soviet oil production ww2
The Presidium of the Supreme Soviet of the Soviet Union adopted a decree on new Martial law, which introduced labor service and regulation of the work for industrial enterprises. “At the peak, in 2008, rent amounted to $650 billion, which is bigger than the Russian GDP for any year before 2003. This in return ensured that, when and if a war broke out, the soldiers and war workers were fed first in line. There is a temptation to compare the economic crises caused by drops in oil prices in the late Soviet Union and modern Russia, and to try to draw lessons from the Soviet crisis in order to exit the current one. In this sense, the Soviet Union, with a delay of a few decades, was following in the footsteps of many developed nations, by sharply boosting oil and gas intensity of GDP (although the transition to gas took longer) and respectively reducing the intensity of coal use.87 Almost 90 percent of the new demand for energy resources was satisfied by oil and natural gas with the costs twice as cheap as those of coal.88, The authorities failed to reduce the efficiency of end energy use in the 1970s (see table 6). In the Soviet period, oil prices peaked in 1980 ($88 per barrel) and then gradually fell to $50 per barrel by 1985 (a 43-percent drop), and crashed to $26 per barrel in 1986 (slightly recovering again to $36 per barrel in 1990 before starting to fall sharply again in 1991116). 46, no. The thing is, despite the economy’s high energy efficiency, its high level of economic development has led to the country consuming a great deal of oil, both by industries and households (thanks to the very high level of vehicles per capita), and it even had to import large amounts of oil. They suggested referring to this cost of production as natural production costs, and to the surplus as excess costs. 74 They also consider the costs of 1,000 m3 of gas to equal to $40 (i.e. This is largely to do with the way Soviets designed and mass-produced weapons. Gas made up 36 percent of the total energy output in the USSR; oil comprised 36 percent; and coal amounted to 20 percent.1. When oil prices increased (and they continuously increased between 1974 and 1980), there was a temptation to boost imports even more. According to their estimates, the extraction industries created all net profits of the economy (270.3 trillion rubles) and also compensated for the losses carried by many other industries, such as agriculture (53.1 trillion rubles) and transportation (11.3 trillion rubles). Higher volumes of oil and gas income would have made it possible to conduct even more massive procurements of food (and increase subsidies to the stagnating agriculture sector), consumer goods, and investment goods. It is not clear how the authors drew the difference between actual and natural oil and gas costs. Manufacturers shirked the consequences, which went to consumers, and reported wrong information about fulfilling the plans to the leadership. If the share of output with rapidly growing marginal costs in the total production is large, the figures of marginal and average costs diverge quite considerably. , Joseph Stalin's five year plans hoped to industrialize the Soviet economy and were designed to overcome the weaknesses that had destroyed the Russian economy during the first world war. In a similar way, if excess value (of extraction) appears during the extraction of raw materials, it is also included in the calculations of resource rent. However, beginning in the 1870s, the Russian government terminated the monopoly and opened Baku for competing private companies. Technological rent apparently doesn’t cause these developments in such an over-the-top way. The country's main economic and military industrial base was now based in the regions a bit east of the Volga, regions that were primarily in the Urals. This is reflected in the structure and location of the nation’s capital stock, network of roads and railroads, size and type of enterprises, distribution of labor resources, and the types of fuel and minerals it uses. . This made both the Soviet Union and Russia extremely dependent on energy markets they could barely influence. As it was in 1942/43 the USSR received more aviation gasoline from the USA than it did from domestic production, Keith Despite the sharp increase in production in Western Siberia, the country’s establishment demanded the extraction of even more oil. If it’s true, we can hardly say that the fight for this rent inside of the Soviet Union’s allied nations had diverted significant resources from production activities. Considering the huge size of gas rent and its relative instability, this poses the question: if Russia suffers from oil and gas dependence, which factor is the main one behind this dependence—oil or gas? In order to accelerate the commissioning of industry facilities. This brought the average annual number of workers and service members to 28.6 million people in 1945, or to 84% of the 1940 level. On 26 May 1943, The State Defense Committee made a resolution on Restoring Railways in Liberated Areas and up until the end of the war, 50 thousand km of main railway lines, 2.5 thousand stations and sidings were restored. They were heavily marked down compared to world prices. The reaction of the Soviet Union and developed nations to the energy shocks of the 1970s is indicative. Then, assuming that from each item of a resource, the consumers will be paid a subsidy ρ, the actual price of the producer is Pt = Pt – ρ. In 1918, oil exports amounted to 2 million tons (almost half of the annual production). There is a conventional theoretical justification of subsidizing inefficient production if the stated cost of positive externalities from such subsidies (in the form of inside-company, inside-industry, or inter-industrial “learning-by-doing”) exceeds the losses from profits not received from the export of goods. The authorities decided to terminate the geological exploration works in the northern latitudes when a telegram was sent from the little village of Beryozovo to the city of Tyumen about an emergency in a well which led to the discovery of the first Siberian gas: “Urgent. . The second one, through spending extra revenue of the resource sector inside the country, increases the demand for services (it is assumed that the service sector is non-traded, that is, it’s hard to substitute foreign goods with domestically produced ones). The best years of the Russian oil industry, when it was a vibrant element of the world market, were over. 106 Russian State Archive of Contemporary History, Fund 89, Inventory 42, Case 66, List 6, as cited by Slavkina, 331. 34, no. Bornstein (1985), Chistovich (1990), and Nove (1986) single out the following reasons why the use of energy was inefficient in light of nature of the Soviet planned economy7: (a) the heads of enterprises did not have incentives to minimize production costs; (b) energy caps and the distribution of energy led to an excessive use of energy; (c) technological progress was suppressed by the lack of incentives to innovate and the fact that any changes could lead to problems in receiving new resources and higher risks in achieving production goals; (d) exclusive production of multiple goods by one enterprise meant that the goods were always in demand, regardless of their features; (e) construction of a large number of apartments in the 1950s and the 1960s led to the situation where their quality and energy features were less important than the volumes of construction; and (f) it was meant a priori that large central heating systems had no alternatives, and systems that were potentially more efficient were never considered. Such an approach is used to explain the existence of many non-competitive industries in the Soviet, and then in the Russian, economy. 30 Daniil Yergin, Extraction: World History of the Fight for Oil, Money and Power (Moscow: DeNovo, 1999), 44. Oil was in desperately short supply for the Axis powers in WW2. This happens due to a combination of two effects—the substitution effect and the income effect. On June 30, 1941, the Committee for the Distribution of Labor (later the Committee for Accounting and the Distribution of Labor) was created under the Bureau of the Council of Constituencies. Firstly, the Soviet economy existed under a centrally controlled system. But despite this, within its last ten years, it experienced grave problems caused by its fuel and energy complex. 36 (November 1984): 359-380. So, possibly these industries would create even more problems. The Soviet Union extracted less resources in almost every category except when it came to Crude oil and Nickel. Then, the authors add to the amount of rent ($153 billion) the difference between the revenues from the sale of petrochemicals at world and domestic prices, counting it as part of the oil and gas rent (and estimating that it composes at least 50 percent of the rent coming directly from oil and gas). Thanks to Lend-Lease, during the war years, the Soviet Union received about 14.8 thousand aircraft, 7.1 thousand tanks, 8.2 thousand anti-aircraft guns, a large number of cars, tractors and other vital supplies. Development of USSR Oil and Gas Complex in 1960-1980s (Moscow: Nauka, 2002),192. w5398. In other words, should the costs of pipelines, geological surveys, and so on, be considered? Any situation better than the very worst one—the lack of money to pay for amortization—brings the rent. We should mention that the Russian government applied some of these measures in 2004, in particular, the creation of a stabilization fund and the struggle with the strengthening of the ruble (although it was not that successful, considering the fact that the dollar’s exchange rate dipped to almost 23 rubles, when oil was at its peak). But instead, it started exporting even more oil! For an extended period of time, the Soviet Union was the world’s largest producer of energy resources. Also, by the end of the 1960s, geologists came to the conclusion that the Yamalo-Nenets Autonomous Region in the northern Tyumen Region had huge, unprecedented natural gas deposits.41, It’s important to note that Western Siberian deposits were located in extremely harsh climatic conditions (although less extreme than Eastern Siberian ones, which Russia plans to explore in the medium term). However, it is the political-economic mechanisms that have been attracting the lion’s share of researchers’ attention over the last two decades. It should be noted that according to credible Soviet estimates, energy intensity of production was falling (see table 5).83 But instead of GDP or GNP, they looked at national income (it was growing faster than GNP, as it doesn’t include social expenses and services, which grew slower in this period).84 It can be seen that over two decades, the energy efficiency of the USSR’s national income decreased by 22 percent. Le migliori offerte per RUSSO SOVIETICO WW2 GUERRA MONDIALE 2 treni CORAZZATI produzione/altri articoli NIT sono su eBay Confronta prezzi e caratteristiche di prodotti nuovi e … However, since the share of the USSR’s exports as a percentage of the GDP of the USSR was much lower than that of modern Russia’s, export fluctuations were therefore less harmful to the Russian economy. For instance, at a Politburo session in May 1984, then premier Nikolay Tikhonov said: “The oil we sell to capitalist nations mostly goes to pay for alimentary and some other goods. Thirdly, as a consequence of the first two reasons, the goals set by the leadership were considerably distorted in the process of achieving them. The heavy dependence of energy-resource consumption on economic growth had disappeared due to the widespread use of energy preservation. It’s better to export oil when it gets more expensive and substitute it with other energy resources in domestic consumption. For instance, Nurske and Watkins wrote about the “get-rich-quick mentality” among the entrepreneurs and the “boom-and-boost” psychology among the politicians, which can be described as a rotation of excessive optimism and harsh austerity.24 Because of that, the resource curse can lead to instable economic policy. If, in addition to the above, the USSR sharply reduced procurements of these products (which would be natural in these circumstances), it would have two choices: to create the necessary production inside the country (subsidized at the expense of resource rent) or to increase procurements in developed nations (at the expense of oil and gas deliveries). 26 June, 1987. Social explanations can be used to describe the negative effect of the military-industrial lobby in the Soviet Union on the distribution of resources—first and foremost, the most scarce ones—between the industries, including to spell out why there were not enough resources to diversify the economy and boost the efficiency of the oil and gas complex. In the case of the modern Russian economy, the drop of raw material revenues is accompanied by the foreign policy crisis that led to a few rounds of sanctions (and countersanctions) against a number of sectors in the Russian economy and individual companies. The size of the share of each category of participants has important political-economic consequences. In the latter case, the economy is highly dependent on the global market (and its consequences, such as Dutch disease and extremely high volatility of resource prices and capital flows). . As Vasiliy Pater, the former head of the State Planning Committee’s (Gosplan’s) oil industry subdivision, recalls, in the 1970s, annual plans did not correspond to the five-year plans, and actual figures were different from both of them. All the economic mechanisms of the resource curse we review presume the existence, in one form or another, of market mechanisms (that is, the existence of private economic agents who react to incentives). During the first world war the Russian Empire collapsed due to the Russian Revolution as its mobilization had failed. There is evidence that in some periods its supply curve sloped downward.100 In other words, it could have sold more oil when it was cheaper and exported less when it was getting more expensive. In particular, this happened during and after the crises of 1982, 1986, 1998, 2008, and 2014. Egan Neuberger, Thane Gustafson,5 and, later, Gaddy and Ickes,6 put an emphasis on another important feature of the Soviet economic system: its accumulated effects, embodied in the country’s physical infrastructure. 33 Robert W. Campbell, Economics of Soviet oil and gas (1968), 2—10. 8 Michael Ross, Oil Curse: How Rich Oil and Gas Raw Material Deposits Shape Development of States (Moscow: Gaidar Institute, 2015), 359. The principal price hike took place in January 1974: from $4.31 to $10.11 per barrel (see figure 2). This seems a little strange, as in 1901 Russia extracted about 250,000 barrels daily, almost on par with the United States.32 Back in 1959, coal, peat, slate, and wood accounted for almost two-thirds of the country’s total energy consumption, despite the fact that huge deposits in the Volga-Urals basin had already been discovered.33. The share of exports in oil production had also been increasing: from 11 percent in 1954 to 25.3 percent in 1964, and finally to 35.5 percent in 1989 (see table 7).94 One could note that the Soviet Union was exporting large volumes of oil compared to output in the first few years of industrialization (1929–1933), when the share of exported oil in the total output stood at 28.5 percent. In this case, it would have been even more exposed to fluctuations in world oil prices (as it used a more complex scheme of determining oil price when trading with allies: first, the moving average over five years, then—over three years; this enabled the leveling out of the short-term oil price fluctuations). We can’t discuss FDI in regards to the Soviet economy, but we know the following fact about the change in the country’s terms of trade: the purchasing power in 1988 of one barrel of Soviet oil, expressed in items of West German machinery, decreased to one-quarter from the 1985 level.18 A change in terms of trade like this is highly painful for the economy; it means that the country had to export four times as much oil in order to buy the same number of imported goods. The actual Soviet oil output amounted to three quarters of the total Middle East production.”35. In The State Planning Committee's plan, a total of nine million workers were working for defense in 1940 and their jobs in industry, agriculture, transport and construction. The central planning system affected economic policy through three main channels. I occasionally watch WW2 documentaries on television, and one of these programs provided a bit of history on the Battle of Kursk. But what if the functioning of market mechanisms is suppressed? Thus, potential rent exaggerates the total amount of rent. The sharp increase in the efficiency of energy use is largely explained by the transition from the less efficient hard fuel (mostly coal) to the more efficient hydrocarbons (oil and gas). In addition, in accordance with the resolutions of the State Defense Committee on January 10 and October 7, 1942, the workers' columns were mobilized Germans (over 120 thousand people), deported from various parts of the country. When reflecting on whether the resource curse existed in the Soviet Union, it is important to determine the meaning of this term. According to geologist John Grace, “the Soviet planning system had nothing to do with it; it was just a reflection of the Gauss distribution of the size of deposits observed around the world.”64. In the same way, the cost of production is not the reported cost of production at any moment of time, but the cost that could have been established under the efficient organization of the industry, i.e. The growing returns on the invested capital and labor in the oil industry should cause a resource movement effect, and they did. This is a list of the former Soviet tank factories.Today most of them are located in the Russian Federation, while only the Malyshev Factory is located in Ukraine.. The first scenario can be considered moderate. They evaluate the total rent at about $250 billion. The energy component of most products’ prime costs was reduced to 5-7 percent, which greatly decreased the incentives to save energy resources. In Washington, they called it a ‘Soviet economic offensive.’”95 Between 1960 and 1980, net energy exports grew almost 10 percent per year (compared to the 4.4-percent growth of domestic energy consumption).96. Known today as Lend-Lease. 103 U.S.Bureau of Mines, Mineral Yearbook 1986 (Washington: U.S. Bureau of Mines, 1986), 859. And few resources can be compared to oil in this regard (see more about price volatility below). 29 See for instance: Jeffrey D. Sachs and Andrew M. Warner, “Natural resource abundance and economic growth,” (National Bureau of Economic Research, 1995) no. Most of the prisoners, showing patriotic feelings, filed an application to be sent to the front. For instance, as the planned numbers were usually set in units of a physical quantity, the number of meters drilled was a reasonable indicator for geologists. Nevertheless, the Soviet economy turned out to be incapable of adequately reacting to the sharp growth of marginal oil production costs (which tripled in the 1970s and 1980s92) and the increase of world oil prices. Specifically, west of the Caspian Sea, with Soviet oilfields at Maikop, Grozny, and Baku, which were threatened by the Germans, but not captured, except for Maikop. In this publication, we will focus on the formation and development of the Soviet economy’s oil and gas dependence. Do we really need to pull our construction industry out of the horrible underdevelopment, if we can just utilize Finnish, Yugoslavian or Swedish construction specialists to build or reconstruct important objects and import the scarcest materials and plumbing equipment from West Germany, and shoes and furniture from other places? The mechanism at the heart of Dutch disease assumes that the movement of labor and capital to the resource sector only takes place when this sector experiences a boom, or, more precisely, until the returns on the invested capital are higher than in other industries. 28 Clifford G. Gaddy and Barry W. Ickes, "Resource rent and the Russian economy," Eurasian Geography and Economics vol. 92, no. . According to the authors, crude oil production costs (transportation included) in the mid-1980s amounted to a little over $40 per ton (or $5.33 per barrel),74 with the world oil price of $240 per ton (as opposed to Gaddy and Ickes, they take the actual crude oil and gas production costs, including the normal level of profitability on the invested capital instead of the so-called natural costs).75 This was yielding rent of $150–$200 from each ton. This was largely due to the loss of the Ukrainian Soviet Socialist Republic, which produced most harvest for the Soviet Union. Thus, rent can be divided into five categories: All these categories need to be taken into account during the calculation of rent. The people who were supposed to make decisions lacked the necessary information, whereas those who had access to the best information were not responsible for making decisions. Here, we would like to conduct an in-depth analysis of the origins and progress of the Soviet Union’s oil and gas dependence in order to reach a deeper understanding of its parallels with the oil and gas dependence of modern Russia. Data by the Customs Revenues Department for various years (as cited by Goldman, 5-6). To combat this, the five year plans created specialized mass production facilities that guaranteed a supply of weapons for the Red Army in the second world war. The coverage highlighted the role of medium tanks, like the Soviet T34 (Figure 1) and the German Panzer Mk V (aka Panther [Figure 2]), and heavy tanks, like the German Panzer Mk VI(aka Tiger I). The United States is a good example. Early theories of economic resource dependence emphasized the economy’s reliance on exports of natural resources. This required the country's leadership to take urgent measures to strengthen the nations economy, with a primary focus on the defense industries. As real income in nations heavily dependent on oil imports goes down when oil is expensive, and the demand on oil incomes has a positive elasticity (quite high, but less than one80), oil demand also falls due to the income effect. The authors define natural value as value corresponding to a competitive manufacturer who uses market interest rates and maximizes the expected discount cost of deposits. There were ongoing debates about the resource dependence of the Soviet, and later, Russian economy. This is why the Soviet Union had to export less and less oil as its level of economic development approached that of developed nations, especially considering the distances and the climate. In 1991, the Soviet Union collapsed, but the debate on the role of oil and gas dependence is still a huge issue. These deposits had extremely high well-production rates of over 100 tons per day (during the second half of the 1970s and the 1980s, they began to plunge, resulting in two severe oil production crises in the USSR). 42 Figures from “22th Congress of the Communist Party of the Soviet Union,” verbatim record (Moscow, 1962), vol. The second option seems more likely, considering that the Soviet Union did sharply raise the deliveries of high-tech products in the 1970s. During the first 6 months of the invasion, German forces managed to occupy or isolate territory which prior to WWII accounted for over 60% of total coal, pig iron, and aluminum production. For instance, in 1975, the five-year plan prescribed to extract 505 million tons of oil.3 This figure was then reduced to 487.4 million tons in the annual plans, and 491 million tons were actually extracted. Imports of clothes and footwear quadrupled in monetary terms (from 699 million to 2.7 billion rubles) and 4.6 times (from 271 million to 1.25 billion rubles), respectively,” notes Russian oil sector historian M. Slavkina.17. This means that companies have easily available capital during periods of structural changes in the economy. But, as often happens, its advocates did not know that it was even more risky than the exploration of Western Siberia. That’s why ‘optimistic’ plans had to be implemented at all costs.”59, In 1977, after a tough talk with then oil minister Nikolai Maltsev, who demanded a boost in output then head of Glavtyumenneftgaz, died of a heart attack. By the end of the first half of 1942, over 1200 evacuated enterprises had begun to operated in the Urals. In the beginning of the 1960s, when the giant Western Siberian oil and gas deposits had not been discovered yet, the authorities actively promoted the idea of building the Lower Ob Hydropower Plant (in 1961, Nikita Khrushchev talked about its construction as a resolved issue51). Manzano and Rigobon also found that resource-rich countries have an incentive to borrow excessively. But what does it have to do with the drop of oil prices in the 1980s? Then more than 2.1 million adolescents were sent to educational institutions of labor reserves. Information flows were moving mostly vertically, not horizontally. The mission was success, the results however were minimal. Prior to the mid-1950s, Soviet oil was consumed inside of the Soviet bloc. In other words, rent is revenue from selling a resource minus its production costs. 8 (2005): 559-583, 569. Active export of oil and gas to distant foreign nations was also not planned. 37 A. Bystritskiy, “The First One, Beryozovo. Destroying Soviet oil production was the main aim of the German 1942 offensive and the nexus of Soviet oil shipment was the rather famous city of Stalingrad. Having lost the western part of the country, significant problems arose transport, specifically rail transport. In a planned economy, there was no financial market in the modern sense (there was a fight between different ministries, authorities, and regions over maximizing their shares in the distribution of resources). Its supporters cited solid arguments. When comparing the economy of Ural regions in 1942 and in 1940 (before the war), it becomes apparent that electricity production was increased by more than 2 times, coal production increased 2.3 times and steel production increased 2.4 times. Moreover, in the mid-1960s, many experts working in Gosplan and the oil and gas industry did not expect that this could happen at all.
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