MORE SOVIET INDUSTRY TRADE BARRIERS COLLAPSE

Soviet Azerbaijan has signed an intergovernmental agreement providing assistance in developing Lithuania's oil potential in the Baltic Sea.

The pact was made possible by Moscow's decision to allow increased autonomy among its 15 constituent republics (OGJ, Sept. 24, p. 38).

In other Soviet deals with outside companies, Elf Aquitaine Group, Paris, signed an agreement with the Soviet Consortium for Commercial and Economic Cooperation with France.

Disclosing no details, Elf said it agreed to provide assistance for "development of commercial activities and establishment of industrial operations" in the Soviet Union.

Elf plans to permit other French companies outside the group to participate.

Elf last summer signed an agreement with the Soviets covering oil and gas exploration and production in two onshore areas around the Volga River and in the Caspian Sea region (OGJ, May 28, p. 26).

These Soviet developments also surfaced last week:

Brazil has proposed a major increase in trade with the Soviet Union, including delivery of high grade Brazilian iron ore to the U.S.S.R. in exchange for Russian oil. The project would involve construction of "huge moorings" on the U.S.S.R.'s Black Sea coast for unloading the Brazilian ore, which would then be transshipped to eastern and central European countries.
Saudi Arabia hopes to open an embassy in Moscow and to have a Soviet embassy functioning in Riyadh by yearend.
Poland and other eastern European countries are being rocked by reports that their oil imports from the U.S.S.R. will again be cut sharply in 1991 even if they can pay for the fuel in dollars.
The U.S.S.R.'s deputy minister of geology objected to proposed budget cuts for exploration.

OFFSHORE LITHUANIA

"Promising" structures have been reported in the Baltic off Lithuania, but there have been no official reports of commercial discoveries there. Lithuania has at least 11 onshore oil fields near the Baltic coast.

The Soviet Union during 1984 found commercial oil in the Baltic off Kaliningrad Province, just southwest of Lithuania.

Besides the discovery well in 98 ft of water near Cape Taran, several more wells were slated to be drilled from a fixed platform. But Moscow said plans were abandoned following protests by environmentalists.

Azerbaijan produces most of the U.S.S.R.'s offshore oil from Caspian Sea fields. It has assisted in developing fields in the Black Sea and Sea of Okhotsk as well as off Viet Nam, India, and Cuba.

Early this year, the U.S.S.R. briefly cut off oil shipments to Lithuania after the republic declared independence from Moscow.

SAUDI RELATIONS

In an interview with Moscow's Izvestia newspaper following discussions with U.S.S.R. President Mikhail Gorbachev late last month on renewing diplomatic relations, Prince Saud al-Faisal, Saudi Arabia's minister of foreign affairs, said he had great hopes for significant broadening of economic, political, and social ties with the Soviet Union.

The prince emphasized that since oil production and exports are vitally important to both countries, they have mutual interests and reasons to cooperate in this sphere.

"Saudi Arabia has the resources to establish joint ventures with Soviet enterprises," the prince told Izvestia.

EXPORTS TO POLAND

Soviet oil shipments to Poland will be slashed to 34 million metric tons/year from 100 million metric tons/year, Opecna News Agency reported.

Warsaw press reports suggest Moscow has agreed to increase oil sales to the U.S. in exchange for large quantities of petroleum industry equipment and technology. That would continue a trend.

Last year, when overall Soviet crude and products sales to foreign customers declined to less than 3.7 million b/d from 4.1 million b/d in 1989, petroleum exports to the U.S. surged from 8.6 million bbl worth 57.5 million rubles to 20.4 million bbl valued at 191 million rubles.

The U.S.S.R.'s imports of U.S. machinery and equipment used for drilling, well operation, and exploration jumped from 14.4 million rubles in 1988 to 34.3 million rubles in 1989.

Former Soviet satellites cite estimates that if the U.S.S.R.'s oil production and exports do not decline further, Moscow will obtain as much as $30 billion from foreign crude oil and petroleum products sales during the next 12 months because of soaring world prices. That would permit a huge increase in Soviet petroleum equipment imports from the West.

EXPLORATION BUDGET

In an effort to reduce the Soviet Union's budget deficit,

Moscow planners recommended that funds for geological work, which are used in large part for oil and gas exploration, be cut at least 10% in second half 1990.

That would mean a reduction of 170 million rubles for exploration in the 6 month period and force a 23% decline in work carried out during the fourth quarter.

Deputy Minister of Geology M. Tolkachev argued that the move would be false economy. He said "tens of thousands" of jobs would be lost, and the government would lose more money paying compensation to displaced workers, shutting down projects, and transferring personnel and equipment than it could save by cutting the exploration budget.