Alcohol, Oil, and the End of the Cold War

LCDR Luke Lazzari

Thesis

• Gorbachev’s anti-alcohol campaign and the steep drop in oil prices created an economic crisis for the Soviet Union.

• This economic crisis was a key factor influencing Gorbachev’s decision to exit the Cold War

Introduction

• What was the Cold War?

• When did it end?

• Timeline of events

• Effects of anti-alcohol campaign and drop in oil prices

• Conclusion

The End of the Cold War

• Disintegration of USSR in December 1991?• Sometime in 1989?• Mikhail Gorbachev’s 1988 speech to the UN?• December 1987: Washington Summit and

signing of the Intermediate Nuclear Forces (INF) Treaty– Abandonment of – Marxist/Leninist idea of class struggle– Elimination of entire class of missiles (really two).– First time Soviets agreed to intrusive verification of a

treaty

Timeline of Talks and Some Key Events

1972 1981-1982 1983-1984 1985 1986 19871977-1980

ABM Treaty and SALT

Enter Detente

Nov 82: Leonid Brezhnev dies. Enter Yuri Andropov

1981: Enter Ronald Reagan

Mar 83: Reagan announces SDI

Nov 83: Soviets walk out of INF talks

Feb 84: Andropov dies. Enter Konstantin Chernenko

Mar: Chernenko dies. Enter Mikhail Gorbachev

1977: Soviets begin deployment of SS-20’s in E. Eur.

1979: Invasion of Afghanistan

1979: Jimmy Carter signs and then abandons SALT II ratification efforts

Nov: Geneva Summit.

Oct: Reykjavik Summit stalls on SDI

Dec: Washington Summit, INF Treaty signed

Détente in tatters

By late 1970s Soviets believe “correlation of forces” moving against them

May: Rust lands Cessna in Red Square

Feb: International Disarmament Forum in Moscow

Feb:

Yakovlev Memo to Gorbachev

Apr: Anti-Alcohol Campaign decision made

Sep: Gorbachev backs away from INF Treaty

Nov 84: Reagan reelected

Jan: SECSTATE Shultz and Foreign Minister Gromyko create framework for future talks

Reagan proposes “zero option,” START

Jan 83: Reagan signs NSDD 75

Apr: Chernobyl

Anti-Alcohol Campaign

• Begun in April 1985– Cut Vodka production

by half by 1987• Reasoning:

– Part of the “struggle for communism”

• Advice against

1984 1985 1986 1987

Tax Revenue (B Rubles)

36.7 33.3 27 29.1

Tax Revenue (% of GDP)

4.8 4.3 3.4 3.5

Retail Sales

(% of GDP)6.9 6.1 4.6 4.4

Oil Prices 1977-1989

Oil Prices

$50 $48

$72

$96

$83

$69$61 $58

$53

$28$33

$26$31

$14 $15

$25

$37 $36 $32 $29 $29 $27

$14 $18 $15 $18

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Time

Pri

ce o

f O

il

2007 Dollars Nominal Dollars

August 1985: Saudi Arabia doubles oil production from 2MBPD to 5MBPD

Iran-Iraq War begins

Oil and the Soviet Union and perestroika

• Oil was the number one source of hard currency– West bought only 6%

of Soviet produced equipment

• USSR was the world's largest importer of grain, which was bought with hard currency.

Total Oil Sale

Revenue

1984 1985 1986 1987

% of GDP

4.04 3.63 2.82 2.76

In B Rubles

30.9 28.2 22.5 22.8

Conclusion

• The overall state of the Soviet economy was the major reason behind perestroika and Gorbachev’s desire to exit the Cold War.

• The anti-alcohol campaigns and drop in oil prices exacerbated the structural flaws of the Soviet economy and made negotiating an end to the Cold War imperative.

References

• Gaidar, Yegor. Collapse of an Empire: Lessons for Modern Russia. Washington, D.C.: Brookings Institution Press, 2007.

• Malia, Martin E. The Soviet Tragedy: A History of Socialism in Russia, 1917-1991. New York: NY: Free Press, 1994.

• Matlock, Jack F. Reagan and Gorbachev: How the Cold War Ended. 1st ed. New York: Random House, 2004.

• Norman A. Graebner, The National Security: Its Theory And Practice, 1945-1960 (New York: Oxford University Press, 1986), p. 55.

• Reed, At the Abyss, p. 227.

• Phillip Tauban “Gorbachev Is Feeling the Heat From the South,” March 6, 1988 http://query.nytimes.com/gst/fullpage.html?res=940DE4D61539F935A35750C0A96E948260&sec=&spon=&pagewanted=all.

• NIAA: http://www.niaaa.nih.gov/Resources/DatabaseResources/QuickFacts/AlcoholSales/consum02.htm

• InvestorWords.com. http://www.investorwords.com/2280/hard_currency.html

• "Soviet Spending for Defense: Trends Since 1951 and Prospects for the 1980s," http://www.foia.cia.gov/browse_docs.asp?doc_no=0000496806&title=SOVIET+SPENDING+FOR+DEFENSE:+TRENDS+SINCE+1951+AND+PROSPECTS+FOR+THE+1980S+(SOV&abstract=&no_pages=0052&pub_date=4/1/1982&release_date=1/29/2001&keywords=SOVIET+ANALYSIS|SOVIET+MILITARY+ANALYSIS|SOVIET+ECONOMIC+ANALYSIS|ECONOMIC+MILITARY&case_no=CSI-2001-00002&copyright=0&release_dec=RIPPUB&classification=U&showPage=0001