Soviet Oil by Stephen Lewarne

Author:Stephen Lewarne [Lewarne, Stephen]
Language: eng
Format: epub
Tags: History, General
ISBN: 9781000312638
Google: jqakDwAAQBAJ
Publisher: Routledge
Published: 2019-07-19T01:37:04+00:00

American Sanctions and the Breakdown of Cooperation

In 1979, the Soviet Union invaded Afghanistan. This brought with it a series of sanctions from the Carter administration. These sanctions were eased off in the first years of Reagan's administration, but were reimposed during the West Europe-Soviet gas pipeline sanctions. Essentially, all of this spelled the end of the agreement with Japan and the development of the Sakhalin deposits, at least with Japanese assistance, for quite a while. When a falling world price for oil in late 1985 and early 1986 was added to the American pressure, the Soviet Union decided foreign cooperation was not only too politically volatile, but also too costly.

The first sanction involved McDermott Inc. (U.K.). McDermott, through its subsidiary Oceanic Contractors Inc. (U.S.), signed a $1.5 million contract to undertake a feasibility study of permanent fixed platform drilling in the waters around Sakhalin. This agreement was then followed by a $450 million equipment deal. The Carter administration stepped in and declared a sanction on the license of U.S. oil and gas parts to the Soviet Union.111 This intervention brought a strong appeal from the Japanese to the United States to exclude the Japanese-Soviet cooperation in Sakhalin from the general American embargo of the Soviet Union. The Japanese complained both French and West German trade with the Soviet Union was being increased because of America's blanket sanctions.112

The fact of the matter was that American technology was intrinsic to Japan's success in the region. Indeed, the Japanese were aware it was probably the most important attraction for the Soviet Union, far outweighing any other considerations. It came as a real blow, therefore, to both the Soviet Union and Japan when the United States Department of Commerce (USDC), halted equipment sales to the Soviet Union by Schlumberger (France-Netherlands), Halliburton Oil Products Co. (U.S.) and Otis Engineering Co. (U.S.).113

Seeing no other option the Japanese increased their lobbying of the USDC and in the spring of 1980 met with some success. In May, all American subcontractors to SODECO were given approval to recommence licensing and sales to the consortium.114 The reprieve was timely since C. Itoh and Co. (Japan) had started negotiating a technical assistance deal with the Soviet Ministry of Gas to deliver a new type of drilling rig in late 1980.115 Armco (U.S.) was then given the go-ahead to supply Mitsui Ocean Development Co. (Japan) with equipment because the Japanese firm was building a rig for Sudoimport.116 The rig, named the Okha, was delivered in July 1980 and began drilling off Chaivo, east of Sakhalin island. In addition to this the Soviet Union enlisted Offshore Supply Association (U.K.) to operate two supply vessels in the region.117

The suspension of American sanctions quickened the pace of development. The Okha soon discovered a well yielding 2,050 bd and 77 million cubic feet of gas a day.118 It was discovered that the Chaivo field had proven reserves of 630 million barrels of oil, 140.5 bcm of gas, and 142 million barrels of condensate.119 This brought the

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