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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R001100230001-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 46
• Document Creation Date: January 12, 2017
• Document Release Date: August 23, 2010
• Sequence Number: 1
• Publication Date: June 7, 1984
• Content Type: MEMO

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Central Intelligence Agency
Washington. D. C. 20505
DIRECTORATE OF INTELLIGENCE
7 June 1984
USSR-Eastern Europe: Approaching the CEMA Summit
Summary
Moscow probably will use the Council for
Mutual Economic Assistance (CEMA) summit set to
begin on 12 June as a platform for displaying Bloc
unity on political and strategic issues against
the West. Although the party leaders will try to
put the best face on it, the economic aspects of
the long-delayed meeting--the first CEMA summit in
15 years--have been largely diluted by
disagreements unresolved despite lengthy
preparations. The USSR's original purpose was to
achieve agreement on increased economic
integration and to reduce the cost of its support
for Eastern Europe; the East Europeans generally
hoped that they could obtain additional help from
Moscow to solve their economic problems.
Reporting on the agenda and the preparations
indicates that neither side is likely to achieve
its objectives: Eastern Europe apparently has
fought off the USSR's drive for greater
integration, but Moscow has not relented on the
terms for future energy and raw materials
deliveries to its allies. The summit is likely to
produce broad statements endorsing CEMA
cooperation and perhaps some relatively minor
economic agreements.
This memorandum was prepared by East European Division,
Office of European Analysis Soviet Economy Division
Office of Soviet Analysis, with contributions by
East European Division, Office of Eur
Policy Analysis Division, Office of Soviet Analysis. Comments and
questions are welcome and should be addressed to
Chief, East European Division, EURA, or
Chief, Soviet Economy Division, SOVA
F
opean Analysis, and
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We expect that the lackluster economic
content will combine with current Soviet
international concerns to shift the spotlight to
political issues. Meeting just days after the
West's London summit, the CEMA leaders may respond
to statements and initiatives agreed upon by the
Western leaders. This will be Chernenko's first
meeting with East European party leaders since
Andropov's funeral, and they will probably cover a
wide range of issues. Chernenko will likely press
for a statement highlighting Bloc unity in the
face of poor East-West relations and possibly will
deliver a harsh rhetorical attack on the US.
The Soviets risk the embarrassment of a
contentious meeting if they try to get more. If
Moscow renews its push for integration, imposes
new cuts in oil deliveries, or presses too hard
for East European exports, the East Europeans may
unite to mount strong resistance. We believe that
the importance of presenting a united front at the
summit will lead the Soviets to yield on some of
their economic objectives. Papering over their
differences, however, means that the leaders wi l l
not produce a forceful blueprint for overcoming
the region's economic problems. Tensions within
the Bloc over economic questions are likely to
continue to rise and to corrode the Soviet
relationship with Eastern Europe.
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Introduction
After repeated postponements, a CEMA economic summit meeting
is scheduled to begin on 12 June.1 This first CEMA summit since
1969 will mark the first meeting of Soviet General Secretary
Chernenko with all of the leaders of the Warsaw Pact East
European countries. The summit will give Moscow and its allies a
forum to present a united front against the West by announcing
Bloc unity on major political and economic issues. 25X1
This memorandum describes the political and economic setting
in which CEMA operates--a setting of conflicting economic
interests, aggravated by economic problems within Eastern Europe
and the USSR. It then reviews the perspectives and motivations
the Soviets and East Europeans will take to the summit. In broad
terms, the Soviet focus is on long-term economic integration and
political unity as well as on keeping the economic burden of
Eastern Europe from rising. The East Europeans are interested in
resolving such short-term trade issues as the price and quantity
of the goods they import from the USSR. Finally, the paper
discusses what we expect to be accomplished at the meeting. 25X1
The Economic and Political Setting
The intra-CEMA relationship has long been marked by
conflicting interests. The East European countries have tried to
exploit their relationship with the USSR without sacrificing
1 CEMA members include the USSR, Bulgaria, Czechoslovakia, East Germany,
Hungary, Poland, Romania, Mongolia, Vietnam, and Cuba.
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control over national economic decision-making. In the process,
they have played both sides of the fence --drawing heavily on
Western credits to help modernize their industries while relying
on the Soviets to provide energy and raw materials on
concessionary terms. The USSR has long tried to promote economic
integration within CEMA to enhance its economic base, to promote
greater specialization of production, and to increase Moscow's
authority in Eastern Europe.
The last CEMA summit in 1969 provided some dynamism by
launching what was to become the Complex Program for Socialist
Economic Integration and by creating institutions to promote
multilateral trade and investment projects. Several major joint
projects were underway by the mid-1970s, but the momentum quickly
faded because of failure to remove longstanding internal CEMA
trade obstacles and East European suspicions of Moscow's
intentions. And in the early 1970s, detente provided more
attractive opportunities for these countries to trade with the
West .
The summit will take place against the backdrop of declining
Soviet economic support for Eastern Europe. From the mid-1970s
through 1981, Moscow provided increasing support mainly in the
form of oil price discounts and low-interest trade credits (see
Table 1). But over the past two years the East Europeans have
been hit by large increases in the price of Soviet oil,
reductions in the volume of Soviet oil deliveries, and less
Soviet willingness to tolerate large East European trade
deficits.2
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Soviet Assistance to Eastern Europe
1975-1983
(US $ Billion)
Annual Oil
Subsidiesa
Annual Trade
Surplus
Total Annual
Assistance to EE
1975
1.8
0.8
2.6
1976
2.5
1.2
3.7
1977
2.1
1.9
4.0
1978
1.1
0.2
1.3
1979
2.8
1.6
4.4
1980
9.7
2.8
12.5
1981
9.7
4.4
14.1
1982
6.3
2.7
9.0
1983
1.6
2.2
3.8
TOTAL
37.6
17.8
55.4
a In 1975, CEMA adopted an interim pricing system which based the price on
the previous three-years' prices; since then oil prices have been based on a
moving average of world oil pries in the previous five years. Values are
based on average unit prices.
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The tougher Soviet policy comes at a bad time for Eastern
Europe, which is just beginning to emerge from the serious
financial crisis of 1982-83. Difficulties in raising hard
currency credits forced Eastern Europe to shift its hard currency
trade from chronic large deficits to sizable surpluses by
slashing imports. Although the region is beginning to enjoy a
slight improvement in creditworthiness and a revival of hard
currency trade, financial pressures remain severe on most
regimes. Trade and financial difficulties with the West have
figured prominently in Eastern Europe's attitude toward the
summit. In general, the regimes have wanted the USSR to
substitute as much as possible for the goods and capital no
longer available from the West.
Many of Eastern Europe's present economic difficulties
derive from past Soviet policies. By exchanging oil for
manufactured goods from its allies, the USSR created a dependency
which the East Europeans now find difficult to sever. By
pressing the East European countries to adopt the Soviet economic
model, Moscow helped create economic systems that in general were
no better than its own and that for the most part produced goods
which could find markets only in other Communist countries. The
Soviets indirectly contributed to the current debt problems of
some of its allies by encouraging the East Europeans to trade
2 Soviet attempts to ease the burden of Eastern Europe are not new. Beginning
in about 1960 the Soviets began holding back the exchange of raw materials,
semimanufactures, foodstuffs, and consumer goods. And Soviet domestic needs
resulted in a decline in net deliveries of materials to Eastern Europe in the
early 1970s. (See Edwin Snell, "East European Economies Between the Soviets
and the ( lists," East European Economies Post-Helsinki, JEC, 25 August
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with the West in the early 1970s in order to partake of the
"scientific-technical revolution" and to obtain from the West raw
materials and agricultural products that the USSR found
increasingly difficult to supply. As a result, Eastern Europe's
need for Soviet help has increased just at a time when Moscow--
faced with its own domestic economic problems--wishes to reduce
its assistance.
While all CEMA countries agree that a summit is necessary to
consider solutions to their growing economic problems, they
differ substantially on what the solutions should be. The
Romanians first proposed a summit four years ago (see Appendix
A). After first objecting, Moscow endorsed such a meeting and
seized the initiative in organizing it. Planning for the summit
was delayed by disagreements over the agenda. By late 1983, the
agenda was set, according to US Embassy in Moscow, but the summit
could not be scheduled because of Andropov's illness. In a brief
meeting with East European party chiefs following Andropov's
funeral in February, new Soviet leader Chernenko said that he
intended to convene the summit as early as possible. Finally, in
April, First Deputy Foreign Minister Korniyenko announced that
the meeting would be held in Moscow in June.
The Bloc leaders will convene at a time when the Soviets are
pursuing a tough line on East-West relations and are pressing for
Bloc solidarity against the West. While the Soviets still
express high interest in East-West trade, they have delivered
harsh attacks against US policies in recent bilateral exchanges
with Western delegations, and have criticized West European
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governments for supporting Washington. The Soviets have
persistently sought East European endorsement for their hardline
policies.
Moscow's East European allies are uneasy with the USSR's
tough stance on East-West relations.3 Over the past year, some
East European states have repeatedly balked at endorsing harsh
anti-Western rhetoric. Soviet missile deployments in Eastern
Europe and the Olympics boycott have spawned discord within the
Bloc and are likely to influence the climate of the summit. F_
What the Soviets Want
The USSR's economic objectives are closer CEMA integration
and a reduction in the economic burden of Eastern Europe on the
USSR. Enhanced CEMA integration, a favorite Soviet theme,
encompasses a more closely coordinated economic policy, and more
joint projects, production synchronization, and international
specialization. Moscow is pushing technical and scientific
cooperation through joint companies in which expertise and
investment from several countries are joined in a single plant or
series of plants. The Soviets also want more direct contact
between enterprises in East European countries producing similar
goods or components for the same products.
Moscow's push for closer integration is aimed at achieving
economies of scale, avoiding duplication, and tightening the
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3 A forthcoming typescript memorandum will provide a more complete
assessment of recent discord within the Soviet Bloc. 25X1
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economic cohesion of the alliance. The Soviets see joint
investment projects as the only long-term solution to Eastern
Europe's demands for more raw materials and lower prices. Moscow
appears increasingly suspicious of potential Western leverage
over Eastern Europe and has cited Western sanctions and economic
conditions as reasons for the CEMA countries to turn inward.4
Moscow's concept of closer integration gives the USSR the
lead role in controlling and coordinating the bloc's activities.
Moscow is CEMA's focal point and is reluctant to share power with
its partners. CEMA continues to operate under a series of
bilateral agreements under the Soviet umbrella rather than as a
multilateral economic community . While the Soviets insist that
integration would not infringe on Eastern Europe's sovereignty,
they have offered little to reassure the East Europeans.
Moscow also wants to curtail its generosity toward Eastern
Europe. The Soviets have stepped up their complaints on the
inadequate volume and poor quality of goods they receive from
Eastern Europe. In late 1983, Soviet Prime Minister Tikhonov
issued a stern warning that Moscow's deliveries of raw materials,
vital to Eastern Europe, were contingent on how well the CEMA
countries satisfied Soviet needs. More recent reporting has
revealed a toughening Soviet posture vis-a-vis the East European
4 Soviet Premier Tikhonov warned his East European counterparts at the CEMA
ministerial meeting last October against relying on trade and economic
cooperation with the West. He claimed the Western sanctions in the wake of
events in Afghanistan and Poland demonstrated the dangers of such a course and
demanded greater cooperation between CEMA members to reduce their
vulnerability to future Western attempts at economic reprisals.
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countries with respect to energy and raw materials deliveries and
prices as well as the mix and volume of commodities expected in
return.
Moscow's attitude reflects slow economic growth at home and
reluctance to support countries with higher standards of living
than its own. A succession of Soviet leaderships has grappled
with the question of how much economic assistance is necessary to
assure political stability in Eastern Europe, and Moscow
apparently has concluded that a gradual reduction of support is
safe. At the summit, Chernenko's positions on trade issues--
pricing, oil deliveries, trade flows--are likely to reflect the
desire to maintain or accelerate the recent trend of declining
Soviet subsidies.
For the longer run, the Soviets probably are interested not
only in reducing or stopping the flow of economic benefits to
Eastern Europe, but also in reversing it. A large soft currency
debt to the USSR has accumulated from the Soviet trade surpluses
with Eastern Europe, and Moscow may begin pressing for
repayment.
East Europe Tries to Hold the Line
Moscow's allies have focused on narrower economic and trade
issues and have tried to water down the Soviet agenda with its
emphasis on integration.5 Eastern Europe's goal is to obtain
more Soviet economic support to help overcome external and
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domestic economic problems. With the possible exception of
Romania, Moscow's allies probably see no realistic hope for major
increases in Soviet deliveries or for a new concessionary price
formula. Although they may ask for more concessions, the best
they can hope for is probably no more cuts in oil deliveries and
continuing trade credits. They may even be satisfied if Moscow
announces its plans and offers commitments for deliveries, which
would at least eliminate the uncertainty plaguing East European
planners.
The East Europeans see serious economic and political
dangers in further integration./
/ The international division of
labor that Moscow advocates implies concentration on industries
or sectors like agriculture that the East Europeans want to
avoid. The regimes fear that their economic relations with the
West are jeopardized not only because the push for integration
could force reorientation of their economies, but also because
Moscow has advocated a policy of limiting trade with the West.
Hungary has fought most forcefully to maintain ties to the West,
and most of the others want to keep their options open.
Czechoslovakia is the chief exception: a recent Rude Pravo
article strongly criticizes neighboring countries that try to
"acquire unilateral advantages from the capitalist world." F
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The East Europeans sometimes act as a bloc to counter the
USSR on important issues in CEMA, but there are significant
differences at this summit among them because of the diversity
of their:
-- political and ideological proximity to Moscow;
-- dependence on trade with the West;
-- levels of economic development; and
-- structures of production.
Agricultural exporters (Hungary, Bulgaria, and Romania)
favor higher food trade prices against the interests not only of
the USSR, but also of East Germany and Czechoslovakia. While
Sofia and Bucharest are on opposite ends of the spectrum in terms
of East European loyalty to Moscow, both want to protect their
industrialization programs against any Soviet push to make them
CEMA's breadbasket. Bulgaria and Romania--the least developed
countries--also agree that CEMA should promote a leveling of the
member economies through aid from the most developed to the least
developed countries. East Germany and Czechoslovakia have the
most industrialized economies in East Europe and share similar
views on several trade and economic issues. Prague's recent
attack in Rude Pravo, however, applies to East Berlin's economic
relations with West Germany as well as to Hungary's aggressive
pursuit of trade links with the West. The Poles have been
reticent on CEMA issues, but are probably still interested in
having allies finish investment projects abandoned by Western
firms when Warsaw ran out of money. 25X1
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What We Expect
Political issues will certainly figure prominently in the
CEMA summit. We believe Moscow sees the need to face the West
with a united and firm alliance, and most of the East Europeans
probably will go along if the rhetoric is not too harsh or
specific. The emphasis on politics is likely to be reinforced by
the need to fill the gap left by little progress on the economic
issues.
Soviet and East European comments indicate that the Soviets
plan to use the summit as a forum for harsh attacks on the West,
especially the US, regarding INF and other foreign policy and
security issues. According to sources of the US Embassy in
Budapest, Hungarian officials view the summit as a political
exercise to demonstrate Chernenko's leadership. The timing of
the summit, just after the Western economic summit in London,
argues that the CEMA leaders will place a high premium on
displaying political unity against a "menacing" West. They will
be watching the Western summit closely to react to Western
declarations on international issues and to exploit any
differences between the US and the West Europeans. In their
public statements the Soviets are likely to note with approval
the economic progress made by the CEMA countries and contrast
their success with Western economic problems such as high
unemployment. El
Despite differences with Moscow, most of the East Europeans
probably will not want the summit to be, or even appear to be
acrimonious. The divergence of views and interests on both
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economic and political issues is likely to lead to sharp
exchanges behind the scenes, however, and the leaders probably
will not be able to hide this from outside observers. As usual,
Romanian President Ceausescu is most likely to frustrate a Soviet
bid for unity.
In terms of CEMA economic issues, the summit is not likely
to result in major new policy initiatives or in a reconciliation
of differences between the Soviets and the East Europeans.
Moscow circulated a proposal in early 1983 calling for sweeping
changes in CEMA which met strong opposition from the East
Europeans. East European officials claim that their objections
have held and that the coordinated document for the summit will
be a much-diluted statement that will not infuse much dynamism
into CEMA. According to the US Embassy in Prague, a Romanian
diplomate said in early June that the economic document will be
very general--"taking up a lot of space but changing little or
nothing." Neither the Soviets nor the East Europeans have shown
much willingness to compromise or to negotiate across issues.
While the East Europeans appear to have deflected the Soviet
drive for further integration, they probably can claim few if any
gains on trade issues. Moscow seems unswervingly tough,
insisting that its allies gradually wean themselves from Soviet
oil and other raw materials supplied on concessionary terms. We
believe the Soviets are likely to divert East European requests
by insisting that negotiations be handled bilaterally.
Even knowledgeable Soviets view major gains for either side
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with a dubious eye. In a discussion with a US embassy officer in
late 1983, a senior official of the USSR's leading institute on
Bloc economic issues expressed little hope for favorable
resolution of the serious problems facing CEMA. He believed that
specialization is not working, not only because the countries
prefer self sufficiency, but also because they do not wish to
invest in producing goods for other CEMA countries.
The leaders may reach agreement on a few relatively minor
issues which they can cite to laud the summit's success.6
New Gas Pipeline. A joint investment project the Soviets
may highlight is the construction of a new gas pipeline, but
probably no more than a preliminary agreement will be
announced. The large-capacity pipeline, which the CEMA Planning
Committee discussed in late March, would run 4,700 km from
Western Siberia into Eastern Europe. The US Embassy in Moscow
reports that Hungary is willing to purchase additional gas, but
will try to avoid contributing construction services.
CEMA-EC Ties. Sources of the US Embassy in Hungary report
that the summit will issue a declaration proposing resumption of
CEMA's stalled negotiations with the EC on a trade agreement,
ostensibly to show the Bloc's interest in expanding contacts with
Western Europe. The Hungarians, however, believe the Soviets'
real motive is to block East European bilateral talks with the EC
by shifting them to a multilateral forum. F-1
6 The leaders may devote some attention to issues such as transferable ruble
convertibility and aid to the less-developed CEMA members Vietnam, Cuba, and
Mongolia. Reporting does not indicate that these subjects have figured
prominently in the simmit narations, but they are of longstanding
importance to CEMA. rP~
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Enterprise cooperation. There is an apparent consensus that
ties between enterprises in different countries should be
facilitated and strengthened, presumably by bypassing the foreign
trade and planning bureaucracies. The Soviets, East Germans,
Hungarians, and Poles have advocated more direct links at lower
levels, and we know of no opposition to this. Establishment of
joint enterprises may be another mechanism for facilitating
cooperation.
High Technology. There seems to be general agreement to
make headway on the development and application of high
technology. The East Europeans, who stress the importance of new
technologies to improving economic performance, share Moscow's
concern about reducing the Bloc's vulnerability to Western export
controls. High-level CEMA meetings in recent years have
announced new programs for cooperation in microelectronics,
robotics, and computers. We have no information that new
programs or mechanisms for cooperation will be launched, but at a
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programs.
On the toughest issues, however, wide differences apparently
remain:
Trade pricing. Although Czechoslovak sources say that a
shift from a 5-year to a 3-year moving average for calculating
CEMA prices is under study, we have no evidence that this will be
approved at the summit. Moreover, because CEMA prices have
largely caught up with world prices, the impact would not be
great and it is not clear which members would gain. One possible
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change is that prices of agricultural products will be negotiated
bilaterally, which almost certainly would raise them. El
Planning. The East Europeans apparently have deflected
Moscow's effort to increase integration by instituting more joint
planning and closer coordination of members' domestic economic
plans. East European diplomats in Moscow say that little change
in the planning process is likely as discussions of 1986-90 plans
begin. There may also be talk of formulating plans out to the
year 2000.
Oil Deliveries. Moscow is unlikely to make commitments for
the 1986-90 period with planning at such a early stage and the
issue of oil supplies so sensitive. A Soviet institute official
recently stated that the USSR's oil allocation priorities are (1)
defense, (2) agriculture, (3) chemical industries, and (4)
exports to CEMA and hard currency markets. In view of these
priorities, the Soviets may propose cuts in oil deliveries to
CEMA and repeat their admonitions on wasteful use of oil. In any
case, the Soviets are likely to continue to negotiate oil
deliveries on a bilateral basis.
Progress on some of these issues is possible at the summit,
but the leaders probably prefer to give a top-level stamp of
approval to already prepared documents rather than to engage in
tough negotiations. The contentious nature of the issues,
however, seems to insure tough talks. Indeed, the summit of party
leaders has become necessary because of failure to resolve these
issues at the government and expert levels.
Holding the summit has become a risky venture with potential
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for Soviet embarrassment. The rarity of a bloc economic summit
raises high expectations, and the several postponements amid open
squabbling over basic goals and policy have put further pressure
on CEMA to show progress. If few concrete economic agreements or
initiatives emerge, the summit could prove a disappointment and
show that the meeting was held only to feign a show of East Bloc
unity in the face of the Western leaders' summit. Even more
embarrassing would be open wrangling between Chernenko and some
East European leaders. If the Soviets renew their push for
integration, try to impose new cuts in oil deliveries, or press
too hard for East European exports, the East Europeans may unite
to mount strong resistance. This could frustrate Moscow's goal
of Bloc unity.
If our expectation of no major progress on longstanding CEMA
issues proves correct, the failure of the summit will reduce the
likelihood that the region's economic problems--and Soviet-East
European tensions--will be eased in the next few years. Lack of a
forceful mandate from the leaders will impede lower level
officials from seeking resolution of CEMA problems. While Moscow
can continue to reduce the cost of its alliance, it can claim
neither the satisfaction of bailing out Eastern Europe when the
West turned away, nor of drawing its allies more closely in a net
of increased economic integration. For their part, the East
Europeans, without crutches in the form of net resource flows
from East or West, will be left on their own to deal with
economic problems, and tensions are likely to grow and corrode
the Soviet relationship with Eastern Europe.
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Appendix A
Chronology of Summit Planning
June 1980 Romania proposes summit at 33rd CEMA Council Session
February 1981 Brezhnev endorses summit at 26th CPSU Congress
March 1982 Czechoslovak official says that summit agenda is far
from complete.
June 1982 Czechoslovakia's Premier Strougal renews call for
summit at 35th CEMA Council session.
October 1982 Pravda article outlines Soviet views; Hungarians call
for postponement until 1983 so that "radical reforms"
can be developed; several sources say meeting will be
in early 1983.
April 1983 Party economic secretaries fail to agree on agenda,
dealing a setback to plans for a spring 1983 summit.
September 1983 Bulgarian official says summit will be held in October
shortly after the CEMA session. Agreement on pricing
of agricultural products reportedly completes the
preparations.
October 1983 In East Berlin, CEMA premiers announce that summit
preparations are completed, but no date is set.
January 1984 The Yugoslav press and several East European sources
say that Andropov's illness has delayed setting a
date.
February 1984 After Andropov's funeral, new leader Chernenko tells
April 1984
East European leaders that he wants to schedule the
summit in April or May.
Following Central Committee and Supreme Soviet
meetings, Soviet Deputy Foreign Minister Korniyenko
announces to the Western press that Moscow will host
the summit in June.
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Appendix B
East European Views on CEMA and the Summit
Bulgaria
Although Sofia is generally the USSR's loyal ally in Eastern
Europe, the Bulgarians have significant differences with Moscow
on CEMA. Along with Romania and Hungary, Bulgaria pushed Moscow
hard for higher agricultural export prices last year. Sofia is
the most dependent economically on the USSR, and perhaps most
concerned about tougher Soviet attitudes on future economic
support. The Bulgarians support economic integration in general,
but worry that Moscow will dictate that Sofia concentrate on
agriculture rather than manufacturing.
Czechoslovakia
Prague has long been one of the most enthusiastic supporters
of CEMA integration. The Czechoslovaks' chronic complaint has
been that other members--including the USSR--often fail to meet
delivery commitments in CEMA projects. Czechoslovakia has a
major role in manufacturing equipment for nuclear power plants in
CEMA--an effort that has lagged badly because of the failure of
other countries to supply components. Prague's major objective
thus has been to improve participation under existing mechanisms
and programs rather than to approve new initiatives. A recent
article in Rude Pravo--reprinted in the Soviet press--indicates
that Czechoslovakia will be Moscow's strongest ally at the
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summit. The article sharply attacked those socialist countries
that experiment with reforms contrary to the Soviet model and
those that cultivate economic ties with Western countries. F__] 25X1
East Germany
East Germany generally has sided with the USSR and
Czechoslovakia on most CEMA issues, emphasizing that other
members must fulfill their delivery commitments in CEMA. East
Berlin, however, does not share Prague's suspicions about
economic relations with the West. The East Germans say that
their main objective at the summit is to maintain "elbow room" to
protect their improved relations with Bonn. The GDR also wants
better compensation for the technology it provides to other CEMA
members. East Germany regards CEMA cooperation in computer
technology as vital, and sees its own role as concentrating on
software.
Hungary
The Hungarians have been the most innovative in proposing
changes for CEMA. They have advocated convertibility of the
transferable ruble, movement toward multilateralism in trade,
more rational pricing, and economic reforms by the other
members. Budapest's motivation in this summit is likely to be
damage limitation--fending off Soviet proposals for
supranationality and integration. The Hungarians are also
concerned that the USSR will reduce economic support by buying
less Hungarian meat for hard currency and by reducing Moscow's
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soft currency trade surplus. The Hungarians are certain to
oppose summit decisions that would interfere with their freedom
to trade with the West. On most of these issues, Hungary will
line up with Romania.
Po l and
Despite the highly-publicized "reorientation" of its economy
toward the East as a result of its financial crisis and Western
sanctions, Warsaw has shown little interest in the summit or in
CEMA issues in general. The Polish press, still one of the most
open in Eastern Europe, did not even mention the summit until
last November. Poland has enjoyed substantial economic support
from Moscow during its economic crisis. The Soviets ran huge
surpluses in 1981-82, but the imbalance declined substantially
last year. Moscow, nonetheless, is still giving special
treatment to Warsaw through a recent agreement to defer repayment
of Poland's debt to the USSR and to supply additional quantitites
of oil and grain.
Trade issues are likely to dominate Warsaw's perspective at
the summit, although it is possible that the Poles will support
some of Moscow's structural aims. At last October's CEMA
session, General Jaruzelski spoke out against "excessive economic
relations with capitalist countries," citing Poland's "bitter
experiences." While little information is available on its
specific provisions, we expect that the agreement on long-term
economic cooperation concluded during Jaruzelski's early-May
visit to Moscow may be a model of what the Soviets would like to
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establish with other CEMA countries.
Roman i a
Bucharest has been the rebel in CEMA ever since rejecting
Moscow's attempt in the early 1960s to force Romania to
concentrate on agricultural development at the expense of
industrializaiton. Romania stresses national interests and the
sovereignty of individual CEMA states and has opposed Soviet
attempts to make CEMA a more supranational body. The word
integration itself is taboo; Romanian officials and press do not
go beyond "cooperation" and "colaboration. Mostly because of its
resistance to Moscow's line, Bucharest receives much less oil--
and on tougher terms--than other East European countries.
Bucharest's main objective--and President Ceausescu's purpose in
initially proposing a summit--has been to obtain equal treatment
on deliveries of oil and other raw materials. The Romanians have
reversed their opposition to joint investment projects, and are
willing to consider multilateral energy and agricultural projects
in Romania. The Ceausescu regime, however, still seems unwilling
to pay the political price of greater fealty to Moscow on foreign
policy issues. F-I
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Central Intelligence Agency
Washington, D. C.20505
DIRECTORATE OF INTELLIGENCE
7 June 1984
USSR-Eastern Europe: Approaching the CEMA Summit
Summary
Moscow probably will use the Council for
Mutual Economic Assistance (CEMA) summit set to
begin on 12 June as a platform for displaying Bloc
unity on political and strategic issues against
the West. Although the party leaders will try to
put the best face on it, the economic aspects of
the long-delayed meeting--the first CEMA summit in
15 years--have been largely diluted by
disagreements unresolved despite lengthy
preparations. The USSR's original purpose was to
achieve agreement on increased economic
integration and to reduce the cost of its support
for Eastern Europe; the East Europeans generally
hoped that they could obtain additional help from
Moscow to solve their economic problems.
Reporting on the agenda and the preparations
indicates that neither side is likely to achieve
its objectives: Eastern Europe apparently has
fought off the USSR's drive for greater
integration, but Moscow has not relented on the
terms for future energy and raw materials
deliveries to its allies. The summit is likely to
produce broad statements endorsing CEMA
cooperation and perhaps some relatively minor
economic agreements.
This memorandum was prepared b East European Division,
Office of European Analysis, and Soviet Economy Division
Office of Soviet Analysis, with contributions by
East European Division, Office of European Analysis, and
Policy Analysis Division, Office of Soviet Analysis. Comments and
questions are welcome and should be addressed to
Chief, East European Division, EURA, or
Chief, Soviet Economy Division, SOVA
C E'i7R 8 -1012
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We expect that the lackluster economic
content will combine with current Soviet
international concerns to shift the spotlight to
political issues. Meeting just days after the
West's London summit, the CEMA leaders may respond
to statements and initiatives agreed upon by the
Western leaders. This will be Chernenko's first
meeting with East European party leaders since
Andropov's funeral, and they will probably cover a
wide range of issues. Chernenko will likely press
for a statement highlighting Bloc unity in the
face of poor East-West relations and possibly will
ver a harsh rhetorical attack on the US.
The Soviets risk the embarrassment of a
contentious meeting if they try to get more. If
Moscow renews its push for integration, imposes
new cuts in oil deliveries, or presses too hard
for East European exports, the East Europeans may
unite to mount strong resistance. We believe that
the importance of presenting a united front at the
summit will lead the Soviets to yield on some of
their economic objectives. Papering over their
differences, however, means that the leaders will
not produce a forceful blueprint for overcoming
the region's economic problems. Tensions within
the Bloc over economic questions are likely to
continue to rise and to corrode the Soviet
relationship with Eastern Europe.
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Introduction
After repeated postponements, a CEMA economic summit meeting
is scheduled to begin on 12 June.1 This first CEMA summit since
1969 will mark the first meeting of Soviet General Secretary
Chernenko with all of the leaders of the Warsaw Pact East
European countries. The summit will give Moscow and its allies a
forum to present a united front against the West by announcing
Bloc unity on major political and economic issues.
This memorandum describes the political and economic setting
in which CEMA operates--a setting of conflicting economic
interests, aggravated by economic problems within Eastern Europe
and the USSR. It then reviews the perspectives and motivations
the Soviets and East Europeans will take to the summit. In broad
terms, the Soviet focus is on long-term economic integration and
political unity as well as on keeping the economic burden of
Eastern Europe from rising. The East Europeans are interested in
resolving such short-term trade issues as the price and quantity
of the goods they import from the USSR. Finally, the paper
discusses what we expect to be accomplished at the meeting. F
The Economic and Political Setting
The intra-CEMA relationship has long been marked by
conflicting interests. The East European countries have tried to
exploit their relationship with the USSR without sacrificing
1 CEMA members include the USSR, Bulgaria, Czechoslovakia, East Germany,
Hungary, Poland, Romania, Mongolia, Vietnam, and Cuba.
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control over national economic decision-making. In the process,
they have played both sides of the fence --drawing heavily on
Western credits to help modernize their industries while relying
on the Soviets to provide energy and raw materials on
concessionary terms. The USSR has long tried to promote economic
integration within CEMA to enhance its economic base, to promote
greater specialization of production, and to increase Moscow's
authority in Eastern Europe. " 25X1
The last CEMA summit in 1969 provided some dynamism by
launching what was to become the Complex Program for Socialist
Economic Integration and by creating institutions to promote
multilateral trade and investment projects. Several major joint
projects were underway by the mid-1970s, but the momentum quickly,ji
faded because of failure to remove longstanding internal CEMA
trade obstacles and East European suspicions of Moscow's
intentions. And in the early 1970s, detente provided more
attractive opportunities for these countries to trade with the
West.
The summit will take place against the backdrop of declining
Soviet economic support for Eastern Europe. From the mid-1970s
through 1981, Moscow provided increasing support mainly in the
form of oil price discounts and low-interest trade credits (see
Table 1). But over the past two years the East Europeans have
J"
been hit by large increases in the price of Soviet oil,
reductions in the volume of Soviet oil deliveries, and less
Soviet willingness to tolerate large East European trade
deficits.2
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Table 1
Soviet Assistance to Eastern Europe
1975-1983
(US $ Billion)
Annual
Subsid
Oi
ies
l
a
Annual Trade
Surplus
Total Annual
Assistance to EE
1975 1.
8
0.8
2.6
1976 2.
5
1.2
3.7
1977 2.
1
1.9
4.0
1978 1.
1
0.2
1.3
1979 2.
8
1.6
4.4
1980 9.
7
2.8
12.5
1981 9.
7
4.4
14.1
1982 6.
3
2.7
9.0
1983 1.
6
2.2
3.8
TOTAL 37.
6
17.8
55.4
a In 1975, CEMA adopted an interim pricing system which based the price on
the previous three-years' prices; since then oil prices have been based on a
moving average of world oil pr' in the previous five years. Values are
based on average unit prices. 7-s]
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The tougher Soviet policy comes at a bad time for Eastern
Europe, which is just beginning to emerge from the serious
financial crisis of 1982-83. Difficulties in raising hard
currency credits forced Eastern Europe to shift its hard currency
trade from chronic large deficits to sizable surpluses by
slashing imports. Although the region is beginning to enjoy a
slight improvement in creditworthiness and a revival of hard
currency trade, financial pressures remain severe on most
regimes. Trade and financial difficulties with the West have
figured prominently in Eastern Europe's attitude toward the
summit. In general, the regimes have wanted the USSR to
substitute as much as possible for the goods and capital no
longer available from the West.
Many of Eastern Europe's present economic difficulties
derive from past Soviet policies. By exchanging oil for
manufactured goods from its allies, the USSR created a dependency
which the East Europeans now find difficult to sever. By
pressing the East European countries to adopt the Soviet economic
model, Moscow helped create economic systems that in general were
no better than its own and that for the most part produced goods
which could find markets only in other Communist countries. The
Soviets indirectly contributed to the current debt problems of
some of its allies by encouraging the East Europeans to trade
2 Soviet attempts to ease the burden of Eastern Europe are not new. Beginning
in about 1960 the Soviets began holding back the exchange of raw materials,
semimanufactures, foodstuffs, and consumer goods. And Soviet domestic needs
resulted in a decline in net deliveries of materials to Eastern Europe in the
early 1970s. (See Edwin Snell, "East European Economies Between the Soviets
and the Ca italists," East European Economies Post-Helsinki, JEC, 25 August
1977.) 17
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with the West in the early 1970s in order to partake of the
"scientific-technical revolution" and to obtain from the West raw
materials and agricultural products that the USSR found
increasingly difficult to supply. As a result, Eastern Europe's
need for Soviet help has increased just at a time when Moscow--
faced with its own domestic economic problems--wishes to reduce
its assistance. 0
While all CEMA countries agree that a summit is necessary to
consider solutions to their growing economic problems, they
differ substantially on what the solutions should be. The
Romanians first proposed a summit four years ago (see Appendix
A) . After first objecting, Moscow endorsed such a meeting and
seized the initiative in organizing it. Planning for the summit
was delayed by disagreements over the agenda. By late 1983, the
agenda was set, according to US Embassy in Moscow, but the summit
could not be scheduled because of Andropov's illness. In a brief
meeting with East European party chiefs following Andropov's
funeral in February, new Soviet leader Chernenko said that he
intended to convene the summit as early as possible. Finally, in
April, First Deputy Foreign Minister Korniyenko announced that
the meeting would be held in Moscow in June.
The Bloc leaders will convene at a time when the Soviets are
pursuing a tough line on East-West relations and are pressing for
Bloc solidarity against the West. While the Soviets still
express high interest in East-West trade, they have delivered
harsh attacks against US policies in recent bilateral exchanges
with Western delegations, and have criticized West European
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governments for supporting Washington. The Soviets have
persistently sought East European endorsement for their hardline
policies.
Moscow's East European allies are uneasy with the USSR's
tough stance on East-West relations.3 Over the past year, some
East European states have repeatedly balked at endorsing harsh
anti-Western rhetoric. Soviet missile deployments in Eastern
Europe and the Olympics boycott have spawned discord within the
Bloc and are likely to influence the climate of the summit. F_
What the Soviets Want
The USSR's economic objectives are closer CEMA integration
and a reduction in the economic burden of Eastern Europe on the
USSR. Enhanced CEMA integration, a favorite Soviet theme,
encompasses a more closely coordinated economic policy, and more
joint projects, production synchronization, and international
specialization. Moscow is pushing technical and scientific
cooperation through joint companies in which expertise and
investment from several countries are joined in a single plant or
series of plants. The Soviets also want more direct contact
between enterprises in East European countries producing similar
goods or components for the same products. 0
Moscow's push for closer integration is aimed at achieving
economies of scale, avoiding duplication, and tightening the
3 A forthcoming typescript memorandum will provide a complete
assessment of recent discord within the Soviet Bloc.
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economic cohesion of the alliance. The Soviets see joint
investment projects as the only long-term solution to Eastern
Europe's demands for more raw materials and lower prices.
appears increasingly suspicious of potential Western leverage
over Eastern Europe and has cited Western sanctions and economic
conditions as reasons for the CEMA countries to turn inward.4
Moscow's concept of closer integration gives the USSR the
lead role in controlling and coordinating the bloc's activities.
Moscow is CEMA's focal point and is reluctant to share power with
its partners. CEMA continues to operate under a series of
bilateral agreements under the Soviet umbrella rather than as a
multilateral economic community . While the Soviets insist that
integration would not infringe on Eastern Europe's sovereignty,
they have offered little to reassure the East Europeans. =
Moscow also wants to curtail its generosity toward Eastern
Europe. The Soviets have stepped up their complaints on the
inadequate volume and poor quality of goods they receive from
Eastern Europe. In late 1983, Soviet Prime Minister Tikhonov
issued a stern warning that Moscow's deliveries of raw materials,
vital to Eastern Europe, were contingent on how well the CEMA
countries satisfied Soviet needs. More recent reporting has
revealed a toughening Soviet posture vis-a-vis the East European
4 Soviet Premier Tikhonov warned his East European counterparts at the CEMA
ministerial meeting last October against relying on trade and economic
cooperation with the West. He claimed the Western sanctions in the wake of
events in Afghanistan and Poland demonstrated the dangers of such a course and
demanded greater cooperation between CEMA members to reduce their
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countries with respect to energy and raw materials deliveries ands
prices as well as the mix and volume of commodities expected in
return. E:1
Moscow's attitude reflects slow economic growth at home and
reluctance to support countries with higher standards of living
than its own. A succession of Soviet leaderships has grappled
with the question of how much economic assistance is necessary to
assure political stability in Eastern Europe, and Moscow
apparently has concluded that a gradual reduction of support is
safe. At the summit, Chernenko's positions on trade issues--
pricing, oil deliveries, trade flows--are likely to reflect the
desire to maintain or accelerate the recent trend of declining
Soviet subsidies.
For the longer run, the Soviets probably are interested not
only in reducing or stopping the flow of economic benefits to
Eastern Europe, but also in reversing it. A large soft currency
debt to the USSR has accumulated from the Soviet trade surpluses
with Eastern Europe, and Moscow may begin pressing for
repayment.
East Europe Tries to Hold the Line
Moscow's allies have focused on narrower economic and trade
issues and have tried to water down the Soviet agenda with its
emphasis on integration.5 Eastern Europe's goal is to obtain
more Soviet economic support to help overcome external and
5 See Appendix B for a more complete discussion of individual views of the
East European CEMA members.
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domestic economic problems. With the possible exception of
Romania, Moscow's allies probably see no realistic hope for major
increases in Soviet deliveries or for a new concessionary price
formula. Although they may ask for more concessions, the best
they can hope for is probably no more cuts in oil deliveries and
continuing trade credits. They may even be satisfied if Moscow
announces its plans and offers commitments for deliveries, which
would at least eliminate the uncertainty plaguing East European
planners. (C)
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The East Europeans see serious economic and political
dangers in further integration.
The international division of
labor that Moscow advocates implies concentration on industries
or sectors like agriculture that the East Europeans want to
avoid. The regimes fear that their economic relations with the
West are jeopardized not only because the push for integration
could force reorientation of their economies, but also because
Moscow has advocated a policy of limiting trade with the West.
Hungary has fought most forcefully to maintain ties to the West,
and most of the others want to keep their options open.
Czechoslovakia is the chief exception: a recent Rude Pravo
article strongly criticizes neighboring countries that try to
"acquire unilateral advantages from the capitalist world."
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The East Europeans sometimes act as a bloc to counter the
USSR on important issues in CEMA, but there are significant
differences at this summit among them because of the diversity
of their :
-- political and ideological proximity to Moscow;
-- dependence on trade with the West;
-- levels of economic development; and
-- structures of production.
Agricultural exporters (Hungary, Bulgaria, and Romania)
favor higher food trade prices against the interests not only of
the USSR, but also of East Germany and Czechoslovakia. While
Sofia and Bucharest are on opposite ends of the spectrum in terms
of East European loyalty to Moscow, both want to protect their
industrialization programs against any Soviet push to make them
CEMA's breadbasket. Bulgaria and Romania--the least developed
countries--also agree that CEMA should promote a leveling of the
member economies through aid from the most developed to the least
developed countries. East Germany and Czechoslovakia have the
most industrialized economies in East Europe and share similar
views on several trade and economic issues. Prague's recent
attack in Rude Pravo, however, applies to East Berlin's economic
relations with West Germany as well as to Hungary's aggressive
pursuit of trade links with the West. The Poles have been
reticent on CEMA issues, but are probably still interested in
having allies finish investment projects abandoned by Western
firms when Warsaw ran out of money. n
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What We Expect
Political issues will certainly figure prominently in the
CEMA summit. We believe Moscow sees the need to face the West
with a united and firm alliance, and most of the East Europeans
probably will go along if the rhetoric is not too harsh or
specific. The emphasis on politics is likely to be reinforced by
the need to fill the gap left by little progress on the economic
issues.
Soviet and East European comments indicate that the Soviets
plan to use the summit as a forum for harsh attacks on the West,
especially the US, regarding INF and other foreign policy and
security issues. According to sources of the US Embassy in
Budapest, Hungarian officials view the summit as a political
exercise to demonstrate Chernenko's leadership. The timing of
the summit , just after the Western economic summit in London
argues that the CEMA leaders will place a high premium on
displaying political unity against a "menacing" West. They will
be watching the Western summit closely to react to Western
declarations on international issues and to exploit any
differences between the US and the West Europeans. In their
public statements the Soviets are likely to note with approval
the economic progress made by the CEMA countries and contrast
their success with Western economic problems such as high
unemployment.
Despite differences with Moscow, most of the East Europeans
probably will not want the summit to be, or even appear to be
acrimonious. The divergence of views and interests on both
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economic and political issues is likely to lead to sharp
exchanges behind the scenes, however, and the leaders probably
will not be able to hide this from outside observers. As usual,
Romanian President Ceausescu is most likely to frustrate a Soviet
bid for unity. El
In terms of CEMA economic issues, the summit is not likely
to result in major new policy initiatives or in a reconciliation
of differences between the Soviets and the East Europeans.
Moscow circulated a proposal in early 1983 calling for sweeping
changes in CEMA which met strong opposition from the East
Europeans. East European officials claim that their objections
have held and that the coordinated document for the summit will
be a much-diluted statement that will not infuse much dynamism
into CEMA. According to the US Embassy in Prague, a Romanian
diplomate said in early June that the economic document will be
very general--"taking up a lot of space but changing little or
nothing." Neither the Soviets nor the East Europeans have shown
much willingness to compromise or to negotiate across issues.
While the East Europeans appear to have deflected the Soviet
drive for further integration, they probably can claim few if any
gains on trade issues. Moscow seems unswervingly tough,
insisting that its allies gradually wean themselves from Soviet
oil and other raw materials supplied on concessionary terms. We
believe the Soviets are likely to divert East European requests
by insisting that negotiations be handled bilaterally.
Even knowledgeable Soviets view major gains for either side
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with a dubious eye. In a discussion with a US embassy officer in
late 1983, a senior official of the USSR's leading institute on
Bloc economic issues expressed little hope for favorable
resolution of the serious problems facing CEMA. He believed that
specialization is not working, not only because the countries
prefer self sufficiency, but also because they do not wish to
invest in producing goods for other CEMA countries.
The leaders may reach agreement on a few relatively minor
issues which they can cite to laud the summit's success.6
New Gas Pipeline. A joint investment project the Soviets
may highlight is the construction of a new gas pipeline, but
probably no more than a preliminary agreement will be
announced. The large-capacity pipeline, which the CEMA Planning
Committee discussed in late March, would run 4,700 km from
Western Siberia into Eastern Europe. The US Embassy in Moscow
reports that Hungary is Willing to purchase additional gas, but
will try to avoid contributing construction services.
CEMA-EC Ties. Sources of the US Embassy in Hungary report
that the summit will issue a declaration proposing resumption of,
CEMA's stalled negotiations with the EC on a trade agreement,
ostensibly to show the Bloc's interest in expanding contacts with
Western Europe. The Hungarians, however, believe the Soviets'
real motive is to block East European bilateral talks with the EC
by shifting them to a multilateral forum.
6 The leaders may devote some attention to issues such as transferable ruble
convertibility and aid to the less-developed CEMA members Vietnam, Cuba, and
Mongolia. Reporting does not indicate that these subjects have figured
prominently in the summit nreearations, but they are of longstanding
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Enterprise cooperation. There is an apparent consensus that
ties between enterprises in different countries should be
facilitated and strengthened, presumably by bypassing the foreign
trade and planning bureaucracies. The Soviets, East Germans,
Hungarians, and Poles have advocated more direct links at lower
levels, and we know of no opposition to this. Establishment of
joint enterprises may be another mechanism for facilitating
cooperation.
High Technology. There seems to be general agreement to
make headway on the development and application of high
technology. The East Europeans, who stress the importance of new
technologies to improving economic performance, share Moscow's
concern about reducing the Bloc's vulnerability to Western export.I'
controls. High-level CEMA meetings in recent years have
announced new programs for cooperation in microelectronics,
robotics, and computers. We have no information that new
programs or mechanisms for cooperation will be launched, but at a
minimum the leaders are likely to cite the progress on existing
programs.
On the toughest issues, however, wide differences apparently
remain:
Trade pricing. Although Czechoslovak sources say that a
shift from a 5-year to a 3-year moving average for calculating
CEMA prices is under study, we have no evidence that this will be
approved at the summit. Moreover, because CEMA prices have
largely caught up with world prices, the impact would not be
great and it is not clear which members would gain. One possible
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change is that prices of agricultural products will be negotiated
bilaterally, which almost certainly would raise them. I 25X1
Planning. The East Europeans apparently have deflected
Moscow's effort to increase integration by instituting more joint
planning and closer coordination of members' domestic economic
plans. East European diplomats in Moscow say that little change
in the planning process is likely as discussions of 1986-90 plans
begin. There may also be talk of formulating plans out to the
year 2000. F__1 25X1
Oil Deliveries. Moscow is unlikely to make commitments for
the 1986-90 period with planning at such a early stage and the
issue of oil supplies so sensitive. A Soviet institute official
recently stated that the USSR's oil allocation priorities are (1)
defense, (2) agriculture, (3) chemical industries, and (4)
exports to CEMA and hard currency markets. In view of these
priorities, the Soviets may propose cuts in oil deliveries to
CEMA and repeat their admonitions on wasteful use of oil. In any
case, the Soviets are likely to continue to negotiate oil
deliveries on a bilateral basis.
Progress on some of these issues is possible at the summit,
but the leaders probably prefer to give a top-level stamp of
approval to already prepared documents rather than to engage in
tough negotiations. The contentious nature of the issues,
however, seems to insure tough talks. Indeed, the summit of party
leaders has become necessary because of failure to resolve these
issues at the government and expert levels.
Holding the summit has become a risky venture with potential
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for Soviet embarrassment. The rarity of a bloc economic summit
raises high expectations, and the several postponements amid open
squabbling over basic goals and policy have put further pressure
on CEMA to show progress. If few concrete economic agreements or
initiatives emerge, the summit could prove a disappointment and
show that the meeting was held only to feign a show of East Bloc
unity in the face of the Western leaders' summit. Even more
embarrassing would be open wrangling between Chernenko and some
East European leaders. If the Soviets renew their push for
integration, try to impose new cuts in oil deliveries, or press
too hard for East European exports, the East Europeans may unite
to mount strong resistance. This could frustrate Moscow's goal
of Bloc unity.
If our expectation of no major progress on longstanding CEMA
issues proves correct, the failure of the summit will reduce the
likelihood that the region's economic problems--and Soviet-East
European tensions--will be eased in the next few years. Lack of a
forceful mandate from the leaders will impede lower level
officials from seeking resolution of CEMA problems. While Moscow
can continue to reduce the cost of its alliance, it can claim
neither the satisfaction of bailing out Eastern Europe when the
West turned away, nor of drawing its allies more closely in a net
of increased economic integration. For their part, the East
Europeans, without crutches in the form of net resource flows
from East or West, will be left on their own to deal with
economic problems, and tensions are likely to grow and corrode
the Soviet relationship with Eastern Europe.
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Appendix A
Chronology of Summit Planning
June 1980 Romania proposes summit at 33rd CEMA Council Session
February 1981 Brezhnev endorses summit at 26th CPSU Congress
March 1982 Czechoslovak official says that summit agenda is far
from complete.
June 1982 Czechoslovakia's Premier Strougal renews call for
summit at 35th CEMA Council session.
uctober 1982 Pravda article outlines Soviet views; Hungarians call
for postponement until 1983 so that "radical reforms"
can be developed; several sources say meeting will be
in early 1983.
April 1983 Party economic secretaries fail to agree on agenda,
dealing a setback to plans for a spring 1983 summit.
September 1983 Bulgarian official says summit will be held in October
shortly after the CEMA session. Agreement on pricing
of agricultural products reportedly completes the
preparations.
October 1983 In East Berlin, CEMA premiers announce that summit
preparations are completed, but no date is set.
January 1984 The Yugoslav press and several East European sources
say that Andropov's illness has delayed setting a
date.
February 1984 After Andropov's funeral, new leader Chernenko tells
April 1984
East European leaders that he wants to schedule the
summit in April or May.
Following Central Committee and Supreme Soviet
meetings, Soviet Deputy Foreign Minister Korniyenko
announces to the Western press that Moscow will host
the summit in June.
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Appendix B
East European Views on CEMA and the Summit
Bulgaria
Although Sofia is generally the USSR's loyal ally in Eastern
Europe, the Bulgarians have significant differences with Moscow
on CEMA. Along with Romania and Hungary, Bulgaria pushed Moscow
hard for higher agricultural export prices last year. Sofia is
the most dependent economically on the USSR, and perhaps most
concerned about tougher Soviet attitudes on future economic
support. The Bulgarians support economic integration in general,
but worry that Moscow will dictate that Sofia concentrate on
agriculture rather than manufacturing.
Czechoslovakia
Prague has long been one of the most enthusiastic supporters
of CEMA integration. The Czechoslovaks' chronic complaint has
been that other members--including the USSR--often fail to meet
delivery commitments in CEMA projects. Czechoslovakia has a
major role in manufacturing equipment for nuclear power plants in
CEMA--an effort that has lagged badly because of the failure of
other countries to supply components. Prague's major objective
thus has been to improve participation under existing mechanisms
and programs rather than to approve new initiatives. A recent
article in Rude Pravo--reprinted in the Soviet press--indicates
that Czechoslovakia will be Moscow's strongest ally at the
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summit. The article sharply attacked those socialist countries
that experiment with reforms contrary to the Soviet model and
those that cultivate economic ties with Western countries.
East Germany
East Germany generally has sided with the USSR and
Czechoslovakia on most CEMA issues, emphasizing that other
members must fulfill their delivery commitments in CEMA. East
Berlin, however, does not share Prague's suspicions about
economic relations with the West. The East Germans say that
their main objective at the summit is to maintain "elbow room" to
protect their improved relations with Bonn. The GDR also wants
better compensation for the technology it provides to other CEMA
members. East Germany regards CEMA cooperation in computer
technology as vital, and sees its own role as concentrating on
software.
Hungary
The Hungarians have been the most innovative in proposing
changes for CEMA. They have advocated convertibility of the
transferable ruble, movement toward multilateralism in trade,
more rational pricing, and economic reforms by the other
members. Budapest's motivation in this summit is likely to be
damage limitation--fending off Soviet proposals for
supranationality and integration. The Hungarians are also
concerned that the USSR will reduce economic support by buying
less Hungarian meat for hard currency and by reducing Moscow's
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soft currency trade surplus. The Hungarians are certain to
oppose summit decisions that would interfere with their freedom
to trade with the West. On most of these issues, Hungary will
line up with Romania.
Po l and
Despite the highly-publicized "reorientation" of its economy
toward the East as a result of its financial crisis and Western
sanctions, Warsaw has shown little interest in the summit or in
CEMA issues in general. The Polish press, still one of the most
`^r
open in Eastern Europe, did not even mention the summit until
last November. Poland has enjoyed substantial economic support
from Moscow during its economic crisis. The Soviets ran huge
surpluses in 1981-82, but the imbalance declined substantially
last year. Moscow, nonetheless, is still giving special
treatment to Warsaw through a recent agreement to defer repayment
of Poland's debt to the USSR and to supply additional quantitites
of oil and grain.
Trade issues are likely to dominate Warsaw's perspective at
the summit, although it is possible that the Poles will support
some of Moscow's structural aims. At last October's CEMA
session, General Jaruzelski spoke out against "excessive economic
relations with capitalist countries," citing Poland's "bitter
experiences." While little information is available on its
specific provisions, we expect that the agreement on long-term
economic cooperation concluded during Jaruzelski's early-May
visit to Moscow may be a model of what the Soviets would like to
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establish with other CEMA countries.
Romania
Bucharest has been the rebel in CEMA ever since rejecting
Moscow's attempt in the early 1960s to force Romania to
concentrate on agricultural development at the expense of
industrializaiton. Romania stresses national interests and the
sovereignty of individual CEMA states and has opposed Soviet
attempts to make CEMA a more supranational body. The word
integration itself is taboo; Romanian officials and press do not
go beyond "cooperation" and "colaboration. Mostly because of its
resistance to Moscow's line, Bucharest receives much less oil--
and on tougher terms--than other East European countries.
Bucharest's main objective--and President Ceausescu's purpose in
initially proposing a summit--has been to obtain equal treatment
on deliveries of oil and other raw materials. The Romanians have
reversed their opposition to joint investment projects, and are
willing to consider multilateral energy and agricultural projects
in Romania. The Ceausescu regime, however, still seems unwilling
to pay the political price of greater fealty to Moscow on foreign
policy issues.
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