Anatoly Chernyaev’s 1972 diary (2)

Selling off Siberia to the imperialist powers[*] 

Nixon and Brezhnev - Moscow (1972)

Anatoly Chernyaev recorded a striking debate in his 1972 diary, held on 8 April at a meeting of the Communist Party of the Soviet Union (CPSU) Politburo. The exchange took place shortly before Nixon’s much-publicised visit to Moscow. At the meeting, which centred on a draft trade and economic cooperation agreement being negotiated with the United States, particular attention was drawn to provisions envisaging the exploitation of Siberia’s vast energy resources through the capital and technology of major imperialist powers such as the USA and Japan. This debate is both significant and revealing, as it illustrates the chronic economic weaknesses of the Stalinist regime -weaknesses that were gradually deepening into a full-blown crisis- and the ideological-economic tensions they triggered within the Politburo.

This internal debate, held at the very command centre of the Stalinist bureaucracy, casts light on the contradiction between the regime’s claim to superpower status and its pressing -indeed insatiable- need for Western technology and hard currency. As such, it helps illuminate some of the underlying dynamics that would ultimately lead to the regime’s collapse.

Nikolai Podgorny

Podgorny [**] took the floor first: “It is inappropriate for us to get involved in these deals, with gas and oil pipelines. As if we are planning to sell off the whole of Siberia; plus, it makes us look technologically helpless. Can’t we do the same things ourselves, without foreign capital?!" 

 

Brezhnev invited Baibakov [***] to explain. The latter calmly approached the microphone, barely suppressing an ironic smile. And he began to speak, providing from memory dozens of numbers, calculations, and comparisons. Clearly and professionally. 

 

1. We have nothing to sell for hard currency. Only timber and pulp. This is not enough, plus we are selling it at a large loss for us. We also cannot ride forward only on the sale of gold. And it would be dangerous in the current world monetary situation, there is little prospect for success this way. 

2. The Americans, the Japanese, and others are interested in our oil, or even better – gas. The fuel balance in the U.S. will become increasingly strained. Their imports will grow, and they prefer to receive liquefied natural gas. They are offering:

a. To build a gas pipeline from Tyumen to Murmansk, and there a gas liquefying plant, and from there – on the ships;

b. Construct a pipeline from Vilyuysk through Yakutsk to Magadan.

The latter option is better for us. It will pay off in seven years. All equipment for construction and operation will be theirs.

Nikolai Baibakov

If we refuse, we will not be able to even approach the Vilyuysk reserves for at least 30 years. Technologically we could lay down the pipeline ourselves. But we have no metal for pipes, nor for machines or other equipment.

3. Sakhalin. The Japanese are offering to set up oil extraction from the bottom of the ocean. But we do not have the equipment for this. There is one machine, a Dutch one, that is operating in the Caspian Sea.

Podgorny: “There are strong winds in Sakhalin, they will topple all the constructions.” 

Baibakov barely suppresses a smirk: “Nikolai Viktorovich, Sakhalin is big, these are strong winds in the north, and no strong winds in the south. And then, let the Japanese worry about these winds, but for some reason they don’t seem to mind.”

Baibakov’s dispassionate presentation of the data laid bare the harsh economic realities facing the Soviet Union in the early 1970s. Apart from petroleum, natural gas, gold, and raw or semi-processed materials (timber and wood pulp) - often sold at a loss - the country had no industrial products competitive enough on global markets to generate significant hard currency. What’s more, the USSR was incapable of carrying out even some of the most basic infrastructure projects using its own resources.

The pipeline proposal for the Vilyuyisk region, raised by Baibakov at the time, only materialised in the 2000s - that is, after the collapse of the Soviet Union - with the launch of the 'Eastern Gas Pipeline' project. Similarly, the development of Sakhalin’s oil reserves became possible only in the 1990s, after the fall of the Stalinist regime, through joint ventures with Western companies such as Exxon and Shell.

[*] The title is mine.

[**] Nikolai Viktorovich Podgorny (1903–1983): Member of the CPSU Politburo (1960–1977) and Chairman of the Presidium of the Supreme Soviet of the USSR (effectively Head of State, 1965–1977). Although a prominent figure during the Brezhnev era, he was known for his ideological scepticism regarding economic cooperation with the West, as well as for his power struggle with Brezhnev. He was removed from all posts in 1977.

[***] Nikolai Konstantinovich Baibakov (1911–2008): One of the USSR’s foremost economic planners and energy specialists.

See also: 

Anatoly Chernyaev’s 1972 diary (1): The poverty of bureaucratic planning

Anatoly Chernyaev’s 1972 diary (3): The Soviet automotive industry through the eyes of a Renault executive

Anatoly Chernyaev’s 1972 diary (4): Famine, cholera, and the summer retreats of the Stalinist bureaucracy

Magnitogorsk Iron and Steel Production Complex: A microcosm of the structural problems of Soviet industry