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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©right=0&release_dec=RIPPUB&classification=U&showPage=0001