Communications on energy

Soviet-American energy involvement

Soviet-US negotiations in the energy sector are just one part of the US administration's effort to expand trade relations with the USSR for political purposes. This article reviews the implications of US support of Soviet energy.

Commodity trade and cooperation in technical and scientific fields are often used as a means of achieving foreign policy objectives when direct political cooperation is not possible. Such is the case with Soviet-American energy involvement and the pursuit of detente in the 1970s. ~

The improvement of overall relations between the USA and the USSR via the energy field is formally stated in Cooperation in the FieM of Energy Agreement Between the USA and the USSR signed in Moscow in 1974. 2 The stimulation of trade as a fundamental part of the USA's effort to improve relations with communist countries was recognized by the US Comptroller General in his report to the US Congress in 1976. 3 This report identified the significance of this trade as political and its economic impact on the US economy limited. Viewed in this context, negotiations in the energy sector are just one part of the administration's drive to expand trade relations with the USSR for political purposes. The pending negotiations for a Soviet oil agreement represent about only 3% of total US import requirements according to 1976 estimates, yet the US State Department recognizes it as a step in building a broader trade relationship with the USSR. 4

The role of detente in stimulating US involvement in Soviet energy sources and the US financing of East-West trade is dramatized by the fact that before 1973 no Export-Import Bank credits were issued to the USSR. However, shortly after President Nixon's visit to Moscow and the signing of the USA- USSR Trade Agreement, almost $500 million in credits were provided in one year, 5 many of which were for energy related and other high technology projects.

The increasing volume of credit to the USSR and the Bank's potential role in financing energy projects became a subject of controversy, and the Bank's activities came under attack in a series of Congressional hearings on the Export-Import Bank which was due for renewal in 1974. 6 The major objections to US involvement in Soviet energy projects, which were voiced by Congress in 1974, and which have been repeated concerns, are based on the following arguments:

• Boosting o f Soviet military expenditure. The cost of developing energy resources places a strain on the Soviet military versus the civilian resource allocation. 7 Many of the credits that were extended were for the export of goods related to capital construction and the development of productive capability. By freeing Soviet resources for other uses, the USA may indirectly be contributing to the Soviet military potential, s

• Increased Soviet political leverage. The financing of long-term projects in the USSR ties up US investment that will not be repaid for 10 years or more. These investments could provide the USSR with leverage if it decided to tie payment of its debt to certain political conditions. 9

• Unreliable source. The USSR might use dependence on energy supplies for political purposes, as in the case of the Middle East embargo. Strategic vulnerability is critical to the USA's national security, and there is no reason to believe that the USSR will be more politically reliable despite detente. ~° US investments in domestic sources might prove a better alternative.

Following widespread Congressional criticism of the Export-Import Bank's

involvement with communist countries, and with the USSR in particular, the Bill HR15977 was passed in 1974 restricting US investment in Soviet raw materials. H This bill increased Congressional responsibility for the Bank's operations, and placed limits on the future loans and guarantees for exports to the USSR. Provisions were added which prohibited the financing of any exports intended for the development of fossil fuel resources, and which required that a 25 day advance notice to Congress be given before the approval of any financing that exceeds $60 million, or for any transaction of $25 million or more for fossil fuel projects in the USSR.

During the Congressional debates of the 93rd US Congress, detente was never the crucial issue. ~2 However, the use of subsidized credits and technology as an effective means of establishing a lasting improvement in relations was called into question. ~3 Demands that explicit political conditions be attached to the extension of credits gave birth to the Jackson-Vanik Amendment to the Trade Act passed in 1974. ~4 According to this amendment no new credits will be extended to the USSR as long as the emigration of its citizens is restricted.

Tactical device

Although the USSR is not as interested in large-scale cooperative development plans as it was in the early 1970s, 15 imports from the West are still key factors of Soviet development plans, 16 and it is expected that Moscow will continue to base a substantial portion of its equipment and pipe imports on receiving medium- and long- term credits from Western sources. ~7 Soviet-American energy development was once attractive as a means of expressing detente as well as a vital source of new energy supplies. However, the availability of Soviet exports to the West no longer seems as promising as it was, ~8 and US support of detente is in danger as alarm spreads over the relentless Soviet military build- up. 19

There is serious concern that the USSR is using detente as a tactical device, 2° and President Carter has urged that NATO respond forcefully to the

166 ENERGY POLICY June 1978

offensive posture of the USSR military build-up in Europe. 2~ Reports have been as extreme as those of Major General George Keegan Jr, former US Air Force Chief of Intelligence, who claims there is evidence that the USSR was preparing for war. 22

If these concerns continue, US support of Soviet energy and any other high technology projects may be substantially curtailed. Fears that civilian technology might be used for military purposes 23 are intensified by the fact that US export control regulations for technology are virtually unenforceable. 24 To protect US national security a total restriction of trade and credits in these areas may be required. The Export-Import Bank Act is due for renewal in 1978, and renewed Congressional debate over US involvement in energy related projects in the USSR can be expected, along with a critical reexamination of detente.

Jul ie Rogers In ternat iona l Energy Agency

Paris, France

The views expressed in this article are those of the author alone and do not necessarily represent those of the lEA.

1The relationship between detente and US commodi ty trade and cooperation in technical fields with the USSR is noted in the fol lowing sources: Marshall Goldman, Detente andDollars, Basic Books Inc, New York, 1975, pp 4, 269; US Congress, House Committee on Science and Technology, Subcommittee on Domestic and International Scientific Planning and Analysis, Background Materials on US- USSR Cooperative Agreements in Science and Technology, 94th Congress, US G o v e r n m e n t Pr in t ing Off ice, Washington, 1975; US Congress, Senate Committee on Banking, Housing and Urban Affairs, Subcommi t tee on International Finance, Extension of the E x p o r t - A d m i n i s t r a t i o n Act, 94 th Congress, Summary Statement by the Comptroller General of the United States Report to Congress on "The Government's Role in East-West Trade - Problems and Issues' US Government Printing Office Washington, March 1976, pp 19-98. z US Congress, House Committee on Science and Technology, Subcommittee on Domestic and International Scientific Planning and Analysis, Background Materials on US-USSR Cooperative Agreements in Science and Technology, 94th Congress, Cooperation in the Field of Energy Agreement Between the USA

and the USSR, US Government Printing Office, Washington, 1975, p 62. 3 US Congress, Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on International Finance, Extension of the Export-Administration Act, 94th Congress, Summary Statement by the Comptroller General of the United States Report to Congress on "The Government's Role in East-West Trade - Problems and Issues; US Government Printing Office, Washington, March 1976, p 23. "US Congress, House Committee on International Relations, International Economic Issues, 94th Congress, Statement of Hen Charles W. Robinson, Under Secretary of State for Economic Affairs, US Government Printing Office, Washington, February 1976, p 7; US Executive Office of the President, International Economic Report of the President, transmitted to the US Congress in January 1977, US Government Printing Office, Washington, 1977. S Adalai Stevenson, 'Views on Eximbank credits to the USSR', in US Financing of East -West Trade, Paul Marer , International Development Research Center, Indiana University, Bloomington, Indiana, 1975, p 249. 6US Congress, House Committee on Banking and Currency, Subcommittee on International Trade, Hearings on HR 774, 13838, 13839, and 13840, 93rd Congress, US Government Printing Office, Washington, 1974; US Congress, Senate Committee on Banking Hou, sing and Urban Affairs, Subcommittee on International Finance, Export-Import Bank of the US, Hearing on $1890, 93rd Congress, US Government Printing Office, Washington, 1974.

Dona ld R. McCal l in , Peaceful Coexistence, Pofitical Economics, and the Military Interest in the USSR: An Interpretation of Soviet Detente, School of Public and International Affairs, George Washington University, Washington, February 1976, p 30. s p. Hassner, Contradictions of Detente - False Dilemmas and Real Problems, Naval Intelligence Support Center, US Department of Commerce, Washington, July 1976, p 3. s US Congress, House Committee on Interstate and Foreign Commerce, Subcommittee on Energy and Power, Middle- and Long-term Energy Policies and Alternatives, Part I, 94th Congress, US G o v e r n m e n t Pr in t ing Office. Washington, March 1976, p 34. lo Colonel Conrad A. Yarmoff, Should the US Participate in the Development of Siberian Oil and Gas Deposits? Mili tary Intelligence, US Army War College, Carlisle Barracks, Pennsylvania, October 1975, p 17. 11 'Compromise Export-Import Bank Bill c leared ' , Congress ional Quarter ly Almanac Congressional Quarterly Inc, Vol XXX, 1975, pp 203-209.

Communicat ions on energy

12 Stanley J. Marcuss, 'New light on the Export-Import Bank', in US Financing of East-West Trade, op cit, Ref 5, p 265. 13 Robert S. Ingersoll, 'Keynote address: The role of technology trade in the US government policy of detente', in Proceedings o f the East- West Technological Tade Symposium, Ed Betsy Ancker-Johnson and Will iam C. Holt, US Department of Commerce, Washington, 1976, p 11. 14 US Executive Office of the President, International Economic Report of the President, Transmitted to the US Congress in March 1976, US Government Printing Office, Washington, 1976, p 57. is Yarmoff, op cit, Ref 10, p 16. le International Economic Report of the President, op cit, Ref 4, p 66. 17 USSR: Hard Currency Trade and Payments, 1977-78, Central Intelligence Agency Research Aid No ER 77-10035 U, US Library of Congress, Washington, March 1977, p 9. 18 The International Energy Situation: Outlook to 1985, Central Intelligence Agency Research Aid No ER 77-10240 U, US Library of Congress, Washington, April 1977, pp 12-13. 19 Some of the more recent articles discussing the Soviet military build-up are: Stephen A. Garrett, 'Detente and the military balance', The Bulletin of the Atomic Scientists Educational Foundation for Nuclear Science Inc, April 1977, pp 10-21; W. Laquer, 'Perils of detente', New York Times Magazine, 27 February 1977, pp 16, 28, 30, 33, 34, 36; 'President bids NATO respond forcefully to Russians' buildup', New York Times, 11 May 1977, pp 1, 14; 'Text of President's address to the conference of NATO countries in London', New York Times, 11 May 1977, p 14; Russia's relentless arms buildup', US News, 17 January 1977, pp 35-37; 'Latest round in debate over Russia's arms', US News, 28 February 1977, p 18. 2o P.H. Nitze, 'Assuring strategic stability in an era of detente', Foreign Affairs, Quarterly Review, January 1976, p 210. zl 'Text of President's address to the conference of NATO countries in London', opcit, Ref 19, p 14. z2 W. Laquer, op cit, Ref 19, p 16. 23 Richard B. Foster, in US/USSR Strategic and Economic Issues, SRI/SSC, IMEMO and ISUAC Joint Symposia, Moscow 1974, Menlo Park 1975, Stanford Research Institute, Arlington, Va, October 1976, p 64. z4US Congress, Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on International Finance, Extension of the Export Administrat ion Act, 94th Congress, Summary Statement by the Comptroller General of the United States Report to the Congress on "The Government's Role in East-West Trade - Problems and Issues" US Government Printing Office, Washington, March 1976, p25 .

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