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THE EVIL EMPIRE:

Reagan Administration and the Soviet Pipeline Embargo
by
Phillip Freiberg
July 9, 2011
Webster University, Thailand







"If it is destroyed, then he will fall, and his fall will be so low that none can foresee his arising
ever again. For he will lose the best part of the strength that was native to him in his beginning,
and all that was made or begun with that power will crumble, and he will be maimed forever,
becoming a mere spirit of malice that gnaws itself in the shadows, but cannot again grow or take
shape. And so a great evil of this world will be removed."

J. R. R. Tolkien The Return of the King, The Last Debate.

1

Introduction
The 2008 Russo-Ukrainian gas debacle that left much of EU without natural gas has made
many to question the reliability of Russia as a gas supplier and whether it could use the
monopoly position as leverage against its consumers. Social instability in the Middle East brings
doubts about the reliability of that energy source as well.
These events bring to memory Ronald Reagan. Not the gracefully smiling former actor posing
with the communist leader Mikhail Gorbachev; but rather, an essentialist Reagan who saw the
Soviet Union as an evil empire governed by the ideology that would stop at nothing to protrude
itself, being a prime source of threat to American security. The same Reagan who imposed an
embargo on Soviet pipeline that was to take Siberian gas to Western Europe.
A 3 US embargo followed, that made the French foreign minister declare, This [is] the
beginning of the end of the Atlantic Alliance. (Stone, 2010). After a diplomatic furor had been
created between the US and its major trading partners over the extra-territorial nature of such
controls, the US rescinded them in late 1982, and construction on the Soviet pipeline continued.
(Alexander, 2009) Inauguration took place in France in 1984.
In 1985, the Soviet Union was at the negotiation table to put an end to the nuclear arms race.
By 1992, the Soviet Union disintegrated but EC became a European Union. US is now the only
standing superpower with China challenging its dominance on all fronts. The threat of
communism has been replaced by Islamic fundamentalism. Presently the Russian gas pipeline,
running though Ukraine, covers 25% of EU natural gas demand (Tsakiris, 2004). Russia and EU
investors are building 2 more pipelines that will bypass Ukraine, Baltic States and Poland.
Desiring to diversify its energy portfolio, the European Union got involved in the Nabuco, a
pipeline project of its own. (Shearman, 2009).
1

This paper will analyze the political and economic background for the US decision to impose but
eventually lift the embargo in the context of historical developments in both the USSR and the
USA. It is the authors opinion that history stands as a witness to the fact that embargos in the
postindustrial globalizing world are ineffective and outdated economic tools in the foreign policy
toolbox. This paper will argue that the US embargo of the Soviet pipeline was an unnecessary
and risky step influenced by domestic politics of the Cold War. The embargo retrieval was in the
long run one of the most strategically correct steps by US, so that in 1992 Reagans successor

1
AMERICAN VS. EUROPEAN( FRENCH) FOREIGN POLICY IN DEALING WITH THE 2008 SOUTH OSSETIA CONFLICT by
Phillip Y. Freiberg Webster University May 2011

2

George H. W. Bush could victoriously declare in his State of the Union address: Communism
died this year. By the grace of God, America won the Cold War.
2

USSR
By 1980, the empire that Joseph Stalin wrought out of the blood of millions still looked very
strong and threatening to the Western world. It occupied the territory of one-sixth of the Earths
land mass, its military was second to none, its international influence spread across the globe
and its huge natural resources were only partially tapped. . It proudly portrayed to the whole
world its defense armaments of mass destruction every May at the Red Square close to the
mausoleum that housed the corpse of the communist ideologue Vladimir Lenin. Marxism-
Leninism was still the only allowed religion, and the curtain looked as iron as ever. Though
officially General Secretary- Leonid I. Brejnev was in charge, due to his poor health, the country
was ruled by the Politburo. Everyone was waiting for the hearse
3
to bring in the next leader with
his new agenda.
And yet with a close up look, it was evident that the Soviet world had changed since the times of
the Georgian despot
4
and that USSR was heading in hitherto unknown direction, to what would
later be identified as its eminent doom. Years ago, the Soviet leaders hadve made a
strategically wrong decision, which would derail the country in the years to come. In response to
dtente, the Soviet world was opened to Western products and technology. Soviets quite soon
realized that in many spheres it was impossible for them to compete against the Western
production tuned to the forces of demand and supply. The planned economy simply did not
have in it to be flexible enough to quickly meet the demands and wishes of consumers. Instead,
it was tuned to the bureaucratically inflexible government Five year plan-Gosplan. Convinced of
the eminent collapse of the capitalist world, Soviet leaders decided in the meantime to simply
buy the technology necessary for the USSR economy. The idea of promoting the communist
cause through tactical alliances with the world [of] capitalism emerged in the Bolshevik version
of realpolitik that was practiced with considerable success in the 1920s and 1930s. (Zubok,
2008) Fords engineer Albert Khan and his company disguised under the name Gosproektstroi
have engineered 571 (Matuz, 2009) factories for the Soviet Union from 1929 to 1932. USSR

2
http://janda.org/politxts/State%20of%20Union%20Addresses/1989-1992%20Bush/bush.92.html
3
Since Lenin, the Politburo member in charge of the funeral of the late General Secretary was the next GS
4
Gori, Georgia, was the home city of Joseph Stalin, the god-father of Soviet Unions policy on nationalities. AMERICAN VS.
EUROPEAN( FRENCH) FOREIGN POLICY IN DEALING WITH THE 2008 SOUTH OSSETIA CONFLICT by Phillip Y. Freiberg
Webster University May 2011
3

had paid his company an astounding amount of 2
5
billion dollars by selling gold and starving its
citizens to death.

Just like in the 1930s, in the late 1960s the Kremlin leaders expected that whole industries
would be created or renovated with Western equipment (Zubok, 2008)for which USSR needed
lots of hard currency. Most of the Soviet consumer goods were inferior to the western
prototypes and thus would never bring in the much needed hard currency. The only things that
Soviet Union could sell
6
to the West were arms, gold and energy resources. Thus as can be
clearly seen from the CIA report (Intelligence, 1982) figure 2 in the appendix, USSR has over
the years steadily increased its hard currency revenues from energy sales. Dtente became for
the Kremlin a substitute for domestic economic, financial, and political reforms. (Zubok, 2008)

By 1980, the Soviet economy was clearly stretching thin. The military and the colossal military-
industrial complex controlled a quarter of the national GNP, three-quarters of all R&D potential.
(Zubok, 2008) Besides the Afghan trap, USSR was helping friendly regimes in Third

World
countries and communist parties around the globe, wiring out $35.4 billion in 197882. USSR
was also subsidizing its citizens on many levels from free education and medicine to housing
and food. Brejnevs plan was to take Soviet meat consumption from 57 kg to 82 kg or roughly
three quarters of US (Paarlberg, 1980). To accomplish that lofty goal, a lot of the hard currency
had been spent on grain imports, most of which were coming from US. In 197680, revenues
from oil and gas were $15 billion; of this the Soviets spent $14 billion to buy grain, both to feed
the cattle on collective farms and to feed the people. (Zubok, 2008)

USA
In 1980 a former Hollywood actor and governor of California, Ronald Wilson Reagan, defeated
Jimmy Carter during the presidential elections and in 1981 became the 33
rd
US president.
Interestingly enough, both Carters defeat and Reagans victory are linked to the Soviet Union.
As it was mentioned earlier, USSR had to purchase roughly 72% of its grain from abroad. Three
quarters or 25 million tons of the grain came from US (Paarlberg, 1980). In 1979, Carter, who
previously vowed not to do it, has imposed a grain embargo on USSR as an act of punishment
for invading Afghanistan, a move that had cost him the support of several Midwestern states in

5
What in todays prices constitutes 220 bln USD
6
(the situation has not changed much since then)
4

the 1980 election (Quester, 2007). Presidential candidate Reagan did not fail to promise to lift
the embargo if elected.
7

Soviet experts preferred Reagan to Carter. Reagan in their view would be more like predictable
Nixon with his dtente and not like Carter with his embargo. Hearing the adjective evil aimed
at them, TASS called Reagan administration as able to think only in terms of confrontation and
bellicose, lunatic anticommunism.
8


In his book The Crusader: Ronald Reagan and the Fall of Communism, Paul Kengor writes
Ronald Reagan want[ed] to do three things: One, build up the economy. Two, build up defense.
Three, he [was] going to bring down the Soviet Union." National Security Directive (NSDD-75)
was "Operation Rollback" by which the U.S. endeavored to "change" and "eventually reduce"
the Marxist system within the USSR. Since the Communist system and the USSR were one and
the same, this meant transforming the USSR itself.
Reagans policy towards the USSR, is his effort to shape an effective campaign of economic
warfare which exploits their growing dependancy on Western imports (Bialer, 1983)
Initially, Reagan considered USSR as Guided by a policy of immoral and unbridled
expansionism," and following a pattern set by Lenin the Soviet Union was advancing "all over
the world" with the goal of promoting revolution." It was thus a threat to the security of the free
world on all fronts.'' (Farnham, 2001) Reagans anti-communist views could be traced as early
as his actors career when he was president of the Screen Actors Guild. In his October 23,
1947 House Un-American Activities Committee Testimony, he cooperated with HUAC in
commenting on the alleged activities of communists in Hollywood and the Guild.

But even after almost two years in office , his conduct toward the Soviet Union [was] guided
less by a comprehensive and consistent long rage policy than by a general ideological
orientation tied to several concrete and controversial elements of policy (Bialer, 1983)
The pipeline project and what it promised
As the USSR needed hard cash for its budget, it saw a great opportunity for itself during the US
initiated dtente. While its western neighbors needed more energy (in part to produce more

7
Reagan lifted the grain embargo against the USSR without denying the principle of economic
sanctions, which was invoked in the case of Poland less than nine months later. (Dobson, 2005)
8
http://www.britannica.com/presidents/article-214232
5

goods for the USSR), the USSR had huge recently tapped gas reserves in the difficult
permafrost region of Siberia. In 1978, the USSR has proposed a pipeline project never before
seen by the world. It would run 4,500 kilometers and have a diameter of 1,420 mm. The annual
capacity of the pipeline would be 32 billion cubic meters (bcm) of natural gas. It would have
42 compressor stations along its route pumping Soviet gas from Urengoy gas field to Central
and Western European countries via Uzhgorod in Western Ukraine.
But the Soviet economy was already stretched thin and did not have the finances necessary to
run a project like that, as much as it desired to do it alone. Thus out of desperation, the Politburo
voted for the draft of economic and trade agreements with the United States. Later, when the
US Congress unexpectedly imposed the discriminatory JacksonVanik amendment on the trade
agreements with the Soviet Union, the Soviets focused on Western Europeans, especially
Germans, French, and Italians, as well as on Japanese, as alternative trade partners and
technology suppliers. (Zubok, 2008)

It was also decided that Soviet Union would take loans from energy desperate countries to
purchase compressors, pipes and pipe laying equipment. Upon the completion of the project
hard currency earned from gas revenues could be used to repay the loans.
In July 1981, a consortium of German banks, agreed to provide 3.4 billion Deutsche Marks in
credits for the compressor stations. Later finance agreements were negotiated with a group of
French Japanese banks. In 1981-1982, contracts were signed with Caterpillar Inc. and Komatsu
and other western companies.
Why US instituted the embargo?
In 1982, the CIA issued a National Intelligence Estimate report entitled The Soviet Gas Pipeline
In Perspective, a response to Soviet plans to build a gas pipeline to Western Europe. The
report warned, that the increased future dependence of the West Europeans on Soviet gas
deliveries will make them more vulnerable to Soviet coercion and will become a permanent
factor in their decision making on East-West issues the Soviets believe successful pipeline
deals will reduce European willingness to support future U.S. economic actions against the
USSR. (Intelligence, 1982) In the report it has been has estimated that if successful, the US
embargo would deny the USSR hard cash. Thus, the Soviet government would be facing a
choice of between continuing military buildup and feeding its population. The CIA reasoned that
if the USSR chose the arms over the bread, its citizens would create civil unrest. On the other
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hand, if the USSR chose bread over the arms, it would put USSR programs of expansionism
and thus threat to the US to a halt, thereby allowing a stronger US to further pressure the USSR
for reforms. For some people in his Administration, the long-range objective [was] nothing less
than to effect a gradual transformation or collapse of the Soviet system of government. While for
others, the maintenance of policy would appear to be to magnify Soviet difficulties at home and
to make Soviet military growth as costly as possible (Bialer, 1983)

The United States imposed sanctions on Poland and the USSR in December 1981, and
extended them extraterritorially against its allies in the summer of 1982.
9
(Dobson, 2005)
The reason for intervention into the EC energy project was simple: the US lacked commercial
contacts with the Soviet Union, and Reagan was averse to another grain embargo since the last
one turned out to be more disastrous to US than to the USSR.
But the pipeline embargo was a lame duck since the inception. Many EC states rejected this
[embargo] because they viewed such reserve powers [by USA] in a contractual agreement to be
an abuse of the freedom to contract and to be an intrusion upon the legislative competency of
the state where the goods or services were exported (Kuijper, 1984, 8487).
Additionally EC was doubtful about real US intentions, since while pressuring EC states to go
along with the embargo Reagan was willing to encourage normal business with the Devil, as
when he authorized a huge five-year contract for Soviet wheat purchases in August (Watt,
1984) Thus, when the French signed a major pipeline contract with the Soviets and it became
evident that there would be a real problem between the United States and its allies, others soon
followed. (Dobson, 2005) Luckily for the US, the EC did not agree to American energy
alternatives of North African gas, US coal and more nuclear energy. OPEC analysts write I
was particularly anxious to show that, with the Soviet gas available , a heavy resort by
European buyers to LNG originating in West Africa would necessitate paying a very large
subsidy, in both direct and indirect costs. (Banks, 2003)

9
It also, however, granted exceptions for a major contract for pipe layers for the Caterpillar Company in
July 1981 and eventually lifted the extraterritorial sanctions in November 1982. In August 1983 it lifted the
embargo on pipe layers. (Dobson, 2005)

7

Why US lifted the embargo?
Before we analyze why US eventually lifted the embargo that was supposed to strike a deadly
blow to its vicious enemy, we need to answer one very important and yet illusive question: what
were the exact objectives that the US wished to achieve with this embargo?
Reagan declared that his intention was to convey to those regimes, how strongly we feel about
their joint attempts to extinguish liberty in Poland. (Dobson, 2005)
Few embargos exist just to punish or to teach a lesson. Such an embargo is set for a failure
since it runs on pure emotions. Italians have a saying: Vengeance is a dish that needs to be
served cold. But again, is embargo a vengeance?
Trying to understand why US pipeline embargo had to be recalled, we simply have to remember
the grain one. The 1979 Carter Grain embargo was there to simply punish USSR for invading
Afghanistan. It ran on politics and doctrines and not on economics and reason. There were no
stipulations attached to it. It was a bet on weather more than anything else. Bad weather in US
fields will explain why US needs to retain its grain for its own needs. (Paarlberg, 1980) The
Soviet Union on the other hand certainly would not take troops out of Afghanistan because of
this embargo, and could without much difficulty find other suppliers of the grain it needed. Carter
was a real hostage of the situation-if he would not announce this embargo, which was more
damaging to US than to the USSR, he would be frowned upon by the allies for trading with the
communist aggressor. Paarlberg writes No future President should wish to find himself
uncomfortably positioned, as was President Carter earlier this year, with his most viable trade
and security policies toward the Soviet Union moving in opposite directions. (Paarlberg, 1980)
And yet here was Reagan.
To understand Reagans actions in imposing and later lifting the embargo, we have to study his
entourage and their views of the issue. Reagan was obviously getting mixed messages. Some
of his advisors wanted harsher actions on USSR while others wanted less. It all depended on
the future they were allocating for the evil empire. Some advisers, like Weinberger, Perle, and
Pipes, saw the situation [in the early 1980s] as a historic opportunity to exhaust the Soviet
system. The principal architect of the pipeline sanctions, Richard Perle, indicated that
American coercive objectives ran much deeper than the symbolic and compellance objectives
associated with the issue of martial law in Poland. George Shultz on the other hand was a
much more effective operator and someone who was on record as a critic of what he called
light-switch diplomacy, or turning on and off trade flows. (Dobson, 2005)
8

Reagans reliance on the advisers prevented neither the firm establishment of a clear intent on
the part of the U.S. administration, or the implementation of an effective strategy of all-out cold
economic warfare. Thus while Reagans language was often provocative and harsh, his actions
toward the Soviets were consistently more moderate. (Dobson, 2005)
Except his core ideas and his powerful performances, when ideology or performances were not
instrumental, Reagan was at a loss at the mercy of his advisors Now if we couple these
qualities with a description of Reagan being: intellectually shallow and inconsistent, with no
analytical abilities; detail ignorant but insistent, (Farnham, 2001) we will get a recipe for disaster
in issues that require more analytical approach, and less charisma.
In the end Reagan was willing to risk Allied estrangement over sanctions, but the extent to
which this pushed them away eventually inclined him to compromise: not so with the ideological
hard-liners. (Dobson, 2005)
Embargos are ineffective foreign policy tools
(Losman) explains that Sanctions are a nonmilitary form of coercion designed to inflict
economic damage. Target state economic distress, then, is a necessary condition for success,
but not a sufficient one. History has taught US a lesson of what a desperate nation is capable
of. Imperial Japan was dependent on the United States and the Netherlands for petroleum but
when squeezed by an energy embargo attacked Pearl Harbor. (Quester, 2007)
Similarly, if the embargo were to stay and were a success, then most probably USSR would
hold a grudge against the West and would withdraw behind the Iron Curtain to plot the
messianic crusade against the rest of the world that happily traded. Bailer continues even were
the West able to impose extreme economic choices on the USSR, the system would not
crumble, the political structures would not disintegrate, the economy would not go bankrupt, the
elites and leadership would not lose their will and power to rule internally and to aspire
externally to the status of a global power (Bialer, 1983)
The Soviet Union would not have been ready for Genve in1985 if embargo was still on.
But in reality, by 1985, the USSR no longer had an enemy. The revolutionary dogma requires
an enemy. In the absence of conflict and enemy; and in the presence of international trade, the
USSR lost its messianic purpose for existence. The messianic role could be found in both
Soviet and American doctrines. They determined the course for these two counties. As much as
the US desired to promote freedom and justice for all, being the last, best hope of mankind on
9

Earth, so did the Soviet Union regard itself and all it actions within a paradigm of a messianic
role of bringing hope to the oppressed proletariat though a worldwide revolution against the
capitalist oppressors. This Marxist revolution was as eminent for the Soviet psyche, as the
Judo-Christian second coming is for the American one. Without this messianic role, 16
independent republics and millions of culturally and ethnically diverse groups USSR no longer
had reason to exist together. After 70 years of being Soviets even the Russians started
questioning who they were.
Conclusion
With Secretary Schultz, the US reevaluated its approach towards its Soviet Strategy. Allowing
the USSR to run this mega project tied the USSR (and Russia) with the western economy for
many years to come. It would allow the USSR to continue in its self-destructive lifestyle of
depending on the highly volatile natural resources prices and not developing its economy, thus
relying on western technology. Hard cash that was available now would continue to purchase
technologically superior western goods and would eliminate a need to create it domestically.
The western economy was in profit as much as western foreign policy was.
As the Soviet economy became more deeply integrated into the world economy, it removed the
Soviet bitterness towards the capitalist West, thus eliminating the possibility of a major arms
conflict. The Soviet Union now depended on the Western economys health, since it was
purchasing many products from it. Western economic heath depended on the reliability of
energy supplies from the east.
Thus it is evident that lifting the embargos brought results that the embargo engineers never
dreamt of. The examples of grain and pipeline embargoes clearly illustrate that these embargos
perhaps inflicted more damage to the inflicting country than to the country originally targeted. .
The use of embargos should be the last tool in the foreign policy tool box, if at all, since it is an
economic measure that distracts the normal course of international trade. Predicting the
outcome of sanctions in any specific situation is extremely difficult, so it is a tool that can be
utilized with limited confidence. (Losman)
The US realized this fact and changed its strategy during the pipeline embargo whose ultimate
goal was elimination of the dangerous communist ideology in the USSR . The US found other
ways to achieve its goals. Unfortunately for the Soviet citizens, the USSR did not survive without
the communist ideology.
10

Between 1981 and 1989, the US and Reagan moved from an idealist approach where all of its
actions were guided by an ideology, to a realist that grasped that if one wanted to defeat an
enemy without going to war, one needed to be a little more cunning, and smiling, actors do the
best. As early as 1983 he was able to sense a change in the level of threat and intentions
emanating from the USSR while its military capabilities were as strong as ever. He has also
showed interest in improving US-USSR relationships. Among the external pressures was the
presence of the soft power of Secretary Shultz, Americas ever growing military strength,
problems in the Soviet command economy and the 1984 elections with American publics
yearning for more security in US-USSR relationships.
10

Perhaps these lessons of history could be of help while the US is formulating its future policy
towards other potentially threatening counties. As happened with USSR openness though
trade reversed the enemys political system, so it could happen with other countries like Iran,
Cuba and North Korea.
Whether US policy was guided by shrewd CIA calculations or by Reagans emotional
intelligence (Farnham, 2001), looking back, we can say that whatever the approach was it did
work. Despite scares that the West would be open to Soviet blackmail, the Soviet economy for
lack of other exports and clients (in the short run) became hostage to energy resources volatile
prices. When in 1987,OPEC (not without US Administration help) increased its oil production,
thus lowering the world oil prices, the Soviet economy went into a picket never to recover again
and to be reduced to a receiver of the US humanitarian aid in the 1990s. The empire that saved
the world from the Third Reich and threatened the US for many decades, in an attempt to
reform, crumbled down like the empire of Sauron in the epic novel by Tolkien.







10
Article analysis Reagan and Gorbachev revolution: Perceiving the End of Threat by Barbara Farnham by Phillip Freiberg June
20, 2011
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APPENDIX
A National Intelligence Estimate report entitled The Soviet Gas Pipeline In Perspective by CIA

Figure 1
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Figure 2
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