The Soviet collapse: grain and oil

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Energy producers - June 20

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The Plan to Disappear Canada

Murray Dobbin, TheTyee.ca
'Deep integration' comes out of shadows.
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If the machinations going on in this country regarding so-called "deep integration" were instead a communist conspiracy to take over the country (you will, of course, have to try hard to imagine this) the news media would be blaring the story.

Pundits would pontificate, editorialists would erupt, security forces would be unleashed.

Instead, a virtual conspiracy to make the country disappear through assimilation into the U.S. gets barely a mention.

But news of the scheme -- formally called the Security and Prosperity Partnership of North America (SPP) -- is finally breaking out of the secret chambers of the ruling elite and the federal government. This is both good news and bad. It's good that ordinary citizens are finally getting a glimpse of the betrayal of their country. The news is bad because it reflects just how much of this scheme is already being implemented.

Given the meetings of CEOs and politicians to advance the scheme politically, as well as all that must go into its actual implementation, there is simply too much activity to keep secret.

Here are 10 developments in the plan to disappear Canada.
(8 June 2007)


Nigeria: A Closer Look at "Above Ground Factors"

Jeff Vail, The Oil Drum
Oil prices recently passed $69/barrel in New York (and above $72/barrel for Brent) over fears that a looming general strike in Nigeria will exacerbate already tight oil supplies.

The "indefinite strike" is scheduled to start Wednesday, June 20th, and will include both major union groups in the country. The prospect of a strike successfully shutting down Nigeria's remaining oil exports is rightly driving world markets, but what is the relationship between this strike and the background of violence and attacks in the Niger Delta? Buried below headlines of the looming strike, this week saw two significant attacks: one on a Chevron facility that cut 42,000 barrels of oil production, and a separate takeover of an ENI facility taking 27 people hostage and cutting 40,000 barrels of production.
(20 June 2007)
Related from Jeff Vail at TOD: Nigeria: Energy Infrastructure Firestorm


The Soviet Collapse: Grain and Oil

Yegor Gaidar, American Enterprise Institute
...The title of my latest book, which I would like to discuss today, can be translated as The Collapse of an Empire: Lessons for Modern Russia.[1] It relates the story of the last few years of the Soviet Union

... To be frank, I never thought that the book--half of which is tables, graphs, or official materials of the Soviet government--could be a bestseller in my country. Yet it is, a fact which provides a glimmer of hope.

In a simplified way, the story of the collapse of the Soviet Union could be told as a story about grain and oil.

...The Story of Oil

The Soviet economy thus hinged on its ability to produce and export raw commodities--namely, oil and gas. The Soviet leadership was extremely fortunate: at almost exactly the time when serious problems with the import of grain emerged, rich oil fields were discovered in the Tyumen region of Western Siberia.

Already in 1970, Western Siberia was considered a large oil region by international standards. During the next twelve years, the Soviet Union increased oil production there twelvefold. There was intensive debate among the Soviet leadership about how to best exploit the Western Siberian oil. The oil industry experts warned the CPSU leadership and government State Planning Committee that it would be impossible to increase the production at such a rapid pace in the future without facing serious technical problems.

Yet the Soviet leadership told the oil ministry there was no other choice. The Soviet premier, Aleksey Kosygin, used to call the chief of the Tyumenneftegaz, Viktor Muravlenko, and explain the desperation of the situation: "Dai tri milliona ton sverkh plana. S khlebushkom sovsem plokho" [Please give three million tons above the planning level. The situation with the bread is awful.].

The "Spanish" Curse

By 1975, the Soviet Union began having serious problems with the output of new oil wells: much higher investment was needed for the current operations to get the same output (see figure 3). But the Soviet Union was fortunate to get unusually high oil prices starting in the mid-1970s.

Imperial ambitions based on such unstable resources were not exclusive to the Soviet Union. The "resource curse" was well-analyzed by the School of Salamanca in the experience of Spain of the sixteenth and seventeenth centuries. The influence of the inflows of gold and the silver from America to Spain are comparable to the impact of oil and gas revenues to the Soviet Union (see figure 5). The Spanish empire, without losing a single battle on the ground for fifty years, managed to lose all of its possessions in Europe outside of the Pyrenees, including Portugal, and came very close to losing Aragon and Catalonia as well. In 1989, also without losing on the battlefield for fifty years, the Soviet Union lost control over Eastern Europe.

...The oil market is peculiar because of the varying levels of elasticity of the demand and supply in both the short and the long terms. The fluctuations of prices are enormous (see figure 4). There is a very well-known economic concept of external shocks. In the United States, the world's largest economy, the biggest external shock during the last fifty years was in 1974, when oil prices quadrupled and terms of trade worsened by 15 percent. For the Soviet Union, skyrocketing oil prices had a much more substantial effect on GDP, which could be measured in hundreds of percentage points. Thus began the collapse of the Soviet empire.

...one of the Soviet leadership's biggest blunders was to spend a significant amount of additional oil revenues to start the war in Afghanistan. The war radically changed the geopolitical situation in the Middle East. In 1974, Saudi Arabia decided to impose an embargo on oil supplies to the United States. But in 1979 the Saudis became interested in American protection because they understood that the Soviet invasion of Afghanistan was a first step toward--or at least an attempt to gain--control over the Middle Eastern oil fields.

The timeline of the collapse of the Soviet Union can be traced to September 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices, and Saudi Arabia quickly regained its share in the world market. During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed by approximately the same amount in real terms.

As a result, the Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.
(19 April 2007)

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