had begun faltering, to restore output and push it higher. Under him, West Siberia had reached 8 million barrels per day—almost rivaling Saudi Arabia’s total output. The scale of the enterprise was enormous: some 450,000 people ultimately reported up to him. And yet West Siberia was part of an even bigger Soviet industry. “It was one big oil family throughout all the republics of the Soviet Union,” he later said. “If anyone had told me that this family was about to collapse, I would have laughed.” But the shock of the collapse wore off, and within a year he had launched a technology company to serve whatever would be the new oil industry of independent Russia. “We had a tough time,” he said. “But I saw that life goes on.”2
“THINGS ARE BAD WITH BREAD”
One of the lasting ironies of the Soviet Union was that while the communist system was almost synonymous with force-paced industrialization, its economy in its final decades was so heavily dependent on vast natural resources—oil and gas in particular.
The economic system that Joseph Stalin had imposed on the Soviet Union was grounded in central planning, five-year plans, and self-sufficiency—what Stalin called, “socialism in one country.” The USSR was largely shut off from the world economy. It was only in the 1960s that the Soviet Union reemerged on the world market as a significant exporter of oil and then, in the 1970s, of natural gas. “Crude oil along with other natural resources were,” as one Russian oil leader later said, “nearly the single existing link of the Soviet Union to the world” for “earning the hard currency so desperately needed by this largely isolated country.”3
By the end of the 1960s, the Soviet economy was showing signs of decay and incapacity to maintain economic growth. But, as a significant oil exporter, it received a huge windfall from the 1973 October War and the Arab oil embargo: the quadrupling of oil prices. The economy further benefitted in the early 1980s when oil prices doubled in response to the Iranian Revolution. This surge in oil revenues helped keep the enfeebled Soviet economy going for another decade, enabling the country to finance its superpower military status and meet other urgent needs.
At the top of the list of these needs were the food imports required, because of its endemic agricultural crisis, in order to avert acute shortages, even famine, and social instability. Sometimes the threat of food shortages was so imminent that Soviet premier Alexei Kosygin would call the head of oil and gas production and tell him, “Things are bad with bread. Give me three million tons [of oil] over the plan.”
Economist Yegor Gaidar, acting Russian prime minister in 1992, summed up the impact of these oil price increases: “The hard currency from oil exports stopped the growing food supply crisis, increased the import of equipment and consumer goods, ensured a financial basis for the arms race and the achievement of nuclear parity with the United States and permitted the realization of such risky foreign policy actions as the war in Afghanistan.”4
The increase in prices also allowed the Soviet Union to go on without reforming its economy or altering its foreign policy. Trapped by its own inertia the Soviet leadership failed to give serious consideration to the thought that oil prices might fall someday, let alone prepare for such an eventuality.
“DEAR JOHN—HELP!”
Mikhail Gorbachev came to power in 1985 determined to modernize both the economy and the political system without overturning either. “We knew what kind of country we had,” he would say. “It was the most militarized, the most centralized, the most rigidly disciplined; it was stuffed with nuclear weapons and other weapons.”
An issue that infuriated him when he came into office—women’s pantyhose—symbolized to him what was so wrong. “We were planning to create a commission headed by the secretary of the Central Committee . . . to solve the problem of women’s pantyhose,” he said. “Imagine a country that flies into space, launches Sputniks, creates such a defense system, and it can’t resolve the problem of women’s pantyhose. There’s no toothpaste, no soap powder, not the basic necessities of life. It was incredible and humiliating to work in such a government.”
But Gorbachev had very bad luck in timing. In 1986, one year after his ascension, oversupply and reduced demand on the world petroleum market triggered a huge collapse in the oil price. This drastically reduced the hard currency earnings that the country needed to pay for imports.
Even though the Soviet oil