How Sheikh Ahmed Zaki Yamani Won the Cold War

Did Reagan win the Cold War? Or, more broadly, did US policies in the 1980s result in the collapse of the Soviet Union? A wonderful analysis by Yegor Gaidar, who was there when it happened, suggests that the answer is no.

Gaidar compellingly describes how a weak Soviet agricultural system, combined with the mid-80s collapse in oil prices, was the key factor leading to the Soviet Union's collapse. The country, faced with an unsustainable financial situation, stuck its head in the sand and started borrowing to the point at which no foreigners would lend any more. And at that point, Moscow was essentially at the mercy of any foreign countries who might conceivably lend it money.

Government-to-government loans were bound to come with a number of rigid conditions. For instance, if the Soviet military crushed Solidarity Party demonstrations in Warsaw, the Soviet Union would not have received the desperately needed $100 billion from the West. The Socialist bloc was stable when the Soviet Union had the prerogative to use as much force as necessary to reestablish control, as previously demonstrated in Germany, Hungary, and Czechoslovakia. But in 1989 the Polish elites understood that Soviet tanks would not be used to defend the communist government.
The only option left for the Soviet elites was to begin immediate negotiations about the conditions of surrender. Gorbachev did not have to inform President George H. W. Bush at the Malta Summit in 1989 that the threat of force to support the communist regimes in Eastern Europe would not be employed. This was already evident at the time. Six weeks after the talks, no communist regime in Eastern Europe remained.

So who do we thank for the collapse of the Soviet Union? If it's one person, that individual is not Ronald Reagan but rather Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia in 1985, who ramped up oil production in that country and send the price of oil tumbling. Without its main source of hard currency, the Soviet Union was doomed.

(Via Cowen)