Refusal from the "petrochemical project"
At the turn of the 1950s and 1960s, the Soviet leadership faced the dilemma of using oil and gas rent. The first option for spending petrodollars provided for the creation of a powerful refining petrochemical complex aimed at the production of products of deep processing of hydrocarbons. In simple words, such a "petrochemical project" would create a lot of new jobs and would finally solve the problem of the eternal shortage of consumer goods.
As you know, up to 100% of the material benefits of a civilization can be produced from oil and gas. An important, if not decisive, bonus of such a project was the ability to export products with high added value. This export item did not depend on fluctuations in world prices for hydrocarbons and could become a stable source of foreign exchange earnings in the USSR. The petrochemical complex would pull up the specialized science and related industries - for example, mechanical engineering and light industry. One of the striking examples of success is Germany with a very developed chemical industry. Everyone in the country enjoys the benefits of this industry - from food to heavy industry. And this is despite the almost complete absence of natural sources of hydrocarbons. The Soviet Union in this situation with huge natural resources was in a much more privileged position. Unfortunately, in the future this caused the opposite effect of economic stagnation.
NS Khrushchev was one of the supporters of the "petrochemical project". But the secretary general and everyone else understood perfectly well that the technological level of the Soviet Union did not allow independently implementing such a large-scale project. Even with the extraction of hydrocarbons, there were difficulties, not to mention industrial chemical synthesis. Chairman of the USSR Oil Industry Committee N. K. Baibakov in the early 60s noted that
“The technical level of drilling works does not meet modern requirements, especially deep drilling, which slows down the pace of well construction and increases their cost … Over the past 5 years, the drilling speed has been lower than the target figures by 60%, and the actual cost of drilling is almost 33% higher."
The first steps in the implementation of the "petrochemical project" were expected - a massive purchase of chemical plants abroad. Under Khrushchev, they acquired turnkey enterprises in France, Italy, Germany and Japan. Payment came from income from the export of hydrocarbons, that is, through the Ministry of Oil Refining and Petrochemical Industry. However, the Ministry itself required considerable funds to further increase oil and gas production. The natural conditions of the still unexplored West Siberian oil and gas province were very difficult; work in most areas could only be carried out in winter. As a result, under pressure from a serious ministerial lobby, it was decided to abandon the "petrochemical project". Among the reasons there were many objective ones. First of all, it was expensive and time-consuming, and the government needed money as soon as possible. The ever-growing military-industrial complex and energy inefficient economy required enormous resources. The rejection of chemical modernization was also influenced by Western sanctions, which seriously complicated the purchase of foreign equipment. And, finally, the overthrow of NS Khrushchev put the final end to the most progressive version of the use of oil rent.
Burning banknotes
The "oil and gas maneuver" became the main concept of using the USSR's hydrocarbon rent for many decades, right up to the very collapse of the empire. Its essence is the use of oil and gas as an energy source within the country, as well as the active export of surpluses abroad. Export revenues were planned to be used to cover all costs. One of the most important items of expenditure was the modernization of the oil production complex for a further increase in production volumes. Such "burning of banknotes", as DI Mendeleev aptly put it, built a very wasteful economy in the USSR. The example of the 70s is typical, when world oil prices soared - in the West this period is called the “fuel crisis”. Oil-consuming countries have launched large-scale programs for the transition of industry and transport to energy conservation. But not in the Soviet Union. Logic dictated that in a period of high energy prices, it was high time to increase exports, and diversify domestic consumption and make it more economical. The surplus petrodollars received would be a great help for this. The leadership of the USSR decided that first of all it was necessary to feed its own production with cheap oil, and only then sell the surplus to the West. As Sergey Ermolaev, Ph. D. in Economics, Associate Professor of the Russian University of Economics, writes in his works, “The abundance of cheap energy resources already in the 70s led to a noticeable weakening of energy-saving trends … The energy component of the cost of the overwhelming majority of products fell to 5-7%, which significantly reduced the incentives to save energy …."
As mentioned above, even for the "oil and gas maneuver" the country did not have all the opportunities. For example, for the Druzhba oil pipeline, large-diameter pipes had to be purchased abroad. Since 1958, they tried in vain to organize the production of pipes with a diameter of 1020 mm at the Babushkin Dnepropetrovsk Plant, the Ilyich Zhdanov Plant and the Chelyabinsk Pipe Rolling Plant. The re-equipment of the factory facilities to meet the new requirements for pipes was not crowned with success. By 1963, the share of quality products was so low that the pipeline was almost completely assembled from imported components. As a result, even the “oil and gas maneuver,” which initially seemed less expensive, turned out to be an expensive pleasure for the Soviet Union. He made the country dependent not only on foreign buyers, but also on volatile oil and gas prices. Somehow the situation could have been mitigated by the sovereign stabilization fund, but this came only in the days of Russia. The Soviet government spent oil revenues almost immediately and in full. In fairness, it should be noted that the USSR was much less dependent on hydrocarbon production than modern Russia. As the aforementioned Sergei Ermolaev writes, in 1989 oil and gas production reached 2, 12 tons / person, and in 2016, 3, 72 tons / person. However, such a specific indicator should be taken into account, taking into account the 286 million population of the Soviet Union at the end of the 80s.
Petrochemicals were gradually forgotten in pursuit of increasing production volumes. In comparison with Western countries, the USSR spent less and less on deep processing of hydrocarbons and bought more and more abroad. For example, in 1965, 120 million rubles were allocated for the industry, while the United States spent $ 500 million, and Japan - 307 million. Even the indicators planned by the State Planning Committee were underestimated. For 1966-1970, almost 750 million rubles were reserved for petrochemicals, but soon they were reduced to 621 million. Russia is still experiencing the consequences of such inattention with the chemical industry.
Oil needle
The original formula for the development of the resources of Western Siberia “domestic technologies and resources + imported capital” by the 70s under Brezhnev was transformed into “domestic resources + imported technologies and capital”. It's a shame to say that the country that launched the first satellite and the first astronaut into space bought an automobile plant in Italy. And by all available means she was forced to knock out machines for the machine-building giant KamAZ from American industrialists. Naturally, Western "partners" were selling far from the most progressive technologies to the USSR. In this situation, the country's leadership has chosen an obscure strategy “what we don’t have, we will buy it for petrodollars”. As a result, entire branches of the domestic industry were not ready to compete with imported counterparts. So the Soviet automotive industry and the chemical industry went into stagnation. To clarify, the Soviet Union did not massively import cars, as is the case in modern Russia, but actively purchased technology from Europe. For example, the VAZ rear-wheel drive platforms are from Italy, and the front-wheel drive platforms were developed with the direct participation of German engineers. Archaic "Muscovites", leading the story from the trophy "Opel", as a result could not withstand the competition with products from Togliatti.
Thunder struck in the 1980s, when the price of oil plummeted. And here again the paradox. The Soviet Union must, in accordance with all laws, reduce the volume of exports of cheaper hydrocarbons, but, on the contrary, it is increasing. Simply because there is nothing more to sell to the country - there is no competitive civilian industry. Agriculture is in complete ruin. In 1984, the Chairman of the Council of Ministers of the USSR N. A. Tikhonov assessed the situation:
“Mainly the oil that we sell to capitalist countries is used to pay for food and some other goods. In this regard, it is advisable, when developing a new five-year plan, to provide for a reserve for a possible additional supply of oil in the amount of 5-6 million tons over the five-year period."
What is the supply of imported grain to the country's food market? This is a further destruction of domestic agriculture. And this did not happen in the 80s. A decade earlier, A. N. Kosygin uttered an epochal, addressing the head of Glavtyumenneftegaz:
"The bread is bad - give 3 million tons of oil above the plan."
An emergency increase in production volumes required a transition to a new technological level, and the country again bought what was missing abroad. So, from 1970 to 1983, the import of oil and gas equipment increased 80 times in value and 38 times in volume. At the same time, oil flowed like a wide river to "friendly" countries in exchange for momentary loyalty. Every year, up to 20 billion petrodollars were irretrievably spent in the black hole.
Now, from 2021, it is very easy to criticize the Soviet leadership, which drove the country into an oil dependence. After all, the Dutch disease itself was only discovered in the early 1960s, not to mention the fundamental principles of oil market regulation. Brezhnev and his entourage simply did not have experience with such a complex resource as hydrocarbons. And there was no one to prompt. Oil and gas made it possible to buy food, furniture, fertilizers, footwear from abroad and hire foreign workers for complex construction? If so, then why bother and modernize your own industry, make it more energy efficient? The huge reserves of hydrocarbons in the Tyumen region have become the main reason for the emergence of such a flawed state mentality.
By about 1987, in the country's ruling circles, everyone clearly understood that it would not last long with cheap oil. The USSR was no longer ready for evolutionary changes, and the prospect of revolutionary perestroika loomed ahead. At that time the expression became fashionable in the State Planning Committee:
"If it weren't for Samotlor's oil, life would have forced the restructuring of the economy 10-15 years ago."
It is difficult to say more precisely.
