Foreign Relations of the United States, 1981–1988, Volume I, Foundations of Foreign Policy

172. Information Memorandum From the Assistant Secretary of State for European and Canadian Affairs (Burt) to Secretary of State Shultz¹

Washington, October 25, 1983

SUBJECT

• U.S Policy Toward Eastern Europe: Difficulties and Opportunities

SUMMARY

Recent developments in Eastern Europe suggest that this region is by no means in the Soviets’ hip pocket and that we can have an important impact there. The Vice President’s trip to Yugoslavia, Romania and Hungary enhanced our position in each of these countries.² The Polish people continue to assert their sense of national identity and to look westward for support. Shortly after exchanging views with you, the Hungarian and Romanian Foreign Ministers participated in the Sofia Warsaw Pact meeting that produced a notably mild statement on INF.³

At the beginning of this year, however, we were in danger of losing the toe-hold in Eastern Europe that had taken us years to establish. We managed to overcome the immediate crises in the three countries where our relations are strongest (with the massive “Friends of Yugoslavia” package;⁴ with resolution of the Romanian education tax/MFN issue;⁵ and with the quieter IMF/bank effort for Hungary).

But these crises are symptoms of larger, longer-term problems in Eastern Europe, which in turn pose important policy options for both the U.S. and the USSR. The basic issue is whether there will be movement towards greater independence from Moscow and greater internal economic and political reform (with potential impact upon the Soviet Union’s own economic and political development). Or will the Soviets succeed in bringing about greater area-wide integration and gaining tighter control over the region? For example, will Poland now revert to the repression and conformity of the 1950’s, or move towards the Hungarian model of the 1980’s? In, larger perspective, will Eastern Europe be a source of Soviet strength or a source of Soviet weakness?

This paper discusses three key factors that will shape the outcome of this issue: (1) Andropov’s policies; (2) the policy debate inside the Administration; (3) the current policy opportunities and pitfalls for the U.S. and its Allies in Eastern Europe. It proposes a new offensive for the region, pointing out that in the aftermath of the KAL tragedy,⁶ we should renew our efforts to weaken the USSR by diminishing its control over Eastern Europe, while we continue to strengthen our economic and defense posture relative to that of the Soviet Union. End Summary.

Andropov’s Policies

In the period following Brezhnev’s death, the importance of Eastern Europe for the Soviet Union has been emphasized by Soviet spokesmen, including Andropov. Moscow’s response to Eastern Europe’s problems thus far has been to seek greater political, economic and ideological unity among the countries of the “World Socialist System”—as Moscow pompously terms its shaky Eastern European (plus Cuba, Mongolia and Vietnam) alliance system. Moscow undoubtedly will also continue to press its economically-strapped allies to maintain, if not increase, real defense spending. As Andropov told the June 1983 CPSU Central Committee Plenum: “The socialist countries and their policy are in our days a factor of immense importance . . . To strengthen the cooperation and cohesion of these countries is, I would say, the paramount direction of the international activities of the CPSU and the Soviet State”(underscoring added).⁷

It is not surprising that Andropov would highlight the importance of Eastern Europe. He has worked fulltime on Eastern European problems for roughly one-half of the past 30 years (as Ambassador in Hungary, 1955–57, and as head of the Central Committee Department for Socialist Countries, 1957–67). In fact, it is his one real specialty.

Throughout the postwar period Moscow has had two fundamental goals regarding Eastern Europe: conformity to the Soviet Union’s domestic and foreign policy norms, and stability that presents a solid facade to the West and averts reallocation of scarce Soviet resources to crisis management in Warsaw Pact countries. As the current Hungarian case shows, Moscow is willing to trade a measure of conformity for enhanced stability, in the sense of accepting internal diversity attractive to the Hungarian populace, so long as Soviet security and foreign policy needs are not jeopardized. However, the current Polish case, as with Hungary in 1956 and Czechoslovakia in 1968,⁸ makes clear there are limits to the amount of non-conformity Moscow will tolerate.

What has changed since 1956 and 1968 is the USSR’s growing inability and unwillingness to provide large-scale economic assistance to Eastern Europe. Because of its own economic stringencies, Moscow can no longer meet the economic needs of its Warsaw Pact allies, particularly those whose relatively developed economies need the West if they are to remain competitive in world markets. Moreover, Moscow does not have an effective prescription for curing the present economic, social and other domestic ailments in Eastern Europe, any more than it has an effective program for addressing its own very serious domestic troubles. Moscow may also feel that the impact of Soviet military intervention in Eastern Europe would be significantly more costly to its policies vis a vis Western Europe than heretofore, because of Moscow’s strong interest in countering tough U.S. policies by fostering “Euro-detente” and isolating the U.S. from its European Allies.

On the other hand, Soviet political doctrine asserts that underlying trends in the area ultimately will bind Eastern Europe closer to the USSR, and Moscow probably believes it feasible to increase economic, political and military integration. The USSR without question has considerable assets in the region. These include overwhelming military power, economic leverage stemming from the Soviet-engineered dependence of most Eastern European economies upon the Soviet economy, and a demonstrated capacity to use coercion against an errant Eastern European regime.

These realities indicate that our objective of reducing Soviet control over Eastern Europe can be achieved only through a gradual process, in which the Soviet leadership will not be able to point to any one specific step as threatening to its vital interests, and therefore as justifying a specific reaction. “Creeping counter-revolution” is what Moscow fears most, and with good reason.

Policy Differences Within the Administration

After lengthy and difficult interagency debates, the President in September 1982 approved National Security Decision Directive 54, “U.S. Policy Toward Eastern Europe.”⁹ The NSDD determines that our primary long-term goal in Eastern Europe is “to loosen the Soviet hold on the region and thereby facilitate its eventual reintegration into the European community of nations.” It calls for our policy to differentiate among the countries of Eastern Europe so as to encourage diversity, using as a baseline our policy toward the Soviet Union. To weaken overall Soviet control in the region, our policy should:

— encourage more liberal trends in Eastern Europe;

— further human and civil rights in East European countries;

— reinforce the pro-Western orientation of their peoples;

— lessen their economic and political dependence on the USSR and facilitate their association with the free nations of Western Europe;

— encourage more private market-oriented development of their economies, free trade union activity, etc;

— undermine the military capabilities of the Warsaw Pact.

Despite the President’s approval, a contrary approach still flourishes among some elements of the USG (primarily OSD) who opposed the NSDD in the first place. Crudely put, this school argues that because the USSR is our mortal enemy, and since Moscow regards Eastern Europe as its sphere of influence, the worse things are in that region, the worse for Moscow, and the better for us. This school questions the wisdom of trade with Eastern European countries on grounds that such trade would strengthen their economies and thereby contribute to the overall strength of the Soviet empire. It is uneasy about technology transfer of even mundane items to the most independent of the East European countries, convinced that the technology subsequently will find its way to the USSR.

In short, this approach tends to ignore both the potential and the limitations on our approach to Eastern Europe. The policy of “the worse, the better,” plays into Soviet hands by weakening the modernizing Europeanist elements in Eastern Europe and by increasing divisions between the United States and its allies over policies in the region. This at a time when the Soviets are vigorously trying to isolate us from our NATO allies. Such an approach concentrates on one aspect of our relationship with the East—the U.S.-Soviet super-power competition—without allowing us to use positive opportunities both to improve our position in Eastern Europe, to weaken the Soviet hold over the region, and to help manage our important alliance relationships.

Current Policy Opportunities

The current situation in Eastern Europe presents the U.S. with unique opportunities to weaken Moscow’s hold over the area, while demonstrating to the rest of the world the incompatibility between Soviet-imposed regimes and national aspirations.

U.S. opportunities arise from four salient facts:

— First, Soviet-style ideology as a motivating force in Eastern Europe is increasingly insignificant. Opportunism and self-advancement are the keys; few in authority believe in a doctrinal program whose inadequacies have become steadily more apparent over the years. Those in high positions continue to have a personal stake in the system, of course, but conviction and proselytizing zeal are waning.

— Second, the unwritten “social contract,” whereby political acquiescence of the population is purchased by steadily rising living standards, is under increasing challenge as those standards continue to fall. Poland is the classic example of the destabilizing political influence of economic stagnation and even decline. Economic deprivation has the potential of causing political instability throughout the region.

— Third, as noted above, the large, sustained injections of Soviet resources that were characteristic of past crisis periods have simply not appeared, and each of the Eastern European countries is seemingly left to work out its own economic problems. In the face of dwindling economic resources, the perceived need to boost productivity with Western equipment and technology is bound to increase.

— Fourth, the bankruptcy of the Soviet model reinforces the general historical tendency of East Europeans to look westward for new ideas. This is particularly true of the most innovative groups: youth and the intelligentsia.

At the same time, U.S. near-term opportunities in Eastern Europe are limited:

— As NSDD–54 points out, Moscow has the capability of using force in the region and likely would do so if it perceived a threat to the Soviet Union’s vital interests.

— Given the reality of Soviet power, plus the promise of Western know-how, East Europeans will attempt to play off East against West to get as much as possible from both.

— In countries whose present regimes emphasize loyalty to the USSR (e.g., Bulgaria and Czechoslovakia), differentiation will have marginal short-term impact, particularly if US-Soviet relations remain strained.

— Our economic leverage is constrained by the nature of Eastern European economies. In addition to the Soviet economic model’s predominance in most European countries, the East Europeans, must rely on the Soviet Union for energy and other raw materials and as a market for large quantities of industrial products whose shoddy quality or low technology make them unmarketable in the West (although some can be marketed in the developing world).

— The kinds of actions we can take are also constrained by our limited domestic resources and by the size of Eastern Europe’s debt burden. The ever more acute economic and political dilemmas of Eastern Europeans, however, make them increasingly receptive to a differentiated approach.

Country Agendas. Pouring more money into Soviet-style economic systems would be foolish, as the experience of the 60’s and 70’s made clear. We need instead to fine-tune our policy for each country to encourage structural change away from the Soviet economic and political model. Specific agendas should be tailored to the countries of the region along the following lines:

— Poland’s distinguishing characteristic continues to be the fundamental refusal of the populace to accept the Soviet-imposed political system. Despite the relative success of martial law in maintaining order, Moscow must be concerned about Poland’s reliability as a Warsaw Pact ally, its political and economic stability, and its future evolution. We should show realism and flexibility in fostering evolution within Poland along the lines of Kadar’s Hungary, as opposed to Husak’s Czechoslovakia. If the human rights situation in Poland allows, we should consider conducting a new high-level, dialogue with Warsaw.

— While the GDR is buffeted by many of the forces that affect other Eastern European countries, it has been allowed to develop a higher standard of living to minimize embarrassing comparisons with life in the FRG. At the same time, political and ideological purity have been strictly enforced, and the GDR has been expected to align its economy especially closely to that of the USSR. Even so, an unofficial anti-war movement has developed in the GDR, as has a heightened awareness of the special role of Germany in Europe. While our ability to influence political and economic developments in the GDR is quite limited, we are exploring with the GDR the possibility of moving forward in parallel to solve several long-standing problems: U.S. official claims against the GDR, non-official Jewish claims, and family reunification. As an incentive for the GDR to deal with these issues constructively, we are holding out the possibility of a trade agreement (short of MFN) containing tariff reductions or elimination on a specified list of items at the end of the process.

— Hungary is implementing a pragmatic, market-oriented economic reform and is experimenting with limited political reform. The Hungarian leadership clearly does not regard the Soviet Union as a model for Hungary, has expanded ties with Western economic institutions, and has been quietly seeking increased elbow room in Warsaw Pact and CEMA affairs. The Vice President’s September visit to Budapest, plus the new Hungarian Foreign Minister’s visit to Washington in the same month, have underscored our regard for Hungary’s relative independence from the USSR. We should broaden and deepen our dialogue with Hungarian officials, encourage Budapest’s experimentation with economic and political reform, and maximize Hungary’s affinity with the West. Specific goals include an enhanced cultural affairs program and multi-year MFN.

— Romania suffers domestically from Ceausescu’s repressive rule, aptly termed “dynastic socialism.” But Romania’s maverick role in the Warsaw Pact and CEMA is a headache for Moscow, as is the anti-Soviet feeling and tradition of independence from foreign domination of the Romanian people. The September visit of the Vice President has bolstered Bucharest’s sense of independence and enhanced Ceausescu’s personal prestige. We need to keep pressure on the GOR for improved human rights performance, as we encourage Romania’s independence from the Soviet Union. An immediate goal should be to provide Bucharest with a Landsat ground station.

— There are stirrings even in Moscow’s most loyal Slavic allies, Czechoslovakia and Bulgaria. The Western-minded Czech and Slovak people clearly resent their Soviet-style, Soviet-oriented government, as indicated by the Charter 77 movement and continuing internal dissent. We shortly plan to test Prague’s willingness to improve our bilateral relationship by having our new Ambassador, Bill Luers, propose the entry into force of a long-standing draft consular agreement and negotiation of a cultural exchanges agreement. In addition to continuing manifestations of Bulgarian national pride, the Bulgarian leadership is quietly experimenting with decentralizing economic reforms similar to the Hungarian approach. Ambassador Barry’s lengthy meeting with Bulgarian Party and Government Chief Zhivkov this summer produced Zhivkov’s promise to move on several bilateral issues of interest to us.¹⁰ This promise has begun to materialize. We are developing an agenda of further bilateral steps that can encourage a more nationalistic, less Soviet-oriented Bulgaria, (assuming the absence of a credible “Bulgarian connection” to the Papal assassination attempt).¹¹

— The two countries in the southwestern part of the region, Yugoslavia and Albania, demonstrate even more clearly than Hungary and Romania that once loyal socialist allies can break out of the Soviets’ grip. Both have refused participation in Moscow’s economic, military and ideological integration schemes (although Yugoslavia maintains observer status in CEMA).

— While maintaining its isolation from the U.S. as well as the USSR, Albania has diplomatic ties with almost 100 countries, including all of Europe except the UK and the FRG. Albania has made some intriguing small openings to the West (though not to the U.S.) over the past five years. We will send you a separate policy paper on Albania. Meanwhile, we are proceeding with the initial stages of a World War Two-related claims/gold agreement with Albania. We also plan to urge our Allies to increase their contacts with the current Albanian regime.

— Yugoslavia is struggling to modernize its economy, with emphasis on decentralization and market forces, while its foreign policy remains independent and nonaligned. We should continue our strong commitment to support Yugoslav independence, most recently accentuated by the Vice President’s visit to Belgrade. In particular, this will require our leadership in crafting a financial assistance package for 1984 acceptable to private banks and participating governments, as well as to the GOY. The package should be in hand when Yugoslav President Spiljak visits the President early next year.

CONCLUSION

Our assessment of the current difficulties and opportunities for our policy toward Eastern Europe indicates that we should resist calls, in the aftermath of the KAL tragedy, to treat Eastern Europe as an integral part of the Soviet Empire and to pursue a policy of “the worse, the better” with regard to individual Eastern European countries. Continuing repression in Poland should not be misread as a signal for retreat by the West, but rather as proof of the weakness of the existing system, and as the inspiration for a new offensive using all of the economic, cultural and ideological weapons in our arsenal.

This will require considerable effort across a broad front, sensitivity to the constrained circumstances of East Europeans and to the differences among them, and political determination in Washington. Like our policy toward the Soviet Union, this approach toward Eastern Europe is a policy for the long haul. It will not bring dramatic short-term payoffs. It will require intensified bilateral dialogue to sustain step-by-step progress. But while we build our strength relative to the USSR, we should undertake a sustained offensive to weaken the USSR by promoting greater independence in Eastern Europe and enhancing our own position in this vital region. The INF issue, U.S.-Soviet relations and other pressing problems have tended to push Eastern Europe to the back burner. We should now move it forward.

The Vice President’s trip to Yugoslavia, Romania and Hungary provides a good beginning. I am planning a trip to Eastern Europe early in 1984 which could serve to lay the groundwork for a visit to the area by you later next year. Meanwhile, we intend to consult with our respective Eastern European embassies regarding detailed agendas for the near and middle terms. We will confer with our Allies concerning common opportunities in the region. And we will push hard for the specific items presently on our agenda, including a Landsat ground station for Romania, a 1984 financial assistance package for Yugoslavia, an enhanced cultural affairs program with Hungary, new bilateral undertakings with Bulgaria and Czechoslovakia, and a new policy towards Albania.

1. Source: Reagan Library, George Shultz Papers, Official Memoranda (11/03/1983) (1). Secret. Sent through Eagleburger. Drafted by Combs on July 25; edited by Combs on October 25; cleared by Palmer, Miles, Simons, and Kornblum. Combs initialed for the clearing officials. An unknown hand wrote “GPS” at the top of the memorandum. Hill initialed the memorandum and wrote “11/3.” The document is also in Foreign Relations, 1981–1988, vol. X, Eastern Europe, Document 22.
2. See footnote 1, Document 168.
3. Warsaw Pact foreign ministers meeting in Sofia, October 13–14, released a communiqué specifying that if agreement had not been reached on INF by the end of 1983, “it is essential that the talks should be continued with a view to reaching it in the conditions of the renunciation by the United States and its NATO allies of their schedule for deploying new medium-range nuclear missiles.” (Serge Schmemann, “East Says Missile Talks Must Continue,” New York Times, p. 3, and Dusko Doder, “Soviet Bloc Hints At Geneva Deal For Missile Delay,” Washington Post, p. A16; both October 15, 1983)
4. Presumable reference to an economic aid package proposed by 15 countries, including the United States, in January. In April, representatives of the 15 Western governments and commercial banks meeting in Zurich announced a Yugoslavian assistance package totaling $1.3 billion. (“Yugoslavia Aid Of $1.3 Billion in ’83 Is Set by 15 Nations,” Wall Street Journal, January 20, 1983, p. 28, and “Yugoslav Aid Deal Confirmed By Banks and Governments,” Washington Post, April 18, 1983, p. 41)
5. Reference is to the Government of Romania’s implementation of a decree, or “education tax,” which required any Romanian citizen wishing to emigrate to repay the educational costs beyond the compulsory level. In a March 4 statement the President indicated that the decree was in conflict with the provisions of the Trade Act of 1974 (P.L. 93–618; 88 Stat. 178) and, therefore, he planned to terminate Romania’s most-favored nation tariff status effective June 30 if the decree remained in force. (Public Papers: Reagan, 1983, Book I, p. 329) On May 25, Derwinski noted at a luncheon of the Overseas Writers that Romanian officials unofficially had informed the Reagan administration that Romania would eliminate the tax to preserve its MFN status. (John M. Goshko, “Romania Called Ready to Alter Policies to Enhance Status Here,” Washington Post, May 26, 1983, p. A24) On June 3, the President noted that he had received assurances from Romania that it would permit emigration to the West and not levy the “education tax” as an emigration precondition. He also indicated that MFN would be extended for 12 months. (“President Extends Romania’s Status As Trading Partner,” Washington Post, June 4, 1983, p. A16)
6. See footnote 7, Document 168.
7. In telegram 7650 from Moscow, June 16, the Embassy transmitted a summary of Andropov’s June 15 speech. (Department of State, Central Foreign Policy File, Electronic Telegrams, D830343–0146)
8. The Hungarian revolution was October 23–November 10, 1956; see footnote 4, Document 8 regarding the Czech revolution.
9. Issued on September 2; see Foreign Relations, 1981–1988, vol. X, Eastern Europe, Document 18.
10. In telegram 2840 from Sofia, August 3, Barry transmitted a synopsis of his 4-hour meeting with Zhivkov on August 1. (Department of State, Central Foreign Policy File, Electronic Telegrams, D830442–0549)
11. On May 13, 1981, Pope John Paul II was shot in St. Peter’s Square at Vatican City and survived the attack.