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Thr following intelligence organisation! participated In tht preparation Of thU estimate' The Central Intelligence Agency and the intelligence organisations ol the Departments of State, the Army, the Nany. the Air Forte, and The Joint Stag.

Concurred in On the INTELLIGENCEebruary Hit. Concurring were The Director ofand Research. Department of Stale, the Assistant Chief of Staff. Inielligence. Devartmcni of Ihe Army, the Director of Naval Intelligence; the Assistant Chief ol Staff,USAF: and the Deputy Di'crlur tor Intelligence. The Joint Staff. The Atamk SnentyKifcmtatlrr to the IAC and thtettor. Federal Pi.'ten of Initilloatxon. abstained, the subfeet being outside of their jurisdiction.



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DISTRTBUnON; White House

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Bulgaria and


Future Soviet

Satellite Economic



Negotiations with the USSR .


Soviet Economic Aid Lo thc

Other Intra-Bloc Credits AfTecting the Satellites



To assess the prospects for stability in the European Satellites over the next few years.


the crisis ofhe USSR and the Satellite regimes have had considerable success in reimposing party unity and general submissiveness among the people, at least on the surface. Even In Poland, the Gomulka regime has strengthened its hold despite continuing unrest.

For at least the next few years the USSR and the Satellites will probably avoid further political Innovation but maintain the general policiesespecially in the economic Heldfollowede estimate that by and large such policies will preserve relative stability in the Satellites over the next lew years. Popular revolts arc unlikely, largelyof thc still fresh example of Soviet repression in Hungary; nor do we expect another coup on thc Polish modelin the Satellites.

But the USSR and the Satellite regimes have by no means eliminated those forces in Eastern Europe which underlay the unrestcontinued atmosphere of change and ferment, more

highly charged than under Stalin.dissatisfaction, party factionalism, intellectual dissent, and chronic economic difficulties will continue to stimulatefor reform anderiod of political turbulence might again emerge if internal controls are relaxed, or there are economic crises, orappear to characterize the policies of the USSR or local regimes. The greatest potentialities for unrest appear to exist in Poland and East Germany.

e also continue to believe that Poland's ability to maintain its semi-independence willey factorfuture political developments inEurope. Barring an acute economic crisis, the Gomulka regimeetter than even chance of surviving thethreats to its position. We also believe that it will be able to retain its relative freedom from direct SovietIn time this development, together with Yugoslavia's continuedmay tend to encourage nationalist-oriented elements in the other Satellites to seek greater autonomy.

For the short term at least the Soviets will almost certainly go slow Intheir policy, but they do not seem toeturn to Stalinist policies as either necessary or feasible. The USSR will probably continue to extendaid to alleviate economic difficulties. Moreover, once reassured that theiris no longer threatened, the Soviet leaders might graduallyorerole to the Satellites, within the limits imposed by Soviet hegemony. On the other hand, should this hegemony again appear to be seriously threatened, reversionarsher policy would follow.

The West's ability to influence the course of European Satellite development

through policies and actions directed at the Satellites themselves is limited,by tight Communist controls. Within these limits, however, the post-Stalin trends in Eastern Europe and the likely continuation of stresses and strains within the Satellites have created amore open to Western influence than at any timerowing trade and East-West contacts offer someBut probably the only meansshort of forcethat could have apositive or negative Impact on Eastern Europe lie within the field of major East-West agreements which would fundamentally affect the current


The situation In Eastern Europe has nowegree of stabilization which could hardly have beenear ago. Since the crisis ofll Satellite regimes have succeeded in reimposing at least surface party unity and popular submisslve-ncss. Even in Poland, the Gomulka regime has strengthened its hold despite continuing unrest. While most of the people in Uieare still anti-Communist andwith economic conditions, they appear convinced for the moment Uiat activewould be fuUle and would Jeopardize whatever prospects they now have for aimprovement at their lot.

Perhaps thc most Important factorto stabilization in Eastern Europe was thc brutal Soviet repression of Hungary's rebellion. In addition, thc fact Uiat the West did not give effective aid to the Hungarian insurgents probably encouraged continued passivity on the part of most other Satellite peoples. More recently, Soviet technological successes have probably alsotabilizing effect. Uy buttressing the impression of rap-

idly growing Soviel power, these developments reinforce the already widespread popularthai the USSR can control Eastern Europe, by force if necessary, and Uiat resistance is futile.

events in Poland and Hungary alsoa slow-down In the mere liberal Soviettoward Uie Satellites which hadthc death of Stalin and which hadsignificantly to the ferment inEurope. SubsequenUy. Uie need fororthodoxy and the supremacy ofhas been vigorously restated andpolicies have assigned high priority toUie stability and unity of Uie

thc orthodox Satellitethemselves further encouraged byexample to remain unyieldinginternal desires for relaxation ofand greater autonomy. Indeed, asthe spring or summerhoby the Soviet de-Stalinlzationhad already caused all thc Satelliteexcept those In Poland anddraw back from any further liberalization.

even where it had been promised.eneral tightening upparalleling that in the USSR itselfthe regimes have repressed the agitation for radical reform. Party"nationalnd student and intellectual liberals have been largely forced into silence. Khrushchev's increasing dominance, and his strong endorsement of such Stalinists as Ulbricht and Novotny, have probably resolved Satellite doubts as to the vigor of Soviet policy and reassured orthodox leaders of continued Soviet support. Though Poland has managed to maintain itsposition, this has as yet had little apparent impact on the other Satellites.

contributing to thc trend towardin Eastern Europe have beenSoviet and Satellite efforts toeconomic discontent. Thedraining of the Satellitehad occurred in the days of Stalinchecked.6ince the HungarianheItself to extend aid to thea total2 billion in credits andmade debt cancellations andto an even greater amount (seeLargelyesult of thisthe Satellite economiesoodfrom the unsettling repercussionsPolish and Hungarian crises andrelatively favorable economic pictureodification of economicto put greater emphasis oncoupled with generally goodresulted in some improvement inof living. However, heavy industryrelative priority in mostindustrial output has continued tocutbacks in investment andof raw materials have reduced ratessubstantially below theevel.



Lhe Gomulka regime hasprogress toward consolidating itspopular discontent, economiccontinued party factionalism pose a

chronic threat to Its stability. So far Gomulka has been able to gain andase ofsupport by presenting himself as aof national Interests, and as aCommunist, but this program involves considerable risk. Externally, If the regime goes too far in its role as champion of Polish autonomy il Jeopardizes its relations with the USSR. Internally, since the Party and the secret police apparatus have been seriously weakened, the Gomulka regime has thus far had to rely largely on the favorable public Image of Gomulkan the political realism of what ls perhaps.the majorforce in Polish society, the Roman Catholic Church, and on the self-restraint of the Polish people.

opular enthusiasm for Gomulka hasduring the past year as he has proved unable to fulfill initial expectations of radical political and economic reform and improvement. The urban living standardunlike that in rural areashas improved only unevenly and is unlikely to show notable gains over the next few years. In addition, there is evidence of disillusionment andamong the Intellectual and youth circles which supportedise inolism, corruption and lawlessness among younger groups (known as hooliganism) has reached serious proportions. Moreover,has barely begun hla fight to transform his disunited and ineffective Party Into aand loyal apparatus. In this, as in his program generally, he Is plagued by the legacy of the Stalinist past and beset by thc disruptive activities of left and right party factions.

ut some progress recently has been made on all these counts. The regime has been able to retain and probably strengthen thcdegree of Internal autonomy it wonhe Stalinist faction in the Party has lost some of its strength and probably active Soviet support. The "revisionists"those anti-Soviet party elements whichore democratic fdrm of socialism and ever-expanding contacts with lhe Westalso exercise diminishedampaign is underway to purge the Party of lukewarm, undesirable and dissident elements and to

bolster Gomulka's authority at all levels.7 harvest has Improved consumption prospects, andaid commitments from both the Bloc and thc West have enabled the regime toIts plans for economic Improvement,public orderthreatened by scattered strikes and the Warsaw riots in October-has been maintained more effectively Inmonths without recourse to old forms of terror which would have damaged the regime's public stature. Nevertheless, thecauses of Polish Instability will probably continue to exist over the next few years.

IS. Gomulka's internal policies, particularly since last summer, show signsrend toward political hardening. The campaign against the liberal press and the "revisionists" has been accelerated. This hardening of the regime's line, reflecting its desire to strengthen Party control and to bolster internal stability, is apt to continue. But we do not regard it as indicating an intention to change major policies. Gomulka has largely adhered to his original domestic program, which, while based on Communism. Includes economic reform, the accord with the Roman Catholic Church in Poland, and thc abolition of secret police terror.

IG. So long as the Soviet threat persists there appears to be. in the public mind, no feasible alternative to Gomulka. Therefore, allhough the fundamental causes of Polish instability will remain, we believe that internalarc unlikely lo leadopular revolt unless thereerious decline in theof living. Even if the current level of Soviet aid to Poland were reduced we think the regime could at least temporarilyharp decline in living standards by cutting back Investment programs. ubstantial cut in Western aid to Poland would havearginal impact on the Polish economy, althoughevelopment would probably weaken Gomulka's stature at home andhis leverage with Uie Soviets.

hile we do notopular revolt against the regime in Poland, we cannotexclude the possibility.evoltthe regime probably could not maintain

power unassisted, since many militarywould probably side with Uie revolt. In such circumstances. Uie regime might call for Soviet military aid. The Polish armedhese circumstances would probably be so disunited and demoralized as not to be an important factor.

ajor threat to Gomulka's posiUon could ariseoviet shift to political or economic pressures or subversion. Weihese would be resisted by the regime to Uie extent they appeared seriously to threaten Gomulka's basicolish capabilities for such resistance, however, are limited. For example, cessation of Soviet trade and aid, unless replaced by the West, would probably prove disastrous to Uie economy. Theresources to combat Soviet-directed subversion arc limited. In large part because thc USSR already probablyotential apparatus within the Polish party, armed forces, and government. If Uie USSRmilitarily to remove Gomulka or to assert control, we believe Uiat the Oomulka regime, having once stood upovietthreat, might do so again. If it did, we believe that the bulk of Uie Polish military forces would remain loyal to the regime and actively oppose Soviet intervention.

inally, It is plain Uiat Uie presentand policies of Uie Polish government depend very greaUy upon the person ofIf he were to die, there are others who would try to carry on his regime. They might succeed in doing so. but there would probably be greaUy increased pressures from Uiewing of thc Party, opposite pressures from the general public, and possibly new attempts by the USSR lo reassert control.


he Soviet-backed Kadar regime hasthe past year made significant progress toward consolidating its position. The Bloc has provided economic assistance totalling0 million in lonR-term loans, and0 million in debt cancellations and grants This aid.wtth recovering industrial producUonood harvest, has enabled the regime

to stave off an economic crisis, lhe current standard of living probably is, ln many ways, superior lo that0 and almost certainly better than prevailing Ln thcakosi era. Despite the regime's complete lack of popular support, arrests and repression have silenced virtually all meaningful overtThe Party has been able to reassemble, and claims to have built up its membership toembers. It has reasserted its control in urban areas; in rural areas, where It Is considerably weaker, it has remainedInactive. It has by and large avoided antagonizing the peasants, offering themIncentive to produce and allowingarge measure of freedom from central authority.

Over the long haul, however, the regime will almost certainly seek to achieve more than superficial economic stability andquiet. In fact, we believeew phase ln regime policy, stressing an expansion of party power over the peopleore vigorous economic program, is likely over the next few years. Political persecution may eventually easeif only because virtually all revolutionaryossibly Including Nagy) will have beenrend toward somewhat tighter economic controls, however, is likely. Passive resistance willigh level but another revolt is very unlikely so long as the people are convinced that Soviet troops, even if withdrawn from Hungary, would re-enter to crush the revolt,

Party first secretary Kadar gives noof becoming another Gomulka.the similarities between his regime and the former Stalinist dictatorship of Rakosi far outweigh the differences. We believe,that Kadar and some of his immediate supporters may still appear potentiallyin Moscow's eyes if only because they were somewhat compromised by service In the Nagy regime during the revolution. Further, there do appear to be some persona! ordifferences between the adherents of Kadar and the essentially unreconstructed Stalinists of the Rakosi era. The Party's ability to organize effective cadres throughout the country will probably be hampered by some opposition to Kadar on the part of the

middle level functionaries who were associated with the Rakosi regime, many of whom appear to be of the unreconstructed variety.the recent resignation of Kadar from the premiership cannot as yet be interpreted as reflecting any diminution in his real power, it is possible that he is considered by Moscow to be an interim Instrument as first secretary and that, once his usefulness is over, he may be replacedigureore orthodox background.

East Germany *

So long as the USSR remains adamantly opposed to German reunification except on Its own terms, it mustegime which can maintain tight controlighlypopulation. The Soviet leaders,the basic unpopularity of the East German regime as well as the unique problems created by the existence of the West German Republic, have been more fearful of theof internal relaxation here thanin the Bloc.esult, they have consistently supported the Stalinist regime of party leader Walter Ulbricht and havethe presence of substantial Soviet forces in Germany as essential for internal security reasons.

Ulbricht and his supporters, themselves highly doctrinaire in outlook and aware of their inability to createpopular base for

maintained basically re-ughout the post-Stalin did, probably onome slight relaxationnd economic difficulties have led to substantial cutbacks in over-ambitious industrialization programs.

urrently the Ulbricht regimeew and harder line designed to consolidate itsrogram ofsecurity, stiffened border controls,of the churches, and increasedover intellectuals and the Party began last fall. Because of chronic weaknesses in the East German economy, including thelarge scale flight of people to Westand resultant labor shortages, aof economic conlrols is also underway.

This includes plans for Increases in worker production norms, wage cuts, and increased pressures on farmers and artisans to JoinMoscow probably views withthe poor performance to date of the East German economy and the relativeof Its socialization. Nevertheless,, Moscow found it necessary to extend substantial economic aid, Including0 million ln credits,eduction by half of East German payments for Sovietcosts. To maintain even the present slow rate of economic growth, the GDR will probably be forced to seek additional aid from the USSR over thc next few years.

Thc hardening of the political line has led to increased disaffection among partyand among the youth groups; theof economic policy is believed to have caused dissension at thc very highest levels. In fact, Ave of the nine Politburo members apparenUy are opposed to Ulbricht'sprogram because of its anticipated effect on popular morale. Such opponents probablyodification of Uiat program rather than Ulbricht's ouster. Should the USSR step into this controversy, we believe Uiat it would almost certainly maintain its support of Ulbricht, although it might, In Uie process, decide to compromise some of the issues.

The immediate effects on popular morale ol Uils hardening of the line will probablya growth of tensionigher flow of refugees to West Germany unless prevented by Uie new controls. We believe Uiat theof local and sporadic strikes andwill increase along with mounting repression. But an East German revolt isin view of the continued presence ofoviet divisions and general public awarenessesort to violence would prove abortive, as it did in Hungary, or In East Germany itself


a Soviet point of view.ls probably the most successful andcommunist state in Eastern Europe.economy, though plagued by

such matters as shortages In fuels, rawand manpower, is probably Uie strongest in Eastern Europe and has'not received Soviet aid in recent years. The standard of livingwhich never reached asoint asIn the Blochas risen perceptibly over the past few years. The regime by and large has been unruffled by the changing scene since Uie death of Stalin; extreme shifts in policy have generally been avoided. Thus Uiegoals of post-Stalin Soviet policy are closer to accomplishment in Czechoslovakia than In any other Satellite. TheParty leaders voluntarily acknowledge their fealty to the Soviet" Union; yet these leadersarty which is probably stronger and more self-sufficient than that of any other Satellite.

disputes do not jeopardizeand Uie top leadership appearsthe election of party leader Novotnyeffective power has beenin Uie handsoctrinaireloyal to Uie USSRout for special praiseeriod of some fermentchoes of which stillappear among thc intellectuals.also widespread separatist sentiment ineven within the Party.population generally appears to beand not disposed to risk, throughaction, themade


Since the Hungarian revolt, theregime has in some ways gone farther than the other orthodox Satellites In thedirection of post-Stalin reform. Itfor example, to beizeable effort to improve living standards and totrade with the West. Further,relations with Yugoslavia havebeen better than those of other orthodox Satellites and it has renewed its pre-Hungary campaign to improve relations with the US.

These developments have prompted some optimistic Yugoslav and Polish observers to suggest that Rumania Is gradually attempt-

ing on ils own initiative to move towardWe believe that thc factors cited in support of this thesis can be explained more satisfactorily in othereal need for expanded trade with the West, internal economic Improvement, and anregime desire to Identify Itself with the policies of Khrushchev. We believen fact, thc Rumanian regime is to gain notably greater autonomy, this would beslowly and cautiously and under Moscow's auspices.

tighter security controls andcharacteristic of the periodafter the Hungarian revolt appearbeen reducedoncomitant ofpopular unrest. In view of theweakness of tho economy,for "economic crimes" hasmore severe. Thc Party, thoughone of Eastern Europe's weakest inof faithful and capable personnel, lsin control, is supported by the presencetroops and is probably unitedleader Ghcorghtu-DeJ.

Bulgaria and Albania

The two most backward of the Satellites. Bulgaria and Albania, areculturally,and politicallythe most Sovlet-Ized states in Eastern Europe. Party policies, especially in Albania, have been less affected by post-Stalin changes than those of the other Satellites. This iseflection of the local leaderships' reluctance or Inability to adjust easily lo new patterns, coupled with specific economic and political weaknesses which argueontinuationough party line. Albania's geographical Isolation from the rest of the Bloc and its antagonism toward Yugoslavia are probably also in part responsible for the party's zeal inigid policy at home and fealty to Moscow abroad. Similarly. Bulgaria's common border with three potentially hostile neighborsserves to reinforce the party'sand interest in close ties with Moscow.

Popular discontent in both countriesstrong. Much of it is generated by the low standards of living and, in Bulgaria, a

high rate of unemployment. But repressive regime policies have held dissidence in check and will probably conUnue to do so, barring an unlikely relaxation of Internal controls. As for party factionalism, it probably does noterious challenge to Bulgariandespite some personal rivalries in the leadership and some degree of agitaUon for more liberal policies. In Albania, where Uie two top leadersHoxha andbeen solidly entrenched for more than aa remnant of the oncc-strongelement may haverevious purges, but, if so, it is too weak to exercise meaningful influence under currentAlthough there may be somechanges in the leadership of Uie two countries, prospects are few for notable shifts In policy.


We believe that Uie relative stability now prevailing in Eastern Europe will probably be preserved over Uie next few years. Tor the short term at least, both Uie USSR and Uie Satellite regimesincluding Uie Polishare likely to follow an essentiallyline, emphasizing internal consolidation, avoiding further political innovations, and maintaining thc general outlines of policiesincluding thc relatively flexible economic programsfollowedy and large this approach will probably enable the Satellite regimes to maintain their authority and to restrain overt manifestations ofwe therefore do notevival of those conditions which led to the major upheavals of

As for Soviet hegemony ln Eastern Europe, we believe that the basic identity of Interests between Uie USSR and its Satellite regimes, their dependence on Soviet aid and support, and thc USSR's overwhelming military power, together with its willingness to use force if necessary, will maintain the essentialof the Bloc over at least the next five years. Poland is thc only Satellite which might beosition io attempt to become another Yugoslavia, and for reasons we have already suggested we do not believe this likely.

ut however successful the USSR and its Satellites have been ln restoring at leaststability, they are still far fromthose forces ln Eastern Europe which underlay the unresthese forces still exist beneath the surface, and areln discontent over current policies within the parties, particularly al middle and lower levels; Intellectual and student agitation for liberal reform and national independence; popular hostility to the regimes, stimulated and,ense, led by party and Intellectual dissidents; and economic discontent, common to all who do not enjoy privilegederiod of political turbulence might again emerge If Internal controls were relaxed, or there were economic crises, or policies of the USSR or local regimes appeared uncertain, rhe greatest potentialities for serious unrest ;urrently appear to exist in Poland and East 3ermany, though evenopularseems unlikely.

oreover, we continue to believe, as we estimated in. that Poland's ability to maintain Its present semi-independence will beey factor affecting the future political developments In Easternheor failure of the Gomulka regime will greatly Influence the future role of theelements which exist in most of thc Satellites, though now quiescent- We do not now foresee conditions leadingolish-type coup in any other Satellite, but if the Polish experiment Is successful andacquiescence in it continues, nationalist elements in more orthodox Satelliles may be encouraged to seek greater autonomy.

hc continued existence ot Yugoslaviaommunist country independent of Moscow will also tend to encourage nationalistin the Satellites to seek greaterTo the extent that therapprochement continues, thebetween Soviet acceptance of thcstatus and Soviet policy toward theSatellites will further stimulate suchIf elements should emerge in thewhich, while adhering to communism, sought greater autonomy. Ihey wouldreceive such encouragement and suppori from Tito as hc believed could be offered with-

out seriously offending Moscow. Anyin the Satelliles which wasor so strongly nationalist as to Invite Soviet armed repression would almostnot have Tito's support, indeed inase he would piobably line up with Moscow.

n sum, while we anticipate that theachieved7 will continue, we also anticipate an atmosphere of change andmore highly charged than under Stalin. Popular dissatisfaction, parly factionalism, intellectual dissent, and chronic economic difficulties all appear lo be continuingThese create very real pressures within the Satellites whlehcombined with varying Polish, Yugoslav, and Chineae "roads topossible future Soviet vacillations and purges, growing contacts with the Westwill continue to stimulate desires for reform and change. The extent to which these desires are realized depends very largely on Soviet policy

Future Soviet Policy

eiminished abilily on the part of Moscow lo exercise unilateralin lhe Communist world. Thc necessity -of maintaining at least outward unity ln the Sino-Soviel Bloc and the internationalmovement has led Uie Soviets toon some issues and at least lothe opinions of other Communist parties on others. Further, Soviet policy ln some areas has tended lo be internally conflicting; thus. Soviet demands for Satellite conformity and loyally have been offset somewhat by the Soviet practice of accepting the Gomulkain Poland and of maintaining thc more relaxed and flexible ouUines of post-Stalin policy. This factor lends to increaseamong thc Satellite parties and keep nationalist ferment alive

nder these circumstances, Uie Sovietwill probably encounter trouble in itsto handle the complex issues associated wiih its presence in Eastern Europe. Wethat these problems are recognised in Moscow and lhat ihe relatively sterileappioach lo Eastern Europe has come lo an end Foi lhe short lerm at least, while

memories of Hungary and Poland are still fresh. Lhe security of the USSR's position In thc Satellites will remain uppermost inminds and measures to insure It given first priority. Thus for the nest few years Moscow will almost certainly remain generally cautious in its approach, going slow In the liberalization of its SalelUte policy.

But the Soviet leaders do not seem toeturn to SLahhist policies as citheror desirable; they may even regard It as lnfeaslble. Thus, despite Uie recent pulling back on the reins, Soviet policy7 has retained most of the Uberalizingin Uie economic fieldwhich have emerged since Stalin's death. Barring further serious threats toelaUvely flexible policy will probably be continued. The Soviet leaders probably remain prepared to tolerate certain differences among the Satellites, especially in Internal economic and social policies, and to tailor their policy to meet varying Satellite requirements, so long as Soviet hegemony and basic Communist tenets are not called into quesUon. The USSR will conUnue to place major reliance on Indirect methods of control, preferring to let Uie Satellite regimes deal with their own internal problems unless these get out of hand.

An indication of the pragmatic nature of current Soviet policy is the USSR's reluctant acceptance of Uie "new" Poland, whichtoong-range adjustment ratheremporary accommodation. Tenseness in Soviet-Polish relations has abatedn part because the Gomulka regime has restrained anti-Soviet and anti-Communist popular sentiments and has removed thethreat to the party's position.direct Soviet press attacks on Polish liberals have abated and Moscow hasits open support of Uie pro-Soviet (Na lolln) faction in the Polish party The USSR is still giving substanUal economic aid to Poland, and is continuing to equip Uie Polish army. Should Uie situation in Poland appear to be getting out of hand. Uie Soviet leadersarge arsenal of political, economic, and military weapons with which lo exert pressure on the Gomulka regime or even to

destroy it. although they cannot be certain Uiat pressures will always prove effective or Uiat then use would not. in .fact, boomerang.

In time, moreover, should Poland remaintate of semi-orthodoxy and dependence, and Soviet control over Uie other Satellites not be threatened, Moscow might graduallyore independent role to otherwithin Uie limits imposed by Uie desire to maintain Soviet hegemony. Khrushchev and his colleagues apparenUy believe Uiat If some concessions are gradually andmeted out, conditions ln Uie Satellites will Improve, the domestic prestige of Uie regimes will be enhanced, and eventually Uie Satellite peoples will become reconciledlosewith the USSR. Moscow has probably at least considered the feasibility of gradually allowing evolutionroup of semi-independent Communist states (closely allied toe doubt that the Soviets have as yet made up their minds on any such plan, especially after Poland and Hungary, but they may come to believe Uiat allowing some such evolution would reduce Uie chances of serious Satellite unrest, improve prospects forgrowth, and enhance the reputation of the USSR in non-Bloc areas.

On Uie other hand, should essentialcontrol over Uie area appear to beor should Poland move notably farther away from orthodoxy, pressures ln Moscoweversionarsher policy wouldcertainly grow, in the event of arevolt beyond the capacity of tho local regime to suppressatellite attempt to secede from thc socialist camp, Uie Soviet leaders would almost certainly InterveneThis. In turn, would probably lead to the conclusion that the post-Stalin Satellite policies in generalailure andeturn to more repressive polices offered the best means of coping with Uie problems ln Eastern Europe.

oviet reaction to another Satellite party 'coup" like Uiat in Polandaimed at greater autonomy rather than outright secessionwould be largely dependent on the particular circumslances of the moment. If, forIntervention threatened lo embiotl tho


ajor military campaign, theleaders would probably again attempt to make the bestad but tolerable situation and use indirect techniques to regain control or to limit the extent of deviation. If, on Uie other hand, there appeared to be few outside risks and litUe chance of sustained localthe Soviet leaders might intervene. We do not believe, however, Uiat Uie USSR will be confronted withhoice during Uie next fewecurrence of Uiecircumstances which permitted the Polish coup Is highly unlikely. None of the olher Satellite parties now appears to have either Uie inclinaUon or the resources to declare Its independence.

The USSR's post-Hungary concern over lis position in Eastern Europe and its resultant sensitivity toward potentially disruptiveinfluence in this area probably contribute significantly to Uie recent Soviet efforts to obtain some form of East-West ratification of Uie European status quo. Moscow, already concerned about US aid to Poland, probably fears that the West may be able to exertInfluence toward encouragingindependence on the part of SatelliteThe Soviets presumably believe that any US acquiescence in Uie status quo in Eastern Europe would tend to underminehopes of future US support and thus reduce the likelihood of "deviation" or unrest.

Despite various Soviet hints as to theof mutual East-West troopwe believe that thc USSR will continue to maintain sizeable forces in Eastern Europe. The USSR has recently announcedof an) Soviet troops will be withdrawn from East Germanys well0 from Hungary (out of an. However, it will almost certainlyizeable garrison In Eastajor reduction would not only threaten its hold on this key Satelliteajor source ofut would havein Poland and ultimately the wholearea. Indeed the presence of Soviet forces in East Germany is probably regarded by Moscowesirable form of implicit pressure on Ihc Poles and Czechs.

Satellite Economic Outlook

Unsatisfactory economic conditions willactor contributing to popularand intra-party differences in Uieover Uie next few years. The progress of the various Satellite regimes in overcoming economic distress has, for the most part, been slow and is unlikely to accelerate very rapidly. Some modest improvement in economicwill probably take place, but we estimate Uiat gains in living standards will on Uie whole be smaller than those of the past several years. We also anticipate seduced rates of industrial growth similar to those oferiod but materially lower than those realized; in both Hungarywhere output is probably still below pre-revolution levelsand Poland these rates7 were at the lowest point since Uieof Communist planning. Under thesethe USSR will probably have to provide further credits and deliveries of badly needed goods, such as fuels and raw materials, to bolster the Satellite economies andimprove living standards.

In addition the Soviets will probablyincrease their efforts to rationalize the Bloc economic structure on the basis of an intra-Bloc division of labor, emphasizing both bilateral cooperation through joint economic commissions and multilateral consultation through the Council for Economic MutualThe stated objective is now Uie long-range coordination of Satellite-Sovietplans. However, thisis only in its initial stages and willbe weakened by the difficulties ofconflicts of economic interest amongand by Poland's refusal to accept Soviet economic dictation. Competition among the Satellites for Western markets ls likely to hamper integration plans. The program will also continue ui be plagued by Bloc shortages of certain key raw materials, fuels andproducts, and by the legacy of past emphasis on Industrial self-sufficiency In each country.

Because Of their economic problems, we expect further efforts by the Satellites totrade with non-Bloc areas. Such trade


generally grown considerablyn both absolute and relative terms;6 it had reachedercent ot over-all Satellite trade turnover (compared toercent. But there has already been atn the growth of trade with Uie West, caused in part by the expansion of Intra-Bloc credit arrangements and trade agreements. This trend will probably continue. In Uie case ofrop in the world market prices of coal, its chief export, coupled with the availability of substantial Bloc credits, is likely to have simitar results, unless onset by additional credits from the West. Non-Bloc trade will also be severely limited by chronic shortages among thc Satellites of Western currencies and of readily exportable

and extension of credits toIn particular byand East Germanyhave beenby Uie USSR to support itsln these areas While this tradeprofitable ln many instances, itin part upon credits which theexcept for Czechoslovakia, may boto finance. The USSR hasthese credits In some instances.


West's ability to influence UieEuropean Satellite developmentand actions directed toward thethemselves is limited. However.in Soviet policy since Uie death ofand the ferment and confusion tnwhich followed, have created awhich Is probably more open tothan al any timepresent trend toward stabilization ofstructure, wc foresee asUesses and strains within Uie variouswhich, together with Uie trendEast-West contacts,eml-lndcpendent Poland,renewal of the trend toward greater

1 In uMttlnt Uie impact ot Western poUcMs. we have not considered the use ot forte or thn-ats of. an announced Western policy of encouraging revolts and of support! nc Uwnt If they occur.

Satellite autonomy, provide increasedfor Western Influence ln Eastern

Nevertheless, despite still strongfeelings among Uie Satellitehe majority of whom are probablyand anti-USSR In their attitudes.ability to give outside stimulus to popular dissidence or toocus foractivities Is generally far less thancapabilities to counter such attempts. As for Uie leaders of thc regimes, thoir broad identity of interest with Uie USSR and general subservience to it make them highly rcsislant to Western influence, particularly as Uieythe West as basically hostile to their own aims In Uie last analysis, Uie West cannot expect by its own efforts to bring about Uie emergence of more autonomous regimes in Eastern Europe. In the two cases on recordYugoslavia and Polandthc regimessought on their own initiative lo free themselves from Soviet domination. But if more of such regimes should emerge, real opportunities for Western Influence would be created.

Aside from the Influence of specificpolicies or actions, such factors as Uie Satellite assessment of Uie general posture of -the Wesl and its relative strengtheal, though Intangible, impact on Eastern Europe. These (actors shape the popular and even the parly conception of US versus Soviet strength and of the consequent ability of either side to carry out its policies Forack of unity within Ihe Western alliance or setbacks to Weslern policy In other parts of the world may be interpreted as Indications of aweakening of the Western position.Soviet scientific and technologicaldepress popular morale, since Uiey tend to undermine confidence In the Satellites Uiat lhc Wesl is both stronger and more advanced

Economic Contocts

Western trade with orto the Satellites tends to lessen theirdependence on Uie Bloc In twoWestern trade and aid gaveas well as material support to efforts to


greater freedom. Thus. Yugoslavia was able tooviet-Imposed economiclargely because of Western aid. The case of Poland is less conclusive, but we believe that Gomulka's efforts to stabilize his position and to maintain his semi-Independence fromhave been aided by US credits. Despite the relatively small amounts involved. Ihey give Lhe regime an enhancedreer hand, and an Improved bargaining position with the USSR. Moreover, the prospect of such US aid mayactor encouraging any other Satellite leaders who may desire toUie Polish example.

reater Western trade with the orthodox Satellites, or possibly some form of aid to them, would have more equivocal results. On the one hand it might help to convince deviant leadership groups of US willingness to support them if they sought greater autonomy. On the other hand it might merely lend added prestige to thc existing orUiodox leaderships without encouraging any moves to Increase their autonomy. Whether or not thc economic well-being of the individual Satellite citizen improvedesult of expanded Western trade or aid would depend on Uie policies of the regime; it Is possible that such trade would merely enable an expansion of present programs for Uie development of heavySo far the USSR has generally acquiesced in greater Satellite economic contacts with the West; but in expanding its own economic assistance to the Satellites it istrying to counteract the attractions of such contacts. The Soviet leaders may not have fully resolved conflicting inclinations on this matter, fearing thc possible consequences but at Uie same time tempted by Uie notion that expanded Western trade or aid might help "build socialism" in Eastern Europe.


M We believe that In this field lie some of Uie potentially most significant. Uiough least tangible, opportunities for Western influence on Satellite developments. Believing that Western knowledge and techniques can be used profitably by the Bloc, the USSR and ils Satellite regimes have permitted some limited exchanges and personal contacts between Kusl

and West. This program has diminished Uie general popular feeling of cultural Isolation and stagnation In the Satellites, particularly among intellectuals. But it may help toferment by Introducing knowledge of Western material successes and Westernto those who otherwise might havelargely ignorant.


many Satellite citizensPartyincludedWestern broadcasts areUie only medium of contact withworld. Despite officialJamming by all the regimes exceptUie direct and indirect audienceservices as VOA, RFE. BBC, andArmed Forces Network probablyUie majority of East Germans,and Hungarians and aelsewhere In the Bloc. Whileare not accorded unanimousthe listeners, they apparently help toCommunist distortions and keepanti-Soviet and pro-Western sentiments.

Negotiations with the USSR

Given the severe limits on Western abUlty to influence Satellite developments dlrecUy, the area of potentially greatest Westernon Eastern Europe, as well as Uie area of greatest risk, appears to lie-within the field o( major East-West agreements which would fundamentally affect the European situation.

The very fact of negotiations on any such issues as mutual troop withdrawals, German reunification, or the status quo ln Europe would have some Impact on the Satellites. To the extent that the West seemed to beSoviet hegemony over Eastern Europe, morale among thc Satellite peoples andparty devlanLs would tend to beOn the other hand, negotiations which appeared to offer hopesoviet troop withdrawal, particularly If coupled withguarantees against their return, would have an opposite effect.

lie developmenl which would mostaffect stability in Eastern Europe would

egotiated. Soviet troop withdrawal. Of course the consequences of any withdrawal would depend on the surroundingespecially the extent to which there were convincing guarantees. Even If thetroops actually withdrew from thc area, thc Satellite peoples would be hard tothat the USSR would not ro-enter in force If Its hegemony in Eastern Europe were seriously threatened; indeed. Moscow might make known ln various ways its detornuha-tton to do so. Therefore, while popularagainst the communist regimes might follow the withdrawal of Soviet troops (the likelihood would be greatest ln East Germany) we believe that the Initial reactions ln most Satellites would be less violent. But some disturbances would probably break out. and there would almost certainly be growingon the regimes for radical modifications In their policies.

f the Soviets and the local regimes did not react forcefully to these pressures,if the USSR did not crush any revolts which occurred, thc conviction would grow that thc Soviets had permanently withdrawn and instability in the Satellites would greatly Increase. The resulting outcome would vary in different Satellites. In time moatregimes would probably be forced tochange their character or might even be overthrown. We continue to believe that the SovieU wouldimilar estimate of the consequences of troop withdrawal, and that this wouldajor reason why they are highly unlikely lo accept it.

lthough also highly unlikely, an East-West agreement on German reunification which was interpreted in Eastern Europe as an abandonment of the USSR's East German Satellite would almost certainly have major repercussions throughout thc area. Unless countered by positive and vigorous Sovietthese repercussionsIn the form ofdissidence, ferment. Party factional-Ism, riots, and strikesmight led toor radical policy shifts in other Satellites, especially ln Poland.

urrent Soviet interest appears directed primarily toward an agreement which would gain Western sanction of the status quo ln the Satellites. Even East-West talks onof the status quo in Europe wouldepressing effect on Satellite morale.already dimmed by Western Inactivity, particularly during the Hungarian revolt, popular hopes have been sustained by the Western refusal lo sanction the SatelliteThus in the short run, East-West agreement on the status quo ln Easternwould probably strengthen both the local regimes and the entire Soviet-Satelliteeven though it brought despair to the Satellite peoples. The long-range effects of such an arrangement, however, are lessTo the extent that lt reassured the USSR as to the security of its position In Eastern Europe, it might contribute to the willingness of the USSR to tolerate theof semi-independent Communlsl



t Official Exchan;


Qrants and

Germany *

goods, gold, and convertible currency credits.

illion in postponement of the repayment of previous debts.

' The8 Soviet-East German economic agreement also provided for thc reduction of lhe East German annual contribution to the maintenance of Soviet occupation forces byillion per annum).





East Oermany







iUlon credit from Communist China. In addition. Hungary received grants5 million from the European Satellites5 million from Communist China.

'In addlUon lo this xnown figure, credits of unknown amount are extended to Albania annually by the Satellites. East Germany cancelled an Albanian debtillion.

* Inredit of unspecified amount fromillion credit to Outer Mongolia.

Original document.

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