The Russian Oil Economy

The Russian Oil Economy

Jennifer I. Considine and William A. Kerr

In this unique work, Jennifer Considine and William Kerr contend that while OPEC currently dominates the international oil market, Russia will be a key player in the future international energy market. Indeed, Russia’s petroleum resources rival those of Saudi Arabia. More than almost any other industry, future performance is often determined by the influence of decisions made in the past. This book provides a detailed history of the development of the Russian oil economy in order to build up a comprehensive and discerning picture of its future role and significance in the global energy market of the 21st century.

Chapter 3: The Command Oil Economy

Jennifer I. Considine and William A. Kerr

Subjects: economics and finance, energy economics

Extract

3.1 THE NEW ECONOMIC POLICY We were mistaken . . . We acted as if one could build Socialism in a country where capitalism scarcely existed. Before we can achieve a Socialist society, we must rebuild capitalism. (V. Lenin, 1921)’ Despite the theoretical aspirations of the Communist Party, the economy of the new Russian republic could not continue the policy of W r Communism a without risking a total economic collapse and the real political dangers that posed for them. After two decades of war and revolution: the Soviet Union was a country headed toward economic disaster, beset as it was by woeful industrial underproduction, inflation, severe lack of capital, and a widespread food shortage that was turning into famine. It desperately needed foreign capital to develop, produce and sell its natural resources (Yergin, 1991, p. 239) In recognition of this dire economic reality, Lenin announced a dramatic reversal of policy. There was a recognition that revitalization and modernization of the economy would require foreign technology. To gain the required assistance, Lenin was willing to give extensive concessions ‘to the most powerful imperialist syndicates’. His first two examples referred to oil - ‘a quarter of Baku, a quarter of Groznyy’.2 The objective of the New Economic Policy was clear, and driven by the political reality. According to Alex Nove (1972, p. 78): The unbearable living conditions of the early 1920s inspired intense episodes of rioting among the peasant population of Russia. The issue reached crisis proportions on February 28, 1921 when the...

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