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

401. Telegram From the Embassy in Bulgaria to the Department of State and the Embassy in Belgium¹

4951/Depto 4071.

Sofia, October 19, 1988, 1437Z

SUBJECT

• Deputy Secretary’s Meeting With Todor Zhivkov, October 18.

1. C—Entire text

2. Summary. In an animated two-hour meeting at his private residence in Pravets the evening of October 18, Bulgarian Chairman Todor Zhivkov explained to Deputy Secretary Whitehead his program for Bulgaria’s economic restructuring; justified recent personnel changes; dismissed the significance of the Turkish minority question; and asked for closer cooperation with the United States. Zhivkov closed the exchange by boasting that, with or without U.S. assistance, his country would by the year 2000 have the highest per capita income of any socialist state in Europe. End summary.

3. President of the State Council of the People’s Republic of Bulgaria, Todor Zhivkov, greeted the Deputy Secretary warmly and said he was pleased to welcome him to his native village. He said he was happy the Deputy Secretary had come to visit him again. Mr. Whitehead was, in his view, a good personal friend and a strong supporter of closer U.S.-Bulgarian relations. Joining Chairman Zhivkov were Bulgarian Foreign Minister, Petur Mladenov, and an assistant to Zhivkov named Goranov Philos. Joining Deputy Secretary Whitehead on the American side were Ambassador Polansky and NSC Senior Director Nelson Ledsky.

4. After an exchange of pleasantries and picture taking, Zhivkov joked briefly about when he would retire. He said he hoped to keep going until the age of 95. Mr. Whitehead recalled during his last visit² that the Chairman had boasted that he would be around for five more five-year plans. This meant he would retire in the year 2008. Zhivkov merely smiled, and said he would like to talk today about the next five-to-ten years, by which time he thought it would be time to turn over the reins of government to a new generation. Indeed, he confessed, some of his older friends and colleagues in Bulgaria were leaving office. This is why he needed foreign friends more than ever.

5. In response to a question from Mr. Whitehead about the pace of economic reform in Bulgaria, Chairman Zhivkov conceded that since February restructuring of the Bulgarian economy had slowed down. The slowdown was required to correct problems which had developed in trying to implement the 1987 restructuring concepts in agriculture and industry. The plans themselves had looked good, but translating them into action had proven difficult. The first problem was that Bulgarian industrial organizations were poorly set up. For example, there were 11,000 people in economic management concerns and from 18,000 to 20,000 individuals in foreign trade organizations. All of these people were disconnected from the manufacturing process. The managers and sales personnel wanted trips and bonuses and other special privileges, but they had no connection with the products they were supposed to be making or selling. Bulgaria would therefore be reorganizing its companies so that each has its own trade department and management elements. These elements will be responsible for the entire organization. The separate trade promotion and management organizations formed earlier would be eliminated. All of this will be done next month, Zhivkov boasted, and your Ambassador will be able to read the announcement.

6. The second problem encountered was related to the question of how socialist property was to be turned over to the workforce, so that it could manage and operate the property successfully. Bulgaria could find the right people at the top of the structure, but there were not enough good people at the bottom. So something new had to be found. Zhivkov said the answer will be to develop a system of shareholding, whereby each employee will be able to buy shares in the company in which he works. The net profit of such companies will be divided, 75 percent for the state and 25 percent for the shareholders. Some 10 percent of the shares of these companies will be available for purchase to those who do not work in the plant, and another 10 to 15 percent will be available for sale to individuals or companies abroad. Chairman Zhivkov said he did not believe that this new system would divide people into rich and poor. There will be restrictions. People will have to work somewhere, and will not be able simply to clip coupons or live on interest payments alone. Investments in these companies will be guaranteed by legislation. Thus, the worker will get paid for his labor and will stand to gain a second income if his company shows a profit.

7. Chairman Zhivkov said he had other ideas in connection with his shareholder plan. The system would be extended to agricultural workers and to collective farms. Family farming would remain possible and certain farmers who lived in marginal farming areas would be exempted from all the taxes.

8. Chairman Zhivkov said there would also be new procedures for management. Management boards would be elected by representatives from workers, shareholders, trade unions, etc. Boards would in turn elect managing directors as occurs in the United States. Moreover, Zhivkov said, Bulgaria would move to a system of convertible currency at least on a national scale, though not immediately to a convertible international currency. We will soon be doing, claimed Zhivkov, “what no other socialist country has done. We have already started down the road to deregulation and decentralization.” Five ministries have been closed, and we have gone from 28 districts to 9 regions. The regions will work like local governments, patterned like the Lander in the Federal Republic of Germany.

9. All of this, Zhivkov claimed, would revitalize and not destroy socialism. These plans would be announced shortly, though some members of the Politburo—including the Foreign Minister who was sitting next to him—had not been briefed fully on them.

10. Deputy Secretary Whitehead said these sounded like exciting developments. It reminded him of the program that President Reagan had adopted in 1981, when he had moved to decentralize and deregulate the economy. Mr. Whitehead suggested that Chairman Zhivkov was adopting the same principles.

11. Zhivkov seemed eager to agree. He said what was underway in Bulgaria was a restructuring of the socialist system. Bulgaria will eliminate those organizations that do not work. Some will be allowed to go bankrupt; others will be changed to operate more efficiently. One company will be allowed to invest in another, and there will be a free flow of capital in the society. Bulgaria will also open itself to foreign investment. Investors will be able to put their money in some 500 Bulgarian companies. Both socialist and non-socialist investors would receive an initial government guarantee, not to insure that profits will be earned, but against the possibility that the organization will go bankrupt. Chairman Zhivkov concluded that what was going on in Bulgaria was a slowdown, not a reversal of restructuring. Mistaken or failed policies were being rectified. All of this, to be sure, was occurring amid domestic criticism. Zhivkov joked that farmers complained when they were asked to join cooperatives, and will complain again once they are asked to leave them. The farmers have gotten used to guaranteed wages and will not want to be left more on their own. Thus, there is need for protective legislation, Zhivkov said, which would be issued next month through a series of decrees. Zhivkov joked that Deputy Secretary Whitehead was the first foreigner to have this new concept of socialist policy explained to him.

12. Deputy Secretary Whitehead thanked Chairman Zhivkov for his explanation, and then turned the conversation to recent personnel changes in the Bulgarian Government. Whitehead asked the Chairman if he could explain the significance of these changes.

13. Chairman Zhivkov said what has occurred was merely a surface scratch. He recalled that in the 1960’s some 19 members of the Central Committee were removed at one time. There was no intention now of removing people. Indeed, more individuals were needed in the Central Committee to manage the kinds of programs the Chairman had outlined. People of talent were required to carry out change, but that meant a few people with old-fashioned ideas who resisted change had to be dropped. So in a sense, Zhivkov concluded, the changes had been made to maintain continuity and progress.

14. Deputy Secretary Whitehead said he would like to spend a minute or two talking about Bulgarian relations with Turkey. He had heard the talks between the two countries had broken down, and wanted to know whether anything was being done to resolve problems between the two countries.

15. Chairman Zhivkov then began a long, animated, rambling explanation of how Bulgaria was misunderstood. He began by recalling a conversation he had with Charles de Gaulle, who seemed to him the only European statesman in recent years with a historical view and the recognition of how Bulgaria had been squeezed on all sides by its neighbors. Zhivkov noted that all kinds of ethnic groups reside within Bulgaria and along its borders. There were probably 400,000 Bulgarians in Turkey and another 100,000 in Romania. Countless Bulgarians have been assimilated into the Soviet Union. Turkey, Zhivkov explained, insists that it has a large minority in this count [garble] had reached an agreement on resettlement. Mr. Whitehead then asked the Chairman if he would comment on how well General Secretary Gorbachev was doing in the Soviet Union. Was he moving too quickly or too slowly? Would he be successful?

17. Chairman Zhivkov did not respond directly to this question. He said Gorbachev’s major accomplishment thus far had been in the field of foreign affairs. The Soviet leader’s strength arose from his insight into the historical context in which he was operating. He had made no foreign policy mistakes and had worked diligently and effectively to prevent nuclear war and assuring that the Soviet Union worked cooperatively with the United States to solve world issues.

18. Chairman Zhivkov said Bulgaria and the Soviet Union saw eye-to-eye on most things. Particularly since the 19th Party Congress, Bulgaria has “only the most minor differences with the USSR.” Restructuring is the correct path, and both states are embarking on it. The Soviet leadership, to be sure, has its special difficulties. This is only natural, said Zhivkov, given the enormous undertaking in which they are engaged. Some of the difficulties also spring from the new openness, but this is a necessary problem since in the long run people need to be told the truth.

19. Deputy Secretary Whitehead commended Zhivkov for his diplomatic answer to this question, but said he had an even more difficult question for the Chairman. Mr. Whitehead said that he had heard recently that a new human rights organization had sprung up in Bulgaria, and he wanted to ask what the attitude of the government was towards these human rights activists.

20. Chairman Zhivkov said this was not a difficult question to answer. The individuals were no problem. They were insignificant. He challenged the United States to meet with these individuals if we wished, but he also suggested that he be allowed to publish information on these people so that everyone will know their background and status. “Keep your contacts if you want,” Zhivkov said, but he labeled the individuals “criminals and fools,” all of whom, except for one woman, had served terms in prison. Zhivkov suggested that the U.S. not support these individuals, and said he could assure us that support for the Bulgarian Government in society, and especially among the young, was not diminishing. Bulgaria had no problem recruiting people into its youth movement or Communist Party. Indeed many volunteers have to be screened out.

21. Chairman Zahivkov conceded there were some difficulties in Bulgarian society. Changes in many fields were required. He mentioned the need, for example, of a total reorganization of the study of science. Somewhat defensively, Chairman Zhivkov, then took up the issue of Western propaganda and human rights. He claimed Western talk did not bother him. It was Eastern propaganda that was dangerous because Bulgaria had idealized the East for so long.

22. Chairman Zhivkov said that what he sought was a reliable partnership with the United States. He knew that Americans made good partners. One existing partnership—the Sheraton Hotel in Sofia—worked extremely well. The country needed assistance, and Bulgaria was a good place for American companies to come and operate. In response to a question from Mr. Whitehead, he confirmed again that Americans could buy up to 50 percent of selected Bulgarian companies. Chairman Zhivkov then touched on the question of Bulgarian membership in GATT. Bulgaria wanted normal relations with the world. Why was the United States blocking Bulgaria in such an important area?

23. Deputy Secretary Whitehead expressed pleasure that Chairman Zhivkov had raised this issue. He observed that the United States had nothing against Bulgaria joining GATT, if Bulgaria was truly on the road to a free market system. Zhivkov interrupted and asked what additional evidence the United States needed. Before the Deputy Secretary could answer, Zhivkov raised his hand and said “let’s just leave this subject for now and talk about other areas where the United States may be of assistance.”Could Bulgaria, for example, send a delegation to Washington to study how the shareholding system in the United States operates. Perhaps a team of three specialists could be allowed to see for themselves how U.S. institutions operated.

24. Mr. Whitehead said the United States would welcome being of assistance in this area, and thought such a Bulgarian team could visit the stock exchange and study U.S. corporate law and our regulatory system. Mr. Whitehead said that we would be glad to help arrange this kind of visit.

25. Chairman Zhivkov then inquired about the possible establishment of a management training center. He observed that there was already such a center in Britain, to which Bulgaria was sending a few students, but the country wanted such an institution inside Bulgaria.

26. Deputy Secretary Whitehead noted that a center for management training was being established by the United States in Hungary and challenged Zhivkov to “supply the place and we’ll help supply the faculty.”

27. Encouraged by these responses, Chairman Zhivkov said he wanted to send many more people to the United States and to cooperate with the United States on a wide scale. Let’s hope, he said, that a new historical context between our two countries will develop. “Please stop looking at Bulgaria as the living devil,” Zhivkov pleaded: “Stop creating difficulties for us in international forums.”

28. Ambassador Polansky said he would like to say a word about education. He recalled that the United States had a long tradition of educational assistance in Bulgaria. Many of the first educators were missionaries and a good part of the education was church-oriented.

29. Chairman Zhivkov interrupted to suggest that American educational assistance be restored. He pleaded, however, that we take this issue step-by-step and not jump too fast into too many areas at once. [less than 10 lines not declassified] He went on to ask again for U.S. assistance, but said if the U.S. did not want to provide this assistance, “our only option will be to stick closely to the strongest socialist country in the region. A small country like Bulgaria has no other option.”

30. Bulgaria wants to live like all other nations. We cannot be squeezed further, for there is no space behind us to retreat. Whether the United States helps us or does not help us, Zhivkov boasted that his country by the year 2000 would have the highest per capita income of any socialist state in Europe. We will do this alone, but we are eager to learn from you, Zhivkov continued. We especially want to have U.S. experience in management, and the best training system is provided by IBM in the United States.

31. Deputy Secretary Whitehead asked if the Chairman wished to send a few students to the IBM training center in upstate New York. Chairman Zhivkov responded that he would be glad to send several dozen. The Deputy Secretary noted that all would have to know English and be available for a six-month training course. When Zhivkov nodded his agreement to these conditions, the Deputy Secretary said he would ask IBM if they would take a contingent of Bulgarian students.

32. Chairman Zhivkov expressed his thanks for this assistance. He said he would like to ask the Deputy Secretary to give him some informal impressions of his just-completed trip to Eastern Europe. Could the Deputy Secretary say a word or two about Hungary and Romania, in particular, since he was somewhat alarmed by developments in Hungary and disturbed by some of the news about events in Romania.³

33. Deputy Secretary Whitehead then reviewed his impressions from his visit to Romania, Hungary, the GDR, and Poland. He outlined the Romanian policy of destroying villages and moving people to cinder-block buildings several miles from their farms.

34. Zhivkov said Bulgaria had never discussed publicly the Romanian policy of “systematization.” Some were trying to link this with minority issues, and Chairman Zhivkov thought this a mistaken idea. There was, in Zhivkov’s words, a hint of an anti-Hungarian attitude.

35. Deputy Secretary Whitehead said the United States was very impressed about what was going on in Hungary. General Secretary Grosz seemed an energetic leader who had developed an excellent plan for moving his country forward. The future in that country looked very promising.

36. As something of an afterthought, Chairman Zhivkov said he would like to say a word about Bulgaria’s plan for future democratization. The Chairman said he had plans to decentralize his country and give greater power to municipalities who would enjoy new rights and responsibilities. Cities will be allowed to buy shares in the industries located within their boundaries. Individuals would feel they were participating more fully in government, if government was moved closer to them. These changes, Chairman Zhivkov suggested, were not ready for implementation, but would be announced in 1989 or 1990.

37. The formal meeting closed at this point with an exchange of jokes which Chairman Zhivkov said were being circulated in recent weeks in his country.

Polansky

1. Source: Department of State, Central Foreign Policy File, D880929-0263. Confidential; Immediate; Exdis. Sent for information to Eastern European posts.
2. See Document 398.
3. See Documents 184 and 365.