Soviet Oil Production and Obstacles to U.S. Trade and Investment

T-NSIAD-91-41: Published: Jun 19, 1991. Publicly Released: Jun 19, 1991.

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GAO discussed the: (1) recent decline in Soviet oil production and the reasons for the decline; and (2) principal obstacles to U.S. trade and investment in Soviet oil exploration and production. GAO noted that: (1) Soviet oil production decreased by about 9 percent and oil exports decreased by 15 percent since 1988; (2) since petroleum exports comprised 33 percent of the Soviet Union's total hard currency earnings, declining petroleum exports limited its ability to purchase goods and services necessary for economic restructuring; (3) Soviet oil production declined due to insufficient capital to finance oil exploration and production activities and outdated and inefficient production practices; (4) in an attempt to reverse the decline in oil production, the Soviet Union sought joint ventures with western companies to obtain needed capital and technology; (5) legislative restrictions enacted during the Cold War limited the ability of U.S. oil companies to aid the Soviet Union; (6) the existing U.S.-Soviet bilateral tax treaty lacked provisions that would allow U.S. companies to repatriate joint-venture profits without double taxation; and (7) conditions in the Soviet Union impeding U.S. investment include political conflicts over who owns the oil resources, uncertainty about the legality of existing agreements and contracts, and unfamiliarity with basic western business practices.

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