61. Memorandum to the File1
SUBJECT
- Eastern Europe: NSPG Meeting October 25
The National Security Planning Group discussed Eastern Europe October 25. Its agenda is attached.2 The following report is based on notes by Deputy Assistant Secretary of State Tom Simons.
The President observed that Eastern Europe was more and more in the news. An important cause of this was the large number of Americans who hailed from the area. Moreover, Soviet actions that had continually disrupted international affairs. This meeting was intended to permit better understanding of what is going on, rather than to decide on dramatic policy changes. It should be possible to identify issues concerning the area for the successor Administration.
CIA Director Webster reviewed the situation in the area. It was a mistake to consider it a monolithic area, he said. There was in fact increasing diversity in the area because of the changes underway in attitudes toward both the Soviet Union and toward the West, including the U.S. But the strikes, demonstrations and changes in leadership we have seen have created a greater climate of instability than at any [Page 201] time in the last 30 years. Moreover, whereas change in the Soviet Union came from above under Gorbachev, the push for change in Eastern Europe came from below.
All six of the area countries shared Communist political systems and command economies, Judge Webster continued; Yugoslavia was outside the bloc. Poland and Hungary had gone further in terms of power-sharing and introducing elements of a market economy. In Poland the changes had so far been mainly rhetoric; only time would tell. Hungary had seen more political reform; the regime was allowing more political expression and market forces to play, but it was wary, and it had broken up demonstrations. In Poland, Jaruzelski had just warned that force would be used to protect the system.
Judge Webster continued that Bulgaria and Czechoslovakia had adopted the lexicon of reform, but were really hardline regimes that preferred talk to real changes. There proposals for change were sowing confusion and disruption in the economy. Jakes had so far limited himself to bureaucratic streamlining, and was actually running a tight policy. Both the GDR and Romania thought they were on the right track already, he continued, and rejected glasnost.
Yugoslavia, finally, was seeing ethnic tensions, Judge Webster said, but these were pressures that had been released by years of political reform.
The outlook, he continued, was for growing internal diversity in the area, vis-a-vis both the Soviet Union and the West/U.S. The prospect was for slow growth and austerity. So far there had been few economic changes, and we could look forward to more political turbulence, and larger outbursts. Poland and Yugoslavia were the countries where instability was most likely, but it was possible also in Hungary and Romania. The other countries were keeping a tight lid on, and it would take leadership changes and a strong push from Moscow to bring significant change. The best chances for change were in Poland, Hungary and Yugoslavia, but even there it would be mainly nibbling around the edges; even there they were slow to bring market forces to bear on prices and wages.
Our interests continued to be to see these countries grow more separate from the USSR, to see a decrease in the power of the party and to see greater integration into the international economy. We will continue to hear charges that we are both causing and blocking change.
With regard to the possibility of upheavals leading to Soviet intervention, Judge Webster continued, it remains, despite Gorbachev’s reluctance. The Soviets need a balance between reform and stability. They believed that economic crisis was at the root of instability, and were leaving the burden of managing change to the local leaders, while demanding greater economic support from the East European [Page 202] countries. They see promise in dialogue in Poland, and were probably not against some powersharing. They were unlikely to intervene in Poland and Romania, and although they were uneasy about developments in Yugoslavia, they were unlikely to put themselves in the middle there for fear of anti-Soviet backlash. They were little concerned about the other countries, and had given them a certain green light to experiment. But they would be leery of signs that party control was eroding, and would not allow any WP country to leave the Pact.
Deputy Secretary Whitehead said he was a little more optimistic than Judge Webster; the extent and prospect of change looked to him to be a little more rapid and positive. He described the mandate Secretary Shultz had given him more than two years before, and his activities under that mandate. The 1982 NSDD set forth our policy objectives toward Eastern Europe: to loosen the Soviet hold on the area and eventually to see it reintegrated into Europe. He had undertaken to make progress toward those objectives where possible. His premise was that these were diverse European countries. On his first visit he had discovered that they indeed felt they were living under an alien system, and were eager to move away from it. He had tried to spur that process forward, as fast as they were willing to go.
Describing his most recent visit, the Deputy Secretary said that Romania had been the low point. It had been impossible really to converse with Ceausescu, and the sight of rural destruction in action had been tragic, and had brought home to him the meaning of the proverb ‘A man’s home is his castle.’ It had been uphill from there.
He had seen Honecker and Axen in East Berlin, the Deputy Secretary continued. He had discussed both official and Jewish claims with them, and challenged them to pay them off. Here there had been some progress, and further developments were likely. He hoped they would pay off $100 million in Jewish claims over the next months. On human rights there had been some movement, particularly with regard to family reunification. There had been progress in exchanging information on narcotics. He had visited the Berlin Wall, and said it should be torn down both in public and to Honecker. We should keep after that issue.
He had gone to Poland at an exciting time, the Deputy Secretary continued. Here there was rapid change. He had met the new prime minister, Rakowski, who told him how many non-Communists were in his cabinet, and how he had left four places open for members of Solidarity. Solidarity had refused these posts until a new structure could be found. The round table talks under discussion were a kind of constitutional convention. He had met with Walesa. Pluralism was beginning to take place, a phasing down of the Communist government. We had told the Poles there would be no cooperation from us until things began to change, and he thought we were seeing that happen.
[Page 203]In Czechoslovakia, the Deputy Secretary continued, he had met with Jakes, and found him more modern than his predecessor, although still conservative. He had reform plans, but would go about reform slowly in order not to let things get out of hand as they had in Poland and Hungary.
In Hungary, he had found Grosz starry-eyed about his trip to the United States, and especially about Chicago. He had visited the West Coast, Washington, New York and Texas as well, had been entranced by Chicago. The Deputy Secretary said he had bashed Grosz on the Conrad spy case,3 and told him that if that sort of thing continued we could not have any kind of relationship at all. Grosz was investigating the case, and said he didn’t want that kind of thing to happen again. He owed us an answer. The Deputy Secretary said he had stressed the Soviet angle to Grosz, who took it positively. He was putting his own system in order, since it appeared that intelligence had had a kind of separate position within the government.
The Deputy Secretary told the President the joke about the man who went into a bar for a beer, and was asked for a ruble instead of the usual 50 kopecks. When he asked about the extra 50 kopecks, the bartender said it was for perestroika. So he paid the ruble, and the bartender then gave him 50 kopecks back. When he asked why, he was told he had paid for perestroika, but there was no beer.
The President said he understood from Grosz’ visit that he was close to Gorbachev, and in some ways he seemed further ahead than Gorbachev. The Deputy Secretary said he thought they prodded each other. He noted that the Hungarians had wanted to talk about Soviet troops, and asked us to put them high on our conventional disarmament list, along with theirs.
Turning to Bulgaria, the Deputy Secretary said Ledsky and Simons had tried to restrain his enthusiasm for Zhivkov during the trip. He had had five hours with him. He had once called Bulgaria a “sleeper,” and believed it was moving ahead rather soundly with changes, step-by-step. For instance, as of January 1 government economic units would become Western-style stockholder corporations, with up to 25% employee ownership; some could go public, and the public and foreigners could buy into them. He had seen modern factories. The trouble with Zhivkov was that he would permit no political changes; he ran a dictatorship which had no regard for human rights. It had been very disturbing that people he was scheduled to meet with had been arrested and prevented from seeing him. We were exploring the facts and hoped to challenge the Bulgarians.
[Page 204]Turning to general comments, the Deputy Secretary said he had found these to be European countries that were not comfortable being parts of the Soviet empire. All the leaders wanted to move away from complete dependence on the Soviets. They all acknowledge that the Soviet system had been a failure. Some reforms were actually taking place everywhere, the fewest in Romania, the most in Poland and Hungary.
As regards U.S. policy, the Deputy Secretary said he thought the NSDD remained valid. We had a step-by-step program in place with each country, challenging them on human rights, on narcotics, on terrorism. There had been some increase of trade, and they were eager to continue that. With each we had in mind a kind of tradeoff: we want better human rights and political reform, they want various kinds of economic support, not aid, but recognition of their participation in the world economy. As they moved on human rights and political reform, we would move in the economic area. Developments in Eastern Europe were as exciting as in the Soviet Union. We see them moving away from the Soviet Union, and the changes going on could add up to an important change in the world scene two or three years down the road.
JCS Chairman Admiral Crowe noted that he had an outstanding invitation from the Romanian Chief of Staff for a return visit, and asked Whitehead how he should answer. The Deputy Secretary said with any other country he would recommend a positive answer, but not with Romania now; Simons suggested that Crowe defer an answer.
General Powell said, summing up, that the challenge for us is thus to synchronize the economic and political elements of our policy approach.
Treasury Secretary Brady said he wished to describe the problem from the Treasury point of view. Resources for foreign aid were drying up, and pressure was building to have us encourage the IMF and the IBRD to lend to East Bloc countries. The decision on how to do this was one for the future Administration to take. The problem was how to do what John Whitehead recommended and still preserve the resources of these institutions. They were after all revolving funds, and for them to survive their funds had to revolve. With regard to trade, they were based on the idea that adoption of open-market policies would allow countries to pay off their debts. The trouble was that countries did not live up to the conditions, and that this engendered bad loans. Unlike ten years ago, they now carried $3–4 billion in bad loans, and 60–70% of these were to U.S. clients, where the U.S. had pushed the bank into making the loans. Our resources were finite, and Congress was bearing down on them. We should shortly arrive at the point where we needed to get very tough. Otherwise, six or eight years out, we would arrive at the point we had already reached with our aid programs, out of money.
[Page 205]General Powell told the President that in the months ahead we could expect conflicts between our political/economic needs and the sound principles the Treasury had described.
Commerce Secretary Verity said that in fact we had little trade with the countries of Eastern Europe. To deal with this we had formed business councils, to encourage the private sector to get engaged. The International Executive Service Corps was one example; Ambassador Palmer’s management school in Budapest was another. We were encouraging these kinds of things until the countries could get their economies in order. For them really to trade they would need convertible currencies. They needed to restructure to provide incentives for the kinds of things that would make a market economy work.
USIA Director Wick opined that Gorbachev was ahead of all the East European leaders with regard to pace. He described his recent information talks in Moscow. Many deals had been made, including increases in sales of Western newspapers, the new VOA Moscow Bureau. Falin had probably been anti-American at one time, but now he was willing to work problems on a non-ideological basis. The new American bookstore was an example.
The President recalled that the President of Guinea, with whom he had just met, had spent most of his time praising the Peace Corps, the volunteers who served without thought of reward. Other African chiefs of state said the same thing. With regard to Eastern Europe, he agreed that these were nations which had never been close to Russia. They were part of the Western world, and now wanted to come back into the Western economy. He told a Hungarian joke about Janos and Ivan who discovered a treasure chest together; Ivan suggested they divide it according to socialist principles; Janos replied that they should instead divide it 50–50.
Summing up, General Powell said that we had a sound policy in place. It was expressed in the NSDD, although, he commented parenthetically, its authors did not anticipate how much would happen in the area when they were writing it. He also opined that we were better off considering these problems here than those who were considering them in Moscow. The President said the Soviet government had to wonder, if ever it came to a shooting war, whether the East Europeans would shoot in the same direction. Admiral Crowe said when the Romanian Chief of Staff had visited it was clear we knew a great deal more about Soviet forces than he did; he did not have a close relationship to the Soviet military. Defense Secretary Carlucci said the trouble was that the Soviets in case of war could take over command of the East European forces without their say-so. General Powell said that except for the GDR the Soviets generally did not count on East European forces.