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

51. Telegram From the Department of State to Multiple Diplomatic Posts¹

396379.

Washington, December 23, 1987, 0810Z

SUBJECT

• COM Meeting.

1. Secret—entire text.

2. During Oslo COM meeting, on December 14, EUR DAS Tom Simons made a presentation along following lines concerning development and prospects in Eastern Europe and their implicaitions for U.S. policy.

3. Simons said his remarks were intended primarily as a contribution to exchange of views among posts and within USG on how to think about Eastern Europe in ways that are productive for U.S. policy purposes.

4. He pointed out that Eastern Europe disappears from the U.S. policy screen for years at a time, and usually surfaces in terms of an outbreak or prospect for crisis in a given country. Thinking about Eastern Europe primarily in crisis terms, he suggested, is a recipe for embarrassing thinking and embarrassing policy.

5. Simons cited two recent examples of crisis oriented thinking:

1) 1956 revisited: At COM conference, Ambassador Palmer had noted that Hungarian contacts are predicting a tense winter, and not excluding violence along 1956 lines;

2) 1972 revisited: In a recent cable,² Ambassador Meehan had sketched out, as one element of his analysis, a prospect which amounts to the Soviet Union’s 1972 dilemma with the shoe on the U.S. foot, i.e. instead of the Soviet leadership having to decide whether to welcome President Nixon in Moscow to sign the SALT Treaty at a moment when the U.S. is mining Haiphong Harbor,³ we would have to decide whether the President should go to Moscow at a moment when Soviet troops are marching into Bucharest.

6. Simons gave his view that such thinking captures attention, and thus provides a useful start to more serious effort. Moreover, it also reflected the way the peoples of the area think. He recalled the Romanian joke about the number to dial in Moscow for fraternal assistance—56–68–80—all U.S. election years, as 1988 would be.

7. But Simons said that in his personal view serious effort to define useful ways to think about the area would require us to get away from crisis-oriented thinking, and to consider longer-term or structural elements of the situation. His suggestions would be somewhat mechanical, but framed with that in mind.

8. Simon said he had found it useful to distinguish between the roots of crisis and the roots of change in Eastern Europe. (In response to later questions, he admitted that given the rigidities of the system, any change involved the possibility of crisis, but thought it was in our interest to make the distinction in order to define a basis for sensible U.S. policy.)

9. We start from the premise, Simon said, that the division of Europe—the imposition of Soviet rule and of regimes modelled on the Stalinist system then in force in the Soviet Union, in the early postwar years—is a source of instability rather than of stability in Europe. It is at the origin of the military confrontation which has packed the continent with weapons, and is contrary to the aspirations of the peoples on both sides of the dividing line. It is in the U.S. interest to see the consequences of the division alleviated, and the division itself eventually eliminated.
Peaceful change in Eastern Europe away from what divides Eastern Europe from the West, although it brings with it an element of risk, is therefore in the U.S. interest.

10. That said, Simons went on, there have been adjustments in the way Eastern Europe is governed since the original system was put in place.

11. In the early years Soviet rule was practically direct—exercised through Red Army occupation and hordes of advisors—and was economically exploitative, sucking resources from Eastern Europe to help with the postwar rebuilding of the Soviet Union. Moreover, the system was so rigid that it could not adjust to new requirements, and invited explosions.

12. 1956 was therefore a combination of anti-colonial, and specifically anti-Soviet, revolt, and anti-poverty revolt.

13. This produced a partial adjustment. The Stalinist system—featuring rigid central control of political and economic decisions and of all significant institutions—was retained, but the direct rpt direct elements of Soviet rule were largely eliminated. The armies of Soviet advisors were withdrawn everywhere, the Red Army in some places.

14. In effect, the USSR took a gamble that the natural tendency of Stalinist economies in the area was to sink into the Soviet market, so that Soviet influence could be retained by indirect means. The Stalinist system was geared for heavy industry along traditional 19th and early 20th century West European lines: coal, iron, steel, later petrochemicals. In a resource-poor area like Eastern Europe, it required raw material inputs easily available only in the Soviet Union, and produced shoddy industrial goods that only the Soviet market was willing to absorb in return for these raw materials.

15. This depoliticization, or “economization,” of Soviet rule had an important effect on East-West competition for influence in the area, Simons continued. The competition itself is fundamentally political, but for a whole generation, between 1956 and around 1981, it took on a primarily economic form.

16. With large new raw materials supplies coming on line in the 1950’s, the Soviet Union’s economic approach turned from exploitation to subsidization, through terms of trade, albeit with political strings attached. Khrushchev made an effort to multilateralize the mechanism, by promoting an agreed division of labor within CMEA, but this produced the Romanian defection in 1964. Even without an effective CMEA framework, however, the mechanism works through bilateral ties. In this it resembles the mechanism for military control: the Warsaw Pact is a stronger organization than CMEA, but even if it were abolished, Soviet military interests would be guaranteed through bilateral agreements.

17. After 1956, the West was permitted to compete for influence in Eastern Europe on this economic basis. Speaking only of the U.S., PL 480 grains sales to Poland began soon after 1956; MFN for selected countries followed in the 1960’s and 1970’s; in the 1970’s there were credits. What the West asked in return, beyond business profits, was basically political: access to society, through cultural agreements; access to decision-makers, through political dialogue; improved human rights performance, first in the emigration area, then, as the de facto political coverage of Jackson-Vanik spread, on other issues.

18. Both the West and the Soviet Union could deny that they were actually competing politically. The West could say it was permitting businessmen to make money, rather than trying to roll back Soviet rule; the Soviets could say they were giving fraternal assistance to socialist countries, rather than maintaining Soviet dominion. Neither side forgot their basic aims, but neither called attention to them.

19. This situation, in Simons’ view, had immense advantages for the East Europeans. It permitted the ruling parties to “nationalize” themselves, to adopt national themes and aspirations in an attempt to increase their legitimacy; it also permitted them to extend their margins for maneuver vis-a-vis the Soviets in practical ways.

20. Thus, all the countries of the area tried, in various ways, either to escape or exploit the natural inertial tendency of their Stalinist economies to sink into the Soviet market. The Czechoslovaks in the 1950’s, the Romanians in the 1960’s and 1970’s, perhaps the GDR as well in the 1970’s, sought barter arrangements with Third World countries, to trade their industrial products for raw materials. Romania at one point had had a fifth of its foreign trade with the Third World, and had put so many eggs in the Shah’s basket that one problem of the 1980’s was where to go after the Shah’s fall. The Poles in the late 1950’s, the Czechoslovaks and the Hungarians in the 1960’s, had tried economic reform, as a way of producing exports saleable on hard-currency markets without actually cutting into the fundamentals of the system. In the 1970’s, the Poles, the Hungarians and then the Romanians had tried tapping Western credits, to boost productivity through technology imports without reform. Finally, the Czechoslovaks after 1968, and the Bulgarians and the East Germans throughout, had tried to exploit their political weakness to snuggle into the Soviet market, to get preferential economic treatment as a reward for political loyalty.

21. Simons said that in his view, all these efforts to escape the Soviet economic “iron ring” had been more or less successful, in that the ring had not actually tightened—levels of dependence on CMEA trade were more or less constant—while those who had gone west had in fact developed some Western ties and permitted some Western access in return. But the basic Stalinist systems and the “iron ring” itself remained intact.

22. What had changed in the 1980’s? Simons suggested a number of changes.

23. First, in his view neither the West nor the Soviet Union any longer had the resources for this kind of economized competition that had been available during the 1956–81 generation.

24. The Soviet Union was running up against its own economic constraints. The cost of making raw materials available was increasing astronomically, and the Soviets were getting more cost-conscious. They wished to relate more to the world economy, and in particular to sell their “hard goods” West. They were more leary of the political effects of East European economic ties to the West. They were thus less willing to subsidize, and more demanding of quality goods from Eastern Europe in return for the raw materials they were still willing to supply at below world market prices.

25. In the West, the economic slowdown since 1973 had reduced willingness and capacity to absorb East European goods and to invest in Eastern Europe. The bonanza psychology of the 1970’s is dead, and East European difficulties in paying off or even servicing financial debt is a disincentive to economic ties.

26. Meanwhile, in Eastern Europe, the regimes were running up against the limits of traditional means of maintaining growth rates. The Soviets were tougher economic partners, Western countries were tougher economic partners, and growth rates at home were slowing or turning negative.

27. In this situation, three developments in the 1980’s combined to force the countries of the area toward change:

1) There was renewed pressure everywhere for economic reform: all the alternative means of escaping from the “iron ring”, all the traditional escape hatches, were closing down.

2) All the countries except Poland were coming up on leadership transitions, always a source of uncertainty in centralized dictatorship: change was in the air.

3) Under the Gorbachev leadership, the Soviet Union was no longer the anchor of conservatism. It was no longer the model for the status quo, to which domestic conservatives could point. Political elites were therefore cast adrift.

28. Indeed, Simons continued, the reverse was true. To the extent the Soviet Union was a point of reference in domestic debate in Eastern Europe, it was embarked at home on a program of economic reform, and more: it was proclaiming that economic reform was not possible without what it called “democratization,” some effort to involve the “masses” in the reform program. In other words, the Soviets themselves were saying that political change was required, that economics and politics could not rpt not be separated. To the extent there was still a Soviet model, it was a model for liberalizing economic and political change.

29. At the same time, Simons went on, the Soviet Union’s explicit policy approach to Eastern Europe appeared to be one of what he would call “preemptive Khrushchevism.” By this he meant that in advance of a crisis, the Soviets—Gorbachev in Prague in March, Ligachev in Budapest in April—had told the East Europeans that what was wanted from them was quality goods, to be furnished in bilateral channels. Khrushchev’s mistake of promoting a multilateral framework in CMEA was not to be repeated. But it was up to the East Europeans to figure out how to produce the quality goods required. This was the Soviets’ post-1956 gamble on the “iron ring” revisited, but in advance rather than in the wake of a crisis. The effect, and perhaps the intent, would be to “de-Sovietize” any crisis that resulted, to try to make sure that change, when it came, would not be anti-Soviet.

30. Thus, Simons said, in his analysis the roots of crisis lay in the rigidity of the Stalinist system, while the roots of change were a confluence of structural economic developments in the area, of impending leadership transitions and of Gorbachev.

31. Simons then turned to the implications for U.S. policy.

32. Simons said that in the confluence described in Para 30 he saw opportunities to exert Western and especially U.S. influence in the direction of political liberalization that were unparalleled in postwar history. It seemed to him that for the first time conditions on the ground were ripe for us successfully to encourage the kinds of change we had always said we wanted.

33. It seemed to him that the East Europeans were not very interesting as economic partners to either the West or the Soviet Union. The transition to an information age implied increasing economic marginalization for Eastern Europe, since neither the heavy industrial goods nor the raw materials they produced would be as important, and the Stalinist system was inefficient when it came to knowledge-based production. Poland produced a lot of copper, for instance, like Zambia, but copper would never recover as an international commodity as telecommunications went over to fiber optics.

34. At the same time, Simons continued, what the East Europeans want from us is economic ties. The U.S. Itself will not be a very important partner when it comes to trade, given distance and transportation costs, given also our laws and regulations limiting trade with communist countries. But their first need is for financial relief and inputs to support economic reform and the U.S. is and will continue to be an important decision-maker in the IFIs which will determine the extent of financial dealings.

35. This fact, Simons opined, gives us the mechanism to press for political reform in terms that are acceptable to the East European regimes, via economic reform.

36. The experience of the 1970’s and 1980’s showed that external financial resources are likely to be wasted without thorough-going economic reform that enjoys broad popular support.

37. Paradoxically, given the course of U.S.-Polish relations since 1981, the basic elements of the current relationship provide a model for U.S. policy vis-a-vis the area. We owe this very much to the courage and determination of Solidarity, which has remained a force in being despite the repression of martial law and the post-martial law period, albeit with our support. Jaruzelski knows he cannot get growth rates up without reform. He has a certain mandate for reform—extending to certain liberalizing political changes—from Gorbachev. The U.S. is telling him that it is ready to help, but that the help will be wasted if it is not help for an economic reform that is supported by Polish society. He is trying to square the circle of capturing such support without actually talking to Solidarity. The referendum experience was basically another failed attempt to do so.

38. The model will apply to other countries in specific ways, Simons suggested, but it should be valid for most of them: what they want from us is economic, but they know that we will require political concessions, involving values rather than goods, in return. We also have a legitimate and increasingly accepted language of discourse in which to talk about this tradeoff, in the Helsinki process, and bilaterally via discussion of expanding economic relations and the need for sustainable economic reform.

39. Simons said his view was that from a policy standpoint this was the best approach whether or not there was to be crisis. Peaceful economic and political change was the best approach to crisis prevention, since it is systemic rigidity which produces crises in Eastern Europe, and it was the approach which would put us in the best position to influence developments in the event of crisis:

1) It would maximize our access to both current and succession elites;

2) It would put us on the side of the angels when sides were drawn in a crisis, for liberalization, human rights and freedom;

3) It would serve as a deterrent to the Soviet Union by clearly demonstrating which side the U.S. was on and would be on. At this point Gorbachev is saying he is on the same side: if the Soviet Union decides to intervene and suppress a crisis, it will be a clear reversal of the Gorbachev line, with a cost in East-West relations. (In response to a later question, Simons said he opposed talking directly to the Soviets about Eastern Europe, since our policy should continue to treat individual countries as if they were in fact independent; the message would be clear even if indirect.)

40. Simons concluded that he had put these ideas forward as a basis for discussion, first within the USG and eventually with our allies in NATO.

41. Minimize considered.

Stuart Unquote

Whitehead

1. Source: Department of State, Records from Ambassador Thomas W. Simons, Jr., Lot 03 D 256, Chron December 1987. Secret; Exdis. Sent for information to the Embassies in all NATO capitals, Helsinki, Stockholm, Dublin, Bern, Vienna, Valetta, Nicosia, and Belgrade, as well as the U.S. missions/delegations to the EC, OECD, CSCE, MBFR, and the Vatican. Repeated from telegram 9059 from Oslo, sent December 18, for action to the Embassies in Moscow, Warsaw, Budapest, Belgrade, Prague, East Berlin, Bucharest, and Sofia, as well as for information to the U.S. mission to NATO and the Secretary of State. Drafted by Simons; cleared by William Haugh (S/S–O); approved by Simons.
2. Not found.
3. See Foreign Relations, 1969–1976, vol. XIV, Soviet Union, October 1971–May 1972, Document 195.