Here’s an interesting thing… according to a post at the Boing-Boing blog, an essay entitled The Soviet Collapse posits that Saudi Arabia’s decision, in 1985, to stop protecting oil prices led to a general collapse of oil prices. This cost the Soviet Union $20 billion per year in lost revenues. Without that income, the USSR had to borrow and then its credit ratings plummeted to the point where it could no longer find anyone to lend to it.

The price of oil in perspective
cshirky

As the price of oil has falled from its dramatic highs of just a few months, ago, I often find myself thinking back to an essay by Yegor Gaidar, an economist and acting prime minister of Russia from 1991 to 1994. The essay, The Soviet Collapse, is subtitled “Grain and Oil” and tells the story of the end of the Soviet Union as the interaction of the price of those two goods.

The Soviet Collapse starts with the history of centrally-managed grain production, an unmitigated but slow-motion disaster, which they then proceeded to patch by importing grain with the budget surplus from rising oil prices, starting in the 1970s. That worked for a while, and then it stopped working.
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