EUROPEAN REVIEW SPECIAL ISSUE: FOCUS ON CEMA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01184R000200640001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 30
• Document Creation Date: December 22, 2016
• Document Release Date: September 21, 2010
• Sequence Number: 1
• Publication Date: February 13, 1985
• Content Type: REPORT

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Intelligence I IRM
K, i
European Review
Special Issue: Focus on CEMA
13 February 1985
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13 February 1985
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European Review
13 February 1985
Briefs Italy: Wage Indexation Referendum
Portugal: Seeking To Limit RENAMO Activities
Turkey-Iran: Results of Iranian Prime Minister's Visit
Yugoslavia: Officials Censured for Economic Mistakes
Bulgaria: Increased Incentives for Research and Development
Developments since 1980 have highlighted the importance of
economic links and dependencies within the Council for Mutual
Economic Assistance (CEMA). These developments have raised
questions about the nature and degree of Soviet control over Eastern
Europe, whether there are important shifts on the way, and whether
and how the West can be a significant factor in the equation.
Articles in this issue provide our assessment of the current situation
and point to a few likely future trends.
After years of drift and temporizing, CEMA party leaders gathered
in Moscow last June to address the problems that have hindered
cooperation throughout CEMA's 36-year history. The summit
developed a long-term strategy for the organization, but its
interpretation and implementation have yet to be worked out. The
need to conclude agreements for the 1986-90 period will increase
pressure on negotiators this year, but we expect the inevitable
concentration on practical questions will delay implementation of
the summit's far-reaching but vague directives beyond the end of
1985.
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CEMA: Planning for Long-Term Cooperation
The Soviet Union has initiated discussions on a wide array of
multilateral and bilateral economic agreements with other members
of CEMA designed to limit CEMA's dependence on the West and
exert tighter control over the East Europeans. These will be long-
term arrangements to guide economic relations within CEMA for
the rest of the century. Although Moscow can cite these framework
agreements as guidelines for cooperation and trade, the
commitments appear too weak and nonspecific to ensure that Soviet
goals will be met.
Eastern Europe: Trade Relations East and West
Despite the rising share of the USSR in Eastern Europe's trade in
recent years, our estimates indicate that Moscow has not stepped in
to replace imports from the West. In terms of the volume of trade,
the Soviets in fact have reduced deliveries to Eastern Europe slightly
while the East Europeans have met Soviet demands for substantial
increases in exports. This has complicated Eastern Europe's efforts
to adjust its trade with the West.
One Analyst's View 23
Economic News in Brief 27
Looking Ahead 29
Some articles are preliminary views of a subject or speculative, but
the contents normally will be coordinated as appropriate with other
offices within CIA. Occasionally an article will represent the views
of a single analyst; these items will be designated as uncoordinated
views.
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?7C _I U t
The Italian Constitutional Court recently approved last year's proposal by the
Communist Party (PCI) to put the issue of last year's six-month limit on wage
indexation before the voters-in effect moving this important economic decision
from parliament to the ballot box. Most labor leaders oppose the referendum,
including those in the Communist-dominated CGIL, partly for fear that it would
further split the labor movement, but the rank and file may ignore their
leaderships' concerns.
If the referendum comes to the vote sometime this spring, it would probably pass,
seriously eroding Rome's efforts to reduce inflation and having other far-reaching
implications for economic policy. Rome's cap on wage indexation was a key
element in bringing Italy's inflation rate down from 15 percent in 1983 to 10.6
percent last year. By repealing the cap, Rome will not be able to hit its 7-percent
inflation target this year. In addition, an estimated $1 billion hike in government
personnel costs would hamper Rome's efforts to control a budget deficit that
amounted to over 16 percent of GDP last year.
The Basque regional government and the Basque Socialist Party signed a
legislative pact on 30 January, which should break the yearlong 32-32 seat
deadlock between the Basque Nationalist Party (PNV) and the Socialist-
dominated opposition in the Basque parliament. Among other things, the pact
deals with cooperation on terrorism, the economy, the transfer of autonomy
powers, and review of the laws governing provincial and regional relations,
including the controversial law of the historical territories. Both sides made
concessions: the Basque government by formally accepting the Spanish
Constitution and agreeing to collaborate on terrorism and the Socialists by
yielding on the transfer of power to the regional government and by implicitly
committing more help for the troubled Basque economy.
In the area of terrorism, the regional government committed itself to help the
Socialists fight terrorism, agreed not to conduct direct political negotiations with
ETA, and accepted Madrid's authority to conduct foreign relations (recently
ousted President Carlos Garaicoechea sometimes dealt with foreign governments
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Ardanza as he seeks to implement the provisions of the agreement.
same splits in the PNV that forced Garaicoechea's resignation will plague
directly). Both sides have hailed it as a step forward in Basque-Madrid relations,
and newly elected Basque President Jose Antonio Ardanza's ability to work with
Basque Socialist leader Txiki Benegas is a positive sign. Even so, the agreement is
vague on key points and could crumble. Significantly, the pact was not negotiated
with the PNV, but with the government itself, leaving the PNV free to distance
itself from the accord-despite its public support-if it chooses. Moreover, the
Portugal Seeking To Limit RENAMO Activities
As part of its effort to improve relations with Mozambique, Lisbon is seeking ways
of legally circumscribing the activities of the Mozambique National Resistance
Movement (RENAMO) in Portugal. Mozambican President Machel has publicly
complained that RENAMO is supported by individuals within the Lisbon
government and has warned that bilateral relations will suffer if strong measures
are not taken. Deputy Prime Minister Carlos Mota Pinto is most often mentioned
as RENAMO's "Lisbon connection."
from supporters in Portugal.
The government is considering ways to prevent RENAMO leaders in Portugal
from speaking publicly, but most are Portuguese citizens and enjoy guarantees of
free speech. Lisbon is also contemplating bringing criminal charges against
RENAMO leaders for the murder of Portuguese citizens in Mozambique. That
move may backfire, as it would give them a public forum for airing their views.
Moreover, efforts to totally muzzle RENAMO could result in a political backlash
hostile references to each other in domestic media.
Iranian Prime Minister Musavi's visit to Ankara in January appears to have been
a success, according to the US Embassy in Ankara. Agreements were signed
committing Iran to buy $2 billion in Turkish goods in exchange for Turkey's
purchase of 6 million tons of Iranian oil, as well as for feasibility studies for two
pipelines to export Iranian oil and natural gas through Turkey. Musavi promised
never to permit Iranian territory to be used by Armenian or Kurdish activists
against Turkey, and apparently did not repeat Tehran's complaint that Turkey is
harboring counterrevolutionaries. The two sides also signed a cultural agreement
permitting the Turks to monitor Iranian cultural activities in Turkey, and banning
influence in Ankara.
The chill in Turkish-Iranian relations stemming from anti-Kurdish operations by
Turkey in Iraq last year appears to have ended. The visit demonstrates Ankara's
playing on Iran's continuing fears that Turkey could edge closer to Iraq. The
Turks suspect the Iranians finally agreed to Ankara's request to discuss pipeline
projects for fear that a planned second oil pipeline from Iraq would increase Iraqi
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Yugoslavia Officials Censured for Economic Mistakes
In late January the People's Assembly of the Macedonian Republic voted to sack
former senior assembly officials associated with construction of a recently
liquidated smelting combine. The announcement said the action was part of an
effort to establish "personal and collective" responsibility for the decision to
construct the project, but also suggested that allegations of evidence tampering
were being investigated. Earlier, Macedonian party chief Pancevski had singled
out the combine at a republic central committee plenum as an example of
economically unjustifiable investment. Because of numerous cost overruns, heavy
foreign debt, and inability to compete on the world market, the plant was forced to
close last year after absorbing at least $300 million in hard currency investment
funds.
The targeted officials would be the most senior figures penalized for economic
mistakes in post-Tito Yugoslavia. The Macedonian leadership probably intends
the penalties to show that it is serious about economic reform, though the censure
is largely symbolic since it appears to exclude the senior party officials who
approved the project. Macedonian leaders have supported many proposals pushed
by Serb reformers, including those for holding decisionmakers accountable for
their actions. In this case, however, the accused may have forced the Assembly to
react because of the bold destruction of evidence; they may also be victims of
another power struggle within the Macedonian leadership.
Bulgaria Increased Incentives for Research and Development
In an effort to spur economic growth through productivity gains, the Bulgarian
Council of Ministers has increased bonuses for technology developments and
managerial processes that reduce production costs. Cash incentives have been
nearly doubled, and managers and workers are to share in bonuses if they
cooperate in new production initiatives. In addition, enterprises will receive 1
percent of their foreign currency revenues as an incentive to boost exports.
The regime hopes that encouragement of domestic research and development will
minimize Bulgaria's dependence on expensive Western capital imports. We do not
expect these measures by themselves to have a significant impact on industrial
productivity as long as funds for research and development are allocated centrally.
To modernize production, Sofia will need to combine entrepreneurial incentives
with a less centralized investment policy and a willingness to increase capital
imports from the West.
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Perspective:
Getting Started on CEMA
Several months ago, the Deputy Director for
Intelligence established a task force to conduct
research and produce intelligence on the Council for
Mutual Economic Assistance (CEMA), the
multilateral economic organization of Moscow and its
allies. Our effort is intended to satisfy the increased
interest of policymakers in economic ties between the
USSR and Eastern Europe. The task force will
concentrate on Soviet-East European economic
relations, setting aside the three non-European
members of CEMA-Vietnam, Cuba, and Mongolia.
Economic issues are key to overall Soviet-East
European relations. Perhaps less than military but
more than political issues, economic questions in the
Bloc require a nearly continuous series of decisions.
Day-to-day deliveries as well as annual trade
protocols often require high-level attention, while
long-run plans for cooperation and coordination of
economic strategies and policies are key determinants
of-or constraints to-national economic plans.
Several developments since 1980 have highlighted the
importance of economic links and dependencies within
CEMA: the Polish crisis of 1980-81; Eastern Europe's
financial and economic problems of 1981-83;
Moscow's growing distaste for economic assistance to
its allies; and strains between the USSR and the East
European regimes over the wide spectrum of political,
military, and economic issues that affect their
relations. These developments have raised questions
about the nature and degree of Soviet control over
Eastern Europe, whether there are important shifts on
the way, and whether and how the West can be a
significant factor in the equation.
The task force intends to address these questions
through development of an understanding of the
economic dependencies within CEMA. Although our
primary objective is research, from time to time we
will offer assessments of current trends and
developments. We will address-directly or
indirectly-questions and issues such as the following:
? How important are East European goods to the
USSR? Do the Soviets rely heavily upon certain
imports from Eastern Europe? Can the East
Europeans fill important gaps in the Soviet
economy, such as oil and gas equipment and
consumer goods?
? How dependent is Eastern Europe on the USSR?
Besides energy, what items are vital to the East
European economies? How do the aggregate trade
flows affect macroeconomic performance?
? How does intra-CEMA trade relate to East-West
trade? What opportunities does Eastern Europe
have to find substitutes within CEMA for imports
from the West? Has the Soviet Union helped
Eastern Europe adjust to its debt problem? Does
greater CEMA cooperation imply reduced reliance
on Western technology, or will the heightened
emphasis on "intensive development" through
technology demand a larger role for imports from
the West?
? How do economic relations affect the overall
relationship within the Bloc? Does Moscow use
trade to pressure its East European allies?
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The articles in this issue provide our assessment of
current developments in CEMA:
? The analysis of Soviet-East European trade
examines trade in real terms to show that-contrary
to East European rhetoric and Western concerns-
the Soviets have not replaced imports Eastern
Europe previously bought from the West.
? The modest momentum from the CEMA summit
last June appears to have faded, and the Soviets and
East Europeans may miss the chance to incorporate
its vague directives in the five-year plan period that
begins in January 1986. Similarly, the Soviet effort
to wrap up very long-term agreements in the
CEMA framework and with each East European
country may meet the same fate as earlier attempts
to achieve genuine integration.
We consider these conclusions, which together suggest
that little has changed or will change, to be
preliminary. Soviet determination to make its allies
less dependent on the West combined with some
easing of the recalcitrance of two of CEMA's problem
members-Poland and Romania-could provide a
chance for progress in CEMA.
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CEMA:
Still Searching for Consensus
After years of drift and temporizing, CEMA party
leaders gathered in Moscow last June to address the
problems that have hindered cooperation throughout
CEMA's 36-year history. The first CEMA economic
summit since 1969 developed a long-term strategy for
the organization, but its interpretation and
implementation have yet to be worked out. The need
to conclude agreements for the 1986-90 period will
increase pressure on negotiators this year. We expect,
however, that the inevitable concentration on
practical questions will delay implementation of the
summit's far-reaching but vague directives beyond the
end of 1985.
Review of the Summit
Probably to avoid East European pleas for assistance,
Moscow objected in 1980 when Romania first
proposed holding a summit. In 1981, however, the
Soviets developed their own agenda and seized the
initiative in organizing the meeting.
the Western press reported during 1982
and 1983 that a summit was imminent, but continued
disagreements over the agenda led to repeated
postponements. According to a senior Polish official in
a press interview, members had to rule on 270
proposed amendments to the original draft. An
agenda was finally agreed to in the fall of 1983, but
Soviet President Andropov's failing health prevented
scheduling of the meeting. Immediately after
Andropov's death in January 1984, new Soviet leader
Chernenko told Romanian President Ceausescu that a
CEMA summit was a major priority, and in April the
Politburo announced that the meeting would be held.
Tensions between the Soviets and East Europeans
over a wide range of economic and other issues raised
the prospect that the meeting would be openly
contentious, but the meeting did achieve some unity.
The lengthy preparations-including a series of
advance bilateral meetings between Chernenko and
East European leaders-helped to settle or at least
paper over differences. Soviet spokesmen thoroughly
dominated reporting on the summit, and, on the East
European side, only a statement by Poland's Premier
Jaruzelski on behalf of the East European leaders was
published.
The summit adopted general guidelines for economic
relations among the CEMA countries and for
development of a long-term strategy of economic
growth. The leaders emphasized a cooperative
solution to the region's problems by accelerating
"intensive" development through productivity
increases based on advances in science and
technology-versus "extensive" development, which
relies on greater inputs of labor, capital, and raw
materials to promote growth.
The CEMA summit approved and released an
economic statement and a political declaration.
Although it is possible that other agreements were
approved privately, the general tone and the lack of
details probably indicates that compromises were
needed to reach a consensus. In this sense, the summit
represented East European success-sometimes by
combining into coalitions, according to US Embassy
sources-in fighting off more demanding Soviet
proposals.
On the major issues facing CEMA, some main
directions for the future emerged:
? Soviet-East European trade. Moscow won
grudging commitments from the East Europeans to
supply more-and higher quality-food, consumer
goods, and machinery in return for continued Soviet
deliveries of energy and raw materials. In some
instances, the East Europeans are to tailor their
investment policies and their industries to supply the
Soviet market.
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? Technology. Perhaps the summit's most important
step was the decision to develop a blueprint for
scientific-technical policy and coordination. Highest
priority areas are electronics, microprocessors, and
robotics-the same areas that CEMA has
emphasized in the past few years and that offer the
most promising opportunities for cooperation.
? Trade with the West. While the leaders sharply
criticized Western sanctions and asserted that the
socialist countries "possess everything they need,"
they declared that the CEMA countries want to
develop cooperation with capitalist firms and states.
The leaders also revived an old Soviet proposal for
an agreement between CEMA and the European
Community (EC).
? Energy. The only specific reference was to the need
for conservation among member states, primarily by
introducing more efficient equipment and by
restructuring industries to less energy-intensive
production.
? Integration. The word integration was replaced
mostly by the term cooperation, which connotes a
more voluntary approach to economic interaction.
To facilitate cooperation, the leaders agreed to
promote direct contacts among countries by
economic units at lower levels and to encourage the
creation of joint firms.
Developments Since the Summit
CEMA's knottiest problems survived years of
negotiations and a summit meeting without being
resolved, and, in the eight months since the summit,
lower levels have made little progress in turning vague
declarations into an operative consensus. CEMA
committees and organizations in each country have
been charged to implement summit decisions.
Communiques from bilateral economic meetings and
CEMA committee meetings have alluded liberally to
the summit and have reported discussions of the
major issues, but no important new decisions have
been announced:
? On the joint investment projects, the East
Europeans appear to accept in principle the Soviet
insistence on East European investments, but they
are continuing to balk at the specific terms.
? The initiative for an agreement with the European
Community was delivered formally in October, but
it was promptly rebuffed by an EC official as
nothing new. CEMA may soon reply to the EC's
letter of 1981-a condition set by the EC for
resumption of negotiations between the two
economic communities.
? Drafting of the science and technology program
"for the next 15 to 20 years" is going slowly and
probably will not be completed on target this year.
The most significant decision so far is that of the
CEMA Foreign Trade Committee which, according
to an Embassy Moscow source, last December agreed
to continue to base intra-CEMA trade prices on the
average of world prices in the previous five years.
Official statements following the meeting in January
of CEMA's Executive Committee confirm the report.
This decision, in fact, counters one of the clear signals
of change produced by the summit; at a news
conference after the summit, a Soviet official said
that CEMA would change its pricing formula to
make it more responsive to world prices.
Heavy Agenda in 1985
On the eve of a new five-year plan period, 1985
promises to be a critical year for CEMA. Probably
not since the early 1970s have CEMA officials and
regimes in member countries had so many important
agreements to conclude. Agreements due to be
completed this year include:
? CEMA's program for scientific and technological
cooperation for the next 15 to 20 years.
? Coordination of national economic plans for 1986-
90.
? Bilateral trade agreements for 1986-90; as well as
more detailed and binding bilateral trade protocols
for 1986.
? Coordinated Plans of Multilateral Integration
Measures for 1986-90.
? Bilateral programs for economic cooperation
through the year 2000 between the USSR and
Bulgaria, Czechoslovakia, Hungary, and Romania.
? Joint investment projects for 1986-90.
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Decisions made in 1985 will go far toward
determining the degree of cooperation, areas of
priority and terms for joint investment, levels and
balances of trade, and lists of commodities to be
exchanged. These factors, in turn, will be crucial to
the development of the East European economies over
the medium and long term, and they could be
important to the USSR as well. Moreover, the
substantive results of talks this year will offer a clear
indication of the power of decisions taken at the
summit last June to tighten CEMA coordination,
redress the trade imbalances of the mid-1970s
through the early 1980s, and push the countries
toward technological progress and coordination.
We expect that progress will be slow and that few
major additional changes are in the offing. Judging by
previous negotiations, the first priority probably will
be to conclude trade agreements because of pressure
to establish a basis for continuing foreign trade. The
broad outlines of Soviet-East European trade for the
next five years were determined last year, but the
East Europeans may well plead with Moscow for
special consideration to get better terms. Joint
investment also is likely to be high on the agenda,
because of Soviet impatience, long leadtimes, and the
size of its impact on planning throughout the region.
Many of these negotiations are interdependent, so
that disputes in one may complicate others. The full
agenda of contentious issues and CEMA's chronic
slowness probably will push conclusion of some of the
agreements into next year or later. Coordination of
plans for the 1981-85 period, for example, was not
completed until 1982. Negotiations on the most
pressing questions may combine with the usual
difficulty of reconciling diverse objectives to preclude
progress on the more fundamental issues that affect
the way CEMA works.
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CEMA: Planning for Long-Term
Cooperation
The Soviet Union has initiated discussions on a wide
array of multilateral and bilateral economic
agreements with other members of the Council on
Mutual Economic Assistance (CEMA) ' designed to
limit CEMA's dependence on the West and exert
tighter control over the East Europeans. These will be
long-term arrangements to guide economic relations
within CEMA for the rest of the century. Although
Moscow can cite these framework agreements as
guidelines for cooperation and trade, the
commitments appear too weak and nonspecific to
ensure that Soviet goals will be met.
Multilateral Programs
Science and Technology. Perhaps the most important
result of last June's CEMA summit was the "Long-
Term Comprehensive Program for Cooperation in
Science and Technology for the Next 15 to 20 Years."
Still incomplete, the program has been billed as equal
in significance to CEMA's highly touted 1971
Comprehensive Program for Economic Cooperation
and Integration.
The program appears to be a Soviet effort to make
technology CEMA's primary concern, and aims to
coordinate development of high-technology industries.
Although it does not rule out a role for Western
imports, a major reason is to defend CEMA against
Western controls on exports of technology. The
program emphasizes cooperation in five key areas-
electronics, flexible manufacturing systems, nuclear
energy, advanced materials technology, and
biotechnology. A basic goal is to avoid duplication of
effort and make CEMA's high-technology products
compatible by sharing data and research. Although
CEMA technology is largely unsophisticated by
Western standards, pooling resources could provide
badly needed gains in productivity. A more
' CEMA members include Bulgaria, Czechoslovakia, East
Germany, Hungary, Poland, Romania, the USSR, Cuba, Vietnam,
ambitious-and contentious-goal would be to assign
certain tasks and responsibilities to individual
countries. Most East European countries continue to
resist Soviet or CEMA measures that would dictate
which industries must be located in which country.
The program appears to be going slowly, and the goal
of completing it by the end of this year may not be
met. In an unusually blunt public criticism,
Czechoslovak Premier Strougal-a proponent of the
program-recently noted that "there are instances of
serious delay in this work." He recommended that
CEMA's Executive Committee review the drafting of
the program and urged the Committee to assure that
it be accompanied by measures linking it to
cooperation in production.
Other CEMA -Wide Agreements. The major
accomplishment announced at the October 1984
Havana gathering of CEMA premiers was agreement
on "Long-Term Comprehensive Measures for
Cooperation in the Sphere of Energy, Fuel, and Raw
Materials for the Period Through 1990 and Beyond."
the
USSR will continue to supply fuel and other raw
materials at present levels in return for more and
better quality East European goods, greater
conservation efforts, and increased investments in
joint projects. In addition, members agreed to work
out plans for building nuclear power plants through
the year 2000. Finally, in January, the CEMA
Executive Committee discussed a program for joint
electric power development up to the year 2000, and a
complex program of cooperation in transport for
1991-2000.
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Let's make a deal. Senior Soviet officials look on as Jaruzelski
and Chernenko sign a program for cooperation through the year
2000.
Bilateral Cooperation Through 2000
The USSR is also negotiating long-term bilateral
agreements with each East European country in
science, technology, and economics. Bilateral accords
can be tailored to fit the Soviet relationship with each
country, and they reflect the reality that CEMA has
little real authority as a multilateral organization.
Agreements already signed with Poland and East
Germany repeat many of the provisions of planned
multilateral programs
Poland. On 4 May 1984, General Jaruzelski and
party leader Chernenko signed the "Long-Term
Program for the Development of Economic,
Scientific, and Technical Cooperation Between the
USSR and Poland for the Period Up to the Year
2000." A harbinger of subsequent accords, the
agreement covers cooperation in all major areas of the
economic relationship.
In machinery, both sides are to modernize existing
industries, as well as devote special attention to
emerging industries-microelectronics, robotics, and
flexible manufacturing systems. Although the
agreement specifies some 15 sectors in which each
country will specialize, the list does not represent any
change from the status quo.
The fuel and energy section guarantees Soviet
deliveries of energy. In return, Poland will help with
the construction of natural gas pipelines in the USSR
and, according to a Polish official, produce machinery
to manufacture large-diameter pipe.
The key innovation is the encouragement of expanded
relations between planning organizations, enterprises,
and institutes (including the Polish and Soviet
Academies of Science). The Polish press has cited
several efforts to implement the commitment:
? Jaruzelski met last September with about 60 Polish
enterprises to discuss ways to stimulate further
cooperation with Soviet counterparts.
? Beginning in 1985, annual trade protocols
will allow some Polish and Soviet enterprises to
bypass foreign trade organizations in both countries.
East Germany. After two and a half years of
negotiations, a program for long-term bilateral
cooperation was signed on 6 October 1984 by Soviet
Minister of Foreign Affairs Gromyko and East
German party leader Honecker. Agreement was
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reached at a time of political strains in the
relationship with Moscow, one month after the
postponement of the Honecker visit to West
Germany. Unlike the Polish-Soviet program, the text
of the "Program for the Development of Cooperation
Between the USSR and the GDR in Science,
Technology, and Production for the Period Until the
Year 2000" was not published, but the press carried
several details of it.
The program is similar to the Soviet-Polish pact:
? The industries specified for cooperation are roughly
the same.
? It calls for modernizing manufacturing plants in
both countries.
? Energy supplies from the Soviet Union are to be
secured in part through East German construction
of capacity to produce equipment for the Soviet oil
and gas industry.
Differences vis-a-vis the Soviet-Polish agreement
appear to be mainly ones of emphasis. In particular,
the East German program puts greater stress on
cooperation in science and technology, in recognition
of East Germany's strength in these fields. It
emphasizes all aspects of microelectronics-
manufacturing, developing new technologies and
applications, and exchanging equipment and material
inputs.
More To Come. In recent months, communiques from
bilateral meetings between Soviet officials and those
in Bulgaria, Hungary, Czechoslovakia, and Romania
have announced negotiations on programs for
cooperation through 2000. We have few details on the
status of these preparations, but the Soviets probably
would like to sign pacts modeled on the Polish and
East German programs by the end of 1985.2
2 Soviet programs for bilateral cooperation through 2000 are not
limited to the East European CEMA members. Vietnam in October
1983 and Cuba in October 1984 signed similar "year 2000"
programs. The Mongolians and the Soviets announced in
November that preparatory work is under way. The East European
countries are also negotiating bilateral programs through 2000 with
each other. Poland's Deputy Premier Messner, for example,
announced last October that Warsaw had concluded agreements
with Bulgaria, Hungary, and Romania and was involved in talks
Predecessor Programs: False Starts of the 1970s
The current drive to wrap up agreements that will
guarantee and direct cooperation for the long term
resembles two major CEMA programs launched in
the 1970s with the same purpose. Although they are
nominally still in effect, both fizzled after only a few
years.
The Comprehensive Program. Two years after it was
proposed at the 1969 Summit, CEMA adopted "The
Comprehensive Program for Further Expansion and
Improvement of Cooperation and Development of
Socialist Economic Integration Among CEMA
Member Countries. " The Comprehensive Program,
considered one of the most important tracts in
CEMA's 35 year history, was designed to stimulate
and guide economic integration for the following 15
to 20 years. It called for extensive plan coordination,
joint investment projects, and increased multilateral
financial relations, including covertibility of the
transferable ruble. Progress in achieving these goals
has been largely disappointing.
Long-Term Target Programs. In the late 1970s,
CEMA initiated long-term programs to single out
five areas for special emphasis in applying the
provisions of the Comprehensive Program. Programs
for energy and raw materials, agriculture and food
industry, and machine building were approved in
1978; those for industrial consumer goods and
transportation were approved the next year. The
Target Programs were accompanied by Soviet
bilateral agreements with each East European
country. Signed in 1979 and 1980, the bilateral
accords also were to cover economic relations
through 1990, but these too have shown few concrete
results.
Obstacles to Integration
Rhetoric aside, there are several reasons to be
skeptical that a breakthrough to achieve genuine
economic integration in CEMA is in the offing.
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Remarkably similar programs launched in the 1970s
with great fanfare were billed as blueprints for
CEMA for 15 to 20 years, but they were quickly
overtaken by events. The Comprehensive Program for
Integration of 1971 failed to offer an attractive
alternative to opportunities then opening up for
CEMA members to trade with the West. The Long-
Term Target Programs of a few years later were
designed to inject new life into the Comprehensive
Program and to guide cooperation through 1990, but
the Polish crisis and Eastern Europe's financial
difficulties consumed the economic efforts of the
region in the early 1980s and disrupted plans for
cooperation.
The present drive for increased integration, like past
efforts, relies heavily on jawboning. It leaves virtually
untouched the chronic obstacles to cooperation:
deficient financial mechanisms; the East Europeans'
continued desire for a measure of political and
economic autonomy; bureaucratic and inefficient
management; and discrepancies between the types
and quality of goods being offered and demanded.
The only significant exception is the seemingly
genuine encouragement for improved links among
lower level economic units in different countries,
particularly the USSR. Previous programs have
stalled in part because lower levels ignored the
directives of the political and planning authorities.
Even this is new only in degree, and there is still sure
to be substantial resistance from foreign trade
ministries and other entrenched bureaucracies.
Despite the record of false starts and failed efforts, it
is too early to write off the present drive as yet
another doomed Soviet attempt to exert economic
control over Eastern Europe. Lessons from past
failures may even offer experience that will improve
future cooperation. With some of the countries feeling
abused or disillusioned by the results of their turn to
the West in the 1970s, there is now a stronger
consensus for making cooperation work. The
programs probably will be important guides in setting
the directions and patterns of economic ties, but, in
their present form, they are statements of intention
whose ultimate impact will only be determined by
more concrete and binding agreements.
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Eastern Europe:
Trade Relations East and West
Despite the rising share of the USSR in Eastern
Europe's trade in recent years, our estimates indicate
that Moscow has not stepped in to replace imports
from the West.' In terms of the volume of trade, the
Soviets in fact have reduced deliveries to Eastern
Europe slightly while the East Europeans have met
Soviet demands for substantial increases in exports.
This has complicated Eastern Europe's efforts to
adjust its trade with the West.
Nominal Trade: Declining Deficits
Because of rising costs of energy and special
assistance to Poland, Eastern Europe's annual trade
deficits with the USSR generally rose through the
1970s to peak at $4.3 billion in 1981. The trend was
sharply reversed in 1982 and 1983, as Eastern Europe
boosted exports to cut the deficit by almost half.
Faced with slower economic growth and rising costs of
energy and raw material production, the Soviets
began demanding more balanced trade and better
quality goods in return for Soviet deliveries. Data
through three-quarters of 1984 show that the deficit
rose, in part because of higher prices for Soviet
energy.
Real Trade: Giving More for Less
Although trade data in value terms show that both
East European exports to and imports from the Soviet
Union expanded rapidly between 1980 and 1983,
estimates of trade volume present a much different
picture. These estimates, constructed by using
Hungarian price data to deflate trade reported in
nominal terms, show that the quantity of goods
exported to the USSR has grown rapidly the past two
years while East European imports have stagnated.'
After several years of virtually no growth, real exports
grew an average of 9 percent annually in 1982 and
' West refers to both developed and developing nonsocialist
countries. In this article, Eastern Europe refers to only the
following six CEMA members: Bulgaria, Czechoslovakia, East
' Excludes the nonspecified residual in Soviet trade statistics, a
large part of which is composed of military equipment and arms.
1983.' The.volume of imports fell about 2 percent in
each of these years. Soviet net exports measured in
constant 1977 prices have declined substantially since
1981.
A worsening in Eastern Europe's terms of trade with
the Soviets is responsible for the divergence between
nominal and real trade. CEMA countries set foreign
trade prices at a level equal to the average of world
prices in the previous five years. Soviet energy
prices-spurred by higher oil costs previously delayed
by this pricing mechanism-have outpaced price
increases for other goods. According to the Hungarian
data, the price of Soviet imports rose roughly 17
percent faster than export prices between 1980 and
1983. Because of this divergence in price movements,
and in order to slow the deficits in trade with the
USSR that followed, East Europeans have increased
exports to the USSR substantially while the Soviets
have reduced the volume of their deliveries slightly.
Energy and Fuels. Energy trade has been the single
most important component of East European trade
with the Soviets in recent years, accounting for more
than half of East European imports from the Soviets
last year. In the trade plans for 1981-85, the Soviets
agreed to supply 80 million tons of oil annually. These
deliveries, however, were cut in 1982 to about 72
million tons when the Soviets reduced deliveries to
Hungary, Czechoslovakia, and East Germany.
Deliveries continued near this level through 1984.
In terms of fuel equivalents, total energy supplies
from the Soviets in 1983 were less than 1981 levels
' Soviet volume indexes for trade with all CEMA countries show
real East European exports to the USSR growing 14 percent in
1982 and 5 percent in 1983. The Hungarian data show steadier
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EAST EUROPEAN TRADE WITH THE USSR AND THE WEST
CURRENT PRICES
35 n (billion $)
25-1
000000000
"0
.'
1977 1978
CURRENT PRICES
35-1 (billion rubles)
-r
1979
1980
IMPORTS FROM USSR ..???
?N
1977 1978 1979 1980 1981 1982
1983
SOURCES: CIA estimates based on East European and Soviet Foreign Trade Statistics
1981 1982 1983
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EAST EUROPEAN TRADE WITH THE USSR AND THE WEST
CONSTANT PRICESa
14 -i billion $
1981 1982 1983
CONSTANT PRICES?
18 -1 billion rubles
EXPORTS TO USSR ~?,..??''?~??
10 --
1977 1978 1979 1980 1981 1982 1983
?Trade with West in 1970 prices; trade with USSR in 1977 prices.
SOURCES: CIA estimates based on Hungarian price indices, Statistical Annual of
Soviet Foreign Trade, and East European Foreign Trade Statistics
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despite increases in other nonoil energy deliveries.
Increased natural gas exports, which rose from 29
billion cubic meters in 1980 to more than 32 billion
cubic meters in 1983, partially offset the shortfall in
oil. While coal and electricity deliveries have also
increased, they account for less than 15 percent of
supplies from the Soviet Union.
Machinery and Equipment. The volume of machinery
imports from the Soviets dropped by over 20 percent
between 1980 and 1983. The largest reduction was to
Eastern Europe:
Share of Imports and Exports,
1980 and 1983
1980
1983
1980
1983
Total
100
100
100
100
USSR
35
42
35
39
Other Socialist
27
29
29
28
Poland, which imported only 40 percent as much in countries
1983 as in 1980. For the other East European
countries, imports of Soviet machinery and equipment
also declined during this period, although imports
appear to be leveling off for Bulgaria and
Czechoslovakia. According to a Soviet lecturer in
Moscow, the volume of Soviet machinery exports fell
because of slower growth in East European economies
and decreased investment needs; he also claimed that
Eastern Europe could not afford machinery imports
because of the rising costs of Soviet energy deliveries.
Exports of machinery to the Soviets, on the other
hand, have increased by over 25 percent in real terms
since 1980, with all East European countries making
significant gains. This rapid increase reflects
increased willingness on the part of the Soviets to
purchase East European machinery to meet Soviet
investment needs, as well as the fact that machinery is
what the East Europeans are best able to supply.
Moscow may have concluded that, although not up to
Western standards, East European machinery is
easier to assimilate in the Soviet economy.
Food and Consumer Goods. Soviet demands for more
of these goods, which comprise roughly a quarter of
East European exports to the USSR, apparently had
little impact last year; after rapid growth in 1982,
East European exports of consumer goods to the
USSR fell 4 percent, and food exports declined 6
percent due in part to poor harvests in several
countries. Although Soviet exports of food and
consumer goods were the only categories of trade that
rose in 1983, these goods comprise less than 4 percent
of Soviet exports.
A Helping Hand?
The rapid expansion between 1980 and 1983 of the
Soviet share of East European trade at the expense of
the West has been cited as evidence that the East
Europeans' hard currency debt problems have forced
reorientation of foreign trade toward Moscow. An
examination of trends in real trade, however, indicates
that, at least in the aggregate, the East Europeans
have not redirected their trade to the USSR by
substituting Soviet products for those previously
purchased from the West. The slight decline in
imports from the USSR, particularly of machinery
and raw materials, refutes this thesis. The East
Europeans have not been shy to ask Moscow for
support, but the Soviet response generally has been
cool. The steep rise in East European exports to
Moscow that accounts for the growth in real trade has
been necessary to meet Soviet demands for stemming
the trade deficits. In short, trade with the USSR
appears to have complicated rather than facilitated
the East Europeans' efforts to adjust their external
accounts with the West.
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Outlook
Trade protocols for 1985 indicate that trade with the
USSR will grow more slowly, except possibly for
Romania. The types of goods traded, for the most part
set by the 1981-85 plan, will be similar to previous
years. From information currently available, the
Soviets will provide Eastern Europe with the same
volumes of oil and gas as last year, although Romania
reportedly has contracted to receive additional
amounts.
CEMA leaders are now concentrating on negotiations
for the 1986-90 five-year plans. In these negotiations,
which should be wrapped up soon, the Soviets are
continuing to press for deliveries of more and better
quality machinery, food, and consumer goods. The
Soviets plan to maintain the volume of energy and
raw material deliveries through 1990 at the levels set
this year, but these
deliveries will be contingent on East European exports
and investments.
Joint Projects. The Soviets also are pressing the East
Europeans for increased participation in joint
investment projects. These projects, such as the
Yamburg gas pipeline and Krivoi Rog iron ore
complex in Western Siberia, will require large outlays
of East European resources. Because the details on
the volume and timing of East European outlays have
not been worked out, the impact on future trade is
difficult to assess. But the level of East European
participation in these projects will have a large
bearing on the development of trade with the Soviets
through 1990.
At the recent CEMA meeting in Havana,
Czechoslovak Premier Strougal said that total
investment in CEMA joint projects during 1986-90
could reach 55 billion rubles. An Embassy source in
Moscow reports that nearly half of this amount will
come from Eastern Europe. According to Soviet and
East European statements, participation in these
projects takes place on the basis of mutual interest
and advantage, implying that East Europeans may
have some freedom in choosing to participate.
East Europeans have been reluctant to invest because
of disagreements over the pricing of their investments
and the vague terms attached to Soviet deliveries in
return. But the Soviets may have raised the costs of
nonparticipation too high to refuse; a Czechoslovak
official told the US Embassy in Moscow that the
Soviets have made investment in the Yamburg project
a necessary condition for maintaining existing gas
deliveries.
Meeting Soviet Demands. We believe that Eastern
Europe could balance trade with the Soviets soon if
world oil prices remain stable, and if-as we expect-
Soviet nonenergy exports and East European exports
follow current trends. CEMA planners have decided
to retain the moving average formula through the
next five years, thus binding Soviet energy prices to
movements in world prices. If East European exports
continue to expand by 10 percent a year, balance
could be reached as early as next year. A slowdown in
East European exports, however, would postpone
balance to the end of the decade.
Moscow apparently believes Eastern Europe has
weathered its financial crisis and domestic economic
difficulties sufficiently to begin improving the quality
of exports to the USSR, but we believe Eastern
Europe will be hard pressed to divert goods to the
Soviets and still export enough to hard currency
markets to keep creditors at bay. For the time being,
Soviet leaders apparently are willing to gamble that
most East European countries are resilient enough,
politically and economically, to handle these strains.
Each of the East European countries likewise faces
tough, albeit narrower, choices, based on the strength
of their economies and their willingness to pursue
policies at odds with Moscow. They can agree to bind
themselves closer to the USSR and forgo Western
ties, thereby falling further behind the West with
outmoded technology and a ponderous economic
system, or they can try to forestall attempts at closer
integration and risk not only the ire of Moscow but
the hard realities of world markets.
Poland and Romania, the countries with the most
serious economic problems, seem most willing to forge
closer ties with the USSR to obtain economic support.
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a
SOVIET-EAST EUROPEAN TRADE PROJECTIONS
10 1980 1932 1934 1916 1988 1960
?Procations assume: (1) world oil prices either stable or increasing five percent annually.
(2 }we eroent annual Increases In Soviet nonenergy deliveries, (3) levd oil and coal deliv-,~
? (4)) nine percent annual Increases In the volume of gas and value of .l.ctrioity Imports
(S) ports growing five and ton percent.
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Moscow showed during the Polish crisis that it is
willing to extend substantial aid to shore up an ailing
East European ally. Hungary and East Germany, the
countries with perhaps the healthiest economies, are
being pressed the hardest, but Hungary appears
determined to pursue its policy of economic reforms at
home and continued ties with the West. Bulgaria and
Czechoslovakia, politically and economically close to
the Soviets and financially independent from the
West, are likely to defer to persistent Soviet demands.
It is possible that Soviet economic policy could have
the eventual effect of making East European
economies more self-sufficient rather than dependent
on the USSR. The Soviets may allow the East
Europeans to undertake systemic reforms, and import
Western technology and machinery to upgrade export
sectors so that the region can meet Moscow's
demands for better quality goods. Weaned from cheap
Soviet oil, East European economies will be forced to
become more energy efficient.
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Glutted Western Markets and
the Cost of Moscow's Empire
One Analyst's View
This article does not represent a DI or CIA position;
it is solely the view of the author. It has not been
This subsidy has fallen sharply in recent years, a fact 25X1
analysts have been slow to recognize. OPEC prices
have slumped, while CEMA prices have continued to
climb because the years newly included in the formula
have represented higher prices than the years being
dropped from the formula. In 1984 the $30 a barrel
CEMA price exceeded OPEC's $29 level so that the
direction of the price subsidy was reversed in
Moscow's favor. The CEMA price will continue to
coordinated or reviewed.
Conventional Western analysis of Soviet subsidies to
Eastern Europe has overstated the appeal to Moscow
of diverting to hard currency markets the oil and
other raw materials now sold to Eastern Europe. The
softening of these markets in recent years has made
such diversion less lucrative and less feasible.
The Oil Price Subsidy
Studies in recent years by Jan Vanous and Michael
Marrese have estimated that the USSR's assistance to
Eastern Europe has been as high as $19 billion in
1981.' They have singled out concessionary oil sales as
the major East European economic benefit from
Soviet trade. Most Soviet oil sales to CEMA countries
are for soft currency at prices dictated by the CEMA
pricing formula, which, since 1976 has calculated the
price in any given year as the average of world market
(OPEC) prices in the previous five years. The price of
Soviet oil in 1979, for example, was the average of
1974-78 OPEC prices. The combination of the lag
built into the pricing mechanism and rising OPEC
prices meant that CEMA benefited from the purchase
of Soviet oil beginning with the first oil shock in 1973.
The East Europeans had to pay steadily rising prices
for Soviet oil, but the subsidy provided by the
difference between OPEC and Soviet prices greatly
cushioned them and allowed them to postpone the
adjustment to the hikes in oil prices. This subsidy
peaked in 1980 when the West paid $30 a barrel for
OPEC oil and Eastern Europe paid the equivalent of
$12 a barrel for Soviet oil.
' Jan Vanous and Michael Marrese have published several studies
in recent years on Soviet subsidies to Eastern Europe. Their most
complete statement is found in Soviet Subsidization of Trade With
Eastern Europe-A Soviet Perspective, Berkeley, Calif.: Institute
23
rise as long as the price in the fifth year (the previous
year) exceeds the price in the first year (five years
before the current year). Thus, the CEMA price has
increased again in 1985, further widening the subsidy
to the USSR.
A more serious error than the belated awareness of
the closing-and recent reversal-of the gap between
OPEC and CEMA oil prices is the simplistic method
of calculating the subsidy. Analysts have regarded the
oil price break to Eastern Europe as an opportunity
cost to the USSR, under the assumption that Moscow
could earn the OPEC price if it chose to divert oil
from Eastern Europe to the West. Vanous and
Marrese state that the true opportunity cost of selling
oil to Eastern Europe in 1983 was $21 billion in hard
currency-a figure obtained by multiplying the
OPEC price of $29 by the volume of oil delivered to
Eastern Europe.
Some Soviet officials have seized upon the Vanous-
Marrese formulation to highlight the cost of
supporting Eastern Europe. At a symposium with
American economists in Moscow last June, a Soviet
economist presented a paper entitled "Methods for
Calculating Soviet Subsidization of CEMA
Countries," which detailed the various forms of
economic assistance from the USSR. Obviously
relying heavily on work by Jan Vanous and Michael
Marrese, the Soviet estimated that Eastern Europe
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Calculations of Soviet Opportunity Costs
West of the 1.4-1.6 million barrels per day sold to
Eastern Europe in the past decade would have been a
substantial "new source" of oil and would have
depressed prices even during periods of strongest
demand.
OPEC price 29.0
($/barrel)
Sales to Eastern 1.4
Europe
(million b/d)
Sales for hard 1.4
currency
(million b/d)
Annual hard 14.8
currency
earnings
(billion $)
b/d that the USSR now sells for hard currency.
b/d of additional oil-the amount Moscow now
supplies to Eastern Europe-without serious
disruption. OPEC oil ministers had great difficulty
reaching an agreement to lower the quotas by this
amount last October, and there are recent indications
that that agreement may be unraveling. If Moscow
brought this oil to Western markets, prices would
probably tumble, including the price of the 1.4 million
Moscow's significant market power means that
opportunity costs in the form of forgone hard currency
revem,es are less than asanmed in the cnnventinnal
gain estimates of the burden of empire, because the
(billion $) alternative of selling oil to the West is much less
saved $25 billion in fuel costs from 1975 to 1983
because of cheaper Soviet energy supplies. He stated
that "Soviet losses can be measured by the
opportunity cost of exporting the corresponding goods
to capitalist markets," and assessed the damage to the
Soviet economy as the potential contribution to Soviet
growth of Western equipment imports that could be
purchased for that amount of hard currency. Even the
Hungarian economist Koves, while critical of Western
studies of subsidies, accepts the assumption that
Soviet oil could be easily diverted to Western markets.
lucrative and feasible than has long been believed.
Not only would the Soviets have to accept lower prices
from additional sales, they would have to discount
present oil sales. If Moscow shifted all of its oil
exports from its allies to Western markets, the price of
oil would fall and erode the gains from diversion.
Each $1 reduction in the price of oil would reduce the
Soviets' gain by about $1 billion annually.
Conventional analysis holds that the USSR is
forgoing nearly $15 billion a year in hard currency by
exporting oil to Eastern Europe; I believe Moscow is
forgoing only about $12 billion annually because
adding 1.4 million b/d could reduce the gain by some
$3 billion, on the arbitrary but plausible assumption
that additional oil sales would depress the world
market price to $26 per barrel.
This assumption is a serious error. For it to be valid,
the USSR must be a price taker on the world oil
market, particularly after adding oil presently sold to
Eastern Europe. Although Soviet oil traders generally
have been cautious and willing to follow OPEC's lead
in pricing, the Soviets have supplied a significant
share of the West European market, probably enough
to influence prices significantly by abrupt and large
volume changes. The addition to existing sales to the
This is even more true in the present fragile oil
market, which would be unable to absorb 1.4 million
Conventional Present Analysis:
Analysis: Oil Price Falls
No Price Effect $3/Barrel
29.0 26.0
Caveats
The above discussion concerns only the price
component of Soviet economic support for Eastern
Europe. It does not address benefits associated with,
for example, the overpricing of Eastern Europe's
exports of manufactured goods to the Soviet Union.
Moreover, the scenario-that Moscow would abruptly
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stop shipments of fuel and raw material to Eastern
Europe in favor of hard currency markets-is an
extreme one. It implies a need for hard currency so
desperate that Moscow would risk a precipitous
collapse of East European economies. A more
plausible Soviet move would be to reduce exports to
Eastern Europe in small amounts over a long period of
time, which would give Western markets-and the
East Europeans-more time to adjust to the shifts.
Moreover, the East Europeans would enter the
market as buyers to absorb some of the increase in
supply, although limited financial capacity would
keep the amount low.
Implications
Thus, Moscow is sacrificing less to support Eastern
Europe than is generally believed. This, along with a
strong hard currency position, may explain the
relative stability of Soviet oil deliveries to its allies in
recent years. Moscow apparently diverted some oil
from Eastern Europe to earn hard currency in 1982,
but weak Western markets probably were a factor
inhibiting further shifts. Continued glutted oil
markets would not necessarily deter Moscow from
diversions in the future, but the potential for
disruption should argue against abrupt and massive
cuts in deliveries to Eastern Europe to earn hard
currency. In present circumstances, with oil
production having declined slightly in 1984, a more
appealing alternative may be to divert oil to the home
market rather than to the West. The relevant measure
of the opportunity cost to the USSR of supplying oil
to Eastern Europe is the impact on the Soviet
economy of "losing" oil that could satisfy the needs of
Soviet position, both current and potential, in Western
markets.
The analysis also applies to other Soviet exports to
Eastern Europe. Moscow's second-leading export,
natural gas, offers even fewer promising opportunities
for hard currency earnings. The Soviets are having
difficulty in nailing down commitments for the
quantities that West European buyers agreed upon
several years ago. The price situation is more complex
than for oil, but it seems likely that even deeper price
reductions would be necessary to increase hard
currency sales of gas. Moreover, unlike oil, natural
gas exports require a complex and expensive transport
system, which would make it much more difficult to
divert exports of gas quickly from Eastern to Western
Europe.
industry and consumers.
This analysis should be considered a significant
modification to, rather than a rebuttal of, the widely
held view that Eastern Europe enjoys favorable terms
in its purchases of Soviet oil. Even though CEMA
prices now exceed OPEC prices, for example, Eastern
Europe does benefit from exchanging its relatively low
quality goods for Soviet oil. Previous estimates,
however, have overstated the costs to the USSR by
belatedly taking into account the catching up of
CEMA to OPEC prices and by neglecting the
difficulties Moscow would have in selling oil in
glutted hard currency markets. Discussions of Soviet
opportunity costs should consider more carefully the
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oecreL
Economic News in Brief
Western Europe
Spain's exports surge: Madrid estimates real exports
rose 20 percent in 1984, helping to turn the current
account deficit of $2.5 billion in 1983 to surplus of $2
billion ... export performance also drove real GDP
growth up 2.5 percent in accordance with Madrid's
goal ... a slight erosion of price competitiveness and
strengthening domestic demand may slow real export
growth to 4 to 5 percent next year, but the current
account should show another surplus.
Canada denies nuclear reactor contract: Officials of
the Canadian firm AECL say no contract has been
signed with Ankara for a nuclear power reactor,
according to the US Embassy in Ottawa ... Ankara's
announcement in January had implied that AECL
had won contract ... ambiguous government
statement may have been intended to put pressure on
other bidders to sweeten proposals.
European Space Agency participation in US space
station program: Contribution will be a space
laboratory called Columbus ... ESA also plans to
develop more powerful Ariane rocket ... cooperation
with United States allows West Europeans to upgrade
technology while pursuing their own projects.
Secret
EUR ER 85-005
13 February 1985
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Secret
Looking Ahead
Arne Treholt, begins in late February.
February
Trial of the Norwegian official arrested last year for spying for the Soviet Union,
March
Western Europe Madrid and Rome are the first stops on Soviet Foreign Minister Gromyko's swing
through Western Europe in late February and March ... visit to The Hague,
Brussels, and London are under discussion ... tour will be an opportunity for anti-
living.
The Polish Government will raise food prices in March as part of its plan to hike
overall retail prices by 12 to 13 percent this year ... chance of major protests
reduced because the regime has engaged the public in discussions for months and
has promised payments to at least partially compensate for the increased cost of
weaken his control of the party and his grasp on the premiership.
Prime Minister Craxi hopes his visit to Washington on 5-6 March will boost his
popularity at home as he prepares for nationwide local elections in May ... Craxi's
Socialists want to score at least 15 percent of the vote ... less than that could
parties likely to win significant overall victory.
Cantonal elections set for 10 and 17 March ... will elect representatives to
recently enhanced departmental and regional assemblies ... rightwing opposition
creation ahead of deficit reduction.
Canadian Prime Minister Mulroney will convene a National Economic Summit of
provincial government, business, and labor leaders on 22-23 March ... he wants to
form a consensus to support trimming the nearly $30 billion federal budget deficit
... likely to be tough sledding, because provincial and labor leaders place job
29 Secret
EUR ER 85-005
13 February 1985
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may see the elevation of younger officials to senior party posts.
The Communist Party holds its 13th party congress in Budapest starting on the
25th of March ... the congress will probably endorse further economic reform and
but certain.
Brussels is to take "final" decision on INF deployments in March ... Flemish
Socialists will hold mass meeting in Antwerp on 23 March ... debate on INF all
Spain EC Summit in Brussels on 29-30 March probably will wrap up membership
Portugal negotiations with Spain and Portugal ... agricultural and fishing issues only
remaining key obstacles ... target for entry of 1 January 1986 still feasible but
requires summit success.
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Secret
Secret
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