One important determinant of the size of the rig park is

the number of rigs retired each year. The

average life of a rig in the United States,

where older equipment is repaired, is 15 to 20

years. In the U. S. S. R., where scrapping ap-

“CI +1, op. cit,, p. 26.

~1’ils[)n, op. cit., pp. 55-59. [ lnl(~ss ot hwwisc nottd, Sotiet

da L a in L his sect-ion is from this wu rcc.
44 . Technology and Soviet Energy Availability

pears to be far more common, the average

life of a rig is about 6 years. This does have

an advantage. If the entire rig park is replaced nearly twice in every decade, its quality can be rapidly upgraded.

The declining size of the rig park is apparently of some concern to Soviet planners,

who have included increases in rig production in the Eleventh FYP. On the other hand,

the Soviet Union has consistently exported

about a quarter of its domestically produced

drilling rigs each year. Presumably, if concern about the number of rigs available for

exploratory and development oil and gas

drilling were intense, a portion of those

designated for export could be diverted.

There is no evidence that this is occurring.

Moreover, despite a smaller rig park, the

total number of meters drilled has increased

over the past 10 years. Table 11 shows

selected data which demonstrate this increase in drilling rig productivity. If these

figures are accurate, they show a phenomenal rise in such productivity, particularly in

contrast to what has been achieved in the

United States.

The U.S.S.R. appears to be counting on

improving the average size and technical

characteristics of the new rigs that are slated

to replace those being scrapped. Plans include producing new models for deep drilling

adjacent to the Caspian (up to 15,000 m);

modifying existing rigs for rotary drilling;

and designing rigs especially for “cluster

drilling” in West Siberia. Cluster drilling is a

Table 11 .— Drilling for Oil and Gas (thousand meters)

Exploration- Development Total

1950 ..., . . . . . . . . - ‘2,127 -

- ‘- 2,156 4,283

1960 .., . . . . . . . . 4,023 3,692 7,715

1970 .., . . . . . . . . . 5,146 6,744 11,890

1975 . . . . . . . . . . . . . 5,419 9,751 15,170

Drilling by the Ministry of Oil only

1975 .., . . 2,733 8,927 11,659

1976 ..., . . . . 2,500 9,600 12,070

1977 . . . . . . . . . . . 2,400 10,400 12,800

1978 ..., . . ... . 2,400 11,700 14,100

1979 . . . . . . . . . . . . 2,500 13,000 15,500

1980 plan . . . . . . . . . 2,500 17,000 19,500

SOURCE” Soviet data In Wilson, op cit , p 56

process particularly suited to the soft rock

conditions of West Siberia. It entails building artificial islands from which clusters of

up to 20 inclined wells are drilled in the clay

or sand. However, it must be noted that at

least some of the “improvements” to Soviet

rigs consist of additions to rig design-such

as higher horsepower motors for hoisting,

improved brakes, and increased diesel engine performance–which are incremental

changes to basic rig designs of the 1950’s. A

more revolutionary change—shifting from

traditional block and tackle hoists to a

hydraulic hoist system–appears to be stymied by bureaucratic problems.78

Although both the quality and quantity of

rigs are increasing, there is evidence too that

the U.S.S.R. has not always achieved an optimum mix of equipment. In 1976, for instance, one drilling association complained

that it was oversupplied with rigs designed

to drill wells below 5,000 m, but did not have

enough lighter rigs for the shallower depths

normally required.79

One important barrier to increasing drill

rig productivity is the time entailed in setting up and tearing down rigs as they move

from one exploratory site to another. Thus,

the availability of portable or “unitized” rigs

is important. The U.S.S.R. has attempted to

improve its situation with respect to unitized rigs both by importing them from the

West (see below), and by creating its own

unitized rigs with new cranes and transport

equipment. These rigs can reportedly be

assembled by a single crew (as opposed to

several different crews of carpenters, earth

movers, etc.), are 60 tons lighter than other

Soviet , rigs, and can drill to 3,300 m at

speeds 33 percent faster than were hitherto

achievable. But while experimental modular

rigs have been successfully tested, serial pro-

— — —

“A. Sherstnev, “Extra-Plan Innovation, ” Souetskaya

RossiyG Dec. 11, 1977, p. 2. Courtesy of Battelle Columbus

Labs.

79A. P. Gorkov and G. F, Lisovskaya, “Analysis of

Estimated Costs of Drilling and Ways of Reducing Them in

the ‘Ukrneft’ Association, ” Ekonomika neftyanove promysh Zerznosty, No. 5, 1976, pp. 7-11. Courtesy of Battelle Columbus Labs.
Ch. 2— The .Soviet Oil and Gas Industry • 45

duction is only just beginning, and it is not

clear how long it will take to produce such

rigs in significant numbers.

Well Logging Equipment

The poor quality of Soviet well logging

has been attributed to two basic problems:

the extensive use of the turbodrill, and the

lack of quality field instrumentation. The action of the turbodrill is such that it occasionally produces erratic and irregular walls

in the borehole. Uneven walls cause the drilling mud to be forced into the resulting

cracks and fissures. When probing this type

of borehole for hydrocarbon content or

permeability, it is difficult to separate the

contributions from the mud from the actual

geological structure. Soviet domestic well

logging instruments in the field are essentially copies of American equipment acquired as part of lend-lease after World War

II. Although Soviet research institutes have

developed instruments comparable to the

Western state-of-the-art, these do not appear

to have been tested or put into operation.

The result is that the accuracy of available

Soviet well logging instruments is generally

inferior to that of Western models.

Blowout Preventers

In the United States, blowout preventers

are considered basic safety devices, and their

use is required by law. In the Soviet Union,

they are employed usually only in initial

drilling in new regions or where underground

conditions (mainly very high pressures) or

corrosion are expected to cause problems.

Once these initial wells are drilled, the use of

blowout preventers is infrequent. Although

this equipment may be necessary to cap

runaway wells, it does not boost production.

Computers

In the United States, a comprehensive set

of computer-based aids is usually used to

optimize drilling operations. This consists of

both onsite and remote monitoring, including online systems connected to a large central data base for advice on drill bit and mud

selection and other parameters, and faster

than real-time analysis. Computer-based

drilling systems to select correct muds and

bits and optimize equipment maintenance

schedules can speed up the drilling process

and help to eliminate drilling deficiencies—

provided that crews have the incentive to do

more drilling and have the appropriate range

of muds and bits from which to choose. It is

not clear that these conditions always pertain in the U.S.S.R.

The available evidence indicates that the

degree of onsite Soviet drilling optimization

is not very great. Applications are primarily

related to data processing and acquisition,

which involve calculations of geological formations and conditions, well-angling, and

the selection of muds and drill bits.80 It has

been claimed that remote monitoring of drilling paramters is taking place on a “wider

and wider” scale in the U.S.S.R.,81 but the

availability of sensing devices is limited, and

indeed this practice is relatively new in the

United States. The Minister of the Oil Industry in 1978 pointed out that although

designs exist, output of “the necessary apparatus has not been organized."82 There is

available a system to monitor and control

drilling, and another that predicts drill bit

wear on the basis of drill stem torque

measurements,’ } but it is impossible to say

whether these are in widespread use.

Similarly, there is little indication of the

use of computerized well-logging devices.

The reservoir modeling routines that exist

are unable to handle complicated structures.

There is evidence only of a few instances of

computers being used for the overall planning of drilling strategies.

“’Yu. V. Vadetskiy, The Drilling of Oil and Gas Wells: 4th

Edition With Additions and Corrections (Moscow: Izd.

“Nedra” 1978), p. 289.

“ I bid,, p. 302.

“Ibid., p. 303; Maltsev, “From W’el]-Site ,” op. cit.,

p. 15.

‘Wadetskiy, op. cit.; and P, h!. Chegolin, A. G. Yaruso~,

and E . IN. Ye fimov, Upru [ Il?’a>ta.veh i,ve si.s tenz~l i ma.vhin?,, No.

4, July August 1977.
46 ● Technology and Soviet Energy Availability

THE CONTRIBUTION OF

WESTERN EQUIPMENT AND

TECHNOLOGY TO DRILLING

Drill Bits

Although the U.S.S.R. has not purchased

a significant number of drill bits from the

West, Soviet concern about drill bit quality

is obviously reflected in the purchase of a

U.S. drill bit manufacturing facility from

Dresser Industries. Once fully operational,

this plant will produce 100,000 bits each

year, 86,000 of which are to be tungsten carbide insert bits (10,000 journal bearing,

74,000 sealed roller bearing, and ‘2,000 nonsealed roller bearing). In all, Dresser furnished designs for 37 separate bits to be produced in the plant. According to the company, all designs incorporated technology as

it existed in Dresser plants at the time the

contract was signed (1978). In addition to

manufacturing equipment, the sale included

product drawings, bills of materials, material specifications, and inplant process and

heat treatment specifications for the 37

specific designs.

Soviet motives for acquiring this facility

are open to differing interpretations. The

decision might indicate that the planners are

reasonably satisfied with domestic capabilities to produce more conventional milled

tooth bits, but lack the manufacturing

capacity for the tungsten carbide designs.

On the other hand, once the need for more

and better tungsten carbide bits was recognized, a new plant might have been seen as

simply the most expeditious way of acquiring additional capabilities.

The bits to be produced in the Dresser

plant should operate for long periods at the

high rotation speeds of Soviet turbodrills.

In fact, it has been estimated that each of

these bits will substitute for at least two,

and perhaps as many as four, Soviet-made

bits. It is a highly speculative exercise to

translate this into estimated production increases, but a rough idea of the potential

contribution of this technology transfer may

be gleaned by assuming that, once the plant

is producing at full capacity, and without additional rigs, the new bits allow an increase

in meterage drilled of 10 to 20 percent.

Assuming that this equates to 10 to 20 percent more new wells with a 30 percent success rate, oil production increases of 3 to 6

percent as a result of this plant are possible.

(This assumes constant productivity.)

But such increases are by no means certain. Improvements in drill bit quality cannot be translated directly into production increases in isolation from such factors as the

incentives provided to drilling teams and the

availability and quality of rigs and other

equipment. In addition, even if the Dresser

plant opens as originally scheduled in 1982,

it is not clear that it will achieve the same

volume and quality of bits as would be the

case in the United States. This problem may

be exacerbated by the fact that, as part of

the post-Afghanistan technology embargo,

the U.S. Government prevented Dresser

from providing onsite training of Soviet personnel. (This occurred despite the fact that

all licensed equipment had been delivered. )

The most that can be said with confidence is

that, all other things being equal, the new

plant should eventually have measurable impact on Soviet ability to drill more efficiently. Whether this additional drilling capacity

could translate into significantly higher production would, however, depend on trends in

well productivity y.

Drill Pipe

Recent purchases of drill pipe from Japan,

Germany, and France have allowed the

Soviets to drill deeper than is generally

possible with domestically produced pipe.

Western exports of drill pipe are included in

more comprehensive categories in trade

statistics (see ch. 6), and it is therefore difficult to estimate the magnitude of Soviet

drill pipe imports. It is probably safe to

assume that this pipe is reserved for deeper

wells, which presently account for about 5 to

10 percent of Soviet oil production. The importance of Western pipe will increase if this

proportion changes in the future.
Ch.. 2— The Soviet Oil and Gas Industry ● 47

Rigs

Aside from rigs used in offshore operations, a subject discussed separately below,

the U.S.S.R. is believed to have purchased a

sizable number of drilling rigs from Canada

during the 1970’s, and at least 15 portable

rigs from Finland. Soviet emphasis on drilling faster, deeper, and in more locations in

the present decade will require additional

changes in the composition of the rig park

(i.e., the variety and quality of available rigs)

as well as increased rig production. It is likely that these demands will lead to continued

imports.

Well Logging Equipment

Soviet logging instruments, as Soviet

seismic hardware, lag Western equipment

both in accuracy and efficiency, i.e., the

number of sensors downhole at a given time.

The U.S.S.R. has purchased items of this

equipment from both U.S. and French firms,

but in amounts that do not seem to significantly alter its overall capabilities. Logging operations in those wells supplied with

Western equipment may be completed 3 to

10 times faster and with greater accuracy

than otherwise, but this does not necessarily

contribute to production. In order to significantly increase its overall logging time,

the U.S.S.R, would have to purchase enough

hardware to equip at least 100 crews and

also allow Western technicians in for training and to operate the equipment. Even this

number of crews would have difficulty logging the more than 20,000 new wells drilled

annually.

Blowout Preventers

The U.S.S.R. has purchased small quantities of American blowout preventers, but

probably imports most of this equipment

from Romania. U.S. industrial representatives who have examined both Romanian

and Soviet-made blowout preventers have

found them inferior to those produced in the

United States, a situation that may change

in the future, as a U.S. firm has sold to

Romania a new design for blowout preventers which may improve their quality.

SUMMARY AND CONCLUSIONS

Although Soviet commitment to the

turbo—as opposed to rotary—drill makes

good sense given the U.S.S.R.’s present

manufacturing capabilities, the speed and efficiency of Soviet drilling have been inhibited by this commitment, as well as by

the low quality of drill bits and drill pipe, and

the size and composition of the rig park.

There is no reason to believe that the

U.S.S.R. will attempt a wholesale switch to

rotary drilling, but it has placed increased

emphasis on improving the quality of bits

and pipe. In the former case, this has consisted of both stressing domestic design and

production of new types of higher quality

bits, and more importantly of importing an

American-designed facility for the production of large numbers of high-quality bits. In

the case of drill pipe, the U.S.S.R. has relied

almost entirely on imports from Europe and

Japan to compensate for domestic production. Some imports have augmented the

Soviet rig park.

In none of these cases does the problem

appear to be a lack of scientific or technical

knowledge on the part of the Soviet Union.

Rather, drilling equipment deficiencies seem

to stem from the same systemic problems

which pervade all Soviet industries, among

them the continued emphasis on quantity

over quality of output. The Soviet Union

produces drill bits in very large quantities,

but there are indications of insufficient

variety, and evidence that many bits are so

poorly made that they may last one-tenth to

one-half as long as Western bits.

Despite these problems, the Soviet Union

has managed increases in meterage drilled,

drill rig productivity, and in its accomplishments in deep drilling. However, plans for

the 1980’s call for enormous improvements

in each of these areas, improvements at least

on the scale of those achieved in the 1970’s.

Clearly, increased investment is being
48 . Technology and Soviet Energy Availability

devoted to the oil and gas sector, but it is in- dustries and in those industries that manupossible to determine how much of this will facture equipment for oil and gas drilling, it

go into manufacturing drilling equipment. is difficult to see how dramatic improveThere is no sign of impending basic changes ments in production will be accomplished

in the incentive system. Thus, given past without stepped-up imports of Western drillperformance, both in the oil and gas in- ing equipment.

PRODUCTION

INTRODUCTION

Perhaps even more controversial than

Soviet drilling practices and capacities are

Soviet oil production techniques. These can

differ considerably from those common in

the West and have occasioned the charge

that in the interest of obtaining maximum

shortrun output to achieve plan targets, the

Soviets have consistently employed methods that damage their fields and ultimately

lead to less oil being recovered. Much of the

debate over the future of Soviet oil production, in fact, centers on the practice of

waterflooding. Equally, much of the claim

for the importance of Western oilfield equipment concerns the provision of Western

pumps and other technology for use in fields

where substantial waterflooding has taken

place.

This section briefly explains the petroleum production process and the role of

waterflooding in this process; describes

Soviet methods for developing fields, including the level of Soviet domestic production technology; and discusses the past and

potential role of the West in this area.

THE PRODUCTION PROCESS84

Oil and gas production are affected by the

porosity and permeability of the reservoir in

which they are found, by the water and gas

content of the reservoir, and by the viscosity

(i.e., thickness) of the oil. The way in which

petroleum deposits must be developed and

the extraction techniques applied vary im-

“See the British Petroleum Co., I,td., our Zndustr.v

Petroleum (London: The British Petroleum Co., I.td., 1977),

pp. 124-136.

portantly according to these factors. A

petroleum reservoir consists of a stratum of

porous rock, usually sandstone, limestone,

or dolomite, capped by a layer of impervious

rock. Oil and gas are stored in the small

spaces or pores in the porous layer and contained by the cap rock. Fractures or fissures

add to the storage capacity of the reservoir.

In order for oil to enter or leave porous rock,

there must be free connection between the

pores. The ability of the rock to allow the

passage of fluids through its interstices

depends on the size of the channels which

connect the pores, i.e., on permeability. The

rate at which petroleum can be extracted

from a reservoir depends largely on its

permeability, but both porosity and permeability may vary over relatively small areas.

Thus, wells located in different parts of the

same reservoir may have different producing

rates.

The first stage in the process of developing oilfields and gasfields is to drill appraisal

wells. These are used to determine the permeability of the rock, the amount of water in

the reservoir, the properties of the petroleum, etc. Such information helps to dictate

the size of the surface production facilities

brought to the field. Actual development of a

field may begin before the appraisal process

is complete. Development wells are drilled in

patterns that reflect the contours of the

reservoir: they may be in grid formations,

straight lines, or rings. In general, the location of the wells is such as to enhance the

producing life of the field. This might mean,

for instance, that wells be initially drilled

close to water zones so that as oil or gas in

the area is depleted they can be turned into

water injection wells. Numerous items of
Ch. 2— The Soviet 011 and Gas Industry ● 49

equipment are required at the wellhead to

“complete’ the well. These include a variety

of valves, casings, and tubings designed to

control the well and the petroleum it is producing.

Oil

Oil that collects in structural traps usually

occurs in association with both water and

gas. The pores in the reservoir rock were

originally occupied by water, which was partially displaced when petroleum migrated

into the upper part of the rock. The percentage of remaining water is obviously an important factor in determining the volume of

oil in the reservoir, Sometimes the water

underlays the entire oil zone. When a considerable body of water underlays the oil in

the same sedimentary bed, it is referred to as

the “aquifer.”

Oil under pressure contains dissolved gas

in amounts governed by reservoir pressure

and temperature. The oil is “saturated” if it

cannot dissolve any more gas at a particular

temperature and pressure; it is “undersaturated if it could dissolve more gas

under the same conditions. In those cases

where there is more gas in the reservoir than

the oil is capable of holding in solution, the

extra gas, which is lighter than the oil, rises

and forms a “gas cap” above the oil accumulation. Moreover, if for any reason the

pressure in a saturated oil reservoir is reduced, gas will come out of solution and

change the production conditions.

The viscosity of oil can depend on the

quantity of gas that it holds in solution.

Crude oil in a reservoir can range from very

viscous (if it contains little or no dissolved

gas) to extremely light and thin (containing

large amounts of gas under high pressure).

The thinner the oil, the more readily it will

flow through the pores and interstices of the

rock into the bottom of the well.

In order for this movement of the oil to

take place, the pressure under which the oil

exists in the reservoir must be greater than

the pressure at the bottom of the well. So

long as this difference in pressure can be

maintained, the oil and its associated

dissolved gas will continue to flow into the

well hole. The rate at which oil or gas moves

towards the borehole depends on the reservoir permeability and, in the case of oil,

viscosity.

As the well begins producing, reservoir

pressure decreases, and the rate of production will decline unless the pressure can

somehow be sustained. There are three

natural ways in which reservoir pressure is

maintained: hydrodynamics, dissolved gas

associated with the oil, and the free gas in

the gas cap. These production mechanisms

are referred to as “water drive, ” “solution

gas drive, ” and “gas cap drive. ” The natural

drainage of the oil through the reservoir rock

under its own gravity provides a further

mechanism, and a combination of any or all

of these may operate in the same reservoir.

The oil obtained as a result of these natural

production mechanisms is known as “primary recovery, ” and a field is said to be in

the primary phase of recovery so long as

there is sufficient pressure left in the reservoir to bring the oil to the bottom of the producing well without outside interference.

At some time in the life of a producing

well, primary recovery mechanisms will

become insufficient and the reservoir pressure will fall to the point where it can no

longer force the oil from the rock into the

well. This stage can be reached long before

the reservoir is depleted, but it once meant

the abandonment of the well. There are now

artificial means, known as secondary and

tertiary recovery, of maintaining reservoir

pressure and forcing more oil out of the pore

spaces of the reservoir rock. As much as 50

to 90 percent of the oil in a reservoir may be

left in place after the end of the primary

recovery phase. Secondary and tertiary recovery techniques now make it technically

possible to recover 30 to 90 percent of the oil

in a deposit.

Secondary recovery involves the direct

displacement of oil with a fluid which is

cheaper and easier to obtain than the oil
50 ● Technology and Soviet Energy Availability

itself. The obvious substances are those

that imitate the primary production mechanisms—water and gas. When water is used,

the secondary recovery process is known as

‘‘waterflooding; when gas is used the process is called “gas drive’ or “gas injection. ’85

Waterflooding is the most successful and

extensively used secondary recovery technique—so much so, in fact, that it is now considered an integral part of the development

of most fields. Water is introduced under

pressure into the reservoir via injection

wells. These wells may be located adjacent to

producing wells to penetrate the reservoir

below the oil/water level in the periphery of

the oil zone, or they may be drilled in a line

across the reservoir or in a grid pattern. The

method chosen usually depends on the type

of reservoir and rock and fluid characteristics. In some reservoirs, there is considerable variation in the permeability of the

rock, and in these instances the rate of injection must be carefully controlled to avoid

trapping and leaving behind large quantities

of oil. Similarly, it is important to ensure

that the injection water is compatible with

the natural reservoir water and that it is free

from impurities that might block the pores

in the reservoir rock. Filters and forms of

chemical treatment may be employed to

achieve maximum efficiency in this respect.

Where waterflooding has been employed,

it is likely that the reservoir pressure will be

so low that mechanical assistance will be required to bring the oil and water to the surface. This is usually accomplished with

pumps, the simplest and most common

being sucker-rod pumps, which work like

plungers. They are run into the well at the

bottom of a length of tubing, and powered by

a pumping jack at the surface. Far more efficient, especially for deep wells, are electric

submersible pumps which, together with

their motors and electric cables, are lowered

“’Some experts would hold that secondary recovery is

limited LO waterflooding and that the use of gas is a “tertiary’ recovery technique. (3TA here follows the industry

usage as expressed in British Petroleum, op. cit.

into the well on the tubing through which

the oil is to be produced. Electric pumps

have a much greater capacity than those of

the plunger type and are used when high

pumping rates are desired. An alternative to

pumps is gas-lift equipment, which injects

gas into the oil column in the well bore. This

method is preferred where the crude oil contains considerable amounts of sand or suspended solids that could damage mechanical

pumps.

More complex and sophisticated variations of these secondary recovery techniques

may be applied to achieve an even greater

degree of recovery of the oil in the reservoir.

Known as “tertiary” recovery, these usually

involve the treatment of reservoir rock with

chemicals or heat. Research and field testing

are being conducted in these techniques, but

tertiary recovery is relatively new and is still

seeing rather limited commercial applications in the West.

Gas

It is possible to have a free gas accumulation with no underlying oil zone, especially in

deeper portions of basins. Sometimes gas is

contained in a closed reservoir where there is

no water closely associated with it, and is

driven out of the pores of the reservoir rock

by its own expansion. As gas escapes, the

reservoir pressure declines. It is possible to

maintain reservoir pressure through water

injection, but unlike oil, gas recovery as such

is not improved sufficiently by water displacement to justify the expense of this

operation. It is preferable, therefore, for the

gas to be contained in a reservoir where it is

in direct contact with an aquifer possessing

a sufficient natural water drive mechanism.

The process here is the same as in oil wells—

the gas is driven out by the expansion of the

aquifer water into the vacated pores, and

there is no marked decrease in the reservoir

pressure or in the producing capacity of the

well. Care must be taken that production

rates are not so high as to cause damage

from infiltrating water, a consideration

which applies equally to oil wells.
Ch. 2— The Soviet Oil and Gas Industry • 51

SOVIET EQUIPMENT AND

PRACTICE

Secondary Recovery: Waterflooding

Gas injection is not an important form of

secondary recovery in the Soviet Union,86

but in 1980 over 85 percent of the oil produced in the U.S.S.R. (v. about 50 percent of

the oil in the United States) was extracted

with the aid of waterflooding. In West

Siberia, 99 percent of all oil is obtained with

waterflooding. 87 Soviet oilfields are often injected with water at high pressures from the

beginning of their development. The dual effect has been both to raise initial recovery

rates and to reduce the number of producing

wells required per unit of land. The latter

allows the U.S.S.R. to conserve capital and

reduce the amount of drilling per ton of oil

produced.

There is little doubt that waterflooding

produces more oil in the short run, but controversy exists over the degree to which this

practice contributes to maximizing the ultimate recovery possible from a given field.

Western observers have argued that, depending on the rate of injection and field

pressure, water can prematurely break

through the oil-bearing formations into the

producing wells. The net result is that total

output over the life of the field is reduced.

Soviet experts, however, contend that waterflooding allows the U.S.S.R. to ultimately recover a much higher percentage of oil in

place than has been possible in the West.

Soviet ultimate recovery rates of 50 to 60

percent have been claimed, with the average

reportedly as high as 40 to 50 percent.89 This

may be compared to a U.S. average in 1977

of 32 to 33 percent.90

It may well be that these figures are not

directly comparable, and that the U.S.S.R,

86W. Kelly, H. L. Shaffer, and J. K. Thompson, Energ~~

Research and l)e~’eloprnent in the U.S.S.R. (Battelle Columbus Labs, 1980), pp. IV 14-IV 32., unpublished manuscript.

“ 1$’ ilson, op. cit,, p. 75.

““(’l :\, op. (it., p. 1 :1.

‘‘Kell~r, (’t a],, op. cit , p, I ;’-;] (); Jf’ilson, op. cit., p, 78.

‘{(’ 1 ~1, op. cit.

calculates its ultimate recovery by using a

base other than that employed in the West.91

Moreover, there is evidence in the Soviet

technical literature of numerous and increasing problems associated with waterflooding,

and indications that at least some ultimate

recovery targets have been scaled down.92

On the other hand, the Soviet Union shows

no sign of abandoning its long-held waterflood practices. Indeed, current plans are to

raise recovery rates still more, and it has

been announced that this will be achieved

through more intensive waterflooding, albeit

with “improved” methods. 93 With Soviet oil

production in mid-1981 still not having

peaked, it would appear that this is one area

of disagreement in which no final verdict is

yet possible.

A similar debate concerns the level of the

“water-cut” in the U. S. S. R., i.e., the percentage of water in the oil-water mixture that

comes out of producing wells. Table 12

shows Soviet water-cut figures for the past

15 years.

It is clear from table 12 that the average

water-cut has been increasing, and that at

least between 1965 and 1976 the increase

in Western Siberia particularly was precipitous. These figures show that for the

U.S.S.R. as a whole in 1980, 57 percent of the

total output of producing wells was expected

to consist of water. If the 1980 water-cut

target of 57 percent were reached, this would

mean that in order to produce 603 million

tons of oil, over 1,400 million tons of oil and

water had to be extracted. Moreover, the

water-cut of individual fields can far exceed

national or regional averages. There are

fields in the Ukraine, for example, in which

by 1975 water represented from 60 to nearly

80 percent of total output.94

Such figures are difficult to interpret or

extrapolate, however. In 1977, CIA attempted a simple extrapolation based on assumed

increases in water-cut of, alternatively, 3 and

9’ Kelly, et al., op. cit.

“Ihi(i,, pp. 1 ;1-:12: (’1 /\, op. cit , p. 14.

“

{\\’ ilson, op. cit,, pp. 78-81,

“Ken}, et al,, op. cit., p. It’-;] 1,
52 ● Technology and Soviet Energy Availability

Table 12.—Waterflooding

1965 1970 1975 1976 1977 1978 1980a

Average-water-cut . ., 412 43.9 48.2 49.9 50.8 51,8 57.0

Average water-cut, West Siberia ., 1 1 5,0 14,5 15.8 NA NA NA

Average water-cut, U.S.S.R. excluding

West Siberia, ., ., ., 412 46.2 57.0 59,0 NA NA NA

NA = not available

aAnnual plan target

SOURCE Wilson, op cit p 76

6 percent per year. This exercise yielded projections of average water-cuts of 65 and 80

percent respectively for the U.S.S.R. in

1980. In fact, the 1978 average national

water-cut was 51.8 percent and the actual

1980 figure probably somewhere between

that and the target of 57 percent.95 Indeed,

projections of this sort are complicated by

the fact that the water-cut does not rise

regularly for the country as a whole, or even

for individual deposits or wells. Large annual

increases may be recorded at certain recovery rates, but these may fall to between 1

and 2 percent per year at certain points in

the life of a deposit. Nor do the Soviets appear to operate on the basis of a simple or

single cutoff point beyond which the watercut makes further production uneconomic.

Eventually, the water-cut may rise to 97 or

98 percent, in which case the cost of pumping fluid will exceed the value of the oil obtained, and the well will be shut down. When

the water-cut in an entire field reaches this

point, the field may have to be redrilled.

(Romashkino has been redrilled four times

for this reason). But Soviet experts contend—and U.S. practice has verified–that

some deposits can operate for many years

with water-cuts of 80 or 90 percent, depending on the value of the oil produced and the

costs associated with the waterflooding.

Fluid Life and Pumping Requirements

Regardless of the unresolved issue of the

wisdom and propriety of waterflooding,

there is general agreement that present

Soviet practice entails enormous fluid-lift requirements, and that the higher the watercut in the future, the greater this problem

will become. Both sucker rod and electric

submersible pumps are produced and used in

the Soviet Union, but the latter have a far

greater capacity and are much preferred,

especially in Siberia where wells have high

water-cuts and therefore high fluid-lift requirements. But electric pumps are in relatively short supply. In 1975, for instance,

there were 68,000 producing oil wells in the

Soviet Union. Some 54,000 of these were

being pumped–9,100 with electric pumps

and the rest with sucker rod pumps. In all,

the U.S.S.R. had an inventory of about

60,000 of the latter, about 75 percent of

which were operational. 96

The U.S.S.R. has also encountered difficulties with the quality of its domestically

produced electric pumps. One problem is

pump capacity, which hitherto has been insufficient for use in West Siberia. Many of

the wells at Samotlor, for instance, yield

2,000 m

3 or more of fluid (petroleum plus

water) a day. Soviet pumps have capacities

of only 700 ins/day, although a 1,000 m

3

model has very recently been tested. Another problem is the frequency of equipment

breakdowns, particularly in areas with high

salt deposition where the average interrepair

period lasts 60 days. Improvements in both

quantity and quality of electric submersible

pumps are apparently being sought in the

present FYP period.

Gaslift has not been employed extensively

in the U. S. S. R., but there are indications

that plans now call for an acceleration in its

use, particularly in those areas where sub-

‘ ‘(’1 :\, op. cit., pp. 16-17: Wilson, op. cit., p. 77.

““}$’ilson, op. cit., p, 68.

‘

- ItJid,, p. 66.
mersible pump capacity has been inadequate. There has been some urgency, for instance, in attempting to transfer gaslift to

Samotlor where, as described above, both

high salinity and fluid lift requirements

make Soviet submersible pumps ineffective.

Gaslift has been used in West Siberia for at

least 10 years, but it has been introduced

slowly and accounts for only a small volume

of the fluid raised. Part of the reason may be

the high capital cost, particularly of installing the necessary compressor units. If this,

rather than inadequacies in the design and

quality of Soviet-built equipment, is the

primary difficulty, there is a chance that the

increases in the price of crude oil scheduled

for 1982 may make gaslift more practicable.

Meanwhile, the U.S.S.R, has ordered gas-lift

equipment from France and is also attempting to improve the quality of its domestically

built equipment.98

Tertiary Recovery

99

Tertiary recovery techniques are very expensive and many are still relatively experimental, even in the West. There is evidence of Soviet experimentation with a

variety of methods, including steam injection and polymer flooding, and indications

that attempts will be made to apply tertiary

recovery in older producing regions during

the 1980’s. The Soviets themselves have

reported that, on the basis of experiments in

tertiary recovery techniques, a 10 to 15 percent increase in recovery rates can be forecast and “billions of tons” of oil can be

reclassified as active reserves. It seems

highly unlikely, however, given the Soviet

system, that the experiments carried out

during the Tenth FYP could affect production significantly for several years at least.

In the long run, there appears to be no

serious technical barrier to an expansion in

the role of tertiary recovery. Rather, there is

an economic barrier in the high cost of tertiary methods. Tertiary recovery must be accorded adequate investment, and economic

Ch. 2—The Soviet Oil and Gas Industry • 53

considerations will influence which methods

and geographic sites are developed. Perhaps

more important, tertiary recovery results

may be affected by the same systemic problems, particularly those stemming from the

incentive system, that crop up continually in

explanations for Soviet inefficiency. The

variety of conditions encountered between

and within petroleum fields means that tertiary recovery methods must be chosen and

used sparingly and with care. Lack of skilled

personnel together with incentives for maximum output over the short term, however,

have tended in the past to cause Soviet

petroleum industry workers to apply crude

and unsuitable techniques in efforts to

achieve “quick fixes.

Computers

Computers can be used in oilfield and

gasfield operations to monitor wells by

signaling when flow rates change, to control

the action of pumps, and to optimize enhanced recovery techniques. The increase in

production made possible by oilfield automation can be substantial. For example, one oil

company in Texas was able to get within 3

bbl of the maximum allowable rate per day

using computers, an increase of about

450,000 tons per year. Soviet systems seem

to be limited to monitoring flow rates. The

largest saving here is in personnel. The

Soviet news agency TASS has claimed that

by 1980, 85 percent of Soviet oil output

would be automated,100 presumably with this

system. However, the head of the Ministry

of Oil has noted that the lack of terminals is

hindering its operation,’”] and in any case it

falls well short of Western standards.

THE CONTRIBUTION OF

WESTERN TECHNOLOGY AND

EQUIPMENT TO PRODUCTION

Submersible Pumps

The Soviet Union obviously has a substantial domestic capacity for producing

‘.so r /(’ t /;//\/ //(’\ ~ (/ //(/ /’)’(/(/(’, Y() 12, NOI” :), 1 $)77, r), H.

‘1 \lalt ~(t, op. (’it
54 ● Technology and Soviet Energy Availability

electric submersible pumps, but since these

have lower capacities and require more

maintenance than their Western counterparts, it has in the past purchased quantities

of pumps from the United States—the only

other country in the world where they are

manufactured. U.S. pumps lift up to 1,000

tons of fluid per day, and can last up to five

times longer than Soviet pumps.

By 1978, the U.S.S.R. had purchased

about 1,500 American pumps, with deliveries staggered over several years. Only

about 2,000 pumps are produced each year in

the United States, and back orders and

limited manufacturing capacity had restricted deliveries to the U.S.S.R. to about

30 pumps per month. The CIA has estimated

that these American pumps may have enhanced Soviet oil production by as much as 1

mbd.

In retrospect, this figure seems misleading. The U.S.S.R. has purchased no submersible pumps since 1978, yet its oil production has not only failed to decline by 1

mbd; it has risen. The American pumps seem

to have a lifetime of 3 to 6 months in Soviet

service before major overhaul is required.

But although the Soviets asked their American suppliers for training in pump repair, the

U.S. firms refused. This suggests that, unless the U.S.S.R. has developed unprecedented capabilities in learning to repair foreign equipment with no information from the

supplier, the U.S. pumps were probably used

until they failed and then put aside. If this is

the case, it is likely that no American pumps

were still in service by 1979, and the

U.S.S.R. must have been able to substitute

its own equipment.

This is not to suggest that U.S. pumps

were not important to the Soviets or that

they might not be so in the future. If pumps

could be purchased at previous rates or increased by a factor of two or three and if

these pumps were replaced or repaired when

they failed, the impact on Soviet oil production could be substantial, although difficult

to quantify. Estimates by U.S. industry experts show an enormous range–from 8 to 20

percent increases in production.

Gaslift Equipment

Soviet gaslift efforts have been importantly enhanced by the sole gaslift sale reported

in the West—a $200 million deal made with

two French firms in 1978 for equipment for

approximately 2,400 wells, including gas

compressors, high-pressure manifolds, and

control valves. (Although the French firms

were the general contractors for this project,

American equipment, built in Ireland,

formed part of the package. U.S. computers

have also been used for operating the gaslift

equipment at the surface.) This equipment

has been employed at the high-priority

Samotlor where the downhole life of submersible pumps is particularly short. However, this quantity of equipment will equip

only about 20 percent of Samotlor’s wells,

and probably has accounted for some 1 to 3

percent of current production.

Computers

The Soviets have purchased sophisticated

automation systems for oilfields and gasfields from the United States and France.

Much of this has gone to Western Siberian

oilfields (Samotlor and Fedorovsk), including

a multimillion dollar multilevel process control system that regulates and optimizes

gas-lift operations on several thousand oil

wells. Another gas monitoring system was

purchased for the Orenburg gasfield. The

equipment used in these systems only recently went into production in the Soviet

bloc, and considering the leadtimes needed

to develop such systems, it is clear that

these purchases allowed capabilities far in

advance of those that would otherwise have

been possible. The Samotlor and Fedorovsk

sales are particularly important because

those fields are entering critical secondary

recovery stages.

These systems may not be necessary if the

fields are pumped continuously at maximum

possible rates. But if the Soviets door intend
Ch. 2— The Soviet Oil and Gas Industry • 55

to plan oilfields so as to optimize overall

recovery rates, automation equipment will

be needed. Automated systems for water

and gas injection operations will also be in

greater demand as more and more fields

enter these stages of production and as labor

becomes scarce.

The Soviets have recently started producing the computers needed for sophisticated

reservoir analysis, i.e., computers with large,

fast main memories. Damaged (over-flooded)

fields and overestimates of reserves have

partially been due to poor reservoir modeling. Future needs will be increased by the

number of fields entering secondary and tertiary recovery phases, and by the switch in

the late 1980’s to fields with more difficult

and complex geologies.

Although the U.S.S.R. has been producing all the equipment needed for such multilevel oilfield and gasfield control systems, it

does not have much experience in building

them, and it may be several years before the

Soviets can organize such systems themselves. They may, therefore, continue to turn

to the West for such systems over the short

term. Over the long term, the U.S.S.R. is

unlikely to purchase large computers for

reservoir modeling, since it has recently

mastered their production. However, purchasing the software may save considerable

time and lend new insights into reservoir

models, especially since combining very

complex geophysical know-how and software

is one of the most difficult tasks in the

geophysical field. The United States remains

the world leader in this technology.

SUMMARY AND CONCLUSIONS

Oilfield development in the Soviet Union

employs different techniques than are common in the West. Most importantly, the

U.S.S.R. initiates secondary recovery, and

particularly waterflooding, at an earlier

stage in the producing life of its fields.

Although this practice is widely used in the

West, the extent to which it is employed in

the U.S.S.R. together with documented

cases of its misuse have led Western experts

to label it potentially damaging to overall extraction prospects. On the other hand, many

Soviet petroleum experts continue to believe

that extensive waterflooding actually enhances ultimate recovery rates. So long as

Soviet oil production continues to rise in

fields like Samotlor, which as a high watercut, this debate is unlikely to be resolved.

While it is misleading to generalize about

the water-cut rate for the U.S.S.R. as a whole

because of important variations between regions and fields, there is no doubt that poor

management has led to damage in some

fields; or that the fluid-lift requirements occasioned by waterflooding are burdensome.

This problem is intensified in the U.S.S.R.

because of its poor domestic capability for

producing large numbers of high-quality

electric submersible pumps for removing the

oil and water mixture from wells. Pumps imported from the United States have been important in alleviating this problem, but the

U.S.S.R. has demonstrated that it is not entirely dependent on such imports,

TRANSPORTATION OF OIL AND GAS

INTRODUCTION most efficient and cost-effective mode of

transport. To a large extent, Soviet plans for

Once oil and gas are brought to the sur- increased gas production and gas exports

face, they must be conveyed to processing rest on the further extension of the gas pipefacilities and then to refineries, storage, or to line system. The length and capacity of

ports. In the U. S. S. R., as in the West, this is Soviet pipeline networks has expanded sigaccomplished by rail, road, water, and pipe- nificantly, an achievement that has been acline, although the latter has proved to be the complished with extensive imports of West-
56 ● Technology and Soviet Energy Availability

ern equipment and technology, particularly

large diameter pipe. This section describes

the way in which petroleum pipelines function, details Soviet progress in constructing

and operating them, and discusses the role of

the West in oil and gas transportation.

TRANSPORTATION OF OIL AND

GAS BY PIPELINE

Pipelines are generally the most cost effective way of conveying large volumes of

petroleum over long distances by land. Although they require a high initial capital investment, in the long run operating and

maintenance costs are low, and the cost of

pipeline transport drops rapidly with increases in the diameter of the pipe, and

therefore the quantity of petroleum that can

be transported. A difficulty with pipelines is

their inflexibility. Once laid, it is impossible

to change their routes, although provision

can be made for additions to pipeline

capacity.

Pipelines carry oil from the well to field

processing centers, and from there to refineries and onward. Sometimes these pipes

are lined to protect them from corrosive

materials in the petroleum; sometimes they

may require insulation or the installation of

heating facilities along their route to prevent

oil from congealing.

Separate gas pipelines transport gas,

which may be independently produced,

found in association with crude oil, or produced during the refining process. In the

past, associated gas produced in oilfields

was often flared off or allowed to escape into

the atmosphere. With higher gas prices, this

natural gas is now transported to markets.

Important characteristics of the pipe from

which oil and gaslines are constructed are
Ch. 2— The Soviet Oil and Gas Industry . 57

the strength of the material, the technique

of manufacture, and the diameter. One

improvement in pipe technology has been to

achieve strong pipe with thin walls, thus

allowing a decrease in production costs. A

second has been the introduction of seamless

pipe, which avoids the weaknesses introduced by welded seams. Seamless pipe of

wide diameter (40 inches and above) is difficult to manufacture, but advances in metallurgical technology have led to the ability to

produce long lengths of wide diameter, thinwalled rolled pipe that can withstand high

pressures.

Both oil and gas are moved along the pipeline with the aid of mechanical devices–

pumps and compressor stations. Oil pipelines may be equipped with any of a variety

of pumps—centrifugal, steam turbines, diesel engines, etc.—the appropriateness of

which are determined by the volume to be

transported, the viscosity of the oil, the pressure required, and the availability of fuel.

Pumping stations situated along the route of

the pipeline can be maintained manually by

mechanical controls, but as distances increase, remote automation becomes more

efficient.

Natural gas is pushed through the pipeline by the pressure obtained from compressing the gas. Gas from the pipeline itself is

normally used to fuel the compressor engines. Valves are installed every 10 to 30

miles along the pipeline to make it possible

to isolate sections for maintenance and repair and to close automatically in response

to rapid large drops in pressure. Whereas in

a level oil line of constant diameter, pressure

will decrease uniformly with distance, in a

gas line it decreases according to parabolic

law. Pressures are highest at the outlet of a

compressor station and drop between them.

The efficiency of gas compressors depends

on where along the line they are situated.

The result is that gas pipeline capacity,

unlike that of oil lines, is related to route

length as well as pipe diameter. The capacity

of a gas pipeline can be increased by adding

compressor stations at close (50 to 100 mile)

intervals along the route.

SOVIET OIL PIPELINES

West Siberian oil has constituted an increasing share of total Soviet production in

the past decade. This has necessitated the

construction of major oil pipelines to bring

the crude hundreds of miles to refineries and

consumers.102 Nevertheless, rail has remained an important means of transporting

oil products in the U.S.S.R. The usual Soviet

practice is to use pipelines to carry crude oil

from field to refinery and the railroad thereafter. (Truck transport, which is used extensively in the United States, is confined to

the distribution of products over relatively

short distances to consumers. ) This heavy

use of rail transport is expensive and inefficient, particularly for the usually short

hauls. Product pipelines (i.e., pipelines designed to carry refined products from the

refinery to local distribution points) would

rapidly pay for themselves, but delays in

pipeline construction have meant that the

volume of oil and products carried by railroad has continued to grow. In 1979, 35 percent of all oil freight was transported in this

manner 103 (see table 13).

Present Soviet policy appears to place priority on phasing out the use of rail for crude

oil transport before extending product pipeline capacity. In any event, establishing an

extensive products system will require intricate planning, as such a system must

serve a variety of distribution points and

cope with a number of different products.

““’1’hi~ is bt~c’ausLI th(’ (Jnl~I railwal running from L h(~ oilpr(du(ing r(~gion of il’(~st Sit)(>ria is working a t full (Oapac>itj,

l!’ilson, op. c.it., p. 32.

“ ‘1 }Jid., p. 2fJ,

Table 13.—Transport of Oil and Oil Products

(million tons)

1975 1976 1977 1978 1979

Volume of 011 and products transported by:

Pipelin e 499 532 559 589 609a

Rail : ., 389 394 406 412 NA

River .. . 39 38 37 40 NA

Sea . : 91 101 104 109 NA

Tota l 1,018 1,065 1,107 1,150 NA

NOTE Totals may not add due to rounding

NA = not avaiIable

a Cited in IZ ves t(y,i Jan 26 1980

SOURCE WiIson oo. cit., p. 25
58 ● Technology and Soviet Energy Availability

—

Despite the fact that 1980 plan targets for

oil pipeline construction were not met,104 the

length and capacity of the Soviet oil pipeline

system have grown extensively over the

past 20 years (see table 14). By the end of

1979, there were 67,400 km (about 41,900

miles) of crude oil and product pipeline in the

U.S.S.R.

The rate at which additions to oil pipeline

capacity can be made depends importantly

on the terrain to be covered and the diameter

of the pipe being laid. Pipelines are expensive and slow to build in the difficult conditions of West Siberia, where high winds,

sand erosion, and swamps inhibit construction. The larger the diameter of the pipe, the

higher the capacity of the pipeline, and the

U.S.S.R. has placed emphasis on increasing

its use of wide diameter pipe. This growth, as

well as the corresponding increase in pipeline

capacity, is shown in table 15.

The location of major Soviet oil pipelines

and their capacities is shown in figure 3. As

would be expected, the evolution of this net-

‘“1[ hid., p. 26.

Table 14.—Length of Oil and Oil Product Pipelines

(thousand kilometers)

1980

1960 1965 1970 1975 1978 1979 (plan) —

Crude. . . 13 22 31 - 46 NA NA NA

Products . . . . . 4 7 7 10 NA NA NA

Total. . . . . . . 17 29 ‘- 37 56 64 67 75

NOTE Totals may not add due to rounding

NA = not available

SOURCE Dienes and Shabad OP cIt P 62. Wilson OP clt p 26

work has been dictated by the movement of

the center of Soviet oil production from the

Caucasus to the Volga-Urals, and then to

West Siberia; and by the location of refineries and export markets. Lines from the

Volga-Urals fields, for instance, followed

three basic directions before the development of West Siberia:105 eastward into Siberian refineries at Omsk and Angarsk; westward to Eastern Europe (this is the Friendship pipeline that carries crude oil to refineries in Poland, East Germany, Czechoslovakia, and Hungary; branch lines also

serve domestic refineries); and northwestward to refineries in the central and northwest portions of the country.

The onrush of West Siberian oil required

large-scale network expansion using increasingly large pipe diameters. West Siberian

lines also now follow three basic directions:

southeastward into eastern Siberia;106 southward to Kazakhstan and Central Asia; and

southwestward to the European U.S.S.R. In

addition, a new pipeline corridor runs due

west across the Urals. Construction on a 48

inch, 3,300 km (over 2,000 mile) segment of

this line began in 1977. It would appear that

this line is intended to handle expected increases in West Siberian production. The

first stage (from Surgut to Perm) was completed in 1979 and, despite the difficulties of

construction, the entire pipeline was finished

.—.

‘ ‘ ‘[hid., p. 66.

“’’

)

’I’his line appears to have been planned as the initial link

in a sJstenl carrying L1’est Siberian oil to the Pacific coast for

export to Japan. This plan has heen dropped and such oil

flows, if and when they exist, will be handled hj the Ba?kal-

,~mur hlainline ( llAhl ) railwaJr. [)ienes and Shahad, op. clt.

Table 15.—Diameters and Capacity of Oil Pipelines

Annual capacity Length of pipelines (thousand kilometers)

Diameter (inches) (million tons) 1940 1950 1955 1960 1965 1970 1975

Below 20. . . . . . . . . — 4,1 5.4 75 9.2 9.5 10.8 12.1

20 . . . 8 — — 3.0 6.3 9.9 10,3 15.9

2 8 17 — — — 1.7 6.1 9.5 11.0

32 .. . 25 — — — 0.05 1.8 2.9 5.9

40 . . . 45 — — — — 1.3 39 6.4

48 . . . . 75 — — — — — — 4.9

Total length of pipelines . . . . . 4.1 5.4 105 17.3 28.6 37.4 56.2

SOURCE D[enes and Shabad OP cI\ p 63

60 ● Technology and Soviet Energy Availability

in 1981.107 The completed line will both serve

refineries and provide oil for export through

the Baltic Sea terminal at Ventspils.

GAS PIPELINES

In 1980, the U.S.S.R. produced 435 bcm of

gas and the Eleventh FYP has called for a

50-percent increase in gas production,

mostly from West Siberia, in part to support

greatly expanded gas exports. The success

of these plans will largely rest on the capacities of the pipelines that are required to

transport this gas. The existing gas pipeline

network grew from about 99,000 km (61,000

miles) in 1975 to about 130,000 km (80,000

miles) in 1980, (see table 16) and has increasingly employed large diameter pipe. Nevertheless, the low capacities of gas pipelines

present particular problems. A 48-inch oil

pipeline, for instance, can carry 75 mmt of oil

each year; a 56-inch gas pipeline can carry

only 23 mmt of oil equivalent (23 bcm of gas).

Present plans to raise West Siberian gas

production, therefore, require enormous increases in the length of the pipeline network.

The Eleventh FYP calls for about 40,000 km

of new pipeline, an increase of 30 percent, including 25,000 km of 56-inch pipe carrying

gas from the Urengoy field.108

The Soviet gas network is shown in figure

4. While important lines in this system serve

‘“ Theodore Shahad, “ News Notes,’” .So{ ict (;cc)gruph>’,

April 19S 1, p. 275.

“’”[bid.

the fields of Central Asia and the giant Orenburg deposit in the Volga-Urals (from which

gas is carried to Eastern Europe), the most

important part of the network connects the

enormous West Siberian fields to consumers.

These fields will be supplying most of the increment to production in the next decade.

Three Siberian trunk systems presently

carry most of this burden. They are the

Northern Lights system, one branch of

which runs to the Czech border from whence

gas is exported; the Tyumen-Moscow line;

and the Tyumen-South Urals system, which

may be able to feed Siberian gas to the

Caucasus to makeup for the cessation of Iranian gas imports. (A pipeline project that

would have supplied Iranian gas to the

U.S.S.R. has now been abandoned. ) Branch

lines from these major systems serve a

number of major towns along their route. All

of these lines employ 56-inch pipe. An important projected pipeline is the one which will

bring additional gas to Western Europe.

This is discussed in detail in chapter 12.

Given the fact that pipe with diameters

exceeding 56 inches has not been mass-produced anywhere in the world, there are three

ways in which the U.S.S.R. might improve

its pipeline capacity: cooling the gas to increase its density, raising the pressure of

pipelines from the present 75 atmospheres to

100 or 125 atmospheres, and reducing the

distance between (and therefore increasing

the number of) compressor stations. While

research into the technology for the first two

62 ● Technology and Soviet Energy A Availability

of these options is ongoing, and cooling technology in gas transportation appears particularly promising, their widespread application does not appear to be imminent. Increasing the number of compressor stations

will therefore play the most crucial role in increasing gas pipeline capacity.

Unfortunately, the design and quality of

Soviet compressors are poor and construction of compressor stations has chronically

lagged behind plan. Moreover, there is apparently an ongoing debate within the

U.S.S.R. as to whether or not the distance

between compressor stations should indeed

be shortened. The argument against such

practice is that construction of these stations is highly labor intensive. Reducing

their number will shorten construction

periods and accelerate the delivery of gas.109

Whether or not this view will prevail remains

to be seen. Should a decision to increase the

number of stations be reached, however, it is

likely that this is another area in which

Western equipment might play an important

role.

Other factors inhibiting the construction

of West Siberian gas pipelines are labor

shortages, the inadequacy of electricity supplies, and shortages of excavating and pipelaying equipment. Delays in the construction of permanent settlements for the large

number of workers required to lay gas

pipelines have contributed to constant labor

turnover. Meanwhile, the North Tyumen

region of West Siberia, location of the most

important giant gasfields, does not have a

permanent electricity supply. Not only does

this mean that each compressor station

must have its own mobile power unit and the

personnel to maintain it, but frequent power

failures cause expensive interruptions in

compressor operation and can damage compressor units. Finally, pipeline construction

is seriously affected by the failure of enterprises producing engineering, excavating,

and construction equipment to fulfill their

obligations.

It has been asserted that despite these difficulties, Soviet pipelaying work is “fast and

efficient." 110 It is difficult to evaluate this

statement. Certainly Siberian conditions impose constraints that should affect the success criteria by which any such enormous

enterprise is measured. However, the ultimate test will be the extent to which the

U.S.S.R. is able to meet its own goals–with

or without massive purchases from the

West.

THE ROLE OF WESTERN

PIPELINE EQUIPMENT

AND TECHNOLOGY

Pipe

111

The Soviets have been heavily dependent

on imports of Western pipe of 40 inch and

greater diameter, most of which seems to be

used in main-line high-pressure transport of

natural gas, and on Arctic quality pipe. Comparisons of Soviet domestic pipe production

and import figures suggest that, at least

through 1975, this dependence exceeded 50

percent and was growing. In 1979, the value

of steel pipe imported by the U.S.S.R. rose

by 29 percent over 1978.112

The Soviet steel industry is capable of producing, 40-, 48-, and 56-inch pipe, and indeed

a substantial part of the domestic gas distribution system uses domestic pipe, albeit

mostly of small diameter. It would therefore

appear that the massive imports are designed to avoid bottlenecks arising from insufficient production capacity and to compensate for the fact that Soviet domestic

pipe is of lower quality in yield strength, wall

thickness, and general workmanship that

that which can be purchased abroad. Soviet

‘“’~f’ils(~rl, (~p tit,, ~)1). 2\)-;l 1.

1

‘ ‘This section is based on Campbell, “Soviet Technology

Imports . . .,” op. cit., pp. 10-12.

‘‘ lf’ils~)n, op. Lit,, p 27,
Ch. 2— The Soviet Oil and Gas Industry . 63

welding practices apparently add to the

problem of quality. The U.S.S.R. is attempting to upgrade its pipe manufacturing capabilities. To this end, it has purchased a

seamless pipe manufacturing plant from

French and German firms. The plant has an

annual capacity of 170,000 metric tons (in

1976, Soviet domestic output of 40 inch and

larger pipe was 2.6 million tons113). In addition, a new pipe-rolling plant destined to produce 56-inch pipe for use at 100 atmospheres

is using imported steel plate.

Pumps and (’Oppressors

The U.S.S.R. has purchased pipeline

boosters, pumping stations, and gas compressors from the West, but the area in

which Western technology appears to have

been most important is in compressors for

gas pipelines. These do not seem to be produced in adequate quantity and quality in

the U.S.S.R. itself. In 1976, the average size

of a Soviet turbine-powered centrifugal compressor unit (produced under license from

the U.S. Dresser Industries and making up

71 percent of installed gas compression

capacity) was slightly over 4 MW. The

U.S.S.R, now widely produces units of 5-, 6-,

and 10-MW capacity, but ones of 16 and 25

MW, mass-produced routinely in the West,

were only scheduled to begin serial production in 1981.114 The large units needed to increase installed capacity must, therefore,

still come almost entirely from the West.

The U.S.S.R. has been importing substantial amounts of gas-turbine-powered compressor equipment since 1973; by 1976, 3,000

MW of such units (about one-third of installed capacity of all types of compressor

equipment) had been imported from Austria,

Great Britain, ,Japan, Norway, and the

United States. 115 While it is obviously impossible to quantify the net benefits generated

by these purchases, one Western expert has

‘(’amphcll, ‘‘SCJJ it’t ‘1’t’lhntllt)g? 1 nlports ,‘ op. (’it.,

[) 12.

1

‘Ifilson, op. (i L., p. 29.

‘‘ (’arnpt)(’11, ‘‘S()\i(~t ‘1’(~(hnol(~g~ 1 rnpt)rts ,‘ op. {’it..

pp I 5, 21.

estimated that pipe and compressor imports

together may well have paid for themselves

within 2 years, given the acceleration of gas

transport capacity they allowed.116

Other Equipment

The U.S.S.R. has purchased American

pipeline inspection equipment, but in general

has not relied extensively on the West for

other material for pipeline cleaning. More important are imports of pipelaying and excavation equipment, particularly that designed for cold climates. Pipelayers have

been purchased both from the West and

from Eastern Europe, but there are signs

that the U.S.S.R, may wish to accelerate

such imports for construction of the proposed new pipeline to Western Europe (see

ch. 12).

Computers

The U.S.S.R. has the ability to build reasonably advanced computer-based control

systems for oil and gas pipelines, but the majority of pipelines probably still employ

older, less efficient and more labor-intensive

technologies. For instance, even the best

Soviet systems do not use microprocessors

and minicomputers as they are used in Western state-of-the-art systems. These are connected in a multilevel hierarchy with a central mainframe, and produce greater reliability, quicker response times, and lower

labor requirements.

The U.S.S.R. has purchased in excess of

$10 million of pipeline-related computer

equipment from the West, mostly for pipelines such as Orenburg, for which large

amounts of other Western equipment has

also been purchased. Announced plans call

for the introduction of at least 10 domestically produced oil pipeline automation systems.

Such systems could reduce operational

mistakes and allow better pipeline maintenance, speedier leak detection, and better

overall management of oil and gas flOWS. If

these systems are indeed about to be intro-

‘ ‘“I hid., pp. 22-24.
64 ● Technology and Soviet Energy Availability

duced, and if delays in the provision of

domestic equipment for them occur, the

U.S.S.R. may turn to the West for assistance. However, it is not clear if this is a

priority area for the acquisition of Western

computers or the expenditure of hard

currency.

SUMMARY AND CONCLUSIONS

The Soviet oil and gas pipeline system has

grown extensively in the past decade. But if

the large increases in West Siberian natural

gas production so important to Soviet energy plans as a whole are to be realized, further expansion of the gas pipeline network is

crucial.

oil and gas pipelines have benefited extensively from Western pipe and compression

equipment. Although the U.S.S.R. does

manufacture some large diameter pipe and is

seeking to upgrade its capabilities in this

area, no end to its dependence on Western

imports of such pipe is in sight. Similarly,

although there are Soviet-made compressors, including some new models with capacities that were hitherto available only in

the West, Soviet purchases of such equipment from the West still appear to be cost effective. Indeed, for some time to come, such

purchases will probably also be necessary as

domestic manufactures remain inadequate

in both quality and quantity.

REFINING

INTRODUCTION

Crude oil is not a homogeneous substance.

Depending on the nature of the deposit from

which it comes, it can consist of a variety of

compounds and exhibit a wide range of properties. These properties determine a number

of both liquid and gas products which can be

produced from the crude in primary distillation. The refineries at which these products

are made can employ both primary and secondary processing techniques so that ideally

each refinery can produce the optimum product mix for the crude oil which comes to it.

Common products are jet, diesel, and residual fuel oil; gasoline; kerosine or paraffin;

lubricating oils; and bitumen. During the oil

refining process, considerable volumes of

gas may also be released. These gases—

methane, ethane, propane, and butane—can

be used as fuel for the refining process or

marketed separately.

Natural gas too is processed both to obtain marketable products and to purify it.

Some gases have a high content of natural

gas liquids, which can be separated out. In

addition many natural gases contain hydrogen sulfide, sometimes in amounts ranging

to more than 75 percent. “Sour” gases, i.e.,

those with high hydrogen

are toxic and corrosive, and

before they are used.

sulfide content,

must be treated

Relatively little is known about the Soviet

refining industry. The U.S.S.R. issues no

statistics on oil refining, and information on

throughput—in terms of both product quality, variety, and quantity—must be gathered

from indirect sources and based on estimates. This section will briefly summarize

major characteristics of this industry.

THE SOVIET OIL REFINING

INDUSTRY

Major difficulties in the Soviet refining industry have resulted from the geographic

distribution and capacity of existing refineries, and from the quality and mix of the

refined products produced. There are indications that the U.S.S.R. recognizes and is attempting to remedy

much improvement

still necessary.

Figure 5 shows

these problems, but that

in the refining sector is

the location of major

Soviet refineries. There are some 44 operating refineries in the U.S.S.R.117 These are

‘‘“W’ilson, op. cit., p. 37.

66 ● Technology and Soviet Energy Availability

well distributed, with some bias toward the

older producing regions-Central Russia,

Volga-Urals, North Caucasus, and Azerbaidzhan regions in the western part of the country. One very large refinery is situated in

West Siberia. The geographic distribution

puts a heavy strain on the overburdened

Soviet rail system which, as the previous

section indicated, is relied upon for the

transport of refined oil products. This fact

may have contributed to an apparent change

in refinery building policy. While the Soviet

predilection has been for expanding refinery

capacity by adding to existing sites, there

are now plans for the construction of new

refineries. Four of these came onstream

during the Tenth FYP period in the Ukraine,

Belorussia, northeast Kazakhstan, and Lithuania, 118 but plans for others in Central Asia,

Eastern Siberia, and southern Kazakhstan

have experienced delays.

The quality of Soviet refined products is

notoriously poor, the result of inadequate

planning and investment in a sector that was

ill-prepared to deal with the rapidly increasing volume and variety of the crude oil that

began to be produced in the 1950’s and

1960’s. A large share of refinery output continues to be in the form of residual fuel oil

(called “mazut”) that is used extensively in

electricity generation. One consequence of

inadequacy in the refining industry has been

an emphasis on the export of crude oil rather

than products. Even with the enormous increase in oil prices after 1974, the U.S.S.R.

could earn more hard currency from refined

product exports. However, export potential

is constrained by product quality and product mix.

Nor has the refining industry in the past

coped in an altogether optimum fashion with

domestic needs. A chronic and pressing

problem, for instance, is the large share of

heavy fuel oil in the product mix. This is accounted for by the lack of appropriate secondary refining capacity to produce other

products. One result is that fuel oil is burned

in cases where natural gas would be a more

118 ‘

m Ibid.

rational and economic fuel. The task facing

the U.S.S.R. is to lower the overall share of

fuel oil in the product mix and raise that of

other products. This will require rationalizing selected refineries through the installation of secondary refining equipment.

The quality as well as the mix of products

must also be raised. One example can be

found in motor fuels and lubricants. In the

past, poor quality automotive products have

tended to decrease the efficiency and life

span of the machinery and to increase the requirements for repairs and maintenance. The

U.S.S.R. has thus made a concerted effort to

improve the quality and quantity of such

products. In 1970, for instance, the share of

high-octane gasoline in total gasoline output

was 50 percent; in 1979, this share reached

94 percent.119 Similarly, the quality of diesel

fuel, as measured by its sulfur content, has

been improving. In 1965, only 40 percent of

Soviet diesel fuel had a sulphur content of

0.5 percent or less. The rate is now over 95

percent, and about 47 percent of Soviet

diesel fuel has a sulfur content of less than

0.2 percent. Some sense of the practical consequences of such an improvement may be

gleaned from the fact that, according to

Soviet calculations, an engine that will run

some 57,000 km on diesel fuel with a l-percent sulfur content will last nearly 89,000 km

on diesel with 0.2 percent sulfur.120 In addition, reductions have been made in the losses

of oil and oil products during the refining

process.

Such improvements have required advances in refining technology and considerable investment in the refining industry.

Further alteration and improvement of the

refined product mix will require additional

large capital expenditures and additional efforts to improve technology. The past and

potential contributions of the West in these

efforts are discussed below.

‘19Campbell, Trends ... , op. cit., p. 47; Wilson, op. cit.,

p. 39.

‘ ‘(’1 b id.
Ch. 2— The Soviet Oil and Gas Industry ● 67

THE SOVIET GAS-PROCESSING

INDUSTRY

The associated gas produced with oil,

“casinghead gas,” can be used in unprocessed form to fuel power stations or it can be

processed to separate the liquid petroleum

gases. In the past, the U.S.S.R. typically

vented or flared this gas. Now, however, efforts are being made to collect and process it.

Between 1975 and 1979, production of

casinghead gas rose from 29 to 36 bcm, an

overall utilization rate of some 69 percent.

The Tenth FYP specifically addressed the

problem of utilizing the large amounts of

casinghead gas being produced (and flared)

in West Siberia by planning construction of

gas-processing facilities in that region. This

work has fallen behind schedule, but the

present FYP calls for additional refineries

and envisages that by 1985 West Siberian

casinghead gas will be fully utilized,

WESTERN TECHNOLOGY IN

THE SOVIET REFINING

INDUSTRY

The U.S.S.R. has purchased large

amounts of oil refining equipment and technology from East Germany and Czechoslovakia, as well as from Japan, France,

Italy, and Britain. Western purchases have

tended to consist of entire refineries rather

than of component parts, and the primary

U.S. contribution has been in provision of

design and engineering services to Italian

and Japanese construction firms (see ch. 6).

To implement planned improvements in

refining, the U.S.S.R. will probably require

additional Western assistance, although

with the exception of computing that might

boost efficiency, the technologies involved

are not advanced. These include secondary

refining techniques such as hydrocracking

and catalytic cracking. In the West, microprocessors and minicomputers are used extensively in refinery operations. Although

the Soviets use computers in all of their

refineries, microprocessors are found only in

the largest and most important, and are, conPhoto credit TASS from SOVFOTO

French technicians at a French hydrocracking plant

in the Bashkir ASSR

servatively speaking, several years behind

those used in the West. The need for microprocessor- and minicomputer-based refinery

control systems will continue to grow in the

U. S. S. R., particularly as the product mix is

restructured. So far, the purchase of such

systems does not seem to have been accorded high priority, although some minicomputer- and microprocessor-based systems have been included in sales of larger

units destined for refineries. The U.S.S.R.

has the hardware base to design and implement such systems itself, but it lacks experience in building the software and associated control devices.

It is likely that systemic constraints and

incentives will impede the development and

introduction of computerized refinery proc-
68 ● Technology and Soviet Energy Availability

ess control systems much more than will

problems with the technology. Western purchases may accelerate improvements in efficiency, but from the present signals, it appears that the U.S.S.R. will continue to rely

predominantly on domestic developments.

SUMMARY AND CONCLUSIONS

Discussion of the Soviet oil refining industry is inhibited by lack of data, but a few

generalizations are possible. Soviet priorities

in this sector lie in building more new refineries in West Siberia and the East, near

sources of supply and markets. In addition,

emphasis is now being placed on improving

both the refinery product mix and quality. If

past patterns persist, these changes in the

refining industry will take place with the aid

of infusions of Western technology and

equipment, particularly of complete refineries. On the other hand, if oil production

does not continue to increase, expansion in

refining capacity will not be necessary.

OFFSHORE

INTRODUCTION

The extensive development of offshore oil

and gas deposits, i.e., deposits in lakes, seas,

and oceans, is a relatively new phenomenon

in both the U.S.S.R. and the West. Although

it is generally believed that the U.S.S.R. has

a promising offshore potential, production

from offshore deposits has not yet made a

very noticeable impact on overall output.

Most of the equipment and technology

employed in the Soviet offshore sector has

been either directly purchased from the

West or reproduced from Western designs.

As new offshore deposits are identified and

developed, the need for additional sophisticated offshore equipment will grow. The

degree of priority to be accorded offshore

development in the Eleventh and Twelfth

FYP’s is not clear.

This section briefly reviews the techniques and equipment necessary to find, produce, and transport offshore petroleum, surveys the state of Soviet practice in these

areas, and describes the past and potential

contribution of Western technology to offshore development.

OFFSHORE EXPLORATION

AND PRODUCTION

Offshore and onshore exploration of oil involve essential the same processes. An energy source, usually compressed air, is used

to generate an impulse capable of penetrating the Earth’s crust. As the energy is

reflected and refracted by the underlying

geological structures, it returns to the surface in the form of echoes that are detected

by sensors (hydrophones). Arrays of hydrophones towed behind a seismic survey ship

are used to detect the returning echoes. The

information is then processed in roughly the

same manner as onshore data are processed.

Modern seismic survey ships employ sophisticated computer systems to control the

precise timing of the bursts of compressed

air and to preprocess the data collected from

the hydrophores. Computers, linked with

satellite navigation systems, provide a

precise fix on the position of the ship. The

positioning of the hydrophone arrays is also

controlled by the computer.

Offshore exploratory drilling is accomplished using basically the same equipment

as onshore, the major difference being the

platform on which the drilling equipment

is placed. Three major types of movable

platforms are presently available—jackups,

semisubmersibles and drilling ships.

Jackup rigs generally employ three or four

hydraulically operated “legs.” The rig is

towed to the drilling site where the legs are

extended downward to the ocean floor. The

entire rig is then raised clear of the water line

to permit drilling operations. Modern jack-
Ch. 2— The Soviet Oil and Gas Industry ● 69

ups are currently limited to working in

depths no greater than 300 ft.

The semisubmersible rig is a refinement

of the jackup. Semisubmersibles are constructed on two or more pontoons on which

the rig floats, and either self-powered or

towed to the drilling site. Once over the site,

the pontoons are partially flooded to provide

a stable platform from which to drill. These

rigs are either anchored into position or

employ a dynamic positioning system. They

operate in water depths up to 1,500 ft and

can drill to 25,000 ft.

Drill ships represent the state-of-the-art

in offshore drilling. The ship is usually of

standard design with a drilling rig mounted

in the middle of the deck. When the ship is

over the drill site, it is either moored with anchors or a dynamic positioning system is employed. A dynamic positioning system uses

a series of computer-controlled thrusters in

conjunction with a set of sonar beacons

placed on the ocean floor to maintain the

ship’s position over the drill site. A modern

dynamically positioned drill ship is capable

of exploratory drilling in water depths up to

6,000 ft.

After the exploratory drilling phase is

complete, the same well logging process as in

onshore wells is used to determine the size of

the reservoirs and the possible flow rates. If

production is warranted, the reservoir can be

developed from an artificial island or a fixed

platform production rig, the latter being

most common. Once the well is dug and the

casing cemented, special subsea wellhead

completion equipment is fastened to the casing. This unit is remotely controlled and

establishes the rate of production from the

well.

Fixed platform rigs differ from exploration rigs in their degree of mobility. These

rigs are erected on platforms that have been

firmly embedded in the ocean floor. Once the

platform is in place, up to 65 development

wells may be drilled from the platform using

offset directional drilling techniques. Where

ice floes make the use of a fixed platform impractical, however, artificial islands may be

employed. Artificial islands and fixed platforms are limited to use in water depths of no

more than 1,500 ft. Production drilling to

greater depths will require new designs such

as tension leg platforms or compliant guyed

towers. Finally, the petroleum is brought to

shore either via pipeline or tanker.

THE SOVIET OFFSHORE

INDUSTRY

The offshore regions of the U.S.S.R. offer

enormous potential for oil and gas production. It has been estimated that of the 8

million km2 of total Soviet shelf area, 2.5

million km2 are promising for the discovery

of petroleum. The most attractive regions

are the Arctic, Baltic, Black, Caspian, and

Okhotsk Seas.121 Some drilling has taken

place in the Sea of Okhotsk off Sakhalin

Island (using Japanese equipment; see ch.

11), and in the Black and Baltic Seas, and

limited exploration of Arctic waters in the

Barents and Kara Seas has begun, but

Soviet offshore experience so far has been

largely confined to production from shallow

waters in the inland Caspian Sea.

Development of the Caspian dates to the

1920’s, when earthen causeways were built

into the Sea. These were later replaced by

fixed pile-supported and trestled platforms,

and drilling proceeded from these and from

small natural islands. The full potential of

the Caspian is only now beginning to be

realized, however, as the U.S.S.R. develops

the capacity to explore and drill in waters

greater than 200 m (600 ft). A major discovery in 1979, the ‘‘28th April” deposit, has

spurred interest in continuing Caspian exploration and development,122

Exploitation of the Caspian, and even

more importantly, of the other promising offshore regions is constrained by the status of

Soviet deep-water technology. Although the
70 . Technology and Soviet Energy Availability

Tenth FYP called for the modernization and

augmentation of offshore drilling capacity,

this upgrading has not proceeded as rapidly

as planned. The Soviet stock of domestic offshore equipment currently consists of seven

jackups (three of which are obsolete) and two

semisubmersible rigs.123 The inadequacy of

this equipment base is attested to by the extent of Soviet dependence on Western offshore equipment.

THE CONTRIBUTION OF

WESTERN OFFSHORE

TECHNOLOGY

The U.S.S.R. has purchased or contracted

for offshore exploration, drilling, and production equipment from a wide variety of

countries, including the United States,

France, Holland, Finland, and Japan (see ch.

6). Its own recently acquired ability to build

jackups and semisubmersibles is the product

of Western technology imports, and it has

contracted with a Finnish firm for three

dynamically positioned drill ships for use in

Arctic waters. These ships are based on a

Dutch design, and are being fitted with the

latest Western drilling and subsea completion equipment. It is believed that these

ships will provide the Soviets with their first

123Ibid.. p. 96.

deep drilling and subsea completion capabilities. 124

In addition to purchases of equipment and

technology, the U.S.S.R. has entered into

joint offshore development projects with

other nations. These include the Sakhalin

project with Japan, and the Petrobaltic consortium, which at present involves cooperation between the U.S.S.R., Poland, and East

Germany in exploring in the Baltic Sea. The

consortium is now using a jackup rig built by

a Dutch firm and furnished with drilling

equipment of U.S. origin.

SUMMARY AND CONCLUSIONS

The U.S.S.R. obviously wishes to expand

its offshore activities and capitalize on its

great potential. However, its own offshore

capabilities are still in their infancy, and purchases of Western equipment and technology will probably continue to be crucial to

offshore development in the foreseeable

future. Given the fact that exploration in

most offshore regions has not even begun, it

is difficult to imagine significant offshore

production occurring before the end of the

present decade.

THE PROSPECTS FOR SOVIET OIL PRODUCTION IN 1985

The prospects for Soviet oil production in

the next 5 years have been the subject of

controversy ever since CIA’s 1977 prediction that Soviet oil output would peak at 550

to 600 mmt (11 to 12 mbd) and then drop

sharply to 500 mmt (10 mbd) or less by 1985.

The CIA has since revised its estimates, but

the fact remains that its original work has

largely set the terms for the entire Soviet

energy debate, with experts ranged on different sides of what have become the central

Soviet energy questions: will oil output peak

in the 1980’s, and if so, when; can a production plateau be maintained, and if so, how

long; if oil output begins to drop, how sharp

a decline can be expected?

Leaving aside for the present the issue of

whether oil production does indeed constitute the key to the future of the Soviet

energy balance (this point is treated below),

this section will discuss the prospects for

Soviet oil production in 1985 and 1990, identifying for the purposes of this analysis

reasonable best and worst case estimates.

Table 17 summarizes recent projections of

Soviet oil production. As the table shows,

the lower limit is represented by the most re-
Ch. 2— The Soviet Oil and Gas Industry ● 71

Table 17.–Soviet Oil Production Forecasts, 1985

(million metric tons)

cent forecast of the CIA and the upper by a

publication from the British Economist Intelligence Unit (EIU). The U.S.S.R. own

Eleventh FYP figures fall between. Using

this universe, OTA has posited best and

worst case scenarios for Soviet oil production in 1985 of 645 and 550 mmt (12.9 and 11

mbd) respectively. These are not predictions.

Rather, OTA has selected plausible high and

low output figures that can be used to illuminate the energy problems and opportunities facing the U.S.S.R. The basis for

these scenarios can best be understood

through an examination of the assumptions

and reasoning behind the differing forecasts

shown here. The following sections, therefore, compare the arguments bolstering the

table’s high and low estimates–700 mmt (14

mbd) and 500 to 550 mmt (10 to 11 mbd).

Differing estimates of future Soviet oil

production have been based on two separate

but related sets of arguments. one concerns

Soviet oil reserves; the other the state of

Soviet oil production practice and technology. Seemingly irreconcilable differences

between diverging forecasts can be traced to

different assumptions and expectations with

respect to each of these.

SOVIET OIL RESERVES

Introduction

Oil production over any given period of

time obviously depends in part upon the

quality, quantity, and accessibility of the

resources in the ground, Reserves are the

portion of this resource base that has been

identified. They are important in determining both cumulative production and annual

rates of output. Unless the rate of additions

to reserves keeps pace with or exceeds the

rate of production, output cannot remain

stable indefinitely or rise over long periods.

Discussion of oil reserves anywhere in the

world can be confusing, first because the

standards of classification and definition

employed by analysts are not always identical; and second, because the concept of a

reserve is meaningful only within the context of some standard of economic feasibility. This means that as economic conditions

or available technology change, amounts of

oil ascribed to different reserve categories

will change. This complex situation is compounded in discussions of the U.S.S.R. both

because the Soviet system of reserve classification and nomenclature is very different

from that employed in the West, and because Soviet oil reserve information is an official state secret. Western analysts must,

therefore, calculate their estimates of Soviet

reserves from intermittent and sometimes

inconsistent bits of information. It is hardly

surprising that analysts working from different data bases should arrive at differing

conclusions.

In sum, two major points must b e

stressed. First, estimates of reserves are not

static. As additional research, exploration,

and development drilling proceed, reserves

in any category may be redesignated to
72 • Technology and Soviet Energy Availability

higher or lower classifications. Second, given

the variety and subtlety of reserve classification systems, extreme care must be taken in

interpreting differing reserve estimates. It is

important to ascertain the definitions and

other assumptions upon which such estimates are based.

The U.S. and Soviet Systems of

Classification

Briefly, two different nomenclatures are

employed in the United States. According to

the American Petroleum Institute, reserves

may be either measured, inferred, or indicated. These are referred to as proved,

probable, or possible by the U.S. Geologic

Survey. In both cases, categorization is by

two sets of criteria, the degree of geological

assurance that the oil exists, and the economic feasibility of producing it.

Soviet categories–A, B, C1

, C2, D1, and

D2— are also broken out according to the

degree of exploration and appraisal drilling

that has been carried out and some inexplicit

criteria of economic recoverability. Only in

the most general sense can Soviet reserve

categories-be made to correspond

used in the West. Indeed, Western

have disagreed over the relations

the two classification systems.

Low and High Soviet Reserve

Estimates

to those

analysts

between

The CIA and EIU figures for Soviet oil

reserves for the most part form the lower

and upper limits of the estimates that have

appeared in the West. While the CIA has

estimated approximately 4.1 bmt (30 billion

bbl) of what it calls “proven” reserves, the

EIU study gives a range of 14 to 15 bmt (102

to 110 billion bbl) of what it calls “proven

and probable” reserves. Only one reserve

figure has slightly exceeded EIU’s–16 bmt

(120 billion bbl), published by the Swedish

group Petrostudies.125 On closer examina1’5Petrostudies has received widespread publicity for fore

casts of Soviet oil reserve and production potential far in excess of those found elsewhere. Most Soviet energy experts

regard Petrostudies’ claims as so sweeping as to be highly

unreliable.

tion, these figures appear to be based on different nomenclatures, different standards of

comparability between Western and Soviet

definitions, and different evaluations of the

abilities of the Soviet oil industry.

The CIA produced a figure for proved reserves that it believes represents a realistic

estimate of economically recoverable oil

given present technology. It must be noted

that this definition yields a conservative

estimate. Nor is CIA sanguine about Soviet

prospects for additional to reserves. To

replace the oil produced between 1976 and

1980, the U.S.S.R. would have had to have

found 2.9 bmt (21 billion bbl). According to

CIA, this amount exceeded gross discoveries

during 1971-75 by roughly 50 percent.126

Reversing the decline in discovery rates

would require increasing exploratory drilling

to what CIA believes to be an unlikely extent. The best hope for reserve additions in

the 1980’s in this analysis, therefore, becomes luck—new finds of giant or supergiant

fields near enough to existing infrastructure

to allow their quick development.

At the opposite end of the spectrum, EIU

does not believe that the present Soviet oil

reserve situation is a constraint on near- and

medium-term production. The EIU study

adopts the same vocabulary as the CIA—

“proved,” and “probable’ ’-but it offers no

explanation of the meanings assigned to

these words or how they are correlated to

Soviet categories.

Conclusions

The basis on which these high and low

reserve estimates rest is in large part that of

subjective judgments about the level of

technology, the production costs, and the

amount of time necessary to exploit deposits

of oil in different stages of development and

exploration. CIA, given its own evaluation of

Soviet petroleum technology, has applied

very strict criteria to its estimate. EIU appears to be far more sanguine about the ability of the Soviets to recover more oil from

their existing fields and to develop new fields

‘2’(’1 A, “Prospects . ,“ p. 23.
Ch. 2— The Soviet Oil and Gas Industry ● 73

within the time frame of current planning

periods. This difference in outlook and interpretation is also reflected in the two assessments of other aspects of Soviet oil industry

practice.

SOVIET OIL PRODUCTION

CAPABILITIES

In addition to its low estimation of Soviet

ability to make sufficient additions to

reserves to support increased production in

the absence of new giant discoveries, CIA’s

analysis of the prospects for Soviet oil output rely heavily on its evaluation of Soviet

production practices and its expectations

that the U.S.S.R. would be unable to significantly improve these by 1985 or 1990.

The EIU study on the other hand is optimistic about Soviet ability to meet plans to

improve its oil industry performance and

technology. Among the most important

areas of disagreement between the two

analyses are waterflooding and other enhanced recovery techniques, drilling, and

equipment manufacture.

CIA appears to have departed from some

aspects of its original 1977 treatment of

waterflooding which, as noted above, presented an overly simplistic—and therefore

misleading—picture of the magnitude,

trends, and consequences of this practice.

But the overall judgment would seem to remain: The U.S.S.R. has engaged in a basically short-sighted policy of overexploiting its

largest deposits through a method that can

lead to sharp production declines once a field

has been exhausted. Should this occur at

Samotlor, the consequences for the entire

Soviet oil industry would be immense—

particularly since new finds do not appear to

have been keeping pace with the rate of production. Moreover, emphasis on maximum

production has led to concentration on

development drilling over exploratory drilling. CIA doubts the Soviet’s ability to

achieve the increases in both of these activities necessary to improve the discovery

rate and to continue to increase production.

This judgment rests in turn on doubts over

the availability of Soviet drilling crews and

the quality and quantity of Soviet drilling

equipment—including bits, pipe, and rigs—

which can be produced during the present

plan period. Nor does CIA believe that

Western equipment and technology can be

imported in sufficient quantities and utilized

efficiently enough to make up for these

lacks.

The EIU analysis takes precisely the opposite tack. Although it notes past cases of

underfulfillment of oil industry targets, it

emphasizes those areas in which the

U.S.S.R. has made progress (in number of

meters drilled, for instance) in the past 5

years. More significantly, it reports Soviet

Eleventh FYP targets and development

plans–for number of drilling crews, number

of new exploratory and development wells to

be drilled, drill crew productivity, average

new well yield, production of more and/or

better bits, drill pipe and rigs, utilization of

sophisticated tertiary recovery techniques—

and forms its assessment of the future of the

industry on the assumption that these will

be fulfilled.

These “pessimistic” and “optimistic”

assessments of Soviet oil production prospects therefore rest in large part on judgments of Soviet ability to greatly improve on

a wide variety of oil industry parameters in

the next 5 years. Past patterns of plan

underfulfillment, poor performance in a

number of areas (equipment quality, drill rig

and crew productivity, for example), and

above all the inefficiencies and obstacles introduced by the nature of the Soviet economy and incentive system, all tend to advise

caution in counting too heavily on fundamental changes in likely Soviet achievements, On the other hand, improvements

have been made in a number of areas, and

there is enough evidence of increased investment in the oil industry to suppose that such

improvements will continue.

The Soviets’ own Eleventh FYP reflects

diminished expectations for oil production.

Its upper limit of 645 mmt (12.9 mbd) is,

after all, only slightly higher than the
74 ● Technology and Soviet Energy Availability

original underfulfilled 1980 target of 640

mmt. Moreover, the average annual rates of

growth envisaged in the plan are substantially lower than the rate of 1.9 percent

achieved between 1979 and 1980. Whether

the new target is more the reflection of

a deliberate investment decision to grant

lower priority to oil in favor of gas (and

possibly nuclear power development) or

more a response to Soviet recognition that

greater oil production would be unachievable

in the absence of giant new finds, it is impossible to tell. In any case, those who before

the plan targets were revealed believed that

gains to as high as 700 mmt by 1985 were

technically achievable are unlikely to abandon that view.

OTA has chosen the Soviet Union’s own

target of 645 mmt for its best case scenario.

Such an outcome seems achievable if a

number of things go well for the U. S. S. R., including new finds, improvements in domestic manufacturing capacities, improvements

in oil industry productivity, and continued—

if not greater-imports of Western equipment to compensate for domestic shortfalls

and inadequacies. The CIA projection is a

plausible worst case, given the opposite set

of expectations about Soviet domestic accomplishments and the continuation of present relatively modest levels of Western imports. However, the likeliest outcome is

probably somewhere between 550 and 645

mmt— i.e., for the next 5 years, the U.S.S.R.

through increased effort and investment in

its oil industry may well be able to hold production fairly stable at 1980 rates.

THE PROSPECTS FOR SOVIET OIL PRODUCTION IN 1990

The variables affecting possible Soviet oil

production in the latter part of the decade

are numerous and complex, and the exercise

even of selecting plausible best and worst

cases for analytic purposes is highly speculative. Here too, the universe of responsible

estimates that have appeared in the West

are bounded by CIA and EIU, CIA projecting a fall to about 350 to 450 mmt (7 to 9

mbd) and EIU an increase to 750 mmt (15

mbd). The central question once again is

whether production will fall, rise, or remain

stable. Assuming no new giant finds in the

immediate future, no massive infusions of

Western equipment, and no hands-on assistance in offshore development, OTA believes

that projections that see Soviet oil production rising significantly between 1985

and 1990 are excessively optimistic. A more

realistic best case assumes that output could

be held stable at 1985 levels or slightly

below. A plausible worst case would see an

absolute decline in production, although

perhaps not as serious as that envisaged by

CIA. However, it must be emphasized that

the difficulties that the U.S.S.R. will probably still be experiencing in 1990 may not be

permanent. As the U.S.S.R. develops capabilities to explore and exploit its offshore

and East Siberian resources, oil production

eventually could begin to rise once more.

This at least is the expectation of both the

U.S. Defense Intelligence Agency and the

U.N.’s Economic Commission for Europe.’*’

“-U.S. Defense Intelligence Agency, “Allocation of Resources in the Soviet Union and China— 1981. Statement of

Maj. Gen, Richard X. I,arkin before the Joint Economic Committee, Subcommittee on International Trade, Finance, and

Security Economics, Sept. 3, 1981.
Ch. 2—The Sovlet Oil and Gas Industry ● 75

THE PROSPECTS FOR SOVIET GAS PRODUCTION,

1985 AND 1990

The attention surrounding the Soviet oil

production controversy has until recently

obscured the significance of gas in the Soviet

energy future. That significance should not

be underestimated. Gas has been called the

“ace in Soviet energy plans . . . a critical

cushion for the uncertainties faced by the

planners with respect to other sources of

(energy) supply."128 Indeed, the key question

for Soviet energy availability in the present

decade may not be whether oil production is

about to decline, but rather whether the

U.S.S.R. can exploit its tremendous gas

reserves quickly enough for gas to become

the critical fuel in the CMEA energ y

balance. While it is important that gas not

be regarded as the U.S.S.R.’s easy energy

panacea–as this chapter has pointed out,

gas development faces numerous obstacles—

discussion of the prospects for gas production to 1990 is essential to understanding the

opportunities confronting the Soviet Union

during this period. This section discusses the

range of estimates of Soviet gas production

in 1985 and 1990 and, as with oil, posits

OTA’s best and worst case scenarios.

Soviet proven natural gas reserves are

enormous. This fact is uncontroversial. In

1980, these were variously estimated in the

West at 25 to 33 trillion cubic meters (tcm),

some 40 percent of the world’s proven reserves.129 The U.S.S.R.’s own estimate is

some 39 tcm. This is the thermal equivalent

of 31.6 billion tons or 231.6 billion bbl of oil.

These orders of magnitude have not been

disputed, and the size of the proven reserve

base alone is enough to support many years

of substantially increased production. Indeed, Soviet gas reserves are equivalent in

magnitude to Saudi Arabian oil reserves.

Constraints on gas output, therefore, rest

not on resources, but on the ability of the gas

industry to deliver its product to consumers

‘ -“ 1)it’nt’\ and Shatmd, op. t>i[,, p. 2H7.

1-’’ Strn,n, (~p (“it., pp. 22-;1: \\’ i]w)n, fjp (i(., p 44

in the U.S.S.R. and in Eastern and Western

Europe. Specifically, these constraints concern the ability of the U.S.S.R. to substantially increase its gas pipeline network—and

this in turn entails obtaining quantities

of large diameter pipe and compressor

stations—and to provide adequate infrastructure for the industry and its workers.

These problems are exacerbated by the fact

that the bulk of the U.S.S.R.’s established

reserve base lies in West Siberia.

The Eleventh FYP calls for increasing gas

output from its 1980 level of 435 bcm to 600

to 640 bcm by 1985, and Soviet projections

supplied to the Secretariat of the United Nations Economic Commission for Europe for

1990 are 710 to 820 bcm. These and the

range of production estimates that have appeared in the West are summarized in table

18. As this table shows, there is very little

disagreement over these figures. For 1985, it

seems reasonable to adopt the range in the

Soviet plan as worst and best cases. Actual

production will probably fall in between. The

Table 18.—Soviet Natural Gas Production Estimates,

1985-90 (bcm/mbdoe)

(bcm) 1985 (mbdoe) (bcm) 1990 (mbdoe)

1. 605 9.9 750 12.3

2.600 9.8 700 11.5

3.660 10.8 — —

4. 600 9.8 750 12,3

5.598-647 9.8-10.6 – —

6.600 9.8 765-785 12.5 -12.9

7.600-640 9.8-10.5 710-820 11.6-13.4

SOURCES:

1 Leslie Dienes and Theodore Shabad, The Soviet Energy System (Washington.

D C V H Winston, 1979), table 53 p 252

2 CIA, as reported in Joseph A Licari, Linkages Between Soviet Energy and

Growth Prospects for the 1980’s, paper presented at the 1981 NATO Economics Directorate Colloquium, Apr. 810, 1981

3 Herbert L Sawyer, “The Soviet Energy Sector Problems and Prospects, ” Har

vard Unlverslty, January 1978, quoted In George W Hoffman “Energy Projec

tlons —011, Natural Gas and Coal In the U S S R and Eastern Europe, Energy

~0//Cy Pp 232241

4 David WI/sorr Soviet 0// and Gas to 7980 Economist Intelligence Unit Special

Report No 90

5 “Sltuatlon et Perspectives du Bllan Energet{que des Pays de L’Est,” Le

Courier des Pays de L ‘Es(. No 216, March 1978, median and low hypotheses

only

6 Jonathan P Stern, Sov/ef Natural Gas Deve{oprnenl to 1990 (Lexington,

Mass Lexington Books, 1980), table 151, p 178

7 Soviet Eleventh FYP and prolecllons submlfted to the Secretariat of the U N

Economic Commlsslon for Euro De
76 . Technology and Soviet Energy Availability

situation for 1990 is more complex. Gas production in the 1980’s will be determined,

above all, by the level of Western exports of

pipe and compressors available to the

U. S. S. R., and a worst case should posit little

or no Western assistance. OTA has, therefore, chosen as its worst case assumption

production of about 665 bcm. This level of

output is approximately halfway between

the high case for 1985 and the low end of the

Soviets’ own 1990 projection. OTA’s best

case for 1990 is 765 bcm, the midpoint of the

Soviet range. The midpoint, rather than the

upper end of the target was chosen in the

face of the extraordinary magnitude of the

Soviet range.

SUMMARY AND CONCLUSION

The heart of the Soviet oil and gas industry is now firmly established in Wes t

Siberia. Despite the harsh climate, difficult

terrain, and the remoteness of this region,

the U.S.S.R. has over the past 10 years built

an extensive petroleum industry there, In

1980 West Siberia accounted for over half of

oil and nearly 36 percent of gas output.

While there is general agreement that the

prospects for gas are bright, the continued

viability of the oil sector, as well as the ability of the U.S.S.R. to remain the world’s

foremost oil producer and a net oil exporter,

has recently been the subject of controversy

in the West.

This controversy was initiated by a 1977

CIA report that contended that Soviet oil

production would drop precipitously to as

low as 400 mmt (8 mbd) by 1985, occasioning

the possibility that the CMEA as a bloc or

even the U.S.S.R. itself would have to import oil. CIA has now raised its estimates

and has clarified its position on CMEA oil

imports, i.e., it does not foresee the U.S.S.R.

itself buying oil on world markets although

it still contends that the CMEA as a bloc

would be in a net deficit position. In fact,

CIA’s basic argument has changed little: it

believes that in the absence of new major

finds, Soviet oil output will peak and decline

sharply before the end of the decade.

CIA production estimates are the lowest

to appear in the West. Others have projected

substantial increases in Soviet oil production

in the present decade. These judgments appear to be based on a different interpretation

of the available Soviet reserve data, different

evaluations of Soviet oil industry practice,

and a higher estimation than CIA’s of the

ability of the U.S.S.R. to overcome its own

institutional problems in improving a variety of industry parameters.

OTA’s own survey of the state of Soviet

oil equipment and technology has shown

that, while the U.S.S.R. has selectively utilized Western imports in a number of areas,

it produces large quantities of most of the

items it needs. For the most part the Soviet

difficulty is not that it lacks the know-how to

provide for itself, but that the structure of

its economy and its incentive system are

such that it has difficulty producing sufficient quantities of high-quality equipment.

Items purchased from the West are usually

of higher standard than those that can be

produced at home, and this reinforces their

ability to compensate for domestic shortfalls. In addition, there are three areas in

which the West probably can make contributions to the Soviet state-of-the art. These are

computers, associated software, and integrated equipment sets for oil exploration;

offshore technology, still in its infancy in the

U. S. S. R.; and high capacity submersible

pumps.

Soviet oil industry performance as

measured in equipment productivity and

number and depth of new wells is improving,

and Western equipment must clearly have

contributed to these improvements, although such contributions are impossible to

quantify. There is every sign that the

U.S.S.R. would like to continue to benefit
Ch. 2—The Soviet Oil and Gas Industry . 77

from Western help, but it does not appear to

be ready to depart from past practice and import massive volumes of equipment or request hands-on assistance.

OTA believes that CIA’s estimates may

be taken as a worst case outcome for Soviet

oil production, but that it is also possible

that the Soviets could achieve their own

target for 1985 of 645 mmt (12.9 mbd), which

would represent a modest increase over 1980

production of 603 mmt. Likelier than either

of these extremes, however, is that production will remain about stable. This assumes

no major changes in Western export or

Soviet import policy, and no major new

discoveries of oil.

Gas production is far less controversial.

Here the proven reserve base is immense and

production is constrained mainly by the lack

of pipelines to carry the gas to consumers.

Western large diameter pipe and pipeline

compressors have made dramatic contributions in the past, and there is every indication that continuation of such imports will

be crucial throughout the decade. The

Soviets’ own plan targets of 600 to 640 bcm

gas production in 1985 (equivalent to 9.8 to

10.5 mbd of oil, up from 435 bcm in 1980)

seem to bound plausible worst and best outcomes in this sector. By 1990, production

could exceed 750 bcm (12.3 mbd of oil equivalent), contingent on continued infusions of

Western pipe and pipeline equipment.

While these large increases in Soviet gas

production will not signify the end of the

U.S.S.R.’s near- and medium-term energy

problems, gas can certainly help to compensate—both in domestic consumption and

in export—for oil production that has leveled

off or even slightly declined.
CHAPTER 3

The Soviet Coal Industry
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

MAJOR SOVIET COAL-PRODUCING REGIONS . . . . . . . . . . . . . . . . . . 84

Bituminous Basins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Subbituminous and Lignite Basins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

SOVIET COAL INDUSTRY TECHNOLOGY–PROBLEMS

AND PROSPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Surface Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Underground Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

SOVIET COAL INDUSTRY INFRASTRUCTURE AND

RELATED AREAS: PROBLEMS AND PROSPECTS . . . . . . . . . . . . . . 93

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Mine Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Capital Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

WESTERN TECHNOLOGY IN THE SOVIET COAL INDUSTRY . . . . . 102

PROSPECTS FOR THE SOVIET COAL INDUSTRY . . . . . . . . . . . . . . . . 103

1981-85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

1986-90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

LIST OF TABLES

Table No. Page

19. Estimated Coal Reserves of the World . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

20. Coal Production in Natural Units and in Standard Fuel . . . . . . . . . . . . . 83

21. Geographical Distribution of Soviet Recoverable

Coal Reserves,1967 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

22. Soviet Coal Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

23. Characteristics of Major Soviet Coal Deposits . . . . . . . . . . . . . . . . . . . . 89

24. Labor ProductivityinSoviet Coal Mining . . . . . . . . . . . . . . . . . . . . . . . . 95

25. Capital Investment in Leading Fuel Industries . . . . . . . . . . . . . . . . . . . 100

26. Soviet Imports of Equipment for Underground and Surface

Mining of Minerals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

27. Estimated Soviet Coal Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

LIST OF FIGURES

Figure Page

6. Soviet Coal Basins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

7. Estimated Mine Depletion, 1975-80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
CHAPTER 3

The Soviet Coal Industry

Prior to World War II, coal was the dominant source of fuel in the Soviet Union, as it

was elsewhere in the world. In 1940, it supplied 75 percent of Soviet energy needs.

Since then, oil and natural gas have become

increasingly important and by the late

1970’s, coal’s share of total Soviet energy

consumed had fallen to approximately 29

percent. There are incentives now to reverse

this trend. Oil exports earn the Soviet Union

the hard currency it needs to finance imports

of Western grain and technology, and it is

not surprising that Soviet energy planners

have shown a strong interest in substituting

other fuels for oil, particularly in electric

power generation and in boiler applications.l

Coal is such a substitute.

‘See A. Troitskiy, ‘‘Ellectric Power: Problems and Perspectives,”’ Planlo[()>c khoz?’aj’.st[’o, No. 2, February 1979, p. 20.

Unfortunately, the Soviet Union’s reserves of easily obtainable high-quality coal

are now seriously depleted, and the Soviet

coal industry has experienced serious difficulties in simply maintaining production.

The expansion of the industry which would

be required for coal to be widely substituted

for oil now seems extremely unlikely. The

purpose of this chapter is to describe the current state and potential of the Soviet coal industry, including: 1) the characteristics of

major coal deposits; 2) the technological and

infrastructure problems facing the coal industry; 3) the degree of reliance of the Soviet

coal industry on Western technology; and

4) the prospects for the industry in the next

decade.

INTRODUCTION

Soviet coal production increased steadily

between 1970 and 1975, growing approximately 16 million metric tons (mmt) per

year. The Tenth Five Year Plan (FYP) (1976-

80) proclaimed that coal would replace oil

wherever possible, and additional yearly increases averaging about 20 mmt were targeted. But the coal industry has encountered

problems. Production peaked at 723.6 mmt

in 1978, far short of the original goal, and

has been declining since. Production in 1980

(716 mmt) was 89 mmt short of the original

plan target and 29 mmt below the revised

1980 annual plan (see table 22, below.) The

coal industry has consistently had difficulties meeting its output goals, and these difficulties cannot be expected to disappear in

the foreseeable future.

In terms of sheer magnitude, the U.S.S.R.

has substantial coal reserves. Table 19

shows the World Energy Conference Survey

of Energy Resources estimates of world coal

reserves. According to this survey the

Soviet Union has over half of the world’s

resources of coal that could be successfully

exploited and used within the foreseeable

future, and approximately one-quarter of

world explored reserves recoverable under

present local economic conditions and available technology.2 The difficulties faced by

the Soviet coal industry lie not in the size of

the resource base, but rather in the location

of coal reserves and in the quality of the coal

now being or expected to be mined in the

foreseeable future.

The first coalfields to be exploited in the

U.S.S.R. were located near the major population centers of the Western European part of

2

For the purposes of this chapter, Soviet “explored” coal

reser~’es, i.e., those rele~’ant for present planning purposes,

are roughly equi~ralent to proved, probable, and possible categories in M’estern nomenclature.

81
82 ● Technology and Sov!et Energy Availability

Table 19.— Estimated Coal Reserves of the World

(billion tons)

Percent Percent Percent

Recoverable world Total world Total world

reserves a

total reserves b

total resourcesctotal

U.S.S.R. . . . . . . . . . . . . . . . . . . . . . . 150.6 23.1 %

United Statesd . . . . . . . . . . . . . . . .

301.2 19.20/o 6,298.2 53.1 0/0

200.4 30.7 400.8 25.6 3,223.7 27.2

Canada . . . . . . . . . . . . . . . . . . . . . . 6.1 0.9 10.0 0.6 119.9 1.0

People’s Republic of China. . . . 88.2 13.5 330.7 21.1 1,102,3 9.3

India . . . . . . . . . . . . . . . . . . . . . . . . . 12.8 2.0 25.5 1.6 91.5 0.8

Rest of Asia . . . . . . . . . . . . . . . . . . 6.6 1.0 19.1 1.2 27.6 0.2

Federal Republic of Germany . 43.6 6.7 109,7 7.0 315.4 2.7

United Kingdom . . . . . . . . . . . . . . 4,3 0.7 109,0 7,0 179,5 1.5

Poland . . . . . . . . . . . . . . . . . . . . . . . 250 3.8 42.9 2,7 66.8 0.6

Rest of Europe . . . . . . . . . . . . . . . 66.9 10.3 91.0 5.8 108,0 0.9

South Africa. . . . . . . . . . . . . . . . . . 11.7 1,8 26.7 1.7 48.9 0.4

Rest of Africa . . . . . . . . . . . . . . . . 5.6 0.9 6.7 0.4 16.0 0.1

Australia 26.8 4.1 81,9 5.2 218.9 1.8

Rest of Oceania . . . . . . . . . . . . . . 0.2 — 0.4 —. 1,2 —

Latin America . . . . . . . . . . . . . . . . 3.1 0.5 10.1 0.7 36.3 0.3

World Total . . . . . . . . . . . . . . 651.7 1 00,00/0 1,565.6 1 00.00/0 11,854.1 1 00,0%

a Amount of reserves in place that can be recovered under present local economic conditions and available technology

b The Portions of total resources that have been carefully measured and assessed as exploitable under local economic conditions and available technologY

c Total amount available in the Earth which can be successfully exploited and used within the foreseeable future d Estimates of U.S. coal reserves here may not agree with other domest IC data

‘Does not Inc Iude addlt!onal resources for Queensland

SOUR(; E N afional Coal Assoclat!on Coa/ Facts

the country. Some of these have been mined

for so long that the thick, easily accessible

coal seams are rapidly nearing depletion.

The remaining seams are not readily susceptible to existing methods of mechanization.

They are one-third thinner than the national

average and lie considerably deeper in the

ground. As mine depths increase, so do the

costs of extraction and the risks from gas

and explosions. Further problems arise because the equipment installed in these mines

has become increasingly seam-specific. As

seams are worked out, the equipment cannot

be transferred.

As many mines have become difficult or

expensive to operate, new ones have been

opened. Those in the eastern part of the

country, like the eastern oilfields and

gasfields, are located in sparsely populated,

inhospitable regions from which the cost of

transporting coal to consumers is much

higher. The Soviets now look increasingly to

surface mining as a source of growth in coal

production because surface-mined coal is

cheaper to extract than underground coal—

it can be mined with higher productivity

equipment requiring less labor. But the

relative share of surface mining in the

U.S.S.R. is still low—about 37 percent in

1980 (as opposed to about 52 percent in the

United States in 1978.)3 For the present, this

low level is adversely affecting overall labor

productivity growth and output in the industry. For the future, the Kansk-Achinsk,

Ekibastuz, Kuznetsk, and South Yakutia

basins are the favored sites for expanded

surface mining. But these basins are all
Ch. 3 —The Soviet Coal Industry ● 83

located at considerable distances from the

consuming centers in the European U.S.S.R.

and high transportation costs would at least

partially offset the lower costs of extraction.

Moreover, the quality of the coal in some

of these new basins is very poor. Coal, which

is formed as the result of millions of years of

physical and chemical changes to moist vegetable matter, is a complex heterogeneous

material.’ It varies by type (depending on

the kind of original plant materials from

which it was formed), rank (based on the carbon and oxygen content, degree of moisture,

volatile matter, etc.), and the type and

amount of impurities that it contains. In

general, anthracite and various grades of

bituminous coal are preferable to lignite or

brown coal because they have a higher heat

content per unit. Large portions of Soviet

coal reserves are comprised of the less

desirable deposits, and the calorific value of

an average ton of Soviet coal has been declining (see table 20). Between 1970 and

‘See Charles Simeons, [ ‘C)al Its Role in Tomorro(i ‘.s

Techno/ogj’ (oxford: Pergamon Press, 1978): and Bernard

Cooper, “Research Challenge: Clean E;nergy From Coal, ”

Physics Today, January 1978.

Table 20.— Coal Production in Natural Units

and in Standard Fuel

(million metric tons, except calorific value)

Coal in Coal in Caloriflc

natural units standard fuela

value,

Year (1) (2) kcal/kgb

1940 . . . . . 165.9 140,5 5,928

1945, , , . . 1493 115,0 5,392

1950 . . . . . 261 1 205.7 5,515

1955 ...., 389.9 3108 5,580

1960 . . . . . 509.6 3731 5,125

1965 . . . . . 577.7 4125 4,998

1970 . . . . . 624.1 4327 4,853

1975 . . . . . 701.3 471.8 4,709

1976 . . . . . 711 5 479.0 4,713

1977 . . . . . 722.1 486,0 4,711

1978 . . . . . 723.6 4870 4,711

1979 ...., 718.7 483.9 4,713

1980 . . . . . 716.0 479.7 4,690

aone ~etrlC tOn of standard fuel equals 278 mllllon Btu or 7 9W@0r’es

bcolumn (2) dlvlded by column ( 1 ) and mult[plled by 7 a 10’ kcal kg of

standard fuel

SOURCES U S S R Central Statlstlcal Admln[stratlon, ?darodnoye khozyaystvo

SSSR v 1978 g ( Moscow Izd Statlstlka 1979) p 144 /bfd ( 1975) p

219 and ( 1980) pp 170-171

1978, the calorific value of Soviet coal declined from 4,853 kilocalories per kilogram

(kcal/kg to 4,711 kcallkg, a drop of 3 percent.

The decline could be even greater in the future. This is due, in part, to the depletion of

higher grade coals and the increasing role of

lignite, primarily from the Kansk-Achinsk

basin. In consequence, part of any future

growth in coal production will be offset by

declines in the calorific content and thus in

the heat value of the coal shipped to consumers.

Indeed, Soviet coal production figures

must be treated warily, for they are given in

terms of “run-of-mine,” i.e., coal which has

not yet been cleaned. This may cause output

figures to be overstated by as much as 20 to

40 percent.’ The most common impurities

found in coal are sulfur, stones, and ash.

Sulfur forms oxides which cause pollution;

stones and ash (noncombustible material

that remains after the coal has been burned)

provide no heat and add to transportation

costs. Coal, particularly lignite, may also

contain considerable moisture which inflates

its true weight.

In sum, the success of the Soviet coal industry seems to rest on the expansion of surface mining. Although the Tenth FYP

sought to raise underground output, this actually fell by 23 mmt during the plan period,

while surface mining production rose some

36 mmt and came closer to meeting its target. Unfortunately, however, Soviet surfacemined coal is often of poor quality. The prospects for the industry, therefore, strongly

depend on the degree to which surface mining can be expanded and the success with

which the coal thus mined can be treated,

transported, and used. The survey of the major Soviet coal basins which follows provides

the context for evaluating these two issues.

‘See Robert W’. Campbell, .~o[liet Energ?l T~ch nologie.s.”

Planning, I>olic?’, R~.~earch, and Ile[eloprnent (Bloomington,

[rid.: Indiana University Press, 1980); and V. V. Strishkov,

George Markon, and Zane E. Murphy, “Soviet Coal Productivity: Clarifying the Facts and Figures, Societj of Alining

Engineers Journal, Nlay 1973.
84 . Technology and Soviet Energy Availability

MAJOR SOVIET COAL-PRODUCING REGIONS

Figure 6 shows the location of the Soviet

Union’s major coal-producing areas. The

geographic distribution of Soviet coal is unfortunate. The heavily populated and industrialized European part of the U.S.S.R.

contains only 6 percent of the nation’s coal

reserves. The rest are located in the Arctic,

Siberia, or Kazakhstan where climatic conditions make coal extraction and transportation difficult and expensive. Tables 21 and

22 summarize the extent of explored reserves and recent coal production by basin.

The following survey briefly describes the

chief characteristics of each of these basins.

BITUMINOUS BASINS

Donets (Donbass) (No. 2 on map)

The Donets basin covers some 60,000

square kilometers (km2

) mainly in the

Ukraine, and has explored reserves of over

40 billion metric tons (bmt) (see table 21). It

Table 21 .—Geographical Distribution of Soviet

Recoverable Coal Reserves, 1967 (billion metric tons)

Basin/field Proved, probable, possible Potential

U.S.S.R. total 255 (180) 170 (99.8)

Kansk-Achinsk . . . . . . . 72.6 (71.1) 43.0 (35.4)

Kuznetsk . . . . . . . . . . . . . 59.5 (33.0) 60.8 (25.1)

Donets . . . . . . . . . . . . . . . 40.4 (7.7) 17.2 (1.2)

Pechora. . . . . . . . . . . . . . 7.9 (4.1) 6.9 (1.9)

Ekibastuz . . . . . . . . . . . . 7.4 ( – ) ( – )

Karaganda . . . . . . . . . . . 7.6 (3.5) 1.8 (0.1)

Irkutsk . . . . . . . . . . . . . . . 7.1 (7.1) 13.3 (13.2)

Turgay . . . . . . . . . . . . . . . 6.3 (5.6) 0.4 (0.4)

Moscow . . . . . . . . . . . . . . 4.8 (4.8) 2.3 (2.3)

Minusinsk . . . . . . . . . . . . 2.8 (2.8) 43.0 (35.4)

Dnepr. . . . . . . . . . . . . . . . 2.6 (2.6) – ( – )

South Yakutia. . . . . . . 2.6 (2.5) 3.2 (3.0)

Tungus . . . . . . . . . . . . . . 1.9 (1.7) 3.0 (2.9)

Maykyuben. . . . . . . . . . . 1.8 (0.9) – ( – )

South Urals . . . . . . . . . . 1.3 ( – )

Lena . . . . . . . . . . . . . . . . . 1.1 (0.7) 1.4 (1.4)

NOTE Column figures in parentheses ( ) denote coal down to 300 meters

(–) denotes not available.

SOURCES V A Shelest, Reglona/nyye energoekonorrricheskiy eprob/erny.SSSR

(Moscow Izd “Nauka,” 1975), pp 113-116, and Sovetskaya

geologiya (April 1970), p 57

Table 22.—Soviet Coal Production

(million metric tons)

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

U.S.S.R. totala . . . . . . . 624.1 640.9 655.2 667.6 684.5 701.3 711.5 722.1 723.6 719 716

(748) (752) (790-810)

Minugleprom SSSR, — 634.3 648.9 661.4 678.1 694.6 704.7 715.7 – – –

of which

Donets . . . . . . . . . . . . 218.0 217.5 217.4 219.4 219.5 221.5 223.7 222.0 – 208 203 (213)

Kuznetsk . . . . . . . . . . 113,3 115.5 119.2 123.3 128.3 134.0 138.9 141.9 (153,7) (154.9) (162.4) (149)

Karaganda . . . . . . . . 38.4 39.8 41,7 43,3 45,3 46.3 47.4 48.2 – (47) (48.6) (49)

Pechora. . . . . . . . . . . 21.5 22,0 22,5

Ekibastuz . . . . . . . . .

23.0 23.4 24,2 25,8 26,7 28.9 28 (29)

22.6 — — — — 45,8 (49,4)(50-53.5) (57.0) 59.2 66.8 (72)

Kansk-Achinsk . . . . — — — — — 27.9 29.1 31.6 — 33 34.5 (46)

Moscow . . . . . . . . . . . 36.2 36.7 36.7 36.1 35.1 34.1 30.9 29.5 — 27 25 (23)

Degree of plan

fulfillment

percent . . . . . . . . . . . — 103.5 103.5 103.2 102.5 102.5 102.4 101.7 96.7 95.6 88.2 -90.5b 

–

NOTE Column figures in parentheses ( ) denote plan targets

aTotal ,ncludes coal ~rc du~ed outside M Inugleprom, the Sowet Coal Ministry. Figures taken from ~arodrroye ~~ozyawwo for various years.

bBased on original FYP targets.

SOURCES Most production figures are from the Aprtl Issues of Ugo/ for given years Other data are from the followlng

—

1979 plan figures Ekonorn(cheskaya gazeta, No 5 (February 1979), p 1

1979 total production Pravda Ukra(na, (Jan 26, 1980), p 2

1980 plan total Narodnoye khozyaysfvo Kazakhsfana, (October 1978), pp 38-45

1977 Eklbastuz plan Partlynaya zhizn Kazakhsfana, (January 1978), pp 34-35 [JPRS 71, 127, (May 17, 1978), p 9 ]

1976 and 1977 Eklbastuz plan targets Ugo/’, (January 1978), pp 16-20

1970 production V A Shelest, Reglona/nyya energoekononrlcheskfya prob/erny SSS/?, (Moscow Izd “Nauka, 1975), p 26

1975 Kansk-Achlnsk and Ektbastuz production and 1980 basin plan targets A M Nekrasov and M G Pervukhln, .r3wrgetika SSSR v 1976-1980 g,, (Moscow: Izd,

“Statlstlka, 1977), p 146

1981 plan Ekonornlcheskaya gazefa, No 15 ( 1981), p 2

See also Sov/ef Geography, April Issues

86 ● Technology and Soviet Energy Availability

is one of the oldest sites of underground mining in the U. S. S. R., and, as table 22 shows,

the country’s leading producer. The basin

contains high-grade coals, including coking

coal and anthracite, and is located close to

consuming industries. It is, therefore, particularly important to the Soviet coal industry.

Past mining in the Donets concentrated

on thicker coal seams close to the surface.

Much of this coal is now depleted, and

miners must work thin seams at everincreasing depths. In fact, the average depth

of working faces in 1978 was well over 500

meters (m), and this depth was increasing at

15 m per year, nearly twice the national

average. In addition over 80 percent of

Donets coal lies in seams less than l-m thick

(coal which would not even be counted in

U.S. reserves), and many of these are steeply

pitched which makes them difficult to work.

Deteriorating mining conditions have also

led to increasing ash and stone contents in

Donets coal.’

It is not surprising, therefore, that production in the Donets has declined over the

past decade, from 216 mmt in 1970, to 203 in

1980. The 1981 production target is 213

mmt, lower than actual 1970 output.7

Kuznetsk (Kuzbass) (No. 10 on map)

The Kuznetsk basin is the Soviet Union’s

second largest hard coal-producing region,

covering some 26,000 km2 in southwest

Siberia. This basin is especially important

because of its reserves of high-quality coking

coal, much of which can be surface mined.

Explored reserves at Kuznetsk are some 60

bmt (see table 21). Production here rose by

‘A. V. Sidorenko, hlining Science un(i the Rational Utilization of Rau’ Mineral Resources (Moscow: Izd. “Nauka,”

1978), p. 47; Joseph K. ~’ilkinson ted.), “Soviet Coal Strives

for Expansion, ” (’ou1 Age, April 1978, p. 86; A. V. Tyzhnov,

‘L(leological Reserves of Coal in the U. S. S.R., ” So[etskaya

geologija, No. 4, April 1970, p. 64; and I,eslie Dienes,

“Regional Dimensions of Soviet ~~nergy Policy, ” paper prepared for the American Association of Geographers, 1979, p.

38.

‘Sol ie t (ieograph,}t, April 1 W 1, p. 276: Ek on om ich e.ska.)~a

gazeta, No. 15, 1981, p. 2.

25 percent between 1970 and 1977, reaching

141.9 mmt. The 1980 plans called for 162.4

mmt. However, the latter were almost certainly underfulfilled (see table 22), and lately

Soviet literature has been reporting production problems in the basin. These seem to be

at least partly due to failure to introduce new

mine capacity. Indeed, in the past 18 years,

only one new mine has gone into operation. a

There are also indications of labor shortages

in the basin. The 1981 plan target was only

149 mmt.9

Pechora Basin (No. 6 on map)

The Pechora basin covers 120,000 to

130,000 km2 in the extreme northeast of the

European U. S. S. R., north of the Arctic Circle. Much of the coal here is located in permafrost areas, and has been only superficially studied. The basin contains explored reserves of 7.9 bmt, much of it coking coal (see

table 21). A large percentage of this lies

below 300 m, but in general, the coal is closer

to the surface than in the Donets basin.

Development of the Pechora basin began

in the early 1940’s, using forced labor. But

although the basin was able to supply coal to

northern Russia during World War II, the

extremely cold climate has made mine construction difficult. Pechora mines are also

susceptible to gas explosions. Production

here rose from 21.5 mmt in 1970 to 26.7 mmt

in 1977, and was slated to reach 29.8 mmt by

1979, but in recent years the basin has failed

to meet plan targets. About two-thirds of

Pechora’s output is high ash content coking

coal, which requires cleaning before use; the

rest is steam coal.

Karaganda Basin (No. 7 on map)

The Karaganda basin, covering 3,000 km2

in northwest Kazakhstan, contains 7.6 bmt

of explored reserves. Over half of this lies

below 300 m. Karaganda has both coking

and steam coal. Here, the steam coal is high

in ash content and difficult to enrich. —- —

“C;. Shum—kin, “1.et’s Look For and Find the Reserves, ”

Trud, Sept. 15, 1978, p. 1.

‘fi~konovli(heska~a” gazeta, No. 15, 1981, p. 2.
Ch. 3—The Soviet Coal lndustry ● 87

Large-scale production in Karaganda began in the 1930’s, when the area was first

reached by railway and coal could be shipped

to the iron and steel industries in the Urals.

Now local iron and steel plants are major

consumers. Karaganda’s output grew steadily between 1970 and 1977, reaching 48.2

mmt. No production figures after 1977 have

been published, but it is highly probable that

growth in output has been slowing since the

mid-1970’s, a fact reflected in the 1981 production target of 49 mmt.10 In March 1979, it

was reported that the “Karagandaugol”

mining association was producing below

plan goals in January and February of that

year, and that the association had also been

under plan for 1978.1

1 A Kazakh Party official reported in October 1978, that the

“50th Anniversary of the U.S.S.R.” mine,

one of the basin’s best, was below plan for

nearly all indicators, including output, and

was even producing below the 1977 level for

the same months.12 There are indications of

equipment problems, shortages of labor, and

inadequate new mine construction.13 Past

planning mistakes also haunt the Karaganda

basin. The city of Karaganda is located over

valuable reserves—1 1 beds with 1 bmt of

coal. Consequently, mined-out seams here

have been packed with rubble to prevent

subsidence of the city, an operation which

diverts needed labor away from production.

South Yakutia (No. 17 on map)

The South Yakutian basin lies in a remote

area of the Soviet Far East. In 1967 explored

reserves here were set at a relatively low

level, 2.6 bmt, but more recent work may

have significantly expanded these estimates.

‘“I bid,; I.eslie I)ienes and ‘1’heodore Shabad, The So[’iet

Energ>’ .V?’.stern. Iiesourcp II,se and Policies (Washington ,

r),c.: V. H. W’inston & Sons, 1 979), p, 114.

‘ ‘B. Gloto\’, “In Iiope of a Sunday Assault, ” Sot.siali.stiche.~ku~a in(iu.stri?’u, hlar. 15, 1979, P. ~.

110. Nlulkibay’ey., “W”hy Are the hlines G i~ring Up the Positions ‘rhe~’ ‘~rc }+’on A’urc)dno?e h h OZVC1?.Y tt <) h“uzakh.<tanu,

No. 10, oct,otwr 1978, pp. 38-4.5 in .JPRS 72,902, ~lar, 1, 1979,

p, 9H.

1‘I bid., p. W; (iloto~, op. cit., p. 2.

‘

4 B. (lloto~’, “Arguments Instead of Action, ” .% Jt-

.siuli.s tich e,sh u) a in dlf .i tri?w, tJ u ne 6, 1980, p. 2, in tJ P KS

76,242, Aug. 18, 1 WO, p. 43.

In any case, the contribution of South

Yakutia lies in the future. Although it is

now producing only very small amounts of

coal, it is the site of a major Soviet-Japanese

energy cooperation project that is expected

to yield about 85 million tons of mediumquality coking coal for export to Japan by

the year 2000. (For details of this project, see

ch. 11. )

SUBBITUMINOUS AND

LIGNITE BASINS

Ekibastuz (No. 8 on map)

Ekibastuz is a small—160 km2—area in

northeast Kazakhstan containing 7.4 bmt of

explored reserves. Production here rose from

22.7 mmt in 1970 to 59 mmt in 1979 (6 mmt

short of the plan target). Ekibastuz has

abundant coal suitable for surface mining,

and in 1978, it alone accounted for 22 percent of Soviet surface-mined coal.15 Labor

productivity in Ekibastuz is high, but the

ease and consequent low cost of extraction is

somewhat offset by the poor quality of the

coal, which has a high ash content (averaging 40 percent, but reaching as high as 48 to

56 percent in some cases) and thus a low

calorific value per unit. Some Ekibastuz coal

is used locally as steam coal, but in 1979,

over 60 percent of the basin’s output was

shipped outside Kazakhstan.16

Kansk-Achinsk (No. 11 on map)

The Kansk-Achinsk basin is located to the

east of the Kuznetsk basin. Its explored

reserves, the largest in the U. S. S. R., have

been set at 72.6 bmt. This coal can be surface

mined at low cost. Unfortunately, however,

it is mostly lignite, which is characteristically low in heat value, and high in moisture

content. Kansk-Achinsk coal also tends to

self-ignite when dried. For these reasons, its

transportation is difficult, and demand for it

is low. In 1975, about 90 percent of the

basin’s output was used 1ocally. This coal is

difficult to use even locally, however, and
power stations refuse shipment whenever

possible. Kansk-Achinsk lignite cakes onto

boilers and has highly variable ash melting

points.17

About 32 mmt of coal were extracted here

in 1977, and the 1981 target is 36 mmt (see

table 22). This basin is considered by many

Soviets to be the best hope for expanded coal

production (production that has been forecast as high as 1 bmt/yr nationwide18), and

there are plans for a large fuel, energy, and

industrial complex to be built in the area.

However, the feasibility of this venture will

rest importantly on the development of

boilers suitable for the coal (see ch. 5.)

“{~~{}1’, No. 12, December 1975, p. 62; Dienes and Shabad,

op. cit., p. 251; Campbell, op. cit., pp. 175-6.

1“l,. Sizov, “Fuel Base of Siberia: Ilow to I)e\elop KanskAchinsk Fuel-17 nergy (’omplex, ” Trud, June 27, 1980, p. 2.

Moscow Basin (No. 3 on map)

This basin, covering 120,000 km2 south of

Moscow, contains some 4.8 bmt of low-quality coal, having high ash and sulfur contents

and low calorific value. Production peaked in

1958 when new underground mine construction stopped,19 and has been declining since

1971. Output fell from 36.2 mmt in 1970 to

29.5 mmt in 1977, and plan targets envisage

a further reduction in 1981 to 23 mmt. Given

the high cost of this coal, underground production probably would have ceased altogether were it not for the proximity to consumers. (In addition, there is relatively

cheap coal suitable for surface mining in the

“A. D. Breyt,erman, The Economic Geogruph>+ of Heut J)

lndu,str~ (Moscow: Izd. “Vysshaya shkola, ” 1969), in JI]RS

49,321, Nov. 26, 1969, p. 66.
Ch. 3— The Soviet Coal Industry • 89

southern part of the basin. ) The Moscow

basin’s output is largely of local importance,

serving the industrial regions around Moscow primarily as boiler fuel.

SUMMARY

Although the U.S.S.R. has large coal reserves, their geographic distribution is unfavorable, with most of the coal lying in

little-studied basins in remote areas with

adverse climates. Not only has coal production declined over the past several years, but

the calorific value of a ton of Soviet coal has

decreased and probably will continue to do

so.

Major characteristics of the primary coal

basins are summarized in table 23. Important features to note include the fact that the

Donets basin, the major coal producer in

the U. S. S. R., has an unfortunate geological

structure. More than 80 percent of the remaining coal is in seams less than 1 m thick

and only 19 percent of this coal is between

ground level and 300 m. Coal from Ekibastuz

is very high in ash content, which means

that Soviet output figures for the basin

overstate its contribution to the production

of energy. Kansk-Achinsk coal is low in heat

value and cannot be transported economically to the central industrial region in untreated form.

In short, despite large reserves, coal output has been falling and the outlook for the

future is not as bright as one might expect.

Increasingly, the unfavorable geographical

distribution of unexploited coal reserves will

have its effect on the costs of production and

utilization, especially in view of continuing

depletion of the Donets reserves. Most of

the major underground mining basins are

having difficulty meeting output goals.

Soviet hopes therefore rest on coal which can

be surface mined.

Table 23.—Characteristics of Major Soviet Coal Deposits

Explored Average

reserves Average Average caloriflc Share of

(billion thickness depth of value Moisture Ash production

metric of seam mine (Btu per content content in 1980

Type of mining tons) ( meters) (meters) pound) (percent) (percent) (percent)

Donets . . . . . . . . . .. Underground 40 0.9 566 10,900 6.50/o 19.20/.

Kuznetsk . . . . . . . . . Underground

and surface 60 2 5 262 9,990 10.2 19.0

Pechora. ., , . . . . . . Underground 8 2.4 454 9,390 8.3 25.1

Karaganda . . . . . . . Underground 8 2.5

Ekibastuz . . . . . . . . Surface

384 9,250 7.5 28,8

4 10-40 — 7,250 7.7 39.1

Kansk-Achinsk . . . Surface 72 — — 6,490 33,0 10,7

Moscow . . . . . . . . . . Underground 5 2.5 135 4,550 32.3 35.5

280/o

22

4

7

10

6

4

SOURCE Off Ice of Technology Assessment CIA USSR Coal Industry Problems and Prospects, "ER 80-10154 (March 1980)

SOVIET COAL INDUSTRY TECHNOLOGY –PROBLEMS

AND PROSPECTS

The technological level of Soviet-designed the better equipment, while some mines

and produced coal mining equipment is un- must make do with old, deteriorated machineven. At its best, the Soviet coal mining cry.

equipment industry has produced sturdy

and well-designed equipment. But the tech- Soviet coal mining equipment stocks are

nological level of equipment in place varies. large, greater in fact than American stocks,

Major basins can be expected to command yet the U.S.S.R. produces less coal than the
90 Technology and Soviet Energy Availability

United States. Despite the large inventory

of equipment, the level of mechanization is

often low, including the main extraction

operations in some basins. This is due in part

to failure to produce needed quantities of

equipment of proper quality; failure to maintain equipment properly; lack of sufficient

parts or repair crews; and neglect of maintenance schedules. Anomalies abound. In

underground mines, coal may be extracted

and the mine roof supported with sophisticated pieces of equipment—which operate

along roadways prepared by hand. In the

country’s open-pit or surface mines, large

capacity excavators may be teamed with

trucks mismatched in size and strength.

Such examples are not isolated extremes;

technological inconsistencies of this type are

widespread and chronic. In short, despite a

seemingly abundant stock of equipment, the

failure to produce an appropriate mix of

machinery models for the special conditions

imposed by different coal seams has led to

shortages in some basins.

Production of coal mining equipment has,

in the past, been of secondary priority to

Soviet planners, subordinate to oil and gas

development. The quality of Soviet machinery reflects this. The older equipment

that makes up the bulk of the stocks is

equivalent to models produced in the United

States 10 to 20 years ago, smaller and less

productive, although apparently mechanically reliable. This has been due in part to

Soviet reluctance to adopt new technologies

in coal mining, even technologies that would

be readily available outside the U.S.S.R.

Plants continue to produce equipment that

is no longer in great demand, while production of new equipment, to mine thin seams

for example, is lagging seriously.

The failure to change products has two

major causes. Perhaps most important is the

pervasive reluctance of plant managers to

jeopardize output plan fulfillment by interrupting production to retool for a new product. A change in the product line not only

means risking bonuses given for plan fulfillment, but also requires new supply arrangements, possible changes in profitability, and

risk associated with new production technology and new products. Soviet managers

have little incentive to incur such risks and

so prefer to continue to use and produce established models, even if they are outmoded

or unwanted.

An additional problem stems from the fact

that the Ministry of the Coal Industry has

been in a relatively weak position vis-a-vis

its equipment suppliers. Responsibility for

producing coal mining and transport equipment was scattered among many factories,

all of which also produce a variety of other

machines for other customers. Nor can the

ministry participate in the research, design,

and testing of new mining equipment—as

does the Ministry of the Power Industry, for

instance, with respect to power generation.

The current renewed interest in coal has

led to some attempts to alleviate these problems. In the early 1970’s an effort was made

to make both manufacturers of some mining

equipment and coal mine construction organizations more responsive to the needs of

the industry, and administrative responsibility for these activities was transferred

to the Ministry of the Coal Industry, known

as Minugleprom. (Underground equipment

is handled by Minugleprom, but the production of surface mining equipment is under

the Ministry of Heavy and Transport Machine Building. ) This has produced some improvement: production of modern equipment

has increased in recent years and the quality

of output has reportedly risen. For instance,

between 1973 and 1977, the number of mining equipment models awarded the State

Seal of Quality, the U.S.S.R.’s highest

category of product quality, increased 2.4

times. 20 However, demand is still not being

satisfied.

Nor does it seem that investment in productive capacity in underground coal mining

machine building is sufficient to support in-

———————

‘

(

’’’ hlake Decisions of the 25th Congress of the CPSU a

Reality, ‘! IIg,j/+, N{), 4, April 1978, pp. 3-7 in ,JPRS 7 1,~~~~,

Jun(l 22, 1978, pp. 3-’7.
Ch. 3— The Soviet Coal Industry ● 91

creased output. It was hoped that transferring coal machinery plants to Minugleprom would eliminate administrative barriers frustrating the satisfaction of demand

for equipment. Minugleprom, already responsible for the fulfillment of coal output

targets, would itself set the production programs of the equipment plants and oversee

their fulfillment. Instead, it appears that

Minugleprom may be diverting capital away

from the machinery plants in an attempt to

assist the fulfillment of short-term coal mining targets.

Inability to produce appropriate mining

equipment in the required quantities and of

required reliability is only one aspect of the

equipment problem facing the industry. Perhaps even more serious in the long term is

the seeming inability of miners themselves

to use and maintain equipment properly. In

large part, the difficulty stems from the inattention to maintenance and repair schedules, lack of spare parts, improper operations, and use of equipment inappropriate to

geological conditions. As a result of poor

maintenance, downtime on machinery is seriously in excess of established norms.21

Several examples may be cited. Equipment

failures in the Karaganda basin have increased by 27 percent in recent years.22 In

1978, one Soviet journal reported that coal

mining equipment idleness had reached 25

percent, 23 while another reported 350 work

stoppages due to equipment failure in one

Donets mine alone.” Poorly maintained

equipment is also leading to an increased

rate of accidents in the labor force. Soviet

fatalities per million tons of coal mined were

several times greater than the U.S. rate in

the mid-1 970’s.25

—

‘“(; lOto\’,” op. (’it., p, 2.

‘JJI ulkitmy(~i, (}p (’it.

L‘(;, I )f~rf)ft’~[~~, ‘‘1 ,()<[ I]ersptlc>t if(~, ” .$’,)( sl(lli ~ t i(/ltj ~ku?’u

[ncl(~ i tri LIU, 1 )ec. ;1, 197H, p. 2

“/1. Zharkikh, ‘‘ I;ar Il(hind, l’r{ll(iu 1‘Aru/H), l)ec. 16 ,

1978, p. 2.

‘‘“ hlore (’ml for the (’t)untr}, ( ‘~1)1 ( ‘Lrurn ), N(). 1 ,

.January’ 1979, pp. 1-4, in J [’1{S 1. H:)70, Apr. :1, 1979, p, 54;

,Jowph J. }’ancik. “SOmt~ I mpr(~ssif)ns and ot]st~rkations” o f

Sokiet (’(ml 111 ining, ” .~’()( i~ t 1’ of ,111 tling l<flgin{c>r,~ ,Ioli rnul,

.Ju I.Y 1974, p. 65.

The following sections briefly describe the

most important technology and equipment

in both surface and underground extraction

of coal, summarizing the state of the Soviet

industry, and identifying the major difficulties it is encountering.

SURFACE MININ G

Surface or strip mining in 1980 accounted

for 37 percent of Soviet coal production. In

surface mining, the rock and earth above the

coal seam, called overburden, is removed to

expose the coal, which is then broken up,

loaded onto transport, and hauled away. Surface mining equipment ranges from construction bulldozers or front-end loaders, to

enormous draglines, the largest moving land

machines in the world. Large shovels and

draglines remove the overburden so the coal

can be picked up by smaller shovels and

front-end loaders, although the latter are

relatively little used in the U.S.S.R. Large

power shovels work from the floor of the coal

pit, taking bits of earth from one wall of the

pit, pivoting and dropping the load on the

other side. Larger draglines work from the

surface at the edge of the pit. Buckets are

dropped from the ends of long booms and are

filled by dragging them back toward the

machine. Draglines then turn, reach across

the pit, and drop their loads. Shovels and

draglines are generally preceded by vertical

or horizontal drills that bore holes for explosives that can shatter the earth and rock

for easier digging.

From an engineering standpoint, the Soviet Union is generally capable of fulfilling

its surface mining needs. (The exception to

this rule is equipment for operating in extremely cold temperatures, as in the Yakutsk basin. Such equipment has yet to be

developed anywhere in the world. ) But equipment is slow in reaching production and supplies are chronically short. In 1980, draglines

accounted for about 33 percent of stripping

work, but there have been production shortages and the demand for draglines is not

being met.26 Lack of haulage capacity is a

—

‘“l ‘(qo/’,- IN:. 1, 1 9/+1, p, 5.
92 . Technology and Soviet Energy Availability

serious problem, and there is also a need for

excavators of greater bucket capacity and

cutting force. With the development and introduction of 120- to 180-ton trucks, the importance of large bucket capacities increases, because of the need to match equipment productivities and achieve more efficient (i.e., uninterrupted) operations. Although some giant (5,000 m3

/hr) rotary excavators exist—two are in operation at the

Bogatyr Mine in Ekibastuz and one is operating at the Irsha-Borodino pit in KanskAchinsk—there remains a general deficit in

their supply and capacity.

Climate plays a special role in contributing to downtime and constraining the efficiency of Soviet equipment. Cold climates

require special design features. Electrical

systems are adversely affected by the cold,

and when the temperature drops below –

40 ‘, the conveyer belts on rotary excavators become virtually inoperable. These

effects are very serious in Siberia where

much of the U.S.S.R. surface mining is carried on. For example, around 70 percent of

the coal in the Kansk-Achinsk basin is produced through these methods.27

As in other energy industries, part of the

problem of supply relates to the inadequacy

of facilities to produce large pieces of equipment. In an effort to alleviate this problem,

work has begun on the development of a

machine building industry in Siberia. Construction of the Krasnoyarsk Heavy Excavator Plant is now underway and is scheduled to be completed by 1984.28 The plant is

to produce mechanical shovels with bucket

capacities of 12.5 m3

, walking excavators

with 40 m3 buckets, and rotary bucket equipment with capacities of 5,000 to 12,500

m

3

/hr.

The success of these and other attempts

to improve the quality and quantity of surface mining equipment are crucial to the coal

“B. Pichugin, “Coal Made Ready During the Summer, ”

Sotsiaiisticheska}!a industn”va, July 17, 1980, p. 2.

W. Lisin, “A Second ‘Uralmash’ on the Banks of the

Yenisey River, “ 7’nld, Feb. 25, 1979, p. 1.

industry as a whole. As mentioned above,

Soviet plans to increase coal output rest

ultimately on the expansion of surface mining. To a large degree, therefore, the fate of

the Eleventh FYP for coal will depend on the

availability of sufficient and appropriate surface mining equipment with adequate capacities to deal with increased output.

UNDERGROUND MININ G

The most common technique for mining

coal underground in the U.S.S.R. is by continuous mining machines built into longwall

systems. 29 Longwall mining utilizes a steel

plow or rotating cutting drum that moves

back and forth across a coal face several hundred feet long. As the machinery moves, it

cuts the coal, which falls onto a conveyer.

Broad steel beams set a few feet apart provide ceiling support. These supports are

moved by self-advancing hydraulic jacks

that change their position during or after

each pass of the cutting machine along the

coal face. This change in position is accomplished by releasing the pressure exerted

on the roof and moving the machinery forward one beam at a time. The unsupported

portion of the roof then collapses. A continuous mining machine tears the coal from

the face and loads it for transportation in one

operation.

Only about 4 percent of U.S. underground

production comes from longwall mining. In

contrast, it is the predominant method in the

U.S.S.R. (as in Western Europe), accounting

in 1979 for over 65 percent of total Soviet

underground output.30 In some basins, this

percentage is even higher, (reaching 96 percent in Moscow, 90 percent in Pechora, and

86 percent in Karaganda), the national average being held down by a relatively low level

of longwall mining in the Donets basin. This

——— —

See Simeons, op. cit., 29 pp. 94-95; Environmental and

Natural Resources Policy Division, Congressional Research

Service, Library of Congress, The Coal Industry: Problems

and Prospects, a background study prepared for the Permanent Subcommittee on Investigations of the Senate Committee on Governmental Affairs, 1978, p. 26.

30"Make Decisions of the 25th Congress . . . . ,“ op. cit., pp.

12-20.
Ch. 3—The Soviet Coal Industry ● 93

is probably due to the lack of longwall

miners designed for work on thin seams.

The Soviet equipment stock in underground mining is large and increasing, but

its quality is declining. Although the number

of mechanized complexes in use over the 4

years from 1975 to 1978 (inclusive) went up

by 24.4 percent, the amount of equipment

recorded as nonoperational went up by 73.7

percent.31 This can be explained by the age of

the equipment in use, the use of equipment

unsuited to worsened geological conditions,

and equipment repair and servicing practices.

Soviet sources point repeatedly to underground equipment requirements that are not

being met. In particular, miners in the

Donets basin are faced with the increasingly

pressing need for equipment suited to new

geological conditions. Sixty percent of Donets coal is being mined from thin seams less

than 1.2 m thick, 50.7 percent of which are

gently sloping, and 9.3 percent of which are

steep. 32 At the beginning of 1978 thin seams

already constituted 83 percent of the commercially recoverable coal reserves. Yet of a

total of 50 working faces at one Donets mine,

only 12 were being worked with appropriate

equipment. Shortfalls in production by the

machine building industry are blamed for

—31Ye. h’. Rozhchenko, “on Some Problems of the I)e\’elopmen t of LJnderground Coal NI ining, 1‘gIJ1 No, 8, August

1979, p. 6,

1’.+%. I. Basho\’, “Dongiprouglemash’s L)e\’elopers Ar e

kf’orking for I)onbass illiners, “ 1‘~ol’, No, 10, octoher 1979,

pp. 41-46, in .JPRS 75,145, Fel), 15, 197s, p. 25,

“J’. I)eshko, “Fjquipment for Thin Seams q ”’ Rabocha?a

f.ylz(’1(1, Dec. 14, 1979, p. 1.

this problem. Past emphasis on production

of machinery for excavation of thicker and

more productive seams had relegated thin

seam equipment to a secondary, nonpriority

role. Despite official recognition now of the

need for thin seam excavators, equipment

for thicker seams has continued to be

developed. ”

In addition to not meeting the present

equipment needs of the coal mining industry, machine builders are criticized for a

lack of attention to quality, reliability, and

ease of repair. 35 Their seemingly slow re

-

sponse to changing needs in the industry is a

function of a mix of operational constraints:

a shortage of labor, insufficient production

space in factories, pressures of shortrun production targets, and the fact that the coal industry is not the sole (nor even, in some

cases, the primary) customer for their products.

Other deficiencies that continue to be

cited include a shortage of equipment for the

transport of support materials and personnel, drills of insufficient power and productivity, highly labor-intensive timbering techniques, low mechanization of tunneling operations, and ventilating systems of inadequate power and efficiency. The claim is

made that while technical solutions for these

problems have been developed, the necessary equipment for implementing change

is not yet being produced.36

“liabochaja gazeta, hla~r 27, 1980, p, 1,

‘

5 Rozchenko, op. cit., p. 7,

‘

b Ibid., p. 9.

SOVIET COAL INDUSTRY INFRASTRUCTURE

AND RELATED AREAS: PROBLEMS AND PROSPECTS

Aside from the quantity and quality of new mines; in the transport of coal; and in

mining equipment, the major problems fac- the amount of capital investment available

ing the Soviet coal industry lie in labor sup- to the industry. The following sections deal

ply and productivity; in the construction of with these issues.
94 • Technology and Soviet Energy Availability

LABOR

The labor force employed in the Soviet

coal industry is enormous. It has been estimated that in the early 1970’s there were

more than 1 million workers involved in the

production of coal.37 In comparison, the U.S.

coal mining industry required only 159,000

people in 1972.3

’ And despite the high absolute level of employment, Soviet labor

shortages in the coal industry are becoming

increasingly serious.

The major reason for the coal industry’s

voracious requirements is the low level of

mechanization. Over 50 percent of those

employed are still engaged in manual labor.

Even in the more highly mechanized longwall mines, one-third of the work performed

is manual. Much of this labor relates to auxiliary operations. Mine repair, roof control,

and even some coal and rock loading is done

manually .39

Labor shortages affect both coal extraction and coal mining machine building. Pravda noted in 1979 that in the Kuznetzk basin,

the work force was 5,000 short in the underground mines alone. Labor shortages are

also reported for the Karaganda basin. The

director of the Gorlovka Machine Building

Plant, a major coal mining equipment producer, recently complained that production

targets cannot be met because the plant

lacks workers. In October 1978, M. I.

Shchadov, a deputy minister of Minugleprom, indicated that the industry as a whole

was facing labor shortages and that the

shortages were impeding output.40

‘

7 SLephen Rapawy, “Estimates and Projections of the

labor Force and Civilian Employment in the U. S. S. R., 1950

to 1990, (Washington, D. C.: U.S. Department of Commerce,

Bureau of Economic Affairs, September 1976), p. 31:

Strishkov, Markon, and Murphy, “So\iet (’oal Productivity . . ., ‘‘ op. cit., p. 48.

“Campbell, op. cit., p. 132.

W’. P, Podgurskiy and A. S. Nlinevich, “Reserves of I,abor

Productivity Growth, ” Llgol’, No. 7, July 1980, p. 43.

4“ Bogachuk. op. cit.; Mulkiba.vev, op. cit., p. 99; V. Vylgin,

‘4 In F;vw-y Column-A Nlinus, ” Rabochu?w gazeta, hlay 27,

1980, p. 1; h!. 1. Shchadov, “Coal: Increase Extraction, Accelerate Deliveries, ” (judoh, oct. 12, 1978, pp. 1-2 in ,JPRS

72,821, Feb. 14, 1979, p. 66.

These shortages may be exacerbated by

the progressive reductions in the length of

the workweek. Before 1956, mines operated

7 days a week. Between 1956 and 1958, extraction and development work began to

shut down 1 day a week and the workday

was reduced to 6 hours for some workers. In

1967, a 2-day weekend was introduced and

miners doing heavy labor underground were

given a 30-hour workweek. These reductions

have created a demand for additional labor

that is not likely to be met in the next few

years, for the industry is experiencing difficulty in recruiting and keeping workers. At

one time, coal miners were among the highest paid workers in the U. S. S. R., but now the

difference between coal miners’ wages and

those of the average industrial worker is

decreasing. Housing for coal miners is in

short supply and this does little to attract

workers. Shortages of labor are especially

acute in the eastern regions of the country41

and are affecting mine construction as well

as coal output there. Labor turnover is also a

substantial problem. In early 1980, turnover

ran at about 20 percent of the total work

force per year.42

Problems of this kind are not unique to the

coal sector; they pervade all Soviet industries and the situation is likely to grow worse

in the years ahead. The probability that the

coal industry will have sufficient labor to

solve its problems without other reforms is

low. Thus, in coming years solution to the

labor problem will rest on increases in labor

productivity.

Table 24 gives official Soviet productivity

figures for 1971 to 1977, the last year for

which they are available. The amounts

shown here are inflated by the fact that, like

output data, Soviet productivity statistics

are in terms of “raw” (i.e., uncleaned) coal

mined per “production” worker, a category

that excludes workers who would be counted

in the West. Nevertheless, several trends are

clear. Labor productivity for the industry as

41 Kurnosov, op. cit.

42 Podgurskiy, op. cit.
Ch. 3— The Soviet Coal Industry ● 95

Table 24.— Labor Productivity in Soviet Coal Mining

(metric tons mined per person per month)

1971

Minugleprom . . . . . ., ., ., . 62.3

Underground mlnlng. ., ., . 48.0

Surface mining . . . . . . . . . . . . 310.0

By basin.

Donetsk (underground) . . . . . . 39.9

Kuznetsk ., . . . . . . . . . . . . . . 74.1

Underground ... ., . . ., —

Surface . . ., . .

Karaganda ., ., . . . . . . . . . . 73.5

Underground . . . . . ., —

Surface . . . . . . ., . . —

Moscow . . . . . . . . ., . . 74.0

Underground . . . . . . . . . . . . . —

Surface . . . . . . . . . . . . . . . . . .

Pechora (underground) . . . . . . 61.0

Kansk-Achlnsk (surface) . . . .

SOURCES April issues of Ugol

1972 1973 1974 1975 1976 1977 1979 —

66.3

40.5

335.1

69.7

52.6

362.5

73.1

54.3

391.2

75.4

55.2

428.3

75.1

54.6

435.5

75.3

53.7

454.0

70.2

48.6

448.0

41.7

78.6

43.3

82.7

43.9

87.0

70.4

231.3

91.2

86.7

295.1

87.2

80.2

306.5

70.6

43.7

92.8

74.2

253.5

96.2

91.3

316.4

90.5

83.4

303.4

75.0

42.5

95.1

75.7

260.0

98.6

93.7

328.2

87.4

80.4

283.6

77.8

929.9

41.4

96.3

75.9

271.9

98.9

93.9

338.4

86.0

78.8

272.2

79.1

909.3

—

—

—

—

—

— —

84.5

—

79.4

—

78.4 82.7—

64.4 67.5—

a whole rose through 1975, but since then appears to have stalled at around 75 mt per

person month. Labor productivity in underground mining has decreased since 1975,

although this decline has been offset by

gains in surface mining, where productivity

is 8.5 times higher. Continued gains in surface labor productivity must be counted

upon to offset underground declines such as

those apparent in the Donets and Moscow

basins. Labor productivity in Donets is not

even one-half as great as in the other major

basins, due largely to a relatively low level of

mechanization of mining operations. Since

the Donets basin employs about 55 percent

of the industry’s labor force,43 improvements

in labor productivity here are particularly

important.

MINE CONSTRUCTION

Coal mine construction organizations, like

underground mining equipment manufacturers, were transferred to the administration of Minugleprom in the early 1970’s, But

here too, there have been complaints that no

improvements have resulted. Instead, the

construction firms have been cut off from

‘‘(’(~ntra] 1 ntt’lli~[~nce .4gLInc~, ‘‘[ 1, S.S. 1{ : (’{la] I ndustr?’

I)rt~lJl~,nl< an[i f’rf)+p((’ts. [~ 1{ H()-I()151, !Iarth 19H(). p, H,

their old ministries and suppliers, and do not

have production capacities of their own.44

They are inhibited by lack of resources and

labor shortages. In addition they must still

contend with all the traditional impediments

to the conduct of business in the Soviet

economy: lack of cooperation from other

organizations, poor plan development, shortages of labor and funds, and improper work

practices.

The Central Intelligence Agency (CIA)

has reported that additions of new coal mining capacity between 1976 and 1979 fell to

the lowest level in nearly a decade. At the

same time the rate of mine depletion has

risen, and it has been estimated that over

three-quarters of new mine capacity now

merely offsets mine depletion .45 Estimates of

recent yearly mine depletions are given in

figure 7. The depletions shown for 1978

through 1980 are substantial and may pose a

serious impediment to coal output growth in

the next 5 years. Since new Soviet mine

capacity is taking 10 to 11 years to introduce, the Soviets will be largely dependent, for many years to come, on assimilating

mines currently under construction.

“N Klunduk, ‘‘Is ‘l’his Really F~cononli(’/ }’r~/ { (ju, I)ec’, 11 ,

197s, p. 2,

4 (’1 ,1, ‘4 [ 1SS[{: Cm] Industry , ‘“ op. Lit , p. 3.
1975 I New capacity added

I replied depletion

Increment in coal production

1978

\

I
Ch. 3— The Soviet Coal industry ● 97

Mine reconstruction is also lagging, According to Soviet norms, a mine with a

capacity of up to 3 mmt per year should require 5 to 7 years for reconstruction. In practice, reconstruction of many mines takes

three times longer.46 Due to shortages of appropriate new capacity, mine operators who

must fulfill their output plan targets mine

whatever coal is available, often damaging

longrun development plans in the process. In

their attempts to maintain output, they

push mining into ill-studied coal seams and

use machines in conditions for which they

were not designed.

The severity of the problem may be suggested by the following example from

Kuznetsk. In this leading Soviet coal region

only one new mine has gone into operation in

the past 18 years in two of the biggest production units–the Kuzbassugol and Leninskugol mining associations. At present, not

one mine is under construction in the province that includes much of the basin.47

TRANSPOR T

The bulk of growth in coal production is

coming from Siberian basins. The limitations

posed by transport conditions were officially

recognized by the November 1979 Plenum of

the Communist Party Central Committee in

the emphasis it placed on solving transport

problems associated with the growing flow

and volume of freight. Basically, there are

three choices open to the U.S.S.R. for the

transport of coal from remote regions: rail,

slurry pipeline, and the conversion to electricity at source and transmission by wire.

This latter option is discussed in chapter 5.

Rail

At present, coal is transported almost entirely by rail and a number of factors hinder

its delivery. These include losses of coal

during shipment, and more important, the

inefficient management and insufficient capacity of the rail system. ——

‘“S. Za~gan O\, et al., ‘ ‘on NI ining Technology, IJra I (ia,

oct. 14, I 979, p, 2,

‘-Shunlkin, op. cit., p, 1, “

First, some Soviet coal is difficult to transport economically. Ekibastuz and Kuznetsk

coals, for instance, can be transported in

run-of-mine form, but Kansk-Achinsk coal,

which tends to self-ignite when dried, can be

shipped only 1,500 to 2,000 km in untreated

form. Longer distances will not be practical

until beneficiation technologies have been

developed and put in place. This is not likely

to occur until the latter part of the 1980’s.

Second, loss of coal from rail cars is a

major problem. Some rail cars leaving the

Donets basin arrive at the power station

with only one-half their cargo remaining, and

about 4 percent of the coal shipped from the

Karaganda basin is lost during transport.

Aside from theft, coal is lost in two ways. It

either leaks out of the bottoms and sides of

the cars or it is blown out of the open cars by

the wind. The introduction of continuous

mining machinery has led to shipments containing finer coal than was the case previously. Consequently, during transport in open

rail cars 1 ton of coal may be blown away in

each car for every 1,000 km traveled. The

‘“l’. %nin, “The Tracks Are Sown R’it h (’ml, ” l}rul(la,

~ov, 1, 1979, p. 3; “ [{ussians I’lan Surface hline Complex for

Power (generation, (’fMJ/ Ag{I, Oc’tolxJr 19’7H, p 47,

Photo credit TASS from SOVFOTO

Coal-loaded trains leave Karaganda
98 ● Technology and Soviet Energy Availability

Ninth FYP (1971-75), called for Minugleprom to construct eight facilities in the

Donets basin to coal the coal in the rail cars

with a protective film, but as of late 1979

none had been built.49

Third, there is substantial evidence of mismanagement in the rail transport of coal.

While there is a shortage of rail cars in

Siberia to transport coal to the Urals, rail

cars are standing idle on sidings in other

regions. In 1978, the Soviet paper Izvestiya

reported that coal from Uzbekistan was being shipped to electric power stations in

Kirgiziya, while coal from Kirgiziya was

being shipped to electric power stations in

Uzbekistan. This was because coal had to be

shipped to the Angren electric power station

to maintain operations during the peakload

period. When the station returned to normal

operation the coal shipments continued (and

this despite the fact that the coal had

already damaged station equipment). Coal

continued to arrive from Kirgiziya for the

next 2 years and piled up at the station.50

Again, such anecdotes are not isolated instances. They reflect deep systemic problems.

The most important constraints in the

ability of the existing rail system to handle

coal shipments, however, lie in factors

related to rail management and engineering.

These difficulties are not grounded in the

Soviet Union’s capability to solve technical

problems in rail transport. The technology

for electrification, double-tracking, and locomotive and freight car design and construction is well-established. The real constraint

lies in a past heritage of mismanagement

and in the inadequacy of capital investment

funds allotted to the rail system, manifest in

the railroad’s poor economic performance in

recent years.51

—.——— ——.

%lonin, op. cit., p. 3.

‘(’G. Dimov, “Wrhy Take Coal to Coal?” lz[(~.sti~w, Sept. 5,

1978, p. 2.

“Central Intelligence Agency, “’rhe Soviet Economy in

1978-79 and Prospects for 1980,:’ June 1980, p. 8.

The engineering and technical improvements needed to increase coal’s share of total

rail freight would include:52

increasing the length of jointless track

on improved roadbeds;

increasing track capacity at arrival and

departure points;

increasing the share of eight-axle rail

cars in the rolling stock fleet in combination with locomotives of increased

power;

continuation of ongoing and planned

double-tracking and electrification; and

improvements in freight car and track

repair and maintenance practices to

curb coal losses en route.

The Eleventh FYP calls for construction

of only 3,500 km of new mainline and 5,000

km of secondary rail line.” Much of this

relates to the Baikal-Amur Mainline (BAM)

railroad in the Far East, and will contribute

little to facilitating the transport of Siberian

coal to the European U.S.S.R. Thus, while

marginal improvements in the system may

continue, the improvements necessary to

support an increased flow of Siberian coal

are not likely to be met in the near future.

Expansion of the rail system to allow for

greater coal freight may be hindered by a

reluctance on the part of the Soviet leadership to commit itself to Siberian coal development (see ch. 8).

Slurry Pipelines

Coal slurry pipelines are a possible solution to the transport problem posed by the

substantial distance separating primary

sites of energy consumption and the country’s largest fuel reserves. Although the initial capital investment for such pipelines is

high, operational costs relative to rail trans52T. M. Borisenko and V. P. Vodyanitski~’, “k:valuation of

Possible J$’ays of Increasing the Economic Effectiveness of

Systems of I,ong-Distance Hydraulic Transport of Coal, ”

Iz[e.stij’u un .S.Y,9R: J;nergetika i trun.vporf, No. 4, April 1979,

p. 44.

‘

] ‘lzl’e.stija, I)ec. 2, 1980, p. 5.
Ch. 3— The Soviet Coal Industry ● 99

port are low.54 Pipeline transport of coal

would also circumvent the problem of stepping-up use rates on an already intensively

operated rail system.

While underground slurry pipelines hold

certain advantages over rail for long-distance coal transport (no loss of transported

material en route; reduction in noise and

pollution; increase in land made available for

alternative uses; and greater process automation) several problems remain to be resolved. There has been little study of the

physical-technical processes of pumping coal

slurry through the large diameter pipes required for efficient pipeline transport over

long distances. 55 Moreover, the Soviet Union

does not now produce the basic equipment

needed for slurry preparation plants, pumping stations, and end-of-line installations for

preparation of the coal for burning. These include high-capacity slurry pumping units,

centrifugal pumps capable of handling large

amounts of slurry, and dependable wearresistant fittings (flush ball cocks, reflux

valves, etc.).56

Two industrial coal slurry pipelines have

been built and are in operation in the Kuznetsk basin. The large particle size of the

coal being pumped through these lines (up to

50 mm) has led to significant wear in the

pipes and has required that they be periodically turned and replaced.57 These pipelines are short (not over 10 to 11 km) and lie

above ground, facts that facilitate maintenance. Nevertheless, pipeline erosion of

this type would have significant impact on

the cost of operating coal slurry pipelines of

greater lengths.

Construction of a 250-km pipeline, connecting the hydraulic underground mine Inskaya in the Kuznetsk basin to a thermal

electric power and heat station in Krasnsyarsk, was scheduled to begin in 1982, but

there are now indications that the project

will be delayed until 1984.58 This line is to

serve as the prototype for 2,000- to 4,000-km

pipelines connecting the Kuznetsk basin to

the western U.S.S.R. The earliest date given

for creation of long-distance coal slurry pipelines is 1990. Additional constraints on development of long-distance coal slurry pipelines arise from the need to prevent the

slurry from freezing in cold weather, and the

high-volume water requirements associated

with hydrotransport. These caveats are particularly important for pipelines originating

in Siberia.

In short, there is a disparity between

Soviet progress in slurry theory and practice. On the one hand, the Soviet Union has

led the world in development of hydrotransport theory. “Soviet insight into the structure of fine coal slurries is of the highest

order, ’59 even in the absence of a longdistance pipeline of a length comparable to

the U.S. Black Mesa coal slurry pipeline. Yet

Soviet domestic capabilities for construction

of pumping equipment remain undeveloped.

CAPITAL INVESTMENT

Annual investment in the coal industry

rose from 1.4 billion rubles in 1965 to 2.0

billion rubles in 1979 (see table 25), but coal’s

share in total investment in industry fell

from 6.9 to 4.5 percent. In comparison, investment in the petroleum industry rose

from 10.0 percent of all industry investment

in 1965 to 12.9 percent in 1979, while investment in the gas industry rose from 3.0 to 4.5

percent. The coal industry has thus failed to

keep pace with the other fuel sectors, and the

current state of the industry reflects this

fact. Its recent poor performance supports

the judgment that past investment has been

too small and too irregular to maintain, let

‘)’ K u z ba ss - No~’osi hirsk Coal Pipeline, .$ot.sia/i.stic}~{’ SAU }’(I [rl(iu,stri?a Sept, 12, 19N(), p, 2 in ,J 1)RS 76,654,

oct 20, ‘1 980, p. 50; I)/(/r/()( ()( k hoz)[~}’,sr( (), N(), 5, hIaJ’ 19/+1,

p. 25.

‘

i

’.John \\’, Kiser, 1 II, “ Report on the Potential for Twhnolog~ Transfer from the .Soy’iet 1 In ion to the L1 nited States, ”

{Santa hlonica, Calif.: Rand, .+lu~wst 19’74), p. 40.
100 ● Technology and Soviet Energy Availability

Table 25.— Capital Investment in

Leading Fuel Industries

Year Coal Oil Gas

(million rubles, constant prices)

1965, . . . . 1,426 2,070 615

1970 . . . . . 1,541 2,527 1,041

1975 . . . . . 1,759 3,853 1,798

1976 . . . . . 1,747 4,066 1,835

1977 . . . . . 1,848 4,503 2,031

1978 . . . . . 2,035 5,270 2,210

1979 . . . . . 2,020 5,860 2,020

(percent of total investment in Industry)

1965 . . . . . 6.9% 1 0.0% 3.0%

1970 . . . . . 5.3 8.8 3.6

1975 . . . . . 4.4 9.7 4.5

1976 . . . . . 4.3 10.0 4.5

1977 ...,. 4.5 10.6 4.8

1978 . . . . . 4,5 11.6 4.9

1979 . . . . . 4,5 12.9 4.5

SOURCE Narodnoye khozyaystvo, various years

alone expand, productive capacity. The situation is aggravated by constantly rising

costs of mining and mine construction in the

European basins.

Evidence of insufficient investment in the

coal industry can be seen in a number of

areas: 1) the extremely low level of introduction of new mine capacity at many basins;

2) the insufficient productive capacity at

plants producing mining equipment; 3) the

lack of repair facilities at many basins and

the attendent rise in machinery downtimes;

4) the shortage of enrichment facilities; 5)

the ill-repair of rail cars; 6) the shortages of

locomotives and rail cars; 7) the short supplies of spare parts; 8) the lack of equipment

suitable for working thin or pitching seams;

9) the low level of mechanization of many

basins, including the Donets; and 10) the

lack of large capacity trucks and rail cars at

surface mines. Probably the two most important of these areas are mine capacity and

transport.

Mine Capacity

One of the most serious effects of the present low level of investment in the coal industry has been the failure to prevent a

decline in productive mine capacity. The

Soviets hope to achieve greater increases in

productive capacity per ruble of investment

by switching from underground to surface

mining. At present, the share of surface mining in total mining is substantially lower for

coal production than for the mining of ferrous and nonferrous metal ores, and for

chemicals. Soviet industry officials believe

that a l-percent increase in the share of surface mining in total output (accompanied by

a l-percent decrease in underground mining)

could save 80 million rubles per year, lower

the capital intensity of the industry by 1 percent, and raise labor productivity by 1.4 percent.60 It must be noted that increases in surface” mining would have to be substantial

before such an effect would result in decreased expenditures by the industry, but increases here would help the Soviets to

achieve greater increases in capacity per

ruble spent.

The differences between surface and

underground mining have an important geographic dimension. Coal production from

the underground mines in the European

U.S.S.R. is stagnating or falling. At the

same time, production is becoming increasingly costly as mines go deeper and the

quality of mined coal falls, and as thin or

steep seams account for greater shares of

output . The cost of coal mined in these

basins is now as much as several times

higher than the cost of coal mined at KanskAchinsk and Ekibastuz, even when compared on a calorific basis.

In the mid-1970’s, the required capital investment for introducing new mine capacity

in the Donets basin was 64.3 rubles/ret of

new capacity and in the Moscow basin, 89.7

rubles/ret. By comparison, the required capital investments in the Ekibastuz and KanskAchinsk basins were 8.2 rubles/ret and 9.6

rubles/ret, respectively. The cost per ton of

coal mined from new capacity was correspondingly high in the Donets and Moscow

60M. I. Shchadov, “Improving Equipment and Technology

for Surface Mining of Coal Deposits,’< U~O/: No. 1, January

1981, p. 1.
Ch. 3— The Soviet Coal Industry ● 101

basins (17.0 rubles/ret and 24.1 rubles/ret,

respectively), and low in the Ekibastuz and

Kansk-Achinsk basins (2.5 rubles/ret and 2.4

rubles/ret). Extraction of Kansk-Achinsk

and Ekibastuz coal is thus economically

more attractive than extraction of any other

coal in the U. S. S.R.61

The relatively large investments that

would be required to maintain Donets and

Moscow basin production are a serious deterrent to production there. This fact is largely

responsible for the turn to eastern coal in

Soviet economic planning.

Coal Transport

A recent Soviet source has given rough

cost estimates for various options for transporting coal from Siberia to the Urals or farther west. These options include: 1) rail

transport of coal not requiring beneficiation

before transport (presumably Kuznetsk

coal); 2) transport of coal requiring beneficiation, i.e., Kansk-Achinsk coal; and 3) transport of coal as electricity. This assumes a

volume of traffic on the order of 250 to 300

mmt of coal per year. 62

Rail transport of Kuznetsk coal to the

Urals or the European U.S.S.R. is an attractive option. Coke from Kuznetsk is significantly less expensive to produce than

coke from Donets, and is competitive with

the latter anywhere in the U.S.S.R. However, expansion of rail traffic from the

61 These cOStS are termed pn”[ Veden n)’ I’P Za tru t}’. a cost that

. .

includes direct costs, plus a capital charge at an interest rate

appropriate for the given industry. Ya. Mazover, ‘‘ Perspectives of the Kansk-Achinsk Coal Basin, ” Pkzno[w.ve khoz.vaj. st[ o, No. 5, May 1976, p. 66.

‘W. E, Popov (cd.) , .qihQn”an b’uel-llnerg~ Complexes,

(Novosibirsk: Izd. “Nauka, ” 1978), p. 207; See also A. Probst,

“W”ays of Developing the Fuel Economy of the U. S. S.R., ”

Vopro.s}r ekonomiki, No. 6, June 1971, p. 57; Ya. Crantman,

“Structural Changes in the Fuel Balance of the U. S. S.R., ”

Plano[o,ve khoz.va.v.st[o, No. 11, N’ovember 1971, pp. 88-91.

Kuznetsk basin would call for substantial investments in the rail system, and would increase the rail sector’s demand for heavyduty steel rails, labor, and improved freight

cars and locomotives. This would place additional stresses on the already strained steel

and machine building industries, and on an

increasingly tight labor market.

Building a railroad, even in the more

favorable terrain of the area, might cost up

to 1 million rubles/km.63 (It probably would

not be necessary to build completely new rail

lines, since junction with existing railroads

would be possible at certain points. ) Increased traffic on the railroads will also lead

to faster depreciation of the track. Present

rails handling 100 to 120 mmt of traffic a

year wear out in 4 to 5 years. Their life would

decrease to 2 to 3 years if 320 to 350 mmt of

traffic were carried,64 and steel rail demand

would therefore remain high after construction of the initial rail line was completed.

Transport of 250 to 300 mmt of coal per

year from Kansk-Achinsk would entail not

only upgrading or expansion of the rail system, but also the expenditure of huge sums

on coal beneficiation facilities. Since the coal

is of such low quality, about 600 to 700 mmt

would have to be mined in order to obtain

250 to 350 mmt of upgraded coal. No less

than 25 treatment plants would have to be

built at a total cost of 10 billion to 12 billion

rubles. The investment in the treatment

plants alone is enormous and is on a level

with the required investment for the proposed Siberian natural gas pipeline to

Western Europe.65

‘3B. S. Filippov, “The Effectiveness of Transporting Kuznetsk Coals and Coke to the Center of the European

U. S. S.R., ” Koks i khirniya, No. 3, March 1977, p. 51.

“Popov, op. cit., p. 207.

‘

5 David Brand, “Soviet Slip-Up, ” 14’a/l Street JournaL Jan.

23, 1981, p. 1.
102 • Technology and Soviet Energy Availability

WESTERN TECHNOLOGY IN THE SOVIET

COAL INDUSTRY

As the above analysis has indicated, the

Soviet coal mining machinery industry is

capable of producing—and does produce—

equipment of sufficient quality to meet the

needs of the industry. The power and capacity of this machinery often tends to be below

the best Western models, but the Soviets are

improving in this respect. For all the shortcomings described above, the production of

many types of machinery increased at substantial rates between 1970 and 1979. Continuous miner production was up 5 percent;

heading machines were up 78 percent; and

loaders were up 28 percent. In addition, the

U.S.S.R. actually exports mining equipment, and the share of annual production of

mining machinery exported has risen. For

example, the export of continuous miners

rose from 5 percent of production in 1970 to

9 percent in 1979. Overall, in 1979, the

Soviets imported about 74 million rubles

worth of mining equipment (all types), while

they exported about 211 million rubles

worth.66 This reinforces the impression that

the Soviets suffer not so much from an

—.

M> CI, s s [{ M in istrv of ~’oreign Trade, VIZ (’s )Z TZ )IU I’U torgo ~‘-

lj’u S.%SR”l’ “1979 g. (hloscow: lzd. “Statistika,” 19~0), pp. 21,

34.

overall equipment shortage as from the lack

of capacity to produce specific models. These

areas of need—in which thin-seam miners

and surface mining equipment (power shovels, draglines, drilling equipment, bucket excavators, trucks, and rail cars) figure prominently—have been supported by modest imports.

Table 26 shows official Soviet foreign

trade statistics for imports of all types of

mining machinery. These statistics should

be treated with some caution. First, they are

certainly incomplete. For instance, Japan is

not listed as a source of imported machinery,

but significant amounts of Japanese equipment are known to be in use in the South

Yakutian basin. Second, the figures are

highly aggregated; they do not break out

coal from other mining equipment.

The volume of Soviet mining equipment

imports rose dramatically during the 1970’s,

peaking at about 92.6 million rubles in 1978.

In 1979, 38.3 percent of these were from the

West (8 percent of total imports were from

the United States); 47.5 percent were from

Eastern Europe; and 14.2 percent were unidentified. It would appear, therefore, that

purchases from the United States are negTable 26.—Soviet Imports of Equipment for Underground and Surface Mining of Minerals

(thousand rubles)

Source

Total

Year U.S.A. Poland G.D. R. F.R.G. France Sweden Czechoslovakia

1970 . . . . . . .

1971 . . . . . . .

1972 , . . . . . .

1973 . . . . . . .

1974 , . . . . . .

1975 . . . . . . .

1976 . . . . . . .

1977 . . . . . . .

1978. , ., . . .

1979 . . . . . . .

2,045

338

353

377

438

7,858

7,287

674

2,836

9,984

—

—

—

—

—

—

—

—

11,426

10,624

7,987

3,383

2,026

2,606

3,449

4,017

5,461

8,826

33,098

24,504

556

1,792

1,552

2,022

10,344

20,515

6,964

8,676

20,710

14,104

969

1,868

2,250

2,370

1,068

3,973

9,999

851

1,898

449

1,515

1,925

404

2,117

7,432

10,108

7,961

1,419

9,923

3,798

6,394

1,343

1,033

2,687 —

—

—

—

—

19,857

10,768

7,623

12,356

26,719

58,181

49,976

36,303

92,636

73,935

SOURCE U S S R Ministry of Foreign Trade Vneshnyaya forgovlya SSSR (Moscow Izd "Statistika") for various years
Ch. 3—The Soviet Coal Industry ● 103

ligible and that Eastern Europe figures more

prominently as a supplier of Soviet mining

equipment than does the West. Poland, for

instance, is an important producer of underground equipment. The U.S.S.R. has also

purchased excavators from East Germany.

Western trade statistics and trade journals provide more information on the precise

nature of imports from the West, The two

major areas here are equipment purchased

from Japan for development of South Yakutian coal, and trucks for use in surface

mining operations. (Meanwhile, the U.S.S.R.

is attempting to increase its own capacity

for the production of large–up to 180

tons—dump trucks.) In general, compared to

the oil and gas industries, the Soviet coal industry shows little reliance on Western technology and equipment. The Soviets have

opted largely for domestic development and

production of equipment, despite the fact

that superior models may be available in the

West.

Nor is there evidence of much use of

Western computers in the Soviet coal industry. Underground and surface mining are

not particularly amenable to the application

of computers. The Soviets would only be

likely to turn to the West in these areas if

they could acquire breakthroughs in automated mining. Given the low level of mechanization in the industry and its secondary

priority after petroleum and nuclear power,

such a development is unlikely. Computerization in Soviet coal mines is, therefore,

not expected to be important in the next 10

years, although it could contribute to the rationalization and management of the industry. Given the pervasive systemic problems described above, the coal industry

would at best benefit slowly and indirectly

from transfers of software. It has not sought

such technology itself, and is not likely to do

so in the near future.

PROSPECTS FOR THE SOVIET COAL INDUSTRY

The Eleventh FYP calls for the production

of 770 to 800 mmt of coal per year by 1985.

Achievement of output in this range, which

is lower than the original 1980 goal (790 to

810 mmt), would represent the reversal of

previous trends of declining production and

restore a modest rate of growth for the industry as a whole. Most of this growth would

be achieved by expanding surface mining.

The FYP targets envisage surface mining

constituting 39 to 40 percent of total output

(300 to 320 mmt), leaving 470 to 480 mmt of

underground production. 1980 underground

output was 451 mmt. Thus, the intention is

to at least hold underground production

stable.

Soviet targets for the Twelfth FYP (1986 -

90), if they exist, have not been published.

However, the literature does support the

qualitative judgment that the Eleventh FYP

period is intended to be a time of preparation

for a period of more intense growth to follow.

The 1981-85 respite will hopefully allow time

to permit the expansion and upgrading of

surface mine capacity, coal processing capacity, the stock of surface mining equipment, and the rail transport system.

In this section, OTA has attempted to

evaluate these goals and to provide estimates of plausible levels of production in

1985 and 1990. As with all of the projections

in this report, the figures provided here are

not predictions. Rather, they are projections

based on OTA’s judgments of likely outcomes, given explicit accompanying assumptions. These estimates, together with 1980

production figures, are given in table 27.

1981-85

OTA believes that the production range

for the Soviet coal industry specified in the

plan is unrealistically high, and that the best
104 • Technology and Soviet Energy Availability

Table 27.—Estimated Soviet Coal Production

(million metric tons)

– Years

1985

1985 (best case Percentage

1980 (plan) projection) change

U.S.S.R. total . . . . . . . 716 (770-800) 765 + 7

Major basin a:

Donets . . . . . . . . . . 203 195 - 3

Kuznetsk . . . . . . . . 154 (167) 160 + 4

Ekibastuz. . . . . . . . 67 (85) 85 + 20

Kansk-Achinsk . . . 40 50 + 25

Karaganda . . . . . . . 49 (49) 49 0

Pechora . . . . . . . . . 30 26 – 13

MOSCOW . . . . . . . . . 26 25 – 4

South Yakutia. . . . 3 + 267

By surface mining. . 264 (300-320) 320 + 21

aEstimates

SOURCE Off Ice of Technology Assessment, Soviet Geography, April 1981,

p. 280

that could be expected is production of 765

mmt. This growth of roughly 7 percent is

short of the low end of the range specified in

the plan, but even this figure should be

regarded as a highly optimistic best case,

which might be possible if the U.S.S.R. could

fulfill announced plan targets for surface

mining and halt the decline in underground

output. Some experts believe that the latter

is impossible and that a more realistic projection would be some 20 mmt lower.

OTA’s most optimistic scenario corresponds closely to recent CIA projections,67

and is based on the following assumptions:

●

●

●

No dramatic changes in the present

organization of the economic system as

it affects coal production.

No dramatic change in the priority to be

accorded to the coal industry; i.e., OTA

assumes that coal will retain its “second-class” status, at least for the next 5

years, while attention is concentrated

on nuclear power and gas development.

This subject is discussed in more detail

in chapter 8.

No major labor shortages. Growth in

coal output will come almost exclusively from Siberian surface mines that

67The CIA in ‘‘U.S.S.R.: coal Industry . . . ,‘ Op. cit., posits

a range of 765-785 mmt.

●

●

●

●

A.

have a labor productivity nearly nine

times as great as underground mines.

The shift to surface mining, coupled

with continued mechanization and automation of underground operations,

should, therefore, help to alleviate labor

shortages.

Few, if any, new measures taken to provide greater protection of the environment. OTA assumes that despite official rhetoric affirming the need for

greater environmental protection, only

those measures that would not lead to

significant sacrifices in output will be

instituted.

Investment resources increased sufficiently to provide for a low level of

growth.

Expansion of coal mining equipment

production in the following areas: larger

capacity power shovels and draglines;

excavating equipment and electrical

systems for Siberian climate; special

subcomponents, lubricants, ventilation

and other systems for excavators; large

diameter steel cables and rolled metal

for excavators; spare parts; drilling

equipment with improved productivity;

larger capacity mine trucks; conveyer

belts with improved strength; and

equipment for mining coal from thin

and steeply pitched seams.

Continuation of present levels of equipment and technology imports, i.e., of

the policy of relying heavily on domestic technology. Specifically, the projections assume that the U.S.S.R. continues to import Japanese equipment

for development of Yakutia; to purchase

little or no Western underground equipment; and to expand imports of surface

mining equipment, mainly from East

Germany and Poland.

major industry concern will be the

maintenance of coking coal production. Virtually all Soviet coking ‘coal is mined

underground, and underground mining will

decline in many basins. Yet, even with substantial declines, four factors suggest that

industry need not suffer from a lack of coke:
Ch. 3—The Soviet Coal Industry ● 105

1) there is reason to believe that domestic

consumption of coke will rise by only 4.5

mmt between 1977 and 1985, and by only 0.5

mmt between 1986 and 1990;68 2) about 44 to

56 mmt of coking coal per year are burned at

electrical power generating plants (due to insufficient enrichment capacity to render

these coals suitable for coking);69 3) some

coking coal being mined is improperly categorized as steam coal;70 and 4) of total

coking coal mined each year, about 4 percent

may be lost in transport.71 The latter “use”

represents a potential source of coking coal

for productive domestic consumption if the

Soviets are willing to make necessary but expensive improvements in the transportation

system.

The best case growth in output projected

here would be largely supported by a growth

in surface mined coal from about 264 mmt in

1980 to about 320 mmt in 1985, in accordance with the FYP target. The share of surface mining in total output would therefore

rise from 37 percent to about 410 percent.

These coal increments could come almost exclusively from Siberia. The following developments seem likely in individual basins:

Donets

Mine depletions here will probably exceed

the introduction of new capacity. The share

of coal mined from deep, thin seams will increase, resulting in slower rates of coal extraction. At the same time, the cost of coal

mined will continue to rise, and this will promote increased substitution in consumption

of cheaper eastern coals. Production in the

basin will probably fall to 195 mmt or less by

1985.

68Bakinskiv rabotn+vv, Apr. 19, 1981, p. 1.

69The slowing of growth in coke consumption is due to likely reductions in the requirements for coke per ton of pig iron

produced. This conclusion is based on the finding of a 1980

Battelle report on energy efficiency in the Soviet iron and

steel industry. See ch. 7.

7 0M. V. Golitsyn and V. F, Cherepovskiy, “Analysis of

U.S.S.R. Coal Reserves and Main Directions of Geological

Prospecting Works, ” .70 ve tsk aya geologi.va, No. 4, April

1980, pp. 25-28.

711 bid., pp. 27-28.

Kuznetsk

This basin has vast reserves, and coal

mined here is cost competitive with Donets

coal in many regions of the European

U.S.S.R. It is likely to become the U.S.S.R.’s

leading producer of coking coal before 1985.

However, the growth in new mine capacity

has been slow and more coal enrichment capacity is needed. Only a small increase in

output —from 154 to 160 mmt—can be expected by 1985.

Karaganda

Introduction of new mining capacity has

lagged seriously. Much of the coking coal

cannot be coked without prior enrichment

and, due to insufficient enrichment capacity,

is not being mined. As in the Kuznetsk

basin, only a small increase in production

can be expected by 1985. Output may rise to

49 mmt by 1985, but stagnation or a decline

in production at the basin cannot be ruled

out .

Moscow

Possibilities for increased coal production

here are virtually nonexistent. The coal has a

high ash and sulphur content and is becoming more and more expensive to mine.

Annual production should fall by at least 1

mmt—and perhaps by as much as 5 mmt—

by 1985.

Pechora

The Pechora basin contains large reserves

of high-quality coking coal and production

could have been substantially expanded, but

little new mine capacity has been added in

the last 15 years. The basin probably will

lose 4 to 5 mmt of yearly capacity by 1985.

Urals

The coalfields in the Urals are being

depleted and production will decline. Current

production is not sufficient to meet even

local needs.
106 . Technology and Soviet Energy Availability

Kansk-Achinsk

Production could grow rapidly, but problems of transport and use will remain. The

contribution this coal can make to the

energy supply of the central regions or the

Urals before 1985 therefore is highly questionable. In any event, annual production

could increase by 10 mmt by 1985.

Ekibastuz

Plans for Ekibastuz production have been

announced and call for increases of some

15 mmt by 1985. However, the quality of

Ekibastuz coal is extremely low.

South Yakutia

Development of this basin is behind

schedule, but production could grow to 11

mmt by 1985. However, a large share of output will be exported to Japan as compensation for developing the basin (see ch. 11.)

It is at least possible that the Soviet

Union could come close to reaching its 1985

coal output targets. But the significance of

this growth in output should not be overestimated. First, as noted above, the calorific

content of Soviet coal has been falling steadily. If past trends continue, it will probably

fall by roughly 1 percent per year between

1980 and 1985. Gains in run-of-mine output

will therefore be largely offset by declines in

calorific content. Fuel output, if calculated in

tons of standard fuel, could actually decline

unless output at high-quality coal basins remains at least relatively stable.

Second, the fact that much of the increase

in coal output is to come from KanskAchinsk and Ekibastuz puts severe limitations on the use to which the coal can be put.

Kansk-Achinsk coal cannot at present be

transported to the Urals or the European

U. S. S. R., let alone to export markets. Production is soon likely to exceed local demand

and, as chapter 5 discusses in detail, generation of electricity at the mine site creates a

number of other problems for Soviet planners. Ekibastuz coal is also of very poor

quality, some of it nearly half ash.

In sum, even an increase in production of

coal to 765 mmt per year, very close to plan

targets, may mean an absolute decline in

standard fuel produced. Moreover, much of

what is mined cannot at present contribute

to fuel supplies in consuming centers of the

European U.S.S.R. because it is uneconomical to transport in untreated form. Achievement of 1985 plan targets, therefore, will

contribute little to efforts to substitute coal

for oil in existing powerplants or the few new

ones to be constructed in the European part

of the country.

1986-9 0

Projections for the Twelfth FYP period

are necessarily highly speculative and must

remain sketchy. In general, however, if present trends continue, and if the U.S.S.R. can

come close to realization of 1985 targets, output could continue to grow. The amount of

this increase would depend on the success of

surface mining operations, although gains in

surface mining would continue to be offset

by declines in underground production.

The most likely areas in which to expect

high rates of growth in the latter half of the

decade are the Kansk-Achinsk, Kuznetsk,

Ekibastuz, and South Yakutian basins.

Stable or declining production can be expected in the Moscow and Donets basins,

but the Soviet literature hints at investment

plans that could lead to a small growth in

output at Karaganda and a recovery at

Pechora to about the 1980 level.72

Even assuming very high rates of growth

in surface mining basins, however, (50 percent in Kansk-Achinsk, 25 percent in Kuznetsk, 35 percent in Ekibastuz, and 35 percent in South Yakutia)—a highly optimistic

assumption—it is difficult to imagine coal

‘

z

’’ Russians Plan Surface Mine Complex for Power Generation, ” Coal Age, October 1978, p. 47.
Ch. 3— The Soviet Coal Industry ● 107

output rising over 1985 levels by more than cess in constructing the coal treatment

100 mmt. Surface-mined coal would thus plants necessary for making use of Kanskhave to constitute about one-half of all coal. Achinsk and Ekibastuz coal, and on the

The significance of this level of output for fate of plans for long-distance electricity

the Soviet economy would depend upon suc- transmission.

SUMMARY AND CONCLUSIONS

The Soviet coal industry has encountered

serious problems in the past few years for

which no solution is yet in sight. These have

to do with the declining output of underground mines located near centers of consumption; the fact that new deposits lie in

remote areas of Siberia; and the declining

quality of the coal that is being produced.

The Eleventh FYP establishes goals that

are dramatically less ambitious than those of

previous plans, a fact that may reflect a

realization and acceptance by planners of the

real limits placed on growth of output by the

combination of problems facing the industry. Even so, these targets are probably

excessively optimistic, and even gains in

overall coal production will be offset to some

degree by the fact that the quality of much

of the new coal being mined is low. In fact,

coal output could increase and its standard

fuel equivalent actually decline.

The Soviet coal industry suffers from

many of the same ailments afflicting most

sectors of the economy. The problems are to

a large degree systemic and have no permanent solutions short of major reforms of the

system itself. The time has come for the coal

industry to “fine tune” its operations. Unfortunately, the Soviet economy is ill-suited

to such a task. The situation here has been

aggravated by the low priority assigned to

the coal industry in the past, and the fact

that in order to achieve meaningful increases

in output, a number of problems must be

simultaneously addressed. These include

labor productivity, additions to mine capacity, increasing the quality and quantity of

mining equipment, resolving coal transport

problems, and devising ways to use the lowquality coals that are making up an increasing share of production.

It is the combination of these difficulties

that has led to the declining performance of

the coal industry as a whole. There is little

reason to expect that such obstacles will be

overcome in the present decade. Nor is it

clear that even massive improvements in one

or several of these areas (e.g., labor productivity) could do more than increase coal industry efficiency, without necessarily significantly affecting output.

At present, there is no evidence to suggest

that extensive Western participation in

Soviet coal development would greatly boost

production. Aside from the South Yakutian

basin, which is being developed with the

assistance of the Japanese, the Soviets have

made little use of Western coal mining equipment and technology. Most such imports

have been in the area of surface mining,

especially large capacity mining trucks. The

cessation of these supplies could have an impact on the efficiency of Soviet surface

mines, but it is unlikely that the converse

would hold, i.e., that more Western trucks

would alone lead to increased coal output.

The Soviets, moreover, have recourse to

their own truck industry. If sufficient

resources are allocated to production of such

domestic models (something that cannot be

taken for granted), the Soviets could satisfy

demand for large-capacity trucks themselves. The Soviets are constructing a plant

near Kansk-Achinsk to manufacture heavy

excavators. Its successful completion would

be another step towards independence from

Western surface mining technology.
108 ● Technology and Soviet Energy Availability

An embargo now, therefore, of all Western

trade with the U.S.S.R. would inconvenience

it—but would not seriously impair coal production. Similarly, Western assistance alone

is unlikely to be able to boost coal production. Possibilities for expanded domestic

production of equipment and for imports

from Poland and other East European countries would compensate for losses of Western

equipment. The longer run impact of such an

embargo is more difficult to predict. If the

U.S.S.R. places priority on expanded coal

output, this growth will have to come largely

from surface mining, since it appears that

underground mining capacity has irreversibly peaked. If later in the decade bottlenecks in surface excavation and haulage

equipment become troublesome, it is possible that the U.S.S.R. would look to the West

for significant amounts of this equipment.

However, these imports would have to be accompanied by serious efforts to solve a much

wider array of coal industry problems.
CHAPTER 4

The Soviet Nuclear Power

Industry
CONTENTS

Page

SOVIET POLICY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

PRESENT NUCLEAR POWER CAPACITY AND PRODUCTION IN

THE U.S.S.R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

1980 Capacity and Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Reactor Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Reactor Manufacture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Past Contribution of Western Equipment and Technology . . . . . . . . . . . . . 118

1980 Plan Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

NUCLEAR CAPACITY AND PRODUCTION: FUTURE PROSPECTS . 120

Targets for 1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Targets for 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Soviet Ability To Meet Plan Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

REQUIREMENTS FOR NEW EQUIPMENT AND TECHNOLOGY . . . 137

Nuclear Capacity and Production: Likely Achievements . . . . . . . . . . . . . . . 137

THE POTENTIAL ROLE OF WESTERN EQUIPMENT AND

TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

LIST OF TABLES

Table No. Page

28.

29.

30.

31.

32.

Production of Electricity by Soviet Nuclear Power Stations . . . . . . . . . 114

Soviet Nuclear Power Stations in Operation , . . . . . . . . . . . . . . . . . . . . . 115

Estimated Total Operating Electric Generating Capacity of Soviet

NPSs as of Dec. 31, 1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Planned New Nuclear Electric Generating Capacity in the U.S.S.RV

Post 1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

Projected Production of Nuclear Reactors and Export Potential . . . . . 131

LIST OF FIGURES

Figure No. Page

8. Soviet Nuclear Reactor Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

9. Past and Projected Additions to Nuclear Generating Capacity . . . . . . . . 123
Chapter 4

The Soviet Nuclear Power Industry

Soviet planners see nuclear energy as an

increasingly important source of electricity.

Current plans call for nuclear power to generate most of the incremental electricity provided to the European U.S.S.R. in this

decade. The Soviet nuclear program has

logged impressive gains. The portion of electricity supplied by nuclear power rose from

0.5 percent in 1970 to more than 5 percent in

1980; and production increased more than

twentyfold, from 3.5 billion kilowatt hours

(kWh) to as much as 73 billion kWh, over the

same period.l Moreover, the current Five

Year Plan (FYP) calls for nuclear’s share of

electricity production to more than double to

14 percent by 1985 and estimates for the

year 2000 have ranged as high as 33

—.— — 1

‘}!~(jrt{)n2ic’h{~.sh{l>u ~Tuzetu, ,Y{). 12, 1 !)H 1, p, 1, git’es a figure

of 7 ~] billion kW’h. F:arlier estimates were 70.5 billion kt$”h.

percent.2 The ease with which the U.S.S.R. is

able to adjust to its problems in the coal and

oil industries will depend in part on its ability to fulfill—or at least approach—these

targets.

This chapter summarizes Soviet policy

toward nuclear power, describes the present

state of the Soviet nuclear power industry,

and evaluates Soviet planners’ goals for the

contribution of nuclear-generated electricity

to the energy balance in 1985 and 1990. It

also examines the past and potential contribution of Western equipment and technology to that industry.

U’. I.epkowski, “U. S.S. It. Reaches ‘1’akeoff in Nuclear

Power-, (’hern[ca/ ar~d fi,’ng(n<><>rlrt,hr .l’tii ,s, Not, 6, 197H, pp.

31-36.

SOVIET POLICY CONSIDERATIONS

The Soviet Union has generated electricity from nuclear power since 1954, when its

first nuclear power station (NPS) came online at Obninsk, near Moscow. The Soviets

are proud of the fact that the U.S.S.R. was

the first country in the world to produce

commercial nuclear-powered electricity. At

the same time, development of the nuclear

industry was slow, and Soviet-installed

nuclear capacity at the end of 1980 was

about one-fourth that of the United States in

the beginning of that year–13,460 megawatts (MW) as opposed to 52,300 MW.3 The

two industries have also experienced different patterns of growth. While nuclear

capacity in the United States expanded

rapidly in the 1960’s and early 1970’s, the

I I“jric \lorgenthaler, “ I+; astern f+;nergJ’: S(lIriet Hloc is

I)ushin~ Nuclear [)owerplants Fj~en as LJ. S. Pulls Back, ”

1! ‘ull i~’trc{t ,J<jurrlal, ,Ian. 4, 19R(), pp. 1, 4, op. cit.

pace of the Soviet industry did not begin to

accelerate until middecade, just the time, in

fact, that the program in the United States

was beginning to slow.

There are several factors that have contributed to the Soviet Union’s policy to expand its nuclear industry. Its growth is

related to the recognition that fossil fuel

resources have become increasingly difficult

and expensive to exploit. As the oil, coal, and

gas of the European U.S.S.R. have been depleted, production has shifted northward

and eastward to Siberia, causing both extraction costs and the cost of transporting

energy to the consumer to rise greatly.

Nuclear power has therefore become an economically viable option, particularly since

power stations are largely located in the

more densely populated European part of

the country.

111
112 ● Technology and Soviet Energy Availability

Soviet nuclear policy is also marked by

relatively little anxiety over safety and environmental issues compared to the West.

Soviet ideology has characteristically reflected a boundless faith in technology and

the beneficial effects of technological developments on the welfare of mankind. Accidents such as the one that occurred at

Three Mile Island are attributed by the

Soviet press to the irresponsible behavior of

profit-seeking private firms, rather than to

any dangers inherent in nuclear power. The

press assumes that in the U.S.S.R.—where

private enterprise does not officially exist,

and production is carried out by planners

armed with what are considered rational,

scientific methods—the welfare of the

citizenry and of the environment will be

carefully considered.4 The official Soviet

position is that concerns over the safety of

nuclear power are founded on ignorance.

This point is illustrated in a 1971 statement

of A. M. Petrosyants, Chairman of the State

Committee on the Utilization of Atomic Energy:

It can be stated that nuclear power stations are no more dangerous than any other

industrial type plant, and can be sited in any

densely populated area and even within the

confines of large cities . . . Widespread publicity on the safety of nuclear power stations,

explanations of the facts with demonstrations of how nuclear power stations

operate, are indispensable measures in

sweeping away the skepticism and lack of

confidence observed in some parts of the

population in some instances.5

Despite recent publicity in the West over

alleged large-scale nuclear accidents in the

Soviet Union,’ there is no evidence that this

position has changed.

Soviet nuclear policy may also be at least

partly driven by a desire to demonstrate conspicuous technological achievement in a

large-scale program that the U.S.S.R. itself

regards as necessary to its role as a world

superpower. A successful nuclear program is

seen as a means of enhancing the prestige of

the nation and providing visible evidence of

the superiority of socialism. The power station at Obninsk, for example, has been hailed

as “a triumph of advanced Soviet science

and technology. It confirmed with new

strength the indisputable advantages and

the richest creative potentialities of the

socialist society.”7 This is not so much a

reflection of any Soviet world lead in terms

of installed nuclear capacity—in 1980, the

U.S.S.R. lagged behind the United States,

Japan, and France in this respect–as much

as an affirmation of the fact that Soviet advances in this area have proceeded with little

direct technical help from the West. This

technical independence is underscored by

the fact that the Soviet Union has had recent

successes exporting its nuclear reactors

(e.g., to Finland); that breeder technology is

more advanced in the U.S.S.R. than in the

West (with the possible exception of France);

and that Western scientists are quite impressed with Soviet fusion research.

Factors such as these have contributed to

the rapid growth of the nuclear sector in the

U.S.S.R. and to the formulation of ambitious

plans for the next decade. The following sections describe the present state of the atomic

power industry and discuss and evaluate

these targets.

‘Gloria Duffy, Soviet Nuclear Energy: Domestic and International Policies (Santa Monica, Calif.: Rand Corp.,

December 1979), p. 38.

‘A. M. Petrosyants, ‘“Nuclear Power in the Soviet Union, ”

So ~’iet A tornic Erzergj’, No. 3, March 1971, pp. 297-302.

‘See, for example, John R. Trabalka, L. Dean Eyman, and

Stanley I. Auerbach, “Analysis of the 1957-1958 Soviet Nuclear Accident, ” Science, July 1, 1980, pp. 345-353.

701eg Kazachkovskiy, “Condition and Outlook for W’ork

To Create AES With Fast Neutron Reactors, ” Ekonomicheskoye sotrudnichest~~o stran-chlenol S’E V, No. 2, 1980,

p. 1, in JPRS 76,135, July 30, 1980, pp. 1-8.
Ch. 4—The Soviet Nuclear Power Industry ● 113

PRESENT NUCLEAR POWER CAPACITY AND

PRODUCTION

In 1976, the 25th Party Congress adopted

the Tenth FYP (1976-80), which called for

the production of 1,340 billion to 1,380

billion kWh of electricity in 1980. Of this, 80

billion (about 5.8 percent) was to be provided

by nuclear power stations.’ Although production failed to meet this ambitious target,

Soviet accomplishments in the area of nuclear electrification over the plan period were

impressive.

1980 CAPACIT Y

AND PRODUCTIO N

As table 28 demonstrates, Soviet nuclear

powerplants produced 73 billion kWh (or

70.5 billion kWh, depending on which Soviet

source is used) in 1980, nearly 3 % times as

much as in 1975 and over 25 percent more

—————

‘~. ~~. Jack, J, R. I*e, and H. H. Lent, “Outlook for Soviet

Energy, ” in Joint Economic Committee, U.S. Congress,

Sotiet Econom>’ in a IVFu P~r.<pecti[e (Washington, D. C.:

U.S. Government Printing Ofice, 1976), p. 466.

IN THE U.S.S.R.

than in 1979. Installed capacity at the end of

1980 reached 13,460 MW, having nearly

doubled in 3 years. Nuclear powerplants accounted for 5.6 (or 5.4) percent of all electricity produced in 1980 and 5.1 percent of installed electrical capacity as of December 31,

1980.9 On a Btu basis, it is estimated that

nuclear energy accounted for a little over 1

percent of Soviet primary energy output in

1980. ’0

This energy is currently being produced

from at least 29 online reactors that are

distributed among 13 sites. These sites are

listed in tables 29 and 30, and shown in

‘Total installed capacity (all sources) as of Jan. 1, 1981, was

taken from Ekonomicheskajla gazeta, No. 12, March 1981, p.

2. The installed nuclear capacity ( 13.5 million kW) was then

divided by this total (267 million kW) to derive the indicated

percentage.

1 olJ M e]entve~, and A. Makarovt “Future Development of

the Fuel-Ene&y Complex, “ ~~/arlo[()},e k hozya},.st[o, No. ~,

April 1980, pp. 87-94, in JPRS 75,903, tlun”e 19, 1980, pp.

13-22.

,, . ..

Photo credit TASS from SOVFOTO

The Novovoronezh NPS
114 ● Technology and Soviet Energy Availability

Table 28.—Production of Electricity by Soviet

Nuclear Power Stations

Installed –

nuclear

capacity

Percent of (end of

Production total year,

Year (billion kWh) production million kW)—

1960 . . . . . . . . . .

1965 . . . . . . . . . .

1970 . . . . . . . . . .

1975 . . . . . . . . . .

1976 . . . . . . . . . .

1977 . . . . . . . . . .

1978 . . . . . . . . . .

1979 . . . . . . . . . .

1980 (plan) . . . .

1980 (actual) . .

Negligible

1 .4b

3.5b

20 2b

26.4c

34.8d

44.8d

54.8f

80.0b

70.5J

(73.0) k

—

0.3g

0.5g

1.9g

2.2g

3.0g

3 7

g

4.4h

5.8b

5.4J

(5.6) k

—

0.3c

0.9b

4.7b

5.7c

7.1 c

9.1 e

1 1.4i

18.4 b

13.5

SOURCES aE.E. Jack, J R Lee and H H Lent Outlook for Soviet Energy In

Joint Economic Committee U S Congress Sov/et Economy In a New

Pempect/ve (Washington DC U S Government Prlntlng Off Ice,

1976) p 462

bEnergeflka SSSR v 1976-1980 g A M Nekrasov and M G

Pervukhln, (eds ) (MOSCOW Izd Energtya 1977), pp 11 61 and 62

CL D[enes and T Shabad The Soviet Energy System (Washington

D C V H Winston and Sons 1979), p 153

dEkonom{cbeskaya gazeta No 7 (February 1980) P 1

‘E/ekfrlcheskfye srar]tsll ( J anuary 1979 ) pp 2 and 3

fElektr,chesklye sfarrts(t (Apr(l 19813) p 7

gCalculated by dlwdlng the figure In column 2 by total elect r(clty

produced In the given year as reported In the Sov(et statistical

yearbook Narodnyoye khozyaystvo SSSR v 1978 g (Moscow Izd

Statlstlka 1979) p 142

hcalculated by dlvldlng the figure !n column 2 for 1979 by the total

elect rtclty produced In that year as reported In The U S S R In

Figures for 1979 ( MOSCOW Izd Statlstlka 1980) p 107

I The Co/urn bus D/spafch (Columbus Oh to) Jan 29, 1980, p A-6

IE/ektr~chesklye sfanfslj (January 1981 ) p 2

kEkonom,cheskaya gazefa NO 12 (1981 ) P 1

figure 8. Most Soviet nuclear power stations

are located in the European portion of the

country, primarily to the west of the Volga

River, where electricity demand is concentrated, but there is also some demand for

nuclear plants in remote regions (e.g., the

Bilibino NPS), apparently because of the

high cost of other energy sources.

In both regions, the Soviets are interested

in using nuclear energy to provide district

heating as well as for generating electricity.

The first heating plants may already be in

operation, and it is claimed that six atomic

heating and cogeneration plants will be built

during the Eleventh FYP. Because of Soviet

confidence in the safety of nuclear power,

there is little written about the environmental implications of locating nuclear power

stations in populated areas. In fact, in the

case of nuclear district heating (where heat

losses are highly sensitive to transmission

distances), the plants are actually to be sited

within urban areas.

REACTOR TYPE S

The Soviets have experimented with a

number of types and sizes of reactors, but

they are now concentrating on two models

that will be standardized to facilitate mass

production: large capacity channel reactors

and pressurized water reactors. The former

are the most commonly used. Called RBMKs

(the initials stand for the Russian words for

“large capacity channel reactors”), they supply approximately 8,000 MW or 61.6 percent

of the total capacity of operational nuclear

power stations. RBMKs are boiling water

reactors; they are light-water cooled and

graphite moderated. The reactor consists of

a large pile of graphite with small tubed

channels running throughout. Some channels house the fuel rods while others allow

for coolant flow.

There are several advantages to the

RBMK. Its modular design allows the reactor to be almost entirely assembled on the

station site, with only a few components

requiring preassembly at the manufacturing

plant; it is capable of online refueling; and it

provides the capacity to detect a failed fuel

element in a given pressure tube during

operation. This latter characteristic permits

immediate removal and reinstallation of

the fuel element without shutdown.11 The

RBMK also uses lightly enriched uranium

and produces more plutonium than the other

most common model. The U.S.S.R. is now

the only country actively engaged in the construction of this type of reactor, the United

States having abandoned plans for its commercial development some years ago.

11‘Joseph D. I.afleur and Victor Steno, “NRC Team Visit to

U. S. S. R., Feb. 5-18, 1978, ” information report No. SECY-78-

1113, hlar. 21, 1978, p. 11.
Ch.. 4—The Soviet Nuclear Power Industry • 115

Table 29.—Soviet Nuclear Power Stations in Operation

Year of

Reactor initial

Station name Location No.

Obninsk Obninsk 1

Siberian Troitsk h

1

Dimitrovgrad Dimitrovgrad 1

(Formerly Melekess) 2

Beloyarskiy Zarechnyy 1

2

3

Novovoronezhskiy Novovoronezhskiy 1

2

3

4

5

Shevchenko Shevchenko 1

Kola Polyarnyye Zori 1

2

Bilibino g

Bilibino 1

2

3

4

Leningrad Sosnovyy Bor 1

2

3

Kursk Kurchatov 1

2

Armenian Metsamor 1

2

Chernobyl Pripyat 1

2

Rovno Kuznetsovsk 1

operation

1954

1958

1965

1969

1964

1967

1980

1964

1969

1971

1972

1980

1973

1973

1974

1974

1974

1975

1976

1973

1975

1979

1976

1979

1976

1979

1977

1978

1980

Hated

reactor

Reactor capacity, Reactor

designation) MW(e) type)

— a

—

VK-50

BOR-60

AMB-100

AM B-200

BN-600

VVER-21O

VVER-365

VVER-440

VVER-440

VVER-1000

BN-350

VVER-440

VVER-440

EGP-6

EGP-6

EGP-6

EGP-6

RBMK-1000

RBMK-1000

RBMK-1000

RBMK-1000

RBMK-1000

VVER-440

VVER-440

RBMK-1000

RBMK-1000

VVER-440

5

600 b

5 0

c

12

100

200

600

210d

365

440

440

1,000

350e

440f

440f

12

12

12

12

1,000

1,000

1,000

1,000

1,000

405i

410i

1,000

1,000

440

BWR

BWR

BWR (Vessel)

Breeder

BWR

BWR

Breeder

PWR

PWR

PWR

PWR

PWR

Breeder

PWR

PWR

BWR

BWR

BWR

BWR

BWR

BWR

BWR

BWR

BWR

PWR

PWR

BWR

BWR

PWR

a

ln U S sources this reactor has been designated as the AM1 (Dlenes and Shabad, OP clt p 156) and !he VAM 1 (Sutton OP cIt p 243)

b

The station reportedly has a total capac[ty of 100 MW In 1958 At present the station IS said to have a capacity which significantly exceeds 600 MW’ (A M Petro

syants op cit p 123

c4ccordlng to Petrosyants op CII p 171 the VK 50 reaclor was upgraded to 65 MW(e) In 1974

‘This capacity reportedly was raised to 240 MW (n February 1965 and briefly to 280 MW In January 1969

‘If the Schevchenko reactor were used exclusively to produce electricity Its capacity would be 350 MW(e) In fact, only 150 MW(el of capacity are devoted to qeneratlon

of electricity wh I Ie the balance IS used to produce 120000 metric tons of desal Inated sea water per day

‘These two reactors of the station s f~rst phase reportedly have been operating at capacities as high as 470 MW each (940 MW totall since December 1978

gThls station generates commercial heat as well as e(eCtrl City

h

According to Dlenes and Shabad OP cIt p 153 this Iocatlon IS given In U S lists of foreign reactors Soviet sources have not ldentlfled the Slberlan statton’s Iocatlon

i

It IS not clear why these two reactors are rated at lower capacities than other VVER 440’s, one source [A fomnaya energfya (May 1977) p 419] relates the lower

capacities to cool lng conditions of the reactors

jpwR = press ur,~ed water reactor ~vessel type) which IS Cieslgnated VVER In Russ Ian, BWR = bolllng water reactor one Series of Which Is designated ~BMK ‘n Rus

slan tn the West the RBMK often IS described as a Ilght water-cooled graphfe moderated reactor (LGR or LWGR)

SOURCES A M Petrosyants Sovrerner?rryye problerny afornrroy naukl I fekhnlk/ v SS’SR (Moscow Atomlzdat 1976) PP 1181921 Sovefskak’a atomnaya nauka / fekhnjka

(Moscow Atom!zdat 1967) pp 91-110 /zvesf(ya akademll nauk SSSR energef~ka f fransporf NO 5 (1977). PP 13-31 E/ekfr~f/kafs/Ya SSSR ( ~967 1977991

P S Neporozhnly ted 1 ~Moscovv Izd Energlya 1977), p 50 E/ektr~chesklye stanfslf No 2 (February 1978) pp 8 13 No 2 (February 19801 pp 711, and NO

6 (June 1980) PP 28 Kornrnunfsf (Jan 1 1980) P 1 and Feb 29 1980), P 1 Afomnaya energlya tApr!l 1980). PP 220-223 Sfro/fe/na Ya 9azefa (Apr 9 1980) P

I L Dlenes and T Shabad, The Sov(ef Energy System (Washington D C V H Winston & Sons, 1979} PP 153 156. and 157 A C Sutton Wesfern Techflo/

ogv arrd Sovlef Econornlc Development [Stanford Call f Hoover lnstltut~on Press. 1973) p 243 Trud (June 1 1980) p 1 /zvesf(ya (Dee 25, 1980) p 1
116 ● Technology and Soviet Energy Availability

Table 30.—Estimated Total Operating Electric

Generating Capacity of Soviet NPS’s as of

Dec. 31, 1980a

Total capacity,

Station MW(e)

Obninsk. . . . . . . . . . . . . . . . . . .

Siberian. . . . . . . . . . . . . . . . . . .

Dimitrovgrad . . . . . . . . . . . . . .

Beloyarskiy . . . . . . . . . . . . . . .

Novovoronezhskiy . . . . . . . . .

Shevchenko . . . . . . . . . . . . . . .

Kola . . . . . . . . . . . . . . . . . . . . . .

Bilibino . . . . . . . . . . . . . . . . . . .

Leningrad . . . . . . . . . . . . . . . . .

Kursk . . . . . . . . . . . . . . . . . . . . .

Armenian . . . . . . . . . . . . . . . . .

Chernobyl . . . . . . . . . . . . . . . . .

Rovno . . . . . . . . . . . . . . . . . . . .

Grand total.... . . . . . . . .

5

600

77

900

2,485

150

940

48

3,000

2,000

815

2,000

440

13,460

a

These are not rated capacltles, but OTA’S best estimates of the actual operattng

capacities at each station

SOURCE Table 29.

The next most commonly used reactors,

pressurized water reactors, supply approximately 4,200 MW or 31 percent of current

capacity. They are known as VVERs in the

Soviet Union (for the Russian words ’’waterwater power reactors”), and are similar to

models available in the West. Light water is

used in these reactors as both moderator and

coolant. A large, cylindrical, steel pressure

vessel houses the fuel and control rods along

with other necessary internal apparatus. The

high pressures involved dictate that major

components, including the reactor vessel, be

manufactured and tested before shipment to

the station site for final assembly.

REACTOR MANUFACTURE

Thus far, the expansion of Soviet nuclear

capacity in 1,000-MW increments has been

based almost exclusively on the RBMK-1000

reactor, the components for which can be

produced at ordinary manufacturing plants.

Pressure vessels for reactors of the VVER

series require specialized production facilities.

One enterprise that produces pressure

vessels and equipment for reactors of both

types is the Izhora Plant Production Association near Leningrad. Izhora began producing main power equipment for NPSS in

1964. In order to manufacture this equipment, it has had to undergo extensive expansion and retooling, and it is now the main

supplier of nuclear power reactors. Izhora is

producing 1,000-MW VVER reactors to be

installed at NPSS under construction in the

Southern Ukraine and at Kalinin, and it has

begun making an RBMK-1500 unit for the

Ignalina NPS.12 However, this enterprise

alone will not be able to produce all the reactors required in the next decade. Some of

this burden has been shifted to Czechoslovakia’s Skoda Works, which has been

assigned the task of producing the smaller

VVER-440 pressure-vessel reactors. In the

Soviet Union, a major share of the burden

is to be assumed by the gigantic new Volgodonsk Heavy Machine Building Plant, better

known as “Atommash."14 As Atommash

reaches full capacity (by 1990), more and

more reliance will be placed on the VVER1000.

When Atommash is fully operational, it

will produce VVER-1000 pressure-vessel reactors on an assembly-line basis, at the rate

of eight reactors per year. Since Atommash

is designed to specialize in reactor production, this rate of output, if achieved, undoubtedly will outstrip that of a more conventional (albeit upgraded) manufacturing

enterprise like Izhora.

In addition, the Soviets have long been interested in introducing commercial breeder

or fast-neutron reactors (designated either

12Yu. Sobolev, “The Direction for the Search, ” Sot.sialisticheskayu irzdustriy~ Nov. 3, 1979, p. 2 in JPRS 75,069, Feb.

5, 1980, pp. 1-3); “Heroes of Izhora, ” Lenirzgradska.va pruvda,

Dec. 19, 1980, p. 2.

IsVarious item9 of largely Soviet-designed equipment tor

NPSS arb being or will be produced in East European CMEA

countries, for use both in these countries and in the Soviet

Union. For a description of this “division of labor, ” see

Vyacheslav Zorichev and Yevgeniy Fadeyev, “The Course for

Accelerated Growth of Atomic Power, ” Ekonomicheskove

sotrudnichestuo stran-chlenou SEV, No. 6, 1979, pp. 51-55.

1 iI~~aUSe Of the growth in size and scope of operations

since its inception, this plant has been redesignated as a production association. See Anatoliy Mashin, “First Phase, ”

Zrzamv~ No. 3, March 1979, pp. 190-199, in JPRS 73,863,

July 19, 1979, pp. 1-13.
L’ . 0

,’

/ . . ,-
118 ● Technology and Soviet Energy Availability

BOR or BN in Soviet terminology) in order

to make better use of available nuclear fuel

supplies. The major characteristic of this

type of reactor is that it “breeds” or produces more fuel than it consumes. Systematic investigation of fast-neutron reactors began in 1948, and the first Soviet reactor of this type was started up at Obninsk in

1956. In 1969 the BOR-60 went into operation in Dimitrovgrad, and in 1973 the first

demonstration breeder reactor began operating in Shevchenko on the east coast of

the Caspian Sea. This reactor has a generating capacity of 150 MW, as well as the

ability to desalinate 120,000 cubic meters of

seawater per day. In April 1980, the BN-600,

with an electrical generating capacity of 600

MW, went into operation as Unit 3 at the

Beloyarskiy station.15 These three reactors

currently account for 5.8 percent of Soviet

nuclear generating capacity.

At one time it was expected that largescale commercial stations equipped with

breeders would be ready by the early 1980’s.

However, recent Soviet literature suggests

that this stage will not be reached until the

end of the 1990’s. Technical difficulties with

the use of sodium and other liquid metals as

heat-transfer agents are the primary problem (no moderator is used in breeders and

the high temperatures involved necessitate

the use of liquid metal, usually sodium, as

the coolant), but unexpectedly high costs

associated with all basic processes in the external fuel cycle have also been cited.16

PAST CONTRIBUTION OF

WESTERN EQUIPMENT AND

TECHNOLOGY

Although the U.S.S.R. collaborates with

its East European allies on nuclear develop-

——————

“Kazachkovskiy, op. cit, pp. 3-4: Peter I’euz, “The Nuclear

Push in the [J. S,S. R. and P;astern I+; urope, ” P{~//er Engineering, No. 8, AUK, 1978, pp. 100-1()1; ‘‘ I,ate Breeder in the Ural

hlountains, ” 11’irt,s(ha~t,sr(f)ch~~ (I)usseldorf), No. 18, May 2,

1{)80, pp. 1 ~- 16, in ,JPRS 75,973, (July 2, 1980, pp. ~-1~.

“IN, I)ollezha] and Y. Koryakin, 4’ Nuclear Power I?ngineering in the So\riet ( J nion, ‘The Bulletin c]f the .s1 tornic .Vc’icrtti.s (.$, No. 1, ,January 1980, pp. 33-3’7, loriginall~ published in

the S(’pt(’nllwr 1979 issue of lt’(~n~ rnu nist. )

ment, its progress has been largely autonomous. The Soviet nuclear power industry

has relied heavily on domestic equipment,

purchasing relatively little from the West.

Western controls on the export of nuclear

technology have almost certainly been an

important reason for this self-sufficiency,

although shortages of foreign exchange and

pride in Soviet technology would probably

have led to some restraint in purchases of

Western equipment in any case.

Soviet purchases of primary nuclear components such as reactors and reactor parts

from the West have been infrequent and

poorly documented.17 However, the U.S.S.R.

has purchased equipment that could be used

in nuclear powerplants. Although evidence is

incomplete,18 documented purchases consist

mostly of machine tools, heavy equipment,

and engineering services slated for Atommash and Izhora. These have been sold by

firms in Italy, West Germany, Japan, Sweden, France, and the United States. Italy

seems to be the country most heavily involved in such trade; several Italian companies have supplied equipment, mainly

machine tools, to Atommash and Izhora.

Besides heavy manufacturing equipment,

Atommash and Izhora are said to be receiving well-outfitted quality control laboratories, including large destructive-testing

equipment, from European, Japanese, and

North American sources. The Soviet nuclear

17‘U.S. Department of Commerce trade statistics report

only two entries under SITC Code 7117, “nuclear reactors

and parts thereof. ” one is a 1978 export of $448,700 from the

United States; the other $329,000 from Wrest (;ermany in

1976. No further unclassified information on either sale could

be found. OTA has been told, however, that a Wrest (lerman

firm was to deliver all fittings and equipment for the nuclear

cycle in three Soviet powerplants with a combined generating

capacity of 1,880 NIP$’; the deli~rery was to be completed

before the end of 1980.

18The remainder of this section is based on various issues of

Soliet Busine.s.s an(i Tra(lp and on A“ucleonic.s lf’m~k, Nov. 8,

1979, p. 12. In general, Soviet sources make no mention or

only passing reference to the use of foreign equipment. For

example, one Soviet source noted in passing that tnetal refining equipment from a Swiss firm is used at the 1 zhora Plant

Association. See V. P. (;olo\riznin, “So\’iet Power F;quipment-The Basis for the De\’elopment of Power h; ngineering

in ( )ur Country, ” filrlc~rg(jnlcl.s)l irtc).vtro?rc~rli >tc>, INo. 4, Apri l

1980, pp. 2-4 in JPRS I, 9176, Jul~ 2, 1980, pp. 11-18 ,

especiall~’ p. 14.
Ch. 4—The Soviet Nuclear Power Industry ● 119

industry has also been acquiring valves from

at least one Western source, a Canadian firm

that has supplied valves for the Novovoronezhskiy NPS; and the Belgorod Power

Machine Building Plant reportedly has introduced technology for automatic argon-arc

welding of austenitic steel pipeline units for

NPSs. The technology uses AM-11 automatic welding units manufactured by a U.S.

firm.19

The U.S.S.R. also may be purchasing

large capacity cranes, both for building

NPSs and for handling heavy items at manufacturing plants. In 1976, there was speculation in the industry that foreign bids would

be solicited for 1,200-ton cranes for Atommash, but OTA has been unable to confirm

any completed transactions. Similarly, in

1979 the U.S.S.R. reportedly ordered three

300-metric-ton truck-mounted cranes from a

West German firm. These cranes are technically well-suited for use at nuclear

facilities.

It is important to note that none of these

purchases appears in an area in which the

Soviets lack technology. Moreover, OTA

found no evidence that equipment of the sort

described has been sought or purchased in

massive amounts or that the Soviets have

thus far sought large-scale active Western

cooperation in their nuclear industry.

1980 PLAN FULFILLMEN T

As table 28 shows, the Soviet nuclear

power industry was originally charged with

producing 80 billion kWh of electricity

during 1980, and completing some 18,000

MW of installed capacity by the end of that

year. By early 1980, it was clear that these

targets could not be reached and in February

of that year a revised production goal of 71.9

billion kWh was published. As of December

31, 1980, installed nuclear capacity was approximately 13,460 MW, a figure that takes

into account the start of unit 1 (440 MW) at

the Rovno NPS in December 1980.20 This is

well below the plan target of 18,400 MW.

Failure to meet the plan was largely due to

delays in the installation of nuclear power

stations. These delays were apparently the

result of a variety of systemic problems and

were more closely associated with the construction industry and suppliers of material

and equipment than with technological difficulties. Although one of its production

lines has been opened, Atommash is now

several years behind schedule. The long leadtimes required to install reactors and to

make nuclear power stations fully operational make it unreasonable to blame Atommash for past failures to meet goals for installed capacity or production of nuclear

electricity. However, problems in bringing

Atommash online may become a major factor in any failures to meet nuclear targets in

the 1980’s.

Soviet literature provides numerous accounts of the difficulties encountered in the

building of nuclear power stations,21 including poor organization of labor, as well as

delays on the part of ministry officials,

designers, builders, and suppliers of materials, construction modules, and equipment. Similar complaints can be found even

in the construction of the BN-600 breeder

reactor (unit 3 at the Beloyarskiy NPS)—

where the Soviets felt themselves to be in

20~~t all sources agree with this 13,460-hl W’ figure. .4 So~iet article, ‘‘ Results of t hc’ ,+ld~rancement of ~; lect ric’ I’ower in

1980 and Tasks for I !)N 1, ” h,’lck tri[>}le.ski \ItI \ fu n t ill, No. 1,

January 1981, pp. 2-4, r~’ports the total (apacit~ of S()\i(~t

NPSS at the end of 19H() as 12, :100” hl J!’ I n part. this discrepanc.v can he explained h> lower .So~’iet i i~~u re~ for [ he (’apacities of the Din]iLro~”grad, Kola, and Nt)~’()~’()r{Jr~t’z}lski~

N PSS, which w(mld ac(~)un t for a differ(~nce of I (),-) h] ii (see

tables 29 and ;10). I n addition, the Soy’iet total may’ (Jxclude

the capacitv of the Siberian N PS (600 NIM’), Finall~r, the Soviet figure may not take into account unit 1 of the new }{()~n()

N 1)S. P’or purposes of this report and on the basis of d(M’-

umented e~’idence, ( )’1’,1 includes the capacit}r increments ap -

parentl~ omit ted from the reported %~riet figure for total nuclear capacit~.,

‘(;. I)olzhenko, “Sanctions’! I’or~et It!” Str~ji([,~n~~ }(I

~~{Iz~ta, ,Jul~r 16, 1980, p, 2.: Zh. ‘1’kachenko, ‘‘Y”ou (’an n(>t 1{(1-

pla(’t~ 1$1[’tal \$’it h kl(’ssa~es, Sot %i(]il \ t][ll{) ~ki] jfa [rI(lii 5 [r! )fw

Apr. 2, 1980, p. 2, in ,J PRS 75,9’711, .July 2, 1980, pp. 17-20.
120 . Technology and Soviet Energy Availability

the international technical spotlight.22 In

this case, the general contractor was several

months late in issuing technical documentation; equipment and materials were late or

defective; there was a shortage of spare

parts; and when equipment did arrive at the

construction site, managerial personnel and

skilled workers were in such short supply

that there frequently were long delays before

the equipment was installed or even properly

stored.

Such problems are not peculiar to the

Soviet nuclear power industry, although

they may be exacerbated by the high technological standards required for nuclear

equipment. Similar sorts of complaints are

published regularly in the Soviet press and

2

"Late Breeder . . . ,” op. cit.

cover a variety of industries. To a certain extent, too, these problems may be seen as

“growing pains.” Installed nuclear capacity

rose an average of 1,760 MW per year during

the period 1976-80, v. only 760 MW per year

in 1971-75. As computed from table 28, the

annual rate of addition continued to increase

during the late 1970’s, rising from 1,000 MW

in 1975-76 to 2,300 MW in 1978-79. The

Eleventh FYP (1981-85) projects continued

rapid growth and it is clear that nuclear

power’s contribution to the Soviet energy

balance will accelerate in the next decade.

Nevertheless, it is likely that this rapid

buildup in the rate of construction of nuclear

power stations has itself created numerous

problems for the future and that the difficulties described above will persist as the

industry struggles to meet the 1985 and

1990 targets.

NUCLEAR CAPACITY AND PRODUCTION:

FUTURE PROSPECTS

TARGETS FOR 1985

Soviet goals for nuclear power are ambitious. The draft of the Eleventh FYP calls

for the generation of 1,550 billion to 1,600

billion kWh of electricity from all sources in

1985, of which 220 billion to 225 billion kWh,

or about 14 percent, are to be generated at

nuclear power stations.23 In order to achieve

these goals, 24,000 to 25,000 MW of additional nuclear generating capacity are to be

installed during the FYP. If these installation goals are achieved, the U.S.S.R. will

have about 38,000 MW of installed nuclear

capacity by the end of 1985.24 (The United

States had 52,300 MW of nuclear capacity as

of January 1980.25)

“’i Draft of the Main Directions of Economic and Social Development of the U.S.S.R. for 1981-1985 and for the Period of

1990, ” lz~lesti-ya Dec. 2, 1980, pp. 2-7.

“This assumes that the Soviet Union had 13,460 MW of effective nuclear power generating capacity, as of Dec. 31,

1980. Addition of 24,000 to 25,000 MW of capacity during the

Eleventh FYP would result in total nuclear capacity at the

end of 1985 of 37,460 to 38,460 MW. OTA has used the

approximate midpoint of this range—38,000 MW.

“hlorgenthaler, op cit.

These targets assume a high utilization

rate for nuclear generation facilities. The

rate for 1985, calculated as the ratio of

planned nuclear electricity production

during 1985 to estimated midyear planned

capacity in 1985, implies that the Soviets expect to operate nuclear stations for an

average of about 6,250 hours per year during

1985. This rate is not impossible, but it is

substantially higher than the utilization rate

of 5,420 hours achieved in 1980.26

TARGETS FOR 1990

Current Soviet goals for 1990 are less explicit. One Western journal cited a 1990 nuclear capacity target of 80,000 MW in one

issue, while another issue 6 months later reported a goal of 90,000 MW.27 In a speech de-

“Calculated from table 28 using estimated capacity as of

Ju1y 1, 1980, 13,020 MW.

“’’Afghanistan Imperils Co-operation on Soviet I+ogramme, ” Nuclear Engineering Internationa~ February

1980, p. 5; Richard Knox, “Pro~ess in the U, S, S.R., ” Aluc/ear

Engineering International, August 1980, p. 14.
Ch.. 4—The Soviet Nuclear Power Industry • 121

livered in December 1978, P. S. Neporozhniy, the Minister of Power and Electrification, spoke of reaching 100,000 MW of

nuclear capacity in the following 10 to 12

years,28 and a West German newspaper has

quoted 1990 targets of 100,000 and 110,000

MW, concluding that one “cannot accurately determine from Soviet data what the

U.S.S.R. wants to have ready or wants to

build by 1980 or 1990.”29

Soviet goals for 1990 are contingent on

the achievements of the industry by 1985.

Reported downward revisions in the 1985

goals make it likely that targets for 1990

also have been adjusted and that any existing plans for 100,000 to 110,000 MW have

now been abandoned. Barring large-scale infusions of Western equipment (e.g., turnkey

NPS projects), a possibility that will be

discussed in more detail below, the published

goal that OTA regards as being most reasonable is 80,000 MW. The discussions that

follow assume this figure, which would require the addition of 42,000 MW of nuclear

capacity during the Twelfth FYP (1986-90),

given that 38,000 MW of capacity were in

place at the end of 1985. If these capacity

goals are achieved by 1990, the Soviets

would have the ability to generate approximately 410 billion to 475 billion kWh of

nuclear electricity per year, depending on

one’s assumptions regarding utilization

rates. 30

SOVIET ABILITY TO MEET

PLAN TARGETS

The following sections evaluate the potential for success of these plans, identifying

the major obstacles likely to be encountered,

and noting the areas in which Western tech28"Speech of P. S. Neporozhniy, ” lz[e.sti.sa, Dec. 1, 1978,

p. 4.

“’’F’rom Lake Baikal to the Elbe River, ” bl’irt.schu ft.~uoche

(Dusseldorf), No. 46, Nov. 12, 1979, pp. 64, 68, 70, 71, 74, and

76, in JPRS 674,792, Dec. 19, 1979, pp. 20-29.

‘(’The low end of the range assumes an operating rate of

5,420 hryr, the rate achieved in 1980, while the uppe r

assumes the operating rate apparently sought for 1985, 6,250

hours. Mid-1980 capacity is estimated as 75,300 to 76,300

Mk$’.

nology and equipment might make the greatest contribution. This evaluation is organized around four key areas:

1.

2.

3.

4.

construction of the stations;

manufacturing reactors, steam equipment, and electrical machinery;

facilities for the external fuel cycle,

which include supply of enriched uranium for reactor fuel and the storage

and disposal or reprocessing of spent

fuel; and

computer technology to support station

operation. (Electricity transmission

lines and pumped storage electricity

generating capacity are discussed in

ch. 5).

For purposes of this discussion, OTA has

assumed a profile of yearly additions to

nuclear capacity. This profile is illustrated in

figure 9, which also shows the actual annual

additions between 1975 and 1980. The latter

increased from about 1,000 MW in 1976 to

about 2,300 in 1979, falling to 2,040 in 1980.

In order to add 24,000 to 25,000 MW by

1985 and 42,000 more by 1990, the Soviets

could proceed at any of a number of different

paces. The one shown in figure 9—successive

increments of 3,000, 4,000, 5,000, 6,000, and

7,000 MW to 1985 and 7,000, 8,000, 8,000,

9,000, and 10,000 MW to 1990—is not the

only possible profile, but it is a reasonable

one to serve as an illustration of the

demands that will be placed on the Soviet

nuclear industry to achieve a total of 80,000

MW installed capacity by 1990.

Table 31 presents much of the published

information on nuclear power stations that

are now under construction or planned.

Rated reactor capacities have not been published for all of these, but those that have

been released total 41,820 MW (excluding

unit 6 at Rovno)—enough to cover the entire

capacity addition called for in the Eleventh

FYP and roughly 40 percent of the likely addition during the Twelfth FYP.

Several features of these planned additions are noteworthy. First, only three more

VVER-440 reactors are scheduled to be built
122 . Technology and Soviet Energy Availability

Photo credit TASS from SOVFOJO

NPS control room in the U. S. S. R., 1980

for domestic NPSS, two for the Kola NPS

and one for Rovno. Production of this type of

reactor is to shift to the Skoda Works in

Czechoslovakia, and such reactors will be installed in Eastern Europe and exported elsewhere, e.g., to Cuba or non-Communist Third

World countries. Second, most announced

capacity additions will involve 1,000-MW

reactors. Of the 31 reactors of this size that

have been scheduled, nine are RBMKs and

22 are VVER units, the latter to be produced

primarily by Atommash. Third, there are

plans to install four RBMK- 1500 reactors at

the Ignalina NPS in Lithuania,” and

—

31A tomic Science and Technology in the U.S.S.R. (Moscow:

Atomizdat, 1977), p. 26. The RBMK-1500 is an upgraded version of the RBMK-1OOO. See A. M. Petrosyants, Problems of

Atomic Science and Technology (Moscow: Atomizdat, 1979),

p. 139.

possibly several more at the Smolensk and

Kostroma NPSS.

32 Finally, there are plans to

eventually build on RBMK-2400,33 but no

details on the installation of such reactors

before 1990 have been published.

Construction

Time.–Plans that call for the addition of

24,000 to 25,000 MW of nuclear capacity by

1985, and an additional 42,000 MW by 1990

can only be realistic if they allow sufficient

time for the construction of new plants. The

Soviets themselves have maintained that

the construction time norms are 6 years for

“F. Ovchinnikov, “By Advancing Tempos, ” Sotsialisticheshaya industn”yq Jan. 30, 1981, p. 2.

“N. A. Dollezhal, “Atomic Power Engineering: ScientificTechnical Tasks of Development, ” Vesti”k ti~”i nu.uk

SSSR, No. 7, July 1978, pp. 46-61.
Ch.. 4—The Soviet Nuclear Power Industry . 123

10,000

9,000

8.000

7,000

0

6,000

5,000

4.000

3.000

2,000

1,000

Figure 9.— Past and Projected Additions to Nuclear Generating Capacity

I

I
124 . Technology and Soviet Energy Availability

. .— —

Table 31.— Planned New Nuclear Electric Generating Capacity in the U. S. S. R., Post-1980

Rated

Year of reactor

Reactor Initial Reactor capacity, Reactor

typee

Station name

Existing Station

Kola

Location No operation —designation— MW(e)

VVER-440

VVER-440

RBMK-1000

RBMK-1000

RBMK-1000

RBMK-1000

RBMK-1000

PWR

PWR

Polyarnyye Zori 3

4

1981

1982

440

440

1,000

1,000

1,000

1,000

1,000

440

1,000

1,000

1,000

1,000

1,000

1 000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,500

1,500

1,500

1,500

1,000

1,000

1,000

1,000

1000

1,000

—

1,000

1,000

1,000

1,000

1,000

1,000

1,000

—

1,500

Leningrad

Kursk

Sosnovyy Bor 4 1981 BWR

BWR

BWR

Kurchatov 3

4

1981

By 1985

Pripyat 3

d

1981

By 1985

BWR

BWR

Chernobyl

New Stations:

Rovnoa VVER-440

VVER-1 000

VVER-1000

VVER-1000

VVER-1000d

VVER-1000

VVER-1000

VVER-1000

VVER-1000

VVER-1000

VVER-1000

VVER-1000

VVER-1000

RBMK-1000

RBMK-1000

RBMK-1000

RBMK-1000

RBMK-1500

RBMK-1500

RBMK-1500

RBMK-1500

VVER-1000

VVER-1000

VVER-1000

VVER-1000

VVER-1000

VVER-1000

—

—

PWR

PWR

PWR

PWR

PWR

Kuznetsovsk 2

3

4

5

6

1981

1983

—

—

By 1992

1981

By 1985

—

PWR

PWR

PWR

PWR

PWR

PWR

PWR

PWR

BWR

BWR

BWR

BWR

BWR

BWR

BWR

BWR

PWR

PWR

PWR

PWR

PWR

PWR

Southern Ukrainiana Konstantinovka 1

2

3

4

Kalinina Udomlya By 1985

By 1985

By 1985

By 1985

1981

By 1985

By 1985

By 1985

By 1985

By 1985

1

2

3

4

Smolensk a Desnogorsk 1

2

3

4

Ignalina a

Snieckus 1

2

3

4

By 1985

By 1985

—

Western Ukrainiana Khmeinitskiy 1

2

3

4

Near Odessa 1

Gorkiy 2

Odessa b

Gorkly b

Minsk b

Kharkov b

Volgograd b

Zaporozhye a

— c

Minsk —-

Kharkov —

Volgograd — —- —

VVER-1000

VVER-1000

vVER-1000

vVER-1000

VVER-1000

VVER-1000

VVER-1000

Energodar 1

2

3

4

PWR

PWR

PWR

PWR

—c

—

—

Balakovo a

Rostov a

Crimeana

Balakovo —c PWR

PWR

PWR

Near Volgodonsk

Aktash —

—c

—c

Tatar

Bashkir

Kostroma

Nizhnekamsk —

Nertekamsk —

—

—

RBMK-1500

—

— BWR

a The station reportedly are under construction

b

The Odessa station IS to be the first of a series of large nuclear heat and power stations (NHPS) located near major urban centers, A small (48.MW) NHPS IS in operation

at Bilibina. Although virtually any type of reactor theoretically can be adapted to this type of station, preference reportedly IS being given to PWR’s, but evidence suggests that there wiII be at least two. Plans for the period 1981-1985 also call for NHPS’s to be built in Minsk, Kharkov, and Volgograd, the reactor type for these stations

IS not known.

cUnspecifiedn amounts of capacity are to be Introduced at these stations during the period 1981.1985.

d

The Rovno NPS IS to have SIX units by 1992, starting with Unit 3, they are to be based on the VVER-1000 reactor

‘See notes to table 29

SOURCES A M Petrosyants, Prob/emy afornrmy rraukl j tekhrrM/ (Moscow: Atomlzdat, 1979), p 139 .4tomrraya nauka / tekhnik~ v SSSR (Moscow Atomlzdat, 1977), p 26

Aforrrrraya energlya, Vol 43, No 5 (November 1977), pp 418.420 E/e/rtr/chesk/ye Sfan?s/1, No 6 (June 1980), pp 2-5, No 10 (October 1980), pp 10.14; and No

12 (December 1980), pp 60-63. Tep/oenergef/ka, No 7 (July 1979), pp 2-9; and No. 8 (August 1980), pp 2.5 Ekonommhes/raya gazeta, No 1 (January 1981), pp

11 and 12, and No 12 (March 1981), p 2 /zvest/ya (December 2, 1980), pp 2.7 Pravda (Jan 6, 1981), p 1. Sots/a//st/c/reslraya /rrdustr/ya (Jan 30, 1981), p 2

Strolte/naya gazefa (July 16, 1980), p. 2 Sov/ef Geography, various Issues.
Ch. 4—The Soviet Nuclear Power Industry ● 125

an NPS equipped with two VVER-1000 reactors and 6 years, 3 months for an NPS

with two RBMK-1000 reactors.34 While only

one VVER-1000 has been installed to date,

experience with smaller VVER reactors and

with the RBMK-1000 suggests that these

estimates may be optimistic.

Unit 1 at the Novovoronezhskiy NPS

(VVER-210) was begun in 1957, but did not

go into operation until 1964.35 The first

phase of the Leningrad NPS (equipped with

two RBMK-1,000 units) was under construction for 7 years, as was the first phase of the

Chernobyl NPS (also equipped with two

RBMK-1000 units). 36 Unit 1 (an RBMK1000) of the Kursk NPS took 6 years to build

and unit 2 (also an RBMK-1000) required 3

years, stretching the total time of phase 1 to

9 years.37 In the case of the Armenian NPS,

where construction began in 1971, unit 1

(VVER-440) achieved criticality in December

1976 and full-power operation in November

1977; however, unit 2 (VVER-440) did not

come online until 1979—8 years after construction began.38 These experiences would

suggest that 7 years is a more realistic

estimate of the time required to bring the

first two units of an NPS online.

According to F. Ya. Ovchinnikov, Deputy

Minister of Power and Electrification, in

mid-1979 the U.S.S.R. had 20 NPSs with a

total rated capacity of over 60,000 MW in

operation or under construction.39 If additions to capacity proceed at the rate suggested in figure 9, the Soviets could have

60,000 MW installed capacity before the end

“N. Ya. Turchin, et al., B[~[lclirlg 1+’ue[ arl(i ,4 tc>nlic l)cjiier

Stations { Nloscow: Stroyizdat, 1979), vol. II, p, 505,

1’)I,afleur and Steno, op. cit,, app. B, p. 20.

‘h}$’illiarn F’. Say’age, “ Report of the Second hleeting of the

(). S.-[ J.S.S. R. .Joint (’ommittee for Cooperation in the Field of

~lnerg~” (J$rashington, 1), (7.: U.S. Department of P:nergy,

Dec. 1 !5, 1977), p. 12: T“. P. Akinfi~e~, A D. Czellerman, and

J’. K, Bronniko~r, ‘

(

~; xperience in Assimilating the Rated

(’apacity of the I’irst Phase of the (’hernoh.vl N PS, ’

F.’leh [n”ch~.<hi?e vtun t.~ii, No. 2, Feb. 1980, pp. 7-11.

‘-S. ‘11-~~’an, “1, ah~r M’atch of the .Atom, ” l:{e.sti}a, Fell. 1,

1979, p. 1,-in tJPRS 73,092, Nlar, 28, 1979, pp. 39-41.

‘“U.S. !Nuclear Regulatory (’omrnission, op. cit., app. B,

p. 26,

“F, Ya. Ovchinniko~’, “Nuclear Power Engineering 1s a

Quarter Century Old, ” ~eploenergctik[l, No. ‘7, July 1979, p p .

2-5, in ,J PRS I, 8700, oct. 4, 1979, pp. 1-8.

of 1988. This allows over 9 years for completion of all of the nuclear power stations

reported by Ovchinnikov. On the surface,

therefore, the contemplated additions to capacity are consistent with Soviet experience

and seem realistic in terms of construction

time.

There is an additional dimension, however. Expenditures for construction and

assembly work are not spread evenly over

the time required to build an NPS. Rather,

they begin at a low level, rise steadily until

the fourth and fifth years of construction,

and then fall off. During construction of an

NPS equipped with two VVER-1000 reactors, for example, only 4 percent of total construction and assembly costs is incurred in

year 1, but 24 percent of total costs is incurred in year 4 and a similar amount in year

5. In the case of an NPS equipped with two

RBMK-1000 reactors, the percentages rise

from 7 percent in the first year to 20 percent

in year 4 and 20 percent in year 5.40

As a result, it may be relatively easy to

begin the construction of an NPS, and it may

be easy to complete one that is in the late

stages of construction, but great effort on

the part of the construction industry is required during years 3 to 5. Based on their

past experience with the construction of nuclear power stations, it is possible that the

Soviets could succeed during the 1980’s in

beginning the construction of all planned

NPSs, and could complete by 1990 those

that are nearly finished. But, the U.S.S.R.

might still reach the end of the decade with a

great deal of unfinished construction because many NPSs were stalled in the demanding third to fifth construction years.

Required Investment.–Although Soviet

data on per unit investment cost is notoriously unreliable, OTA has attempted to

convey a rough idea of the order of magnitude of investment entailed in Soviet

nuclear plants. A number of estimates of the

investment cost per kilowatt of nuclear

‘“V. 13, I)uhro~’skiy, et. al , B/iil(iirz,q .4 tornic Is’lectn’c IJorier

.$tuti~~r~.s ( Nloscow: Izd. “h~nergi~’a, ” 19791, p. 187,
126 ● Technology and Soviet Energy Availability

capacity have appeared in Soviet publications and have ranged from as low as 175

rubles/kW to as high as 413 rubles/kW,

depending on the date of the estimate, the

cost categories encompassed by the estimate, the assumed size of the power station,

and the prospective site.41

The most authoritative recent estimates

of specific capital investment are probably

those that appeared in a February 1979 article by A. Troitskiy, a deputy head of the

Department of Power and Electrification

of Gosplan.42 Troitskiy’s estimate for the

“Center,” which best typifies the European

U. S. S. R., where most plants are likely to be

built, is 380 rubles/kW. This figure includes

all associated costs—transmission lines,

mining uranium, providing housing for construction workers, etc.

Assuming that the Soviet Union does add

the 24,000 to 25,000 MW of capacity called

for in the Eleventh FYP, and using Troitskiy’s figure, the total cost of additions to

nuclear capacity during the period 1981-85

should be 9.1 billion to 9.5 billion rubles. The

Eleventh FYP target for planned capital investment in the period 1981-85 is 711 billion

to 730 billion rubles. Given that industry has

usually been accorded about 35 percent of

the total, planned industrial investment in

the period is probably about 250 billion

rubles. The cost of additions to nuclear

capacity therefore constitutes about 3.6 to

3.8 percent of industrial investment. However, investment in the electric power industry as a whole has been usually about 4.6

percent of the total. This means that the

nuclear program, which will account for 45 to

50 percent of new electric capacity by 1985

(see ch. 5), could take up about 80 percent of

all electric power investment.

41 Turchin, et al., op. cit., vol. 1 I, p. 894; A. Troitskiy, “Electric Power: Problems and Perspectives, ” Planovoye khozyaystvo, No. 2, February 1979, pp. 18-25. For a thorough discussion of Soviet estimates of nuclear power costs, see

William J. Kelly, Hugh L. Shaffer, an J. Kenneth Thompson,

“The Economics of Nuclear Power in the Soviet Union, ” presented at the 55th Annual Conference of the Western Economic Association, San Diego, June 1980. (Forthcoming in

Sovie t Studies. ) 4Troitskiy, Op. Cit., p. 20.

This is a large burden indeed—and if even

greater increases in nuclear capacity are to

be realized in the 1986-90 period, the investment problem can only intensify. Nuclear

plant construction on this scale will therefore place much greater demands on the Soviet economy in the coming decades. On the

one hand, it is hard to argue from these

figures that the aggregate investment demands cannot be met, if the U.S.S.R. is prepared to rearrange its priorities and direct a

larger share of total investment funds to this

sector. On the other hand, such a reallocation is likely to cause painful readjustments

in the Soviet economy and “losers” in the

system can be expected to resist the change.

Labor Requirements.—Although data on

the construction labor requirements in the

nuclear power industry are scarce, available

information suggests that these requirements are heavy. An idea of their order of

magnitude might be gleaned from the following calculation. In nonnuclear power stations, the lowest levels of labor expenditure

achieved in construction were 2.4 to 2.7

person-days/kW of installed capacity.” If

the Soviets were able to add nuclear capacity

with a rate of labor expenditure of only

2.5 person-days/kW of capacity, addition of

24,000 to 25,000 MW during the period

1981-85 would require 60 million to 62.5

million person-days of construction and installation work, while the indicated addition

of 42,000 MW during the Twelfth FYP

would require about 105 million persondays. 44 If the time profile shown in figure 9

were followed, the construction labor embodied in annual commissioning would rise

43 Turchin, et, al., op. cit., vol. II, p. 896.

44 Interestingly, the figure of 2.5 person-days/kW is approximately correct for construction of nuclear power plants in

the United States, if U.S. figures are revised to make them

more compatible with Soviet practice. See L.M. Voronin (cd.),

Atornnyye elektricheskive .stantsii, No. 2 ( MOSCO W: Izd.

“’Energiya, ” 1979), p. 47. However, the 2.5 person-day figure

(derived from Soviet fossil-fired power construction) understates labor requirements for construction of Soviet NPSS, if

one can judge from figures on labor requirements per ton o f

equipment. As an example, it is estimated in Voronin that the

amount of installation labor required per metric ton of equipment installed is 2 to 2.5 times greater for an N PS than for an

analogous fossil-fired power station. Ibid., p. 68.
Ch. 4—The Soviet Nuclear Power Industry • 727

from 5.8 million person-days in 1979 to 7.5

million in 1981 and 25 million in 1990.

Assuming, further, that the average construction worker provides 250 person-days

of labor per year, a work force of 23,200

would have been required to deliver the 1979

total, while 30,000 workers would be required in 1981 and 100,000 in 1990.

This growing need for workers to build

nuclear power stations comes at a time when

the total demand for construction labor appears to be outstripping the supply. It is

true that the Soviet Union has a large construction labor force. In 1979, 11.2 million

workers and office employees were employed

in construction, 10.1 percent of all employment in the national economy. But the rate

of growth of construction employment has

begun to slow,45 and in the last 3 years the

absolute increment to total construction

employment has fallen successively. These

declining growth rates do not signify a diminished interest in construction on the part

of Soviet planners, but rather a necessary

adjustment of the economy in general to

slow growth in the labor force.46 As a result,

all sectors of the Soviet economy are under

pressure to achieve output gains through increases in labor productivity rather than

through expansion of employment.

The use of mechanization and automation

as solutions to these problems has met with

limited success in the construction industry.

F. Sapozhnikov, Deputy Minister of Power

and Electrification, has observed that “nonindustrial and technologically ineffective

solutions”’ still are used in the construction

of nuclear power stations, and that the share

of manual labor remains high.47 One reason

for this seems to be that specially developed

equipment and tools for installation work

“AI] figures from U.S, S. R., op. cit., pp. 387 and 388.

“’See Murray Feshhach and Stephen Rapawy, “Sovie t

Population and Manpower Trends and Policies, ” in So[’iet

Econ(Jmy in u ,~’~uI Pe.specti[e, compendium submitted to the

,Jo int F; conomic Corn mittee of the U, S. Congress, Oct. 14,

1976 (Washington. 1). (’.: [J. S. (;o\ernment Printing Office,

19761, p. 13,3.

“F. Sapozhniko~’, “F~nergy, Ileat, and I.ight for All, ”

.Strf~itelna\’a g(lzetu Dec. 21, 1979, p. ‘2, in ,J PRS 75,069, F’eb.

5, 1 980! pp. 1 H-20.

have not been introduced into practice fast

enough to keep up with the rapid growth

rate of nuclear construction projects.48

Other approaches to productivity improvements have been tried, including an effort to reduce onsite labor requirements by

increasing the amount of assembly work carried out at factories before components are

shipped to the construction site. It has also

been suggested that the turnover rate for

construction labor could be reduced (and

labor productivity increased) if more attention were paid to the needs of construction

workers for housing, health care, entertainment, and other social amenities. 49

Despite the growing demand for workers

to build nuclear power stations and the

declining rate of growth of the total construction labor force and of the nonagricultural labor force, overall labor shortages

need not impede nuclear power development

if Soviet authorities plan ahead and allocate

their available workers carefully. According

to the rough estimates above, nuclear plant

commissioning in 1979 would have required

an aggregate amount of construction and installation labor equal to only 0.2 percent of

the 11.2 million worker construction labor

force available in that year. Projected commissionings in 1985 and 1990 would represent only 0.3 and 0.9 percent of the 1979

labor force, respectively. Although there appear to be limited opportunities to shift

workers from construction of fossil fuel or

hydroelectric power stations, the aggregate

labor requirements to support NPS construction need not pose a serious problem.

While the Soviet construction labor force

as a whole may be adequate, shortages of individual skills could well arise. Installation is

a crucial part of the activity involved in

building a nuclear power station, and when

Wu, S. hledvedev, “hlethods of Increasing the Efficiency

of TES, A E S Equipment I ntallation, Energetiche.skoye

stroitel.st[’o, No. 11, November 1979, pp. 7-11, in JPRS

1, 8955, Feb. 28, 1980, pp 7-16. Medvedev implies that this lag

exists.

‘qOvchinniko~,, “F3y Advancing ‘1’empos, ” op. cit., p. 2.
128 ● Technology and Soviet Energy Availability

construction reaches the heavy installation

stages at a large plant, more than 2,000 installation workers may be needed onsite for

up to 1 to 1.5 years.50 If a number of plants

were to reach the installation stage at about

the same time, a severe shortage of installation workers could result.

Construction Support.–Besides labor, the

Soviet nuclear program will require adequate

support in the way of equipment and facilities for construction and installation

work. 51 An important equipment category at

nuclear construction sites is large cranes and

other hoisting equipment to move building

materials such as steel structures and to install heavy components such as reactor

vessels. This equipment will become increasingly important as the construction of

nuclear plants is based more and more on

standardized modular components—large,

prefabricated pieces—which reduce labor

costs and speed the work at the site.52

Available hoisting equipment may already

be in short supply; one source mentions the

possibility of using this equipment for both

construction and installation work by combining these two phases of operations

wherever possible.53

Besides more and better construction

equipment, the Soviet Union sees a need to

improve the organization and management

of construction operations in order to efficiently utilize both equipment and available

labor. One form of improvement, as mentioned above, is the timely scheduling of construction and installation operations at an

NPS site so that scarce equipment can be

shared. On a larger scale, an attempt is being

‘

(

’ Medvedev, op. cit.

‘

] Russian construction terminology distinguishes the work

of “constructing” or erecting the buildings of a nuclear station from the work of “installing” the reactors and other

equipment housed in these buildings. Installation (rnontazh)

often is more specialized and intricate work and, thus, requires more highly skilled labor than does construction

(stroitelstvo). As an industry, “construction” takes in both

types of work, and it is in this sense that the word is used

here.

“D. B. Fedorchukov, “Basic Directions for Raising the Effectiveness, Quality, and Rates of Construction of Nuclear

Power Stations, ” in Voronin (cd.), op. cit., pp. 49-57.

5’Medvedev, op. cit., p. 13.

made to organize nuclear station construction work on a “flow-line” basis, much like

that in the housing construction industry .54

As a model for further efforts in this direction, a new type of facility called a nuclear

power construction combine (NPCC) is being

created in the city of Energodar, at the

site of the Zaporozhye plant, now under

construction. The NPCC is to manufacture

metallic and reinforced-concrete structural

and, presumably, to assemble these pieces

into buildings at the plant site.55

More NPCCs will probably be organized,56

but it is not clear how many construction

projects would be supported by each combine and, therefore, how many combines will

be needed to support the entire nuclear program to 1990. Nor has the level of capital

and labor investment in NPCCs been determined. While additional staff and equipment

will no doubt be required, it is conceivable

that the combines could be formed, in part,

on the basis of existing construction organizations and equipment. The aim is to

save time and money by using labor and

equipment efficiently. Since construction delays have been a major source of bottlenecks

in the Soviet nuclear program, these aims

take on particular significance.

Plant and Equipment Requirements

This section discusses plant and equipment requirements for the U.S.S.R. to meet

its nuclear targets for 1985 and 1990. These

requirements include major components of

NPSs—reactors, turbines, and generators.

Reactors.–As noted above, the growth of

Soviet nuclear generating capacity over the

next 10 years will be based on 1,000-MW

reactors of the RBMK (graphite-moderated)

and the VVER (water-moderated) series, and

also on the RBMK-1500. The announced

plans for expansion and new construction of

Soviet nuclear power stations summarized in

table 31 more than cover the capacity needed

54Fedorchukov, op. cit., p. 56.

“A. Podgurskiy, “NPS’s-On a Flow Line! ‘“ .Stroite/naj~a

gazet~ May 5, 1980, p. 1.

“Fedorchukov, op. cit., p. 56.
Ch. 4—The Soviet Nuclear Power Industry ● 129

to reach the 1985 goal of 24,000 to 25,000

MW of additional capacity. At stations

where the types and capacities of new reactors are known, the new capacity planned by

1985 amounts to at least 27,320 MW—some

780 MW more than needed to achieve the

assumed goal of 38,000 MW by the end of

1985. Table 31 also shows at least ten 1,000 -

MW units (including units 3 and 4 at Rovno)

and three 1,500-MW units to be added,

presumably after 1985. Together with the

aforementioned 780 MW, these additional

units give a total of 17,280 MW of capacity

to apply toward the anticipated growth in

1986-90, leaving some 24,720 MW of new

capacity unaccounted for. Some flexibility

exists in choosing how to cover this remainder.

From table 31, it appears that the

U.S.S.R. is building nuclear power stations

according to a regular pattern with either

four 1,000- or 1,500-MW units per station, ”

each unit consisting of a reactor and accompanying turbine-generator sets. Typically, the Soviets construct stations in

“phases” (ocheredi) of two power units each.

Assuming that this pattern continues, it is

logical to assume that planned stations for

which total capacities have not been announced will have at least four units and,

therefore, four reactors of 1,000- to 1,500 -

M W capacity each. ”

Table 31 shows seven prospective stations

for which total capacities have not been announced. However, the type of reactor to be

installed at four of these stations is known;

‘-one exception to this pat tern is the Ro\rno station, which

is plan n[’d t o h a~re six units. [lowe~’cr, the first two are

\’~’F; R-440 reac’tors, both of which originall~ were planned to

come onstrwm b~’ the end of 1980; onlJr one of them did. The

four subsequent units are to he \’}’I+; R- 1000s, thus conforming to the genera] construction pattern for th~ 1980’s.

A not her c~x cep t ion ma~r he the nuclear heat and power station

near Odessa, which apparent IJ’ will ha~’e two 1,000-11 W’ units.

““’I’his strate~~ was outlined at a conference held in hlay

19/+0 at the site of the Zaporozhye plant. It was noted that

the rated capacitJr of stations under construction in the next

10 ~rears will he 4,000 to 6,000 Nl\$’, based on units with capa~ities of 1,000” to 1,500 ll~$r. See “Conference on the FlowI.ine Construction of N PS’S and the Curtailment of I,abor Expenditures and Duration of Construction, A tom IZU?IU

CT1 ergi~’u. ~’ol. 49, No. 4, october 1980, pp. 264 and 265.

OTA has therefore assigned at least one

reactor of the designated type to each station and included these reactors in the

figures given above for planned new capacity. Assuming that the four stations will

have at least three more reactors of the same

type when completed, the stations will account for additional capacity totalling

13,500 MW and consisting of nine VVER1000 reactors at three of the stations and

three RBMK-1500s at one (Kostroma).

If the remaining three stations, which are

to be heat and power plants, were to have at

least two VVER-1000 units each (by analogy

with Odessa), all seven nuclear power stations would provide a total of 19,500 MW of

new capacity, or 5,220 MW less than the

24,720 MW needed to attain the 1990 goal.

One conceivable way of covering this difference would be by building one more

ochered of two 1,000 MW units at three of

the stations. This would signify a departure

from current practice. It is also possible that

plans for other sites have not yet come to

light. Neither of these possibilities alters the

crucial question: How many 440-, 1,000-, and

1,500-MW units are needed to attain the

desired goal, and can the Soviets produce

and bring them online?

In order to equip those stations for which

reactors types are given in table 31 (excluding unit 6 at Rovno), the Soviet nuclear

industry must be supplied with three VVER440 reactors and at least 24 VVER-1000s,

nine RBMK-1000s, and five RBMK-1500s.

In addition, based on the alternatives

discussed for covering the remaining capacity, as many as 21 more VVER-1000s, and at

least three more RBMK-1500s may be required. In all, besides the 440-MW units, this

would mean the production of some 45

VVER-1000 reactors, 9 RBMK-1000S, and 8

RBMK-1500s before 1990. One factor that

may affect the choice of the reactor mix is

that the RBMK-1500 is as yet unproven in

practice; operating experience at the Ignalina station may determine its future.

In summary, the growth of the Soviet

nuclear power industry in the next 10 years
130 ● Technology and Soviet Energy Availability

will be based largely on 1,000-MW reactors

of the VVER and RBMK series and also on

the RBMK-1500, an upgraded version of the

1,000. 59 The 440-MW class of VVERS is apparently being phased out; additional units

of this size are to be installed only at Kola

and Rovno. Although the U.S.S.R. seems

committed to the larger classes of reactors

and has designed many of its new stations

accordingly, there is some flexibility as to

which reactors to install. This flexibility is

mainly in the choice between the RBMK1000 and the RBMK-1500. If problems develop with the RBMK-1500, the Soviets

could in principle substitute the RBMK1000. If continued indefinitely, however,

such substitutions would result in a capacity

shortfall that would have to be covered in

some way, such as by the installation of

more 1,000-MW units.

It must be noted that reactor substitution

is economic only between the 1,000- and

1,500-MW RBMK units and not between

this reactor series and the VVER series.

Unless a decision were made very early,

substituting between the RBMK and VVER

would be difficult and costly. Therefore,

if there were a production shortfall in

VVER-1000 reactors, stations designed to

receive these could not employ the RBMK1000 without a fundamental redesign. It is

possible of course that construction

schedules could be altered so that work on

stations with RBMKs could move ahead and

ones needing VVERs delayed. This would

mean that more of the RBMKs could be installed than VVERs in order to keep up with

capacity growth plans and to allow the solution of production problems. Eventually, in

order to fulfill nuclear capacity goals either

Soviet nuclear manufacturers would have to

supply the needed reactors of both series, or

some other measure—such as the import of

59The 50-percent increase in capacity in the RBMK-1500 is

achieved by increasing the amount of coolant circulated

through the core, thereby yielding more steam. For comparative specifications on the two reactors, see T. Kh.

Margulova, Atomnyye eiektricheshiye stantsii (Moscow: Izd.

“Vysshaya shkola, ” 1978), p. 181; and Atomrmva nauka . . ,

op. cit., p. 37.

reactor equipment—would have to be

adopted.

Soviet hopes for domestic reactor production rest on Izhora and Atommash. OTA has

attempted to determine the demands that

might be placed on these facilities during the

next 10 years. The results, broken down by

facility and year, are shown in table 32. This

table is not a prediction for installed capacity or facility output over the next 10 years.

Rather, it combines numerous statements

from the Soviet press and open literature

regarding the future of the nuclear industry

with OTA’s own understanding of that industry’s development. It endeavors to show

what the U.S.S.R. must accomplish if it is to

achieve its goals. The most important of the

assumptions that underlie table 32 are as

follows:

1) The table assumes the Soviet stated

goals of adding 24,000 to 25,000 MW of installed capacity by 1985 and achieving

80,000 MW by the end of 1990.

2) The table assumes that annual production of nuclear capacity at an individual

facility in any given year will equal or exceed

production in the previous year.

3) The table assumes that Izhora now has

the ability to produce annually reactors having a total capacity of about 5,000 MW. This

assumption is based on three pieces of evidence. First, representatives of the U.S. Nuclear Regulatory Commission were told during a visit to Izhora on February 10, 1978,

that the plant had an annual capacity of

5,000 MW or more.60 Second, a 1980 article

lists 1980 production obligations for the

plant that total at least 5,320 MW (three

VVER-440s, two RBMK-1000s, and two

VVER- 1000s).61 Finally, the nuclear plans

incorporated in the recently adopted

Eleventh FYP would be absurd if Izhora

were not capable of producing about 5,000

MW of capacity per year. OTA has postu60 Lafleur and Steno, op. cit.

61V. V. Krotov, “The Contribution of the Power Machine

Builders to the Fuel-Energy Complex of the Country, ”

Energomashinostroy eniye, No. 1, January 1980, pp. 2-5.
Ch. 4—The Soviet Nuclear Power Industry ● 131

Table 32.—Projected Production of Nuclear Reactors and Export Potential

(MW )

Production capacitv. Domestic Available

Year Izhora Atom mash Total requirements for export

1981 .., . . . . . . . . . . . .

1982 . . . . . . . . . . . . . . .

1983 . . . . . . . . . . . . . . .

1984 . . . . . . . . . . . . . . .

1985, . . . . . . . . . . . . . .

1986 . . . . . . . . . . . . . . .

1987 . . . . . . . . . . . . . . .

1988 . . . . . . . . . . . . . . .

5,000

5,000

5,000

5,000

5,000

5,000

5,000

6,000

1,000

1000

2,000

2,000

3,000

4,000

5,000

5,000

6,000

6,000

7,000

7,000

8,000

9,000

10,000

11,000

5,000

6,000

7,000

7,000

8,000

8,000

9,000

10,000

1,000

0

0

0

0

1,000

1,000

1,000

SOURCE Office of Technology Assessment

lated that Izhora will continue to produce

reactors at a rate of 5,000 MW per year until

1988, when a rise to 6,000 MW is assumed.

This second assumption may well be too conservative. It is possible that Izhora’s capacity will expand more rapidly.

4) The table takes into account indications

that the Skoda Works will assume primary

responsibility for providing VVER-440 reactors for Eastern Europe, but also assumes

that the U.S.S.R. will provide some VVER1000 reactors for Eastern Europe during the

Twelfth FYP (see below and ch. 9).

5) Finally, the table discounts Soviet

statements that seven VVER-1000 reactors,

produced at Atommash, will be shipped by

1985; and that Atommash will be fully operational, producing 8,000 MW per year, by

1990. 62 Assuming that 2 years must be allowed for the installation of a reactor, it is

unlikely that Atommash can supply seven

1,000-MW reactors for installation during

the 1981-85 period. Four is a more probable

total (i.e., annual production of 1,000, 1,000,

and 2,000 MW in the years 1981, 1982, and

1983).

Given these assumptions, table 32 demonstrates the rate at which both Izhora and

Atommash must produce reactors if nuclear

capacity—and therefore nuclear electricity

production–goals are to be met. One vulnerable point in these projections is Atommash, the successful and timely completion

of which will dictate the success of the

Soviet nuclear program and, to some extent,

the program of the Council for Mutual

Economic Assistance (CMEA) countries.

Construction of Atommash, which is being

carried out in stages, has been underway

since 1976. Originally planned for startup in

1977, the plant’s first stage, with a rated

output of 3,000 MW of nuclear capacity per

year, was not operating until the end of

1978.63 This delay is indicative of progress

with the project as a whole. Since its inception, it has been beset with both internal and

external problems that are frequently publicized in Soviet newspapers and journals.

These include excessive idle time and poor

organization of workers at the construction

site, as well as delays in the deliveries of

equipment and materials from external suppliers. The labor problem is complicated by

shortages of workers in the plant and at the

construction site. As a result, construction

of Atommash is estimated to be at least 2

years behind schedule; although the first

1,000-MW reactor vessel was completed in

62’’Five Year Plan Accelerates Nuclear Programmed,” Nuclear Engineering International, January 1981, p. 4: V. Pershin, “TO Eliminate Disproportions, ” Sotsialisticheshaya in

dustriya Jan. 30, 1981, p. 2.

“’’Building the Atommash Plant, ” Culture and Life, No. 5,

1976, p, 10; and “Chronicle of Events,’” Stroitelnaya gazeta,

Dec. 12, 1980, p. 1.
132 . Technology and Soviet Energy Availability

February 1981, series production at the

plant probably will not begin before 1983 or

1984.64

Even after the plant is completed, there

are likely to be problems with acquiring

skilled workers to operate its sophisticated

machinery. As recently as 1979, efforts to

train such workers—for example, operators

of automatic welding equipment—were said

to be highly inadequate to meet the needs of

Soviet industry as a whole, let alone those of

Atommash. 65 Fortunately it appears that the

reconstructed Izhora plant will be able to

compensate for at least some of the difficulties at Atommash.

The profile assumed here should permit

the Soviets to meet domestic requirements

for reactors and to supply 1,000 MW for export in the years 1981, 1986, 1987, and 1988.

During the first of these years such exports

would take the form of VVER-440s (two),

while in the later years exports would be in

the form of VVER-1000s. It must be noted,

however, that it is not clear that these exports will necessarily be sufficient to support

the planned Soviet role in CMEA cooperative nuclear power development.

As chapter 9 notes, Eastern Europe plans

to have installed nuclear capacity totaling

some 37,000 MW by 1990. Until 1985, nuclear powerplants built in CMEA countries

will be based on the VVER-440; in the period

1986-90, the plan is to switch to the VVER1000. The needed VVER-440s presumably

will be supplied mainly by Skoda, with one or

two reactors possibly coming from Izhora.66

Since no plans have been announced for

“’’Obligated by the Initiative, ‘‘ Soltsiali.s ticheska.va indus -

triya, Feb. 14, 1980, p. 2, in JPRS 75,741, May 2, 1980, pp. 1

and 2; “Commentary by the Industrial Construction Department, StroitelnaLva gazeta, Dec. 12, 1980, p. 1; ‘‘Soviets Building Nuclear Reactor Assembly Line, The Columbus Dispatch, Oct. 13, 1980, p. A-8. According to a report in

lzcestiva, Feb. 21, 1981, p. 3, Atommash completed its first

reactor as planned.

65V. Pershin, “Personnel for Atommash, ” Trud Feb. 9,

1979, p. 2, in JPRS 73,015, Mar. 16, 1979, pp. 14-16.

“The VVER-440 may also be exported to non-CMEA nations. Two of these rectors are in operation at the Loviisa

NPS in Finland, and at least one other country–Libya-has

purchased a Soviet power reactor. For more on the Libyan

deal, see Gloria Duffy, op. cit., pp. 84-86.

building VVER-1000s outside the U. S. S. R.,

the intent seems to be for these units to be

supplied by the Soviet Union. Thus, some

undetermined portion of that plant’s output

after 1985 will be designated for export.

Overall, according to the CMEA agreement,

the Soviet Union is to supply about 50 percent of the basic equipment for nuclear

plants in Eastern Europe, but the U.S.S.R.

might well decide to allocate Atommash’s

early units to Eastern Europe to offset

future hydrocarbon requirements there.67

This could strain Soviet manufacturing facilities as they attempt to keep pace with

large-scale nuclear growth both at home and

abroad, particularly if Skoda is slow in

building to capacity. Moreover, the U.S.S.R.

has in the past exported reactors outside

CMEA. Should it wish to continue these exports, facilities would be taxed even further.

In sum, although Soviet plans for expansion of nuclear power are reasonable, they

undoubtedly pose a difficult task for plants

that manufacture reactor equipment. In the

past, the capacity of Soviet industry to meet

the increasing needs for this equipment has

been inadequate. More recently, Atommash

has become operational, albeit with construction lagging behind schedule, and

Izhora has been reconstructed and its capacity significantly upgraded. It is therefore

possible that the U.S.S.R. will be able to produce reactors fast enough to meet domestic

requirements and to maintain some exports

—two 400-MW units in 1981 and at least

1,000 MW per year after 1985.

Steam Turbines.–The planned expansion

of Soviet nuclear power will also necessitate

increased production of steam turbines. In

principle, the power generation equipment

used in nuclear power stations is essentially

the same as that in nonnuclear thermal

plants. This is particularly true of turbines,

and Soviet designs of steam turbines for

nuclear stations sometimes duplicate or incorporate design features of those used in

fossil-fired stations. This means that Soviet

manufacturing plants have been able to ap67Zorichev and Fadeyev, op. cit., p. 53.
Ch. 4—The Soviet Nuclear Power Industry ● 133

ply some of their experience in making turbines and generators for fossil-fuel power

stations to steam and electrical equipment

for nuclear stations, and also that similar

kinds of problems are likely to occur. By the

same token, the demands of the nuclear

power industry do place new requirements

on these plants. Output of equipment must

be increased to keep pace with nuclear

growth, and the equipment itself, especially

turbines, must be compatible with reactor

systems.

Current Soviet practice is to install at

least two turbines with each reactor. The

VVER-440 reactor uses two 220-MW turbines, and the VVER-1000 and the RBMK1000 units use two 500-MW turbines. The

addition of the RBMK-1500, however, will

require development of a 750-MW turbine

for use with saturated steam. In addition,

work reportedly is under way to produce turbines with a rated capacity of 1,000 MW, in

order to couple the VVER-1000 and RBMK1000 with a single turbine.68

These steam turbines can be either “lowspeed” or “high-speed” units, operating at

1,500 and 3,000 rpm respectively. In the

United States, for large capacity turbines

(500 MW or more) operating in saturated

steam, the low-speed design is considered

more suitable; large high-speed turbines operate better and last longer when run on

superheated steam. This is because large,

high-speed turbines used with steam at low

parameters require very long blades in the

low-pressure sections of the turbine, and the

high velocities at the outer ends involve too

much stress. Such difficulties would explain

reported Soviet problems with the highspeed (3,000 rpm) 500-MW turbines used

with the 1,000-MW reactors. Based on U.S.

experience, it is reasonable to expect that

unless the Soviet nuclear industry switches

to low-speed (1,500-rpm) turbines, it will

probably encounter even greater problems

with the 750- and 1,000-MW turbines that it

plans to use in the near future.

—-

—

68 Margulova, op. cit., pp. 184,224.

It is interesting that Soviet experts seem

to have weighed the costs and benefits and

concluded that high-speed turbines are more

promising, although considerable expenditures have already been made on preparing

designs for powerhouses using the low-speed

variety.

69 The only low-speed turbines known

to be in place to date are two 500-MW turbines manufactured for the VVER-1000

reactor of unit 5 at Novovoronezhskiy. 70 At

the same time, the U.S.S.R. is pursuing the

development of high-speed turbines with

capacities of 750 and 1,000 MW. Fabrication

of the latter has begun, although there is no

evidence that a 750-MW high-speed turbine

is actually yet in production.

In sum, with the possible exception of the

750-MW size, the Soviet Union is producing

turbines of both types and with the unit

capacities that it needs, including 1,000

MW. However, only one size–500 MW–actually is in use; the large turbines remain unproven in practice. Whether problems will be

encountered, particularly with the highspeed equipment, remains to be seen. Preference does seem to be for the high-speed type.

More of these are in service, at stations with

the RBMK-1000. Part of the reason for this

preference may be that Soviet nuclear manufacturing facilities are not yet adequately

equipped to produce high-capacity, lowspeed turbines, which are bulkier and more

metal-intensive.

Major Soviet turbine and generator manufacturers have been expanding and upgrading their facilities for purposes of turning out more and better equipment. One

such plant—the Kharkov Turbine Plant Production Association–has been designated

the chief enterprise for the development of

low-speed turbines. Another leading manu-

“B. M. Troyanovskiy, Turbines for A tomic Electn”c Pouter

Stations, (Moscow: Izd. “Energiya,” 1978); V. Krotov,

“Power Machine Buildng and Scientific-Technical Progress, ”

Planoloe khozyaystco, No. 5, 1981, p. 8.

‘“See table 28 and G. 1. Grigorash, “Turbogenerators of the

Kharkov Plant ‘Elektrotyazhmash’ for NPS’S, ” Elektrz”cheskiye stantsii, No. 8, August 1980, pp. 5-8. Grigorash notes

that the Kharkov Turbine Plant has been designated as the

chief Soviet enterprise for designing low-speed turbines for

nuclear stations.
134 • Technology and Soviet Energy Availability

facturer that has been undergoing expansion

and remodeling is the Leningrad Metal Plant

Production Association.71 These two associations appear to be the major suppliers of turbines for the nuclear industry.

Despite such efforts, an official of the

power machine building industry observed

in 1979 that too little attention has been

given to turbine construction, with the

result that that industry cannot provide

proper nuclear equipment.” No evidence was

found to suggest that this situation has improved. Too many problems with the highspeed turbines larger than 500 MW may inhibit plans for the growth of the nuclear industry. In the case of the 750-MW turbine,

the option exists, if necessary, to fall back to

the 500-MW size, at least until any problems

with the former are resolved. The same

should be true with 1,000-MW turbines.73 At

some point, however, if the goals of its expansion plans are to be met, the Soviet

nuclear industry will have to be assured of

supplies of the larger turbines.

Generators. —As with steam turbines, turbogenerators are essentially the same for

both fossil-fired and nuclear plants, and

some generators are able to operate in either

type of station74 Development of larger and

larger turbines requires the creation of

generators to match. Turbines and generators must be designed to produce alternating current power at the correct frequency. High-speed generators are designed with

two magnetic poles and low-speed with four

poles. Turbines and generators are directcoupled and installed in sets, so that a

generator will be required for each new turbine unit produced.

71G. A. Shishov, “The ‘Leningrad Metal Plant’ Production

Association in the Tenth Five-Year Plan, ” Energomashinostroyeniye, No. 9, September 1980, pp. 5-8.

72V. Krotov, “Prospects for Power Engineering Dictate, ”

Sotszalisticheskaya indzMttiyG Feb. 3, 1979, p. 2, in JPS

73,015, Mar. 16, 1979, pp. 8-11.

“It should be noted that constraints on the substitutability of turbines increase as the construction of a station proceeds. The turbine size must be decided and the order for this

equipment placed prior to the start of construction of the stations’s turbine hall.

74rigorash, op. cit.

As power stations are built with larger

unit capacities, generators too must be

designed with higher rated capacities–1,000

MW and 2,000 MW in the case of those

destined for nuclear plants. In the past,

generator production has been a chronic

source of bottlenecks in nuclear construction. Now responsibility for large generators

is being given to plants like Elektrotyazhmash in Kharkov and the Elektrosila Electrical Machine Building Production Association in Leningrad, facilities that have extensive experience in designing generators for

nonnuclear stations.75 Elektrotyazhmash

has been expanded and charged with producing four-pole generators with capacities of

500 and 1,000 MW. The first two 500-MW

generators of this type were manufactured

for unit 5 at Novovoronezhskiy, but present

plans include 1,000-MW generators. Although no evidence was found regarding

large capacity two-pole generators for highspeed turbines, expanded production facilities at Elektrotyazhmash seem to be adequate to manufacture both two- and fourpole generators with capacities as large as

2,000 MW.76

Summary. —If Soviet claims are accurate,

the U.S.S.R. is fully technologically capable

of developing the necessary equipment for

its nuclear power industry, including reactors and compatible turbine-generator sets.

While limited options exist for deciding

which type of equipment to use, the burden

of supplying this equipment rests with

manufacturing plants. There is evidence

that such plants are already having difficulty meeting the demands being placed on

them by the nuclear program. OTA has not

investigated the extent of Soviet investment

in manufacturing other nuclear plant equipment—valves, tubing, etc.—but all evidence

suggests that difficulties may be widespread

in the nuclear industry. This is not implausible, given the problems faced by Soviet industry as a whole in fulfilling output quotas.

Moreover, these difficulties undoubtedly will

“’Ibid., p. 5.

“’Ibid.
Ch. 4—The Soviet Nuclear Power Industry ● 135

be aggravated by the increasing rate of

growth of nuclear power and the demands

for supporting this growth.

The External Fuel Cycle

An important part of the infrastructure

for nuclear power generation is the external

fuel cycle–the supply of uranium and the

system for disposal or reprocessing of spent

fuel and wastes. Little information is

available on the first part of the fuel cycle in

the Soviet nuclear industry. The size of

uranium supplies is an official State secret

and there is virtually no unclassified information regarding Soviet plants that

manufacture the fuel elements themselves.77

Based on what is known about its consumption of uranium, the U.S.S.R. seems to

be accumulating a substantial stockpile.78

This may, in part, be a response to perceived

worldwide scarcity of this element. OTA is

unable to judge whether stockpiling will

provide the U.S.S.R. with uranium adequate

to support its nuclear program, but on

the evidence of its announced plans, the

U.S.S.R. seems to be confident that it has or

can get the uranium it will need in the years

ahead. The emphasis on breeders presumably is at least partly based on ensuring adequate uranium supplies. ’g Moreover, it apparently has adequate enrichment capacity

to convert the uranium to usable fuel for its

reactors. The demand for Soviet enriched

fuel will increase as more and more VVER

reactors are installed in the U. S. S. R., in

Eastern Europe, and in Third World countries. These reactors require more highly

enriched fuel than do the RBMK models.

“-Peter Feuz, “The Nuclear Push in the U.S.S.R. and Eastern F;urope, ” Pouer Engineen’ng, No. H, August 1978, pp. 100

and 101. See also Dienes and Shabad, op. cit., for information

on the location of the uranium industry.

“r)uffYr, op. cit., p. 68.

““Jean A. Brigg-s, “Soviet Nuclear Power: Tortoise and

Hare’?” fi’orhe.s, vol. 122, No. 9, oct. 30, 1978, pp. 123-126, reported t,hat the U.S.S.R. imports uranium from East Germany and Czechoslovakia. Regarding the need to seek outside sources of uranium, Petrosyants, op. cit., p. 268, declared

that the development of the nuclear industry and nuclear

power in the ‘‘socialist countries” (including the U.S.S.R.) “in

no wav depends on supplies of uranium from the capitalist

world.”

The growing demand for this fuel may put a

strain on the enrichment industry in the

U. S. S. R., but it must be noted that this industry already exports its services abroad,

including to Western Europe and more recently to the United States.80

The other end of the external fuel cycle–

disposal or reprocessing of spent fuel and

other waste material—is discussed somewhat more openly in the Soviet literature,

although little quantitative information is

available. Although Soviet experts recognize

the increasing importance of dealing with

wastes from NPSs, current disposal methods should be adequate for some years. Despite its rapid growth, the total nuclear generating capacity of the U.S.S.R. is still relatively small compared, for example, to that

of the United States. The amount of spent

fuel produced is therefore correspondingly

small.

Commercial reactors in the U. S. S. R., like

those in other countries, operate on a “oncethrough” fuel cycle. After the fuel has been

burned up in the reactor, it is discharged to

interim storage.81 At Soviet nuclear power

stations, the spent fuel elements are placed

in water-filled storage basins that cool the

fuel and allow it to decay over time.82 Eventually, this spent fuel, its radioactivity significantly lessened during interim storage,

will be transported to special plants for

reprocessing in order to recover reusable

fissile materials, particularly uranium and

plutonium.

Technology for reprocessing spent fuel

has been available in the Soviet Union since

about 1950, 83 and there is reason to believe

that reprocessing has also been in practical

“’fluffy, op. cit., p. v; Theodore Shabad, “Russian Uranium

Exported to the United States, ” in The New York Times,

Aug. 17, 1981.

“For a discussion of nuclear fuel cycles in non-Communist

countries, see 1. Spiewak and J. N. Barkenbus, “Nuclear Proliferation and Nuclear Power: A Review of the NASAP and

INF’CE Studies, ”Nuclear Safety, No. 6, November-December

1980, pp. 691-702.

“Atomic Science ., op. cit., p. 154.

‘

] Ibid., p. 153. For a description of a process designed by

Soviet scientists for what they call “regeneration” (regeneratsiya) of spent fuel, see pp. 153-159 of this source.
136 • Technology and Soviet Energy Availability

use there for some time. Indeed, American

scientists suspect that the U.S.S.R. was extensively involved in chemical separation of

nuclear wastes as early as the mid-1950’s.84

If this is true, the Soviet Union may already

have practical experience with the technology it will need to eventually perform fullscale commercial reprocessing. It has been

estimated that full-scale reprocessing of

spent fuel will not be economical in the

U.S.S.R. until Soviet nuclear stations are

producing 1,500 tons of spent fuel per year—

about as much as the United States was producing from 60 reactors in 1978. At that

time, total U.S. nuclear capacity was some

47,000 MW.85 Based on OTA’s projection in

figure 9, the U.S.S.R. will not reach this level

until after 1985. This reasoning is supported

by a 1978 Soviet source that maintained that

while no reprocessing plant had yet been

built in the U. S. S. R., that country would

have reprocessing in the 1980’s.86

Besides spent fuel, the operation of NPSs

produces other waste products, primarily liquid wastes, of high, medium, and low radioactivity. Highly radioactive liquid waste

results mainly from reprocessing, and the

Soviet nuclear industry, therefore, will probably not have to handle large amounts of

these products until after 1985. By and

large, nuclear plants produce wastes of

medium and low radioactivity .87

As a nuclear industry grows, so does the

problem of liquid-waste disposal. In response, Soviet scientists reportedly are developing various permanent disposal methods, from deep underground burial in natural

geological formations to different ways of

concentrating and solidifying waste material

84Duffy, op. cit., p. 64.

“5Biggs, op. cit., pp. 126, 124.

“John J. Fialka, “Soviets Think They’ve Solved Atom

Safety Problems, ” Washington Star, Oct. 1, 1978, pp. A-1

and A-10.

‘

7 Petrosyants, op. cit., p. 356, notes that relatively small

amounts of highly radioactive waste also are produced in the

operation of NPSS. At the same time, V. B. Dubrovskiy, et

al., op. cit., p. 33, states that such waste products are not

formed at NPSs, Small amounts of highly radioactive waste

undoubtedly are produced by industrial and research

reactors.

(depending on its level of radioactivity), and

at least one Soviet source considers the problem of deep burial of low- and medium-level

waste to be solved.88 Concentrated low-level

wastes from research facilities are already

being stored underground at Zagorsk, near

Moscow, and at Dimitrovgrad. In the future,

high-level wastes are to be compacted,

solidified, and encapsulated for storage in

abandoned salt or coal mines .89

Computers

Computers have been used more intensively for process control applications in

nuclear facilities than elsewhere in the power

generation industry, but the U.S.S.R. evidently recognizes a need for wider use of this

technology. 90 This need will grow as the number of NPSs and the demands placed on

them increase.

The Soviet Union reportedly began developing computerized control systems for

fossil-fired power stations as early as 1961,

and development of these systems for

nuclear stations began in 1971.91 Nevertheless, there is evidence that Soviet NPSs

lack components such as microprocessors

and other control equipment to support their

functions. For example, Western observers

have noted that Soviet NPSs employ manually operated plumbing in reactor cooling

systems. The computer systems themselves

are said to be relatively primitive,92 and new

systems are introduced into plants slowly. If

the Soviets do not meet their goals for the

construction of NPSs in the Eleventh and

Twelfth FYPs, it will not be due primarily to

deficiencies in computer control systems.

88Petrosyants, op. cit., pp. 356-366.

89Briggs, op. cit., p. 126.

‘Ye. P. Stefani and V. I. Gritskov, “The Status and Prospects for the Development of Computerized Technological

Process Control Systems for Power Units of Thermal and

Nuclear Power Stations, ” Tepfoenergetik% No. 7, July 1980,

pp. 2-7.

‘

l Ibid., pp. 2 and 3.

‘

2 Fialka, “Russia’s Nuclear Program . . .,” op. cit.
Ch. 4—The Soviet Nuclear Power Industry ● 137

REQUIREMENTS FOR NEW EQUIPMENT

AND TECHNOLOGY

NUCLEAR CAPACITY AND

PRODUCTION: LIKELY

ACHIEVEMENTS

Based on the foregoing analysis of the

problems facing the Soviet nuclear power industry and its surrounding infrastructure,

OTA has developed a set of projections for

likely levels of achievement of nuclear

capacity and electricity y production.

As noted above, the Soviet Union has set

a goal of adding 24,000 to 25,000 MW of

nuclear capacity during the Eleventh FYP

period. If this goal is achieved, total installed

nuclear capacity at the end of 1985 would be

about 38,000 MW. If the 1985 target is

reached, or not seriously underfulfilled, there

is good reason to believe that the Soviets

would set a goal of 80,000 MW of installed

capacity by the end of 1990. Figure 9

presented a time profile of capacity additions that would permit the U.S.S.R. to meet

these goals. This profile hypothesized successive increments of 3,000, 4,000, 5,000,

6,000, and 7,000 MW during the period

1981-85, followed by additions of 7,000,

8,000, 8,000, 9,000, and 10,000 MW during

the Twelfth FYP.

The above discussion has indicated that

the U.S.S.R. should be capable of producing

reactors fast enough to meet domestic requirements, to export 1,000 MW in 1981,

and at least 1,000 MW per year after 1985.

Therefore, reactor production itself is not a

particularly weak link in the Soviet nuclear

power industry. The picture is less sanguine

with respect to other requirements for

meeting the capacity targets assumed for

1985 and 1990.

Bottlenecks will probably develop in construction and installation work. The contemplated rate of commissioning of nuclear

capacity implies a need to triple the size of

the construction labor force. If the rate of addition of generating capacity (of all forms)

were expected to moderate in the 1980’s, it

might be possible to meet this need for labor

by drawing workers from nonnuclear power

projects. But no such moderation is in prospect. Gross additions to generating capacity

(all forms) are to rise from 52,000 MW in the

Tenth FYP to about 64,000 MW in the Eleventh FYP, and about 85,000 MW in the

Twelfth FYP (see ch. 5). Furthermore, since

there appears to be no prospect that the absolute rate of construction of fossil-fired and

hydroelectric powerplants will decrease during the coming two FYP periods, it may not

be possible for nuclear projects to draw any

workers (on net) from these competing projects unless there are substantial increases in

the productivity of construction labor.

Power station construction overall probably

will require large numbers of additional

workers, while NPS construction in particular will require a great deal of additional

specialized construction and installation

labor (e.g., workers to assemble and install

reactors and associated equipment).

A second area in which bottlenecks may

develop is the production of turbines and

generators. The Soviets have not yet

mastered the production of low-speed 500-

MW turbines, high-speed 750-MW turbines,

and high-speed 1,000-MW turbines. All of

these will be needed in the present decade. If

technical problems arise, the Soviets may be

forced to fall back on the more tested highspeed 500-MW turbine that has found widespread application in conjunction with the

RBMK-1000. Generator problems may develop in the production of the four-pole 500-

MW models needed to go with the new lowspeed 500-MW turbines. A more serious

problem may be a general shortage of capacity to manufacture generators. As in the case

of labor, no help will come from a reduced

burden of fossil-fired and hydroelectric

capacity additions. The U.S.S.R. could reduce its exports of turbines and generators,

but it is not clear that this action would in-
138 . Technology and Soviet Energy Availability

crease its ability to produce the types of turbines and generators needed for nuclear

power stations.

As a result of these factors–likely delays

in construction of NPSs and delays in installation work at NPSs, plus shortfalls in

the production of turbines, generators, and

other equipment required for NPSs—OTA

expects the Soviet nuclear program to fall

behind schedule. Although estimates of developments 5 and 10 years into the future

are necessarily speculative, it seems reasonable to adopt as an optimistic or best-case

projection the expection that the Soviets will

have installed 36,000 MW by the end of 1985

(v. 38,000 MW planned) and 75,000 MW by

the end of 1990 (v. 80,000 MW planned). If

the U.S.S.R. achieves 36,000 MW of capacity by the end of 1985, its nuclear power stations will generate about 190 billion to 210

billion kWh of electricity during that year.93

Achievement of 75,000 MW by the end of

1990 should lead to generation of 400 billion

to 445 billion kWh in 1990.94

“Estimated by multiplying projected capacity for mid1985 (33,800 MW) by operating rates of 5,663 to 6,259 hr/yr.

The former rate is the estimated 1980 rate, while the latter is

the 1985 operating rate implied by targets announced for the

Eleventh FYP.

“Estimated capacity for mid-1990 (71,000 MW) operated

for 5,663 to 6,259 hr/yr.

THE POTENTIAL ROLE OF WESTERN EQUIPMENT

AND TECHNOLOGY

Despite the achievements justly claimed

by the U.S.S.R. in developing and upgrading

its nuclear technology and equipment, there

is room for new technology and equipment

available in the West. For example, while

some spent fuel reprocessing apparently is

being carried out, the U.S.S.R. has not yet

built a commercial-size plant for this purpose. Such a plant will require large-scale

production equipment that may still be lacking despite the long-standing availability

and use of basic reprocessing technology. In

addition, there may be alternative processes

that have not been developed or explored

thoroughly in the U. S. S. R..

Another area that probably could benefit

from new technology and equipment is the

manufacture of metal parts, such as turbines

and reactor tubing. Soviet metallurgical

processes and fabrication techniques for

these parts seem to be less advanced than

similar processes and techniques used in the

United States. A third area of technological

need is in control equipment, particularly

microprocessors.

Soviet experts have themselves noted

some areas where new or improved equipment is needed. According to one article, the

horizontal drum-type steam separators currently used with RBMK reactors should be

replaced with more efficient vertical separators, a process that requires more research. 95 A new type of reactor vessel made

of prestressed steel-reinforced concrete is being developed for a 500-MW reactor for

nuclear heat and powerplants,96 and according to another source, work is being

done and more is needed to find better materials and designs for the motors of main

circulatory pumps of nuclear stations.97 In

the area of steel pressure vessel fabrication,

Soviet industry is said to lack progressive

forging technology for making reactor vessels. There are reports, however, that such

technology is being introduced at Atommash.98 Finally, it has been suggested that

one way to improve the American uranium

9G. V. Yermakov, “Scientific and Technical Tasks for the

Advancement of Atomic Power in the U.S.S.R.,” E1ektricheskiye stantsii, No. 7, July 1979, pp. 5-9.

9

’ibid., p. 8.

“O. L. Verber, et. al., “High-Power Asynchronous Electric

Motors for Main Circulatory Pumps of Nuclear Power Stations, ” E/ektrichesAiye stantsii, No, 9, September 1980, pp.

5-9.

“’Ye. N. Moshnin and S. A. Yeletskiy, “Directions of the

Advancement of Forging and Pressing Production Technology of Atomic Machine Building, Energoma.shinost royeniye, No. 1, January 1980, pp. 36-38.
Ch. 4—The Soviet Nuclear Power Industry • 139

enrichment industry is through the use of

advanced isotope separation processes such

as laser enrichment.99 Conceivably, such

processes could also be applied in the

U.S.S.R.

While the acquisition of these technologies would undoubtedly benefit the Soviet

nuclear industry, it may be that more mundane needs in the area of construction equipment and manufacturing of parts for nuclear

reactors, turbines, and generators would be

more critical for the fulfillment of 1985 and

1990 plan targets. These needs include

heavy machinery for manufacturing plants;

large capacity cranes for construction and

installation work; small parts such as valves

and circulatory pump motors; and small

computer components and other electronic

control equipment.

One way for the U.S.S.R. to fill both kinds

of needs is to purchase technology and

equipment from the West. There are two

possible motives for making such purchases,

depending on whether the need is technical

or economic. In the first instance, the Soviet

Union is motivated to make foreign purchases because its own scientists and engineers have not yet developed or will not be

able to develop the desired equipment or

technology. OTA believes that this need is

slight, if it exists at all, in the Soviet nuclear

industry. Soviet nuclear power R&D capabilities apparently have been and will continue to be adequate to meet virtually all the

requirements of the nuclear industry for new

equipment and technology.

Economic motives are far more likely to

animate Soviet trade with the West in this

area, largely because of the widespread systemic problems that have caused bottlenecks in the nuclear program as well as in

other areas of the Soviet economy. As a

result of such problems, domestic equipment

and technology cannot be introduced or

manufactured fast enough to keep pace with

planned nuclear expansion. These delays have

apparently led the Soviets to seek outside

99Spiewak and Barkenbus, op. cit., p, 695.

sources for additional supplies of equipment

and technology to augment domestic

sources, and there is no reason to believe

that such purchases will not continue or indeed increase–if development of these items

in the U.S.S.R. remains costly in comparison.

If the Soviets fail to meet their plan

targets for installed nuclear capacity, they

should have continued interest in acquiring

equipment from the West. Under these circumstances, the U.S.S.R. might well attempt to purchase an entire nuclear power

station from the West on a turnkey basis.

This option would be attractive from several

points of view. Purchase of one 4,000- to

5,000-MW NPS would fill the gap between

the assumed target capacity for 1990 and

OTA’s projected actual capacity. In addition, although the Soviets have a highly developed nuclear technology, purchase of

such a plant from an advanced Western nation probably would have substantial technology transfer benefits. It might also be

possible to reduce the immediate financing

and foreign exchange cost of the project by

negotiating a barter arrangement in which

the Soviets would pay for the plant in part

by supplying electricity to Western countries (e.g., to West Germany).100

Alternatively, the U.S.S.R. might choose

to purchase selected components for nuclear

powerplants in order to compensate for particular shortfalls in domestic equipment production. Since the Soviets seem likely to

have an adequate supply of reactors, their

purchase seems unlikely unless the Soviets

foresee technology transfer benefits. However, shortfalls in domestic production of

turbines, generators, and other components

could occur and could lead to Soviet interest

in Western imports.

Nuclear power is a high-priority sector in

the Soviet Union and probably has been able

100At least one such barter deal has already been suggested

by the Soviet Union. The deal, whereby West Germany would

have built a nuclear station in Kaliningrad in exchange for

electric power, fell through in 1976 for economic and political

reasons.
140 ● Technology and Soviet Energy Availability

to command foreign exchange to finance imports. It seems likely that the volume of

Soviet imports for this industry has been

constrained by Western export restrictions

and by the adequacy of Soviet-made equipment, rather than by the availability of

foreign exchange to this sector or the

availability of Western credits.

If trade restrictions are relaxed, Soviet

purchases of nuclear equipment are likely to

rise even if purchases must be made on a

cash basis. The availability of Western

credit on liberal terms probably would lead

to larger volumes of imports. A barter deal in

which the Soviets acquired a turnkey NPS

and paid for it over a number of years with

exports of electricity would almost certainly

be the most attractive alternative from the

Soviet perspective because the project

would be self-amortizing.

In short, even though the Soviet Union

has developed a substantial nuclear power

sector relying largely on its own efforts, the

major surge planned for the 1980’s is likely

to encounter problems, and progress will

probably not be as fast as the Soviets hope.

This gap between expectations and results

could create interest in the possibility of importing Western nuclear components. If

Western trade restrictions were relaxed,

Soviet needs for equipment and traditional

Soviet interest in Western technology could

lead to substantial imports for this industry.

Liberal credit terms are not essential to such

trade, but might result in greater volumes.

However, Soviet imports are likely to be

limited to amounts needed to meet plan targets for NPS capacities. The prospects of the

United States in competing for shares in this

hypothetical market are discussed in chapter

6.

SUMMARY AND CONCLUSIONS

This chapter has described the recent

growth of the Soviet nuclear industry, including officially announced plans for adding

24,000 to 25,000 MW of nuclear generating

capacity by 1985 and another 42,000 MW by

1990. While these plans are feasible in terms

of the number and capacity of planned power

stations and required levels of investment,

OTA has identified a number of potential

problems.

Many of these problems relate to the construction of NPSs. Past experience suggests

that completion of facilities will lag behind

plan targets. Although nuclear construction

need not necessarily be hampered by insufficient labor in general, highly skilled installation workers may be in short supply. Shortages of materials and equipment, poor organization of available resources and equipment, and lack of experience in installing and

bringing online the relatively untried VVER1000 reactor may also contribute to delays.

Another potentially important source of

bottlenecks in the Soviet nuclear program is

inadequate capacity to manufacture turbines and generators. In addition, Soviet industry seems to lack experience with, and

perhaps manufacturing capacity for, producing low-speed turbines, which the U.S.

nuclear industry has found more suitable

than high-speed turbines for running on the

low-parameter steam generated by nuclear

reactors. A similar situation may exist with

respect to four-pole generators used with the

slower turbines. Evidence suggests that the

U.S.S.R. intends to install low-speed turbines with VVER-1000 reactors, as is the

case with unit 5 at the Novovoronezhskiy

NPS. If so, turbines and generators needed

for new NPSs with these reactors could be in

short supply if manufacturing plants are

unable to turn out this equipment in sufficient quantities.

Thus, despite a record of self-sufficiency

in the nuclear industry, shortages of equipment and materials at home could force the

U.S.S.R. to seek these products abroad. The

CMEA countries have adopted a long-range
plan for cooperative nuclear development

that will support the U.S.S.R. program by

providing additional sources of needed products. In addition, the Soviet Union is known

to be engaged in trade with Western countries for this purpose. Although such trade

so far has been modest and for the benefit of

Soviet plants manufacturing nuclear equipment, it is possible that the situation could

change as the demands of the industry grow.

(See ch. 12 for a discussion of potential deals

in Italy and West Germany. The role of the

United States in this trade is discussed in ch.

6.)

In summary, OTA believes that while announced and estimated Soviet goals for

nuclear growth to 1990 are attainable in

principle, given the systemic problems that

continue to hamper Soviet economic growth

Ch. 4—The Soviet Nuclear Power Industry • 141

in general and that seem to be aggravated by

the qualitative and quantitative demands of

the nuclear industry for materials, equipment, and labor, the U.S.S.R. will probably

fall at least 5,000 MW short of its targets.

The demands of the nuclear industry will

place great strain on other already overburdened areas of the Soviet economy, particularly the construction industry and nuclear manufacturing plants. To relieve some

of this strain, the U.S.S.R. might wish to

rely on foreign trade, both with CMEA countries and with the West, as it has done in the

past. If shortfalls in domestic production are

coupled with delays in or curtailment of supplies of needed equipment and technology

from the West, the U.S.S.R. planned rate

of nuclear growth will probably slow.
CHAPTER 5

The Soviet Electric

Power Industry
— — — — — ——

CONTENTS

Page

THE FUTURE FOR ELECTRICITY GENERATION IN

THE U.S.S.R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

The Generation of Electricity in Mine-Mouth Power Complexes . . . . . . . . . 148

ELECTRIC TRANSMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

SYSTEM INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

Prospects for Coping With Demand Variations . . . . . . . . . . . . . . . . . . . . . . 152

The Unified Power System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

WESTERN TECHNOLOGY AND THE SOVIET ELECTRIC

POWER INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

THE FUTURE OF THE SOVIET ELECTRIC POWER INDUSTRY . . . 160

Alternatives for Meeting Increased Electricity Demand . . . . . . . . . . . . . . . 160

Prospects for Meeting Plan Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

SUMMARY AND CONCLUSIONS .

LIST OF

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

TABLES

Table No. Page

33. Soviet Electricity Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

34.

35.

36,

37.

38.

39. Estimated Soviet Electricity Production, l985 and 1990 . . . . . . . . . . . . 163

Installed Soviet Electrical Generating Capacity . . . . . . . . . . . . . . . . . . . 146

Structure of Fuel Use in Fossil-Fired Electrical Power Generation . . . . 146

Planned Expansion of Fossil-Fired Power Plant Capacity, 1981-85 . . . . 148

Electricity Generation and Consumption in the U.S.S.R. . . . . . . . . . . . . 153

Estimated Soviet Electrical Generating Capacity, 1985 and 1990 . . . . . 162

FIGURE

Figure No.

10. Major Sites for the Construction of New

Additions to Installed Capacity, 1981-85

Page

Fossil-Fuel Burning Plants or

. . . . . . . . . . . . . . . . . . . . . . . . . 147
CHAPTER 5

The Soviet Electric Power Industry

Ever since Lenin articulated the goal of

electrification of the entire country, the electric power industry has been considered fundamental to the task of Soviet economic

development. Although realization of this

goal still belongs to the future, the use of

electricity has been promoted throughout

the Soviet economy, and the construction of

generating stations and an integrated power

transmission and distribution system have

been given high priority in State plans. As a

result, electricity consumption in all sectors

of the Soviet economy has grown considerably.

Electric power is produced in the U.S.S.R.

through the conversion of nuclear or hydropower, or through burning fossil fuels—coal

and liquid hydrocarbons. The status of and

prospects for the Soviet nuclear industry are

treated separately in chapter 4; and OTA has

not studied Soviet hydropower. This chapter, therefore, concentrates on the technological and other problems facing the

U.S.S.R. in the conversion of coal, oil, and

gas to electricity. These problems fall into

three major categories: problems of electricity generation, problems relating to the construction of electricity transmission lines,

and problems associated with the development of integrated electricity networks,

The chapter is concerned with the difficulties encountered in, and the prospects for,

generation of electricity at powerplants fired

by fossil fuels, with the ability of the

U.S.S.R. to construct high voltage (HV)

power transmission lines, and with the formations of power systems and the problems

associated with managing these systems. It

analyzes the present and prospective role of

electric power in supplying energy to the

Soviet economy, and the changes–in generating capacity and output, in location of

generating stations, and in technology and

equipment—which must take place for this

role to expand. It goes on to describe present

activities in, and plans for, electricity transmission lines and integrated networks, to

discuss the present and potential contributions of the West in each of these areas,

and to evaluate Soviet prospects for meeting

growing electricity demands and for fulfilling existing plans for the addition of installed electricity capacity and growth in

electricity production.

THE FUTURE FOR ELECTRICITY GENERATION

IN THE U.S.S.R.

Table 33 shows that in 1980 the U.S.S.R.

generated 1,295 billion kilowatt hours (kWh)

of electricity, a 4.5 percent increase over

1979. Approximately 80 percent of this electricity came from fossil fuel or conventional

plants, and about 5.5 percent from nuclear

power. But the U.S.S.R, is planning a sharp

shift from fossil-fired to nuclear and hydro

generating capacity. In the next 5 years, the

contribution of the nuclear industry will triple, while the amount of electricity provided

by fossil-fuel stations is expected to grow

only 5 to 9 percent for the entire period. This

shift is further demonstrated in table 34,

which shows that while installed fossil-fuel

generating capacity is expected to grow

about 15 percent by 1985, nuclear capacity is

slated to nearly triple and hydropower to rise

some 23 percent. This planned relative

growth in hydropower’s share of installed

capacity is much higher than in previous

years.

145
146 ● Technology and Soviet Energy Availability

Table 33.—Soviet Electricity Production

(billion kWh)

1975 1979 1982 1985

(plan)

Total. . . . . . . . . . . . . 1 ,03911,23811,2951,550-1,600 5

Fossil-Fired . . . 8934

1,01141,0381,100-1, 1 356

Nuclear . . . . . . . . 20.2754,8 3 73 220-2255

Hydro a

126.01

172.01184 230-2355

a

Includes production at pumped-storage stations

SOURCES 1USSR Central Statistical Administration, Narodnoye khozyaystvo

SSSR v 1979 g , (Moscow Izd “Statistika,” 1980), p 168

2

.Ekorrorrr/ctreskaya gazefa, No 12 (1981), p 2

IEkorrorrr/ctreskaya gazefa, No 7 (1980), p 1

‘Residual

3/zyest/ya (Dee 2, 1980), p 3

6FOSSII. FI red generat Ion to account for 71 percent of total generation In 1985 IEkononr/clreskaya gazefa No 12, (1981), p 2]

7

L Dlenes and T Shabad, The Sov/ef Energy Sysfem (Washington,

D C V H Winston & Sons, 1979), p 153

Table 34.—installed Soviet Electrical

Generating Capacity

(thousand MW end of year)

1975’ 0 1978’ 1979 1980 1985

(plan)

Total . . . . . . . . . . . . . . 217 246 2552

2 6 7

5 3 3 26

,

8

Fossil-Fired a. . . . . 171 190 1944

2 0 1

4 2 3 06

,

8

Nuclear. . . . . . . . . . 4.7 8.4 11,43

13, 4

6 3 89

Hydrob . . . . . . . . . . 41.5 47.5 50.02

52. 3

7 6 45

a

Includes about 76000 MW at heat and power stations (TETs) in 1980s

b

Includes pumped-storage stations

SOURCES 1Elektricheskiye stantsii, No 8 (1979), p 6

2Narodnoye khozyaystvo, SSSR b 1979 g p 168

3See ch. 4

4Residual

5Ekonomicheskaya gazeta, No. 12 (1981), p 2

6 Teploenergetika, No 1 (1981), p. 2.

7Elektricheskiye stantsii, No 1 (1981), p 3

8Planovoye khozyaystvo, No 1 (1981), p 7, reports a planned gross

addition of 71,000 MW between 1981 and 1985 OTA has subtracted

6,000 MW to represent retirement of depreciated capacity in

the period

9

Izvestiya (Dec. 2, 1980), p 3, reports 24,00025,000 MW of new

capacity to be added between 1981 and 1985

10ACES Bulletin, No 1 (spring 1978), p 41,

Despite this change in emphasis, however,

fossil-fired plants still make up the bulk of

Soviet generating capacity and will account

for 44 percent of the new capacity called for

in 1985. This section describes the present

status of fossil-fired generating capacity, the

ways in which the U.S.S.R. expects this

capacity to change, and the demands that

will be placed on the electric power and

related industries if these plans are to be

met.

One notable trend in fossil-fired electric

power generation has been the substantial

reduction in the relative importance of coal

in power station supply over the past 15

years. Between 1960 and 1975, coal’s share

in the fuel structure of powerplants fell from

70.9 to 41.3 percent (see table 35). Coal was

replaced largely by liquid fuels, the use of

which has risen from 7.5 to 28.8 percent of

the total; and by natural gas, which rose

from 12.3 to 25.7 percent. The shift away

from coal was due largely to the relatively

low cost to the Soviets of petroleum in this

period.

Now there are important incentives to return to coal for that increment to installed

capacity that is not to come from nuclear or

hydropower stations. Figure 10 shows the

location of major sites for the construction of

new fossil-fuel generating plants and of

plants where plans exist to increase installed

capacity. Table 36 summarizes the known

characteristics of these new plants and additions. It is obvious that the Soviets hope

that much of the increment in fossil-fired installed capacity and electricity production in

the next Five Year Plan (FYP) period will

come from coal produced in remote regions

of the U.S.S.R. Seven of the nine new stations shown in figure 10 will be built in

Kazakhstan, central and eastern Siberia, and

Table 35.—Structure of Fuel Use in Fossil-Fired

Electrical Power Generation (percent)

G a s

Liquld fuel. . . . . ..

Coal. . . . . . 

Peat . . . . . . . . . . . . . 

Shale . . . . . . . .

Other . . . . . . . . . . . . . .

Total . . . . . . . . . . . . 

1960

12 .3%

7.5

70.9

7.0

1.0

1.3

100 0%

1965

25 6%

12.8

54.6

4.5

1.5

1.0

100.0%

1970

26.0%

22.5

46.1

3.1

1.7

0.6

100.0%

1975

25.7°10

28.8

41.3

2.0

1.7

0.5

100.0°0

1980a

25.1%

2 8 .

42.5

2.6

1.4

0.4

100.0 %

aPlanned structure

SOURCE A M Nekrasov and M G Pervukhin (eds.), Energetika SSSR v

1976-1980 godakh, (Moscow Izd. "Energiya,”’ 1977), p 151
b

0
148 ● Technology and Soviet Energy Availability

Table 36.—Planned Expansion of Fossil-Fired

Powerplant Capacity, 1981-85

Location Fuel Comments

New station s

Unknown

Lignite

(Coal)

(Coal)

(Coal)

(Coal/gas)

(Coal)

Coal

Additions to exlsting stat/ens

Boiler system not

developed

300 MW in 1981

300 MW in 1981

800 MW in 1981

2500 MW generators installed

as of 1980

NOTE ( ) indicates probable fuel

SOURCES Ekonomicheskaya gazeta, No 1 (January 1981 ) p 11 and Izvestiya

(December 2, 1980), p 6

the Far East. The plants will all be coal fired,

although one at Yakutsk may also burn natural gas.

In fact, these plans not withstanding, it

may be natural gas—not coal—which shows

the most significant growth as a fuel for

power generation in the 1980’s. Recently

published Soviet figures show that the

planned structure of fuel use shown in table

35 was not fulfilled.1 During the Tenth FYP

there was a further jump in the share as well

as the quantity of oil and gas used in power

stations. Given the problems facing the

Soviet coal industry (see ch. 3) and the enormous planned increases in gas output, it is

not unreasonable to expect an appreciable

surge in the share of gas as a power station

fuel.

This outcome is made even more plausible

by the nature of Soviet plans to utilize coal

in power generation. Nearly all the increment in coal production will now come

from Kazakhstan, Siberia, and the Far East.

1Elektricheskiye stantsii. No. 5, 1981.

Given the difficulties in coal transport, one

way of utilizing this coal is to use it to

generate electricity at the mine itself. Large

electric power complexes intended to supply

local and regional needs and fired by local

coal are already under construction in both

the Ekibastuz and Kansk-Achinsk basins.

Indeed, one Soviet source claims that 77 percent of all the new fossil-fired capacity to be

introduced in the present FYP will be mineside plants at Ekibastuz and KanskAchinsk. 2 Eventually long-distance power

transmission lines are expected to make this

electricity available to the Urals and European U.S.S.R. These complexes, therefore,

are central to known existing plans for electric power generation in the coming decade.

The following sections describe the difficulties that are most likely to inhibit their

completion and consequent growth in coalfired power generation.

THE GENERATION OF

ELECTRICITY IN MINE-MOUTH

POWER COMPLEXE S

The first Ekibastuz State Regional Power

Station was to go online and construction of

a second to begin during the Tenth FYP

(1976-80). Eventually, four of these stations

are to be built in the Ekibastuz region, each

equipped with eight 500-MW generator

blocks. Over 600 million rubles were to be invested in the Ekibastuz power and fuel complex between 1977 and 1980.3

Similarly, 8 to 10 power stations are to be

built as part of the Kansk-Achinsk Fuel and

Power Complex, development of which was

formally called for in a 1979 decree.4 Power

stations erected near the eastern Kansk-
Ch. 5—The Soviet Electric Power Industry • 149

Achinsk deposits are intended for local and

regional power generation only, while those

near the Western deposits are to supply

power to the Urals and European U.S.S.R.

Long-range plans envisage the investment of

13 billion to 14 billion rubles on development

of mining, power generation, and coal treatment facilities.5

There are four major problems confronting these complexes. The first two—construction and supply of power equipment—

are common to all forms of powerplant construction. The third—the development of

boilers–relates to the intended use of lowgrade coal from Siberia, especially KanskAchinsk lignites. The fourth factor is the

development of appropriate electricity transmission technology and is discussed in a

subsequent section of this chapter. Such

technology is critical to the ability of the

Ekibastuz and Kansk-Achinsk complexes to

supply electricity to the Western U.S.S.R.

Construction

A major obstacle to the introduction of

planned electrical generating capacity is the

low quality of construction operations at

many plant sites. Problems here are similar

to those found in other sectors of the construction industry. They include labor shortages, supply problems, plant design errors,

planning inefficiencies, and long construction times.

Like many other Soviet industries, the

electrical powerplant construction industry

faces labor shortages, resulting in part from

a high degree of usage of manual labor (40

percent of the work in building powerplants). 6 This is caused largely by the low

level of mechanization of auxiliary operations and insufficient use of prefabricated

building elements. The situation is aggravated by the frequent need to “disassemble”

5

; s f\g[’\’(’\’, (’t al , “ }Iasic I )ir(’ct ions of 1“’ornlalion” of the

Kansk-Ac’hinsk F’u(~l and I’owt’r (’ompl(Ix, l’f’l)/fJ(t/fr<~{’ti), {~,

N() 4, April 19’74, pp. ~11 -~li,

6

1’. 1’ F’alal(’}’m , ‘‘ }]a\I[ 1 )Irt’c[ ions of 1 ncreasing th[’

f’: f f[’c.t ikt’nt’<+ of I)t)w (Jr E;n~in(JtJring (’onst ru~t ion,

l;rt{’rg[,t/c//~ ~},{) )’(J \ frf~/ t[’1~ I r ,) ~(), 6, .J une 1979, pp. 2-6.

completed work because of errors in construction or changes in plans. Such disassembly is not highly mechanized. In addition, labor shortages are exacerbated in

Eastern regions where poor living conditions

promote high labor turnover.

The Soviet press carries numerous articles

on the problems of equipment and materials

supply to powerplant construction sites.

Producers of boilers or turbines often ship

equipment in installments at their own convenience, and builders must store this machinery awaiting other needed parts. Often

components arrive in insufficient quantities

or in unsuitable grades or types. The supply

system itself seems to be straining to maintain the flow of materials to a growing

number of construction sites, It is increasingly common for materials to pile up at one

site, while another runs short.

A frequent complaint is that the blueprints for powerplants contain errors, for

which no one will take responsibility and

which no one will correct. Often construction

is well underway when the errors are discovered and it becomes necessary to rebuild

part of the plant. Or, modifications are

added to the initial designs during construction, and again, construction must be halted.

Designers out of touch with construction

problems may incorporate unobtainable

parts or equipment in their designs. Problems of this sort are endemic to the Soviet

system and are caused largely by the

absence of a single point of responsibility for

all phases of a project.

Attempts to fulfill construction plans

often result in surges in new capacity startups during the fourth quarter of the year.

This leads to a practice called “storming” in

which intense efforts are made to finish work

in a short time and projects of lower priority

are abandoned in order to divert resources to

others. Resources are increasingly dispersed

among too many projects. This results in

supply breakdowns, lower labor productivity, and increasing volumes of unfinished

plant construction at the end of each year.

Plant construction often consumes 1.5 to 2
150 ● Technology and Soviet Energy Availability

times as long as called for in plan norms.7

The situation is aggravated by increasing

downtime of construction equipment, due in

large part to the poor quality of maintenance

work.

Supply and Quality of Power

Machinery

Important problems here are the apparent

difficulties of the power machine building

and electrical equipment industries in meeting delivery schedules, and the unreliability

of equipment. The power machine building

industry produces, among other things,

boilers, turbines, and generators for hydroelectric, fossil-fired, and nuclear powerplants. The performance of this industry

generally reflects the high priority accorded

electrification. Production of electrical

equipment grew by over 21 percent between

1975 and 1978, and industry labor productivity grew by over 14 percent. Its share

of products in the highest product quality

category nearly doubled between 1975 and

1978, rising from 12 to 22 percent.8 The

Soviets claim that the latest products of this

industry are on a par with the best Western

equipment. Indeed, Soviet hydroelectric turbines have found a market in the West where

few other Soviet industrial products are competitive, and the efficiency of Soviet oil- and

gas-fired boilers is said to be 0.5 to 1 percent

higher than that of foreign analogs.9

Yet the performance of the industry is

uneven, and not all its power machinery is up

to the technical level of the export-worthy

models. The industry as a whole seems not to

have an integrated plan for solution of its

quality problems and only faces those which

can no longer be ignored.10 Low quality here

can be traced directly to the economic incentive system where, output being the prime

... — 7

I bid., p. 35.

8Ekonomicheskaya gazeta No. 22, May 1979, pp. 1-2, in

JPRS 73,859, July 18, 1979, pp. 9, 11.

9V. P. Goloviznin, “Soviet Power Machine Building-Base

of Development of Power of Engineering of the Country,”

Energomash-inostroyeniye, No. 4, April 1980, p. 3.

10V. Krotov, “Complex Approach to Management, ” Trud,

Mar. 15, 1979, p. 2, in JPRS 73,380, May 4, 1979, p. 62.

goal, much may be sacrificed to achieve it. In

the power machinery industry, such sacrifices can take the form of inadequate testing

of new equipment before the start of serial

production. In addition, finished equipment

is not “debugged” before delivery; rather it

is left to the engineers of the powerplants to

correct the defects. A turbogenerator destined for the Nazarovo regional power station, for example, was not tested before

delivery. Vibration problems surfaced in

operation and over a 5-year period resulted

in 62 shutdowns—equivalent to nearly 3

years of idle time.11 Such problems will persist until the incentive system is reoriented

toward rewarding producers for production

of “quality equipment” instead of merely

‘‘equipment.

Boiler Development

A major problem of coal-fired power stations is declining coal quality. The Soviet

Ministry of the Coal Industry (Minugleprom) is required to monitor coal quality and

to deliver suitable supplies to power stations. Minugleprom’s plan targets, however,

are expressed in terms of the quantity,

rather than the quality of the coal shipped.

Indeed, it has been known to falsify records

to hide the low quality of its coal.12 The

Ministry of Power and Electrification (Minenergo) frequently complains about the coal

it receives, and promotes the idea of either

moving quality control outside the coal industry or of setting up an independent agency to perform this function. Meanwhile, poor

quality coal–particularly coal with high ash

content—poses serious problems for electricity generation.

Both Kansk-Achinsk and Ekibastuz coal

tend to form sediment on the convective surfaces of boilers. The Soviets have reportedly

succeeded in designing a boiler which suits

the particular properties of coal from

Ekibastuz, and this is now being burned at

11 Sidanov and A. Zarnadze, “h;ffecti~reness of I ntroducing New ‘1’echnolog~’. ” L’opro.sj (IkonomiAi,” No. 2, F’el}ruar~’

1980, p. 128.

‘W. I.e\’in, “Padding the I,oad, ” ,~c)tsiuli~tic} tt~.vhll>f[l irr-

(iustri}a. hla.v 11, 1980, p. 2.
Ch. 5—The Soviet Electric Power Industry . 151

15 thermal power stations. Kansk-Achinsk sufficiently studied to permit development

coal has proved less tractable. The Soviets of boilers which can be fired by it.13 Until this

claim to have modified a large boiler system problem is solved, Kansk-Achinsk coal will

so that it can burn some types of Kansk- be of limited utility in electricity generation.

Achinsk coal; however, coal from at least one 13 "The Problem of the Combustion of Kansk-Alchinsk

of the basin’s large deposits has not yet been Coal," Teploenergetika. No. 7, .July 1975, p. 92.

ELECTRIC TRANSMISSION

A major purpose in creating the KanskAchinsk and Ekibastuz complexes is to provide electricity to the Urals and the European U.S.S.R. Development of appropriate

ultrahigh voltage (UHV) transmission technology is necessary if this goal is to be realized. (Lines at voltages between 250 and

1,000 kilovolt (kV) are considered extra-high

voltage (EHV) and voltages above this are

UHV.) The Ekibastuz complex is to be

linked to the Urals by an 1,150-kV alternating current (AC) line and to the central

regions by a ±750-kV direct current (DC)

line. The Kansk-Achinsk complex is to be

linked to the Urals or the central regions by

a

±1,100 to ±1,200-kV DC line. This section examines the current status of UHV

technology and prospects for its development by 1990.

Transmission of large amounts of power

over very long distances is expensive. The

amount of power that an electrical transmission line can carry increases as the square of

the voltage, i.e., if the voltage of a line is

doubled, it carries four times the original

power. Thus, HV transmission lines mean

that power can be more economically transmitted over longer distances than lower

voltage lines. But the task of bringing electricity from the East to the European part of

the country requires the construction and

operation of UHV lines at unprecedented

voltages. In this respect, the U.S.S.R. will be

entering relatively uncharted territory.

In the Soviet Union, as in the United

States, AC is the most common method of

transmitting electric power, allowing high

voltages to be transmitted and then easily

reduced to lower voltages at the point of

utilization. On the other hand, HV DC

transmission requires less insulation, and

when the same size cables and insulation are

used, a DC circuit will carry considerably

more power than an AC circuit. In addition,

because no alternating magnetic field exists

inside the wires carrying DC, energy losses

and the problem of synchronizing systems

are reduced. But the cost of DC wires is

raised by the necessity of placing converters

at both ends of the line. For this reason, DC

transmission is not economical over short

distances. The U.S.S.R. considers DC more

economic than AC for transmitting power

over distances in excess of 1,500 to 2,000

km, 14 and it is pioneering the use of direct

current in UHV from power stations in

Kazakhstan and Siberia to the European

part of the country.

The U.S.S.R. has thus far built only two

DC transmission lines. The newer and larger

of these is a ±400-kV line between Volgograd and the Donets basin. Commissioned in

stages between 1962 and 1965, this line is

scheduled to be overhauled within the next 5

years in order to upgrade its equipment.15

Experience gained in the construction and

operation of the ±400-kV line is being used

to develop DC lines of higher voltages.

1 4

Zhinlerin, op. cit., p, S2. I+’or more on AC ~, 1)(’ power

transmission, see Ronald Amann, ,Julian Cooper, and R. if’.

I)a\ies (eds. 1, Th( Tc(il II ()/()gr’ro/ 1.(II (1 ()/’ ,S()( I(If ln(~({.s tr~’

( New I la~en and I.ondon: }ral~’ [Jni\’t~rsitj I)ress, 1977), pp.

202-204 and 23,

15"On Reconstruction of the Volgograd-Donbass DirectCurrent Power ‘1’rtinsmission 1 ,int’s, ” };n(’r<q(’ (/ L , N(), 1, ,Januar}r 1981, p, :17. ‘1’h~’ first 1X’ 1 inc>, wit h a Iol t age of t 200”

kV, runs from the Kashira Power Station to Moscow. See D.

G. Zhimerin, Energetika nastovashche)e i buduschche.ve

(Moscou: Izd. “Znani.ve, ‘“ 1978), p. 82.
152 . Technology and Soviet Energy Availability

Increasing line voltages has been a basic

trend in the development of Soviet power

engineering. At present, the voltage in

Soviet trunklines has reached 500-to 750-kV

AC and ±400-kV DC, and there have been

plans for lines of 1,150-kV AC and ±750-kV

and higher DC. The attainment of these voltage levels is based on many years’ experience with powerline development and

construction, which in the past has earned

the U.S.S.R. a leading position worldwide in

high-voltage transmission.16

The construction of UHV powerlines of

1,150-kV AC and ±750-kV DC signifies a

qualitatively new level in Soviet power

engineering-a transition to what is still

largely an experimental technology, both in

Soviet and world practice. In the case of the

±750-kV DC line, all equipment reportedly

has been developed in the U.S.S.R. and will

“K. D. I.avrenenko, ‘‘.Soviet ~; lec tric Power in the Past 60

Years, “ 77(>ploerz(~rg(jtik(/, No. 11, November 1977, pp. 2-8; P.

S. Neporozhniy (cd.), [;lc~ktrifi”hclj,.vi>,u .Y.v.q}i (1.9(i7-1977 Kg, }

(hf OSCOW: Izd. ‘‘ ~~nergi~’a, 1977), pp. 260-26 1; Amann ,

Cooper, and I)avies, op. c]t., pp. 222-224.

be produced at Soviet plants.17 Nevertheless,

some technical problems apparently remain.

For example, at least one Soviet expert sees

the need to hasten the development of

new reactive-power compensation devices to

maintain voltage levels and reduce energy

losses in AC lines of 1,150 kV (and also 750

kV).18 In the development of UHV DC transmission, the major problems have centered

around circuit breakers and, especially, converter equipment.19 While Soviet experts

seem to be confident that these problems

have been or will be solved,20 Western experts are less certain.

“ill. Pchelin, “A River of Energy Wrill Start to Flow, ”

.Vtroite[na>a guzctu, Jan. 23, 1980, p. 3.

‘

H Pet,erson, op. cit., p. 66.

‘qAmann, Cooper, and Da\ies (eds. ), op. cit., pp. 215-220.

““A major reason for the planned overhaul of the f400-kV

Volgograd-Donets line is to replace less efficient mercury-arc

converter equipment with more advanced thyristor devices.

See “On Reconstruction ., .,” op. cit. Similar devices

reportedly by have been developed in the U.S.S.R. for the

t750-kV Ekibastuz-Tambov line. See V. P. Fotin, “Development of a Complex of Equipment for the 1,500-kV EkibastuzCenter Direct-Current Power Transmission Line, ” Elektrotekhnik~ No. 6, June 1978, pp. 1-6.

SYSTEM INTEGRATION

Soviet efforts to extend electricity supply

to all sectors of the economy have aggravated the problem of “maneuverability,” i.e.,

meeting widely varying demands for electricity, increasing the need for reserve

capacity and maneuverable equipment at

power generating stations. This section

describes the ways in which the Soviet load

pattern is changing, and Soviet problems

and plans for responding to these changes. It

deals first with peaking problems–including

programs for creating equipment for this

purpose and the difficulties associated with

introducing large amounts of baseload nuclear capacity—and then with plans for integrating the electricity system through a

nationwide power grid.

PROSPECTS FOR COPING WITH

DEMAND VARIATIONS

Table 37 illustrates the growth in electricity generation and consumption in the

U.S.S.R. from 1960 to 1980. From this table,

it can be calculated that total electricity consumption increased from 292 billion kWh in

1960 to about 736 billion kWh in 1970 and

about 1,276 billion in 1980. (The difference

between total production and total consumption in the latter 2 years is due to exported

electricity. ) Electricity consumption is clearly growing rapidly and demand must be met

by the construction of adequate amounts of

generating capacity. The table also shows

dramatic changes in electricity consumption
Ch. 5—The Soviet Electric Power Industry • 153

Table 37.— Electricity Generation and Consumption

in the U.S.S.R.

(billion kWh)

1960 1970 1980a

Generation of electricity . . . . . . 292 740.9 1293

Consumption of electricity

Industry ... . . . . . . . . . . . . . . 188.7 438 696.2

Construction . . . . . . . . . . . . . . . 89 15 23.3

Transportation . . . . . . . . . . . . . 17.6 54.4 102.5

Agriculture . . . . . . . . . . . . . . . . . 9.9 38.5 109

Municipal services

and households . . . . . . . . . 30.5 81.1 155

Electricity generation

and transport. . . . . . . . . . . . 36.4 108.7 189.7

a 1980 figures are preliminary

b

lncludes electricity consumed at power stations (approximately 6 percent of the

total) and grid losses (between 85 and 9 percent of the total)

SOURCE Elekfricheskiye stantsii No 12 (December 1980) p 44 and NO 1

(January 1981) p 2

by economic sector. The relative share of

consumption by industry–the heaviest

user—has decreased, while shares of agriculture and municipal services and households have increased.

As demand has grown in the agricultural,

urban services, and household sectors, the

power system has been confronted with increasingly irregular load curves, with more

pronounced periods of moderate to high

demand–so-called semipeakloads and peakloads—during certain hours of the day.

These alternate with periods of sharply

reduced demand.21 (The maximum continuous demand throughout all periods is called

the baseload).

The Soviet power industry continues to

have difficulty covering semipeak and peak

loads, primarily because of a lack of generating equipment designed for this purpose.

Soviet convention distinguishes three types

of generating capacity: 1) baseload units,

2) semibaseload (or semipeakload) units, and

3) peakload units.22 The equipment stock

I,{M(Is alw) ~[]r~ on ot her haw+, including weekl}, monthl}r, anci st’:ison:iii}r; h{)w{’~[’r, t h[’ short [’r arrci morr f’requent

{i ti i 1~’ J ZI r i:] L ion ~ w’f’ m [ () po<t” t h(~ ~rt’~i t [J+t (i if fic.uit it’s totpf)wt’r st:1 t ion~.

J- N, ( i u se~ a n(i \’. 1. f{ o~. (j~”a, “on t ht’ [’ossil)iiit~’ o f

( )p[’r:it in~ N“ut.i(’:ir I)OW [’r St:it ions [Jncicr \’ari:il)i(~ I,o:i(i>, ”

f;/f’/, tr~(~t{s)( ( }~) \ f[~rt ISII, N(). 9, S(ptt’n]l)t’r I 97’7, pp. !)- 11.

now consists mainly of the baseload type, in

both fossil-fired units and nuclear units.

The U.S.S.R. lacks adequate gas-turbine

technology, pumped-storage facilities, and

hydro units for handling sharp, short-time

peaks. Moreover, the problem of coping with

semipeak fluctuations is aggravated by the

increasing importance of large (300 MW or

more) generating units which are technologically unsuited for this purpose.23 The

power machine building industry is aware of

these deficiencies and is being called on to

step up the development and construction of

peak and semipeak equipment, including

150- to 200-MW gas-turbine units and hydroturbines for pumped-storage plants.24

The Soviets have tended to build generating stations and units with larger and

larger capacities in order to reap benefits of

economies of scale in power generation. This

has created a problem, because the market

for electricity from baseload capacity is

limited. Even with the growing overall demand for electricity, particularly in the

European part of the country, there may

even now be a surplus of available baseload

capacity. The lack of highly maneuverable

equipment has already forced power stations

to use ill-suited baseload equipment to cover

peak and semipeak periods.25

The installation of more baseload equipment will increasingly raise both technical

and economic problems. Both fossil-fuel and

nuclear units are slow to start up and to

reach rated capacity. They, therefore, cannot

respond to sudden sharp load fluctuations.

Indeed, such fluctuations can even damage

the equipment.26 The equipment may be

used to cover moderate load fluctuations,

but this practice is economically inadvisable,

especially in the case of nuclear units.

————— 2 3Leslie Dienes an(i ‘1’heocforc Shaha(i, ‘/’}/{’ .$()[ 1~ ( }“,’f~[’r<~r}’

S), s torn (J1’ashington, 1).(’,: Jr. II. }1’ inston & Sons, 19’79], p,

19 i

4( ;oiot’iznin, op. cit.: }’[~, l~oris{~~, ‘‘l I igh Tension.” .SfJt.</~//-

ls / i[ ‘h {)s J: [1 II{J /71 (Iii \ / rr \4(J, [ )(K. ~ I , 1 $)X(), p. ] : IIrl(i i“ ll(~i(i}r”(~,

“ F’or th[~ !ie(’(i~ of l{tI:it Suppil , ” .so t <1(1 /1< tli’}1 ( \/, (J I<(J ;?)

[///.s tri}’a, ,Jan. ;10, 19R 1, p. 2,

2 I)it’nes anci Sh:il)[i(i. op. (’it , pp. I /+9- 192.

‘ N ~~porolhn i}, [~p, (’it , p 215.
154 ● Technology and Soviet Energy Availability

Besides being technically suited to baseload

operation, nuclear stations must be operated

for a large number of hours per year. This is

because nuclear stations have low operating

costs but high fixed costs (e.g., high construction costs per kW of capacity). Only by

producing large volumes of electricity per

year can the fixed cost per kW be brought

low enough to make the average cost of nuclear electricity competitive. Soviet planners

are well aware of the need to balance the advantages of nuclear power stations (NPSs) in

conserving fossil fuels against their high investment costs.27

Soviet experts recognize the importance

of using nonnuclear capacity wherever possible to compensate for load fluctuations. It is

now recommended that fuel-intensive fossilfuel stations be unloaded before nuclear

ones.28 In such a case, nuclear capacity is

used as a substitute for less economical

fossil-fuel capacity. As the proportion of

nuclear capacity increases, it will eventually

become necessary to operate both fossil-fuel

and nuclear units under variable loads.29

OTA’s information does not permit it to

determine the point at which this problem

will become acute in the U. S. S. R., but the

evidence does allow some observations on

this subject.

Much has been written about the maneuverability of nuclear generating units.30 Until recently, nuclear plants were designed to

operate only under baseloads. An all-union

conference was held in 1977 to discuss

results of research on this problem, and

trials have been conducted to determine the

feasibility of running nuclear stations under

variable loads. In order for them to perform

well under such conditions, several technical

problems must be solved, including removal

——— 27 —

I. M. Volkenau and Ye. A. Volkova, “operating Conditions of Nuclear Power Stations in Power Systems, ”

Elektn”che.~kive stantsii, No. 3, March 1978, pp. 7-9.

28S. Ye. Shitsman, “The Effectiveness of N PS’S LJnder Daily (Unloading, ” Elektriche.ski<ve .stunt.sii, No. 8, August 1980,

p. 11.

29-’”1 bid.

30“N. A. Dollezhal, “Nuclear Power and Scientific-Technical

Tasks of Its Advancement, ” A tomnava energi~)a, vol. 44, No.

3, March 1978, pp. 203-212.

of limitations on the number of start-stop

cycles for the equipment; choice of the best

fuel, fuel cladding, and designs of fuel

elements; and optimization of reactor control

and protection systems. Moreover, operating conditions themselves will have to be improved. Stations presently operating under

variable loads are very inefficient.

According to one Soviet source, baseloading of nuclear capacity will be possible

as long as the following conditions pertain:

1) NPSs account for no more than 22 to 24

percent of total generating capacity; 2) other

types of capacity are unloaded to the degree

possible, as needed, including complete

weekly shutdowns of one or two units at regional fossil-fuel stations; and 3) maneuverable equipment (hydraulic, pumped-storage, and gas-turbine units) accounts for at

least 18 to 19 percent of total capacity (in the

European part of the U.S.S.R.).31

OTA has estimated that Soviet NPSs will

account for approximately 11 percent of

total installed capacity by 1985, and for no

more than 18.5 percent by 1990 (see below).

This suggests that baseloading of Soviet

NPSs should present no problems until after

1990. However, if NPSs account for as much

as 18.5 percent of installed capacity nationwide by 1990, their proportion could exceed

24 percent in the European U.S.S.R. This

would force NPSs there to operate under

variable loads. In fact, the Soviet source

cited above anticipates some unloading of

nuclear capacity, mainly on weekends, even

before the 24-percent level is exceeded.32 The

likelihood that this will happen depends, in

part, on how successfully the U.S.S.R. exercises its options for coping with load fluctuations.

One such option is building new, flexible

heat and power (cogeneration) stations, designed to operate under either base or varying loads. This would obviate the construc31Volkenau and Volkova, op. cit., pp. 8 and 9, According to

this source, in 1975 the share of maneuverable equipment in

the European part of the Unified Power System was approximately 22 percent, but this share is expected to decrease to

18 to 19 percent in the future.

32I bid., p. 9.
Ch. 5—The Soviet Electric Power industry ● 155

tion of specialized semipeak condensing stations, which would generate only electricity

and consume fuel at a higher rate than would

cogeneration stations operating under variable loads. Proponents of this option contend that the expansion of cogeneration capacity in the European U.S.S.R. will be necessary despite the growth of nuclear capacity in that region.33

This position is controversial, however. A

1979 article by A. Troitskiy, Deputy Head of

the Department of Power and Electrification

of Gosplan U.S.S.R., argues that construction of cogeneration stations should be

“drastically limited” so that these stations

will not displace generating capacity at

N P SS.

34 Troitskiy recommends: 1) the retention of obsolete units which are not physically worn out to serve as reserve capacity for

short-term peakloading, 2) the improvement

of the load-following characteristics of large

fossil-fuel units, and 3) the construction of

pumped-storage stations. Pumped-storage

stations (PSSs) are a form of hydroelectric

capacity.

Hydropower is highly maneuverable. The

Soviet power industry is well aware of this

option and is striving to maximize it s

value. 35 Unfortunately, the availability of

hydraulic capacity is affected by water levels

in the rivers and reservoirs that feed

hydroelectric stations. In the European part

of the U.S.S.R., where the load-variation

problem is at its worst and where most NPSs

are being built, suitable water resources are

much more limited than in remote regions

such as Siberia. 36 Since as much as 70 percent of the suitable hydraulic resources in

the European U.S.S.R. have already been de- —.. .

33 —

J’. P. K~rJ’tniko~, “[]~si~ ‘t’~sks for ~lci~h~enin~ the Effecti~reness and Reliability of I Ieat Supply to the Country’s

P;conorny,” l’f’plc){~rzc~r~f~tika, No. 8, August 1980, pp. 2-5.

3 4

Troitskiy, op. cit., p. 22. Both ‘1’roitskiy’s and Korytnikov ar~ ments are aimed at lowering fuel costs and conserving fossil fuel. To cover growing heat demand, which

would ordinarily he met with cogeneration capacity, Troit -

skiy calls for construction of large hoiler houses, presuma hly

in conjunction with conventional fossil-fired and nuclear electric stations. Korytnikov, op. cit., p. 3, points out, however,

that this arrangement would result in greater fuel expenditures than those incurred at cogeneration stations.

35Dienes and Shabad, op. cit., pp. 13,3-136.

“’[Peterson, op. cit., p. 65.

veloped,37 the construction of conventional

hydrostations alone will not satisfy the

growing need for maneuverable capacity in

areas where it is most needed. Therefore, the

U.S.S.R. is turning more and more to the

construction of PSSs for peakload coverage.38 The specially designed reversible

hydraulic turbines of pumped-storage units

serve a dual purpose: during offpeak hours,

excess generating capacity from other units

is used to run the turbines to pump water up

into a reservoir; in peak hours, this water is

released to generate electricity by turning

the turbines in the opposite direction. The

use of pumped-storage capacity, consequently, can help to maintain baseload operation

of nuclear or other stations by providing

coverage of peakloads and also additional

consumption during offpeak hours. For this

reason, the construction of PSSs is considered an inseparable part of Soviet plans

for growth in nuclear power production.39

Despite such plans and the expressed

need for pumped-storage capacity, progress

with the design and construction of PSSs in

the U.S.S.R. is said to be slow, mainly

because Soviet designers have neglected

these stations, which are expensive to build.

Only one small PSS near Kiev is presently in

operation.

The first PSS to be built in conjunction

with an NPS is, however, underway. This is

the Southern Ukrainian Power Complex,

which includes the Southern Ukrainian NPS,

the Tashlyk Hydroelectric Station, and the

Konstantinovka Hydroelectric and PumpedStorage Station. When completed, the complex will have a total capacity of more than

6,000 MW, nearly two-thirds of which will be

nuclear.40 Another PSS has been under construction at Zagorsk, near Moscow, since

1976, but its completion is apparently not

yet in sight.41 The Kayshyadoris PSS in

‘“Ilienes and Shabad, op. cit., p. 133.

‘hNeporozhniy, fi~[ck tn’fikat,si~a ., , op. cit., p. 216,

“’I>et,erson, op. cit., p. 65.

4“1’. S, Neporozhniy, “I,enin’s (joF:I,RO Plan 1s 60 Years

old, li’lck trich[~,ski?’e .stafl t.sii, No. 12, I)ecemher 1980, pp .

2-8, especially p. 6.

‘IV. Venniko~, ‘contemplating the Future, ” S’ot.siu/-

i.s tirhe.~ka?$ain[fu. s trij’u, ,Jan. 30, 1981, p. 2.
156 “ Technology and Soviet Energy Availability

Lithuania is to be commissioned during the

Eleventh FYP, and plans have been drafted

for at least two other stations—the

Dnestrovsk and the Leningrad PSSS.

42

But even the timely construction of PSSs

will not completely solve the problem of

covering sharp load fluctuations in the European U.S.S.R. Pumped-storage capacity

must be augmented with other highly

maneuverable equipment, particularly gasturbine units, which may be used alone or as

part of combined “steam-and-gas” units.43

The U.S.S.R. is reported to be working on

the practical use of gas-turbine units with a

capacity of 100-MW and also of 250-MW

steam and gas units.44 However, there is no

evidence that these units are being used extensively in the Soviet power industry.45

A final option for coping with load fluctuation is capacity substitution through the

creation of large-scale, interconnected power

systems or grids. Such systems permit generating capacities to be shared by shifting

their output from one grid to another. This is

particularly advantageous to the U.S.S.R.,

with territory that spans 11 time zones.

When a grid in one time zone is experiencing

peak demand for electricity, it can borrow

power from an interconnected grid in

another time zone. The supplier also benefits

by utilizing capacity that would otherwise be

idle. Predictable load variations allow capacity exchange schedules to be worked out in

advance, and this has reportedly been done

for Soviet power systems. On the other

hand, unplanned variations require more immediate response. This situation is said to be

covered through the intervention of dis-

.————

4ik’k[)jlc)rr)ics/1 +~.vktl>tcz g[IzcIta, 1981 :2, p, 2; Neporozhnil’,

Elek trifi~utsijlu . . . op. cit., p. 2 17; f)orisov, 4’ [+igh

‘r~nsiont ” op, ~it.

‘ ‘Peterson, op. cit,, p. 65.

‘4 Neporozhniy, “I, enin’s (;oh;I,f{() ., ,“’ op. cit., p. 8, uses

the passi~re form ().s I l~~i[ ‘~I,vu ts)’a, which literally means that

the new t~’pes of equipment ‘‘are heing mastered.

‘‘W’orkers of the “ Kharkot’ Turhine Plant”’ Production

Association reportedl~~ ha~re hegun work on adjusting and

puttinx into operation a gas turhine designated the (;’1’-35.

The turhine is part of the U.S.S.R. first steam-and-gas unit,

the P(; U-250, which is installed at the hlolda~’ian Thermal

Power Station, %w V. hl. Velichko, ‘“I’he I.ahor- Contribution

of [)ower hla~’h ine Iluilciers, Ijr/f’r(g[jrr/f~ .s}/ir/(~,s tr(~)~[~rri]’f~, N’o,

1, .Januar~’ 1981, pp. 2-5.

patcher personnel and the operation of the

automatic frequency and power regulating

system.46 The effectiveness of response to

unplanned loads by many power stations

probably is reduced, however, by the shortage of maneuverable generating equipment.

In sum, if the U.S.S.R. carries out its

plans: 1) for building peakload capacity, including hydroelectric and pumped-storage

stations as well as gas-turbine and steamand-gas units, 2) for improving the maneuverability of fossil-fuel stations, and 3)

for expanding its unified power grid to

facilitate capacity sharing and substitution,

the baseloading of NPSs should be feasible

until 1990. Delays in these plans could force

some unloading of nuclear capacity during

offpeak hours. This situation could present

technical problems for the Soviet nuclear industry; as recently as 1978, the ability of

conventional reactors to withstand repeated

load variations was still in question.47

THE UNIFIED POWER SYSTEM

The Soviet Union is attempting to take

full advantage of large-scale grids by the formation of a nationwide Unified Power System (UPS). When complete, UPS will incorporate 11 smaller joint power systems

ranging across the entire U.S.S.R. In addition, UPS will be tied into the unified system

of the East European countries.

The core of the unified system was formed

in the 1950’s in the European U.S.S.R. The

“European” UPS presently takes in eight

joint systems in the Northwest, the Center,

the South, the Middle Volga region, the

North Caucasus, Transcaucasus, the Urals,

and North Kazakhstan. In 1978, a 500-kV

line was strung linking the European UPS

with the Joint Power System (JPS) o f

Siberia. Other joint systems are in Central

Asia and the Far East, 48 and plans exist for

46L. G. it!arnikoyants, et. al., “1’he Det’elopment of I)ower

F:ngineer-ing in the U.S.S.R. and the Control of F;lectrical

I>ower (Generation and Distribution,” pr~s~ntt~~ at the control Data Corp. Seminar on Power Industry I)etrelopment,

Washington, 1).(’., Dec. 6 and 7, 1979.

+ Jrolkenau and Volkova, op. cit., p. 9.

1H170tin, op. cit., pp. 1 /14 and 18,5.
Ch. 5—The Soviet Electrlc Power Industry • 157

these to be linked to the European UPS in

the 1980’s, thus completing the formation of

the nationwide system. 49 The smallest units

of the unified system are the so-called

Regional Power Systems, which can cover

several administrative regions or oblasts. 50

To form the unified system, JPSs and

regional systems are tied together with HV

transmission lines of 220- to 750-kV AC and

±4000-kV DC. In the future, higher voltages

are to be used—1,150-kV AC and ±750- to

±1,125-kV DC and above.51 The main AC

voltage level for system interties in the UPS

is 500 kV. In the South and Northwest JPSs,

330-kV interties have been used in the past,

but a network of 750-kV lines is being developed. At present, a 750-kV system intertie connects Leningrad and Moscow, and a

second line of this voltage runs from the

Donets basin to the Western Ukrainian substation and on into Hungary. Plans also call

for the construction of a ring of 750-kV lines

around the Moscow region to transmit and

distribute power from nuclear stations, and

1,150-kV lines linking Ekibastuz to the

Urals. Construction of the first of the latter

lines, which will be nearly 1,500-km long, reportedly is already underway.52

The Soviet Union claims that the JPSs

presently tied into the UPS encompass an

area of 10 million km2 with a population of

nearly 220 million people; that UPS unites

88 of the 97 power systems in the U.S.S.R.;

that only two JPSs and several power systems ‘‘in remote regions’ remain isolated

from UPS; and that in 1979, power stations

of UPS accounted for 82 percent of the in1‘\lanlik{j~:int +, op. (’it

“ if’. (;. /\llin~tJn, “11 igh J’{lltag(> }.; lec’t ric l’owt~r ‘l’riinsmis -

sion, c’ h. 5 in A ma n n, (’()()per, I)a\ies, op. cit., pp. 199-224.

I t should lx’ noted that not all s~wtor~ of th(’ StJ~iet economy

:i rt’ scrt.ed h? [ h~, [ J n ifi~d SJ’s tt’nl a n d j f) i n t s~’s t t’ms. [ T n t il re-

[en t 1}’, agric’ultur[’ and ~’{’rt:i in other ‘sector+ were excluded,

gitrin~ ri+e t () the sprt’ad of small, unconnected elc’ctric power

~t a t io ns, ‘1’h is problem of a ‘‘d ua 1 twon om~” i n the elvc L r ic

p(~w[’r industr}r is discuswl b~r I)ienes and Shahad, op. ~)it.,

pp. 185-1 H7.

‘ .4. I’it[’nko, “ I li~h-(’apacit~ ‘t’ransfornlrr~, ~:[~.~ ti]u

,Jun(. 1, 1 :)H(), p, 1; and t’. (;anzha, (title unknown], .$’(j~-

iiail \ (i(h{~ \L [1 }IU { H IIu \ /r-{ 1!u, .J u nt’ 14, 19X(), p. 2.

‘I,, 1,, 1)(’terson, ‘‘Th(’ I )e~t’lopment of I>ower S~’stems,

},’1111: tric}l(s~i,vf \ (un tsll, N(). 12, I)ec’emlx’r 1 9X(). pp. 6:1-66.

stalled capacity and 88 percent of the electricity generated in the U.S.S.R. 53

It is difficult to evaluate these claims,

however. While the Soviet literature stresses

the achievements of UPS in providing connections between grids and tends to convey

the impression of a sophisticated system,

Western electrical engineers who have

visited the U.S.S.R. report that these connections are tenuous and that the entire system is run from a single, underequipped dispatching office in Moscow. 54

The latter point is particularly important.

The coordination and management of a

power system covering a large territory requires a well-organized system of control

centers and effective control equipment. In

theory, overall management of the Soviet

UPS is assigned to the system’s central

dispatching department (CDD), which oversees the work of dispatching departments of

the 11 joint systems. The latter de -

partments, in turn, supervise the work of

regional control centers and power stations.

55 The CDD’s primary responsibility is

to ensure the stable, efficient operation of

UPS and its components and, thus, the delivery of reliable, quality electric power to

consumers. In addition, the CDD takes part

or assists in research, development, and

planning aimed at maintaining and improving UPS.

To accomplish all of this would require

constant upgrading of control facilities and

equipment, including the introduction of

new communication and data transmission

techniques. The rapid transmission and

processing of information on all aspects of

grid performance and operating conditions

are necessary to effect timely shifts of power

from one system to another. It is not clear

that the U.S.S.R. has as yet acquired these

capabilities.

53 Ibid.

54 Discussion with Val Lava and Frank Young, members of

the Joint American-Soviet Committee on Cooperation in the

Field of Energy.

55Mamikoyants, et al., op. cit.
158 ● Technology and Soviet Energy Availability

Computer technology is also important to

UPS management, and there is evidence

that the Soviet Union recognizes a need to

use computers more extensively for this purpose.56 For example, the automatic monitoring of frequency (which is supposed to be the

same throughout UPS) and of active power,

is reportedly done using minicomputers at

56 Ibid. See also the section below on Western Technology

in the Soviet Electric Power Industry.

all levels of control, from the CDD down to

local power systems. Voltage levels in basic

networks will also eventually be placed

under centralized automatic control, which

likely will require the use of computers, but

this work is said to be only at the preliminary development stage. Such control

equipment is the basis for the formation of a

hierarchical computerized system for managing UPS—a goal which is still to be

achieved.

WESTERN TECHNOLOGY AND THE SOVIET

ELECTRIC POWER INDUSTRY

The Soviet Union has so far been successful in the development and implementation

of HV (up to 750-kV AC and ± 400-kV DC)

transmission, apparently with little or no

assistance from the West.57 Moreover, at

least on the evidence of Soviet literature,

there seems no reason to doubt the

U.S.S.R.’s ability to continue to progress

and to make the transition to UHV transmission. Certainly given the great distances

over which electric power is to be transported in the U.S.S.R., it probably has

greater economic motivation than any other

country in the world to employ UHV.

But, from a technical standpoint, the fact

remains that UHV is still a relatively new

and experimental technology. There is evidence that the U.S.S.R., which in the 1960’s

emerged as a world leader in HV power

transmission, has since lagged behind the

West in some aspects of UHV, particularly

in the development of thyristor converters

for DC lines.58 These observations cast some

doubt on Soviet claims about UHV powerline construction and suggest that the

Soviet program might benefit from foreign

experience and equipment.

OTA found no direct evidence that the

U.S.S.R. is purchasing or intends to purchase UHV equipment and technology from

57 ”Amann, Cooper, and Davies, op. cit.

‘

)

’’ Ibid., p. 220.

the West, yet the possibility of future purchases cannot be ruled out. In the case

of thyristor converters, for example, the

U.S.S.R. has developed its own equipment.

But this may be inferior to that available

from Western countries; Sweden has at least

one firm that is actively engaged in commercial applications of this technology.59 While

the U.S.S.R. can and does achieve the same

effect as one foreign thryistor by using

several of its own, it is possible that a decision could be made to purchase foreign models if large numbers were required. Soviet industry may also be unable to manufacture

enough cable for power distribution. A 1976

source reported that the U.S.S.R. had been

placing large orders for cable for small (10-

kV) powerlines with suppliers in West Germany and Finland, and that even larger

orders could be expected in the future.60 Conceivably, the U.S.S.R. could also turn to the

West for assistance with the development or

supply of compensation devices for UHV AC

lines.

Finally, despite its gains in the automation and computerization of UPS, the Soviets have a long way to go before they can

possibly realize centralized control of the

whole system. A considerable amount of

computerization has been applied at the

——59 Ibid.

60 "Power Lines, "Soviet Busine.s.s and Trade, No. 9, 1976,

pp. 5-6.
Ch. 5—The Soviet Electric Power Industry ● 159

regional and power-system levels for economic and grid management. But very little

closed-loop control has been implemented

and the software lags that of Western

systems. Only limited computerization exists at regional control points and powerplants. These functions tend to be limited to

accounting, monitoring, and short-term

planning. Some form of closed-loop control is

not planned until the early 1980’s, and the

Soviet goal of automating the whole system

over the next 10 years does not seem

realistic,

The power industry has had access to and

made use of most of the major computers

produced in the U.S.S.R. over the last 15

years. Conversely, it has not relied extensively on the West for computer equipment

although, as has generally been the case with

economic management, the indirect influence of U.S. computing has been great.

The addition of inflexible nuclear powerplants, the need for more power generating

capacity, and more reliance on Siberian

plants now make management tasks considerably more difficult, increasing the need for

more sophisticated control of the whole

power system. The more the Soviets try to

tie the network together, the greater will be

their requirements for real-time control systems which can model a wide variety of situations and optimize operational economics.

In addition, very large computers may

allow the Soviets to do more extensive modeling, as opposed to field testing, of various

network configurations. The U.S.S.R. has

spent millions of dollars on test generators

and other testing equipment. In the United

States, such testing is performed by simulations on computers. Soviet facilities for computer modeling are only now being created.

As the grid becomes more complex, substantial savings could be realized here.

Building a multilevel hierarchical process

control system of the magnitude of UPS

raises enormous software engineering problems. The Soviets lack sophisticated software design tools and experience. Their

usual practice is to farm out the development of separate pieces of large systems to

various institutes. Without rigorous specifications of interfaces and frequent communications, the overall system is unlikely to

work correctly. Consequently, the U.S.S.R.

will probably have to settle for considerably

less during the eighties than UPS envisaged:

greater manual intervention at each level,

slower system response, greater cost, and

less reliability.

The West could supply integrated software tools, data base management systems,

and other software which would help the

Soviet software industry and trickle down to

this application. Joint ventures, long-term

contacts, training, and other transfer mechanisms would also help to build up overall

software engineering capabilities. It is

unlikely that the Soviets would seek to purchase a large computer for modeling. The

new large Soviet-made computers are sufficient for this purpose, provided they are

available to the power industry over the next

few years. This is another area in which

general help in software would play the most

decisive role. The same can be said for software for management of construction.

In sum, the Soviets have introduced a

large number of computers at various levels

of the electric power generation hierarchy.

Most of these are concerned with economic

management tasks and the overall level of

closed-loop control of the power grid is not

great. As new atomic and peakload capacities are added and more electricity is generated in Siberia, the management problems

will become even more complex. Building

this system requires software abilities that

the Soviets probably do not yet possess. The

U.S.S.R. may also encourage technology

transfer from the West in this area. This

would be a departure from past experience,

for the electric power industry has not

previously made extensive purchases of

hardware and software. Despite Soviet

claims about domestic developments in

power transmission technology, the
160 • Technology and Soviet Energy Availability

U.S.S.R.’S apparent loss of supremacy in puter equipment, software, and software enthis field in recent years suggests the poten- gineering tools and techniques for power

tial for Western assistance, particularly in system management and control.

the areas of UHV transmission and comTHE FUTURE OF THE SOVIET

ELECTRIC POWER INDUSTRY

ALTERNATIVES FOR MEETING

INCREASED ELECTRICITY

DEMAND

This chapter has discussed two ways in

which the U.S.S.R. can generate and transmit more electricity to meet a still growing

demand in the European part of the country.

It can build power stations in the European

U.S.S.R. itself, or it can transmit power

there over long-distance lines which originate at remote coal basins. Soviet planners

are pursuing both approaches, but it seems

that some preference is being accorded the

first, which is based mainly on the construction of nuclear power stations and the curtailment of fossil-fuel generation in this

region. The second approach involves the

construction of UHV power transmission

lines from coal-fired stations in Kazakhstan

and Siberia. As noted above, this project has

begun, although the ultimate fate of the program may be delayed, pending the outcome

of the nuclear program.

Soviet preference for localized power generation at NPSs can be understood by comparing the costs of electricity supplied by

each approach. Troitskiy has compared the

costs of electricity y generated at a baseloaded

NPS in the European U.S.S.R. and electricity transmitted there over a 1,500-kV DC line

from a coal-fired station in Ekibastuz in

Kazakhstan. 61 According to his figures, the

total cost of 1 kWh of electricity, including

the costs of extracting, producing, and

transporting fuel (coal or uranium) and elec61 A. Troitskiy, ‘‘Electric Power: Problems and Prespects,

Planovoye khozyaystvo, No. 2, February 1979, pp. 18-25.

OTA believes that Troitskiy’s figures for the center are indicative of the European U.S.S.R. as a whole.

tricity, is 6 percent higher at the point of

consumption for electricity from an Ekibastuz power station than for electricity from

a local NPS (1.22 kopecks/kWh v. 1.15

kopecks/kWh, respectively).62 Given the possibility of error in the calculations, actual

costs could be roughly the same, or nuclear

electricity could be even less expensive than

indicated. In either case, one may question

the U.S.S.R.’S decision to build long-distance transmission lines at all if nuclear electricity costs about the same or is cheaper to

produce locally. Indeed, Troitskiy himself

argues that power transmission westward

from Ekibastuz and Kansk-Achinsk is advisable only if the demand for baseload

capacity in the European U.S.S.R. cannot be

covered with nuclear stations.63

One answer may be to substitute fossilfired generation for nuclear, particularly if

nuclear growth falls short of planned targets. In such a case, a shortfall in nuclear

generating capacity might be covered with

coal-fired capacity in Ekibastuz. Troitskiy

also gives figures for capital investment

costs per kilowatt of capacity required to

deliver electricity to the European U.S.S.R.

(including transmission lines) via either

62 Ibid., p. 20. Troitskiy also considers the option of

building gas-fired condenser stations in the Center and supplying them with natural gas from the Tyumen region.

Although this option is cheaper (1.08 kopecks/kWh) than the

other two options described, Troitskiy points out that gasfired stations “cannot be recommended” for the Center for

two reasons: 1) possibilities for long-distance transport of

natural gas in the future are still limited, and 2) additional

gas resources are necessary, first of all, in order to replace

residual fuel oil (mazut) as a fuel at power stations.

63 Ibid., p. 21. Troitskiy’s estimate of the cost of elec’tricit?’

from Kansk-Ac. hinsk is has(~d t~n transmission ()~~~r a 2,2hok~’ DC lint’, Because this iroltage It’trcl is not Iikclj to h e

r(~ached before 1990, if at till, the h: k il)a stuz-(’ent tlr option is

(Tons id w-cd i n the present d i ww +s ion.
Ch. 5—The Soviet Electric Power Industry ● 161

nuclear capacity there or coal-fired capacity

in Ekibastuz.64 To cover a shortfall in nuclear

capacity of, for example, 5,000 MW with an

equivalent amount of coal capacity in

Ekibastuz would require only about 25 million rubles of capital investment less than

the investment in the equivalent nuclear

capacity, a difference of about 1 percent. 65

Again, given the likely margin for error in

Troitskiy’s estimates and the magnitude of

the investment costs (billions of rubles), this

difference is insignificant.

In terms of capital investment, then,

using low-grade Ekibastuz coal to generate

electricity for the European U.S.S.R. appears to be at least as good as, and maybe

slightly better than, building nuclear stations near consumers. Nevertheless, the fact

remains that the estimated total cost per

kilowatt-hour of electricity (as opposed to

capacity) is lower for the nuclear than for the

Ekibastuz coal option.

Furthermore, from a technical standpoint,

there are at least two major risks associated

with coal-generated electric power from

Kazakhstan or Siberia. First, Soviet equipment for burning low-grade coal at power

stations, particularly boilers for burning

Kansk-Achinsk coal, remains to be perfected. Second, as noted above, technology

for transmitting coal-generated electricity,

especially UHV DC technology, is unproven

in practice. Although the first ±750-kV DC

line from Ekibastuz apparently is under construction, the U.S.S.R. has not demonstrated practical mastery of this voltage

level. Even more uncertain is the possibility

of practical application of ±1,125-kV DC,

which is the minimum voltage planned for

use in UHV lines from Kansk-Achinsk.

Nor are the economics of using AC lines

entirely clear. Troitskiy views 1,150-kV AC

lines as an effective means of supplying

power to the Urals from Ekibastuz, but he

does not mention the possibility of further

extending such lines.66 Conceivably, announced plans to do this could be questioned, since UHV AC lines from Ekibastuz

to the area around Moscow presumably

would create problems similar to those discussed above in connection with UHV DC

transmission v. nuclear power generation. In

any case, as with UHV DC, Soviet success

with UHV AC will depend on the solution to

whatever technical problems exist. Here,

again, Soviet plans reflect a confidence that

such problems have been or can be solved.

Nuclear technology, on the other hand, is

proven. NPSs have been operating successfully in the European U.S.S.R. for years, and

the voltage level for transmission lines from

these stations–750-kV AC–apparently has

been mastered. Moreover, the cost of building these lines is lower than that for UHV

lines. If Troitskiy’s estimates of capital investment costs are accurate, the share of

powerlines in total investment costs is

greater for coal-fired stations in Ekibastuz

than for NPSs around Moscow.67

In sum, while the option of supplying electricity by building NPSs in the western part

of the country requires slightly higher capital investment than building coal-fired stations in Ekibastuz for the same purpose, the

delivered cost of electricity from NPSs is

slightly lower than for coal-generated electricity from Ekibastuz. Moreover, a large

portion of the investment costs for the coalfired stations, and the higher cost of Ekibastuz electricity, can be attributed to the
162 • Technology and Soviet Energy Availability

cost of UHV DC transmission lines-technology which is unproven in practice. These

factors, plus unsolved problems of burning

low-grade coal at power stations and successful experience with nuclear power, make

the nuclear option seem more desirable than

the coal option. Technological advancements

in UHV and coal power generation, together

with practical experience, may make coal use

more viable in the future. At least for the

present, however, OTA believes that Soviet

planners will downplay coal, particularly

plans to use Kansk-Achinsk coal to generate

electricity, and place more emphasis on

nuclear power.68

PROSPECTS FOR MEETING

PLAN TARGETS

1981-85

Tables 33 and 34 above showed Soviet

plans for commissioning of new generating

capacity and for electricity production between 1981 and 1985. Achievement of this

program could be jeopardized in at least two

important ways. First, Soviet plans call for

the commissioning of only 10,000 MW of

new capacity in 1981,69 leaving over 15,200

MW to be added each year from 1982

through 1985. In the past, introductions of

new capacity have averaged about 10,000

MW per year (in 1980, however, the increment was some 13,000 MW), although production of turbines and generators has been

running at 18,000 to 20,000 MW per year.70

Construction must be expanded in the last 4

years of the FYP if the goal of installing

68 Besides greater technical risks, the option of using

Siberian coal to supply electric power to the European

U.S.S.R. involves higher costs than the Ekibastuz option. According to Troitskiy (Ibid.), supply of the Center from

generating capacity in Kansk-Achinsk would cost nearly 390

rubles/kW, presumably because of the greater distance from

the European U.S.S.R. and the use of higher voltage (2,250-

kV DC v. 1,500-kV DC) in transmission lines. Overall, electricity from Kansk-Achinsk would cost an estimated 1.28

kopecks/kWh.

69 Result.s of Development of Elctric Power Engineering

in 1980 and Tasks for 1981, Elektricheskiye .stantsii, No. 1,

,January 1981, p. 181.

70 U.S.S.R. Central Statistical Administration, Narodnoye

khf)z},{lv.$tltt) SS,SK 1, 1979g, ( MOSCO W: 1 xd. “Statistika,”’

1980), p. 181.

71,000 MW of new capacity is to be met. Second a substantial share of this new capacity

is to be built at Kansk-Achinsk (the Berezovskoye No. 1 Plant) (see table 35), but there is

no evidence that a suitable boiler has yet

been developed. It is known that trials using

a 2,650 tons of steam/hour boiler have failed

to solve the problems.

Taking these factors into account, OTA

estimates that lags in construction at fossilfired plants make it likely that the projected

growth of 29,000 MW will not be attained

and that net growth might more probably be

around only 24,000 MW. If the estimated

“best-case” shortfalls projected in chapter 4

(2,000 MW) and the plan targets for hydropower are factored in, the result is the

achievement of 325,000 MW by 1985, 7,000

MW short of the plan. These projections are

summarized in table 38.

The Eleventh FYP calls for the generation

of 1,550 billion to 1,600 billion kWh of electricity by 1985.71 As table 39 demonstrates,

OTA estimates that actual generation will be

71 Draft of the hlain t)ire(tions of t’jconomic” and Social I)tJ-

~elopmen t of the ( 1..S..S. R. ff~r 19/41 -1985 and for the f’er-iod t o

1 9:)(), “ /J/,~,s(/ )(I, I )W. 2, 1980, p. ~.

Table 38.— Estimated Soviet Electrical Generating

Capacity, 1985 and 1990

(thousand MW)

1985

Planned Projected 1990

(from table 34)

Total . . . . . . . . . 332 325a

405a

Fossil-Fired 230 255b

255e

Nuclear . . . . 38 3 6

c

7 5

c

Hydro , . . . . . 64 64 7 5

d

aSum of fossil - fired, nuclear, and hydro capacities

bEstimated Of 71,000 MW to be added in the period, 35,000 MW are assumed to

be fossil.fired This figure has been adjusted downward by 11,000 MW to ac.

count for retirements and underfulfillment of plan targets

c Estimated

d Extrapolated trend. V S. Serkov (ed), Ekspluatatsiya gidroelektrostantsiy,

(Moscow Izd. “Energiya,” 1977), p 18, indicates that hydroelectric capacity in

1990 IS to be 82,000 MW. This appears ambitious, but indicates that sites for

new capacity are not exhausted

e Represents a net addition of 30,000 MW (A gross increase of 35,000 MW, less

5,000 MW of retirements )

SOURCE Off Ice of Technology Assessment
Ch. 5—The Soviet Electrlc Power Industry ● 163

Table 39.— Estimated Soviet Electricity Production,

1985 and 1990

(billion kWh)

1985

Planned Projected 1990

(from table 33)

Total . . . . . . . . . 1,550-1,600 1 ,515-1 ,625a

1,900-2,040 a

Fossil-Fired 1,100-1,135 1,095-1,180 b

1,235-1,330 d

Nuclear . . . . 220-225 190-210 c

400-445

Hydro . . . . . . 230-235 230-235 265e

aSum of fess I I fired nuclear and hydro capacities

bMid 1985 capacity of 223,000 MW times operating rate range of 4,900 to 5,291

hr/yr The latter IS the 1980 rate

c Estimated

dMid 1990 capacity of 252,000 MW times operating rate range of 4,900-5,291

hr/yr The latter IS the 1980 rate

e Estimated mid-1990 capacity of 73,900 MW used at a rate of 3600 hr/yr, that is

at roughIy the 1979 rate of utilization. See Narodnoye khozyaystvo op. cit.

(1980) p 169

SOURCE: Office of Technology Assessment

1,515 billion to 1,625 billion kWh in 1985,

well within the scope of the plan. This estimate too uses the optimistic nuclear projections in chapter 4 and adopts the goal set for

hydroelectric generation; OTA estimates

that fossil-fired electricity generation will

reach 1,095 billion to 1,180 billion kWh in

1985. Combining these three components

yields a result that should equal the plan

target even if capacity introductions fall

short of the goal. This outcome depends on

the assumed rate of utilization of installed

capacity. If the 1980 rate is maintained,

fossil-fired generation could reach 1,180

billion kWh, but if rates continue to decline—say to 4,900 hr/yr—then generation

will reach only 1,095 billion kWh, still within

the plan target range.

It must be noted that opportunities to increase the amount of electricity produced

from coal may be limited by the availability

of coal. Although planned coal growth is

commensurate with planned growth in fossilfired electricity generation over the FYP (8

to 12 percent v. 5 to 9 percent, respectively),

chapter 3 estimates that at most coal output

will actually increase by only 7 percent, and

even this is a highly optimistic projection.

Given probable growth of demand for coal in

other industrial sectors, notably in ferrous

metallurgy, even a 7-percent growth in coal

production is insufficient to achieve the upper end of the range for electricity growth.

In addition, if growth in Kansk-Achinsk output is excluded owing to boiler problems,

growth in coal production to 1985 falls to 5

to 6 percent, When likely declines in the

average calorific value of other coals are

taken into account, there is a possibility that

coal production on a Btu-basis will fall from

the 1980 level. There is, then, a substantial

probability that coal’s contribution to total

fuel consumption in electrical power generation will decline. As a consequence, some

plans for adding new coal-burning capacity

may have to be scrapped or at least postponed until after 1985.

In sum, present rates of power machinery

production suggest that the Soviets are capable of producing the 35,000 MW of power

generating equipment needed to achieve the

planned gross addition of fossil-fired capacity by 1985. But unless greater resources are

allocated to construction of powerplants,

there will be insufficient finished plant to

house much of this equipment at the end of

1985. In addition, it is possible that growth

in coal production will not be sufficient to

support a 5- to 9-percent growth of fossilfired electricity production. As a consequence, it is difficult to see how coal’s share

of the fuel balance in electricity generation

can be expanded between 1981 and 1985.

1986-90

Estimates for Soviet electricity generating capacity in the Twelfth FYP are highly

speculative. The figures shown in table 38 indicated that this capacity could exceed

400,000 MW by 1990, possibly amounting to

405,000 to 415,000 MW. Fossil-fired capacity will grow between 1986 and 1990, although the extent of the growth is hard to

judge. During this period, additional plants

will be built at the Ekibastuz and KanskAchinsk basins and probably at the South

Yakutian basin. Other plants may be built in

the Far East and in the Urals, In all, OTA

has assumed a net addition of 30,000 MW of

capacity between 1986 and 1990. If so, fossil-
164 ● Technology and Soviet Energy Availability

fired capacity in 1990 could reach 255,000 kWh by 1990, with 1,235 billion to 1,330

MW (see table 38). Total electricity produc- billion kWh being generated by fossil-fired

tion could reach 1,900 billion to 2,040 billion stations (see table 39).

SUMMARY AND CONCLUSIONS

The U.S.S.R. has amassed great experience in power transmission, including longdistance HV transmission. This experience

has proved valuable in and has been enhanced by the formation of the nationwide

Unified Power System. At the same time,

Soviet power engineering is moving into a

qualitatively new field—UHV transmission.

The move to UHV, at least initially, will involve substantially higher investment and

operating costs; but the Soviets are confident that these costs will be offset by the

great savings to be gained from longdistance UHV transmission. The success of

this move may determine the outcome of

Soviet plans to complete the UPS. The

chances for success will depend, in large

part, on the applicability to UHV of past

Soviet experience in power transmission

and, perhaps, the availability of assistance

from the West.

Plans for UHV DC transmission of coalgenerated electricity to the center of the

European U.S.S.R. from Kazakhstan and

West Siberia seem to be viewed as a way to

supplement nuclear power, particularly in

the event of a shortfall in planned nuclear

capacity. However, the technical risks involved in UHV transmission and power generation using low-grade coal support the conclusion that Soviet planners may be downplaying coal in favor of nuclear power, at

least for the present. This may mean that

construction of UHV DC lines other than the

±750-kV line now being built will be delayed, pending success of the nuclear program and the solution of technical problems

connected with developing a boiler to burn

Kansk-Achinsk coal and technology for DC

transmission at voltages of ±1,125-kV and

more. Gas may also come to play a more important role in power generation.

There are no economic constraints to

building the planned 1,150-kV AC lines to

supply power to the Urals, assuming that

technical problems are or can be solved.

Presumably, however, plans to extend these

lines to the Western U.S.S.R. would raise

economic questions similar to those entailed

in proposed UHV DC transmission vis a vis

nuclear power.

To some extent, the generation of electricity by fossil-fired plants in the 1980’s will be

tied to the fate of the nuclear electrification

program. But if nuclear power falls behind

schedule, fossil-fired equipment will be called

on to cover the shortfall.

On the face of it, there would appear to be

a substantial amount of flexibility in the system, at least in handling the baseload.

Fossil-fired capacity at the end of 1980

(201,000 M W) would satisfy and even exceed

the 1985 generation targets of 1,100 billion

to 1,135 billion kWh if utilization rates of

5,475 to 5,650 hr/yr could be achieved. If the

1985 goal for fossil-fired capacity (230,000

MW) were met, operation of this capacity at

the 1979 utilization rate (5,651 hr/yr) would

permit the generation of 1,300 billion kWh in

1985–almost enough to cover the 1985 targets for both fossil-fired and nuclear plants.

There is sufficient evidence to suggest

that the U.S.S.R. will have substantial

reserve capacity in its power generation

system in the 1980’s and will be able to compensate to some degree for shortfalls in the

nuclear program by increasing the rate of

utilization of fossil-fired capacity, provided

that the needed fossil fuel supplies are
Ch. 5—The Soviet Electric Power Industry • 165

available. Nor does the availability of generating equipment appear to be a problem.

Present annual production of turbines and

generators seems more than sufficient to

support a gross addition of 65,000 MW of

fossil-fired capacity by 1990 (54,000 MW

net).

Examination of the available literature,

both Soviet and Western, revealed virtually

no imports of Western technology and equipment in nonnuclear power generation. In

fact, the Soviets have opted for domestic

development of this industry and have largely succeeded in achieving a high technological level in their equipment, comparable

in some cases with the best available in the

West.

One equipment problem–the development of large boilers for Kansk-Achinsk

coal—probably must be solved domestically.

Boilers are custom designed for specific

types of coal and suitable boilers would not

be available from the West. The Soviets have

been working on the development of such

boilers for years, but to date appear to have

had little success. This is not unusual,

however. Boiler development can take decades, and there is no assurance that an efficient boiler can be developed for a given type

of coal. In any event, Soviet capabilities in

boiler design are comparable with Western

capabilities. In short, Soviet reliance on

domestically produced power generating

equipment will probably continue into the

foreseeable future and the availability of

Western technology and credits should be of

small concern in this area.

Similarly, the U.S.S.R. appears to be

largely self-reliant in the construction of

power transmission lines. This self-reliance

may be reduced if Soviet plans for UHV

transmission are carried out; the U.S.S.R.

may be forced to turn to the West to help it

supply the large body of technology and

equipment which would be required. At the

same time, the need for the U.S.S.R, to move

ahead at full speed with plans for UHV development, particularly UHV DC, is questionable, given past success with and future

plans for nuclear power. Postponement or

abandonment of Soviet UHV plans would

limit the potential impact of Western technology in this field.

Although reliance on the West for computer technology for UPS has been very

limited, the U.S.S.R. could profit substantially from using U.S. software engineering

techniques to build the network’s computer

control system. Continued indirect acquisition of these techniques is at least as likely,

however, as direct acquisition.
CHAPTER 6

Western Energy Equipment

and Technology Trade With

the U.S.S.R.

CONTENTS

Page

EAST-WEST TRADE IN ENERGY

TECHNOLOGY AND

EQUIPMENT . . . . . . . . . . . . . . . . . . . . 171

NUCLEAR . . . . . . . . . . . . . . . . . . . . .. ..174

Western Exports. . .................174

Foreign Availability of Nuclear

Equipment and Technology. . .......176

Summary and Conclusions. . ..........177

COAL . . . . . . . . . . . . . . . . . . . . . .......177

Page

Foreign Availability of Coal

Technology and Equipment. . . . . . . . .180

Summary and Conclusions. . . . . . . . . . . .180

ELECTRIC POWER, . . . . . . . . . . . . . . .181

Western Exports. . .................181

Foreign Availability of Electric Power

Equipment and Technology. . .......183

Summary and Conclusions. . ..........183

OIL AND GAS. . . . . . . . . . . . . . . . . . . . . 184

Western Exports. . .................177 Western Exports. . .................184
.

Page

Foreign Availability of Oil and Gas

Industry Equipment and

Technology . . . . . . . . . . . . . . . . . . . . . . 191

Technology Transfer and “Foreign

Availability” . . . . . . . . .............200

Summary and Conclusions. . ..........204

APPENDIX A. Energy Corporation

Affiliations. . . . . . . . . . . . . . . . . . . . . ..205

APPENDIX B. Trade by Company. .. .209

APPENDIX C. Suppliers of Essential

Equipment. . . . . . . . . . . . . . . . . . . . . ..219

LIST OF TABLES

Table No. Page

40.

41.

42.

43.

44.

45.

46.

47.

48.

UN SITC Energy-Related

Equipment Codes. . ..............170

Industrial West Exports to the

U. S. S. R., Selected Countries. .. ....172

Soviet Energy-Related Imports

From Selected Western Countries. .. 172

Energy-Related Exports to the

U.S.S.R. by Selected Countries. .. ..174

Soviet Imports From Selected

Western Nations. ... , . ...........179

U.S. Oil and Gas Equipment Trade

With U.S.S.R. Relative Percentage

of Each Technology Area. . . . . . . . . .186

Comparison of U.S. and French

Seismic Equipment. . . . . . . . .......192

Manufacture of Siesmic Equipment

by Country. . . . . . . . . . . . . . . . . . . . . 193

Non-U.S. Offshore Engineering

Firms , . . . . . . . . . . . . . . . . . . . . ., .. .199

B-1. Trade by Company–Oil

and Gas. . . . . . . . . . . . . . . . . . . . . . .209

B-2. Trade by Company–Coal. . .......217

C-1. Suppliers of Nuclear Grade

c-2

c-3

Pip& and Tubes Outside

the United States. . .............219

Suppliers of Welding Equipment

Outside the United States. . ......219

Suppliers of Steam Generators

Outside the United States. . ......220

c-4.

c-5.

C-6.

c-7.

C-8.

c-9.

Page

Suppliers of Pumps Outside the

United States. . ................220

Suppliers of Valves Outside the

United States. . ................220

Suppliers of Containment

Structures Outside the

United States. . ................221

Suppliers of Control Systems

Outside the United States. . ......221

Essential Equipment for Coal

Mining . . . . . . . . . . . . . . . . . . . . .. ..221

West European and Japanese

Suppliers of Essential Coal

Mining Equipment. . ............222

C-10. West European and Japanese

Producers of Electric

Transmission Equipment. . ......225

LIST OF FIGURES

Figure No. Page

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

Soviet Imports of Western Energy “

Equipment and Technology, by -

Industry . . . . . . . . . . . . . . . . . . . . . . . 173

U.S. Energy-Related Exports to

the U. S. S. R., by Industry. ... , .. ...174

Western Energy Trade With

U.S.S.R.–Welding Equipment. .. ..175

Coal-Related Equipment Exports

to the U. S: S. R.. . ................178

Electric Power Equipment Exports

to the U. S. S. R.. . . . . . . . . . . . . . .. ..182

U.S.S.R. Imports of Oil and Gas

Equipment ., . . . . . . . . . . . . . . . . . . . 185

U.S. Oil and Gas Equipment Trade

With U.S.S.R. by Technology

Area. . . . . . . . . . . . . . . . . . . . . . . . . . .187

Western Energy Trade With

U.S.S.R. Automated Data

Processing Equipment. . ..........188

Western Energy Trade With

U.S.S.R. Pumps for Liquids. . ......189

Relative Importance to Soviet

Energy Industries of ComputerRelated Technologies in Which the

U.S.S.R. Lags the United States. .. .203
.

CHAPTER 6

Western Energy Equipment and

Technology Trade With the U.S.S.R.

—.—-

The previous four chapters have discussed

the impact of Western energy technology

and equipment on Soviet energy production

in qualitative terms. This chapter examines

the nature and extent of Soviet energyrelated purchases from the West. Using

available trade data, it seeks t. ascertain the

magnitude and sources of this trade, to

analyze identifiable patterns and trends, and

to illuminate the role of the United States in

providing material assistance to Soviet

energy industries. In the latter context, the

chapter addresses the issue of “foreign availability," i.e., the extent to which the United

States is the sole or preferred supplier of

energy equipment and technologies that the

Soviet Union has purchased in the last 5

years or is likely to seek during the present

decade.

The methodology employed in this chapter is as follows: OTA used the surveys of

the Soviet oil, gas, coal, nuclear, and electricity transmission industries which appear

in chapters 2 through 5, together with information on common Western practice, to

compile a broad list of important energy

technologies, items of equipment, and services. 1 This list was refined by using trade

statistics to identify those areas in which the

U.S.S.R. has made purchases from the West

in the past 5 years. Major items were then

subjected to a foreign availability analysis in

which OTA attempted to ascertain which

West European and Japanese firms manufacture similar equipment or possess expertise comparable to those companies that actually supplied the U.S.S.R.

— 1No attempt has been made here to distinguish between

“technology” and “products” or “equipment”. For a discussion of this subject, see OTA, Technology and East-West

Trade (Washington, D. C.: U.S. Government Printing Office,

1979), ch. VI.

Foreign availability is a highly subjective

concept. As chapter 13 discusses in detail,

there is no universal agreement on the

parameters that define the degree of equivalency necessary to constitute foreign availability, on how the parameters should be

weighted, or indeed on how equivalency

itself can and should be measured. Given the

limitations of this study, no attempt was

made to conduct an exhaustive worldwide

search for all alternative sources for each

item; in most cases identification of two or

three suppliers was deemed sufficient.

Nor did OTA construct a rigorous framework for defining and measuring foreign

availability. Information on energy technologies and equipment was collected from

industry sources in a number of countries

and evaluated by independent technicians.

These evaluations were supplemented by interviews with representatives from energyrelated companies in the United States and

with members of the intelligence community. The criteria of comparability were

quality, price, and technical capabilities (i.e.,

speed, capacity, precision). OTA did not investigate the potential manufacturing capacity of alternative suppliers or evaluate

the willingness of firms to sell to the

U.S.S.R. The latter are both issues that

would have to be taken into account in an exhaustive foreign availability analysis.

Although the results of the analysis carried out here are limited, they can be used to

indicate those areas in which the United

States enjoys a significant technological

edge over other Western nations in an energy-related process, system, or piece of equipment important to the oil, gas, coal, nuclear,

or electric power industries of the U.S.S.R.

169
170 • Technology and Soviet Energy Availability

A variety of statistical systems were examined in the course of this study, no one of

which provided an ideal data base. OTA has

dealt elsewhere with the problems associated

with measuring and reporting trade,2 but a

brief review of the data sources employed

here can provide a sense of the limitations of

the analysis that follows and of the strength

of the generalizations that may legitimately

be drawn from it.

This chapter relies most heavily on the

United Nations’ Standard International

Trade Classification (SITC). This scheme

summarizes trade information for thousands

of different items by organizing them into

commodity groupings of up to seven digits,

The SITC system is the only readily available statistical source that reports data for

all of the Western countries examined during

the course of this assessment. The disadvantage of SITC lies in the fact that it is highly

aggregative, i.e., its codes encompass items

that are not specifically energy related. Consequently, many of the values shown are inflated, and should be understood to represent relative orders of magnitude rather

than precise amounts of energy-related exports. OTA has collected data for those

SITC codes believed to consist largely, albeit

not exclusively, of energy-related items.

These codes are shown in table 40. The data

are best used for comparative purposes—to

identify the relative importance of suppliers

of particular items to the U. S. S. R., for

example.

In some cases a more discrete analysis

than that possible from SITC data seemed

warranted. Here three other data bases were

employed: Schedules B and E from the U.S.

Department of Commerce,3 and the European Economic Community (EEC)’s Nomenclature of Goods for the External Trade

Statistics of the Community and Statistics of Trade Between Member States

Table 40.—UN SITC Energy-Related

Equipment Codes

SITC code

571 1

571.2, 571.2

6294

642.93

655.92

678, 672.9

695.24

711.1

711.2

711.7

714.3

714.92

718.42

718.51

719.21

719.22

719.23, 712.31

719.31

722.1

722.2

723.1

723.21

729.52

729.92

732.4

735.92

735.93

861.81, 729.51

861.91

86199

Description

Propellent powders and other prepared

explosives

Safety and detonating fuses, percussion

and detonating caps, igniters, etc.

Transmission, conveyor or elevator belts of

vulcanized rubber

Gummed or adhesive paper in strips or rolls

Transmission, conveyor or elevator belts of

textiled material

Tubes, pipes and fittings of iron and steel

Rock drilling bits; tools and bits for

assorted hand tools

Steam and other vapor generating boilers

and parts, n.e.s.

Auxiliary plant for use with steam and other

vapor generating boilers

Nuclear reactors and parts thereof n.e.s.

Automatic data processing machines and

units thereof; magnetic and optical

readers and machines for processing

data

Parts, n es. of and accessories for ADP

and other calculating machines

Self-propelled shovels and excavators,

self and nonself propelled Ievelling,

tamping, boring, etc., machinery and

parts thereof

Machinery for sorting, screening,

separating, washing, crushing, etc.,

for earth, stone, ores and other minerals

Pumps for Iiquids and parts thereof

Air and vacuum pumps and air or gas

compressors and parts thereof

Filtering and purifying machinery and

apparatus for liquids and gases

Other Iifting, handling, Ioading and

unloading machinery, n.e.s.

Rotating electric plant and parts thereof;

transformers, converters, rectifiers,

Inductors and parts.

Electrical apparatus for making or breaking

electrical circuits

Insulated electric wire, cable, bars, strip

and the Iike

Electrical Insulators of other materials

Electrical measuring, checking, analysing

or controlling Instruments, n.e.s.

Electric welding, brazing, soldering and

cutting machines and apparatus and

parts thereof, n e s.

Special purpose motor Iorries, vans,

crane Iorries, etc.

Light vessels, floating cranes and other

special purpose vessels, floating docks

Floating structures other than vessels

Gas, Iiquid, and electricity supply or

production meters.

Surveying, hydrographic, etc., and

geophysical Instruments (nonelectrical)

Parts, n.e.s., of meters and counters;

nonelectrical and electrical measuring,

checking, etc., instruments of SITC

729.52, 861.8 and 861 97

SOURCE Off Ice of Technology Assessment
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 171

(NIMEXE). The former were useful in providing a clearer sense of the role of energyrelated items in U.S. exports; the latter fulfilled the same role for West European countries. Cross-checking Western export with

Soviet import data proved impossible. This

phenomenon is not unique to the energy sector; it reflects different classification systems and data reporting criteria.

It must be noted that U.S. export statistics do not include the value of Western technology and equipment sales that originate

from U.S. subsidiaries or licensees abroad;

nor will the category of U.S. exports to the

U.S.S.R. include items that are first destined

for third countries. Corporations that export

energy technology and equipment are often

multinationals or at least have international

corporate affiliations in other countries.

Some sense of the international nature of

this industry can be gleaned from appendix

A, which shows a partial list of energy corporation affiliations worldwide. The complexity of these relationships makes it extremely difficult, if not impossible, to always

attribute technology sales to the true country of origin. The data collected here, therefore, very likely understate the contribution

of American technology to the U.S.S.R.

Finally, export statistics are ill-suited to

identifying such technology transfers as the

sale of licenses or turnkey plants. For this

reason, OTA supplemented its statistical

data bases with a comprehensive search of

Soviet Business and Trade, a biweekly

publication that reports major trade deals

between the U.S.S.R. and the West.4 Tables

B-1 and B-2 in appendix B summarize energy-related transactions reported in this publication between 1975 and 1980.

EAST-WEST TRADE IN ENERGY TECHNOLOGY

AND EQUIPMENT

Although Soviet trade with the West has

grown markedly in the past decade, it has remained a relatively small part of world trade

as a whole. Except for sales of agricultural

commodities (i.e., grain), the United States

has captured relatively small market shares

of this trade compared to other nations in

the Industrial West (IW, defined here as

Canada, France, Italy, Japan, Netherlands,

Norway, Sweden, Switzerland, the United

Kingdom, the United States, and West Germany). 5 Table 41, which shows total Soviet

imports from the IW, demonstrates that

when agricultural commodities are excluded,

in 1979 the United States lagged behind

West Germany, Japan, and France in industrial exports to the U.S.S.R.

Table 42 shows the value of Soviet imports of items in the energy-related SITC

codes listed in table 40. From these data,

5 See OTA, op cit., ch. 111.

OTA estimates that energy-related items

constituted about 25 percent of total Soviet

imports from the IW in 1975, and about 22

percent in 1979. When total imports are adjusted to omit agricultural commodities, the

relative importance of energy-related trade

increases slightly. In 1979, about 28 percent

of Soviet nonagricultural imports from the

West consisted of energy equipment and

technology.

It is clear from table 42 that the vast

preponderance of the U.S.S.R.’s energyrelated imports are destined for its oil and

gas industries, a fact that is demonstrated

graphically in figure 11. The oil and gas sector in 1979 took up 77 percent of such imports. Assuming that a similar proportion of

multiarea items—i.e., those that could be

employed in more than one energy industry—were destined for the oil and gas industries, approximately 81 percent of all

Soviet purchases of energy equipment and
172 • Technology and Soviet Energy Availability

Table 41 .—industrial West Exports to the U. S. S. R., Selected Countriesa 1975-1979 (million U.S. dollars)

Total Industrial United West United

Year West a

States Japan — . —France Germany Italy Kingdom Other

1979 . . . . . . . . . . . . . . . . $15,255 $3,604 $2,461.0 $2,007 $3,619 $1,220 $694 $1650.4

Industrial. . . . . . . . . 12,151 1,319 2,461 1,791 3551 1,191 655 1,183,1

Agricultural . . . . . . 3,104 2,285 0.2 216 68 29 39 467,3

1978 . . . . . . . . . . . . . . . . 12,419 2,249 2,502 1,455 3,141 1,133 665 1,274

Industrial. . . . . . . . . 10,485 804 2,501 1,408 3,128 1,084 615 945

Agricultural . . . . . . 1,934 1,445 1 47 13 49 50 329

1977 . . . . . . . . . . . . . . . . 10,788 1,624 1,934 1,496 2,789 1,228 607 1,110,1

Industrial. . . . . . . . . 9,411 747 1,934 1,369 2,765 1,218 602 776

Agricultural . . . . . . 1,377 877 0 127 24 10 5 334

1976 . . . . . . . . . . . . . . . . 11,051 2,306 2,252 1,118 2,685 981 432 1,277

Industrial, . . . . . . . . 9,005 946 2,252 977 2,659 974 427 770

Agricultural . . . . . . 2,047 1,360 0 141 26 8 5 507

1975 . . . . . . . . . . . . . . . . 10,092 1,834 1,625 1,147 2,824 1,020 464 1,178

Industrial. . . . . . . . . 8,469 720 1,625 1,059 2,816 996 459 794

Agricultural . . . . . . $1,623 $1,114 $ 0 $ 88 $ 8 $ 24 $ 5 $384

a lndustrialized Western nations Include Canada France Italy Japan the Netherlands Norway Sweden Switzerland the United Kingdom the United Stales and West

Germany

SOURCE: OECD, Stastitics of Foreign Trade Series B Paris (Annual).

Table 42.—Soviet Energy-Related Imports From Selected Western Countriesa

(million U.S. dollars)

Electric Multiarea

Year Oil/qas Coal Nuclear power commodities Total

1979 . . . . . . . . . . . . . . . . . . . . $2,652.5 $255.9 $84.1 $279,3 $155.1 $3,427

1978 ..., . . . . . . . . . . . . . . . . 2,321,0 237.0 70.4 3319 134.8 3,095

1977 . . . . . . . . . . . . . . . . . . . . 1,991.7 174.4 98.8 252.6 103.4 2,621

1976 ......, . . . . . . . . . . . . . 2,250,0 202.8 70.2 157.0 86,5 2,767

1975 ......, . . . . . . . . . . . . . $1,989.5 $212.5 $90.5 $117,6 $90.3 $2,500

a lncludes Canada France Italy Japan, the Netherlands Norway Sweden, Switzerland the United Kingdom the United States and West Germany

NOTE Data here IS for the SITC codes Iisted in table 40

SOURCE United Nations SITC data

technology were used to find, produce, and

deliver oil and gas. The share of the nuclear

power sector was less than 3 percent; that of

coal 7 percent; electric power, 8 percent; and

other multiarea items, 1 percent.

The role of the United States in this

energy-related trade has been small, both in

terms of its share in U.S.-Soviet trade as a

whole, and in comparison to the relative

shares of energy-related equipment and technology in the Soviet trade of America’s

allies. As table 43 displays, the value of U.S.

exports to the U.S.S.R. in energy-related

SITC codes for 1979 was $237.6 million. This

constituted some 6.6 percent of America’s

total and about 18 percent of its industrial

exports to the Soviet Union in that year.

Table 43 also shows that in 1979, the value

of U.S. energy-related exports to the
Ch. 6— Western Energy Equipment and Technology Trade With the US.S.R. ● 173

Figure 11 .—Soviet

Equipment and

Imports of Western Energy

Technology, by Industry

U.S.S.R. was lower than those of Japan,

West Germany, France, and Italy. Japan

was by far the largest energy equipment supplier to the U. S. S. R., its exports totalling

about one-third of all Soviet purchases in

this area. West Germany was a close second.

France and Italy both recorded exports

about double those of the United States. In

1979, the United States accounted for under

7 percent of energy-related exports to the

U.S.S.R. of the Western countries examined.

on which this analysis is based seriously inflates the export figures by including items

not destined for the Soviet energy sector,

this percentage may actually be even

smaller. U.S. trade statistics as of this writing are available only through October 1980,

but these suggest that U.S. energy-related

exports plummeted in 1980, the result of the

post-Afghanistan technology embargo.

The composition of the Soviet Union’s

purchases from the United States reflects

the same pattern as its energy-related imports from the West as a whole, i.e., they are

largely composed of items destined for the

oil and gas industries. This pattern is shown

in figure 12. But although U.S. sales have

not been high in dollar amounts, or particularly impressive as a percentage of total

Soviet energy-related imports, it has been

contended that their importance to the

U.S.S.R. is greatly magnified by the fact

that they have been composed of critical

items, some of which are unavailable elsewhere in the world. The remainder of this

chapter will investigate this assertion, examining sector by sector the composition and

n

1975 1976 1977 1978 1979

Year

SOURCE Table 42

magnitude of Soviet imports in each of the

five energy industries under consideration,

and identifying the sources of these imports.

Where U.S. firms have been active traders,

an attempt has been made to ascertain

whether or not comparable items are

available elsewhere in the West.
174 ● Technology and Soviet Energy Availability

Table 43.—Energy-Related Exports to the U.S.S.R. by Selected Countriesa (million U.S. dollars)

——— .

United West United Total energy

Year States Japan France Germany Italy Kingdom Other exports — — —

1979 . . . . . . . $2376 $1,0971 $474.4 $906.1 $408,2 $90.5 $213.1 $3,427

1978 . . . . . . . 1598 1,0675 391.4 8393 390.6 113.8 133.0 3,095

1977 . . . . . . 211.7 5999 418.6 7454 447,5 49,7 148.2 2,621

1976 . . . . . . . 2847 9044 3083 627.8 4384 46.3 156.7 2,700

1975 . . . . . . $2183 $4795 $3344 $854.8 $4338 $38.4 $140,3 $2,500

— — a includes Canada, France, Italy, Japan, Netherlands, Norway, Sweden, Switzerland, United Kingdom, United States, and West German y

SOURCE: United Nations SITC Data

Figure 12.—U.S. Energy Related Exports to the

U. S. S. R., by Industry

140

130

120

110

100

90

80

70

60

50

40

30

20

10

5

A

SOURCE U S Department of Commerce

NUCLEAR

WESTERN EXPORTS The latter code clearly incorporates a broad

Two SITC codes relate particularly to the

range of equipment that can also be utilized

by other industries.

nuclear industrv: .

Little Soviet trade in nuclear reactors

711.7

729.92

Nuclear reactors and parts thereof. and parts has been recorded—exports of

$448,700 from the United States in 1978 and

Electric welding, brazing soldering $329,000 from West Germany in 1976. OTA

has been unable to find any unclassified ac- and cutting machines and apparatus and parts thereof.

counts that provide further information on

either of these figures. There have been
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 175

report that the U.S.S.R. may be considering

the purchase of reactors from Italy, but as

yet no such deal has been completed. (It

must be noted that the U.S.S.R. has also exported nuclear reactors to the West.) However, the limitations of using and difficulties

in interpreting trade statistics may be illustrated by the fact that a $47 million contract purportedly signed with the Italian

firm Breda Termomeccanica in 1976 for the

design and building of reactor manufacturing facilities at Atommash and Izhora does

Figure 13.— Western Energy Trade With

not appear in this SITC code.6 It is possible

that this deal was not consummated or that

it is reflected elsewhere in the trade data,

SITC code 729.92 covers electric welding,

brazing, soldering, and cutting machines and

apparatus and parts. IW trade in this area

amounted to over $90 million in 1975 and

over $84 million in 1979, but as figure 13 indicates, U.S. shares have been falling since

6 Soviet Business and Trade,

U.S.S.R.—Welding Equipment

I United Kingdom

l\ \ \

Nov. 24, 1976, p. 4.

(SITC 729.92)

\

West Germany

1975 1976 1977 1978 1979

Year

SOURCE United Nations SITC Data
176 ● Technology and Soviet Energy Availability

1975. In 1979, less than 10 percent of the

welding equipment supplied to the U.S.S.R.

by the IW came from the United States,

while West Germany and Italy together supplied nearly half.

In addition to the items contained in these

two codes, several purchases that may have

been destined for the nuclear industry have

been noted in Soviet Business and Trade.

These include a hydraulic press purchased

from Japan;7 pumps from a United Kingdom

firm, 8 and various valves, shutters, and

plugs from West Germany and Canada.9

Velan Engineering Co. of Canada is a major

supplier of valves for the Soviet oil, gas,

chemical, and nuclear industries.

FOREIGN AVAILABILITY OF

NUCLEAR EQUIPMENT AN D

TECHNOLOG Y

Aside from complete reactors, chapter 4

has identified some areas in which, should

they decide to step up their nuclear-related

purchases, the Soviets might usefully turn

to the West to supplement their own manufacturing capabilities. These areas include

nuclear grade tubing and pipes, welding and

brazing equipment, steam generators,

pumps and casings (to circulate coolant

through the reactor), nuclear valves, and

computers, software, and automatic control.

It must be stressed that at present the

U.S.S.R. imports very little, if any, such

equipment. Indeed, analysis of the trade

data has confirmed chapter 4’s generalization that the Soviet nuclear power industry

has been virtually self-sufficient. Assuming

for purposes of argument that the U.S.S.R.

might reverse its policy, OTA sought to

determine in which, if any, of these areas the

————— ——

“i${)/itJt Bu,sinc,s,s art[i Tru~ie, No\T. 24, 1976. This, togethe r

with Italian large boring and milling machines, German

machine tools, and U.S. welding and X-ray equipment, was

destined for Atommash. See also Nucleonics Week, Nov. 8,

1979, p. 12.

‘1 la~’w.ard ‘1’a?rlor & (’o., 1,td. .Sf)[ ‘ict };u.sin~).s.s IIn(i ‘/’ra(ie,

1+’et). 17, 1975.

“.%)fict l~u.iillf~s,s IIHfi ‘1’r[~tlf, P’eh. 1 l’, 1 975; Apr. 2H, 1975:

and I)ec. 6, 1978.

United States might be considered a sole or

preferred supplier to the U.S.S.R.

OTA’s “foreign availability analysis” for

the nuclear industry was based on information from industrial trade journals and interviews with representatives of U.S. firms

(Westinghouse, Rollmet, Ransome), Oak

Ridge National Laboratories, the Nuclear

Regulatory Commission, and the U.S. Department of Energy. The results of this

analysis are reported in tables C-1 through

C-7 of appendix C. It can be seen from these

tables that firms in a variety of countries

could potentially supply the U.S.S.R. with

the kind of nuclear equipment and technology it is most likely to seek.

There is one area in which the United

States could be a strongly preferred supplier. The United States is the acknowledged

world leader in many areas of computer technology. Computers are normally used at nuclear power stations for rather mundane

tasks—data acquisition and simple process

control—and the U.S.S.R. presently relies

heavily on domestically produced computers

at its nuclear stations. If greater power station automation is planned, however, more

sophisticated systems might be necessary.

The United States is also a world leader in

developing and mass-producing exotic, highstrength materials (zircalloy, and high nickel

content stainless steel). These are useful in

the nuclear industry, particularly for advanced breeder reactors. Such technology

has been fairly widely diffused. Indeed, the

means by which nuclear technology is spread

throughout the world may be illustrated by

several examples: The U.S.-based Westinghouse Electric Co. exports nuclear grade tubing to Mitsubishi in Japan, Framatone in

France, and ENSA in Spain, and each of

these companies constructs nuclear reactors

under a Westinghouse license. Toshiba and

Hitachi of Japan are General Electric licensees.10 The reactor in the state-owned plant at

10 Mans Lonnroth and William Walker, T’he Viahilit J’ of

the (’ivil Nuclear IndustrJr, ” International Consultati~e

(;roup on Nuclear Flnergy (The Rockefeller l’oundation,

1979),
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R • 177

Krsko, Yugoslavia, was purchased from nuclear plants. Should it reverse its policy

Westinghouse. and begin seeking Western imports in this

area, it would find numerous potential supSUMMARY AND CONCLUSION S

pliers in several nations.

The U.S.S.R. is presently self-sufficient in

the design, manufacture, and operation of its

COAL

WESTERN EXPORTS

The U.N. SITC codes that contain equipment applicable to coal mining are as

follows: ‘ ‘

571.1

571.2

629.4

655.92

695.24

718.42

718.51

Figure

Propellent powers and other prepared explosives.

Safety and detonating fuses, percussion, and detonating caps,

igniters, etc.

Transmission, conveyor and elevator belts of vulcanized rubber.

Transmission, conveyor and elevator belts of textile materials.

Rock drilling bits: tools and bits

for assorted hand tools.

Self-propelled shovels and excavators, self and non-self-propelled leveling, tamping, boring, etc., machinery and parts

thereof.

Machinery for sorting, screening, separating, washing, crushing, etc., for earth, stone, ores,

and other minerals.

14 summarizes trade in each of

these categories for the period 1975-79. It

shows that the U.S.S.R. has purchased no

fuses or explosives from any IW nation

(SITC 571.1 and 571.2) since 1977. During

1975 and 1976, U.S. exports in these categories were very small ($5,000 to $28,000).

Japan and West Germany led the sale of

transmission, conveyor, and elevator belts of

vulcanized rubber (SITC 629.4) to the

U.S.S.R. in 1975-79; Soviet purchases from

the United States were a weak third or

fourth (behind Italy). These sales totaled

about $48.7 million for all countries during

the entire period. Sales in the category

655.92 were negligible.

In sales of rock drilling bits and tools, and

bits for assorted hand tools (SITC 695.24) to

the U. S. S. R., the United States lagged West

Germany, Japan, France, Italy, and the

United Kingdom. Indeed, the U.S. market

share here has fallen precipitously since 1975

when sales of $1.3 million were recorded—in

1979 only $13,000 of such goods were purchased from the United States. Because this

equipment might equally well be destined for

the oil and gas sector, it is discussed in more

detail below.

The Soviet Union buys considerable

amounts of self-propelled shovels and excavators, leveling, tamping, and boring machinery (SITC 718.42). However, the finer

breakdowns available from U.S. Scheduled B

and E and NIMEXE data reveal that most

of the purchases here are for items probably

destined for the oil and gas industries. Coalrelevant subcategories from Schedule B and

Schedule E include draglines, dragline buckets, coal cutting machines, continuous mining machines, longwall mining machines,

and excavating machines (including attachments). No exports from the United States

to the U.S.S.R. whatsoever have been reported in any of these subcategories.

In 1979, the U.S.S.R. bought $81.8 million

worth of machinery for sorting, screening,
178 • Technology and Soviet Energy Availability

Figure 14.—Coal-Related Equipment Exports to U.S.S.R. (million U.S. dollars)

130-

125 -

120 -

115 -

110 -

105 -

100 -

9 5 -

8 0 -

6 5 -

8 0 -

7 5 -

7 0 -

6 5 -

6 0 -

5 5 -

5 0 -

4 5 -

4 0 -

3 5 -

3 0 -

2 5 -

2 0 -

1 5 -

l o -

5 -

0-

126.0 —

Othel

119.6 —

Otho

—

UK

—

Italy

—

v Oe

—

Japaf

—

ram

—

us

—

Othe! N Ge

—

UK 110.7

106.4

99.7

—

N GGI

Oth#

7s

—

Ma!)

—

UK

—

Fran< —

Jbpa

—

v Ge

—

—

‘m-m Otue —UK

T&—

us

Franc4

w 501

Italy

82.4

UK —

w G@

France

us

us

—

64.9

63.5

Othe,

—

%anc{ —

Italy —

N GOI

—

us

Ottwr

Italy

T

France

Swttz

W Ger

us

51.0

— Otilel

JaPM

us

w GIN

1976

N Ger

aaan

21.4

& ,8.I

Other

w Ger

‘$-

Othel

Japan

Olhef France

France ~apa,,

w tam

us

12.4

Japan

France

— —

19?7 1978 1978 1975 1976 1977 19?8 1079 1975 1976 1977 1978 1979

SITC 695.24

1975 1975 1977 1976 1979

SITC 571.1, 571.2

628.4, 655,92

SITC 718.42 SITC 718.42

SOURCE United Nations, SITC dat a
Ch. 6—Western Energy Equipment and Technology Trade With the U.S.S.R. ● 179

separating, washing, and crushing (SITC

718.51) from West Germany. Imports from

the United States in the same category came

to less than $2.4 million, mostly for crushing, pulverizing, and grinding machines and

parts. West Germany has carried most of

this market since 1976.

In sum, it would appear that Soviet purchases from the West for its coal industry

have been relatively modest and that between 1975 and 1979 little of these came

from American firms. Soviet import statistics corroborate this broad conclusion. Although the Soviet method of reporting commodity trade differs from that employed in

the West—in commodity groupings, valuation, coverage, and the method used for

identifying trade partners—data from the

U.S.S.R. reflect the same patterns as Western export statistics.

Table 44 shows official Soviet import data

on items that may have an impact on coalrelated activities, These data indicate that in

recent years, Soviet purchases from West

Germany and Japan have been much larger

than those from the United States. For example, in 1978, the figures show imports of

$115.4 million of sorting machinery from

West Germany, but only $6 million from the

United States. West Germany ($30.4 million)

also led the United States ($4.2 million) in exports of mechanical shovels and excavators.

Although the only Soviet imports of ships,

derricks, and cranes reported in 1977 and

1978 come from the United States, the dollar

amounts ($891 ,000 and $5.7 million) are

relatively small. The U.S.S.R. purchased

$58.6 million and $92.4 million worth of

these goods from Japan in 1976 and 1975,

respectively.

A search of Soviet Business and Trade for

transactions that might not have appeared

in the SITC codes indicates that the most

important category of U.S. exports likely

destined for the Soviet coal industry was

transportation. Approximately 100 trucks

(ranging in size from 100 to 200 tons) purchased from the Unit Rig & Equipment Co.

of Tulsa, Okla., for about $70 million were

Table 44.—Soviet Imports From Selected

Western Nationsa

-——.

1978 1977 1976 1975 —

U.S.S.R. imports of machinery for sorting

United States . . 6,096 26,287 32,900 24,110

West Germany 115,423 30,780 7,573 4,555

1978 1977 1976 1975

U.S.S.R. Imports of mechancial shovels and excavators

United States . . 4,169 917 9,692 10,92 3

West Germany . 30,444 11,799 9,262 28,516

France . . . . . . . . 2,790 1,157 13,299 5,522

1978 1977 1976 1975

U.S.S.R. imports of ships, derricks and cranes

United States . . 5,677 891 266 10,424

Italy . . . . . . . . . . . — — 3,693 16,068

United Kingdom 110 037 2,758 3,700

Japan . . . . . . . . . — — 58,646 92,403

aOTA collected Soviet data for France, Italy, Japan, the United KIngdom, United

States West Germany and West Berlin. Only those areas that showed trade in a

given category are presented here

SOURCE CIA based on Soviet trade data

for use in coal-related activities.

12 Othe r

American deals have included $14 million

worth of slurry pumps from Ingersoll-Rand

between 1974 and 1976 ;

13 and front-end

loaders contracted for $1 million from the

Clark Equipment Co. in 1978, and for $2.9

million from Dart Division of Paccar, inc. in

1979.

14

Between 1974 and 1980 Japanese firms involved in the South Yakutian Development

Corp. were responsible for sales totaling approximately $450 million,

15 most of which

consisted of shovels and other surface mining equipment. In addition, in 1976 and

1975, respectively, the U.S.S.R. reportedly

contracted for $500,000 worth of equipment

for excavation in underground mines from
180 ● Technology and Soviet Energy Availability

the United Kingdom, and a similar amount

in front tunneling machines and loaders from

West Germany.16

FOREIGN AVAILABILITY OF

COAL TECHNOLOGY AN D

EQUIPMEN T

As chapter 3 has indicated, the U.S.S.R.

is well able to design, test, and manufacture

its own coal mining equipment. Soviet equipment is heavier and somewhat less sophisticated than U.S. equipment, but it is adequate. A common Soviet practice has been to

buy items applicable to a specific phase of

coal mining and reproduce them. Sovietmade continuous miners, for example, are

copies of West German, English, and French

models. Drill bits that were formerly purchased from Western Europe are now domestically produced. Equipment for Siberian

surface mining was originally purchased

from Marion in Japan.

In short, like the nuclear industry, the

Soviet coal mining industry has been essentially self-sufficient. In an attempt to ascertain whether a reversal of past Soviet practice with respect to coal-industry equipment

imports would focus on items in which the

United States is a sole or preferred supplier,

OTA assembled a list of essential equipment

for coal mining operations, and attempted to

locate suppliers of this equipment in Western Europe and Japan. The results may be

found in tables C-8 and C-9 of appendix C.

Outside of the few deals discussed above,

there is no evidence that any of the companies listed here have actually supplied or

intend to supply equipment to the U.S.S.R.

Nevertheless, it is clear from table C-9 that

there exist many European and Japanese

suppliers of coal mining equipment.

Comparison of the items available from

these companies and those produced in the

United States reveals substantial differences between underground and surface mining capabilities. The majority of Soviet un-

——16 Soviet Business and Trade, Nov., 22, 1978; June 6, 1979.

derground mining utilizes longwall techniques not widely employed in the United

States. Longwall mining was invented in the

1950’s in West Germany; in fact, the United

States is heavily dependent on Britain and

West Germany for longwall research and development, and it also imports substantial

amounts of European longwall equipment.

(The U.S.S.R. has attempted to export its

own longwall systems to the United States.)

Much of the underground coal mining equipment manufactured in large quantities in the

United States is therefore of little or no use

to the U.S.S.R. Undercutter are available

only from the United States, but these are

not necessary for longwall mining operations. There are also differences in geologic

formations that render much U.S. equipment inapplicable in the U.S.S.R.; e.g., the

narrow seams in many Soviet mines do not

easily lend themselves to mechanization.

A different situation pertains with respect

to surface mining, which, as chapter 3 has

pointed out, will become increasingly crucial

to Soviet coal production as the decade progresses. The United States is a world leader

in surface mining equipment and technology, and produces items that could be of

great use to the U.S.S.R. One example is the

dragline. This is the only piece of surface

mining equipment in continuous operation,

and coal output is heavily affected by its

speed in removing overburden. U.S. draglines and excavators have the largest capacities currently available. Increased excavation capacity would allow Soviet surface

mining to become more productive, and bigger draglines would facilitate deeper surface

mining. U.S. firms also produce trucks,

power shovels, and excavators with capacities much larger than any available from

Western Europe or Japan. These items,

though not vital to the ability to mine coal,

could help to increase output.

SUMMARY AND CONCLUSION S

Both Soviet and Western trade data show

that the U.S.S.R. has purchased relatively

little coal mining equipment and technology
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R • 181

from the West, perhaps less than 10 percent

of its total equipment needs. With the possible exception of transport vehicles, American market shares in this trade are smaller

than those of other Western countries, especially West Germany and Japan. The only

coal mining technology that OTA could establish as unique to the United States is

undercutter, but these are not used in

the U.S.S.R. American underground mining

technology is unlikely to be particularly attractive to the Soviet Union.

ELECTRIC

WESTERN EXPORTS

Figure 15 shows export statistics for the

following SITC codes containing equipment

used for the generation and transmission of

electric power:

711.1 Steam generating boilers.

711.2 Auxiliary plant for use with steam

and other vapor generating

boilers.

722.1 Rotating electric plant and parts

thereof; transformers, converters, rectifiers, inductors and

parts.

722.2 Electrical apparatus for making

or breaking electric circuits.

723.1 Insulated electric wire, cable,

bars, strip and the like.

723.21 Electrical insulators and other

materials.

1979 statistics for SITC 722.1 indicate

that Japanese, French, and West German

firms supplied the U.S.S.R. with $15.2 million, $11.9 million, and $11.1 million worth of

transformers, converters, rectifiers, inductors, and parts thereof, respectively. Purchases from the United States in this category amounted to only $1.35 million. Much

the same situation has prevailed since 1977.

Similar patterns hold for electrical apparatus used in making or breaking electrical circuits (SITC 722.2). From 1975 to 1979,

Soviet imports from the United States ($3

While no surface mining technologies

seem to be unique to the United States, U.S.

firms do produce the largest capacity trucks,

draglines, and excavators in the world.

Chapter 3 has maintained that the future of

Soviet coal production rests on expanding

its surface mining operations. Should the

U.S.S.R. depart from past practice and begin

to import large quantities of Western surface mining equipment, the United States

would—all other things being equal—be the

preferred supplier.

POWER

million) have been dwarfed by imports from

France ($59.2 million), Japan ($51.7 million),

West German ($11.3 million), and Italy

($13.6 million). The Soviet Union does not

purchase many electrical insulators (SITC

723.21). Most of its 1979 purchases came

from the United States, but these amounted

to only $666,000. Even this was an anomaly.

Between 1975 and 1979, no Soviet purchases

from any country exceeded $48,000.

A similar aberration can be seen in the

data for SITC 711.1, steam generating

boilers. The $19 million recorded in this

category for U.S. exports in 1979, although

not a large amount in absolute terms, represented a departure from Soviet practice over

the past 5 years in two ways. The United

States had not before been the larges t

Western supplier of this equipment, and the

amount was significantly greater than any

recorded previously for a single country in a

single year. OTA has been unable to discover

any details of the transaction or transactions

that accounted for these exports. SITC

711.2 contains auxiliary plant for such

boilers. Except for large U.S. sales in 1976

and 1977 ($9.4 and $22.7 million), for which

OTA has been unable to obtain more information, Soviet purchases in this category

have come almost exclusively from France in

amounts ranging between about $.2 and $5

million per year.
182 ● Technology and Soviet Energy Availability

Figure 15.—Electric Power Equipment Exports to the U.S.S.R. (million U.S. dollars)

180 -

175-

170-

165-

mo155-

150-

145-

140 “

135-

130-

125-

120 -

115-

110-

105-

100-

9 5 -

90“

85-

so75-

70 -

65”

6 o -

5 5 -

5 0 -

45-

40-

35-

3 0 -

25-

20-

M

t o - -

5 -

0 -

1975 1976 1977 1978 1979 1975 1976 1977 1978 1979

SITC 711.1 SITC 711.2 SITC 722.1

SOURCE United Nat Ions, SITC data

am

—Ux

—

Japan

W. Ger.

41&

1975

106.9 —Other

U.K. —

U.S.

—

Japan

—

Italy

—

33.7

Other W. Ger.

U.K.

U.S.

Italy

W. Ger

France

France

—

Japan

1976 1977

SITC 722.2

72.’ —

Other

U.S.

U.K. —

Italy

.

W. Ger.

.

France

Japan

1978

148.6

Other —

U.S.

—

U.K.

—

W. Ger,

.

Italy,

—

Japan

France

1979

59.4

48.2

other

W. Ger.

Italy

France

Japan

—

1975 1976 1977 1978 1979

SITC 723.1,723.21
Ch. 6—Western Energy Equipment and Technology Trade With the U.S.S.R. * 183

It was not possible to determine the proportion of the equipment in these codes that

was actually destined for the Soviet electric

power industry. Soviet Business and Trade

noted only one relevant deal over the past 5

years, a Soviet purchase of cable for the

Siberian power grid from Siemans AG of

India and West Germany. 1 7

FOREIGN AVAILABILITY OF

ELECTRIC POWER EQUIPMEN T

AND TECHNOLOGY

The U.S.S.R. does not purchase very large

amounts of electric generation or transmission equipment from the West. As in the coal

and nuclear sectors, however, Soviet policy

could change. OTA, therefore, attempted to

determine whether competing firms in

Europe and Japan could supply the U.S.S.R.

with electrical transmission technology.

American industry representatives have

maintained that technology for the production of most of the necessary equipment for

electricity generation and transmission is

widespread and available in the open literature. Interviews with General Electric

(GE), Westinghouse, the Electric Power Research Institute (EPRI), and the Bonneville

Power Administration produced a consensus

view that European-produced equipment

typically costs less than American equipment, and that the quality and capacity of

the equipment produced by West European

and Japanese companies compare favorably

with U.S. items. A representative from GE

claimed that the West Europeans were at

———.—

‘‘L5’{)({Pt B(t.sttte.vs an(i 7’ra(le, Sept. 29, 1976.

least on par with, and possibly ahead of, the

United States in high voltage transmission,

and a representative from the Bonneville

Power Administration told OTA that West

Germany, Sweden, and Japan equal the

United States in producing high capacity

underground cable technology and equipment,

West European and Japanese firms that

produce electric generation and transmission

equipment are listed in tables C-3 and C-10

of appendix C. Licensing agreements between Mitsubishi and Siemens exist for

many of the items used in transmission,

Moreover, the U.S.S.R. itself produces some

transmission components for export. The

Soviet trading organization, Energomash,

has sales agents in Australia, Austria, Argentina, Belgium, Brazil, Canada, West Germany, and the United States. Among the

products it markets are coupling capacitors

for high voltage transmission lines, threephase power transformers, and circuit

breakers for use in substations.

SUMMARY AND CONCLUSION S

While the Soviets buy some electrical

equipment from the West, these purchases

are relatively modest and no corroborating

evidence is available to link them to electric

transmission. The sole exception is purchases of cable (from Siemens of West Germany). International sales representatives

for General Electric and Westinghouse, and

electric transmission experts who have

visited the U.S.S.R. agree that the Soviets

design and produce virtually all their own

transmission equipment.
184 ● Technology and Soviet Energy Availability

OIL AND GAS

WESTERN EXPORTS

Figure 16 shows United Nations data for

the most important oil and gas related SITC

codes:

Exploration

714.3

714.92

861.91

861.99

Drilling

695.24

732.4

Automatic data processing

(ADP) machines and units

thereof; magnetic and optical

readers and machines for processing data.

Parts and accessories for ADP

and other calculating machines.

Surveying, hydrographic, etc.,

and geophysical instruments

(nonelectric).

Parts of meters and counters;

nonelectric and electrical

measuring, checking, etc., instruments.

Rock drilling bits; tools and

bits for assorted hand tools.

Special purpose motor lorries,

vans, crane lorries, etc. (includes rigs).

~>roductionlcom ple tiOn/t7-anSpOrta tion

678,

679.2

642.93

719.21

719.22

719.23,

712.31

719.31

Tube-s, pipes, and-fittings of

iron and steel.

Gummed or adhesive paper in

strips or rolls (for pipe insulation).

Pumps for liquids and parts

thereof.

Air and vacuum pumps and air

or gas compressors and parts

thereof.

Filtering and purifying

machinery and apparatus for

liquids and gases.

Ships, derricks, cranes and

mobile lifting cranes and

parts; other lifting, handling,

and loading and unloading

machinery.

Offshore

735.92 Light vessels, floating cranes

and other special purpose

vessels, floating docks.

735.93 Floating structures other than

vessels.

Multiarea

729.52 Electrical measuring, checking,

analyzing, or controlling instruments.

861.81, Gas, liquid, and electricity

729.51 supply or production meters.

The codes presented here are clearly unsuitable for any precise analysis of Soviet oil

and gas industry imports. They include

many items that may have been destined for

other energy sectors or for another part of

the Soviet economy altogether, and they fail

to reflect known important transactions—

the U.S. sale by Dresser Industries of a drill

bit plant, for instance. For this reason, OTA

has supplemented the SITC data with Department of Commerce Schedules B and E

statistics—which provide detailed information about U.S. exports–the EEC NIMEXE

system, and information about specific

transactions gleaned from Soviet Business

and Trade. These sources have allowed a

rather more detailed, albeit sometimes qualitative, discussion of the nature, extent, and

source of Western exports in the Soviet oil

and gas industry.

The Department of Commerce data shown

in table 45 indicate that U.S. oil and gas

equipment trade with the U.S.S.R. nearly

tripled between 1975 and 1979, from about

$31 million to about $90 million. This growth

has been largely due to increases in the value

of computers and parts, drill rigs and parts,

and pumps. The data also show that while

the share of Soviet purchases of exploration

equipment has declined slightly, that of drilling-related equipment has grown enormously, largely at the expense of well completion

and production items. This may partly reflect a shift in Soviet emphasis away from
Ch. 6—Western Energy Equipment and Technology Trade With the U.S.S.R. ● 185

Figure 16.— U.S.S.R. Imports of Oil and Gas Equipment (million U.S. dollars)

1900-

1850-

1600-

1750-

1700-

1650-

1600-

1550.

1500-

1450-

1400-

1350-

1300-

1250-

12043-

1150-

1100-

1050-

1000-

950-

9oo -

850-

8oo750-

700-

650-

600-

550-

500-

450-

4oo350-

3oo -

Offshore

!.’,6

,IWl %

197519761977 19781979 1975 19761977 1978 1979

SITC 735.92, 735.93 SITC 729.52,

661.81/728.51

Oil and gas completion

250

200

I

150

i

Exploration Drilling

011 and gas pipelines

“u;

production

‘(excluding pipe)

0250

F1Otttn

Lm

“

u

?80

R-

%

,“.

Italy

—

Japan,

W. Ger.

—

,4:(

~

—

Q

,*”.

—

w,

—

W. Ger.

—

—

*

),..

=

II.

—

,,,,,

—

,,*,

—

! 0“

.,..

.

1975 1976 1977 19781979 1975 1976197719761979 1975 1976197719781979 1975197619771978 1979

SITC 714.3, 714.92. SITC 732.4 SITC 64293, 71921, 71922, SITC 678/6729

861.91. 861.99 71923171237, 719.31

SOURCE United Nations SITC data
186 ● Technology and Soviet Energy Availability

Table 45.—U.S. Oil and Gas Equipment Trade With U.S.S.R. Relative Percentage of

Each Technology Area (thousand U.S. dollars)

1975 1976 1977 1978 1979

Total 30,818.0 68,418.8 33,882.8 59,652.7 89,741.0

Exploration

Geophysical . . . . . . . . . . . . . . . . . . . . . . . . 2,282.0

Computers & pts . . . . . . . . . . . . . . . . . . . 8,282.0

Total exploration . . . . . . . . . . . + . . . . . . . . . . 10,569.8

Percent of total . . . . . . . . . . . . . . . . . . . . . . . 3 4 %

Pipe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Bits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,9

Rigs and pts . . . . . . . . . . . . . . . . . . . . . . . 1,477.0

Total drilling . . . . . . . . . . . . . . . . . . . . . . . . . 1,696.9

Percent of total . . . . . . . . . . . . . . . . . . . . . . 5%

Well completion/

production . . . . . . . . . . . . . . . . . . . . . . . . .

Pumps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,657.4

Pump parts . . . . . . . . . . . . . . . . . . . . . . . . . 5,928.8

Gas compressors . . . . . . . . . . . . . . . . . . . 765.3

Oil and gas sep. . . . . . . . . . . . . . . . . . . . . . 199.8

Total comp/prod . . . . . . . . . . . . . . . . . . . . . . 18,551.3

Percent of total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60%

983.1

16,215.0

17,198.1

25%

2,821.0

—

6,513.0

9,334.0

13.6%

22,220.1

8,235.6

10,445.6

685.4

41,886.7

61%

480.7

3,643.4

4,124.1

12.2%

1.9

147.2

8,272.0

8,421.1

24.8%

3,674.3

11,743,9

5,432.3

487.1

21,337.6

63%

862.5

17,578.3

18,440.8

31%

404.7

—

33,247.9

33,652.6

56.4%

1,241.9

242.9

5,937.8

136.7

7,559.3

12.7%

SOURCE Department of Commerce

the use of U.S. electric submersible pumps in

favor of gaslift techniques that are available

from non-U.S. sources (see below).

According to these data, the United

States captured only 3.3 percent of the 1979

estimated Western sales in the oil and gas

sector reported in table 42 above. It must be

noted, however, that the Department of

Commerce statistics underrepresent the full

value of the U.S. equipment and technology

purchased by the U.S.S.R. For instance,

neither SITC nor DOC trade statistics show

any U.S. contributions in the area of offshore

equipment. Yet, a recent survey of Soviet

offshore rigs revealed drilling equipment of

2,022,6

22,311.0

24,333.6

27%

579.2

—

37,235.3

37,814.5

42%

9,979.7

17,613.2

—

—

27,592,9

30,7%

U.S. origin.” This apparent contradiction

may be attributed to the fact that although

the U.S.S.R. has purchased its rigs from

other nations, these suppliers themselves

have imported U.S. drilling equipment for installation on the rigs. The U.S. sale will appear as an export to the third country.19

Similarly, although U.S. statistics show no

sales in the area of refining, U.S. firms are

known to have supplied engineering and

technical services to West European and

Japanese companies engaged in the con-

——18 1980-81 Directory of Marine Drilling Rigs, pp. 19-172.

“American technology reexported from third countries is

still subject to U.S. export control laws.
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. • 187

struction of petroleum refineries in the

U.S.S.R.

20 These transfers of know-how–

like the sale of the Dresser drill bit plant–

are not recorded in Schedule B/E data and

are thus not reflected in table 45 or figure 17.

These data problems limit the precision of

any conclusions that can be drawn from

Western export statistics. Nonetheless,

some generalizations about Western exports

to the U.S.S.R. in a number of oil and gas industry sectors are possible.

Exploration

Most of the exploration equipment exported to the U.S.S.R. has consisted of computers and geophysical equipment. Figure

18, for instance, illustrates Soviet purchases

of automated data processing equipment

from selected Western countries. This figure

shows that the primary exporters of this exploration-related computer equipment were

the United States, France, and West Germany. Through 1978, the United States

tended to supply the majority of the hard-

-—20 Soviet Business and Trade, Jan. 1, 1979

Figure 17.— U.S. Oil and Gas Equipment Trade With

U.S.S.R. by Technology Area

100

r

1 1 1 I I I

1975 1976 1977 1978 1979 1980

ware and the French to specialize in software.21 The post-1978 decline in such exports

may be due to tighter multilateral export

controls on computers, or to improvements

in the Soviet hardware base.

The Control Data Corp. (CDC) has been by

far the leading exporter of American computers capable of processing the large quantities of data associated with seismic surveying. In recent years, CDC has sold three

Cyber 172s and a Cyber 73 to various Soviet

ministries engaged in seismic exploration.

IBM has also sold two S/370-148 computers

for geophysical applications. Another

American firm, Geosource, Inc. of Houston,

had by 1979 sold 13 Command II field processing systems that are used to preprocess

seismic data in the field.22 This sale alone,

valued at $6 million, accounted for nearly 30

percent of total U.S. sales of computers and

computer parts in 1979. The French firms

Ferney-Voltaire and CIE Generale Geophysique (CGG) have provided the majority

of the specialized software used with the

CDC computers. 23

The United States and France are also the

U.S.S.R.’s leading Western suppliers of

geophysical equipment. NIMEXE and DOC

data show that between 1975 and 197 9

French sales in this area have increased,

while those from the United States have

been erratic, ranging from as high as $2.2

million to as low as $480,000. CGG was a

major supplier of geophysical equipment, in

1976 alone selling to the U.S.S.R. $14 million

worth of digital seismographic recorders,

magnetometers, gravity meters, and hydrophones. The equipment was used to equip

two geophysical ships that were built for the

Soviet Union by Mitsubishi of Japan. 24

Geosource is the largest American supplier of geophysical equipment, and it sold

approximately $30 million worth of equipment to the U.S.S.R. between 1975 and

SOURCE Table 45

2 1Soviet Business andi Trade, Apr. 11, 1979.

22 Ibid,

23 Ibid., and Mar. 18, 1979.

24 Soviet Business and Trade, Sept. 29, 1976.
188 . Technology and Soviet Energy Availability

70

60

50

40

30

20

10

0

Figure 18.— Western Energy Trade With U.S.S.R. Automated Data Processing Equipment

;

Switzerland ,

I l l

Sweden ~ .

The Nethariands

Canada

I

L

1975 1976

SOURCE United Nations SITC Data

1979.25 Geosource has supplied the U.S.S.R.

with a wide array of geophysical prospecting

equipment, including 13 photodot automated digital display systems that are used

in conjunction with the Command I I system.

Drilling

The major Soviet imports in this area have

been drill pipe and casing. Soviet imports of

drill pipe and casing have come predominantly from Japan, West Germany, France,

and Italy. Within these countries, important

suppliers have been Mannesmann (West

Germany); Vallourec (France); and Finsider

(Italy). The U.S.S.R. has also sporadically

purchased packers, mud additives, power

1977 1978 1979

Year

tongs, and heavy drilling equipment from

the West. The Soviets have purchased a

number of packers from both Technip in

France and Lyne s International in the

United States. 26

U.S. exports of drill pipe and casing to the

U.S.S.R. totaled less than $1 million over the

last 3 years. These relatively low levels are at

least partially due to a rapid increase in U.S.

drilling activity, which caused U.S. demand

for drill pipe and casing to exceed domestic

supply. The American shortfall has largely

been made up with pipe and casing imported

from Japan. The majority of U.S. drillingrelated exports to the U.S.S.R. are drilling

rigs and parts for drilling rigs. While the

25 Soviet Business and Trade, Feb. 14, 1979.
Ch.. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 189

United States has not been a major supplier

of complete rigs–-approximately 12 U.S. rigs

have been sold to the Soviet Union over the

last 10 years–the Soviets are purchasing

U.S. drilling rig parts in significant dollar

values.

U.S. firms account for most of the nonCommunist world’s production of drill bits,

and U.S. bits are of significantly higher

quality than Soviet counterparts. The Soviets, however, have purchased fewer than

100 U.S. drill bits over the last 5 years. Instead they have opted to purchase the design and equipment for a drill bit plant from

Dresser Industries. Nor have drill bit imports from Western Europe been large. The

NIMEXE system classifies drill bits into

both bits made of base metal and metal carbide. EEC exports of both types have been

inconsequential.

Well Completion/Production

Figure 19 shows a steady growth in Soviet

imports of pumps for liquids. The leading exporters of these items have been France,

West Germany, and the United States.

While it is not clear that West German and

French pumps are used in the production of

oil and gas, Schedule B/E data show that

almost all of the U.S. trade is in oil well and

oilfield pumps. This is confirmed by articles

in Soviet Business and Trade that indicate

that U.S. companies such as TRW-Reda,

Centrilift, and Oil Dynamics have been major exporters of electric submersible pumps

for Soviet oilfields.

Finally, Western trade activity in pipe

handlers and gas lift equipment was not ascertainable from the trade data due to problems of aggregation. It was apparent from

Figure 19.— Western Energy Trade With U.S.S.R. Pumps for Liquids

140

120

100

80

60

40

20

0

.

. United States

.

France

}

-

West Germany

1975 1976 1977 1978 1979

Year

SOURCE United Nat Ions SITC Dat a
190 • Technology and Soviet Energy Availability

articles in Soviet Business and Trade,

however, that these items have been exported to the Soviets by the United States,

Japan, and France: gas lift equipment predominantly by the French, and pipelayers

primarily by the United States and Japan.

Technip of France has sold gas lift equipment for over 2,000 wells. Pipelayers have

been sold to the U.S.S.R. by Caterpillar and

International Harvester in the United States

and Komatsu in Japan.

The Soviet Union has made sporadic purchases of enhanced recovery equipment and

technology. Among the transactions that

have appeared in Soviet Business and Trade

have been the sale of two carbon dioxide

(co 2

) plants by Borsig of West Germany,

two surfactant plants by Pressindustria of

Italy, a surfactant plant as well as chemicals

from Sanyo Chemical Industries of Japan,

and an alpha-olefin plant from Davy International in Great Britain.27

Transportation

The most important commodities in this

sector have been large diameter pipe and gas

pipeline compressor stations. SITC codes

678 and 672.9 contain a number of subcategories and cover a wide variety of tubes and

pipes. Figure 16 shows that in each category,

Japan, West Germany, and France are the

major Soviet suppliers, and the United

States is by far the smallest. In the category

of tubes, pipes, and fittings of iron and steel,

for instance, 1979 Japanese exports were

worth approximately $0.75 billion and West

Germany’s over $0.5 billion, while U.S. sales

amounted to a little over $1 million. Some of

this pipe may have been used in the nuclear

industry, but it is probably safe to assume

that a large portion of it went to the oil and

gas sector. The principal companies supplying the pipe are Sumitomo (Japan), Mannesmann (West Germany), Vallourec (France),

and Finsider (Italy). The United States does

“Soviet Business and Trade, Aug. 15, 1979.

not produce the 56-inch diameter pipe that

the Soviets use to construct gas pipelines.28

Compressor stations for gas pipelines are

another active commodity. The largest exporters of compressor stations to the

U.S.S.R. have been Italy, West Germany,

and the United States, with Nuovo Pignone

of Italy and GE of the United States the

major suppliers.29

Refining

The U.S.S.R. has purchased refineries and

refinery equipment from Japan, Italy, and

France, the tendency being to import entire

refineries rather than component parts. The

primary contribution of the United States in

this area has been through Fluor Corp.,

which provided design and engineering services to Italian and Japanese construction

firms. 30

Offshore

Trade in this area has consisted primarily

of sales of offshore drilling rigs and auxiliary

vessels and equipment, and the principal

suppliers have been Japan and the Netherlands. 31 Rauma-Repola Oy of Finland was

recently granted a contract to build three

dynamically positioned drill ships for the

Soviet Union, to be delivered in 1981 and

1982. The United States has supplied auxiliary equipment for rigs sold to the Soviets,

but Soviet purchases in this area have been

both moderate and sporadic.32

Conclusions

Examination of trade data reveals that

the U.S.S.R. has been very selective in the

kinds of Western equipment and technology

it has purchased to supplement its domestic

28 Interview with J. 13rougher, Bureau of East-W’est Affairs, Department of Commerce.

“’.SO[ !iet Business and Trade, Nov. 10, 1976.

‘(’Sot’iet Business and Trade, Jan. 31, 1979.

“So[’iet Z?usines.s and Trade, July 15, 1980; May 21, 1980.

“1980-81 Directory of Marine Drilling Rigs, pp. 19-172.
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R, . 191

oil and gas equipment. Indeed, the relatively

modest imports of may items lead one to

suspect that the U.S.S.R. has been supplementing domestic equipment stocks at

times of peak demand and/or purchasing the

best available product for particularly difficult application. It is equally probable that

some items have been procured for laboratory examination and duplication, or to

serve as guides to correct specific problems. 33 The most prominent exception here

is Soviet imports of Japanese and West

European large diameter pipe, which have

been consistently large and which seem to be

required because of insufficient domestic

production capacity.

Interestingly, the U.S.S.R. has not purchased many items basic to the petroleum industry. These include magnetometers, gravimeters, mud-pumps, drilling mud, casing

cement, engines, pipe insulation, separation

equipment, and offshore floating production

platforms. These omissions or gaps in trade

with Western countries can be interpreted in

a number of ways: that the U.S.S.R. and its

CMEA partners have an adequate industrial

base to supply their needs, even if the result

is inefficient by Western standards; that insufficient hard currency has forced prioritysetting among Western imports; or that the

U.S.S.R. has made a policy decision to be as

independent as possible of supplies from the

Western countries in certain critical segments of the oil and gas industries. It is

most likely that a combination of such factors is at work.

Be that as it may, the following generalizations seem warranted by the data:

• In value terms, by far the largest Soviet

purchases from the West have been in

the area of iron or steel seamless pipes

and tubes (including the large diameter

pipe used in Soviet oil and gas lines).

Purchases in this area from the United

33 There is substantial evidence of duplication. 1 n an interview with OTA, a Vice President of TRW-Reda Pump, Inc.,

asserted that when one of his technicians toured a Soviet

pump plant in 1979, he saw 20-year-old Reda models being

produced.

States have been negligible. By far the

largest suppliers have been Japan and

West Germany.

The U.S.S.R. has also purchased substantial amounts of various pumps and

gas compression equipment. Here, the

United States has had larger market

shares. The U.S.S.R. has made only a

few large purchases in the area of light

vessels, floating docks, etc., which includes offshore drilling rigs. None of the

vessels themselves have come from the

United States. In 1979, Japan and

Sweden were the only large exporters in

this category.

The U.S.S.R. has purchased very few

drill bits from the West, apparently preferring to acquire its own additional

manufacturing capacity in the form of

an entire plant.

FOREIGN AVAILABILITY OF OIL

AND GAS INDUSTRY EQUIPMENT

AND TECHNOLOGY34

Much oil and gas technology originated in

the United States, but that technology has

lost its American identity over the years

through licensed production, wholly owned

subsidiaries overseas, and employment of

U.S. commodities and expertise worldwide.

Other sophisticated technology was developed elsewhere. For example, Schlumberger

of France first developed electric well log34 This section is based on trade journals, industry catalogues. Soviet Business and Trade, The Composite Catalogu e

of Oil Field Equipmcnt and Services (Houston, Tex.: Gulf

Publishing Co., 1980), and inter~.iews with representati~res of

the following firms: Gulf Oil Exploration & Production CO.,

(ieosource, Inc., Dresser Industries, BW”T M’orld Trade ,

Cameron Iron Works, Inc., Hughes Tool Co., TRW-Reda

pump, Inc., Brown & Root, Inc., and Williams Bros. Engineering Co. Representatives of these firms provided candid,

forthright observations of their past dealings with the

U. S. S. R., insight gained during country visits and an appraisal of their foreign competitors. These visits, coupled

with the other reported U.S.S.R./Western trade deals, provided a basis on which to judge the availability of Western oil

and gas technology. While these sources could not provide

complete identification of all possible suppliers, OTA believes

that it was acquainted with the most significant suppliers

and the strongest competitors to U.S. firms.
192 • Technology and Soviet Energy Availability

ging equipment that is recognized today as

the world’s standard. Likewise, the steel industries in Western Europe and Japan generally produce products that are as good as,

if not better than, those available from the

United States–and at lower prices. Technological leads are perishable with time.

Licensed manufacturers frequently improve

upon designs or manufacturing processes

based on local conditions and equipment.

Wherever the original development work

and design may have been done, ideas soon

become general knowledge. The following

sections discuss the foreign availability of

energy technology that would be useful to

the U.S.S.R. in the various phases of oil and

gas production and delivery.

Exploration

As noted above, the American firm Geosource has been very active in Soviet trade.

Sercel of France has been a strong competitor to Geosource for sales of field data

collection and preprocessing centers. Table

46 compares basic parameters of Geosource,

Texas Instruments (another U.S. firm), and

Sercel products used in seismic work. The

table shows that the equipment, although

not identical, is similar.

Table 47 identifies the major items of

seismic surveying equipment and suppliers

around the world. Most items are produced

by firms in Western Europe and Japan, and

many are available in the Eastern Bloc,

although the quality of the latter is questionable and Western equipment tends to be

more advanced. The United States may lead

technically in one or two items, but the

general consensus is that products from

Sercel, for example, are capable of performing similar functions. On the other hand,

only the United States is able to supply the

full range of equipment.

Table 46.—Comparison of U.S. and French Seismic Equipment

Geosource MDS-10 Texas Instruments DFSV Sercel 338 B

Data Sample Packing Data Auxiliary Sample

channels Interval (MS) density channels channels rates

24 1⁄2 1,600 SEG-B 24 Channels @ 1, 2, 4 ms

Data 24 1 800 or 1,600a

To 24 4 1, 2 or 4 ms

24 2 800 or 1,600a28 2 1, 2 or 4 ms

24 4 800

Channels 48 1 1,600 48 4 1

b

, 2 or 4 ms 48 Channels @ 2, 4 ms

48 2 800 or 1,600a

60 2 2 or 4 ms

48 4 800 or 1,600a

96 4 2 or 4 ms

96 2 1,600 120 4 2 or 4 ms

96 4 800 or 1,600a240 4 4 ms

Solid state stacking available at Packing density 800 or 1,600 bpi

all sample rates except (1) 1,600 bpi only.

Packing density 1,600 1,600

maximum

BPI

Number of bits 14 bits plus sign bit 14 bits plus sign bit

4 bit gain word 3 bit gain word

Frequency 2 to 1,000 Hz 3 to 256 Hz

response

Distortion 0.1 0/0 maximum @ 0.050/0

0.53V RMS input

Tape speed Unknown 10 to 120 ips

range

—

96 Channels @ 4 ms

1,600

6,250 for 338lR

(IBM recorder)

14 bits plus sign bit

Unknown

Less than 0.1 0

/0 @

.05V input

20 to 92 ips

a

800 BPI NRZI optional

b 1 ms at extra cost to 56 channels

SOURCE Office of Technology Assessment
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R, ● 193

Table 47.—Manufacture of Seismic Equipment by Country

Vibrator

Vibrator control

Shooter explosive

Recorder field

Tape transport

Camera CRT

Cables

Connector

Geophone

Airgun (marine)

Marine streamer

Marine positioning

Seismic computer

Array transform

processor

Plotter

,

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

NOTE No Inferences as to quality or comparability can be made from

SOURCE Off Ice of Technology Assessment

Seismic survey data must ultimately be

processed by large mainframe, third generation computers with floating point and array

processors. The United States has approved

the sale of six large computers, with somewhat restricted array processors, for use in

the major hydrocarbon producing regions in

the U.S.S.R. Two French firms, Ferney -

Voltaire and CGG, are known to have supplied sophisticated geophysical software

(computer programs) used on the U.S.

machines to analyze seismic survey results.

An IBM sale included American software.

In sum, the equipment to perform seismic

surveys and record seismic data are generally available worldwide. U.S. firms are

unique, however, in being able to provide

systems displaying the full range of equipment and know-how. U.S. firms also lead in

the accuracy of some equipment; and the

United States has a substantial lead in computers that process the seismic data. Soviet

this table which merely shows the existence of commercial manufacturers

capabilities in this area are generally 5 to 15

years behind the West and purchases of such

equipment would certainly enhance the

U.S.S.R.’s seismic work. The degree to

which this would necessarily lead to increased oil production in the present decade is

unclear, however.

Drilling

The U.S.S.R. has purchased 15 portable

drilling rigs from Tamrock Oy of Finland.

Canadian sales of $12 million to $32 million

each year between 1975 and 1979 were probably also portable rigs, which are known to

be produced by the Canadian firm Foremost.

Mobile equipment capable of drilling to

20,000 ft is also available from Romania,

although it may not perform to advertised

specifications.

The U.S.S.R. has imported drill pipe almost entirely from firms in Western Europe
194 ● Technology and Soviet Energy Availability

and Japan. Prominent suppliers have been

Vallourec and Creusôt-Loire of France; Mannesmann of West Germany; Italsider and

EFIM of Italy; and Mitsubishi, Mitsui,

Sumitomo, Japan Steel Works, and Nippon

Kokan of Japan. Japanese pipe is generally

considered to be equal to, if not better than,

U.S. pipe and is available at a significantly

lower price. It is manufactured by the latest

methods including inertial welding of the

tool joints on the ends of the pipe, and U.S.

drillers are buying Japanese pipe to supplement U.S. production capacity.

The United States is the predominant producer of drill bits in the West, with the

American firms Hughes, Dresser, Smith,

and Reed supplying the vast majority of bits

used outside the Communist world. These

firms produce the greatest diversity of highquality bit types for varying underground

rock strata. A few diamond bits and core bits

are produced by Diament-Boart of Belgium

and Tsukimoto Seiki in France, but these

cannot substitute directly for rock drill bits.

While Tsukimoto produces both diamond

and metal bits, its total annual production is

very small, approximately 5,000 bits. European bits have a more limited operating

capability than their U.S. counterparts and

their quality does not match U.S. standards.

Creusôt-Loire, SMF Division of France, has

recently been purchased by Hughes Tool Co.

and the drill bit plant is being modernized to

U.S. standards.

The Soviet Union is itself a prodigous producer of drill bits, and it has not purchased

Western bits in large quantities. A great

deal of publicity has accompanied the sale by

Dresser Industries of a tungsen carbide journal bearing drill bit plant to the U. S. S. R., the

capabilities of which are discussed in chapter

2. The export license for this plant was

recently revoked, but all the technology

relating to production machinery, manufacturing processes and metallurgical specifications has already been transferred. The

revocation mainly prohibits Dresser from

providing onsite training of Soviet technicians once the manufacturing plant is completed. The U.S.S.R. will therefore be forced

to resort to trial and error to duplicate

Dresser-achieved quality. In sum, the

United States enjoys a significant lead in

both quality and quantity of rock drill bits.

But the U.S.S.R. does not purchase significant quantities of such bits and the sale of

the American advantage—if the plant

achieves its rated capacity of high-quality

bits.

Most of the well-logging equipment currently employed in the U.S.S.R. is copied

from U.S. Halliburton “Jeep” single conductor logging tools acquired as part of lendlease equipment after World War II. The

current technology in the West employs

multiple conductors (up to seven) to obtain

all the desired information on a single pass in

the borehole. These multiple conductors significantly expedite complete logging operations. The Soviets have purchased well-logging tools from several U.S. firms (Halliburton, Dresser, Gearhart-Owens) but have

not allowed experienced Western firms to

enter the U.S.S.R. to provide logging service. The world’s leading logging firm,

Schlumberger, has a policy of selling only

services, not equipment, and it performs 80

percent of the logging services outside the

Communist world. Other logging services

exist in France, United Kingdom, and West

Germany. These firms are generally small,

however, without Schlumberger’s reputation

for quality of service. In sum, the U.S.S.R.

substantially lags in logging equipment, but

the technology is available outside the

United States.

Well Completion/Production

The process of completing a well entails

the installation of equipment necessary to

isolate the producing zones in the well, extract, and contain the crude oil or gas–well

head assemblies (christmas trees, chokes,

valves), downhole packers (for both single

and multiple zone completion in a single

well), and artificial lift equipment (sucker rod

pumps, electrical submersible pumps, and

gas lift equipment).
Ch. 6—Western Energy Equipment and Technology Trade With the U.S.S.R, ● 195

The literature reveals few exports of well

completion equipment to the U.S.S.R. Sales

of well head assemblies have been made by

Hübner-Vamag AG in Austria; FMC Europe

(Luceat), Cameron de France and CreusôtLoire of France; EFIM of Italy; producers in

Romania; and BWT World Trade, CAMCO,

Otis Engineering, Cameron Iron Works,

FMC Petroleum Equipment Co., and Baker

Oil Tools, Inc. of the United States. U.S. industrial representatives generally agree that

equipment available overseas provides satisfactory service except under severe conditions, i.e., high pressure and corrosive atmospheres. These problems are usually best

served by U.S.-supplied equipment. But

such conditions are found infrequently in the

major Soviet oil and gas producing regions—

less than 5 percent of the time and then principally only in the North Caucasus, the Caspian, and Sakhalin.

Artificial lift equipment is less generally

available outside the United States than

wellhead equipment. The Soviets are known

to produce their own sucker rod pumps and

electric submersible pumps. U.S. technicians

who have seen Soviet submersible pumps

report that they appear to be exact copies of

pumps produced by Reda in the United

States shortly after World War II. None of

the pumps observed were estimated at

greater than 200 horsepower (hp). This may

be compared to the up to 1,000 hp pumps

available in the United States. Soviet pumps

also have a considerably shorter life in the

well than their U.S. counterparts. Within the

U. S. S. R., Soviet pumps reportedly operate

30 to 90 days in the hole while pumps imported from the United States last 120 to

360 days. (American pumps routinely operate in excess of 1 year in U.S. wells before

they require service. ) U.S. pumps that fail in

the U.S.S.R. are often not returned to service. The Soviet Union has consistency refused to allow American service technicians

into the field, and the Soviets themselves

have insufficient trained personnel and supplies of replacement parts. In the West, a

specific pump is “fine tuned” by the manufacturer at the site to optimize usage. Since

this has been made impossible in the

U. S. S. R., the pumps probably operate inefficiently.

Excluding the U. S. S. R., the world supply

of submersible pumps is provided by four

U.S. firms. They are TRW-Reda, HughesCentrilift (formerly Borg-Warner/ByronJackson), Baker-Kobe (formerly FMC), and

Oil Dynamics, Inc. Prices of U.S. pumps

range from approximately $10,000 for those

with small diameters and low power, to

$200,000 for the largest and most powerful.

Soviet purchases have averaged approximately $100,000 per unit, suggesting that

they are supplementing their own production with the larger units available only in

the United States. The U.S.S.R. purchased

about 1,500 pumps from the United States

between 1974 and 1978, but none have been

imported since. This suggests that the

Soviets are now supplying their own needs

or using other techniques to remove fluid

from wells.

One such technique is gas lift, which the

U.S.S.R. has in fact used to augment its submersible pumps. The Soviets made a major

purchase of gas lift equipment–enough to

equip almost 2,400 wells—in 1978 from

Technip of France. They have also purchased gas compressors from Dresser Industries and gas lift equipment from

CAMCO in the United States. Gas lift is

more expensive than pumps per unit volume

of oil produced because it requires complicated compression equipment to handle

the large volumes of gas it employs. The gas

distribution valves and their proper sequencing are the most critical technology required

in this technique. These are generally

available outside the United States.

Sucker rod pumps, such as those seen dotting the Midwestern and Western United

States, are also used to lift oil. Until about 15

years ago, Soviet-made models were commonly beset with bearing failures and cracking of the rods. Through improved metallurgy, the U.S.S.R. seems to have solved
196 ● Technology and Soviet Energy Availability

these problems and it does not import in this

area.

Transportation

The expansion of Soviet pipelines for both

oil and gas has benefitted extensively from

imports from the West. The Soviets have

purchased a seamless pipe manufacturing

plant with a capacity of 170,000 metric tons

per year from Creusót-Loire in France and a

West German group composed of Mannesmann-Demag-Meev. The plant uses the

French Vallourec process. The U.S.S.R. has

also purchased extensive quantities of

finished pipe from Mannesmann and Kloeckner of West Germany; Cie de St. GobainPoint-a-Mousson in France; Finsider in

Italy; and Mitsui, Sumitomo, Nippon, Seiko,

Nippon Kokan, Kawasaki, and Itoh of

Japan. Japanese steel plate is also used for

rolling into pipe in the U.S.S.R. The Soviet

Union has purchased pipeline valves from

Hubner-Vamag in Austria; Honeywell

Gmbh, Borsig Gmbh, and Klaus Union in

West Germany; Petrovalves, WAGI SpA,

and Grove Italia in Italy; and Kobe Steel and

Japan Steel Works in Japan. Clearly this

technology is available worldwide.

Pipeline booster pumping stations for oil

and gas compressor stations and their

related components have been supplied to

the U.S.S.R. by Honeywell-Austria Gmbh in

Austria; AEG-Kanis Turbinenfabrik, Klaus

Union, Cooper Vulkan Compressor Gmbh in

West Germany; Kongsberg Turbinfabrik in

Norway; Nuovo Pignone and Worthington

SpA of Italy; Sumitomo and Hitachi of

Japan; Thomassen of the Netherlands; and

John Brown Engineering of Scotland. Several U.S. firms, including Ingersoll-Rand,

Dresser, GE, Cooper Industries, and International Harvester, have also exported compression and pumping equipment. GE was

selected as a major supplier of compression

equipment for the Orenberg gas pipeline, but

75 percent of GE Orenberg order was filled

by firms outside the United States under

subcontract to GE. Compression equipment

is manufactured worldwide. Some of the

more modern designs are derivatives of jet

aircraft engines, but the technology is not

advanced and is available in Western Europe

and Japan.

The U.S.S.R. has also purchased pipeline

laying equipment from the West. This usually consists of a crawler tractor with sidemounted support to lower the pipe into a

prepared trench. Fiat-Allis Construction

Machinery, Inc., of Finland has supplied

spare parts for both bulldozers and pipePhoto credit Oil and Gas Journal

Equipment for work on large diameter pipelines
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 197

layers, Caterpillar-Mitsubishi and Komatsu

of Japan have also exported pipelayers, as

has Bunsar in Poland (an International Harvester licensee). International Harvester and

Caterpillar have been the major U.S. suppliers of similar equipment. Foremost of

Canada has also supplied heavy pipe carrying vehicles. The technology requirements

for these vehicles are not advanced and are

generally available outside the United

States. Although American firms may produce the largest machines and American

models may be better suited to work in cold

climates, alternative models, especially from

Japan, could fulfill Soviet requirements. No

information was collected on production

capacities in any country. The Soviets seem

to be buying these commodities due to shortfalls in their own production.

U.S. firms, namely CRC International and

Perry Equipment Corp., have won contracts

to supply the U.S.S.R. with pipeline inspection robots, or “pigs,” but competitive bidding to supply this type equipment for the

Orenberg gas pipeline included Mannesmann and Prenatechnik of West Germany;

Primaberg and OeMV of Austria; General

Descaling of the United Kingdom; Nippon

Kokan of Japan; and Aveary Lawrence of

Singapore. Both Prenatechnik and General

Descaling have previously sold pipeline inspection pigs to the U.S.S.R. OTA’s assessment of the general capabilities of these pigs

indicated that foreign equipment is comparable to U.S. models.

In sum, well completion/production equipment, blowout preventers and wellhead assemblies (Christmas trees) designed for very

high pressure and/or highly corrosive conditions are available only from U.S. firms. But

these types of equipment would be required

for only a small percentage of the wells

drilled in the U.S.S.R. The United States

does maintain a monopoly on quality electric

submersible pumps, but the U.S.S.R. has

not purchased these for the past 2 years. It

is purchasing large quanities of pipe and

pipeline equipment–which are available in

Western Europe and Japan.

Secondary/Tertiary Recovery

The Soviets have been experimenting with

several enhanced recovery techniques. As

noted above, the U.S.S.R. has purchased two

CO2 recuperation/liquefaction plants with a

combined capacity of 400,000 tons/year from

Borsig Gmbh, a subsidiary of Deutsche Babcock AG, and a chemical surfactant plant

(alkyl phenol) with a 100,000-ton/yr capacity

from Fried Uhde Gmbh, both of West Germany. A plant capable of producing 250,000

tons of surfactant per year was obtained

from Pressindustria in Italy, and other deals

have been broached with firms in Japan and

England. It is not clear when these facilities

will be brought online. In any event, the contribution to overall production will be

negligible. The benefits of tertiary recovery

techniques are still being explored through

testing and experimentation in the West as

well as in the U.S.S.R.

More enhanced recovery experience resides in the major oil and service companies

operating in the United States than anywhere else in the world. U.S. firms could

probably aid the U. S. S. R., if it would allow

foreigners to provide technical services.

There has as yet been no sign of Soviet interest in such services.

Offshore

After the initiation of the Soviet-Japanese

cooperative project on Sakhalin Island (see

ch. 11), the U.S.S.R. approached the Gulf

Corp. regarding the use of its highly sophisticated survey ship, the Hollis Hedberg.

The Soviet Union, however, prohibited the

use of an American crew in Soviet waters,

and Gulf declined to participate. Instead, the

U.S.S.R. leased a French survey ship with

crew from CGG for 6 months during the

summer of 1976. The Soviets also procured

from CGG sufficient geophysical equipment

to completely outfit two geophysical ships.

In the same year, they purchased two ships

from Mitsubishi of Japan, and another completely equipped geophysical survey ship

has reportedly been bought from Serete Engineering of France. GECO of Norway was
198 ● Technology and Soviet Energy Availability

hired in 1978 to conduct an offshore survey

using 48-channel equipment in the Baltic Sea

off the East German-Polish coast. A similar

ship, ordered from GECO in 1977, performed

surveys during the summer of 1978 in the

Barents Sea. These transactions suggest

that the U.S.S.R. has been able to acquire

substantial Western expertise to develop its

offshore fields, with little to no direct participation from the United States.

The United States has, however, provided

a third-generation main frame computer, a

CDC-Cyber 172, suitable for seismic analysis. This is installed in a computer center on

Sakhalin Island. The software for the CDC

computer, and for another installed elsewhere in the U. S. S. R., was purchased from

the French firms CGG and Ferney-Voltaire.

The Sakhalin Island computer facility is

used to analyze the marine seismic data acquired by at least two of the Soviet geophysical ships equipped with CGG instrumentation and equipment.

Offshore exploratory drilling in the Sakhalin region was initially performed in 1977

with a semisubmersible rig leased from a

Norwegian firm, Fred Olsen & Co. This was

subsequently replaced by a Mitsubishi-built

semi, the Hakuryu II. Additionally, the

Japanese consortium has provided several

jackup rigs for exploratory drilling off

Sakhalin. The drilling rigs are operated by

Japanese-trained Soviets, and a Japanese

drilling supervisor remains with each rig.

The U.S.S.R. obtained its first mobile offshore rig in 1966 from IHC in the Netherlands. This rig, which was for use in the Caspian Sea, has become the prototype for

Soviet domestically produced rigs. Equipment used on Soviet domestically produced

offshore rigs is also reported to be of Soviet

origin.

In 1976, Armco Steel (U. S.) was granted

an export license to provide Rauma-Repola

Oy of Finland the necessary technical data

to produce three semisubmersible drilling

rigs that were to be sold to the U.S.S.R. and

assembled at the Astrakhan shipyards on

the Caspian Sea. The first semi, the Kaspmorneft, was completed for sea trials in

August 1979, but is not yet operational. The

second, the Shelf-1, was ready for sea trials

in 1980. The third semi is being modified at

the yard based on experience with Kaspmorneft. The Soviets have now ordered three

dynamically positioned drill ships, also from

Rauma-Repola Oy, for exploratory drilling in

the Barents and Kara Seas. The dynamic

positioning systems are being provided

by Kongsberg Vaapenfabriken of Norway.

Other competitors included Simrad A/S of

Norway and Honeywell of the United States.

The drill ships, as well as many of the

other assembled offshore rigs supplied to the

U. S. S. R., are largely outfitted with drawworks, prime power, rotary tables, subsea

blowout preventors, mud pumps, and cranes

made by U.S. firms and their overseas subsidiaries and licensees. Dominant U.S. suppliers are National Supply, Ideco, Continental Emsco, Oilwell, and Gardner-Denver. The

main structural platforms for these rigs are

made in many shipyards around the world,

but U.S. firms produce the majority of the

mobile offshore designs. Major U.S. firms

here are Bethlehem Steel, Marathon LaTourneau, Livingston, Avondale, Todd, McDermott, and Ingalls. Significant quantities of

rigs are also produced in the Netherlands by

Verolme, IHC, Rhine-Schelde-Veroime; in

Canada by Davie, Halifax and Scott-Lithgow; in Finland by Rauma-Repola Oy; in

Japan by Mitsubishi, Mitsui, Hitachi,

Sumitomo, IHI, and Nippon Kokan; in Norway by Aker, Nylands, Trosvik and Normarig; and in France by CFEM. Lesser suppliers may be found in Taiwan, Italy, United

Kingdom, West Germany, Venezuela, Scotland, Hong Kong, Singapore, Australia,

Sweden, Korea, and Spain. In the Communist world, rigs have been constructed by

the People’s Republic of China, Romania,

and the U.S.S.R. These are usually copies of

Western rigs.

The prime power used on the rigs is usually diesel-electric, and the suppliers include

all the world’s major diesel manufacturers:
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 199

General Electric/EMD, Caterpillar, Fairbanks-Morse, Detroit Diesel Allison, SACM

and Alsthom-Atlantique/SEMT Pielstick

(France), and Paxman and MTU (West Germany). Dynamic positioning control systems

have been supplied to the U.S.S.R. by

Honeywell and Delco in the United States,

Simrad A/S and Kongsberg Vaapenfabriken

in Norway and CIT Alcatel in France. Mechanical anchoring systems and cranes have

been provided by U. S., Japanese, West German, Norwegian, and French firms. Diving

equipment on the rigs has been most frequently provided by COMEX in France, but

Ocean Systems (U. S.) has also exported in

this area. Subsea blowout preventers appear

to be available only from U.S. suppliers, including Cameron Iron Works, Hydril, and

NL Industries. These firms are also the sole

suppliers of subsea well completion stacks.

A leading U.S. supplier indicated that his

firm had provided subsea blowout preventors for all Soviet offshore rigs and ships.

The offshore oil and gas industry is a

classic example of the worldwide nature of

this technology. While the earliest offshore

activities were concentrated off the Gulf and

California coasts of the United States, the industry is now active in other parts of the

Caribbean, off Brazil, West Africa, the

North Sea, Asia, and the North Slope of

Alaska and Canada, The most stringent requirements for offshore technology are represented by North Sea and North Slope activities, and both U.S. and European firms

are benefiting from this experience. In sum,

while the U.S.S.R. sorely needs offshore

equipment, with the exception of drawworks, rotary tables, mud pumps, subsea

blowout preventers, and well completion

stacks—the narrow range of items in which

the United States still maintains a monopoly

or lead—it can acquire quality items in

Western Europe and Japan.

Engineering firms are perhaps the most

critical element in successful offshore operations. U.S. firms clearly have the greatest

breadth of experience in this area, but numerous foreign companies can supply most

individual aspects of the know-how. Table 48

lists major foreign offshore engineering

firms that are able to perform all or part of

the engineering design required in defining

and establishing a new offshore producing

field and providing associated equipment.

Teamed together, the firms listed in table

48 could provide the same capability that is

resident in U.S. firms like Brown & Root,

Inc., and J. Ray McDermott. In fact, there

has been substantial teaming for the North

Sea and the Beau fort Sea.

Refining

Although current capacity seems to supply current needs, improved refining technology and equipment may well be required

in the U.S.S.R. during this decade. Increased

natural gas production will require processing of vast amounts of natural gas. Gas processing complexes have been sold to the

U.S.S.R. by Technip and Construction

Metalliques de Provence in France and the

Japan Steel Works, Nichiman Jitsugyo &

Co., Ltd., and Mitsubishi in Japan. The

Fluor Corp. of the United States has proTable 48.—Non-U.S. Offshore Engineering Firms

Norway:

Aker, Kvaener

Netherlands:

Herrema

United Kingdom

Worley

Adkins

Halgrove-Eubank

Matthew-Hall

Davey Powergas

Willey

Lawrence & Allison

France:

E.T.P.M.

U.I. E.

Serete

Italy:

Technomare

Saipem

Snamergetti

Mexico:

Protectors

Spain:

— Inite l

.

SOURCE Brown and Root, Inc.

—.
200 ● Technology and Soviet Energy Availability

vialed engineering services and technical

assistance on at least two Japanese sales.

Mitsubishi has sold an oil refinery to the

U.S.S.R. Competitors for that sale were reported to be Linde AG in West Germany and

C-E Lummus in the United States. Other

Soviet imports of oil refining equipment during the period 1975-78 have included deals

worth over 190 million rubles from Japan,

165 million rubles from East Germany, 76

million rubles from France, 43 million rubles

from Czechoslovakia, 1.5 million rubles from

Italy, and 1 million rubles from the United

Kingdom. The U.S.S.R. will probably continue to seek assistance in this area, but the

technology to produce and operate an adequate refinery is not advanced and is available on a worldwide basis. (This includes the

use of hydro and catalytic cracking to break

up the heavy hydrocarbon molecules to form

the lighter molecules in motor fuels and aviation gasoline. ) Modern U.S. and Western

European refineries now have sophisticated

computer controls, which the Soviets lack.

These controls improve efficiency but are

not generally integral to the basic technology. In short, the technology required for

refining crude oil is available in several

Western countries, and the U.S.S.R. is certainly not dependent on the United States

for refining technology to meet its near-term

needs.

TECHNOLOGY TRANSFER AND

“FOREIGN AVAILABILITY”

Until recently, the United States had been

the sole source of “state-of-the-art” technology in virtually all technological areas.

Photo credit TASS from SOVFOTO

Separation installations at a West Siberian gas compression station
Ch. 6—Western Energy Equipment and Technology Trade With the U.S.S.R. ● 201

America’s technological lead was largely attributable to two factors: it outspent most

other countries in research and development

and the wealth of technological “know-how;”

and equipment produced by U.S. R&D had

remained resident in U.S. corporations. The

rise of the multinational corporations during

the 1960’s altered this state of affairs.

In their quest for expanded markets and

higher profit margins, the multinationals

have transferred significant quantities of advanced technological know-how and equipment. This process is nowhere more evident

than in the oil industry, where the first true

multinationals emerged. The international

nature of oil and gas exploration and production provided a natural incentive for oil industries to adopt a global approach to the

dispersion of know-how and equipment. As

far back as the 1940’s, oil companies perceived a need for local sources of equipment

and technology. Transfers of technology between U.S. firms and other Western concerns have taken place in nearly all of the

key technological areas of the oil and gas industry. The data also show several transfers

of American technological know-how directly to the Soviets; i.e., the Dresser drill bit

plant and the Armco licensing of offshore

rigs. The result of these transfers has been to

significantly reduce the number of areas in

which the United States is a sole source of

supply.

The three principal vehicles for transfer of

technology are wholly owned subsidiaries,

affiliates, and licensing of production processes and know-how. Parent corporations

have availed themselves of all three

methods. Each provides varying levels of

technology transfer, and differing amounts

of control which the parent organization retains over the end use of technology.

Transfers of technology have affected the

position of the United States as sole source

in two ways. An initial technology transfer

spreads U.S. know-how throughout the

world. Once a foreign concern acquires a

technological base, it can expand upon this

base and develop similar product lines on its

own. One example of this process in the case

of GE licensing of compressor technology

to Nuovo Pignone of Italy. Shortly after acquiring the technology, Nuovo Pignone was

producing its own gas pipeline compressor

stations in competition with GE line. In

1976 Nuovo Pignone won a large Soviet contract for pipeline compressors over a competing bid from GE. Nuovo Pignone is now

an important supplier of this type of

equipment.

The United States still leads in some areas,

however. These are discussed in the following sections.

Exploration

In exploration, the United States holds a

unique position in that it is able to provide

the complete set of equipment, computers,

and software needed to model subsurface

structures and locate oil and gas. The lead of

American firms in this area may be attributed to the fact that their international subsidiaries, affiliates, and licensees do the vast

majority of exploration in the West. Many of

the components of these systems are

available elsewhere, especially from the

Japanese, but the most advanced expertise

resides in the United States. The United

States also has a slight edge in hydrophore

and geophone accuracy.

Although other sources exist for the latest

technology in integrated circuits, the United

States currently is the only source of minicomputers used to rapidly process and initially analyze seismic data in the field. This

capability allows up to 24-hour turnaround

for initial seismic results (v. a more normal

90-day turnaround of complete results from

a central data processing center) to alert the

field crew to particularly promising locations

or to inadequate data that should be repeated. This is “state-of-the-art” technology, however, and is still used by only a

small number of firms, even in the United

States.

Several U.S. firms manufacture advanced

geophones and hydrophores that exhibit
202 ● Technology and Soviet Energy Availability

small, incremental advances over items

available in the United Kingdom, France, or

Germany. The foreign models, however, can

certainly perform the necessary tasks.

Computers

In the United States, computers have

become an integral part of the business of

finding, extracting, processing, and delivering energy. Computers do not play as pervasive a role in the U.S.S.R. both because

their value was recognized later and because

of systemic problems in organizing and

realizing the production of hardware and

software. Soviet energy industries have

relied extensively on indirect transfers,

although a number of direct transfers have

played an appreciable role in selected areas,

most notably in geophysical processing.

OTA has isolated a number of key areas

where the Soviets lag behind the United

States in computing. These are summarized

in figure 20. The first is hardware. Although

other Western nations, notably Japan, can

supply equivalents, the United States still

leads in supplying integrated systems for

these applications. The United States also

holds a commanding lead in software and

software development techniques, although

the French have supplied the U.S.S.R. with

some geophysical software. It is in the

development of integrated systems and software that Soviet systemic problems have

had the greatest impact.35 Because of the improving Soviet hardware base, there will be

less overt pressure to buy from the West,

but indirect Soviet reliance on Western, and

in particular, American developments will

very likely continue.

Other Oil and Gas Equipment

U.S. drill bit manufacturers have the most

extensive variety of bits in the world and a

near monopoly on bit sales outside the Communist countries. Only a few small bit suppliers exist outside the United States, Most

35 S. E. Goodman, "Soviet Software: Progress and Prob1ems" Advances inComputers, vol. 18, 1979,

of these specialize in diamond-coated bits

that have a relatively narrow range of application. In any case, the experience base of

U.S. firms and the proven quality and durability of their products clearly establish

them as world leaders. Even with the sale of

a U.S. bit manufacturing plant to the

U. S. S. R., it is doubtful that the Soviets can

produce comparable quality bits without extensive one-on-one training by U.S. technicians in the manufacturing steps and quality

assurance provisions. Sustaining high-quality metallurgical raw materials will also be

necessary to achieve a capability equal to

that of the United States. The required

knowledge and experience can be gained

through trial and error, but several years

may be required to achieve the capability

that a few months of onsite training might

provide.

The world’s major purveyor of well logging services is Schlumberger, a French

firm, and logging equipment was first developed in France. Nevertheless, U.S. firms do

excel in the electronic technology and interpretation experience necessary to obtain

high-quality well-logging survey results, and

improvements made in the United States,

with U.S. technology and based on the extensive U.S. drilling and logging experience,

have been important.

In well completion and production, several

items appear to be unique to the United

States: blowout preventers and wellhead

assemblies designed for either very high-

-pressure service (above 10,000 psi) or for use

in highly corrosive hydrogen sulfide environments, and electric submersible pumps.

Although firms outside the United States

can provide less capable units, oil field

specialists everywhere recognize U.S.

blowout preventors and Christmas trees as

the ultimate in quality. The electric submersible pumps needed to produce high volume

wells are exclusively available in the United

States. U.S. pumps have proven down-hole

longevity when properly tailored to the well

and served with reliable power. The size

range of 25 to 1,000 horsepower exceeds by a
 ——

Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R, ● 203

Figure 20.— Relative Importance to Soviet Energy Industries of Computer-Related Technologies

in Which the U.S.S.R. Lags the United States

I II Ill IV v VI VlII Vlll lX

Very large computers

Array processors

Microprocessor production

High density storage

Multi-level process control

Micro/Mini-computer systems software

I

I

Software engineering

I. Software tools I l l

1 I I I

Legend I GeophysicaI Precessing V Economic Management

I I Oil and Gas Production (Oil and Gas )

I I I Refining and Petrochemicals

I v Pipelines

wide margin the range of pumps produced in

the U.S.S.R.

The area of enhanced recovery equipment

and know-how is difficult to evaluate. The

Soviet Union has purchased entire plants to

produce chemical surfactants and CO, to aid

in the extraction of heavy oil or oil tightly

bound in rock. Soviet literature has also

reported experimentation with hot water

and steam injection, fire flooding, and even

under-ground nuclear explosions to achieve

improved recovery of oil from a reservoir.

These techniques are still not in widespread

commercial use even in the United States.

Nevertheless, the United States has had

more experience with technical approaches

to achieve improved recovery of crude oil

than any other nation. I t is reasonable to

conclude, therefore, that the United States is

the sole source of substantial experience in

tertiary recovery methods-if the U.S.S.R.

VI Coal Mining

VII Economic Management (Coal)

VIII Electric Power Process Control

IX Electric Power and Grid Management

were to seek that type of service. Thus far, it

has not.

The final area where the United States is a

sole source supplier is in subsea blowout

preventers, marine draw-works, mud pumps,

rotary tables, and wellhead completion assemblies used in offshore operations. Any

such items with significant capacity ratings

are available only from U.S. manufacturers.

But the current proliferation of licensees for

the manufacture of platform drilling equipment; i.e., draw-works, mud pumps, rotary

tables, etc., may soon effectively remove

those items from the sole source list.

In sum, of the thousands of pieces of

equipment used to find, extract, and produce

oil and gas, only a handful are unique to the

United States. This finding reflects the dispersal of technology that occurs with multinational companies and the worldwide nature of the petroleum business.
204 “ Technology and Soviet Energy Availability

SUMMARY AND CONCLUSIONS

In 1979, the Soviet Union devoted some

$3.4 billion, approximately 22 percent of its

trade with its major Western trading partners, to energy-related technology and

equipment. The vast majority of its purchases—worth about $2.7 billion—was destined for the Soviet oil and gas industries.

These imports clearly have played important

roles in compensating for production shortfalls and poor quality of Soviet domestically

produced equipment. With the exceptions of

sophisticated computers and software, and

some aspects of offshore development, however, there is little reason to believe that the

U.S.S.R. uses these imports to acquire technologies hitherto beyond its own capabilities.

The Soviet coal, nuclear, and electric power sectors have been largely self-sufficient. It

is the oil and gas industries that have been

most characterized over the years by the involvement of the West, and there is no doubt

that the industry would benefit substantially from Western imports on a massive

scale. Whether from lack of hard currency, a

deliberate policy of self-reliance, the reluctance or inability of Western firms to sell, or

all three, Soviet purchases have generally remained relatively modest and strategically

targeted. An important exception is large

diameter pipe, an item that will be crucial to

energy development in the present decade.

Here, the U.S.S.R. is quite dependent on

firms in Japan and West Germany. The

United States does not produce pipe in the

diameter required by the U.S.S.R.

Indeed, the United States is not the

predominant supplier of most energy-related

items recently imported by the Soviet

Union. The foreign availability sections of

this chapter have identified numerous foreign firms supplying oil and gas equipment

to the U. S. S. R., reinforcing the theme of the

international nature of the major oil and gas

companies. Newly developed technology has

generally been diffused throughout the

world through an extensive network of subsidiaries, affiliates, and licensees.

There are a few items of oil and gas equipment which are either solely available from

the United States or for which the United

States is generally considered a preferred

supplier: integrated computer systems and

software; rock drill bits; electric well logging

equipment; blowout preventers; and wellhead completion assemblies for high pressure, corrosive or subsea applications; marine draw-works; mud pumps; rotary tables;

electric submersible pumps; and a substantial experience base in tertiary recovery

techniques. With the exception of computers, however, the U.S.S.R. is either not

purchasing these items, is on its way to acquiring the capacity to produce them domestically, or has demonstrated that they are

not essential to oil and gas production.

This study reinforces the international extent of the oil and gas industry. The spread

of technology that was originally developed

in the United States has been enhanced

through the growth of multinational companies that supply equipment to all users.

This results in relatively few items that

remain exclusively available from U.S.

sources. The United States continues to

represent the ultimate in quality or capability in some equipment, but the extent of that

lead is diminishing. The United States still

leads in exploration, drilling, offshore, well

completion, enhanced recovery, and operations in extreme geologic conditions. But the

item most badly needed by the U.S.S.R.—

large diameter pipe–is available from

Japan, West Germany, France, and Italy.

The United States retains the best reputation as the supplier of pipeline pumping and

compressor stations, and, in particular, for

the turbine drive units that power them. But

the Soviet Union can and does obtain most

of what it needs for continued development

of its oil and gas resources from sources outside the United States. In short, U.S. industry could assist the U. S. S. R., but to make

a significant impact the assistance would

have to be massive—and unprecedented.
Appendix A. – Energy Corporation Affiliations7

Parent company Country Products Divisions Subsidiaries Licenses

ITT

Texas International

Marion Power Shovel Co

Deutsche Babcock & WIICOX

Studebaker-Worthington, Inc

Int’1 Systems & Controls

Corp.

George Kent Group

Harnischfeger

Bucyrus-Erie

Baker Trading Corp.

TRW

Creusôt-Loire S.A.

Joy Manufacturing Co.

ASEA

United Oil seal equipment Gallino (Italy)

States

United Oil seal equipment, Rockwell Machine

States High speed presses Tool Ltd. (Britain)

Matrix Engineering

Ltd. (Scotland)

United Crawler cranes, pile drivers, Sumitomo (Japan)

States Mining shovels, large

diameter pipes, steel piping,

compressor equipment

West Ball valves for pipelines Borsig GmbH

Germany

United Booster pumps, concrete Worthington SpA

States pumps, high pressure (Italy) Division of

pumps Worthington Pump

Inc. (U. S.)

United Natural gas filtration Black, Syvallo

States equipment and Bryson

United Turbine meters, readout Kent France S.A.

Kingdom instruments

United Crawler cranes, pile drivers Kobe Steel (Japan)

States Crawler cranes, pile drivers Komatsu (Japan)

United Wellhead equipment, Baker Division Lynes Inc.

States testing equipment for

wildcat well heads,

workover rigs, drilling

test equipment

United Submersible pumping TRW-Reda Pump

States units, pumps, cable Inc.

TRW Crescent

Wire and

Cable Division

France Seamless pipe plant

United Powertongs

States

Sweden Welding line (automatic)

Creusôt-Loire

Enterprises

(Licensee of

SMF International Member)

Hillman-Kelly

ESAB

205
206 ● Technology and Soviet Energy Availability

Parent company Country Products Divisions Subsidiaries Licenses

J. Ray McDermott & Co. United Propane coolers, pipeline Hudson Products

States coolers Corp. Licensee

of Creusôt-Loire

(France), Hudson

Italiana SpA

(Italy)

Cooper-Besemer Co.

Finmeccanica SpA

Borg-Warner Corp.

W-K-M Valve Group

Dresser Industries

Grove Valve & Regulator Co

Armco Steel

U.S. Steel

International Harvester Co.

VOP Inc.

Perry Equipment Co.

Rockwell International

Westinghouse Elec. Co.

Big Three Industries

of Houston

Stewart & Stevenson

Cameron Iron Works

FMC Corp.

Schenck GmbH

McNally-Pittsburgh

Manuf. Corp.

United

States

Italy

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

West

Valves

Submersible pumps

Gate valves, wellheads

Mining shovels and blast

hole drills; compressors

for pipe line

Gate and ball valves

Machine for semisubmersible offshore drilling rigs,

semisubmersible rigs

Oilwell cementing

Standby power generating

equipment turbines

Large dry gas scrubbers

Pig launching/receiving

station

Pipeline metering stations

Compressor stations

Welding positioners

Blow-out prevention

controls

Christmas trees, stainless

steel wellhead equipment

Christmas trees, stainless

steel wellhead equipment

Screens for coal washing

Germany plant

United Flo-driers

States

Marion Power

Shovel, Clark

Division

Chiyoda Co. Ltd.

(Japan)

WAG I International

SpA (Italy)

Centrilift Inc.

Hubner-Vamag AG

& Co. (Austria)

National Supply

Western Rock Bit

and Oilwell Supply

Solar

VOP Ltd., U.K.

Robsa (Neth.)

Sumitomo Heavy

Industries

Japan Steel Works

U.S.S.R. Ministry

of Shipbuilding

Sirtech (Italy)

Mitsubishi

Ransome Co.

Koomey Division

Cameron DeFrance

FMC Europe

(Luceat)

Japan Kurimoto

Iron Works Co.

Sumitomo Heavy

Industry
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. • 207

Parent company Country Products Divisions Subsidiaries Licenses

General Electric United Compressors, gas General Electric Nuovo Pignone

States pipeline, turbines, of Britain (Italy)

automation equipment, Mitsubishi Heavy

compressor stations Ind.

AEG-Kanis (FRG)

John Brown

Engineering Ltd.

(Scotland)

Thomassen Holland

(Neth.)

AEG-Telefunken

(FRG)

Mannesmann (FRG)

Hitachi (Japan)

All these associates have worked

with G.E. on gas

turbines. Under

the agreement,

G.E. supplied rotating parts and the

associates supplied

stationary parts

and compressor

to G.E. specs.

Mannesmann supplied engineering

and design, procurement,

Installation and

training services

Smith Int'l Inc.

Kendavis Industries

Int’l, Inc.

Cooper Industries Inc.

United

States

United

States

United

States

Crutcher Resources Corp. United

States

Honeywell-Bull, Inc.

Fiat Group

Geosource Inc.

United

States

Italy

United

States

Vertical drill

Triple-joining plants for

wide-diameter pipe

mining dump trucks

M-200s

Centrifugal compressors

Spare parts - large

diameter pipeline and

welding equipment

leases welding

systems

Control and measuring

devices

Caldwell Division

Mid-Continental

Equipment Co.

Unit Rig and

Equipment Co.

Cooper Energy Cooper-Vulkan Creus8t-Loire

Services Compressor (France)

GmbH Kawasaki Heavy

(W. Germany Industries, Ltd.

Joint Venture) (Japan)

CRC Crose

CRC Automatic

Welding

CRC Int’l

Honeywell Austria

GmbH (Austria)

Flexible hose, flexible hose

expansion joints

Digital display system ET L/Mandrel I

seismic field recorder Products Division

photo dot digital Petty Ray

plotting system Geophysical

Gilardini SpA

(Member)
208 • Technology and Soviet Energy Availability

Parent company Country Products Divisions Subsidiaries Licenses

Grove Valve & Regulator United Flex-flo valves Italian Affiliate

co. States

Caterpillar Tractor Co. United Spare parts - bulldozers Fiat-Allis

States and pipelayers Construct ion

Machinery, Inc,

(Witractor)

(Finland)
Appendix B. – Trade by Company

The following table presents a sampling of the

dealings of various Western companies involved

in the export of energy-related equipment to the

U.S.S.R. The data was obtained from a search of

the bimonthly publication Soviet Business and

Trade (SB&T) for the period 1975-80.

SB&T draws on a variety of sources, including

the Soviet News Agency TASS, to gather information on Soviet trade. The staff ensures the

accuracy of the reported deals through a system

of cross-checking sources and phone verification

with U.S. companies.

According to its publisher, fully one-half of the

subscribers of SB&T are found in countries outside the United States, especially Western

Europe and the Soviet Union. The subscribers

provide feedback as to the accuracy of the reporting. A concerted effort is made by the editorial

staff to provide a representative sample of Soviet

purchases across the spectrum of both technological areas and supplying countries.

U.S. Government agencies, such as the Department of Commerce, the Central Intelligence

Agency, and the Department of Energy, also subscribe to SB&T. U.S. industry representatives

have indicated that information about their

firms’ activities is generally accurate, and they

are usually contacted in advance of publication

regarding the accuracy of a reported item.

No attempt has been made to validate total

authenticity or completeness of the trade data

contained in SB&T. OTA is confident that the

major trade deals from SB&T referred to in the

course of this study are factual and accurately

represent the availability of energy technology

and commodities from sources outside the United

States. It is possible, however, that transactions

recorded here may not have been consummated,

or that their terms may have changed.

Table B-1 .—Trade by Company—Oil and Gas

Equipment area Exploration

Suppliers Country Product

Foremost Industries

Potter Test

Serete Engineering

Ferneg - Voltaire

CIE Generale

Geophysique

ClE Generale

Geophysique

CIE Generale

Geophysique

Stere

Comex

Mitsubishi Corp.

Geosource Inc.

Control Data Corp.

Control Data Corp.

Canada

Canada

France

France

France

France

France

France

France

Japan

United

States

United

States

United

States

73 tracked geophysical survey vehicles [under

subcontract to Geosource (U.S.)]

Portable production testing equipment

1 geological survey ship

Geophysical software to be used on CDCs Cyber 172s

Special geophysical software used on the CDC

Cyber 172s

6 month lease of a complete geophysical ship and crew

Digital seismographic recorders, magnetometers,

gravity meters, cables and hydrophores for 2

geophysical ships

Underwater prospecting equipment

Deep sea diving equipment

2 geophysical ships (using the geophysical

equipment bought from CIE above)

Command II field processing systems

2 Cyber 172-4 computers

1 Cyber 73; 1 Cyber 172 computer

Year Value

1979

1980 $113 million

1979

1979

1976

1976 $14 million

1975

1976 $2.5 million

1979 $6 million

1979 $12.1 million

209
210 ● Technology and Soviet Energy Availability

Table B-1 .–Trade by Company–Oil and Gas (Continued)

Equipment area Exploration

Suppliers Country Product Year Value

Geosource Inc.

Gearhart-Owen, Inc.

Magnavox Labs

Geosource Inc.

Petty Ray Geophysical

Division of Geosource

Geospace Corp.

Lynes Inc.

Mertz Inc.

IBM Trade Development

S.A. with Western

Geophysical

Schlumberger S.A.

Halliburton Services Inc.

Dresser Industries

Maschinenfabrik

Tamrock Oy

Airan

Drilling

Heid

SMF International

Vallourec Export

Wotan Werke

Japanese Consortium

Sodeco

Baker Trading Co,

Farr International

Halliburton Services

Joy Manufacturing

Ekel Manufacturing Co.

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

France

France

United

States

Austria

Finland

Finland

France

France

West

Germany

Japan

Japan

United

States

United

States

United

States

United

States

United

States

13 photodot automated digital display 1979

Cooperative agreement on the production of direct 1978

digital well logging equipment

5 navigation systems for satellite pinpointing of 1975

geological teams

Seismic field recorder (manufactured by Geosource, 1975

Inc., ETL/Mandrell Products Division)

Photodot digital plotting system 1975

Seismic plotting system with geophones 1975

Testing equipment for wildcat wellheads 1975

24 servo-hydraulic vibrator systems

IBM 370-148 and an array processor

Help locate hydrocarbon reserves

Machine tools for making couplings and adapters

for oilwell casing and drill pipe

15 crawler mounted drilling rigs

Drilling equipment

400 kellies

Well head casing

Heavy drilling equipment

200,000 tons of seamless pipe for oil wells; to be

delivered between October 1980 and March 1981

Casing, drill pipe, bits and clay

Drilling test equipment

10 power tongs and a diesel/hydraulic power

system for each

Cementing systems

Power tongs

20 power tongs

competitors: Farr International (U. S.)

Joy Manufacturing Co. (U. S.)

1979

1978

$7 million

$370,000

$300,000

$250,000

$2.5 million

$6 million

1979 Sch 150 million

1978

1975 $100,000

1978

1975

1980 R4 million

1980

1976 $2 million

1979 $1.6 million

1979 $1 million

1978 $3 million

1978

1978
Ch. 6—Western Energy Equipment and Technology Trade With the U.S.S.R, ● 211

Table B-1 –Trade by Company—Oil and Gas (Continued)

Equipment area Drilling

Suppliers Country Product Year Value

Dresser Industries Inc.

Hercules Inc.

Stewart & Stevenson’s

Koomey Division

Drilco

Well

Hübner-Vamag AG

Hübner-Vamag AG

Hübner-Vamag AG

Hübner-Vamag AG

Hübner-Vamag AG

Hübner-Vamag

Honeywell Austria

GmbH

Dresser Industries Ltd.

United Equip a new addition to an existing rock

States drill bit plant

United Mud additives

States

United 6 blow-out prevention controls

States

United Degasser and pipe inspector

States

Com~ietion/Production

Austria

Austria

Austria

Austria

Austria

Austria

Austria

Canada

Foremost Industrles Ltd. Canada

Flat-AlIis Construction Finland

Machinery, Inc. (Witractor)

Vallourec France

Entrepose S.A. France

CIE Francaise d’Etudes France

de Constructions (Technip)

Cie de St. Gobain-Point-a- France

Mousson & Vallourec

Export S.A.

FMC Europe (Luceat) and France

Cameron de France

Honeywell GmbH West

Germany

Borsig GmbH West

Germany

Klaus Union West

Germany

AEG-Kanis Turbinenfabrik West

Germany

130 complete oil well head assemblies

155 natural gas drill hole plugs and production vanes

1,000 single slab gate valves for pipelines and

well heads

80 well heads

702.5 meter diameter ball valves for duty

down to -55° C

Ball cock and tilt check valves for gas pipelines

129 units of control and measuring devices for

Orenberg line equipment built by British Sereck

Controls Ltd.; UK)

42 compressor units

21 - used for gas lift

21 - used in fire flooding

30 metric ton payload husky 8 vehicles (pipe carriers)

Spare parts for bulldozers and pipelayers

152,000 tons of large diameter pipe in 1980

Line pipe (actually supplied by Vallourec Export S. A.)

Gas lift equipment for 2,371 wells

Steel line pipe

Christmas trees and stainless steel wellhead

equipment

Large diameter pipeline valves

Large diameter pipeline valves

Pipeline fittings and ball valves

17 gas compressor stations

1978

1978

1975

1975

1979

1979

1978

1978

1976

1976

1976

1978

1976

1978

1980

1978

1978

1977

1975

1980

1980

1979

1978

$147 million

$14.5 million

$11.5 million

Sch 100 million

$5.2 million

$9 million

$30 million

$4 million

R241,000

Fr 835 million

$70 million

$6 million

DM 1.3 million
212 ● Technology and Soviet Energy Availability

Table 6-1 —Trade by Company –Oil and Gas (Continued)

Equipment area Well Completion/Production

Suppiers Country Product Year Value

Klaus Union

Borsig GmbH

Mannesmann Rohrwerke

AG

Cooper-Vulkan

Compressor GmbH

Gebr Windhosst

Kloeckner

Hudson Italiana SpA

Nuovo Pignone

Petrovalves SpA

WAGI SpA

Worthington SpA

Nuovo Pignone

Finsider

Finsider

Grove Italia

Mitsui & Co,

Kobe Steel, Ltd.

Sumitomo Corp.

West

Germany

West

Germany

West

Germany

West

Germany

West

Germany

West

Germany

Italy

Italy

Italy

Italy

Italy

Italy

Italy

Italy

Italy

Japan

Japan

Japan

Sumitomo Metal Industries

Nippon Seiko Japan

Nippon Kokorn

Kawasaki Steel

C. Itoh & Co., Ltd. Japan

Yamamoto Suiatsu Japan

Kogyosho, Ltd.

Hitachi Ltd. Japan

Japan Steel Works Japan

Caterpillar-Mitsubishi Japan

Sumitomo Corp. Japan

20 multipurpose pumps

200 ball valves for pipelines

3.5 million tons of wide diameter steel pipe

15, RF2BB-30 centrifugal compressors (a joint

venture with Bremer Vulkan Schiffbau und

Maschinenfabrik)

Fire prevention gear for Orenberg line 123 units

32,000 tons of large diameter pipe

32 propane coolers for severe climatic conditions

1. Automation equipment; gas compression plant

2. Remote control equipment for gas gathering and

transmission system

3. 5 compressor stations

400 check valves for oil and gas pipelines, with

diameters from 1,000 to 700 MM

Pipeline valves

20 booster pumps for pipeline

35 compressors for Orenberg line

2,5 million tons of large diameter pipe

Large diameter pipe

Ball valves for oil and gas pipelines

200,000 tons of 70 kg/mm2 grade steel plates for

production of wide diameter pipe

230 large diameter ball valves for gas pipelines

Steel piping, pumping and compressor equipment,

large diameter pipe

500,000 tons 1,400 mm steel pipe for pipelines

Wide diameter steel pipe

Pipe binding equipment

Five 10,000 kW gas turbine compressor units

56” valves for Orenberg line (subcontract to Perry)

193 D-6 bulldozers/pipelayers

400,000 metric tons of pipes, both large

diameter and seamless

1977

1976

1976

1976

1976

n.a.

1978

1978

1978

1978

1978

1978

1976

1976

1975

1974

1979

1979

1979

1978

1976

1976

1976

1976

1976

1975

1980

$200,000

$8.8 million

$3.2 million

$1.5 million

$150 million

$6 million

$1.5 billion

Y20 billion

$6.8 million

$130 million

$4.3 million

$9 million

$16 million
Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 213

Table B-1 —Trade by Company —Oil and Gas (Continued)

Equipment area Well Completion/Production

Suppliers Country Product Year Value

Robsa

Thomassen

Kongsberg Turbinfabrik

Bunsar

John Brown Engineering

TRW-Reda Pump, Inc.

Ingersoll-Rand Co.

Baker World Trade

Cameo

Otis Engineering

ODI Inc.

TRW-Reda Pump, Inc.

and Borg Warner

011 Dynamics

TRW-Reda Pump, Inc.

Centrilift Inc.

Occidental Int’l Eng. Co.

CRC International

Otis Engineering

Cameron Iron Works

Netherlands Pipeline metering stations, using Perry (U. S.)

flow measuring equipment (Robsa is a subsidiary of

Rockwell International; U. S.)

Netherlands 10 turbines for Orenberg (under subcontract to GE.)

Norway

Poland

Scotland

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

Standby turbine generators for Orenberg line

(a subcontract for Nuovo Pignone - Italy)

34 pipe layers (International Harvester Co. supplied

dimensions, metallurgical specs, tooling and

machinery techniques, quality control and

assembly methods. International Harvester receives

a royalty on each vehicle sold to a third party )

33 gas turbine compressor units for Orenberg line

(J.B.E. as a manufacturing associate of G.E.)

90 submersible pumps

Gas pipeline compressors

Down-hole completion equipment, including wireIine, packers, safety valves and primary cementing

equipment for 31 gas wells. About half are designed for

extreme cold weather operations (-65°) for large

diameter, large volume production.

2,216 gas lift and completion units and 80 wire line units

Down-hole completion and wire line equipment

for 101 gas wells

Submersible oil pumps

Submersible oil pumps

20 submersible pumps

90 submersible pumps

188 submersible pumps (built in the firm’s Toronto

plant). Note: This sale brought total number of

centrilift pumps in the U.S. S, R. to 600

Design and construction of a pipeline

internal line-up clamps, clean and wrap machines,

pipe benders; pigs

Completion equipment

40 well heads

1976

1975

1976

1976

$5 million

$10 million

1976 $47 million

1979 $10.5 million

1979

1979 $2,5 million

1979

1979

1978

1978

1978

1978

1978

1978

1978

1978

1978

$36.1 million

$7 million

$2 million

$33.5 million

$2 million

$10.5 million

$23 million

$300 million

$3 million
214 • Technology and Soviet Energy Availability

Table B-1 .—Trade by Company—Oil and Gas (Continued)

Equipment area Well Completion/Product/in

Suppliers Country Product Year Value

FMC Petroleum

Equipment Division &

Cameron Iron Works

TRW-Reda Pump, Inc.

International Harvester

General Electric

Crutcher Resources Corp.

Roscoe Brown Sales

Co. Inc.

Cooper Industries

International Harvester

Grove Valve &

Regulator Co.

F. H Maloney Co,

Health Consultants Inc.

E. H Wachs Co.

Perry Equipment Corp.

Baker Oil Tools Inc.

Mertick Engineering

CRC Automatic Welding

Mid-Continent Pipeline

Equipment Co,

Ransome Co.

Deuma

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

Christmas trees

350 pumps

500 TD-25C bulldozers and pipelayers

Hot gas rotating components of the compressors

for the Orenberg line

Spare parts for large diameter pipeline welding

equipment

Pipeline augers

73 RF2BB-30 centrifugal compressors

Standby turbine generators for Orenberg line

The smaller valves for Orenberg line (a

subcontractor for Perry)

Pig signalers (subcontract to Perry)

Pig locaters (subcontract to Perry)

Pipe cutters

Entire complement of pig launching/receiving

stations for Orenberg pipeline

Competitors: Mannesmann - FRG

Prenatechnik - FRG*

Primaberg - Austria

OeMV - Austria

General Descaling - U.K. ●

N,K,K. - Japan

Avery Lawrence - Singapore

● Have sold pigs to U.S.S.R. before.

20 sets of gas well completion equipment,

2 wire line units, and inflatable packers

Equipment for welding 12 to 25mm diameter pipe

Lease of its proprietary automatic welding system

to Hungary and Poland for Orenberg line

2 triple jointing plants for 42, 48, and 56 inch pipe;

mandrills, clamps, cleaning, lining and coating

equipment

9 welding positioners

4 welding positioners

1978

1976

1976

1976

1976

1976

1976

1976

1976

1976

1976

1976

1976

1976

1975

1975

1975

1975

1975

$64 million

$200,000

$250,000

$250,000

$250,000

$300,000

$27,650,000

$9 million

from Perry

$700,000

$5 million

$200,000
—

Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 215

Table B-1 .—Trade by Company –Oil and Gas (Continued)

Equipment area Well Completion/Production

Suppliers Country Product Year Value

International Harvester

General Electric Co.

TRW-Reda Pump, Inc.

TRW-Reda Pump, Inc.

Borg-Warner

Mission Manufacturing

General Electric

C-E Lummus & Co.

FMC Petroleum

Creusôt-Loire

Enterprises with

Mannesmann-DemagMeev Group

Creusôt-Loire

Hudson Italiana SpA

Caterpillar Tractor Co.

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

United

States

France

West

Germany

France

Italy

United

and Caterpillar-Mitsubishi States

Japan

Bulldozers and pipe layers

Gas turbines for pipelines

137 electrodynamics submersible pumping units

Submersible pumps

120 submersible pumps

Submersible pumps

65 MS3002, two-shaft turbines rated at 14,500 hp

(all are being built under GE license in 6

different countries)

Pipeline coolers

Stainless steel wellhead equipment

A seamless pipe plant using the Vallourec process

with a capability of 170,000 metric tons per annum

Pipeline coolers

Pipeline coolers

50 Caterpillar pipelayers and 2 years of

spare parts

Secondary/Tertiary Recovery

Fried Uhde GmbH West 100,000 ton per year alkyl phenol plant

Germany (used as a surfactant)

Borslg GmbH West C 02 recuperation plant

Germany

Offshore

Rauma-Repola Oy Finland Build the hull for the semi below

UIE & ETPM France An offshore oil platform fabrication yard at Baku

Serete France Floating drilling platforms

Blohm & Voss West Self-propelled crane to position offshore rigs

Germany

Blohm & Voss AG West Rebuild a shipyard at Astrakhan for assembling

Germany jackups and semi-submersible rigs

Modec Japan Class III 3-legged jackup rig; design by Levlngston

Shipbuilding (U.S.); drilling equipment by National

Supply (U.S.); blowout preventor stacks and controls

from N.L. Petroleum (U.S.)

1975

1975

1975

1975

1975

1975

1974

1978

1978

1979

1978

1976

1978

1979

1976

1980

1975

1976

1979

1979

$17 million

$20 million

$250 million

$1 million

$230 million

DM 50 million

$15 million

$40 million

$35 million
216 ● Technology and Soviet Energy Availability

Table B-l —Trade by Company —Oil and Gas (Continued)

Equipment area Offshore

Suppliers Country Product Year Value

Sanwa Kizai Co. Ltd. Japan

IHC Netherlands

IHC Netherlands

Ulstein Hatlo A/S Norway

14 augers used for pile driving 1976

Seagoing pipe layer 1971

Jackup rig 1967

3 ships to tow exploration and production 1976

drilling platforms

Kongsberg Vaapen Norway

Fabrikk A/S

3 dynamic positioning systems for the 3-drill ships 1979

built by Rauma-Repola Oy

Competitors:

Simrad A/S (Norway)

Honeywell (U. S.)

Simrad A/S Norway 1979

1978

1979 $3.8 million

1978

1976 $25 million

Dynamic positioning system for the Armco semi

built for U.S.S.R.

Armco, Inc. United

States

Equipment for a jackup being built by Mitsui Ocean

Development & Engineering Co. Ltd.

Lynes International Inc. United

States

11 strings of drill stem testing equipment for

offshore facilities

Armco, Inc. United

States

License for semisubmersible rigs built by RaumaRepola Oy for Soviets

National Supply United

States

Provide most of the machinery for a

semisubmerisble rig being built

by Rauma-Repola Oy

Armco, Inc. United

States

License for production of semi’s in U.S.S.R. 1976

Refining

Tech nip France

France

15,000 cubic meter per annum natural gas

28 natural gas purification stations

1975 $230 million

1975

1975

1979

1976 $250 million

1978

Constructions

Metalliques de Provence

Walworth Aloyco

Grove International

Italy 1,580 ball valves for oil refineries

Japan Steel Works Japan

Japan

Japan

Manufacturing for the above plant

Nichimen Jitsugyo 3 plant gas processing complex

Mitsubishi Corp. Primary oil refining equipment

Competitors: Linde AG - FRG

C-E Lummus - U.S.

Fluor Corp. United

States

Designs, engineering, procurement, and field

technical advisory services for plants to convert

natural gas into ethane, methane, pentane, liquid

propane, gasoline and other products

1979

Fluor Corp. United

States

Provide engineering and technology assistance

for the three plants above

1976

Mitsubishi Heavy Japan 1978

Industries United

States

Gas processing complex

Japan Steel Works Japan

& Fluor Corp. United

States

Gas processing complex 1978 $250 million
—-

Ch. 6— Western Energy Equipment and Technology Trade With the U.S.S.R. ● 217

Table B-2.—Trade by Company—Coal

Equipment

Suppliers

area Exploration

Country Product Year Value

Plategods Co Norway

Preparation

South Yakutian Coal Japan

Development Corp.

Marubeni Corp. Japan

Sumitomo Heavy Japan

Industrles

Transportation from

Komatsu Ltd. Japan

Unit Rig & Equipment Co United

States

Unit Rig & Equipment Co. United

States

Ingersoll-Rand United

States

Ingersoll-Rand United

States

Unit Rig & Equipment Co. United

States

Surface Mining Excavation

Sumitomo Heavy

Industries

Sumitomo Heavy

Industries

Rock drilling equipment

Coal preparation equipment

33 large screens for coal washing plant

Note built by Kurimoto Iron Works Co under a

Iicense from Schenck GmbH (FRG)

Four 600 ton/hour flo-driers (under license from McNally

Pittsburgh Manufacturing Corp. (United States)

Mine

30 120 ton capacity heavy mining trucks

30 M-200 vehicles for use in coal fields

Heavy duty dump trucks

Slurry pumps powered by a 3,000 HP engine

Slurry pumps

54 M-200s Note To be built by the Canadian

Kent France S A

Orensteim und Koppel

Sumitomo Heavy

Industries

Sumitomo Corp.

South Yakutian Coal

Development Corp.

Sumitomo Heavy

Industries

Paccar Inc.

France

West

Germany

Japan

Japan

Japan

Japan

Japan

Japan

United

States

Clark Equipment Co United

States

10 electric mining shovels

3 large and 1 small excavator for open cast

Iignite mines

Division

20 cubic meter bucket, hydraulic mining dhovels

10 self-propelled 20 cubic meter bucket, mining

Shovels

10 “Super Front” mining shovels used in strip mining

Coal development equipment

10 crawler-mounted blast hole drills

Note Built under a Marion Power Shovel Iicense

5 “Super Front” mining shovels

Note Built under Iicense from Marion Power Shovel,

Division of Dresser Industries

7 Dart D-600 15 cubic yard front-end loaders

3 Model 475 B front-end loaders

1975

1978

1978

1978

1979

1976

1975

1975

1974

1979

1975

1980

1978

1976

1975

1974

$25 million

Y1.2 billion

$30 million

$40 million

$13 million

$14 million

DM 220 million

$450 million

1979 $286 million

1978 $1 million
218 ● Technology and Soviet Energy Availability

Table B-2.–Trade by Company—Coal (Continued)

Equipment area Transportation at Underground Mine Site

Suppliers Country — Product Year Value

.

Ohlemann GmbH West 36 underground mining vehicles 1979

Germany

Komatsu Ltd. Japan 30 120-ton capacity heavy mining trucks 1979 $30 million

Linden Alimak Sweden Mine shaft hoists 1979 SKr 5 million
Appendix C. – Suppliers of Essential Equipment

———— —

Table C-1 .—Suppliers of Nuclear Grade Pipes and Tubes Outside the United States

Austria Austriatom

Vereinigte Edelstahlwerke Voest-Alpine

Canada Chase Nuclear

Dominion Bridge Co

Finnan Engineered Products

Noranda Metal Industries

RIO Algorn (Atlas Alloys DI V. )

France

Great Britain

Creusôt-Loire

Delattre-Levivier

Metaux Inoxydables Ouvres

Vallourec

Cabot Alloys Europe

Cameron Iron Works

Fine TUbes

Pipework Engineering

RGB Pipelines

Tioga Pipe Supply International

Developments

Netherlands

Japan IHI

Japan Steel Works

Kawasaki Steel Corp.

Kobe Steel

Kubota

Ameron BV

Kawecki-Billiton Metaalindustrie

Trent Tube

Van MulIekom

Van Wijk & Boerma

Sweden Avesta Jernverks

Nyby Uddeholm

Sandvik

Switzerland Zschokke Wartmann AG

West Germany Klockner-Werke

Mannesmannroehren-Werke AG

Schmoele, R.&G. Metallwere GmbH

Table C-2.—Suppliers of Welding Equipment Outside the United States

Canada

France

Great Britain

Bata Engineerlng

Polysoud e

Sciaky S. A.

Cunnington & Cooper

NEl Clarke Chapman Power

Engineering

Sciaky Electric Welding Machines

Italy

Japan

Tioga Pipe Supply International

Vickers ShipbuiIding Group

Breda Termomeccania

Corradi, Franco

IHI

Kawasaki Heavy industries

Kobe Steel

219
220 ● Technology and Soviet Energy Availability

Table C-3.—Suppliers of Steam Generators Outside the United States

Austria Austriatom

Simmering-Graz- Paaker

Voest-Alpine

Canada Babcock & WIICOX Canada

Davie Shipbuilding

Noranda Metal Industries

France Creusôt-Loire

Framatome

Stein Industrie

Sulzer

Great Britain Babcock Power

NEI Clark Chapman Power

Engineering

NEI International Combustion

RNC Nuclear

Italy Breda Termomeccanica

Construzioni Meccaniche

Franco TO Si

NIRA —

SOURCE NEI International Buyers GuiIde, 1980

Table C-4.—SuppIiers of Pumps

Austria

Canada

France

Great Britain

Italy

Japan

Netherlands

Sweden

Switzerland

Outside the United States

West Germany

SOURCE NEI International Buyers

Andritz

Austriatom

Finnan Engineered Products

Hayward Gordon

Creusôt-Lotre

Dresser Europe

Framatome

Pompes Guinard

GEC Reactor Equipment

Haskel

Hayward Tyler & Co

Holden & Brooke

Weir Pumps

Fiat TTG

Franco TO Si

IHI

Kawasaki Heavy Industries

Torishima Pump Manufacturing Co

Toshiba

Borg-Warner Corp.

Delaval-Stork

Karlstads Mekaniska Werkstad

Eschler Urania

K. Rutschi, Ltd.

Sulzer Brothers

Interatom

Klein, Schanzlin

Orlita

Guilde,198 0

& Becker

Japan IHI

Kawasaki Heavy Industries

Kobe Steel

Mitsubishi Heavy Industries

Toshiba

Netherlands Neratoom

Royal Scheide

RSV-A

Spain Babcock & WIICOX Espanola

Equipos Nucleares

Sweden Uddcomb Sweden

Switzerland Sulzer Brothers

West Germany Babcock-Brown Boveri Reaktor

Deutsche Babcock

GHH Sterkade

Klockner-Werke

Table C-5.—Suppliers of Valves

Canada

France

Great Britain

Italy

Japan

Netherlands

Sweden

Switzerland

West Germany

Outside the “United States

Canadian Worcester Controls

Curran Valve Supply

EPG Energy Products Group

Fisher Controls Co of Canada

Velan Engineering

Alsthom-Atlantique

Neyrpic Pont-a-Mousson

Trouvay & Cauvin

Adams, Gebruder

GEC-Elliott Control Valves

Hattersley Heaton

Hindle Valves

Hopkinsons

Fiat TTG

Japan Steel Works

Okano Valve Mfg. Co.

Utsie Valve Co.

Borg-Warner

G. Dikkers & Co,

Karlstads Mekaniska Werkstad

Alfred Battig

Sulzer Brothers

Gebruder Adams

ARF Armaturen-Vetrieb

Deutsche Babcock

Stahl-Armaturen Persta

SOURCE: NEI International Buyers Guide, 1980
Ch. 6—Western Energy Equipment and Technology Trade With the U.S.S.R. ● 221

Austria

Canada

France

Great Britain

Italy

Japan

Switzerland

Table C-6.—Suppliers of Containment Structures

Outside the United States

RFB

Veost-Alpine

Can atom

Davie Shipbuilding

Bignier Schmid-Laurent

Creusôt-Loire

Neypic

Spie-Batignolles S.A.

Babcock Power

Fairey Engineering

GEC Reactor Equipment

Sir Robert McAlpine & Sons, Ltd.

Bosco Industrie Mecca niche

Fochi

I HI

Kawasaki Heavy lndustries

Kobe Steel

Shimizu Construct Ion Co

Bureau BBR

Buss

Sulzer Brothers

Woolley

Zschokke Wartmann

West Germany Krupp Fried

Maschinenfabrik Augsburg-Nurnberg

L. & C. Steinmuller

SOURCE: NEI International Buyers Guide, 1980

Table C-8. —Essential

Preparation

1

2

3

4

5

6

7

8

9

10

Agitators, Conditioners, Mixers

Crushers

Table C-7.—Suppliers of Control Systems

Outside the United States

Canada

France

Great Britain

Italy

Japan

Sweden

Switzerland

AG

West Germany

SOUR CE NEI International

Automatec

Canadian General Electric

Enercorp Instruments

Fischer & Porter

Thermo Electric

CGEE Alsthom

Fichet-Bauche

Leanord

SODETEG

Spie Batignolles

Ferranti Computer Systems

Foxboro-Yoxall

Honeywell

Kent Process Control

R.P. Automation

ELSAG

Marelli, Ercole & Co.

Montedel

F UJI Electric Co

Kawasaki Steel Corp.

Sukegawa Electric Co.

Toshiba

A SEA

Tekniska Rontgencentralen

Bachofen

Equipment for Coal Mining

Brown Boveri & Cie

High Energy & Nuclear Equiprnent

Sulzer Borthers

Brown Boveri & Cie

Karftwerk Union

Nuclear Data

Siemens —

Buyers Guide, 1980

14 Bulldozers

15 Front-end Loaders

16 Scrapers

Flotation Machines and Reagents

Grinders Transportation at Surface Mine Site

Pulverizers 17. Coal Haulers (100 ton)

Separators Underground Mine Excavation

Washers 18 Continuous Miners

Cleaning Breakers 19 Loading Machines

Blending Machines 20 Longwall Equipment

Electrostatic Precipitators 21 Bulldozers

Surface Mining Excavation

11 Draglines

12 Drills

22 Coal Cutters

23 Heading Machines

24 Undercutter

13 Power Shovels

SOURCE C. Simeons, Coal Its Role in Tomorrow's Technology (New York Pergamon Press 1978I
222 ● Technology and Soviet Energy Availability

—

1.

2.

3.

Table C-9.—West European and Japanese Suppliers of Essential Coal Mining Equipment

Agitators, Conditioner and Mixers

France

Fives-Call Babcock

England

APV-Mitchell (Dryers), Ltd.

GEC Mechanical Handling, Ltd.

Johnson-Progress, Ltd.

Joy Manufacturing Co.

Japan

Kawasaki Heavy Industries, Ltd.

Crushers

England

Aveling-Beuford, Ltd.

British Jeffrey Diamond

Magco, Ltd.

Newell Dunford Eng., Ltd.

Pegson, Ltd.

Underground Mining Machinery, Ltd.

West Germany

Buckan-Wolf Maschinenfabrik AG

Buhler-Miag

Esch-Werke AG

Hazemag GmbH & Co

IBAG International Baumaschinenfabrik AG

Krupp GmbH

France

Alsthom Atlantique

Dragon SA Appareils

Fives-Call Babcock

Joy SA

Stephanoise de Constr

Japan

lshikawajima-Harima Heavy Industries

Kawasaki Heavy Industries, Ltd.

Kurimoto Iron Works, Ltd.

Flotation Machines and Reagents

England

Machines

Joy Manufacturing Co

Reagents

Century OiIs, Ltd.

West Germany

Machines

KHD Industrianlagen AG

Krupp GmbH, Fried, Krupp Industriel

Lurgi Gesellschaften

Japan

Machines

Kawasaki Heavy Industries, Ltd.

Reagents

Sanyo Chemical Industries, Ltd.

4.

5.

6.

Grinders

England

Beryllium Smelting Co, Ltd.

Chapman, Ltd.

GEC Mechanical Handling, Ltd.

Head Wrightson & Co, Ltd.

Helipeds, Ltd.

Joy Manufacturing Co

Newell Dunford Eng., Ltd.

Pegson, Ltd.

Simon-Warman

Wilkinson Process Linatex Rubber Co, Ltd.

France

Alsthom Atlantique

Dragon SA Appareils

Fives-Call Babcock

Stein Industrie

West Germany

Buhler-Miag

Esch-Werke AG

IBAG International Baumaschinenfabrik AG

KHD Industrianlagen AG

Krupp GmbH, Fried, Krupp Industrie

Kulenkampff Gebruder

O&K Orenstein & Koppel AG

Polysius Werke

Japan

lshikawajima-Harima Heavy Industries

Kawasaki Heavy Industries, Ltd.

Kabe Steel, Ltd.

Kurimoto Iron Works, Ltd.

Mitsubishi Steel Mfg. Co. Ltd.

Pulverizers

England

British Jeffrey Diamond

West Germany

KHD Industrianlagen AG

Krupp GmbH, Fried, Krupp Industrie

Japan

lshikawajima-Harima Heavy Industries

Separators

England

Boxmag-Rapid, Ltd.

GEC Mechanical Handling, Ltd.

France

Fives-Cail Babcock

Saulas & CiI

Stein Industrie

West Germany

Bavaria Maschinenfabrik GmbH & Co

KHD Industrianlagen AG

Krupp GmbH, Fried, Krupp Industrie

Polysius Werke
Ch. 6— Western Energy

— —

7.

8.

9.

Equipment and Technology Trade With the U S S R . 223

Table C-9.–West European and Japanese Suppliers of Essential Coal Mining Equipment (Continued)

Japan

lshikawajima-Harima Heavy Industries

Kawasaki Heavy Industries. Ltd.

Kobe Steel Ltd.

Kurimoto Iron Works Ltd.

Washers

England

Aveling Barford Ltd.

GEC Mechanical Handling, Ltd.

France

Alsthom Atlantique

Dragon SA Appareils

West Germany

Bavaria Maschinenfabrik GmbH & Co

Esch-Werke AG

IRAQ International Baumascninenfabrik AG

KHD Industrianlagen AG

Japan

Kurirnoto Iron Works Ltd.

Cleaning Breakers

England

British Jeffrey Diamond

Compair Construction & Mining Ltd.

GEC Mechanical Handling, Ltd.

Gullick Dobson, Ltd.

Mining Supplies, Ltd.

Padley & Venables

Underground Mining Machinery, Ltd.

France

Fives-Ca[l Babcock

Stephanoise de Constr. Mecaniques. Soc .

West Germany

Deutsche Montabert GmbH

KHD Industrianlagen AG

Orenstein & Koppel AG

Westfalia Lunen

Japan

Furukawa Rock Drill Sales Co Ltd.

lshikawajima-Harima Heavy Industries

Blending Machines

England

Babcock-Moxey. Ltd.

Babcock & WIICOX , Ltd.

France

Fives-Call Babcock

Realization Equipments Industriels

West Germany

Buckau-Wolf Maschinenfabrik AG

Demag Lauchammer Masch

Japan

lshikawajima-Harima Heavy

10. Electrostatic Precipitators

England

Head Wrightson & Co Ltd.

& Stahlbau GmbH

Industries

West Germany

KHD Industrianlagen AG

Lurgi Gesellschaften

Japan

lshikawajima-Harlam Heavy industries

Kawasaki Heavy lndustries Ltd.

11. Draglines

England

Ransomes & Rapier Ltd.

Ruston-Bucyrus Ltd.

France

Poclain

Realization Equiprnents Industriels

West Germany

Aumund-Forderbau GmbH

Demag AG. ABT Bergwerksmachinen

Demag Lauchhammer Masch & Stahlbau GmbH

Demag Verdichtertechnik GmbH

Krupp GmbH, Fried, Drupp lndustril Una Stahlbau

Liebherr Hydraulikbagger GmbH

Maschinenfabrik Augsburg-Nurnberg AG

Orenstein & Koppel AG

Japan

Hitachi Construction Machine Co. Ltd.

lshikawajima-Harima Heavy Industries

Kawasaki Heavy Industries

Kobe Steel Ltd.

12. Drills

England

Boart, Ltd.

Compair Construction & Mining. Ltd.

Eimco, Ltd.

English Drilling Equipment Co., Ltd.

Euro-Drill Equipment, Ltd.

Hydraulic Drilling Equipment. Ltd.

Mining Dev., Ltd.

Underground Mining Machinery, Ltd.

13. Power Shovels

See DragIines

14. Bulldozers

See Draglines

France

Maco-Meudon

West Germany

Demag AG, ABT Bergwerksmachinen

Demag Drucklufttechnik GmbH

Demag Verdichtertechnik GmbH

Deutsche Montabert GmbH

Flottman-Werke GmbH

Werth & Co

Japan

Furukawa Rock Drill Sales Co

Koken Boring Machine Company

Mitsubishi Steel Mfg. Co Ltd.

Mitsui Shipbuilding & Eng. Co, Ltd.
224 ● Technology and Soviet Energy Availability

Table C-9.—West European and Japanese Suppliers of Essential Coal Mining Equipment (Continued)

15.

16.

17.

18.

19.

Front-end Loaders

England

Aveling-Barford,

Eimco, Ltd.

Matbro, Ltd.

Mining Dev., Ltd.

France

France Loader

20.

Ltd.

Realization Equipment Industriels

West Germany

Aumund-Fordererbau GmbH

21.

Deilmann-Hanill GmbH

Eickhoff Maschinf bk-U Eisengiesserei Mb 22.

Gutehoffnungshuttl Sterkrade AG

Orenstein & Koppel AG

Salzgitter Maschinen AG

Westfalia Lunen

Japan

Furukawa Rock Drill Sales Co

Hiltachi Construction Machine Co., Ltd.

Kawasaki Heavy Industries, Ltd.

Kobe Steel, Ltd.

Komatsu, Ltd.

Mitsuboshi Belting, Ltd.

Shinko Electric Co, Ltd.

Scrapers

See Draglines

Coal Hauler

See Draglines 23.

Continuous Miner

England

Babcock & WIICOX, Ltd.

Dasco Overseas Eng., Ltd.

West Germany

Demag AG, ABT Bergwerksmachinen

Demag Verdichtertechnik GmbH

Loading Machine 24.

See Front-end Loaders

Longwall Equipment

England

British Jeffrey Diamond

Underground Mining Machinery, Ltd.

France

Minex Mine-Expert

West Germany

Eilckhoff Maschinf bk-U Eisengiesserei Mb

Westfalia Lunen

Bulldozer

See Draglines

Coal Cutters

England

Babcock & Wilcox, Ltd.

Bntish Jeffrey Diamond

Dosco Overseas Eng., Ltd.

Mining Supplies, Ltd.

Underground Mining Machinery, Ltd.

France

Minex Mine-Expert

Stephanoise de Constr. Mecaniques

West Germany

Eickhoff Maschinf bk-U Eisengiesserei Mb

Thyssen Industrie AG

Titanit Bergbau Technik

Westfalia Lunen

Heading Machines

England

Eimco, Ltd.

Gullick Dobson, Ltd.

Mining Dev., Ltd.

Thymark Thyssen Group

West Germany

Becorit Grubenausbau GmbH

Salzgitter Maschinen AG

Westfalia Lunen

Undercutter

See Draglines

—

SOURCE C Simeons Coal Its Role In Tomorrow s Technology (New York Pergamon Press, 1978)

Table C-10.—West European and Japanese Producers of Electric Transmission Equipment

—

Country Company Country Company -

— —

West Germany Siemens Sweden ASEA (High Voltage Transformers

AEG and DC Equipment)

England English Electric Switzerland Brown- Boveri

GEC Japan Mitsubishi

France Thomson-Brandt

Alstom-Atlantique Netherlands Philips

DEL (High Voltage Circuit Breakers)

SOURCE Off Ice of Technology Assessment
CHAPTER 7

The Prospects for Energy

Conservation in the U.S.S.R.
—

CONTENTS

Page

STRUCTURE AND TRENDS IN SOVIET ENERGY CONSUMPTION. ..228

ENERGY CONSUMPTION AND ECONOMIC GROWTH . .............229

Evolution of Soviet Conservation Policy. . . . . . . . . . . . . . . . . . . . . . .......,230

The High-Investment Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...231

The Low-Investment Strategy . . . . . . . . . . ............................234

Other Conservation Strategies, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..239

OFFICIAL SOVIET CONSERVATION TARGETS. . .................240

PROSPECTS FOR CONSERVATION . . . . . . . . . . . . . . . . . . . . . ..........241

THE POTENTIAL ROLE OF THE WEST IN

SOVIET ENERGY CONSERVATION. . . . . . . . . . . . . . . . . . . . . .. ....244

SUMMARY AND CONCLUSIONS. . . . . . . . . . . . . . . . . . . . . . ...........245

LIST OF TABLES

Table No. Page

49. Soviet Energy Consumption. . . . . . . . . . . . . . . . . . . ..................228

50. Relationship of Economic Growth to Energy Use, 1961-78............230

51. Relationship of Economic Growth to Energy Use, 1960-80............230

52. Tenth FYP Planned Energy Savings. . . . . . . . . . . . . . . . . . . . . . ........240

FIGURE

Figure No. Page

21. Where Energy Savings Come From. . . . . . . . . . . . . . .................242
CHAPTER 7

The Prospects for Energy

Conservation in the U.S.S.R.

Most of the attention devoted to Soviet

energy in Western literature of the last

several years has focused on production,

especially the prospects for Soviet oil and

gas and the potential role of Western technology in petroleum output. Production,

however, is only half of the energy picture:

the prospects for Soviet energy consumption

are equally important. If the U.S.S.R. could

slow its rate of growth of energy demand,

the consequences of any decline in production would be correspondingly less critical.

Moreover, Soviet plans to substitute among

different sources of energy supply (more

abundant for scarcer, nearer for farther,

more efficient for less) will involve corresponding shifts in the structure of consumption. Measures aimed at controlling or modifying consumption, therefore, are not simply

alternatives or complements to a “supply-

-side’ energy strategy; the two are inseparably dependent on one another.

This chapter briefly examines the current

structure of Soviet energy consumption and

recent trends in Soviet energy use; describes

the evolution of Soviet official policy on

energy conservation and the major conservation options available to Soviet planners;

reviews recent performance in achieving energy savings; and discusses the implications

for Western policy of Soviet conservation

strategies.

Energy conservation is not a new issue for

Soviet policy makers, but an aspect of a general concern with the availability and use of

all raw materials. The increasing scarcity of

attractively located and high-yield natural

resources is a constraint on Soviet prospects

for economic growth. Nevertheless, Soviet

experience in conservation has been mixed.

For all the official exhortation over the

years, there are only a few cases in which

more than token gains have been recorded.

This is not for want of opportunities. In

1975, the Soviet Union used nearly as much

energy as the United States in industry, but

Soviet industrial output was only threefourths that of the United States. Similarly,

in the agricultural sector in the same year,

the U.S.S.R. used appreciably more energy

to achieve 80 to 85 percent of America’s output. ‘

Impressive Soviet conservation efforts

have taken place in the energy field itself,

particularly through steady improvement in

the efficiency of electrical power generation

and the use of cogeneration for centralized

urban heat supply.2 Unfortunately, now that

these gains have been realized, further progress may be slow. The reasons, as this chapter demonstrates, stem from basic features

of the Soviet command economy: the system

of prices and incentives, the mechanisms for

investment and technological innovation,

and the distribution of power. In addition,

Soviet decisionmakers are disposed to think

of output performance before efficiency.

This makes individual enterprises disinclined to support actions that might

threaten the former in support of the latter,

and planners reluctant to stake the success

of their energy policy on conservation measures that they may know from previous experience are unlikely to work. In short, the

future of Soviet efforts to conserve energy

can be regarded as one part of a larger problem–the struggle of the Soviet system to

overcome the inherited habits of Staliniststyle industrialization.

227
228 ● Technology and Soviet Energy Availability

STRUCTURE AND TRENDS IN

SOVIET ENERGY CONSUMPTION

The most striking feature of Soviet energy

consumption compared to that of any major

Western industrialized country is the dominance of the industrial and the comparatively small shares of the transportation and

residential sectors in energy use. Table 49

shows how Soviet primary energy supply is

allocated among various uses—including

own use and losses in the energy industries,

nonfuel uses, and various sectors of the

economy—both with electric power stations

shown as consumers and with consumption

shown by final user (i.e., after consumption

in power stations has been reallocated

3 For a review of recent data on this subject, see Leslie

Dienes and Nikos F;conornou, “Chl F;A Energ?r Ikmand in the

1980 ‘s: A Sector-al Anal~’sis, paper presented at the 1981

(’olh)qu ium of t hc N A’I’() I’:conomics I )irect(n-ate, Brussels,

/\pril 19H 1.

Table 49.—Soviet Energy Consumption

(million tons of oil equivalent)

— 1960 1965 1970 1975 1980

Total primary

energy supply

(corrected for

foreign trade) . . . 438.9 579.5 737.4 922.0 1,086.2

Consumed in:

Own needs and

losses. . . . . . . . . . 56.4 67.8

Industry. . . . . . . . . 132.0 169.9

Electric power

stations . . . . . . . . 1119 164. 0

Household and

municipal . . . . . . 4 6 3 65.3

Agriculture . . . . . . 21.3 29.3

Transportation . . 5 1 7 57.1

Construction . . . . 73 82

Nonfuel . . . . . . . . . 12.0 17.9

79.8

209 9

2253

79.5

42,6

57.0

14,2

29.1

115.7 119.2

253.4 306.4

3028 367. 4

98.0 80.5

43.4 5 4 3

5 2 9 85.9

16.0 27.0

39.8 45.5

After reallocation of electric power

and cogenerated heat:

Own needs and

losses. . . . 123.4 157 5 1957 271.8 304. 6

Industry . . . . . . . . . 165.8 2275 292.9 360.0 438. 9

Household and

municipal . . . . . . 54.7 7 7 3 98.7 1267 114, 4

Agriculture . . . . . . 21,8 3 0 2 44.5 47.5 60.2

Transportation . . 53.1 5 9 9 6 1 2 58.6 93.5

Construction . . . . 8.0 91 15,3 17,6 29.1

Nonfuel . . . . . . . . 12.0 1 7 9 29,1 39.8 45.5

SOURCE Robert W Campbell

among the sectors that use their output). Industry has consistently accounted for by far

the largest share of Soviet domestic energy

consumption over the past 20 years. This is

largely due to the small stock of private

automobiles and the low share of trucks in

the overall transport mix, and the fact that a

large proportion of Soviet buildings are

heated through centralized systems using

the heat cogenerated during the production

of electrical power.

Another striking characteristic of Soviet

energy consumption is the large share used

by the energy-producing sector itself. Ownuse by the gas industry, for example, is

about 10 percent of total output, mostly to

power pipeline compressors.4 Much of the

energy consumed by the energy industries is

simply due to the circumstances under

which they must operate: long transit distances to points of consumption (40 percent

of all Soviet rail traffic is devoted to shipment of fuels), inhospitable environments in

the producing regions, the need to work with

low-grade fuels, and some energy-intensive

extractive methods. For example, waterflooding has turned the Ministry of the Oil

Industry into a major consumer of electricity. The industry consumed 48 billion

kilowatt-hours (kWh) in 1979, and the rate is

rising by 11 to 13 percent a year.5 These factors are becoming even more important over

time, as transportation distances increase

and the accessibility of fuel declines. In fact,

———— 4 A. A.Makarov and L. A. Melentev, ‘‘ I)rohlems and I)irections of I“:nergy I)e\elopment in the U. S. S.R., ” Il)iot/()/)/iA(/ i

( ~r~ru H i:(~ t,si )IU prom )! ,s h lcrt t~ og(J /) roi: I ()(1,~ t 110 (L’}i ()}, N (), ;),

1981, p. 28.

5 V. D. Kudinov, ‘‘Rational [Utilization of F’uel and I’ower

Resources in the oil I ndustrj., ” A’(’ftJ’(Inf)\’(’Ii)loz }’(1 )1.$tf ‘(),

No, 9, 1980, pp. 6-9. According to Kudino\’, the rninistr?’ also

consumed 9.:] mtoe in liquici fuels and gas in 1979, onequarter of which was used for gas-lift operations. Total mvnuse h.v the hl inist r-y of the Pet mleum 1 ndust ry in 1979, according to another source, was 14.7 mtoe. See I. Grekhov, et

al,, “(ls[~ F’u(JI and l+: nerg~ Resources p~cononlicall} ancf F: fficient ly, ,?’cftj’anik, No, 1 (), 19H(), p. 12, in .J 1)l{S N(). 77154,

Jan. 12, 1 W 1, p. 8.
Ch. 7—The Prospects for Energy Conservation In the U.S.S.R. • 229

there is overall an upward trend in own-use

by the energy sector.6

Prospects for Soviet energy conservation

and substitution, therefore, turn heavily on

developments in industry, and especially in

the energy industries. This is in contrast to

conservation prospects in the West, where

major savings have recently been realized in

residential and transportation uses. Analysts in both the U.S.S.R. and the West have

argued that Soviet industrial consumption

tends to be less flexible than that of other

sectors, and potential energy savings will

consequently be harder and slower to realize

than were gains in the past. ’ This is not to

say, however, that opportunities for most

such savings have been exhausted. In any

case, the shares of residential and municipal

consumption, relative to industrial, are unlikely to alter much without a sharp shift in

the political priorities of the Soviet leadership. There is no evidence that such a change

is imminent.

The inevitable rise in the energy sector’s

consumption may alter the regional distribution of demand, yet the traditional concentration of demand in the European part of

the U.S.S.R. is reinforced by the tendency of

industrial ministries to locate where infrastructure and labor are readily available.

Further, as table 49 demonstrates, a large

share of Soviet energy is consumed in the

form of electricity. This is due to the nature

of the technological processes employed in

industry. (The transportation and residential

sectors directly consume greater proportions

of liquid, solid, or gaseous fuel. ) Gradual

technological modernization of Soviet industry and the rise of sophisticated manufacturing specialities should lead to a continuation

of this trend.

But the balance among Soviet energy

sources must change. Soviet planners have

understood for some time that the share of

oil must be cut and other fuels substituted.

At the center of their effort has been a policy

of investing in nuclear and hydropower for

electricity generation, and of mobilizing the

abundant resources of lignite and subbituminous coal from Siberia and Kazakhstan.

Now, a growing emphasis on gas has

emerged. Much of what is presently used as

fuel oil will be converted to lighter fractions,

requiring a major expansion of refinery capacity in the next decade. There have been

recurring differences of opinion among

Soviet leaders and planners, however, over

the relative priority to accord these plans

(see below and ch. 8).

ENERGY CONSUMPTION AND ECONOMIC GROWTH

The key point at issue is whether the

Soviet Union can ‘‘decouple” increases in

energy consumption from overall economic

growth by the end of the century. There are

important areas in the Soviet economy

where certain energy intensities have fallen—largely accomplished through substituting gas and oil for less efficient coal; electrifying key sectors of the economy, including

half of all railroad haulage; and controlling

conversion losses through improvements in

the heat rate and extensive use of cogeneration. But in general, once the Soviet index

for gross national product (GNP) growth is

corrected (downward) to make it conform

more closely to Western definitions, it is apparent that Soviet energy use is growing

faster than Soviet GNP.

Analysis of Soviet energy/GNP elasticities shows a progressive deterioration

since the early 1970’s. Soviet economists

continue to claim an elasticity of less than 1,

perhaps because they use an exaggerated

measure for growth rate of aggregate output, but the Soviet data in table 50 nonetheless reflect the recent rise in GNP elasticity

of energy use. It must be noted, however,
230 ● Technology and Soviet Energy Availability

Table 50.—Relationship of Economic Growth to

Energy Use, 1961-78

(increments expressed in average annual percentages)

Gross energy National Coefficient

consumption Income of elasticity

1961-65 , 6.6 6.5 1.02

1966-70 , 4.8 7.8 0,62

1971 -75... , 5.1 5.7 0.89

1976 -78...., 4,8 5.1 0.94

SOURCE- S N Yatrov Fuel-Energy Complexes Ekonomieheskaya gazeta,

No. 10, March 1980, P 10

that this trend appears to rest more on a decline in GNP than on growth in gross energy

consumption.

The most authoritative Western estimates of energy/GNP coefficients are given

in table 51. These are based on different data

than the Soviet estimates, and consequently

show significantly higher coefficients. Nevertheless, they reflect the same trend. Both

Soviet and Western calculations, therefore,

carry the same long-term implications. If one

assumes an average annual Soviet growth

rate of 2.5 percent and an energy/GNP elasticity of 1.0, gross energy consumption

would rise from under 1,556 million tons of

oil equivalent (mtoe) in 1980 to 1,615 mtoe a

year by the year 2000.8 Some forecasts for

total Soviet primary energy production in

that year come to very little more, leaving

nothing for energy exports. This is a crude

calculation, but it serves to highlight the

importance of conservation in the Soviet

economy.

The aggregate energy intensity of the

Soviet economy can decline only if energy efTable 51 .—Relationship of Economic Growth to

Energy Use, 1960-80

(increments expressed in average annual percentages)

Gross energy Coefficient

consumption GNP of elasticity

1965-60, ... ., 5.9 4.9 1.20

1970-65 ., ., 4.9 5.3 0.92

1975-70, . , 4.0 4.1 0,97

1980-75, 4.0 3.0 1.33

SOURCE Robert W Campbell Energy in the U S S R to the Year 2000 unpublished paper prepared for the Conference on the Soviet Economy

Oct 23-25 1980 AIrIie l-louse, Va

ficiency continues to improve as it did before

1970; or if the overall structure of the Soviet

economy evolves in the direction of sectors

that are less energy- and material-intensive.

The degree to which either of these conditions can be met is, at best, debatable. Several factors work against the prospect of

declining energy intensity.

First, opportunities that made it possible

for Soviet managers to reduce the energy input per unit of output in many processes in

the 1950’s and 1960’s—shifts to cheaper

fuel, rapid improvements in the heat rate of

powerplants, etc.–dwindled in the 1970’s

and are vanishing in the 1980’s. Extraction

and transportation costs for all energy

sources are climbing; the quality of coal and

oil is deteriorating; and progress in lowering

the heat rate in the best powerplants has

nearly reached its limits. Furthermore, any

structural shifts in the Soviet economy

toward reemphasis of energy- and materialintensive sectors may be offset by equally

strong trends in the opposite direction, i.e.,

toward sectors like agriculture that are

highly energy-intensive. In addition, the

energy-producing sector itself is growing

rapidly in importance.

The prospects for improvement in either

the net energy intensity or the efficiency of

major conversion processes are, in short,

uncertain. If present trends continue, a deterioration in the aggregate energy intensity

of the Soviet economy over the next two

decades is possible. It is in this context that

Soviet energy conservation policy must be

evaluated.

EVOLUTION OF SOVIET

CONSERVATION POLICY

High-level interest in energy conservation

has been evident in the U.S.S.R. since the

early 1970’s. Such concern is probably less

attributable to specific anxiety about future

Soviet oil production (Siberian supergiants

were still being discovered until 1973) than

to a general deterioration in the economics of

energy supply caused by the rapidly growing

extraction and transmission costs connected
Ch. 7— The Prospects for Energy Conservation in the U.S.S.R. ● 231

with the decline of European energy deposits

and the development of Siberian resources.

In 1973, the Central Committee of the Communist Party and the U.S.S.R, Council of

Ministers issued a joint decree on energy

conservation, “On Steps to Improve Efficiency in Using Fuel-Energy Resources in

the National Economy.” This decree, frequently cited as the starting point of the

present conservation policy,’ was primarily

concerned with recovery of “secondary energy resources," mainly high-temperature

process heat that could be profitably reused

before being released and lost.

By now a number of official decrees have

appeared on the subject of energy conservation, gradually broadening the scope of the

policy. This policy now encompasses a wide

range of investment and housekeeping measures, aimed not merely at capturing secondary heat resources but at monitoring energy

use, establishing criteria of efficiency for

major industries and processes, improving

insulation, etc. The decrees have also created

an administrative apparatus for the implementation of the conservation effort, and

have attempted to increase the involvement

of the party in conservation. As a result, conservation is now a prominent part of official

energy policy.

Soviet decrees evince a tension between

two broad conservation strategies. The first,

a “high-investment strategy,” is aimed at

improving the efficiency of Soviet energy

use through technological innovation and

replacement of obsolete plant. The second,

a “low-investment”’ or “housekeeping” approach to conservation, is aimed at saving

energy through better monitoring and better

production practices, but largely within the

confines of existing technology and plant.

For example, in the case of automotive

transportation, the first strategy might aim

at developing more efficient engines, perhaps through widespread adoption of

diesels; the second approach would call for

better maintenance of the existing stock and

for measures to curtail the thriving black

market in oil and gasoline.

In principle, the investment and housekeeping strategies are complementary, The

former seeks to substitute capital for energy,

the latter labor for energy, including labor in

the form of innovation and more stringent

management. In a market economy, their

precise mix is determined in principle by the

relative marginal return from each, and the

conservation strategy employed at any time

will be a combination of investment and

housekeeping, with no clear disjunction between them. In the Soviet Union, in contrast, there is a clear difference between the

investment and housekeeping strategies.

The first is handled through the central planning system. The second is regarded as an

enforcement and monitoring problem, and is

handled through so-called “public organizations," largely at the local or enterprise level.

Coordination of these two strategies is a difficult process in a command economy.

THE HIGH-INVESTMENT

STRATEGY

Restructuring Demand

The most urgent task of Soviet planners

in the next decade is to lessen the share of oil

in the overall energy balance. This involves

both producing fuel substitutes and adjusting the capital stock on the demand side to

accommodate them. Problems exist on both

counts. Nuclear power development and electrical power construction have fallen behind

schedule; and coal output has seriously

lagged plan targets. The combination of

these problems has caused a virtual eclipse

of the ambitious program adopted at the

25th Party Congress in 1976, which relied

heavily on conversion to coal-fired powerplants. Although ambitious gas targets have

been adopted, it is still possible that diversification of supply will not proceed fast

enough to avoid domestic oil shortages in

the mid to late 1980’s. These might necessitate fuel rationing or mandatory cutbacks

(see below).
232 ● Technology and Soviet Energy Availability

Altering the structure of energy demand

in the Soviet Union raises some of the same

problems as in any other industrialized country. Consumption patterns are the outcome

of many past policies. Changing these patterns requires making adjustments to the

country’s basic infrastructure, a slow and expensive process, despite the fact that aging

capital stock must eventually be replaced. In

the Soviet Union such replacement has

taken place much more slowly than in the

West, and there is a large stock of inefficient

and obsolete equipment. Given the present

shortage of capital, alleviation of this problem in the near term is unlikely.

The existing capital stock strongly inhibits Soviet ability to shift the energy consumption mix. For example, there are about

250,000 small boiler plants in the U. S. S. R.,

the majority of which operate on coal. Half

of the Soviets’ larger nonnuclear powerplants use gas and fuel oil. Sound policy, according to Soviet fuel experts, would be to

convert the small boilers to gas and the

larger ones to coal.”) But such a conversion

would require a massive expansion of local

gas lines and of gas storage facilities, a project that seems out of the question for a gas

ministry that will be totally absorbed in the

next few years in expanding gas production

and bulk carriage.11

Coal presents other obstacles. It is unattractive to users, and its quality is rapidly

declining. Enrichment facilities, treatment

to remove moisture and ash, and the utilization of new boiler types that can deal with

poorer grades of coal have all been slow to

achieve widespread application. Coal’s declining heat content also makes larger shipments necessary. The Moscow power system, for example, requires 20,000 more coal

cars than formerly just to offset the poorer

quality. The presence of impurities adds to

downtime and maintenance costs, and short11 S N. }’at ro~. ‘‘ f’;n(~r~} Resources: W’ajs to f+; conomize,

.S(J( \i(//i.s(i(//sA(A)()(/ i)~(l((.striju, Nla} 19, 19/+(), in ,J 1’1{S No.

76261, Aug. 20, 1980, p. 9.

‘‘S N, }’ati-o~ :ind /1. 1)~’atkin, “I+;ift’~’ti\~’ness of (Jtilizat ion ot” I“uel and I)ow[jr fi~~sourct~s, ~ /)/(1,, ()( ,()\l(l /<}102],(1 )’~tl ’09

N(). 2, 19’79, p. I 2,

ens the lifetime of boilers.12 Moreover, conversion of large powerplants to coal is expensive and time-consuming, taking powerplants out of operation for long periods. The

latter is a particularly serious consideration

in view of existing concern over power supplies to the European U. S. S. R., where generating capacities are strained by demanding

output targets.

The result of these problems has been a

tendency to convert oil-fired powerplants to

gas, but even that process has been lagging. 13 In short, there is reason to believe

that Soviet planners will find it difficult to

restructure demand. Success will depend to

a great extent on replacing an older, inefficient plant, and on planning an energysaving investment.

Replacing Inefficient Plant

Modernizing or replacing existing stock

with more energy-efficient equipment requires both capital and the active commitment of industrial planners and designers. In

the U.S.S.R., technological innovation and

diffusion have traditionally been hampered

by a dysfunctional incentive system and

problems of coordination across administrative boundaries.14 The country has been

slow in modernizing its inefficient plant, and

this situation is unlikely to readily change.

An illustration of Soviet problems in this

area may be found in the electrical-power

sector. The Ministry of Power and Electrification is assigned an annual plan for the

replacement of obsolete boiler equipment,

particularly equipment operating at pressures of less than 90 atmospheres. The

Power Ministry’s planners nevertheless continue to include the less efficient equipment

in their own specifications, because they

know it has a better chance of being pro12N. Kovalev, N. Tikhodeyev, and I. Y. Ershov, “HOW TO

Draw Reserves, ” Praudq Nov. 20, 1980.

‘‘kl. A. St~rikoIich, “rl’h(~ N]ain I,ink, ‘‘ ]:r(,,$ti),(l, ,June ] ,

1980.

‘ ‘See I)aul hl. (’ocks, (‘Science l’olic~ in the So\it’t LJnion,

in [National Science Foundation, Science Polic), Usm

U. S. S. R., vol. 2 (Washington, D. C.: U.S. Government Printing Office, 19801.
—

Ch. 7—The Prospects for Energy Conservation in the U.S.S.R. • 233

duced in sufficient quantities to meet plan

targets. No incentive exists for the enterprises that manufacture boilers to undertake

difficult and time-consuming change-over

operations that would inevitably affect

planned output fulfillment for some time.

The Ministry of Power Machine Building,

which builds boilers for the Ministry of

Power, claims to be indignant about the lack

of progress and has raised the issue before

planning authorities. Yet large numbers of

small and energy-inefficient boilers continue

to be produced.15

Because Soviet industry has problems

with technological innovation in general, it

of course does not necessarily follow that improved energy efficiency in particular is impossible. Energy efficiency in the Soviet iron

and steel industry, for example, has long

been increasing. These improvements in ferrous metallurgy can be seen in dramatic

declines in the average fuel rate in Soviet

open hearth furnaces over the past 40 years,

declines that are likely to continue in the

present decade. 16 Similar improvements

have occurred in thermal power generational’

and a number of other energy-intensive

industrial sectors—construction materials

and chemicals for example—might well cut

their energy use sharply with the introduction of modern equipment.

The potential for significant energy savings through the high-investment strategy

should, therefore, not be lightly written off.

The key to the rate and degree of success in

this area lies in the Soviet economic system

itself. One major inhibitor of innovation in

the U.S.S.R. is the fact that ready measures

of “good’ innovation are lacking—a seller’s

market prevails in the producer-goods sector, and users must accept what they get,

regardless of whether changes actually constitute improvements. Energy efficiency is

an exception. It can be based on a criterion

that is readily measurable, both by users and

by outside monitors. With such a criterion,

Soviet industry has in the past been able to

produce useful change, once it was given the

incentive to do so. Restructuring incentives

may, therefore, be the key in determining the

response of Soviet industry to a high-investment conservation strategy.

Planning Mechanisms

Energy conservation cannot be built into

new industrial technology simply by decree

from above; it must originate within the industrial ministries themselves and be built

into basic technologies and designs. Consequently, a high-investment approach to

energy conservation requires more than just

the cooperation of industrial ministries and

research and design institutes. Enterprises

must also be given the appropriate instructions and incentives to incorporate energysaving schemes into proposals for new plant

and machinery. In the absence of such cooperation and incentives, official exhortation

will have little practical effect.

There is little evidence of the necessary

mechanisms for progress in this area. In

1979, a deputy chief of Gosplan’s energy

division criticized the industrial ministries

for failing to incorporate energy conservation into their planning systems. In the most

important areas of fuel substitution—nuclear power, hydropower, and waste heat recovery—the necessary procedures had been

“partially” implemented. But the article was

especially critical of the failure to plan for

greater efficiency in low-parameter use of

heat resources.18 Similarly, a high-level

survey done in the same year revealed that

only 2 of 67 enterprises of the Ministry of the

Automobile Industry had adopted 5-year

energy conservation plans, and that matters

were no better in other industries.19

‘\. ‘1’r(~it +ki}, })l~~t~t)r (~1( A }~~)~)~1 IS (I {). N(). 2, 1 !179, p 21.

‘ ‘s. t’(Jw~lo\ , “ Riil ional I“; xpt>nditurt> (){ f’u(~l IIn(i l’~)wt~r I{LJ-

~ourL’(’\,“‘ /’/(///()/ () )’(’ }, //():\’(11 f// (), N (). 2, 1979, p. :1!1.

, .— .- . - 3: - “t
234 ● Technology and Soviet Energy Availability

Such results are hardly surprising given

the past cheapness and abundance of energy

resources and the relative novelty of Soviet

recognition of “energy problems. ” No evidence has yet appeared in the West of any

adaptation of industrial ministries’ policymaking systems to these emerging problems. Perhaps the relative lack of official attention to this issue reflects a shift of focus

away from a centralized-investment approach to energy conservation, since during

the same period there has been no lack of

coverage of the ministries’ mechanisms for

oversight and enforcement. It would appear

that for now this aspect of conservation policy is still fluid.

Planning Prices 20

Another factor inhibiting the high-investment strategy relates to the price system

employed by planners in making major investment decisions. Soviet “planning

prices’” are intended to convey the national

economic cost of various fuels in the major

economic regions. Planning prices are calculated through a complex system which

takes account of aggregate demand for boiler and furnace fuel in each region; capacity

levels for these fuels and for certain transport links; the capital and operating costs of

producing the fuels; and the capital and

operating costs of transporting them.

These planning prices, however, tend to

understate the real costs of producing and

delivering the energy, which rose steeply in

the 1970’s as the centers of oil, gas, and coal

production moved eastward. In addition,

planning price calculations take only domestic demand into account. World market

prices for energy have been rising rapidly,

however, and the real opportunity cost of,

for example, Soviet oil is the world market

price. This is substantially higher than its

planning price. The absence of a system

which takes account of the true opportunity

costs of exportable oil and gas makes it difficult to construct optimum production

——

““1’h)s st~c’ti{)n is hased on (’anlphell. “14;nerglr f’ric(>s ..”

{lp, (’it.

mixes and to decide on rational fuel substitution policies. The high-investment conservation strategy is, therefore, seriously hampered because the prices used as a basis for

investment decisions do not sufficiently encourage the substitution of capital for energy or of one energy source for another.

THE LOW-INVESTMENT

STRATEGY

Transaction Prices

Prices play a second role in Soviet energy

conservation. Beside the planning price used

to make investment decisions is a separate

system of transaction prices. These are the

prices at which energy is actually bought

and sold. Because they directly affect the

consumer, transaction prices figure prominently in the low-investment or housekeeping strategy, and here too prices have proved

an obstacle to energy conservation.

Soviet energy transaction prices for both

industrial and residential consumers are far

below actual energy costs. The fuel bills of

even large enterprises can be too low even to

be recorded. At the large Gorky Automobile

Factory, for instance, natural gas constitutes less than 2 or 3 percent of total production costs.21 One plan to control industrial

over-consumption of gas during periods of

intense cold by charging punitive rates (as

much as five times above normal) for consumption above established limits had to be

abandoned when planners concluded that

gas prices were so low that such surcharges

would have no effect if charged to an enterprise’s direct production costs.22 It is hard to

imagine how a surcharge system could be applied to residential customers. Most homes

are charged only a flat subscription fee for

gas.23

Underpricing of energy was part of earlier

policies designed to encourage consumption.

In 1968, prices for centrally supplied heat

and electricity were set low to encourage

~‘ t’ara~ka, op lit., p. 16,

‘N. Fedorov, “Economic Flame, ” f+acda, Feb. 2, 1981.

‘‘\’aratk:i, op. (it,
Ch. 7—The Prospects for Energy Conservation in the U S S R ● 235

users to switch to the central sources. The

rates have not changed since. As a result,

most power systems lose money-70 million

rubles a year at the Moscow system alone.

Demand for electrical power has recently

been growing faster than capacity, but authorities have added to this demand by establishing a new system of preferential rates

to agricultural users.24

Soviet planners are well aware that energy

prices are too low. On January 1, 1982, transaction prices of coal, petroleum, natural gas,

fuel oil, electric power, and thermal energy

will be increased. According to the State

Committee on Prices, the new prices will provide a better stimulus to conservation because they will make the more remote consumer and the consumer of higher quality

fuels pay more. Early indications are that

this price rise will be on the order of a 2.3-

fold increase. If this is indeed the case, it

should help to alleviate the problemassuming that all other prices are not increased in tandem. But although a major

criterion for this reform appears to have

been the increasing cost of energy extraction, Western experts believe that it is still

unlikely that the 1982 prices will reflect the

real opportunity costs of energy.25

Nor is there necessarily a strong correlation between higher prices and lower energy

consumption. There is some evidence that

the 1967 price reform—which greatly increased the prices of oil products, natural

gas, and coal–resulted in substantial energy

savings. 26 However, the mechanisms which

brought about that result are not well-understood and may not still be operative. Be-

— . ..——

‘ K()\ :il[. \ , (It ;i ] ( tp (,1(

},’/L (jrl{~~?tfll {} T/{1/”/ ]~l~j~~ ~ I)ri)t)) I ih/f’rlr7 I (~ \ I }, .\u~u st I 9X(),

p 2, ( ‘;i r]]l)t)t,ll, ‘‘1; t](’r~t l’rl((’~ ( Ip (It , pp. :)().{ :

\l illl:in~ J Kt’lli, “1; f ttt[ L- 01 t ho Sf)I 111[ I’rl[( 1{[’tt)rn) {It

1 !)fi7 {Ill 1“: !l(’l”~\ ( ‘on~u nlp( 1{}11,‘‘ S(JI 1( f .s’fl(fll(’~. \ (J1 .x.x x !

No. 3, tJuly 19’78, pp. 394-402: Alhert 1,, [)anielson and

(’har]es D. Ik’1.orme, tJr., “An }!lternat i~e Anal}sis of the P; ffects of k;nerg~ Prices on h;nergv (’consumption in the So~iet

IJnion, ” .Solr’et ,$tlidie~, YO1, XX-X 1, No, 4, octoher 1979. pp.

581-,584. I)an ielson and I)(’ 1,orrne emplo~’ed different e~sont).

met ric specifications, hut ron firmed KellJ thesis that energ~ prices and energ~ consu mpt ion in the So~i[lt c(’r~nom~. are

in~’er~[’1~ related,

cause of numerous institutional barriers in

the Soviet economy, higher prices do not

guarantee significantly lowered consumption.

In sum, it is far from axiomatic that higher prices will lead to large energy savings.

The Soviet system is one in which the role of

markets is deliberate} restricted and the impact of prices therefore limited. Within the

existing incentive system, factory directors

who cut their energy bills are likely to be

rewarded with a cut in future energy allocations. Moreover, some energy-related commodities have “no value’ because no markets exist for them. Designers of petrochemical plants typically fail to provide uses for

byproducts, which can amount to two-thirds

of the original feedstock. The usual practice

is simply to burn them-using fuel oil.27

Finally, the numerous administrative barriers that separate producers from users

may make decisionmakers remote from the

costs they impose.

Measurement of Energy Consumption

The difficulties of employing a price

mechanism are compounded by problems in

measuring the amount of energy actually

consumed. The Soviet press frequently

alludes to the widespread lack of apparatus

to measure all energy sources, at every stage

from extraction to final use. From the oilfields of Tyumen to the gas heaters in

Moscow homes, energy is produced and delivered “na glazok,” as the Russians say,

“by eye alone.’’” The situation is apparently

less serious for electricity than for gas,29 and

less serious in the cities than in the countryside, 30 but the problem remains pervasive.

— — . ..———

‘1’. 1’ I;(’(iorin, ‘‘In I mpor[a n[ Sourt[” of S:Il inxs {)! 1’(](’1

a mi l’ow(’r,” 1,’lt orIorn~c/rfJ\A” (I lcI q[I:( t,J, \ {) ,5, ,};t nutirj 1 !)<% 1,

p. 10, ‘‘ I t 1 )w+ K ot \pp[~:ir in t ht’ I )(’+ IK13+. 1’1-[/ t (lfl, \l :Ir ,-~,

1 :)X(), in ,J 1’ t{ S N (). 75W7 , hla\’ 1 :1, 1 !)so, ~)[) 1,)-1 f;

‘F’f)r {.f~mmt,nt ~)n ‘1’j un](Itl, +(t) J’ 1’ l{()~liiik{~I . “ l{(~(ri (’~

( )f t h[’ f’;ct)n( ) m } of l’: n f~rg} [{ ~~ <~)u r(( ~~ 1 ]1 \l [ > ~ t ( ~r II .S I [ J(, r 1:1 n I r]-

(Iu \t ri[~s, ‘ ~ , /f/ \l \ ,)() \, ), /,1 ,J- ](/ \ \ /

 11/ )

, y f) :), ] !]~(), p. I (), ‘)])

houv’hold ” U+(’ ~(’(’ \“:ira\ k;], {Ip {’1[

‘( )ru(i/,hc~ , op (it

‘” “1’11[ t)rl(( of ii tiii{~~f ;it [ -ilour. I’1711 (1(~, ?l;~r. 7, I 9% I

l.: 1(’([ ri(lt } (’harg(~ I rl rl)( ) + t { ( ) I 1( ,(” t i \ (’ ,1 rl( i ~ t ii ( (’ Iii r-m ~ ii 1“[’

(’\ t [i 1) i i + h( i <I ((’( )r(i I rl~’ t ( 1 t 11(’ r; I t t K i ~1[ )W t’r ( )f t h t J (’1(1(’I r i(’:~ 1

I ,(1 u I p r])( in t 1 ( K: I 1 f I( i ( ) n t II( I,1 t- r]), r{ ,g:i r( i I( I C-s ( I f [I( t II ii I I( I t‘1 ( ) i
236 • Technology and Soviet Energy Availability

Lack of measurement apparatus causes both

short- and long-term problems. In periods of

intense cold, for instance, there is no way to

control or even evaluate surges in demand

for gas.31 Serious long-term consequences are

the impossibility of setting and enforcing rational consumption standards, and the difficulty of setting meaningful energy prices,

particularly for individual or small consumers.

Minpribor, the ministry in charge of instruments, automation, and control systems, is often blamed for the lack of meters

and other energy-measuring devices. Gas

and electricity meters are low-cost items,

and therefore unprofitable for Minpribor to

manufacture. (Ironically, Minpribor was one

of the first ministries to undergo “economic

reform” putting it on a profit-oriented, costaccounting basis. Its failure exemplifies the

difficulties of economic reform in a command

system.) But the blame does not lie with

Minpribor alone. Soviet energy has been

literally “too cheap to meter, and it is

doubtful that the forthcoming price reforms

are radical enough to change this situation.

Consumption Norms

In the absence of a realistic price system

or market mechanism, Soviet planners provide industries and enterprises with energyconsumption norms or indices to set optimum levels for energy use. These are detailed specifications for the amount of

energy that may be employed in any process.

Consumption indices are rigid and often

arbitrary, and there is ample evidence that

norm-setting is a process fraught with

bargaining and controversy.

Because energy consumption varies widely with the age of the plant and type of

technology, each industry exhibits a considerable range between the consumption of

Continued from p. 235.

use, This fact, combined with preferential rates for electrical

power (part of a massive program of rural electrification that

received high priority during the 1970’s), means that there

are no disincentives attached to overconsumption.

‘1 F’edoroi, op. cit.

the leading enterprises and the industry

average. In 1976, for example, the leading

enterprise in the production of forgings and

stampings in machine-building consumed

288 kg of standard fuel for every ton of metal

it used. The industry average was 342

kg/ton. Similarly, the leading iron casting

enterprise consumed nearly 100 kg/ton less

of standard fuel than the industry average.32

An optimum system would not only require separate indices for every enterprise,

but for every major process within each

enterprise. Even then, the system would be

flawed because energy inputs are usually

measured only for the enterprise as a whole,

not for individual processes. In practice, little information is available to advise on the

effectiveness of indices.33

Therefore, the most common system of

norm-setting is simply to set a consumption

ceiling for an enterprise as a whole. This

practice entails a large measure of guesswork, and encourages bargaining by interested ministries or local regions. Ministries

can assign their enterprises inflated consumption norms that allow output targets to

be met without energy constraints. If an

enterprise exceeds its norm, the ministry can

raise it after the fact. The enterprise can

then claim paper energy savings which are

credited to its conservation performance.34

In principle, the main consumption norms

are steadily lowered each year according to

an official plan specifying the amount of the

decline. But ministries do not always abide

by these plans. One recent article charged

that the Ministry of Power failed to carry

out its 1979 plan for lowering the heat-rate

norm in thermal powerplants, and was thereby responsible for wasting over 0.622 mtoe.35

Moreover, some norms are exempt from the

‘J}ru. Sihikin, “rl’he Plfficiency of’ Utilization of P’uel-p; nerg}

Resources in hlachine Building, ‘ ‘ f~~(lflo( ,()], (> h /102 )(1 )’.s tl ‘().

No. 12, 1979, p. 49.

‘ ‘\’. A. ~hmurko, “F;conon~ics of F;lectric I+lnergy’-/4 (’ommon Concern, ” fi’koflof?zi(}l( ~sA’(l\’(/” ,Aru:(tu, No. 4, 1981, p. 9.

““Fuel and I+:nerg~– Stric.t ~lccountahilit~’” pr(Ir(i(J

1‘Aruin,v. I)ec. 7, 1979; S. IIogatko, “rl’he ~!’orking Kilowatt, ”

/’r(J[’(i(J, ,Jan. 8, 1980: sec also Zhmurko, op. cit.

‘ l)ol~iktl, “’I’() 1 ncreasc th(~ 1,(I\I(~l ..., op. cit., p. 2;~.
Ch. 7—The Prospects for Energy Conservation In the U.S.S.R. ● 237

annual change. The Ministry of Power has

been blamed for failing to insulate power stations and streamlines. As a result, 24 million

gigacalories of thermal energy are purportedly lost each year. But the norms governing insulation have not changed since

1959.36

The combination of a consumption system

with no meters, prices too low to encourage

strenuous conservation efforts, and meaningless norms produces a vicious circle which

has been very difficult to break. The deficiencies of the price system make the norms

necessary, but the lack of measurement apparatus makes them easy to virtually ignore.

So long as this situation persists, there is little incentive to obtain meters or to pressure

Minpribor, which at present cannot be induced to produce them. The root of the problem is the fact that energy has in the past

been so cheap in the true economic sense

that careful monitoring was unnecessary.

Now that this is no longer the case, the task

of the Soviet system will be to adjust to the

new circumstances. It may be expected,

however, that the rigidities and dysfunctional side-effects of the command economy

will make change slow, especially if the

political leadership is less than fully committed to conservation.

Monitoring and Enforcement

of Conservation

The Soviet leadership’s commitment to

housekeeping strategies might be measured

by the effort put into creating effective

machinery for monitoring and enforcement.

In the last year, enforcement offices with

modest functions have been upgraded and

given greater powers; the scale of monitoring activity and enforcement has increased;

and the official publicity given to the effort

has grown. Officials of the monitoring agencies themselves, however, are among the

most outspoken in charging that their efforts have been almost totally ineffective.

“ 1 )011 I 1A’( J 1(’<lt [It’ 1,{)+[ , \]() /, ‘!7(/ //1( )II /, // //1( /)( ./ ( ) ) i

\)/ (/ /):)/( ~// / \ ( \ ( ) ( ) I !17 ! ) , p!) t 2- 1 \ , I!) ,1 I )1{ s \ ( ) 7,-)7 !-l.\. \ 1:1}

~~ , 1 S)%( ), [)1) 1 () I !)

The two most visible enforcement offices,

the State Power Inspectorate of the Ministry of Power and Electrification and the

State Gas Inspectorate of the Ministry of

the Gas Industry, are well-established

bodies. Originally charged with oversight of

the supply of gas and electricity in their

respective ministries, their jurisdiction has

been expanded to include a wide range of

other industrial ministries. In theory, the

State Gas Inspectorate can recommend administrative fines of up to 100 rubles, and it

has the power to cut off an offender’s gas

supply. In practice, however, such powers

are weak. The likelihood of a cutoff is very

small, and even the imposition of a fine must

be assessed by the apparatus of the local

Soviets. The “recommendations” of the inspectorates have been widely ignored by

enterprises.

The energy inspectorates are useful,

however, in conducting investigations which

have publicized the extent of inefficient

energy use throughout Soviet industry.

Such publicity in itself will do little if

anything to influence the incentive structure

which regulates the behavior of Soviet enterprise officials, but it may be a first step to

potentially more drastic actions.

Another way of publicizing official Soviet

policy is through public mobilization campaigns. Common devices in the conservation

campaign include ‘‘commissions and

‘‘staffs" located in factories to perform

public inspections; “raids and contests for

energy conservation; ‘‘socialist pledges” and

“personal creative plans” to save energy.

These groups lack power and are usually

regarded as a symptom of low priority and

inaction. This appears to be true of the conservation campaign; in fact, many enterprises are not even going through the motions. In 1978, the State Power Inspectorate

found that 21 of 48 enterprises surveyed in

the Ministry of Ferrous Metallurgy had

made no move to apply a recent statute establishing bonuses for workers and engineers for saving energy, and about a third of

the enterprises had adopted no energy-
238 ● Technology and Soviet Energy Availability

Now no one will reproach us that we are devoting Iittle attention to saving electrlc power

A Soviet cartoon that appeared in Pravda in March 1978

saving program at all.37 According to one account, the much-vaunted public groups are

“activated only when the corresponding

directives come down from above and

gradually dwindle down to nothing as soon

as the campaign is over. "38

The result is widespread cheating. According to critics in the energy inspectorates, industrial enterprises have become

adept at saving awe-inspiring amounts of

energy—on paper. For example, in 1978 the

Uzbek Ministry of Municipal Services

claimed to have saved 410 tons of gasoline, 2

percent of its annual consumption. An official inspection discovered that the ministry’s drivers did not log gas consumption

in their trip reports, routinely exaggerated

the length of their trips, and sold quantities

of gasoline on the black market.39 Such accounts have lately become common in the

Soviet press.

The enforcement system is now being expanded. A recent official decree on energy

conservation instructs all ministries, state

agencies, and republic-level Councils of

‘ \’[Js[JlfJ\, {Jp tit., p :)4.

‘h I u, Kop}’[o\’, ‘‘W’hat 1 )otIs ( I](I .lnal}’sls Say”?” .Sot sia/-

isticiresiza}~a industri.va, ,July 5, 1979; see also Ilinskiy, op.

(it

‘(’1 linski~, op. tit.

Ministers to develop conservation offices. ’()

In 1980, a decree of the U.S.S.R. Council of

Ministers upgraded the official rank and

powers of the conservation inspectorates of

the Ministries of Gas and Power.41 T he

responsibilities of the Gas Inspectorate now

include gas consumption throughout the

economy—a change which has increased its

jurisdiction from 22,000 enterprises to

150,000. 4

’ In addition, the Gas Inspectorate

is now responsible for forwarding recommendations to the State planning apparatus on

whether natural gas should be used in proposed new enterprises; passing on all proposals to install new gas-using equipment;

demanding the removal from service of old

and inefficient gas-burning devices; and

—

“““I’() 1 nlpro~[l tht~ l;[t)non]i(s of ~’ut~]s, op. t!it.

4

“1’ht’ official t(>xt appears in ,$’c)ljrurlijc’ pcj.~ IUIIC)I 1(’rlii

pr(l I I t[’/.st I I(I .$’,S.$//, !io. 14, 1 9X(), pp. ;l~l!)-fl-1~. A ~tatt~nlent t)~’

TASS appeared in Sotsiafisticheskaya industriya on June

22, 19M). Sc’t> also “’1’11[’ Kilowatt hlust 11(’ f’ut to \lrork, ”

})ra~ I(i[I, I )[x’. 1 ~}. 19H(); and ,!. S. i’()~t(lnk(), ‘ ‘To 1 nlpr(jk[~ t ht~

(’ont rot of ( ;as [ I( ilizat ion in t ho N:it ional l;(’ononlJ, (;{~~f)-

(‘o I’(] I) rf)m tI vh ion HC J,W t, N(). 8, 19X(), pp. 20-22. ‘1’ht~ ~hange is

part IJ ~1 nla~t[’r 01 nomcnclat ure: t h{’ Sta [e ( ;as I nspw’t orate

has lxwn upgr-adwt trom t ho rank of” {~/~ro r /~ni}’t {adnlinis t ra 1 ion I t ~) ~rlfl I I r) f ) }1~~ (Il)r(l I ~ i~II) I )I(J (chief administration),

w hil~’ t h[~ .st att> [}ower I nspect oratt’ has he[’n promoted from

t ht~ ( )ff i(t) of l)owr[~r Supp]} an(i ()1 (Jrsight of ( lse to St atfl

l’ow[~r 1 nsptw(orat~~ and Sal[I~ ( )f f i[tl t ht~ LLhangc of or(j[~r

pr[~sunlat)l} refl~lt’t ing a ~ha n~[~ in (lnlpha~is in the agt~n~~r

f )t ficia 1 d u t it~s.

‘‘1’()~rtcrlko, op. [’it.
Ch. 7—The Prospects for Energy Conservation In the U.S.S.R. • 239

screening recommendations for mass manufacture of new devices. Inspectorate representatives have also been made official

members of so-called ‘‘acceptance commissions,” the bodies charged with commissioning new completed buildings and plants

which are about to be transferred to the user.

Membership on these commissions gives the

State Gas Inspectorate the power to veto the

commissioning of new plants with gasconsumption systems not up to official

regulations.

It will be some time before the impact of

the Gas Inspectorate’s new powers can be

measured. On paper they resemble those

technically available to similar enforcement

offices, notably water-quality inspectorates,

whose actual influence is known to be

modest. 43 But analogous groups have made

impressive claims. In 1980, the Power Inspectorate reportedly made over 60,000

plant inspections, imposed over 100 million

rubles in fines, and saved 1.5 billion kWh of

electricity. It is difficult to evaluate the accuracy and practical effect of these assertions, but an important inference can be

drawn from the evolution of their tone over

time. Power Inspectorate officials who now

boast of housekeeping savings were recently

writing derisively of the local energy-saving

efforts, stressing instead the importance of

central investment measures as the only way

to meaningfully conserve energy.44

This change in attitude, together with the

general evolution of official policy, suggests

that emphasis in the conservation campaign

as a whole has shifted from high- to lowinvestment. The stress of such a strategy

would be on the small innovations that enterprises can implement without central investment—substituting stamping for cutting in

the manufacture of small metal parts, for example. If a locally oriented conservation

strategy has in fact been accorded priority,

and if Soviet leaders are serious about

energy conservation, there should now be

evidence of more prominent participation in

these campaigns by the apparatus of the

Communist Party. References to such involvement by the Party have hitherto been

rare.45

OTHER CONSERVATION

STRATEGIES

The preceding discussion has suggested

that the U.S.S.R. lacks the capital to implement a major high-investment conservation

strategy and will encounter difficulties in

monitoring and enforcing low-investment

measures. These do not exhaust the leadership alternatives. It can also impose

calculated fuel and power cutoffs. Such tactics would obviously be reserved for emergencies, but they would not necessarily impose unprecedented hardships on industrial

or residential consumers-or seriously increase threats to economic growth. The

European portion of the Soviet Union has

historically experienced chronic shortages of

power and fuel. Difficulties during the

1980’s might, therefore, be viewed as a

return to a traditional state of affairs that

was interrupted by a brief period of energy

abundance in the 1960’s and 1970’s.

One would expect Soviet authorities to be

experienced in allocating shortages and cutoffs so as to preserve economic growth, and

to be prepared to force unable or unwilling

Soviet industry to conserve energy. There is

no sign of coordinated implementation of

such measures, however. The allocation of

electrical power, for example, resembles a

tug-of-war in which Gosplan and the industrial ministries are pitted against the Ministry of Power. The quotas assigned by the

Ministry of Power to its regional power authorities are smaller than the quotas as-
240 • Technology and Soviet Energy Availability

signed by State planners to each of the consuming industries (based on the industries’

own statements of their power needs). The

result is power cutoffs. Those who are unable

to pad their requirements so as to ensure a

healthy margin of safety are those who suffer.46

Moreover, chronic problems in fuel supply

to powerplants frequently cause the unified

power grid that serves the European part of

the country, the Urals, and the Transcaucasus to operate at reduced power, Shortages are not apportioned according to a

system of political or economic priorities,

but are spread equally among all unified grid

customers in “universal brown-outs. ” Those

users whose production depends on small

electric motors, which slow or stop alto-

“},l. h’edosluk, “ I’r(Jtt’~.t l<; nrrg~, ” I)rw{ 1(111, I)ec. 7’, 1980.

gether when the power drops, are most seriously affected. Similarly, lack of sufficient

capacity to cover daily peak demand forces

network operators to resort to load-shedding, sometimes blacking-out entire areas.

There is no sign of priority setting to determine who shall bear the costs, and indeed,

there is evidence that these costs have never

been systematically studied. As a result,

undersupply of kilowatt-hours that cost 2 or

3 kopecks to generate cause losses of production on the order of 1 or 2 rubles.” These examples support the generalization that rationing and cutbacks, although increasingly

frequent, are not well planned. Nor are they

a particularly promising route for enforced

energy savings in the economy.

$ St~riko\ri~’h, op. cit,

OFFICIAL SOVIET CONSERVATION TARGETS

The preceding sections have described

Soviet conservation strategies and the opportunities and constraints appropriate to

them. The true test of any set of conservation measures is the extent of energy savings. These are particularly difficult to identify in the U. S. S. R., both because consumption data are scarce and difficult to interpret,

and because of the manner in which energy

savings are counted.

Energy savings in the U.S.S.R. are computed on the basis of the last year of the Five

Year Plan (FYP) to which they apply. In

other words, if a “savings rate” of 100 mtoe

is claimed, this means that by the last year

of the plan actual energy consumption was

lower by 100 mtoe than it would have been at

the input norms experienced at the beginning of the plan period. The results are noncumulative, and the reduced consumption

rates achieved by the end of one plan become

the norm for the following one.

The U.S.S.R. claims that in the Ninth

FYP rates were reduced enough to save 81

mtoe and in the Tenth, 62 to 78 mtoe, The

latter was considerably below the plan

target which called for savings of 100 mtoe.48

The savings target for 1985 is 100 to 106

mtoe, roughly 10 percent of 1980 domestic

energy consumption.49 Table 52 shows the

way in which the savings target for 1980 was

broken down in the original plan. It demonstrates how conservation is defined in the

Table 52.–Tenth FYP (1976-80)

Planned Energy Savings

27 mtoe . . . . Decline--in consumption of fuel

per unit of output.

24 mtoe ... . . Increase in output of electricity

from nuclear power and hydropower.

22 mtoe . . Decline in consumption of electricity

and heat per unit of output.

12 mtoe ... . . Better use of secondary heat

resources.

9 mtoe . . . . Efficiency gains in consumption of

light fractions.

4 mtoe . . . . . Cuts in losses from storage and

transportation.

SOURCE Eko, September 1980 p 124
— . — . —

Ch. 7—The Prospects for Energy Conservation in the U.S.S.R. ● 241

U. S. S. R., and the areas in which major

energy savings are anticipated. These

figures include net additions to nuclear and

hydropower capacity, items which would not

be considered “savings” in the West.

The most noteworthy feature of the

targets for both the Tenth and Eleventh

FYPs is their modesty, particularly if they

represent the outer bounds of official optimism. The original 1980 goal of saving 100

mtoe amounted to conserving about 10 percent of the total primary energy planned for

distribution in that year. If the figures are

adjusted to subtract net additions of nuclear

and hydropower capacity, actual planned

savings were about 7.5 percent of total

primary energy. The 1985 goal is even less

ambitious. Although the total primary energy available for distribution is projected to

grow by over 20 percent, the total amount to

be saved remains unchanged from the previous plan.

Based on past performance, however, the

prospects for achieving even this are uncertain. Although Soviet energy consumption

nearly doubled between 1965 and 1980, the

‘‘annual savings rate” declined from 16.1 to

5.6 percent over the same period.50 A careful

examination of Soviet predictions for the

period beyond 1985 shows that experts expect this downward trend to continue, albeit

at a more moderate rate, to the end of the

century. One prediction is for a savings of

only 49.8 mtoe by 2000,51 a forecast predicated on the assumption that major technological advances will be achieved, i.e., that

high-investment conservation strategy will

be successfully implemented. Although the

electric power and ferrous metallurgy sectors have continued to improve their energy

efficiency, Soviet difficulties with assimilating technological innovation, and the extreme shortage of capital for investment,

make the prospects for wholesale achievements across a number of industrial sectors

unlikely. Without evidence of fundamental

changes in investment and conservation

strategies, and without basic reforms of incentive, price, and monitoring systems,

there is little reason to expect more than

modest energy savings in the Soviet Union

over the next 10 years.

PROSPECTS FOR CONSERVATION

The picture that emerges is of a level of

technology and a structure of energy consumption that provide ample opportunities

for energy conservation, and an economic

system which impedes the implementation

of promising conservation measures. Some

idea of the potential for and difficulties to be

encountered in conservation in the U.S.S.R.

can be gleaned from an examination of

several areas in which energy savings might

be most easily achievable.

Perhaps the most promising target for

Soviet energy savings is in boiler uses, i.e.,

the use of fuel for the production of electricity, steam, and hot water. Energy consumption in boiler uses is increasing rapidly. In

1970, they accounted for 54 percent of the

total primary consumption; by 1980 the

share had risen to 59 percent.52 This trend is

expected to continue. One Soviet source estimates that by 2000 half of all Soviet energy

consumed will be in the form of electricity.53

Boiler uses are potentially the most flexible

means of energy consumption, and they give

the U.S.S.R. a measure of flexibility in its efforts to substitute coal and gas for fuel oil.

Efficiency gains in the production of electricity and heat have been the chief source of

energy savings in the past two decades, but

an upper limit has nearly been reached. Even

the most optimistic Soviet forecasts see sav-
242 ● Technology and Soviet Energy Availability

ing no more than about 16 mtoe in this area

by 1990,54 a small fraction of the roughly 249

mtoe in conversion losses the Soviet economy will be experiencing by that time.

Figure 21 shows the striking pattern of

decline in efficiency gains over the last

decade. The trend suggests the possibility

that by 2000, efficiency in electricity and

heat generation may actually be declining.

Nevertheless, replacement of small furnaces

and the displacement of the direct use of fuel

in them should lead to continued, if small,

overall gains in energy efficiency .55 Soviet

“’1’roi(ski}’, op. cit., p. 25.

‘

)

’

> Tht’re are o\’er 2H(),()()() small furnaces and boilers scattercxi throughout the country’. These produce 1.5 hil]ion of a

nii ( i(~na 1 tot a 1 (}f ;]. 2 ~igaca lorit’s f) f hc>a t a n n u al l.v. Their t’f’fiL. it>m..v is low: t hey require an a~vra~v of 200 t () 220 kg of

standard fuel t o produce I gigaca Iorie of heat, w hwxws the

largt~r l)oil(~rs requirt’ onl~ 1‘7;] [() 175 k~, S~JtI l,ala~ants, op.

cit., p. 40.

Figure 21 .—Where Energy Savings Come From

(1961-85)

Legend:

A. More efficient use of heat and electricity

B. Recovery of secondary heat resources

C. Efficiency gains in use of boiler and furnace

fuel

planners are aware that future progress will

depend more on efficiency gains in the use of

electricity and heat, rather than in their production.

Further insight into energy conservation

prospects may be gained from analysis of individual consumption sectors. Agriculture,

whose share of total energy use has grown

substantially in the last two decades, is particularly interesting. A large part of the considerable agricultural investment under the

present Soviet leadership has consisted of

mechanization of farm and off-farm operations and food processing. Table 49 recorded

the result. The amount of energy used by the

agricultural sector doubled between 1965

and 1980, from 30.2 to 60.5 mtoe. The horsepower available per worker in Soviet agriculture increased from 7.7 in 1965 to 22.9 in

1979, and continues to rise rapidly .5’

This growth in energy consumption has

largely consisted of electricity, a reflection of

an active rural electrification policy. Total

agriculture-related use of electricity rose

about fivefold between 1965 and 1979, from

21 billion to 102.3 billion kWh.57 In 1965

most of the fuel consumed in the agricultural

sector was diesel fuel and gasoline, but by

1979 electricity accounted for more than 10

percent of total agricultural energy consumption. This proportion is growing.58

Agriculture is an important sector for

overall energy conservation policy because it

may be one of the few sectors of the economy

in which more or less arbitrary cuts could be

made in case of emergency. Agriculture’s

share of total energy—just as its share of

capital investment—depends on whether it

continues to enjoy the high priority accorded

it under the present leadership. There is at

present no evidence that Soviet leaders are

considering any major curtailments. Prime

Minister Tikhonov's report to the 26th Party Congress called for a 50-percent increase

in the horsepower available per agricultural

1961-65 1966-70 1971-75 1976-80 1981-85

(7th FYP) (8th FYP) (9th FYP) (plan) (forecast)

(lOth FYP) (llth FYP)

SOURCE Vestnik rnashinostroyeniya No 3 1980 p 5

‘ $’(/) ()(///()},(, /, /?,)z)(J),,\fro, 1979, p. 1 ’20.

‘ I hid., p, I 25.

‘(’an lpht>]l, op. cit.
Ch. 7—The Prospects for Energy Conservation In the U S S R ● 243

worker during the Eleventh FYP.59 Still,

eventual successors to Premier Brezhnev

may cut back the massive flow of inputs to

the countryside, and it is possible that

agriculture could be held considerably short

of the roughly 156 to 187 mtoe it might have

expected to receive by the end of the century.

Such a change in priorities would allow the

Soviet economy to save some of the lightfraction petroleum products which make up

a substantial portion of agricultural consumption. To the extent that agricultural

energy consumption continues to shift

toward electricity, the demand for lightfractions is lightened further. On the other

hand, increasing electricity consumption

compounds Soviet problems in shifting away

from fuel-oil in electricity generation. Opportunities to ration agricultural electricity

supply, therefore, will presumably be

welcome.

Another promising candidate for conservation efforts is the energy producing sector

itself. The importance of conservation here is

magnified by the fact that own-use by energy producers is bound to increase. The refining and petrochemicals industry, for example, in 1979 consumed 7 percent of the country’s total output of refined oil. As the

Soviet Union increases the volume and

depth of refining, this share will grow, even

if efficiency is improved.60

Important savings could be gleaned here

by reducing losses, which are currently

estimated at 3 mtoe/yr in the gas industry

‘1’r(/ ( (/(/, I“(’t) 2h, 1 !)% I

‘(;, \l }’(’rrI)f)l(l\ , ‘(‘t )t)i(’r~ tIt II in t lt I’u(’] :In(i f;ntrg~ 1{(,-

+( )U r{.t,+ I 11 ( ht, ( ) I I t{ (, t I n i n ~r ,1 n [i I ‘(,( r( I(. 1) t, nl i( :i 1 1 1) f! (1 ~ t r~, ”

/i}/ ~n~l \ (l { 1~}1 h)~( ~lf )qi I(I 1{ jI~// I { nl~j s(I, \ { I 1 I. 1 !)+(~, t)[) I :1-

1 (~, ] n J 1’1{ S N () J. !) 1X2, J;] II 12, 1 !)~ 1, p 17

alone. In the coal industry 6.2 to 9.3 mtoe are

lost annually through faulty transportation

and storage. In the oil industry in 1980, 13.5

out of a total of 47 billion cubic meters of

associated gas were lost in 1979.61 Newspaper accounts claim that 30 million tons of

crude oil (i. e., 5 percent of total Soviet output) are lost annually by producing organizations, i.e., before the crude oil is shipped.62

Further sizable losses occur in transportation, because of the poor state of repair of

tank cars and wasteful methods of transferring oil and oil products from one vessel to

another in transit.63 Finally, losses of electricity in transmission networks are substantial. In 1978, these amounted to more

than 9 percent of the total generated (95 billion kWh), and the share will increase as

transmission distances rise.64
244 ● Technology and Soviet Energy Availability

THE POTENTIAL ROLE OF THE WEST

IN SOVIET ENERGY CONSERVATION

Western energy technology might play a

role in either a high- or low-investment conservation strategy. If Soviet planners implement centralized, high-investment methods,

logic would dictate that it consist primarily

of new plant and processes in the most

energy- and capital-intensive industries—

metallurgy, oil refining and petrochemicals,

chemistry—and that investment be aimed at

reducing own-use within the energy-producing sector itself. Promising areas for industrial conservation include the following:65

●

●

●

●

Chemicals: improvements in the energyefficiency of production of yellow phosphorus, chlorine, caustic soda, ethylene,

acids of phosphorus and nitrogen,

divinyl monomers. Investment in these

processes could produce reductions of 5

to 25 percent in energy use below current levels. One example frequently

mentioned in Soviet sources is process

changes in the production of ammonia,

which could considerably cut unit electricity consumption.

Computers: institution of microprocessor and minicomputer-based process

control systems in such energy-intensive processes as oil refining.

Metallurgy: improvements in aluminum-refining, continuous steel-casting,

combined-blast systems for blast furnaces, autogenic processes in nonferrous metallurgy.

Materials: production of cement by the

dry method, which consumes half as

much energy as the wet method.

With the exception of computer process

control, none of these require particularly advanced technologies, and if Soviet policy-

“ ‘These examples are drawn from a series of ar(icles putJlishcd in }Jlar/<J/(J)I, k}/((J~a\.st{ (~, No. 2, 1979, Similar “shopping llsts’ of opport u n I t it’s for- ener-gjr sa I’ i ngs through ct’nt r}ilizt~d in ~’est men t art’ {>ornrnon in the So\riet literature, See

ti]~() I u. .Sihikin, “Tht’ f;tfi~’it’n(.~’ of [It ilizat ion of Fuel-FJnerg~

Resour(.t’s in hl a(.hinti l~ui]ding, ‘ fl/~lrl~)/ (j\(, /: /10.?Jf(l)’.YI1‘(),

N(). ] 2, ] 979, pp. $!+~i.

makers decided to import the required

capacity, they would likely find manufacturers throughout the West who could

meet their needs. In fact, implementation of

a high-investment conservation strategy is

tantamount to industrial modernization.

There is no reason to believe that the same

constraints that have inhibited wholesale

purchase and implementation of Western industrial technology in general–including

shortages of hard currency and difficulty in

absorbing and diffusing imported technology-will not continue to operate.

A serious, high-priority, low-technology

approach to conservation might lead to considerable demand for Western equipment to

bolster the inadequate output of Soviet industry in insulating materials, metering

equipment, small boilers and furnaces, jets

and burners, static condensor batteries, etc.

In the past, however, Soviet ministries and

foreign-trade organizations have been unwilling to expend scarce hard currency on

small items of this type, partly because they

are less attractive than high technology

items and partly because the need for them

is scattered across many separate organizations.

An important complement to conservation is the restructuring of energy consumption to allow substitution among primary

energy sources. Here major investment is

needed soon in expansion of gas pipeline

capacity, particularly expansion of local

feeder networks; improvement of capacity

for cleaning and enriching coal; peak-coverage technology to make up for the rigidities

of nuclear power in the European zone of the

country; acceleration of nuclear powerplant

construction and transmission lines; and

development of refinery capacity. These

tasks should not be postponed, yet the

evidence from Soviet literature is that planners are experiencing severe delays in all of

them.
Ch. 7—The Prospects for Energy Conservation In the U.S.S.R. ● 245

Soviet decisionmakers might resort to

Western technology to eliminate the most

crucial of these bottlenecks. If they do so in a

manner consistent with behavior of the past

two decades, Western technology will be

sought to gain a degree of flexibility that

compensates for the sluggishness of domestic industry. The list of sectors in which the

Soviets have made the greatest use of imported technology reveals an interesting pattern. In the chemical and agrochemical industries, in the automotive and trucking industries, and in machine tools, much of the

Soviet import activity has been clearly

aimed at accelerating new policy initiatives.

Restructuring Soviet energy demand to

allow an indispensable substitution among

primary sources of supply might fall into the

same urgent category.

Perhaps the most important connection

between conservation and technology transfer, however, lies in possible displacement effects. To the extent that conservation is tantamount to modernization, a vigorous and

successful conservation program could

result either in an overall reduction of the

need for Western technology or in a displacement of imports toward smaller, lower

technology equipment. But, since the main

thrust of Soviet energy policy appears to be

directed toward energy production rather

than conservation, it is possible that Soviet

need for large, high-technology Western

items will be correspondingly greater.

Production-related imports are more likely

to be concentrated in a few industries and

firms than are imports targeted at energy

consumption.

SUMMARY AND CONCLUSIONS

The structure of Soviet energy consumption, particularly the high percentage of

energy consumed by industry, presents

many opportunities for conservation. This

could well be accomplished both through a

centralized, high-investment strategy and a

local, low-investment strategy, the latter

aimed at improving the efficiency of operation of equipment already in place. Conservation should be an extremely promising policy

for the U.S.S.R. Effort invested in saving

energy could yield a greater payoff at the

margin than investment in new production,

and the difference would grow as in time production costs rise.

The emphasis of the Soviet energy policy

has hitherto been on production rather than

conservation. As in the West, the perception

of a pressing need to conserve expensive

energy resources is relatively recent and

serious conservation campaigns are relatively new. Stress has lately been on a local, lowinvestment rather than a centralized highinvestment approach. Significant savings

could be achieved through a low-investment

strategy, but it is unlikely to produce major

results very quickly because of weaknesses

in the price structure and the prevailing incentives, the enforcement mechanism, the

system of norms, and monitoring of measurement.

There is little reason to expect that Western nations will have significant impact on

Soviet energy conservation. Short of contributing to a long-term program of extensive industrial modernization, the most that

the West could provide is a variety of “lowtechnology” conservation equipment, on

which the U.S.S.R. is unlikely to expend

precious hard currency. In sum, while major

opportunities for energy savings exist and

indeed have brought results, rigidities in the

political and economic structure could still

prevent Soviet policymakers from taking full

advantage of them.
CHAPTER 8

Energy and

the Soviet Economy
CONTENTS

Page

SOVIET ECONOMIC PERFORMANCE . . . . . . . . . . . . . . . . . . . . . .......249

Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......249

Prospects for Economic Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....251

ENERGY IN THE SOVIET ECONOMY. . . . . . . . . . . . . . . . . . . . . . .......252

Energy and Economic Performance to 1980.. . ........................252

The Formulation of Energy Policy . . . . . . . . . . . ........................255

Energy and Future Economic Performance. . . . . .......................261

ENERGY AND THE SOVIET ECONOMY: BEST AND WORST

CASE SCENARIOS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..265

Alternative Soviet Economic Growth and Hard Currency

Trade Scenarios, 1981-85. . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........266

ALTERNATIVE SOVIET HARD CURRENCY TRADE SCENARIOS,

1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........................273

SUMMARY AND CONCLUSIONS. . . . . . . . . . . . . . . . . . . . . . ...........275

APPENDIX A. – Export and Domestic Output Performance for

Selected Nonenergy Products . . . . . . . . . ..........................278

LIST OF TABLES

Table No. Page

53. Average Annual Rates of Growth for Soviet GNP, Factor Inputs,

Factor Productivity, and Consumption Per Capita. . . . . . . ............250

54. Distribution of Soviet Gross Fixed Investment by Sector unselected

Years, and of Increments to Fixed Investment for 1970-77. . . . . .......253

55. Estimated Soviet Energy Production and Foreign Trade, 1980.........254

56. The Importance of Soviet Energy Exports and Imports, 1972-79.......254

57. Major Assumptions Underlying 1980-85 Scenarios . . . . . . . ...........268

58. Fuel Balances by Category, 1985 Scenarios and 1980 Base Year. .......269

59. Alternative Scenarios for 1980-85. . . . . . . ........................271

60. Major Assumptions Underlying 1990 Scenarios. . . ..................274

61. Alternative Scenarios for 1990. . . . . . . . . ..........................274

LIST OF FIGURES

Figure No. Page

22. Energy Decisionmaking in the Soviet Union. . ......................257

23. The Soviet Economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........262
CHAPTER 8

Energy and the Soviet Economy

The energy sector importantly influences

and is influenced by the nature and health of

the Soviet economy as a whole. Those who

formulate energy policy do so in a context

which is affected by the structures and performance of the national economy. Their

decisions, in turn, help to set the parameters

for economic performance. This chapter explores the role of energy in the Soviet

economy. It seeks to highlight the economic

impacts of alternative plausible levels of

Soviet energy availability, and to point out

major consequences of various economic

eventualities for energy production.

The chapter begins with an overview of

the Soviet economy, highlighting recent

growth trends. This provides a basis for examining the role of the energy sector in that

economy, for identifying some of the factors

that influence Soviet energy policies, and for

describing the recent direction of these policies. The chapter then presents a simplified

description of the Soviet economy that can

be used to better understand prospects for

energy and economic growth in the present

decade. It culminates in the development of

“best” and “worst” case scenarios for Soviet

economic growth and energy trade in 1985

and 1990.

SOVIET ECONOMIC PERFORMANCE

ECONOMIC GROWTH

The rate of Soviet economic growth over

the past quarter century has generally

declined. This slowdown is reflected in gross

national product (GNP), investment, and

consumption spending growth rates. According to Western estimates, Soviet GNP

grew at close to 6 percent annually in the

1950’s, but growth slowed to 5.0 to 5.5 percent in the 1960’s, to 3.8 percent in 1971-75,

and to 2.8 percent during the Tenth Five

Year Plan (FYP), (1976-80)1 (see table 53). Investment has traditionally grown faster

than consumption in the Soviet economy. In

the 1950’s, new fixed investment grew at an

average annual rate of 10 to 12 percent, contrasted with 5 to 6 percent annual growth for

consumption. Since then, the absolute and

relative gap in growth rates has alternately

narrowed and widened. In the period

1976-79, annual growth was roughly 4 percent for investment v. 3.2 percent for congumption.2 The average annual growth rate

of per capita consumption, a major contributor to maintaining political stability for

the Soviet regime, fell from 4.6 percent per

annum in the 1950’s, to 3.6 percent in the

1960’s, and 2.5 percent for the period

1971 -79.3

Soviet defense spending is commonly

believed to have grown roughly in line with

GNP for most of the postwar period. In the

past several years, however, estimated

defense spending has grown at a more rapid

rate than GNP. According to the Central In-

‘( ;r(w)nsladt), op. c it ; and (’ rnt ra I 1 n tt’lligt’ ncc Age ncf,

.$/ l)t /[ /(/ ti(lrr,. ()/ .so/ /(’t (;ro/( (h ()/) tiot~ ~ (() Iwl’t’i. F: R ’79- 1()1:11

(M’ashin~ton, 1), (’,: (’ 1,1, Nlarch 19’79).

‘S(~tI ( ~ t~rt rud[’ S(hr(xder-(; revnslacie, “(’consumption and

1 nconle I)istrit)ut ion, ” pap(~r pr(’sented at the A irlie }IOLIS(I

(’onfcrencr, ( )ct. 2;1-25, 1 W)

249
250 ● Technology and Soviet Energy Availability

Table 53.—Average Annual Rates of Growth for

Soviet GNP, Factor Inputs, Factor Productivity,

and Consumption Per Capita

(percent)

1951 1956 1961 1966 1971 1976

-55 -60 -65 -70 -75 -80

GNP . . . . . . . . . . . . . . . . 6.00/0 5.80/o 5.00/0 5.50/0 3.80/o 2.80/o

Labor a . . . . . . . . . . . . . . 1.9 0.6 1.6 2.0 1.7 1.2

Capital ... , . . . . . . . . . . 9.0 9.8 8,7 7.5 7.9 6.8

Land . . . . . . . . . . . . . . . . 4.0 1.3 06 -0. 3 0.8 –c

Combined factor

productivity . . . . . . . 1.4 1.8 0.9 1.5 -0,4 -0,7

Per capita

consumption b 

. . . . . 5.3% 4.2% 2.5% 4.7% 3.2% 1.6%c

a Marl-hours

b Total consumption

cRefers only to 1976-79

SOURCES Rows 1-5 (1951.70). Rush V Greenslade, “The Real Gross National

Product of the US S R , 1950.1975, ” In Joint Economic Committee,

U S Congress, Sov/ef Ecorrorrry in a New Perspective (VVash!ngton,

D C U S Government Prlntlng Off Ice, 1976), Rows 1.5 (1971.79)

Central Intelligence Agency, The Sovfet .Ecorrorny Irr 1978.79 and

Prospecfs for 1980, ER.80.10328 (Washington, D C June 1980),

Row 6 (1 951 .70), Gertrude E Schroeder and Barbara S SeverIn, “SO.

vlet Consumption and Income Poltcies In Perspective, ” In Joint

Economic Committee, op cit pp 620-660, Row 6 (1971 .79) Ger

trude Schroeder. Green slade, “Consumption and Income Dlstrlbutlon, ” paper presented at the Alrlle House Conference, Oct 23.25,

1980, and Central Intelligence Agency S/rnu/at/errs of Sov/et

Growfh OptIorrs (O 1985, ER 79.10131 (Washington, D C March

1979) Prellmtnary 1980 est!mates suppl{ed by the Central In.

telllgence Agency

telligence Agency (CIA), the defense share

rose to a level of 12 to 14 percent of Soviet

GNP at the end of the Tenth FYP period,

after having stabilized at roughly 11 to 13

percent of GNP between 1965 and 1978.4

Although there is debate in the West

regarding the relative weight of different factors in explaining the Soviet economic

slowdown, identification of the basic factors

is not in dispute. A country’s aggregate output typically depends on the size of its labor

force, its accumulated capital stock, and the

combined productivity of capital and labors

(Land is a third factor of production when

agricultural output is included in the summary output measure. ) The more rapid the

— 4 Greenslade, op. cit.; CIA, Simulations , op. cit.: and

CIA, Tfie Soc’ict Econom?’ ..., op. cit.

‘There is now, moreover, a growing 3-factor production

function literature based on capital, labor, and energy.

growth of capital and labor and of their combined productivity, the greater the rate of

growth of output. Soviet growth rates for individual 5-year periods for each of these factors are shown in table 53,

Labo r

6

Growth in the Soviet labor force has fluctuated as a result of underlying demographic

factors and changes in the labor force participation rate, i.e., the labor force as a

percentage of the population of able-bodied

ages. The dramatic slowdown in labor force

growth in the late 1950’s was caused primarily by the fall in the birthrate during

World War II. The jump in the growth rate

in the 1960’s is attributable both to underlying demographic factors and to an increase

in the labor force participation rate from 83

to 88 percent, reflecting in large part a

significant increase in the number of women

workers. The 1970’s were characterized by a

gradual decline in the labor force growth

rate.

Capital

Although the overall rate of capital accumulation has slowed since the 1950’s,

Table 53 shows that it continues to be quite

high, particularly in relation to GNP growth.

Throughout this period, the capital stock

has grown much faster than the labor force.

This has resulted in a remarkably rapid rise

in the Soviet capital-labor ratio. In industry,

for example, the labor force increased about

140 percent between 1958 and 1978 (from 15

million to 36 million), while the industrial

capital stock grew by 14.5 times over the

same period. 7 This has led some observers to

attribute part of the decline in Soviet growth

6 All data cm So\iet labor are from ~lurray Feshbach and

Stephen Rapawy, “Soviet Population and hlanpower Trends

and Policies, ” in Joint Economic Committee, U.S. Congress,

S0( ‘ic t Econorn II in a A’P 1(’ Per.~pec ti 1 ‘e, op. cit. , pp. 1 13-1 54;

and Nlurray Feshbach, “Population and I.abor Force, ” paper

presented at the Airlie House Conference, Oct. 23-25, 1980.

‘hlartin L. W’eitzman, “Soviet Industrial Production, ”

paper presented at the Airlie House Conference, (kt. ‘23-25,

1980.
Ch. 8—Energy and The Soviet Economy ● 251

rates to strong diminishing returns to

capital in industry.8

Slowing growth of inputs has been reinforced by falling productivity. Increased

productivity of the factor inputs, made

possible by the introduction of new technology, and perhaps in some cases by improvements in the planning and management systems, accounted on average for 1 to 2 percentage points of the annual GNP growth

rate in the 1950’s and 1960’s, but in the

1970’s turned negative.

PROSPECTS FOR ECONOMIC

GROWTH

In 1979 Soviet GNP rose only 0.7 percent,

and economic growth in 1980 has been

estimated by the CIA at 1.5 percent. For the

period 1978-80, GNP increased by an annual

average of 1.9 percent, the lowest for any 3-

year period since World War 11.9 It therefore

appears that the U.S.S.R. has entered a

period of more fundamental constraints on

economic growth. As analysts in both East

and West have long anticipated, the Soviets

have exhausted the potential for rapid

growth based on an extensive strategy, i.e.,

the rapid accumulation of factor inputs with

relatively little emphasis placed on their

quality or their efficient use.

Barring a significant change in the labor

force participation rate and the death rate in

the 1980’s, the increase in the Soviet labor

force over the next decade is preordained,

i.e., all its potential members have already

been born. Western experts have estimated

that this rate of growth will be only 0.4 to 0,5

percent annually over the next decade, about

one-fourth the rate of the 1970’s. This

dramatic projected slowdown in the annual

growth of the population of able-bodied ages

is due to a number of demographic factors,

including progressive aging of the popula-

——— .— 8 This interpretation was first de\’eloped in \l artin 1,,

}freitzman, ‘‘So\iet I’ostwar (;rowth and Capital-I.abor Suhst it ut ion, A m(’rican F.’(onomic ” }if( iei(. IO]. 60, h’o, 4, %ptemher 19’70, pp. 676-692

“~’ IA, ~’h~) .~(~rt~f]t ~;con(Jm \ IH I,97N-W , op. cit.

tion, a fall in the birth rate since the 1950’s,

and a recent increase in mortality rates not

entirely explained by the age structure of the

population.

The slow growth of the labor force is expected to continue to the end of the century.

While the labor force participation rate may

be influenced through economic policy, it is

unlikely that it can be raised much more in

the absence of coercion. At 88 percent (v. 65

percent for the United States), the rate is

already the highest in the industrialized

world. These aggregate labor force trends

will be aggravated by the shift in the population structure towards non-Russians in Central Asia. Unless there is considerable migration of Central Asians to labor-deficit areas

of the U. S. S. R., Soviet industry could face

labor constraints even greater than those

suggested by the aggregate labor force projections.

Capital accumulation cannot continue to

grow at the high rates of the past without severely curtailing the share of output going to

consumption. In any event, the productivity

of such additions to the capital stock is questionable.

To counter these declines in the growth of

inputs, Soviet leaders are hoping for large increases in productivity. The Eleventh FYP

calls for an increase in the productivity of

“socialist labor” of between 17 and 20 percent over 5 years. 10 The growth of produc -

tivity is partly determined by economic

policy but, perhaps more fundamentally, it is

also conditioned by the economic system. In

particular, the capability of the economy to

generate ever larger output levels from given

‘‘inputs’ of labor and capital—in other

words, to shift from extensive to intensive

growth-is critically dependent on the

nature of the prevailing decisionmaking, information, and incentive systems. These

elements of the economic system will have a

fundamental impact on the efficiency with

which existing resources are used, and on the

“’~;kononli(’}1(’.sk(l)(l” gazfjta, No. 49, December 1980.
252 ● Technology and Soviet Energy Availability

extent to which technological progress and

industrial innovation are stimulated. A

significant improvement in productivity performance, therefore, would seem to presuppose important changes in the way in which

the economy operates.

Soviet leaders have understandably

resisted the idea that the economic system

requires fundamental change, but they have

accepted modifications classified as “improvements in the economic ‘mechanism.'"

In contrast to the limited decentralization

that has occurred in other socialist countries

such as Hungary, Soviet “reform” efforts

since the 1950’s have largely been devoted to

attempting to perfect the system of central

planning and to modifying organizational

structures and incentive systems so as to increase the likelihood that lower management

levels will operate in accordance with plan

directives.

The latest of these reforms, announced in

a party-government decree in July, 1979,

concerning the “improvement of planning

and the strengthening of the influence of the

economic mechanism in the promotion of

production efficiency and the quality of

work,” called for several changes in the planning and management systems. These included emphasizing interenterprise contractual obligations, strengthening the bonus

11 See tJoseph S, Berliner, “~~]anning and hlanagement, ”

presented at the Airlie Iiouse Conference, oct, 23-25, 1980.

system, and adopting new major success indicators for industrial management.12 In addition, there is to be a basic reform in the

wholesale price structure at the beginning of

1982. The implications of price reform for

energy are discussed in chapter 7.

U.S. experts on the Soviet economy have

been virtually unanimous in concluding that

these changes in the “mechanism” are not

fundamental, and are therefore unlikely to

significantly forestall a continued slowing in

Soviet economic growth.13 Indeed, the 1979

decree has been characterized as one of a

series of fairly minor reforms which began in

1965. The reform process has been likened to

“being on a treadmill, for most of them

amounted to reforming previous reforms

that failed to work.” 14 It is difficult to

evaluate these predictions, however, because

it is almost impossible to empirically

measure the impact of changes in economic

system on aggregate economic performance.

.—

‘ hlkc)rl<~nlichc~,vkcl>u guzetu. No. 32, August 19’79. See also

Berliner; op. cit., and Hans-} iermann IIohmann and Gertraud

Seidenstecher, ‘‘Anderungen irn Sowjetischen Planungssystem: Rezept gegen Wrachstrumsruckschlag?” 11, Bericht Nr.

33 ( Koln: Bundesinstitut fur ostwissenschaftliche und lnternationale Studien, 1979).

‘ ‘See, for example, Gertrude F;, Schroeder, “The So\’iet

I+~conomy on a Treadmill of I Reforms, ” ‘ “ in Joint P:conomic

Conlmittee, U.S. Congress, .Yo(ict Fjcononzj” irl u Time o f

(’har~gvi ~rol. 1 (Washington, D. C.: U.S. Go\’ernment Printing

office, 1979), pp. 3 12-340: IIohmann and Seidenstecher, op.

cit.: and C IA, The .S() [ ict Ecc)rlc)nl>’ in 1,978-79 , op. cit.

1‘Schroeder, op. cit,

ENERGY IN THE SOVIET ECONOMY

ENERGY AND ECONOMIC

PERFORMANCE TO 1980

Economic Growth

Easily accessible energy played an important role in generating past high Soviet

growth rates. Soviet “gross energy consumption” has increased roughly in line with

Soviet GNP over the past 30 years. However, energy consumption grew more rapidly

than GNP between 1950 and 1965, less rapidly in the 1965-75 period, and then again

more rapidly over the past 5 years. Indeed,

the elasticity of energy use with respect to

GNP (the growth rate of the former divided

by the growth rate of the latter) was higher

between 1975 and 1980 than in any of the

earlier subperiods, precisely at a time “when

the government has pursued a vigorous cam-
Ch. 8—Energy and the Soviet Economy ● 253

paign to encourage energy saving and reduce

waste.

15

Table 54 shows how the investment requirements of the energy sector compete

with other sectors of the economy. The investment share of agriculture, construction,

and transport-communications increased

from 25 percent in 1960 to over 35 percent

by the late 1970’s. Most of this increase

came at the expense of investment in housing and to a lesser extent, consumer goods,

trade, and services.

The investment share of the nonconsumergoods industrial branches (mainly machinery, industrial raw materials, and intermediate products) and the energy sector

Table 54.—Distribution of Soviet Gross Fixed

Investment by Sector in Selected Years, and of

Increments to Fixed Investment for 1970-77

(percent)

Fuels and

power. . . . . . . .

Agriculture . . . .

Construction

Housing

Trade and

services . . . . . .

Transport and

communlcatlons. . . . . .

Consumer

goods . . . . . . . . .

Other

Industry a 

. . . . .

1960 1965 1970 1975 1978 1970-77

(increment)

10.4% 11.6% 10.0% 9.7% 10.3% 9.1 %

13.2 16.9 17.7 20.6 19.9 24.6

2.8 2.6 3.6 3.8 3.7 5.2

22.8 17.1 16.6 14.4 13.5 8.5

16.1 16.9 17.1 15.1 14.9 11.1

9.3 9.6 9.4 10.8 12.5 14.6

4.8 4.3 4.3 4.0 3.3 3.6

20.8 20.9 212 21.6 21.8 233

Total b. . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

a

lncludes machinery and Industrial raw materials and Intermediate products

b Columns may not exactIy add to 100 percent due to rounding

SOURCES Calculations based on Cl A Simulations..., op cit and CIA. The

Soviet Economy..., op. cit.

have remained quite stable. The energy sector’s share was about 10 percent throughout

this period. Between 1970 and 1977 energy’s

share of increments to annual total fixed investment in the Soviet economy was only 9

percent. In December 1977, however, the

energy sector was declared a “leading link”

in the economy. Since then it has apparently

enjoyed priority status. In 1978, almost 50

percent of the increase in fixed investment in

industry was allocated to energy. In 1979,

roughly one-half of the increment in total

fixed investment was accounted for by increased investment in energy.

Energy Trade

The U.S.S.R. is a leading energy exporter

and the revenues generated by its energy

sales have been critical to its economy.

Tables 55 and 56 highlight the important

role of energy exports both in relation to output and as a source of export revenues. As

shown in table 55, roughly one-fourth of

Soviet production of petroleum and petroleum products is exported, with about 40

percent of these exports (in terms of quantities) going to non-Communist countries.

The U.S.S.R. also imports petroleum, principally from Iraq and Libya, but it is commonly believed that a large portion of this

imported oil is reexported. In any case, these

imports have not amounted to much more

than 5 percent of its total petroleum exports.

About 13 percent of Soviet natural gas

output was exported in 1980, and this percentage has been growing rapidly in the last

few years. A little under half of Soviet

natural gas exports now go to the West.

Soviet imports of natural gas, principally

from Iran and Afghanistan, were also significant in the late 1970’s, but the 1evel of imports has fallen and their relative importance continues to fall. By 1980, when deliveries of gas from Iran had ceased, these

imports were less than 5 percent of exports.

Less than 5 percent of Soviet coal output

is exported. Over one-third of these exports
254 ● Technology and Soviet Energy Availability

Table 55.—Estimated Soviet Energy Production and Foreign Trade, 1980a

Exports Percent of I reports

Product Soviet Soviet as percent of exports Soviet as percent of

group production exports production to Westb

Imports exports

Petroleum and

petroleum products. 603 mmt 150 mmt 25% 39% 7 mmt 5%

Natural gas. . . . . . . . . . 435 bcm 56 bcm 13% 4 1 % 2 bcm 4%

Coal . . . . . . . . . . . . . . . . 716 mmt 27 mmt 4% 39% 9 mmt 33%

a All of the foreign trade figures are estimates, Since 1976, the U.S.S.R. has not published such data for energy commodities in natural units The estimates for coal trade, in

particular are subject to considerable margin of error

b The West here corresponds to non-CMEA countries

SOURCES SSRT /ffdx v 7980 g { fVf OSCOW 1981 ) C 1A lr)ferndf{or]al Energy S(affsf/cal l?evlew Mar 31 1981 Wharton Economet r[c F orecasfl ng Servtce Centrally Planned

E conorv les P rolect and OTA estimates

Table 56.—The Importance of Soviet Energy Exports and Imports, 1972-79

1972 1973 1974 1975 1976 1977 1978 1979

Share of energy exports as percent of

ruble value of Soviet

exports to:

Socialist Countries . . . . . . . . . . . . . . . 16.6’YO 17,60/o 18,50/o 26.00/o 27.30/o 29 80/0 31 ,80/0 36.00/o

All other countries , . . . . . . . . . . . . . . . 19.8 21.4 33.3 39.7 44.2 42.2 41,3 50.0

Share of all energy exports to

Socialist Countries . . . . . . . . . . . . . . . 65.1 57.7 53.5 60.7 58.7 57.4 60.0 55,7

All other countries . . . . . . . . . . . . . . . . 34.9 42.3 46.5 39.3 41.3 42,6 40,0 44,3

1 00.0% 1 00.0% 1 00.0% 100.0% 1 00,00/0 1 00.00/0 1 00.00/0 1 00.0%

Share of Energy Imports as percent of

ruble value of all Soviet

imports from:

Socialist Countries . . . . . . . . . . . . . . . 2.4% 2.3% 1 .9% 3.0% 2.7% 2.4% 2.2% 2.4%

All other countries . . . . . . . . . . . . . . . . 4.1 5.0 5.4 4.9 4.6 5 2 5.6 5.9

Share of all energy imports from:

Socialist Countries . . . . . . . . . . . . . . . 64.0 59.3 54.7 52.4 52.6 57,1 60.0 56.6

All other countries. . . . . . . . . . . . 36.0 40.7 45,3 47.6 47.4 42,9 40,0 43,4

100.0% 1 00.0% 1 00.0% 1 00.0% 1 00.0% 1 00.0% 1 00.0% 1 00.0%

SOURCE Derived from Vneshnyaya torgovlya, various years

are directed to Western markets (see table

55). Imports of coal, largely from Poland,

may have amounted to over one-third of the

volume of Soviet coal exports in the late

1970’s.

The growing importance of energy exports

in total Soviet trade during the course of the

1970’s is illustrated in table 56. In 1972, fuel

and electric power exports accounted for

16.6 percent of the ruble value of Soviet exports to all “socialist” countries, and 19.8

percent of the value of exports to the “capitalist” world (the industrialized West and

non-Communist developing countries). By

1979, the share of these energy exports had

risen to 36.0 percent for exports to the

socialist countries and 50.0 percent for exports to the capitalist world. Similarly, the

quantities of oil and oil products exported
Ch. 8—Energy and the Soviet Economy . 255

Photo credit TASS from SOVFOTO

First Soviet-made supertanker

grew by more than 50 percent and the quantity of natural gas exported more than sextupled (from a very low base) between 1972

and 1979.

The relative importance of energy as a

source of export revenue has been further

enhanced by the enormous increases in

world energy prices. Indeed, it has been

estimated that for the period 1970-77 alone,

improvements in Soviet hard currency terms

of trade permitted the U.S.S.R. to purchase

$14.2 billion more in hard currency imports

than otherwise would have been possible

without resorting to some combination of expanded real exports, increased gold sales, or

additional hard currency debt. This windfall

gain amounted to 21 percent of the cumulative value of Soviet hard currency merchandise exports from 1971 through 1977.17

THE FORMULATION OF

ENERGY POLICY

It is clear that the time of easy energy

supplies is over for the U. S. S. R., and the

easy answers to energy policy followed in the

past two decades are unlikely to be fruitful in

the future. A new strategy has become necessary, but its formulation is, and will continue to be, a complex process. There is

evidence that debates have arisen over the

relative priority to be accorded different

17 F;dward A. Hewett, ‘4rI’he Foreign Sector in the So\’iet

Economy: Developments Since 1960, and Possibilities to

2000, ” paper presented at the Airlie Ilouse Conference, Oct.

23-25, 1 9/+().

energy industries and over the best way to

improve the efficiency and productivity of

energy production. While decisions naturally

reflect the choices of the Communist Party

and its Executive Committee (Politburo) and

a number of state planning and administrative organizations, Soviet leaders are influenced by a variety of ministerial, regional,

and scientific connections. These groups,

which compete for resources and influence,

play an identifiable role in the formation of

economic policy and are critical to the outcome of policy once formulated. Thus,

energy decisionmaking in the Soviet Union

takes place in a political context. A brief

description of the process by which energy

policy is set, including identification of the

actors involved, is helpful in understanding

the apparent outcome and consequences of

these debates.

Decisionmakers

There are two important steps in energy,

as in all, decisionmaking in the U.S.S.R.18

The first is the continuous determination of

basic policy directions by the Politburo,

which then directs the Council of Ministers

and other state agencies to work out the

details. The second is the formal elaboration

of energy policy plans by Gosplan, the State

—.

‘HFor further information on the structure of the Soviet

(;overnrnent and econom~’ and on the economic planning system. see Office of Technology Assessment, Technologjl and

East- 11’e.st Tradr (Washington, D. C.: U.S. Government Printing office, 19791, ch. X: and ,J oseph S. Berliner, The in no ( ‘a -

tion Z)eci.sion in So[ict Indu str~ (Cambridge, Mass.: MIT

Press, 1976).
256 ● Technology and Soviet Energy Availability

—

Planning Agency, in cooperation with

government ministries and planning and

research institutes. Ministries involved in

producing and supplying energy, together

with those involved in supporting functions

such as the construction of necessary infrastructure, assist in the formulation of

plans for the branches of the industries for

which they are responsible. The ministries

also have a major role in implementing the

plans.

Within the general guidelines set by the

Politburo, Central Committee, and the Council of Ministers, Gosplan exerts a considerable degree of influence over the allocation of priorities between the energy sector

and other sectors of the economy, and over

the setting of priorities among the various

energy industries. Various departments of

Gosplan are responsible for general planning

(which must take energy supply and demand

into account), for working out the balances

of inputs into the energy-producing industries and balances of supply and demand

for various types of energy, and for energy

production. Gosplan also makes decisions

regarding energy-related imports and exports, although such decisions require the

participation of a number of other ministries

and government agencies.

Despite the comparative centralization of

the Soviet system, there is a good deal of diffusion of responsibility among a number of

energy ministries. Figure 22 demonstrates

the plethora of organizations involved in the

discovery, production, and delivery of Soviet

energy resources. There are over 60 ministries in the Soviet Government. Of these, 11

have direct responsibility for energy production and energy resource management, and

another 6 provide support (e.g., construction, transportation, infrastructure).

The involvement of some 17 ministries results in considerable overlap in jurisdiction

and intense competition for resources. Deciding what Western energy technology

should be imported and what energy should

be exported, and implementing these decisions, are processes that involve complex

interactions among a variety of individuals

and organizations. A ministry may be

responsible for producing commodities for

export (such as oil) and various institutions

can request Western imports (such as turnkey plants, large diameter pipe, or mining

equipment), but it is Gosplan that makes the

critical choices, the monetary aspects of

which must be approved and executed by

Gosbank, the State Bank. The Ministry of

Foreign Trade carries out approved export

and import plans through its various trade

associations. In addition, the State Committee for Science and Technology (SCST) coordinates policy on technology imports. The

decisions and actions of all of these parties

are subject to approval by high Party and

government organs such as the Politburo

and the Council of Ministers.

Energy Policy Debates

Problems in measuring the performance of

Soviet energy industries and in appropriately allocating resources recur in a fairly

routine manner, as a part of energy planning

and policy implementation. But at a higher

level, Soviet planners have been engaged in

debates over the general direction of energy

policy. Disagreements over policy are seldom pursued openly, but a careful reading of

the Soviet press and scientific journals reveals a variety of opinions on energy priorities among key leaders. A fundamental

question here concerns which energy sector

should be awarded priority in capital investments.

Energy industries usually require largescale investments with long-term payoff

periods. This makes decisions about energyrelated investments particularly difficult, as

increasing allocations to one sector may

necessitate reductions in growth of investments in other sectors. Soviet policymakers have been faced with setting

priorities among the following: investments

for expanded oil and gas production in

Siberia; investments designed to increase
Figure 22.—Energy Decisionmaking

Politburo

of the CPSU 7

I

in the Soviet Union

I

J

I

Energy-Related Mlnlstrles

I I I I I I I I I I I .

Chemical and Construct Ion of Electrical Gas Geology

Petroleum

Petroleum Medium Machine Petroleum Power and Power

Petroleum and Equipment Industry Industry Bulldlng Reflnlng and Elect rlflcatlon Machine

Mach Ine Gas Industry Industry

Bulldlng

Petrochemical

Enterprises

Buildlng
258 ● Technology and Soviet Energy Availability

coal production, particularly through the development of surface mining in Siberia; investments in nuclear power stations; and

commitments of resources for energy conservation, especially on a regional basis. Among

the key policy debates of recent years has

been controversy over the question of

whether primary emphasis should be placed

on the development of petroleum, i.e., oil and

gas, or coal, particularly lignite.19 This issue

has been an important one in the Politburo

during the last decade.

Those who have publicly emphasized the

importance of oil and gas development in

Western Siberia include Party President and

General Secretary Brezhnev; representatives from Moscow, Western Siberia, Upper

Volga, and Azerbaijan; the Chairman of

Gosplan; and spokesmen from oil- and gasrelated ministries and ministries concerned

with automobiles, agriculture, aviation, and

defense. Those who have gone on record supporting increased coal production include

the late Premier Kosygin, the President of

the Soviet Academy of Sciences, and others

who perceive a limited future for hydrocarbon development. While Soviet controversies over energy planning are complex,

normally carried out in secret, and not easily

capsulized in simple dichotomies, public

statements of key leaders about these issues

have received widespread attention in the

Soviet press.

Controversies over whether coal or oil and

gas should be made the centerpiece of Soviet

energy policy now appear to be resolved. In

the current FYP, investment in the gas industry, mostly in West Siberia, will double,

and it would seem that increased gas production is now considered the answer to meeting

both growing domestic needs and export

commitments. 20 But the debate itself merits

examination to the extent that it illustrates

the institutional conflicts which tend to arise

in Soviet energy planning. These debates

can be analyzed in terms of individuals—

their background, preferences, and personalities, as well as the regional or institutional interests which they legitimately

represent. For example, the preference of one

Politburo member, V. V. Grishin, for gas and

oil might be explained in part by the fact

that, as the First Secretary of the Communist Party in Moscow, he has a vested interest in assuring large and reliable supplies

of motor fuel as well as heat, power, and gas

for its residents. Experience with shipments

of poor quality coal which caused frequent

shutdowns of power-generating units in the

area evidently convinced Grishin that the

conversion of coal-burning plants to natural

gas is necessary.21

It is not surprising that individuals exhibit preferences for energy policy options

which promote their own regional or organizational interests. More important for longterm policy trends, however, are recurring

conflicts among institutions. At the 25th

Party Congress in March 1976, then Premier

Kosygin championed a program for large increases in coal production. According to this

proposal, during the Tenth FYP the importance of coal would increase in the total

energy balance. This was to be achieved

through the expansion of surface mining of

lignite in the remote Kansk-Achinsk,

Ekibastuz and Kuznetsk regions, and the

construction of lignite-fired power stations

near the mines. Extra-high-voltage powerlines would carry electricity from these stations to the European U. S. S. R., more than

2,500 km away (see ch. 5).

Both the coal advocates and the petroleum advocates had persuasive arguments

to support their positions. Kosygin emphasized the fact that development of coal

could facilitate savings in natural gas and

oil, fuels that could be used most efficiently

1(’ I.eslie Ilienes and Theodore Shahad, 7’h(j .So I if~t F.’nerg?

.Yj’.stern. He.sc)ur[e [ ‘.sf arl(i I)olicie.s (Washington, DC.: V. 11.

tirinston & Sons, 19791, p. 268.

1“See Theodore Shahad, ‘

( Sit)erian (ias 1+’ield Delayed hy

Soviet, ” .T’eI/ }rorA Tim{>.s, Aug. 20, 1981.

“V. V. (irishin, “AI] F;nergy for the Fulfillment of the Decisions of the 25th Congress of the Communist Party of the

Soviet Union, and for the Successful Completion of the Tenth

Fi\e-1’ear Plan, ” in .Vdwtd .Speeche.v (Ind A rticlev of b’. V.

(;ri.shin (Nloscow’: Izd, politicheskoi literature, 1979), p. 562.
Ch. 8—Energy and the Soviet Economy ● 259

as exports and chemical feedstocks. Coal advocates also argued that, because of the high

labor productivity of surface mining, coal

developed in the Kansk-Achinsk region is

among the cheapest fuels available. Those

who placed first priority on an oil and gas

strategy asserted that, because overall coal

output has not expanded rapidly and

because of the low quality of much of the

coal produced in Siberia, the coal industry is

not a reliable energy supplier. Indeed, demand for coal from Kansk-Achinsk and

Ekibastuz has consistently fallen below

quota. While coal advocates expected that

the European U.S.S.R. would be a great market for coal, consumers there and in Siberia

have tended to prefer more reliable natural

gas supplies.

Strong institutional resistance to a coal

strategy evidently came from Gosplan,

whose research reported unfavorably on

the idea of using lignite as a major source of

electricity for population and industrial

centers in the European U.S.S.R. Furthermore, Gosplan has placed priority on an oil

and gas strategy in its allocation and administrative functions, obstructing the construction of the long-distance powerlines.

These powerlines area critical element in the

coal strategy which is oriented toward increasing supply of “coal by wire” electricity

to consumers in the European U.S.S.R. Despite the fact that construction of the lines

was approved by the Ministry of Power and

Electrification, Gosplan delayed and reduced allocations for the project.22 Without

this crucial powerline link, the lignite

strategy foundered.

Gosplan's reluctance to rapidly develop

the long-distance powerlines can be explained by a number of factors. First, Gosplan experts calculated that capital investment in the transportation of natural gas

was more efficient than investment in the

development of coal production. This is an

important point. The “coal v. gas” decision

“V. kl. ‘1’uchke\rich, “Speech at the Session of the Genera]

kl(~t~ting of the Academ? of Sciences of ~he U .S. S. R.,

L’t,stnik an S,$.S1{, No. 5, Nlay 1980, pp. W-99.

also entails basic choices affecting the

transportation sector, i.e., whether investment should be directed toward the construction of gas pipelines or additional rail

capacity for coal. At a seminar held in Washington, D. C., in March 1980, a Gosplan official stated that his research institute favored postponement of Kansk-Achinsk lignite development, because capital investments could be more effectively directed

toward the purchase of French gas industry

equipment. 23 Gosplan’s electricity cost projections were also important. It was calculated that nuclear and gas-burning power

stations located in central Russia could provide cheaper electricity to consumers in that

area than electricity transported from the

Kansk-Achinsk and Ekibastuz mine-mouth

stations. 24 In short, Gosplan’s research on investment and energy costs worked against a

lignite strategy and tended to favor development of the more ‘‘progressive and efficient

gas industry.

The coal and power and electrification

ministries also opposed the lignite strategy,

but for different reasons. Where Gosplan officials stressed investment and energy cost

considerations, the ministries charged with

implementing plans for coal development

were concerned with the past performance of

the coal industry. Surprisingly, even the

Ministry of Coal has been ambivalent toward the development of lignite complexes.

While it is naturally anxious to increase coal

production, its officials have been slow to

commit resources to the construction and

equipment of new mines, evidently preferring to direct investments to older mines

in areas where regional ties to the ministry

are long-standing. Moreover, since the earnings of coal enterprises depend primarily on

the quantity of coal shipped, the quality of

“Interview with Albina ‘1’retiako\a, Demographic I)i\ision, Department of Commerce, M’ashington, D. C,, Ilec. 17,

1980, concerning R. V. orlov’s comments at the ‘ ‘Seminar on

I+:nergy Nlodelling Studies and Their Conclusions on Energy

Conser\’ation and Its Impact on the l+~conom~’, ” held in

M“ashington, D, C,, hlay 24-28, 1980.

“I;/(~k trichc.ski}Ic .s tan tsii, No. 12 ( 1978). pp. 11-14,

translated in ‘‘.News Notes, ” ,S~J(Iic( (;(~ogr(lphj’,hlar. 20,

1979, pp. 188-190.
260 Ž Technology and Soviet Energy Availability

the coal mined is a secondary consideration.

Electricity producers are consequently

vulnerable to being forced to rely on poorquality Kansk-Achinsk and Ekibastuz coal.

It is no wonder that reliable and cheap

hydropower is much more popular among

the electricity producers in Siberia. As the

coal and power ministries each attempt to

maximize their profits and performance, the

result is systemic suboptimization (delays in

expansion of overall coal-fired power production).

The Ministry of Power and Electrification

(Minenergo) has neglected construction of

lignite or coal-fired powerplants not only

because hydroelectric plants are cheaper to

operate, but also because of the poor quality

of delivered coal. High in ash, and often certified above its actual calorific content, the

coal tends to cause power equipment breakdowns and consequent loss in production

time. Since Minenergo’s performance is

measured in terms of total output and by

grams of standard fuel consumed per kilowatt-hour of electricity produced, the ministry’s record is jeopardized by coal-fired power production. Although Minenergo was directed to construct coal-fired power stations

in the Tenth FYP, the system of performance indicators actually embodies strong disincentives to carry out such orders. As long

as the ministry maintains a good overall record in production of electricity, it is unlikely

that it will be punished for failing to speed

up construction of coal-fired plants.

As chapter 3 has described, efforts to increase coal production and consumption during the Tenth FYP clearly fell behind expectations. Where former Premier Kosygin had

forecast a growth in coal output from 701

million metric tons (mmt) in 1975 to 790 to

800 mmt by 1980, actual output for 1980

was only 716 mmt. Stated in calorific terms,

these statistics reveal an actual decrease in

coal output during the plan period due to the

increasing share of low calorie lignite in coal

production. Furthermore, labor productivity

in the coal industry has been declining since

1978. Recently published guidelines for the

Eleventh FYP now reflect diminished expectations for coal. Targets for 1985 coal production have been set at 770 to 800 mmt,

equivalent to the original goals for 1980, and

the coal’s calorific value will continue to

decline as most of this growth will come from

increased production of lignite. The new

FYP guidelines can therefore be interpreted

as a resolution of the coal v. petroleum controversy in favor of the latter.

A second and equally important consideration is the relative priority which has

been accorded oil and gas. These are handled

by different ministries which compete for investment, drilling capacity, and pipeline

priority. The most widespread interpretation

of the current FYP—in which oil production

is set to rise 7 percent and gas production 47

percent–is that the U.S.S.R. is now placing

its emphasis on gas.

This view is supported by the fact that in

his speech before the Party Congress on

February 23, 1981, Brezhnev emphasized

the importance of Siberian gas development:

As a task of paramount economic and

political importance I consider it necessary

to single out the rapid expansion of output of

Siberian gas.

The deposits of the Western Siberian

region are unique . . . . The extraction of gas

and petroleum in Western Siberia and their

transportation to the European part of the

country are becoming a predominant link of

the energy program of the 11th and even of

the 12th Five-Year Plan. This is the line of

the Central Committee of the Party, and I

hope it will be supported by the Congress. 25

Summary and Conclusions

Controversy among Soviet energy planners and among various energy-related institutions suggests that in order to be successful, a Soviet energy strategy needs more

25 "Report of the Central Committee of the CPSU to the

26th Congress of the CPSU on the Immediate Tasks of the

Party in the Sphere of Domestic and K’oreign Policy: The

Report of the General Secretary of the Central Committee of

the C PSU, Comrade 1,.1. Hrezhne\,Pra[ Ida, Fell. 24, 1 $)~ 1,

p. 5.
Ch. 8—Energy and the Soviet Economy 261

.-

than the formal support of the leadership. In

addition to the backing of members of the

Politburo and the Council of Ministers, it requires the cooperation of Gosplan, other

agencies, and the several ministries directly

involved in its implementation. The personalities and preferences of top leaders can be

important. The decline of the coal strategy,

for instance, was surely affected by the

demise of a prime advocate, the late Premier

Kosygin; the present emphasis on gas has

been underscored by Brezhnev. The actions

of many institutions and ministries, however, have also been important. This fact

takes on added significance in light of the advanced age of much of the present Soviet

leadership.

On the evidence of the new FYP, advocates of gas development and of nuclear

power have had the most influential voice in

energy planning. Current policy guidelines

indicate a strong commitment to the development of these fuels. But the energy debates of the last few years suggest that competition for resources may well reappear

among ministries involved in the development of oil, gas, and nuclear power—particularly when the impending change in

Soviet leadership takes place. Both international and domestic developments may affect priorities placed on various types of

energy development. The gas industry,

because of its reliance on Western equipment imports, is likely to be more committed

to pursuing a strategy of interdependence

with the West than the nuclear power industry, which prides itself on the development of indigenous technology. Whatever

the strategy chosen at the top, however, successful implementation will depend on the

cooperation of a variety of organizations and

regions.

ENERGY AND FUTURE

ECONOMIC PERFORMANCE

Whatever the energy policy pursued, it

will affect and be affected by Soviet

economic performance in the present decade.

Any understanding of the ways in which

energy availability is related to and affected

by the range of Soviet economic options

must carry with it a sense of the multitude of

economic variables, the complexity of their

interaction, and the considerable range of

plausible values for many of them. A

simplified and stylized way of understanding

the Soviet economy is shown in figure 23. In

this scheme, Soviet planners are assumed to

make decisions regarding the allocation of

the fixed resources at their disposal—the existing capital stock, labor force, and resource

bases (e.g., timber, mineral, and energy reserves)—to produce a range of intermediate

products (industrial materials and energy)

which are principally valued for their use in

producing other goods, and final products

(capital, consumer, and defense goods). Both

intermediate and final products may be earmarked for domestic use or exported, requiring decisions on the allocation of exports between other Council for Mutual Economic

Assistance (CMEA) nations and the rest of

the world.

Soviet planners are assumed to attempt to

maximize the contribution of foreign trade

to domestic growth, subject to foreign

market conditions, regional balance of

payments constraints, and possible “noneconomic constraints on trade with each

region. In theory, and noneconomic constraints permitting, the planners would want

to expand trade with a region as long as the

terms of trade (the weighted price of exports

relative to that of imports) exceeded the re/-

ative marginal productivity of the exports to

domestic growth. This is the principle

behind actual “foreign trade effectiveness”

indices developed by Soviet and East European economists and designed to guide decisions on the structure of foreign trade.

An example of the kind of decisions facing

planners can be found in Soviet oil trade with

the West. Assuming for simplicity that this

trade consisted solely of the export of Soviet

oil in return for oil industry technology and

equipment and that the main economic goal

were to maximize the amount of oil available
262 ● Technology and Soviet Energy Availability

Figure 23.—The Soviet Economy

b — ----- - - - - - - - -- - -- -. -- - - - - — - . - - - - . . - -- - J

SOURCE Off Ice of Technology Assessment

to domestic industry, political considerations aside, the Soviets would find it economically advantageous to expand this

trade as long as their terms of trade (the export price of oil relative to the price of imported machinery and technology) were

greater than the relative marginal productivity of the exportable oil in making oil

available domestically. In other words, it

would only make sense in this case to export

oil to the West if the the proceeds could be

used to buy sufficient technology to yield (on

a present value basis) more oil than was exported.26

26 ’1’hotnas A, Klro]f, “Soviet Petroleum ‘1’rade and Western

Technology in a (ieneral I+;quilibrium Context: Some Preliminary Notes, ” paper presented at the Twelfth National

(’on\ention of the American Asswiation for the Advancement of Sla\’ic Studies, Philadelphia, No\, 6, 1980.

The actual calculations are not nearly so

simple, and even in this highly stylized

framework, the process of deciding whether

and where oil should be exported would entail consideration of numerous tradeoffs. Obviously, Soviet planners could not make all

possible calculations and comparisons given

the tremendous informational requirements

and the lack of a price system which efficiently generates such information. But

presumably, to the extent that the planners

exhibit economic rationality, these types of

calculations implicitly enter into the medium

and longrun planning of Soviet foreign

trade. Complicating the calculus are various

“noneconomic” constraints or goals. For example, the proportion of domestic oil output

exported to Eastern Europe may be higher

than that suggested solely on the basis of

economic criteria alone.
Ch. 8—Energy and the Soviet Economy ● 263

The remainder of this section seeks to

elucidate some of the complex relationships

and the nature of the costs and benefits

associated with different Soviet policy options as they concern energy. For purposes

of illustration, it hypothesizes a fall in oil

output at existing levels of use of capital,

labor, and intermediate products in the oil industry. Faced with this disturbance, Soviet

policy makers can follow one or both of two

basic courses of action. They can attempt to

regain the previous level of oil output, or

they can attempt to “make do” with a lower

level of domestic oil production.

In order to boost oil output, the planners

could increase the proportion of total labor

and capital available to the oil industry.

Wage rates could be raised in the hope of attracting workers, but such material incentives might have to be very large to overcome the disadvantages of working in West

Siberia and the East. Assuming that other

money wage rates were not reduced, such a

measure would increase aggregate money income in the U.S.S.R. If increased real output

of consumer goods were not forthcoming,

this would be inflationary and could in turn

negatively affect labor productivity.

The diversion of labor and current investment from other sectors would reduce the

rate of growth of output in those industries.

To the extent this diversion were at the expense of investment in the machine building

and heavy industry branches, the potential

for future growth in all other sectors, including oil, would be reduced. Diversion of

investment spending from the consumer

goods sector would reduce the future rate of

growth of real consumption, which could in

turn adversely affect the rate of productivity

growth throughout the economy, as dissatisfied workers work less hard and spend

more time away from the job queuing for

consumer goods. A decline in productivity

growth would cause a further slowing in

overall Soviet economic growth. In short,

the diversion of resources would not only

have direct adverse consequences for output

in various sectors. There would also be second, third, and higher order “multiplier” effects throughout the economy.

One way to try to reduce the adverse effects on economic growth in other sectors

would be to raise the labor force participation rate. This is already very high, however,

and the impact on overall economic growth

of any conceivable changes would be negligible. Moreover, in order to induce additional

people to enter the work force, it might be

necessary to raise the output of consumer

goods, at the expense of investment and

future growth.

Another option would be to improve the

decisionmaking, information, and incentive

systems of the economy enough to raise the

rate of growth of combined factor productivity. This could both raise the rate of

growth of output in the oil sector itself, and

stimulate higher output growth in other sectors. This approach might not involve

significant economic costs, except insofar as

changed indicators and norms might create

considerable uncertainty among managers

and workers during the transition period.

Further, it would avoid the type of direct

and indirect economic costs involved in any

policy of resource reallocation. But such

system change invokes other potential costs.

The conventional wisdom among most Western observers is that any changes in planning and management systems profound

enough to significantly affect productivity

may well carry unacceptably high ideological

and political costs for the Soviet leadership.

Finally, Soviet planners could attempt to

increase and accelerate imports of Western

oil equipment and technology. This strategy

would presumably be based on the perception that the opportunity cost of such imports was relatively low. The calculation,

however, is not so simple as might appear.

Increased imports of technology for hard

currency would have to be paid for with

some combination of the following: increased

exports of energy or industrial materials,

reduced hard currency imports of other

goods, greater exports of gold, and an increase in hard currency debt.
264 ● Technology and Soviet Energy Availability

The latter two choices would carry the

cost of reducing future external financial

flexibility. Increased real exports of energy

or industrial materials would reduce the supplies available to domestic industries,

thereby slowing output growth in these sectors. A decline in hard currency imports of

industrial materials or nonenergy capital

goods and technology would likewise slow

domestic output growth. A reduction in imports of grain or other consumer goods

would reduce domestic consumption growth

and indirectly adversely affect productivity

growth. World market price trends for all

these products, for gold, and for Western export credits, would influence the final choice.

At the same time, the planners would be

comparing the costs and benefits of expanded technology imports with the costs

and benefits associated with other major

policies, such as intersectoral reallocation of

labor and capital.

In effect, each option has its economic and

political opportunity costs. The economic

cost of a given policy lies in the direct or indirect negative effect it has on output

growth in one or more sectors, and the impact it has on future external financial flexibility. The benefit of a given policy could be

measured in terms of its direct or indirect

positive effect on output growth in one or

more sectors. The planners’ intersectoral

priorities would determine the implicit

weight attached to the induced change in

output in each sector.

In addition to pursuing policies aimed at

reviving petroleum output, the planners

could seek to make a new lower level of oil

production go farther, thus minimizing its

negative impact on economic growth. Such

an approach would involve some combination of reallocation of available energy supplies, direct energy conservation, interfuel

substitution, and expansion of energy imports.

One possibility is that Soviet planners

might seek to absorb any fall in oil output by

cutting back on oil allocations to the capital

goods and industrial material sectors.27 This

would have an especially profound effect on

the overall rate of economic growth. Consumption would only be affected indirectly,

through the slowdown of investment spending in that sector, but eventually production

in the consumption sector would slow, and

thus there might also be a decline in the rate

of growth of productivity.

As output declined in certain sectors as a

result of reduced energy availability (combined with unchanged energy-use coefficients), either domestic consumption of

these products or exports would have to fall.

In the former case, the impact on future

growth would be direct; if exports are reduced, the impact would be less immediate.

In that case the multiplier effect would come

through an eventual fall in real imports induced by the deteriorating trade balance.

Output declines stemming from factor

reallocation, energy reallocation, or other

policies, could in principle be avoided

through fuel conservation and substitution.

But a conservation-substitution policy is not

without cost. Significant retrofitting and

other conversion measures would claim some

new investment which otherwise would be

used to expand productive capacity. On the

other hand, as chapter 7 points out, much of

the Soviet conservation effort is aimed at

urging industry to use less energy and

motivating management to reduce the

materials intensity of production, which in

turn indirectly reduces energy consumption.

Another way of “conserving” oil would be

to export less of it. The costs of pursuing

this policy are similar to those attached to increased imports of oil technology. Reduced

exports of oil or other energy products to

CMEA and/or the West would indirectly involve some combination of a fall in domestic

output of some sectors and reduced future

‘

T

’l’his is the basic policy assumption built into the

econometric model of the So\riet economy used b}’ the CIA.

Se~~ C 1A, .S{1 Vi’SIM: A hlodcl of th~ ,Yo(’iet L’conom>,” E R

79- 10001” (Washington, D. C.: CIA, February 1979); and CIA,

.Sirnulutions, op.. cit.
Ch. 8—Energy and the Soviet Economy ● 265

external financial flexibility. In the case of

CMEA there are also the “political” costs of

reducing oil exports.

Alternatively, the U.S.S.R. could step-up

its imports from selected oil-producing less

developed countries (LDCs) in return for exports of Soviet capital goods and arms. But

this “soft currency solution” would not be

costless to the Soviet economy. Expanded

exports of Soviet capital goods would slow

Soviet domestic output growth. Increased

arms exports, unless from inflated inventories, might also come either at the expense

of the Soviet military or at the cost of diverting investment from one or more ‘‘civilian”

sectors into defense. Successful pursuit of

this policy would also be predicated on the

existence of sufficient demand by oilproducing LDCs for Soviet capital goods

and arms. If demand is weak relative to

Soviet export offers, Soviet terms of trade

with this region would decline, eliminating

much of the economic advantage of such

trade. In other words, the relative price of

LDC oil would no longer be below its relative

marginal productivity to the Soviet

economy.

Finally, the effect of a partial or total

Western embargo of energy technology and

ENERGY AND THE

BEST AND WORST

While Soviet leaders have already made

and publicized their energy policy preferences for the Eleventh FYP period, their

(or their successors’) options for the late

1980’s seem for the most part to remain

open. The scenarios constructed for both

1985 and 1990 suggest some parameters and

a few of the policy choices facing Soviet

policy makers during the 1980’s. These are

not predictions. The intention here is simply

to provide the reader with a sense, not only

of the number and complexity of factors

which together determine the outcomes of

policy choices, but also of the sensitivities of

the Soviet economy to various energy-reequipment exports must be considered. An

embargo policy that stopped or interrupted

economically beneficial trade would mean

that Soviet demand for this technology at

existing prices would be frustrated. This

would increase the relative attractiveness of

all other policy options. It would also mean

generally lower rates of growth for Soviet investment, consumption and defense than

otherwise.

In sum, virtually any policy that the

leadership pursues carries with it both

economic costs and benefits. The task is to

select that combination of policies which

together yield the highest benefit-cost ratio.

The remainder of this chapter attempts to

suggest a plausible range of parameters

within which these policies will have to be

made. It seeks to shed light on the ways in

which energy availability in the present

decade will affect Soviet economic growth,

and on the ways in which energy availability

could affect Soviet hard currency trade prospects. To accomplish this, OTA has posited

high and low levels of output for 1985 and

1990 in the various Soviet energy sectors

and used these to generate “best” and

‘‘worst’ case scenarios for Soviet economic

growth and hard currency trade.

SOVIET ECONOMY:

CASE SCENARIOS

lated developments. Because OTA has not

relied on formal econometric modeling, all estimates are in highly aggregative terms.28

One basic assumption entailed in these

scenarios is that Western exports of energy

equipment and technology to the U.S.S.R. in

coming years will have a greater effect on

the Soviet energy sector after 1985 than during the Eleventh FYP. This assumption is

based on the length of time usually required

“Reaciers wishing to consult such formal models should see

C IA. ,S() L’,Sl,tl, op. cit.; and Daniel 1,. Bond and Herhert S.

I.e\’ine, “rI’he So\iet l-; conom} to the Y’ear 2000: An ()\rer-

\’ iew, paper presented to tht) .lirlic I louse Conference, oct,

2:3-25, 1980.
266 ● Technology and Soviet Energy Availability

to consummate deals with Western firms,

the lags generally encountered in utilizing

Western technology and equipment, and the

long lead times involved in most large

energy projects. Even the West Siberian export pipeline project, discussed below and in

chapter 12, is not scheduled to begin gas

deliveries until the latter part of the decade.

Thus, in the 1990 scenarios an attempt is

made to address the question of the difference alternative “extreme” Western trade

policies might have on Soviet economic

growth, fuel balances, and East-West trade

in the late 1980’s and beyond. The extremes

considered are “maximal” and “minimal”

Western energy-related trade, technology,

and credit assistance to the U.S.S.R. in the

1980’s. It should be noted, however, that

OTA does not assume that Western assistance to Soviet energy industries will have

only a negligible effect before 1985. There is

evidence, for example, that the U.S.S.R. is in

part relying on imported pipe and possibly

compressors to further expand its internal

gas distribution system during the Eleventh

FYP.

ALTERNATIVE SOVIET

ECONOMIC GROWTH AND

HARD CURRENCY TRADE

SCENARIOS, 1981-85

OTA's “best” and “worst” case scenarios

for the Soviet economy for the period

1980-85 are based on assumptions for Soviet

economic growth, domestic energy supply

and demand trends, and basic foreign trade

conditions. The scenario “outcomes” are

estimates of the Soviet net fuel balance after

meeting domestic needs and commitments

to other CMEA countries, as well as an implied maximum rate of growth for Soviet

nonenergy imports from the non-CMEA

region. It must be emphasized that most of

the assumptions employed here are informed

guesses and as such subject to question. The

scenario outcomes can be visualized as orderof-magnitude indicators of the range of the

plausible. But while each of the assumptions

made is in itself plausible, it is far less likely

that all these conditions would ever be simultaneously either “best” or “worst.” Consequently, while these cases define a reasonable universe of possible developments, the

most extreme outcomes are unlikely.

As noted above, the rate of Soviet economic growth both influences and is influenced by the size as well as the composition of the Soviet energy balance. All other

things being equal, the greater the supply of

domestic energy supply relative to domestic

energy demand, the higher the expected rate

of economic growth. At the same time, the

more rapidly the economy is growing, the

greater will be the growth in demand for

energy.

This chapter assumes that the rate of

growth of Soviet GNP is basically determined by the rates of growth of the fixed

capital stock, the labor force, and combined

factor productivity, respectively. But changing levels of domestic energy output have an

indirect influence on Soviet economic

growth. The growth rate in the capital stock

is influenced by current investment decisions; the size of the labor force is affected

by labor market policies; and productivity

growth is influenced by both economic policy

and “reforms” in the system. All of these

policies are affected in turn by domestic

energy conditions.

Plausible growth rates for the Eleventh

FYP period seem to be bracketed by “low”

and “high” annual averages of 1.6 and 3.2

percent respectively. The low rate suggests a

perhaps politically unacceptable growth rate

for per capita consumption, well below 1.0

percent per annum, but given that estimated

GNP growth for the U.S.S.R. was only 0.8

percent in 1979 and 1.4 percent in 1980, the

lower bound is clearly not impossible.

The methodology used in developing these

“extreme” GNP growth rates is as follows:

1. The labor force is alternatively assumed

to grow at 0.4 and 0.5 percent per annum. The higher rate assumes various

policy measures designed to raise the
Ch. 8—Energy and the Soviet Economy . 267

labor force participation rate above 88

percent.

2. The growth rate for the Soviet fixed

capital stock is projected on the basis of

published CIA estimates of fixed

capital investment and the net fixed

capital stock for individual years in the

late 1970’s; and Soviet figures for 1980

investment and planned investment in

1981 and for the Eleventh FYP as a

whole. 29 By making reasonable assumptions about the distribution of this investment over the Eleventh FYP, it can

be estimated that, if plans are met, the

net fixed capital stock would increase

about 5.4 percent annually.

3. Combined factor productivity is alternatively assumed to decline by 0.5 percent and to rise by 1.0 percent annually.

While the former prospect would be

very unwelcome, it is not out of the

question. As indicated in table 53, combined factor productivity in the

U.S.S.R. fell at an annual average rate

of 0.7 percent between 1976 and 1980.

The higher growth rate assumes that

the various announced measures for

raising productivity in the Eleventh

FYP would be enormously successful.

OTA makes the conventional assumptions of 0.66 and 0.34 for the imputed

shares of national product accruing to

labor and capital respectively.

The Eleventh FYP projects the rate of

growth of “national income utilized” to

decline by about one-fifth from the average

rate for 1976-1980. 30 Applying this same proportionate decline to the rate shown in table

53 above for Soviet GNP growth for 1976-80,

yields a rate of 2.2 percent per annum for

1981-85, which is close to the midpoint of the

“plausible” range posited here.

For each of the GNP growth rates, an

estimate is made of the net energy trade

balance that would result from best-worst

alternatives for domestic and foreign trade

conditions with the non-CMEA world. The

principal assumptions underlying both cases

are listed in table 57. The worst case

assumes an income elasticity of energy demand of unity (i. e., a l-percent increase in

GNP leads to a l-percent rise in the demand

for energy). This corresponds roughly to the

relationship existing in the U.S.S.R. between

1965 and 1975. (For the Tenth FYP period

this elasticity apparently significantly exceeded unity. ) In the “best” case the energy

demand elasticity is assumed to fall to 0.8.

This would probably be considered highly

optimistic by most experts, particularly in

the near future. For example, some estimates assume that the Soviet energy

elasticity will remain at about 1.00 for the

next 20 years, or possibly fall to 0.9.31

The worst and best case assumptions for

domestic output of oil, natural gas, coal,

nuclear, and hydroelectric power are listed in

table 57, and are based on the analyses in

chapters 2 to 5 of this report. With the exceptions of gas and hydropower, these projections somewhat discount official Soviet

plan targets. The worst case assumption for

oil, 550 mmt, is the upper bound of the revised range estimated by the CIA.

Table 58 presents the estimated Soviet

fuel balances, both aggregated and by major

energy category, for 1980 and for each of the

four 1985 scenarios (worst energy: high and

low GNP growth; best energy: high and low

GNP growth). Lacking sufficient information regarding fuel-specific conservation and

interfuel substitution possibilities, OTA has

refrained from disaggregating domestic consumption by energy source. In table 58,

estimated domestic energy demand (calculated using the appropriate energy demand elasticities from table 57) is subtracted

from the total available domestic energy

supply, leaving an estimated net fuel export

balance. To this is added an assumed level

of Soviet 1985 energy imports from nonCMEA sources, leaving a gross fuel balance

available for export outside CM EA. For sim-

.—.

“ Se[J (’amph[>ll, op. cit., table 1.
268 - Technology and Soviet Energy Availability

Table 57.—Major Assumptions Underlying

1980-85 Scenarios

Worst case Best case

Income elasticity of

energy demand. . . . . . . . . . . . . . . .

Petroleum output (mmt) . . . . . . . . .

Natural gas output (bcm) . . . . . . . .

Coal output ( mmt) . . . . . . . . . . . . . . .

Nuclear power (bkwh) . . . . . . . . . . .

Hydroelectric power (bkwh) . . . . . .

Average annual growth rates

for real exports to nonCMEA area of (1979

share of total exports

in brackets):

Timber products (7,5%) . . . . . . . .

Platinum group metals (2.1%) . .

Raw cotton (2.0%) . . . . . . . . . . . . .

Chemicals (6.5%) . . . . . . . . . . . . . .

Automobiles (1.4%) . . . . . . . . . . . .

Diamonds (1.7%) . . . . . . . . . . . . . .

Other products (23.7%) . . . . . . . .

Maximum permissible

normalized trade balancea. 

. . . . . . .

Average annual growth rates

for Soviet foreign trade

prices with non-CMEA area:

Export prices . . . . . . . . . . . . . . . . . .

Import prices . . . . . . . . . . . . . . . . . .

1.0 0.8

550 645

600 640

750 800

170 227

237 237

0%

2.2

0

12,3

5.0

0

0

-0.50

2 .5%

4,4

2.5

17.7

10.0

5.0

5.0

-0.50

10.0% 12.5%

10.0 7.5

aMerchandise trade balance divided by the value of exports, see P 270

SOURCE Off Ice of Technology Assessment

plicity OTA assumes that these imports remain at their estimated 1979 level (roughly 7

mmt of crude oil, and 2 billion cubic meters

(bcm) of natural gas from Afghanistan.)32

This is not a forecast (indeed, gas shipments

from Iran may have only temporarily

ceased) but an assumption made to facilitate

the computations underlying the alternative

scenarios.

The figures in table 58 raise some important issues. For example, the worst energy/

low growth scenario (column 3) suggests a

net fuel export balance of nearly 61 million

tons of oil equivalent (mtoe) (1.22 mbd), with

coal consumption declining from 1980 levels,

and oil consumption virtually stagnating.

Thus, unless significant substitution of gas

‘JCampbell, op. cit.; and tJan Various, “F;astern F;uropean

and Sot’iet Fuel ‘1’rade, 1970-1985, discussion paper No.

80- 1() (1’ancou\’er: [department of ~:conomics, [Jni\rersity of

Hrit ish Columbia, April 1980).

for oil in domestic consumption occurred

fairly quickly, most or all energy exports

would have to be composed of natural gas

shipments. An export level of 61 mtoe is imposing by 1979 or 1980 Soviet gas export

standards, however. OTA has estimated

that present pipeline capacity might support

27 to 29 mtoe of natural gas exports to

Western Europe. 33 For the “best” case

scenarios, which yield even larger net fuel

balances but also larger implied natural gas

deliveries, the possible pipeline capacity constraint could be even more serious.

Assessment of the foreign trade implications of these net fuel balances also involves

assumptions regarding the possibilities for

expanding Soviet nonenergy exports to nonCMEA countries and Soviet terms of trade

with these nations. It is assumed here that

all non-CMEA trade roughly reflects patterns of trade with the Soviet Union’s hard

crrency partners. Given the difficulty of

separating hard currency from non-CMEA

soft currency trade, and the very aggregative level of this analysis, it was not

thought worthwhile to strive for a greater

degree of accuracy. In any event, the focus

here is on the net Soviet energy balance

available for export to the non-CMEA region, and most of these exports are undoubtedly made for hard currency.

Western trade statistics show that Soviet

energy exports accounted for an estimated

55.1 percent of the total value of Soviet exports to 17 “Industrialized West” (IW) countries in 1979. 34 Six nonenergy export product

‘‘ 1980 Soviet gas deli\’cries to W’estern h;urope totaled

roughl~r 23 bcm. The excess capacity of the orenhurg gas

pipeline (i.e., after meeting annual commitments of 15.5 bcm

to I’; astern ~~urope) a\’ailable for export to 1$’estern F;urope is

about 1‘2 to 11] bcm. Present pipeline capacity could, therefore, support possibly 23 + 13 = 36 bcm x ().8 123 = 29 mtoe of

nat ura 1 Kas exports. .See Campbell, op. cit.: and (ioldman, ~.

cit.

“rI’hese estimates are based on adjustments to unpublished data made a\ailable b~r the I)epartment of (’ornmerce.

According to Vrze,shrljIcJ?I{l tc]r~()[lj’(1 S.%SR, 1!17.9, energy accounted for 50 percent of total 1979 exports to nonsmvalist

countries. A study b~’ .Jan Various (‘‘So\’iet and K;astern

F;uropean Foreign Trade in the 1970’s: A Quantitati\’e

Assessment, discussion paper No. 80-11 (Vancou\er: I)epartment of I-; conomics, Uni\crsity of Hritish C(~lumbia,

April 1 980) suggests that 1979 So\riet energy exports
Ch. 8—Energy and the Soviet Economy - 269

Table 58.—Fuel Balances by Category, 1985 Scenarios and 1980 Base Year

(millions tons of oil equivalent)

1980 1985 1985 1985 1985

base (worst energy, (worst energy, (best energy, (best energy,

year a

high GNP growth) low GNP growth) high GNP growth) low GNP growth)

Hydro, Nuclear Power and

“other” . . . . . . . . . . . . . . . 1075 138 134 150 146

Coal. ., . . . . . . . . . . . . . . . . 319.3 300 300 320 320

011 and products . . . . . . . . . . . 3541 362 364 444 446

Natural gas . . . . . . . . . . . . . . . . . 2496 368 370 396 399

Total . . . . . . . . . . . . . ., . 1,030.5 b

1,168 1,168 1,310 1,311

Domestic and CMEA energy

demand c

. ... . . . . . . . . . . . . . (1206) (1 116) (1169) (1099)

Net fuel balance . . . . . . . . . . . . 8 3

d

(38) 52 141 212

1979 energy Imports from

non-CM EA. . . . . . . . . . . . ., . g

d

9 9 9 9

Gross fuel balance (available

for export to non-CMEA) ., 92 (29) 61 150 221

—

a From CampbelI op cit table 2 b Net of alI exports and Imports of energy

c The methodology for deriving the amount of energy available for domestic consumption and hard currency export relies heavily on Campbell OP cit and may be

summarized as foIIows

a Assurn P a level of d omes!jc energy output I 011 gas coal hy dro and nuclear generated eleclrjcjt y and other e g Peal firewood shale 011) Output for the latter IS

ass~j med I per Campbell I to decl Ine from about 5 percent of energy demand n 1980 10 3 percent In the year 2000 at a rate of O 5 percent every 5 years

b Suhlract net losses and Internal consumption and net lntrasector outflow per Campbell

( SU bl rac, t ass~~ med level of net ex ports to the CM EA F o r SI m pl IC If y It IS assumed t hat a I I elect riclty ex ported to E astern E (I rope w II I be generated by nuclear power

f Ch 9 eslfmates 16 bkWh per year In 1981 85 } Other estimates are coal I net of coal [reports from Poland I 8 mmt 011 80 mmt annually m 1981-85 to Eastern

Europe arid 11 mmt annual Iy to non-European CMEA gas 30 bc m per year O TA ass urnes fhat fhese are fixed comrn(lmenfs that the S ovfe(s wI1/ horror

regdrd/e5S of Ihefr owrl frlle(lla / energy S,luaf) On

rj ~(, (tl ~ I ~ fhe resu It of f a ~

\ C I by Convp rslon faC!Or 10 Obta I n amount av al la hle fol dlstr bl)tl On

P Subtract nonfuel uses fror 011 and gas assuming the following per annum growth rates

GNP Oil Natural gas

32% 2 5% 4 0%

24 15 30

16 10 20

d Based on C I A InternationalI Energy Statistical Review March 31 1981 Wharton Econometric Forecas!lng Associates Inc Centrally Planned Economics Project

un PU bl IS hed data

groups, listed in table 57 and together accounting for an additional 21.2 percent of

Soviet exports to the IW in 1979, were

analyzed and assigned individual best and

worst case growth rates, in terms of real export growth. In each of these markets real

export growth is determined by both supply

and demand. Detailed analyses taking into

account such conditions for each product

group were beyond the scope of this study.

[l nlf)u nt t’[i to :i 1)( )u t 6 1 pvr[’(’nt f)f Lt}lal S(j\it’t nonarnls LIX -

port \ to non-(” 71 t: ~1 c(~un[ rit’<. ( ii\cn the r-ou~h equl\alvnce

f ) f a II t h[>w’ pr( )p( )r t i [ )n ~. i t ~t~t~nlt>(l rt’a son;i t) It> t () u WI t ht’ nmr[~

{i{’t a t 1(’(J I if \t a t is t i(i :]+ a t)a ~i + for ~’alcu la t ing t ho w(~igh[s of

t’n(’rg~ ii nd s(’ltIt!t {I(1 md 1 or n On(~nm-gy (IX pOr(s in total SOY’1(’t

JI( I JI:i rm < (Ix pOr t < t ( )r h :i rd (’u rr(’n c}’.

Past real export and domestic output performance was investigated for some products, however, in an attempt to generate

plausible worst and best case estimates for

real export growth in the 1980’s. Some of

these considerations are briefly set forth in

appendix A.

Attempting to estimate price developments for each of these product groups is an

even more speculative exercise than making

real export growth projections. This is equally true for the prices of Soviet imports from

non-CMEA sources. Consequently, OTA has

simply assumed a uniform rate of inflation

for all exportable, and a uniform rate of
270 - Technology and Soviet Energy Availability

price increase for all importable. Indeed,

assuming an unchanged relative price structure within each category of goods is more

reasonable than attempting to estimate

rates of inflation for separate product

groups. By distinguishing clearly between

exports and imports, one can still assume

that Soviet terms of trade change.

Price indices developed on the basis of official Soviet trade statistics suggest that

Soviet export and import prices in trade with

non-Socialist countries increased at annual

rates of 4.5 and 3.1 percent respectively between 1970 and 1978.35 This implies an average annual improvement in terms of trade of

about 1.3 percent. However, a possible upward bias in the export quantity index

employed here may understate the rate of

export price increase. It has been estimated,

for instance, that between 1971 and 1977

Soviet export and import prices in “hard currency trade” (a subset of trade with nonsocialist countries) increased at average annual rates of 20, 21, and 12 percent respectively. This suggests an average annual

terms-of-trade improvement of about 7 percent.36

As a “best” case, OTA assumes that

Soviet export prices in trade with the nonCMEA area increase by 12.5 percent annually, whereas import prices rise by 7.5 percent.

The implied annual terms-of-trade improvement is about 4.7 percent. For the worst case

it is assumed that all foreign trade prices rise

at 10 percent a year, leaving Soviet terms of

trade with the non-CMEA region unchanged.

Soviet import capacity is not determined

solely by the growth of Soviet real exports of

energy and nonenergy products and the

terms of trade. Revenues from gold sales,

services, and military sales to various

developing countries have often accounted

“)Hewett, “rI’he Foreign Sector, ” op. cit.

“’Paul l~ricson and Ronald S. Miller, “Soviet Foreign Economic Behavior: A Balance of Pa~’ments Perspective, in

Joint Econorilic Committee, U.S. Congress, So{ Iie( Econorn.v

in u ‘Ti mc of ( ‘hu ngc, vol. 2 IMrashington, D.C’,: U ,S. Government Printing office, 1 979), pp. 208-243.

for more than enough hard currency to offset

hard currency merchandise trade deficits.

Furthermore, the U.S.S.R. has financed

much of its trade deficit in recent years with

Western credits.

Data on gold sales and arms shipments

are notoriously poor, and erratic movements

in gold prices increase the difficulty of projecting hard currency revenues from this

source. Moreover, any attempt to estimate

Soviet credit drawdowns would be an extremely complicated and speculative undertaking. OTA has therefore assumed that,

regardless of Western credit availability and

supply-demand conditions on world gold and

arms markets, Soviet policy makers would

avoid allowing the hard currency merchandise trade deficit to exceed, at least for any

extended period of time, some reasonably

conservative proportion of current Soviet exports. This analysis therefore utilizes the

concept of a “normalized” trade balance,

which is the merchandise trade balance

divided by the value of the exports.37

The U.S.S.R. normalized balance varied

between – 0.11 and – 0.82 in the 1970’s. It

reached its most negative value in 1975, due

to a rapid increase in Soviet imports and a

weakening of Soviet exports to the West

because of recession. The U.S.S.R. was able

to bring the normalized deficit to below

– 0.30 by 1977. Changes in the value of the

normalized deficit have also typically

(though not inevitably) been associated with

more gradual changes in the Soviet debt

service ratio, because varying degrees of the

merchandise trade deficit can be financed by

gold and arms sales.

For both the “worst” and “best” cases

OTA has assumed that maximum permissible normalized trade deficit for 1985 is – 0.5.

“rl’his concept was first used by Edward A. Hewett in,

“So\iet Primary Product Exports to CMEA and the West, ‘“

paper presented to the Association of American Geographers

Project on National Resources in the World Economy, May

1979; and has also been used by Thomas A. Wolf, “Alternative Soviet Hard Currency Scenarios: A Back of the

P;nvelope Analysis, ‘“ app. I I I in Phillip D. Stewart, Souiet

fi>ncrg?’ ~)ption. s und United Stutes Interests (Columbus,

ohio: hlershon Center, April 1980), pp. 37-56.
Ch. 8—Energy and the Soviet Economy ● 271

—

In other words, the hard currency deficit is

allowed to equal one-half the value of Soviet

exports (or imports could be 1.5 times as

great as exports). The exact manner in which

this deficit is financed remains unspecified.

Possibly under the “best’” conditions more

Western credit would be available, and the

U.S.S.R. would be more willing to take on

debt obligations, whereas in the “worst

case” scenario credit sources might dry up

and the U.S.S.R. would have to more rapidly

increase gold and arms sales.

Table 59 presents the different hard currency trade outcomes implied by alternative

assumptions regarding: 1) GNP growth, 2)

domestic energy supply and demand conditions, and 3) foreign trade conditions. Soviet

hard currency import capacity has been

singled out for the following reasons: 1) The

Soviets view hard currency imports–

whether grain, machinery and equipment, or

technology-as an important stimulus to

domestic productivity growth and to general

economic development. 2) The U.S.S.R.

cannot afford to run indefinitely a hard currency deficit above some “prudent” level, a

fact which will constrain Soviet ability to import both fuels and nonenergy items, and

under certain circumstances, may seriously

constrain Soviet economic growth. 3) The

degree to which the U.S.S.R. can increase its

real hard currency imports will have a bearing on its foreign economic and political

policies.

Most observers of the Soviet energy situation now dismiss—if indeed they ever entertained–the possibility that the U.S.S.R.

itself might become a net importer of energy

by 1985. This judgment is easily supported

by the outcome in table 59 for the high GNP

growth/worst case scenario in which the

U.S.S.R. would have to import 38 mtoe

(763,000 barrels per day) of energy in order

to meet domestic demands and fixed commitments to other CMEA countries. Even if

the normalized trade deficit quintuples to

– 0.5 by 1985, Soviet real imports of

nonenergy products from the non-CMEA region would in this case still have to decline

by an average of 9.2 percent a year. By 1985

real nonenergy imports would be only 56 percent as great as they were in 1979. While

such a circumstance is not impossible, it

would send East-West trade into sharp decline and could put enormous pressure on the

Soviet Union to solve its energy problems in

other ways.

Table 59.—Alternative Scenarios for 1980-85a

GNP growth Worst case Midrangeb Best case

(Average Net fuel Maximum Net fuel Net fuel Maximum

annual rate) balance growth of balance balance growth of

(MTOE) non energy (MTOE) (MTOE) nonenergy

imports from imports from

non-CMEA non-CMEA

(average (average

annual annual

rate) rate)

3.2% (38) -9.2% 141 1 9.3%

12.7% 92 15.2%

1,6% 52 3,3% 212 24.2%

aAl I growth rates are actually calculated for the period 1979-85, because base year value and export weight figures are Included In the appendix expressions and 1979 IS the

most recent year for which dwaggregated value data on Soviet foreign trade IS presently available The actual value for the normalized trade deffclt tn 1979 was -O t 1 The

Soviet net fuel balance (as defined In table 58) for 1979 was estimated as 83 mtoe (60 8 mmt of petroleum and petroleum products, 207 bcm of natural gas, and roughly

102 mmt of coal exported to non-CMEA destlnatlons)Add!ng to this estimated Soviet energy Imports from non CMEA sources of 9 mtoe gives a gross fuel balance (I e

available for export) In 1979 of 92 mtoe The total percentage growth of energy exports between 1979 and 1985 IS then calculated by relat!ng the estimated gross fuel bal

an ce for 1985 (e g 61 mtoe for the worst casellow growth scenar{o) to the base year balance for 92 m toe

bin this Scenario, middle range values for GNP growth and domestic energy supply and demand conditions are assumed for bofh cases Worst and best cases here

therefore refer only to rates of real nonenergy export growth The terms of trade are assumed to Increase by the same amount In both cases

SOURCE Off Ice of Technology Assessment
272 ● Technology and Soviet Energy Availability

While military and political solutions to

the “worst case” energy situation are possible, a less drastic and perhaps more likely

response would be to permit the energy constraint to slow the rate of economic growth.

Maintaining some level of hard currency

energy exports would lead to growing

domestic energy shortages. These shortages

could stimulate redoubled conservation and

substitution efforts, but the near-term impact might largely be in terms of reduced

economic growth. As growth slowed, energy

demand would fall, and the U.S.S.R. would

move toward the low growth-worst case outcome in the lower left corner of table 58.

When GNP growth slows to 1.6 percent,

the ability of the U.S.S.R. to expand its real

nonenergy imports from the non-CMEA

region is respectable, albeit limited. A yearly

3.3-percent growth of real imports would

mean a dramatic slowdown in the enormous

growth of the past two decades, financed in

the second half of the 1970’s by windfall

gains caused by exploding energy prices.

(Soviet real imports from nonsocialist countries grew at annual rates of 9.3 percent in

the 1960’s and 12.7 percent between 1970

and 1978.38) Such a low GNP growth rate

might be politically intolerable. Even with

investment growing at only 2.5 percent a

year, and with a slowdown in the growth of

defense spending, annual GNP growth of 1.6

percent could easily reduce annual per capita

consumption growth below 0.5 percent. This

compares with an annual average growth

rate of 2.5 percent in the period 1971-79.39

If the low extreme of the new CIA oil output estimate for 1985 (500 mmt) were used

for the “worst case” analysis, the outlook for

Soviet hard currency trade and economic

growth would worsen. Specifically, the maximum growth rate for Soviet nonenergy hard

currency imports would fall to minus 16 percent and minus 3.1 percent for the high and

‘“ Ilewett, “’i’he Foreign Sector, ” op. cit.

“’Schroeder-( lreenslade, op. cit.

low growth scenarios respectively. The corresponding net fuel balances would be (83)

and 16 mtoe (1.67 million and 321,000 barrels per day respectively).

The “best case” scenarios yield much

higher net fuel balances and permit annual

growth of real nonenergy imports from the

non-CMEA region of between 19.3 and 24.2

percent. Even in the event of rapid GNP

growth, the U.S.S.R. would emerge with a

net fuel balance larger than it has today.

Both these instances, however, raise the

question of how this much energy would be

physically exported, particularly if considerable substitution of gas for oil in domestic

uses were not achieved. Energy exports to

Eastern Europe could be raised above planned levels, but again, if most of the increase

were to be in the form of natural gas, the

logistical feasibility of transporting the gas

is uncertain.

It is highly unlikely that the U.S.S.R. will

be faced with either the worst or best cases.

Assuming that the most probable outcome

falls between, OTA has also calculated the

implied maximum growth of nonenergy imports from the non-CMEA region under midrange economic growth and domestic energy

conditions that yield a net fuel balance of 92

mtoe (1.85 mbd). Depending on the rate of

growth of nonenergy exports to the nonCMEA area, real non-energy import capacity would grow in this case by 12.7 to 15.2

percent annually, consistent with Soviet performance in the 1970’s. This result is essentially due to the assumed improvement of

roughly 5-percent- per-annum in Soviet

terms of trade under conditions of net

energy exports. Indeed, this analysis shows

the very important role that the terms of

trade play in determining the growth of

Soviet real import capacity. For the best

case scenarios, for example, a l-percent-perannum improvement in the terms of trade

has the same impact on Soviet import capacity as an increase of 17.8 mtoe (357,000

bpd) in the Soviet net fuel balance.
.

Ch 8—Energy and the Soviet Economy . 273

ALTERNATIVE SOVIET HARD CURRENCY TRADE

SCENARIOS, 1990

The effects of different levels of Western

assistance will be reflected much more

strongly in Soviet energy output by 1990

than will be the case by 1985. An interesting

issue here is the difference Western assistance might make in the Soviet Union’s

capacity in 1990 to import nonenergy products (grain, machinery and equipment, technology, consumer goods, intermediate industrial products) from outside the CM EA.

OTA has considered two cases: maximal

Western trade, technology, and credit

availability for Soviet energy projects; and

minimal Western energy assistance. The

former case assumes development and completion of the West Siberian gas export

pipeline (see ch. 12) by 1985 or 1986, as well

as other large-scale projects possibly directly involving the United States and

Japan. The minimalist case assumes a virtual embargo or at best a very low level of

Western energy-related technology transfer,

pipe deliveries and energy credits to the

Soviet Union. No attempt is made in this

analysis to examine the feasibility of the

maximalist case on the supply side.40

Rather than deal with a number of combinations of Western trade policy, Soviet

energy conditions and economic growth

rates, a single plausible Soviet energy situation is assumed, and a single constant rate of

Soviet economic growth for the entire period

is posited. The growth of nonenergy exports,

the terms of trade and the maximum allowable “normalized’ trade deficit are also

assumed to be the same regardless of the

“)fjecaus(’ of the d[)art h of hard data and hecause the focus

her-c is on th~’ %~iet side of the }Zlast-il’est r-elat ionship, the

a na 1}’ <is proceeds n~)t from [’s t i ma tes of the scale o f \f’es tern

[’x ports and credit a\a ila hilit~’, but r-at her from aggregati\’e

hut plausihlr assurnptioms r(~garding the impact of such

ass i sta nce on 1990 So\’iet output lc\’els for d i ff~’ren t ~’nrr~r>r

W)U reels, Such issues as whet hc>r or at what ttlrnls suffici(>nt

M’cstern financing for such \cntures could he arranged are

not considered.

state of Western trade policy.41 Specifically,

OTA assumes that the Soviet economy

grows at an average annual rate of 2.4 percent, which is the midpoint of the extreme

growth rates considered for 1980-85. An income elasticity of energy demand of 0.9 is

assumed, again half way between the high

and low elasticities considered for the earlier

period. Nonenergy exports are assumed to

increase at rates that are for the most part

intermediate between the 1985 worst and

best case assumptions. Soviet terms of trade

are assumed to increase at 2.3 percent annually, and the normalized deficit is permitted to rise to – 0.5. Planned levels of

Soviet energy exports to CMEA are retained

at 1985 levels. Again, worst and best cases

for energy production are based on chapters

2 to 5 in this study. These assumptions are

summarized in table 60.

The discussion in the foregoing chapters

leads to the conclusion that Western energy

technology and equipment would have a

relatively greater quantitative impact on the

Soviet gas industry than on the oil industry.

Translating such a judgment into numerical

production levels is a highly speculative

exercise. The figures in table 60 should,

therefore, be seen as merely illustrative of

the possible impact of Western assistance on

these industries.

For oil, OTA assumes that Western assistance would make no more than a 10 percent

difference in output levels. Given a policy of

maximal assistance, OTA estimates that

Soviet natural gas production in 1990 could

be 100 bcm (or 15 percent) higher than otherwise. This assumes that the new export pipeline to Western Europe would lead to an an-

‘1 For simplicity}. the normalized trade deficit is assumed

not t o app]~’ to credits rel a t ccl t o nrwf energ}’ projm’ts. )1s contemplat d, t hose projects would in\ol\re a \cr~ rapid huildup

in credits to ahou t 1 W5-86 a ncl then equa ll~r fast repa~nwn t

hy ahout 1990.
274 Technology and Soviet Energy Availability

Table 60.—Major Assumptions Underlying

1990 Scenarios

Worst case Best case

(minimal Common (maximal

Western to Western

energy both cases energy

assistance) assistance)

Income elasticity of

energy demand. . . .

Petroleum output

(mmt) . . . . . . . . . . . . .

Natural gas output

(bcm) . . . . . . . . . . . . .

Coal output (mmt) . . .

Nuclear power

(bkwh) . . . . . . . . . . . .

Hydroelectric power

(bkwh) a

Average annual

growth rates for

real exports to

non-CMEA area:

Timber products. . .

Platinum group

Metals . . . . . . . . . . .

Raw cotton . . . . . . . .

Chemicals. . . . . . . . .

Automobiles. . . . . . .

Diamonds . . . . . . . . .

Other products . . . .

Maximum permissible

normalized

trade balance. . . . . . . .

Average annual

growth rates

for Soviet

foreign trade

prices with

non-CMEA area:

Export prices . . . . . .

Import prices . . . . . .

0.9

500

665

850

411

271

1.0%

3.0

1.0

10.0

5 0

2.0

2.0

550

765

875

470

271

of existing 1990 production estimates is

tremendous. These are from 350 to 450 mmt

(CIA) to 750 mmt (The Economist Intelligence Unit). (see ch. 2). The assumed range

of 500 to 550 mmt in table 60 falls roughly

halfway between these two extremes.

The outcomes for the worst-best case scenarios are reported in table 61. Without

Western assistance, the Soviet net fuel

balance (i.e., net fuel available for export to

the non-CMEA region) declines from 83

mtoe (1.67 mbd) in 1979 to a deficit of 12

mtoe by 1990. With maximal Western help,

on the other hand, the net fuel balance increases by over one-third to 126 mtoe (2.53

mbd) in 1990. As with the scenarios for 1985,

however, one would want to examine in some

detail the technical capacity of the Soviets

actually to export such large volumes of

fuels, particularly natural gas.42

42 For the best case scenario, 1990 Soviet energy demand is

estimated as 1,276 mtoe. 1990 estimated Soviet “available

energy” (i.e., after assumed exports to CMEA), balances for

each fuel category (Campbell, op. cit., estimates of 1980

domestic energy consumption by category are in parentheses) are: hydro, nuclear, and “other”’= 209 mtoe

(108); coal= 350 mtoe (319); oil= 404 mtoe (354); and gas= 480

mtoe (250).

-0.50

Table 61 .—Alternative Scenarios for 1990 (percent)

1O.O %

7.5%

a Based on Campbell OP cit.

SOURCE Off Ice of Technology Assessment

nual output increase of from 40 to 70 bcm,

that joint U.S.-Japanese-aided projects

could yield an additional 20 bcm, and other

smaller scale efforts could augment Soviet

gas output (but not necessarily Soviet exports) by 10 to 40 bcm.

The assumed production levels are, of

course, key to the quantitative outcomes of

each scenario. For oil in particular, the range

Worst case Best case

(minimal (maximal

Western Western

energy energy

assistance) assistance)

1990 net fuel balance . . . . . . (12) mtoe 126 mtoe

Percentage change in net

fuel balance (1979-90) . . . -100% 51%

Percentage change in

capacity to import nonenergy products from nonCMEA area (1979-90) . . . . 14% 163%

Implied average annual

growth rate for real import

capacity. . . . . . . . . . . . . . . . . 1.2% 10.2%

a

This would be the average annual rate of growth of nonenergy Imports from the

non-C MEA region Implied by the level of real nonenergy related Imports that the

U S S R could purchase in 1990 after repayment of energy project-related debt

The actual average annual rate of growth of such Imports prior to debt repayment

would be considerably smaller

SOURCE Off Ice of Technology Assessment
Ch. 8—Energy and the Soviet Economy - 275

Given the foreign trade conditions posited

above, the Soviet Union’s capacity to import

nonenergy products from the West grows in

real terms between 1979 and 1990 by 14 percent in the worst case and by 163 percent in

the best case. These changes translate into

per annum growth rates of 1.2 and 10.2 percent respectively. The latter figure, however,

must be interpreted with great care. The

significant increase in energy exports implied in the best case outcome would only occur in the second half of the decade, after

completion of the massive natural gas pipeline projects and after technology transfer in

the coal, nuclear, and oil sectors had had an

appreciable effect. Furthermore, a good portion of these incremental energy exports

would have to be used to pay off projectrelated debts in the 1986-90 period. Consequently, under the assumed conditions

Soviet real imports of nonenergy and nonenergy-project products would actually grow

at a rate somewhere between 1.2 and 10.2

percent. Nevertheless, assuming that the

bulk of these large Western credits had been

retired by 1990, Soviet real import capacity

at that time would have increased by 163

percent, having grown at an average annual

rate of 10.2 percent since 1979. In the worst

case scenario Soviet real import capacity increases at a negligible rate. In the best case,

the growth in import capacity almost matches the growth rate of the 1960’s.

SUMMARY AND CONCLUSIONS

Soviet economic growth has gradually

slowed in recent years, and even without an

energy “problem, it is likely that growth

would continue to decelerate in the 1980’s.

The basic causes of this slowdown are falling

rates of growth of the Soviet capital stock

and labor force. Recently their impact has

been reinforced by stagnating or declining

productivity, only in part the result of

adverse weather conditions. Even in the

absence of a serious decline in Soviet oil output, the Soviet economy in this decade will

probably not be able to attain the growth

rates of the 1970 unless significant gains in

productivity can be achieved.

It is generally agreed in the West that

significant productivity increases are unlikely to occur in the absence of more profound

changes in the Soviet planning and management systems than are presently contemplated. Superimposed on these fundamental

trends and challenges to the Soviet planners

is now the possibility of a plateauing or even

decline in oil output. A decline would certainly cause Soviet growth to slow even more,

although the magnitude of such a slowdown

is not at all obvious. The impact of falling

domestic energy supplies will depend on a

system of complex relationships in the economy, and on Soviet priorities and actual

policies regarding the composition of the

future energy balance and foreign trade patterns. The formulation of Soviet energy

policy takes place in a political context and

involves a number of different interests and

actors. It now appears that this policy

broadly favors gas and nuclear development,

partly at the expense of the oil and coal sectors.

The foregoing discussion has attempted to

suggest the major direct and indirect economic ramifications of basic Soviet economic

policy options. There is nothing to keep

Soviet planners from pursuing some or all of

these policies simultaneously. They probably will pursue most of them in some

measure. But every policy carries with it

costs and benefits to the Soviet economy. In

an effort to give some rough order-of-magnitude sense of how the Soviet economy

might be affected by the energy situation,

OTA has developed several alternative scenarios for Soviet energy and aggregate economic conditions in the 1980’s. The “worst”

and “best” case scenarios are meant to

bracket plausible outcomes for Soviet eco-
276 . Technology and Soviet Energy Availability

nomic growth, energy balances, and growth

in hard currency import capacity. These

scenarios should not be viewed as predictions. They are simply attempts to set

forth plausible ranges for the parameters

under which Soviet economic policy makers

will have to operate over the next decade.

Each scenario is based on a long list of

simplifying assumptions.

The scenario outcomes for the period

1981-85 suggest that if most or all of the

‘‘worst case assumptions materialize, Soviet economic growth could slow considerably during the Eleventh FYP. Annual rates

of GNP growth would probably be much lower than the 2.8-percent-per-annum average

recorded for 1976-80, and could result in

small and perhaps politically unacceptable increases in real per capita consumption

for the Soviet population. Under such conditions the ability of the U.S.S.R. to increase

its real nonenergy imports from the West

would also be seriously impaired. This would

negatively affect the overall growth prospects for East-West trade and would in turn

place further strains on the Soviet economy.

Under a series of “best” case conditions,

the Soviet Union would be able to continue

to grow at a rate approximating overall

Soviet performance for the Tenth FYP. At

the same time, its net fuel balance available

for export to the West would increase over

1979-80 levels. This, combined with continued improvements in Soviet terms of

trade under “best” conditions, would permit

the U.S.S.R. to expand real hard currency

imports at historic rates and possibly to

divert more energy than presently contemplated to Eastern Europe.

Actual conditions will likely fall somewhere between these extremes. If the

U.S.S.R. encountered economic growth,

energy, and foreign trade conditions midrange between those assumed for the worst

and best cases, the Soviet Union might be

able to maintain energy exports to the West

at about 1979-80 levels and continue to increase its real hard currency imports at rates

established over the past 15 to 20 years. This

would make possible annual per capita consumption growth well above 1 percent.

OTA assumed that Western assistance in

the development of Soviet energy resources

would have its greatest quantitative impact

after 1985. The 1990 scenarios therefore consider the possibility of minimal Western

energy assistance (the “worst” case) and

maximal Western cooperation (the “best”

case). Such help, in the form of exports of

energy-related equipment, materials and

technology, and extensive export credits,

would be forthcoming principally in the

1981-85 period. The credits are assumed to

be more or less fully repaid by 1990. Most of

the assumptions regarding energy and foreign trade conditions are essentially “midrange’ estimates.

In the worst case scenario, Soviet fuel exports would disappear by 1990. Soviet capacity for hard currency imports (in real

terms) would grow at a little more than 1 percent per annum in the 1980’s, contrasted to

annual growth of over 12 percent in the

1970’s. With massive Western assistance in

energy development, on the other hand, once

these project debts were repaid, Soviet import capacity would more than double. This

would mean that the Soviet capacity to purchase real imports from the non-CMEA area

would have increased at an effective annual

rate of over 10 percent a year. Real nonenergy-related imports in the interim would

not have grown so rapidly because most of

the increase in the net fuel balance would occur only after 1985, and debt repayment

would eat into energy export revenues up to

1990. In both cases, real GNP was assumed

to grow at a ‘‘midrange" value of 2.4 percent, a rate that would be compatible with

real per capita consumption growth in excess of 1 percent a year.

Sizable increases in the Soviet fuel balance

available for export to the West raise the

question of whether all of the implied

balance could really be exported. The issue

arises because the big gains in domestic

energy production are likely to come in

natural gas. In most cases sizable oil exports
Ch. 8—Energy and the Soviet Economy . 277

could only be maintained if very significant

substitution of gas (not coal) for oil were

possible. If gas is to replace rather than augment oil exports, a much-expanded natural

gas pipeline network, perhaps even beyond

the scale of ongoing and contemplated projects, is needed. More precise judgments

about these constraints, however, would

only be possible after examining much more

closely the degree to and rate at which gas

can really be substituted for oil in domestic

consumption.

range of plausible outcomes, they suggest

that the simultaneous maintenance of a

politically feasible rate of economic growth

in the U. S. S. R., the further expansion of real

energy exports to Eastern Europe after

1985, and a reasonably high rate of growth

of East-West trade (in real terms), will hinge

importantly on whether or not the West

plays a significant part in developing Soviet

energy sources, and particularly gas, in the

1980’s.

Assuming that the worst-best case

scenarios for 1990 are at all close to the
Appendix A. – Export and Domestic Output

Performance for Selected Nonenergy Products

TIMBER

Although subject to considerable cyclical fluctuations, Soviet real exports to the West of timber products (mainly sawn lumber to Western

Europe, sawlogs to Japan, and pulpwood) tended

to stagnate in the 1970’s. Real exports of sawlogs

increased only about 4 percent in the course of the

1970’s and declined between 1975 and 1979. Lumber exports declined by 20 percent between 1970

and 1975 and then increased to slightly more

than their 1970 levels by the end of the decade.

Timber export prices tended to grow at 10 to 12

percent per annum in the first half of the decade

and at about 10 percent annually after 1975. According to Soviet statistics the volume of timbercutting in the U.S.S.R. actually declined between

1975 and 1979. ’ The Eleventh Five-Year Plan

(FYP), however, calls for a 17- to 19-percent increase in output in the wood products sector over

the next 5 years.2 On the basis of this information, OTA assumed a plausible range of zero to

2.5 percent annual growth in Soviet real timber

product exports to the non-Council for Mutual

Economic Assistance (CMEA) region. The upper

limit is based on an optimistic Western assessment of Soviet timber production by 1990.3

PLATINUM

Soviet platinum group exports, primarily

directed to Japan, West Germany, and the

United States, have fluctuated considerably over

the past decade, presumably because of rapidly

changing demand conditions and the possible

tendency to utilize platinum exports as a residual

financing mechanism, much the way gold appears

to be used.4 Estimated Soviet production of these

metals increased at an average annual rate of 4.1

percent between 1970 and 1979, although growth

slowed to 2.2 percent per annum after 1975.5 OTA — —.— —-—

‘Jlrur(dnove kht)z~u}st{ I() S.S.SR, 1979.

‘F~kt]/lf~r~~~ch~’.\k[~}~~ Hazetu. No. 49, I)ewmher 1980.

‘Hrenton It!, tlarr, “I)omestic and 1 nternational Implications of Regional (’hange in the So\iet ‘1’imber and W’ood. Processing Industries,

Association of American (;eogr-aphers Project on So\riet Natural Resources in the W’orld ~kwnom~., .J urw 1978, manuscript.

4

See Ronald (; oechsler and Iiedija 11 Kravalis, “(’on~plt’nlentari~}”

in LJ S, I report Needs and So\’iet F]xport Capahilit ies: I)latinum,

;,

unpublished study, F’eh. i 5, 19’79; and Thomas A. W’elf, “So\iet

Primar} Product b:xports to the W’est: An k:mpirical Anal}sis of

Llarket l’ower and I)rice St~nsiti\it~, stud}’ prepared for- the ( )f’fice of

E;xternal Research, {~ S I)epartmt’nt of State, Septemher 1 W)

“(’al culatt’d from (’1A, }I[ltt(ih,)ok [)~}’;([ln(~mi[ StalI.stIcs. op. cit.

has taken this latter rate as a basis for the lower

bound of real export growth up to 1985, with the

upper bound assumed to be twice this rate (4.4

percent).

COTTON

Soviet production of cotton grew considerably

in the 1970’s, with output rising at an average 2.7

percent annually from 1970 to 1975 and 3.8 percent between 1975 and 1979.6 From a fairly low

base, Soviet exports of raw cotton to the West

(principally Western Europe and Japan) rose by

an average 30 percent a year in the first half of

the decade, slowing to about 2.5 percent per annum after 1975.7 In his 26th Party Congress

speech, Soviet Prime Minister Tikhonov indicated a goal of 9.2 million to 9.3 million tons

average annual cotton production between 1981

and 1985, which suggests essentially no growth

over 1979 output.8 OTA’s range for export

growth was therefore set at an annual rate of zero

to 2.5 percent, the worst case figure assuming a

constant ratio of hard currency exports to output,

the latter assuming that the export growth rate

of the late 1970’s could be maintained.

CHEMICALS

About three-quarters of Soviet chemical exports to the West in 1979 were accounted for by

“radioactive chemical elements’ shipped primarily to France and West Germany. No data are

available on these exports in real terms, but real

growth has obviously been dramatic, as the total

value of shipments to the IW rose from only $60

million in 1975 to $922 million in 1979.9 OTA has

fairly arbitrarily assumed that these exports

would increase by another $250 million to $500

million by 1985, in 1979 prices.

The Organization for Economic Cooperation

and Development (OECD) has estimated that annual CMEA deliveries to the West of chemicals

on the basis of recent compensation agreements

will total some $1.0 billion to $1.5 billion in the

-— . . - — — 6 ,!”(lro(ino}{” kho:)w \\t/ I() S.S.S}{, 19N

\“ri(].ihff w\r(J t(JrR(~(/\w S.$.SR, t’arious issues.

“fi.’k(~nt~n~l(h(~.~k[j~[~ g(Jzt’t(J, No. 10, hlarch 1981.

‘+lledija f I Kra\ahs, et al., “So\it’t F;xports to tht> I ndustriallzed

}f’est: l’erformanct> and l’respect ~,’ in L I S. (’ongress <Joint ~;cononl]c

(’omnlittee, S’()[ict ~~((III~)m 11 n u 7’Im{ of ( ‘han,Kc, vol 2 (lt’ashington,

1).(’ : LI S ( ;o~ernn]~’nt I’rlnting office, 19’79), pp. -t 1 -t.-l(; 1; and IJ.S.

I )epart mmt of (’onlmerc(l data

278
Ch. 8—Energy and the Soviet Economy - 279

early mid-1980’s, presumably in constant (i.e.,

1979 or 1980) prices. Roughly 90 percent of these

deliveries are to come from the Soviet Union.

OTA has, therefore, taken $1.0 billion to $1.5

billion as a plausible range for the increase by

1985 in Soviet chemical exports to the West in

1979 prices. (As OECD points out, however,

whether all of these compensation deliveries will

augment rather than replace current deliveries is

not known. ) Combining the very rough estimates

for enriched uranium and compensation deliveries

yields a range for average annual growth of real

Soviet chemical exports to 1985 of 12.3 and 17.7

percent.

AUTOMOBILES

Soviet exports of automobiles to the IW countries increased from 8,000 units in 1970 to 60,000

in 1975 and 110,000 by 1979.10 The average annual growth rate for 1975-79 was about 16 per- —. . . . .— 10 

~’ne~hnyava t(jrgol IVU S.~.VR, ~’ari~us issues.

cent. Assuming a continued strong Soviet push in

this area, OTA set a 5- to 10-percent-per-annum

plausible growth rate range for automobile exports in the 1980-85 period.

DIAMONDS

Soviet diamond exports are in many respects

more of a mystery than platinum group metals. It

has been estimated, however, that real diamond

exports fluctuated relatively little and without

trend between 1971 and 1977.11 Rather arbitrarily, real diamond exports are estimated to increase

at an average annual rate of zero to 5 percent to

1985.

All other Soviet exports to the West, (no one of

which, at the SITC 4- to 5-digit level of aggregation, exceeded more than one percent of Soviet exports to the IW in 1979), are also arbitrarily

assumed to grow within the range of O to 5 percent to 1985.

‘‘Ericson and Miller, op. cit.
CHAPTER 9

East European

Energy Options

84-389 0 - 81 - 19
CONTENTS

Page

INTRODUCTION . .................284

ENERGY SUPPLY AND DEMAND

IN EASTERN EUROPE, 1960-79:

MAJOR THEMES. . ..............285

Reserves . . . . . . . ...................285

Energy Imports . . . . . . . . . ...........285

The Energy Balance. . ...............285

The Role of the U.S.S.R.. . ............286

EAST EUROPEAN ENERGY

SUPPLIES IN THE 1980’S. . .......290

The Coal Industry. . .... . . . . . . . . . ....291

The Nuclear Power Industry . . . . . . . . ..295

Soviet Electricity Exports to

Eastern Europe. . ... . . . . . . . . . . . . . .299

Other Domestic Sources o fEnergy .. ...299

Conclusions. . . . . ... . . . . . ...........300

EAST EUROPEAN ENERGY

DEMAND IN THE 1980’S. . .......301

EAST EUROPEAN ENERGY

IMPORTS IN THE 1980’S:

IMPLICATIONS FOR TRADE

WITH THE SOVIET UNION AND

THE REST OF THE WORLD. ......304

Import Needs: Best, Worst, and

Middle Cases . . . . . . . . . . . . .........304

Soviet Energy Exports to

Eastern Europe. . .................305

Hard Currency Requirements. . . .. ....306

SUMMARY AND CONCLUSIONS. .. .308

LIST OF TABLES

Table No. Page

62. Soviet Exports to CMEA of Crude

Oil and Oil Products, 1970-80.......288

63. Soviet Natural Gas Exports,

1970-80 . . . . . . . . . . . . . . ..........289

64. Comparison of Unit Values for

Soviet Gas and Oil Exports, 1976...289

65.

66.

67.

68.

69.

70.

71.

72.

73.

74.

75.

Page

East European Plans for Coal

Output in 1985 and 1990..........291

Projected and Planned East

European Coal Production. . .......294

Nuclear Power Capacity, and

Production of Electricity From

Nuclear Powerplants, 1979, and

Planned for 1985 and 1990.........297

Planned and Projected Nuclear

Capacity to 1990 . . . . . . . . . . . . . . . . .298

East European Energy: 1979-90,

Plans and Projected Actual

Supplies. . . . . . . . . . . . . . . . . . . . . .. .300

Energy GNP Elasticities in Eastern

Europe: Past Trends and Future

Projections . . . . . . . . . . . . . . . . . . . . .301

Energy Demand Projections for

Eastern Europe, 1985 and 1990.....303

Projected Energy Consumption and

Production in Eastern Europe,

1985 and 1990 . . . . . . . . . . . . . . . . .. .304

Soviet Energy Exports to CMEA,

Actual in 1976-80, and Planned

for 1981 -85. . . . . . . . . . . . . . ........305

East European Projected Net

Energy Imports, 1985 and 1990:

Total, From the Soviet Union, and

From the Rest of the World. . ......306

Projected Hard Currency Burden on

Eastern Europe of Various

Projected Net Imports of Energy,

1985 and 1990 . . . . . . . . . . . . . . . . .. .307

LIST OF FIGURES

Figure No. Page

24.

25.

26.

Consumption, Production, and Net

Imports-of Energy for All of

Eastern Europe, 1960-79, . . . . . . . . . .286

East European Energy

Consumption by Energy Source,

1960-78 . . . . . . . . . . . . . . ..........286

Energy Production in Eastern

Europe, Total, and by Country,

1960-79 . . . . . . . . . . . . . . ..........287
CHAPTER 9

East European Energy Options

Eastern Europe is now struggling to adjust to an energy-expensive world. During

the present decade, the six Council for

Mutual Economic Assistance (CMEA or

CMEA-6) countries examined here–Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania–will attempt to

resolve their energy problems while simultaneously increasing living standards at

a politically acceptable pace, and without

falling more deeply into debt with Western

banks. All this must be done without the

degree of reliance on Soviet subsidies in the

form of cheap energy which has played such

an important role in East European energy

supplies in years past. The outcome will have

important implications not only for political

stability and economic development in Eastern Europe, but also for Soviet-East European relations.

The most important international dimension of Eastern Europe’s energy problem lies

in its relations with the U.S.S.R. Soviet oil

subsidies to Eastern Europe at present are

enormous, their value in 1980 amounting to

half of all Eastern Europe's exports to the

West or to half the value of all Soviet imports from developed countries. As the

U.S.S.R. has faced the prospect of increasing

constraints on its own energy supplies, its

willingness to supply Eastern Europe with

cheap energy has diminished. But it is by no

means clear that the Soviets could quickly

reduce these subsidies without precipitating

a degree of economic crisis and political

unrest in some East European countries.

The Soviet Union’s strategy with regard

to East European energy combines plans to

stabilize the level of its energy exports (i. e.,

by cutting the increments of energy, espel’l~urt’~ tf)r f’xpf)rt ~, I report ~ 0 nd d{Il)t ti rf’ 1):1 ~(d f)n 1979

[id t a i n (‘ 1 I\, II(I I) ~i~)( )( )/, fJ/ }’.’{ ‘f III t) m Ir ,S (~~ ( I \ tif f F; 1{ N()- 1 ()452.

{ )(1( )I)t,r 1 $)\(), iin(l on 1 \)<N() (J<l i tll:i( t,i [)r{ I\ 1(1(’(1 t t) ( )“1’ 1 l)f l.:(iw ii r( I ,1 I I f ~w’tL[ I

cially oil, to be supplied) with assistance to

the CMEA countries in their efforts to develop their own energy resources and to use

energy more efficiently. At the basis of this

policy seems to be the assumption that tight

energy supplies in the U.S.S.R. preclude increments to shipments comparable to those

of the 1960’s and 1970’s.

The purpose of this chapter is to illuminate the degree to which this Soviet strategy

is feasible, given the problems and opportunities in domestic energy production and

consumption which will confront the nations

of Eastern Europe in the next decade. The

chapter briefly reviews energy trends in

Eastern Europe over the last 20 years. It

then analyzes the energy problem from both

the supply and demand sides, identifying

constraints and opportunities and evaluating the political and economic implications

for East European energy imports-particularly imports from the Soviet Union. The discussion addresses the important issue of

whether Eastern Europe will be able to cover

its energy needs with Soviet imports supplementing domestic production, or whether

large energy deficits which must be met with

other imports may occur. The latter situation could augur heightened domestic political and economic difficulties in Eastern

Europe and might necessitate alterations in

Soviet policy.

The East European countries make up a

fairly well-defined energy system, characterized by relatively few options for expanded domestic energy production and

well-established historical trends of energy

usage. Therefore, it is possible to make

reasonable guesses about future trends, In

the analysis that follows, East European

plan targets for energy production are

evaluated and contrasted to best and worst

case projections for energy production, demand, economic growth, net energy imports,

283
284 - Technology and Soviet Energy Availabity

and hard currency debt. These cases, con- delineate a range of possible alternatives.

structed by OTA, are judgments of what ap- They are not predictions, but informed

pear to be most and least optimistic alter- guesses about likely possibilities.

native futures, and are included in order to

INTRODUCTION

The key goals of the Soviet energy strategy for CMEA are outlined in the “LongTerm Target Program for Cooperation in the

Areas of Energy, Fuels, and Raw Materials.” They are: 1) the development of natural

resources to their fullest in every member

country through expanded exploration and

quick development of newly discovered

deposits; 2) strong promotion of nuclear

power, particularly through intra-CMEA cooperation; 3) promotion of the development

of energy-saving technologies and the application of energy-saving processes; and 4)

changes in the structure of output designed

to reduce the share of energy-intensive products in gross national product (GNP).2

The emphasis in this program, one evidently supported by East European planners, has been on supply-side remedies to the

energy problem. But while there has been little discussion of conservation, and few concrete measures have been designed to promote it, at least one Soviet expert has recently raised serious doubts concerning the

viability of a supply-side approach in view of

recent difficulties in expanding East European production of coal and other energy

sources. He suggests that conservation

measures deserve serious consideration

since the only other alternative—energy imports from third countries—is simply too expensive. 3

The energy-saving approach recognizes

that it is cheaper to conserve than to in- ——2 P. Bagudin, “The Long-Term Tar-get I)rogram for Cooperat ion in the Area of h: nm-gy, Fuels, and Ikl a terials, and its Realization, ” ~’n{.shn~~~}u t{Jrg(~t’/Ju, october 1980, pp. 13-18.

‘L’ladimir hl. (izo\rskiv, “The h;conomics of Energ~’ Resources in the (’ hl 1“; A (’OU n t ries, L ‘[~prf),s)f (’Af)r/on7iki, I)ecemtwr 1980, pp. 96-103.

crease production, but the problem of how

genuine conservation can be achieved remains. $ One way is to change the structure of

GNP to reduce the share of energy-intensive

industries and product. This approach has

adherents, but it gives rise to other difficulties, since energy-intensive sectors

(chemicals, fuels, metallurgy, and construction materials) are so important in CMEA

economies. The development of energy-saving technology is a promising long-term solution, but the quickest short-term option—

reform of the economic system—is understandably downplayed. An enhanced role for

meaningful prices, and for profits, combined

with a workable set of bankruptcy and enterprise reorganization laws, would probably

help to reduce energy wastage by industries.

The political costs of such a strategy could

be quite high, however, and such reforms

have not received widespread support.

Understanding East European domestic

political and economic considerations, as

well as those that govern relations with

U. S. S. R., is important for comprehending

the policy choices which East European

leaders have made, and those which they are

likely to make in the years ahead. The approaches they take to the energy problem

will combine three elements: 1) increased

domestic energy supplies; 2) reduced energy

demand; and 3) increased imports. Each

country calculates the costs and benefits of

these strategies differently, depending on its

energy situation and on perceptions of the

political consequences of one or another

path.

. —

“N! iklos Szocs, 4’ Program for the Next F’i\’e Years,”’

f’i~]clf~, I)ec. 24, 1980, pp. 1, 4.
Ch. 9—East European Energy Options . 285

— . .

ENERGY SUPPLY AND DEMAND IN

EASTERN EUROPE, 1960-79: MAJOR THEMES

This section reviews major trends in the

development of East European energy production and consumption over the past 20

years. These themes will form the context

for the choices facing planners, and will

become the basis for OTA own projections

for Eastern Europe’s energy future in the

coming decade,

RESERVES

East European energy reserves are small

and dwindling. The size of Eastern Europe’s

oil reserves is only about 3 percent of that of

the estimated proved oil reserves of the

U.S.S.R. Gas reserves are even smaller.

Most of this petroleum is concentrated in

Romania, which has about 89 percent of all

Eastern Europe’s proven oil reserves. In

1976, however, Romanian oil production

peaked and now appears to be in long-term

decline. If reserves are exploited at late

1970’s production rates, they will be exhausted in a little more than 10 years.

Romania also holds Eastern Europe’s

largest gas reserves, about 40 percent of the

total. Here too declining production trends

are clear.

Forty percent of Eastern Europe’s coal

reserves, and almost all of its hard coal, are

located in Poland. These reserves have been

the sole source of net energy exports from

Eastern Europe, but recent events in Poland

put continued exports in considerable doubt.

The other major deposits, located in Czechoslovakia and East Germany, are coals with

low calorific value that have served as the

backbone of those countries’ primary energy

and electricity production.

ENERGY IMPORTS

East European net energy imports have

been rising rapidly. In every year since 1961,

Eastern Europe as a whole has been a net

energy importer, with imports rising to 23

percent of consumption in 1978. The rate of

increase, too, has been growing. One indicator of this has been the recent rise in the

marginal import to consumption ratio, which

records the proportion of the increment to

consumption that is covered by net imports.

In recent years, two-thirds of the increase in

energy consumption has been covered by increases in energy imports. The increasing

import/consumption ratio represents a

significant policy problem in that it creates

an added strain in export requirements

necessary to pay for the additional energy.

Almost all of these imports are of oil and gas

and the percentage of the latter is rising.

Figure 24 shows the growing importance

of net energy imports in Eastern Europe.

Some perspective may be gained by comparing the East European energy situation with

that of Western Europe.5 In 1978 the countries of the European Economic Community

(EEC) produced 81 million barrels per day of

oil equivalent (mbdoe) or 438.7 million tons

of oil equivalent (mtoe), importing 54 percent

of all their energy. During the same year,

consumption in Eastern Europe was about

9.5 mbdoe (473.1 mtoe) and production 6.24

mbdoe (3 10.7 mtoe). Thus, it was necessary

to import only 23 percent of energy consumed. But the EEC's far higher import dependence is declining over time, and between

1974 and 1978 net imports to the EEC actually fell as North Sea oil production began.

The opposite is true in Eastern Europe

where import dependence is growing and

where there is no prospect of a North Sea.

THE ENERGY BALANCE

Figure 25 illustrates the strikingly dominant position of coal in East European

energy consumption. In 1979, 78 percent of

the energy produced in the area was coal;

— 5

International Energy Agency Organization for E;conomic

Coopcrat ion and I)e\(>lopnlent (01’:(’1)1, }~~ttr,g) Bf//~/n{~Ji ,~/”

OE(’1) (’~jf{n tri(,i 1!);./ 1,97(~ ( I’aris: OF;(’1), 19S()),
286 • Technology and Soviet Energy Availability

Figure 24.—Consumption, Production, and Net

Imports of Energy for All of Eastern Europe, 1960-79

3.5-

2.5-

1,5-

1960 1965 1970 1975 1980

SOURCE Data are from CIA Energy Supplies in Eastern Europe A Statistical

Compilation, " ER 7610624, December 1979, and CIA, Handbook of

EcorrorrrIc .Sfatlsflcs ER 80.10452 October 1980

natural gas constituted 14 percent. and

nuclear and hydropower together 3 percent.

Poland, the mainstay of this production, provided 2.7 mbdoe (134.4 mtoe) in 1979—42

percent of all energy output for the region.

The second largest energy producer, Romania, contributed 17 percent in the same

year, but Romanian energy production has

been falling since 1976. Figure 26 illustrates

the crucial importance of Polish coal. Poland

was primarily responsible for increases in

energy production during the 1970’s. Without those increases the small output gains

made by other countries would have been

completely canceled by Romania’s decline.

Figure 25.—East European Energy Consumption

by Energy Source, 1960-78

9.00

8.00

7,00

6.00

@ 5.00

$

Q

>

4.00

300

200

1.00

0

Total consumption

Other

1960 1965 1970 1975 1979

SOURCE Data are from CIA “Energy Supplies in Eastern Europe A Statlstlcal

Compilation ER 76-10624 December 1979, and CIA Handbook of

Economic Statlstlcs ER 80-10452. October 1980

cent of total energy consumption; in Eastern

Europe in 1979, 57 percent of energy was

consumed in the form of coal. In contrast, oil

and gas-–which made up 74 percent of EEC

energy consumption-provided 40 percent of

the total in Eastern Europe. Consumption of

petroleum has increased over the last two

decades in Eastern Europe, but world price

rises have slowed that process. This gives

CMEA one advantage relative to the rest of

the world. As many nations attempt to

switch back to coal, Eastern Europe can

merely slow its transition to oil.

THE ROLE OF THE U.S.S.R.

The Soviet Union is overwhelmingly important as an energy supplier to Eastern

Europe. Table 62 shows estimated Soviet
— — —

Figure 26.— Energy Production in Eastern Europe,

7 0 0

6 0 0

5 0 0

4 0 0

a

:

D

>

3 0 0

2 0 0

1 0 0

0

Total, and by Country, 1960”79

All others

1960 1965 1970 1975 1980

SOURCE Data are from C 1A Energy Supplies in Eastern Europe A Statitical

Compdatlon ER 76 10624 December 1979 and Cl A Handbook of

Econom!c Staflstlcs ER 80-10452 October 1980

crude oil and product exports to CMEA during the 1970’s. The Soviet Union’s oil exports to all nine CMEA countries have generally been about 55 percent of its exports to

the world. In 1979, for example, the Soviet

Union shipped to CMEA 87.1 million tons

( 1.74 mbd) of crude oil and oil products, more

than half of all its exports (158.1 million tons

or 3.16 mbd). This percentage has remained

relatively constant, although the rate of

growth of Soviet oil exports to CMEA has

slowed. This reflects a reduction in total

Soviet oil exports over the past 5 years.

Even more important than the huge quantities of Soviet oil shipped to Eastern Europe

is its relatively low price. This has constituted a substantial subsidy. The average

Ch 9— East European Energy Options - 287

—

price per ton chargedl by the Soviet Union for

crude oil shipped to Eastern Europe in 1980

was about half of the world price.6 This price

is calculated according to a method, adopted

in 1975, called the ‘‘Five Year Moving Average." This system uses world oil market

price averages over the previous 5 years as a

basis for annual price negotiations in intraCMEA oil trade. The result is a considerable

lag in CMEA prices for oil. The advantage to

Eastern Europe has been enormous. While

world oil market prices rose almost thirteenfold between 1972 and 1980, prices paid by

East European countries for Soviet oil rose

only about 4.5 times. In 1980, Soviet exports

to Western nations brought an estimated

average price of $230/ton, while export

prices to CMEA countries were $105/ton.

Assuming a subsidy amounting to the difference between the two prices, the 1980 subsidy was 81.1 million tons x $125 = $10.1

billion. This was one-half the value of all

Eastern Europe’s exports to the West. If

East European nations were forced to pay

the full world market value for this oil, they

would have had to increase their dollar exports by 50 percent, or double their annual

hard currency borrowing. Such loans would

be very difficult, if not impossible, to Obtain. 7 Conversely, by selling this oil on the

world market. the U.S.S.R. could increase its

hard currency, imports 50 percent. Obviously, however, the subsidy is so large that if

the Soviets tried to eliminate it quickly, the

result would be chaos for Eastern Europe.

I t must be noted, however, that Eastern

Europe actually imports Slightly more

energy from the Soviet Union than yhe total

of its net energy imports. The reason is that

while Eastern Europe has been a net importer of energy from the Soviet Union, it

has also exported energy, mostly coal, to
288 . Technology and Soviet Energy Availability

Table 62.–Soviet Exports to CMEA of Crude Oil and Oil Products, 1979-80

Exports to

Bulgarla . . . . . . . . . . . . . . . . 48

Czechosolvakia . . . . . . . . . 9.4

East Germany. . . . . . . . . . . 9.2

Hungary . . . . . . . . . . . . . . . . 4.0

Poland . . . . . . . . . . . . . . . . . 7,0

Romania. . . . . . . . . . . . . . . . —

CMEA-6 ., . . . . . . . . . . . . . . . 344

Cuba . . . . . . . . . . . , ... , , ,. 43

Vietnam . . . . . . . . . . . . . . . . —

Mongolia . . . . . . . . . . . . . . . —

CMEA-9 . . . . . . . . . . . . . . . . . 387

7.1 99 11.6 10.0 11.9 108 12.9 11,3 13.4 13,0 14.1 13.0 14.0

105 155 16.0 163 17.2 17.0 17.0 17.7 17.7 183 18.3 19,2 19.2

9 3 15.1 15.0 16.0 168 17.0 17.0 17.8 17.8 185 18.5 19.0 19.0

4.8 6.9 7.5 7.7 84 7,7 9.1 85 10,2 8.6 11.0 9.5 12,0

8 6 10.9 133 11.7 14.1 12.8 14.7 13.4 15.5 12.9 14.0 13.1 15.9

— — — —. — — — — — 0.4 0.4 1.0 1,0

403 58.2 63.4 61.7 68.4 65.3 70,7 68.6 74.6 71.7 76.3 73,8 81.1

6.0 58 8.1 6.0 8.8 6.2 9.2 6.4 9.6 6.7 9.6 7.0 10.0

0.4 – 0.4 –- 0.4 — 0.5 — 0.5 — 0.6 – 0.6

0.3 – 0.4 –- 0.4 — 0.5 — 0.5 — 0.6 – 0.6

47.0 64 0 72.3 67.7 780 71.5 80.9 750 85.2 78.4 87.1 80.8 92.3

Entire world . . . . . . . . . . . . . 668 95.8 93.1 130.4 110.8 1485 NA 152, 5 NA 165, 6 NA 1581 NA NA

C Crude T Crude plus products

NA = not available

a These are estimates necessitated by the fact that the Sovtet Unlon stopped reporting quantlty data on its energy exports in 1977, but they are probably fairly reliable indlcators of actual shipments

b T hesf> are estimates but son)ewhat Ies5 rel la ble I han the 1977-78 f(g ures T hey should be taken only as I nd Icators of genera I mag nltudes In some cases the actual number

cou Id be eas!ly 1 ton larger or smal Ier

SOURCES The data through 1976 are from Sovle! foreign trade yearbooks ( Vnestrnyaya torgov/ya .SSSR) Figures concerning the proportion of crude and products for

Cuba, Vietnam, and Mongolla are estimated Data beglnnlng In 1977 are estimates based on CMEA, Vneshayaya forgovlya (Stat lstlcal Yearbook of the

Member-Countries of the Council for Mutual Economic Assistance) (Moscow “Statlstlka,” 1979 and 1980), and The ,/ourna/ of Commerce

nonsocialist countries. In effect, Eastern

Europe as a whole is reexporting in the form

of coal some of the energy it imports from

the Soviet Union in the form of oil.

Table 63 shows estimated Soviet natural

gas shipments to CMEA in the last decade.

The Soviet Union only began to develop its

natural gas export capabilities in the 1970’s,

with the completion of the Orenburg (or

Soyuz) gas pipeline, the result of a 3 billion

transferable ruble joint development project involving the U.S.S.R. and the CMEA-6.

Each of the East European countries provided some combination of equipment, labor,

and hard currency to buy Western equipment for construction of the 2,750-km pipeline, 22 compressor stations, gas treatment

plant, and gas condensation unit at Orenburg. The pipeline began operating at full

capacity (transporting 15.5 billion cubic

meters or bcm of gas per year to Eastern

Europe) during 1980.

It is likely that most future increments in

Soviet energy shipments to Eastern Europe

will be in the form of natural gas. The implications of this trend are important because, in contrast to oil, the Soviet Union

has not been subsidizing natural gas prices

paid by Eastern Europe. In fact, it appears

that while the Soviet Union has sold Eastern

Europe oil at one-half the world market

prices, it has sold gas at about the world

price level,

Table 64 provides a rough comparison of

average 1976 prices of Soviet oil and gas exports to both Eastern and Western Europe.

This table shows that Soviet gas prices to

Western Europe on a per calorie basis were

about one-half oil prices, 35 rubles/ton of oil

equivalent of gas compared to 68.6 rubles/

ton of oil. This is consistent with world practice: gas prices generally are lower on a

calorific basis than are oil prices, reflecting

the higher transport costs and the fact that

gas is an imperfect substitute for oil. In contrast, Soviet gas and oil exports to Eastern

Europe in that year cost about the same per

calorie—39.5 rubles/ton of gas v. 38.1 rubles/

ton of oil. Moreover, the gas price was actually higher than the average price to West

European countries.
Ch. 9—East European Energy Opt/ens ● 289

Table 63.–Soviet Natural Gas Exports, 1970-80

1970 1975 1976 1 977a

1978a1979b1980b

Bulgaria. . . . . . . . . . . . . . . . — 1.19 2.23 2.90 3.00 340

Czechoslovakia. . . . . . . . . 130 3.69 4,29 5.20 5.30 7.30

East Germany . . . . . . . . . . — 3.30 3,37 355 3.62 4.33

Hungary . . . . . . . . . . . . . . . — — 1,00 1,03 2.50

Poland . . . . . . . . . . . . . . . . . 1 00 2,51 2,55 2.77 2.76 3.99

Romania . . . . . . . . . . . . . . . — — — — — 0.75

Total, CMEA-6 . . . . . . . 230 10.69 1244 1542 1571 22.22

Total, all countries . . . . 330 19.33 25.78 3123 NA NA

5.80

8.10

570

383

5.56

1,49

30.48

55.00

NA = not available

aThese are estimates necessitated by the fact that fhe Soviet Umon stopped reporting quantity data on Its energy eXPOrts In 1977. but they are probably fairly rellable In.

dlcators of actual shipments

b These are estimates also but somewhat less reliable than the 1977-78 figures They should be taken only as indicators of general magnitudes the actual figures could differ

from these

Table 64.—Comparison of Unit Values for Soviet Gas and Oil Exports, 1976

1976 1979

Gas Oil Rubles per Gas Oil

B c m T o e

d

T o n B c m T o e T o n

Exports to:

West Germany . . . . . . . . . . . . . . . . . . . . 2 2 7 27.8 65.5 N A NA N A

Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7 3 57.8 80.9 NA NA NA

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 6 31.3 66.4 N A NA NA

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 0 17.1 6 5 0 NA NA N A

Austria . . . . . . . . . . . . . . . . . ., . . . . . . 3 3 5 40,9 6 5 4 NA NA NA

Average, West . . . . . . . ., ., . . . . . . . . 28.6 350 686 NA NA NA

Bulgaria. . . . . . . . . . . . . . . . . . . . . . . . . . . 334

Czechoslovakia. . . . . . . . . . . . . . . . . . . . 34.5

East Germany . . . . . . . . . . . . . . . . . . . . 277

Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . 33.9

Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

Romania . . . . . . . . . . . . . . . . . . . . . . . . . .

Average, CMEA . . . . . . . . . . . . . . . . . . 323

408 37.5

422 34.1

33.9 32.0

41 1 44.7

39.1 42.0

39.5 38.1

45 9a

45.9

50.5

50.6

49.5

51 1

489

561

561

61.7

619

60.5

630

599

64.4

561

55,3

76.0

716—

64.7

NA = not available

Bcm BilIions of cubic meters

Toe Tons of oil equivalent of 1000 cubic meters of gas 0818 toe)

a Assumed equal to the Czech unit value

SOURCE Vneshnyaya torgovlya SSSR

If, as it appears, Soviet gas sold in Eastern Europe is not being subsidized,8 one

8 ‘Set’ er:i] aclditi{)nal factors temper these gas prices, howeter. F’irst, the official exchange ra tt~ understates the rate of

subsidy. Even at roughly equivalent gas prices at official exchange rates, Eastern Europe is receiving some implicit subsidy in being able to pay for the gas with manufactured goods

sold to the Soviets at what are, in effect, inflated prices. Secondly, gas prices are complicated because of compensation

deals. For example, the Orenburg pipeline agreement involved machinery and equipment, labor, and money capital in

exchange for gas. I t is possible that those East European investments of labor, money, and goods were overvalued relative to the final prices of gas.

possible explanation lies in the fact that

large gas shipments only began after the

1974 world oil increases, and the Soviets

must have been able to force through a full

market price for gas. This would have been

possible because even at that price, Soviet

gas remains attractive for Eastern Europe.

In any case, CMEA countries can buy additional increments of energy only at the world

market price, and the world price of gas is

still much lower than that of oil on a calorific

basis. Transport costs also make the closest

supplier the cheapest.
290 ● Technology and Soviet Energy Availability

1 -

. ..---- -

● .’

Photo credit Oil and Gas Journal

Orenburg gas pipeline

Imports of Soviet gas have, therefore,

grown rapidly. In 1977 these amounted to

about 15.42 bcm or 18 percent of the 70.7

million tons of the Soviet crude oil and products imported. By 1980 the Soviets were

shipping 30.48 bcm of gas to Eastern Europe. This equals 24.93 mtoe, or 31 percent of

the 81.1 million tons of crude and products

shipped to Eastern Europe that year.

Assuming that oil shipments from the

U.S.S.R. will not increase above 1980 levels,

the critical issues for Eastern Europe are

how rapidly the oil subsidy will be reduced,

and how quickly imports of natural gas will

increase.

These major themes—dwindling East European energy reserves, rising imports, the

continuing importance of coal, and the overwhelming importance of the Soviet Union as

an energy supplier—delineate the policy context of future East European energy planning. The next two sections, on supply and

demand prospects for the 1980’s, investigate

critical opportunities for and constraints on

future East European energy strategies.

EAST EUROPEAN ENERGY SUPPLIES IN THE 1980’S

A centerpiece of the East European energy strategy is the commitment to increased

coal and nuclear development to cover increases in demand over the next decade.

Almost all of the additional coal output will

be used in conventional powerplants, condensing stations, and cogeneration units.

Coal and expanded nuclear power together

will thus cover incremental electricity

demands. At the same time, petroleum will

be freed for use as chemical industry feedstocks, for automobile fuel, and other uses

where solid fuels are inappropriate. In

Romania, where state policies already prohibit the commissioning of any new heat or

power stations operating on oil and gas, the

proportion of electricity generated from

these fuels is projected to drop from the current level of 65 to 40 percent by 1990.9 Other

East European nations, lacking Romania’s

9 "WPC Host Country Romania Swaps Tools and Technology for Crude, oil and Gas Journal vol. 77, No. 35, I)ec, 27,

1979, p. 76ff.

domestic petroleum reserves, have been attempting to cover all of their incremental

energy needs with coal and nuclear power.

For example, Czechoslovakia employed this

strategy during its 1976-80 plan period, but

did not succeed by the amount originally

targeted. 10

Coal is likely to remain the predominant

source of domestically produced energy in

Eastern Europe, at least in the near future,

and official plans for the next 10 years feature expanded output of coal, particularly

lignite. Eastern Europe’s success in domestic energy output over the next decade will

rest mainly on its ability to increase coal output.

A second major source of energy will be

nuclear power. Despite the currently tiny

fraction of East European domestic energy

production (1.25 percent) accounted for by

10 "The National Economy . .,” 1980, p. ] 1. SW also Radio

Free Europe (RI~P~), Czechoslo~ak SR No. 4, tJan. 31, 1979,

pp. 1-2.
Ch. 9—East European Energy Opt/ens - 291

nuclear power, future prospects for the industry are promising. It is the focus of one of

the major, and apparently rather successful,

cooperative efforts within CMEA. (See

below and ch. 4.) Finally, prospects for the

Romanian petroleum industry are poor. The

sections that follow explore the constraints

and options for each of these energy sectors,

as a foundation for the projection of future

net energy import needs.

THE COAL INDUSTRY

Table 65 summarizes the plans of various

East European countries for coal output in

the 1980’s. Since the quality of information

varies considerably for different countries,

these data should be viewed only as general

approximations. All six countries are planning a major expansion of coal output, mostly lignites. Taken together, the plans suggest a growth rate of lignite and brown coal

production of 5.4 percent per annum during

1980-85, and a growth rate of 3.8 percent for

hard coal production during the same period.

Lower growth rates are projected for the second half of the decade, but these are less certain, as a number of the countries have not

yet announced formal plans.

The projected growth rates for coal are

ambitious. During the last 5 years (1975-80)

lignite and brown coal output grew 2.9 percent and hard coal grew 1.9 percent per year.

1980 production was slightly below that of

1979, reflecting a drop in Polish coal production, and continued stagnation in Hungarian, Czech, and East German output. The

plans for the 1980’s thus call for a doubling

of the growth rates of the past 10 years, and

a substantial improvement over 1979-80 performance. While this is not impossible, there

is normally a considerable lag between the

time that the decision is made to increase

output, and the actual completion of the

mine capacity necessary to implement this

decision. Investment processes to increase

lignite production have, to some extent, been

set in motion in all six East European countries. When these investments will begin to

bear fruit, and what type of coal will be produced, remain to be seen.

There are at least three potentially serious

obstacles to the fulfillment of coal output

targets. The first applies mainly to open-pit

mining of lignite and is a technology constraint: East European machinery in this

area is apparently of low quality, but planners are reluctant, or unable, to approve

large imports of Western equipment because

of severe foreign currency constraints. Second, there may be labor problems in underground mining of both brown and hard coals.

Finally, there may be an environmental constraint, again associated primarily with

lignites. The following sections briefly discuss each of these problems, describe intraTable 65.— East European Plans for Coal Output in 1985 and 1990

(1980 estimate) 1985 (plan) 1990 (plan)

Total Total Total

HC BC + LIG Mtnat Mbdoe HC BC + LIG Mtnat Mbdoe HC BC + LIG Mtnat Mbdo e

Bulgaria . . ., 0 31 31 0.12 0 37 37 0.15 0 45 45 0.18

Czechoslovakia . . . . 28 95 123 0.91 28 104 132 0.96 28 109 138 0.99

East Germany ., . . 0 250 250 1.05 0 275 275 1.16 0 300 300 1.26

Hungary. . . . ... . 3 23 26 0.14 3 32 35 0.18 3 34 37 0.19

Poland . . . . . . . 193 37 230 2.30 235 85 320 3.20 260 115 375 3.75

Romania . . . . . . . . . 8 32 40 0.20 13 74 87 0.44 15 82 97 0.49

Total . . . . . . . . . . . 232 467 700 4.72 279 607 887 6.09 306 685 992 6.86

— —

HC = hard coal BC = brown coal LIG = Iignites. Mtnat = million tons in natural units: mbdoe = million barrels per day of 011 equivalent Hard coal contains at least 57

million kilocalories per ton.

All tonnages rounded off to the nearest ton. Thus some "0"s simply indlcate a figure of less than 0.5 tons, and some totals will not equal the sum of the components of

the columns due to rounding

SOURCE Off Ice of Technology Assessment
292 ● Technology and Soviet Energy Availability

CMEA cooperation in coal, and evaluate the

feasibility of plans to increase coal output.

Technology

The Polish and Czech cases, about which

there is a good deal of information, illustrate

the types of measures which East European

nations are taking to increase lignite production. Hoping to set aside as much hard coal

as possible for export, Polish planners are

pushing lignite for domestic consumption.

Much of Poland’s planned expansion of

low-calorie coal and electric power centers on

the Belchatow Power Plant and the Szcezercow lignite mine. The Belchatow station is

designed to have twelve 360-MW generators

by 1985 (completion of which may be delayed by such problems as water incursion).

The entire station will run on lignites with

calorific contents ranging from 1.600 to

1.900 kilocalories/kg.11 At full capacity, the

station should produce 26.5 billion kWh of

electricity per year, the equivalent of 23 percent of all the electricity produced in Poland

in 1979. A second station (Belchatow II),

with a total generating capacity of 2,880

MW, is to come online in the period 1985-90.

This complex is the major source of Polish

incremental demand for lignites in the

1980's. Between 1980 and 1985, the complex

will use 33 million tons of lignite, or 87 percent of the total increase in Poland’s planned

lignite production.12

While it is difficult to judge the progress

of the Polish project, there are indications of

11 ~~~Udi~, OP. ~i t., p. 1s, r~p~rts these calOrific values for

the coal and calls it “lignite.”’ Bartosetrichcal]s it “brown”

coal of approxima tel:’. 2,000 kilocalories kg. See Abignev Bartosel’ich, “The Sign] flcance of Cooperation in the I,ong-Term

])e~relopment of Ejnergy in Peoples’ Repub]ic of Poland, ”

Ekonomicheskoye sotrudnichestuo stran-chlenou SEV, February 1980, pp. 37-42. The calculations assume that the lower

figure is correct.

12 These calculations assume a 70-percent load factor in the

stat ion and 40-percent efficienc~’. F;ach 1,000 k~’h equals

0.0875 toe, and at 40-percent efficiency!’, it will require 0.219

toe to produce that 1,000 kWh. The hgnites feeding Belchatow run from 1,600 to 1,900 calories. Assuming the a~’erage

is 1,750, they conk’ert at O. 175 toe. Thus 1,000 k~rh, which require 0.219 toe, will require 0,2190.175 = 1.25, or 0,00125

tons of lignite per kl$’h. 26.5 billion klf’h multiplied b~’

().001 25 yield 33.125 million tons of lignite to produce the 26.5

billion k~’h.

problems similar to those which have developed in Czechoslovakia in attempts there to

expand lignite production. First, open-pit

mining equipment of East European design

is evidently inferior in quality to comparable

Western equipment; it breaks down frequently, causing delays in removing overburden, mining the coal, and moving it by

conveyor belt. The Czechs, who have reported repeated problems with excavators

and conveyors, were finally forced to import

conveyors from the West. A second problem

is that East European suppliers of mining

equipment are not meeting their orders on

time. It may well be that the sudden increase

in demand for mining equipment is pushing

the suppliers beyond their capabilities. At

the same time, severe hard currency shortages preclude imports of high-quality Western mining equipment. These common and

recurring problems suggest that East European plans to expand lignite production may

be overly ambitious.13

Labor

A second potentially important impediment to the fulfillment of East European

plans for expanded coal output lies in the unwillingness of the labor force to work long

hours in underground mines. The labor constraint is a key to Polish coal production, but

it is also significant in Hungary, where new

brown coal mines run 24 hours a day, 6 days

a week; and in Romania, where miners in the

Jiu Valley have shown reluctance to work for

low wages.

Indeed, Poland’s plans for hard coal–

about 42 million tons, constituting almost all

13 Hungary may be the one CMEA country that has tried to

directly deal with the technology problem by buying the

proper equipment in the Wrest, and then using it effecti~elv.

In the earl}’ 1970’s it completed construction of the Visonta

Thorez Open-Pit mine which was then responsible for a 20-

percent increase in the output of surface-mined coal. It was

equipped with what was called “world le~’el technolog~’,

Judging from the pictures accompanj’ing the story, this consisted of Western equipment. ,N’epsza hud,sug, Dec. 7, 1980, p.

1. The Hungarians are now finishing construction of two

highly mechanized brown coal mines, Nlarkushegy and Nag-

~’eg?’haz, which will increase brown coal production by 9.6

million tons by the mid- 1980’s, an increase of 40 percent.

Again, it would appear that they are relying heavily on West -

ern equipment.
Ch. 9—East European Energy Options - 293

of Eastern Europe’s planned increment to

1985—seem unattainable. Goals for lignite

production increases in all the countries of

Eastern Europe amount to 140 million tons,

but in calorific value this equals only 30

mtoe. If Polish targets for hard coal are not

met, two-fifths of Eastern Europe’s projected coal increment will be eliminated.

Nevertheless, it is difficult to imagine how

such growth in Polish coal output can be attained. Increased production in the 1970’s

was made possible by the implementation of

a four brigade system of working the mines,

supplemented with overtime and, more recently, Sunday work. This effort was part of

a frantic search for hard currency exportable brought on by Poland’s severe debt

problems. One source of Polish labor unrest

in the summer of 1980 was the rapid pace of

mining activity, and one concession won was

reversion to a 5-day workweek. Polish hard

coal output for 1980 fell to 193 million tons,

14 million tons below plan. The original 1981

plan of 188 million tons was abandoned in

midyear after output during the period

January-June amounted to only 81.3 million

tons. Now planners feel that they can

achieve approximately 170 tons for all of

1981 only if workers will again agree to work

6 days a week; otherwise, an output of 160

million tons—41 million tons below the 1979

peak of 201 million tons—appears likely. 14

As of this writing, no one can say how the

Polish situation might be resolved, and in

particular, how the resolution will affect coal

production. Certainly the old targets of 235

million tons in 1985 and 260 million tons in

1990 seem unattainable, having been constructed on the now impossible assumption

that Polish coal mines could be worked 7

days a week. On the other hand, the low coal

outputs in 1980-81 are surely below what is

possible with given capital stock and a normal 5-day workweek.

14 See RFE. Polish SR No. 10, May 9, 1979, pp. 1 -4; and

RFF;, Polish S[{ No. 1, .Jan. 26, 1981, p. 13: }{F’F:, Polish S1{

No. 12, ,Jul~’ 3, 1981, p. 14; and Petrolf>urn Econo mist,” August

1981, p. 359.

Environmental Costs

Environmental costs form another potentially important political and economic constraint on lignite production. Two major

problems are the loss of land to other uses as

open-pit mines are developed, and the effects

on air and water of mining and coal burning.

The land costs have not been quantified,

but they are potentially important. In both

East Germany and Czechoslovakia, countries which are heavily engaged in open-pit

mining, cities and rivers have been moved to

obtain access to coal deposits.15 Aside from

the enormous costs in capital and labor, the

dislocation of people and the disruption of

the countryside may create popular dissatisfaction which cannot be discounted.

Even more serious, however, are the air

and water pollution which result from heavy

reliance on coal. Environmental damage

caused by coal mining dates back to the

1950’s in Eastern Europe. At that time

heavy fallout of particulate matter and emissions from chemical plants in some areas in

Czechoslovakia reduced morning light by 50

percent, killed 37,000 spruce trees, and cut

90 percent of the ultraviolet rays.16 These impacts evidently presented enough of a political problem that the Dubcek government responded by halting work in the North Bohemian brown coal basin in 1968. Today official

statements recognize the environmental

problems associated with open-pit mining. ”

While there is insufficient evidence of how

deep feelings run, it seems possible that major attempts to increase coal output will do

enough damage and displace enough people

to turn this into a political issue.

15 Leslie Dienes, “Energy Prospects for Eastern Europe, ”

~;ncr~~~ ~(~licj’, June 1976, p. 126; V. 13eliano~’, “11’orking Successes of the Miners, Ekonomiche.~ka>a gazc~ta, Feb. 9,

1978, p. 21.

‘“,J, (;. Polach, “The Det’elopment of Energ}’ in East Europe, “ ‘ in ,Joint F;conomic Committee, Subcommittee on Foreign Economic Policy, U.S. (’ongress, Ecf)n{)mic l)f~r ‘f~lopmf>n ts in C’()[I n tn”e,s of F;as tern F.’u r[)pc (Jtrashington, 1), (’.:

(J. S. (lokernment Printing office, 1970), p, 360,

‘

-R F’P; , Czechoslo\’akS}{ No. 4, tJan. 31, 1979, p. 2.
294 - Technology and Soviet Energy Availability

CMEA Cooperation in Coal

There are currently no joint CMEA coal

mining efforts, but some cooperative activity is aimed at developing coal-fired plants

using low-calorific coals, and at cogeneration

from conventional plants. For example, Bulgaria and the U.S.S.R. are reconstructing

power stations to burn low-calorie coals

without prior preparation. East Germany,

the U. S. S. R., Poland, and Hungary are working on a joint project in East Germany involving the construction of mines and power

stations for low-calorie coal. At various

research institutes, cooperative work is being conducted in cogeneration, high-productivity steam boilers, and centralized steam

production. However, none of the cooperative CMEA projects hold real promise of increasing coal supplies in the next decade.

Such efforts may have some effect in efficient utilization of coal, but even in that area

the joint R&D effort is modest. Prospects for

East European coal in the next decade will

depend to a great extent on the initiatives

taken by individual countries.

The Feasibility of Meeting

Coal Output Targets

The success of aggregate East European

plans for the coal industry rests on developments in Poland and Romania. These two

countries account for all of the planned increment to hard coal production in the 1980’s,

and 65 percent of the planned 140-millionton increase in brown coal and lignites. This

equals approximately 80 percent of planned

increases when these figures are converted

to tons of oil equivalent. The key problem in

evaluating these targets is the uncertainty

associated with the Polish crisis. At the very

least, it seems impossible for Poland to reintroduce 7-day workweeks for miners.

Mindful of these uncertainties, OTA has

constructed “best” and “worst” case estimates for coal output. Table 66 summarizes

these best and worst case projections, and

compares them to plan targets.

Table 66.—Projected and Planned East European

Coal Production (million barrels per day of oil equivalent)

1980 1985 1990

Actual . . . . . . . . . . . . . . . . . . . . . . . 4.72

Plan . . . . . . . . . . . . . . . . . . . . . . . . . 6.09 6.86

Best case projection . . . . . . . . . . 5.46 5.98

Worst case projection . . . . . . . . . 4,99 5.44

SOURCE Office of Technology Assessment

For Poland, the best case assumes that

output levels in 1985 will reach 210 million

and in 1990 220 million tons (as opposed to

the planned targets of 235 million and 260

million tons). These best case figures are still

above what the Minister of Mining has implied are possible; they assume a settlement

of labor troubles, some new investment, and

productivity improvements. OTA’s worst

and increasingly probable case assumes that

although output will fall below long-term

trends in the early 1980’s, it will recover in

the latter half of the decade, reaching 190

million tons in 1985 and 200 in 1990. Current

events in Poland are a reminder that things

could be worse in 1985 than even this worst

case. But the year 1985 here is merely representative of the mid-1980’s, and it is unlikely

that the current level of chaos in the Polish

economy can or will be sustained for that

long. This is, therefore, not the worst imaginable case (which is no coal output), but rather

the worst case within the range of likely coal

outputs.

Romanian plan targets appear to be no

more realistic. Indeed, since 1977 these have

been consistently underfulfilled. In 1980, for

example, Romania planned to produce 54

million tons of of coal, but probably attained

an output of no more than 40 million tons.

The situation has been serious enough that

the army has been called in to assist the

miners.18 While it is difficult to estimate

18 RFE, Romanian SR No. 18, Dec. 10, 1980, p. 15. It seems

certain that they will not meet the 1979 plan, but the figure of

40 is a guess which assumes that they underfulfill in 1980 by

the same amount they underfulfilled in 1975.
Ch. 9—East European Energy Options ● 295

future output, OTA projection of a reasonable best case is 60 million tons in 1985, 20

million tons above actual performance in

1980. Since there are no Romanian plan

figures now available for 1990, projections

are necessarily speculative. But it would appear unlikely that total output could rise

above 80 million tons for that year. A worst

case projection would put 1985 output at 40

million tons, and 1990 output at 60 million

tons.

The other countries of Eastern Europe are

less important in coal production, but if their

planned targets are taken as a best case, and

somewhat lower levels as a more realistic

case, it appears unlikely that Eastern Europe will be able to attain regional production

goals. Even under the best case conditions,

therefore, the combined coal output for

Eastern Europe as a region is likely to grow

only half as much between 1980 and 1985 as

planned (0.74 mbdoe or 36.8 mtoe v. 1.37

mbdoe or 68.2 mtoe).

THE NUCLEAR POWER

INDUSTRY

Nuclear power is the only other feasible

source of substantial increases in domestic

energy production in Eastern Europe, although at the moment it contributes only a

small portion of the electric power produced

in the region, Eastern Europe’s nuclear

power program has been behind schedule for

some time. As late as 1976, forecasts of

10,000 MW of installed nuclear capacity by

1980 were common.19 But in 1979 installed

nuclear capacity in the six countries was

3,100 MW, or about 3.4 percent of total generating capacity. This amounted to about 4.7

percent of all electricity generated in

Eastern Europe during that year.20 In 1980

installed capacity was increased to 4,440

—..— 19 —

For 1976 forecasts, see Figyelo, Sept. 11, 1976, p. 9; M.

\’irius and ,J. Balek, “Co(lperation Between (’NI ~; A (’oun tries

in Securin~ Suppl it’s of F’uels and F; nerg~, ” ( ‘zefh~~ sl{~ [ ‘(1A

F;(onomi(>” I)l,g(’i t, No. 8, !kIa? 19’76, p. 39.

20 These calculations simply assume a O.i’ load factor for nuclear powvrplant ~, and then di~ide t hc elect ric. it ~’ generated

a t that load fac t or b.v a 11 clt’c t ri (’i I ~’ ~renw-a t ed t ha t y’t>a r.

MW by the addition of new reactors in Bulgaria, Czechoslovakia, and Hungary.

Current plans for nuclear power production contrast sharply with past performance.

The six individual East European country

plans, added together, call for a fourfold

capacity increase between 1979 and 1985,

and a tripling of that between 1985 and 1990

(see table 65). These plans depend heavily on

an extremely complex cooperative CMEA effort involving specialization and cooperation

in the production of, and trade in, equipment

for nuclear powerplants. This program aims

at raising nuclear capacity to 37,000 MW by

1990. With the exception of Romania, which

is developing its own industry using Canadian “Candu” reactors, East European

nuclear power is being built with Soviet

technology -Soviet-designed VVER-440 reactors, produced in Czechoslovakia and the

U.S.S.R. These 440-MW pressurized water

reactors are apparently both reliable and

economical. Another series of Soviet reactors, the 1,000-MW VVER-1000, is now under development and in the mid-1980’s East

European countries plan to commission stations using the new design. (see ch. 4 for a

detailed description of the Soviet nuclear

power industry). Plans call primarily for

VVER-440 reactors to be introduced

through 1985, and for VVER-1000s to be

added thereafter. One exception is Bulgaria,

which hopes to have a VVER-1000 in operation by 1985. Romania hopes to produce its

own 660-MW “Candu” reactors and to have

six of these operating by 1990.21

Two joint enterprises have been established to assist in this effort. One, Interatomistrument, oversees the manufacture of hightechnology equipment for nuclear powerplants; another, Interatomenergo, handles

shipment of equipment, parts, materials,

and apparatus for nuclear powerplants. It

has already been decided that two 4,000-MW

nuclear power stations will be constructed in

the Ukraine with Polish, Hungarian, Czech,

and Romanian participation. Repayment to

—— 

21 —

RFE, Romanian SR No. 2, February 1981, pp. 12-13.
296 - Technology and Soviet Energy Availability

Eastern Europe will be in the form of electricity, shipped via 750-kV powerlines. The

first of these powerlines, between Albertirsa

near Budapest in Hungary and the Ukraine,

was completed in 1978.

The first Ukrainian 4,000-MW station is

scheduled to be completed in 1984-85.

Czechoslovakia, Poland, and Hungary will

pay half of the estimated total cost of 1.5

billion transferable rubles (TR). Poland’s

contribution of 400 million TR will be made

in goods and services; the Czechs will cover

240 million TR through supplying equipment and machine tools; and the Hungarians

will supply 110 million TR. Half of the

capacity of the new station will be dedicated

to shipments to each of the East European

nations in proportion to their contributions

to its construction. A second 4,000-MW station, Konstantinovka, is projected for the

latter part of the decade, but the details remain unclear. In addition, draft agreements

on cooperative development of atomic cogeneration units and atomic boilers for producing steam for industry are in preparation.

CMEA agreements on specialization and

cooperation in manufacturing generally lack

substance, but it appears that those relating

to the nuclear power industry may be exceptions. The most plausible explanation for the

exceptional efforts being made in the area of

cooperative nuclear programs is that Soviet

leaders recognize the importance of East

European development and are determined

to retain control of the technology.

One great attraction of nuclear power is

that it relieves pressure on the coal industry,

which otherwise would be called on to provide the fuel necessary to generate equivalent amounts of electricity. But while the

amount of coal “displaced” by an extensive

nuclear power program could be significant,

nuclear development will not much diminish

the importance of Eastern Europe’s coal industry.

Assuming that it replaces a conventional

thermal powerplant working at 40-percent

efficiency, a new 440-MW reactor operating

at 70-percent capacity can displace 2.94

million tons of lignite per year.22 Nuclear

powerplants are now usually built with at

least four VVER-440s (i.e., with installed

capacities of 1,760 MW). Commissioning

such a plant would thus obviate the mining

of nearly 12 million tons of lignite per year.

This amount of lignite equals 2.3 mtoe or

0.047 mbdoe. The best case increase in coal

output between now and 1985 was 0.74

mbdoe. Thus, it would take almost sixteen

1,760-MW nuclear powerplants (each with

four 440-MW reactors) to match that increment. This is clearly impossible. Even in the

best case, therefore, nuclear power’s contribution to increased supplies of domestic

energy in Eastern Europe in the 1980’s will

be much smaller than that of coal.

The potential obstacles to fulfillment of

nuclear targets differ sharply from those

likely to be encountered with coal production. As in the U. S. S. R., there are no East

European counterparts to the Western antinuclear groups. Nuclear power is officially

considered much cleaner than coal, and

therefore a very attractive energy source.

Press reports include little discussion of

safety issues, and individuals who may

worry about the safety of nuclear power

have no easy way to express their concern.

Barring an accident near a major population

center (a prospect not to be dismissed since

current plans call for cogeneration using

nuclear reactors situated in heavily populated areas), it is unlikely that safety and environmental concerns will impede the development of nuclear power. Labor problems

are also unlikely to be a major factor, since

the nuclear industry is not as labor-intensive

as the coal industry.

22 A new 440-MW reactor operating 70 percent of the time

can produce 2.6981 billion kWh of electricity per year (24

hours per day x 365 days x .70 x 440 MW = 2.6981 billion

kWh). Modern fossil-fired plants can produce 1,000 kW of

electricity using approximately 0.218 toe of energy equivalent inputs. 1,000 kW equals approximately 0.0875 toe of energy, and therefore energy out divided by energy in is 0.0875/

0.218 = 0.4 efficiency of energy conversion. A 440-MW lignite-fired plant working at that efficiency level will require

2.6981 billion kWh x 0.000218 mtoe = 0.588 mtoe of energy

inputs per year. Assuming the lignite inputs average 0.2

mtoe per ton, that requires 0.58/0.2 = 2.941 tons of lignite.
Ch. 9—East European Energy Options - 297

The two potentially significant constraints on the development of nuclear

power in Eastern Europe are technology and

capital costs. While there appear to be few

problems with the VVER-440 reactors, the

introduction of new VVER-1000s and their

attending support equipment is tantamount

to an experimental program and delays are

not unlikely. The capital costs of nuclear

power may also impede the realization of

plans for nuclear power development in the

1980’s. Nuclear powerplants are huge,

highly visible investment projects. If, as

seems likely, East European GNP growth

rates are low during this decade, the need to

maintain living standards might result in a

slowdown in nuclear power development,

and possibly a heightened interest in conservation.

The Feasibility of Meeting Installed

Nuclear Capacity Targets

East European plans for 1985 nuclear

power capacity appear to be fairly realistic

(see table 67). These foresee a capacity of

12,000 MW in 1985, 2,000 MW above mid1970’s forecasts for 1980. This installed

capacity would support electricity production amounting to 0.320 mbdoe (15.9 mtoe).

Most of the planned increment for the

1980-85 period is associated with the introduction of additional VVER-440 reactors,

with which the East European and Soviet

power industries now have considerable experience. Therefore, 12,000-MW installed

capacity in 1985 can be viewed as a reasonable best case. A worst case could assume

that Bulgaria’s VVER-1000 is not operational until after 1985, that the Czechs only

manage to achieve the low end of their plan

(2,200 MW of capacity operating in 1985),

that the Poles can get none of the capacity at

Zarnowiec operational in 1985,23 and that

Romania’s first reactor does not make its

scheduled commissioning in 1985. It is entirely possible that all of these delays could

coincide. Under these worst case conditions,

9,250-MW capacity might be in place by that

year, which would produce 56.66 billion kWh

or 0.247 mbdoe (12.3 mtoe) of electricity.

It is difficult to determine best and worst

cases for nuclear power for 1990 since in23 ‘See RFE, background report No. 11 -Eastern Europe, Jan.

20, 1981.

Table 67.— Nuclear Power Capacity, and Production of Electricity From Nuclear Powerplants,

1979 (actual), and Planned for 1985 and 1990

Actual Planned

1979 1985 1990

Capacity Productiona Capacity Productiona Capacity Production

(mkW) (bkWh) (mbdoe) (mkW) (bkWh) (mbdoe) (mkW) (bkWh) (mbdoe)

Bulgaria . . . . . . . . . . . 0.88 54 0.024 2.76 16,9 0.074 3.76 231 0101

Czechoslovakia . . . . 0.44 2.7 0.012 2.42 14,9 0.065 10.52 67.5 0,295

East Germany. . . . . . 1 76 10,8 0.047 (3.52) b

(21 .6)b

(0.094) b

(3.52+)d

(21 .6+)d

(0.094+)d

Hungary . . . . . . . . . . . 0 0 0 1 76 10.8 0.047 (2.76)e

(16.9) e

(0.074) e

Poland . . . . . . . . . . . . 0 0 0 0.88 5.4 0.024 4.90 30.1 0.132

Romania. . . . . . . . . . . 0 0 0 0.66 4.1——.

0.018 3.96 23.9 ——— 0.104

Eastern Europe,

—

total . . . . . . . . . . . . . 3.08 18,9 0.083 12.0 73.7 0.320 37.00’ 226.9’ 0.991 c

a These are estimates assure Ina a O 7 load factor

b

This is the German Democratic RePubll~~ 1980 ~Ian ~u~te OTA had no information for 1985 or 1990, and assumed that the GDR planS to fulflll thts early VerSlon Of the

1980 plan by ?985, and that more plants are planned (n 1990

c

Th IS IS an independent est I mate of total nuclear capac!ty by 1990 The elements I n the CO I umn add up to 2942 mkWh Some of the remain I ng u nex plalned portion must

be In the East German plans, and whatever IS left apparently represents upward plan revision(s) that have not been publlshed d A~sumes that the German Democraflc Republl~ plans rnor~ capacity by 1 g$lo than the plan (guessed) for 1985

SOURCE Office of Technology Assessment
298 ● Technology and Soviet Energy Availability

formation on the plans themselves is incomplete. Several sources indicate that all

CMEA countries except the U.S.S.R. plan to

have a total nuclear capacity by 1990 of

37,000 MW24 (see table 57). The available

fragmentary 1990 official plan data shows

that over the 1986-90 period Czechoslovakia

apparently expects to bring on line eight

VVER-1000 reactors; Poland, at a much

earlier stage in its nuclear program and

therefore less experienced, is planning to add

four; and Bulgaria’s target calls for the construction of an additional two. By 1990

Romania plans to have six Candu reactors in

operation, at least three of which will be produced by the Romanians themselves under

Canadian license. Romanian expectations for

solving both the problems of construction

and manufacturing of nuclear reactors in the

next decade are especially ambitious. The

country first 660-MW reactor is not

scheduled for commission until 1985.

Based on past experience, OTA believes

that goals for nuclear power development

which rest on the timely installation of all of

the planned reactors are too optimistic to

serve as a best case projection. A realistic

best case would assume that some, but not

all, of the VVER-1000 reactors are in operation by the end of the decade, and that total

capacity reaches about 30,000 MW. This

assumes that Poland and Romania each fall

2,000 MW short of their 1980 targets, and

that Czechoslovakia falls 3,000 MW below

its plans. The scenario is still optimistic in

that it assumes no slippage in Bulgarian and

Hungarian plans. This best case projection

for 1990 is 7,000 MW below the estimates

referred to above by East European sources.

If there are considerable investment constraints, or if there are significant difficulties

in introducing the large VVER-1000 reactors, a worst case for 1990 would be total

nuclear capacity of 20,000 M W (see table 68).

Even under best case conditions, nuclear

—.—— — 24 Iu. Savenko and M. Samkov, “Cooperation of the MemtJer-Countries of CNIEA in the Development of Electric

Energy, ” Ekonomicheskoye sotrudnichestuo stran-chlenov

SEV, February 1980, p. 52.

power generation is likely to supply only a

small increment to the growth in domestic

energy production through the end of the

decade. In the best case, production will

reach 184 billion kWh in 1990 (0.804 mbdoe

or 40 mtoe), accounting for a little over 1 percent of the yearly growth rate in energy production to 1990. If, instead, the worst case

obtains, then the 20,000-MW capacity (0.536

mbdoe or 26.7 mtoe) would add 0.6 percent

per annum to the growth in energy production over the same period.

It is interesting to compare feasible

nuclear and coal production increments to

get a sense of the contributions each is likely

to make to Eastern Europe’s energy supply

in the next decade. Total energy production

in Eastern Europe in 1979 was 6.737 mbdoe

(336 mtoe). Production in 1980 was certainly

no higher, due to leveling coal output. Under

the best case conditions, nuclear power will

add 0.201 mbdoe (10 mtoe), 3 percent of 1979

production, by the year 1985. In the best

case coal could contribute more than four

times that amount of energy over the same

period, 0.86 mbdoe (43 mtoe). The worst case

for coal is nearly equivalent to the best case

increment to energy supplies from nuclear.

Under the best of circumstances, by 1990

nuclear could provide a 0.684-mbdoe (34.1 -

Table 68.—Planned and Projected Nuclear Capacity

to 1990 (million barrels per day of oil equivalent)

—

1990

1979 1985 1990 (Coal)

Actual . . . . . . . . . . . . . . 0.119

(out of

6.37 total

energy

production)

Plan . . . . . . . . . . . . . . . . . . . . . . . . . 0.320 0.991 a

(6.86)

Best case projection . . . . . . . . . . 0.320 0.803 (5.98)

Worst case projection . . . . . . . . . 0.247 0.536 (5.44)

Best case Increment provided by nuclear (1979-90) = 0.684

Worst case increment provided by nuclear (1 979-90) = 0.417

Best case increment provided by coal (1979-90) = 1.36

Worst case Increment provided by coal (1979-90) = ,62

a 

Estimate Using 37000 MW and a load factor of O 7

SOURCE Off Ice of Technology Assessment
Ch. 9—East European Energy OptIons - 299

mtoe) increment to 1980 total energy production; under the worst case nuclear power in

1990 would provide a 0.417-mbdoe (20.8 -

mtoe) increment. Coal, on the other hand,

would provide under best conditions 1.36

mbdoe (67.7 mtoe), and under worst conditions an increment of 0.62 mbdoe (30.9

mtoe), by 1990. In sum, even in the best of

circumstances, throughout the 1980’s nuclear power will provide no more of an increment to domestically produced energy in

Eastern Europe than coal.

SOVIET ELECTRICITY

EXPORTS TO

EASTERN EUROPE

Soviet electricity exports to Eastern

Europe have never been large. In 1979 these

amounted to 12.6 billion kWh, about 3 percent of Eastern Europe’s own electricity production that year. One important constraint

on exports of electricity has been the lack of

high-voltage transmission lines to link up

with the East European system. The previously mentioned 750-kV line running from

the Soviet Ukraine to the Hungarian electric

power grid near Budapest was the first step

in breaking this bottleneck. The Soviets

built the portion of the line within their

borders, while the Hungarians built the rest

with Polish and Czech assistance. At full

capacity of 6.4 billion kWh the line will increase Soviet electricity export capacity

about 50 percent above 1978 levels.25 This

line accounts for all of the increment to

Soviet electric energy export capacity to

Eastern Europe in 1978 and 1979.

The transmission network will grow further. When the two jointly built Ukrainian

nuclear power stations are operating at full

capacity in the latter half of the decade, 20

billion to 22 billion kWh of electricity will be

shipped to Eastern Europe through the completed Hungarian line, and two similar lines

to Poland and Romania. This will triple pres-

 25 Leslie Dienes and Theodore Shabad, The Soviet Energy

Y},st(tn 1{(.s~j~~rc~ 1’,sP (In(i l’(~lic~(s {M’ashington. 1).(’,: F’. 1{.

L~’instOn & Sons, 1 979), pp. 2~19-40,

ent levels of Soviet exports of electricity to

Eastern Europe.

In the absence of projections for total electricity production in Eastern Europe in the

1980’s, it is difficult to say how large the contribution of imported Soviet electricity will

be. An additional 20 billion to 22 billion kWh

of electricity would amount to 0.096 mbdoe

(4.8 mtoe), or less than 25 percent of the

worst case increment to domestic energy

supplies coming from nuclear power in the

next 10 years. Clearly, the exports of electricity from the Soviet Union will not make a

contribution as large as is likely to come

from coal and nuclear power development.

OTHER DOMESTIC SOURCES

OF ENERGY

Romania is the only significant East European producer of petroleum, supplying most

of Eastern Europe’s oil and two-thirds of its

gas in 1979. However, Romanian output of

both oil and gas has been declining since

1977 and it is generally agreed that this

trend will continue. Romanian plans call for

maintenance of oil production at the 1979

level (0.25 mbd or 12.4 mtoe) and a reduction

in natural gas production to 0.51 mbdoe or

25.4 mtoe (down from 0.61 mbdoe or 30.4

mtoe in 1979). Hungary, which produces

0.04 mbd (1.99 mmt) of oil and 0.11 mbdoe

(5.48 mtoe) of gas expects to maintain, but

not increase, those levels. Poland’s natural

gas production plans are unknown, but it

seems unlikely that output will increase

significantly. Therefore, it is realistic to

assume that East European hydrocarbon

production, which totaled 1.22 mbdoe (60.8

mtoe) in 1979, will probably fall to about 1.10

mbdoe (54.8 mtoe) for the 1980’s.

The only remaining East European domestic energy source is hydroelectric power,

the contribution of which is small in comparison to coal, nuclear, or even oil and gas.

Since plans for hydropower either have not

been developed or are not available, it is very

difficult to make meaningful predictions. A

few hydropower development projects can
300 ● Technology and Soviet Energy Availability

in 1979, and present plans where these were

available.

Between 1970 and 1979 total East European energy production grew at an annual

rate of 2.4 percent.27 Projections of total

energy production in Eastern Europe for

1985 are at best 7.07 mbdoe (352.1 mtoe) and

at worst 6.43 mbdoe (320.2 mtoe). The best

case figure represents annual growth in

energy production of 1.8 percent, while the

worst case represents virtual stagnation in

production over the 1980-85 period. The

1990 projections range from a best case of

7.88 mbdoe (392.4 mtoe) production, which

implies a 2-percent annual growth rate over

the decade, to a worst case of 6.89 (343.1

mtoe) mbdoe which implies a growth rate of

0.7 percent.

be identified, however. Two of these–in Bulgaria and Hungary–are aimed at the development of pumped storage capacity to handle peakloads and have evidently received

preliminary approval in CMEA.26 A number

of East European nations are also discussing

the development of minihydro stations (less

than 100 MW) to supply small rural areas.

Finally, there are traditional hydroelectric

stations under construction in several countries. Overall, however, it does not appear

that hydroelectric power can make a major

contribution to added domestically produced

energy supplies.

CONCLUSIONS

OTA’s best and worst case projections of

East European energy supply in the 1980’s

are summarized in table 69, which also

shows actual and official energy production

26 Bagudin, op. cit., pp. 39-40.

27 This is a simple compound growth rate, computed from

1980 CIA data.

Table 69.—East European Energy: 1979-90, Plans and Projected Actual Supplies

(million barrels per day of oil equivalent)

1979

ElecOil Gas tric

1985

ElecTotal Coal Oil Gas tric a Total Coal

1990

ElecGas tric d Coal Oil Tota l

Bulgaria Plan b . . . . . . 0.11

Projected (b)c 

. . . . —

Projected (w)c 

. . . . —

Czechoslovakia Plan b . . . . . . 0.93

Projected (b) . . . . . –

Projected (w) . . . . . —

East Germany Plan b . . . . . . 1.06

Projected (b) . . . . . —

Projected (w) . . . . . —

Hungary Plan b . . . . . . 0.14

Projected (b) . . . . . —

Projected (w) . . . . . —

Poland Plan b . . . . . . 2.56

Projected (b) . . . . . —

Projected (w) . . . . . —

Romania Plan b . . . . . . 0.16

Projected (b) . . . . . —

Projected (w) . . . . . —

Total Plan b . . . . . . 4.96

Projected (b) . . . . . —

Projected (w) . . . . . —

0.01 0 0.04 0.16 0.15 NA NA 0,09 NA 0.18

— 0.15 0.01 0 0.09 0.25 0.18

— 0.12 0.01 0 0.06 0.19 0.15

0.97 0.96 NA NA 0.08 NA 0.99

— 0.96 0 0.01 0.08 1.05 0.99

— 0.93 0 0.01 0.08 1.02 0.96

1.17 1.16 NA NA NA NA 1.26

— 1.15 0 0.05 0.09 1.29 1.26

— 1.06 0 0.05 0.09 1.20 1.15

0.29 0.18 0.04 0.10 0.05 NA 0.19

— 0.18 0.04 0.10 0.05 0.37 0.19

— 0.16 0.04 0.10 0.05 0.35 0.18

2.70 320 NA NA 0.03 NA 3.75

— 2.82 0.01 0.12 0.03 2.98 3.06

— 2.42 0.01 0.12 0.01 2.56 2.60

2.08 0.44 0.25’ 0.51 0.07 1.27 0.49

— 0.30 0.25 0.51 0.07 1.13 0.40

— 0.20 0.25 0.51 0.05 1.01 0.30

6.37 6.09 NA NA NA NA 6.86

— 5.56 0.31 0.79 0.41 7.07 6.08

— 4.89 0.31 0.79 0.34 6.43 5.34

NA

0.01

0.01

bd

0

0

NA

0

0

0.04

0.04

0.04

NA

0.01

0.01

NA

0.25

0.25

NA

0.31

0.31

NA 0.12 NA

0 0.12 031

0 0.09 0.25

bd 0.33 NA

0.01 0.23 1.23

0.01 0.12 1.09

NA NA NA

0.05 0.09 1.40

0.05 0.09 1.29

0.10 0.07 0.40

0.10 0.07 0.30

0.10 0.05 0.37

NA 0.14 NA

0.12 0.09 3.28

0.12 0.03 2.76

NA 0.15 NA

0.51 0.10 1.26

0.51 0.09 1.15

NA NA NA

0.79 0.70 7.88

0.79 0.45 6.89

—

—

0 0.01 0.03 —

—

0 0.05 0.05

—

—

0

—

— —

0.04 0.11 —

—

0.01 0.12 0.01 — —

—

0.26 0.61 0.05 —

—

0.32

— —

0.90 0.19 —

—

NA = not available

a This includes electricity produced in 1979, plus the planned Increment from nuclear PowerPlants

b The 1979 figures are actual production

c Projected (b) IS best projected case, Projected (w) IS worst projected case

d This includes electticity produced in 1979 and the Increment planned from nuclear power through 1990

SOURCE Off Ice of Technology Assessment
Ch. 9—East European Energy Options ● 301

The results of this analysis suggest that

Eastern Europe’s plans for domestic energy

supplies in the 1980’s are overly optimistic.

The plans assume that growth in energy production can be maintained at levels attained

in the last decade—an assumption which

seems unjustified. While there are no data

available on total planned energy output in

Eastern Europe in 1985, it is reasonable to

assume that planners’ expectations for

energy production resemble OTA best case

projections for all fuel sources except coal,

where their plans show much higher production levels. The implied plan for 1985 is 7.6

mbdoe (378.4 mtoe) total energy production,

an annual growth of 3 percent over 1979; for

1990 the plan is 8.66 mbdoe (431.2 mtoe) or

2.8 percent per annum growth rate over the

1979-90 period. These growth rates are

higher than those actually achieved in the

last decade, and probably unattainable. It

would be more reasonable to assume that, at

best, East European energy production will

grow at 1.8 percent, and at worst at less than

1 percent yearly.

EAST EUROPEAN ENERGY DEMAND IN THE 1980’S

In the last 15 years, energy consumption

in Eastern Europe has grown at approximately 4 percent per year, while production

has been growing at about 2.5 percent per

year. The difference has been met with

Soviet oil. This situation cannot continue.

As previously noted, the U.S.S.R. has announced that henceforth it intends to maintain its oil exports to Eastern Europe at

1980 levels. Thus, even maintaining the

status quo would involve East European

countries’ increasing imports of OPEC oil at

world market prices. As the analysis in the

previous section has shown, even under the

best of circumstances the growth rate of

East European energy production in the

1980’s will be no more than 2 percent, and

under worst case conditions the growth rate

might fall below 1 percent. These statistics

underline the importance of efforts to moderate growth in energy consumption in the

years ahead.

A critical determinant of the growth of

energy demand in any country is the production of goods and services, as measured by

GNP. One indicator of the relationship between GNP and energy is energy/GNP elasticity, i.e., the percentage change in the consumption of energy divided by the percentage change in GNP. Table 70 summarizes estimates of historical trends in energy/GNP

elasticity for Eastern Europe. A coefficient

Table 70.— Energy GNP Elasticities in Eastern Europe:

Past Trends and Future Projections

1965-78 1974-78 1981-90

(projection)

Bulgaria. . . . . . . . . . . . . . . . . . . . . . 1.79 1.50 1.65

Czechoslovakia . . ., . . . . . . . . . . 1.06 2.34 1.00

East Germany . . . . . . . . . . . . . . . . ,76 .79 .75

Hungary . . . . . . . ... , . . . . . . . . . . 1.20 1.34 100

Poland . . . . . . . . . . . . . . . . . . . . . . . 1.01 1,29 1,00

Romania . . . . . . . . . . . . . . . . . . . . . 1,34 1,10 1.21

Total - Eastern Europeb . . . . . 109 1.28 1,00

aNone of these elastlcltles IS slgnlflcantly different from the elastlc[fy for the enttre

1965-78 period

bwelg hted average from a regression for al I of Eastern EU roPe

SOURCE All the elastlcltles are from the equation

log (cl q -al + bl 10g (DUM) + Cl 10g (GNp) + d, 10g (DUM) - iOg

(GNP)

where Cl 

e - consumption of energy (n the Ith country

G N P1 GNP of the Ith country

DUM ❑ a dummy variable -1 through 1973 and e for 1974-78

For a dlscusston of the econometric techn[que used here see Edward

A Hewett, “Alternative Econometric Approaches for Study{ng the

L Ink Between Econom IC Systems and Econom{c Outcomes Journa/

of Cornparaf[ve EconornIcs, 4 ( 1980) pp 274-290

(an indicator of energy/GNP elasticity) of

“1” for a given period means that when GNP

has grown by 1 percent, average energy consumption has grown by a like amount.

Several important conclusions can be

drawn from table 70. First and most important, the energy/GNP relationship has been

above “1“ for each covered period for every

Eastern European nation except East Ger-
302 ● Technology and Soviet Energy Availability

many. For the six countries together, between 1965 and 1978 a l-percent increase in

GNP was associated with a 1.12-percent increase in energy consumption.

Secondly, the figures for the brief 1974-78

interval show no statistically significant differences from the elasticity for the entire

period, although clearly the trend was for

elasticities to increase during this period.

There is no evidence that frequent public

statements on energy conservation in Eastern Europe have had any tangible effect. On

the other hand, one should not place a great

deal of weight on the 1974-78 elasticities.

The sample period is quite short, and the

fact that there is no statistically significant

difference between these estimates and

those for 1965-78 indicates high variability

in energy/GNP elasticities. Hence these

1974-78 coefficients are averages of a broad

range of numbers,

Third, there is evidence that levels of economic development influence the energy/

GNP elasticity. In countries such as Bulgaria and Romania where industrialization is

occurring at a fairly rapid pace, energy/GNP

elasticity is high. East Germany and Czechoslovakia, on the other hand, have lower

energy/GNP coefficients. This suggests that

the elasticities may fall over time as development proceeds.

East European leaders have become increasingly concerned with energy/GNP

elasticity, and their concern has been enhanced both by recognition of the costs involved in expanding domestic energy production and awareness of the U.S.S.R.’s intentions not to increase its energy exports.

Not surprisingly, therefore, discussions of

conservation as the least expensive policy

for avoiding a full-fledged energy crisis are

becoming increasingly frequent,28 and a variety of energy conservation measures are now

being contemplated or employed. The most

important of these include the following:

1. reducing the proportion of energyintensive products in total output;

28 Gzovskiy, op. cit.

2.

3.

4.

development and installation of energysaving machinery in energy-intensive

sectors, including efforts to recapture

heat lost in power stations;

introduction of various administrative

regulations designed to control household and industrial energy demand; and

increasing prices to cut energy use

throughout the economy, including in

the household sector.

These efforts appear to have had little effect

so far on the energy/GNP ratio. Slowdowns

in the growth of energy consumption in

Eastern Europe in the late 1970’s were due

to slowdowns in production, not to conservation. Now, as concern about energy supply

increases, energy conservation is being

taken more seriously. Soviet leaders have

also apparently urged their East European

counterparts to adopt conservation measures, particularly those aimed at restructuring GNP and modernizing capital stock in

energy-intensive industries.

These policies may have some effect, but

it is doubtful whether they will seriously

reduce energy/GNP elasticity. Excess use of

energy in Eastern Europe is a manifestation

of a general pattern of excess use of all industrial materials. The situation is similar to

that in the U. S. S. R.: traditionally, economic

institutions have emphasized high output

growth rates over economizing on inputs to

the production process. In most cases, East

European leaders are attempting to deal

with the energy crisis by using the same administrative techniques they have relied on

in the past. In 1979 and 1980, for example,

East European countries introduced special

plan targets designed to reduce energy use

by industry, with penalties for noncompliance. However, this consumption target is

only one of a variety of targets which enterprise managers must consider. Often

managers give preference to the fulfillment

of production tasks rather than to rationalization measures. For example, a survey in East Germany, a country which has

been fairly successful in controlling energy

demand, showed that one-third of all enter-
Ch. 9—East European Energy OptIons ● 303

prises simply ignored their

mizing targets.29

Enterprises will probably

conservation until they are

energy -econoavoid energy

forced to do

otherwise. Administrative measures have

limited impacts since enterprise managers

know a number of ways to get around them.

The only effective method of introducing

conservation may be to weave energy conservation into a package of comprehensive

economic reform. This is presently being attempted in Hungary. If the Hungarian experiment proves successful, it may suggest a

promising approach for other countries.30

Overall, it appears unlikely that the

energy/GNP coefficient will fall sharply in

the absence of economic reforms. As the industrialization drives in Romania and Bulgaria slow, coefficients for those countries

could fall slightly, but Hungary is the only

country in which the energy/GNP elasticity

may fall significantly, Assuming no other

major economic reforms, it is reasonable to

expect that during the next decade the

energy/GNP coefficient for all of Eastern

Europe will fall from 1.09 to 1.00, if Hungary

is able to achieve relatively higher levels of

conservation (see table 70).

In order to make energy demand projections based on energy/GNP elasticity, it is

necessary to consider likely developments in

economic growth. Analyzing the prospects

for East European GNP is complicated by

two problems. First there are no reliable

GNP projections for Eastern Europe. Second, it is possible that tight energy supplies

may constrain GNP in the 1980’s, reversing

the situation of the last decade. This would

occur if the supply projections developed in

the last section result in import and balance

of payments problems which force East

Table 71 .—Energy Demand Projections for

Eastern Europe, 1985 and 1990 (million barrels per day

of oil equivalent)

1979 energy 1985 energy 1990 energy

consumpton consumption consumptlon

High Low High Low—

Bulgaria . . . . . . . . . . . 0.65 0.80 072 093 079

Czechoslovakia . . . . 1.59 1,77 1 68 2.08 1 75

East Germany. . . . . . 1.74 1.97 185 2.18 196

Hungary . . . . . . . . . . . 060 071 0 6 5 0.81 070

Poland . . . . . . . . . . . . 2 3 8 2,86 2 6 2 3 3 3 2.83

Romania. . . . . . . . . . . 1 3 9 2.00 1.68 2 6 8 1.96

Eastern Europe,

Total . . . . . . . . . . . . 8.35 10.10 920 120 1 9.99

SOURCE The 1979 figures are an estimate based on 1978 figures the energy/GNP elasticities in table 70, and 1979 GNP growth rates reported

by CIA for each East European country The 1985 and 1990 projections are derived by applying the high and low GNP growth rates assumed for 1981.90, and the assumed energy demand elasticities to

estimated energy consumption in 1979 For example the figure for

the high case for Bulgaria in 1985 IS derived as 21 percent x 165 =

3465, which IS the estimated per annum growth rate of energy con

sumption 1.03456’ x 0.65 = 0.80 mbdoe

European countries to curtail imports and

GNP. With these caveats in mind, OTA has

attempted projections of likely rates of

economic growth in the next 10 years

without considering a feedback from energy

constraints.

During the 1970's, GNP growth rates in

Eastern Europe declined from about 5 percent to less than half that figure. Although

the reasons for this are multifarious and

complex, the energy crisis exacerbated

already existing problems by putting tremendous pressure on Eastern Europe’s balance of payments. OTA here assumes as a

best case that Eastern Europe will be able

somehow to maintain the levels of growth

achieved for the latter half of the 1970’s (2.9

percent per year) in the next decade. A worst

case would involve growth at half of this

rate—i.e., rates of GNP for 1981-90 of 1.5

percent. These GNP projections, combined

with the energy/GNP elasticity projections

above, yield the energy demand projections

in table 71. The final section of this analysis

combines these demand projections with the

supply projections developed above. The

result is a projection of Eastern Europe’s

energy import needs in the next decade.
304 ● Technology and Soviet Energy Availability

EAST EUROPEAN ENERGY IMPORTS IN THE 1980’S:

IMPLICATIONS FOR TRADE WITH THE SOVIET UNION

AND THE REST OF THE WORLD

IMPORT NEEDS: BEST, WORST,

AND MIDDLE CASES

Combining projections of domestic production and energy demand can yield a

reasonable estimate of energy import needs

for the next decade. Table 72 summarizes

these estimates, and outlines best, worst,

and middle cases for net imports in the

1980’s. The worst cases for both 1985 and

1990 assume that energy consumption continues to grow at a high rate, while simultaneously domestic energy production

follows the worst case in table 69. The best

case is based on the lowest projections for

growth in energy consumption and the

highest for production. One middle case is

also identified. This assumes that while

energy consumption grows at a high rate,

the six East European nations are successful

in attaining the best case energy production

projections.

Table 72 posits a best case in which

Eastern Europe maintains a stable net import/energy consumption ratio throughout

the 1980’s. This outcome is not impossible,

although it is based on the assumption that

everything goes well for Eastern Europe;

i.e., demand grows slowly and production increases at best case rates. Under these conditions, which are certainly less optimistic on

the production side than those outlined in

the official plans, net imports for the six

Eastern European countries together will actually fall from about 24 percent of all

energy consumed in 1979 to about 21 percent in 1990.

The worst case is dramatically different.

Under worst case conditions even Poland

becomes an importer of energy and by 1990

Eastern Europe as a whole will import 43

percent of all the energy it uses. For all countries except Poland, the net import/consumption ratio is even higher by 1990—52

percent. Like the best case, this is a possible

outcome. It is conceivable that energy production will grow slowly while energy conservation programs fail to have significant

impacts.

The middle case, which is probably the

most likely, assumes favorable developTable 72.—Projected Energy Consumption and Production in Eastern Europe, 1985 and 1990

(million barrels per day of oil equivalent)

1979 actual 1985 projected 1990 Projected

Con- Pro- Consump- Produc- Consump- Producsump- duc- Net tion tion Net Imp.a

tion tion Net Imp.a

tion tion Imp . High Low Worst Best Worst Mid Best High Low Worst Best Worst Mid Best

Bulgaria. . . . . . . . . . 0.65 0.16 0.49 0.79 0.72 0.19 0.25 0,60 0.54 0.47 0.93 0.79 0.25 0.31 0.68 0.62 0.48

Czechoslovakia . . . . 1.59 0.97 0.62 1,77 1,68 1.02 1.05 0,75 0.72 0.63 2,08 1.75 1.09 1,23 0.99 0.85 0,52

East Germany . . . . 1.74 1,17 0.57 1,97 1,85 1,20 1.29 0,77 0.68 0.56 2,18 1.96 1.29 1.40 0.89 0.78 0.56

Hungary . . . . . . . . . 0.60 0.29 0.31 0.71 0.65 0,35 0.37 0.36 0.34 0.28 0,81 0.70 0.37 0.40 0.44 0.41 0.30

Poland . . . . . . . . . . . 2.38 2,70 -0320 2.86 2.62 2.56 2,98 0.30 -0.12 -0.36b 3.33 2.83 2.76 3.28 0.57 0.05 -0,45

Romania . . . . . . . . . 1.39 1,08 0.31 2.00 1.68 1.01 1.13 0.99 0,87 0,58 2.68 1.96 1.15 1.26 1.53 1.42 0.70

East Europe,

Total. . . . . . . . . . . 8.35 6.37 1.98 10.10 9.20 6.43 7.07 3,77 3.03 2.16 12,01 9.99 6.89 7.88 5.12 4.13 2.11

a The worst case IS when consumption IS ‘h{gh and production IS worst Thus for Bulgarla In 1975, the worst case ISO 79-019 = O 60 mbdoe The mid (middle) case IS wher{

consumption IS high and production is ‘best The best case IS when consumption IS low and product Ion IS best

blnd[cates net energy exports

SOURCE Office of Technology Assessment Actual 1979 consumption data are estimated by multiplying the 1978 Consumption data by actual 1979 GNP growth rates,

and those by the elastlcltles In table 70
Ch. 9—East European Energy Options ● 305

ments in energy production, combined with

high-GNP growth rates. This case assumes

that for political reasons East European

planners will place high priority on attempting to maintain relatively high economic

growth rates, hence acceptable growth rates

for personal consumption.

SOVIET ENERGY EXPORTS TO

EASTERN EUROPE

Thus far, this chapter has approached the

question of East European energy in the

1980’s from the perspective of the East

European planners themselves. But Eastern

Europe’s energy future rests heavily on the

actions of the Soviet Union. The amount of

energy that the Soviet Union is willing to export to Eastern Europe for transferable

rubles will to a large extent determine the

amounts which Eastern Europe will be

forced to buy on world markets–at world

prices, for hard currency.

In order to make precise projections here,

one would have to know the intentions and

capabilities of the Soviet Union regarding

energy exports to Eastern Europe. All that

is known about Soviet intentions is embodied in several statements by the late

Premier Kosygin, indicating that energy exports to all CMEA countries will be about 20

percent more in the 1981-85 period than they

were in the 1976-80 period, and that crude oil

exports to CMEA during the first half of the

decade will total 400 million tons.31 If these

statements are accurate, the Soviet Union

will export about 117.98 mtoe (about 2.36

mbdoe) of energy annually between 1981-85

to Eastern Europe. This is a substantial cut

in increments to energy exports as compared

to the situation in the last decade. Table 73

summarizes plans for Soviet energy exports

to CMEA.

Table 74 combines estimates and projections of Eastern Europe’s net energy imports in 1979, 1985, and 1990, with esti31 A.N. Kosygin, “Speech of the Head of the Delegation of

the Union of Soviet Socialist Republics, Comrade A. N.

Kosygin," Ekonomicheskoye sotrudnichestvo stran-chlenol

SEV, April 1980, p. 30.

Table 73.—Soviet Energy Exports to CMEA,

Actual in 1976-80, and Planned for 1981.85

1976-80 (estlmates)c1981-85 plan

Natural a Mtoe Natural

a Mtoe

Natural gas. . . . . . . . . . 97.8 80.1 152.4d124.8d

Crude Oil, . . . . . . . . . . . 370.4 370.4 400.0e

400.0e

Oil products. . . . . . . . . 55.0 55.8 64.4i

65.3 i

Electricity . . . . . . . . . . . 55.6 19.5 80.0h

28.0g

Coal and cokeb. . . . . . 41.0 28.1 41.0g28.1g

Total . . . . . . . . . . . . . . — 553.9 – 646.2f

Eastern Europe . . . — 501.2 j — 589.9k

aNatural unlts of measure bcm for natural gas metric tons for crude oil. Oil

products coal and coke and bkWh for electricity

b

These figures are net of East Europe s coal exports to the Soviet Unlon

cEach of these figures cnclude estimates for 1980 as well as earner years in some

cases The hydrocarbon exports are from tables 1 and 2 Electricity exports are

given in table 11 For coal and coke the assumption IS that 1976-80 exports

remained at the 1976 level since value data suggest that this trade is quite stable

d Assumes 1980 levels of Soviet gas exports through 1985 since Orenburg was at

full capacity in 1980

e Statement by Premier Kosygln, 1979

f Kosygin in 1980 stated that energy exports to Eastern Europe from the Soviet

Union wiII rise 20 percent in 1981.85 over 1976-80, and he gives the figures for

1976-80 Those figures which equal 538.5 mtoe, multiplied by 0.12 yield the

6462 mtoe for 1981-85 Note that Kosygin's preliminary figures were apparently low

g Assumes 1976-80 delivery levels wiII be maintained

h Assumes 1979-80 Ievels IS of electricity exports and that Khmel nitska nuclear

powerplant begins full shipments in 1984 (Optimisic)

I Th IS IS a resldu al obtained by su blracl! ng al I other elemenls from the total derived

from Kosyg[n statement

j T hls subtracts the 52 7 mtoe of 011 and products shipped to Cuba V letnam and

Mongolla

k Assumes that 563 mtoe of 011 and products WIII be shipped to V Iefnam CU ba

and Mongolla during 1981-85 which IS 5 x the 1980 level

SOURCE Off Ice of Technology Assessment

mates and projections of Soviet energy exports to Eastern Europe in those years. The

table shows that in 1979 Eastern Europe as

a whole was a slight net exporter of energy

to the world outside the Soviet Union. This

was due to Poland’s imports of energy from

the Soviet Union and simultaneous exports

of coal to the rest of the world. The other

East European countries were able to cover

most of their needs with Soviet energy, except for Romania, which had significant imports from outside CMEA.

If the best case obtains, Eastern Europe

will be able overall, and in each individual

case, to cover virtually all of its net energy

needs with imports from the Soviet Union.

Overall, Eastern Europe would remain a

slight net exporter of energy to the rest of

the world. If the worst case should occur, by

1985 Eastern Europe will switch from being

a small net energy exporter to a net importer

of 1.41 mbdoe (70.2 mtoe); by 1990 imports

would reach 2.74 mbdoe ( 137 mtoe). Even in
306 ● Technology and Soviet Energy Availability

Table 74.—East European Projected Net Energy Imports, 1985 and 1990: Total, From the Soviet Union, and

From the Rest of the World (million barrels per day of oil equivalent)

1979 actual 1985 projected 1990 projected

From Ne t Total From Net from ROWa

Total From Net from ROWa

Total U.S.S.R. from Worst Mid Best U.S.S.R. Worst Mid Best Worst Mid Best U.S.S.R. b Worst Mid Best

R O W

a

Bulgaria. . . . . . . . . . 0.49 0.45 0.05 0.60 0.54 0.47 0.49 0.13 0,05 -002 0.68 0,62 0.48 0.49 0.19 0.13 -0.01

Czechoslovakia. . . 0.62 0.53 0.09 0.75 0.72 0.63 0.57 0.18 0,15 0.06 0.99 0.85 0.52 0,57 0.42 0,28 -0.05

East Germany . . . . 0.57 0.51 0.06 0.77 0.68 0.56 0.55 0.22 0.13 0.01 0.89 0.78 0.56 0,55 0.34 0,23 0.01

Hungary . . . . . . . . . 0.31 0.30 0,01 0.36 0.34 0.28 0,36 0 -0.02 -008 0.44 0.41 0.30 0.36 0.08 0.05 -006

Poland . . . . . . . . . . .-032 0.22 -054 0.30 -012 -0.36 0.30 0 -042 -066 0,57 0,05 -0.45 0,30 0.27 -0,25 -075

Romania . . . . . . . . . 0.31 0.05 0.26 0.99 0.87 0.58 0,09 0.90 0.78 0,49 1.53 1.42 0.70 0.09 1.44 1.33 0.61

Eastern Europe,

total . . . . . . . . . . . 1.98 2.06 -008 3,77 3.03 2.16 2,36 1,41 0.67 0.20 5,10 4.13 2.11 2.36 2.74 1.77 0,25

aNet Imports from the rest of the world, derived by subtracting the imports from the U S S R from 1979 actual I n the case of 1979, and for the projections, by subtracting

Imports from the U S S R from the worst medium and best cases Thus the worst case for East German net Imports from the rest of the world in 1985 equals their worst case

net imports from all sources (0.77) minus net imports from the U.S.S.R. (0.55) - 022

b There are no public Commitments for Soviet energy shipments to Eastern Europe after 1985 This assumes the same commitments made for the 1981-85 period

SOURCE Off Ice of Technology Assessment

the worst case, Hungary and Poland would

be able to cover their energy needs with

Soviet imports. However, Bulgaria, Czechoslovakia, East Germany, and Romania

would be forced onto world markets to purchase substantial amounts of energy.

Energy imports would surely be in the form

of oil or gas, the most easily transported

fuels. The middle case projects net energy

imports to Eastern Europe from the rest of

the world at 0.67 mbdoe (33.4 mtoe) in 1985,

and 1.77 mbdoe (88.1 mtoe) in 1990. In the

middle case, Poland remains a net energy exporter, and Hungary exports a small amount

(0.02 mbdoe or 1.0 mtoe) to the rest of the

world. Romania accounts for two-thirds of

all net imports in the middle case.32

It is possible, although unlikely, that

Polish energy production will fall below

OTA’s worst case projections. Should that

occur, it will probably be accompanied by a

32 The only other comparable estimates have been done by

Jan Various with results strikingly similar to OTA’s projections. Various estimates that in 1985 Eastern Europe will be

buying from the Middle Eastern suppliers at worst 1.23

mbdoe (OTA's projection is 1.41), and as a medium projection

0.88 mbdoe (0.67 in the OTA projection). See Various, op. cit.

general economic slowdown which will also

cause a reduction in Polish energy demand

below the low case. Because of this connection between energy supplies and energy demands, OTA’s forecasts of energy balances

in Poland (and Eastern Europe) are less sensitive to unforeseen events than are either

the production or demand forecasts by themselves. Therefore, even in light of recent

events in Poland, OTA regards these balances as a realistic view of the range

sible outcomes in 1985 and 1990.

HARD CURRENCY

REQUIREMENTS

In order to evaluate the feasibility

of posof any

of these outcomes, it is important to ascertain whether the foreign exchange burden

implied by a projection can actually be

handled by the East European nations,

given their export capacities and their

abilities to absorb new debt.

Table 75 shows Eastern Europe’s hard

currency debt in 1979, and projections of the

hard currency requirements for 1985 and

1990 based on the energy import levels
Ch. 9—East European Energy Opt/ens ● 307

Table 75.—Projected Hard Currency Burden on Eastern Europe of Various Projected Net Imports of Energy,

1985 and 1990 (millions of dollars)

Net Hard Hard currency Net oil Imports at $30/barrel

currency exports (dev. 1985 1990

debt 1979 countries) Best Medium Worst Best Medium Worst

Bulgaria. . . . . . . . . . . . . . . . 3.73 1.29 -0.22 0.55 1.42 -0.11 1.42 2.08

Czechoslovakia. . . . . . . . . 3.07 2.85 0.66 1.64 1.97 -0.55 3.07 4.60

East Germany . . . . . . . . . . 844 4.10 0.11 1.42 2.41 011 2.52 3.72

Hungary . . . . . . . . . . . . . . . 7.32 2.64 -0.88 -0.22 0 -066 0.55 0.87

Poland . . . . . . . . . . . . . . . . . 20.00 5.04 -7.28 -4.60 0 -8.21 -2.74 2.96

Romania . . . . . . . . . . . . . . . 6.70 3.45 5.37 8.54 9,86 6.68 14.56 15.77

Eastern Europe,

total . . . . . . . . . . . . . . . . 49.23 19.37 -2.24 7.34 15.66 -2.74 19.38 30.00

SOURCE Office of Technology Assessment

outlined above at 1980 oil prices ($30/barrel).

These data provide a very conservative

estimate of the hard currency burden implied in each of the three cases, since the

world market price of oil may rise faster than

the value of Eastern Europe’s exports in the

next 10 years.

The best case is a possible scenario for

Eastern Europe as a whole and for each

country. It is, however, rather implausible,

since it assumes that per capita consumption growth rates will stagnate. The worst

case would impose extreme difficulties, both

for Eastern Europe overall, and for each individual country with the possible exception

of Hungary. If the worst case actually occurred, Romania would be spending three

times its 1979 dollar exports for energy imports. Bulgaria, Czechoslovakia, and East

Germany would all be forced to significantly

increase their debts. For all of these countries, the 1990 worst case is even more unattractive. Hungary appears to be the only

country which might be able to surmount

the worst case with no critical difficulty.

The worst case should therefore not be

viewed as a feasible outcome. The nations of

Eastern Europe have neither the export

reserves nor the borrowing capacity to handle such hard currency problems. If the conditions underlying this case actually begin to

develop, a number of factors are likely to intervene and prevent its fulfillment. In the

short run, growth rates would fall sharply if

hard currency constraints hold back imports

of energy and other inputs. Stagnating production, which would accompany such a situation, would create political tensions over

declining living standards, and perhaps even

rekindle discussion of significant economic

reforms. Under such conditions, the Soviet

Union would surely participate in all decisions, and might choose to alleviate part of

the crisis by increasing energy exports (particularly natural gas). Soviet preoccupation

with a politically stable Eastern Europe

would probably stimulate the U.S.S.R.’s

assistance if worst case conditions developed. The other eventuality which might

redirect a worst case scenario would be the

introduction of significant economic reforms

aimed at reducing energy demand, and increasing production of manufactured goods

which could be exported for hard currency.

This would not be an easy road, nor one that

the East European nations are likely to freely choose. In a worst case situation, however, there might be no alternative.

The middle, and probably most likely, case

is closer to the worst outcome than to the

best. It suggests that in 1985 an amount

equal to 38 percent of Eastern Europe’s 1979

hard currency export proceeds will be required for the purchase of oil, and that all of

the amount of 1979 export sales will be

necessary to cover oil imports in the year
308 - Technology and Soviet Energy Availability

1990. In this case, Hungary would be under

no apparent pressure and Poland would be

much better off than it is likely to be in the

worst case. The pressure would be greatest

on Romania, which would spend more than

double its hard currency export proceeds on

oil imports, and on Czechoslovakia, which

would be spending more than half. The pressure would be comparatively strong on Bulgaria and East Germany as well, but neither

of these nations would face such strong hard

currency constraints as Romania and Czechoslovakia.

If, as is likely, hard currency burdens in

the middle case are actually greater than is

indicated by table 74 because of rapidly rising oil prices, then Bulgaria, Czechoslovakia

and East Germany would all face added

pressure. If these countries are forced to

spend more than half their hard currency exports on oil, they will be less able to import

the machinery and industrial materials necessary to expand output. If the medium case

actually transpires, there will be pressure on

the Soviet Union to increase energy exports.

In the absence of such assistance from the

Soviet Union, pressure for economic reform

within Eastern Europe, as well as growing

difficulties in the East European-Soviet energy relationship, will likely result.

This analysis suggests that most East

European nations can make it through the

1980’s without major crisis, if their domestic

energy production develops according to the

best case, and if the Soviet Union will continue to provide them heavily subsidized

energy shipments at the quantities promised

in the early 1980 ‘s. Should an energy crisis in

the Soviet Union cause a cutback in Soviet

energy exports, or should Eastern Europe’s

energy production stagnate along worst case

lines, there will be serious difficulties.

SUMMARY AND CONCLUSIONS

A review of Eastern Europe’s energy options in the 1980’s suggests the following

conclusions: First, there is a wide disparity

in the energy situations of various East

European nations. Eastern Europe’s natural

resources are concentrated largely in Poland

and Romania. Some nations such as Romania appear quite likely to encounter difficulties associated with requirements for additional imports of energy in the decade

ahead, as domestic supplies are depleted;

others such as Hungary may be capable of

withstanding even worst case developments,

Thus, while this chapter has treated Eastern

Europe as a region, there are good reasons to

watch the developments in individual nations. For example, a continuing and severe

Polish crisis might strain domestic energy

production for the region as a whole.

Second, and even more important, is the

crucial position of the Soviet Union as an

energy supplier to Eastern Europe. East

European economic development has been

significantly assisted by the subsidization of

its oil imports from the Soviet Union. If this

subsidy were abruptly removed, the negative impacts would be serious. While it is

unlikely that the Soviet Union will opt to

quickly end the subsidy, the transition from

oil to gas exports in itself embodies a decisive change, since the U.S.S.R. is selling its

gas to CMEA at world market prices.

An energy crisis in the Soviet Union

would seriously impact the nations of Eastern Europe. If, for some reason, the U.S.S.R.

decisively reduced its energy exports to the

CMEA-6, these nations would be faced with

a difficult set of choices. Hard currency constraints would preclude massive purchases

of oil on the international market, but

demand-reduction measures might be politically problematic.

While it is true that Eastern Europe as a

region is much less dependent on imported

energy than is Western Europe, there are

a variety of additional constraints which

bound the energy options available to
Ch. 9—East European Energy Options ● 309

CMEA planners. With limited prospects for Regardless of whether best, worst, or middle

increased energy production, and with rela- cases actually transpire, East European

tively energy-intensive economies, Soviet energy plans and strategies will be sigenergy exports occupy a critical position in nificantly affected by those of the U.S.S.R.

the energy situations of these countries.
CHAPTER 10

The Soviet Bloc and World

Energy Markets
.

CONTENTS

Page

CMEA ENERGY TRADE: A MIDRANGE SCENARIO FOR 1985.......314

CMEA Impact on World Oil Markets. . . . . . . . . . . . . . . . . . . . . . ..........315

The Volume and Composition of Energy Exports to the West. . ...........316

The Hard Currency Position of the CMEA. . . . . . . . . . . . . . . . . . . . . . .. . . . .318

Soviet Energy and Eastern Europe. . . . . . . . . . . . . . . . . . . . . . ............319

CMEA ENERGY TRADE IN 1990 . . . . . . . . . . . . . . . . . .................320

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........321

LIST OF TABLES

Table No. Page

76. CMEA-Seven Net Hard Currency Energy Exports, 1979 and 1985......314

77. World Oil Supply–Noncentrally Planned Economies, 1985 and 1990....316

78. Possible Composition of Soviet Net Energy Exports. . ...............317
—.- -—

CHAPTER 10

The Soviet Bloc and World

Energy Markets

One important theme in the debate over

the Soviet Union’s energy future has been

the potential impact on the west of a decline

in Soviet oil production. The prospect of

such a decline has been greeted with the apprehension that it could cause the Council

for Mutual Economic Assistance (CMEA) as

a whole, or even the U.S.S.R. itself, to

become a net oil importer. Many have argued

that, by increasing demand, net oil imports

by the countries of the CMEA could initiate

additional competition on world markets and

further push up the price of oil, OTA’s analysis indicates that this is improbable. A

more likely eventuality is that CMEA’s net

exports will decline. This would have repercussions for the countries of both the Western alliance and the Eastern bloc. Such an

outcome would certainly place strains on the

economies of the U.S.S.R, and Eastern

Europe, strains which would have both domestic and foreign policy consequences.

This chapter addresses the question of the

likelihood and implications for both the East

and West of the CMEA’s changing its position as a net energy exporter. Informed discussion of the probability and consequences

of the Soviet bloc’s importing or exporting

less oil is hampered by a number of complicating factors, foremost among them the

enormous range between plausible best and

worst case oil production scenarios extending 5 and 10 years into the future. But oil

production is not the only important variable. Oil is obviously important to Soviet

and East European energy balances, but it is

only part of a far larger energy picture.

Future prospects—for energy self-sufficiency or dependence—will be determined by

total energy production and consumption in

all energy sectors. Thus, the continued ability of the U.S.S.R. to fill most of the energy

needs of Eastern Europe on favorable terms

and to earn large amounts of hard currency

by exporting energy to the west will rest on

a complex array of factors. These include the

volume and mix of total CMEA energy production and consumption (the latter strongly

correlated in the past with economic growth

rates and also dependent on the success of

conservation programs); and perhaps most

important, on the degree to which other

fuels–i.e., gas–can be substituted for oil.

Given the range of outcomes possible for

each of these variables, attempting to make

firm predictions on this subject is futile.

OTA has instead chosen to devise and analyze a scenario which will illuminate likely

prospects for the present decade. This scenario is constructed from the foregoing material. Chapters 2 through 5 of this study culminate in sector-by-sector projections of reasonable levels of Soviet energy production

for 1985 and 1990; chapter 8 employs these

projections to construct plausible best and

worst case energy production, consumption,

export, and hard currency import scenarios

for the U. S. S. R.; and chapter 9 consists of a

similar exercise for six East European countries. The present chapter combines these

separate analyses into one that focuses on

the CMEA as a whole.

Although previous chapters have presented both best and worst case scenarios,

here only one “midrange,” outcome is considered. OTA’s decision to employ a midrange scenario in the analysis is based on the

expectation that, while extreme developments are of course possible, the most probable outcome will lie between them. For

either extreme possibility to materialize, a

313
314 ● Technology and Soviet Energy Availability

—

large number of parameters must simultan- ber of worst case developments occurred sieously exhibit either “best” or “worst” char- multaneously, the U.S.S.R. could well be

acteristics. This is improbable if for no other forced to any of a number of drastic acreason than that political events are likely to tions—e.g., military adventurism, economic

intervene to prevent extreme consequences. reform, or massive Western imports. Neither

If, for instance, the most optimistic energy of these extremes illuminates the more likely

production targets were fulfilled, planners intermediate outcome. A far more informamight reallocate investment away from the tive discussion can, therefore, result from

energy sector. On the other hand, if a num- consideration of a medium case.

CMEA ENERGY TRADE: A MIDRANGE SCENARIO FOR 1985

From the perspective of the Soviet bloc,

the future of CMEA participation on world

energy markets will be determined not simply by production in each energy sector, but

by a number of other factors as well. These

apply to the countries of Eastern Europe as

well as to the U.S.S.R. and include overall

levels of economic growth (which affect rates

of growth of energy consumption), the degree of substitution among fuels, and levels

of debt and hard currency requirements. If,

for instance, the worst possible conditions

prevail in the U. S. S. R.–i.e., energy production in all sectors falls far short of targets;

and oil is replaced with gas to only a limited

extent—the Soviet Union may itself experience an oil deficit. Beyond a certain point,

however, hard currency constraints will almost certainly preclude Soviet purchases of

oil on the world market. Instead, there may

be no alternative but to cut back on economic growth and energy consumption.

On the other hand, if the Soviet economy

continues to grow comparatively slowly

(about 1.6 percent), and domestic demand for

oil can be kept down, the U.S.S.R. might be

able to maintain oil exports even in the face

of declining growth in oil production. Moreover, to the extent that gas can replace oil as

an export to the West, the criticality of oil in

Soviet hard currency exports will decline,

and the key question for the U.S.S.R. will

become not whether it can maintain its oil

exports, but whether it can continue to earn

hard currency as a net energy exporter.

Chapters 8 and 9 show the enormous range

of outcomes in the Soviet and East European energy balances which are possible

from different combinations of assumptions

regarding economic growth, the growth in

energy demand, and domestic energy production. These scenario outcomes are summarized, in terms of net hard currency

energy balances, in table 76. In each case it

is assumed that Soviet energy exports to

Eastern Europe (the CMEA-6) remain as

planned for 1981-85 (in other words, about

118 million tons of oil equivalency (mtoe) annually, or about 18 percent above the average annual level in 1976-80). Soviet exports

Table 76.—CMEA-Seven Net Hard Currency

Energy Exports, 1979 and 1985

1979 1985

(Esti- Worst Mid- Best

mated) case range case

/Vet hard currency energy exports (mtoe)

U.S.S.R. . . . . . . . 83 (38) 92 212

CMEA-6. . . . . . . 4 (70) (33) 10

CMEA-7 . . . . . . . 87 (108) 59 222

Change in net hard currency energy exports (mtoe)

U.S.S.R. . . . . . ,. . . . . . . . . . . (121 ) 9 129

CMEA-6. . . . . . . . . . . . . . . . . (74) (37) 6

CMEA-7 . . . . . . . . . . . . . . . . . (195) (28) 135

SOURCE Chs. 8 and 9
Ch. 10—The Soviet Bloc and World Energy Markets ● 315

to other CMEA countries (notably Cuba) are

assumed to reach about 11 mtoe annually, a

rate slightly higher than in 1976-80. The

total of assumed Soviet energy exports to

CMEA countries (129 mtoe), as well as the

1979 level of Soviet energy imports from outside CMEA (9 mtoe), is netted out of the

figures shown in table 76.

As the table indicates, CMEA was a net

exporter of energy in 1979, the last year for

which reliable estimates are available, of

roughly 87 mtoe. By 1985, under OTA’s

worst and best case scenarios, the net hard

currency energy balance for CMEA could

range from a deficit of 108 mtoe to a surplus

of 222 mtoe, As noted earlier, a much more

likely outcome would fall between these two

extremes and the analysis which follows concentrates on the midrange scenario.

In this case, Soviet gross national product

(GNP) is assumed to increase at 2.4 percent

annually, and midrange estimates are used

for the income elasticity of Soviet energy demand and for Soviet energy production (see

ch. 8, tables 53-55). The midrange assumptions for Eastern Europe include GNP

growth comparable to that achieved in the

late 1970’s (about 2.9 percent annually), combined with a lower income elasticity of energy demand and favorable developments in

domestic energy production (see ch. 9, tables

70-72).

Given these midrange assumptions, the

Soviet Union in 1985 would be in a position

to export a slightly greater amount of energy

(net) than in 1979, about 92 mtoe. Eastern

Europe, on the other hand, would change

from being a net exporter of energy outside

the CMEA of 4 mtoe in 1979, to a net importer of energy for hard currency of 33 mtoe

by 1985. Overall, CMEA would remain a net

energy exporter (59 mtoe), but it would be offering 28 mtoe less to the world market in

1985 than it was in 1979.

The impacts of this midrange situation for

the West and for the Soviet bloc itself are

equally important. The relevant question for

Western nations is twofold. First, what are

the implications of this outcome for world oil

markets; and second, what are its implications for the volume and composition of the

U.S.S.R.’s energy exports to the West? The

issues faced by Eastern nations have to do

with their hard currency situations and with

the implications of Soviet energy export decisions for the economies of Eastern Europe.

CMEA IMPACT ON WORLD

OIL MARKETS

From the point of view of the West, any

assessment of the likely impact of the

CMEA on world energy markets must take

into account the worldwide availability of

petroleum during the 1980’s. OTA has elsewhere provided a basis for estimates of

world oil production.l Table 77, which is

based on this work, shows that between 1980

and 1990 world oil production, excluding

that produced by the U.S.S.R. and other centrally planned economies, is unlikely to rise

significantly.

Such predictions are complicated by the

fact that a number of oil-producing countries

do not produce at full capacity. If the capability of these “swing” nations is considered, the capacity for oil production is increased2 by as much as 500 million metric

tons (mmt). The rather conservative estimates 3 of excess capacity in table 77 show

that world oil production could be significantly increased in this decade if Iraq,

Kuwait, Libya, Iran, and Saudi Arabia

(which alone accounts for over half of the excess capacity shown in table 77) so wished.

A variety of economic and political factors–the price and demand for oil, and the

1 See Office of Technology Assessment, World Petroleum

Atazlabilit~~,I!WA2W)0, October 1980.

2 See Department of Energy, International Energy Evaluation S}~stems, VI, Sept. 1, 1978,

3 See Congressional Budget Office, The World Oil Market in

the 1980’s, lmpliration.q for the United States, May 1980. The

estimates for excess capacit~’ are 300 mmt higher for both

1985 and 1990 than those in this chapter.
316 - Technology and Soviet Energy Availability

Table 77.—World Oil Supply—Noncentrally Planned

Economies, 1985 and 1990

(million metric tons to nearest 25 mmt)

1980 1985 1990

OPEC medium

production . . . . . 1,350 1,600 1,650

Non-OPEC

LDC’s b . . . . . . . . . .

}

375-450 375-500

1,625

Developed

countries. 

. . . . . . 650-775 550-750

World

production . . . . . 2,975 2,625-2,825 2,575-2,900

Excess capability

of OPEC swing

countries over

production . . . . . 775 550 500

World capacityc . . 3,750 3,175-3,375 3,075-3,400

Capacity above

1980 levels . . . . . . 775 200-400 100-425

SOURCES ‘1980 estimate– Monthly Energy Review May 1981 DOE, 1988 and

1990 projections are mean figures in World Petroleurn A valuability

1980-2000 OTA October 1980 with 1990 figures obtained through

Inter polation

1980 estimates Monthly Energy Review May 1981 DOE 1985 and

1990 projections are from World Petroleum Availability 1980-2000

OTA October 1980

Excluding centrally planned economies

international and domestic political situations of the “swing” countries—will affect

decisions to use excess production capacity.

Barring intensified political instability in the

Middle East, the pressure of growing world

demand would likely result in an increase in

the capacity utilization level of the OPEC

“swing” producers. This could mean that in

1985 and 1990, there would be an additional

200 to 400 mmt and 100 to 425 mmt respectively of oil available in the world market

from noncentrally planned economies. This

would more than compensate for even the

worst case Soviet production declines.

But while these additional supplies are

possible, it would be a mistake to count on

them. It is by no means clear that demand is

the most important stimulus for increased

capacity. The most important limits are political, and, as recent events in Iran have

shown, cannot be forecasted. Even if this

were not the case, experience following

OPEC oil price increases in 1979-80 has

shown the limitations of demand forecasting

models which rely on historical price elasticities. At present, oil demand has slackened

and further production cutbacks have been

announced.

To the extent that these uncertainties

allow reasonable projections, however, it is

clear that the outcome described in OTA’s

midrange scenario would likely have only a

negligible impact on the supply-demand balance in world energy markets. A decline of

net CMEA exports of 28 mtoe would equal

only about one percent of estimated petroleum production capacity in the non-Communist world in 1985, as reflected in table

77.

THE VOLUME AND COMPOSITION

OF ENERGY EXPORTS

TO THE WEST

Table 78 shows that under midrange

assumptions the Soviet Union could entirely

cover Eastern Europe’s incremental energy

needs if it chose to do so, and still have some

energy left to export for hard currency. The

issue, however, is not just one of aggregate

energy balances. It is also important for the

CMEA countries to ensure that energy is

supplied in volume and form appropriate to

meet local demand. Thus, an important consideration for both energy producers and

consumers is the composition of incremental

1985 supplies.

In 1979, the Soviet Union exported an

estimated 83 mtoe to countries outside Eastern Europe. Of this, 60 mtoe (more than 70

percent) was oil and oil products; 16 mtoe

was gas; and 7 mtoe was coal. But while in

1979 oil exports clearly dominated CMEA

net energy exports, by 1985 the situation

may change. Although it is difficult to anticipate the precise contribution of each

energy sector to Soviet incremental energy

production or exports, it is clear that even

under best case conditions oil production in

the U.S.S.R. is unlikely to increase rapidly

enough to carry the primary weight of incremental energy exports. Likewise, OTA ex-
Ch. 10—The Soviet Bloc and World Energy Markets ● 317

Table 78.— Possible Composition of Soviet

Net Energy Exports

1979 1985 Midrange

Oil = Oil =

(Estl- 50 40

mated) percent percent

(million tons of oil equivalent)

Net export . . . .

Oil . . . . . . . . . . . .

Coal . . . . . . . . . .

Required gas

and electricity

exports . . . . . .

Estimated

present

capacity for

gas exports

to West . . . . . .

Required

Increase in gas

export MTOE

capacity if no

electricity

exports . .

(bcm

equivalent) . .

83 92 92

(60) (46) (37)

(7) (7) (7)

16 39 48

(29) (29) (29)

10 19

12 23 34

Oil =

30

percent

92

(28)

(7)

57

28

SOURCE Office of Technology Assessment

pects that by 1985, coal production will at

best rise little above 1980 levels. Gas production, however, is projected to increase substantially. The only remaining energy sector

which is growing rapidly is electricity produced from nuclear and hydropower. This

suggests that gas, in conjunction with electric power, must supply the preponderance

of additional energy available both for export and for internal substitution.

Chapter 2 demonstrates clearly that the

U.S.S.R. can produce as much gas as it

needs, provided it can be moved and utilized.

This raises two issues, the feasibility of replacing oil with gas in hard currency-exports, and the prospects for internal substitution of gas for oil.

The countries of Western Europe have

made it clear that they are willing, indeed

eager, to import substantially greater quantities of Soviet gas. Table 78 shows the level

of Soviet gas exports to the West in 1985

necessary to maintain net energy exports of

92 mtoe. This table assumes that coal exports are maintained at estimated 1979 levels and that oil exports fall, alternatively, to

50, 40, and 30 percent of total net energy

exports.

These calculations raise important questions concerning the logistics of such sales.

At present, there is limited pipeline capacity

in place to support additional gas exports. In

1980, the excess capacity of the Orenburg

pipeline (after meeting annual commitments

to Eastern Europe of 15.5 bcm) was 12 to 13

bcm. During that year an additional 23 bcm

of gas were exported to the West. Present

pipeline capacity could therefore support 23

+ 13 bcm = 36 bcm of natural gas exports to

the West. This is equivalent to 29 mtoe/yr.

When this figure is subtracted from indicated required gas exports (see table 78), it

appears that by 1985 additional gas export

pipeline of from 12 to 34 bcm might have to

be constructed–if oil exports do decline

within the indicated range and to the extent

that the export shortfall is not made up by

sales of electricity.

According to the U.S. Defense Intelligence

Agency, two new lines are already under construction, and altogether six to seven are

contemplated during the present Five Year

Plan (FYP) period, including the controversial pipeline which will carry West Siberian

gas to Western Europe. Four of these pipelines should be available for supporting

growth in domestic gas consumption.4The

West Siberian export pipeline, discussed in

chapter 12, is scheduled to support from 40

to 70 bcm of additional gas exports to Western Europe, but whether it will be completed

by 1985 remains an open question.

The second important issue is the ability

of the Soviet Union to substitute other types

of energy for oil. Current Soviet plans reflect

4 Statement of Major General Richard X. Larkin, Deputy

Director, Defense Intelligence Agency, before the Joint Economic Committee, Subcommittee on International Trade, Finance, and Security Economics, Sept. 3, 1981,
318 ● Technology and Soviet Energy Availability

a high level of optimism in this area. The targets for rapidly increasing gas production in

the next 5 years imply a good measure of domestic substitution. The capability of the

CMEA to maintain net oil exports–or avoid

the need to import more oil—will depend on

its success in substituting gas and non-oilfired electric power for domestic oil consumption. In other words, the greater the

success of energy policies promoting substitution, the more oil will be available for export in 1985. Some idea of the sensitivity of

the CMEA export position to substitution

can be gained from considering the consequences of the U.S.S.R.’s achieving a rather

limited level of substitution.

OTA has amassed very little hard data on

substitution of gas for oil, but it seems reasonable to assume that while complete substitution is unlikely, 20 percent may be attainable. For purposes of illustration, OTA

has assumed that gas is substituted for 20

percent of Soviet oil consumption. This level

of substitution is equivalent to 6.8 percent of

total U.S.S.R. energy consumption—87 mtoe

or 1.75 mbdoe. Complete substitution of oil

would imply a major effort—displacing 439

mtoe (almost 9 mbd of oil). But since the

U.S.S.R. uses oil extensively to generate

electricity, and since ECE data for 1980

show that both the U.S.S.R. and Eastern

Europe depended on oil as a source of energy

to a much lesser extent than did many Western nations,5 there would seem to be fair

potential for substitution on the order of 20

percent.

Under these circumstances, roughly 40

mmt less oil would be available for export. In

this case, the Soviet Union could probably

meet the projected incremental East European energy import needs (about 33 mtoe)

with oil exports. However, the U.S.S.R.

would have only about 10 mtoe of oil above

1980 levels available for export to countries

outside the CMEA. In other words, the

U.S.S.R. could actually have as much as 70

5 United Nations, Economic Commission for Europe, Economic Bulletin for Europe, June 1981, p, 162. In 1980, Soviet

dependence on liquid fuel was 38 percent of total energy consumption. East European dependence was 25 percent.

mtoe of oil for export if a substantial degree

of domestic substitution were possible. Assuming continued exports to Eastern Europe at 1980 levels and low levels of substitution, domestic oil demand would preclude an

expansion of energy exports in the form of

oil.

In sum, the U.S.S.R.’s great gas potential

could allow it to compensate on world energy

markets for stagnating or even declining oil

production. For this to occur, gas will have

to replace oil to a certain extent in domestic

consumption, but more importantly it will

have to become much more prominent as a

hard currency export. Since the countries of

Western Europe are already eager to import

more Soviet gas, and since this gas is widely

regarded as replacing rather than supplementing current Soviet oil deliveries, such

an outcome need not present problems for

the West. It is contingent, however, on the

successful and timely completion of sufficient pipeline capacity to transport the gas.

THE HARD CURRENCY POSITION

OF THE CMEA

Under the midrange conditions of moderate GNP growth, energy production and

consumption posited here, it does not appear

that the U.S.S.R. itself will face a hardcurrency crisis by 1985. Indeed, under the

midrange scenario, the analysis in chapter 8

shows that the Soviets would be in a position, in terms of the aggregate energy balance, to possibly increase the amount of

energy they export for hard currency at

roughly 1979-80 levels and, given favorable

terms of trade developments, continue to expand hard currency imports at a respectable

rate.

The U.S.S.R. cannot be considered in isolation from Eastern Europe, however. The energy position of the entire CMEA-7 will set

the parameters for the Soviet leadership.

The situation facing the bloc as a whole is

rather less sanguine. The midrange case

shows a drop in net energy exports for hardcurrency of 28 mtoe. Where this burden falls
Ch. 10— The Soviet Bloc and World Energy Markets ● 319

will be determined by Soviet policy makers.

The “energy squeeze” could conceivably be

borne by the U.S.S.R. itself in an effort to

ameliorate Eastern Europe’s economic problems; it could be shared; or the U.S.S.R.

could leave the CMEA-6 to purchase energy–most likely in the form of oil—on world

.

If the Soviets were to make up the entire

1985 shortfall of Eastern Europe (33 mtoe),

hard currency pressures on these countries

would be reduced. They would not be eliminated because presumably Eastern Europe

would have to divert increasing amounts of

relatively high-quality exportable away

from the West and towards the Soviet market, as payment for stepped-up Soviet

energy deliveries. But such a policy would

also reduce Soviet energy deliveries to the

world market by one-third, and as chapter 8

suggests, would seriously erode Soviet hard

currency import growth.

On the other hand, if the net East European hard currency energy balance deteriorates through the purchase of 37 mtoe (see

table 76), it will be extremely difficult for

most of these nations to pay for imports.

Romania will be particularly hard pressed.

As chapter 9 points out, Romania alone may

be responsible for one-third of all energy imported by Eastern Europe in 1985. Romanian energy imports, moreover, are expected

to triple between 1979 and 1985. Changes in

Poland’s energy situation could also affect

the overall position of the group-Poland is

the only East European country with a

chance of remaining an energy exporter

through the decade.

Assuming for purposes of illustration that

incremental East European net hard currency energy requirements reached 37 mtoe

in 1985, and that they were met entirely with

imports of oil from the world market (priced

at $36/barrel), hard currency requirements

for the region would increase by almost $10

billion annually. Because one or two of these

countries are likely to remain net energy exporters, an even greater burden would actually fall on the others, particularly

Romania. Romania would be forced to use

from one-half to three-quarters of its export

earnings to pay for oil imports—a situation

which is neither feasible nor likely. (Use of 25

percent of export earnings to finance oil imports is considered a reasonable hard currency “breakpoint.”)

There are, of course, a number of developments which might ease the hard currency

constraints on Eastern Europe. Poland could

improve its hard currency position if oil consumption could be held at 1980 levels, and if

coal and electricity were used to meet additional energy needs. Even more beneficial

from the perspective of the CMEA as a

group would be measures taken by Romania,

the nation most dependent on oil, to meet all

of its incremental energy needs by importing

gas instead. This would considerably improve Romania’s hard currency situation,

since gas is currently priced at half the cost

of oil per Btu. The overall situation of the

CMEA-6 could, furthermore, be ameliorated

by conservation and improvements in energy efficiency. Even in the absence of such

measures it is unlikely that Eastern Europe

will be able to rapidly increase purchases of

energy (particularly oil) from outside the

CMEA. If energy demand should increase in

line with high consumption scenarios, it is

far likelier that economic growth will slow

and energy demand consequently fall. Hard

currency constraints thus reduce the probability of a sudden increase in oil purchases

on world markets by Eastern Europe.

SOVIET ENERGY AND

EASTERN EUROPE

This exercise has shown that under midrange conditions for GNP growth, energy

production, and substitution, the CMEA as

a group is not likely to become a net energy

importer by 1985. Increases in aggregate

Soviet energy production will overall offset

rising Eastern European energy requirements. Soviet leaders are thus faced with a

tradeoff between supplying cheap energy to

the Eastern alliance and potential hard cur-
320 ● Technology and Soviet Energy Availability

rency earnings through energy exports to

the West.

As chapter 9 has pointed out, the critical

linkage between Soviet energy exports and

East European energy supplies cannot be

overemphasized, and since prospects for expanded energy production in East Europe

are dim, the U.S.S.R. is certain to continue

as an important supplier. Thus, while oil

sales to Western Europe are obviously attractive to the U. S. S. R., it is fully cognizant

of the risks to itself should Eastern Europe

be faced with economic chaos. When East

European countries suffered shortfalls in oil

imports from Iran and Iraq in 1980, the

Soviet Union expanded its own exports to its

allies—at the expense of hard-currencyearning sales to Western Europe. (It must be

noted, however, that given the rising world

market price of oil, the U.S.S.R. can maintain its hard currency earnings while exporting less oil. )

But the extent to which the U.S.S.R. will

be willing to continue this assistance remains to be seen. In late summer 1981,

Romania requested increased Soviet deliveries of both oil and gas. The U.S.S.R. had

already offered to export additional gas to

Romania—in return for Romanian participation in gas pipeline, nuclear power, and

iron ore mining projects. As of this writing,

it is not known whether Romania has accepted these terms or whether the U.S.S.R.’s

willingness to supply additional energy will

extend to oil. It might be expected that the

U.S.S.R. will encourage its allies to import

incremental energy supplies wherever possible in the form of gas.

CMEA ENERGY TRADE IN 1990

World oil production in 1990 is likely to be

only slightly higher than that for 1985—

reaching a maximum of 2,900 mmt (compared to 2,825 mmt for 1985). If the excess

capacity of the swing producers is taken into

consideration, world production capacity for

1990 could reach 3,400 mmt (v. 3,375 for

1985) (see table 77.)

This production differential is enormous.

When the range of scenarios constructed for

Soviet energy trade in chapter 8 are taken

into account, the range of 1990 possibilities

widens even further, significantly beyond

those postulated for 1985. Chapter 9 shows

too that a similarly wide range of possibilities exists for the CMEA as a whole. Under

worst case conditions, the Soviet Union by

1990 could become a net hard currency energy importer (ch. 8: table 60), and Eastern

Europe would have incremental net hard currency energy import requirements well in excess of contemplated Soviet energy exports

in 1981-85 (ch. 9: table 73). On the other

hand, if-optimistic assumptions are used as

the basis for calculation, the U.S.S.R. would

be in a position to expand its hard currency

energy exports over 1979-80 levels, and

Eastern Europe would remain a net hard currency exporter of energy.

This tremendous range of possibilities

makes the construction of a midrange scenario for 1990 an extremely tenuous exercise—and one of little utility. What can be

said with some degree of certainty, however,

is that the same constraints operating on

energy trade outcomes for 1985 will be relevant in 1990. Regardless of whether the

U.S.S.R. is able to reach its energy production targets, levels of Soviet economic

growth, the degree to which gas and electricity are substituted for oil, and the ability

of Eastern Europe to hold down oil imports

will all influence CMEA incremental oil import needs. The message here is that a variety of factors, amenable at least in part to

policy direction, could significantly ameliorate or aggravate the CMEA’s oil import/export situation.
Regardless of whether the

able to meet its own energy

gets, a variety of additional

Ch. 10—The Soviet Bloc

CONCLUSIONS

Soviet Union is

production tarfactors will significantly influence its ability to maintain its

status as an energy exporting nation. Those

factors include the degree to which economic

growth proceeds at a moderate or low (rather

than a higher) level, and the ability of

Eastern Europe (particularly Poland and

Romania) to hold down demand for imported

oil, but the most crucial are the ability of the

U.S.S.R. to substitute gas for oil in domestic

consumption and the rate of construction of

new pipelines for gas exports to the West.

The ability of the CMEA to develop an energy policy which results in the better case

conditions for substitution, demand, and

economic growth will be as important as its

ability to meet production targets in determining the degree to which CMEA’s net

hard currency energy balance will deteriorate.

The formulation of such policy will confront the U.S.S.R. with difficult choices involving tradeoffs which will inevitably be

most difficult if worst case conditions develop. The most obvious example here is the

trade-off of hard currency earned through oil

exports to the West against supplying subsidized energy to Eastern Europe. There are

also costs involved in decisions over gas exports, where the primary problem is not production, but rather transportation of the gas

both to Eastern and Western Europe and

within the U. S. S. R.. To the extent that the

Soviet bloc is able to increase its domestic

use of gas, nuclear power, and other energy

sources, it frees oil for export to the West.

The development of gas and other energy

sources, however, requires considerable investment and economic adjustment. While

expansion of gas production and consumption is an attractive option, it is not a costless alternative,

Should it become necessary for Eastern

Europe to increase its purchases of oil on the

and World Energy Markets ● 321

world market, these nations will be faced

with decisions about the reliability of supply

similar to those that must be made by policymakers in the industrial West. One approach, consistent with past patterns of

energy imports to the CMEA, would be to

strengthen special relationships with a few

key Middle East oil producers like Iran and

Iraq, perhaps through an expansion of barter trade. The difficulty here is that this

policy would increase CMEA vulnerability

to interruptions in supply by one of these

key suppliers. Indeed, the Iranian revolution

has already demonstrated precisely such vulnerability. Thus, while the “special relationship” option may appear just as attractive

to CMEA leaders as it has to certain Western policy makers intent upon building bilateral ties with producer countries, it offers no

easy solution. Even military occupation of

an oil producing nation would not necessarily eliminate such supply uncertainties—the

ongoing costs of a military solution are

clearly high, albeit difficult to measure

precisely, and oil supplies could be highly

vulnerable to sabotage.

In the final analysis, oil and energy import

problems must be viewed as critical threads

in the fabric of CMEA economic viability. If

the U.S.S.R. and Eastern Europe together

find it increasingly difficult to produce energy needed for both internal consumption

and export earnings, it will be more difficult

to sustain a growing economy. While constrained energy supplies are commonly

assumed to lead directly to increased purchases in the international market, OTA’s

analysis makes it clear that the domestic

economic impacts of such problems are extremely important. In fact, if the worst conditions materialized and the CMEA faced an

oil deficit, hard currency constraints would

almost certainly preclude large purchases on

world markets and, therefore, the most

likely immediate impact would be to reduce

levels of economic growth and domestic

consumption.
322 ● Technology and Soviet Energy Availability

In short, a growing CMEA energy crisis

would signify difficult and long-term economic and social adjustment—as has been

the case in the West. Energy must be viewed

as one of a number of critical policy factors

which could either severely constrain or

greatly enhance the economic and political

viability of the Soviet bloc. Shortfalls or surpluses in Soviet oil are probably more significant from the perspective of the domestic

economic adjustments that they will engender within CMEA than in their implications

for the nature of CMEA participation in

world energy markets.

The significance of this analysis for U.S.

policy makers, of course, rests on the question of the maximum possible oil import

needs of the CMEA relative to projected

world oil production in the decade ahead.

Assuming that the most likely future for

the CMEA lies somewhere between the extremes sketched in chapters 8 and 9, through

1985, at least, it appears that if moderate

conditions of production, substitution and

economic growth prevail, the CMEA as a

bloc will not become a net energy importer.

The U.S.S.R. could meet all incremental

East European oil needs by reducing its

energy exports to the West—if it chose to do

so—although this would have a significant

impact on Soviet hard currency import

capacity. Regardless of which policy the

Soviets pursue, the decline in net CMEA

energy balances available for hard currency

export by 1985 would probably have a far

less significant effect on world energy

markets (amounting to roughly 1 percent of

expected non-Communist oil production

capacity) than on the economies of the

Soviet Union and its East European allies.
CHAPTER 11

Japanese-Soviet

Energy Relations
CONTENTS

Page

JAPAN’S ENERGY AND TECHNOLOGY TRADE RELATIONS

WITH CMEA DURING THE POSTWAR PERIOD. . ... . . . . . . . . . .326

Japanese Energy Imports From the Soviet Union. . . . . . . . . . . . . . . . . . . . . .326

Japanese Energy Technology Trade With CMEA. . . . . . . . . . . . . . . . . . . . . .329

JAPANESE POLICY TOWARD ENERGY TRADE WITH THE CMEA:

THE INSTITUTIONAL AND INTERNATIONAL POLITICAL

CONTEXT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........331

The Domestic Institutional Setting for Policy. . . . . . . .... . . . . . . . . . . . ...332

JAPANESE PARTICIPATION IN SIBERIAN ENERGY

DEVELOPMENT ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 338

Yakutian Natural Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...339

South Yakutian Coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..340

Sakhalin Offshore Oil and Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....342

Other Prospects for Japanese Participation in Soviet Energy Development . . . . . . .344

RECENT DEVELOPMENTS IN JAPANESE-SOVIET RELATIONS:

PROSPECTS FOR THE FUTURE . . . . . . . . . . . ... . . . . . . . . . . . . . . . .345

SUMMARY AND CONCLUSIONS. . . . . . . . . . . . . . . . . . . . . . ..... . . . . . .348

LIST OF TABLES

Table No. Page

79.

80.

81.

82.

83.

International Comparison of Dependence on Imported Energy-1979 ...326

Japanese Energy Balance—1979. . . . . . . . . . . . . . . . . . . . . . . . . ........327

Japanese Energy Dependence-1979. . . . . . . . . . . . . . . . . . . . . . ........327

Soviet-Japanese Trade–1975-80. . . . .... . . . . . . . . . . . . . . . . . . . . . . . ..329

Projected Japanese Energy Imports From the U.S.S.R.

During the 1980’s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..,340

LIST OF FIGURES

Figure No. Page

27. Japan’s Provisional Long-Term Energy Supply and Demand Outlook. ..328

28. Soviet East Siberia and Japan. . . . . . . . . . . . . . . . . . . . . . .............336
CHAPTER 11

Japanese-Soviet Energy Relations

Japan’s postwar energy-related trade with

the Soviet Union has been limited. Although

Japanese leaders are committed to cooperating in Soviet energy development in East Siberia, Japan depends on the U.S.S.R. for

only a miniscule part of its energy supply.

Similarly, Japan is the West’s largest supplier of energy-related technology and equipment to the Soviet Union, yet these exports

constitute a relatively small part of Japan’s

total world exports. Both of these facts reflect a situation in which Japan’s political

relations with the U.S.S.R. have tempered,

but not precluded, energy interaction between the two countries.

A variety of factors—political economic,

and energy-related-provide a mix of incentives and disincentives for Japanese energy

interaction with the U.S. S, R. On the political

side, Japan’s orientation has been clearly

toward the West. It is a member of the International Energy Agency (IEA), the Organization for Economic Cooperation and Development (OECD), and CoCorn,* and its foreign policy has been anchored on the U. S.-

Japan Security Treaty. Despite a number of

persisting disputes between Japan and the

Soviet Union, however, Japanese leaders

consider joint energy development projects

to be an important signal to the Soviet

Union that they are committed to peaceful

coexistence in Asia. From energy and economic perspectives, there is clear complementarity between Japan’s energy import requirements and Soviet plans for

energy and economic development. Japan is

understandably anxious to diversify its

sources of imported energy so as to reduce

dependence on Middle East oil, and its

leaders have for years looked to the Soviet

Union as a potential—and nearby-energy

supplier. The Soviet Union also provides a

significant market for Japanese energy

equipment and technology exports. T he

balance of these factors favors a positive,

albeit cautious, Japanese approach to energy

relations with the Soviet Union.

A systematic look at the way in which

Japanese leaders evaluate the potential risks

and benefits of trade and energy cooperation

with the U.S.S.R. is essential for an evaluation of past trends and future prospects for

Japanese-Soviet energy relations. The purpose of this chapter is to explore from the

Japanese perspective the dimensions and

dynamics of Japan’s energy and trade relationship with the Soviet Union. The focus

underscores Japan’s importance—for both

the Soviet Union and for the United States.1

Japan is the single most important market

for Soviet timber and coal, and a potential

market for gas produced in Eastern Siberia.

Thus, Japanese policy is a critical factor in

Soviet economic calculations in Asia. But

Japan is also the strongest non-Communist

economy in Asia, and Japanese cooperation

is important for the success of American

foreign policies, globally and toward the

region. The chapter outlines the nature of

Japan’s trade and energy relations with the

U. S. S. R.; explores the domestic organizational and international political context of

Japanese policymaking; examines three primary examples of Soviet-Japanese joint energy development; and assesses likely future

developments in energy relations between

the two nations.

1 Allen S. Whiting, “The Japan Connection.” Siberian Development and East Asia: Threat or Promise? (Stanford,

1981).

325
326 ● Technology and Soviet Energy Availability

JAPAN’S ENERGY AND TECHNOLOGY TRADE

RELATIONS WITH CMEA DURING

THE POSTWAR PERIOD

JAPANESE ENERGY IMPORTS

FROM THE SOVIET UNION

Japan is highly dependent on imported

energy and other resources. It must purchase over 90 percent of the energy it consumes (see table 79). A large portion of these

imports consists of oil, for Japan is more

dependent on oil for its total energy requirements than any other Western nation

examined here (see table 80 and ch. 12, tables

86-89). Oil accounts for more than 78 percent

of the nation’s total primary energy supply,

and virtually all of it is purchased abroad.

Japan has for years sought to relieve its

dependence on the Persian Gulf, which supplies 75 percent of its imported crude oil, by

decreasing the share of oil in its energy

balance and by increasing imports from nonOPEC nations.

Despite this extreme energy dependence,

however, Japanese energy imports from the

U.S.S.R. have been small, both in value

terms and as a percentage of total energy

supplies. During the last 5 years, the value

of all Japan’s imports (including energy and

other commodities) from all communist nations has annually averaged less than 5 percent of its total imports, and the relative importance of energy-related imports has actually fallen. The U.S.S.R. is the only Council for Mutual Economic Assistance (CMEA)

nation that exports energy—oil and coal—in

significant quantities to Japan, but the

dollar value of this trade has been consistently low. In recent years the total value

of all Soviet energy exports to Japan has not

exceeded $300 million annually. This

amounts to less than 1 percent of all Japan’s

imports.

Table 81 illustrates Japan’s very limited

dependence on Soviet energy, which comprises a miniscule part of total Japanese

energy imports and available primary energy. In recent years energy imported from the

Table 79.—lnternationaI Comparison of Dependence

on Imported Energy—1979

(million tons of oil equivalent)

West

Ger- United

Japan many France Italy States

Total energy

requirements 1979 ..327.5 283.3 184.9 132.5 1,747.0

Energy imports

as percent of

total energy

requirements . . . . . . . . 94% 67% 96% 109%b

25.2%

Oil imports

as percent of

total energy

requirements . . . . . . . . 78% 53% 75% 91% 2 4 %

Gas imports

as percent of

total energy

requirements . . . . . . . . 4% 12% 9% 10% 2%

Coal imports

as percent of

total energy

requirements ., . . . . . . 12% 2% 11% 7% 0.1%

Conversion factor 1,000 million tons coal equivalent (MTCE) = 6859 MTOE

a

Total energy requirements by commodity - observed consumption data IS used

wherever available for coal and natural gas due to the Iimited avaliability of

Inventory data, otherwise requirements are computed by the following

formula domestic primary production + imports exports international bunkers

Inventory changes Total energy requirements are computed only if inclusive of

all commodities (oil, gas, coal, primary electric power, and net electricity imports)

Other electricity Includes net electricity Imports Graphs of total energy

requirements do not account for inventory changes if production and import data

are separated

b Italy re-exports imported energy

SOURCE Business Information Display World Energy Industry, Volume 1 First

Quarter 1980

Soviet Union has not exceeded 1 percent of

Japan’s total primary energy requirements.

Even Soviet coal, the most important of

these imports, represented only 5 percent of

all hard coal imports in 1979.2

2 The 1979 total import figure is taken from World Energy

lndustry, while the U.S.S.R. import figure is taken from

MITI data. See table 81.

During 1979 imports from the U.S.S.R. probably represented less than 3 percent of total Japanese coal imports. For

the first 9 months of 19’79 imports of Sovet hard coal totaled

1.7 million tons, while Japan's total coal imports from all

sources for that year amounted to 60 million tons. See Soren

Too Boekikai Chosa Geppo (hereafter Chosa Geppo) (Monthly Report of the Soviet–East European Trade Association),

November 1980, p. 3; for total coal import data for 1979, see

Japan Economic Journal, Industrial Review of Japan, 1980 ,

p, 60,
Ch. 1 l—Japanese-Soviet Energy Relations ● 327

Table 80.—Japanese Energy Balance—1979

(million tons of oil equivalent)

Hydro and Imported

Oil Gas Coal Nuclear electricity LNG

Total energy requirements

1000 percent . . . . . . . . . 74.0% 0.6% 15.5% 1 ,3 % 1 .5 % 7 1 %

327.5 mtoe. . . . . 242,3 2.0 50.7 4.4 4.9 23.2

Energy imports:

—as percent of total energy

requirements . . . . . . . . . . . 78.4% — 12.1% — 3.5%

308.3 mtoe. ., .

.

256.7 — 39.9 — . 12.0

Energy exports:

11.2 mtoe

SOURCE Business Information Display op Cit.

Table 81 .—Japanese Energy Dependence—1979

(million tons of oil equivalent)

.

Oil/oil Imported Total

products Gas Hard coal Nuclear electricity LNG energy

Requirements . ., . . ... . . 242.3 2.0 50.7 4.4 4.9 23.2 327.5

Imports from world . . . . ., 256.7 — 39.9 — — 1 2 0 308.3

Imports from U. S. S. R,. ., . . . . . 0.7 — 2.0 . — 2.7

Imports from U.S.S.R. as percent

of total imports . 0.3% — 5.0% — — — 0.9%

Imports from U.S.S.R, as

percent of

requirements . . . . . . . . . . . . . . . . . . . 0.3% — 9.9% — — — 0.8%

Conversion factors 1 kiloliter = 6.289 barrels, 1 barrel = 0.1358 thousand rnetric tons oil equivalent, 1.000 mtce = 0.6859 mtoe

SOURCE: For Imports from world Business In forma/ion Display World Energy Industry VO l. 1 NO 3, First Quarter 1980 p 116 For imports from U S S R Ministry of

Internatonal Trade and Industry (Japan) Energy Tokei Nenpo [Yearbook of Coal Petroleum and Coke Statistics) (Tokyo Tsusho Sangyo Chosa Kai 1979) pp.

30 39 82 176ff

From the Japanese perspective, then,

Soviet energy has been relatively unimportant. From the Soviet perspective, however,

Japan is a very important customer, purchasing virtually all of the lignite and more

than half of the hard coal that the Soviet

Union has sold to the industrialized West. In

1979, about a quarter of the U.S.S.R.'s total

petroleum product exports to Japan, West

Germany, France, Italy, the United Kingdom, and United States were purchased by

the Japanese. In short, Japan, is presently

more important to the U.S.S.R. as a customer than the U.S.S.R, is to it as an energy

supplier.

This situation may change in the years

ahead, but probably only in limited ways.

Current Japanese official energy forecasts

suggest that, theoretically at least, Soviet

energy might play a role in meeting projected needs, Japan’s official long-term

energy forecast, first drawn up at the end of

1979 and now under revision, shows a

dramatic reduction in the use of oil over the

next decade. Recent revisions for 1990 call

for the share of oil in the energy supply to

fall from 74 percent to 47 to 48 percent,’ and
328 ● Technology and Soviet Energy Availability

for the proportion of oil-fired electricity uefied natural gas (LNG); rapid development

generation to be reduced by nearly half– of new energy sources; and continuing sucfrom 46 percent to about 24 percent. These cess in energy conservation (see fig. 27). The

ambitious plans assume rapid increases in plans will require imports of all types of coal

consumption of coal, nuclear power, and liq- to rise rapidly from about 60 million tons

Figure 27.—Japan’s Provisional Long-Term Energy Supply and Demand Outlook

10

9

8

7

6

5

4

3

2

1

0

412

mllllon kl

—

582

miIIion

kl

-

1977 1985 1990

/

807

million

kl

/

/

/

348

million

kl

1995

Energy conservation

New fuel 011,

new types of energy

“Geothermal energy

LNG

Coal Imports

Coal production

011 and natural gas

production

Nuclear power

Hydroelectric power

011 Imports

Fiscal year

Note The projections shown in this diagram are now under revislon According to the long-term 011 supply plan published in May 1981 Japan s 011 imports durinq 1985 wiII

totaI 308 miIIion kl In 1985 This figure IncIudes imports of crude oil and refined products excluding L N G The new oil supply plan reflects a reduction in oil imports to

Japan from a level of 63-69 millilon barrels per day for 1985 set at the time of the Tokyo summit in 1979 to a level of about 57 million barrels a day for the year 1985 See

Tsusho Sangyosho (MITI), Showa 56-60 Nendo Sekiyu Kyokyu Keikaku (Oil Supply Plan for 1981- 1985) May 27 1981

SOURCE News from MITI NR-213 (79-281 Tokyo Sept 29 1979 p 9
Ch. 1 l—Japanese-Soviet Energy Relations ● 329

(40 million tons of oil equivalent (mtoe)) in

1979 to 143 million tons (98 mtoe) by 1990.

Steam coal imports are expected to soar

from less than 1 million tons per year in the

late 1970’s to more than 50 million tons (34

mtoe) by the end of the decade, as the cement and steel industries reduce their oil

consumption by substituting coal, and as

more coal is used to generate electricity.

Soviet coal could contribute to this planned energy transformation, but not on any

massive scale. Japan is now participating in

a joint effort to develop Siberian coal in

South Yakutia (see below). But the projected

4 million to 6.5 million tons (2.7 to 4.4 mtoe)

of coal for export to Japan which the project

is expected to produce by the mid-1980’s

will still constitute only a small portion of

Japan’s anticipated 1985 coal imports of

more than 100 million tons (68.59 mtoe).4 In

sum, Japan’s urgent need to diversify its

energy imports, both by geographic source

and by type of energy, means that the Soviet

Union will continue to be seriously considered as a potential energy supplier. At the

same time, however, energy imports from

the Soviet Union will not rapidly increase as

a share of total supplies.

4 Nihon Keizai Shimbun, Dec, 25, 1980). ‘l’ho articlt> cites a

revised delivery schedule for South Yakutian and Kuznetsk

coal: 1 million tons annually 1979-82; 4.5 million tons,

1982-85; and 6.5 million tons, 1985-99. Nihorz Keizai Shirnburz, Feb. 9, 1981, reported that it is unlikely that supplies

will reach 3.2 million tons by 1983.

JAPANESE ENERGY

TECHNOLOGY TRADE

WITH CMEA

The second dimension of Japan’s commercial relationship with the Soviet Union and

Eastern Europe has been in exports of

Japanese manufactured equipment and

plants to CM EA. Japan has been an important contributor to both Soviet and East

European economic development, and has

traditionally maintained a positive overall

balance of trade with CMEA. The relative

volume of Japanese exports to the U. S. S. R.,

however, has not been large. Between 1975

and 1979, these accounted on average for

less than 3 percent of Japan’s total yearly

exports ($2.4 billion in 1979). As a rule, the

value of Japan’s exports to the U.S.S.R. has

been two to four times as great as those to

Eastern Europe. Thus, even if all CMEA nations are included, exports to the Soviet bloc

represented less than 4 percent of Japan’s

total exports during most of the 1970’s.5

Similarly, in 1979 Soviet goods made up less

than 2 percent of all Japanese imports. In

fact, from the Soviet perspective overall

trade with Japan has diminished in importance during the last decade, falling from

a high of 12.7 percent of all Soviet trade with

industrial nations in 1975 to 8.8 percent in

1980 (see table 82).

—- — - —.

5 

"1979 Nen no Nisso Boeki” (Japan-U.S.S.R. Trade in

1979), Chosa Geppo, April 1980,

Table 82.—Soviet-Japanese Trade—1975-80

(millions of rubles)

—

1975 - 1976 1977 ‘- 1978 -

1979 a 1980

A. Soviet Imports from Japan. . . . . . . . . . . . . . . 1,253.5 1,372.1 1,444.4 1,583.7 1,653,5 1,772.6

B. Soviet exports to Japan. . . . . . . . . . . . . . . . . . 668.9 748.4 853.4 736.1 944.4 950.2

C. Total Japanese-Soviet trade turnover. . . . . 1,922.4 2,210.5 2,297.8 2,319.8 2,597.5 2,722.8

D. Total trade turnover between U.S.S.R.

and industrial nationsb

. . . . . . . 15,843.9 18,658,1 18,741.6 19,679.9 25,753.8 31,583.1

C/D . . . . . . . . . . . . . . ., . . . . . . . . . . . . . 12.8% 11 .40/o 12.30/o 11 .80/0 1 O.OO

/O 8.60/0

a Revised figures

— —

b "lndustrial nations” iS a standard Soviet trade classiflcation which includes Western Europe, North America, Japan, and Australia

SOURCE Moscow Narodny Bank Press Bulletin, 1975-1980 (inter alia Soviet Foreign Trade, 1975-1980, inter alia

13 84-389 0 - 81 - 22
330 ● Technology and Soviet Energy Availability

In certain industrial sectors trade with the

U.S.S.R. is disproportionately important.

The bulk of Japan’s exports to the U.S.S.R.

and Eastern Europe (86.7 percent in 1979)

has been in plants and equipment for heavy

industry. In 1979, almost half of these were

in iron and steel.6 This trade is concentrated

in areas which complement Japan’s own efforts to restructure its domestic industries.

Heavy and petrochemical industries have for

years dominated Japan’s industrial structure, but current government plans foresee a

diminished importance for these sectors. Exports are viewed as a way to help declining

industries. Moreover, declining plant exports in 1980, due mainly to contract

cancellations by the Chinese, have led Japanese plant exporters to hope for a compensating growth in CMEA markets.7 Before

the Soviet invasion of Afghanistan, Japanese plant exports to the U.S.S.R. and Eastern Europe were growing briskly, earning

Japan about 10 percent of the world plant

export market.8

Japan has made an important contribution to energy-related technology trade with

the Soviet Union and Eastern Europe (see

ch. 6). In 1979, Japanese worldwide energy

equipment and technology exports were

valued at more than 6 billion. Exports to the

Soviet Union accounted for 15.9 percent and

those to Eastern Europe 2.6 percent of this

total. (Exports to all communist nations, including the People’s Republic of China, totaled almost 30 percent of all Japan’s energy-technology related exports during that

year.) 9 Between 1975 and 1979, Japan alone

supplied almost 30 percent of all Western

6 Kin Murakami, “TaiSo Boeki no Genjo to Hatten" (Current Status and P’u ture Prospects for Japan- [ 1.S.S. R. ‘1’rade),

,1’/ k ir(~n (;(’ppo (, Japan hlachiner? I ndustr~’ Federatio n

Xlont hl?’1, No\’emher 19W, p. 4.

7 1 nter~’iew. with I’resident of New’ (Japan Steel, .I’ihon

A’[’iz(li Shimblln, Ipeh. 2, 1981, p. 3.

8

“ l)lant Pjxports to the Soviet Union and East European

(’oun t ries, l)i~f)s t (}[ ,Iapa Ilc’.se Irtciu.vtr> clftci Tec/t fl~}i{~~jI,

N(). 144, 1 W), p, 41.

9 Data from the Japan Tariff Association, ,Japan Exports

(i H (i tInpo rt.~. f ‘om m miit )’ /j\’ ( ‘(JU n tr?’, 1979 (’1’ok~’o: 1980).

CC F’’I’S categories were ~hosen to correspond with those de-

~eloped I)J’ orl’)\ for [1, S, 1 )epar-t ment of (’ommerce data.

(’ompiled h~ Stephen Sternheimer for OTA.

energy-related exports to the U.S.S.R.

About 45 percent of Japan’s total exports to

the U.S.S.R. during 1979 were of energyrelated equipment.

Such trade has been heavily concentrated

in a few areas—pipes, tubes, pumps, and

light vessels. Japan has not been a major

manufacturer of seismic equipment for oil

exploration, but Japanese companies have

been important suppliers of pipe and other

petroleum production equipment. Japanese

exports of “tubes, pipes, and fittings” accounted for 34 to 53 percent of all trade

in these commodities between the United

States, Germany, France, Italy, United

Kingdom, and Japan and CMEA between

1975 and 1979.10 Between 1975 and 1979,

Japan ranked first among Western nations

in the dollar value of energy equipment and

technology trade with the U.S.S.R.

Japan is undoubtedly a major exporter of

energy-related equipment and technology to

CMEA; opinion as to the significance of

these exports differs, however. Many Japanese businessmen believe that American

technology in these areas is superior to their

own; U.S. manufacturers suggest that there

are many items which can be produced in

Japan as well as anywhere in the world.

Japanese drill pipe, for example, incorporates the latest technology, including inertial welding of the tool joints at the end of

the pipe, and it is widely recognized as at

least comparable to that produced by American firms. 11 Japanese firms such as Mitsui,

Sumitomo, Nippon Kokan, Kawasaki, and

others have supplied quality pipelines for

transporting oil and gas, as well as pipeline

valves, pipeline booster stations, and pipelaying equipment. Mitsubishi has built

quality offshore semisubmersible rigs such

as the Hakuryu II (White Dragon), used in

exploration around Sakhalin Island. Japanese firms are capable of producing almost

all of the major pieces of equipment needed

——.

10 —

“U. N. SITC data, compiled by Stephen Sternheimer for

OTA.

11 See ch. 6, on Western Energy Equipment and Technology

Exports to the U.S.S.R.
Ch. 11—Japanese-Soviet Energy Relations ● 331

/’

.

The Japanese-built Hakuryu oil rig, off Sakhalin Island

for coal mining. In almost every major

category of energy technology, therefore,

there are Japanese companies competing

with those from the U.S. and Western Europe. In some cases, Japanese manufacturers

are able to produce items at low cost, making

them attractive suppliers for CMEA energy

development projects.12

In sum, past patterns of trade between

Japan and the U.S.S.R. in fuels and energyrelated equipment and technology show

that—despite the potential for mutually

beneficial exchange of Japanese equipment

and know-how for Soviet energy and raw

materials—the interaction between these

two nations has been limited. Japan’s present reliance on Soviet energy is very small.

However, in certain sectors, including

energy-related technology and equipment,

Japan has been a major Soviet supplier. Except in specialized areas, Japanese energy

equipment is on a par with equipment produced by other Western nations.

Japan’s consistently positive trade balance and its low level of energy imports from

the Soviet Union indicate a cautious approach to energy and trade relations. This

brief outline of past patterns of interaction

shows that while there are strong underlying

incentives for Japanese participation in Siberian energy and economic development,

there has been no rapid development of such

ties. Japan has avoided dependence on the

U.S.S.R. for energy, although its exports of

energy-related technology have increased.

[’rlfl~]~rt] pip[> [(~ f i 11 [i ( )rl]t>< [ i(> {It’rlltl rl(l. .St’(1 “,Japarl(’+(’ NI akt~r-s

of .Sca m les \ I‘ i p(, Swarl]p(d 1$’ it h 1>( )r~~lgr) ( )rdt}rs, ,1 ,si(i//

It ‘(ill ,Strf,(, t ,/()// rll(I/, 1 )(~c H, 1 $)h(J.

JAPANESE POLICY TOWARD ENERGY TRADE WITH THE

CMEA: THE INSTITUTIONAL AND INTERNATIONAL

POLITICAL CONTEXT

Japan’s postwar policies concerning energy cooperation with the Soviet Union have

developed both informally and officially.

Semigovernmental and private organizations, as well as government agencies, have

played important roles in exploring potential

trade and joint energy projects, and in carrying out agreements. These organizations

—which include the large trading companies

(sogo shosha), companies manufacturing

various types of machinery and equipment,

Japanese utilities and other potential consumers of energy, the Federation of Economic Organizations (Keidanren), the Ministry of

International Trade and Industry (MITI),

the Foreign Ministry, and the ExportImport Bank (Ex-Im Bank) of Japan–all

participate in development and implementation of joint Japanese-Soviet energy projects. The persistence of an identifiable group

of institutions responsible for these policies

has ensured a degree of policy continuity.

This section briefly identifies the central actors in this institutional setting, and then ex-
332 - Technology and Soviet Energy Availability

amines the international political context of

Japanese energy trade with the U.S.S.R.

THE DOMESTIC

INSTITUTIONAL SETTING

FOR POLICY

Private Organizations

The Keidanren has played a leading role

among the private organizations, companies,

and institutions involved in negotiating and

participating in joint Japanese-Soviet energy projects. Since the 1960’s Keidanren

leaders have taken a strong personal interest

in prospects for Siberian development, and

businessmen from Keidanren, as well as

other economic organizations such as the

Japan Chamber of Commerce, have participated in these negotiations with the Soviet

Union.

The Keidanren’s Japan-Soviet Economic

Committee (Nisso Keizai Iinkai), which is

made up of more than 100 Japanese businessmen, works to coordinate opinions

among interested Japanese firms. The committee includes a number of subcommittees,

each of which has primary responsibility for

a particular type of project area (gas, coal,

oil), and is made up of corporate executives

from these firms. At times one individual or

firm may exert decisive influence. An individual from Tokyo Gas, for example, has

been the leading figure in negotiations over

Siberian gas development.

Preparatory negotiations over potential

energy development projects normally span

a number of years. During this time a series

of meetings are held to discuss the project’s

possibilities and to specify the nature of participation on both the Japanese and Soviet

sides. A Soviet organization, the U. S. S. R.-

Japan Business Cooperation Committee,

parallel’s Keidanren’s committee, and is

headed by the Soviet First Deputy Minister

of Trade. The Keidanren and Soviet committees hold discussions; a protocol agreement

is signed; and finally a “general agreement”

specifies the overall commitment of both

sides. The latter agreement outlines the

financing, cost estimates, and plans for

equipment purchases, and carries the commitment of both the governments.

In addition to their participation as members of Keidanren, a number of private

trading, manufacturing, and energy companies play important roles at various stages

of the development of joint energy projects.

The sogo shosha have handled the bulk of

trade between Japan and the Soviet Union

since 1956. In 1980 the primary trading companies dealing with the U. S. S. R., in rank

order, were Mitsubishi, Mitsui, C. Itoh,

Nissho Iwai, Sumitomo, and Marubeni. The

first three of these were responsible for

about a third of all Soviet trade.13 These companies all have Moscow offices. Since these

firms are associated with other related corporations in company groups (keiretsu) they

are in a good position to bring affiliated companies into projects as they develop. Many

of the trading companies have specialized

departments, comprised of Soviet area specialists, who deal in trade with CMEA. All of

these factors make the trading companies

important participants in the development

of joint Japanese-Soviet energy projects,

both during preliminary negotiations, and in

later discussions of supply contracts.

Another secondary actor on the private

side is the Soren Too Boekikai, the Association for Trade with the Soviet Union and

Eastern Europe. This group specializes in

economic and trade research, publishing

monthly journals and assembling trade data.

When requested by member firms, the Association undertakes special studies. It also arranges for visits of Soviet delegations,

assists Soviet participation in Japanese

trade fairs, and helps Japanese businessmen

interested in trading with U.S.S.R. and

Eastern Europe.

Consortiums may be formed to organize

participation of Japanese firms in joint ven13 Chosa Geppo April 1978, p. 212. See also Alexander K.

Young, The Sogo Shosha: Japan's Multinational Trading

Companies (Boulder, Colo.: Westview Press, 1979), p. 8.
Ch. 11—Japanese-Sov\it Energy Relations ● 333

tures. The Sakhalin Oil Development Corp.

(SODECO), for example, is composed of

firms that represent a variety of Japanese

industries—manufacturers of equipment, energy corporations, banks, and trading companies engaged in joint ,Japanese-Soviet oil

and gas development offshore Sakhalin.

Such consortia spread the financial risk

among a group of firms and facilitate coordination among them, The businessmen involved in joint energy projects with the

Soviet Union are generally also in close

touch with Japanese Government officials.

In some cases, such as the unfruitful negotiations that took place over joint oil development in T’yumen, businessmen have

preferred to move more positively toward

cooperation than have government officials.14 But despite a natural difference in the

perspectives of government officials (particularly those in the Foreign Ministry) who

have broad policy concerns, and Japanese

businessmen interested in expanding trade,

the two sides are normally in fairly close

agreement.

Government organizations

The Ministry of Foreign Affairs is the formal coordinator of Japan overseas policies.

However, in general, the ministry has been

less involved in the development of specific

joint Japanese-Soviet energy projects than

other government agencies. Since 1956,

when Japan and the Soviet Union officially

resumed diplomatic relations, overall trade

agreements have been reviewed and revised

every 5 years. These 5-year trade agreements do not generally spell out the precise

details of joint energy development projects.

When a proposed project becomes a matter

of political debate—and this has generally

not been the case—the Ministry of Foreign

Affairs can play a decisive role in the

negotiations.

The government's trade and financial

a genc ies ( MITI, the Ministry of Finance,

.

14 Gerald L. Curtis, “The ‘1’~’um~n oil I)e~el~pment Pr~je~t

and tJapanese Foreign I’cJli~~ I)e~isi~n-N1akin~, in The F’OF

Qign Polic II of ,f!()(i(jrn .jajI(In% Rohert Scalapino led. ] { Rerke1(’} , (’:il]t [ If Ii\ IJr+lt \ 01 ( ‘:illforni;] l’rt’~~, 1 !~Y7}, p I tio

and the Ex-Im Bank) all routinely play more

important roles in the development of energy projects. MITI, through its International

Trade Policy Bureau, supports Japanese

firms with export insurance, and tax and

credit incentives. Since MITI implements

the foreign exchange and trade control laws,

including Export Control Division oversight

of items restricted by CoCom, it plays an important role in the development of trade and

exchange with the Communist nations.

Through its support for the Japan National

Oil Corp. and other public energy corporations, M IT I has helped to provide financing

for overseas energy development.

Government financial institutions are also

directly involved in negotiations over energy

projects with the U.S.S.R. The Ministry of

Finance is authorized to provide policy

guidance to financial institutions making

overseas loans and investments; it normally

plays an important indirect role through its

budgetary oversight of the Ex-Im Bank.

Through its loans, the Ex-lm Bank supplies

the major share of government funding for

large-scale development projects in the

Soviet Union. These loans can be made to

Japanese importers and exporters and to

foreign governments for financing imports

of Japanese plants and equipment.

Officials of the Ex-Im Bank are usually

consulted by Japanese firms at a number of

stages in project negotiations. Through its

assessments of risk and projections of credit

needs and appropriations availability, the

Ex-Im Bank determines which Soviet projects should be supported, and eventually the

Bank signs a loan agreement with the

U.S.S.R. Bank of Foreign Trade. This

establishes bank-to-bank credits used by the

Soviet bank to reimburse Japanese firms.15

As early project stages are completed, progress is reviewed and financing arrangements

15 ‘Ipor :] d(jwriJ~t ]~m of ,J ap:]n~~w~ f ]nontin~ of j o]nt ,J;Ip;]ntw~-

%1~ it’1 C(XI I [it~~ IJl{IpIn[~n t In Sil)t~rla, <(’[’ ( ‘(J k 1 tl,q ( ‘f )11 I ,1 1(1111/(11,

1980, p. 289, According to experts, the bank pro~rided $4 million in loans for Siberian de~elopment projects as of 1979. Sce

A hen l$rh iting, op. cit., p. 137, and Henry Scott St ekes, ‘‘ tJ apan Facing Complex Polir)’ Issues Almut Sanctions on So\iet IJnion and I ran,” A’(II{ lror.k Times, ,Jan. 9, 1980.
334 • Technology and Soviet Energy Availability —

renegotiated. Under routine circumstances,

the financial arrangements form the framework for development and review of joint

projects.

Japanese commercial banks are legally

prohibited from lending more than 25 percent of their capital funds to any one recipient; therefore, firms interested in participating in large projects often turn to the

Ex-Im Bank for assistance. While project

loans generally involve a combination of

government credits and monies from commercial banks, the Ex-Im Bank’s commercial assessment of the project is important in

determining loan rates.16 The Bank does not

usually make public the exact proportion of

the loan it provides, or the differential between the loan rate charged by it and that

charged by private banks. Since its purpose

is to stimulate Japanese exports, Ex-Im

Bank financing is concentrated in those

parts of a project that involve purchases of

Japanese-manufactured plants and equipment, rather than in those involving purchases of Soviet-made goods.

The institutional and financial support

provided by the Japanese Government

through the bank and other agencies has

been a distinguishing feature of the joint

development projects in which Japanese

firms have participated.17 Even when Japanese Government and business officials are

favorably disposed toward a project, financial considerations can delay or significantly

modify it. The example of the joint JapanU.S.S.R. oil and gas project offshore Sakhalin illustrates the central role of financial institutions.

In the first stages of the Sakhalin negotiations in the early 1970’s, Keidanren’s Japan161n 1976, the OECD instituted guidelines for lending

ra t~~s c.hargt~ci h~’ memher na ti{)ns for largt~-scale projects

such as t host) t~st ahlishtd t ~) promot (~ S()\’i(>t [~nerg~ d(~Y’elopmthnt. llefort~ t hat t imc, interest rates set 1)~’ tht’ h~x- I m Bank

and other financial institut ions could t)(~ the key cieterminan ts of wh(>t her tJapan{Jse firms or their compct,itor-s won

:1s s(x.ia ttd e.x port (“on t ra~. [s. I n t ~~rest ra t e c ha r~res continue

t () ht’ a focus of negotia t ions olcr So\iet ent’rgy projects.

17 Terutomao Ozawa, .J[l/)an(I.sf’ ,Il[{ltin(l (l(~nuli.sn~ ( Princet on, N. .J,: l’rin(t’ton [Jni\t~rsit~’ f)ress, 1980), p. ;1;1.

Soviet Economic Committee held discussions with Soviet representatives. Once the

two sides reached a preliminary understanding, Keidanren leaders undertook extensive

consultations with various Japanese Government agencies. The Ministry of Foreign

Affairs apparently was not extensively involved, but the Ex-Im Bank made an important contribution to these discussions

through its project risk assessments. MITI

officials helped to develop the consensus

among Japanese parties that provided the

working basis for a new round of more detailed negotiations between the Keidanren

committee and the Soviets.

After both sides agreed on a protocol,

discussions took place with the U.S.S.R.’s

Bank of Foreign Trade. A Japanese consortium was formed to organize corporate participation in the project. This consortium,

the aforementioned SODECO, signed the basic contract with the Soviet Ministry of

Foreign Trade in January 1975. A “general

agreement” outlined the financial participation of both sides, and set various project

targets.

The formation of SODECO and the arrangements for financial backing from the

Ex-Im Bank and other institutions were crucial to the progress of this project. The Japanese initially advanced risk money of $100

million for drilling at Sakhalin. Much of that

capital came from the Japanese corporate

shareholders in SODECO, as well as from

the Japan National Oil Corp. The Ex-Im

Bank’s risk assessment and its financing signaled the commitment of the Japanese Government.

The Political Context of JapaneseSoviet Energy Relations

Political Relations With the U.S.S.R.–

Japan’s lack of indigenous energy resources

and history of export-led economic growth

both suggest strong incentives for cooperation in Soviet energy development. However, the historical and political context of

Japanese-Soviet relations is marked by a

variety of complicated and persisting dis-
Ch. 11—Japanese-Sov\it Energy Relations ● 335

putes and tradeoffs. These are important

factors that Japanese policy makers weigh in

their negotiations with Soviet leaders. While

the political factors are usually viewed as

constraints on interaction between these two

nations, incentives for cautious Japanese

interdependence with the U.S.S.R. can also

be identified.

It is often noted that Japanese public

opinion surveys demonstrate acute public

dislike and distrust of the Soviet Union. This

is generally assumed to indicate fundamental opposition to expanded Japanese-Soviet

relations. The implications of such surveys

are, however, far from clear. A recent survey

of Japanese elite views on security issues indicates that Japan’s policymaking leadership holds no clearly distinguishable or

coherent view of the “Soviet threat."18 Most

of the respondents considered a Soviet military attack unlikely, supported only a modest (Japanese defense build-up, and perceived

the “Soviet threat” as primarily psychological and political rather than military. Like

numerous other polls on the subject, this

survey provides no conclusive indications

about what policy Japanese leaders are likely to initiate, but it does indicate that the

Soviet Union is not perceived by them in

black-and-white terms.

A second factor commonly viewed as an

obstacle to increased cooperation is the

Northern Islands issue (see fig. 28). Persisting disputes over territorial claims to four

northern islands were reflected in the failure

of Japan and the Soviet Union to conclude a

peace treaty following World War II. The

Northern Islands issue is a recurrent theme

in the Japanese media. The problem has been

recently exacerbated by a Soviet military

build-up on these islands between 1978 and

1980.

The emotional significance of the issue,

however, has not prevented the establishment of diplomatic relations between the

two nations or the development of a number

of joint Siberian projects.19 In other words, it

is not clear that there is any direct policy

link between the Northern islands and Japanese-Soviet interaction in Siberia. Publicly,

the domestic salience of the issue precludes

any Japanese public official from conceding

the improbability of the return of the islands

to Japan. Privately, however, many admit

that there is no precedent for the U.S.S.R.

returning territory it has occupied for so

long.

The China Factor. -The “China Factor” is

shorthand for another set of policy issues

which are often assumed to inhibit Japan's

interactions with the U.S.S.R. It has been

suggested in the West that China and the

Soviet Union pose an either/or choice for

Japanese economic involvement, for reasons

of both politics and competitive economics.

According to this argument, Japan's historic

ties to, cultural compatibility with. and

nearness to China mean that priority is

placed on Japanese-Chinese relations.

Japanese leaders nevertheless strongly

disagree with the idea that they can or

should choose between their two Asian

neighbors. A prime concern is that the

Soviet Union not be provoked to take aggressive action in Asia. Japan’s basic allegiance is clearly to the United States, but

Japanese leaders worry that Moscow may

perceive Tokyo as cooperating (tacitly or explicitly) with Washington and Peking in an

anti-Soviet alliance. As a result, Japanese

leaders attempt to signal the U.S.S.R. as to

Japan’s peaceful intent, without alienating

China.20

19 Richard L. Edmonds, ‘‘Sib(~rian f{t’+our(’c 1 )(~k(’loprnt~rl t

a nd t hc .J a pa m+e K;conorn}: ‘1’1)[’ ,Japanwt~ 1){’rspt’t.t i~~’,

paper prepared for t\ ssociat ion Of A rncriran ( ;(~()~raph()rs

[)roject on So\it’t Natural l{twource~ in the tf’orld F;conorn}.

August 19’79.

1 t is interesting to note t hat a par~ille] disput[’ ht’tw(~t’rl

tJapan and China 01 er the Senkaku Islands - located hrt we(~r~

‘1’aiwan and the R\’uk~u-has not inhihitwi joint oil de~[~l(~p

ment between t hcsc nat ions. Ad min isterrd l)?’ t ho { ! nit t~d

Sta[es and t hen rrturnvd t o Japan at the time t~f t h(’ return (Jt

okinawa, t hes(l islan(j+ h~i ~(~ rt~[~~if[d l[~s< m[dia att[’rlt](}n

!)u t t ht~ disput (~ oi[~r t h(~nl i~ n{) lt~+s st>rl~it i~e, ‘1’h i< i~ :Inot 11(’r

ca sc of a n u nrc solt’ed (’( )n fl i(’ t w h i [’ h has not pre~’erl t d a w i(i(’

ra ng[’ of in t [~r[]( t lorr \ ]n~’lu(] i n,g .J apa r~twv part i(.ipat ion i n

( )t fshorc o i] d (~~.el( )p men t I n ot h(’r a r(’as n(~a r (1 h i rra

20 ~f’h it irl~, op. cit.
. .
Ch. 11—Japanese-Soviet Energy Relations ● 337

To this end, Japanese leaders both in and

out of government depict cooperation in

Siberian energy development as necessary to

Japan’s political interest–not for abstract

reasons such as winning good will, but in

order to reduce perceptions of hostility.

Sakhalin offshore oil and gas development is

a prime example. Sakhalin was contested by

Japan and the Soviet Union for nearly a half

century, finally falling under Soviet control

in the final stages of World War I I after the

U.S.S.R, hastily renounced a neutrality treaty and entered the war against Japan. If the

island represents a symbolically sensitive

piece of lost territory, the oil and gas resources there are also strategic commodities

important for both Japan and the U.S.S.R.

Japanese participation in the development

of these resources symbolizes commitment

to peaceful cooperation in the Asian region.

Japan’s Sakhalin “signal” has continued–

despite the Soviet invasion of Afghanistan.

Furthermore, China has not protested joint

energy development there, Indeed, the same

Japanese firm exploring for oil offshore

Sakhalin won the first foreign contract to explore in the Bohai Gulf near China.

Nor does it appear that such signals involve unusually great economic risks, at

least compared to those incurred in participation in energy and development projects in other nations. Following China’s readjustment of national planning priorities in

1980-81, Japanese contracts valued at $1.5

billion were canceled as projects were postponed. While China has indicated its willingness to renegotiate the bulk of these contracts, the incident cautions against overly

optimistic expectations about the China

market, No similar renegotiation or reversal

has affected Japanese-Soviet interaction

since the abortive Tyumen pipeline proposal

of 1974-75, which ended before any contracts

were signed. Nor is there any concrete evidence that firms which participate in Chinese economic development are denied access to the Soviet market, or vice versa.

Indeed, a number of Japanese firms have

figured prominently (and simultaneously) in

both Soviet and Chinese development proj -

ects, supported by export credits from the

Japanese Ex-Im Bank.

Policy Stance. — Contrary to popular

stereotypes, it appears that Japan attitude

toward energy cooperation with the U.S.S.R.

is based on a careful assessment of both

political and economic tradeoffs. Politically,

Japan hopes to avoid strong association

with either China or the U.S.S.R. Economically, Japan needs diversified sources of

energy and prospers through expanded

plant, equipment, and technology exports.

The Japanese organizations and institutions

involved in formulating policy toward energy cooperation with the U.S.S.R. naturally

weigh the potential risks and benefits of

various projects from different perspectives

–financial, political, energy, and trade.

However, there appears to be widespread

agreement on the broad outlines of Japanese

policy regarding Japanese-Soviet interaction. This is best described as cautiously optimistic. Disagreements within Japan’s

policymaking leadership inevitably arise

over the details of specific projects, and

recur when international political or economic conditions change—but the general

orientation of Japanese policy has been fairly consistent. For Japanese policy makers

who are officially committed to diversifying

Japan’s energy supplies–both by types of

fuels and geographic sources–both the Soviet Union and China are viewed as potential

alternatives. During the 1980’s Japan hopes

to import a modest amount of oil from China,

some gas from the Soviet Union, and considerable coal from both.

The Soviet Union is thus viewed as a

potential supplier of additional energy—in

limited increments. So long as the U.S.S.R.

remains merely one among many more-orless equal suppliers, the Japanese believe

that the political leverage likely to accrue

through a threat of a cutoff will be minimal,

if not nonexistent. A further and commonly

held extension of this view is that to the extent that the Soviet Union relies on Japan

for capital, technology, and equipment to

develop its energy resources, the likelihood
338 • Technology and Soviet Energy Availability

of political manipulation or pressure is reduced and international tensions obviated.

Japan’s willingness to cooperate with the

Soviet Union in developing the latter’s energy resources is in no sense an unbounded

commitment. Informally and unofficially,

Japanese leaders often cite 20 percent as the

maximum safe level of reliance on Soviet imports for any commodity, energy included.

Japanese are quick to point out that this

falls well below the dependence of a number

of West European nations in some fuels, and

that actual Japanese energy imports from

the Soviet Union are likely to fall far short of

this level in the next few years. Another indication of the bounds to Japanese cooperation is the fact that, despite Soviet proposals, Japan has not entered into comprehensive trade agreements lasting longer

than 5 years. ” Additionally, Japanese

leaders have been reluctant to move ahead in

some cases of Siberian development without

American approval, and even participation.

This reluctance is illustrated by the case of

the now dormant proposed gas development

project in Yakutia (see below), in which

Japanese firms under the leadership of

Tokyo Gas strongly requested American

participation.

While Japan’s positive attitude toward

energy and trade interaction with the

U.S.S.R. has been cautious, at the same time

there is little sympathy among Japanese

leaders for a policy of strong controls over

trade and technology exports to the Soviet

Union. Nor do they support the idea of attempting to employ trade as a political lever

in order to promote long-term Western security interests. Despite the continuing concern, particularly of Foreign Ministry officials, that Japan not take a position that

isolates it from the United States and Western Europe, expanded controls on both

equipment and technology trade are viewed

as intrinsically unattractive options.

This position is in part based on the apparently widespread view within the Japanese

bureaucracy that where there is trade, there

is bound to be some technology leakage.

Japan participates in CoCorn and Japanese

leaders believe that some export controls are

feasible and necessary. But MITI officials in

particular contend that controls on technology transfer are both difficult to construct and to implement. Such controls, they

say, are best applied to limiting the sale of

spare parts and manufacturing know-how,

and then only to technology that is easily

identifiable and separate from products.

In sum, the political context of JapaneseSoviet energy relations includes complicated

and persisting issues such as the Northern

Islands dispute and the “China factor."

These lie behind Japan’s policy of cautious

interaction with the U.S.S.R. The economic

and cultural complementarily of Japan and

China make it unlikely that Japan’s relationship with the Soviet Union will be promoted to a position of equal importance with

its relationship with China. However, from

the Japanese perspective, it is important

that, in principle at least, Japan offer similar

opportunities for economic cooperation to

both nations. Japan’s “omnidirectional diplomacy” thus implies involvement with

both China and the U.S.S.R. in energy development and trade.

JAPANESE PARTICIPATION IN SIBERIAN

ENERGY DEVELOPMENT

Japanese-Soviet energy development proj- Tyumen never even began, despite the inects have been beset by repeated problems terest of Japanese firms. Oil and gas deand delays. Joint development of oil in velopment offshore Sakhalin is progressing
Ch. 11—Japanese-Sov/it Energy Relations ● 339

—

very slowly; 5 years after the signing of the

initial agreement, the exploration stage has

still not been completed. Technical problems

elsewhere have caused coal shipments from

the Soviet Union to fall below anticipated

levels.

The following sections describe three key

Japanese-Soviet energy projects–Yakutian

natural gas and coal development schemes

and the Sakhalin offshore oil and gas project—analyzing the nature and prospective

results of Japanese participation. These are

the most significant examples of JapaneseSoviet joint energy cooperation to date, and

illustrate the type of interactions likely to be

feasible in years ahead.

YAKUTIAN NATURAL GAS

The Yakutian gas development project is

a trilateral effort involving Japan, the Soviet

Union, and the United States. Since the

early negotiations, Japanese firms and organizations have taken the lead. Japanese participation is organized in a consortium of 21

firms called Siberia Natural Gas. The consortium includes major trading companies,

utilities, banks, steelmaker, and other plant

exporters. Hiroshi Anzai, President of Tokyo Gas and Chairman of Keidanren’s Japan-U.S.S.R. Joint Economic Committee’s

subcommittee on gas, is Chairman of the

consortium, and has been the leading figure

in the development of the project. El Paso

Natural Gas, Occidental Petroleum, and

Bechtel Inc. were involved on the American

side.

At the time of the preliminary negotiations and signing of the first contracts in

1975, the extent of Yakutian gas reserves

had not been determined. ” Under the terms

of the original agreement, the beginning of

actual production would await initial exploration, during which an anticipated 1 trillion cubic meters of gas reserves would be

22 

U.S. Senate [{, ,S-, Tra(ip u n (] in ( ,P.s tmen t in th c .70 1s ic t

Union and ~;u.st~m Europr, staff report for the Subcommittee on hlultinational Corporations, Committee on F’oreign Relations (Washington, D. C.: U.S. (jo\ernment Printing Office,

1974), p. 19.

verified. This stage is now 90 percent completed but production has yet to commence.

When and if it does, one-third of the gas will

be retained by the U.S.S.R. and the other

two-thirds divided equally between Japan

and the United States at prevailing market

prices–roughly 7.5 million tons of LNG annually to each country over a period of 25

years. 23

Initial estimates of development costs for

Yakutian gas stood at $3.4 billion. A loan of

$50 million–half from Japan’s Ex-Im Bank

and half from the Bank of America-was

provided for purchases of exploration equipment. The bulk of the Japanese financing

came directly from the Ex-Im Bank, with

only about 20 percent supplied by private

companies. 24 U.S. law (i.e., Jackson-Vanik

Amendment), however, precluded U.S. Export-Import Bank loans to the Soviet Union,

The project developed slowly, due to

delays caused by cold weather and export

licensing problems with the shipment of a

U.S. computer. By the time of the Soviet invasion of Afghanistan, proved reserves were

still about 10-percent short of the target:

after the invasion, a tripartite meeting

scheduled for the spring of 1980 was canceled. I t has now been tabled. At this

meeting a second general agreement to cover

the next stage of the project was to have

been developed. Those involved believe that

it will take at least another year to conclude

a second-stage agreement, and that even

under such best-case conditions, actual commercial production of gas will not begin until

1987. Moreover, in formal Japanese estimates suggest that the costs of the project

may climb to $7 billion to $8 billion, double

the initial figure.

In addition to the costs for exploration

and production, huge investments will be required to complete the necessary infrastructure. Gas produced in Yakutia was to be

shipped by a new pipeline to the Soviet port

of Olga on the Pacific Coast, where liquefac23 Soren Too Boekikai, Handbook of the U.S..S.R. (Tokyo:

Sort~n ‘1’{J{J Ilookikai,” 19’ihI. pp ii I- l(i.

24 Raymond S. Mathieson. Japan's Role in Soviet Economic

Growth (New Yourk: Praeger, 1979), p. 112.
340 ● Technology and Soviet Energy Availability

tion plants and additional port facilities will

be constructed. Original plans called for the

United States and Japan to share the costs.

The planned pipeline would be longer than

the 1,700-mile Orenburg pipeline and would

run over extremely cold and mountainous

terrain. Japanese experts view this venture

as being at least on a par with the efforts

which will be required to construct the gas

export pipeline across West Siberia to Western Europe. The cost of the equipment (pipeline and liquefaction facilities) needed for the

next stages of the project will be very large,

and any previous consensus that might have

existed regarding who should pay for facilities to be built within the Soviet Union has

broken down.

For the Japanese, Yakutian gas offers a

market for energy equipment and technology and a source of LNG. To date, Japanese

firms have supplied drill pipe and bits, gas

detectors and masks. The Japanese firm I HI

Heavy Industries has apparently offered to

sell 36-MW compressors for the pipeline, and

there will certainly be opportunities for sales

of a variety of other Japanese equipment if

the gas is actually developed.

But even assuming that all goes according

to plan, it is not likely that Yakutia will

render Japan greatly dependent on Soviet

natural gas. The planned 7.5 million tons of

LNG, to be supplied to Japan by the year

1990, will amount to less than 15 percent of

Japan’s projected total LNG imports for

that year (45 million tons), or a little more

than 1 percent of Japan’s total primary

energy supply. Soviet gas from Sakhalin (see

below) might add 3.5 million tons per year,

however, The two projects together, therefore, could provide one-quarter of Japan’s

gas imports by 1990 (see table 83).

These considerations belong to the future,

however. With delay in proving reserves,

mounting cost estimates, and delays due to

international political tensions, the ultimate

fate of the tripartite Yakutian gas project remains uncertain. Participants continue to

maintain that it is economically and technically feasible, but there is little likelihood

Table 83.—Projected Japanese Energy Imports

From the U.S.S.R. During the 1980’s

(million tons of oil equivalent)

Gas

(liquefied

natural gas

Coal Oil -LNG)

A. 1979 Imports from

the U.S.S.R. . . . . . . . . . . . 2.0 0.683

B. Projected incremental

i reports 2 4—1985c

from U.S.S.R. +

1979 imports . . . . . . . . . . 6.4a

2.051 b

5.1 —1 990

C. Projected total Japanese

imports from

all sources, 1985 . . . . . . . 69.2 312 19.8

D. projected total Japanese

imports from

all sources, 1990. , . . . . . 98.0 294 308

B/C . . . . . . . . . . 9.2% 0.65% 12.1 %

d

B/D ., ... . 6.5% 0.69% 24.3%d

Conversions 1000 metric tons coal , 06859 1.000 metric tons oil equivalent

1000 barrels day , 01358 1,000 metric tons oil equivalent

1 kiloliter 6.28 U.S. barrels.

a Assumes 65 million tons (4.4 mtoe) additional coal imports from South

Yakutia.

b Assumes 10,000 barrels/day (1.6 mtoe) additional oil from Sakhalin

c Assumes 35 million tons from Sakhalin (2.4 mtoe) + 7.5 million tons (5.1 mtoe)

from South Yakutia In all Iikelihood, the Yakutia gas wiII not come on stream

until 1990 or later.

LNG reports from all sources wiII provide 72 percent of Japan's primary energy

suppIy In 1985 and 90 percent In 1990 according to official Japanese Government

forecast

SOURCES Minstry of International Trade (Japan) Energy Tokei Nenp o

(Tokyo: Tsuko Sangyo Chosa Kai 1979) and Japanese government

long-term energy forecast

that all three parties will quickly move ahead

in the current international environment.

SOUTH YAKUTIAN COAL

In contrast to the situation with Yakutian

gas, where adequate recoverable reserves

have not yet been established, a sufficient

amount of coking coal, much of it located in

thick seams, is known to exist in the area,

and feasibility studies by the Soviets and onsite inspection by Japanese experts have led

to the joint development of the Siberian Yakutian coalfields. Although South Yakutian

production is still very small, ” generally

high-quality coal has been mined here for a

number of years.
Ch. 17—Japanese-Soviet Energy Relations ● 341

An initial agreement, signed in 1974, provided $450 million in Japanese credits for

Yakutia, $60 million of which were to be

spent within the U.S.S.R. for onsite costs

connected with the labor force. The rest of

the credits were set up to facilitate Soviet

purchases of plant and machinery. The loan

period extended from 1975 through 1982,

with repayments in the form of coking coal

to begin in 1983. Japan is to receive 85 million tons of medium-quality coking coal by

the end of the century. In addition, the

general agreement provides for the import of

Soviet coal from the Kuznetsk basin at a rate

of 1 million tons annually from 1979 to 1999.

The South Yakutian coal project encountered no major negotiation problems, but

technical obstacles appear to have further

delayed delivery schedules of both Kuznetsk

and Yakutian coal. In December 1980, a revised timetable projected exports of 4.5 million tons to Japan between 1982 and 1985;

and exports of 6.5 million tons between 1985

and 1999.26 In the opinion of Japanese experts, schedules may be set back by as much

as 2 years, due to difficulties associated with

the use of equipment in such harsh climates. 2

7 In addition, inadequacies in the

“coal chain” on the Soviet side—insufficient

numbers of coal tankers and poorly developed transportation facilities—may raise

further difficulties. A 400-km section of

railroad connecting the mine site to the

Trans-Siberian Railroad was completed in

1978. The city of Neryungri and nearby regions of Chulman are expected to experience

a population influx, and the progress of

regional infrastructure development will

greatly influence the delivery schedules of

coal produced in the mines.

Japan has sold the U.S.S.R. a variety of

coal mining equipment for use in South Yakutia. This has included coal rotors, draglines, coal-washing and sorting equipment,

— 26 Nihon Keizai .Sh(mbl{n 1)[’c. 25, 19H().

“Information in English on South Yakutian coal reserves

is scanty. The Central Intelligence Agenc~r (CIA) expects

that the Neryungri mine, which will supply .Japan, will produce 13 million tons of coal after 1985. CIA, .U. tS..’SR. (’ou1 lndust~~ Problems and Prospects, Pill 80-10154, March 1980,

p. 15,

and earth-moving and excavation equipment, The Komatsu Co. has sold 190 bulldozers for the project, worth about $40 million.

other Japanese companies have supplied

transport vehicles, electric locomotives, a

crusher station, coal-washing equipment,

and a coal terminal. The latter went into

operation in 1978.28 (Since U.S. firms are able

to produce larger capacity trucks, draglines,

and excavators than are available elsewhere,

some American equipment has also been

used here.29) Japanese firms expect to have

expanded opportunities for sales as the project continues.

Even if produced on schedule, Yakutian

coal is unlikely to provide a major portion of

Japan’s future coal imports. If Japan’s imports reach the projected 100 million tons by

1985, 4 million to 6.5 million tons per year of

South Yakutian coal would make up less

than 1 percent of 1985 total Japanese primary energy supplies. In 1979, Japan imported about 2.0 million tons of Soviet coal

(about so percent below the level contracted), all of it from the Kuznetsk basin.

Even combined with this, Yakutian coal will

still represent well under 10 percent of Japan’s total imports of coal in 1990–a much

lower percentage than supplies from the

United States, Canada, or Australia (see

table 83).

Yakutian coal development has progressed more rapidly than the tripartite gas

effort, but deliveries from this area are not

scheduled to start before 1983 and even then

may not proceed before the latter part of the

decade. Nevertheless, the Yakutian project

is one of the centerpieces of joint JapaneseSoviet energy development. At the end of

1980, after holding up new loans for Siberian

development in the wake of the invasion of

Afghanistan, the Japanese Government approved a loan of $42.3 million for this project.30 This, as much as anything, demonstrates its importance to Japan.

28 Mathieson, op. cit., pp. 76-78; Soviet Geography, February 1979, pp. 125-126.

29 Ibid, p. 77.

30 Asian Wall Street Journal, Dec. 29, 1980.
342 ● Technology and Soviet Energy Availability

SAKHALIN OFFSHORE OIL

AND GAS

Sakhalin Island is located between Japan

and the continental Soviet Union (see fig.

28), about 50 miles from the northernmost

Japanese island of Hokkaido; at points on its

northwest coast, the island is even closer to

the continental Soviet Union. Japan’s participation in Sakhalin onshore oil development began before World War II, when the

southern half of the island was Japanese territory. Offshore development dates from the

1960’s, when Japanese oil refiners, as well as

Gulf Oil Corp. (which had been supplying independent Japanese firms with oil from

other regions) became interested in the proj -

ect. Inspections began at the site in the early

1970’s.

As noted above, Japanese participation

here is organized through the consortium

SODECO. SODECO is comprised of 18 corporate shareholders, the largest of which is a

public corporation–the Japan National Oil

Corp. tJNOC). JNOC holds more than 40 percent of the equity, as well as stock in a

number of other shareholding firms. Japanese oil and trading companies also have

shares in the project, and Gulf Oil holds

about 5.7 percent of the total equity.31

In 1975, SODECO and the Soviet Union

signed a basic agreement. The contract provided some $100 million to $150 million in

Japanese credits, to be used for exploration

equipment, including excavators, drilling

rigs, drill casing, and computers. In return,

for 10 years Japan is to receive 50 percent of

any crude oil or gas produced offshore at a

discounted price.32

The Soviet Union is the project operator.

Day-to-day operation is supervised by a

secretariat which has offices on Sakhalin

Island. Onsite work teams are composed of

technicians from a variety of different companies and nationalities. On the Japanese

—————— 31 Japan Petroleum and EnergyHandbook (Tokyo: Japan

f)t~trolt~unl (Consultants, 1 97/i), pp. T 11 N 19.

‘‘Sor(~n ‘I’()() f30(Jkikai, //(/)? (~/)()()1/ (J/’ th( i ‘ .S .$. /{ ~Tok~o:

Sor(~n Too flo(~kika i, 197HI, p. 446.

side, technical experts from the various participating companies are periodically “detailed” to the project, allowing the consortium to draw on a wide range of skills.

Working in teams with Western technicians,

Soviets gain “hands on” experience in

operating the equipment.

The U.S.S.R. is contributing money as

well as labor to the project. Soviet expenses

have run about $100 million, paid in rubles

to cover the costs of labor and construction

for the 1980-82 exploration period. To date,

SODECO and other Japanese sources such

as the Ex-Im Bank have probably provided

as much as $170 million.

Western technology has played an important role at Sakhalin. In 1976, SODECO

leased a French geophysical vessel and computer equipment, and a variety of Japanesemanufactured rigs have been used. The

semisubmersible White Dragon II, built by

Mitsui, as well as the Okha jack-up rig, built

by the same firm to a design patented by

Armco, have been used for offshore test drilling. In July, 1979, the marine department of

C. Itoh trading company sold a Mitsui-Livingston Class I I I jack-up rig for use at

Sakhalin. This rig was especially designed

for very cold conditions.33

One of the project’s most important technological requirements will be for ice-penetrating rigs. Because of the thickness of ice

around Sakhalin, Western technology developed for the Alaskan slope cannot be used

without modification. In instances where

specialized equipment is needed, American

companies will probably be given market

opportunities. However, the general pattern

to date has been for Japanese firms to do the

basic hull construction, finally assembling

the rigs with equipment from a variety of

companies.

The last phase of test drilling has now

begun, with exploration concentrated in two

fields, where 13 test wells have been drilled,

seven of which have proved promising.

Three more test wells will be sunk in 1982 to
Ch. 11—Japanese-Soviet Energy Relations • 343

complete the exploration phase. If all goes

well thereafter, plant construction and the

installation of equipment will begin. This is

scheduled to be completed by 1986, when a

third stage will feature production and shipment of LNG.34 The final stages of the project will involve the most costly outlays.

Costs of building an LNG plant, extending

the pipeline system on the island, tankers,

and receiving facilities could add $5 billion to

investment requirements.

An oil discovery has already been made in

the Sea of Okhotsk, northeast of Sakhalin,35

and as exploration has progressed, prospects

for gas production have appeared more and

more promising. Test wells sunk in the same

area have confirmed gas reserves adequate

to produce 5 bcm annually and oil deposits

producing 6,600 bcm (0.328 mtoe/yr).36

In recent months, the major point of

discussion among project participants has

been how offshore gas will be transported to

Japan. The initial Soviet proposal was to

build a north-south pipeline on Sakhalin,

with an underwater connecting link to Hokkaido. The U.S.S.R. favored the pipeline

because it would be cheap and technically

feasible to build, given the shallow waters.

The Japanese have opposed this plan for

security reasons, i.e., the pipeline might tie

the northern part of Japan too strongly to

one Soviet source of energy, and because it

entails piping gas to the rural island of Hokkaido, where demand is low and where domestic coal producton is significant.

At the beginning of 1981, agreement was

reached on a different option—construction

of LNG facilities on Sakhalin.37 Japanese

LNG tankers will transport the LNG directly to areas on the island of Honshu where demand is strong. As mentioned above, this

plan will involve huge capital outlays for

34 1 nfr)rrrl~it ion {Jn Sakhalin pr{)j[ct ~ta~{s from SO I) I”;C()

officials in ‘1’ok}{), ,Ji]pan, N1 arch, 19X 1, and from A“r’hon

h’{t:(~i $l)imlj~( n. ,Jun(~ 9, 19H 1

35 Mathi[~s{)n, op. (it., p. f)9

36 /h//l\’ /1/(/(/ \tri .1’(’// f, I )(’(’ %, ] 9X(). 1“/ // ()// A“(’/:(Ii ,s’/// 7)/

1~~~ n. ~{}~ I 1, 1 !!N() ((’orl~[’r-t (L(i a[ 1 kilo]it [~r = f;. ?,R<)H llarr[~ls),

o n (i ,J u n [’ 9. I !M 1, ft jr i n form o t I c ) n t ~n t t’i t w’(’11 ~.

37 ‘‘N I ~+{) 1,\ (; k:] d~I ( ;(}i ~ ,J apii n u nd [ I S S, R, ,,\gr[xl on

I,N( i l’a(ilit 111+1, ! (h~)~~ h’{lr~~~ S/~/n~/j/~)1. I;[l) 2, 1 w 1,

building an extended pipeline to the LNG

facilities, the construction of the liquefaction

plants, and the related harbor and loading

facilities. While many details must still be

worked out and the financing arranged, the

agreement in principle indicates serious commitment by both sides to the continuance

and development of the project.

Problems in U.S. participation have also

delayed Sakhalin development. The export

license for drilling equipment to be supplied

by an American division of Armco was temporarily held up by the U.S. Department of

Commerce. 38 This led to concern that American equipment could not arrive in time for

the very short Sakhalin drilling season.

After clarifications were sought by both the

Japanese firm assembling the rig for

SODECO and the U.S. firm, the export license was reinstated. The decision was taken

quickly enough so that drilling proceeded on

schedule.

Other problems have been largely technical, and generally related to the cold

climate and difficult terrain. The ice around

Sakhalin is so thick that drilling can only be

carried out during a few months of the year,

and special equipment is needed. Test rigs

have been hauled out and then transported

back to Japan when the drilling season ends.

Storms and difficult weather conditions

have periodically damaged equipment. This

does have one bright side. Experience with

drilling offshore Sakhalin will be invaluable

to the U.S.S.R. as it exploits its potential for

offshore exploration in other very cold regions.

The Japanese do not expect Sakhalin to

ever provide them with large quantities of

oil. But the hoped-for 3 million to 3.5 million

tons of LNG per year would be a significant

contribution to Japan’s LNG imports which

are expected to reach 29 million tons by

1985, and 45 million tons by 1990. Sakhalin

gas alone could represent more than 10 percent of Japanese LNG imports in 1985, but

it is far from certain that deliveries will begin ——— 

38 Based on interview with officials from National Supply,

:1 (1 i ~ Is I ( )n ( )f \ r rllc’fl I n l]:1 r[’ h I !)(< I.
344 ● Technology and Soviet Energy Availability

so soon. If LNG makes up the expected 7.2

percent of Japan’s total primary energy supply in 1985, the contribution of Sakhalin gas

to Japan’s overall energy supply will be

minimal—less than 1 percent of total primary energy in 1990 (see table 83). If Sakhalin gas came onstream at 3.5 million tons per

year, and if Yakutian natural gas were available at the projected 7 million tons per year,

Japan could receive almost 24 percent of its

LNG imports from the Soviet Union in 1990.

This is optimistic, however, considering the

delays that have developed at Yakutia and

the fact that the decision was only recently

made to set up an LNG facility on Sakhalin,

the financing for which must still be worked

out. It seems more probable that Sakhalin

development will progress more quickly than

Yakutian. Prospects for Soviet natural gas

are fairly certain. Therefore, a respectable

contribution to Japan’s energy needs may be

anticipated.

In the final analysis, the real significance

of the Sakhalin project is as a test case for

joint Japanese-Soviet development. With

the Yakutian gas project stalled, and Siberian coal development proceeding slowly,

Sakhalin remains the brightest spot in

Soviet-Japanese energy cooperation for the

next decade. For the Japanese, it offers a potential for diversification of energy supplies

as well as a market for equipment and technology. For the Soviets, it offers a chance to

develop exploration expertise and perhaps

production capability in offshore oil and gas.

Should Sakhalin become a significant source

of energy to Japan, the proximity of the

island to Japanese territory would certainly

heighten chances for interchange between

Soviet and Japanese industrial and technical

personnel.

OTHER PROSPECTS FOR

JAPANESE PARTICIPATION

IN SOVIET ENERGY

DEVELOPMENT

A few other areas of Japanese energy

technology assistance to the U.S.S.R. are

also worth mentioning. The Japanese

Science and Technology Agency has signed

an agreement with the U.S.S.R. State Committee on Science and Technology to promote scientific and technical exchanges between the two nations. These exchanges do

not appear so far to have directly aided

energy development. Between 1968 and

1978, the U.S.S.R. sent more than 100 missions to Japan under the auspices of the

agreement, but only about 12 percent of

these were even peripherally related to energy.39 During the 1970’s these energy-related

missions visited power plants, and factories

producing generators and steel pipe. One recent Soviet delegation has studied highvoltage transmission technology, necessary

to bring power generated in Siberia to the

European U.S.S.R. Missions from East

European nations have focused primarily on

the study of Japanese energy conservation

techniques.

Another potential area for energy technology transfer between Japan and the

U.S.S.R. is in nuclear power. The Soviet

Union has approached Japan several times

with requests for cooperation in this area,

but although Japan and the Soviet Union

signed a Cooperative Agreement on the

Peaceful Use of Nuclear Energy in 1978,

there have been few results. Initially the

Soviets hoped to obtain a pressurized water

reactor which Mitsubishi manufactures

under license from Westinghouse, but these

negotiations never proceeded far. Exports of

nuclear reactors are controlled by CoCom,

and Japan announced in 1978 that it was in

principle willing to fabricate a nuclear reactor for the U. S. S. R., but only if construction

was to Soviet design.

Japan has a large, well-integrated and

technologically sophisticated nuclear industry. There is natural interest in exporting

its equipment and technology for peaceful

purposes. However, exports to other Asian

neighbors are more likely than to the Soviet

Union. As of 1981, the only Japanese sale to

the U.S.S.R. in the area of nuclear power pro-
Ch. 11—Japanese-Soviet Energy Relations ● 345

duction has been a l5,000-ton press for manufacturing heads for atomic vessels. This

utilized a type of manufacturing process

already well-established in the U.S.S.R.

The U.S.S.R. has offered to provide uranium enrichment services for Japan: Difficulties with the U.S. over consignment commitments led in 1976 to the Chairman of Keidanren’s energy policy committee broaching

the possibility of using either French or

Soviet enrichment services.40 The U.S.S.R.

offered in 1977 to enrich and return Japanese-supplied uranium. Japan, with longterm enrichment contracts with the United

States and France, would consider purchasing enriched uranium from the U.S.S.R. on a

commercial basis, but was not interested in

providing the feedstock. Nothing more came

of this deal.

In a few instances, Japan has actually imported energy technology from the Soviet

Union. Japanese steel companies have purchased Soviet technology for the treatment

of coking coal and for top furnace gas turbines, which have reportedly resulted in

significant energy conservation. Most of

these transactions, however, occurred in the

— —-—

40 “’SfJic>hi N1 at ~unc~, “( ;t~nshir}oku h;i[ sud(’n ni f)k(lru kaku -

nt~nr~’o ● a ik(jru no kak uritsu ni t ● u it e, ~“(~i(i({ n r(~~~ ~;(’[jpo,

f\ugu\t 19’i6, pp. r) 1 (;- 19.

late 1960’s and early 1970’s. Today perhaps

the only area in which Japanese energy experts are studying Soviet techniques is in

high voltage electricity transmission.

This overview of Japanese participation in

Soviet energy development reveals cautious

participation on the part of Japanese firms.

Joint Japanese-Soviet energy projects have

evolved slowly and unevenly. Japanese

firms, like their counterparts in the United

States and Western Europe, produce equipment and possess technology which can

assist Soviet energy development. As Japanese firms develop their technological expertise in electronics and other areas, there may

be even greater demand for their products in

the U.S.S.R. In militarily sensitive areas like

nuclear power, however, the Japanese have

been reluctant to deal with the Soviet Union.

Security issues aside, Japanese businessmen

have been inclined to participate in technology trade, both because of the prospect of

expanded worldwide energy supplies and because of the potential market for Japanese

exports, although this predisposition has

been tempered to some extent by the changing shape of international politics following

the Soviet invasion of Afghanistan. The final

section of this chapter briefly reviews these

recent developments in Japan’s trade and

energy relations with the Soviet Union.

RECENT DEVELOPMENTS IN JAPANESE-SOVIET

RELATIONS: PROSPECTS FOR THE FUTURE

The worsening of U.S.-Soviet relations

following the invasion of Afghanistan, and

the second oil crisis triggered by the suspension of oil production in Iran, have provided

a new context for Japan’s interactions with

the U.S.S.R. Beginning in early January,

1980, when President Carter ordered sanctions, Japan’s policy toward the U.S.S.R.

has been under review and reconsideration.

American policy, as it gradually evolved, included expanded restrictions on the export

of products (such as grain and phosphoric

acid used in the manufacture of fertilizer)

and of high technology, particularly computers, The U.S. Department of Commerce

was to act on all applications to export industrial technology for manufacturing oil

and gas production and exploration equipment with a presumption of denial,41

Japan, like the West European nations,

actually increased its exports to the U.S.S.R.

during the period of the sanctions, although
346 • Technology and Soviet Energy Availability

probably not as much as would otherwise

have been the case. During 1980, Japanese

exports to the U.S.S.R. rose almost 25 percent over the 1979 levels. The Japanese response to the U.S.-initiated sanctions was

thus similar to that of Western Europe—

lukewarm (see ch. 12). Officially, Japanese

policy prohibited the extension of new government credits for the U. S. S. R., and suspended high-level diplomatic exchanges.

This effectively froze all financing through

the Japanese Ex-Im Bank. At the private

level, however, trade continued unabated.

During most of 1980, those joint energy

projects already underway were continued,

with no new official funding. Japan’s official

policy thus amounted to a kind of holding

pattern—maintaining prior commitments,

but studiously avoiding their extension or

the initiation of any new ones. This policy

was pursued despite the fact that the Soviet

Union both warned Japan about possible

Soviet retaliation if it participated in such

sanctions,42 and invited it to join in the

pipeline project designed to carry Soviet gas

from West Siberia to Western Europe.43

By the end of 1980, Japanese businessmen

were publicly criticizing the sanctions, arguing that government policy disadvantaged

Japanese firms vis-a-vis their competitors in

Western Europe but had no real effect on

Soviet foreign policy.” Industrial leaders in

Japan claimed that the sanctions accounted

for the loss of 14 plant export contracts

worth some $4 billion to $5 billion. They

pointed to examples of trade lost to other

Western nations which failed to participate

in the sanctions. For example, the planned

export of an electrical steel sheet plant by

the U.S. firm Armco International and Nippon Steel Corp. fell through after more than

3 years of preliminary negotiations. The contract was awarded to the French firm

42 Asian Ii’ull Street li’c~kl?I. Itlay 12, 1980.

43 "Soren Daikei Shakkan o Yosei ” ( U.S.S.R. Asks for

I.arge-Scale I.oans), Yomiuri Shimbun, Sept. 9, 1980.

44A.sian llralf Street .Journui, Nov. 10, 1980; “Japan Fears

Sanctions Breakdown,” ~1’ashin~ton P().sf, Sept. 23, 1980.

Creusôt Loire.45 In other cases vacillations in

U.S. policy–e.g., denying license applications for Sakhalin drilling equipment and

then reinstating them,46 as well as the decision to grant export licenses to the American

firm Caterpillar for pipelaying equipment (an

item which Japanese firms were also interested in selling to the Soviet Union) were

carefully noted in the Japanese press.

By the end of 1980, there were indications

that the Japanese government was ready to

relax the measures it had imposed. It made a

significant step in approving new loans,

which were reported to carry a 7.25-percent

interest rate repayable over a 5-year period,

through its Ex-Im Bank for the continuation

and expansion of two Siberian development

projects. The loans included $42.3 million for

coal development in South Yakutia, and

$96.3 million for a Siberian forest resource

development project. In return, the Soviet

Union committed itself to increased exports

of coking coal to Japan.47

In April 1981, the Japanese Government

resumed official trade talks with the Soviet

Union. These had been suspended, although

the previous bilatral trade agreement had expired. Under the new trade accord, which

runs until 1985, Japan will import about 90

Soviet commodities including coal and oil; in

return the U.S.S.R. will import items in 70

different categories from Japan. Another

signal of a thaw in the trade freeze was the

announcement in late January 1981, that

agreement had been reached over the construction of the Sakhalin LNG facility.48 Finally, additional new loans of $949 million

for two Siberian development projects were

approved in June 1981, evidence of the loosening of sanctions following the U.S. decision to end the grain embargo. The bulk of

this money is for forestry, with about $40

million earmarked for coal development.49

The loans will allow the U.S.S.R. to purchase

—— —-—

4r’SeetJapan [lcorlomi(tJolirnal,” Sept. 2, 1980, p. 1.

“.$o(ict Business and Tra(ic, Nlay 21, 1980.

4’Asian Uruil Street tJournal, Dec. 29, 1980.

4H’’Nisso, I.NGka de Goi ” (tJapan and the Soviet Union

Agree on I. N(l), A’ihorz h’eizai, Jan. 28, 1981.

“,k’el~’ l’orh Tim f~.s, June 11, 1981.
Ch. 11—Japanese-Soviet Energy Relations ● 347

equipment and services from Japanese

firms.

The U.S.S.R. has also sought Japanese

participation in the West Siberian gas pipeline project. At present, there are no firm indications of the role Japan might play, but

the Soviet Union has been calling for

Japanese financing amounting to as much as

$3 billion. Japan would not receive gas, but

its prospects for sales of large diameter pipe

and other related commodities and equipment are good. The Soviet Union has apparently approached two Japanese firms—

Hitachi and Marubeni–about the possibility

of buying at least 10 gas boosters, each

worth more than $1 million, and Nippon

Electric Co. was reported to be considering

bidding on contracts for the central pipeline

control system.50 The Japanese firm Komatsu is negotiating for a sale of pipelay -

ing equipment worth $1.5 million to the

U.S.S.R.51 In late May 1981, press reports indicated that Japan’s four largest steel firms

had reached agreement with the Soviet

Union to supply 750,000 metric tons of large

diameter pipe over the next year. It was further reported that the Japanese Ex-Im Bank

would extend $500 million in credit for the

sale. Evidently the pipe is to be supplied on a

regular commercial basis, without any clear

specification that it will be used for the West

Siberian project.

All of these developments reflect significant controversy within Japan over the

economic sanctions, and a general reconsideration of policies toward the Soviet

50 ——

"Russia Said to offer one Billion I)ollar Cent ract to ,Japanese F’irms, ,.1.~{arz Ii’all Stre(’t ,Jc>urnal, Apr. 2’7, 19H 1.

“IV iden, ‘1’aiw Shodan Kaiso ” ( N I+lC Begins Talks M’ith the

SoYiet L[nion), ,~r[h~~rl h“(;zui, F’el). 4, 1981 .

51 

.J(l[MJ1 7’1 m(’ \, !LIa}r 20, 1981. Ther(> were $152 million in

crecfi t ~ rvport (d IJ’ ex tendecl h~ t ht’ tJ apanese (;o~’crn ment to

co~’er S(j\r i{~t pure ha st~~ of plpela?er+ and hu lldozers from

Komatsu (’o. for a pip(’lint’ from (lrengc)~r, south of l’amhurg

in ~$r~’st Siheria. StYJ .!’f~{ }’{~rL’ ‘J’Ifn(J\, Aug. 20, 1 9H 1.

Union during the last year and a half.

Throughout most of that period official

Japanese foreign policy statements showed

a chill in relations with the Soviet Union.

The 1980 Foreign Ministry Blue Book, for

example, stressed the need for close alliance

with the free world in a period of growing international tensions.52 Additionally, February 7 was designated as “Northern Islands

Day," 53 While there were apparently a variety of domestic political reasons for the decision to institute the new commemorative

day, the choice, as well as the rising salience

of defense issues, reflected growing concern

with East-West tension,

By mid-1981, however, signs were that

Japanese leaders were moving back to their

cautious but positive approach to energy

and trade with the Soviet Union. Soon after

his appointment, Foreign Minister Sonoda

announced plans to ‘‘review’ policies toward

the Soviet Union with an eye toward renewing Japan’s “omnidirectional diplomacy."54

The events of the 18 months following the

Soviet invasion of Afghanistan illustrate the

fact that international political tensions can

act as an effective brake on Japan-Soviet

energy and trade relations. Even in the

presence of such conditions, however, Japanese leaders tend to favor continuing cooperative energy development. For Japan

Government and business leaders, questions

of trade with and technology transfer to the

Soviet Union are just as much energy and

economic as they are political issues.

“Statements by Cabinet SecretarJ NI i~’azawa, ‘‘(’aut ion

Necessar?’ About th(~ %~iet IJnion, ” }’(jmil~rl Shim hu n, Sept.

12, 1980.

“”( I Ioppo Ryodo }’oron Lloriag(’ (J$’hipping (Jp I’uhlic

opinion Ahout the Northern Islands), .4’/ h~~n A’cizal .Shim /)//n

Jan, 6, 1981); “Kono Koe Todoke Iloppo Ryodo ” (Northern

Islands Campaign), A’/hon Kcizai Shimhun, ,Jan. 23, 1981.

““’’ l’aiso Seizai Rosen o Shussen’” (Toward a Re~rision of

Sanctions on Trade W’ith the Sotriet IJnion), .l’ih(~n h’eizai

.Shimhun, hlay 21, 19811, p. 2,
348 ● Technology and Soviet Energy Availability

SUMMARY AND CONCLUSIONS

This overview of past patterns of interaction between Japan and the Soviet Union, as

well as recent developments during the

period of economic sanctions following the

invasion of Afghanistan, leads to the conclusion that Japan will probably continue to

pursue a positive approach to energy relations with the Soviet Union. Available data

indicate that it is unlikely that Japan will

become very dependent on the Soviet Union

for energy in the next decade—even if all the

projects currently underway come to fruition. Table 83 shows projections for

Japanese imports of Soviet energy as a

percentage of the nation’s total energy imports, and total primary energy supply. If

Japan imports 6.5 million tons of coal from

South Yakutia, and if other Soviet fuels

such as gas from Sakhalin are available as

planned, the Soviet Union will still supply

only about 3 percent of Japan’s total energy

imports, and about 2.2 percent of the nation’s total primary energy. The only sector

in which Soviet energy would be of more

than marginal significance is gas, where it

could account for nearly one-quarter of

Japanese imports by 1990. Even this, however, is a relatively small portion of total

Japanese energy requirements. Thus, in contrast to some West European countries,

Japan does not risk any significant degree of

“energy dependence” on the U.S.S.R.

While it is unlikely that Japan will become

very dependent on Soviet energy in the years

ahead, it is certain that Japan will remain a

very important supplier of energy-related

equipment to the Soviet Union. Japan’s

unique geographical proximity to the East

Siberian energy development projects ensures a continuing Japanese role in Siberian

energy development. Over the last 5 years,

Japan has ranked first among all Western

nations as an exporter of such equipment to

the U.S.S.R. A few industrial sectors play a

dominant role in this trade–and Japanese

business leaders from those sectors have

traditionally taken the lead in trade negotiations with the U.S.S.R. In the last analysis,

Japan may be much more important as a

supplier of energy-related equipment to the

Soviet Union than the U.S.S.R. is to the continued dynamism of Japanese trade worldwide. Japan’s energy-related exports to the

U.S.S.R. make up only a tiny portion of total

Japanese exports to all nations worldwide,

but Japan is the largest supplier in dollar

value of energy equipment to the U.S.S.R.

Any policies aimed at affecting the volume

or nature of Western energy-related exports

to the U.S.S.R. must necessarily take into

consideration the role of Japan.

When the variety of economic, energy, and

political factors influencing Japanese-Soviet

energy relations are weighed, the result is a

general Japanese orientation that favors expanded energy and trade interaction. The

potential gains—in increased exports, diversified energy supplies, and political signals

to Moscow that Japan is committed to

peaceful coexistence in Asia—appear normally to outweigh the persisting political

disputes and the technical and financial constraints on joint energy development efforts

with the Soviet Union. Only under extraordinary circumstances would Japanese

leaders support proposals for a policy of embargo or leverage against the U.S.S.R. From

the Japanese perspective, the benefits of expanded but limited energy and trade relations with the Soviet Union clearly counterbalance the potential risks.
CHAPTER 12

West European-Soviet

Energy Relations
CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......352

WEST GERMANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...355

Energy Cooperation Between West Germany and the U.S.S.R.. . ..........355

FRG-Soviet Energy Trade, 1970-80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....357

FRANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ..361

Energy Cooperation Between France and the U.S.S.R.. . ................361

Franco-Soviet Energy Trade, 1970-80. . . . . ........... . . . . . .....362

ITALY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363

Energy Cooperation Between Italy and the U.S.S.R.. . . .... . . . . . . . . . ....364

Italian-Soviet Energy Trade, 1970-80. . . . . . . . . . . . . . . . . . . . . . . . . . ......364

UNITED KINGDOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...367

Energy Cooperation Between Britain and the U.S.S.R.. . . . . . . . . . . . . . . ..,368

British-Soviet Energy Trade, 1970-80. .., . ........ . . . . . . . . . . . . . . . . . . .369

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..369

FUTURE PROSPECTS FOR ENERGY INTERDEPENDENCE:

THE WEST SIBERIAN GAS PIPELINE PROJECT. ... , . .........370

West European Policy Perspectives.. . . . . . . . . . . . . . . . . . . . . . . . . ........373

Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........378

Prospects for West European Policy Coordination. . .... . . . . . . . . . . . . . . ..378

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........380

LIST OF TABLES

Table No. Page

84. Western Trade With the CMEA–1979 . . . . . . . . . . . . . . . . . . . . . . . . ....353

85. Western European Energy Dependence, 1979. . . . . . . . . . . . . . . . . . .....354

86. Federal Republic of Germany-Energy Balance, 1979 , . . . . ... . . ......356

87. France’s Energy Balance, 1979. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....362

88. Italy’s Energy Balance, 1979.... . .... . .. . . . . . . . . . . . . . . . . ....,,..367

89. United Kingdom Energy Balance, 1979 .... . . . . . . . . . . . . . . . . . . . .....368

LIST OF FIGURES

Figure No. Page

29. West European Energy Imports From U.S.S.R. and World–1979 .. ....355

30. Gas Pipeline Feeding Western Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . ..359
CHAPTER 12

West European-Soviet Energy

Relations

In Western Europe, growing energy interdependence with the Council for Mutual

Economic Assistance (CMEA)–the Communist world equivalent of the Common

Market–is a fact of life. It is generally

viewed as a natural and desirable extension

of historic trade patterns, which is not disadvantageous so long as it is kept within

prudent bounds. Evaluations of what constitutes a “reasonable” or “dangerous” level of

East-West interdependence hinge on a variety of factors, including the availability of

alternative export markets and energy supply sources. Controversy over West European-CMEA energy relations has grown

among observers—primarily on this side

of the Atlantic—who weigh these factors

differently.

This chapter explores the dimensions of

West European energy relations with

CMEA, and particularly with the Soviet

Union. It focuses on four Western nations—

the Federal Republic of Germany (FRG or

West Germany), France, Italy, and the

United Kingdom (U.K.), examining first past

trends in both energy-related equipment exports to, and energy commodity imports

from, the U.S.S.R. The chapter then turns to

the proposed West Siberian gas export pipeline, the controversial project which will significantly increase Soviet gas exports to

much of Western Europe. “Yamburg,” the

popular name for this project, which will

transport gas initially from the Urengoy

field in West Siberia, is used here to illuminate the differing perspectives of these

Western nations on increasing East-West

trade and energy interdependence, including

the costs and benefits associated with such

interdependence.

351
352 ● Technology and Soviet Energy Availability

INTRODUCTION

Trade between Western Europe and

CMEA constitutes a relatively small, but

growing, part of Western Europe’s worldwide trade. Between 1972 and 1978, the

percentage of European Economic Community (EEC) exports that went to CMEA

grew from 2.9 to 3.7 percent. Similarly, commodities from the CMEA constituted 2.9

percent of EEC imports in 1972. These increased to 3.2 percent in 1978.1 Energy and

energy-related equipment and technology

have made up an important portion of this

trade.

Western Europe has been importing energy from CMEA for decades, but during the

course of the last 10 years these imports—

particularly those from the U.S.S.R.–have

grown. Exports of Soviet oil to Western

Europe rose from a level of 33.8 million

metric tons (mmt) or 0.678 million barrels

per day (mbd) in 1971 to 54.8 mmt (1.1 mbd)

in 1979.2 While exports of coal from the

Soviet Union to Western Europe fell during

the same period, gas exports grew exponentially from 0.005 to 0.06 billion cubic meters

(bcm) per day.3 In 1980, Soviet gas exports

to the region were estimated at 24.5 bcm.4

This is the equivalent of 20 million tons of oil

equivalent per year (mtoe/yr) or 0.40 million

barrels per day of oil equivalent (mbdoe). In

1 International Monetary Fund, I)irf’ction of Tr(l(if~ Year-

/)()()/l, 1979. pp. 60-61.

‘Central 1 nt,elli~ence A~enc~, In tc~rnationul Energ>’

,Stuti.sticu/ Hc[ic’u, E;li I h;SR 81-003, Mar. 31, 1981, p. 25.

(Wrestern P:urope here is defined as France, 1 taly, Finland, the

Net herlands, Italy, Sweden, and West Germany. )

‘Coal exports to EEC from the U.S.S.R. fell from 448,000

metric tons in 1970 to 3,’700 in 1975, and to 2,800 in 1979.

Data for 1970 and 1975 is from Soviet trade statistics. After

1976, however, Soviet data records coal exports in ruble value

rather than in volumes. Data for 1979 come from Business Information Display, World Energy Industry, vol. 1, No. 3, first

quarter, 1980, p. 195. It should also be noted that coal imports to EEC from Poland rose substantially until recent

months, In 1979 EEC imported 15 mmt of hard coal from

I’eland (out of total hard coal imports of 81 mmt). During the

sa m{) year, howe~’er, 1 ~ mmt of hard coal were exported b~’

P;l+;(’. I hid., p. 313.

I)ata on gas exports from lhid., p. 26. I let-e, W’estern

Flurope consists of Austria, Finland, F’rance, 1 tal?’, and Wrest

( ;erman~’.

‘tJonat han P. Stern, ,S(~( i(~t .N’(1 tur(~l (;(1.s I)f’[ ‘f’loprncn t to

I$)$M) (}~’ashington, IJ.C’,: heath, 1980), p. ~~~~.

short, energy trade between the CMEA and

Western Europe has been one of the most

dynamic sectors of East-West trade during

the last decade.

These trends are even more striking when

the energy situation of Western Europe is

compared with that of Eastern Europe.

Western Europe’s dependence on imported

energy is more than twice as high (54 percent) as that of Eastern Europe (23 percent) (see ch. 9). Despite the fact that

Western Europe’s overall dependence on imported energy has declined since the first oil

crisis in 1973-74, imports of energy from the

Soviet Union have been increasing.

Total Western exports to CMEA have

also increased over the last decade. Historically, Western Europe’s exports to

CMEA, unlike those of the United States,

have been heavily concentrated in industrial

goods. Energy-related equipment and technology have been an important part of this

trade. As was shown in chapter 6, the

U.S.S.R.’s largest Western supplier of energy-related technology and equipment has

been Japan, but West Germany is a close

second. Between 1975 and 1979, Japan captured nearly 29 percent of this market; West

Germany, 28 percent; Italy, 15.7 percent;

France, 13 percent; the United States, 8 percent; and the United Kingdom, 0.2 percent.

Moreover, as table 1 demonstrates, these

energy-related items constituted over onethird of Italy’s exports to the U. S. S. R.,

about one-quarter of France and West Germany’s and 10 percent of Britain ’s. Thus,

while overall trade between Western Europe

and CMEA remains a relatively small part of

Western Europe’s worldwide exports, energy equipment and technology make up a

significant part of those exports which do go

to the U. S. S. R..

There is disagreement about the significance of West European energy and industrial trade with the Soviet Union. on the

one hand, proponents of interdependence
—

Ch. 12— West European-Soviet Energy Relations ● 353

Table 84.—Western Trade With the CMEA—1979 (million U.S. dollars)

A. Energy-related exports to U.S.S.R. (see table 1)

B. Total exports to U.S.S.R .

A/B . . . . . . . . . ... . . . . . . .

C. Total exports to CMEA-6 + U.S.S.R. .

D. Total exports to world . . . . . . . . . . .

C/D . . . .

Unite d

States

237

3,607

6.5%

5,672

181,801

3.1%

West United

Japan France Germany Italy Kingdom

1,097 474 906 408 90

2,442 2,005 3,619 1,217 889

44.9% 23.6% 25.0% 33.5% 10.1%

3,243 4.028 11,270 2,633 2.059

102,802 97,981 174,092 72,123 90,810

3.1% 4.1% 6.4% 3.6% 2.2%

SOURCE Ch 6 and OECD Statistics of Foreign Trade

argue that growing trade and energy relations between the East and West should be

encouraged. Adherents of this position in all

major political parties in Western Europe

advance both economic and political reasons

for such interdependence being ultimately

beneficial to both sides. Economically, it contributes to expanded energy supplies and

produces new trade opportunities. The countries of Western Europe need imported energy and, perhaps even more importantly,

wish to export, particularly steel pipe.

Politically, such trade is expected to lock the

U.S.S.R. into long-term economic relationships which will give it a stake in maintaining the political status quo and increase the

chances of its moderating its policies—

toward Berlin, for instance.

On the other side, critics of interdependence fear it will lead to heightened reliance of

Western countries on the Soviet Union for

both energy and export markets, rendering

these nations more susceptible to pressures

from the East. The inevitable result as economic ties are strengthened becomes the

“Finlandization” of Europe—i.e., the moderation of West European policy to placate

Soviet demands.

These opposing views provide the foundation for dramatically different policy proposals, one aimed at promoting expanded interaction and the other at controlling it. A

prime example of such policy disputes has

been the controversy over the proposed

5,000-km natural gas pipeline, which would

bring 40 to 70 bcm of gas (32.9 to 57.3 mtoe

or 0.66 to 1.15 mbdoe) annually from Soviet

West Siberia to Western Europe. This project is the largest and most recent in a series

of gas deals between the U.S.S.R. and Western Europe. It could more than double the

present level of imports (24.5 bcm). For

Western Europe, the proposed pipeline offers prospects for significantly expanded gas

supplies, as well as for exports of energyrelated equipment and technology. At the

same time, however, the deal would mean

that Western Europe’s dependence on Soviet energy would increase.

Assessing either the economic benefit to

Western Europe or the potential degree of

dependency which this project raises is

hampered by both practical and conceptual

problems. The most fundamental of these is

that much of the readily available energy

trade data have not been standardized to

allow analysis of CMEA-West Europe flows.

Since 1976, for instance, the Soviet Union

has recorded only the ruble value–not the

volumes—of energy exports.

Policy debate about interdependence is

also confounded by definitional issues.

“Western Europe” is sometimes used as a

shorthand for any of a variety of multilateral

organizations: the European Economic Community (EEC), the Organization for Economic Cooperation and Development

(OECD), the International Energy Agency

(IEA), or the Economic Commission for

Europe (ECE–part of the United Nations).

Each of this confusing array of organizations has a slightly different list of members.

In 1979, for example, Soviet oil accounted

for 7.2 percent of all oil and oil product imports by the European OECD, and of 6.7 percent of such imports by the EEC. During the

same year, Soviet oil provided 0.2 percent of
354 ● Technology and Soviet Energy Availability

all oil imported by the total OECD membership (which includes the United States, Japan, and their nations).’ Similarly, the magnitude of Communist world coal exports

changes, depending on whether one includes

exports from Poland. If West German imports of Polish hard coal are added to those

from the Soviet Union, its dependence on

CMEA coal in 1979 rises from 2.4 to almost

30 percent of total coal imports.

There are also different ways to calculate

“energy dependence.” It can be seen from

table 85 and figure 29 that, except in the

case of Italy, levels of dependence are higher

Table 85.—Western Energy Dependence, 1979

(million tons of oil equivalent)

Geothermal,

Oil and oil hydro and imported

products Gas Hard coal Nuclear electricity Total energy

Federal Republic of Germany

A. Total energy requirements

B. Total energy imports from

world . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Total imports, from U.S.S.R.

D. Imports from U.S.S.R. percent of

total imports . . . . . . . . . . . . . . . . . .

E. Imports from USSR as percent of

total energy requirements . . . . . .

France

A. Total energy requirements . . . . . . .

B. Total energy imports from

world . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Total imports from U.S.S.R. . . . . . .

D. Imports from U.S.S.R, as percent of

total imports . . . . . . . . . . . . . . . . . .

E. Imports from U.S.S.R. as percent of

total energy requirements

ltaly b

A. Total energy requirements . . . . . . .

B. Total energy imports from

world . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Total imports from U.S.S.R. . . . . . .

D. Imports from U.S.S.R. as percent of

total imports . . . . . . . . . . . . . . . . . .

E. Imports from U.S.S.R, as percent of

total energy requirements . . . . .

United Kingdom

A. Total energy requirements . . . . . . .

B. Total energy imports from

world . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Total imports from U.S.S.R. . . . . . .

D. Imports from U.S.S.R, as percent of

total imports

E. Imports from U.S.S.R, as percent of

total energy requirements . . . . .

145,4

150.8

9.3

6.20/o

6.40/o

117.8

139.1

6.5

4.7%

5.5%

93.4

120.9

6.8

5.6%

7.2%

90.3

70.4

2.9

4.1 %

3.2%

49,6

33.5

8.0

23.9%

16.1%

22.7

16.1

1.6

9.9%

7.4%

24.1

13.2

5.7

43.2%

23.7%

43.2

8.2

—

—

—

833

6.0

01

1 .7%

.1%

34.2

20.2

0.5

2.5%

1.5%

10.6

9.1

0.6

6.6%

5.7%

87.2

3.0

—

—

—

3.4

—

—

—

1.6

—

—

—

— —

3.2

—

—

7.0

1.4

—

—

— —

0.2

—

—

4,2

0.6

—

— —

—

2.8

—

—

0.5

—

— —

— —

— .

283.3

190.3

17.4

9.190

6.1 ‘/0

184.9

176.8

8.6

4.9%

4.7%

132.5

143.8

13.1

9.1 %

9.9%

224.0

81.6

2.9

3.6%

1.3%

a

Total energy requirements IS similar but not Identical to apparent consumption — observed consumption data IS used where available for coal and natural gas. Otherwise

requirements are computed by the following formula domestic primary production + imports - exports international bunkers - inventory changes Total energy

requirements are computed only if inclusive of all commodities (oil, gas, coal, primary electric power and net electricity imports) "Other EIectricity" includes net electricity

Imports Graphs of total energy requirements do not account for Inventory changes if production and import data are separated.

b Italy reexports Imported energy

SOURCE Business Information Display World Energy Industry Vol 2 No 3 First Quarter 1980 Petroleurn Economlst Natural Gas Across Frontiers, December 1980,

Petroleurn Intelligence Week/y July 21 1980
Ch. 12— West European-Soviet Energy Relations • 355

— —

Figure 29.—West European Energy Imports From U.S.S.R. and World—1979

(million tons of oil equivalent)

Percent imports from U.S.S.R.

as part of total imports Percent imports from U. S.S.R

as part of total

Federal

Republic

Germany

France

Italya

United

Kingdom

9.1%

4.9%

9.1%

3.6%

6.1%

190.3 Total energy “

imports

imports

from U.S.S.R.

176.8 Total energy imports

from U.S.S.R.

132.5 Total energy requirements

143.8 Total energy imports

13.1 Energy

imports

from U.S.S.R.

. . . Total energy requirements

I

Imports

from U.S.S.R.

a Italy reexports Imported energy

SOURCE Table 85

if one looks at Soviet energy imports as a

percentage of all energy imports to each nation (fig. 29) than if one looks at energy imports as a percentage of a nation’s total

energy requirements (table 85). Italy purchased 43 percent of its imported gas from

the U.S.S.R. in 1979, but the Soviet Union

provided less than 10 percent of the total

9.9%

1.3%

energy that Italy apparently consumed. The

data thus provide no unambiguous indicators of levels of risk or dependence. Individuals make risk assessments based on

their perceptions of vulnerability and their

judgments about energy supply alternatives—factors which cannot be precisely

measured.

WEST GERMANY

Over the past decade, West Germany has ENERGY COOPERATIO N

become a major Western supplier of energy BETWEEN WEST GERMANY

equipment to the U.S.S.R. Meanwhile, the

Soviet Union has become a major source of

AND THE U.S.S.R.

natural gas for West Germany, and for polit- There are three important explanations

ical and economic reasons, Bonn is officially for West Germany’s interest in energy

committed to greater energy interdepend- cooperations with the U.S.S.R. These relate

ence with CM EA. The following sections to the energy, economic, and political realms.

outline past and present patterns in West First, and perhaps most important, West

German energy and trade relations with the Germany imports 67 percent of its energy,

U. S. S. R.. and is anxious to diversify sources of energy
356 • Technology and Soviet Energy Availability

supply (see table 86). In 1979, 51 percent of

the FRG’s total energy requirements came

from oil; 29 percent from coal; 17 percent

from gas; and less than 2 percent from

nuclear and other energy sources. Even

though West Germany produced nearly all

of the coal and more than a third of the

natural gas it consumed in 1979, it remained

dependent on imports for 96 percent of its oil

and 62 percent of its natural gas.6

Official government energy forecasts

show West German oil imports remaining

level and thus declining in importance within

the overall energy balance during the next

decade. These plans require a doubling in

nuclear power production between 1979 and

1984, and a quadrupling over the decade.7

Although politicians from all three parties

have expressed support for nuclear power,

opposition from the left wing of the Social

Democratic Party (SPD), segments of the

Free Democratic Party (FDP), and various

environmental groups has slowed construction of additional nuclear power plants. Oil

will also be replaced with natural gas and

coal, augmented by intensified conservation

measures.

Soviet energy-particularly natural gas—

offers an alternative for West German

6 Jochen Bethkenhagen, ‘“l+; nergy Policy of the Federa l

Repuhlic of Germany, ” paper presented at the NAT() Colloquium, 1980, p. 11.

7 ’(; erman~’,” in International k: nergy Agenc~’ (I FJA),

b;nerg,v Polici(’.s ar)(l Pro<r(lfnrne. v of IZ+,’A f ‘()//n t ri(’.s ( Paris:

OP;C’1), 1980), pp. 115-121.

Table 86.—Federal Republic of

Oil

energy planners anxious to reduce dependence on Middle East oil. Currently West

Germany imports the bulk of its natural gas

from the Netherlands; the Soviet Union is

the second-largest supplier, and Norway the

third. As figure 29 shows, energy imports

from the Soviet Union made up 9 percent of

West Germany’s total energy imports in

1979 and 6.1 percent of its total energy requirements.

The second reason for West German interest in energy relations with CMEA is that

the FRG depends on foreign trade for 30 percent of its gross national product (GNP).

West Germany is the U.S.S.R. most important Western supplier of machinery and

equipment, especially chemical equipment,

and the largest supplier of high technology.8

West German exports to the U. S. S. R., like

those of Japan, are concentrated in a few

key industries. Between 1973 and 1979, half

of its large-diameter pipe exports went to the

U. S. S. R.; indeed, pipe exports were the

largest single export item in West GermanSoviet trade during the period.’ Moreover,

specific firms are strongly involved in EastWest trade. The giant steel firm Mannesmann exports 60 percent of its total produc8 John Young, ‘Quantification of Western Exports of High

‘1’echnolog~r Products to Communist Nations’ (Washington,

1). C,: U.S. Department of’ Commerce, 1 977).

“Deutsches Institut Fur W’irtschaftsforschung, ~l’(whcnbericht, No. 15 (Berlin, 1980). h~xports of large-diameter pipe

made up 12 percent of all W’cst (lerman exports to the

U.S.S.R. during that period.

Germany—Energy Balance, 1979

Geothermal

hydro and Imported

Gas Coal Nuclear electricity —

Total energy requirements

51 3% 17.5% 29.4% 1.2% .6%

283.3 MTOE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1454 4 9 6 8 3 3 3 4 1 6

Energy imports:

–-as percent of total energy requirements 53.2% 11.8% 2.1%

190.3 MTOE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.8 33.5 6 0

Energy exports

17.2 MTOE . . . . . . . . . . . . . . . . . . . .

—

SOURCE Business lnformation Display op cit.
tion of large-diameter pipe to the U. S. S. R.;

Salzgitter, the other large West German

steel producer, sells 40 percent of steel exports to CMEA nations. Thus, while EastWest trade represents only a small portion of

FRG’s total worldwide trade, in energyrelated equipment, trade with the Soviet

Union is disproportionately significant.

Some experts estimate that 92,000 West

German jobs are dependent on trade with

the Soviet Union, and 220,000 on trade with

CMEA. 10

The third dimension of West GermanCMEA energy interdependence is political.

The ruling SPD-FDP Party coalition officially supports East-West trade as an incentive

for detente and as a basis for long-term

political interdependence which reduces the

likelihood of conflict between East and

West.11 The West German Government has,

moreover, specifically stated that it is in the

interest of the West to assist the U.S.S.R, in

developing its natural resources,12 The 1978

Soviet-West German economic cooperation

agreement contains a section committing

both sides to cooperate in joint energy

development, and in May 1980, official

spokesmen from the two nations agreed to

intensify such efforts. Support for this position, among businessmen and others, is

widespread.

FRG-SOVIET ENERGY TRADE ,

1970-8 0

FRG Equipment and Technology

Exports

The FRG has been exporting energyrelated equipment to the Soviet Union for

more than 30 years, very often as part of

compensation deals in which the exports are

paid for in other goods or commodities. In recent years, a pattern of growing equipment

exports linked to increasing imports of

Ch. 12—West European-Soviet Energy Relations • 357

Soviet energy has evolved. The greater part

of FRG exports has been in pipe, compressor

stations, and pumps for pipelines. Additionally, West German firms have supplied

equipment for petrochemical plants in the

CMEA region. Added together, these categories of energy-related exports make up

about 25 percent of all West German exports

to CMEA (see table 84).

West German energy equipment trade

with the U.S.S.R. first came to prominence

in 1963, when three large West German steel

companies signed a contract to supply the

U.S.S.R. with 163,000 tons of 40-inch steel

pipe, valued at $28 million. In November

1962, a North Atlantic Treaty Organization

(NATO) resolution, passed at U.S. initiative,

embargoed all sales of large-diameter pipe to

the Soviet Union. The intention of the

United States was to impede the completion

of the Friendship oil pipeline from the

U.S.S.R. to Eastern Europe. While the governments of some other West European nations refused to cooperate, the FRG compelled its firms to cancel their contracts.

This understandably provoked considerable

outcry from the West German business community. One company, Phoenix-Rheinrohr,

was forced to close one of its plants, and

others suffered substantial financial losses

and were forced to cut back capacity.

Since the United States did not have as

great political leverage over its other allies

as it did over Bonn at the time, it was unable

to prevent Great Britain, Italy, or Japan

(which was not a member of NATO) from

selling similar pipe. Ultimately, the U.S.S.R.

found alternative suppliers and completion

of the pipeline was delayed by only 1 year,

Moreover, many contend today that the embargo forced the U.S.S.R, to develop its own

pipemaking capability. This episode still

rankles. West German leaders still recount it

and regard it as misguided.13 It remains an

important event in the shaping of West German opinion on the utility of economic sanc13 Angela E. Stent, From Embargo to Ostpolitik: The Political Economy of West German-So uiet Reh tions, 195.5-1.%0

(New York: Cambridge University Press, 1981), ch. 5.
358 ● Technology and Soviet Energy Availability

—— —

tions and the ineffectiveness of such sanctions in preventing the acquisition of

technical capabilities in the U.S.S.R. Since

then, pipeline equipment has played an increasingly important role in West GermanSoviet trade.

In 1969, 3 years after the NATO embargo

was lifted, the U.S.S.R. concluded a $25 million contract with the West German firm

Thyssen for joint construction of pipe- making factories in the U.S.S.R. and the FRG.

The pipes were used to transport gas from

the Soviet Union to Eastern Europe. This

contract marked the beginning of intensified

West German exports of energy- related

equipment to the U.S.S.R.

The first major exchange of West German

equipment for Soviet energy was arranged in

February 1970. West German banks, steel,

and gas firms were all involved in the deal,

which provided for the sale of 1.2 million

tons of pipe, worth $400 million, as well as increased imports of natural gas. A consortium of 17 West German banks under the

leadership of the Deutsche Bank supplied

the credits at an undisclosed, but reportedly

very favorable, rate of interest. By charging

high prices for the pipe they sold, steel firms

were evidently able to help to compensate

the banks for losses suffered in interest rate

charges. This deal assisted the ailing West

German steel industry, which, as noted

above, is highly dependent on foreign trade.

The exchange was viewed as a success by

both sides; it was followed by similar contracts for West German pipe arranged in

1972 and 1974.

Another important gas project was the

“triangular” West European-Soviet-Iran

contract signed in 1975. Here, West European equipment was sold to Iran, Iranian

gas to the Soviet Union, and Soviet gas to

Western Europe. In 1977, the deal was

enlarged to include construction of the

IGAT-II, a 1,440-km pipeline designed to

carry gas from fields in southern Iran to the

town of Astara on the Soviet border (see fig.

30). France, West Germany, and Austria

were scheduled to receive a combined total of

11 bcm of this gas in exchange for supplies

of equipment and cash.14 The project has

now been abandoned.

West German firms also took a leading

role in the Orenburg pipeline project. The

2,750-km Orenburg or “Soyuz” pipeline is a

joint project involving the U.S.S.R. and the

CMEA-6, which will supply the bulk of additional Soviet gas exports to Eastern Europe

over the next decade. After only 21⁄2 years of

construction, the pipeline was completed on

schedule in 1978, and heralded as a prime example of CMEA cooperation. West German

firms such as Mannesmann supplied pipe

and other ancillary equipment, including

drill pipe, casing, and equipment for 22 compressor stations. Japanese, French, American, and Italian companies were also involved.

The possibility of exporting West German

equipment for Soviet nuclear power stations

has been under discussion for some years.

One project, initially discussed by the

U.S.S.R. and the FRG in 1975, eventually

fell through. The German Kraftwerkunion

was to construct a 1,200-MW nuclear powerplant at Kaliningrad in the U.S.S.R. at a cost

of $600 million. One major point of contention was the West German stipulation that

some of the power produced by the plant

should supply West Berlin. West Berlin’s

energy situation is precarious—the city is

not connected to the electrical grids of either

East or West Germany. The project failed,

not only because the Soviets asked a very

high price for the electricity, but also

because East Germany objected to transmitting electricity to West Berlin.15 Some

West German firms have supplied equipment for Soviet powerplants, and while discussions of prospects for new projects surface periodically, FRG Government spokesmen say that there is little likelihood of

West German nuclear plant exports to the

U.S.S.R. in the immediate future.

14 Stern, op. cit., p. 79.

15 Walter B. Smith, “Securing Energy for West Germany

and West Berlin, ” paper presented at Department of State

Executive Seminar on National and International Affairs,

1978-79, pp. 13-15.
 .

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al

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a
360 ● Technology and Soviet Energy Availability

FRG Energy Imports

Imports of Soviet oil and natural gas to

West Germany have grown steadily over the

last decade, and have become increasingly

significant in the FRG’s energy balance.

Soviet exports of crude oil and products to

the FRG rose from 6.6 mmt in 1972 to 9.3

mmt in 1979,16 about 0.187 mbd or 6.2 percent of total oil consumption17 (see table 85).

However, the West German Government is

cognizant of the declining rate of growth of

Soviet oil production and is not expecting its

level of Soviet oil imports to significantly increase.

Clearly the most promising area for potential Soviet hydrocarbon imports is natural

gas. When the first gas-pipe contract was

signed in 1970, the Soviet trading company

Soyuzneftexport agreed to supply German

Ruhrgas with 51.5 bcm of gas (equal to 41.8

mtoe) over a 20-year period beginning in

1973. Soviet gas began to flow into Bavaria

in 1973. Subsequent deals have increased

supplies from the Soviet Union to West Germany. Between 1974 and 1979 West German

natural gas imports from the U.S.S.R. have

grown from 2.1 to 9.8 bcm/yr (9.8 bcm is

about 8.0 mtoe/yr or 0.16 mbdoe).18 As table

85 shows, this represented about 24 percent

of all West German gas imports and about

16 percent of gas consumed in 1979. Had

IGAT II come on line as projected, West

Germany might have been receiving an additional 5.7 bcm of gas from the U.S.S.R. Imports of Soviet gas have thus become a significant part of West Germany’s gas imports.

Soviet gas supplies have been relatively

dependable. In 1979, however, deliveries

were reduced by as much as 25 percent due

to technical problems accompanying a very

severe winter. Those living in Bavaria, the

“Marshall Goldman, The Enigma of Soviet Petroleum

(Boston: George Allen & Unwin, 1980), p. 64.

17“l’he 1979 imports from the total Chl EA region to the

FR(; made up 8 percent of (Ierman oil consumption. See /~er

Ileut.sche ().sthandel 1980, p. 19.

I

nU. S. Department of Energy, 11’orld ,h’atural (iu.s l~~W and

Petroleum ~~conomist, N’a tural (;(Is Across F’ron tiers, December 1980.

region primarily supplied by Soviet gas,

have apparently not been adversely affected

by these supply cuts due to substitution of

gas from other parts of West Germany. ’g

The impact of any future cuts will depend

not only on the region involved, but the

nature of the consumer (industry or residential), the time of year and available storage

facilities.

West Germany also imports CMEA coal,

particularly from Poland. In 1979, the FRG

imported 2.4 mmt of hard coal (1.65 mtoe or

0.03 mbdoe) from Poland and 0.210 mmt

from the Soviet Union. Together these

amounted to 30 percent of all coal imports,

or about 2.1 percent of West German coal requirements for the year.20 The FRG also imports substantial amounts of brown coal

(lignite) from Eastern Europe, and the West

German and Polish governments are jointly

supporting a coal gasification project

scheduled to produce nearly 1 bcm/yr of gas

by 1983. In addition, 55 percent of the

uranium used in West German nuclear

plants is enriched in the U. S. S. R.21

In sum, while West Germany’s oil imports

from the U.S.S.R. are expected to decline,

natural gas imports are expected to rise,

perhaps doubling in volume by the end of the

decade.22 There appears to be little likelihood

of expanded imports of coal from Poland;

Polish coal exports to Western Europe declined dramatically in 1980 due to faltering

production. 23 Overall, the FRG now imports

about 6.1 percent of all the energy it uses

from the Soviet Union; this represents about

9.1 percent of its total energy imports (see

table 85). This level of dependence is significantly higher than that of Japan, for example, but still much lower than the FRG’s

dependence on OPEC oil (about 60 percent).

— . —.— 19 Interview with Ruhrgas spokesman.

20 Workd Enprgy Industr?t, op. cit., p. 7 8 .

“IlqrIleut.schc ().sthandel, 1980.

“Stern, op. cit., p. 105.

‘‘A’efI Yorh Times, May ’21, 1981, p. 1, Business Section.

“Y$restern governments and banks alike are concerned that in

recent months the Soviet Union has been receiving a growing

proportion of Poland’s faltering coal production, always considered the country best collateral, L$’hile the P1’est used to

get two out of every 3 tons of coal shipped out of Poland, it

now receives only about half, bankers say,
Ch. 12— West European-Soviet Energy Relations ● 361

— .

FRANCE

Like the Federal Republic of Germany,

France has been interested in promoting

greater interdependence with the Soviet

bloc. Since the Presidency of General de

Gaulle, French leaders have sought to maintain a foreign policy stance distinct from

that of the United States. In addition, pursuit of detente with the Soviet Union has

long been a major policy goal.

French energy-related interaction with the

Soviet Union is, however, tempered by two

factors. First, while France’s dependence on

imported energy is much higher than that of

the FRG, French energy planners have in

the past committed themselves to a very ambitious nuclear power program. The fate of

this program has now been called into question as the new Mitterrand government has

placed a moratorium on new nuclear reactor

construction, but if targets were met, nuclear power, which made up only a miniscule

portion of total energy requirements in the

1970’s, would provide 30 percent of total

energy by the year 1990. This has now been

scaled down to 21 percent.24 (See tables 86

and 87 for a comparison of French and West

German energy balances in 1979.) Even this

would minimize—theoretically at least—the

need to seek alternative foreign energy suppliers. Secondly, French political relations

with the U.S.S.R. have not been as sensitive

or complicated as those of West Germany.

There is no French Berlin; nor are Soviet

troops stationed on French borders.

ENERGY COOPERATION

BETWEEN FRANCE

AND THE U.S.S.R.

French energy relations with CMEA are,

like those of West Germany, informed by

energy policy, more general economic, and

political concerns, France is seeking to

change its energy balance so as to reduce its

dependence on imported oil. In 1979, 63.8

percent of France’s total energy requirements were provided by oil (crude and products); 12.3 percent by gas; 18.6 percent by

coal; and about 5.3 percent by nuclear, hydropower, and other sources. At the time of

the first oil shock, only Italy among the EEC

nations had a higher oil dependence. Since

that time French energy policy has operated

with the assumption that such dependence

creates national security risks. Hence its emphasis on nuclear power.

France has a tradition of strong state intervention in the economy, which has provided a supportive context for strong guidance of energy industries.25 There are virtual

state monopolies in electricity supply, coal

mining, and gas sales, and extensive regulation of the oil sector. Official government

statements recently reflected a strong resolution to develop nuclear power: “France

has no viable alternative to nuclear power

other than economic recession and dependence." 26 The vigorous nuclear program is

supported by the huge Eurodif uranium enrichment plant, which started production in

1979. It was envisaged that by 198549 reactors would provide 50 percent of French electricity. 27 (In August 1980, there were 19

French reactors in operation with a capacity

of 10,000 MW. ) The French Communist Party, and the Communist-dominated trade

union federation CGT, have supported this

direction. Socialists and environmental

groups, however, have opposed nuclear

power in the past and the Mitterrand government now appears to be formulating a

policy which compensates for reduced

growth in nuclear power with coal and massive investment in conservation and alternative energy sources.

France’s attempts to reduce dependence

on oil have been accompanied by stress on

25 See Robert ,1, I,ieher, “Energ\’ policies of th~~ F’ifth

P’ren(’h Repuhlic: Autonom~ L’ersus (’cons traint, ” in (’. .lnd rews and .S. I 1 f)ffnlan (eds. 1, 7’// {~ I“’i/’//t p’r(~tl (’h Hop II hli( { !N’ewr

}’ork: State [lni~ersit~ of New JTork Press. 19R()),

“hlinist ere de 1’ Indust ri~, Op. (“i[., p. 7.

‘- Nicholas \f’ade, ‘‘ F’rance’s ~~ 11-ou t Nuclear Ih-ogram

Takes Shape. ‘“ .\(>i(I//Ce, ,AU~. 22, 1980.

~ q – 3 - 81 - . II 4 a -,
362 • Technology and Soviet Energy Availability

Table 87.— France’s Energy Balance, 1979

Geothermal

hydro and imported

Oil — Gas Coal Nuclear electricity

Total energy requirements:

63.9% 12.3% 18.6% 1.7% 3.8%

184.9 mtoe. . . . . . . . . . . . . . . . . . . . . . . . . . . 117.8 22.7 34.2 3.2 7.0

Energy imports:

—as percent of total energy requirements 75.5% 8.7% 10.9% — 0. 7%

176.8 mtoe. . . . . . . . . . . . . . . . . . . . . . . . . . . 139.1 16.1 20,2 — 1.4

Energy exports:

18.0 mtoe

SOURCE Business Information Display op cit.

diversifying geographical sources of oil supply. In 1979, Saudi Arabia and Iran supplied

more than 40 percent of France’s crude oil

imports. As table 85 shows, France relied on

Soviet oil and products for less than 5 percent of all imports in this category during

1979 and for some 5.5 percent of oil and

products consumed in that year. Soviet gas

amounted to 9.9 percent of total gas imports

and 7.4 percent of gas consumption. While

gas from the U.S.S.R. could contribute to a

reduction in OPEC oil imports, spokesmen in

the previous French Government have expressed concern that such imports not rise

too quickly.28 (More than 60 percent of

French gas supplies come from the Netherlands.) Soviet coal constitutes an even

smaller share of French coal consumption.

While, overall, France is very dependent on

imported energy, supplies from the Soviet

Union make up less than 5 percent of its

total fuel imports and total energy consumption (see table 85).

French leaders are perhaps more interested in energy cooperation with the

U.S.S.R. because of the export possibilities

it raises. East-West trade makes up only a

very small share of French trade worldwide,

but certain industrial sectors such as steel

have important stakes. France was the third

largest supplier of energy-related equipment

and technology to the U.S.S.R. during the

1975-79 period, and this trade has become increasingly important (see table 84).

28 Interview with French Foreign Ministry officials.

The political incentives for energy cooperation with the U.S.S.R. relates to French

desire to strengthen detente. Both business

and government leaders in France have

viewed trade with the U.S.S.R. as normal

and desirable. This attitude was reflected in

French reluctance to participate in the postAfghanistan economic sanctions initiated by

the United States. In 1980, the French steel

firm Creusôt-Loire won a Soviet contract for

a steel sheet manufacturing plant, a contract

originally awarded to Japanese and American firms and canceled when participation of

the latter was prohibited by the United

States on political grounds. France thus appears unwilling to use trade as a political

lever in East-West relations, and indeed, the

French Foreign Ministry has regarded efforts to assist CMEA–particularly the

U.S.S.R.–as necessary and mutually beneficial. By helping the Soviet Union to develop

its resources, they say, the Soviet Union will

be less likely to extend its influence-military and otherwise—into the Persian Gulf.

FRANCO-SOVIET ENERGY

TRADE, 1970-80

French Energy Equipment and

Technology Exports

France has never been as important a supplier of energy equipment and technology to

the U.S.S.R. as has West Germany, but

French exports to the Soviet Union have
Ch. 12— West European-Soviet Energy Relations • 363

been significant in certain areas. French

steel firms, especially Creusôt-Loire and

Vallourec, have shipped large amounts of

pipe and plants for pipe manufacturing, and

French companies have also sold petrochemical equipment and plants to the

U.S.S.R. One French firm recently signed a

contract with the U.S.S.R. to produce offshore oil exploration equipment. In many

cases the U.S.S.R. has paid for these in

shipments of oil or gas.

At the same time that French firms have

attempted to enlarge their sales to the

Soviet Union, the French government has

sought economic ties. The first FrancoSoviet Economic Cooperation Agreement,

signed in 1971 and later extended, identified

several areas for cooperation, including

power generation and the development of

new energy technologies,29 and commissions

have been established to discuss mutual

research in such areas. These commissions

and numerous associated working groups

provide a forum where French and Soviet

specialists share technical information.

Since both industry experts and government

officials participate, information about potential contracts and projects is disseminated. French participants have repeatedly

demonstrated their reluctance to discuss certain types of energy projects—such as exchange of technical information about nuclear powerplants, or Soviet proposals for joining the European and Soviet electricity

grids-at these meetings. There is, however,

shared interest in fusion technology, and a

French delegation has recently visited a

Soviet fast breeder reactor.

In sum, like the West Germans, the

French take a positive view of sales of

29 Axel Krause "F’rance S1OWS Down on Soviet Gas Deal,”

in International Herald T’ribune, Jan. 22, 1981,

energy-related equipment. At the governmental level, mechanisms for cooperation in

energy technology development have been

established and energy trade with the

U.S.S.R. is supported by official policies as

well as by the informal efforts of businessmen.

French Energy Imports From

the U.S.S.R.

Soviet energy has played a modest role in

the French energy balance. During the

period following the Iranian revolution, the

Soviets raised oil prices to France. These increases presented particular problems for

companies like French BP, which depends on

Soviet crude oil for as much as 25 percent of

its supplies. In 1980, the Soviets cut back oil

deliveries to France by 15 percent; French

Government leaders were particularly concerned about these reductions since they included some 300,000 tons of oil contracted

under a compensation agreement.30 It appears unlikely that Soviet oil exports to

France in the next decade will claim a higher

proportion of total French oil imports than

in 1979.

France has imported gas from the Soviet

Union since 1976, although until 1980 Soviet

gas was traded for Dutch gas originally

destined for Italy. Since then, Soviet gas has

flowed directly to France via a pipeline

which crosses into Eastern Europe at the

Czech border. In 1979, France imported

about 1.9 bcm of Soviet gas (1.54 mtoe/yr or

0.03 mbdoe), almost 10 percent of total gas

imports and 7.4 percent of the gas consumed

during that year. Thus, French reliance on

Soviet gas has not been as great as that of

West Germany or Italy (see table 85).

ITALY

Italy has been importing energy from U.S.S.R. and Eastern

CMEA since the late 1950’s, and Italian of West Germany

policies toward energy relations with the political relationship

Europe resemble those

and France. Italy’s

with the U.S.S.R. is
364 Ž Technology and Soviet Energy Availability

less sensitive than that of West Germany.

However, Italy’s position is distinguished

by the existence of a Communist party, the

PCI, with 30 percent of the national vote.

Despite its differences with Moscow, the importance of PCI influences Italian-Soviet

political and economic relations.

ENERGY COOPERATIO N

BETWEEN ITALY AN D

THE U.S.S.R.

Italy’s dependence on imported energy in

general and on oil as a share of its total

energy requirements is higher than that of

any other Western nation considered in this

report. In 1979, oil made up more than 70

percent of total energy consumed, and Italy

is well aware of the need to reduce its

dependence on oil and diversify its energy

suppliers. In late 1979 the Italian Government adopted measures, including higher

gasoline prices, to restrain energy demand,

but progress in implementing these plans

was slow.31 Official energy forecasts project

rising levels of oil imports during the present

decade.

The main reason for this projected trend is

that nuclear power development has fallen

behind plans. Forecasts for nuclear power,

which in 1979 contributed less than 1 percent to total Italian energy requirements,

have been scaled down dramatically to less

than one-half the levels projected a few years

ago. If all goes according to this revised

plan, nuclear power will contribute about 7

percent of total energy consumed in 1990.

Reaching this goal will require 12 new

nuclear powerplants, only one of which was

under construction in 1980.

A dominant trend in Italy’s energy balance has been the rising importance of natural gas. Since the early 1970’s, Italian natural gas imports have grown steeply, while domestic production has remained stable.32 As

table 85 indicates, in 1979 Italy imported

over 43 percent of its natural gas from the

31 See IF~A, op. cit., p. 139

32 "Italy, ” in OECD, Economic” .’-l(/r-[ Ie?I, March 1980, p. 47.

U. S. S. R., which provided 23.7 percent of Italy’s gas requirements in that year. Italian

dependence on Soviet gas is currently the

highest of any of the Western industrial nations OTA has studied, although Italy plans

to lessen this dependence through a transMediterranean pipeline, currently under construction, which will carry Algerian gas.

Italy is facing continuing economic problems, particularly in export competitiveness,

and its leaders tend to take a positive view of

trade with the Communist world. Italy has

been an important supplier of pipe to the

U.S.S.R. for many years, and continued exports are important for Italy’s steel industry, which, like steel industries in other

West European nations, has been experiencing a recession. Italian corporations, with

government encouragement, hope to increase cooperation with the Soviet Union in

hydrocarbon exploitation and production. In

recent years, Italy has had a negative balance of payments with the U.S.S.R. and

would like to remedy that situation. 33

Italy also has a political interest in the

promotion of trade with the Soviet Union.

While Italian officials are less likely to argue

that Western trade with the U.S.S.R. can act

to moderate Soviet political ambitions, they

view cooperation in energy development as

mutually beneficial and overall trade as part

of their traditional relationship with the

U.S.S.R.

ITALIAN-~SOVIET ENERGY

TRADE, 1970-8 0

Italian Energy Equipment and

Technology Exports

The U.S.S.R. and Italy signed their first

postwar bilateral trade agreement in 1948,

and since the early 1960’s trade in energyrelated equipment has been a major component of Italian exports to the Soviet Union.

— .

33 In 1979 total imports from the CME A amounted to 5 percent of all imports; exports were valued 3.6 percent of all exports for the year. Department of State, Bureau of Intelligence and Research, “Trade of NAT() Countries With Communist Countries, 1976 -79,” report No. 31 -AR, Dec. 1, 1980.
Ch. 12— West European-Soviet Energy Relations • 365

Italian firms have exported large-diameter

pipe, refinery and telecommunications equipment, gas turbines, electricity generators,

and compressor stations.

Some Italian firms do as considerable a

business with the U.S.S.R. as do German

companies such as Mannesmann. Finsider, a

subsidiary of state-owned IRI, has been selling large-diameter pipe to the U.S.S.R. since

1962, when Italy defied the U.S.-initiated

NATO pipe embargo. Under current contracts, Finsider will sell 2,5 million tons of

large-diameter pipe and 5,000 tons of steel

pipe and special pipe to the U.S.S.R. over the

next 5 years.34 In all, some 25 to 30 percent

of the firm’s annual production in pipe and

other steel products goes to the Soviet

Union. Finsider has concluded 5-year agreements that provide for partial payment by

the U.S.S.R. in coal, iron ore, and scrap

metal. The company issues promissory notes

which are subsequently discounted and repurchased, an unusual practice in East-West

trade.

There is considerable cooperation between

Italy and the Soviet Union in energy development. Finsider is currently considering

a proposal to assist in the construction of a

coal slurry pipeline from the Kansk-Achinsk

basin in Siberia to the Western U.S.S.R.

Italian firms such as Nuovo Pignone, a subsidiary of EN I, have been important suppliers of equipment for gas pipelines—

compressor and booster stations. ENI has

also discussed prospects for cooperation

with the U.S.S.R. in offshore oil development.

As with West Germany, there have been

discussions for years about joint nuclear

power development involving Italy and various CMEA members. In the Italian case,

agreement in principle has been reached to

build a nuclear power station–in the

U.S.S.R. or Czechoslovakia.35 Since more

than 4,000 workers are now unemployed due

to setbacks in Italy’s domestic nuclear program, there is strong interest among the

Italian corporations involved in such a project. If constructed, the joint Soviet-Italian

powerplant would supply some electricity to

Italy. Reports also indicate that a consortium (Ansaldi Nucleari), in which both the

Italian firm IRI and General Electric are

participants, will build two nuclear powerplants in Romania, each with a capacity of

700 MW. Since Romania plans to build more

than 10 power stations in the next decade,

this contract may provide the basis for additional Italian participation in CMEA nuclear

power development.]’ Italy has thus come

closer than any other European nation to

joint development of nuclear power with

CMEA.

In order to encourage Italian exports, the

Italian Government, like the French and

British but unlike the West German, subsidizes credits to Communist nations.37 Until

1972, this system of cheap credits evidently

worked fairly smoothly, but since that time

the consensus on interest has broken down

and many Italian firms have criticized

the policy of granting low-interest rates to

the U.S.S.R. In 1980, previously arranged

credits having expired, the Soviet invasion

of Afghanistan led to controversy over the

renewal of these cheap credits. The Italian

Government, heeding U.S. wishes, stopped

all negotiation with the U.S.S.R. on the subject, but Socialist and Communist deputies

in the Italian parliament sharply criticized

Italy’s support of the United States. In the

end, Italy announced that a new credit

agreement would not be extended, but that

loans would be granted on a case-by-case

basis. This move was unprecedented for

Italy, given its past commitment to EastWest trade. There may, however, have been

domestic economic reasons for halting the

credits.

“>l{upert (’ornwtll, “ l{onlania to Iluj Rtwctors F’rf)m

1 taliam[ J,S. (;roup, “ I.’irlafl(’ial ‘1’(m(~, \lar. l], 19N 1.

‘-1 n 1966, for example, 1 tal~ t>xt(’ndt’ci a $;)67 million credit

w it h a 14 -}”t~:i r m[it urat ion p(’ri(d for t ht~ C>OIIS[ ruc’t ion of a

Iriat plant in the [ !.S, S. 1{. Sec ( ;l(JII .Alden Smith, ,$’f~~ i(f

L’or{i,qtj ‘/’r([(l(’ ( h’vw }’ork: f)raeg(’r, 197:11, p 16f;.
366 ● Technology and Soviet Energy Availability

Finally, a number of bilateral forums have

been established for discussions of energy

cooperation with the U.S.S.R. involving government officials, businessmen, and technicians. There have been a number of private

joint symposia on Soviet energy development. At one such meeting in Moscow in

1979, a major topic was proposed nuclear

cooperation; at another, held in Italy in 1980,

new developments in energy technology—

including nuclear, geothermal, biomass, and

pipeline technologies—were discussed.38

Government-to-government energy meetings, the most recent of which was held in

March 1981, also provide opportunities for

exploring potential energy development

projects.

Italian Energy Imports From

the U.S.S.R.

In 1979, more than 9 percent of all Italy’s

energy imports and nearly 10 percent of all

the energy it used came from the Soviet

Union. Since 1958, Italy has been importing

Soviet oil under the terms of a series of 5-

year agreements. In 1979, these imports

amounted to 6.7 mmt (0.135 mbd) of oil and

oil products,39 about 5.6 percent of Italy’s oil

imports and 7.2 percent of its total oil requirements for that year. During 1976-81,

the Italian company ENI alone imported 4

mmt of oil annually (about 80,000 bd) from

the Soviet Union. In 1981, however, for the

first time, the supply agreement was not

renewed. At the same time all Western importers of Soviet oil—with the exception of

Finland—were the subjects of delivery cuts,

which some attribute to Soviet failure to

achieve production targets. Italian experts

believe that a new supply agreement will

soon be signed and that ENI will receive

Soviet oil at about the same level as in the

past. Since official energy plans project

growing oil imports, the share of Soviet oil is

likely to decline as part of total Italian oil

imports.

—--.———— 38 See S’ta~~ettCJ Quotidinia Petrolifia, July 2, 1980.

‘qPctnjleum In t(~iligerrce U’eekl,V, ,July 21, 1980, compiled

by Petro Studies.

Italy has imported gas from the U.S.S.R.

since 1974. In 1979, 7 bcm (5.7 mtoe/yr or

0.11 mbdoe)—over 40 percent of Italy’s gas

imports and nearly 24 percent of its total gas

requirements came from the U.S.S.R. Most

of the Soviet gas is imported by SNAM, a

state-owned company which is part of the

EN I group, and distributed throughout

Italy. Soviet gas is evidently competitively

priced.

SNAM has arranged a variety of contracts with Libya, the Netherlands, the

U.S.S.R. and Algeria, to cover Italy’s projected rise in gas requirements over the decade. Beginning in the fall of 1981, Italy will

receive Algerian gas via a new submarine

pipeline to Sicily. Arrangements have been

made for as much as 15.9 bcm (12.9 mtoe) to

be supplied to Italy through this pipeline in

the event of an emergency.

Italy’s official energy plan foresees a rise

in gas requirements from about 30 bcm (24.1

mtoe) in 1979 (see table 88) to about 40 bcm

in 1985. While domestic production is expected to remain stable at about 12 bcm, imports will rise sharply to about 28 bcm. Informed estimates show that in 1985 Libya

will supply about 3, the U.S.S.R. 7, the

Netherlands 6, and Algeria 12 bcm.40 If this

does in fact occur, the Soviet Union will be

providing about one quarter of Italy’s total

gas imports in 1985—considerably less than

the current percentage.

Until 1981 Italy received stable and dependable gas supplies from the U.S.S.R.

These imports came during the early part of

the 1970’s primarily from the Ukraine, and

later from Urengoy in West Siberia. It was

reported that in 1981 Soviet supplies of gas

to Italy fell 30 percent—a fact which some

attribute to “technical difficulties, ” and

others to rising Soviet exports to Eastern

Europe. 41 If such supply shortfalls persist,

the U.S.S.R. is unlikely to be able to provide

40 These import projections, and much of the information in

this section, can be found in U.S. Department of State, Outgoing Telegram, Rome, hlar. 28, 1980, “’I’he Italian PetrOleum and Natural Gas Industry, 1978-79.”’

4’ 1 nterview with officials from Italian Ministry of Foreign

‘1’rade.
Ch. 12—West European-Soviet Energy Relations ● 367

Table 88.—ltaly’s Energy Balance, 1979

Geothermal

hydro and Imported

Oil Gas Coal Nuclear electricity

Total energy requirements

70.9% 18.3% 8.0% 0.15% 3.2%

132.5 mtoe, . . . . . . . . . . . ,.. 93.4 24.1 10.6 0.2 4.2

Energy Imports

—as percent of total energy requirements 91.7% 10.0% 6.9% — 0.46%

143.8 mtoe. . . . . . . . . . . . . . 120.9 13,2 9.1 — 0 6

Energy exports.

22.4 mtoe

SOURCE Business Information Display op cit.

the projected amounts of gas mentioned

above.

Italy also imports CMEA coal. In 1979,

nearly 7 percent of its hard coal imports and

almost 6 percent of its hard coal requirements came from the U.S.S.R. (see table 85).

Coal imports from the U.S.S.R. have fallen

steadily over the past decade—from more

than 2,000 metric tons in 1970 to only 925

tons in 1979.42 Poland has remained a more

important source of Italy’s coal, providing

26 percent of its coal imports in 1979. (Italy

imports the bulk of its coal from the United

States; deliveries from America made up 32

percent of Italian coal imports in 1979.)

Since late 1980, coal imports from the Soviet

Union have fallen still further, as have those

from Poland.

42 “’A 1970 figure from Soviet trade data; 1979 figure from

World Energy Industry, op. cit., p. 108,

Italy, like West Germany and France, has

used Soviet uranium enrichment services.

However, due to delays in the Italian nuclear

program, there will be excess capacity in

Eurodif, the French enrichment facility in

which Italy participates. This means that

Italy could easily depend on Eurodif if

necessary.

In sum, Italy is more reliant on CMEA for

imports of natural gas than the other West

European nations examined here. In addition, Soviet oil and coal have played significant roles in its energy imports. Altogether,

the U.S.S.R. fulfills nearly 10 percent of

Italy’s total energy requirements. This comparatively high level of dependence, together

with past patterns of Italian exports of pipe

and other energy-related commodities, indicate an overall relationship of energy and

trade interdependence with the Soviet bloc

stronger than that of France and on a par

with that of West Germany.

THE UNITED KINGDOM

The United Kingdom has also been favor- tions. Britain’s

ably disposed toward East-West energy from North Sea

cooperation, but a variety of factors dif- 1969. In 1979,

ferentiate the British approach from those of ported 81.6 mtoe

enviable position derives

oil and gas, discovered in

the United Kingdom imof energy commodities and

the other countries discussed here. Most im- exported more than 51 mtoe. Its total energy

portant among these is the fact that the requirements amounted to 224 mtoe (see

United Kingdom is more nearly self-suf- table 89). Therefore, Britain imported energy

ficient in energy than any of these other na- to meet only about 13 percent of all its
368 ● Technology and Soviet Energy Availability

Table 89.—United Kingdom Energy Balance, 1979

Geothermal

hydro and imported

Oil Gas Coal Nuclear electricity

Total energy requirements:

40.3% 19.3% 39.0% 1 .3% .2@

224 mtoe. . . . . . . . . . . . . . . . . . . . . . . . . . . 90.3 43.2 87.2 2.8 .5

Energy imports:

—as percent of total energy requirements 31.4% 3.6% 1.3%

81.6 mtoe. ... . . . . . . . . . . . . . . . . . . . . .

— —

70.4 8.2 3.0

Total exports:

54.9 mtoe

SOURCE Business Information Display op cit

energy requirements. It can afford to be

quite distanced from the U.S.S.R. in its role

as energy supplier.

A political factor also distinguishes the

current British approach. The United Kingdom refused to follow the 1962 NATO pipe

embargo, and in the past it has generally

pursued a course of separating trade with

the Soviet bloc from politics. However, the

Thatcher government has been the strongest

supporter of U.S. initiatives aimed at using

trade sanctions as a lever against the Soviet

Union. Dissenters have questioned the efficacy of such an approach, but Britain’s

political stance has been considerably more

distanced than that of the continental Europeans to East-West trade and energy cooperation issues.43 Britain’s weaker involvement with the Soviet bloc is illustrated in the

trade data. In 1979, only about 1 percent of

all British exports went to CMEA, and energy-related trade represented only about 12

percent of all British exports to the Soviet

Union (see table 84).

ENERGY COOPERATION

BETWEEN BRITAIN AND

THE U.S.S.R.

As noted above, Britain’s very limited

energy relationship with the U.S.S.R. is

primarily determined by its own fortunate

43 For a dissenting opinion, see I louse of Commons, Fifth

Report for the Foreign .Affairs Committee, Session 1979-80,

energy situation. The United Kingdom has

substantial reserves of oil and gas and

enough coal to last 300 years at current rates

of extraction. Table 89 shows Britain’s 1979

energy balance. Energy use by the United

Kingdom is more balanced among a variety

of fuel sources than in most other Western

industrialized nations, and its dependence on

oil is low—about 40 percent of its energy requirements. Coal occupies a position of

about equal importance to oil, with gas third.

Britain’s long-term national energy policy

is based on the development of a balance

among four fuels (oil, gas, coal, and nuclear),

and the further reduction of energy imports

through increased domestic production. By

1985, the government hopes to achieve a net

surplus in oil. In the year 2000—when North

Sea oil and gas production will have

peaked—the plan calls for an equal balance

among various types of energy. National

energy planning in Britain is facilitated by

the fact that many energy industries are

owned or guided by the government.

Afghanistan: The Soviet Invasion and Its (Jon.sequence.s for

British Polic~) (1.onclon: Her hlajesty’s Stationery office,

1980), p. xxxi. The report warns:” . . . Despite large Soviet reser~’es of oil, technical difficulties with extraction could produce circumstances in which a V1’estern embargo of oil technology might lead the Soviet Union or its allies to action in

the Gulf to acquire oil on terms which would be detrimental

to J1’estern interests."
Ch. 12— West European-Soviet Energy Relations ● 369

BRITISH-SOVIET ENERGY

TRADE, 1970-80

British Energy Equipment and

Technology Exports

Only a very small portion of total British

exports go to CMEA, and the United Kingdom has not been as important an exporter

of energy-related equipment to the U.S.S.R.

as have the other Western nations studied

here. Between 1975 and 1979, the United

Kingdom ranked a distant sixth among

Western nations in such sales.

British experts are skeptical about claims

that Western technology is critical for Soviet energy development, but they do believe

that Western exports can nevertheless make

a significant contribution in speeding or easing this development. In the past, British

companies such as John Brown Engineering

and Rolls Royce have sold gas turbine compressor units and engines for use in the Orenburg pipeline. The most promising area for

energy-related exports in the future is undoubtedly in oil and gas exploration and production equipment. Britain has considerable

experience in offshore oil and gas development in the North Sea, and such technology

could contribute to the development of the

Soviet Baltic and Barents seas.

In 1976, British Petroleum signed a technological cooperation agreement with the

Soviet Union which covered certain energyrelated areas—modernization of refineries,

secondary and tertiary oil recovery technologies, and offshore exploration. But despite the fact that the British government

has extended credits to facilitate this agreement, little concrete action has yet been

taken on the Soviet side, and there exists no

elaborate system of working groups (as is

the case in France) to manage the details of

specific projects.

The British Government provides subsidized credits to Communist nations through

its Export Credit Guarantee Department. In

recent years, the Soviet Union has not taken

full advantage of this cheap credit. The longterm U.K.-Soviet trade agreement expired in

early 1980, but as was the case with Italy,

the Afghanistan invasion led to no new

agreement being reached, and since then

credits have been supplied on a case-by-case

basis.44

British Energy Imports

From the U.S.S.R.

The United Kingdom imports no Soviet

gas and in 1979 imports of Soviet oil and oil

products amounted to 2.9 mtoe (two-thirds

of it in the form of crude oil), about 4 percent

of the nation’s oil imports and 3 percent of

its oil requirements (see table 85). During the

same year the United Kingdom exported

more than 49.7 mtoe of oil and oil products.

Soviet oil imports are clearly not critical to

Britain’s energy balance. Nor could it be

argued that coal imports (from Eastern Europe) are important, since domestic coal production is so large.

In sum, Britain’s relatively high level of

energy self-sufficiency gives it less incentive

for involvement in energy trade with the

U.S.S.R. than other West European countries. In addition, as past patterns of trade in

energy and energy-related equipment with

CMEA show, the United Kingdom is less involved with CMEA in this area than any of

the other four West European nations reviewed here. Should these trends change and

a policy of expanded trade with the Soviet

bloc be instituted, however, Britain’s experience with North Sea oil and gas could

put it and its corporations in a good position

to assist Soviet offshore petroleum development.

SUMMAR Y

The previous sections have briefly examined the energy-related trade relations

between West Germany, France, Italy, the

United Kingdom, and the Soviet Union. This

survey has shown that, although East-West

44 Testimony of Christopher Mallaby from the F’oreign and

Commonwealth Office in the House of Commons, op cit..

p. lo.
370 - Technology and Soviet Energy Availability

trade makes up only a small portion of the

overall trade of these nations, energy-related

exports in 1979 constituted about one-third

of Italian, approximately one-quarter of

West German and French, and about 10 percent of British exports to the U.S.S.R. (This

may be compared with 45 percent for Japan

and 7 percent for the United States. ) In absolute amounts, this translates into nearly

$1 billion worth of energy-related exports in

1979 for West Germany, and nearly one-half

billion each for France and Italy. Particularly in West Germany, much of this trade is

concentrated in the steel industry, where a

significant number of jobs depend on it. Important industrial sectors in Western

Europe, therefore, have strong interest in

trade with the U.S.S.R,

These nations also import energy from the

Soviet Union. The most important Soviet

energy export to Western Europe is gas. At

present, 43 percent of Italy’s and about 20

percent of West Germany’s imported gas

comes from the U.S.S.R. The corresponding

figures for gas consumption show that Italy

imports from the U.S.S.R. nearly 24 percent

and West Germany about 16 percent of the

gas they require. These figures may be interpreted in several different ways. In no country examined here, for instance, does Soviet

energy constitute more than about 9 percent

of total energy imports or 10 percent of total

energy consumption. Once again, it is clear

that while overall “dependence” on the

U.S.S.R. is low, the importance of certain

forms of Soviet energy -i.e., gas–may be

disproportionately prominent in the imports

of some West European countries.

FUTURE PROSPECTS FOR ENERGY INTERDEPENDENCE:

THE WEST SIBERIAN GAS PIPELINE PROJECT

OTA’s examination of past patterns of energy cooperation and trade between Western

Europe and CMEA reveals increasing, but

at present still limited, levels of interdependence. Except in specific sectors of

energy or equipment trade (gas imports for

FRG and Italy; energy equipment exports

for FRG, France, and Italy), levels of interdependence have remained relatively low.

This situation will not necessarily persist.

The “Yamburg” gas pipeline project has the

potential for raising the level of Soviet-West

European energy interdependence in both

quantitative and qualitative terms.

one reason for the controversy surrounding this project is that it embodies the

classic dilemmas of interdependence with

the Soviet bloc. The U.S.S.R. has been anxious to enlist Western participation—

particularly that of Japan, FRG, and Italy–

because in terms of sheer construction and

manufacturing capacity, the project may

well be beyond the ability of the Soviet gas

industry alone to handle efficiently and expeditiously. The U.S.S.R. possesses the technical knowledge to construct such a pipeline

itself, but could not without massive domestic economic adjustment produce pipe of

adequate quantities and quality. Moreover,

equipment could be paid for in exports of gas

to the West. This is a clear case in which

Western equipment and know- how could

make a significant contribution to speed

Soviet energy development.

In return, the pipeline will provide Western Europe with greatly expanded gas deliveries. The gas may largely replace exports

of Soviet oil. This may somewhat offset projected levels of dependence on Soviet energy

as a whole, but that level is likely nevertheless to rise. Likewise, the fact that the

project offers opportunities for Western exporters of energy-related equipment raises

the potential for Soviet manipulation of competing suppliers. Much of the equipment to
Ch. 12— West European-Soviet Energy Relations ● 371

photo Credit Oil and Gas Journal

Soviet gas pipelaying barge used in the construction of pipeline from Urengoy to the Ukraine

be used in this project–compressor stations,

pipelaying, and telecommunications equipment, for instance, could be manufactured

by firms in several Western countries. There

is, therefore, strong competition among various potential Western suppliers. Moreover,

discussions over the export pipeline are occurring in a period of heightened East-West

tension. The difficulty of assessing these

costs and benefits, together with the magnitude of the deal and its timing, make it a test

case for East-West energy relations that

may well set a precedent for future projects.

A great deal of confusion has surrounded

the West Siberian gas export project.45 One

reason is that negotiations are still underway and many details have yet to be settled.

A second problem is the lack of a single

authoritative source of information; accounts must often be assembled from periodicals in a number of different countries,

and these are sometimes inconsistent or contradictory. Third, and perhaps most im-
372 - Technology and Soviet Energy Availability

portant, incomplete information on changing

Soviet plans, together with a general Western lack of familiarity with Soviet geography

and geology (particularly the status and

location of Soviet gas deposits), has led to

the persistence of a number of misconceptions about the proposed route of the new

pipeline and the source of the gas which it is

to carry.

Yamburg is a supergiant gasfield located

in West Siberia and extending north toward

the Arctic Ocean. It is said to contain one of

the world’s largest untapped proven resources of gas—an estimated 2.6 trillion

cubic meters. (This is equal to 2.1 billion tons

or 15.6 billion barrels of oil equivalent. ) But

although this field has given its name to the

new gas export pipeline which will supply

Western Europe, it is itself not expected to

produce gas until at least the end of the

decade. Until that time gas destined for

Western Europe will come from Urengoy,

the world’s largest gasfield, about 150 miles

to the south. Initially, this gas will be

transported through additions to the existing pipeline network. For instance, construction of a 56-inch pipeline which parallels

the Northern Lights line to the Czech border

is now well underway. (In April 1981, this

new string had reached some 250 miles

northeast of Moscow.) This line is scheduled

to be put into service in 1984, and is only one

of several new 56-inch pipelines planned for

construction after 1982.

Another high-pressure 56-inch pipeline

from Western Siberia is also planned. It is

the latter which is commonly referred to as

“Yamburg.” The new export pipeline may

eventually have two legs. It would seem that

the U.S.S.R. now plans to build the first of

these by the mid-1980’s, reserving the latter

for the end of the decade.

There are both economic and political

advantages for the U.S.S.R. in exporting

Urengoy gas. Unlike Yamburg, Urengoy is

already a producing field. It will be significantly cheaper for the Soviets to further

develop Urengoy than to initiate operations

at Yamburg, and it thus makes good

economic sense to postpone development of

the latter. Because key segments of the new

line will follow the existing routes, construction and borrowing costs should be significantly reduced. This is an important consideration. Estimates of the cost of this project have ranged from $15 billion to $20

billion to as much as $40 billion. On the

political side, this plan may well be designed,

at least in part, to minimize political controversy over the entire export scheme. The

Western equipment which the U.S.S.R. will

need can now be purchased for expansion of

the existing pipeline network, without

necessarily specifying for which project the

equipment will be used.

Regardless of where the gas is to come

from, the new pipeline to Western Europe

(hereafter referred to as Yamburg to conform to popular usage), together with the additional pipeline capacity already under construction, will allow a significant increase in

Soviet natural gas exports to that region.

Eventually this pipeline could bring Soviet

gas to as many as 10 West European nations—West Germany, France, Italy, Belgium, Austria, Finland, the Netherlands,

Switzerland, Sweden, and Greece. One Western estimate is that by 1985, Soviet natural

gas exports to Western Europe will increase

120 percent over 1980 levels; by 1990, they

could exceed 1980 levels by 270 to 330 percent.46 These projections are shown in table

90. The 1988-90 projections shown here, 90

to 105 bcm, are the equivalent of 73 to 85

mmt/yr or 1.5-1.7 mbd of oil. In 1980, the

U.S.S.R. exported about 66 mmt of oil (1.3

46 Ibid,

Table 90.—Soviet Exports of Natural Gas to

Western Europe (in billion cubic meters)

Exlstlng transit Planned new

pipeline and West Siberian

Year Total additions (Yamburg) pipeline

198 0 24.5 24.5 —

19811983 “. 25.0 25.0

1984 32-46 32-46 —

198 5 53.0 53.0 —

1986 62-76 53-58 9-18

198 7 71-91 53-63 18-28

1988-199 0 90-10.5 53-68 37.0

SOURCE Wharton Econometric Forecasting Associates, Inc.
Ch. 12—West European-Soviet Energy Relations ● 373

mbd). The energy of value of Soviet gas exports to Western Europe could therefore exceed that of its oil exports by the end of the

decade.

WEST EUROPEAN POLICY

PERSPECTIVES

At the heart of controversies over Yamburg has been the question of whether or not

Western nations might become unacceptably subject to Soviet economic, political,

and energy leverage by virtue of their participation. If Western nations such as West

Germany and France become more dependent on the U.S.S.R. for their gas, will they

become in fact hostage to Soviet political

pressure? This section reviews the relevant

policy perspectives of groups in West Germany, France, Italy, and the United Kingdom. These reflect concern about increasing

dependence on Soviet energy among West

Europeans, but also fairly strong support for

the project and considerable competition

among the potential participants for contracts and sales. From the West European

perspective, the Yamburg pipeline offers attractive export and import possibilities, and

private firms likely to expand their sales if

the project materializes have been at the

center of negotiations.

West Germany

The FRG has taken a leading role in all

aspects of the Yamburg discussions, with

West German equipment suppliers–particularly the steel firms—playing key roles.

West German banks and Ruhrgas, the country’s largest gas importer and distributor,

have also participated. Industrial and financial groups have evidently coordinated their

efforts closely with the West German Government. But while the negotiations have

primarily been carried on between Soviet

officials and West German manufacturers

and bankers, the scope of the project and its

political sensitivity mean that government

officials throughout Europe have been consulted.

In recent months, there has been a good

deal of debate about Yamburg among informed policy makers in West Germany. The

general consensus is that the pipeline is

desirable for both economic and political

reasons. This conclusion is based not only on

the general orientations of West German industrialists and bankers toward trade with

the East, but also on a fairly detailed assessment of security implications, policymakers

believe that trade acts as an incentive to

restrained Soviet behavior in Europe, and

many claim that the Yamburg negotiations

may well have acted as a deterrent to a

Soviet invasion of Poland.

Although the focus of much of the discussion between the United States and the FRG

about Yamburg has been energy imports,

the primary incentive for West Germany has

been equipment exports. For West German

firms such as Mannesman Steel Works,

which last year exported to the U.S.S.R. 60

percent of the large-diameter pipe it produced, Yamburg represents the latest and

largest in a long series of pipeline projects

which help to to employ a few thousand

workers. In fact, many West German government and business spokesmen generally

view East-West trade as mutually beneficial,

and the Yamburg project is particularly attractive because of the jobs it is likely to

create. 47 It is not surprising that West German steel firms, including state-owned Salzgitter, have actively lobbied for the project.

A second important attraction of the

pipeline is its potential for expanding energy

supplies and diversifying energy sources.

Several factors—levels of total imports from

the U. S. S. R., projected West German domestic production, and imports from alternative suppliers—affect calculations of the

significance of Yamburg for the FRG. West

Germany already receives about 16 percent

of the natural gas it consumes from the

Soviet Union. The new pipeline would sig-
374 • Technology and Soviet Energy Availability

nificantly increase Soviet gas supplies, but

the exact levels of dependence likely to result are difficult to predict. This is partly due

to the abandonment of the IGAT II project,

which has now reduced anticipated gas supplies from the U.S.S.R. Yamburg could not

only make up for IGAT II; it could also more

than double the volume of Soviet gas imported by the FRG in 1979 (9.8 bcm).

Forecasts of FRG dependence likely to

result from Yamburg vary not only according to assessments of IGAT II, but also

according to forecasts of overall West German dependence on natural gas in the years

ahead. If the FRG increases its consumption

of natural gas from 60 to 80 bcm between

1980 and 1990, and if supplies from the

U.S.S.R. rise to 24 bcm, then Soviet gas

might represent more than 30 percent of

West German gas consumption. The West

German cabinet in 1980 announced that importing up to 30 percent of its natural gas

from the Soviet Union would not constitute

a security risk.48 However, German gas firms

do not need the permission of the government to import gas. Some observers estimate that by the year 2000 the FRG could

be importing 40 percent of its gas from the

U. S. S. R.,49 but there is no concrete evidence

to suggest that this is likely.

Evaluations of future dependence also

hinge on assessments of the reliability and

availability of alternative suppliers of gas.

Some West German observers view the Soviet Union as a reliable supplier—at least in

comparison to the Dutch, who have threatened to cut off gas because of a dispute over

prices. Algeria is another alternative, but it

has recently reneged on a contract for a

natural gas liquefaction plant. Norway,

which will be supplying small amounts of

gas to the FRG beginning in 1985, could

potentially provide more if the Norwegians

decide to develop more of their gas,50 but

4“Iler Spiegel, No. 26, 1980.

‘qk$rolfgang Nlueller-llassler, “I)ie lrerantwortung de r

(~asmanner,” b’ranhfurtrr A//~vnleirle z<~it[ln~, Jan. 1 () ,

1981, p, 11.

““’~ orwegen will mehr (ias I.iefern ” Sl;ci(ivu t .sche Zeitung,

Dec. 23, 1980.

Norway has proved extremely difficult to

deal with in these matters. Nigeria will begin

supplying West Germany after 1984; and a

variety of other nations might also sell LNG

to West Germany.

Another factor which will influence the impact of increased levels of Soviet gas on FRG

energy import dependence is West German

domestic gas production. While some observers anticipate that domestic output will

continue to supply Germany with about 30

percent of its gas needs, others worry that

the level of domestic production might fall,

partly because important deposits may be

technically difficult to exploit.

West German spokesmen are skeptical

about the prospect of increased Soviet leverage over the FRG by virtue of its energy

exports. First, at least until quite recently,

the Soviet Union had the reputation of being

a reliable exporter. It is true that in 1981 the

U.S.S.R. announced a 30 percent cutback of

gas deliveries to the FRG, but these reductions caused little difficulty because West

Germany had alternative supply arrangements. 51 On the other hand, while West German observers point out that Algerian and

Libyan suppliers have been less reliable than

the Soviets in years past, the Soviet Union

may be said to have a far greater political interest in West Germany. The incentives to

use such threats for political purposes may

therefore be stronger. Similarly, some argue

that the Soviets would be unlikely to suddenly withdraw or threaten gas cutoffs to the

FRG since the Soviets themselves need the

equipment and the hard currency which gas

exports will provide. While this argument

makes sense in the short term, according to

this logic, after the pipeline is in place, West

Germany could be more vulnerable to a supply cutoff, or the threat of one.

A third line of reasoning holds that viable

alternatives to Soviet gas provide a deterrent to the U.S.S.R. use of political pressure. The FRG could buy gas from a number

“’Otto (;raf I.amhsdorff, ‘

( Pladoyer fur sowjetishes F:rdgas, ” Rhc~ini.schc Alcrkur, (’hri,vt un(i ~i’~lt, No. 4, Jan. 17 ,

1981.
Ch. 12— West European-Soviet Energy Relations - 375

of nations, including Holland. Current plans

are to reduce Dutch imports as more West

Siberian gas begins to flow, but the Dutch

have evidently agreed in principle to provide

supplies in the event of shortfalls of Soviet

gas. There is also the possibility of LNG

from the Persian Gulf. Secondly, since the

West German gas pipeline network is interconnected, shortfalls could be equalized

through the country, and deficiencies in supply from the Soviet Union could be compensated for by increased supplies from the

North Sea, to which a pipeline now extends.52

Another protection lies in underground storage—about 2.5 bcm of gas are now stored underground and this is to be increased. (West

Germany also has oil stockpiles for about

100 days. ) Fourthly, many contracts with industrial users are “interruptible,” meaning

that industries are responsible for providing

alternative energy for periods of up to 50

days if necessary. And finally, more dualfired burners will be used in industry so that

power stations can switch to oil or coal in

connection with interruptible contracts. In

short, according to spokesmen from the gas

industry, the FRG could now survive a total

cutoff in gas from the Soviet Union if it were

forced to do so. 53

One major, as yet unanswered, question

surrounding the effect of a Soviet gas cutoff

concerns which customers would be most affected. Most Soviet gas will go to Bavaria in

southern Germany, site of the automobile

and chemical industries. These may be less

vulnerable to energy supply interruptions

than the more energy-intensive steel industry, concentrated in the north. The proportion of gas going to households is also an important variable. Given present information,

there is no way of evaluating the likely impact of cutoffs on these various consumers.

The tone of the West German debates

about contingency planning and substitute

supplies suggests that under current condi-

— — — 52 Answer to State Secretary A. ~’on L$’uerzen to Hundestag

mem}wr I,int net- i n I )eu tscher 13undestag, [)rl~(’k .s[zche, 935,

pp. 9-10.

‘ ‘I leinz ( ;unther Kemmer, “~$renn Nloskau an (;ashahn

dreht, ” /)ic Zcit, .Jan. 211, 1 !)fi 1, p. 23.

tions, the West German Government believes that most consumers would not be

greatly affected by a cutoff in supplies from

the Soviet Union—all other things being

equal. However, if such a shortfall were associated with a worldwide energy crisis, perhaps precipitated by an OPEC oil embargo,

the ramifications could be much more serious. To the extent that West German dependence on Soviet gas increases, contingency planning becomes even more important.

Timelags associated with substitution of

alternative forms of energy for Soviet gas

might cause hardship for certain consumers.

While West Germany seeks to develop alternative supplies and contingency arrangements, these cannot completely eliminate

the potential threat of a gas cutoff by the

U.S.S.R.

At one time, financing was the most problematic aspect of the pipeline for the West

Germans. The Soviet Union has been a reliable creditor, paying back loans for previous

gas-pipe deals an average of 3 years early.

The West German Government does not

subsidize export credits. While the banks

would probably prefer to use a system of

floating credit rates for at least part of the

loans, West German equipment suppliers object to this arrangement since floating rates

would allegedly complicate supply contracts.

The Soviet Union at first established a tentative arrangement for $5 billion in credits.

This involved a consortium of more than 20

West German banks, led by the Deutsche

Bank.54 In early 1981, a deal was worked out

whereby the banks would offer a fixed interest credit worth 9.75 percent (a nominal

external rate of 7.75 percent plus a 2-percent

increase in charges for West German equipment). The credit was to last for ten years.

As interest rates rose in West Germany,

however, the Deutsche Bank and others began to reconsider the Soviet credits.55 The

West Germans have now found a new, acceptable credit formula and negotiations

“’Ke~’in I)are, 4‘So~riet Gas Project I,oans Deadlock, ”

l’iT7an(i(Jl ‘1’im(’s, hlar. 16, 1981.

“’See ,John \l. (;eddes, “(; ermans offer I,oan to So~’iets for

(;as I)ipeline” 11’[1// .Str(~{~t .Jf)urnal F’eh. 2, 1981 .
376 ● Technology and Soviet Energy Availability

have turned to the question of gas prices.

Credits are to be provided in stages, an arrangement that not only allows for the contingency that interest rates may go down,

but which also helps to reduce the political

sensitivity of the deal. West German financing, instead of being concluded in dramatic,

billion dollar segments, will take on a much

lower profile, incremental aspect.

In sum, both the official position of the

West German Government, and informal

opinion in the FRG business community,

strongly favor the pipeline project. Although groups within opposition parties

have expressed reservations and asked for

risk assessments, no party has come out in

open opposition. 56 Interest in contingency

planning to minimize risks is growing. It appears that, failing a Soviet invasion of

Poland or counterproductive pressure from

Moscow over the terms of the deal, the pipeline will be built with strong support from

West German firms.

France

French policy makers are interested in the

pipeline project for the same reasons as the

West Germans–expanded gas supplies and

equipment export opportunities. Delivery of

8 to 10 bcm/yr of Soviet gas will add significantly to French dependence.57 In 1979,

France received 1.9 bcm–less than 10 percent of its imported gas and about 7 percent

of its gas consumption—from the U.S.S.R.

Some observers estimate that by 2000 the

U.S.S.R. might be providing almost 30 percent of French gas.

The Soviets have been negotiating with

French firms for credits, which could amount

to $4 billion, and for equipment, but these

discussions slowed in early 1981 in anticipation of the French election. Negotiations

over French credits continue, with the Credit

“’[i einz Riesenhuher in (’I)U CS~l }>r{~.s,s{’[ii(’r?st, Jan. 7,

19H1

‘ I.’or estimates of Yamhurg gas exports to lrarious W’est

F;uropean nations, see Rohert W’. Ball, ‘ 4 k;urope W’arms to

Soki(’t (;as, ” l’f)rt((r~c, ,June 1, 1981, p. 7/+.

Lyonnais taking the lead for a consortium of

French banks.

Like the West Germans, French policymakers have been generally positive toward

the Yamburg project. They have tended to

believe that the Soviet Union will have a

long-term interest in assuring continued supplies of Western equipment, and that the

U.S.S.R. will be a reliable supplier of energy.

These beliefs were apparently unshaken by

the fact that in the winter of 1979-80, gas

shipments from the U.S.S.R. to France fell

about 30 percent, due primarily to weather

conditions. The shortfalls evidently did not

cause any great hardships.

It would be technically possible for the

Soviet Union to reduce or cut gas supplies to

France without affecting West Germany,

although the reverse is impossible—i.e., a

cutoff of West Germany would also involve

France. It would seem, however, that potential Soviet economic or political leverage

over France is relatively small and there are

at present no obvious incentives for such a

cutoff. Additionally, the French have considered—perhaps more carefully than the

West Germans—contingency arrangements

in the event of gas supply shortfalls. France

currently has 4 bcm of gas stored underground, and this stockpile will be doubled in

the next 10 years. Moreover, French planners intend to place a ceiling on domestic gas

use, allowing no more than 45 percent of the

total to be used for household consumption.

Gaz de France also hopes to increase interruptible supply contracts with industry during the next decade to about 30 percent of all

industrial contracts. Company spokesmen

say that all Soviet gas will be sold on the

basis of interruptible supply contracts, and

that none of it will be used for home heating.

Despite this stress on contingency planning and risk assessment, however, it would

be a mistake to suggest that France would

be unaffected by a Soviet gas cutoff. As is

the case with West Germany, if Soviet gas

supplies reach levels of 30 percent or more of

total gas consumption, the effect of a cutoff
Ch. 12— West European-Soviet Energy Relations ● 377

could be significant, particularly if it occurred in the context of a worldwide energy

crisis.

On the whole, it appears that while the

French Government has supported the export pipeline, it has been less enthusiastic

than the FRG. The new Socialist government may in time develop a different attitude toward the project, but all the major

French parties have in the past indicated

their support. The French have left it to the

West Germans to take the lead in negotiations, but they are nonetheless committed—

both to the prospect of increased Soviet gas

imports and to the idea of continued trade

with the U.S.S.R.

Italy

Italian negotiations over Yamburg are at

a more preliminary stage than those of either

West Germany or France, Here, financing

questions loom large, and only limited discussions have been held between Soviet officials and Italian equipment suppliers.58 The

pipeline was the main topic at the March

1981 meeting of the Italian-Soviet Economic

Commission, but the results were inconclusive. The Italian Government has decided to

set up an interministerial commission to

study the project.59 The question may eventually be taken to a vote in the Italian parliament—a move that would be unprecedented

in Italian relations with the U.S.S.R.

Given these uncertainties, it is difficult to

predict the significance of the project for

Italy. Yamburg could yield between 5 and 10

bcm/yr of additional gas. Assuming a midlevel of 8 bcm, this would double Italian imports of Soviet gas (in 1979 these were 7

bcm). 60 If Italian gas consumption reaches

the expected 40 bcm by 1985, Soviet supplies would account for 40 percent of Italy’s

gas consumption. Extensive Italian participation in Yamburg would thus ensure a con-

“1/ }.’lf~rinf), Nlar, H, 1 $)/i 1.

‘“// (J’Iornu/[J, Nlar. 1 ‘7, 1981,

60 See statement by. I“; nrico hl:inca, N1 inist [’r of Foreign

Tra(]e, in // ,tl[i i{l~{r,~, Nlar 14, 19X 1.

tinued high level of dependence on Soviet

energy.

Italy does not now have elaborate plans to

deal with potential reductions in Soviet

energy supplies—a point worth noting, given

the present level of Italian import dependence on Soviet gas. While the Italian

gas corporation SNAM does not now have

interruptible gas contracts, there are plans

to introduce such arrangements if and when

the pipeline project proceeds. There are also

plans to increase stockpiles. At present,

however, it would appear that the major contingency plan calls for use of the Algerian

pipeline to pump additional supplies in the

event of an emergency.

On the equipment export side, a number

of Italian firms might participate, but the

central issue has been financing. At a

meeting of Italian and Soviet government officials in March 1981, the Soviets reportedly

asked for credits to cover 85 percent of the

financing of equipment exports worth $3 billion to $4 billion, at an interest rate of 7 percent.61 The Italian Government is clearly

doubtful that these conditions can be met.

Firms such as Finsider, which sells largediameter pipe, and Nuovo Pignone, which

sells compressor stations, naturally favor

the deal, but financing problems have precluded final agreement.

In sum, the Italians favor Yamburg, but

with some reservations. If financing problems are solved–and this may be a major

obstacle—then the predisposition of Italian

leaders is to participate. But there is

markedly less enthusiasm here than in West

Germany or France. The Italians are both

the most dependent of this group on Soviet

energy, and the most cautious about continued and increased reliance on the Soviet

Union as a gas supplier.

Britain

Of the nations included in this study, Britain has the least vested interest in the West

Siberian pipeline project. But although the

61 II }’i(~rr’no, Mar. 10, 1981.
378 ● Technology and Soviet Energy Availability

U.S.S.R. would not provide gas to the

United Kingdom, British firms such as John

Brown, Rolls Royce, and Cooper Industries

could sell equipment for the project. British

financial institutions have discussed the

possibility of extending credits to this end,

but talks remain at a preliminary stage.

The pipeline has received less attention

in Britain than elsewhere in Europe or in

the United States. Government spokesmen

claim that the question of what constitutes a

reasonable or dangerous level of dependence

on Soviet energy is something that other

governments must decide for themselves.

There has been no official comment about

the desirability of the project from the

perspective of West European energy security. Indeed, the British case illustrates the

clear connection between the energy and

trade position of each Western nation and its

interest in Soviet gas development. More

nearly energy self-sufficient than any of the

other nations, and traditionally less involved

in East-West trade, the United Kingdom is

understandably the least active participant

in negotiations.

SUMMARY AND CONCLUSION S

West Germany, France, and Italy all look

to the Soviet Union not only as a way to increase energy supplies, but also as an attractive market for equipment exports. Barring

unexpected political or economic developments in Europe, therefore, the West Siberian gas export pipeline will probably be

constructed, and West Germany, France,

and Italy will certainly become more dependent on Soviet gas. While it is very difficult to

make precise determinations of the impact of

West Siberian gas on the energy balance of

each nation, reasonable estimates are that

both West Germany and France could depend on the U.S.S.R. for about 30 percent of

all gas imports, and that Italy could receive

almost 50 percent of its imported gas from

the Soviet Union, The corresponding percentages for total gas and total energy consumption would depend on the energy balance of each country at the time—a highly

uncertain matter. It must be remembered,

however, that to some extent Soviet gas will

replace, not supplement, Soviet oil in these

countries, and that even with these import

levels, energy dependence on OPEC is likely

to remain much higher than dependence on

the U.S.S.R. If the overall energy dependence of each nation examined here on the

U.S.S.R. doubled, that dependence would

range from about 3 percent in the case of Britain to nearly 20 percent in the case of Italy.

A sudden cutoff in gas supplies from the

U.S.S.R. would impact each nation differently, but none would be immune from hardship—particularly in the context of a tightened world oil market or energy crisis. All

would benefit by the development of more effective contingency plans to allow for substitution of alternative energy supplies in the

event of a shortfall in Soviet gas. Such plans

would diminish incentives for the Soviet

Union to make use of its “gas weapon” to

pressure Western Europe. Emergency planning would be most effective if it were undertaken by all the nations involved. Joint planning would reduce the ability of the Soviet

Union to divide Western Europe by playing

one country off against another. However,

the prospects for coordination of West European policy toward trade and energy relations with the U.S.S.R. are not bright.

PROSPECTS FOR WEST

EUROPEAN POLICY

COORDINATION

One indication of Western Europe’s willingness and ability to coordinate policy

toward the U.S.S.R. was its response to the

trade sanctions initiated by the United

States against the Soviet Union following

the invasion of Afghanistan. In January

1980, President Carter announced that U.S.

exports of certain agricultural commodities

and of high technology items would be

restricted. In March 1980, these restrictions

were intensified.

The extent to which America’s allies were

prepared to support these sanctions was un-
Ch. 12— West European-Soviet Energy Relations ● 379

clear.” In the area of “high technology” (including computer systems, other advanced

electronic equipment, and automated machine tools) a policy of “no exceptions” to

CoCom controls was established. The expectation was that sales in these areas would be

drastically reduced. But, except for the

United Kingdom, West European nations,

on the whole, were and remain unsympathetic to the political use of economic pressures against the U.S.S.R. One important exception was made to the CoCom “no exceptions” policy—exports of spare parts for oil

and gas pipelines were not restricted. 63

CoCom’s decision was based on the reasoning that it is not in Western Europe’s interest to reduce the efficient functioning of

the Soviet pipeline system which carries

energy to the West.

In fact, the West European response t o

the economic sanctions initiated by the U.S.

was largely one of “every man for himself. ”

As table 91 shows, during 1980 all of the

allied nations reviewed here increased their

overall exports to the U.S.S.R. (Japan and

Britain were the most supportive of U.S.

sanctions, and the French and Italian governments did limit credits for the Soviet

Union.) 64 West European businessmen openly criticized the sanctions as ineffective and

contrary to the fundamental interest of the

West. Both West Germany and France officially expressed their wariness of the sanctions; and discussions over the gas export

—. — ——— —-— 62 U.S. Senate, Commit tee on llanking, }Iousing, and Urban

A ffa i r~, ,Suhcom mit tee on 1 n terna t iona 1 Fi na rice, ‘‘ (J. S. h; mhar-go of J+’o(A and ‘1’echnolog? to the Soyiet IJnion, ” ,Jan. 22

and illar. 24, 1980, pp. 36 and 117.

“‘Ri(’hard N. Cooper, ‘Lh; xport Restriction on the LJ.S.S. R.,”

(’urrcnt l’(~lic}, No. 211, /\ug. 20, 19N().

“’~’e(i[’rico Bungo, “Cossiga 1 nfuria, 11 Piano Manca,”’

1, ‘}.’\prcs S(A .June 15, 19W, See also 1/ ~’if~rz’no, <June 15, 1980.

pipeline project and other deals continued

throughout 1980. In a number of cases, West

German and French firms won contracts

which had been nearly completed by U. S.,

Japanese, or British firms. In Britain, the

Thatcher government support for the sanctions was openly questioned in a report for

the House of Commons Foreign Affairs Comittee. The report concluded that a Western

embargo of technology needed by the Soviet

Union for energy development might well

prove counterproductive by stimulating

Soviet aggression in the Persian Gulf. Thus,

rather than responding with a set of joint

policy initiatives, Western Europe remained

divided.

This response not only illustrates the difficulty which the United States has had–

and may well continue to have—in influencing West European trade relations with the

U.S.S.R. It also reflects the limited ability of

EEC nations to coordinate East-West trade

policies. The EEC treaty calls for development of joint trade policies toward CMEA.

But, despite repeated efforts on the part of

EEC to persuade its members to negotiate

one multilateral treaty with each CMEA nation, a joint approach has not emerged. EEC

has legislation which prohibits the establishment of bilateral trade treaties, but its

members have circumvented the substance

of this position by concluding separate

‘‘cooperation” agreements with East European nations–for example, the FRG’s 1978

25-year agreement with the U.S.S.R. for

long-term cooperation in energy and trade.

This limited coordination also exists in

energy policy, a fact largely the result of the

differing resource endowments and differing

Table 91 .—Exports of Western Nations to U.S.S.R. 1975-80 (millions of U.S. dollars)

United States ‘- - Japan France West Germany Italy United Kingdom Total 6

1975 . . . . . . . . 1,625 1,147 2,824 1,020 -

964 8,914

1979 ., . 3,604 2,461 2,007 3,619 1,220 694 13,605

1980 . . . . . 1,664 3,075 2,712 4,811 n/a 1,162 13,424

(without Italy)

– 540/o + 24.9% + 35% + 32% NA + 67%

SOURCE 1975-79 UN SITC 1980 preliminary IMF data

—
380 ● Technology and Soviet Energy Availability

interests of the various EEC members.65

Discussions of energy security within EEC

have dealt with such issues as oil stockpiles,

conservation, and substitution of coal and

other energy sources for oil, but it is not

clear that even the small degree of coordination achieved can be translated into the area

of East-West energy relations.

Efforts to promote multinational energy

cooperation have also resulted in discussions

of an ‘‘all-European energy conference.

This idea originated in 1971 with a proposal

by Soviet Prime Minister Kosygin for greater East-West cooperation in energy.66 Proposals for such a conference have surfaced

over the years at both the United Nations

Economic Commission for Europe (ECE)

(both the United States and the U.S.S.R. are

members) and at the Conference on Security

and Cooperation in Europe (CSCE), most

recently at the 1980-81 Madrid CSCE meet-

———— 65 ——

“See Georges Bronde], “ h;nt~rgy I’olicy and ~h(’ ~; F;(’, ” fi:ncrgJI Polic,)’, Septemlwr 1978, p. 231.

““l)ra(~iu, Apr. 7, 1971.

Interaction between Western

the U.S.S.R. over the course

decade–measured by both the

ing. The United States strongly opposes

such a conference and little progress has

been made on the proposal, although a first

step was taken in 1979 when the ECE established an ad hoc group, of “Senior Advisors to the ECE Governments on Energy. ”

The major effort of the group so far has been

to collect and study responses from member

nations to an energy questionnaire. One

problem has been that energy data from the

Communist nations, particularly the

U. S. S. R., has been either incomplete or unresponsive. In December 1980, ECE published

a report on the energy problems of the ECE

region,” but especially given the opposition

of the United States, the future of this effort

is uncertain. In fact, the all- European

energy conference has become a political

issue between the United States and its

allies in Western Europe who favor its convening.

CONCLUSIONS

Europe and

of the last

level of exports of Western equipment to, and imports

of energy and raw materials from, the Soviet

Union–has increased. While trade with the

U.S.S.R. does not represent a great portion

of the total exports of any of the Western nations examined here, this trade does constitute a significant proportion of production

for certain industrial sectors (e.g., steel).

Similar patterns exist with respect to imports of Soviet energy. No nation included in

this study receives more than about 10 percent of its total energy requirements from

the U.S.S.R. However, in West Germany

and Italy, dependence on Soviet gas now

stands respectively at about 24 and 43,2 percent of gas imports, and 16 and 24 percent of

total gas consumption. If the new West

Siberian gas pipeline project is completed,

such dependence will rise significantly for

West Germany, France, and probably Italy.

The degree of overall dependence for each

West European nation on Soviet energy will

also rise, but given the fact that Soviet gas

exports will largely replace Soviet oil exports, this increase may not be as large as

would otherwise be expected. The existing

situation is one of limited overall dependence

of Western Europe on energy from and

energy-related trade with the U.S.S.R.—but

significantly greater dependence in certain

industrial and energy sectors. If the West

Siberian pipeline is built, Western Europe’s

interdependence in trade and energy with

the Soviet Union will increase further.

To a large extent, this trend may be

regarded as a fait accompli. There is strong

commitment to energy and trade relations

with the U.S.S.R. among all of the nations
Ch. 12— West European-Soviet Energy Relations ● 381

studied here, despite considerable variation

in the salience of East-West energy and

trade for public policy debate. This variation

can be attributed to considerable differences

in the energy and export situations of the

countries. West Germany, by virtue of its

historic ties, its geographic proximity, and

its political concerns, e.g., with East Germany, is most active—both at the official

and at the private diplomatic levels—in actively promoting interaction with the Eastern bloc. Italy, likewise, has developed a pattern of fairly strong energy and trade ties

with the U.S.S.R. and its allies. France, and

especially Great Britain, appear to perceive

less need to promote energy imports (in the

latter case because of North Sea oil, and in

the former because of plans to rapidly develop nuclear power). France, unlike Great

Britain, has played a strong role in exports

of energy-related equipment. The prospects

for interaction between any of these nations

and the U.S.S.R. cannot be understood outside the context of these differing national

interests, experiences, and perspectives.

This is not to suggest that there i s

unanimity in any West European nation

over energy imports from the U. S. S. R., participation in the gas pipeline project or support of U.S. economic sanctions against the

Soviet Union. Nevertheless, the general

predisposition in each country examined

here is to promote interdependence and to be

unwilling to use trade as a lever in EastWest political disputes. The latter Point is

well-illustrated by the fact that West Germany, France, and the United Kingdom all

actually increased exports to the U.S.S.R. in

1980—despite U.S. calls for trade sanctions.

Of course, a variety of domestic political

forces could change West European official

policies toward trade with the U. S. S. R., but

interdependence with the U.S.S.R. is currently viewed as a fact of life. To a great extent, this view is based on a positive attitude

(rather than simple resignation) toward the

perceived potential benefits which EastWest interaction generally, and cooperative

energy development with the U.S.S.R. specifically can confer. These benefits are

perceived in both political and economic

terms.

Unless the political situation changes

dramatically, it is likely that the countries of

Western Europe will participate in the development of the new West Siberian gas

pipeline. If the project proceeds on the scale

currently envisaged, it will lead to a significant growth in West European-Soviet energy independence. The value of the equipment needed for the pipeline is double the

value of all the exports of the industrial

West to the U.S.S.R. in the year 1979. Thus,

completion of the project would be tantamount to a quantum increase in Western

equipment exports to and credit financing

for the U.S.S.R. In addition, while it is difficult to make precise estimates of the

amounts of gas the pipeline will provide to

any one country individually or to Western

Europe as a region, dependence on Soviet

energy will probably increase in the FRCI,

France, and Italy.

The gas pipeline project marks a significant new development in East-West relations. It will require a multinational effort on

the part of Western Europe, and it is precisely this dimension which may be of greatest

long-term significance to the United States.

More than the increased trade and energy

import opportunities which the project

offers—and in both of these areas Western

Europe’s relationship with the U.S.S.R.

would still be considerably weaker than its

dependence on OPEC–a changed political

climate would offer both potential risks and

benefits. On the one hand, the project may

provide an opportunity for the Soviet Union

to lever individual West European nations—

thereby challenging overall Western unity.

On the other hand, if the project stimulates

new types of Western policy coordination, it

could change the overall context of EastWest relations.

The critical question is whether Western

nations, either individually or in concert, can
382 ● Technology and Soviet Energy Availability

act to limit the risks involved. (Any coordinated policy would necessarily involve

Japan–the nation which supplied one-third

of all energy-related equipment exports to

the Soviet Union in 1979. ) One area in which

joint action could be useful is in assessing

levels of energy dependence likely to result

from new Soviet gas pipeline(s), and

planning for contingency arrangements in

the event of a supply shortfall. There is

precedent for such an effort; IEA has

already undertaken such discussions in the

context of dependence on OPEC oil. A critical aspect of such a joint policy approach

would be plans for gas and oil sharing in the

event of a Soviet cutoff, including emergency provision of gas and other energy supplies

from alternative sources.

A second area in which joint policy could

profitably be developed is in further coordinating project negotiations at both official

and private levels. This kind of joint action

cannot be simply decreed; it must be built

carefully and gradually. The absence of formal Western coordination may provide opportunities for the Soviet Union to play

firms in one nation off against another. The

U.S.S.R. could, for example, use an attractive offer of credit from one government to

bargain with another. These tactics could

produce a West Siberian project economically more advantageous to the U.S.S.R. than

to the West. While firms generally tend to

prefer open competition, in this case there

are indications that, informally at least,

some degree of cooperation has evolved

among participating companies; informal exchange of information concerning prices, interest rates and credit terms has set an

unspoken context within which each participant bargains with the U.S.S.R. Such communication, fostered by governments and by

publically owned energy companies, could

help to maintain Western unity. Recent

moves in IEA to establish a system to

monitor prices paid for oil are more formal

but analogous mechanisms. Maintaining the

flow of information about pipeline negotiations is thus an important component of a

joint approach.

Some observers argue that a joint West

European policy is not feasible–and that the

past 10 years of limited progress confirms

this view. The question is whether there is

any viable alternative for limiting the

risks of increasing energy dependence on

the U.S.S.R. OTA’s analysis suggests that

under current conditions, predipositions in

Western Europe would preclude the success

of any attempt to “stop Yamburg.” A more

fruitful approach, therefore, would be to develop mechanisms for anticipating and ameliorating any negative consequences for the

Western alliance which the project might

engender.
CHAPTER 13

Soviet Energy Availability

and U.S. Policy
CONTENTS

Page

CURRENT U.S. POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .386

The Export Administration Act of 1979. . . . . . . . . . . . ..................386

Foreign Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......386

U.S. Policy on Exports of Energy-Related Goods and Technology. . .......388

THE EMGARGO PERSPECTIVE . . . . . . . . . . . . . . . . . . ................389

Goals and Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........389

Discussion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................389

THE LINKAGE PERSPECTIVE . . . . . . . . . . . . . . . . . . .................390

Goals and Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........390

Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................392

THE ENERGY COOPERATION PERSPECTIVE. . . . . ...............394

Goals and Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........394

Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................394

THE COMMERCIAL PERSPECTIVE . .............................395

Goals and Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........395

Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................396
CHAPTER 13

Soviet Energy Availability

and U.S. Policy

The Soviet energy situation was brought

to the attention of the U.S. public in 1977

when the Central Intelligence Agency (CIA)

forecast substantial and steep declines in

Soviet oil output by 1985.1 Although it has

since modified its position, the C I A as late

as April 1980 was predicting that the Council for Mutual Economic Assistance (CMEA)

would be importing ‘‘at least" 1 million barrels of oil a day by 1985.2 The possibility of

impending Soviet energy shortages and of

increased competition for oil on world markets thus raised a policy debate in the

United States, a debate framed largely in

terms of whether or not. it is in the best interest of the United States to institute a policy of helping the Soviet Union increase its

energy production.

Some favor a policy of promoting American exports of energy production technology

to the Soviet Union in order to increase the

world total available supply of energy, to

obviate extensive CMEA. A pressure on world

energy markets, and/or to reduce the likelihood that the U.S.S.R. would intervene in

the Middle East to acquire oil it could no

longer produce in sufficient quantities at

home. Adherents of the opposing view contend that assisting the development of

Soviet energy resources would help to

strengthen the economy of an adversary

and or that such assistance may convey

direct or indirect military benefits. The con1 Central Intelligence Agency, I)r(j i)j{’(1 \ ~i~r ,$’(~f {(I( oil IJr(J-

(1(~ ( t I () n. :~ pr i 1, 1 ~)~~: )~ro~l)()( t ~ /~Ir ,f’,jr ~(t ()// ~’r~}[l{i((i(~tt ,1

.f”~ippl(’m{n ({//,1 11(1111 \i.s, .Jul~ 1 !)77.

‘1’[’+t im~)ny of .,\[] m ir:il Stansfi(’ld ‘1’urn[’r, 1 )irwtor of the

(’I ;$. lx’f{}r~’ t h~’ (’~)mnlitt (YJ on F:ner~~ and Natural I{e-

~f)u r[t’s, [ T. ,S. StIn2 t [I. \pr 22, 1 9X()

cern here is with the transfer of dual-use

technologies which have military application

and/or the view that oil itself is a strategic

commodity. Another dimension of this position is concerned with the prospects of increasing Soviet energy (i. e., gas) exports to

Western Europe and the dangers of increased West European energy ‘‘dependence" on the U.S.S.R.

Whichever view one holds, the most direct

means by which the United States might affect Soviet energy availability would be by

deciding to export or withhold exports of

energy (particularly petroleum) equipment

and technology to the U.S.S.R. Alternatives

for formulating a policy on U.S. energyrelated exports to the Soviet Union can be

broadly divided into four basic categories:

policy options designed to bar the transfer of Western energy equipment and

technology to the U.S.S.R.;

policy options designed to use the inducement of increased exports or threat

of curtailing production equipment and

technology exports to exact political

concessions from the Soviet Union, i.e.,

options designed to further a policy of

linkage or leverage;

policy options designed to facilitate

Soviet energy resource development as

quickly and efficiently as possible, in

order to mitigate future energy shortages in the world as a whole; and

policy options designed to reap whatever commercial advantages may be

available from trade with the U.S.S.R.

in all items except those of direct military relevance.

385
386 ● Technology and Soviet Energy Availability

CURRENT U.S. POLICY

THE EXPORT

ADMINISTRATION ACT

OF 19793

U.S. exports of energy-related technology

and equipment to the U.S.S.R. are regulated

by the Export Administration Act of 1979

(Public Law 96-72). This act is the latest in a

series of laws which for the past 30 years

have sought to balance the dual objectives of

promoting international commerce and safeguarding American national security. Controversy over the proper weight to be accorded each of these interests has been continuous, but over the years the thrust of U.S.

trading policy has been gradually to expand

opportunities for selling U.S. products and

know-how to Communist nations.

Under the present legislation, U.S. firms

seeking to do business with the Soviet Union

must obtain validated export licenses if the

goods or technology they plan to sell appear

on the U.S. Commodities Control List (CCI.).

Most of the CCI. consists of items which are

also regulated by CoCom, the informal multilateral export control organization consisting of the United States and its NATO allies

(minus Iceland, plus Japan). However, the

United States does maintain unilateral controls over some 38 additional products and

technologies. Many of these are energy

related. The Secretary of Commerce, with

the advice of the Secretaries of State and

Defense, may delete such items from the

CCL. Items may also be added if these are

deemed to have significant military applications, to be in short supply, or to relate to

specific foreign policy objectives. Inclusion

in the CCI. does not mean that the item is

necessarily embargoed. Rather, it means

that the potential exporter must file a license

application with the Department of Commerce (DOC).

‘For a legislative history of U.S. export control policy, as

well as descriptions of the U.S. export licensing procedure

and of CoCom regulations. see Office of Technology AssessThere are three circumstances under

which a license application may be refused:

the export will make a significant contribution to the military potential of another

country; the item in question is in domestic

short supply; or the restriction is necessary

to significantly further the foreign policy of

the United States.

Prior to passage of the 1979 Export Administration Act, the President’s discretion

to control exports for the latter reason was

largely unlimited. Now, all foreign policy

controls expire at the end of each calendar

year. To renew them, the President must

notify Congress and justify the reextention

on the basis of criteria which include the

probability that controls will achieve the intended foreign policy purpose in light of such

factors as the availability of the goods or

technology in question from other countries.

FOREIGN AVAILABILITY

This concept of “foreign availability”’ constitutes an important part of the Export Administration Act. Recognizing that the availability from other sources of items controlled

by the United States undermines the impact

of U.S. policies and places U.S. firms at a

competitive disadvantage, section 5(f) stipulates that the Secretary of Commerce, in consultation with other Government agencies

and technical advisory committees, should:

. . . review, on a continuing basis, the availability

to countries to which exports are controlled . . ,

from sources outside the United States, including

countries which participate wit h the United

States in multilateral export controls, of any

goods or technology the export of which requires

a validated license . . . (In the event) that any such

goods and technology are available in fact to such

destinations from such sources in sufficient quantity and of sufficient quality so that the requirement for a validated license for the export of such

goods or technology is or would be ineffective in

achieving the purpose set forth . . . the Secretary

ment, Technology and East-West Trade (Washington, D. C.:

U.S. Government Printing Office, November 1979). This volume also contains the text of Public Law 96-72.
Ch. 13—Soviet Energy Availability and U.S. Policy ● 387

may not, after the determination is made, require

a validated license for the export of such goods or

technology during the period of such foreign

availability, unless the Presidcnt determines that

the absence of such export controls under this section would prove detrimental to the national security of the United States,

The section goes on to require that the

grounds for such a determination, together

with an statement of the estimated economic

impact of the decision, be published. The

President is further enjoined to undertake

negotiations with foreign governments to

eliminate the availability. In the absence of

such a Presidential determination, the Secretary of Commerce is directed to approve any

validated license application which meets all

other requirements and which is for export

of goods or technology for which foreign

availability has been established.

Determinations of foreign availability

that are to be the basis for these licensing

decisions must be supported by “reliable

evidence, including scientific or physical examination, expert opinion based on adequate

factual information, or intelligence information.” The act specifically stipulates that

‘‘uncorroborated representations by applicants shall not be deemed sufficient ev’idence

of foreign availability. Capability to monitor and gather information on foreign availability of all goods and technologies subject

to U.S. export controls was to be established

within the office of Export Administration

(OEA), the part of DOC responsible for export licensing, and each department or agency of the United States with export control

responsibilities, including the intelligence

services, were required to furnish OEA with

appropriate foreign availability in formation.

However, it is clear by now that the entire

concept of foreign availability is fraught

with ambiguity and raises important practical difficulties. Nowhere, for instance, does

the 1979 Export Administration Act define

the terms ‘‘available without restriction,

‘‘a~’ailable in significant quantity," or "comparable quality.” Among the definitional

questions pertaining to the meaning of

‘‘availability and “comparability” are the

following:

●

●

●

●

Must a foreign competitor have expressed a willingness to sell to the

U.S.S.R. for its goods to be considered

‘‘available?” Must the U.S.S.R. have actually approached the competitor; o r

does the mere existence of goods and

technologies outside the United States

count as foreign availability?

How do matters of price affect both

availability and comparability: if a

foreign item is cheaper or backed by

foreign government export credits, how

inferior need it be to the U.S. alternative before it is no longer counted as

evidence of foreign availability’?

What are the parameters for assessing

comparable quality; are these different

for many pieces of equipment or technologies appearing on the CCL’? Must

items be identical to be considered comparable?

Similarly, how are “significant quantities” to be determined? Are - these

relative to the amounts the Soviets

wish to purchase in the immediate sale

in question, to total world supply, or

does their assessment involve comparison of the manufacturing capacities of

U.S. industries and their foreign competitors’?

Aside from these conceptual difficulties,

there have been enormous practical problems involved in establishing a foreign availability assessment mechanism in DOC. Assembling sufficient information to answer

the kinds of questions suggested above is a

massive undertaking and as of this writing it

does not appear that the executive branch

has released the funds allocated by Congress

to allot the staff and other resources necessary to complete this task in a systematic

or comprehensive way.

Furthermore, even assuming that a clear

conceptual framework for assessing foreign

availability and the resources to handle the

resulting data existed, it is not clear that

present information-gathering mechanisms
388 • Technology and Soviet Energy Availability

would be sufficient to satisfy the terms of

the act. Indeed, most of the information required would have to be secured from private

firms in foreign countries. Since a great part

of this information might reasonably be expected to be company proprietary, serious

practical—if not legal and ethical–problems

might be encountered.

In short, satisfying the present legal cri-

 teria for ascertaining foreign availability will

be expensive, time-consuming, and perhaps

intrusive. The requirement in the act that

this assessment be conducted “on a continuing basis” adds to these burdens. Given the

fact that DOC’s foreign availability capabilities have yet to be fully instituted, it is difficult to determine whether or not the provisions can be fulfilled in a cost-effective manner.

U.S. POLICY ON EXPORTS

OF ENERGY-RELATED GOODS

AND TECHNOLOGY

In July 1978, in response to the U.S.S.R.’s

policies towards its dissidents, President

Carter decided to invoke foreign policy controls and to place exports to the Soviet

Union of technology and equipment for the

exploration and production of oil and gas on

the CCL. These items thereby became subject to U.S. unilateral control, i.e., U.S. exporters were required to obtain validated

licenses for petroleum equipment and technology not included on the multilateral

CoCom list. The absence of CoCom controls

meant that firms in allied countries could

continue to export such equipment and technology free of any restriction.4 Two impor4 Under (J. S. law, technology of U.S. origin requires a U.S.

export license in order to he reexported from a third country.

tant assumptions underlay Carter’s decision: the Soviet Union had a critical need for

the items in question, and it was largely

dependent on the United States for their

Supply.5

Foreign policy controls on petroleumrelated items were reaffirmed and reiterated

in January 1980, following the Soviet invasion of Afghanistan. In his letter notifying

Congress of the renewal of these controls,

President Carter asserted that:

The control on the export of petroleum equipment to the U.S.S.R. provides a flexible foreign

policy tool. When necessary and appropriate it

can be used to sensitize the Soviets regarding actions which are damaging to United States foreign policy interests . . . Discontinuation of this

control would represent a change in policy not

warranted by existing circumstances in our relationship with the U.S.S.R.6

At this writing, U.S. policy toward energy-related equipment and technology exports to the U.S.S.R. is under review. For

the moment, applications for validated

licenses for exports of oil and gas equipment

and technology to the U.S.S.R. are decided

on a case-by-case basis. Sales of end products alone have generally been approved, but

those involving industrial manufacturing

know-how are acted on with a presumption

of denial. 7

Any new policy direction, as noted above,

would fit broadly into one of four basic categories. The following sections describe the

four perspectives from the point of view of

their advocates, and discuss the implications

of implementing each.

‘Samuel P. Huntington, “Trade, Technology, and Leverage: l+~conomic’ Diplomacy, “ J’orvign I)olifj, fall, 1978, p. 76.

“1.etter of President Carter to }{on, Thomas 1]. ()’ Neill,

I)ec. 29, 1979, in ThII (’f)rzgr[’.s,siotzul h’{’corci ,Jan. 29, 1980, p.

[1 3/i 1.

‘llu,~inc.s,v Arrlerica, Apr. 7, 1980, p. 12.
. .

Ch. 13—Soviet Energy Availability and U.S. Policy ● 389

THE EMBARGO PERSPECTIVE

GOALS AND ASSUMPTIONS

In the past, legislation has been introduced in Congress which has been designed

to severely curtail the ability of U.S. firms to

sell energy-related equipment. and technology to the U. S. S. R.8

Those who favor this

policy orientation usually hold one or more of

the following views with respect to such

sales:

1. Energy, and particularly petroleum,

equipment and technology are dual-use

items, i.e., they may have military applications.

2. Oil is itself a strategic commodity.

3. Helping the U.S.S.R. to maintain or improve its energy output bolsters the Soviet economy, contrary to U.S. national

interest.

This perspective, like the linkage perspective discussed below, is often based on the

premise that the denial of American equipment and technology will significantly inhibit the development of Soviet energy resources and Soviet energy output. I n those

cases where the United States is neither a

sole nor a preferred supplier of equipment

and technology, adherents of this position

hold that the U.S. Government can and

should undertake negotiations with its allies

to enlist their cooperation in a technology

embargo.

DISCUSSION

In a very few cases, energy-related technologies and equipment have had the potential for direct military use, The sophisticated

computers and other seismic equipment, including large main-frame computers, array

processors, and advanced automated data

processing systems, sought by the U.S.S.R.

certainly could convey military capabilities.

Such computers and software are already un8 See, for example, The Technology Transfer Han Act, 11. R.

140N5, introduced in tht’ Iiouse of Representati~es on Sept.

14, 197X.

der both U.S. national security and CoCom

controls. It has been alleged that certain

aspects of the technology required for the

manufacture of oil drilling bits with tungsten carbide inserts are militarily relevant.

These allegations have been the subject of

considerable dispute and experts have disagreed over the military utility of this technology. 9 However, the final determination of

U.S. export licensing authorities, including

the Department of Defense, was that these

technologies could be safely exported.

These instances are exceptions. The great

majority of the energy equipment and technology which the U.S.S.R. purchases from

the West consists of items which have raised

few questions from the standpoint of their

direct military relevance. Defining fuel itself

as a strategic commodity, however, raises a

different kind of problem-and invokes a

rather different policy, A decision to restrict

the export of items because of their economic

or indirect, as opposed to direct, military

significance would be tantamount to reversing the trend of the last 30 years of export

control in the United States.

The Export Control Act of 1949, by allowing the control of items of “indirect”

military utility, in fact was aimed at pursuing a policy of economic warfare against the

Soviet Union.10 This policy was abandoned,

partly because it was recognized that it

could be effective only if adhered to by

America’s allies. In other words, a wide array of items which the U.S.S.R. wished to

purchase from the West had become available outside of the United States, in countries far more dependent than was the

United States on foreign trade. The United

States appeared to be unable to convince

these alternative suppliers to impose the

—9 ‘‘Transfer of Technology and the Dresser Industries

Export 14icensing Actions, ” I Iearings hefore The Permanent

Subcommittee on I ntestigat ions, Comnlittee on (;o~rernnwntal Affairs, LJ. S. Senate, oct. 3, 19’78.

10 OTA, op. ci~., ch. k’ 11.
390 ● Technology and Soviet Energy Availability

same restrictive policies. Without such

cooperation, American firms lost sales to

European and Japanese competitors, and

the U.S.S.R. was nonetheless able to obtain

the nonmilitary goods and technologies it

sought.

OTA has elsewhere explored the general

East-West trade policies of those allied nations which are major Western trading partners of the U. S. S. R.11 The basic conclusions

of that analysis were that while America’s

allies do not deny the basic necessity of

withholding items of direct military significance from the U. S. S. R., East-West trade

has been economically more important to

Western Europe and Japan than to the

United States. These countries tend to view

trading with the Soviet Union as primarily

an economic issue, and to eschew the use of

export controls for political purposes. The

lukewarm response with which the postAfghanistan technology embargo was

greeted in Western Europe and, to a lesser

extent, Japan—as well as the 1980 statistics

reported in chapter 12 which show that trade

between the Soviet Union and Japan, West

Germany, France, Italy, and the United

Kingdom actually grew during the “embargo period”- indicate that these basic

orientations have not changed.

Chapters 11 and 12 discuss in detail the

attitudes of Japan, West Germany, France,

Italy, and the United Kingdom to specifically energy-related trade with the U.S.S.R. In

general, it appears that for these nations,

sales of energy-related technology and equipment to the U.S.S.R. pose no special foreign

policy or national security concerns, nor

have these transactions sparked intense de11 Ibid., ch. IX.

GOALS

Linkage is

prospect of

THE LINKAGE

AND ASSUMPTIONS

a policy which seeks to use the

expansion or curtailment of

12 Ibid., ch. IV.

bate. Indeed, in some of these countries such

sales are of significant economic importance.

A U.S. policy of extending export controls to

energy-related items with economic and

political, but little or no direct military

relevance, is therefore unlikely to encounter

much sympathy or active cooperation.

The highly publicized gas pipeline deal, in

which West European and Japanese export

credits and equipment will be bartered for

Soviet gas may change the context of this

trade, however. There is little doubt that the

magnitude of the proposed project and its

importance to the Soviet economy make it a

transaction of particular significance. OTA’s

research indicates that the potential Western participants are by no means insensitive

to both the economic and security implications of embarking on this degree of cooperation and interdependence with the

U.S.S.R. Nevertheless, these nations appear

to have decided—both in principle, and now

in practice—to proceed.

It is possible to posit circumstances under

which the United States could persuade its

allies to reverse these decisions. A major

change in the international climate precipitated by a Soviet invasion of Poland, for instance, could certainly cause either a temporary or a permanent halt to the gas export

pipeline project. In the absence of this kind

of event, a U.S. policy initiative designed to

discourage continued or increased allied

energy- related trade with the U.S.S.R.

might have its best chance of success if

designed to offer allied governments positive

alternatives, in the form of either realistic

alternative energy supplies to replace Soviet

gas or assistance in devising contingency

plans for Soviet supply interruption.

PERSPECTIVE12

trade as a “carrot or stick” to exact policy

concessions from a trading partner. The

perspective itself accommodates a number of

different points of view. Those who favor

pursuing a linkage strategy may disagree

over the nature and scope of the goals which
Ch. 13—Soviet Energy Availabiiity and U.S. Policy ● 391

such a policy can further. These disagreements center on both the range of policies

which linkage can or should hope to affect

(i.e.. should future trade be linked to the

trading partner’s domestic policies—treatment of dissidents in the case of the

U.S.S.R.–or should it be restricted to

attempting to affect only major foreign policies—such as the invasion of Afghanistan?)

and on the kinds of trade which should be

used as policy instruments (should the extension of credits and most-favored nation

(MFN) become part of a linkage strategy;

should all trade be affected—including

grain—or should the policy apply only to

technology trade?).

Adherents of adopting a linkage policy

toward trade with the Soviet Union may also

hold different basic perceptions of the nature

of the U.S.-Soviet relationship and its potential. Some believe that trade can have a

moderating effect on international politics

by enmeshing trading partners in a “web of

interdependence. Others see a fundamentally adversarial relationship between the

United States and the Soviet Union. They

may accept the fact that trade can be harnessed to political purposes, but are skeptical of the connection between trade and political moderation. Here trade is justified only if in return the trading partner makes

policy concessions.

Regardless of these differences, however,

the belief that a linkage policy can be effective entails acceptance of the basic proposition that the potential exports in question

must be of sufficient value to the U. S. S. R.,

and the assumption that the United States

either has a monoply on these items, or failing that, is a strongly preferred supplier.

Although different Administrations have

disagreed over the ways in which a linkage

policy vis-a-vis the Soviet Union should be

conducted, for some years America’s trade

with the Soviet Union has taken place within

the context of linkage. U.S. efforts to use

trade to moderate Soviet behavior have included linking the extension of MFN status

and eligibility for official U.S. export credits

with the emigration of Soviet Jews (the

Jackson-Vanik amendment): linking the export of a U.S. computer to the Soviet

Union’s treatment of its dissidents; and curtailing both shipments of U.S. grain and the

export of technology after the Soviet invasion of Afghanistan.

There is little clear evidence so far that in

any of these cases U.S. trade policy has had

a measurable effect on Soviet foreign o r

domestic activities. Nevertheless, no overall

determination of the success or failure of

linkage as a basic strategy has yet been

made, and the results of these policies have

been subject to varying interpretations. The

potential effectiveness of a policy specifically linking exports of U.S. petroleum equipment and technology is also the subject of

some debate.

Opponents of such a policy may entirely

reject the notion that trade can be an effective instrument to achieve political objectives. This view is held by a number of other

Western governments and is often espoused

by some American corporations. Others—

often members of the petroleum equipment

industry—contend that the United States

has little or no leverage in this area because

of the wide foreign availability of the equipment and technologies desired by the

U.S.S.R. .

On the other side, it has been contended

that President Carter’s inclusion of energy

equipment and technology on the CCL was a

major step in placing the United States in a

position vis-a-vis the U.S.S.R. “in which the

technological door can be more easily closed,

or swung near to being closed, if that seems

desirable or necessary.”13 This assertion is

premised on the belief that for many items in

the area of petroleum technology and equipment, including downhole pumps, gas-lift

equipment, drill bits, well completion equipment, and offshore drilling technology, the

United States has virtually been the Soviet

Union’s sole supplier, and that “this type of

equipment is absolutely essential to the

13Huntington, op. cit.
392 Ž Technology and Soviet Energy Availability

Soviets if they are to stave off a significant

decline in their oil production in the early or

mid- 1980's.14

Such statements are supported by CIA’s

1977 report which identified items of technology and equipment particularly crucial to

Soviet petroleum output. These included

seismic exploration equipment; rock drill

bits; oilfield pumps and gas-lift equipment;

large diameter pipe; offshore technology;

rotary rigs, drill pipe and casings; multiple

completion equipment; and secondary and

tertiary recovery equipment.

In December 1979, however, President

Carter himself acknowledged that the list of

items in which the United States was the

sole or preferred supplier was somewhat narrower. His letter to Congress on December

29 stated that for most items of petroleum

equipment, “adequate quantities of similar

equipment are available from foreign

sources.” At the same time, “there is only

limited foreign availability of some deep

submersible pumps and seismic equipment.” 15 The implication presumably remained that these items were critical enough

to the U. S. S. R., and their supply controlled

sufficiently by the United States, for the

foreign policy controls to continue to be

useful in furthering U.S. objectives.

DISCUSSION

As chapter 6 points out, the foreign

availability assessment which was performed in the course of this study was inhibited by the same conceptual and practical

difficulties described above, and its results

should be considered suggestive rather than

conclusive. With this caveat, OTA’s findings tend to confirm President Carter’s

assertion that, with few exceptions, adequate quantities of the energy equipment

sought by the U.S.S.R. are produced and

available outside the United States, and that

the quality of these foreign goods is general14 Ibid.

15 Letter of President Carter, op. cit.

ly comparable to that of their U.S. counterparts. The most important exceptions to this

general finding are electric submersible

pumps and sophisticated seismic systems.

But it does not necessarily follow that obtaining the latter items from U.S. firms is so

critical to the U.S.S.R. at this time that the

threat of their being withheld would result in

significant Soviet policy concessions. Nor is

it clear that the fate of Soviet petroleum production in this decade is entirely or even

largely dependent on them.

The United States is the only producer of

high capacity electric submersible pumps in

the Free World. Several years ago, the

U.S.S.R. purchased relatively large amounts

of such equipment. It will be recalled, however, that although U.S. pumps are of

substantially better quality than their

Soviet counterparts, they never constituted

more than a small portion of total Soviet

stocks. Moreover, there is reason to believe

that virtually all the American pumps in the

U.S.S.R, are by now out of commission, and

the Soviet Union has not replaced them. Indeed, the Soviet Union has bought no U.S.

pumps for the past 3 years—nor has its oil

output declined over this period. I t seems

hardly reasonable, therefore, to characterize

the Soviet oil industry as dependent on this

type of equipment. One or more of three

things appears to have occurred: the Soviet

Union has found at least a partial substitute

for high-quality pumps (gas-lift equipment,

purchased in France); in addition, it may

have improved the quantity and/or the quality of its domestic pumps; or planners may

have decided that less than state-of-the-art

equipment is acceptable.

Similarly, it is generally recognized that

the United States is a preferred supplier of

seismic exploration equipment and that such

equipment could significantly improve the

quality and efficiency of Soviet seismic

work. The United States also appears to be

the Western nation best able to provide the

U.S.S.R. with the full range of services and

capabilities necessary for its exploratory efforts. Most of the oil hitherto discovered in
Ch. 13—Soviet Energy Availability and U.S. PolIcy ● 393

— -.

the world, however, has been found in giant

fields with exploration technology that

significantly lagged the present state-of-theart. In any case, long leadtimes are usually

necessary before newly discovered deposits

can be developed, and it is not clear that exploratory activities initiated now would produce significant results before the latter part

of the decade. Moreover, even though systems with components assembled from a

number of different suppliers may be less

desirable than those purchased in their entirety. the U.S.S.R. might well be able to

replace Armerican equipment with a collection of items which, although not ideal, could

function significantly better than Soviet

domestic equipment.

There is a further issue. An important conclusion of this study is that the status of the

Soviet gas industry may be more crucial

than that of the oil industry to overall

energy availability. Here, the U.S.S.R. is

quite dependent on the West—for the large

diameter pipe and compressor stations it

needs to construct gas pipelines—but the

former item is not produced in the United

States and there are multiple alternative

suppliers for the latter. It has been suggested that the United States may be the

sole or preferred supplier of the heaviest

pipelaying machinery used for installing gas

pipeline, and that foreign manufacturing capabilities may be insufficient to fully supply

the needs of the U.S.S.R. in this area. It is

difficult to either establish or disprove the

accuracy of this claim without access to detailed information about specific foreign corporations, but it must be recognized that the

U.S.S.R. has in the past purchased pipelaying equipment from Japan.

The chances of the United States persuading its allies to join it in an energyrelated policy of leverage against the

U.S.S.R. are as small as those of obtaining

agreement to an energy equipment and technology embargo. The point is not simply

that the countries examined here—West

Germany, France, Italy, Britain, and Japan

—each have an economic stake in East-West

trade greater than that of the United States,

or that they have been traditionally reluctant to engage publicly in linkage practices.

While the danger of energy dependence on

the U.S.S.R. may seem to some to be the

overriding political concern for the entire

Western alliance, each nation approaches its

trade and energy relations with the U.S.S.R.

from its own political perspective. These differ among the allies themselves and from

that of the United States. They range from

West Germany’s natural preoccupation with

West Berlin in particular and European

security in general to Japan attempts to

balance its policies towards both the

U.S.S.R. and the People’s Republic of China

(see chs. 11 and 12 for a fuller discussion of

these perspectives). It would seem that, regardless of U.S. judgments of the wisdom or

accuracy of their views, these nations have

determined that the risks of a certain degree

of energy cooperation with the U.S.S.R. are

outweighed by other political benefits.

In sum, the immediate leverage of the

United States over the Soviet Union in the

area of petroleum equipment and technology

is probably limited by at least three factors.

First, the United States is the sole supplier

of very few petroleum-related items. .Second,

the U.S.S.R. has demonstrated some ability

to do without these items, at least in the

short term. Third, and perhaps most important, gas is the energy sector in which the

U.S.S.R. is both most reliant on the West

and most dependent for its energy future—

and with the possible exception of construction equipment, the United States has little

to offer in this area that is unique.

84- 389 0-84 -26 : – ~
394 ● Technology and Soviet Energy Availability

THE ENERGY COOPERATION PERSPECTIVE

GOALS AND ASSUMPTIONS

Adherents of this perspective may hold

one or more of the following views:

1.

2.

3.

Increased energy-related exports from

the United States to the Soviet Union

reduce the chances that the U.S.S.R.

will experience the serious oil production problems predicted by the CIA,

and therefore the chance that it will

either have to import oil on world markets or have an incentive to intervene in

the Middle East.

Such U.S. exports, by helping the

U.S.S.R. to produce more oil, help to increase worldwide energy availability.

This is a positive development no matter where such oil is located.

The trade ties established with the Soviet Union during the period of detente

were a positive step toward drawing the

U.S.S.R. into the world economy, a

move which should increase that country’s interest in maintaining world

political and economic stability.

DISCUSSION

Here, the basic premise is the obverse of

that of the embargo perspective, i.e., it is

assumed that American technology and

equipment could make a significant positive

contribution toward increasing Soviet

energy availability in the present decade.

OTA's findings cast doubt on this assertion.

It is certainly true that American and or

other Western petroleum equipment could

assist the U.S.S.R. in overcoming many of

the problems presently caused by equipment

of inferior quality and insufficient quantity.

It could also speed the development of offshore resourses. But while it is undeniable

that Western exports have made important,

albeit unquantifiable, contributions to Soviet petroleum output in the past and could

continue to do so in the future, policy

changes in both the United States and the

Soviet Union would be required for such assistance to have maximum effect.

In its report, Technology and East-West

Trade, OTA identified the lack of official

U.S. export credits as the primary legal barrier to the expansion of trade between the

United States and the Soviet Union. There is

no reason to believe that this problem would

not continue to hamper such expansion. But

the willingness of the United States to sell

on favorable terms is only half of what is

needed for American exports to extensively

aid the U.S.S.R. The Soviet Union must also

be both able and willing to buy the items it

needs in sufficient quantities, and to use

them in an efficient and productive manner.

A frequent theme throughout this report

has been the difficulties posed by the Soviet

economic system in utilizing both domestic

and foreign technology effectively. While it

may be true that imported equipment is

more productive than the closest Soviet

equivalents, it is also usually the case that

Western equipment and technology perform less well in the U.S.S.R. than in the

country of origin or other Western nations.

It cannot necessarily be assumed, therefore,

that simple shipments of equipment or

transfers of technology could easily solve

Soviet energy problems.

This problem is exacerbated by the fact

that the U.S.S.R. has traditionally been unwilling to allow the hands-on training by

Western personnel which would make Western equipment and technology most productive. Nor has it appeared very willing to

allow Western firms to participate extensively in Soviet energy development. Some

overtures in this direction were made before

the invasion of Afghanistan, but little has

come of them. Not only would such active

participation greatly expedite this development, but it would also give American and

other Western companies the incentive,

presently lacking, to become more extensively involed in the U.S.S.R.
Ch. 13—Soviet Energy Availability and U.S. Policy . 395

Furthermore, hard currency shortages

presently constrain the amounts of energyrelated items which the U.S. S. R. can import.

The Soviet Union has traditional} kept its

trade with the West relatively small. Not

only has it been unwilling to become dependent on the West, but it has been quite conservative in amassing a Western debt (especially compared to the nations of Eastern

Europe). As chapter 8 points out, one consequence of this hard currency shortage is that

different sectors of the Soviet economy compete for the ability to purchase from the

West. Energy equipment and technology imports have thus been highly selective.

It is not entirely clear, moreover, that the

U.S.S.R. will necessarily be propelled onto

world markets for oil. Indeed, as chapter 2

has noted, if thc CIA ever intended to foster

this expectation, it no longer holds this view.

OTA has identified worst case or ‘pessimis -

tic ’ scenarios which show conditions under

which the Soviet Union could have a net oil

deficit, but a number of factors make this a

highly, uncertain basis on which to plan

policy. First, more optimistic scenarios are

probably more likely, i.e., the U.S.S.R. could

continue to export oil for hard currency

without extensive U.S. help. Second, the

degre e to which the U.S.S.R. is able to

substitute gas for oil, both in domestic consumption and in exports, seems the more

crucial variable. In other words, the overall

Soviet energy balance, not simply oil production, will be important in determining the

ways in which the U.S.S.R. is able to handle

its energy situation in the 1980’s. Third, hard

currency constraints would almost certainly

minimize or even prevent such purchases.

It must also be pointed out that any

Soviet decision to intervene in the Middle

East—either militarily or through policy initiatives directed at OPEC governments

need not necessarily be driven by a domestic

need for oil. The vital U.S. interest would

seem more than sufficient to give the

U.S.S.R. a reason for acting in this area

should it wish to do so, The availability of

additional oil, assuming that conditions

allowed local cooperation or Soviet ability to

operate the oil fields itself, might be an attractive bonus, but is is hardly a necessary

condition.

Finally, institutions presently exist for

fostering multilateral cooperation in energy

supply issues. For instance, the Soviet

Union has requested that the U.N. Economic

Commission for Europe sponsor a high-leve]

conference which would consider possibilities for multilateral energy cooperation. The

United States has hitherto opposed the convening of such a conference. Presumably the

reversal of this position would signal

America interest in participanting in Soviet

energy development. In addition, policymakers might wish to consider the formulation of a broader allied policy perspective on

Soviet energy , arrived at either on a bilateral

basis, through NAT(), or through the International Energy Agency. It must be noted

that the West European nations themselves

hade made little progress toward developing

a unified East-West energy policy for their

own region.
396 ● Technology and Soviet Energy Availability

2

3

has little prospect of convincing America's allies to cease their own exports.

An embargo of U.S. energy technology

would, therefore. have little effect on

the U.S.S.R., and the prospect of such

an embargo confers very little leverage.

on the other hand, the ability of the

United States to significantly enhance

Soviet oil production, thereby relieving

economic pressure on the U.S.S.R. and

increasing the amount of oil in the

world, is also constrained by the factors

discussed in the previous section.

I n any case, Soviet energy industries

are enormous and the U. S. S. R. has a

good record for being largely self-sufficient in areas where Western help is not

easily forthcoming.

Given this line of reasoning, it becomes

sensible to argue for the United States abandoning the area of energy as a promising context for its Soviet foreign policy, and reaping

whatever economic benefits can be conferred

by sales of energy and equipment to the

U.S.S.R., so long as these have no direct

military relevance. Such a policy would not

necessarily have to be accompanied by the

extension of export credits on favorable

terms. The ability of American firms to compete with West European and Japanese companies for sales of energy-related items to

the U.S.S.R. could be significantly enhanced

simply by removing U.S. unilateral export

controls on such items.

DISCUSSION

Givcn a desire to facilitate–or at least not

to unduly impede—nonn~ilitarily sensitive

exports to the U.S.S.R., there is room for

significant improvement in the administration of export license applications. The export licensing system is complex, and given

the volume of applications it handles, has

worked with reasonable efficiency. Procedures could be instituted to streamline the

system. however, without tampering with its

basic structure or effectiveness. Such procedures might eliminate the present, seemingly unwarranted. occasional delays which

have subjected the entire export licensing

system to criticism.

It must be recalled that Soviet trade with

the West has never been large in absolute

terms and that, except for grain sales, [J. S.

market shares in this trade have been relatively modest. The cost and difficulty of

doing business with the U.S.S.R., American

export license procedures, and the ineligibility of the U.S.S.R. for U.S. export credits

have all been limiting factors. There is little

or no reason to expect that this situation

could change without dramatic changes in

both U.S. export and Soviet import policies.

Thus, while individual firms might well be

able to conclude lucrative individual contracts for items of energy-related equipment

or technology, it is highly unlikey that these

sales would be large enough to affect the

U.S. economy in general or even specific industries in any crucial fashion.

Aside from these economic considrra -

tions, there is a political dimension to the

commercial perspective. Given the relatively

limited opportunities for the United States

alone to significantly influence Soviet

energy availability in the present decade,

and given the difficulties which would certainly arise in attempting to persuade

America allies to curtail their own energy

relations with the U.S.S.R., U.S. policymakers might well choose not to expend political “chips” —either in negotiations with

the USSR or with allied nations—by making

Soviet energy development an area of contention. Removing energy-related export

control issues from the political agenda, in

other words, might possibly enhance the

chances of obtaining allied cooperation in

other aspects of East-West policy. If the

commercial perspective is pursued for these

motives, the extent of the trade it woul d

engender becomes a secondary consider-a -

tion.

A FINAL NOTE

The perspectives and policy options discussed in this chapter apply to the present
Ch. 13—Soviet Energy Availability and U S Policy ● 397

state of the relationships between the Soviet

Union and the West. But the judgments and

decisions of both U.S. and Allied policymakers can and will tend to shift over time,

in response to changing economic and political conditions. For instance, dramatic events

involving the Soviet position in Eastern

Europe could drastically alter the views of

both Soviet and Western leaders on the options open to them, and on the national interests which would shape their choices. In

contrast, the overall parameters of Soviet

energy supply and demand are unlikely to

change rapidly, because of the sheer size of

the resources and infrastructure involved.

Thus, even should their perceptions of national interests change, policy makers will

still have to reckon with the limits imposed

by the strengths and weaknesses to the

Soviet energy industries.
Appendix
— Appendix

COMMITTEE ON BANKING, HOUSING, AND

URBAN AFFAIR S

W ASHINGTO N, D.C. 20510

Udal 1, Chairman

401
402 ● Technology and Soviet Energy Availability
Appendix ● 4 0 3

May 2, 1980

The Honorable Morris Udall

Chairman

Office of Technology Assessment

235 Cannon House Office Building

Washing t on, D. C. 20515

Dear Mr. Chairman:

Future relations between the United States and the Soviet Union

will almost certainly b e shaped in part by issues arising from energy

supply and demand. The U. S. intelligence assessment is that the Soviet

bloc will be forced to import petroleum by 1985, and the Soviets have

acknowledged that they face impending problems in maintaining current

levels of oil and gas production and delivery. The implications for

the U. S. of Soviet entry onto world oil markets are enormous. Congress

should , therefore, be aware of ways in which the U. S. could influence

Soviet energy production.

One critical area of uncertainty is the manner and extent to

which U. S. technologies could affect Soviet oil production and, thereby,

Soviet energy policies.

Little is known about the potential contribution of American

technology to Soviet energy development, or precisely how American

equipment compares technically to that available from other Western

count r i es. It is often difficult to identify sole or unique suppliers

of equipment and technology, and to determine the costs to the importer

of resorting to second best choices. Better analysis in this area could

have important implications for U.S. policies on exporting energy

technology.

As Chairman of the House Foreign Affairs Committee, I request

that the Office of Technology Assessment conduct a full-scale assessment of the possible effects of American technology upon Soviet energy

availability during this decade. Such a study could draw partly upon

the material OTA has already assembled for its recent major study on

Technology and East-Rest Trade.
404 ● Technology and Soviet Energy Availability

The Honorable Morris Udall

May 2, 1980

Page Two

The study should address the following questions:

First, what equipment and technology are needed by the Soviet Union

for its energy resources? In particular, what is the role of advanced

computers and computer systems in expanded energy production? This may

be partly illuminated by analysis of past energy technology purchases.

Second, what problems inhibit the applicability and the efficient

use of imported energy technology in the U.S.S.R.? Such problems might

range from geology, infrastructure, and lack of trained manpower to

inappropriate institutional structures. What affect will particular

foreign technologies have upon these problems?

Third, to what extent is the United States the sole or preferred

supplier of energy technologies likely to be sought by the U.S.S.R. , and

what is the nature of and capabilities of those technologies?

Fourth, what would be the near or medium term (to 1990) impacts

on Soviet oil (or other energy) production of either an expansion or

contraction of American energy technology exports?

Your cooperation in this matter would be greatly appreciated.

With best wishes, I am

Chairman

CJZ:giy
Appendix ● 405

Honorable Ted Stevens , Chairman

Technology Assessment Board

Office of Technology Assessment

Washington, D. C . 20510

Dear Mr. Chairman: