World

The Gooey Archipelago

Peter C. Newman December 31 1979
World

The Gooey Archipelago

Peter C. Newman December 31 1979

The Gooey Archipelago

All the worry and the fear over the current energy situation is centred on the confused situation in the Middle East. But if new and authoritative, though still unconfirmed, studies turn out to be true, the real mega-giant among the world’s petroleum nations may turn out to be the Soviet Union. At a time when oil has become the standard by which countries judge their economic futures, this could significantly alter the fragile East-West power balance.

Until recently, total oil reserves were set at 650 billion barrels. The Soviet share accounted for 71 billion barrels, or 10.9 per cent of the total. Even at these current levels, the Soviet Union had become the world's No. 1 oil producer, with an average output of 11.7 million barrels per day, an amazing 2.2 million barrels more than Saudi Arabia’s output. Yet it has been widely assumed that by 1985 the Soviet Union would join the West as a net oil importer.

But a new report by PetroStudies, an independent Swedish research organization, now claims that the Soviets have deliberately downplayed their reserves, which really amount to 150 billion barrels—more than twice the conventionally accepted total. PetroStudies claims it tabulated these as-yet-undisclosed finds as well as obtaining still-secret production and exploration quotas contained in the next Five Year Plan.

The report, which took two years to complete, has thrown the free world’s intelligence agencies into a tizzy; only recently the CIA had confidently reported that the Soviet Union was facing severe oil shortages. The Swedish document says, however, that that error is "so large that the world's oil reserves must be revised upward by an amount equal to the combined reserves of the U.S., Canada and Mexico.” It claims the Soviet leadership’s long-term policy is to increase oil exports to the West, particularly refined oil products, "to earn the hard currency needed to purchase American technology and Canadian wheat.”

Even now, the Soviets play an important part in the European energy mix, exporting 700,000 barrels of oil a day, mostly to Britain, Italy, Germany and France. For example, Nafta GB, Ltd., a wholly owned subsidiary of the Soviet ministry of foreign trade, runs 250 filling stations in the greater London area.

Soviet oil has historically come from the Baku fields, tapping the vast reserves beneath the Caspian Sea. The new finds are situated in the Tartar Republic between the Volga and the Urals, with major pools around Kuybyshev, Saratov and Volgograd. The Soviet Union possesses 31 per cent of the world’s natural gas reserves and nearly half its coal and the recently discovered Urengoi gas field in western Siberia is thought to be the earth’s largest.

Despite their adequate energy supplies, the Soviets have been busy tying up petroleum exports from Iraq, Libya and Algeria, using hard-currency loans and transfers of military equipment to clinch the deals. Part of the reason is that many of the Soviet Union’s new oil finds are located in remote parts of Siberia and off-shore in the Barents Sea. Only Western drilling technology will allow the extraction of those remote resources.

Ironically, the fall of the shah has put a halt to what was the Soviets’ most imaginative energy import venture, which was to have been financed through a syndicate headed by the Chase Manhattan Bank. It involved construction of a new natural gas pipeline from the Iranian fields north into the eastern republics of the Soviet Union, thereby freeing gas in the west for sale to Italy and West Germany. That particular arrangement died with the assumption of power by the Khomeini regime. But in the world poker game over future energy resources, the Soviet Union remains an underrated player—even though it may end up holding the winning hand.

Peter C. Newman