White Nights and Polar Lights

In the second half of the 1980s the collapse of the Soviet empire created an unprecedented

opportunity for Western businesses. With dizzying speed, nearly all of the world's communist states

embarked upon radical programs of economic liberalization and declared themselves open for capital

flows and foreign investment. Among the first to heed this call were Western oil firms, who rushed

to investigate the vast petroleum reserves of what was once the Soviet Union. In many respects,

investment in Russian oil seemed a perfect match between East and West. Western firms promised

to bring to Russia the capital, technology, and managerial talent that the country so desperately

needed. They also had the ability—and desire—to restore production levels in Russia's long neglected

fields and provide the fledgling government with a valuable source of hard currency. For decades,

oil sales had financed the Soviet Union's ambitious program of industrialization. Now, the continued

capacity of the oil sector to generate tax revenues was vital to the success of political reform.

The potential for the Western oil firms was similarly vast. Even divorced from the other

republics of the Soviet Union, Russia was still the world's largest single producer of crude petroleum.

Its reserves of petroleum were the seventh largest in the world, and its reserves of natural gas the

largest. Unlike many other oil rich countries, moreover, Russia was located directly next to the lucrative