Soviet Energy:

U.S. Attempts to Aid Oil Production Are Hindered by Many Obstacles

NSIAD-91-214: Published: May 24, 1991. Publicly Released: Jun 19, 1991.

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Allan I. Mendelowitz
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Pursuant to a congressional request, GAO provided information on the: (1) decline in Soviet oil production and the reasons for that decline; and (2) principal obstacles to U.S. trade and investment in Soviet oil exploration and production.

GAO found that: (1) since 1988, Soviet oil production declined by about 8.8 percent; (2) from 1988 through 1990, oil exports declined about 15 percent; (3) production and export declines were due to a lack of sufficient exploration and production capital and the Soviet Union's use of outdated and inefficient production practices; (4) Soviet officials believed that U.S. oil companies could assist in reversing the oil production decline by participating in more U.S.-Soviet joint ventures; (5) the Soviet Union's political uncertainty and lack of western business knowledge constrained oil trade and investment; (6) the absence of a bilateral tax treaty allowing U.S. companies to repatriate joint-venture profits without double taxation hindered efforts to promote investment in Soviet oil production; (7) despite those difficulties, several U.S. multinational oil companies signed or were considering joint-venture agreements; (8) the federal government, private companies, and universities developed some training programs on western business practices; and (9) the U.S. and Soviet governments were currently negotiating a tax treaty.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress passed H.J. Resolution 456 on April 1, 1992, and the President signed it the same day (P.L. 102-266), which repealed the Stevenson and Byrd Amendments.

    Matter: In light of the changes in the Soviet Union since 1974, when the Stevenson and Byrd amendments were adopted, Congress may wish to reconsider the continued need for those amendments. A decision to remove the legislative restrictions would not necessarily mean immediate U.S. loans and guarantees to the Soviet energy sector. The U.S. Export-Import Bank would still be expected to apply its standard procedures for assessing the risk of nonrepayment of loans, including country risk analysis, in determining whether loans and guarantees should be extended to the Soviet Union.


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