EAST EUROPEAN REGIONAL ECONOMIC WRAP-UP

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06141801
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 25
• Document Creation Date: December 28, 2022
• Document Release Date: August 28, 2018
• Case Number: F-2017-01874
• Publication Date: February 19, 1988

Approved for Release: 2018/08/22 C06141801
Issue No. 5
19 February 1988
East European
Regional Economic Wrap-up
East
Germany
Poland
Czechoslovakia
2t
DATE 3-30
DOG NO b(i,( m 4-z0031
MR 3
P &PD
Hungary
Romania
Yugoslavia
Bulgaria
Albania
--SECRET
-
(b)(3)
(b)(3)
EUR M 88-20031
)(3)
Approved for Release: 2018/08/22 C06141801
Approved for Release: 2018/08/22 C06141801
�&EeRE-7
(b)(3)
EAST EUROPEAN REGIONAL ECONOMIC WRAPUP
Synopsis of this Issue
A. Economic Relations Between East and West
1. Financial Problems Continue
Declining trade surpluses over the past two years indicate
that most East European countries, have done little to correct
fundamental balance of payments weaknesses.
2. Slow Progress on CEMA-EC Bilateral Agreements
Several obstacles continue to slow progress toward accords
between the EC and CEMA countries, and we doubt any CEMA member
will conclude an agreement with the EC soon.
3. Increased Soviet Pressure on Eastern Europe for Computer
Technology
The CEMA effort to modernize its computer technology is
lagging, and this may result in increased efforts to acquire
Western technology.
4. East European Economic Ties with Japan Remain Modest
Several East European countries and Japan have increased
economic contacts over the past year, but these discussions
are not likely to result in a significant increase in trade
or joint venture activities.
B. Regional Problems
1. East European Economic Growth Slows in 1987
Our preliminary estimate for East European economic growth
in 1987 is about 1.5 percent, slightly below last year's rate
of just over 2 percent, and we project about the same growth
rate this year.
2. East Germany: Impending Economic Slowdown
We estimate that GNP growth last year was slightly less than
the 2 percent gain recorded in 1986, partly due to bad weather
and electricity shortages.
SECRET
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
-36GRE-T-
(b)(3)
3. High Costs of Progress Pipeline for Eastern Europe
The Progress natural gas pipeline--a Soviet-East European
joint venture--is on schedule, but it is proving to be an
expensive proposition for the East Europeans.
4. East European Harvest Results Mixed
Smaller harvests in 1987 will add to economic strains in the
southern countries of Eastern Europe, while most of the
northern countries will benefit from increased production.
-sc-eRET-
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
--CrECrIc
(b)(3)
Financial Problems Continue
Most East European countries will continue to struggle with hard currency debt
problems into the next decade. Improved hard currency trade performance in 1982-84
sparked some optimism in East and West that the region could eventually recover from
its financial crisis. Declining trade surpluses since then, however, indicate that most East
European countries have done little to correct fundamental balance-of-payments
weaknesses.
o Poland increased its trade surplus in 1987, but its debt continued to rise due to
the falling dollar-and missed interest payments. Warsaw has given up all
pretense of repaying its debt soon and rescheduled debt last year initially
rescheduled in the early 1980s.
o Despite a decreased trade deficit and debt level last year, Yugoslavia did not
cover all obligations on earlier rescheduling agreements and sought further
rescheduling and credits at the end of 1987.
o After reducing debt in 1981-84, Hungary has since run record current account
deficits, enlarged its debt, and risks requiring its first rescheduling this year.
o Romania has held to its policy of rapid debt reduction--at the cost of depressed
economic performance and crushing austerity on the population--but even
sizable trade surpluses have not been enough to prevent liquidity shortages and
debt reschedulings.
o East Germany, Czechoslovakia, and Bulgaria have avoided debt servicing
problems and maintained good credit ratings, although the sudden burgeoning of
Sofia's trade deficit in 1986 forced a retrenchment on imports in 1987.
Eastern Europe's problem debtors will continue to pose headaches for Western
banks and governments. These regimes will repeatedly petition their creditors for
generous debt relief and new credits but resist most demands for actions that would
improve their ability to repay borrowings. While they may make veiled threats about
declaring extended moratoria on payments, the East Europeans are unlikely to take such
actions because they still hope to obtain more financial assistance and restore their
creditworthiness. The Poles and Yugoslays, however, will watch closely any concessions
creditors make to Latin American debtors and press for similar treatment.
o Poland hopes to unlock new lending by banks and governments with an IMF
standby program. Although Warsaw has announced a new program of economic
reforms, the Fund and creditors will have difficulty persuading the Poles to
implement the painful measures needed to improve hard currency trade
performance, especially since an austerity program was rejected by voters in the
November 1987 referendum.
(b)(3)
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
�ErEORE-T-
(b)(3)
o Yugoslavia is already negotiating with the IMF for a $400-600 million standby
agreement, and is hoping for rescheduling accords with banks and official
creditors early in 1988. If negotiations stall and already low foreign exchange
reserves are drawn down further, Belgrade could face a severe liquidity crisis in
the next few months.
Eastern Europa Gross and Net Debt
Billion US $
1983
1984 1985 1986'
1987
(b)(3)
-7SEetkrrl
4
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
SECRET
(b)(3)
o Hungary also intends to sign an agreement with the IMF this year for a standby
loan worth $1.5 billion over three years. If Budapest fails to enact an adequate
program, it risks falling into the endless debt trap that has ensnared Poland and
Yugoslavia.
o Romania may become the region's smallest debtor by 1988, but its economy will
have paid a high price. With debt paid down, an eventual post-Ceausescu
leadership might seek new loans from the West to help rebuild the economy, but
Western lenders are likely to be wary about Bucharest's ability to use new
borrowings effectively.
Eastern Europe's financially sounder regimes probably will give greater priority to
increasing imports than further reducing their debts. Nonetheless, we expect these
countries to remain conservative in their borrowing strategies and avoid a large runup of
debt that could strain relations with Western lenders.
o Although East Germany faces no immediate financial difficulties and can afford to
step up hard currency imports, the regime apparently is increasing its intra-German
trade--while trade with other Western countries languishes--to acquire Western goods at
minimal financial risk.
o Czechoslovakia and, to a lesser extent, Bulgaria have room to boost Western
imports in the near future without risking liquidity or debt servicing problems. Their
limited export earnings, however, will constrain their ability to afford large purchases
without returning to Western credit markets.
(b)(3)
(b)(3)
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
SECRET
� Slow Progress on CEMA-EC Bilateral Agreements
Several obstacles continue to slow progress toward accords between the EC and
CEMA countries, and we doubt any CEMA country will conclude an agreement with the
Community soon. The demands of various CEMA countries for elimination of quotas on
industrial exports, lower tariffs, and concessions on agricultural sales have met strong
op,position from some EC member states. These EC countries fear that an influx of East
European goods�particularly agricultural items--will harm domestic producers. Another
sticking point has been diplomatic recognition. Although countries typically request
formal recognition by the EC before signing trade and cooperation agreements, some
CEMA countries are demanding that the EC request recognition first.
Status of
Major EC-CEMA Bilateral Negotiations
Last Topics of
Country Meeting Negotiation
Hungary October o Elimination of
1987 quotas on Hungarian
goods, reciprocal
concessions on
agricultural goods,
and lower tariffs.
o Mutual recognition.
Romania
Czecho-
slovakia
Poland
January o Granting EC trade
1988 concessions,
business data,
and commercial
exchanges.
o Cooperation in
various fields.
November o A limited trade
1987 accord, including
MFN.
o Easing quotas on
industrial goods.
September o Granting MFN,
1987 quota reductions,
preferential
tariffs, credits,
and cooperation.
Status
EC adopted negotiating
mandate for comprehen-
sive trade and
cooperation accord;
agreed to negotiate
gradual elimination of
quotas on Hungarian
goods.
Romania tabled demands
that exceeded
EC's negotiating
mandate.
EC adopted negotiating
mandate but no real
bargaining started.
EC officials rejected
Polish demands,
offered to discuss
trade accord only.
Approved for Release: 2018/08/22 C06141801
Approved for Release: 2018/08/22 C06141801
SECRET
(b)(3)
If bilateral agreements are signed in the future, they probably would have greater
implications for US political interests in Western Europe and technology transfer than for
US trade:
o Bilateral accords would help lay the groundwork for a formal group-to-group
accord between the EC and CEMA; this would allow the Soviet Bloc a larger
presence in Western Europe, greater access to EC personnel, and increased
opportunities to influence the Community.
o Agreements probably would call for increased industrial cooperation, potentially
allowing CEMA countries greater access to high technology industries, but
restrictions on technology transfer would still apply to EC member states in
COCOM.
o EC trade accords with CEMA countries would have little effect on US exports to
CEMA, which totaled about $700 million in 1986. CEMA countries probably still
would purchase a fair amount of this total.
o Nor would US exports to the EC be affected significantly by increased CEMA
sales to the Community.
(b)(3)
SECRET
1
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
�SEeRET
(b)(3)
Increased Soviet Pressure on Eastern Europe for Computer
Technology
Moscow is placing high priority on accelerated development of computer technology
and is pushing Eastern Europe to speed up its lagging computer effort, as part of the
region's contribution to the CEMA 2000 Science. and Technology program. East European
regimes appear more concerned with strengthening their international trade
competitiveness through modernization. Advanced computer technology increases the
productivity of both labor and machinery so that more and better quality products can be
produced. Improving product quality would enable the East European regimes to compete
more effectively in Western markets, earning more hard currency.
Eastern Europe: Progress in Computer Technology
Country State of Technology
East Germany
Czechoslovakia
CEMA leader in the development of personal
computers; developed line of high performance
personal computers based on an IBM type and
now exported to the USSR.
Plans production of personal computers in 1989;
plans to participate in development of more
advanced integrated circuits.
Hungary Provides computer software for CEMA programs;
will produce more integrated circuits.
Bulgaria Co-leader with the GDR in personal computer
technology; leader in production of selected
computer peripherals.
Poland
Romania
Lags behind all East European countries, except
Romania in computer developments; participating in
development of personal computers and robotics.
Not deeply involved in computer use or development,
despite a joint venture with a Western computer
firm going back more than a decade.
(b)(3)
(b)(3)
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
(b)(3)
Several Several of the East European regimes are attempting to satisfy the computer
iubtasks of the CEMA science and technology effort. East Germany, Czechoslovakia,
Hungary, and Bulgaria, in particular, have made some progress in developing
minicomputers, disk drives, and applications software programs. Nonetheless, the overall
effort is advancing more slowly than projected by Moscow because of problems with
pricing of labor and capital, currency convertibility, and East European fears that the
Soviets will dominate regional science and technology programs. The Soviets had hoped
that CEMA's computer programs would enable the East Bloc to become independent of
Western technology and ease the constraints imposed by COCOM restrictions and hard
currency shortages. The slow developments to date have not accomplished this goal and
are not likely to over the next few years.
While the CEMA science and technology effort has not decreased dependence on
Western computer technology, the cooperative effort may provide Moscow the
opportunity to better coordinate illegal acquisitions. Soviet pressure on CEMA members
to meet their S&T 2000 goals involves pressure to increase acquisitions of Western
computer technology. We believe that the USSR is making renewed efforts to infuence
and coordinate illegal transfer in the Bloc to serve its priorities.
the East
Europeans generally have maintained as much independent control as possible over their
acquisition programs and have focused on acquiring Western high technology primarily
for domestic use.
Moscow probably will encourage its allies to pursue legal East-West ventures
through, for example, participation in West Europe's Eureka program. Continuing legal
joint ventures are desirable from Moscow's perspective because the technology often can
be updated more easily than through illegally obtained computer advances. The desire to
expand access to Western technology is probably one reason why Moscow now appears
willing to accept West Berlin as an EC member in return for Soviet-East European
entrance into the Eureka program.
Eastern Europe probably will respond to Soviet pressures and increase acquisition
efforts for Moscow to a greater extent than previously. Joint ventures with Western firms
are increasing, especially with the current trend in the East Bloc to liberalize joint venture
laws. For the East Europeans, this represents a less expensive method of obtaining
current technology than through imports or illegal acquisition, but it also complicates
enforcement of COCOM restrictions for the West because continuing contacts between
East European and Western engineers and scientists create additional opportunities for
technology diversion.
(b)(3)
(b)(31
(b)p)
(b)(3)
(b)(3)
(b)(3)
(b)(3)
(b)(3)
9
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
�SECRET
(b)(3)
East European Economic Ties With Japan Remain Modest
Meetings between East European leaders and Japanese Prime Minister Nakasone in
the past year have focused on the potential for closer economic cooperation, but such
discussions seem unlikely to produce a significant increase in trade or joint venture
activity. Eastern Europe's financial problems, its traditional ties with Western Europe, the
mismatch in tradable goods, and Japanese trade protectionism stand in the way of closer
economic relations. Nonetheless, Eastern Europe has been seeking additional Japanese
financing and technology for modernization efforts and increased exports to Japan to earn
hard currency. Japan, for its part, is looking for creditworthy outlets for surplus capital
and customert for industrial plant exports.
East European trade with Japan is small compared with the region's trade with West
Germany, Italy, Austria, and the United States. Eastern Europe exports chemicals, textiles,
and foods and imports Japanese chemicals, machinery; and equipment. The region has
increased sales of chemicals and steel manufactures since 1981 and wants to increase
food exports. Boosting exports to Japan, however, has been difficult because of the poor
quality of East European goods, competition from the newly industrialized countries, and
trade barriers, especially for food. The region's technology needs have resulted in a
number of purchases from Japan, particularly in microelectronics, machine tools, and
robotics.
East European economic relations with Japan are not likely to expand rapidly due to
the following additional obstacles:
o COCOM Regulations.
o Restrictions on Joint Ventures. Japanese businessmen claim that shop floor
control over production processes is key to successful joint ventures, but Poland,
East Germany and Czechoslovakia appear unwilling to grant such latitude to
attract Japanese ventures. Moreover, the output of Japanese export-oriented
joint ventures in Eastern Europe would compete against Tokyo's exports
originating elsewhere.
o Tougher Japanese Financial Terms. The Japanese government is one of the
leading official creditors of Bulgaria, East Germany, and Hungary, but Japanese
commercial banks have extended a much larger amount of credit in recent years.
The creditworthy East European countries--East Germany, Bulgaria and
Czechoslovakia--most likely still have access to Japanese banks. Recent
negotiations on the issue of a $200 million Hungarian bond on the Tokyo market
also show that banks are- prepared to lend to Budapest, despite its financial
problems, probably because bankers view the economic reforms positively. The
chronic debtor countries, however, will come under closer scrutiny in lending
decisions.
(b)(3)
(b)(3)
(b)(3)
(b)(3)
(b)(1)
(b)(3)
(b)(3)
�rACCR ET
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
SECREll
(b)(3)
800 �
700 -
600 -
500 -
400 -
300 -
200 -
100 -
0 �
East European Trade with Japan
Million US $
1981 1981
Imports Exports
UNCLASSIFIED
Foodtituffs
III Raw Materials
123 Manufactured
Goods
1986 1986
Imports Exports
SECRET
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
SEeltET
(b)(3)
East European Economic Growth Slows in 1987
East European GNP grew about 1.5 percent last year--based on preliminary
estimates--and we project about the same growth rate for 1988. Growth slowed from
just over 2 percent in 1986 because of shortfalls in industrial output in some countries
and disappointing harvests in southern areas. (See section on agricultural performance.).
Bulgaria and Poland probably had the highest GNP growth at 2 percent, while Yugoslavia
and East Germany had the lowest at about 1 percent. Highly inflated Romanian data
claim a growth rate of 4.5 percent, but we believe it is below half that rate.
East European Economic Growth, 1980-88�
Percentage change over previous year
3-
-1
2
sb 81 8:2 16 84 81.5 86 Eib
a Figures exclude Romania due to data distortions
b Preliminary
Projected
UNCLASSIFIED
(b)(3)
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
SECRET-
Industrial production increased approximately 1 percent last year compared to over
2 percent in 1986.
o East German and Czechoslovak industrial growth rates apparently declined, partly
due to harsh winter weather that disrupted transportation and factory operations
early in the year.
o Hard currency import cutbacks in Bulgaria and Yugoslavia apparently caused
shortages in industrial inputs, provoking hottlenecks and production slowdowns.
More than 1300 strikes in Yugoslavia to protest low wages, and the declining
standard of living also contributed to a fall off in production there.
o The exception was Hungarian industrial output which probably accelerated due to
increased imports and investments.
Although we do not have reliable data, we believe Romanian industrial output was about
half the 1986 growth rate of 4 percent due to further hard currency import cuts, energy
shortages, and low worker productivity.
As a result of falling growth rates, standards of living in some East European
countries deteriorated, further lowering worker morale and increasing political tensions.
Romanian consumers--beset by steadily shrinking rations of energy and staple
foods--were the worst off in Eastern Europe as President Ceausescu continued his policy
of slashing imports for domestic use and-exporting all saleable goods, including food.
While conditions were better in Yugoslavia, its population had to contend with 170
percent inflation and 14 percent unemployment. Inflation rates of 26 percent in Poland
and 9 percent in Hungary exceeded wage increases for consumers in these countries.
Consumers in East Germany, Czechoslovakia, and Bulgaria had some usual spot food and
consumer good shortages but relatively stable prices, and living standards probably rose
marginally.
Some East European countries are looking to plans for reform and restructuring to
improve domestic economic and trade performance in 1988. Poland and Bulgaria
announced extensive programs for reform last year, but the population's rejection of
Warsaw's proposals in last November's referendum and Moscow's objections to the scope
of Sofia's restructuring as well as domestic resistance have cast doubt on the
implementation of these measures. Romania and East Germany have rejected a reform
course, and Czechoslovakia has transferred only some limited decisionmaking power to
managers. Hungary is trying to restructure its economy through World Bank loans and is
reforming its tax system to aid the effort.
To deal with worsening financial problems, several East European countries are
implementing austerity programs and looking for more financial support from the West
this year. Price hikes and limits on wage growth scheduled in Hungary and Yugoslavia
are angering workers more, and are likely to be moderated, as Warsaw has done already,
if political unrest develops. -East Germany is looking to West Germany for more hard
currency, while Yugoslavia, Poland and Hungary are pursuing credits through IMF
stand-by agreements.
�66GRET
13
Approved for Release: 2018/08/22 C06141801
Approved for Release: 2018/08/22 C06141801
SECRET
(b)(3)
East Germany: Impending Economic Slowdown
East Germany experienced a slowdown in economic growth last year partly due to
bad weather and electricity shortages after four years of comparatively solid economic
performance. We estimate that GNP growth for 1987 was about 1.5 percent, slightly
lower than growth in 1986. East Berlin's industrial modernization drive will continue to be
threatened by shortages of energy, labor, and investment through at least 1990. The
economic slowdown will increase popular resentment and limit the regime's ability to
meet Soviet demands for more advanced machinery and consumer goods.
Shortfalls in energy production continue to be the economy's worst problem.
Electricity shortages forced temporary shutdowns of some factories when an explosion
last January knocked out two 500 megawatt plants--about 5 percent of the country's
total capacity. For the first time since 1978, production of lignite coal--source of about
80 percent of the country's electricity--probably declined. Because East Germany already
eliminated the most blatant sources of energy inefficiency in the early 1980s through
tighter rationing and organizational adjustments, the regime must now invest heavily in
energy-saving technologies and limit energy deliveries to factories to stretch scarce
energy supplies.
The regime must also deal with other serious problems to avoid further economic
slowdown:
o Meeting Soviet demands for more high technology goods and greater CEMA
integration will divert resources from domestic development and trade with the
West.
o Alleviating massive environmental damage--due mainly to burning low-grade
lignite coal for energy--will require heavy investments.
o An aging population will allow virtually no growth in the labor force, aggravate
problems in labor productivity, and burden the economy with rising pension and
health care costs.
o Modernizing the aging capital stock will require completion of a heavy backlog of
investment left over from the early 1980s.
East Germany's foreign trade position -- though still solid by Eastern Europe's
standards -- also is weakening. Its short-term financial situation is secure due its $8
billion hard currency holdings, but it faces growing problems in sustaining hard currency
trade surpluses because of the growing obsolescence of its machinery exports, low prices
for its petrochemical exports, and strong competition from developing countries. The
data are scant, but it appears that East Germany's hard currency trade performance did
not improve significantly over 1986, when its hard currency trade surplus plunged nearly
50 percent.
Despite these problems, the Honecker government appears resolved to maintain its
highly-centralized approach to planning and management, making it a conspicuous
exception to the decentralization efforts being undertaken in most other Bloc countries.
To cushion against an expected downturn, the regime may seek closer economic relations
(b)(3)
(b)(3)
(b)(3)
(b)(3)
SECRET
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
SECRET
(b)(3)
with the West Germans. Following Honecker's visit to West Germany last September,
Bonn and East Berlin have announced a number of agreements in environmental
protection and nuclear safety. If East Berlin anticipates severe financial problems, they
may seek a large loan from West Germany to help them through the period.
East Germany: Economic Growth Measures
Percent
8... Produced National Income
6-
4-
2-
o-
1984 1985
4_ Gross National Product
3-
2
1-
0
-
1984
1985
1986 1987�
1986
19.37�
�Preliminary estimate
Sources: GDR official statistics, Western estimates
UNCLASSIFIED
(b)(3)
�6EeRET
I'
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
-SECRET
(b)(3)
High Costs of Progress Pipeline for Eastern Europe
The 4600-kilometer Progress natural gas pipeline--a joint venture between Eastern
Europe and the USSR--is on schedule, but is proving to be an expensive proposition for
the East Europeans. The high pipeline construction costs, the overvalued price for Soviet
natural gas, and the inability of East European economies to use extra natural gas without
large investment made the East Europeans reluctant to participate in this venture.
Despite this, all East European countries, except Romania, have signed participation
agreements and are scheduled to receive a total of 20 to 22 billion cubic meters per year
for twenty years as compensation for costs incurred in construction.
Negotiating the participation agreements was more protracted than the Soviets had
anticipated because the East Europeans did not immediately need extra gas and most
regimes were reluctant to spend the hard currency required for Western imports of
pipeline material. The USSR had expected to conclude negotiations by the end of 1984,
but most of the agreements were not signed until 1986.
o Czechoslovakia and Bulgaria were reluctant to sign because the extra gas could
not be utilized in the near future.
o Poland did not want to make hard currency pipeline purchases.
o Romania--which still has not signed its formal agreement--does not want to
spend hard currency on pipeline imports and has a large reserve of natural gas
relative to the rest of Eastern Europe.
Moscow's unfavorable terms and the substantial domestic investment costs also
dampened East European enthusiasm for the project:
o The Soviets undervalued East European contributions to the pipeline and locked
in future natural gas prices at the high CEMA price in effect at the time the
accord was signed. Because gas prices have subsequently fallen, Eastern Europe
in effect will receive less gas in repayment for its investment than it would if the
deliveries were valued at the price Moscow charges its West European
customers.
o East European regimes probably will have to make substantial new investment in
gas conversion equipment once the pipeline is complete. We estimate that the
region can absorb 8 billion cubic meters of the extra gas for such immmediate
needs as chemical feedstocks, but the extra 12-14 billion cubic meters probably
is more, however, than Eastern Europe can efficiently absorb unless the regimes
choose to invest in the storage and distribution systems required for industry to
substitute gas for oil and coal.
The regimes are unlikely to undertake these energy conversion investments in the
near future and probably will not achieve their energy conservation goals. Hard currency
shortages make it difficult to increase expenditures on gas equipment, especially because
the regimes have already made a commitment to nuclear power development and are
likely to continue to give this priority over natural gas investments. The East Europeans
(b)(3)
(b)(3)
(b)(3)
(.;
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
SECRET
are likely to increase gas consumption significantly when pipeline deliveries begin, but
without new investments they probably will not make the most efficient use of this
resource.
Progress 1,420 - mm -Diameter Natural Gas Pipeline
Selected compressor station
(approx. 40 total)
O 500 Kilometers
O 500 Miles
Nctweri.an
Sea
Med;tettanea
Sea
7
y-
8aftic j) �
Sea
�ftenr
Approved for Release: 2018/08/22 C06141801
Barents
Sea
The united States Government has not recognized
the incorporation of Ester.. Lat.,. and Lithuania
into the Soviet Union Other boundary representation
is not necessarily authontatave
*Moscow
Yelets
---,-)
__--,-- _s- A--
- �-,,,,' ..---
, .--
Black Sea
�
Yamburg
Gasfield
Orda
Soviet
Union
Sea
711295 (546685) 9-87
_ Approved for Release: 2018/08/22 C06141801
(b)(3)
East European Harvest Results Mixed
Smaller harvests in 1987 will add to economic strains in the southern countries of
Eastern Europe, while most of the northern countries will benefit from increased grain
production. Harvests in Yugoslavia, Bulgaria, and Hungary were slightly below average
because of drought and reduction of sown areas. In Romania, grain output probably was
average, but cold weather and dry conditions reduced other crops, such as potatoes.
Grain production in Poland, East Germany, and Czechoslovakia was above average, but the
harsh winter damaged fruits and vegetables, particularly in Poland, leading to some
consumer shortages.
Eastern Europe: Grain Production.
Northern Tier
� Million tons
Southern Tier
30
Poland
30
20
East Germany
20
11.-.1.-zechoslovakia
10
10
0 1983
84
85
86
87b
0
Romania c
''Yugoslavia
Hungary
Bulgaria
1983 84 85 86 87b
(b)(3)
31466310-87 (b)(3)
-stelter
Approved for Release: '21018/08/22 C06141801
(b)(3)
Approvedel for Release: 2018/08/22 C06141801-
--Sftrr
Already poor food supplies in Romania have worsened and most likely will
contribute to continued local demonstrations, such as in Brasov, if Bucharest exports food
at last year's high levels. Yugoslavia and Bulgaria probably will need to import more
grain than in 1986 and reduce agricultural exports; this course will damage Belgrade's
already weak hard currency position. In Hungary, grain exports also will be down,
although supplies are sufficient for domestic needs. Better harvests in recent years for
Poland reflect increased incentives for private farmers, a trend that may be strengthened
by President Jaruzelski's reform program.
�SEGRE-T-
A
Approved for Release: 2018/08/22 C06141801
Approved for Release: 2018/08/22 C06141801
Next 4 Page(s) In Document Denied
Approved for Release: 2018/08/22 C06141801
:
Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
:. Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
 Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801
 Approved for Release: 2018/08/22 C06141801
(b)(3)
Approved for Release: 2018/08/22 C06141801