Perestroika, Soviet Oil, and Joint Ventures
CHURKIN, MICHAEL, JR., Consultant, Yuba City, CA
"Glaznost," the freedom of expression in both the public and private sectors of the Soviet Union, has rapidly transformed the country from a largely isolated and closed society to one that is rapidly becoming more cosmopolitan and open to the West. There is a general trend toward decentralization of the government and industry that, when coupled with ethnic unrest, has created an atmosphere of uncertainty and tension between republics that consider themselves as sovereign nations. Open news coverage now brings to the Soviet public the realization that the overall standard of living in the West is not being realized in the Soviet Union. Demands are increasing for political, and especially economic, "Perestroika" or restructuring.
A thorough economic restructuring to a free-market economy will be especially difficult in the near term because the country has developed a complicated system of central planning based on collectivization, community property, barter, and price controls.
Now that the Soviet Union is moving toward a free-market economy, a number of new laws are being generated to create a favorable environment for Western investment, especially joint ventures. In this regard, the Soviet petroleum industry represents a key to perestroika of the economy.
First, crude oil sales have provided over 75% of much-needed hard currency, and oil has been the principal barter for manufactured goods produced in eastern Europe. Second, joint oil ventures with Western companies can reverse declining production levels and provide sufficient stimulus to turn around the economic recession.
The Soviet Union has a very large inventory of discovered but undeveloped oil and gas fields. Most of these fields are difficult for the Soviets to produce technically, financially, and environmentally safely, and they are actively seeking appropriate Western partners. From an exploration point of view, the Soviet Union has probably the largest number of undrilled and highly prospective oil basins, which may replenish declining reserves in the West.
Finally, the Soviet Union represents in the long term a large unsaturated market eager to absorb the surplus of goods and services in the Western world. Again, joint oil ventures could provide the convertible currency to increase East-West trade.
AAPG Search and Discovery Article #91007© 1991 AAPG International Conference, London, England, September 29-October 2, 1991 (2009)