The Emergence of Russian Oil
But a more interesting commodity which the U.S.S.R. has begun to put on the market in bigger quantities was oil.
In approximately the last half of 1953 the U.S.S.R. made agreements to ship to free-world countries about 3.5 million metric tons of crude petroleum, kerosene, diesel fuel, and other petroleum products. The countries due to receive the largest amounts—if delivered—were Finland, France, and Argentina. Other customers were Greece, Italy, Iceland, Denmark, Sweden, Israel, and the Netherlands. Some deliveries were made in 1953; more would be made in 1954; there was no certainty that all the commitments would be fulfilled. But even a two-thirds fulfillment apparently would be enough to hoist petroleum ahead of lumber and furs and place it second only to grain among Soviet exports to the free world.
What would this mean to the free world? What problems would it raise? Again we can find clues in the past. The present situation is not the first time that the U.S.S.R. has created a stir by abruptly entering oil markets. This also happened in the late 1920’s, when the U.S.S.R. began exporting large amounts of oil as a means of obtaining industrial imports. These exports grew each year and were 6.1 million metric tons in 1932. This was around 10 percent of the world’s oil exports, and was almost 30 percent of Soviet oil production at the time. The United Kingdom and Italy were the major customers for this oil, but there were many others. The marketing was done through various channels. The Soviet monopoly that controlled all oil exports set up a network of sales offices abroad. Long-term contracts were made in Spain, Italy, France, Belgium, and the Netherlands.
The expansion of Soviet oil sales gave rise to bitter price wars with established oil groups. The bitterness was made more intense by the fact that the Bolsheviks had neglected to settle for the foreign oil properties that they had seized after the revolution. As in all exports, the U.S.S.R. was more interested in total receipts of foreign exchange than in making high per-unit profits; so it could and did use price cutting as a means of achieving a foothold. Subsidiaries of some of the world oil trusts then tried to drive the Soviet oil back home by underselling the Soviet monopoly. But the attempts failed, and Soviet oil won an important place in world markets.
In the late 1930’s, the oil was withdrawn. Soviet exports dropped back to 1.4 million tons in 1938, and kept fading. After the war, they came back only in a trickle—for example, 100,000 metric tons in 1951 and 250,000 in 1952, then rising to 450,000 in 1953 as some of the new commitments of 3.5 million tons began to be fulfilled.
Meanwhile the war had swept additional oil into the Kremlin’s hands, including the oil wells of Rumania and those which were taken over as “German assets” in the Soviet zone of Austria. And the oil exported to the West from these new Eastern European acquisitions greatly exceeded the exports of the U.S.S.R. itself, amounting to 1.2 million metric tons in 1951, 1.7 million in 1952, and 2.3 million in 1953. In recent months, while the U.S.S.R. was making agreements to ship 3.5 million tons, the new export commitments of these other properties in Eastern Europe became known only in part, at least at this writing.
The Soviet bloc, though still short of certain specialized refined products, probably has the oil capacity to make considerable exports for at least some years, if the Kremlin so decides. Whether the bloc will indeed step into the world markets in an important way, as the U.S.S.R. did in the twenties, is of course not known. The West is watching closely to see whether the Kremlin will again use its monopoly control to undertake a major campaign of underselling other suppliers in world markets.
It was natural for oil-importing countries in the free world to be interested in new supplies from the Soviet bloc, especially if the price was attractive or if the transaction also enabled a free country to market its own products in the East. But the West could not forget past patterns, nor ignore the problems brought by new Soviet sales.
When the Russians abruptly disappear from markets, free-world importers turn to free-world sources to make up the difference. And if the importers later jump whenever the Soviet Government decides to stage another of their dramatic entrances, the free-world sources whose production has been stimulated will be the losers. And who can predict when the dictates of the Kremlin—economic or political—will override the dictates of the market place, and the oil, manganese, chrome, or whatever it may be, will suddenly be whisked out of reach?