USSR: Economics of Ibe Siberia-lo-Europe Cas Pipctine|
Siberia-tc-Europe natural gasf ceassiderablc impceiaocche USSR even (hough ttbcmarginal project if evaluated by Western liacdarda of profi lability. With oil eaj>oru lo the Well likely to disappear.in the nest few years.has no prospective capons other than tea to incrcate or even maintain hardrevenues.,^
If.ai setms likely, Soviet gas sells at roughly paritythe price of retidul fuel oil. the pipeline wouldrofit ai the wellhead only if the rates of return on Soviel capital were fairlyrom the Soviet viewpoint, horn ever, ibe pipeline is vitally necessary. MoicOsxr. the Western foods purchai-able with Ihe project'i earnings arc aorth far mote io the Soviet cccjnomy than are the gcesdsvilh ihe Soviet resources uud to build and operate the pipeline. Finally, the gas to be .hipped through Ihe pipeline could not be used dornettically for several jears because of inadequate capacity of distribution pipelines.^
USSR: Kat.-al Cas Exaortt to Western
the likely softening in West European (is demand forill force thecat to sell ai near parity with the price of residual fuel ofl.*ubic reelb. West Germany^ UiadeV several atiumplions about overruns oo Soviet construct km costs and rates of return on Soviet api'ial1 however, the
Algerian gas. the largest alternative natural gas source for Wcstcra Europe during, is probablyby pipeline orkciswnjore cheaply than Siberian4ubic feci, either Algerian project wouldroTn. Moscow, on the other hand, has beearice (fay.b. West Germany) near pariiycrude oil. roughly S6ubic fees. Only tHiithe Siberian projectrofit at current Western rates of rciurn. I
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Hard Cun-taci- f. Fr*.E>
The upon pipeline project would be attractive to Moscow,er. even if it appeared marginal is term*of Western ptc^ubilit> accour.img Mott important, (be pipeEsc at ibe Soviets' bug estource of stable hard currency earnings. Incrcaicd sales of alternative goods, even ifwould produce leu revenue! than far.
Exports of jold. nickel, and platinum groupfor example, could be increased for leu cost than building the pipeline, tad tbdr combined earnings could approximate those from (beproject if exiitingmarket price) held firm. The Soviets* already line *hare of those mnabowever, would probably cause increased Soviet supply lo depress prices (ubsunilally. reducing revenues further for each increment in exports. Tbe West European catoa the otherrobably largebsorb tbe single lice's ddrVaicsrice roughly equivalent to that of raidui] Tael oil.
Increased Soviet export* of matt Otba rj* male-rials and of manufacturedencounter more rapidly rising cost* thin would gas exporti and would achieve a
smaller net giowth in revenue. Rcloru on Invest-meat in many Soviet extractive Industries are falling faster than they arc fornan Improvement in theoualitycdexporl-orknted good* accessary to achieve an increase in hard earrcacy revenues equal to that from the pipeline project wouldnvestment than the pipeline iudfj,
Conversely, tbe costs to Mosco* of notipeline deal arc higb Although bard earrcacy earningsne-line project probably would be aboutercent of lhatwin-line deal, they would still be substantial. Moreover, since Iht pipeline's hard currency costs could be repaid within two to three yean after startup, most of the prefect's suUcqacal revenue could go forith oil exporu lo ibe West probably disappearing byuiemid-IMOt.Uckofapipdtneoalwftild ubstantial drop in Soviet import capadiy. By the, total gai bard carreacy earrings with tbe pipeline Ind equal onc-balf of0 revenue* from oil;tbcpipeliae they would equal only one-fourth. Tbe rertnae* foregone, moreover, would moil likely have pur-chased machinery and other manufactured goods, whose marginal twoducsiViiy exceed* ihai of similar items produced denes'icailj "ajjgja
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TVe gU den.ncd Tor open under .deal could nor be used domeukally for wmeaequate (rid of iu (Curiboiior. lines -ill pre-
hocnocbiai u> tM aad .bus,be entire plannedniPI .be export Ua.no. free apOriginal document.