Tags: Russia | Running | Low | Oil | Raw | Materials

Russia Running Low on Oil, Raw Materials

Wednesday, 04 April 2001 12:00 AM

In a March 30 dispatch, Rossiyskaya Gazeta revealed that Russia is running out of oil that is easily extracted – the kind that has boosted Moscow's financial condition. The publication noted that more than half of Russia’s budget is funded by the flow of petrodollars and warns that the days of lush oil profits are about to end.

The blame for the depletion of easy oil sources is laid on Russia’s fevered attempt to sell as much oil abroad as it could pump out of the ground, leading Moscow to increase drilling dramatically. The result was a substantial reduction of remaining supplies.

Wrote the Gazeta: "They were only able to scrape up an additional 20 million tons; moreover, even for this they had to reopen old wells that had been mothballed. ..."

But the drain on oil supplies is not Moscow's only problem in the area of depletion of natural resources.

Warns Viktor Orlov, president of the Russian Geological Society, the depletion of raw materials is exactly what will be Russia's main economic problem in coming years. The nation's industry, only now emerging from its state of collapse, will suddenly demand an increase in the extraction of raw materials. But, he warns, it will be extremely difficult to achieve that.

"In the last 10 years, we have used what was already discovered," Orlov claims. "The country will be able to hold out on these reserves for maybe 10 years. But that is only if extraction does not increase [to] about 300 million tons of oil and 600 billion cubic meters of gas a year. And at the end of this decade we will already be scraping up the remainders."

Time is not on Russia's side, he added, noting that it takes at least 15 years to go from the moment that a deposit is discovered until commercial extraction can begin. "That is why geologists in all the developed countries explore 10-15 percent more new reserves each year than were extracted in the same year. This slight excess is the guarantee of economic stability. But in our country in recent years, geology has been in a state of neglect," Orlov said.

"Each year the state has directed a significant part of the money that the companies transferred to the budget for geology to other needs. And then, too, the oil generals and gas barons themselves often preferred to cherry-pick deposits, saving money on exploration to use for building private homes, opening foreign bank accounts, and other luxuries.

"The 'oil kingdom' of western Siberia has passed the peak of its glory. Extraction there is falling swiftly. To compensate for this loss we need to scratch out 100 million tons of oil a year in other compartments. Meanwhile, the Nenetsk Autonomous Area and the Republic of Komi can only give a total of 20 million tons, and eastern Siberia and Yakutia will not give more than 40 million tons.

"Only the offshore fields in the Far East and the northern seas are equal to western Siberia," Orlov says. "It should have been brought into use 10-15 years ago. Since the Soviet Union did not do it, Russia should. But without rigid regulation by the state, this is impossible."

Russia has been relying on the financial windfall that high oil prices have given Moscow. Reduction in the flow of oil capital could help spur an international arms race, since Russia's President Vladimir Putin has made peddling sophisticated weaponry to all comers a principal fund-raising tool for the nation. If he has to rely on arms sales for income to make up for loss of oil revenues, he can be expected to increase his efforts to sell weapons without paying much attention to who his customers are or for what they plan to use the arms.

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In a March 30 dispatch, Rossiyskaya Gazeta revealed that Russia is running out of oil that is easily extracted - the kind that has boosted Moscow's financial condition. The publication noted that more than half of Russia's budget is funded by the flow of petrodollars and...
Wednesday, 04 April 2001 12:00 AM
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