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soviet oil production ww2

It can be expressed the following way: Rt = (1 – τ – τ')[PtQt – Ĉt] + τ[PtQt – Ĉt] + τ'[PtQt – Ĉt] + ρQt + εt. This disease emerges and progresses through the real exchange rate of a national currency and, in particular, through its strengthening.11 There are two ways that this could happen: through the increase of the national currency’s nominal exchange rate or through a higher rate of inflation in the country compared to that in other countries (its trading partners). 56 Viktor Andriyanov, Kosygin (Moscow: 2004), 238 (as cited by Slavkina, 271). For instance, in 1975, the five-year plan prescribed to extract 505 million tons of oil.3 This figure was then reduced to 487.4 million tons in the annual plans, and 491 million tons were actually extracted. At the start of the war, the Soviet Union suffered loss of valuable lands with economic and agricultural potential, great industrial losses and human casualties. There is evidence that in some periods its supply curve sloped downward.100 In other words, it could have sold more oil when it was cheaper and exported less when it was getting more expensive. 1779 Massachusetts Avenue NW And in the short term, the company has no opportunity to avoid nonrecoverable capital investment (that is, in the worst case, it is ready to downplay the prices until the loss exceeds the amount of amortization of these capital investments). In the same way, the cost of production is not the reported cost of production at any moment of time, but the cost that could have been established under the efficient organization of the industry, i.e. Furthermore, there were mobilization and national economic plans that were approved and they were all aimed at increasing military output. Higher volumes of oil and gas income would have made it possible to conduct even more massive procurements of food (and increase subsidies to the stagnating agriculture sector), consumer goods, and investment goods. However, even Gosplan had to react to the demands of consumers and the leaders of the country in one way or another and change the flows of investment. . Oil was in desperately short supply for the Axis powers in WW2. What is important is the following: Even the fluctuations of these two kinds of rent result in different incentives of economic agents inside the country. We can’t discuss FDI in regards to the Soviet economy, but we know the following fact about the change in the country’s terms of trade: the purchasing power in 1988 of one barrel of Soviet oil, expressed in items of West German machinery, decreased to one-quarter from the 1985 level.18 A change in terms of trade like this is highly painful for the economy; it means that the country had to export four times as much oil in order to buy the same number of imported goods. According to it, Western Siberian deposits were supposed to be actively explored in the short term. In the 1960s–1980s, the main benefits in energy savings—three-quarters—were achieved by decreasing the second kind of energy efficiency. Be it for the Axis of for the Allies, each side attached great importance to its civilian’s participation in the effort to win the war and assist the army and its advances in the different fronts. Do we really need to pull our construction industry out of the horrible underdevelopment, if we can just utilize Finnish, Yugoslavian or Swedish construction specialists to build or reconstruct important objects and import the scarcest materials and plumbing equipment from West Germany, and shoes and furniture from other places? In fact, the Soviet Union’s rent income was much smaller, as about 60 percent of oil and petrochemicals exports were going to the Comecon nations at prices well below the world level (these nations paid on average $7–$9 per barrel of oil, which is about one third of the world market price; a similar situation existed on the natural gas market). The desire to quickly explore this huge region and get maximum returns with minimal costs has led to the situation in which the issues of long-term infrastructure planning were not paid the attention they needed.”57 The emphasis on the second option—the intensive one—has paid off (from the medium-term perspective, up to the beginning of the 1980s). Another issue is that if oil and gas were supplied to subsidized countries at world prices, Russian GDP would increase (real GDP of the current year is the volume of production of this year, measured in prices of a basis year—f we use world prices instead of the subsidized ones, the prices of the basis year will rise, and so will the current year’s GDP). [7], As soon as the war broke it, it was clear to the Soviet government that this conflict would require a total war approach. . Imports of oil and gas equipment surpassed record heights; from 1970 to 1983, they increased eighty times in terms of value. According to other estimates, the maximum amount of Soviet oil and gas rent was $270 billion in 1980–1981, while in 1986 and later, it dropped below $100 billion.76 This was mostly linked to the drop in world oil prices, but the production expenses also played a part—they grew by two-thirds between 1983 and 1987. 80 See, for instance: Joyce M. Dargay, Dermot Gately and Hillard G. Huntington, “Price and Income Responsiveness of World Oil Demand, by Product,” Energy Modeling Forum working paper EMF OP, vol. However, huge investment and efforts have yielded results which made the Russian industry surpass its previous output levels. The Dutch disease is called a disease because it implies that it’s hard for the economy to recover after a period of high oil prices since over this period the processing industry and agriculture lose their competitiveness due to reduced output volumes during a boom period (it learns by doing less than it could have if there was no boom). Unfortunately, the Soviet Union lost that opportunity. Gaddy and Ickes use the term “inverted funnel” to explain how the resource rent flows vertically down in the economy—from the beginning to the end of value chains.28. Cognitive explanations could partly reveal why the Soviet, and later Russian, leaders have proved to be shortsighted, as they failed to foresee a dangerous trend for at least a decade ahead (although oil prices started to drop earlier than ten years after they had started to rapidly grow). . It was looking for any buyers and scaled down prices in order to attract them. 30 Daniil Yergin, Extraction: World History of the Fight for Oil, Money and Power (Moscow: DeNovo, 1999), 44. 508 (2006), 1-20. He claimed that the struggle to curb the economic downturn rates had led to excessive spending on the expansion of the fuel and energy complex and boosted supplies of new resources and their irrational use.79 According to Gorbachev, one of the main directions of this was the excessive export of energy resources. . If cross-border capital flows are nonexistent or very small, their volatility should pose no threat to the economy (as there is no stock market and the pressure on the national currency’s exchange rate is tiny in both directions). Prior to the mid-1950s, Soviet oil was consumed inside of the Soviet bloc. Firstly, thanks to the existence of huge deposits, existing resources could be focused entirely on exploration, without even touching other deposits. In particular, this means that a considerable part of rent went not to the country itself, but to the countries receiving oil and gas at subsidized prices. When oil prices increased (and they continuously increased between 1974 and 1980), there was a temptation to boost imports even more. On the whole, surprising as it is, the attitude toward exports was somewhat neglectful. K. N. Plotnikov, Ocherki istoriia biudzheta sovetskogo gosudarstva [Essays in the History of the Soviet State's Budget] (Moscow, 1955), pp. The industry’s development was considerably hindered by the underdevelopment of the region, its location away from industrial centers, its corruption, its despotism, and the low qualifications of the Czarist administration, which ran the oil industry as part of the state monopoly. Between 1960 and 1973, the amounts of energy used in the OECD nations and in the Soviet Union were growing at the same rate as their GDPs. A. Bergson, The Real National Income of Soviet Russia Since 1928 (Cambridge, MA, 1961), p. 128. Production of aircraft, tanks, armaments, and munitions, June 26, 1941 the Supreme Soviet of the Soviet Union adopted a new decree "On the working hours of workers and service members in wartime," which introduced overtime work with work on holidays and weekends. Oil production in the Volga-Urals region was growing fast and reached its peak by around 1975.36 However, afterward, its decline was steeper than expected. According to conventional logic, when oil got cheaper (meaning that the real exchange rate of the Soviet ruble dropped), the Soviet Union was supposed to export less oil and more other goods. 25 Mansoorian, Arman, “Resource Discoveries and Excessive External Borrowing,” The Economic Journal vol. But oil dependence was not an issue back then as absolute volumes of exports were small and prices were not highly volatile. 13 Alexander Arbatov, Vladimir Feygin and Victor Smirnov, “Unrelenting Oil Addiction,” Russia in Global Affairs, no. There is a consensus in economic science that the resource curse, if it exists, is relative. In other words, rent is revenue from selling a resource minus its production costs. Thus, even if a material is traded below the world price, according to this calculation methodology, this doesn’t reduce the resource rent received by the country. Gas made up 36 percent of the total energy output in the USSR; oil comprised 36 percent; and coal amounted to 20 percent.1. We should mention that the Russian government applied some of these measures in 2004, in particular, the creation of a stabilization fund and the struggle with the strengthening of the ruble (although it was not that successful, considering the fact that the dollar’s exchange rate dipped to almost 23 rubles, when oil was at its peak). 59 Mariya Slavkina, Triumph and Tragedy. A different source on number of weapons manufactured between the Soviet Union and Germany. It was transformed on December 25 of the same year into the Committee of unloading transit cargo. Between 1970 and 1973, before the energy crisis, the share of the oil industry in total capital investment across all industries hovered around 8.8–9.3 percent; in 1986, it amounted to 19.5 percent. 35 (Centre for Russian and East European Studies, University of Birmingham, 1993). . The results of many studies showcase this. If we take the actual production costs Ĉt = Ct + εt, where ε is the excess value of production, the corrected rent will be R = PtQt – Ĉt = PtQt – Ĉt – εt. According to an official report: "Beginning in September, and right to the end of 1941, a decline in industrial output occurred. During World War I and the Civil War, oil production in Russia suffered a lot but then started to recover. This was militarily and economically. 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