Eastern Europe and Oil: The Soviet Dilemma

The nations of Eastern Europe depend on Soviet oil because it is less expensive than that bought at world prices, it can be obtained without draining scarce hard-currency reserves, and it is reliably supplied. Since 1970, however, the Soviet Union has been urging its CMEA/Warsaw Pact allies to seek additional suppliers. The Central Intelligence Agency predicts that Soviet oil production will level off in the near future and then decline. Lower production and increased domestic consumption, the CIA suggests, will cause the Soviets to cut their oil exports to the West and hold at a constant level their oil exports to Eastern Europe. This paper postulates that as long as industrial growth in Eastern Europe continues, the demand for oil will increase. The non-Soviet CMEA nations cannot now afford to buy large amounts of oil from OPEC. For this reason, the Soviet Union will probably continue to increase its oil sales to the CMEA nations, rather than risk their economic deterioration, which might lead to political unrestand instability. (Author)