STAFF NOTES: SOVIET UNION EASTERN EUROPE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000400090024-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 16, 2016
• Document Release Date: July 26, 2004
• Sequence Number: 24
• Publication Date: June 30, 1975
• Content Type: REPORT

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ecret
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Soviet Union
Eastern Europe
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Secret
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SOVIET UNION - EASTERN EUROPE
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June 30 , 1975
Gromyko Ends Visit to Italy. . . . . . . . . . . 1
Kapitsa Discusses the Far East . . . . . . . . . 2
Hungarian Price Increases Predicted. . . . . . . 4
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Gromyko Ends Visit to Italy
Soviet Foreign Minister Gromyko returned home
on Sunday after a three-day visit to Italy.
Gromyko did not seem totally satisfied with his
talks with the Italian leaders. At a press confer-
ence at the end of his trip, he expressed some dis-
satisfaction over the pace of Soviet-Italian politi-
cal rapprochement. He also made some veiled remarks
warning against delays in convening the European se-
curity summit. This suggests that the Italians were
not ready to pull their forelocks for their Soviet
guest.
No mention was made of a visit by Soviet party
chief Brezhnev to Italy this year, but a fall visit
by President Leone to the USSR was announced, and
an invitation was extended to Foreign Minister Rumor.
Gromyko signed a number of minor technical. coopera-
tion agreements.
Gromvko also talked with Communist party chief
Berlinguer. Presumably the two men had the Italian
political scene much on their minds, but protocol
and propriety required that they say only that they
had discussed the international situation.I
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June 30, 1975
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Kapitsa Discusses the Far East
The voluble Mikhail Kapitsa, one of the Soviet
Foreign Ministry's top experts on the Far East,
told that
relations with China were stalemated, but he gave
no hint of particular tensions. Kapitsa claimed,
as he had in the past, that the Sino-Soviet border
problem could be solved "any day" if the Chinese
were willing to negotiate realistically. Kapitsa
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Kapitsa claimed that, in return for the three
Soviet helicopter crew members held in China since
March 1974, the Chinese have demanded the return
of all Chinese who have illegally entered the So-
viet Union. The Soviets had sent back 35 border-
crossers last year, he said, but obviously could
not meet the Chinese demand to repatriate all the
100,000 Chinese who, he said, fled China in 1962
after disturbances in Sinkiang. Kapitsa claimed
that these Chinese refugees were situated in "camps."
Commenting on other subjects, Kapitsa said:
--China has 150 nuclear warheads, but
the means of delivery are not "very
accurate."
--Hanoi is the only strongly anti-
Chinese force in a "wobbly" area.
--Vietnam will be reunited in one to
two years.
The Soviet Union had considered taking an is
tiative toward Taiwan, but rejected the idea, bec..::a
June 30, 1975
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any such step would unduly complicate relations
with Peking.
In a separate conversation, another Soviet
official in the Soviet Union acknowledged that
Soviet maps show the Spratley and Paracel islands
as Chinese, but he said this was a "technicality,"
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determined."
and in fact Moscow regards their status as "un-
June 30, 1975
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llunctcrian Pr. icci :1:ncroasorm l:'rod. (:ad
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Budapest will announce an incrcae;e in consumer
prices of more than 10 percent In Auc uE;t, 25X1
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predicted that major restrictions on Imports--pre-
sumably limited to those from the West--would fol-
low in short order.
Party chief Kadar telegraphed at least some
increase in the consumer price level in a tough
election speech in June. The speech was larded
with references to slower economic growth and smaller
improvements in living standards, and Kadar stated
that the population was "not sufficiently aware" of
the real cost of the goods in the domestic market
place.
The resource-poor Hungarian economy has been
severely strained by higher prices for both Western
and Soviet oil and raw materials, and by shrinking
Western markets. On the heels of a record $700-
million deficit with the West last year, exports in
the first four months of 1975 slumped 8 percent be-
low the same period last year.
Despite some trimming of purchases on consumer
goods this year, imports from the West increased by
25 percent. As a result, the trade deficit with
the West reached $400 million for January-April,
compared with $200 million foi? the same period last
year. The rapidly escalating deficit apparently
has sparked a high-level debate since early this
year over how much to cut back the growth of West-
ern imports.
Maintaining relatively stable prices has be-
come increasingly incompatible with efforts to have
consumer prices reflect real costs. The economic
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reform has permitted an inflation rate of 2-3 per-
cent a year since 1968 as part of a deliberate ef-
fort to expose the domestic economy to world economic
forces. When import prices from the West rose 40
percent last year, however, budget authorities had
to stop in with massive price subsidies to keep the
rise in the consumer price level to only 2 percent.
Budapest-is likely to soften the impact of any
price increases by granting some wage and welfare
benefits. :4ie effective date of the increases may
be delayed until the beginning of the next five-year
plan in January so that the leadership will have an
opportunity to justify its decision and to assess
public reaction before the price hikes take effect.
June 30, 1975
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