PERSPECTIVE ON THE SOVIET UNION : Foreign Capital Isn’t a Bogeyman : Oil venture with Chevron will test the seriousness of Moscow’s intentions to pursue economic <i> perestroika.</i>

The mass media have started a heated discussion of the feasibility of Tengizchevroil, a joint U.S.-Soviet project. The very fact of such a discussion is an encouraging sign, demonstrating a clean break with the past, when multibillion deals fraught with colossal damage to the state interests were being struck without any publicity.

The Tengiz oil field has been the focus of debate for a long time, and the proposal to tap it ourselves keeps cropping up. Since late 1979, 2 billion rubles has been spent with this goal in mind, but any return has yet to be seen.

So, against this backdrop, the decision to invite foreign partners appears perfectly natural. The negotiations with Chevron Oil Co. have been going on for close to four years. The two sides have not only agreed on all financial and technological issues, but also conducted feasibility studies that solidly confirm the soundness of the project.

Attracting foreign capital is a new development for our economy, and it still suffers from the old syndrome under which all activities by Western firms in the Soviet Union are highly suspect. This is not surprising, because from early childhood we have been taught that “capitalists” do nothing but “plunder” the national wealth of other states.

Of course, we can either sell raw material, or not. If we lived comfortably off other activities, then perhaps we would do well to conserve our oil, ores, natural gas, lumber, etc. Another approach would have been to make judicious use of them without damaging either the people or the environment. Alas, we seem unable to do it. Shall we keep on tapping our natural wealth in the same incompetent or even barbaric way, or do we appeal for help from those who have the expertise, experience, capital and technology that such an undertaking requires?

Recently, we have changed many of our perceptions and the process is still going on. We now have more realistic views of ourselves and of others. We must take a new approach to foreign investments in the spirit of the new era. Foreign investments open the road to an alternate economic sector, to a greater level of competition, which is the motive force of economic growth and technological advance.

One method of attracting foreign capital--through joint ventures--is coming to fruition, however slowly and painfully. But the overall size of these investments is estimated so far at only $3 billion to $4 billion, whereas in Hungary alone the total is three times higher.

The Tengizchevroil project is essentially the first attempt to give this process its proper dimensions. One important aspect is that this will be a producing investment (as opposed to services or resale of foreign-made consumer goods, where most Soviet/foreign joint ventures function today).

Nearly all of the American politicians and industrialists I met recently showed active interest in the project. In the United States, they don’t conceal the fact that this project is for them the touchstone on which our readiness for business cooperation will be tested.

We in the Soviet Union waited for the new law on foreign investments. Now we have this law. But how do we persuade foreign investors to take the risk, to set up their operations in the Soviet Union, if even joint ventures require such colossal efforts and time to start? And this risk is being further heightened by the instability of the economic and political situation.

Weighing the consequences of various approaches, we should not forget that the work on the Tengizchevroil joint venture proceeds as part of a broader agreement between the Soviet and American consortia, which provides also for production of consumer goods, medicines, processing of agricultural produce and added social benefits for inhabitants of the region. In the first stage of the project alone, the construction has been envisioned in 1991 of eight jointly operated factories, with the total value of their production at 700 million rubles.

These joint operations will make products the Soviet Union does not produce and has to buy abroad.

The public in this country is hardly aware of the fact that hundreds of millions of dollars are sometimes literally thrown to the winds as the country goes through periods of acute shortages of certain products. The joint efforts aimed at producing some of these items and improving technology could lessen our currency drain.

Perhaps this is not a problem that worries everyone. Then, how about factories turning out medicines, child-care products, etc.? They, too, are to be built within the Tengizchevroil project. Joint ventures in the Ukraine, Russia and Kazakhstan will enable us to produce up to 20 billion rubles worth of goods annually.

This project is a catalyst in the growth and renovation of many industries in this country, a powerful economic boost for the free-market economy here, and, if you will, an indicator of the seriousness of our intentions in economic perestroika.