Victory: the Reagan administration’s secret strategy that hastened the collapse of the Soviet Union

Victory: the Reagan administration’s secret strategy that hastened the collapse of the Soviet Union  / Peter Schweizer, 1994 (ISBN 0871136333)

This long subtitle serves as a reasonably good summary for this entire relatively small (<300 pages) book. I went out of my way to get it after seeing it referred to with respect to oil prices.

Official policy via then-secret National Security Directives (NSSD’s and NSDD’s, see especially NSDD-75 ) was to wage nothing short of all out economic war against the Soviet economy. All sorts of high-tech goods were under export embargo — weapons of course, but additionally all sorts of computer gear, and even computer software. This directly casued delays in the trans-Siberian natural gas pipeline by years. Anything in an effort to deprive the Soviet economy (especially) of hard currency (i.e. exports, of which energy were by far the majority).

A sweeping claim oft made (but not necessarily in this book) is the collapse in oil prices was engineered and pulled off by the Reagan administration’s policies; and this directly led to the collapse of the Soviet Union by depriving their economy of critical hard currency. I would imagine there is some truth to this, but on the other hand cause and effect aren’t clear, and there were many other things going on outside of the US – Saudi policy.

And on a side note, it’s interesting to read this version of history which was written in 1994 about the era dominated by the Soviet war in Afghanistan, American covert operations in Poland (funding Solidarity) and Afghanistan (funding the mujadeen resistance to the Soviet occupation), and culminating in the collapse of the Soviet Union. Also at the same time the Iran -Iraq war (Revolutionary Kohmeinism versus Bathist, Saddam Hussein) raged, but the US was not very involved other than to supply intelligence to Saddam — the US was “rooting” for Iraq.

Here’s a quote from the book regarding oil prices, p. 217:

Only one track of the economic war against Moscow had yet to be fully implemented. Lower oil prices became a key administration objective in 1985. For many the main advantage was to the United States. “We wanted to lower international oil prices, largely for the benefit of the American economy,” says Edwin Meese, then the White House counsel. “The fact that it meant trouble for Moscow was icing on the cake.” But some individuals recognized the gravity of the subject as it related to Moscow’s precarious economic position. Roger Robinson recalls, “Bill Casey was keeping an eye on oil prices almost daily, and so were we. It was the centerpiece of the Soviet hard currency earnings structure and principal funding source of its military industrial complex.” Some believed that lower oil prices would happen simply by letting the market process run its course. Others, like Casey and Weinberger, thought the world’s larges oil producer, Saudi Arabia, needed some encouragement and support from the United States.

That encouragement and support from the US to Saudi Arabia took a very tangible form in the selling of highly sensitive military hardware to the Saudi’s; first AWACS spyplanes, and later Stinger missiles. These sales were both controversial, see .g. The Stingers raise the most concerns. The Saudis were cooperating in supporting the mujadeen resistance in Afghanistan, and the Royal Family in particular was seen as staunchly anti-Soviet.

Saudi production — presumably at the behest of the US — went from ~2mbd (million barrels / day) to 6mbd in a span of a less than a year, 1985, very much playing the role as swing producer, with barrel prices plummeting.

In Afghanistan, the US supplied stingers to the resistance via Pakistan’s ISI are widely credited with turning the tide of the war, culminating in the Soviet pull-out in 1986.

The cost of SDI (strategic defense initiative, known somewhat derisively as “star wars”) was a major worry for the Kremlin.

In summary, from the epilogue:

“The Soviet Union did not collapse by osmosis, not because time was somehow on our side. Had the Kremlin no faced the cumulative effects of SDI and the defense buildup, geopolitical setbacks in Poland and Afghanistan, the loss of tens of billions of dollars in hard currency earnings from energy exports, and reduced access to technology, it is reasonable to believe that it could have weathered the storm”.  “No singular event or policy pushed the Kremlin over the brink. The power of the Reagan administration’s overall strategy is measured by the cumulative effect of the policies that were adopted”

Here’s another one — newer and  much fringier:

The Oil Card: Global Economic Warfare in the 21st Century

2007 Fatals by type

James R. Norman, 2008  (ISBN 097779539X). Publisher is Trine Day — be sure to check out their, ummm, interesting selection of books. The cover is certainly cute, dogs playing poker with a geo-political twist.

By fringy; I mean for example his belief in abiotic petroleum origin, and the conspiracy theory that Vince Foster (“Fostergate“) was murdered or whatever by the Clinton Administration.

Anyway, his main interesting idea it that the true purpose of the American invasion of Iraq in 2003 was to prevent the Chinese from making inroads there in securing oil from Saddam’s government. And further that the enormous run-up in the price of oil, say from 2000 – 2008) was also orchestrated by America (and it’s allies; Saudi Arabia of course but now including Putin’s Russia) to constrain Chinese ecomonic growth.

Of course, he has the misfortune of finishing his book around the time when oil peaked at $140 plus, with no signs of stopping — so his talk about $200 oil seems silly now: “In theory, there is no reason they (oil futures prices) could not be pushed to $200/bbl or beyond”. Yes, in theory, and of course maybe someday but that seems a long long way away with prices now in the mid to low $30’s.

We are also now, as of beginning of 2009, in the curious/atypical position of sweet crude being actually cheaper than sour crudes. According to Norman, and I have no reason to doubt him on this, Chinese refiners are almost totally dependent on (normally more expensive) sweet because their refineries lack the extra stuff to refine sour crudes. So if there were some conspiracy to drive up (sweet) crude prices; that has now backfired.

“…the price runup ($140 and counting, at the time he wrote that) is far from over and could go on for another decade, as did the low-price oil war against the Soviets”.

On the role of commodity futures speculation, by in particular institutional investors such as pension funds (he names Calpers by name, calling it a quasi-government entity): “critics will argue that the government is not smart enough to orchestrate such a price rise in oil”. Call me a critic.

Still he points out some curiosities that even made me skeptical at the time — e.g. the very public begging of President Bush to the Saudis in (early?) 2008, to which he was seemingly publicly humiliated by the Saudis. This seems like too big a political miscalculation, and too theatrical even for me.