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

42. Memorandum From David Fairman of the National Security Council Staff to Stephen Sestanovich of the National Security Council Staff¹

Washington, July 3, 1986

SUBJECT

• State Policy Planning Paper on Eastern Europe

State’s paper on Eastern Europe policy proposes amending our present policy of “differentiation.”² It urges a combination of increased issue selectivity and increased attention to political conditions within the six Soviet bloc countries. Reduced contact with EE governments, emphasis on exploiting divisions between Moscow and EE, and co-ordination with the Allies in Europe are the main channels for implementing the policy of “selective engagement. “The goals of the policy change are to increase our leverage in Eastern Europe, heighten tensions between Eastern Europe and the Soviets, send clearer critical signals in response to EE governmental behavior, and limit East-West collaboration to specific problems, avoiding the illusion of normal diplomatic relations between the West and EE regimes whose legitimacy we question.

The argument for the policy shift is threefold. First, differentiation’s original goal of weaning EE governments away from Soviet influence seems to be unreachable. Although progress has been made with EE governments on a limited range of issues, they remain dependent on and committed to Soviet economic, political, and military programs. Further, the Soviets continue to have both vital interests in and means to control EE governments. Second, differentiation now puts an unwelcome spotlight on the “1½” countries we favor—Hungary and Romania. Hungary’s significant domestic liberalization and Romania’s independent foreign policy line have been grounds for expanding Western economic and diplomatic links, but Hungary is under increasing scrutiny from Moscow, and Romania’s internal repression is worsening, so our commitment to both countries needs to be de-emphasized. A more even spread of Western involvement in EE might help to take pressure off Hungary, and make our disapproval of Ceausescu’s police state more apparent. The third reason is the tendency for differentiation to slide toward normalization of diplomatic contacts between Western and Eastern Europe. In the absence of morally acceptable candidates for Western linkage, “pragmatism” and exaggerated confidence in our ability to influence the EE governments tempt us to respond to their requests for collaboration, rather than sticking to our own agenda.

State’s idea is to recognize the reality of Soviet dominance and EE regime inflexibility by pursuing an agenda that reaffirms the West’s “moral highground,” but also allows us leeway in initiating and responding to East-West collaboration offers. They see six areas for action:

1. increased co-ordination and division of responsibility with European allies

2. maintaining a moral stance

3. limiting “prestige” diplomatic contacts

4. pressure to end EE co-operation with the Soviets in the 3rd World

5. targeting cultural exchange at peoples, avoiding regime screening by using private sector groups

6. tighten up on economic dealings

Comment: State’s plan attempts to deal with the reality of limited influence in potentially contradictory ways. By taking advantage of splits within the EE bloc when they occur, it may be possible to heighten tensions between the Soviets and their allies, but this will be difficult to accomplish if diplomatic contacts are severely limited and public condemnation takes the place of quiet pressure. It is necessary to prioritize our EE policy goals, so that we have an understanding of tradeoffs and a way to choose among alternatives. I suggest the following as a goal ranking:

1) maintaining a unified Allied front

2) exploiting EE bloc splits

3) pressing for EE political and economic reform

4) retaining open channels to EE governments

The Allies continue to differ significantly from the U.S. on EE policy. For them economic relations and EE regime stability are more important than loosening the Soviet grip. We saw in the Polish crackdown in 1981 that they are willing to rally against repression in a crisis, but the pipeline problem of 1982 and the ongoing arguments about technology transfer and beefing up NATO show their reluctance to sacrifice economic interests and the desire for stability otherwise. At present, with slow economic growth in Western Europe and clear signals from Gorbachev that EE remains a vital interest, there is little likelihood of Allied co-operation on a tougher anti-EE line and few opportunities to split EE from the Soviets. Given this picture, our best prospect for accomplishing goals 1 and 2 is in the area of reduced diplomatic visibility and increased cultural exchange. These are relatively painless for the Allies, and go some way toward maintaining the moral stance and sowing the seeds for the next EE generations to distance themselves from the Soviets.

Our economic leverage in EE can be used to our benefit in promoting political and economic reform, but it requires a high level of co-ordination among both Allied finance ministers and Western commercial banks. The Polish debt situation gives us the opportunity to send Jaruzelski clear signals against his “normalization” campaign. The fora of the IMF and commercial debt rescheduling talks can be used to push for liberalization. In the current agricultural glut, the damage to Polish exports from Chernobyl might be sustained by encouraging substitutes from the developing countries. If Jaruzelski wants to be the Soviets’ “number one ally,” let’s make him, and the Soviets, pay as high a price as possible for his status.

In Hungary, on the other hand, we may be able to counteract the “spotlight” effect while continuing to support liberalization. Three recent developments—the opening of two funds for industrial and agricultural initiatives (see tab 1),³ Citibank’s co-operation with the National Bank, and the IFC’s negotiations on a joint venture with a Hungarian and a foreign bank—give us the chance to encourage the private sector while reducing our official visibility in Budapest. If Western commercial banks can get their foot in the door by offering financial service training and small joint ventures, the new funds may spawn a group of entrepreneurs capable of reducing the heavy state dominance of industry and agriculture.

Romania’s recent denunciation of contra aid, and Ceausescu’s growing personality cult, should prompt a re-evaluation of our diplomatic ties with him. We should however make a positive overture before cutting him off. It may be possible to play up his independent foreign policy line in a way that brings him closer to the West and makes other EE leaders take notice. My suggestion is an offer to collaborate with him on development projects in the Third World through the auspices of multilateral development agencies, European agencies, or possibly through USAID. His wife, a major force in the government, is particularly interested in technology development. Romanian co-operation with the West on a Third World project that involved some technology transfer to Romania might lead others in EE to reassess their co-operation with the Soviets in the Third World. The West can offer technology and technical training on the neutral ground of economic development projects, conditional on reduced EE involvement with Soviet Third World ventures.

At the moment there are few openings in relations with the GDR, Czechoslovakia, or Bulgaria. Renewed calls for FRG-GDR rapprochement and FRG “independence” from NATO commitments, stemming mostly from East Berlin and German youth, make this a poor time for either condemnatory rhetoric or diplomatic overtures. The situation in Bulgaria and Czechoslovakia seems stagnant, so we may end up waiting for a changeover in leadership before any new initiatives.

Conclusion: By maintaining a firm stance on limited diplomacy and limiting economic co-operation wherever the Allies will go along, we can increase the Soviet “burden of empire” and its stigma without dividing our own ranks. We need to maintain a minimum of diplomatic links to EE in order to capitalize on EE bloc gaps as they appear, and our “moral highground” should not be maintained at the cost of letting genuine splits go unrewarded. If implemented along these lines, “selective engagement” may be a more effective policy than “differentiation.”

1. Source: Reagan Library, Stephen Sestanovich Files, Eastern Europe: 1983–1986. Secret. Sent for information. Fairman did not initial the memorandum.
2. Attached but not printed. See Document 41.
3. Attached but not printed is a Euromoney article on Hungary.