Foreign Relations of the United States, 1981–1988, Volume X, Eastern Europe

155. Paper Prepared in the Bureau of Intelligence and Research¹

No. 91

Washington, June 5, 1987

(U) Romania in Transition: A Test of Gorbachev’s Policy

Major Findings

Anti-regime activity in Romania increased this past winter as economic conditions worsened. In keeping with its time-honored Stalinist methods, the regime responded with austerity and repression. With no relief in sight for the long-suffering Romanian population, popular discontent is likely to continue and intensify.

The current situation evolves from President Nicolae Ceausescu’s personal method of rule. Over the past two decades Ceausescu, exploiting Romanian nationalism and anti-Soviet sentiment, has sought to carve out a degree of independence from Moscow. He has greatly expanded the latitude permitted a Soviet bloc country by remaining a member of the Warsaw Pact while pursuing policies separate from and sometimes contrary to that alliance. He also over a long period has maintained extensive ties with noncommunist states. At the same time, to perpetuate his dictatorial rule, he has brooked no outside interference in Romania’s internal affairs, directing his insular mindset toward both the East and the West.

With foreign debt accumulating over an extended period as a result of forced industrialization based on large hard-currency imports, the regime turned to creditors in the West for debt relief but interpreted their terms for settlement as interference in Romania’s internal affairs. In particular, Ceausescu opposed conditions set by the International Monetary Fund (IMF) for supervision of debt rescheduling, opting instead for rapid repayment of the debt by increasing exports, with consequent heavy costs to the domestic consumer.

Turning eastward has its limits. The USSR for years has given East European regimes indirect subsidies by selling raw materials at prices below those on the world market while purchasing manufactured goods at higher than world market prices, receiving in return “socialist allegiance.” Although one of the lesser beneficiaries of this policy, Romania has counted on some form of Soviet assistance, especially accelerated deliveries of energy in times of stress. The Soviets, however, are pressing all their allies for accelerated exports of higher quality industrial goods, as Gorbachev did during his recent visit to Romania.

All this comes at a time when the drive for economic reform in the Soviet Union is spilling over into Eastern Europe. Gorbachev’s experimentation with decentralization—more decisionmaking authority devolving to local enterprises, and calls for direct contacts at the plant level with both communist and capitalist countries—has an unsettling effect in countries like Romania where such measures would mean a loosening of political central control. As long as Ceausescu is at the helm, he will insist on limiting outside influences, which might fuel popular dissent; but his successors may be less able to do so.

Although Gorbachev professes a policy of diversity and separate roads for East European countries, the Soviets have always viewed social upheaval on their borders as a threat to their security. History shows that they are impelled to act in such situations. In the event of serious unrest in Romania—or elsewhere in Eastern Europe—the Soviets would exhaust other options, such as infusions of economic aid to quiet the population, before resorting to direct intervention and the use of force.

Social upheaval in this region would not benefit the US, whose interests are best served by pursuing a policy of differentiation which encourages market-oriented developments and fosters more liberal political trends. With regard to Romania, however, given the linkage in US law between trade liberalization and human rights performance, the US administration’s options are limited. Efforts to encourage a broader dialogue with Ceausescu now to improve bilateral relations, despite abhorrence of his methods of rule, could lay the groundwork for a more viable relationship with his successors.

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[Omitted here is the table of contents.]

The Romanian population during the last two winters experienced hardships probably unprecedented since the immediate postwar period. Popular dissent and acts of protest against the regime reportedly were expressed far more openly than ever before. With economic conditions steadily deteriorating, the regime responded with strong political repression rather than change its economic strategy to alleviate the lot of the population.

This paper focuses on two questions: Given the current situation, what is the outlook for stability in Romania in the immediate period and in a more extended timeframe beyond Ceausescu’s tenure? What problems/opportunities are the Soviets likely to confront in dealing with the evolving situation? These questions are placed within the larger framework of Romania’s position between East and West and its self-styled independent role within the Warsaw Pact alliance.

Popular Dissent and Regime Response

Rarely in its 20-year history has the Ceausescu regime faced open defiance of its authority. Occasional strikes and worker protests occurred over the past decade, but never any sustained acts of anti-regime hostility. On the whole, the regime’s main worry seemed to be worker absenteeism, which worsened when many factories demanded that workers put in longer hours with no improvement in working and living conditions. Beginning last autumn, however, public dissent became more overt, manifesting itself in various ways:

— the appearance of leaflets in the capital urging the public to hoard food, stay at home, and wait for the “wicked” regime to collapse;

— strikes in factories protesting food and other consumer shortages;

— deepening despondency in rural areas as well as the cities over shortages of basic foodstuffs and fuels;

— extension of military control (already over the energy sector since 1985) to heavy-industry plants in a number of cities; uniformed soldiers now monitor production and workers;

— suspected sabotage, such as the reported explosion at an oil refinery on January 26, Ceausescu’s birthday; and

— electricity shortages that, to add irony to austerity, have imposed limits on television broadcasts to two hours a day, which are taken up mostly with Ceausescu speeches calling for greater sacrifices rather than promising relief from those already made.

Unlike the Soviet Union, there is no glimmer of openness or “glasnost” in Romania. These events have not appeared in Romanian media, though they have been widely reported in the Western press. But for a population traditionally known for its docile acceptance of authority and of hardships of life under socialism, such acts—scattered and unorganized as these seem to be—may signify a deep malaise that has not yet run its course.

Seeing this discontent as a threat, the regime has responded in its own reflexive way by keeping the lid on all forms of public dissent. Its main concern has been to keep deteriorating morale from hurting worker productivity, and its main solution has been a steady increase in coercion, a heightened appeal to Romanian nationalism, and exhortations to work harder. Apart from special food supplies for coal miners and workers in some large plants, the regime has not offered the public any positive incentives.

Rigidly orthodox communist methods of rule have enabled the regime to maintain such practices even though in most other East European states authoritarian methods have been diluted over the years. The Romanian Communist Party is the guiding authority in the country; and the party, government, and internal security apparatus tolerate no opposition. Under the dynastic system of rule established by Ceausescu, he and his close cohorts and family members have entrenched themselves in controlling positions throughout the entire ruling apparatus. He has given a new meaning to the “cult of personality” concept, buying off loyalties in the military, the police, and wherever else his purposes are served.

All forms of mass media are tightly controlled; association and assembly are allowed only for officially approved purposes; labor unions are integrated with and controlled by party and state; the practice of religion is circumscribed by the government; and freedom of conscience is seriously limited in a society conditioned to believing that police informants are everywhere.

Minority Issue a Complicating Factor

Romanian popular dissidence is not confined to causes stemming from economic privation. Many manifestations of dissidence (leaflets, strikes, etc.) have appeared in Transylvania, where the country’s largest minority—Hungarians—is concentrated. The Hungarian issue has roots deep in history, but its immediate antecedents stem from the World War I peace settlement, wherein a part of Transylvania with a substantial Hungarian population was awarded to Romania. The recent sharp exchange of polemics between Hungary and Romania over the Hungarian minority issue is an unusual phenomenon among “fraternal” socialist countries.

The Romanian regime refutes Hungarian complaints of discrimination and claims to guarantee the same rights to these citizens (almost 10 percent of a population of 21.5 million) as to the rest of the Romanian population. In fact, however, the government does discriminate in culture, education, and other areas and basically seeks to assimilate the Hungarian minority. Although the government through budget allocations has supported a large institutional structure of Hungarian schools, publications, and cultural institutions, there is evidence of a systematic government effort in recent years to erode this support. Probably Romanians of Hungarian nationality are no worse off economically than the rest of the population, but they are able to contrast their depressed condition with that of their compatriots across the border in Hungary who live in better circumstances.

Regime sensitivity to the issue is indicated by a greater internal security presence in Transylvania; by careful monitoring of Hungarian cultural, educational, press, and other activities; and by the public attention the regime pays to the problem. Ceausescu has made it the focus of a number of recent speeches, defending the government’s record and accusing Budapest of taking up the Hungarian minority’s cause and interfering in Romanian affairs. Ceausescu feels confident he has the backing of the entire population outside Transylvania on the issue, one which he uses to deflect some public resentment of his rule.

The regime’s treatment of its small Jewish minority is also a source of deep inquietude. In recent months incidents involving demolition of a unique synagogue and a Jewish old-age home—despite earlier government pledges to the contrary—have aroused Romanian Jews as well as human rights activists abroad. The Jewish community has also been disturbed by recent Romanian press attempts to show that a 1941 pogrom in Iasi, Romania, in which many thousands died, was an event of only minor significance and one for which Romanian authorities bore no responsibility. Other minority groups—ethnic Germans, Protestant sects—have their own specific grievances against the regime and are additional sources of dissidence.

Balancing Between East and West

The minority issue aside, economic problems are the preeminent cause of the current civil unrest in Romania. But the policies that have brought them about are essentially political and peculiar to Ceausescu’s personal style of rule. Under his leadership, Romania has occupied a unique position among Warsaw Pact countries. Political skill and innovativeness have allowed him for more than two decades to remain a member of a communist political/military/economic alliance yet conduct policies separate from and sometimes contrary to that alliance. In the process, he has greatly expanded the latitude for independence permitted a Soviet bloc country.

Examples are well known: Ceausescu has refused to allow Warsaw Pact troop maneuvers on Romanian soil, abstained from joining the Pact in such historic acts as the 1968 invasion of Czechoslovakia, and frequently disrupted the unity Moscow has sought within the Pact by refusing to join in various declarations and actions vis-a-vis other communist states (e.g., not taking sides in the Sino-Soviet dispute of the 1960s). He even balked when the Pact came up for renewal in 1985, preventing any major change in its political/military thrust. It may be noted, though, that for all Ceausescu’s differences with his Eastern allies, he has never challenged Soviet hegemony in Eastern Europe by threatening to leave the Pact as Hungary actually did in 1956.

In relations with the noncommunist world, Ceausescu has been even more independent, viewing himself as having inherited Tito’s mantle as a leader of the Third World: He has maintained extensive trade and political ties with noncommunist countries, kept Romania’s ties with Israel when Moscow broke with it, and often taken positions in international forums which are at variance with the Soviet Union. He has not, however, seriously confronted Moscow in important security areas; in recent times he has generally gone along with major Soviet arms control policies (which, to be sure, have moved in directions he favors); or if he has been critical, he has balanced any criticism with fault-finding of Western positions.

In the Western view, Ceausescu is a maverick although it has been more his Stalinist internal policies than his international posture that have made him stand out in recent years. (Most other Warsaw Pact countries have also gradually developed independent openings to the West.) In the Soviet view, Ceausescu in some respects has been an exemplary communist ruler: He has never allowed dissent to develop to the point where the Soviets could see a situation of instability on their borders as a threat to them, as happened in Poland. And he has remained faithful to orthodox communist doctrine—until recently, at least, an undoubted virtue in Soviet eyes. The Soviets have tolerated Ceausescu not only because he has kept his deviance within acceptable bounds but also because he has refrained from establishing too-close ties with the West.

Thus, for two decades Ceausescu has managed to balance external forces skillfully enough to obtain economic aid from both East and West while he has prevented either from exacting a high political price for its assistance; particularly, he has prevented interference in Romanian internal affairs. He has managed to keep foreign policy distinct from internal concerns, which he has always considered an area of his own exclusive purview. Any attempts to infringe on this special preserve have always been rejected, even at heavy economic cost. The question now arises, is the country approaching a point where this delicate balance will no longer work, and in what direction will Romania move—if it must—from this position?

Genesis of Economic Malaise

Romania’s present problems stem from Ceausescu’s effort to transform the country into a modern industrial power through rapid industrialization based on costly imports of Western machinery and equipment. His strategy has differed from that of other East European countries where fear of popular discontent has impelled regimes in varying degrees to give greater priority to consumer concerns and less to investment. Bucharest has given lower priority to the consumer sector, insisting instead on preserving its industrialization program through high levels of investment despite halting economic growth and lagging exports.

With industrialization, Romania, formerly an exporter of oil and natural gas, rapidly became dependent on energy imports. At the same time, the regime made the classic error of neglecting agriculture. Small investments in agriculture led to limited gains in output and increased imports of feedstuffs. Hard currency outlays for agricultural items, along with a decline in earnings from agricultural exports, turned Romania’s balance in agricultural trade to a deficit position.

The net result of these policies was a relatively large foreign debt; how to meet it has become the regime’s main concern in formulating its economic policy. After the 1979 oil price shock, Bucharest began financing its foreign debt with hard-currency credits: By 1981 its debt had mounted to some $10 billion, nearly three times the 1977 level. Relying on short-term borrowing, the Romanians ran into serious problems when Western banks began to withdraw credit lines from Eastern Europe in the early 1980s in the face of the Polish debt crisis.

“Interference” From the West

Romania was the first East European country to turn to the West in search of a solution to economic stabilization problems. It joined the World Bank (IBRD) and the IMF in 1972, at a time when the USSR opposed membership in these UN-affiliated organizations for fear of US dominance of their policies, the statistical disclosure requirements, and the obligations of IMF members to work toward elimination of trade and payments restrictions.

Romania’s motives in seeking membership were straightforward: It could improve its creditworthiness in the eyes of the international financial community and gain access to standby credits. To this end, in 1981 Romania negotiated a three-year standing credit and stabilization program with the IMF in the hope of reassuring Western bankers that Romania was bringing its balance-of-payments problems under control. Its effort failed. With unpaid obligations mounting, and arrears in violation of the IMF charter, Romania’s drawings under the IMF standby agreement were suspended. The IMF did persuade Bucharest to negotiate rescheduling agreements with its creditors, but it also called for the regime to furnish fuller statistical data, to take action on prices and on exchange and interest rates, and to undertake certain other reform measures.

Sensitive to anything that would lessen his control over the economy, Ceausescu rejected the IMF requests as interference in Romania’s internal affairs. By 1984, with the last year of the IMF standby arrangements canceled, Romania decided to avoid new borrowings and reschedulings and to pay off its foreign debt by the end of the 1980s. (Ceausescu has given no indication since then that he will go back to the IMF, and in fact on numerous occasions has denounced it for imposing economic conditions on would-be borrowers.)

To get rid of the foreign debt, the regime then counted on a rapid growth of exports, mainly from sales of machinery, to generate hard currency. This required increasing industrial investment which in turn meant that the regime would have to resort to further cuts in consumer welfare. This strategy did not work: The hoped-for strong economic growth and improved trade performance did not follow. Nevertheless, Ceausescu has insisted on continuing his drive to eliminate the debt and sustain investment, and as a consequence the outlook for improved living standards remains bleak. In turn, the prospect for civil unrest continues, along with regime efforts through the security apparatus to maintain tight control.

Uneasy Relations With the East

Predictably, Bucharest’s inability to solve problems with Western creditors impelled it to try to improve its economic standing vis-a-vis the Soviet Union and the other East European countries. The Soviet Union historically has sold raw materials to the East Europeans at prices below those on the world market and purchased from them manufactured goods at higher than world market prices. Its unfavorable terms of trade with Eastern Europe in effect are implicit subsidies for which the Soviet Union receives the intangible benefits of “socialist allegiance.”

These subsidies were relatively small in the 1970s (around $1 billion per annum), rose to about $18 billion in the early 1980s, then declined to around $12 billion currently. They also fluctuated widely in value because of the wavering price of Soviet oil. And they varied in amount from country to country, with Romania apparently receiving the smallest share, corresponding, according to some analysts, to its relative strategic and political importance to the USSR and to Ceausescu’s resistance to participation in joint Council for Mutual Economic Assistance (CEMA) projects. Whatever its share, Romania to an important degree has relied on this form of indirect aid from the Soviet Union. Recent statistics on Soviet-Romanian trade may indicate an intensification of this trend, even though they give only a fraction of the picture.

The net result of Romania’s drive to pay down its Western debt and reduce its reliance on foreign resources in general has been that the East has supplied a greater share of Romania’s imports than the West. Soviet-Romanian trade increased nearly 25 percent in 1986 over 1985, in large part because of a rise in Soviet energy, raw materials, and machinery exports, according to recent embassy reporting. The Soviets agreed to pay higher prices for Romanian goods, but the Romanians had to pay for some Soviet imports with foodstuffs, meat, and agricultural commodities, all in short supply in Romania. And the Soviets, citing their own difficulties with the severe 1986–87 winter, only reluctantly agreed to accelerate energy deliveries.

The question arises whether the Soviet Union, pressed for hard currency itself, might contemplate eventually cutting back on its exports of fuels and raw materials to Romania in order to sell more to the West. It could use the money earned to buy Western machinery and equipment which would be technically more advanced and of higher quality than it typically can get from Romania. A leveling-off of Soviet-Romanian trade from the large increase last year, or Soviet insistence on barter of additional quantities of crude oil for good-quality merchandise which in turn could be marketed in the West, would point in this direction. (Ceausescu in a recent speech admitted that production delays and poor quality had cost Romania “tens of millions” of dollars in hard-currency exports already this year.) The Soviets may be questioning whether closer economic cooperation with Romania warrants diminishing their own energy and raw materials resources.

Cooperation in other economic areas appears uneven. Although details are lacking, the Soviets have hoped for greater cooperation in joint-venture production in Romania, but the Romanian response apparently has been noncommittal. The Soviets claim to have signed joint-venture agreements with all CEMA countries except Romania, which has held that no agreement is needed because a 1971 law allows for such ventures on a 51 percent Romanian/49 percent foreign ownership basis. Even though such cooperation would appear to benefit the Romanians more than the Soviets, the Romanians impose such restrictions as limited access of foreign technicians to plant facilities, which generally discourages the participation of all foreigners, Soviets included.

The Impact of Soviet Reforms

During his May 25–27 visit, Gorbachev expounded on his policy of more cooperation and openness—at a time when there is growing uncertainty about the potential impact the whole panorama of Soviet changes will have on the individual East European countries and on the region as a whole. His stance on economic matters has raised serious doubts in many quarters about how far the Soviets will be willing to allow diversity to go. This question may be especially significant for Romania, both now and in the period of transition to a new leadership.

Like most other East European leaders, Ceausescu has been in power long enough to have vivid memories of the upheavals that Khrushchev’s de-Stalinization and economic reform programs caused in East European countries. Most regime leaders have been strongly identified with the Brezhnev era and are entrenched in their own ways of running their countries. Radical change usually has brought turmoil. It would be unrealistic to expect the leaders universally to welcome major Soviet reforms; to do so, for some of them at least, would be to undercut many of their own longstanding policies. In the past, even where significant reforms were initiated, they generally were cautious and moderate.

Until now, Gorbachev has not introduced any entirely new policies bearing directly on Eastern Europe and has been content to pursue the separate-roads thesis. Although his reforms in the Soviet Union may bring fundamental changes in time, Gorbachev proclaims them to be well within the bounds of socialism. And he has not called for radical changes in Eastern Europe; instead, he has acknowledged that the Soviet Union is learning from the examples of its allies. But the lagging East European economies have brought the need for change into the open. Caught between this need and the dangers inherent in it, the Soviets run the risk of unraveling what they want to strengthen in Eastern Europe.

For their part, East European leaders are wary. Those in favor of reforming their own political/economic structures are using the Soviet reforms to sanctify their programs and to argue that reform throughout the socialist world is inevitable. Others seem to believe that the Soviet Union’s impulse to present itself as the economic model for the East waned in the Brezhnev years. They imply that in any event they already are out in front of the Soviet Union in such areas as decentralization and multiple electoral candidates and thus have little to learn from the Soviets. In reality, though, these regimes fear it will be necessary to alter their economies by relaxing central controls and permitting a freer market approach.

Ceausescu is one of those who points to “reforms” already in place to give the impression that it is the Soviet Union, not Eastern Europe, that lags in this area. He pointed out in a recent speech, for example, that Romania already had worker self-management and self-financing; that conditions were created as far back as 1975 for setting up joint companies with capitalist, socialist, and developing countries; and that “socialist democracy” was strong in Romania. “We not only formulated the thesis of building socialism with the people and for the people, but also acted to . . . ensure conscious participation by all our people in fulfilling our development programs.” In his remarks during Gorbachev’s visit, he showed no inclination to become more accommodating to Gorbachev’s desire for reform.

Ceausescu has reason to be apprehensive about what is going on in the Soviet Union, for although he has pursued a detente-style policy abroad, he alone among the East European leaders has managed to cling for so long to Stalinist methods of rule at home. He has brooked almost no leadership debate and repeatedly has purged pro-Soviet officials. Moreover, he has virtually stated that he is out of sympathy with Gorbachev’s reform program. In speeches he has gone so far as to call attempts at restructuring and democratization “illusions” and “delusions.” He has said, for example, that “no one can conceive of a revolutionary party saying that it will let enterprises or economic sectors manage themselves,” an obvious reference to the Soviet call for greater autonomy for enterprises. And “there is no way of speaking about socialist perfection and [at the same time] about so-called market socialism and free competition. . . . One cannot speak of a socialist economy and not assume the socialist ownership of the means of production as its basis.”

Anything that would give rise to even a suspicion of tampering with such a basic Marxist tenet as socialist ownership of the means of production, or of undermining the party’s leading role by attacking corruption within it, would constitute revisionism if not something worse for an old-style communist like Ceausescu. The correct road to socialism should not be strayed from even for promises of temporary relief: “Under no circumstances do we encourage ways that can lead to the strengthening of any forms of capitalist ownership—even small ones.” And, “Life and experience have shown the party’s leading and decisive role in all areas of activity.” This kind of barely veiled criticism of Moscow, whether or not well founded, is bound sooner or later to have repercussions. It puts Ceausescu in the same category as those in the Soviet Union that Gorbachev has attacked as opponents of reform and is removing from the party ranks.

The dominant element in Soviet policy toward the region up to now has been CEMA’s program for technological development. The Soviets want higher quality goods from their allies and hope that greater cooperation within CEMA will close the technological gap with the West. Soviet Premier Ryzhkov at the CEMA session last November proclaimed that the entire socialist system, not just the USSR, had to undergo restructuring and accelerated development. The program he outlined called for “radical changes” in CEMA which would involve genuine restructuring—an overhaul of the planning system, changes in members’ currency and monetary systems, and a reform of the body’s organizational structure. The long-term agreements the USSR signed with individual CEMA members at that time point in these directions.

The Soviets evidently believe that one of the best ways to improve CEMA operations is to bypass its members’ unwieldy centralized bureaucracies and implement direct links between enterprises and Western firms. As with the Soviet reforms, this would involve stronger coordination of plans at the macro-level, along with more independence in decisionmaking and operations at lower levels, including experiments with Western-style labor management techniques. Any Soviet attempt to restructure national bureaucracies to accept this new concept implies greater Soviet involvement in individual members’ economic projects. Given his dismay over Western (IMF) “interference,” Ceausescu is not likely to be in a hurry to commit himself to this kind of Eastern meddling, should the Soviets push for it.

While it is too early to assess the extent to which the Soviets will impose their reform ideas on CEMA, the Romanians already are resisting. Romanian Foreign Minister Totu recently told a Western visitor that his country was under pressure at every level to go along with changes that would encourage a greater division of labor to allow more Soviet exports of manufactured goods to CEMA countries and less of raw materials and gas. The Romanians, said Totu, were holding out against these changes. Such resistance, while not new or surprising, contributes to an atmosphere of differences with Moscow which in turn could contribute to instability in the area.

So far the Soviets have not betrayed any great concern that their reform policies are causing anguish in Eastern Europe, and they have not taken any action to rein in Ceausescu. Soviet media have acknowledged differences by refuting Western press accounts predicting that, as in the past, reforms will spell genuine trouble for the Soviet Union. According to Fedor Burlatskiy, an influential and reform-minded commentator (thought to be an unofficial adviser to Gorbachev), whereas Moscow previously viewed domestic affairs of other socialist countries to be its legitimate concern, a more laissez-faire policy now reigns. “If Ceausescu wants to be a dictator, fine, let him. Of course, we may not approve such actions, but we will not criticize them,” he said, noting at the same time that criticism of domestic developments in socialist countries would continue.

Transition Scenarios

Whatever its proclaimed policy, Moscow must be at least as attentive as the West to the possibility of greater instability in Eastern Europe growing out of its reform strategies there and what Gorbachev has called the “revolution of expectations” within the Soviet Union. Romania can expect further economic deterioration accompanied by continued and even intensified popular discontent as long as it pursues its policy of paying off foreign obligations at the price of domestic austerity. (The current five-year plan, for example, allocates nearly all growth up to 1990 to investment and exports rather than to the consumer area.) Given the momentum for reform in the Soviet Union, the resistance to change on the part of some East European leaders, and the likelihood of regime transitions in the not-too-distant future in some or all East European countries, the stage could be set for a period of political turmoil throughout the region. What happens in the other countries will certainly affect Romania, where political repression may no longer be an adequate tool to contain popular discontent. How the forces play themselves out will depend significantly on whether Ceausescu remains on the scene.

While Ceausescu Lasts: More of Same. Communist leaders do not retire; they either die in office or are forced out. Ceausescu is not likely to be an exception. Analysts generally agree that, despite possible health problems, he will hang on to power to the end. And as long as he does, he will be able to control the situation inside the country. His internal security apparatus is likely to remain responsive enough to his direction to maintain stability in the face of civil unrest even if it becomes intensified or more widespread. He used troops to put down a miners’ strike a decade ago, and there is no reason to suppose that he would not do so again. Under such circumstances, prospects for the rise of a popular movement such as Solidarity seem remote in Romania, where labor is under tight party control (Ceausescu is chairman of the national labor organization).

A Transition to Ceausescu’s Coterie: Additional Cause for Unrest. The main element of uncertainty here is Ceausescu’s longevity. He apparently could experience a health crisis at any time; on the other hand, he could last much longer. Ceausescu’s practice of nepotism and cronyism has been described as having kept socialism in one family. Analysts generally agree that whether he dies or becomes incapacitated, a regime headed by Mrs. Ceausescu will take power at least briefly. Her regime, or one made up of Nicolae’s coterie that followed it, might attempt to carry on his tradition of communist autocracy, orthodoxy, and resistance to outside interference if for no other reason than to establish its authority.

Beyond the Ceausescu Era: A Race Between Reform and Upheaval. A regime made up of Ceausescu’s circle might eventually give way to a more pragmatic leader or group. A new generation of technocrats more in tune with the times might try to maintain Romania’s balance between East and West but be more flexible in dealing with both. If it were able to ameliorate economic conditions and quiet public discontent, a prolonged honeymoon between the regime and the population could ensue.

But a new regime struggling to establish itself might not be able to make a smooth transition, and the situation could deteriorate into wider and possibly violent forms of popular unrest. The discontent of the Hungarian minority could intensify as economic conditions got worse. Ethnic Hungarians are more likely to protest actively than ethnic Romanians living under the same conditions, and an incident involving the Hungarians might be the spark that set off public violence. Official repression under any regime, whether that of Ceausescu or his successors, would likely be harsh and would be rationalized by arguments about foreign agitation or moves aimed at detaching Transylvania from Romania. Such a situation could get out of hand.

Soviet Options

No matter what form the transition takes, or for that matter if there is an indefinite continuation of Ceausescu’s style of rule, Moscow is likely to face new problems in dealing with Romania, as with other regimes in the region. What Gorbachev wants in Eastern Europe may be ambiguous at this time, but what he does not want is clear: He does not want another Hungary, Czechoslovakia, or Poland—that is, any kind of internal ferment or instability that would undermine communist party authority and thus require force or even threat of the use of force on Moscow’s part. Such a development could put a brake on Gorbachev’s domestic program and intensify opposition in the party and the bureaucracy.

The Soviets have learned something about the costs of intervention in the 30-some years since Khrushchev’s invasion of Hungary and the 20 years since Brezhnev’s invasion of Czechoslovakia. But turmoil in a border country has always been viewed by Moscow as a danger; and even though the Soviets avoided direct intervention in Poland, their invasion of Afghanistan demonstrated once again the Soviet will to act in the face of border-country instability. Romania would be no exception should events there get out of hand. But while direct military intervention is a credible sanction, it is one the Soviets would be anxious to avoid, and Moscow would exhaust its other options first.

Analysts generally hold to the view that if Romania should face serious internal strife, Moscow would immediately offer more economic aid but in return would demand a more cooperative attitude on Bucharest’s part in the Warsaw Pact and CEMA—in effect a significant shift of its orientation eastward. This argument may have been true in the past, when Moscow was intent on keeping as tight a rein as possible over its East European allies. But given Gorbachev’s own policies of greater political flexibility and broadened economic contact with the West, the Soviets might not see a continuation of Romania’s balancing role between East and West as necessarily against their own interests. Thus, they might concentrate on the economic situation, expecting greater exertions on Romania’s part to put its house in order—and perhaps a direct voice in instituting reforms—as the price for their largesse.

Although Gorbachev has not shown any particular warmth for Ceausescu’s leadership, he could continue to live with a regime that pursued more pragmatic economic policies so long as it did not allow them to become an opening to unacceptable Western influence in Romanian affairs—that is, influence that would weaken Romania’s place in the Warsaw Pact and wean it away from the Soviet sphere. That kind of alienation would have to be dealt with: It could have repercussions not only in Eastern Europe but also against Gorbachev himself inside the Soviet Union. While it may not become directly involved in the succession, Moscow will watch it closely and of course will try to influence any successor regime in Bucharest to adopt more rational economic policies than Ceausescu has. A regime committed to more rational economic policies might regain Western financial support.

The field of energy is one example of both the extent and the limits of Soviet leverage. According to 1986 data, the Romanians are involved in 157 new development projects in the USSR, among them the gigantic Yamburg gas pipeline, a project far more ambitious than the current Urengoy-Pomari-Uzhgorod and Friendship lines which supply Soviet gas to Eastern Europe in exchange for exports to the Soviet Union. This new energy bridge is being lauded by the Soviets as promising a reliable source of natural gas to the East Europeans which will help them significantly in solving their energy problems. “What does it mean,” a Soviet commentator asked, “for a country deprived of rich energy resources to build its future economy with absolute confidence on a long-term basis because it relies on gas from Siberia?” The answer was “friendship and cooperation,” but it is apparent that this cooperation will give Moscow an important source of leverage that could be particularly useful in times of crisis.

Implications for the US

Romania’s unique position of balance between East and West has given the US scope to pursue its policy of differentiation, a policy which rejects the view that the East European states form a monolithic bloc led by the Soviet Union. In the case of Romania, this policy has served US interests by encouraging market-oriented developments there and by fostering at least some movement in the area of emigration, if not human rights in general. Although US options, like the Soviet Union’s, are limited in dealing with the current Romanian situation and in planning for the future, there is some room for maneuver and further exploration.

More Destabilization. A continuation of Romania’s refusal to change policies sufficiently to comply with IMF requests and thereby gain substantial relief from the West could lead to worse economic conditions in the country, with greater social instability and more widespread opposition to the regime. Any potential US attempt to support such opposition in order to promote democratic change would be unlikely to succeed while Ceausescu was still at the helm.

Destabilization would be likely to lead to greater repression rather than to democratization, as the history of Eastern Europe amply shows. The need to establish law and order and its own authority might impel even a more pragmatic successor regime to go slow in liberalizing social policy, at least initially. Without conceding that Eastern Europe is irreversibly a part of the Soviet sphere, one may thus conclude that encouragement of destabilization is not in the US interest. It has never been US policy. In the current situation, other approaches might be more profitably pursued.

Encouraging Stability Through the IMF. Based on the hard currency debt alone, it can be argued that the US has a long-term interest in fostering stability and healthier economies—not to be confused with the status quo—in Eastern Europe. In Romania in particular, the US would have an interest in preventing the economic situation from deteriorating to the point where it could lead to domestic upheaval. By using what leverage it has to encourage economic stability, the US has achieved at least a modicum of influence there.

Given the IMF’s past pivotal role in Romania’s international financial standing, the question is raised whether IMF policies have been reasonable. Some experts posit the view that the conventional IMF prescription of domestic austerity to correct external imbalance does not suit Romania, whose consumer sector is already severely strained. A more innovative approach on the part of the IMF would be required if Romania were to reapply for debt rescheduling, or if it were to take on a new debt burden after paying off its current indebtedness.

A comparison of the Romanian and Hungarian experiences is relevant. Both countries cut imports and shifted investment priorities; but Hungary, in contrast to Romania, while instituting an austerity program, went about it more moderately and did undertake economic reforms. Given Ceausescu’s demonstrated refusal to acknowledge that political stability is directly tied to economic performance, the “lesson” may be more relevant for his successors than for him.

Flexibility in Bilateral Relations. One of the ways the US has encouraged Romania’s independence vis-a-vis the East was by granting it most-favored-nation (MFN) trade status more than a decade ago—and later the Generalized System of Preference (GSP). By linking MFN and GSP to another key aspect of US policy—Romanian performance on questions of emigration and human rights—the US has made MFN/GSP a political rather than strictly economic policy, requiring that it be withdrawn (as GSP recently was) when political conditions dictated.

Some observers of the Romanian scene argue that this linkage should be less rigid and that US policy should not be driven by human rights considerations. But grounded as the system now is in law (Jackson-Vanik amendment to the Trade Act of 1974), there would appear to be leverage primarily in influencing specific human rights cases which the US might choose to emphasize.

From the Romanian point of view as expressed by Ceausescu recently to a Western visitor, MFN is not the cornerstone of the relationship. Relations were good before MFN, which is used by “certain groups in the US as a way to try to impose their will on Romania.” According to Ceausescu, however, “the US Senate is not the Senate of Rome, and Romania will continue its independent policy.” In the Romanians’ view, economic benefits are the most significant human right. First and foremost, they say, are citizens’ rights to the essentials of life: food, shelter, employment, and economic security; lesser standards of performance should be tolerated in order to achieve progress toward this primary goal. Rejection of US views may be to some extent a tactic or possibly the result of misunderstanding of US motives. In any event, there would seem to be room for further dialogue here.

One such forum for dialogue was the 1986 “Human Contacts Meeting” in which the participating member states of the Conference on Security and Cooperation in Europe (CSCE) met in Bern, Switzerland, to discuss “the development of contacts among persons, institutions and organizations.” Issues addressed included trade union contacts, contacts among members of religious faiths and national minorities, freedom of movement, and development of tourism and exchanges. A1though no consensus document emerged, a sustained, low-key, and effective review was conducted of Eastern compliance, including that of Romania, with CSCE commitments; and participants discussed many ideas for easing if not resolving some of the problems in this area.

Ceausescu has indicated he wants a continuing dialogue with the US and a broader political-economic relationship including more cooperative ventures and exchanges in as many areas as possible. He has shown some flexibility on the emigration issue, stating recently that he would allow Romania to be used as a transfer point for Jewish emigration from the Soviet Union to Israel and promising the necessary security precautions.

Romania’s success in balancing between East and West has been a feature not only of its own policies but also of a degree of toleration on the part of both the US and the USSR. As is evident, pressure from either direction can tip the balance to some degree. Ceausescu will not allow too much of a shift, but his successors may opt differently. It would seem to be in the US interest to use what influence it has to lay the groundwork now for a better relationship with a future regime which might become more responsive to US policy concerns even though it continued balancing between East and West.

1. Source: Reagan Library, Rudolf Perina Files, Subject Files, Romania—Substance 1987 (1). Confidential; Noforn. Drafted by Isabel Kulski (INR); approved by E. Raymond Platig (INR). All brackets and ellipses are in the original.