America’s China Policy Is Not Working
The Dangers of a Broad Decoupling
FOR a long time Russian reserves of oil were thought by everyone to be abundant, but rather suddenly the picture changed. The U.S.S.R. no longer emphasizes her richness in oil, as she did a few years ago, but on the contrary seems to wish to emphasize her need of oil -- an emphasis which has been dramatized by recent events in northern Iran, centering about the Soviet demand for oil concessions there. What facts are ascertainable as to the extent of reserves of this precious mineral in the U.S.S.R.?
During the second half of the last century Russian oil production was the greatest in the world, and on the threshold of the twentieth century it still accounted for 50 to 51 percent of world production. The output of the United States amounted to approximately 41 percent of world production at that time.[i] Since then, the oil production of the world has increased enormously, and that of Russia has grown at a lesser rate; as a result, in 1940 the Russian output amounted to only one-sixth of the United States production, and barely 10 percent of the world total.
At the beginning of this century the Russian production of more than 10,000,000 tons came almost exclusively from the region around Baku, though a small amount came from the Grozny area of the northern Caucasus. During the next decade it decreased slightly (to 9,234,000 tons in 1913); and during the early years of the Revolution it diminished sharply. It began to rise again in 1922 and by 1927 it had surpassed the former high mark of 10,000,000 tons. The beginning of the policy of large-scale industrialization brought a rapid increase in oil production. Under the First Five Year Plan (1928-1932) it more than doubled and (including natural gas [ii]) amounted to 22,300,000 tons in 1932. However, this gain was to some extent achieved by a thorough utilization of oil fields which had been prepared for exploitation. Beginning with the Second Five Year Plan, the development of the oil industry slowed considerably.
The Second Five Year Plan (1933-1937) called for an increase in oil production (including natural gas) from 22,300,000 tons in 1932 to 46,800,000 tons in 1937, i.e. an increase of 110 percent. Actually, production rose during these five years to 30,400,000 tons, or 36 percent, thus attaining in 1937 only 65 percent of the figure set by the plan.
Under the Third Five Year Plan (1938-1942) the results were even less favorable. The plan called for an increase of oil from 28,400,000 tons to 48,500-000 tons (67 percent), and an increase in gas from 2,000,000 tons to 5,500,000 tons (178 percent). The total of oil and gas combined was to be 54,000,000 tons, an increase of 77 percent. Actually, in 1940, the third year of this Five Year Plan, production of oil reached 31,147,000 tons, a gain of only 9.7 percent during three years; oil production, including natural gas production, attained a total of 34,200,000 tons, or a gain of 12.5 percent.
The Fourth Five Year Plan (1946-1950), which was approved in March of this year by the Supreme Council of the U.S.S.R., calls for an increase in oil production to 35,400,000 tons in 1950 and a rise of natural gas production up to 8.4 billion cubic meters (equivalent to 8,400,000 tons of oil) -- a combined total of 43,800,000 tons of oil and gas. Not only is this goal much smaller than that for 1942 set under the Third Five Year Plan, but smaller even than that envisaged for 1937 by the Second Five Year Plan. It is indeed a striking reduction. Is it a sign of the approaching exhaustion of the Russian oil deposits?
Reports on Russian oil reserves are highly controversial. At the 17th International Geological Congress in Moscow in 1937, the Russians claimed that the Soviet Union had 3.877 billion tons of proven oil reserves as against approximately 3.2 billion in all other countries. According to this estimate, the share of the Soviet Union in the oil reserves of the world would amount to 55 percent. Foreign experts, however, who also based their estimates on the figures presented at that Congress, credited the Soviet Union with only 887,000,000 tons, or 22 percent of the proven reserves of the world. More recently, a table published in World Petroleum (September 1945) gave an even lower estimate of the oil reserves of the Soviet Union: 5.735 billion barrels as against a total world reserve of 63.773 billion barrels. By this estimate Russia's share would amount to only 9 percent of the total reserves of the world. As a matter of fact, according to the rate accepted by the United States Bureau of Mines for converting Russian oil -- 7.29 barrels for one metric ton -- this figure of 5.735 billion barrels is the equivalent of 787,000,000 tons, or 11 percent less than was assumed in 1937. What is the solution of this riddle?
The international oil statistics distinguish two kinds of oil reserves: "proven" and "probable" reserves. In his report on "World's Oil Reserves" at the 17th International Geological Congress, Professor Ivan M. Gubkin, prominent Russian geologist and oil expert, emphasized that this classification is not sufficient for the work of the Russian geologists because the planning of future developments requires that the classification of oil deposits be much more differentiated. The Soviet oil geologists, therefore, first of all distinguish "explored," "prepared" and "visible" reserves. These three groups taken together are also called "industrial reserves" and unquestionably belong to the category of "proven reserves;" consequently, it is not necessary to analyze them any further. The Soviet geologists, however, have made estimates regarding two additional groups of reserves: "supposed reserves" -- estimated "on the basis of the geological structure of the field and of the region" -- and "possible reserves" -- "possible for various geological reasons." According to Professor Gubkin, the assessment of "supposed reserves" is necessary for the planning of future oil production, that of "possible reserves" for "long-term general orientation."[viii]
There can be no doubt that "possible reserves" are not "proven reserves" according to the classification accepted in international statistics. The question arises, however, how to treat "supposed reserves." Professor Gubkin cited the characterization of "proven reserves" in the "Statistical Yearbook of the World Power Conference," to the effect that areas which "may reasonably be assumed to contain crude petroleum in quantities sufficient to warrant eventual commercial exploitation" are considered "proven reserves," and insisted that the Soviet category of "supposed reserves" be classified as "proven reserves" in any comparison with statistical data of other countries.
Professor Gubkin's reasoning made a certain impression upon the Congress. Apparently it is true that the Russian "industrial reserves" give a somewhat narrower conception of the extent of oil reserves than what is considered proven reserves in the United States and in other countries. On the other hand, the Congress could not agree at all with Gubkin's idea that the entire group of "supposable reserves" should be considered proven reserves; an important part of the resources in this category undoubtedly must be considered only "probable reserves" according to international terminology. In other words, the "proven reserves" of the Soviet Union may be somewhat larger than the "industrial reserves," but it is impossible to say how much larger. Therefore, international statistics accept for the Soviet Union as "proven reserves" only the total of the three groups of "industrial reserves." In the light of these distinctions, it is possible to understand the difference between the 1937 estimates of Professor Gubkin (which gave the U.S.S.R. 55 percent of the world reserves) and of foreign experts (which allotted her 22 percent). The Gubkin figure was undoubtedly much exaggerated; however, the figure of 22 percent could likewise hardly be accepted as accurate. The Soviet Union's share of "proven reserves" of the world in 1937 was at least 25 to 30 percent, perhaps one-third of total oil reserves.
However, all this was in 1937. Since that time gigantic events have taken place in the world of oil. Immense new reserves have been "proven," in the Near East and also in the United States. No new data on the Soviet Union have been published since the end of the thirties. In international statistical publications the 1937 data for the Soviet Union's "industrial reserves" are still being used; some authors give even lower figures (as in the estimate of World Petroleum), concluding, apparently, on the basis of the alarmed reports in the Soviet oil periodicals about the decline in prospecting drilling, that from 1937 exploration in the Soviet Union lagged heavily behind production. Prospecting drilling, however, is only one form of exploring oil reserves -- the most reliable, but the most difficult. True, it is often impossible to prove the presence of oil without some prospecting drilling; but oil reserves often can be "proven" to a sufficient degree of certitude (though not prepared for exploitation) by thorough geological surface exploration in connection with limited prospecting drillings. This was done extensively in the Soviet Union in the late thirties and apparently also on a large scale during the war.
International publications on oil seem not to have noticed that new Russian data on oil reserves were published at least once after the International Geological Congress. An article by Professor Gubkin gave much higher figures of Soviet oil deposits at the beginning of 1938 than those presented to the International Geological Congress as of January 1, 1937 [iv]:
|January 1, 1937||January 1, 1938|
|(in million tons)|
During 1937 the increase in industrial reserves was three-and-a-half times as large as the actual oil production. The increase in Russian oil reserves appears even greater if we accept the idea that a part of the so-called supposed reserves also belongs to the category of proven reserves. From 1938 to 1940 this building up of reserves continued intensively in all oil-bearing areas of the Soviet Union, and during the war it was continued in all non-Caucasian areas and to a limited extent in the Caucasian region. The People's Commissar for the Oil Industry, Nikolai Baibakov, emphasized this recently:
With respect to natural oil reserves the Soviet Union occupies first place in the world. . . . Solely during the four years of the war 34 new oil and gas fields were discovered. In 20 prewar years a total of 83 fields were discovered. During the war discovery was made and exploitation started of oil fields in the Devonian formations in Bashkiria, in the Samara bend, in the Molotov province. . . . New oil fields were given to the country by the oil geologists of Dagestan (north Caucasus), Central Asia, Sakhalin, etc. The oil reserves of the Soviet Union have increased considerably.[v]
The proven oil reserves of the Soviet Union thus are today much larger than at the time of the 17th International Geological Congress, although the increase undoubtedly is smaller than the increase in the proven reserves of the rest of the world. To assume that present Russian oil reserves amount to at least 15 percent and perhaps 20 percent of the total world reserve would be a rather conservative estimate.
In reality, the Soviet Union is probably much richer in oil than might be assumed on the basis of data on proven reserves. In the United States, oil reserves have been explored meticulously; the prospects for the discovery of new fields are limited and new reserves are usually discovered by digging deeper in already known fields. The Soviet Union, on the other hand, has been thoroughly explored for oil only in the Caucasus -- and indeed, not all parts of that area have been exhaustively searched. Outside of the Caucasus, the work of exploration has not much more than begun, and great discoveries are still probable. The wealth of a country in oil comprises not only reserves which have already been proven but also reserves which still are lying undiscovered in the depths of the earth and which guarantee the future production. From this point of view the Soviet Union is perhaps richer in oil than any other country.
The oil problem in the Soviet Union is not a lack of deposits, but the problem of the industrial exploitation of reserves; and this is primarily a problem of geography. The main oil region of the Soviet Union is in Transcaucasia, near Baku, on the western shore of the Caspian Sea, near the southern border of the Soviet Union, thousands of kilometers from the main industrial centers. The distance between Baku and Kharkov is 1,887 kilometers, between Baku and Moscow 2,550 kilometers, between Baku and Leningrad 3,201 kilometers. Baku has been the chief source of oil and its by-products for the Soviet Union in spite of the fact that oil fields with very large reserves have been discovered outside of the Baku area. This Baku region is apparently part of an immense territory which contains large clusters of oil fields. To the southeast it extends beneath the Caspian Sea to the deserts of Turkmenistan where oil production is under way under very unfavorable climatic and geographical conditions; from there individual oil fields have been found as far to the east as the mountainous regions of Tadzhikistan and southern Uzbekistan. To the north and northwest of the Baku region rich oil fields are situated in the northern Caucasus (Grozny, Maikop and the fields in Makhach-Kala on the shore of the Caspian Sea, which were discovered during the war).[vi]
It is possible that the oil fields situated to the north and the northeast of the Caspian Sea in the direction of the Urals, the so-called Emba region, and the natural gas fields on the lower Volga are geologically related to the Caucasian fields. During the preceding 15 years important oil fields were discovered in various places between the Urals and the middle Volga, along the entire western slope of the Urals. These discoveries make it possible to view the entire immense territory between the Urals and the middle Volga as a unit, interspersed everywhere with oil fields and natural gas fields -- the so-called "second Baku." In this connection, Soviet oil experts and geologists attach special importance to the fact that rich oil fields were discovered in this territory in the Devonian formation. The discovery was made in 1944, almost simultaneously in three places remote from each other: near Kuibyshev on the Volga, near Ufa in the middle Urals, and near Severokamsk in the northern Urals. The large amount of oil in this immense territory is also indicated by the recently prospected rich natural gas fields near Kuibyshev and especially near Saratov. The latter were discovered in 1941; in the spring of 1946 a gas pipeline 783 kilometers long was laid from Saratov to Moscow. Estimates are that it will provide about 500,000,000 cubic meters of natural gas annually.
In addition to these fields the Soviet Union has oil in the Pacific region -- in Kamchatka and on Sakhalin, and elsewhere. Favorable prospects for oil production seem to exist also along the Siberian shores of the Arctic Sea; this is vigorously asserted, on a predominantly theoretical basis, by Wallace E. Pratt.
Industrialization, in particular the mechanization of agriculture, increased the demand for oil products in every part of the Soviet Union. Yet the remote Caucasian region remained the chief source of supply. Movement of oil by pipeline plays an unimportant rôle in Russian oil, and the increase in the length of the average haul of oil and oil products by rail was dangerously large. From 1913 to 1928 the average rose from 601 kilometers to 728; and by 1937 it had risen to 1,228 kilometers.[vii]
Russian economic authorities have known for a long time that geographical redistribution of the oil industry was an urgent task. The Second Five Year Plan formulated a relatively modest program, which proposed to increase the production of the non-Caucasian regions from 7.1 percent of the total to 11.3 percent. The Third Five Year Plan raised the figure to 25.3; but in 1940, 90 percent of the entire oil production still came from the Caucasian areas.
The war hit Russian oil production very hard. The oil regions in the northern Caucasus -- the Maikop and Grozny fields -- which accounted for about 15 percent of the entire oil production of the country, were either occupied by the Germans or were under bombardment. In both areas the oil industry was largely destroyed. At one time there was a possibility that Baku might be almost cut off from the rest of the country and a part of its drilling equipment and drilling personnel was therefore transferred to less menaced areas. A considerable section of the prepared oil fields of the Baku area were exhausted during the war, and the oil production in Baku decreased sharply. Efforts to step up the output in the "second Baku" and in middle Asia areas could not make up for the losses from the Caucasian fields, and even after a partial recovery of the oil industry in the Grozny and Maikop regions Russia finished the war with a sharply diminished oil production.
The precise amount of the 1945 production is not known, but the modest figure envisaged for 1950 in the recently announced Fourth Five Year Plan plainly suggests how low the present output is. An important feature of this new plan is the effort to change the geography of oil production. The plan, as it was presented in Izvestia, March 21, 1946, contains not only figures for the U.S.S.R. as a whole but also for its individual republics. Since the northern Caucasus areas form part of the Russian Republic (RSFSR) and no separate figures regarding these areas have been published, it is not possible to estimate the share of the Caucasian oil fields in the total oil production of the Soviet Union. Information in the Soviet press shows, however, that the plan proposes full recovery of the north Caucasian oil industry, and perhaps an increase in its output above its prewar level. For the Baku area (in the Azerbaijan republic), however, the goal set for 1950 is only 17,000,000 tons of oil, although this area in 1938 produced 24,000,000 tons of oil and natural gas, and not less than 22,000,000 tons of oil alone. The share of the fields of Azerbaijan in the total oil production of the Soviet Union is to be reduced from 74.4 percent (as of 1938) to 47.9 percent (in 1950). Consequently, the share of the Russian (RSFSR) oil fields, including north Caucasus, has to rise to 40.9 percent, that of the fields of Turkmenistan republic to 3.1 percent, and of the Uzbekian republic to 3 percent.
The general tendency to expand Soviet oil industry in new areas nearer to the centers of oil consumption can be observed also in the plan for drilling. New producing wells which are to be prepared from 1946 to 1950 are scheduled in terms of "points." A total of 11,370 "points" are listed for the seven oil producing republics mentioned in the plan: 5,805 in the Russian republic; 2,240 in three republics of middle Asia -- Uzbekian, Turkmenian and Kazakh; 2,660 in Azerbaijan; 340 in Georgia; and 325 in the Ukraine. (The plan contains no figures on two of the oil producing republics of middle Asia.) That the geography of the Soviet oil industry will be reshaped as fully as proposed in the coming five years is doubtful, but the figures do indicate the trend.
[i]Cf. "World Resources and Industries," by Erich W. Zimmermann. New York: Harper, 1933, p. 494-495.
[ii] Until recently, Russian statisticians usually included in the figures of oil production those for natural gas production, calculated in units of oil on the basis of 1,000 cubic meters of natural gas equivalent to one ton of oil. The rôle of natural gas in Russian economy was insignificant.
[viii] See "International Geological Congress, Report of the XVII Session" (1937), v. I, Moscow 1939, p. 170-172 (title in Russian and in English, text in Russian).
[iv]Cf. Ivan M. Gubkin, Vestnik Akademii Nauk SSSR, 1939, No. ⅔.
[v]Izvestia, March 6, 1946.
[vi] The notion recently mentioned in the newspapers that exploitation of the oil fields of northern Iran might "drain" the Baku field, or vice versa, is a fantasy.
[vii]Cf. "Economics of Transportation," by L. Y. Volfson, V. I. Ledovski and N. S. Shilnikov. Moscow: 1941, p. 245 (in Russian).
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