Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

Current Economic Developments, Lot 70 D 467

Current Economic Developments¹

[Extract] confidential

[Washington,] February 7, 1949.

No. 188

Council for Economic Mutual Aid Created by Eastern European States

The announcement of the formation of a Council for Economic Mutual Aid by the Soviet Union and five of the satellites² tends to bear out, at least partially, earlier reports that the Soviets were planning even more closely integrated “economic cooperation” with the orbit countries. Bulgaria, Czechoslovakia, Hungary, Poland, Rumania and the USSE are members of the council, which has the announced aims of the exchange of experience in the economic field and the rendering of technical assistance, as well as assistance in regard to raw materials, foodstuffs, machinery and equipment. The Moscow communiqué emphasized that the council was an answer to discriminatory US and western European licensing policies and the European recovery program. Seen as possible bids to non-satellite countries are the allegedly non-binding aspects of council membership: the council is open to membership by other countries subscribing to the organization’s principles and desiring to participate in “broad economic collaboration” with present members of the council; decisions of the meetings, which will be held in the various capitals under the presidency of the host country, will be binding on the country affected only with its assent.

The Department is giving careful consideration to the reports being made by our missions behind the Iron Curtain to determine to what extent further economic integration may be expected.³

Rumors Preceded Soviet Move About the middle of November developments in the USSR caused Embassy Moscow to foresee the possibility that the Soviets might be planning the inauguration, shortly after the first of the year, of some form of ruble area, with satellite monetary and banking systems brought into more direct relationship with, and dependence on operations of the USSR state bank.⁴ Some observers limited their predictions to more closely integrated economic planning and “cooperation” between the USSR and orbit countries, plus the possible institution of an eastern European customs union. We asked for comments from our other missions in the area.⁵ There was agreement among our missions in the orbit countries that there was little likelihood of an eastern European customs union, a common ruble currency, or a central gold and exchange pool. It was pointed out at the same time that, if such measures were adopted, they might be instituted without much advance warning. With the exception of Helsinki, all our missions agreed that Soviet -control had intensified and that a continuing effort would be made toward even greater economic integration of eastern Europe. Views differed, however, as to the extent and form of integration.

Embassy Moscow’s Views on Council [Here follows a summary of telegram 212, January 27, from Moscow, page 1.]

Economic Council Viewed by Other Missions While agreeing that the formation of the eastern economic council is a move toward further economic integration and may be even the first step toward the development of an economically viable Central European-Danubian area, most of our missions in Other parts of eastern Europe anticipate the council will have less far-reaching effects than foreseen by Embassy Moscow. Although bloc trading between the Soviet-dominated countries and the west and creation of a ruble area are not to be excluded, Embassy Warsaw⁶ places stock in Polish officials’ statements that attention for the ensuing few years will be devoted almost exclusively to the solution of industrialization problems, with a trend toward conversion of the bloc into a self-sufficient whole. The Poles stated an effort will now be made to introduce order within the orbit through central planning of industrialization of the area. They discounted the suggestion of bloc trading with the west and the present intention of creating a ruble area.

Embassy Praha⁷ is of the opinion that the Soviets intend to put primary emphasis on economic control over the satellites on an individual (bilateral) basis rather than through a multilateral organization with real authority. Since the network of existing intra-Soviet-orbit trade agreements and relatively long-term satellite economic plans are too elaborate and rigid a structure to be changed overnight, it believes it unlikely that the council will for the present have much effect on other than peripheral questions, such as exchange of information and technical standardization. There appears to be agreement among the missions that the council’s role will be essentially that of a Soviet-directed agency, to be used in the transmission of general economic directives in the same manner as the Cominform is used in the political field. The consensus of eastern European representatives to ECE, who thus far seem to have no information on the organization, is that the council is a psychological but in no sense an economic substitute for ERP, and that the satellites will receive little aid, except possibly in the field of technical assistance.

Yugoslavia Excluded from Council Yugoslavia’s exclusion from the group is variously interpreted—that the council was formed to complete the breach between the Soviets and Tito, to precipitate a showdown with Tito, or to help prevent a recurrence of the Tito defection. The Yugoslav government has notified the USSR and governments of the countries participating in the eastern economic council that it cannot take part unless those countries fulfill their treaty obligations toward Yugoslavia and abandon their campaign to overthrow Yugoslav leaders. Yugoslavia expressed satisfaction that the conclusions reached at the conference were identical with Yugoslav views on the question of economic cooperation and pointed out that it could on that basis cooperate with the council.⁸

It is believed that Albania was omitted from the negotiations in order to provide an early applicant for admission.⁹

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1. A weekly classified publication, prepared toy the Policy Information Committee of the Department of State, designed to highlight developments in the economic divisions of the Department and to indicate the economic problems which were currently receiving attention in the Department. It was circulated within the Department and to missions abroad.
2. For the text of announcement, issued as a Tass communiqué in Moscow on January 25, see Current Digest of the Soviet Press, vol. i, No. 4, February 22, 1949, p. 11. The purported complete text of the agreement establishing the Council for Mutual Economic Aid, as signed in Moscow on January 18, 1949, was furnished to the Legation in Romania and was transmitted to the Department as an enclosure to despatch 99, February 28, 1949, from Bucharest, not printed (640.6131/2–2849). A summary of the main features of the agreement was printed in the New York Times, June 4, 1949.
3. At his press and radio news conference on January 26, Secretary of State Acheson was asked to comment on the formation of the Council of Mutual Economic Aid. The Secretary observed that event was not very surprising and seemed to be the natural development from the attitude that had already been taken in regard to the Marshall Plan. The Secretary did not think that the Council would be in competition with the Marshall Plan (ON Files, Lot 60 D 641).
4. The views described here were presented in telegram 2649, November 15, 1948, from Moscow, Foreign Relations, 1948, vol. iv, p. 933.
5. The request for comments was contained in the Department of State’s circular telegram of December 8, 1948, to various Eastern European posts, not printed (861.50/12–848).
6. The comments that follow here are based upon telegram 123, January 27, from Warsaw, not printed (640.6131/1–2749).
7. The comments that follow here are derived from telegram 133, January 27, from Praha, not printed (640.6131/1–2749).
8. For the text of the Yugoslav note of protest under reference here, dated February 1, and an extract of the Soviet reply of February 11, and the text of the Bulgarian reply of February 17, see Margaret Carlyle, Documents on International Affairs 1949–1950, issued under the auspices of the Royal Institute of International Affairs (London, Toronto, New York: Oxford University Press, 1953), pp. 443–447.
9. Telegram 205, February 28, from Belgrade, not printed, reported that the Albanian Legation Bulletin on February 25 published the text of the formal Albanian request for admission to the Council of Mutual Economic Aid (dated February 8) together with the announcement of the favorable Soviet reply (761.75/2–2849).