ASSESSMENT OF ANDROPOV S POWER

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B01072R000100120023-1
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• Document Creation Date: December 20, 2016
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Attached are the papers requested on
Andropov and the Soviet economy. Let
me know if there is anything further we
can do.
Robert M. Gates
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Central Intelligence Agency
Office of the Deputy Director for Intelligence
MajGen Richard Boverie
National Security Council Staff
Rm. 386 OEOB
'QOM Deputy Director for Intelligence
Boverie, NSC
Montgomery, State
DCI
DDI
D/SOVA
DDI Registry
DDI Chrono
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H
Central Intelligence Agency
Office of the Deputy Director for Intelligence
Atched are copies of the papers on
Andro v and the Soviet economy we have
Dick Boverie at the NSC
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 Appro
Washinp{on. D.C 20505
DIRECTORATE OF INTELLIGENCE
13 December 1982
ASSESSMENT OF ANDROPOV'S POWER
certainly reflected an informal understanding at least among a
core group of members that the country needed a strong leader,
that Andropov was best qualified to assume the post, and, more
importantly, that Chernenko -- his chief rival and Brezhnev's
choice -- was weak and unacceptable. Andropov undoubtedly
exploited such negative views of Chernenko in his successful
efforts in May to maneuver his way back into the Secretariat
in order to become a major contender in the succession
sweepstakes. While Brezhnev's patronage gave Chernenko some
obvious advantages in this contest, this strength was not
institutionalized and evaporated with Brezhnev's death. The
speed of Andropov's ascendancy reflected a leadership desire
to project an image of decisiveness abroad and avoid any
to him as the "head of the Politburo," an accolade given to
Brezhnev several years after he was named General Secretary.
The Politburo's decision to promote Andropov almost
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Andropov's Power
General Secretary Yuriy Andropov is the most
authoritative leader in the Politburo and has demonstrated
impressive political power from the outset. He certainly has
more strength than Brezhnev had at the beginning of his long
tenure (in 1964). Andropov's status as top leader was most
visible in his meetings with foreign leaders only days after
he had become General Secretary. Moreover, Andropov has
already been given pride of place in protocol rankings and in 25X1
leadership listings, and a few officials have begun to refer
This paper was prepared by the Policy Analysis Division, Office
of Soviet Analysis. Comments and queries are w come and may be
directed to the Chief, Policy Analysis Division
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 signal of conflict and political paralysis, not a prearranged
decision made last May when Andropov entered the
Secretariat. Chernenko's own visibility and activity in
recent months sugges~ that the contest remained open while
Brezhnev was alive.
The Lineup
We do not know how various Politburo members actually
voted in the Andropov-Chernenko contest or even whether a
formal vote was taken, but Moscow rumors,
backing from Defense Minister Ustinov, Foreign Minister
Gromyko, and Ukrainian party boss Shcherbitskiy. With their
political fortunes still ahead of them, the two youngest
Politburo members -- party secretary Gorbachev and Leningrad
First Secretary Romanov -- may have joined this strong
coalition as well, at least on this vote. Chernenko probably
received support from the two Brezhnev loyalists -- Prime
Minister Tikhonov and Kazakhstan First Secretary Kunayev.
Grishin, the Moscow party chief, may have joined this group
possibly in hopes of becoming a compromise choice.
Octogenarian Arvid Pelshe was very likely too sick to play a
role in the decision. For his part Chernenko apparently did
not fight the decision to the bitter end, opting instead to
close ranks behind Andropov and preserve his position as
"second" secretary, a strategy that for the present has been
successful. Only Grishin -- to judge from his slippage in
protocol -- seems to have fought excessively and suffered for
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leadership status indicators, and informed
speculation provide the basis for a reconstruction of the
likely lineup. At a minimum Andropov seems to have had strong
it.
Andropov, thus, has institutional support where it
counts. The national security apparatus, particularly the
military-industrial complex and the KGB, is behind him. Such
backing gives him added room for maneuver but, at least in the
case of the military, cannot be taken for granted. He will,
in addition, need to strengthen his position within the party
apparatus. He lacks a strong regional base and must depend on
officials whose careers he has had little influence in
shaping .
Opportunities and Flexibility
Andropov, nonetheless, has come to power with what seems to
be solid backing and without resorting to a major political
bloodbath. This situation has allowed him to assume a more
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 authoritative stance in the leadership than Stalin, Khrushchev,
or Brezhnev did at a comparable point in these successions. His
promotion has giv a new momentum to leadership
decisionmaking.
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From what we can tell, is
colleagues recognize an value is ability and perceive him to be
intelligent. They know from his tenure as KGB chief that he can
be counted on to be decisive in preserving the party's legitimacy
and social order. They probably expect him -- within limits --
to be a bold, forceful leader, and they are likely to give him
some room to be such. As a result, he is probably in a strong
position to influence and lead the Politburo consensus.
Andropov seems to be in a particularly good position to
chart the course of Soviet foreign policy. He has considerable
experience and knowledge in this area and is obviously inclined
to take an active role. Foreign policy initiatives, moreover,
have the potential for producing beneficial results more quickly
than changes in domestic policy, a matter of considerable
importance for a leader who wants to build his power. He is not
as likely, in addition, to encounter the sharp factional
infighting and debate that occurs over proposals for domestic
shifts, particularly in economic management.
This situation effectively means that the Soviet Union will
not be paralyzed in the foreign policy arena. Andropov has room
for maneuver here and can be expected to propose initiatives and
respond to those from abroad he deems serious. In doing so,
however, Andropov will rely heavily on two of his colleagues on
the Defense Council, Defense Minister Ustinov and Foreign
Minister Gromyko, for advice. He would certainly need their
support to get the Politburo's assent to a major shift in Soviet
foreign policy or to make major modifications in arms control
negotiations with the US. Andropov will probably count on his
personal and political alliance with Ustinov and apparently good
working relationship with Gromyko to help create the Politburo
consensus required for important departures.
It seems likely that the three have been key figures in
formulating line pursued in Brezhnev
last years.
s long as they
remain united the Politburo is likely to fol ow their lead. If,
I
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on the other hand, there are significant disagreements
between them on future foreign policy steps or tactics, Andropov
would not be likely to force the issue at least in the near term.
Constraints
This flexibility on foreign policy, nonetheless, does not
mean that he has carte blanche from the Politburo. While he can
lead and shape the consensus, he is still bound by it. The
Politburo remains a collegial body and its current membership is
not beholden to Andropov nor under his thumb.. Andropov is
indebted to many of his Politburo colleagues, particularly
Ustinov, and is dependent on their collusion and support until
he can reshape the Politburo, a process that could take several
years.
Andropov's colleagues are evidently trying to hold back his
advance. The failure to name a replacement. for Brezhnev as
Chairman of the Presidium of the Supreme Soviet indicates
conflict. The personnel changes (Aliyev, Komsomol, progaganda
organs, Council of ministers) made since Andropov became party
chief while almost certainly endorsed by him, seem to have served
many interests within the leadership (Ustinov, Chernenko) as
well. Even if Andropov is named Soviet President at a scheduled
session of the Supreme Soviet on 21 December (a better than even
possibility), he must still push through even more politically
important personnel shifts in the Politburo and Secretaries
fully consolidate his position and to dominate policy.
The collective restraint on Andropov is likely to be
particularly evident in domestic policy. While the entire
leadership is undoubtedly committed to solving Soviet economic
problems as a top priority, consensus on what the solution should
be has not been reached. Economic issues are inherently
political, complex, and controversial. The bureaucratic
obstacles to significant changes in economic management are
immense. Andropov is probably generally knowledgeable about the
economy and is certainly well informed about issues affecting
internal security, but he has little personal experience in
economic management and his closest supporters are more concerned
with foreign and security policy. No one, moreover, as Andropov
emphasized to the Central Committee, has all. the solutions to the
country's economic difficulties. As a result, he is likely to
move cautiously in this area -- a strategy he said was needed in
his- plenum speech.
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Domestic and Foreign Policy Linkage
Significant movement toward resolving the nation's economic
problems might, in fact, require Andropov to achieve some
relaxation of tensions with the US on China or both. Only by
doing so can he justify to his colleagues and the military some
reallocation of resources from defense to investment, an
essential step in any plan to address the country's economic
problems. In this regard, the next two years are particularly
crucial for Andropov and the Politburo. The planning cycle for
tha 12th Five Year Plan -- 1986-1990 -- is already underway.
This will be the
new Politburo's first formal and comprehensive ordering or
internal priorities between economic investment and defense
procurement. Without reduction in international tensions, which
some in the military such as Chief of the General Staff Ogarkov,
contend are exceedingly high, the rate of defense growth will be
politically hard to reduce. Failure to reduce defense spending,
nonetheless, will make it very difficult to solve Soviet economic
problems and will over the long run erode economic base of
the military industrial complex itself.
Advisers
Andropov will also get advice from his own staff of foreign
and domestic aides. He is now assembling his team, and a few
have already been publicly identified. Andrey Aleksandrov-
Agentov, Brezhnev's longtime assistant, has participated in
several of Andropov's meetings with foreign dignitaries and
rnntinuPs to be identified as an aide to the General Secretary.
In addition to the formally identified group of personal
aides to Andropov, the new party leader will likely tap three old
associates on an ad hoc basis: Georgiy Arbatov, director of the
Institute of the USA and Canada, Aleksandr Bovin, a Brezhnev
speech writer, and Fedor Burlatskiy, an expert on China and
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public opinion. All three worked for Andropov in the 1960s when
he was the party secretary responsible for Communist Bloc
relations. These men are knowledgeable, sophisticated observers
of US policy and have been identified with Brezhnev's detente
strategy, but their actual influence on Andropov is not known.
Prospects
On balance, the speed with which the new General Secretary
was appointed, his assertion of a leading role in foreign policy,
and the self confident statements of Andropov and Ustinov on
international issues reflect real strengths and potential
flexibility on Soviet policy that were not present in Brezhnev's
final days. While there are bureaucratic obstacles to significant
changes in economic management, there does seem to be general
agreement on the need for action and this will provide some
receptivity to specific proposals as long as they preserve party
power. Additionally, the improved leadership ranking of the key
actors in national security affairs (i.e., Andropov, Ustinov, and
Gromyko) and the clouds on the international horizon for the USSR
provide the necessary consensus and incentive for change and
flexibility in foreign affairs.
During previous succession periods in the 1950s and 1960s,
for example, there were definite new departures in foreign policy.
In the fifties, the Soviets ended the Korean war, signed a peace
treaty accepting Austrian neutrality, reopened diplomatic relations
with Israel, called off disputes with Greece and Turkey, and moved
towards summitry with President Eisenhower. They also made their
first moves to counter Western influence in the Third World. In
the sixties, the Soviets developed a policy of selective detente with
France, then slowly did the same with West Germany, before turning
to improved relations with the US. Partly in response to worsening
relations with China, the Soviets also pressed for a series of arms
control measures that led to the nonproliferation treaty and SALT I.
At the same time, they began the buildup on the Sino-Soviet border,
gave impetus to a massive Soviet arms program, began aiding
North Vietnam's effort to take over the South. 25X1
The new leadership has already taken pains to reaffirm the
broad outlines of Brezhnev's foreign policy and to signal the
importance of improved ties with the US. Andropov's decision to
meet with Vice President Bush and Secretary of State Shultz
within hours after Brezhnev's funeral indicated the Kremlin's
interest in some normalization of US-Soviet relations. In view
of the prospect of an enhanced US strategic challenge in this
decade, there appears to be ample incentive for Andropov. to try
to curb new US arms program and particularly to prevent or at
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least delay the deployment of INF. The specter of Pershing-II
in the FRG and the attendant threat to Soviet strategic forces
and command and control capabilities could lead to new initiatives
in the INF negotiations as well as to build European opposition
to INF deployment. Gromyko's visit to Bonn next m h -- would
provide a convenient forum for such an initiative.ra_ 25X1
The Gromyko visit provides an opportunity not only to put
the US on the defensive but to increase divisions between the
US and its NATO allies. Gromyko will lobby for increased Soviet-
West European cooperation and trade, which provide political as
well as economic benefits for the Soviets. The removal of US
sanctions imposed after Afghanistan and the steady return to
normalcy in Po d will add to the credibility of Gromyko's
brief in Bonn. 25X1
The inability to effect some visible reduction of tensions
with the US will generate even greater interest in Moscow to
improve Sino-Soviet relations and to exploit differences between
Washington and Beijing. The Soviets clearly do not want
continued antagonism on "two fronts" at a time of more assertive
US policies, a mounting US defense effort, and ever increasing
economic problems at home. For these reasons, the Soviets have
sufficient incentive to entertain a unilateral move that would
include withdrawing a division or two from the Sino-Soviet border
or Mongolia in addition to thinning out various units in the area.
Although the reduction of force in any area would be highly
controversial within the Soviet military, it would probably
create the greatest geopolitical payoff if Moscow were able to do
so in Afghanistan. Any significant diminishing of the Soviet
military role there would offer considerable potential rewards:
-- removal of a key obstacle to improved relations with
both the US and China,
-- termination of a source of embarrassment in the entire
Islamic community,
-- earlier dealings with key European actors as well as
India, and
-- savings in both lives and treasure at home.
D
Elsewhere, continuity appears to be the order of the day.
Continued fighting between Iran and Iraq as well as the loss of
credibility in the wake of the Israeli invasion of Lebanon add up
to rather bleak short-term options in the Middle East. There are
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no likely targets of opportunity in South America at this
juncture, and the Soviets will probably be content to pursue
their gradual and incremental strategy in Central America.
In Africa, the Soviets will concentrate on complicating the
Namibean talks in which the Soviets also find themselves as
odd man out. They also will be alert to opportunities in
southern Africa -- such as in Mozambique -- to expand their
(and especially the Cuban) presence. Senior Politburo member
Grishin's anniversary speech earlier this month, which
reaffirmed Soviet support for Cuba and Vietnam, argues for
continued activism on behalf of Moscow's most important clients
in the Third World.
These Soviet priorities suggest areas for US pressure and/or
blandishment that could have an impact on Soviet ability to
improve their international position. Indeed, Andropov must
realize that the US is well placed in certain respects to
challenge the international position of the USSR and to exploit
Moscow's fear of the specter of encirclement.
-- The US could play the role of spoiler in the Sino-
Soviet-US triangle by. holding out to the Chinese the
promise of increased defense cooperation, expanded
technological ties, and a more equivocal position
on Taiwan.
US willingness to modify the "zero option" at INF would
preempt Soviet initiatives in this area and might help
sustain support for US deployments in Western Europe
(although such modifications might have other, less
desirable consequences).
prestige and leverage in the Middle East and Southern Africa
The mere perception of US pressure on Israeli and South
Africa to become more conciliatory would enhance Washington's
and commensurately reduce Soviet influences.
Conversely, the US is in a position to offer to Moscow some
restoration of the centrality of Soviet-American relations that
would enhance Moscow's international position and ameliorate
Moscow's economic problems.
-- There are several economic initiatives open to the US,
particularly some easing up of limits on credits and
technology transfer.
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-- Notwithstanding recent Soviet references to strengthening
defense, Moscow would like to prevent a major US arms
buildup, which they would be hard-pressed to match right
now and sees arms control as the best way to achieve this.
-- Less acrimonious atmospherics and a dialogue with the US
on Third World trouble spots would also be attractive to
Moscow, although past experience strongly suggests they
would not alter their behavior.
The Soviets have already suggested that they are looking for
ways to restore the notion of the centrality of Soviet-American
relations in international affairs, and presumably realize that
some relaxation of tensions would ease the problems of making
their own choices on future allocation of resources as well as
the pressure from the national security apparatus for increased
military spending. The rise in stature for Andropov, Ustinov,
and Gromyko suggests the emergence of a consensus on national
security issues in general and the prospect of some flexibility
on specific issues. Such putative critics of Andropov as
Chernenko and Grishin would probably support the triumvirate's
efforts to improve relations with. the US in view of their earlier
support for Brezhnev's detente and arms control initiatives. The
key role will be played by Ustinov who appears to be in a position
to block those initiatives that do not protect the equity of the
military.
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CONFIDENTIAL
Central Intelligence Agency
Washingpon.D C 20505
DIRECTORATE OF INTELLIGENCE
13 December 1982
The State of the Soviet Economy in the 1980s
The Basic Situation
Soviet economic growth will continue to decline in the 1980s
as average annual rates of increase in labor and capital decline
and productivity gains fall short of plans. We expect average
annual GNP growth to fall below 2 percent per year in the 1980s.
? The labor force will grow more slowly in the eighties
than it did in the seventies--at an average annual rate
of 0.7 percent compared with 1.5 percent.
? Growth in the productivity of Soviet plant and equipment,
which has fallen substantially since 1975, will continue
to drop as the cost of exploiting natural resources rises
and Moscow is forced to spend more on infrastructure.
? Continued stagnation in key industrial materials--
particularly metals--will inhibit growth in new
machinery, the key source for introducing new technology.
? Energy production will grow more slowly and become more
expensive, whether or not oil production falls.
? With continued growth in domestic energy requirements,
Moscow will face a conflict between maintaining oil
exports and meeting domestic needs.
Agriculture will remain the most unstable sector of the
Soviet economy, with performance in any year highly
dependent on weather conditions.
Slower growth of production will mean slower expansion in
the availability of goods and services to be divided among
competing claimants--resources for future growth (investment),
the consumer, and defense.
This memorandum was prepared by the Soviet Economy Division, Office of
Soviet Analysis. Comments and queries are wale d may be addressed to
Deputy Chief, Soviet Economy Division,
SOV M--82-10201
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? Continued rapid growth in defense spending can be
maintained only at the expense of investment growth.
? Slower expansion of investment will be compounded by the
increasing demand for investment goods in the energy,
transportation, metallurgy, and machinery sectors.
? An increased share of investment in heavy industries,
together with continued large allocations to agriculture,
will depress the expansion of housing, and other consumer
goods and services.
Making up production shortfalls through imports will become
more expensive as the need for imports increases and Moscow's
ability to pay (hard currency earnings) declines.
? The Soviet need for imports of Western grain and other
agricultural commodities will remain high in the 1980s,
as will requirements for Western machinery and techology.
? We expect real export earnings to decline between now and
1990 as sales of natural gas fail to offset the drop in
oil earnings, and opportunities to expand exports of
other commodities remain limited by their low
marketability and tightness in domestic supplies.
? The availability of Western credits will be crucial for
Moscow to maintain or increase its imports from the West;
a tighter credit market would complicate Soviet economic
problems and make resource allocation decisions more
painful.
Options for the New Leaders
Changes in Decision-Making Process
The poor performance of the economy during the latter years
of the Brezhnev regime has driven home to the new leadership the
notion that there are relatively few opportunities for quick
fixes and that the economic problems of the current decade may
spill over into the 1990s. Because the new leaders can expect to
reap the benefits of policies with longer pay-off periods, their
policy decisions may be more forward looking. The new leaders
will be especially sensitive to the fact that severe disruption
of the economic system by the implementation of hasty, ill-
conceived policies might be a quick route to both economic and
political disaster.
The new leadership probably will continue to favor
bureaucratic centralism rather than moving voluntarily toward
fundamental systemic change. These leaders--because of the
stringent economic situation and their own personalities--will
rely more on tightened discipline and control to effect economic
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policies of long standing than on coaxing desired behavior
through increased incentives. Andropov's long tenure in the KGB
has given him experience in using administrativeamedsur es to
modify behavior. Moreover, the Soviet people,
unsettling economic and sociaproblems, deseem ready to accept a
leader who would demand greater
' This trend, however, would not rule out a mix of liberal and
authoritarian measures. Greater dependence on the private
sector, for example, is a distinct possibility that could be
classified as liberal, while harsher penalties for labor
absenteeism and mismanagement, though authoritarian in nature,
need not mark a return to neo-Stalinism.
Changes in Policy
The new leaders will surely bring changes in economic
policy. Because they have laid particular stress on continuity,
and because it may take some time to develop a strong consensus,
new policy lines may not appear until the 1986-90 five year plan
has been drafted--i.e., 19 84/ 85. Some windications
s sof changenare
likely to be discernable next year,
debate about policies for the late eighties ensues and annual
plans for 1984 and 1985 are formulated.
Major Claimants. The hardest policy decision for the
Andropov leadership will be resource allocation among the major
claimants. Maintaining historical growth in defense spending
would squeeze investment and consumption further. Keepitngn an
investment growth at current rates as well, might re
absolute decline in consumption.
The Military. Strong incentives exist for at least some
slowdown in military hardware procurement. In addition to
needing more resources to break economic bottlenecks, a slowdown
(or even zero growth) in military procurement for a few years
would have no appreciable negative impact on forces already in
the field, and modernization of these forces could still
proceed. We believe the groundwork for such a course may have
already been laid in Brezhnev's speech to top military officers
if 27eOctober course will be required
i economic performance
f P
substantially.
Investment. A strong condidate to receive more investment
funds is the machine-building sector--because of the need to
modernize Soviet industry and because of constraints on importing
foreign machinery and technology. Modernizing machine-bull ding
would also help justify a temporary slowdown in defense hardware
as such action could ultimately enhance military hardware
production. The new leadership, with its longer time horizon,
might launch such an effort.
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Consumption. A new leadership prone to authoritarian
solutions is likely to be more pragmatic in its consumer policy,
lace more stress on tying wages and "perks" more closely
and may p prices may also be raised on all
to production results. Retail p
beain theeoffing~n of the private
but essential goosseand rvicesservices,
sector in consumer
Reform. The new leadership's predilection for
administrative measures and bureaucratic centralism would
severely limit the extent of future economic reform. The
difficult economic sittEuropeguthatghadsneverobeenetested inike
those lauched in Eastern
the USSR. Some movement toward a regionally organized economy
might be thought more suitable to today's problems--for example,
exploitation of energy and raw materials in Siberia.
Agriculture. The new leaders will continue to support the
farm sector, but might decide to favor the industries that Food
support agriculture and those that processbitsaoutp t. cut of
Program already does this to some extent, un actual
investment inside the farm gate would be a stronger signal of the
new leaders' dissatisfaction with the returns from agricultural
investment.
Labor. In addition to instilling tighter discipline, the
new leaders are apt to focus on automating manual reloping
The
(consistent with more investment in machinery), and social and cultural infrastructure in labor-deficit regions.
latter would provide some inducment for egrantstfromdlabornatal
surplus areas and reinforce a regionally di
policy favoring the labor deficit areas.
East-West Trade. With economic problems pressing from every
quarter, the new leadership might welcome--though perhaps not
publicly--the opportunity to expand economic ties with the West
in general and with the US in particular; the more so if
decisions are taken to slow growth in military hardware, step-up
investment in machinery, and reduce investment on the farms.
Under these circumstances, Moscow might find it advantagous to
press for (1) economic ties that provide them with technology and
goods for both civilian and military purposes and (2) arms
control arrangements tifindT''idifficultVandecostlyitotcounter.
technology which they would
Impact of Changes. These changes in approach and policies
will not be a panacea for the Soviet economy's ills.
Nevertheless, the changed policies could bring marginalo
improvements in key areas and allow the new leadership to
continue to muddle through even in face of aceeofedeconomic crimary
had
conditions probably worse than they
importance to the new leaders, these policies would no"t.require
the surrender of power and would continue to allow them the
freedom to impose their will on the smallest economic or
administrative unit. In this way, they could feel assured of
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their ability to handle such problems as public unrest, external
economic or military threats, or internal disasters that would
require an emergency redistribution of resources.
Opportunities for the US
Opportunities for the US to influence the policy changes
discussed above lie mainly in whether and to what extent we are
willing to expand commercial ties with Moscow and in the signals
we send the new Soviet leaders with respect to arms control
negotiations. Of most immediate use to Moscow would be an arms
control agreement that would provide a more predictable future
strategic environment and thereby permit the Soviets to avoid
certain costly new systems--and perhaps thereby enable them to
increase somewhat future investment for bottleneck sectors of the
economy--particularly transportation, ferrous metals, and machine
building. Soviet officials have clearly indicated that staying
with the United States in an arms race would have dire consequences
for their economy. They probably are also uncertain of their
ability to keep up technologically.
Moscow's recent attitude toward purchases of US grain not-
withstanding, the United States could again become an important
source of Soviet purchases of agricultural products and machinery
and equipment for both agriculture and industry. The need is
there, if the "price" (including sanctity of contract) is right.
Soviet agriculture could benefit substantially from US technology
in livestock feed production, fertilizer application, and animal
breeding, and the US is still Moscow's best long-term bet for
grain imports on a large scale.
The USSR faces increasing dependence on the West in developing
and processing its oil and gas resources in the 1980s. From a
technical viewpoint, the US is the preferred supplier of most types
of oil and gas equipment because it is by far the largest producer,
with the most experience, the best support network, and often the
best technology. In some products--for example, large capacity
down-hole pumps--the US has a world monopoly (albeit one that could
be broken in a few years by entry of other Western producers),
and the most critical needs of Soviet oil industry are for just
such equipment.
Because the prospects for Soviet hard currency earnings in
the 1980s are far from bright, Western credits will have to cover
an increasing proportion of Soviet imports from the West. An
increase in the availability of US government backed credit could
look very attractive to the new leaders in Moscow.
However, since the mid-1970s, the Soviet experience in com-
mercial relations with the US has been disappointing to,-Moscow,
and it would probably take a strong initiative on our part just
--to get their attention. Although a US offer to renew close economic
ties with the USSR might be welcome, it would probably be greeted
skeptically by the Soviet leadership as primarily a tactical maneuver--
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a further retreat by Washington (following the grain and pipeline
decisions) brought about by US-West European economic competition
and pressures from US business circles. Needing to consolidate
his power, Andropov could not--even if he wished--respond unilat-
erally to such an initiative, but would have to move within a
leadership consensus strongly influenced by the views of Gromyko
and Ustinov, who would urge caution. Thus the Soviets might:
? Accept part of the offer as a means of coping with
particularly acute bottlenecks, especially in technology
and food supplies.
? Seek to avoid the establishment of long-term economic
dependencies on the US.
? Exploit any new atmosphere of mutual accommodation as a
means of reinforcing support in the United States and
Western Europe for cutbacks in defense spending and arms
control measures favorable to Soviet interests.
We would expect the Soviets to give any US initiative low-key
treatment, publicly casting doubt on US motives, but at the same
time seeking to engage the Administration in a dialogue about it.
A US offer to return to a "business-as-usual" basis would probably
not result in any surge in orders for US companies beyond the sectors
in which the US is already an important supplier. Moscow is at least
as likely to use the opportunity created by a US offer to put commercial
pressure on the West Europeans and Japanese, and exacerbate existing
tensions in the Alliance. At a minimum, Moscow would press for US
government guarantees regarding fulfillment of contracts while at a
maximum it might seek repeal of the Jackson-Vanik and Stevenson amend-
ments. In either case, it would refuse to make any significant
political concessions in return--which Andropov probably could not
deliver even if he desired. If this process permitted the Soviets
to acquire more technology on acceptable terms from the United States,
they would do so--but not at the expense of established ties with
Western Europe and Japan, or of their own long-term economic inde-
pendence. The Soviets have traditionally taken advantage of
opportunities to exploit relations with the West to acquire tech-
nology and goods for both military and civilian purposes and we
expect they will continue to do so.
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