KEY ISSUES IN WESTERN AID TO POLAND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000200280015-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 20, 2016
• Sequence Number: 15
• Content Type: MEMO

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THE DIRECTOR OF CENTRAL INTELLIGENCE
National Intelligence Council
MEMORANDUM FOR: Director of Central Intelligence
NFAC #7931-81
4 December 1981
VIA: Chairman, National Intelligence Council
FROM: Maurice Ernst
National Intelligence Officer for Economics
SUBJECT: Key Issues in Western Aid to Poland
The attached is for your use in preparing for the NSC discussions on
Poland and for distribution to the NSC or other levels if you so desire. I
have tried to tackle as directly as possible some of the key questions that
are constantly being asked on the Polish aid issue. The paper has been
discussed with Bob Gates, and25X1
the principal Polish experts in NFAC. It is consistent, I believe, with
NFAC's findings. I am a bit more optimistic than Bob Gates but not by
much. In any event, we appear to agree that a good case for larger aid to
Poland can now be made, while before it could not.
Maurice C. Ernst
Attachment,
As Stated
All portions of this document Deriv Cl By Signer
are classified SECRET SECRET Revw on 4 Dec 87
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NFAC #7931-81
4 December 1981
SUBJECT: Key Issues in Western Aid to Poland
DCI/NIC/NI0/Econ/M. Ernst:bha(4 Dec 81)
0
Orig - Addressee
1 - DDCI
1 - ER
1 - C/NIC
1 - NFAC Registry
2 - NI0/Econ
1 - MErnst Chrono
1 - NI0/USSR
1 - D/EURA
1 - NI0/AL
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Key Issues in Western Aid to Poland
Conclusions
1. Large scale Western aid to Poland is still a long shot, but its
potential pay off and the process which might bring it about are beginning
to come into focus.
2. What the US, and the West, can hope for in Poland is:
? An internal political evolution which allows much broader
popular participation in policy formation and implementation.
? A foreign policy somewhat less subservient to Moscow.
? A spreading of pluralistic tendencies into other Eastern
European countries, leading to a loosening of Soviet control over the
area.
? Some eventual encouragement of similar trends in the USSR.
3. The power struggle between the Polish government and Solidarity
has reached a point where both sides must try to find some grounds for
cooperation. This is because the exclusive reliance on confrontation and
subsequent compromise to define political power over the past two years has
brought an economic slide so severe that both sides are now afraid of
losing control. Consequently a difficult process of seeking methods of
consultation and of institutionalizing the role of workers' groups has
begun. At best the process will continue for a long time, perhaps years,
and be marked by recurring crises. At worst it could yet fail because of
splits within both the Party and Solidarity, and misjudgments as to the
limits of Soviet tolerance. But there is a reasonable chance that Poland
will evolve along lines favorable to Western interests.
4. Western aid could help stabilize the economy during the period
when a new political balance is being developed and, after this, to support
economic expansion. Substantial amounts of any large new aid may be
directed, however, to pay interest on past unguaranteed bank loans.
5. Moscow may be willing to tolerate considerable political change in
Poland so long as it does not directly threaten its vital security
interests in central Europe, the acceptance of Communism as an official
ideology in Poland and the primacy of the Communist Party, or major Soviet
foreign policies. The limits of the toleration are ill defined and often
ambiguous, but Moscow clearly considers the costs of military intevention
to be high. It is unlikely that Moscow will use its enormous economic
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leverage against Poland on a large scale unless Poland's political
evolution gets at least close to the point of justifying military
intervention. On the other hand, Moscow would not want to help a radical
reformist Polish government to succeed. Given their radically different
long term objectives, the Soviets cannot be expected to formally cooperate
with the West to stabilize the Polish economy. What use Moscow would make
of carrots and sticks in reacting to Western aid would depend on the
circumstances.
The Issue
6. This memorandum addresses the rationale for a large-scale infusion
of new aid into Poland. It is not concerned with rescheduling of existing
debt obligations. Rescheduling can be justified on economic grounds alone,
since Poland is unable to meet its obligations in any event. Also not
considered is small-scale ad hoc emergency food aid which can be defended
on humanitarian grounds and to show continued Western interest in the
Polish workers' movement. In addition to rescheduling and small-scale food
aid, however, Poland clearly needs several billion dollars in new aid if it
is to get its economy moving again. Although economic recovery in time
will facilitate repayment of debt, this prospect is a long way off. For
the US the main purpose of such aid is to help influence evolution of the
Polish political system and policies in a direction that is favorable to
our national interests.
The Key Ouestions
7. In order to be in a position to decide on whether and how much new
aid to give Poland, four basic questions need to be answered. These are:
? What favorable developments in the Polish political scene can we
hope for?
? What process could bring these developments about, has
this process begun and, if so, how far along is it?
? Could Western aid help this process and how?
? Is Moscow likely to neutralize the impact of Western aid
and under what conditions?
Potential Political Evolution in Poland
8. Our best hope is that Poland will develop, within the general
framework of an officially Communistic system and membership in the Warsaw
Pact, a more representative domestic political process, checks and balances
on the exercising of central power, and a degree of independence in foreign
policy. Although the limits of Soviet tolerance are not well defined, it
is obvious that Moscow would not allow Poland to:
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? become an unreliable bridge for Soviet military movements to and
from East Germany and other Warsaw Pact countries;
? abandon Communism as an official philosophy or the primacy of
the Communist Party as a political institution;
? oppose Soviet foreign policy positions, or support Western
positions, on many important issues.
9. Within these rather broad limits, however, there may be
considerable room for change. At least the dominant political forces in
Moscow evidently view the cost of invading and pacifying Poland as being
very high. Although the Soviets no doubt hope that the erosion of party
control in Poland can be halted and reversed eventually, as time goes on it
will become more and more difficult for Moscow to justify military action
for any reason other than a disintegration of public order in Poland or a
clear-cut challenge to the principles mentioned above.
10. Given these inhibitions on Soviet actions, we might reasonably
hope for the following outcome in Poland's political evolution.
11. On the domestic scene, development of a process of political
consultation between the Communist Party and various interest groups, such
as labor and farmers. At the plant level, a balance of power between
managers and workers' councils. Also, a mixed economy with much broader
market elements, but still large-scale central planning.
12. Changes such as these would entail a far more pluralistic
political system and far more constraints than in the past on government
policy formulation and implementation in the economic, social and cultural
areas.
13. In foreign policy, greater emphasis on Polish national interests,
in response to the strong current of nationalist revival inherent in the
political reforms. Although Poland obviously could not afford to actively
oppose major Soviet initiatives, it could become a difficult partner for
Moscow on such issues as disarmament and arms control, East-West economic
relations, and relations with Third World areas.
14. In the military area, Poland no doubt would remain in the Warsaw
Pact, but Moscow would have greater difficulty dictating military policy to
the Poles.
15. The USSR and the other Soviet Bloc countries would try, but would
probably fail to quarantine the kind of Poland that we have just
described. The successful demonstration by Poland of an officially
Communistic system that permitted serious popular involvement in the
political process and in economic decisions could be a powerful attraction
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in other Bloc countries. The degree of attractiveness, however, would
depend on how successfully Poland was able to tackle its economic
problems. With reasonable success, eventually the Polish disease would
spread, in one form or another, perhaps even to the USSR itself.
16. The implications of such developments for US interests are
vast. They include:
? the further weakening of the Warsaw Pact military threat in
Europe;
? increased constraints on Soviet foreign policy;
? an erosion of Moscow's hold over Eastern Europe;
? and, most important, planting the seeds for changes in the
Soviet system and policies in a direction of reduced antagonism with
the West.
17. These trends in the Soviet Bloc would have an impact on the
Western alliance as well. Many Western Europeans would view Soviet
tolerance of a more pluralistic political system in Eastern Europe as a
vindication of detente and a strong further reason for arms limitations.
This situation would involve opportunities as well as risks for the United
States, depending on our reactions.
The Polish Political Process
18. Beginning from irreconcilable positions, the Polish government
and the workers' movement have taken some first steps to begin major
reforms of the political and economic system. At the political level, the
government has been forced to consult on basic policy questions with
Solidarity and the Church. At the institutional level, new laws are being
passed that will legitimize the new powers of workers' councils.
19. Ever since the first strikes in 1980 which led to the formation
of Solidarity, the process of political evolution in Poland has been one of
crisis and compromise. The crises usually took the form of unacceptable
government actions, followed by strikes, followed by a resolution through
ad hoc consultations. All of this took place outside the legal
institutional structure. Coming on top of Poland's deep-seated economic
problem, it has caused an economic tailspin. Until recently, the threat of
disrupting the economy was an important weapon for the workers' movement,
and a useful bargaining tool for Solidarity. Although Solidarity still
needs the strike weapon, it now sees a further worsening of the economic
situation as potentially detrimental to its interests. Accordingly a large
element in Solidarity now appears to be willing to try to develop a more
stable, less confrontational, process for dealing with the government.
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20. If a more cooperative process of compromise between the
government and Solidarity is to be developed, however, the government must
be willing to go along. There is obviously a split in the Polish party on
this issue, and the outcome is in doubt. The chances are that the outcome
will be ambiguous, with occasional confrontations, but also with more
serious attempts to cooperate.
21. Although the outcome remains highly uncertain, there is a
reasonable chance that the almost, continuous political confrontations which
have caused the economic slide will become less frequent. That alone would
permit some economic recovery if sufficient foreign exchange were available
to finance essential imports. A major economic recovery, however, will
depend also on renewed popular confidence in the government, and that will
take a long time at best.
Could Western Aid Help?
22. Yes, Western aid could help Poland develop along lines favorable
to US interests by supporting the process of political rebuilding. So long
as Solidarity could freely use forms of political action that caused major
economic disruptions in its struggle for gaining a lasting political role,
it was not at all clear that large scale Western aid would promote a
favorable political evolution in the long term. But now that a further
worsening of the economic situation has become as much of a threat to the
workers' movement as to the government, and both sides consequently have a
strong interest in stabilization, Western aid can be helpful in achieving
this result. At a minimum, Western aid can help avert an economic collapse
while serious negotiations between the two sides proceed and new
institutions are formed. Beyond this, substantial new aid would be needed
to finance the imports of materials and spare parts that factories need if
they are to begin expanding production. Exports will increase as well,
but, initially at least, import needs will grow more. This will mean
several billion dollars a year in new aid for at least two or three years.
23. In providing new aid, Western governments must realize that
substantial funds are likely to be used to pay interest on unguaranteed
obligations to banks. Although the banks have reluctantly allowed payments
on these obligations to slip, they did so because Poland had no money, and
consequently there was no other choice. With any government decision to
provide large scale aid, the banks would try to lay claim to the Polish
foreign exchange earnings that were freed up by the aid.
Soviet Reactions
24. The USSR has ample economic leverage over Poland with which to
offset or neutralize any amount of Western aid. Indeed Moscow could cause
much of the Polish economy to collapse, if it chose to do so. Several
considerations limit Moscow's freedom to use economic pressure aginst
Poland.
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? Large-scale economic sanctions are likely to be so destabilizing
as to lead to military intervention.
? More modest economic sanctions may be useful as signals of
Moscow's discontent but, if taken too far, can stimulate reactions in
Poland which bring about a major crisis and, once again, to the
question of military intervention.
? Reductions in Soviet economic aid or a hardening of economic
terms could push Poland toward even greater reliance on the West.
25. This does not mean, however, that Moscow would help a radical
reformist Polish government to succeed. Although the Soviets, like the
West, would like the Polish economy to stabilize, their long term interests
in the political evolution of Poland are irreconcilable with those of the
West. They would, therefore, reject any lasting arrangement to share the
burden of aid to Poland. Moreover, if Moscow believed that Western aid was
becoming an important force pushing Polish political reform, it might
reduce or withdraw its aid to Poland.
26. The upshot is that Soviet reactions to large-scale Western aid to
Poland are not predictable. Their use of economic pressure and influence
is likely to be subtle--carrots or sticks depending on the circumstances.
But the USSR is unlikely to engage in large-scale economic warfare unless
it had become prepared also to use military force.