DECISIONMAKING FOR SOVIET OIL POLICY (SOV 84-10076X)

Created: 6/1/1984

OCR scan of the original document, errors are possible

Decisionmaking for Soviet Oil Policy

CIA HISTORICAL REVIEW PROGRAM RELEASE AS9

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Decisionmaking for Soviet Oil Policy '

Judgments

lafa-melkt* anltaWt

aloftU

-Ol airtpon.

Soviet oil policy reflects the leadership's awareness of the present near stagnation of oil produciion and the uncertain outlook over the balance of the decade. The policy has three bask, Inierrelaied objectives.-

Mainuining energy self-sufficiency.

Providing the major share of hard currency earning! through exports lo the Weert.

the demand for politically important exports to Eastern Europe. The first objective is clearly most important and lakes precedence tn oil policy decision-.

meet these goals, ihe leadership hasong-term strategy lhai relies on increased efficiency, subsiiiuiion of fuels, andot toand hold down demand Specifically, the Soviets intend to:

- Acquire and assimilate new, more productive equipment for ihe oil industry and more energy-efficient equipment for the balance ofomy. Although ihey will continue lo rely on imports to meet some needs, sanctions by ihe United States have convinced Moscow of the need to diversify iis sources of supply and develop its own technological capabilities.

Improve performance throughout the oil industry by introducing new planning indicators and procedures, using new forms of labor organi-ia-lion. and rcorganiiing ihe energy production bureaucracy

Use iradilional methods of ohomiion lo further their goals

Il will be very difficult, if noi impossible, however, (or Soviet leaders to supply simultaneously ihe oil neededeet all ihree objectives. Rapidly rising investment costs and worsening operating conditions are likely to leadradual fall in oil production. Moreover, as in ihe past, (he Soviet leadership is likely to overestimate the rvcrssibilit.es energy conservation and interfile) substituiion. while domestic demand for oil continues to rise. Consequently, shortfalls in oil supply could develop lhai would disrupt the domestic economy and squeeze exports

bility lo meet its objectives will be conswaincd by tbe inlicicnl weaknesses in its planning and decisionmakinB system:

The Politburo and the Secretariat have limited technical expertise in energy matters, and unbiased advice on energy issuescarce commodity. This situation was not helped by the death or retirement over the past several years ol* several of the members most experienced in energy matters.

Institutional conflicu exist between the ministries and the State Planning Committee (Cmsplan) over the selling of plan targets. Furthermore, responsibilily for implementing oil policy at the ministry level is diffused among organiiaiions lhat often have conflicting goals and frequently fail lo coordinate their efforts, leading to waste and inefficiency

The system of central planning limits the willingness of the leadership to use prices, wages, and profits lo cncouiagc more efficient energy production and use. andmprove ihe siiueturc of rewards and incentives lhat discourages innovation andrediti-osiiioii to mortgage the future in pursuit of shori-lcrm benefits.

eciiiumnaIcing process funnels mundane decitium in the lop. diverting senior policymaker* from long-term planning and oficnemerging piobkrr

Soviei options ate further constrained by such factors as competing invesimem demands from key noneisrigy sectors, the extern to which ihe East European countries could absorb further cuts in oil imports, ihe vagaries of the world oil nwkei. and the USSR's own fluctuating hard CunenCy requirement!

Facedthese constiainli. he creativity and fieaibility ol Soviet decisionmakers will be sirained as (hey Iry lo manage ihe ptobaWe gapoil supply and demand. They could Iry lo cope with this problem by

Further centralizing oil policy decisionmaking at both ih< regional and national levels

Making significant Shifts tn the structure ol investment boih "iitiin and outside the energy

Adorning more auihoiiuiian musiiies to reduce domestic demand

Risking the'poli'tcaleconomic effects ol lurihei reducinc. oil capons to Fasterr-Europe.

- rosipotiini'some nonenercy import BMM

s if

effective (bese rncainrea would be depends bothbc siu of any trrtrtfallibelsvccn oil supply and demand, and onearly and accurately lhc leaden hip perceive* lhc problem. The hitlorical record sur gem thai .ihe Soviets will'bc slow to recognize major probleras thai will hinderof (heir oil policy objectives. This taiditvcss could foice them to react in'the future at ihey didhaip. last-minute decision toil policy was made by lhc Pottbo to to sustain growih in West Siberian oil production The ability of top- level leaders to rapidly rrsobilirc and tcallocaic resources in response to majoi ptoblemi is an impoilanl strength of the Soviet deciiionmaijng system This type of policy annot be frequently repeated, however, bccatiie of the disruptive consc-quenees ii carries for the rest of the economy

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Contents

KeyJudf menu

The Deeiiioimufcing

Poticy Formula lion

CPSU Secretariat,

of tbc Council of Muirttcr)

Suic Planning Committee

Policy Approval: Toe Politburo

Policv ImpleBrepution:n^Tc^cl

Tbc DocnK*ifna.jrir Ptoceai io

Petaic Over Oil PeJJcy ""

Changing Oil Policy

Oil Policy Objectivei for ibc

Europe Venn Hard CurrtneTEar^ir""'

OilPolkyfoctholygQi

Moderon

Meaiurcj

The Future

ideological ConitralriU -

Geological

Eaport Conn tain la

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trace'

paper buildi upon an earlier Hud) j

i Oil ten (torn loc earner wort in iu-ino> focus on od polity and ihr leu attention given lo idefllificalion ol aliornalivc itrttcjia and their supporters, but provides pmk detailed discussion on ibc effectiveness of lhc decisionmaking proem These differences reflect nol only lac duTctcntcooorptnal base lor lhc present paper, bat also lhc chicgej thai ban occurred in the Se-kt ovl and cnerty situation during the past five years Artaortg Ihe cooo hnporuM factorseen'

The ability of the Sovklt to bear the rapidly iitcrcatiag Costs requiredaintain and even increase lhc output of oil in the face of lightened US unci ions on oil cquipcncni.

Ihe death or temcmcnl of several lop leaden with oonisdcrablc ciperiertcc in energy mattcit as welt as changca in tbc bureaucratic ittuciure and system of planning indicators and incentives far oil

Tbc appearance of an aulhotlutivc. long term energy progiai

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The success of Soviei oil policy and ihe degreehich oil policy dcctsMcis are woooihly integrated into the broader pcttitical and economic environmentin part on ihe effectiveness of ihe docasionmak-ini process itself The importance nf effectivehat increaied ai the share of oQ in the Soviei energy balance and in Soviet hard currency earnings has grown. It became critical, however, in thes Ihe leadership faced the prospectecline in oil production, coupled with rapidly rising production costs,eriod of slow economic growth

This paper ciamtncs Ihe reUtionshtp between Ihe Sovietcess and oil policy, ll exam-ines the bureaucratic structure and operation of deci-sibnrriakins for oil policy and identifies the underlying objectives of oil polieyihat influence Soviet decision, making. Ii ihen analyie* the tmpaci of Iheprocess on the impkmenuiion of Soviet oil policy fornd reviews constraints on the decisionmaking system and ihe likely responses of tbe decisionmaking process to looming problems in Soviet oil polic:

The Oeeisiooanalin, Apparatus

*

Responsibility for the formula two. approval, and im-ptementatioo of Soviei oil policy is dssiribuiedwle tange of eaganiuiiorts and individuals within the party-tiaie bureaucracy (see figure andhey are lied logcthcr in the decisionmaking processomples network lhat passes informationolicies and plans sip andormalhierarchy, supplementedcl ed personal and political relationships These relationships ioelu.tr trie tnterlocljng directorate of party and government i;

ndrfliud bioadlt isW..

amiilxiKH.Vol al int ml

officiils. as well as ihe lies of officials to iheir former organiiations and regions. Foresample. BorisShchcr-bioa. who was Ihe head of the Ministry ofof (Ml and Gas Industry Enterprises (Miimefte-tauirortJas pany first secretary in Tyumen*major center ofears prio. to hit appointment. In addition, many decisionmakers at ihe highest levels are supported and influenced by personal advisers and outside spextaitsts who have their own vestedand career interests that tend to bias the Information they provide

Policy Formed* (ioo

Alihough formal authority (or tbe approval oftests wkh ihe Politburo, much of Iheactually occurs in ihe Secretarial of ihethe Presidium of the Council ofand the State Planning Committeeorganisations monitor oil policy for iheproviding iiroad spectrum ofserving as high-level forums for discussionson alternate strategies Like thetheyational, integrative policyAt this level, however, oii policy begins to takeseparate idenuiyas authoritative

spokesmen fee ii appeal

The Council o( Ministers and Gosptan. in particular, have TOdy accessigh degree of eapenite onmatters and are continually involved in the evaluation and adjustment of oil policy Bothhave advisory staffs. Ihe Kcfcrcntura of the Council of Ministers, and ihe Slate Unpens*of Cosplan. to which iheycan turn. In addilion. each has access to an eiiensive network of research and design institutes, such as the Caspian Institute of Comple. Fuel Energy ProMetnslVNIIKTEPl and Ihe Oilop institute, the All-Union Instilule forther important

riovitl

Decisionmaking Hierarchy

(iiiiwii Puis

nl

(Mill <

.JM-nlci.

nliliM

*Mhil Winrul

inlm, "n

ii

0<iW fluiiKiMii

ill

ib.>

rciri.kiim* ind.O'< liWBnd

of information and advice arc ibc Stale Commiltee for Science andCKNTI and the USSR Academy of Science

The quality and obiceiivtty of ihe tdv.ee received by top-level ekciiionmakers from allrees is Subject to much variation For instance, the bead of ihe Academy ofnatoliy Ateksatidrov. in hi* tpeechea anda* shown himself toaunch promoter of nuclear power and bis advice on energy policy peesumably reflect*openaity. In *imilar fashion. Guriy Marchuk. the head of the GKNT. hastrong supporter of btoad-bascd develcesmenl in Siberia, and he is probably inclined to favor enerty projects there over those in othern addition, too.wests for information may frequently be contracted out. often to individual* working inalTihatcd wilh interested minUirvc) The

Rcferenlura. in paniculai. appaiently reiki primarily on such outside eoniuliants, whose vkws are probably eolor-i"he interest* of thethey serv

CPSU Stcrttiiu. The Secretariat, lupponed panic-ularly by the Heavy Industry and Power Depanment of the Central Committee beaded by Vladimir Dc4-gikh. ha* reswroibility for mooitortng andoil polky for Ihe party.epanment used to be known at the Heavypa(tment. The adoiiion of lhc term "power" to the tillc. which wasoted in Trur/inrobably lefVecii incrcatcd concern by top parly leaders over ihe USSR's energy polky. Alihongn ipeciric policy option* probably coiginaie primarily in specialized goveinmcni. scientific, and academic otganiMiiom.

Table I

Key DeeUiMmktrs foe

Oil Politynd Forinulalion

J th-o may become involved in resolving conflicis overatlocaiion and plan (uirillmem bei>vccn Got-plan and Ihe ministries.'

N.loliy Tillwim

Otydir Aliycv

"Milboro member:of uk Councilen

Pctttbvro mcmbti; First fepotyCUimunolihe Council ofparty boil of

. Cind-fatefeemei Piimm ef

lt.olitiu-

fetiit..-

Viltlty votouao-

' to; Party Seortary. head ofeavy

ro.f Rodin

mihiu larpuly ciiairrivw of Colin.

rs-headofiu

tcOcmnmentil Cem-O-

Oviiy Minhui

volion. Devel-orlof the West Siberian Oil

^Gast^nk.

Deputy Chaitman of

eil of Minitieis.of the Sine Committeeufenaei head of Siberian Oe-panracDt of the Academy of Stic

ii CbiikB

of Mmmen. Chumun

Aitld-yft

ilinonaiy-Tinlav

PI:

Oil Minitui

Gothi-mwn,

Chief of Covet

sod Ca> ladutiy Der-rime-

f the CouMtil *fMi*ht*ri- Within ihe Presidium, C.

3 an Energy Commission was set up nu later than theo bring ihose membersirect iotercsi in energy problems into (reejuentand to give dircclion to energy policy. The Commission probably is headed by Veniamin Dyrr.str.ii. the Deputy Chairman of the Council of Ministers,rimarily responsible for energy questions, and includes the ministers of ihe energy-productiongas, coal, and electricthe energy-related machine-building and construction industries, as well as the chairmen of Caspian and ihcGKNT.

The Energy Commission likely serves as an arena for intensive negoiisiing over policy direction and alloca-lion of resources and ai the primary source of recom. mcndalioits fot energy policy for the Council of Ministershole. In this process, its members are factd with the difficult and sometimes inheretiliy eontradktory task of balancing the vested Inleresls of their own ministries against broader national political, economic, and social considerations

To supplement the efforts of the Energy Commission, an Interdepartmental Commissionorss of Developing Ihe Weil Siberian Oil and Gas Complci. also headed by Dymshils. was sei up by the Council of MinistersI to deal more directly wuh the problems and needs ol the USSR's principal energy-prcducing area For example, according lo the Soviet newspaper Stxualimthtikaya induimya. in) ii tasked several ministries io send repretenia-trues to Weti Siberia to oversee imptos'ement in the construction of socialreprimanded officials of Iheof Po-er and Electrification tMlnencrox for endangering the production goals of the Ministry of

Secretariat hat an important iole io play in the demon making process, because ihose options must be coordinated with the party apparatus btfoic being presented fot Polnburo rewe-

1 nvori.iarini in" ff-criuM fa-cuora f*heil Scercli'r of lyvvxn 0ettu f. Phii beenhefSibeni" fU in*fleldi

T-Uf 2

Ministry-Lesel OrganltaliOas With rrimirj Responsibility lor Implementation ol Oil Policy

Otl-

Mininry ol Groloey

bil.ty

Ministry of Peiro-kurn ladust'y

ew reserves lo suppers fiture preducueo.

ull ci KM of (WI01bj

Ministry ofroposes plini

lor Mi OmloenuH indadiae: ipvopri

1IC tOChKtoffr: indeid miinl.iu

and equipment for drilling ex-

UhIim. infill piocallng, nord

Miniitir ol tilt Indvury

S'liilor UsclalMuMlll KcKivarSKtl

Mirrjirs ol Crn. K'WiioitOilCn Irtdistif Lawr crisa

Ministry ol Peiio-leumcirnchrmiala.m.

Sun Conn-Slcr tn Ik*

diit'iSiim of crude <at

Ruponiibk linn IfJt fa offshore eip1*

Titian irdion.

Cealirn rcscrvr. miimwio'iru Minoiry of Geoloer in! ipprovn theo, *x> MMf Id* Mirmtrym

Pilnuir fonlitllor to to-uiKi-Jn of oil-

fnU lidbliri ind Infrutrurluri.of wuipmrni diriaj oilfirU

product pipriiro

RcMSnuMc lor {nun ml teeoiiiii) protcst-if of crude oil inle virirun lines a< Iwclt. lutniunu. >nd pclrockcaiitil

ind iwmai the disiribasioa. pty.ud

Miuiiii Of foriici

Trade

producis

Negotiate* and

mm indrtii tonlrom for oil lad prifclcum croSicti,<ti*eci fur

ibr roriron of oilayusem in

lintesponsible lor nrcoUumns lor it* pvnhiH ol facifnrntry ptsrei.

nn, r, Commitift. Gosplan. alihooghtubordinale lo the Council of Miniiiers.owerful separate influence on the formulation of oil policy through its extensive involvemeni in setting plan largcis ind allocating resources. On the basis of guidance from higher authoriiies (the Politburo.and Presidium of the Council ofosplan est abilities final plan targets through aof negotiation with the responsible ministries. This process may require several iterations of Gosplan proposals and ministry counterproposals beforeis reached, reflecting differing objectives. In the negotiation process, Gosplan attempts io set relatively higher production targets than the ministries, which trystablish relatively lower plan largeit io ensure bonuses for plan ovcrfulfitlrncni. Overfulfillment of assigned largcisirect effect on the size of bonuses received by minisify and enterpriseAccording lor

' disputes between Gosplaninistry are usually resolved in favor of Ihe former *

osplan's role in oil policy was cipanded with ihe formation of ihe Gosplan West Siberian Interdcpanmcniat Commission, which parallels ihe Council of Ministers Commissiont Ihe same lime' This Cimmission is located in Tyumen', ihe first USSR Gosplan group to be located outside ofUs assignedo actocal project manager foi development of the critical oil and gas resources of ibc region by resolving conflicts and promoting cooperation across ministerial and regional boundaries. So far. however, according to iisand depuly chairman, the Gosplan commission has enjoyed only limited success, ll must refer most issues back to Moscow for resolution and. thus, lacks genuine authority lo challenge the control of each ministry over its own aciivitses in the

Induiiry (Af mne/leprom) bytlcouate and teliabk supplies of clccirieiiyhe region The effeeiiveneu of web edict* beyond ihe short lerm. howevet. remains highly oueslionable. tincr ihe* do cot alter the long-term operational strategy of the ministries

Policybe Politburo

Tbe Politburo, because ol the breadth and complexity of its responsibilities for all national policy, consider* oil policy moil frequentlyarger context, such as energy or economic policy. Thus, theat ili weekly meetingxamined the draft of the no long-term Energy Program for the USSR tn which oil policy figured prominently I

it -sSteK

The tendency ol tbe Soviet system to funnel decisions up the hierarchy, however, also requires the Politburo to spend lime on more mundane, relatively minor aspects of oil policy. For eiample.'onlytwo weeks beforepril session, the Politburo reviewed the problem of improving the supply of fuel and(or (arm tractors. This practice if typical of the Soviet system and has the potential to overload, and thus weaken, the decisionmaking process. Moreover, the time required (or one ol these issues to make its way to the top of the hierarchy could cause an unnecessary, and pcihaps even damaging, delay.

In aciual practice. Politburo actions on both major and minor issues typically constitute largely pcoratification of policy decisions worked out ai lower levels, rather than substantive intervention from the lop ll probably is presentedrxrtition paper" lhat it can accept, reject, or remand for further work. The basic outline ol the long-term energy program, for ciamplc. was apparently adopted in) The program was finally published in1 months alter ihe Politburo approved K. In early August, according to the chief of Oosplan's Petroleum and Gas Industry Department. Vladimir Filanovskiy-Tenlov. the program was not quite ready to go public, suggesling lhat il was remanded to Cosplan for further ironing out of contentious issues

tn some instances, however, for both economic and poliiical reasons. Ihe Politburo departs from this prsciice and intervenes directly to make changes in basic policy for cxan. >le. in7 the Politburoharp reallocation ofsourcesncrease Oil production in Wen Siberia when laced with an uncipecsedhe overall growth ol oil

production. Similarly, the quick resrvjnsc by ihe Soviets lo shift enough resources to theore natural gas pipeline lo ensure its on-time completion following the expansion of USon IE2 almost certainly came directly al the initiative and direction of the Politburo.2 Pravda reported ihn ihe CPSU Central Committee (CC) and the USSR Council ol Ministers had given an official blessing to "patriotic initiatives" to overcome ihe effects of ihe embargo anddecision" had been taken on mcasuics to ensure completion of the pipeline. Thisas made at least ai much (or political reasons as (cr economicexportin the (ace of ai leasi some degree of disruption to the domestic

In miling its decisionsolicy, the Politburo depends on those ft- mcmbcts whose functional and regional responsibilities haveonsiderable involvement in energy matters lo take Ihe lead in discussions, lo its detriment, the Politburo hat Ion several ol its most experienced members in eneig) policy issues ihe pati lew years with ihe death of former Chairman of ihe Council of Ministers Alekscy Kos^gin0 and the resignation of parlyAndrey Kirilcnko"

Those current full members ol the Politburo with ihe greatest responsibility for oil and energy policy in-elude Nikolay Tikhonov. who replaced Kosygm0 as Chairman of the Council of Ministers, and his firsi deputy chairman sinceeydathyev was lormcily Ihe parly boss of the Azerbaijan Republic, whichong history of important activity in (he Oil industry

'll liwlliernrr

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Illl

Appro.al Tlx

of the breadth aad complctiiy

of til responsibilities for all national policy, considers Oil policy moil frequentlyiner contest, such asar woocarut policy. That, the PotHbu-ro. al ill weekly meetinga mined ihr draft of the new leaar-lctrn Energy Piogram for Ihe USSR ia which oil policymi neatly .

The tendency of ibe Soviet syWem'So/uisnel decision! up ihe hicraichy. however, alio requires ihe Poliiburopend lime on more mundane, rejativ'ely minor alpecu of oil policy. For eiample.'onlyTlwo weelu beforepril teuton, the Polilbuio fcvicwcd ihr problem of improving the supply of fuel andlor farm tractors. This practice it typical of the Soviet system and has the potential to overload, and thus weaken, the decision ma king process. Moteovei. ihe time (eouircd for one of these issues to make itsto the lop of the hierarchy could cause an unre.eui y. and perhaps evert damaging, delay

In actual practice. Politburo actions eat both mafor and minor issues typically const hale largely pro for ma rstification of policys -cried oat al lower ks-eli. rather lhan tabttartTrvc iBieas-eMaon from ihe top Itipatiiicat paper" lhai it canject, or remind for farthere basic outline of the loot-term energy program, lor (sample, was apparently adopted in] Ihe program was Finally published in4 onths alter the Politburo amoved it In eaily August, according to ihe chief ol Gosplan's Pctiolcuin and Gas Industry Department. Vladimir Filanovskiy Zenkov, ihe program was not quite ready to go public, suggesting lhat it was remanded lo Gosplan foi further ironing out of contentious issues

In some instances, however, for both economic and political reasons, the Politburo departs from this practice and intervenes directly to make changes in bat*For nan.7 ihe Politburoharp reallocation ofsources hi increase oil production in West Siberia when lacedan uneapieled decline the overall growth of oil

production aaanuWIy. theresponse by ibe Souieis to ifooueces to theur ope eat-.nl ess pipeline lo ensure its oa time comrAiio. Icaaemsnc Ibe cipansaOn of US. oa> alanosl certainly came directly ai Ihe initiative and direction of the PolitburooWri reported lhat the CPSU Central Commiitee ICQ and Ihe USSR Council of Ministers had given an official blessing to "patrioticovercome ihe effects of the embargo andad been taken on measures lo ensure completion ol the pipeline. Thisas made al least at mirth (or political lessons as fcr economiccaponin ihe face of at (cast some dcgicc of disruption to the domes lie

In making Hi decisions on oil policy, ihe Politburo depends on those few members -hose functional and regional respontibilriies haveonsider able involvement in energy matters so lake Ihe lead in discosiaoas ToOCtrmtcai. the Polrtbors Isas losl several of its most eapersenced members in eitergs pofcey issues ihe past ft- years -ah the deaih ofChurrata..hettrt Alettey0 and the rcwee.iton of partyAndre, Kartleato > -

Those current full members of ibe Polrlburo -ilh the greaicsl responsibility lor oJ and energyikhonov. -ho replaced Kotygin in

mcora 1'

I9g0 as Chairman of ihe Council of Mimsiers. and hil fill! deputy eluirman unceeydir Aliyev. Aliycv was formerly ihe parly boss of the Azerbaijan Republic, -hiehong history of import*ni activity in ihe oil industry

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m W,

I

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nih uhui aaaaai

ana*.I*

ar^Np-ranp

U

Three candidate Polilbuto members alto haveresponsibilitiesackgrounds in oil polky. Mikhailho wit appointed in1 to hud ihe partr'i Control Committee, -ss Tor II year* ihe Premier of ibc Russian Repubh" (RSI-SKI. where the van mi>oriiy of Ihe Soviet Union's oil rejervea ind moil of ill oil icfinini and petrochemical facilitiei art Voeaicd. Thz newestmembei. Vitallyill alio becomein oil pcticy at Ibc new Premiet of the RSPSR. Vofotnikew'i proem capcrlcncc inclvdcs serving at the First Deputy Chaiiman of ibcCouncil of Ministers, with responsibility for mditirytrully. VUdimir Oetf.IV. who wasandidate member of the Politburo inat been head of lhc CPSU Ceawnl Committee's Heavy Indattr) Depanment since at6 and it often ihe senior party officii! present ai meetings and conferences conceintd -ilh energy potic

Ne-ly elccied Pany General Seeretary Komtanttn Chernenko. who hat tpenl his career largely in party adminislralive and propaganda activities, has never had dfreei reipcntibillty for oil, energy, or even economic policy, althoughember cd thehe iri.ni haveflmillinly wilh the issues He is likely la rely heavily on Tikhonov. who nominated him for General Secretary and who is clearly acolleague, for advice on iheseer* m

PolicyIV Ministry I

Prima-yfor impkntewing oil policy lies with severalrncaiUrura tad other all-urua bodies orgamrcd along limctonal liivrs They tie supported by and ait dependent on various in asportation, con Struction. supply, and machine-building ministries, moil of which alto serve many other clients A'lhough the gcneial (leas of retponiibility are fairly wtll delineated, some overlap occurs For instance, ihere hisontinuing piobkm defining who nfor exploratory dulling at well at balancing ciploraievv and development drilling, especially in Wesi Siberia, between the Minimy of Geology and ihe Ministryettolruml Similarl

"nherent lensson.

oct*;en trie oast: iiff of lhc Oil Ministry to man-eniie current produetion and thaijsl the Stalefor Useful Mineral Reserves (GKZj, which is more concerned with maitmiiing Long.termeven if sbotl-lcrm pcodoction is lesvtocii

Mirustciia! asseasmcnu and recommcodiuom of teconcaogiCal and ptoduclton upabiliiics. incoeporii itag citcaiivc practical and often proprietaryeocttitute tignlicani inputs into the deration-making process The policy perspective of lhc minittries, however, is lypically narrow, meeting their ownlanned production goali. rather than attemptingmprove energy resources across the board. This often leadsack of cooperation and coordination among Ihem. despite their operational interdependence The pteas is filled with ciamples of supplies, machinery, and eq.ipment not delivered on time; supplies (including foreign equipment) lying unused and leierina t> lhc harsh Siberianoorly designed or constructed equipment bteakiog down; and chrome failure to provide act eruate tuppoung infra Mr act ore on lime. Under ibese oreumsiances Ihe failure of any one ministry to achieve plan target! or lo fulfill conn actual obligi-tiont echoes throughout the ptodwciion and supply chain, forcing adjustments and encouraging the kindt ofofrsouices, duplication ol effort, and underestimation ofre common throughout th* Soviet cconomi

The Decisionmaking Process la Acrlon

The Soviet decisionmaking process lypically confirms, rather than alters, tbc banc direction of established policy Considerable lime is spent mecharucallythrough the sequence of annual planning eye lei duringInch the often cotiTlictiiig parochial interests of the individual mint tries mutt be balanced agnnsi ihr broader political and economic concerns of higher level policymaking bodies. In thit environment plan ning demons lend to be cautious and incremental, and the achievement of shori-tctm results thai boliter

I ivnclassifiedbr drtwie. Keuition, riri/ratio Jowei laVniio-.

ir-eerr-

continued lo tagbehindhe abtotuic mcicaic in oil productionhichobtained primarily because Ihe increase in production from Weat Siberia cicetdcd lhc arnounl of production lott from older producing regions, wai the nmlleit uneethe corictpooding relative increaseercent -as the imaleu in three decacka (see tableSonet concern ovei this pioovcm wai openly manifcsl-

cd bjleduClio* in Iheil pioduaion

data on the oWci icgions and by con fldatai il tourcei on Wtn Siberian productionoreover, the Soviets, having failed to meel1 od ptoductioo urge! by atillion mcltk ions fmrnlj. reduced8 goalm I. Thisrelude of iking! to come following the dramatic slowdown hi theof oil ptoductioo that toot placehe Se-Kit lo-eiee* ihe target feu oil prodocimuymrOmt.

The decitionntiling process, with its tradition of telling overly op-.imniK plan targets and ill locus on current plan fulfilment, had failed to aleii ihe leader, thip io ihe icverny ol impending mi Soviet planners, accustomed io large andeiincreases in Cnl production, and not anticipating ihe thiipin economic growth that accom pamed the planned reduction in investment,greatly mucakulaied the utr at whreh Ihe change in iWilaacc could take place

il roliri Bccautt ol the failure loachirve the planned compost -uonal change in energy supply, (he Politburo wai forced to depart from the normal incremental dcci. sionmaking pioccts ind Quickly reassess and slier in energy nolici onlyycart after ir bad lieenDiethnev outlmcd thepolicy at a

Total Annvi

USSR: Oil Production

r i

0

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i

Unithfgi

w-.eh. t

|.* I IW.|*

il.

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f ii.

' IM'I

biO."

"ifaWiri v.

l Arl*^- A

> IW>, Itilnil intAilhil

fanV fmmjrirrH. -1

1 Cemril Committeel though Hie long trrm [lull remnncd lhc time. In indicated thato

.It ll'r llinc"*l

i'

delayed. The Politburo decided to return for Ihe neatears to its previous strategy of depending heavily on the production of oil. which would increasend of natural gas, which would grow rapidly, for meeting energy needs.

The key clement in this policy was Weil Siberia. The planned increase in total oil production could be achieved only if the increase in production from West Siberia more than offset the amount of production lost Irom older producing areas. The Politburo rocog-nined that the investment planned for that region was insufficient to meel production targets andeallocation of investment resources to West Siberia. Drilling brigades from other areas scon began to arrive in West Siberia, and inampaign was unleashed with great fanfare assigning high priority for Tyumen'deliveries from plants all over ihe USSR. However, as was apparent from criticisms levied inSoundtabte meeting of officials and planners on Weil Siberian development, there was concern thai lhc amount rcailocaied was not adequate lo support critically needed ccploratioo. at well at development drilling and construction of infrastructure In addition, there was controversy over whether to concentrate on lhc developmentarger number of Smaller fields wi'h all of the logistic problems that entailed, or lo attempt to meel the increased production needs by increasing drilling and eiltaciion above planned levels al ihe older, known West Siberian fields, notably the supergianiIn typical Soviet fathion. the second alternative was chosen, which guaranteed the necessary rapid increase in productionelatively lower cost, but only at the price of reducing the long-run total recoverable yield andteeper rate of decline

The decision to thill investment to West Siberia, aiming in the middleive-year plan that also wasignificant slowing of growih in Ihe economy and in investment, meant thai theof resource* to other sexton and regions of lhc economy would be constrained Within the energy tenor, it ptobibly contributed to the vinual leveling

off of coal productionR and llie downturn thatear laier. More broadly, the shift into West Siberia eoniributed to the further slowdown in the gro-th of CNP lhat has characiet-iied lhc Soviet economy since the Isle'

The decision demonslritcd an important strength of tbc Soviet decisionmaking system. Because finalit concentrated delusively in the Politburo, it hat Ihe ability to rapidly mobiliie and shift resources in response to pressing problems that require reevi|u. aiion and redirection of policy. '

This approach, however, alto has importantIn thisecisionmaking mode, the leader-thip does not have the luxury of weighing both Ihe long- and stiori-iermand bencfilt of sueh sharp changes in policy. Thus, decisions made in this fashion are likely to requite major ad)us(menii throughout the economy thai are not easy lo absorb

Deeiiions of thii magnitude eannoi be madewiiboui increasing the costs involved and teducing the capacity of the system fot absorbing additional shocks if ne- [iroWcmi arise, frequent changes could caiily Iwd to confusion and enormous wasle as lower level managers and production units fail to masier the tasks associated with one policy shift and to gain economies of scale before yet another let of directions and piocedurcs mutt be instituted I

The way the decision waj made alto contrasted markedly with the more typical nyle of consensual decisionmaking that characterised the Brcrhnev era. The new policy did not appear to enjoy universal suppnrt. at debate ovei energy policy continued In particular. Premier Kosygm several times tn the sue-eroding motiilti emph.isir.ed Ihe needore balanced approich to the energy situation. Brechnev

* Ih< lelmmihiplinen in ofml HeofIn owrn iin IIITim

l Itexiie. Pipe.

, nit-'i

-nTie:

respondcd io tltjs lack ol support through remarksomsomol Congress in8 in which he do fended the need for the large investment in Tyumen* oil and gat. This irresolution probably occurred, in pan. becaute the decision to shift resources to West Siberia -at made too swiftlyllow lor fullof views aod. in pan. because realand uncertainty about the policy remained:

economic objectives during tbc transitioneriod of leaser dependence on cat.

Mainisuuag energy self-sufficiency.

Provid-fig the mayor share of hard currency earnings

through eto the West

the demand for politicallyotts to foster iittd other client stales

The first objective is clearly most important aod raket precedence in oil policy rkcsUont. la makingdecnaom for oil capons to meet the other twoobiectivea. however, the leadership has someepending on world market conditions and the

policyeturn io the long-term strategy thai was adopted intO plan of reducing dependence on oil, while making lhc transition lo increasing reliance on coal and nuclear power. The exception was ibc role of gas, which now would be increasingly relied upon as the transition fuel. Previ-ously. gas had been reservedn fuel usesashion similar to the policy foe o"

Oil Policy Ob'eeti-es for

Leadership commitment lo Ibe ohiective of energy self-sufficiency wai clearly stated in Kosygin'slo the ijlh Party Congress6 that ihe USSK "is tbc only major industrial state in the world that bates its economicn its own fuelhtl ficcrartuly repeated scarti-ment, which is bcrirpooled into the firs section of the Energy Program, fill well within the Soviet Union't tradition of autarkic dtveiopiricni andource o' popular peid' and international propaganda

J

leaders probably believe thai the oil poncy they have adopted will prevent the developmentroduction critis such as theyhe7 plenumeriod of uncertainty foUoving the decisions ol that plenum the decisionmaking process hat returned to its typical, inetrmental mode ol operationrelatively Intlt attention irvcn io identifiesikm of potential future problem

Soviet oil polwy for the ivSOt is bated on the leadership* awareness of the current leveling off of oil production and probably, an anticipated decline in the oeaihe resulting polo appaitnily is devgred to meel three basic, lutcrielatednd

i-iuM-Ui

* i*H* hutiia*

tuvialaaami.

i'h'islit-m

vOrrnr On*

Eaiernsl events, moreovet. appear to have strength ened kadcisrup cnmenMmeni io this obytct The en! supply doruptrorts off> thai pUgued the United Slates and the West European countriesheightened Soviet awareness of the dangers of becoming dependent on foreign sources of fuel and energy it reflected in Kosygin's comment noted above Ihis point was brought home more directly by the US efTotts to apply ctortuaut sanction!ing the impowtioa ofaw in Poland in1 Ihe sanctions included Iht espar-son of ihe Intat equipment requiting validated raport license* *nd sutpention of iht issuance of tueh

The Sovscu responded by ihe United Suits ai aatrading amine* and prouedeil lo Imd ne"o" Oil and gas-hen rvtrStmeove* Iheylso attempted lo

irl--

increase domestic capabilities in the manufacturing of

Jipmcit. According lo C

3 many

jtcoptc in ihe Soviei Government "en beginning 10

rlic sanctioos aiblessing in disguise lhai forced the USSR lo improve ill own eeonoen, and develop iuproduction faciliticsC

onfirmed Ihe commilmcnlpsftct-hen be sti led lhai ibe

USSRone*iled effort under way lo develop i-be manufacture and supplyange of petroleum drilling and pipeline

On Ihe Other hind, the Soviet> recognize IheUS technology can make to the lucccti ol thcii oil policy. Byccording

3 Soviei foreign trade organtiauontshowing an incieaied willingness to eiplorc options and enter inio coatractl with US Suppliers lor machinery and equipment Thiitrue especially il the if miunavailable from other sources. This shtfi. -tSiCh occurred after the casing of vatactions and Ckt-ie continuedr Iwt-reecision thai had to be appeoved by (he PoHlbuiO

Sirntlarly. the Soviei leadership was welt awarepredictions of anhe suggestion heft is not thatprovided ihe leadership with newand thus altered us decisionmakingthemay have servedocusattention mote acutrtyon thesi is lhat Ihe propaganda value aloneClA wrong and overcoming USthe Soviets -iih some additionala maintain or increase production Thus, according' propaganda official

Sgrj that one of the main themes for So-iets abroad tn ihe coming yearsbe lhat the Soviet Umon does not need foteign oil

iol CIA wcOinrom m

c

ClA i- hlicttuni. however, also might have had an effcci in strengthening the hand of lhose arguing Tor increased investment in West Siberia Thil is suggest cdomsade by Od Minister Maliscv. who said lhai ihe much1 ggaJMM of Soviei ml reserves by the Swedish Tub FctiMiaekct had led his superiorsthe eiiauiij- estimates. Meprobably concerned thai this higher eiiimatc would be used agamsi his ministry in the competition for investment, whereas the CIA preJictions could be used tn buttress his claim for additional rctouicct.

Fair ope Venus Hard Currency taports "

flccausc leadership eommiimem so the objective of energy self-sufficiency is deeply icoicd. decisions aboul how io balance oil supply and demand will largely reflect pragmatic trade-offs between taports lhai meet the other iwof earning hard carrcney and ensuring eorlrci ores linein Europe On the one hand, oil eipofts for hard currency, primarily io European members of the Organtration (or Economic Cooperation andCDl. have accounted lor about half of Soviet hard currency earnings It urn commodity iradeko the otheroans to Eastern Europe helphose countries more securely into political and eccesom*ith and dependence On the Soviet Union

The attitude of the leadership toward the relationship between eiports io Eastern Europe and htrd currency countries was exemplified1 when ii Chose torowing Soviet hard currency irade deficit by cutiiag oil deliveries lo Eastern Europe} and divertingarrels pei day io ihr inter national market Moscow recogrned that such cult couldet ratedtah>lny and worsen eiorsomw' per for ma nee ia Eastern Europe

Sirairllieriur

case Ihe teadeithip apparently believed,he taller figure represented almost one-third of the ihe short-term effects could be contained, inlpart.'byK' investment allocated to the energy teetor. up from JO making the cuts selectively rather lhan equally among'* percent in the pcevioui plan period, and about one-ihe East Europeanfor irrstancc"^': third of the planned increment to investment in was not affected by the cuts;Abo. St suggestedindustryhe pare of oil industry invest-tcveral occasions'by_a_ leading Soviet tpofcumanment in the fust two year* oflan

later in'the decade, it would beimitar fashion, even though therisks might be greater.'

Oil Policy for

To meel its objectives, the leadership hastrategy thai letics on increased productivity,of fuels, and conservation to maintain supply and hold down demand. These ate lo be achieved through modernization of plant and equipment and the applicationide range of traditionalmeasures. To the degree that these mcasutcs are successfully implemented, the leadership'sin making decisions to meet its basic oil policy objectives will be increased. This strategy, however, must be implementederiod when overall investment is growingistorically low rate, and the geological and environmental conditions in the primary producing areas are making il more difficult and far more costly to maintain oil production at or near current levels. The impact of these factors will reduce the flctibthiy of Soviet decisionmakers to meet their oil policy objcciivet.

To back up its oil policy, tbc leadershiparge proportion of inveslmenl funds to energyand oillan calledpercent increase in investment in the energy Sector compared with that of me orevtoui five-year plan. Investment in oil production alone was plannedncreaseeiercent,illion rublesob-llton rubles during IVBI-BS.

nirniiinvr* I'-lOl )1

r*r

indicates that oil may account for almost one-half of the increment in total induttrial investment.'

Ycl even these generous allocations by themselves -ill not be adequate to guarantee Soviet polky objcciivet during. For cample, according to t

11 the average cost ofon of oil nearly tripled, from iiublet. The rate of increase in cost, moreover, it opected to accelerate during the current decade, at new production operations move into more difficult areat and the quality of deposits in the Olderareas declines further. Moscow it well aware that it cannot continue indefinitely to increase the share of investment going looil production. At some point these costs must run into the limits imposedinite investment budget thai must accommodate othersuch as defense, machinery, andai well as other energy teeiort.

Efficiency gains, thus, are essential to the Soviet strateev and have a'rcidy been factored intogoals, lor rnstancc. lu) oil production targets,lan callsorepercent improvement in efficiency of drilling opera-nons. Similarly, the peiiochemical industry plant too JJ-percent rite in labor producnviit. primarily through lhc introduction of new equipment The need for more productive equipment was bluntly stated by two Got plan officials writing in the? ittue or the Cotplan journal According to them, the capacity of lhc Soviet petroleum machine-building industry to produce needed equipment it much less than the amount of currently produced machinery that will be required duting the decade. Therefore, toajor and cosily cipantion of capacity, the gap between supply and demand for this critically

Vh imluUnl i- Itior,<tinartivyu. in oil refining and iSe peiinc tumuli irOvti'

-Seem

eouipment be closed, they argued, only by producing new. ieehnoJja;ically advanced and more

eouipnseni

M nderwilatioa

Ai indicated above. Ih* Soviets are n ihr. wirtetnrcad infusion ol new. more productive

rnC'ey-e'lKicnt lexhcrCrogicl fromplant*

ornet> help 'h<rr implet. litTo obtain ibe neededual approach Fm. ihey

sought to import advancedWest,

including entires wellol

individual ilerm such ai sriim* iar-i. and papclayers Second, ihecjgat to is*-

omcatie produCtiM capabi'ilie-

During theean, ihe Soviets appear io have shiftedreater emphasis on the leeond approach bccauie ol peoblcmi encountered in absorb, inj foreign trxhr^Soey. difficulties in obtaiomf aeecti

e-an technology, and limit!availability of hard caneney. Technology tUnnplc proecit. and resultsfallen ihori o* leadership eipcclatioeiswai reiof ni.rd) CZ

nic<.Siealinc Wcki-

ern technology docs neip it'eani gel people io (p'Oprrlyl avor

Jipai Iromurchased Iromuer Company, although bti-tct than thai of domestic bil planii. probably will never approach the quality produced in limilac plant*the United Stain bccauie ol problem* in quality

control la lyixal So-tct fahe ptaaji manager!

androdoeiion quotas over

quality

Soviet hopca for irKi cased peoduCtivif) through mod-ito./atioft are Kopaidircd. however, becauseotoaitreula'. Ihe USSR hai indilionally had problerm in dcicloft-ing practical aiiphcaiiont for new lechnok>g> Thene orgamulioai resrasnsible forotici

rvwrtg innovation often have hiik incentive for

wa IicHa.il imiituKt. lor eiample afg reinh for interning air) pertcriirig tcchnoitiui haie no icsiuonbiliii and receive notco

brnrfiivimj them put iaiu UH Indi-iiluil operating enter tenet, oo Ihe other hjiteLaie rewarded primarily foe mcciiog current prodoeiion goata and arc not aniaoui to'risk the initial drop ha production thai oftenecision lo introduce new technologies

Such drtineentivca to innovate aad moderniic received considerablehe press after Arsdeeajo-became parly leader, with Ihe Generalimself calling for changea to correct these) joint Central Committee -Council of Ministers resolution lhai encourages modernization by rjescent rati ring some trnesiaacai decisions to ihe enter prise Ve-eltest. albeit lunited. attempt under Andropov to deal wiih this problem Moreover, none of ibe five ministries involved in Ihe ciperiment is directly imobcd tn ail policy impiemen-tation. so that any poteniial benefit from this ciperi-men: in the oil scoot wJ1 he delayed

Bureaucralle Mrasurrs

The Soviets are also relying on various kind* of iraditmnal administrative anil bureaucratic measures to implement their Ctl policy These Include changes in coooonwc indicators and ptanmag procedures. Pew typeslabor orgamutiion. burcauciaiK teoif amra-tion. and eihoriative decrees and campaign

Oil Minister MaTlsev. for eiample.2 article, wrote lhat the aaaaitary had considerably opanded ihr use of planning and incentive indicator* based on the frnal result, lhat is. ions of ml produced These rndiratort ate cipccied in supplement and perhaps eventually rcrlacr inch indicators ai number of meters drilled, which encourage crews lo drill many shallow, unproductive wells Meanwhile, according2 article by one of its deputy ministers, ihe Ministry lot Construction of Oil and Gas Industry t'nlcrprises fWrane/tegri/i'rov) haswo-year planning cycleurvlrmcnt toear and

annual plaas so eetiei coordinate produei-on of papf

tswpptyl and the sun of pipeline eonsirvciior. Ideesr kinds of measures are designer) to make

-Srrrff-

jnd iniplcmrntilion of oil point more rational in econnmk terms, especially at lo-ei levels ol ihe hierarchy

ifUimi approachhe Mine prohUm. when domestic prices lo> oil and ratchanced7 lur the litsi lime inears. Ihey -ere designed.

i i 1 ailicle in .'

rcitu lo more accurately reflect atlual prod*cl<on colli and allegedly arcromoir ihe intuitu line ol gas loi oil" ll it not elear. however, whether list new pricci do promote tubiiiiuiion. gis-en Ihe limited ability ol individual enleipriie mini|eri to imitate such aetioai without approval from eenualhe So.ovtehaarta far eamtin-uoully ot e'en fieowcnlly adjusting paiccs; thus, ihe new i willor any rclilionihip ihey mtghr have had lo real eenu. More importantly, bctauac ol* Ihe earuyhaia oo mrrpsaoiiiains targets regardless ol con and ikeabuocarofit motive for enterprise managers, priccieiyinfluence on enterprise behavior

The !b'<ii arc trying tolasercasend ei-ii".itior. of resources by *tr entraining some dcci-sionmaitng through ihe use Ol crtgadc contraeis This relatively new approach lo labor oreat ion ii di signed io allow individual crews toighei monetary re mm lor iheir numbers in return lor asore rapid eomp!ctioricoyMl Accor eJ.ru;1 article by Deputy Minister K.or ii'oy planned to have S' percent ol its brigades working under such cantrieis} as compared withperceni

The Soviet leadership has also tried the familiareorganiratiori lo solve problrms of bureaucratic inelfii iin manaienwni and dcciaioamatirig '" For eiample the State (owmntne far the Supply af Petroleum Pioducts was upgraded liom Union He

pu.ti'n to AII-Union status7 On the ham

continuing stream of complaints in the press thit

*ant - a> .

o j. awwisai astaaaar gaastaaW

Mfu ttmat mm

'iinlni.nl

further ccntralitation el auinority noes cot <erm la hat done much to improve "com rot over the ditinbu iio- of it-eve

Anoihcr etampte ol this kind ol bureaucratichich hai potentiallyeachingfor the DunagcrttcsM of eatraction of energy resources generally, was the creation an IW2 of ibe Gotnlin commission on West Siberia referred lo eatlitr. The Commission has as ill specific goal ihe breaking down of buieaucralic barriers and theupingle project manager for therati aoo TV Lack of 'cat authortty grvea Ihe Commission and its conseoueni relative lack of success, however, reflects ihe tensions and inclficieo-ciet inherent in ihe Soviet bureaucratic decision mj I

f

Rcoiganiiations lo improve opcraiing il-Mifiy have also occurred al lower levels Afmne/renrpm. forreal roc lured part of its operationsumen' ObUsi inirjucatcd their

diss! ush the performirc ofan-

agtmtni by notany ol its offitialt for ihi new or gamSimilarly, an official of Iheinistry ofsnniDetron

J in7 thati tea roaO const rue iron in Weal Siberia was shifted io his Ministry because MwHtlt'tatH'oy had appannily lei tins task slip io concentrate itson building gas papeline* This thus in reiponowever, apparently ocruircd wubovi pan

agreement by hit Mir.f'y.ccompanied

by additional resource

When all else fails, the leadership frequently resorts toon. ewcouri(inf tbe nvnittries and theio workarisuit of important goaH foi1 CC CPSU retoluiiori. in typical Soviet fashion, praises Afmnr/rrgorirroy for us prueni consirwction effoni but then admonishes itariety of sins, ineaudaag failure ia retool and more raradl) and ftikuic to improve the Quahi> of pipchnrhe ineflecuvrneis

*OnuH tt, ,i,

of iuchndicated by the need (or lltii deneo only iwoyearsa similar onessued. Trie measures being likenesolvethese problems were outlined by the then head of the roinbtry. Boris Shche-bina.1 article in the mtnbtrysetailed analysis of the articleormer Soviet (at aod petroleum equipment engineer inowtrrer. artists forccfulry that imple-mcnlation of these needo! measures* will be only parlial and skrwat best.lo bis analysts, which paralleli our own. ibe ministry will resist changes that might improve its iWlerm'tapabailto and ii will continue to favor trkd-arsdW rnetlvods for meeting inod action large!)

The leadership has also been eond fashioned Soviel'ityte campaign for'energy oMicrva-lion, led by Cosplan Deputy Chairman Lalayants. Enierprises and individuals are coosianily beingin the press of the need to rxrnserve oil and are showered with reports on bow mucb'fucl wai saved ai this enterprise or by ihai driver. The campaign hat not spared the defense sector, where, for eaample. the military publishingeni,datoc*0 onh special refer encc to miliiary cquipdici.*I "

The central authorities are also introducing new planning norm, and requirements lo encourage9 Gospian resolution set-ting out Ibc meie-odology for establishing rates ol consumption of foci and ekctrk power had as its slated primary goal the establishment of "progressive sundards" in conserve these resources, distributefficiently, and uliliic them effectively Thit resolutionimiliar one thai had been on the books for moreoint Central Cc-nmittee-Council of Ministersears latei focused on Ihe same theme One of its resultsei of regulations for monitornd iccording consumption of energy resources that were pirvmul-gaicdis months later,upiemc Soviet session tn stanjingenergy were established to monitor Ihe eonsei vjikjci efforts of ministries nnd enterprise

Prebttmi in iHe Stank fot Oil Substitutes:

The Proliant ToNuclear Cntrgy

Certainly cv of iht moil ttlting txamples of ihe huitautralK Inefficiencies ihol att endtmic la ihe Soviet decisionmaking ptocesi can be seen in the program io develop nuclear entity. wklet, it on invariant pen of Ihe effori loredutt oil eontumeiion through substitution. ProUtmt ml Atommoth. ihe plan! dtiizmdfot letial produtiion ofttotloti, appattmly had become to ctttital byhat ihe Politburo imtteeded dlttttly In ihe mallet.discussionolitburo meeting on the problems. Delrikh went toVolgodomk. where the plant it totaled, and.peech ony that was itporled in Pravda. Strongly rtptimanded ptofectnd total parly afpiiats. Two days lattr. Pravda ttpotitd ihe rtilrtmtnl of I. T.eputy thairman of iht Council of Minium and iht chairman of ,ht State Committte fur Construction

Affciri. Although this -ai rrporitdly donr al

NeMkaes 'toutst. ihe ttmint and handling of the affair ,on hardly be coincidental. While it I, far from ttrioin thai then octioni will have long-ieim positive retulu. tne fact that the Politburo had lo bttome involved 'a straightening out problems or one of iht OSSft's top priority energy projtttt is suggestive of iht depth of the bureauctailt uitfficitntits that must be overcome in iht decisionmakingprot'is. ol well oi the tendency of the decisionmaking lysttm to push such problem; lo the top for 'esotutio

The difficulty the Soviets have in achieving desired changes in economic behavior by administrative fiatelestly seen when the commrtticosear later inJ. According io litstiya. they found thai ministries on the -hole had overeonsumed elecirieny to the tuneillion kilowall-hours. The Ministry of Po-ei and Electrification alone had over-consumcd the cquivatcnions olubstantial nc-iion of this enceis consumpiion must actually lie nil which in Ivgil accounted for the

iii-jl iI- t,

rrnwr iha eim

generation of about J5 percent ol ctcclricilyThese figures only serve to confirm the rcmarkineputy diteeiofajor institute that the program forot going well and eontidersWcs inn exists on bow lo make it mote successful. Ibe director saw the underlying problemasteful attitude on (he part of fuel users that cannot be overcome by current irtccnUves.

Similarly, the Soviet penchant for changing economic indicators and planning procedures al seemingly ran* dom intervals stems from the fact that normative Success indicators and centrally plannedhich aic seldom revised to reOeci changingos. do noroortd basis for making economicThe frequent bureaucratic reorganaialions alto arc largely cosmetic and ineffective because of more fundamental, underlyinglack of real decisionmaking authority away from ihe tenter and in* continuing subservience of managers lo centrally planned productieo gosh Thus. Ihe very structure of thenus ma king process aad ibe delegation of responsibilities between and among its various levels oftenross-pur pose, is efforts to develop av that works effeciis.

TV Future laccsmaraniakiati Ea'iriisaBral

So long as cut supply and demand remain in rough balance. Soviei leaders will have some latitude in determining allocationsoreign and domcsiici i. and meeting iheir oil policy objeCiives. Deei-sions inituation are likelye ineremcnial. in line with current policies aad plans, and oriented toward making marginal -erapeov-estseau anrsal sirsiciure and operaiing

On the other hand, this conservative and myopic decisionmakinglikrlyrovide rati* identification of probiemi that could leadeeignificant gap between supply and demandf ihe pohcy is not working, the Soviets wsll raobabii 'rspoad only ai ihr last miniic. with shaip

tt like Deeinr-er HI1

plenum when ihrs reatloeated investmentest Siberia, and again1 when the decision was made lo cut oil deliveriesastern Europe Such

decisions necessarily, will involve greater rua Iron-by senior leaden al ihe Poliiboro and Council ol Minislera level and win reflect- pMiiieareontide rat torn as well at purely economic and managerial ones.

la ihe latter ease panicularly. the degree to winch Sew set eal policy is successful will depend in port on the drubs!nd creativity of deeis-CHimalers Ihey will be constrained during ihe remainder of ihe decade byess favorable geological situation, poorer economic prospecti. and unfavorable changes in ea! etportla combination, those constraints will present Soviei cceitionmaten with fewer option!ore difficult deositjnmaking environment lhan lhai of Ihe previousear

Idrotogiial Camera in Is

The (cade neap's Itciibslity il kesatcd by ibeboundaries of Ihesystem and potrlacal Concern for maintaining regime control and domestic tranquillity. These factors paitrtulatly consirainwillingness to use prices, wages, and profits to encourage new. more economically rational forms of behavior thai could lead lo increased prodoclinty. inr.svaiion. and eonscrvatio

On ihe other hand. Ihe Icadenhip can be opened to try to induce the desired behavioral changes through the slepprd-up use of administrative mcaiurei. inch as further centra It tataoet of decisionmaking at both the regional aad national levels These measures, however, are unlikely to be aeeompan-cd by more lhan mmoi changes in the structure of economic incentives, ihus. il ithat tbry will result in f. gnli. ii" improvement tn the functioning of the economy TV Soviets also might resort to morerttanistratrve measures, such as stricter enlorcement of conservation and eipanded use of rationing, in conjunctioniepped-opdiscipline campaign io (educe demand and improve efficiency Not only would such mcaiures be bighty unpopular and pii- lulli ditruprivr the shori lerm they would not be an effective tubWittrtc for ihe king-termmiudes toward energy use lhai an MrstW

ei

iI li,

The options of Sonet decisionmakers are alsoI" ause meeting llScir oil policy objectivesdependentiling the level of oilWest Si be til. Without this Increase, iheytotal production at or near its present levelremainder of Ibe decade Unlike txeviousSoviets do not have new major ml Vet ionsbe tapidty ey have no real

alternative lo bearing the rapidly eir.ilj casts associated with the declining ii.tr* crttality. and acces-tibility of deposits that characteriic Wot Siberian oil ptodacltor

Copingimfrcanl ihortfall in plinntd Westductioa. especially in the rtcit lev yeais. -ixiId ptobably require suUiiniial direct Politburo involvement in Ibe deciiionmaking piixcsi, which itself wouldey indication that the Soicis -ci< eipenrajor problems for cumplc. ina. in response lo the failuic of Tyumen' to meet itstirieis for lhc first lime. Iitiiiya reported the dispatchigh-level invest in live group headed by Ooiptan Chairman Daybakov lo Westmong lhc invest i- Mors were five USSRncluding Oil Mimstei Mal'tiev. Minitte' ofof Petroleum and Oas Industry Enterprises V. C. Chirskov. and Mmiilef of GeologyutlovskiT. Also involved -tie Tyumen' Pan* first

Secretary C P. Bogomyilov and hit1 i

. NikitM. chairman of the Tyumen' Oblasi Eaecuiive Cammiitee AI of these individuals have ready sctesi to top parly and govemtTKOt

The investors* findings of majot disjunct ionsthe plans of ihe various ministries lot ibe supply of equipment and development of infiastruc-turc. and ol the continuationtbiiftlesi attitude" by oil Industry workers that left millions of rubles'of pipe, equipment, and chemicals wasted, are indicative of the continuing problems the Soviets have in balancing plans agiintf the objective inefficiencies of the Soviet economicubsequent Piavda article4 resoundingly criticiicd the nil ministry's efforts in West Siberia, accusing it of

followingmethod of sealed-down planning" ol largetv and of ftequenily reducing previously set targets, rather than ; . he challenges for increased efficiency and betler planning and manage menl posed by the need to raise output in the new. more difficult production condinoru -

Ecorrarratc Ca-ustraMts

Oil it only one of many important claimantstvestmcni pic thatistoricalrowing relatively slo-ly Within the energy seder, natutal gas. coal,cleii po-tr all reqairenfusions of investment Outside the energy vccioe. Andropov, like Drerhntv, singled out agriculture and the Food Progtam and also added transportation to the list for special allcntion These sectors, along whh defense, probably will lemain major competitors for inveslmenl under Chet nenko and serveonstraint on oil policy choiee*

Faeedignificant shortfall to oil production, the Soviets would probably fust choose to les'leote

rrtcwrec, and Hivesinrna vnihvaector

Weu Siberiaecision wouldoach lower likehl-sod of success no- than Ihe similar one made7 because ol the geological constraints noted above These geological conmaints mean first iltat ihe investment required lo produce more oil would be several times grenicr lhann addition. Ihe sovie' union'i own technologicalto locate and enliael Oil from the deeper and geologically more complei regions of West Siberia is also relatively lower by comparison io ibe situation7 in particular C

7 in reference todevelco ineni of the potentially od-rath offshore Arctic region, the ussr iseetfshelp laeeauseacks the cquipiweni. facihiics. and pettemnel so carry out ihe -or'

Alternatively, lhcln choose toshiti inveslmenl within theilikely to accclciaic the use of natural gas -hich it ihe easiest fuel to subitum, for ml Tim might also try to speed up the nuclear power program If Ihe squeere on investment andil production becomes

Th,j| vt.

( iji.-ol ihn-,'iHirrbnbars tu-+d.

-Vti.-t

very severe, especiallythe ind of Ibe decade.

coafiKlresource illrsealiOnB

nd Ibe o'I'imioii niir becomes

rodent. Such Strains to-.ll KM Ihr leadership"i

mi-.mcnt ioresentnd politic itiia-aau loc-by ibe PcJitburc to

fipoel Canst raiols

Fhe Sovietutein Europe's Oil needs hat already provede Veil lhan solid. Although -ill.re lo provide Iheir allies with other lypes of -energy, especially gai and clcctrsciiy. the Soviets apparently arc prepared to test the lirnits to which they can loree the Bail Europeans to bear the bruni oi any imbalance in oil supplydemand^by absorbing further cut) in Sovieiporis

None ihr less, thereimil loount of oil thai ihe Soviets can unilaterally with-hold-elatively small reduction in oil topfJm couldevere impact oa the mbmmfcl of ike '

1 -

ruw. Iterr wd10

fall back oa Moreo-er. despite Iheir modesr improve mcnl intff) aad irnprcrved track balance the pastyeais. last Last European eouev

aatalulle prospeat lor pure-*turf'.

4ional cnl foe domestic ronsumpt-on (orcither on ihe world oilr IromUnion Ihi' limit Milonstraint on

In pursuing ihe uOjccuvc of sanilytng their own haid currency needs, ihelso can do little to affect Ciiber the woilde foe oil or Western oil demand. Nor can ibey greatly affect these same factors -iih respect to gas. which ihey hope will replace oil as thr mayor earner ol fore tin eschange later the decade If thelor cal remainsV-ry in increase the amount available for eirsun so turd curirney punhasers by suiting einorissouk*tM lined atrrers as paymentind

hussw-afc -w 1 >

u--* ai m

-v -irv -r .

t*-

- + r . . V. - .

for earlier deliveries of arms and eii-iipo-cni is was done in 1 in the Case of Libya and.uch lesser eilcnl. Iran. IriQ. Saudi Arabia. anC yria, rather lhan by diveeijng oil from domestic users. The hinds ol decisionsirccHo opand this option would probably lead ihe Soviets to move more actively to improve economic and political lies with Middle East oil-producing couniric "

The Soviets could also iry to reduce their rcouiic*

meals for hard currency, for example, the current

development of domestic manufacturing capabilities

based on French technology for the production of

dcepwatcr drilling platforms should help moderate

hard currency requirements lor the oil industry. The

Soviets also may liy to case the burden on oil as a

source of hard currency by postponing or decreasing

some imparts until the anticipated earnings from

eiporci of natural gai arc available or in the hope that

ihe market price of oil will begin tu rise again.

*^lhn jrnj-orij e' oilfield equipment for lefccioo* pro/coi rhil Aid fceen pi'inned far

were being posiponedSonserve hard currency. This opciort. ftpweser.strongly affccicdequirements fry- agricultural imports, as welt as fortechnology, espee.ili. foi olfshoren andtu-.li ihey icmain heavily dependent on the West tie Soviets also might incicasc effortsncouiage Westernin oil and other energy dcve'oomeni projcCii.

such is with ihehe liarenti Sea and

the lipanese in Ihe Sea of Okhotsk, prrfciabtyarter basil.ove probably -Ould also provide ifcem wiih better accessestern technology and financial _

In ihe long run. ibe questioneihei iheprocess supports nr hinders Soviet efforu lail notify ob|octivet -ill depend gicatty on the timing of events If conditions deier-ome rapidly and loree the Icadcrihip toenes ol disiupt|yc policy shills. ihe So-ieis may "ell be unable to meet ihcit obicctivcs. On the other hand, if ihe leadership

his adequate time between pru*.il"iii fn< the system toew eondilmns then i'ic c'dirJi slteilglh ol

itsc decisionmaking process 'iii nouiliie

pinvt dec-s.

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