Soviets may be crimping oil exports and aiding OPEC - but will it last?
THE Soviet Union has offered to cooperate with the Organization of Petroleum Exporting Countries in maintaining oil prices. That's what OPEC spokesman James Audu claimed in a telephone interview to his Vienna office.
But Jan Vanous, a Washington expert on the Soviet Union and East European countries, is skeptical. ``They [the Soviets] don't play along with OPEC,'' he says.
Since the Soviets are a major force in the world oil market, their genuine cooperation in restraining exports would be of considerable significance to the price of oil and the world economy. It would make it easier for OPEC to hold the price at its current level of around $18 per barrel.
Hisham Nazer, who replaced Ahmad Zaki Yamani as Saudi Arabia's oil minister, visited the Soviet Union in late January. There are reports the Soviets promised to keep 100,000 barrels a day off the market. Mr. Audu says he knows of no such numerical agreement by the Soviets to cut exports - only of a promise of cooperation.
Mr. Vanous, editor of PlanEcon Report, says the Soviets are not going to be ``overly bound by what they told a Saudi minister.'' They had made similar assurances to oil ministers from other OPEC nations, such as Iran and Algeria, and then carried out oil export policies that reflect Soviet national interests.
But talk of cooperation, he notes, may help push up the price by creating tension and uncertainty in the oil markets.
Actual Soviet oil exports last year were certainly not helpful to OPEC's efforts to boost the price of crude.
Vanous estimates that total Soviet exports of energy to non-communist countries were up 19 percent last year. Oil exports (crude and refined products) rose 24 percent from 1,560,000 barrels a day in 1980 to 1,927,000 barrels a day last year. That is slightly in excess of previous peak exports of 1,872,000 barrels a day in 1984. Natural gas exports were up 6 percent, coal and coke exports increased 5 percent, and electricity exports rose 7 percent.
This export increase occurred while oil prices were collapsing and both OPEC and some non-OPEC countries were restraining output.
This, says Vanous, ``indicates what the Soviets can do when pushed to the wall by unfavorable external economic development.'' In other words, the Soviets needed foreign exchange and boosted energy exports to offset the fall in prices.
Similarly, the Soviets dramatically increased the quantity of arms sold in the third world, perhaps partly to make up for a 17 percent decline in their terms of trade (the cost of imports versus the price received on exports) last year. These arms sales surged 46 percent in nominal dollar terms, from $5.52 billion in 1985 to $8.07 billion in 1986.
Since prices on Soviet military hardware rose 15 percent last year, the actual quantity of Soviet arms exports to third world nations rose about 27 percent, Vanous estimates. Arms sales were especially high in the last quarter of 1986.
Vanous sees two important economic consequences from the jump in weapons sales. First, since most sales are made on credit, the Soviets will be borrowing more money from the West to finance them. Second, the sales could mean an increase in Soviet oil re-exports. The Middle East buyers of the arms, such as Iraq and Kuwait, will pay for them with oil which the Soviets then sell abroad.
Soviet oil reexports, Vanous estimates, jumped 56 percent, from 260,000 barrels daily in 1985 to 406,000 barrels in 1986 and could reach 500,000 to 600,000 this year.
So far, though, Soviet oil exports this year have been relatively modest. For the first three months, they were running at an annual rate of about 1.3 million barrels daily.
The decline, however, may reflect either the Soviet Union's high winter needs for heating oil or the fact that with the price of oil higher than in the winter of 1986, the Soviets need to export less oil to obtain needed foreign exchange.
OPEC's Mr. Audu welcomes the downturn in Soviet exports, saying, ``The important thing is, a certain amount of oil has been taken off the market.''
OPEC itself managed to restrain output to an annual rate of 15 million barrels a day in March, Audu says. That is 800,000 barrels below the target quotas the OPEC nations set up for themselves.
There is some speculation that Soviet exports will jump again during the current spring quarter. If so, when the OPEC ministers meet again in Vienna June 2-5, there may well be some questioning of the meaning of Soviet ``cooperation.''