MOSCOW — The Soviet Union has joined the rest of the world in condemning Iraqi strongman Saddam Hussein and his nation's invasion of Kuwait. But the Kremlin could just as well send him a thank-you note.
The invasion Aug. 2 sparked a worldwide hike in oil prices that is providing a windfall of hard currency to the Soviets, still the world's largest producer and second-largest exporter (after Saudi Arabia) of crude oil.
That windfall comes at a time when the Soviet Union is reeling from economic problems so severe that disgruntled consumers across the country have recently been rioting over shortages of liquor, cigarettes and other consumer goods.
The unexpected petrodollars also promise to ease some of the economic strain caused by an unexpectedly sharp decline in Soviet oil production in the last two years. A shortage of gasoline at home has left farm equipment idle; it is one reason grain is rotting in fields despite a bumper crop this year. Moscow has curtailed oil exports to Eastern European allies to make up the difference.
Any windfall from oil revenue "won't substitute for economic reform, without which the economy will stagger," said Tomasz Telma, an economist with PlanEcon Inc., a Washington-based consulting firm specializing in the Soviet Union and Eastern Europe.
"But in the short term, it gives them real breathing space. . . . If (high prices) persist for the next six months to a year, the Soviets will be able to set aside quite a substantial amount of hard currency."
Kommersant, a well-connected independent business newspaper, reported last month that the Soviet Union could see a windfall of as much as $750 million in hard currency this year as a result of higher world oil prices after the invasion.
Western analysts said the take could go much higher, depending on where oil prices stabilize. Prices, which climbed as high as $32 a barrel on world markets from less than $18 a barrel in July, are now trading at about $25 or $26 a barrel.
By perhaps the most optimistic rule of thumb, the Soviet Union gains $1 billion in hard currency income for every $1 increase in the price of a barrel of oil.
For their part, the Soviets, longtime allies of Iraq, have downplayed any desire to profit from the crisis.
"We do not see the present situation from a position of commercial benefit," said an official at the Soviet Union's oil export firm shortly after the invasion. "Sales of Soviet oil on the world market will not be increased from the planned levels."
That is hardly likely in any case, given the dramatic falloff in Soviet oil production.
The 1986 Five-Year Plan set an oil-production target of 12.5 million to 12.8 million barrels of oil per day in 1990. But in 1989, oil output actually fell to 12.1 million barrels per day from 12.5 million barrels in 1988.
In the first half of this year, production declined 4.3% to 11.7 million barrels per day, according to PlanEcon. The figures are estimates, given the difficulty in assessing the performance of the Soviet economy.
Production has fallen because of aging fields, poor management, equipment breakdowns, lack of spare parts, transportation problems and widespread labor unrest in oil-producing regions. There is little prospect for a turnaround, given a lack of capital for new exploration, lack of technology to increase the output from nearly depleted oil fields and few incentives to attract skilled workers to remote oil areas.
As a result, exports from the Soviet Union have fallen off. In the first quarter of the year, the Soviets sold about 6.5% less oil to the developed West than they did last year, PlanEcon reported. At the same time, the Soviets cut crude oil exports to Eastern Europe by about 12%.
The reduction in sales to the West threatens a prime source of hard currency. In 1989, the Soviets depended on oil exports to non-Socialist countries for $12.1 billion in hard currency, or 28.7% of the total $42.1 billion from exports to those countries, PlanEcon reported.
The cuts to Eastern Europe accelerated in the summer, when shortages at home forced curtailments. "This will permit us to supply our agriculture," said Prime Minister Nikolai I. Ryzhkov.
"We knew this would be an unpopular move, but there wasn't much we could do," added Ryzhkov's deputy, Deputy Prime Minister Leonid I. Abalkin. "We need this oil for ourselves."
"Cutbacks to Eastern Europe in the first six or seven months of the year are related partly to problems with domestic production, partly to the fact that the Soviets are getting low prices in trade with Eastern Europe and they do not want to continue subsidizing their former allies," economist Telma said.
In 1989, Telma estimated that Eastern European nations paid the Soviets the equivalent of roughly $7.40 per barrel for oil, compared to the world market price of about $19.03 a barrel then. The Soviets have put Eastern Europe allies on notice that they will have to cough up hard currency for oil beginning next year.