WEEKLY SUMMARY SPECIAL REPORT CZECHOSLOVAKIA: FIVE YEARS LATER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500050022-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 16, 2016
• Document Release Date: November 26, 2004
• Sequence Number: 22
• Publication Date: August 31, 1973
• Content Type: REPORT

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Czechoslovakia: Five Years Later
Secret
N2 661
31 August 1973
No. 0385/73A
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Summary
In the five years since the Soviet invasion in August 1958, Czechoslovakia's
Communist Party General Secretary Gustav Husak has achieved political normaliza-
tion and economic stability, placated the Czechoslovak consumer, and pursued a
pattern of foreign relations imposed by the Sov'ots. Husak has kept control by
firmly dealing with overt political problems without reverting to the administrative
and police tactics prevalent during the early Novotny era.
Economic policies have revolved around maintaining central control of the
economy while increasing the supply of consumer goods. Meanwhile, the pattern of
economic activity remains substantially unchanged from the Novotny era, and the
old problems of poor worker discipline, poor management, and inefficiency con-
tinue. The next Five Year Plan (1976-1980) should bring a few minor changes,
reflecting Husak's emerging confidence in his ability to control the domestic situa-
tion.
For now, the only major initiatives-under the watchful eye of the Soviets-will
be in improving relations with some Western powers, particularly the US. Prompted
by Soviet movements toward detente, Husak has been seeking accords with West
Germany, Austria, and the US. Moreover, Czechoslovak trade with the West is
increasing rapidly.
August 20 marked the fifth anniversary of
the Soviet-led invasion that terminated Czechoslo-
vakia's experiment with "socialism with a human
face." Althcugh the Prague regime continues to
be plagued by the consequences of these events, it
has regained, under the leadership of Gustav
Husak, a degree of political stability and is dis-
playing a budding self-confidence. There are signs
that it may be ready to relax some of the more
stringent policies instituted during the forced
return to orthodoxy.
When Husak took over in March 1969, he
faced a faltering economy and a thoroughly dis-
ordered society. A suooorter of the reforms
during the "Prague Spring," Husak as general sec-
retary adopted a policy of "realism," i.e., broad
compliance with Moscow's demands in the face of
Soviet military intervention and thi~ palpable
threat of violent repression. Althounh moat
Czechoslovaks looked with distaste on his oppor-
Special Report -2-
tunistic willingness to do what Moscow wanted,
they were generally agreed that he was the best
rnan all around in a difficult situation.
Husak, in doing Moscow's bidding, did man-
age to inject a degree of restraint into the "nor-
malization" process, but as time went on the bulk
of Dubcek's reforms were dismantled: censorship
was reinstituted, the party's control over all seg-
ments of the government and society was re-
stored, freedom of travel to the West was sharply
curtailed, and the various special interest groups
that had sprung up under Dubcek were either
disbanded or reoriented to serve the purposes of
the party. Moreover, the party was subjected to a
massive purge. Of the 1.7 million party members
when Husak came in, some 300,000 were stricken
from the rolls and another 200,000 resigned in
disgust. In the end, the individuals who were in
the forefront of the Dubcek reform movement
were removed from positions of power end ostra-
cized. Dubcek, for example, runs a motor pool
for the Slovak forestry administration-a non-job.
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Alexander Dubcek...
Nevertheless, the Husak "normalization"
never included the administrative and police prac-
tices prevalent during the early days of Novotny.
Husak, himself a victim of a purge of so-called
Slovak "bourgeois nationalists" in the early
1950s, successfully opposed putting the reformers
on trial. His success in deflecting the more severe
rep?isals advocated by the party's ultra-conserva-
tives, however, has led to squabbling among the
leadership. The question of how to deal with the
leading figures of the reform era remains a major
point of contention five years after the events of
1968. While one faction apparently feels that the
time has come to use selectively the talents of the
Dubcek reformers in economic affairs and cul-
tural efforts, the ultra-conservatives continue to
voice paranoid concern over the continued danger
posed by these ''rightist opportunists."
Husak seems to favor a policy of "differenti-
ation." He would separate the ex-reformers into
an irredeemable "hard core" responsible for the
events of 1968, and "honest Communists" who
were merely duped and who can return to the
mainstream of Czechoslovak life by recanting.
Although most of the country's technocrats ap-
pear to have reached a modus rirendi with the
regime, most creative artists and other intellec-
tuals have resisted all the regime's blandishments
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and have boycotted the party-controlled cultural
organizations. As a result, the country has be-
come a cultural wasteland. Within the party,
Husak has repeatedly counseled patience in deal-
ing with the intellectuals, and since early this year
there have been some signs of a new and less
oppressive cultural policy.
Husak has taken a weal-publicized interest in
popular welfare, and is continually reminding the
people that they "never had it so good." Indeed,
he has taken steps to raise the standard of living.
More and better consumer goods are available,
and fo, the most part, the populace has re-
sponded by grudgingly granting qualified accept-
ance to the Husak regime.
Even more important, Husak has been ac-
cepted by the Soviets. Soviet party chief Brezh-
nev made it clear during his visit to Prague last
February that Husak had passed the performance
test, ending speculation that his stewardship over
the party would he temporary and that fie would
be replaced by a more reliable conservative.
In spite of all this, the Czechoslovak regime's
claims to "normalization"-i.e., that the "Prague
Spring" has been obliterated-are a sham. The
leaders, the people, and Moscow recognize this.
Internal repression, though hidden behind an aura
...Replaced by Husak
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of material prosperity, is harsher than it was in
1967, and leaders of the reform are in e;ile, in
jail, or at least out of the way. Neither their
erstwhile supporters nor their opponents who are
now in power can forget the impact of the re-
formers. Indeed, current policies are what they
are in large part because the reformers once held
sway and because they continue to influence,
even if negatively, the thinking of the leadership.
The Domestic Economy
Husak has successfully carried out two major
economic tasks he set for himself-placing the
economy under stronger central control ano in-
creasing the supply of consumer goods. The lead-
ership does seem to be debar :g the introduction
of some mild reforms during the Sixth Five Year
Plan (1976-1980).
Stability, not change, has been the watch-
word. Husak's first act was to strengthen control
over planning and direction in the economy. In-
flationary pressures forced him to raise retail
prices, halt planned wage increases and cut back
Consumer Imports: % Share
From Major World Trading Blocs
Industrial
West
IDC's
I I I
J
_
1967 1968 1969 1977 1971 1972 ,
r * Preliminary est;rnates Lased on plan fulfr ni rit reports.
Special Report
new investment projects. Inflation was brought
under control by the end of 1970. At this point
he unveiled a new Five Year Plan (1971-75), and
it turned out to be the most cautious of any
CEMA country-and the most closely attuned to
Soviet desires. The plan basically called for a
renewed stress on heavy industry, closer coopera-
tion with the USSR and other Communist coun-
tries, and increased attention to the immediate
needs of the Czech consumer.
A number of significant steps have been
taken in pursuit of improved consumer welfare.
The Czech diet, already one of the best in Eastern
Europe, has been steadily improved th, ough in-
creased output of milk and meat and imports of
previously scarce fruits and vegetables. The sup-
ply of consumer durables has steadily increased,
and while still far short of Western standards,
Czechoslovakia is the only East European country
that has no waiting list to buy a car. In 1972,
when the domestic supply of consumer goods was
threatened by a spending spree by East German
tourists, Prague acted quickly, placing strict
quotas on p,irchases by the tourists. Finally,
Czechoslo%'ak shopper
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"lWe are thinking over... our domestic and foreign rela-
tionships,..to ensure that the 15th Congress can deter-
mine the economic, political, and other tasks of the
next period.... Such an approach is necessar?; to en-
sure that the stabilization process which we have
achieved in the past two years can continue and that
the advantage of socialism, which our people feel
today, will not be a transitory period but a lasting
prospect. "
Gustav Husak, 4 July 1973
Husak's regime has greatly stepped up the pace of
housing construction since the beginning of the
plan period.
Although Czech national income and indus-
trial production are growing at about 6 percent a
year, a number of old problems remain. The labor
supply is very tight, and various sources suggest
that labor-management problems are growing.
Construction and production costs are increasing
faster than planned, largely because of poor
worker discipline and unsound management.
Many industrial facilities are antiquated and lag
far behind the. Western countr.?parts.
Various sources have reported that reforms
in wages, prices, and managerial techniques are
being debated. For one thing, the Czechs are
paying a good deal of attention to the New Eco-
nomic Mechanism in Hungary. Within the past
year, every major Czech economic periodical has
discussed one or another aspect of the Hungarian
reforms. The Czech Central Committee recently
approved :n new system for top-level managers. An
experimental wage system, tying wages to produc-
tivity, is being tried in a few industries. Heavily
backed by Premier Strougal, this system is likely
to be introduced more generally in the next Five
Year Plan. The political rationale for such eco-
nomic reforms in Czechoslovakia would presum-
ably be that similar reforms were approved by the
13th Party Congress in 1966 and that "revision-
ists" like Ota Sik deviated from the guidelines. In
any case, really sweeping changes are not likely,
Special Repor t
Brezhnev and Husak
and any reform that is enacted will be kept under
strong party control.
Foreign Policy
During the first three years of its existence,
the Husak regime focused its attention on bring-
ing order to the domestic situation. Its foreign
policy during the period was characterized by
total subordination to Moscow. As Prague gained
acceptance from the invaders, its relations with
Yugoslavia and Romania deteriorated over the
issue of the invasion and Husak's domestic poli-
cies. Relations with the Western countries became
strained as Husak moved to cut off the free travel
of Czechoslovak citizens to the West, and as his
hard domestic policies came under growing West-
ern criticism.
During the past year, as the regime gained
self-confidence and Moscow elaborated its policy
of detente, Prague has moved out of its isolation
and won some successes. The most important was
the negotiation of a bilateral treaty with West
Germany. The agreement was made possible when
Prague abandoned its demand that Bonn declare
the 1938 Munich Agreement invalid "from the
beginning" lab initio). This demand had been a
basic tenet of Czechoslovak foreign policy for
over 30 years, and Husak's retreat has been attrib-
uted to Soviet prodding in the interest of Brezh-
nev's detente policy. Problems have arisen at the
last moment over the question of Bonn's
representing West Berlin; these will almost
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certainly delay Chancellor Brandt's visit to Prague
scheduled for the first week of September. De-
spite the delay, both sides seem intent on over-
coming this impediment. The treaty and the
Brandt visit will open the way for diplomatic
relations and will be welcomed by the Husak
regime as a further recognition of its legitimacy.
The Husak regime has buried the hatchet
with Romania. The improvement in relations was
underlined by Romanian President Ceausescu's
visit to Prague earlier this year. Normalization of
relations with Yugosiavia is progressing more
slowly, but relations have tangibly improved.
Husak will travel to Belgrade in October.
Some progess has also been scored in nego-
tiations with the Vatican. For the first time since
the Communist coup in 1948, Prague has permit-
ted the appointment this spring of bishops to fill
vacant seats. Husak has not neglected n3ighboring
Austria, and Prague has moved to work out long-
standing financial claims and periodically trouble-
some border problems.
Special Report - 6 -
Although Prague has become more active in
the field of foreign relations in the past year, its
activities in the field will clearly remain circum-
scribed by its loyalty to the Soviet Union. Indeed,
Czechoslovakia is the loudest proponent of a "co-
ordinated socialist foreign policy." The Husak
regime, however, will do what it can to utilize the
openings created by the Soviet policy of detente
to seek further recognition of its legitimacy.
On the other hand, the potentially corrosive
impact of detente will perhaps be felt more in
Prague than elsewhere in Eastern Europe. After
all, Moscow's rationale for the 1968 invasion was
to counter the danger stemming from Dubcek's
inability to resist the alleged subversive influence
of Western ideas. Husak inherited this rationale,
but it now looks as if he may have to contend
with much the same Western influence as a matter
of course, treading a tightrope between the im-
pact the west will have on popular expectations
and the demands of Soviet-imposed discipline. His
success in this is by no means a foregone conclu-
sion.
A major development in Prague's foreign
policy has been the new momentum given its
relations with Washington by the recent visit of
US-Czechoslovak Negotiating Issues
? The US holds about $70 million in
Czech gold (18.4 tons) pendi ig compensation
for $72 million of US property in Czechoslo-
vakia seized after World War 11.
? The US has blocked withdrawal of $1.7
million in Czech accounts, and the Czechs
have defaulted on a bond issue valued at $2.7
million.
? Czechoslovakia seeks return of $17 mil-
lion paid for a steel mill never delivered by
the US.
? The Czechs want most-favored-nation
trade treatment and a Czech consulate in
Chicago in exchange for a US consulate in
Bratislava.
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Secretary of State Rogers to Prague. On 10 Sep-
tember, the US and Czechoslovakia will begin
talks aimed at settling outstanding financial
claims, one of the major roadblocks to improved
bilateral relations.
Indications are that the Czechs, for the first
time since the 1968 invasion, are interested in
making progress on these matters and will prob-
ably propose a new financial settlement package.
A Foreign Ministry official, in relaying the latest
Czech position, indicated willingness to pay $29
million of $72 million in US property claims if
the US m-kes good on the $17-million steel mill.
If the US agrees to this and returns gold being
held in Fort Knox, the official noted that the
Czechs might spend the dollar value of the gold
for US technology.
Foreign Trade Policy
Prague's policy on foreign trade, like its for-
eign policy in general, is careful and centered on
the Communist world, particularly the Soviet
Union. Compared with the rest of Eastern
Europe, Czechoslovakia has not been aggressive in
seeking Western industrial products and tech-
nology. While trade with the West is increasing
substantially this year-due in part to sizable agri-
cultural purchases from the US-there is no sign
that Czechoslovakia plans to follow Poland and
Romania in making large purchases of Western
machinery on credit.
The Czech economy, since the end of Word
War II, has been organized to meet the needs of
the Soviet Union and CEMA. Most machinery and
equipment plants set up since the late 1950s, for
example, are geared for export to Czechoslo-
vakia's socialist neighbors. The Czechs have lost
their comparative advantage within the group.
Products equal to the Czechs' in quality are being
produced in other socialist nations, no longer
guaranteeing a market for Czech machinery,
which had long enjoyed the reputation of being
the best in Eastern Europe. Moscow is growing
unhappy with Czech industrial goods, and Prague
has begun to feel the consequences. For example,
a plant designed to produce locomotives for the
Soviet Union is operating at only 20 percent of its
capacity because the Soviets find that the Czech
Czechoslovak-Soviet Friendship Chemical Works
locomotive no longer meets their needs. On the
other hand, the Czechs have felt the impact of
last year's Soviet economic setbacks. The setbacks
led to lower Soviet exports, quickening Czech
concern that future Soviet difficulties may carry
even larger costs for the Czech economy.
The Husak regime is the strongest supporter
of integration within CEMA and has been openly
critical of the slow progress being made toward
this goal. Deputy Premier Hamouz described the
regime as "dissatisfied" with the slow pace of
cooperative ventures. Frague had hoped that
major projects in industrial cooperation-at least
in specific areas such as automobile production-
could be started by 1976. The Czechs are now
pessimistic. Joint auto production with East
Germany and Hungary has now been put off until
at least 1980.
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Selected Major Trading Partners-1972
USSR
32.6%
Trade with Non-Socialist Countries
Trade with non-socialist countries is increas-
ing faster this year than in any year since Husak
took control. In the first six months of the year
exports to the "capitalist" nations were up 14.4
percent, and imports were up 20.5 percent. These
advances were above planned levels and outran
increases in trade with the socialist countries. The
increase in imports has mainly come in the form
of agricultural products, consumer goods, and raw
materials-not machinery. Midyear figures show
that Czechoslovakia continues to rely on the
socialist countries for machinery imports.
Unlike Poland and Romania
the Czechs
,
Other have shown little interest in obtaining long-term
22.6% Western credits. The only sizable borrowing
C
1972 Regional Breakdown of Foreign Trade
Special Report
zechoslovakia has done this year was a $48-
million credit from the Japanese Export-Import
Bank for a petrochemical plant. Several major
Western bankers recently in Prague have noted
that Czechoslovakia would seem to be a "prime
lending prospect," but the bankers believe that
the Czechs will continue a pay-as-you-go policy.
Licenses have been more important than credits
in recent years, although the Czechs say only 2
percent of total production can be accounted for
by licensing arrangements.
Czechoslovakia must import most of its raw
materials. The Soviet Union has been the main
source of these imports since World War II, but
sizable increases in the future are doubtful even
with additional Czech investment in Soviet raw
material production. As a result, the Czechs have
had to look elsewhere; to the Middle East for oil
and cotton; to the developing countries-particu-
larly Brazil and India-tor ores; and to the US for
agricultural products. The share of raw material
imports from non-socialist countries will surely
CEMA increase. A Czech economist recently wrote that
priority will be given in granting credits to devel-
oping countries that repay in raw materials, par-
ticularly oil.
Good Prospects for Trade with the US
Last year, Czech-US trade reached $89 mil-
lion, an increase of 61 percent over the previous
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Imports of Consumer Goods
1967=100
Total Imports From
S
ocialist Nations From Industrial West
1967
100.0
100.0
100.0
1968
147.8
152.7
130.4
1969
180.0
193.7
166.9
1970
185.5
187.0
219.4
1971
177.4
170.9
249.6
1972
195.1 *
187.8*
282.0*
*Prelitninarv estimates based on plan fulfillment reports.
year. Czech exports to the US were $26 million,
13 percent higher than 1971, and imports reached
$63 million, double the 1971 figure. All signs
point toward further increases this year. The
Czechs have placed orders for $100 million worth
of US goods so far this year, about 80 percent of
which have been for agricultural products, mostly
soybeans.
In 1971, only 24 percent of Czech imports
from the US were manufactured products and
machinery. The Czechs, however, have been
cautiously seeking access to US technology. Major
US trade missions have been well-received in
Prague, and interest was shown in US machine
tools, as well as automotive and petrochemical
technology. In addition, US bids are now being
solicited for several turnkey plants already in-
corporated in the next Five Year Plan. The
Czechs' conservative attitude toward credits will
restrict their shopping list, but the recent Husak
moves to diversify trade with the West and to
reduce trade with West Germany could mean
more business for other nations, particularly the
United States.
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