Nature's Evil

The oil in Baku was running out, but the Soviet Union opened new oilfields. Remembering their early experiences, the authorities referred to these regions in Tatarstan and the Urals as ‘a second Baku’ and those in western Siberia as ‘a third Baku’. After the discovery of oil and gas in Siberia at the beginning of the 1960s, the rate of extraction increased so quickly that the supply seemed inexhaustible. As the oil historian Maria Slavkina suggests, the unexpected windfall of Siberian oil allowed the Soviet leadership first to postpone and then to bury the plans they had made for economic reform. But the law of diminishing returns applied even to a socialist country. Between 1975 and 1990, supplies of Siberian oil hardly increased, but capital investment increased fourfold and the number of oilfields tenfold. 14 But the productivity of collective farms declined even faster than that of the oilfields. In 1982, the country embarked on the Food Programme (see chapter 2 ). A massive plan to exchange oil for food made the USSR completely dependent on its Cold War opponents. New pipelines delivered oil and gas from western Siberia to Western Europe, but their crucial elements were manufactured in Germany or the USA. In the booming oilfields of Siberia, everything was in short supply – labour, equipment and provisions. Ignoring its self-imposed restrictions, Moscow brought to Siberia thousands of workers from Ukraine, Azerbaijan and Tatarstan – the former oil-rich parts of the Soviet Union – and paid them much more than they would have earned at home. Throughout the 1980s, dozens of daily charter flights brought thousands of volunteers from western Ukraine to work two-week long shifts in western Siberia, and then flew them back home for two weeks’ rest. 15 Then the oil price began to fall. By the historical standards of resource empires, the drop in price was rapid but not very steep. Many other oil-producing countries, from Norway to Venezuela, weathered the crisis. Only the USSR collapsed.

Privatisation, imported equipment and foreign expertise solved many problems with which the Soviet State Planning Committee had been wrestling for decades. But while it sold its oilfields, the new Russian state kept the entire network of pipelines in its own hands. Ironically, this decision confirmed Adam Smith’s conclusion from long ago: the most important monopoly belongs not to the producers but to the transporters. It is the carriers that are the principal obstacle to free trade. Oiligarchs realised that technology, expertise and trained personnel don’t have to be produced locally – they can be bought for a small fraction of the revenue. The great knowledge machine of the Soviet era – the Academy of Sciences, schools and universities – now turned out to be surplus to requirements. In 2004, the top leadership in the Kremlin renationalised Yukos – the biggest oil company in western Siberia.

The petrostate

Throughout the twentieth century, geologists found more and more oil and gas on the planet, identifying new reserves before the old sites ran out. Some discoveries were kept secret; others turned into symbols of corporate or national pride. The industry’s main problem was a surplus of oil, which could harm prices. 16 In 1930, a colossal oil deposit was discovered in eastern Texas; oil prices fell sharply and contributed to the Great Depression. By buying concessions all over the world, from Venezuela to Kuwait, oil companies aimed not to increase production but to limit it. In the ideal world which the oil companies were constructing for themselves, the growth in world consumption would outstrip the volume of extraction. In fact, oil prices grew more slowly than inflation. Consumption turned out to be the bottleneck in the system, and it had to grow. American culture exhibited to Europe and the world the glamour of Fordism, Hollywood, gas-guzzling automobiles, changing fashions, freeways and the charms of the suburbs. 17 Private cars supplanted public transport. Engines were ever more powerful. Everybody drove – gender equality claimed a rare victory. The commutes between home and work, home and school, work and leisure, became ever longer. Equated with modernity, the new cult of speed followed the same logic as British sugar producers of an earlier age: rebranding addictive pleasures from the arena of aristocratic consumption into enjoyment for the masses, the producers lost out on price but won on volume of trade.