http://www.freerepublic.com/focus/f-news/1151517/posts
Former senior Reagan advisers who spoke with UPI solely on condition of anonymity told how the Reagan group ingeniously had targeted Soviet hard-currency earnings. If Moscow were broke it couldn't develop or buy weapons and couldn't even pay the troops of its overextended military machine, much less finance wars of liberation around the world. It could talk tough, but "it would no longer be tough," as one former Reagan official put it.
The first blow was struck in May 1983, when American pressure forced the International Energy Agency to put a limit on European exports of Soviet natural gas, blocking huge sums of money from reaching Moscow. But natural-gas earnings were only a Kremlin sideshow: Russia's top engine of economic wealth was its oil industry, which generated half of its hard-currency earnings, these sources said.
By early 1983, the Treasury Department, under the direction of Casey and Weinberger, had completed a voluminous study of U.S. and Soviet energy costs. The study had discovered that the best price required by the United States for a barrel of crude oil was only $20. This was far below the $34 per barrel being charged in 1983. If oil prices came down, it would save the United States almost $72 million a year, or almost one percent of the gross national product. What would a fall in the oil price do to the Russians?
Very ugly things, it seemed. The study concluded that while a cut in oil prices would boost U.S. economic welfare, the same cut would have a "devastating effect on the Soviet economy," in the words of one former Reagan adviser. In fact, Reagan National Security Adviser Bill Clark told Schweizer that "Ronald Reagan was fully aware that energy exports represented the centerpiece of Moscow's hard-currency earnings." The energy-export industry was working at full capacity. A drop in price, and the Russians were badly lamed.
Soon U.S. officials were huddling in Geneva with the Saudi oil adviser, Sheikh Ahmed Zaki Yamani. Following the meeting, the United States announced it was cutting its oil imports from 220,000 barrels per day to 145,000 barrels. In late February, the Saudi ambassador, Prince Bandar, met with senior U.S. officials, including Casey and Weinberger, according to former Reagan officials who were involved.
Abruptly, the Saudis boosted production of oil, resulting in lower world prices. By August 1985, Saudi production jumped from 2 billion barrels a day to 9 billion. Since Saudi Arabia was the swing producer in OPEC, which used its production levels to control the market price of crude, the effect was instantaneous. In Russia, the effect was calamitous, former Reagan officials said.
How did the price cuts affect Saudi incomes? Did they lose money on the deal? Hardly. According to former senior CIA officials, CIA currency-exchange specialists bounced billions of dollars of Saudi currency reserves from one currency to another: from the Belgian franc to the British pound and back. This earned the Saudis "billion of dollars" in the words of one former official.
"Reagan's doctrine was simple -- no quarter for the Soviet Union, no concessions. Instead, stop and counter it any way you could -- whether it was support for free unions or groups resisting its encroachments," said a former White House staffer.
Nice story but it doesn't really make much sense.