Director of
Central
Intelligence
Deepening Crisis in the USSR: Prospects for the Next Year
National Intelligence Estimate
This National Intelligence Estimate represents the views of the Director of Central Intelligence with the advice and assistance of the US Intelligence Community.
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Director of
Central
Intelligence
0
The Deepening Crisis in the USSR; Prospects for the Next Year
information available as0 was used In the preparation of this National Intelligence Estimato.
The following intelligence organizations participated
in the preparation of this Estimate:
The Central Intelligence Agency
The Defense Intelligence Agency
The Nattonal Security Agency
The Bureau of Intelligence and Research,
Department of State
also participating:
The Deputy Chief of Staff for Inteffcgence.
Department of the Army
The Director ol Naval Intelligence,
Department of the Navy
The Assistant Chief of Staff, Intelligence.
Department of the Air Force
This Estimate was approved tor publication by tho National Foreign Intelligence Board.
0
The Deepening Crisis in the USSR: Prospects for the Next Year
No end to the Soviet domestic crisis is in sight, and theretrong probability that the situation will getmuchthe next year,
The economy is certain to decline, and an economic breakdownossibility. The central government will be weaker, and some republics will be further along the road to political independence.
The current situation is so fragileombination ofsuch as the death of Gorbachev orrecipitous economic decline, massive consumer unrest, or an outbreak of widespread intercthniclead to anarchy and/or the intervention of the military into politics.
The certain continued diffusion of power will make tbe conduct of Soviet foreign policy more difficult and complicate relations with the West.inimum, Western countries will be confronted with more urgent pleas for economicfromleaders, who will also push for political recognition.
Suctui
tJtC0
el
That Could Lead to Scenario
'rohiihility
Short o( Anarchy
gree upon and implemcMar-reaching marfceiiniron plan, or the broad reWsiince of theourse.
Failure of the center and the republics to nunc to new, mutually acceptable political and economic relation*.
Inabtliryof political inuiiutkmstoadapi tochangingpolitioil realities, and ineffectiveness of new democratically etecied lenders in govern mg.
Qsniinucd. ilioush din-rushed, viability of the central
government.
ic even
piccipilous decline of ihe economy.
Massive social protests or tabor strikes lhai proved to bc beyond Ihe security services' ability to control.
TV assassination of Gorbachev or Yeltsin.
The complete breakdown of rcbtictru bcrweea ihe center andihe rcpuMics-.especially ihe Russian Republic
Intro cut loo (niiijin^oup
to civi reeled
martial tow)
of Key etc menu of ibe national economy, such as the transportation system.
Violence against central government institutions.
A situation approaching collapse of central authority.
Anarchy.
progress loward:
to deal constnxiivcfy with each oiher and the censer.
Tbe tilting of ihe political power vacuum by new political institutions and parties.
EMablrslnng new economic relations based on the market.
S or tew
scenarios are analytical constructs desermine overall dircctwoi the USSR could (ate over ihe not rear and are nol mutually exclusive.
JV
11
Key Judgments
The USSR is in lhe midstistoric transformation that threatens to tear the country apart. The old Communist order is in its death throes. But its diehards remain an obstructive force, and new political parties and institutions have yet to prove their effectiveness. The erosion of the center's influence, coupled with the republics' assertion of sovereignty, isower vacuum. Gorbachev has amassed impressive power on paper, but his ability to use it effectively is increasingly in doubt. Meanwhile, economic conditions are steadily deteriorating.
Whether the Soviet Union over the next year can begin toay out of its crisis will hinge, above all, on two variables:
The performance of the; economy. The question is not whether the economy will decline further but how steep that decline willrecipitous drop would makeew center-republic relationship next to impossible and markedly increase the likelihood of serious societal unrestreakdown of political authority.
- The Gorbachev-YeVtsin relationship. Because of the Russian Republic's disproportionate size and influence in the union and YcFtsin's role as the most prominent leader of the new political forces emerging throughout the country, the more open the confrontation between the two leaders, the more destabilizing it would be.
In our view, prospects for positive movement in each variable are tew. Gorbachev's economic reform plan, while endorsing marketization. falls far short of what is needed to stem the economy's decline. And the Yel'lsin-Gorbachev clash over tbe plan bodes ill for both economic and center-republic reform.
For these reasons, we believe that over the nextcenario of "deterioration short of anarchy" is more likely than any of the other three scenarios that we consider possible (seehere is,ignificant potential for dramatic departures along the lines of tbe "anarchy" or "military intervention" scenarios.
In our most likely scenario, deterioration short of anarchy, the country's economic, political, ethnic, and societal problems will continue to get worse at an accelerating rate. Gorbachev probably will remainear from now, but his authority will continue to decline. His ambivalence
1 i. im ih "
toward radical transformation of the system probably will continue to delay decisive action and dilute the effectiveness of efforts to implement market reform orew union. Yel'tsin's popularity and control over the Russian government will give him significant influence on the country's course over the next year. The different visions the two men have of Russia's and the USSR's future are likely to lead to more damaging political clashes.ombination of the remaining powers of the old order and the limited reforms the regime implements would prevent the entire system from disintegrating.
In view of the volatile situation that prevails in the USSR today, however, we believe that threen-5are also possible over the next year.
An accelerating deterioration is unlikely to continue indefinitely and could during the next yearree fall that would resulteriod ofbreakdown of central political and economic order.
The chances for military Intervention in politics would increase markedlycenario where the country was on the verge of, ortate ofMilitary intervention could take severalilitary coup against the constitutional order, rogue activity by individualor martial law ordered by Gorbachev to enforce government directives. Of these. Intelligence Community analystsoup to be the least likely variantivilian-directed martial law the most likely.
A "light at the end of the tunnel" scenario, where progress over the next year toward the creationew system outpaces the breakdown of the old, cannot be ruled out. There would be further progress toward marketization and pluralization in spite of continued economic decline
- and political turmoil.
Whichever scenario prevails, the USSR during the next year will remain inward looking,eclining ability to maintain its roleuperpower. The domestic crisis will continue to preoccupy any Soviet leaders and prompt them,inimum, to seek to avoid direct confrontation with the West. But the particular foreign policies they pursue could vary significantly depending upon the scenario. Under the "deterioration short of anarchy" or "light at the end of the tunnel" scenarios, Moscow's Western orientation probably would be reflected in continued, possibly greater, Soviet willingness to compromiseange of international issues.
Special requests to the West for consultations, technical assistance, emergency aid, and trade from lhe central and republic governments are certain to increase. Unless political conflict over who owns resources and
controls forcip.ii trade is resolved, which is unlikely, both US governmental and private business relations with the USSR and its republics will be increasingly complicated.
An "anarchy" scenario would create precarious conditions for relations with the West and would present the United Slates with some difficult choices. If tbe situation evolved into civil wars, we would face competing claims for recognition and assistance. The prospects for the righting to spill over into neighboring countries would increase. The West would be inundated wilh refugees, and there would be enormous uncertainties over who was in control of the Soviet military's nuclear weapons.
military intervention"ilitary-dominated regime wouldess concessionary approach than Gorbachev's on foreign policy issues andougher line on arms control issues and economic relations with Easternilitary regime, however, would be unable to restore Soviet influence in Eastern Europe and would be too busy attempting lo hold the USSR together toostile military posture loward the West.
Discussion
(be Intelligence Community's last Estimate of the Soviet domesticearhe USSR's internal crisis has deepened considerably'.
The Communist Party is dying but is (tillGorbachev has tried to shift tbe local of power to the new presidency andut they have yet lo demonstrate their effectiveness
New political groups aad parties have won power in key republics and alios and arerowing challenfe to lie Communist system.
The national government is scrambling to control centrifugal trends, but iu writ over the republics is fait eroding, and there is growing ethnic turmoil.
Economic problems have become more intractable. The uncontrolled growth in demand andproblems have created increasing consumer discontent. Gorbachev hnv lost valuable time in stabilizing the economy and beginning the traniiiionaikct ecooorny.
Our previous Estimate, while foreseeing the tumuli, overstated the regime's abilityontain thedrive for sovereignty ind underestimated the challenge to Coramuniit Party rule from new political forces.
Inolatile atmosphere, events could go in any number of directions. Because of this, the Intelligence Community's uncertainties about the future of the Soviet lystcm arc greater today than at any lime in theears we have been producing Estimates on the USSR. Accordingly, our projections for the neat year will be highly tentative
ife. Prospects fin iht Next Two Yean.
ew Political Order
Tbe Communist Party's monopoly of power is history. Tbeidely seen as the source of the country'i problems, and popular hatred of it is increasingly evident. It lost iu constitutional guarantee of political primacy in March, andh Congress in July excluded government leaders (except for Gorbachev] from key party pom. The country's Iwo largest cities and largest republic, as well as the three Baltic republics. Georgia, and Armenia, arc now headed or have legislatures dominated by former or
A new pluralistic, decentralized political system is emerging but ii not yet capable of running lhe country. The center and the Communist Party stillonsiderable, though declining, share of political power. Bui lhe CPSUis loo discredited to ailroct suffurirm popular support needed to govern in lhe current environment. At tbe tame time, tbe emerging political groups, while showing strength, are still small and inexperienced in the ways of power and are not competitive on (he all-union level (see insel,
The governmental institutions to which Gorbachev has been attempting to shift power arc likewise only in their formative stages The Congress of People's Deputies (CPD) is foundering. The Supremeelected by theshown more promise, but is also losing Influence because of JU lack of popular legitimacy, iu inability to ad dcciiively, and the center's difficulty in maintaining control over major sectors of government. Gorbachev has made thetbe highest organ of executive power, lupplant-ing lhe CPSU Politburo aod Ibe Council of Ministers, but its real authority remains to be proved. This diffusion and confuiion of power, coupled with the republics' assertion of sovereignly. Isower
vacuum. Gorbachev has amassed impressive power on paper, but his ability to use it effectively isin question and his popular support^
"lis
Political Strategy of tht Key Players Gorbachev's defeat of the party's conservative wing al the congress bas given him greater room to maneuver. The pressure created by Yel'tsin's growing influence has made Gorbachev realize thai he must work wiih Yel'tsin and other non-Communist forces. Me tow accepts the inevitabilityeakerarket-orienled economy. Yetafraid of social upheaval wants toignificant measure of control over events This has led bim to try lo bolitcr bis powers as President, limil Ihe influence of new non-Communist political forces, retain significant powers for the centerew union, and water down the Sbalalin Planarket economy. This course is at odds with Yel'isin's on some key issues aod is slower and Dot as far reaching as we believe is accessary.
The political forces outside Ihe Communist Party are certain lo gel stronger; thcie is as yet. however, no coherent strategy among those forceshole. Many non-Oxnmunm figures are concentrating their efforts on organizing political parties. Others who have already won elections, such as Yel'tsin and
Moscow Mayor Gavriil Popov, have shunnedIhe time being atany political party and concentrated on the basics of governing (seef they demonstrate over the next year that Ibey can get things done and make the voice* of their constituenu beard, the prospecuore rapid emergenceon-Communist leadership on the all-union level would increase markedly.
Ycl'tsin's immediate goal is achieving sovereignty and greater power for the Russian Republic (see p.ut the enormous size of thai republic and bis reputation throughout the USSR as giwthcia! leader of the non-Communist forces makeormidable competitor to Gorbachev. Yel'tsin. who quit the CPSU in July,ultiparty democracy, rapid movementarket economy,uch looser union in which the republics grant only limited powers lo the center.
Currently. Yel'tsin appears to have the political advantage over Gorbachev; he Is far more popular than Gorbachev In USSR-wide opinion polls. In tlsc six months since Yel'uin became Russia's President, the two have bad periods of cooperation andTheir willingness and ability to cooperate willritical role in the fate of political, economic, and center-republic transformation in the USSR over ihe neil year. Whether ihey will do so is open to question, given their mutunl personal antagonism,
Embryonic National Political Parties
A wide array of political groups is emerging in the USSR as the country moves towardultiparty, stole-of-law political system. They have the potential lo gain significantsupportfew those in ihe Baltics and theyet to develop into full-blown political parties. The groups generally lack clear, comprehensive political platforms, and noneormal membership of more than severalSeveral groups claim to be parties or will claim lhal title soon. Although based In theRepublic, they have some following in other parts of the country.
Democratic Platform. This group of democratic reformers from the CPSU is in the process of transforming tiself Into an Independent party, lis leaders predict that JO percent of the current CPSU membership will eventually fain the new
party, but the actual figure is likely to be lower. The party's platform supports the market as the
prime regulator of the economy, private properly.
and "Independence"for the republics.
Democratic Rustle. This group is currently servingegislative coalition and has not proreform candidates for local and Russian RepublicIt embraces an assortment of political forces opposed to CPSU traditionalists. The grouphas strong majorities in the Moscow and Leningrad city councilshin majority In Russian Supreme Soviet.
Social Demieraxie Party. Founded Inhis party is trying to associate Itself with European Social Democrats. It has generallyGorbachev but has charged him with being too cautious and seeking to perpetuate ansystem.
Christian Democratic Union of Russia. This party openly opposes Gorbachev. It Insists that "Russia should become Independent af the USSR" by establishing new forms of federation with other democratically inclined republics. The party'splatform rejects capitalism whileree market controlled by society" and atax scale to protect the poor.
Democratic Union. Radical by Soviet standards, this party believes the Soviet political system should be thoroughly overhauled tooluntary federation of republics basedVest-ern-styte multiparty systemull market economy. Party leaders have stressed the need to confront government authorities in order to bring attention to lhe repressive character of thesystem.
Greem Party. This party Is taking shape amongcological organisations. These organizations agree on the need to protect the environment but have mot been able toonsensus on other political or economic Issues.
policy agendas, and political rivalry. Open confrontation would stymie system transformation and lead to greater instability. Cooperation would not guarantee peaceful transformation, but it would help significantly by garnering popular support for painful economic measures linked to marketization and by making it more difficult for the entrenched party machinery in the countryside to be obstructive. If Yel'tsui follows through during the next year on his
pledge, to stand for popular election to the Russian Republicecisive victory would further enhance his political influence.
Gorbachev, the Supreme Soviet, and the Congress of People's Deputies, elected before the establishment of independent political parties, lack the popular support
to push through the difficult and painful measures needed to deal with tbe country's crises Accordingly, Gorbachev could decide during the next year toroundtable" between tbeand non-Communista Poland9 or perhaps evenraod coalition. This would involve the removal of tbe increasingly Ineffective Nikolay Ryzhkc* from the premiership Elections for tbe Congress of People's Deputies are not due4 and for the presidencyutmay calculate that holding early legislative elections would allow new parties to gainSubmitting himself to the popular will would be risky, and he is unlikely to do so during the coming year.
Impact of Other Players
The Armed Faeces and Security Services. Leaders of the military and security services perceive dangerous consequences from Gorbachev's domestic and foreign policies. These concerns reflect alarm over tbeauthority of the party and the central government, growing domestic disorder, the unchecked spread of separatist movements, and the breakup of the East European security system.
-Rnu.at
-fie urge-
organizations will find iheir abiUty to cope wiir firowmg internal disorder limited over the next year The luliUiy is averse to using iu troops to police tbe population. Moreover, most Soviet troop units.
because they are conscript based, are ill suited to controllingin Slavic areas. The KGB's ability lo perform its internal security mission
figurifionliralloaj on
Uaym RcdSwe. Panne/ rrodi Vow* io ihe pecpli end runhe pony!"
iheir apprehension over Ihe current domestic situation and concern about their abilities to perform assigned missions, the military and security services do noterious challenge to GorbachevsThey vie* themselves as instruments of ihe stale and arc attempting to help Gorbachev in dealing with ibe turmoil. Even wiih their many internal problems, ihey represent the most reliable institutional assets remaining at Gorbachev's disposal.
Society. Popular anger is growing, us is belief in the inability of the central government to lead ihe country out of ibe moraia it is in. Deep pessimism about the future prevails, especially when il comes to bread and butter issues. People are searching for something to fill the emptiness ia Soviet society through such alternatives as religion and nationalism, tn particular. Russianlikely in anraiher than chauvinistic, variant- willrowing role in the future of tbe country.
The reforms under way have given the peoples ol tne USSR greater say in their political and economic lives, and they have expressed their views through tbe ballot, demonstrations, strikes, and violence. Theinfluence is likely Io grow even more during the next year as power continues to move away from central institutions. How this influence is exercised and channeled will be critical variables. Separatist groups and new politicalon the left, bul also from IheUp much of Ihis popular activism. This will increase (heir importance bul could also embolden them to take steps that lead to greater instability. Outbursts of civil disobedience arc almost certain to grow; they are more likely tobe mostnon-Russian areas but probably will also take place in tbe largest cities ofthe Russian Republic and in energy-producing regions.
The Crumbling Union
The Soviet Union as wc have known it is finished. The USSR is.inimum, headedmaller and looser union. The republics, led by Yel'tsin and the RSFSR, will intensify efforts to resha pe the uniop independent of the center, further loosening Moscow's
Figure 5
Soviet Republics
I IU *
RUSSIAN SOVIET FEDERATIVE SOCIALIST REPUBLIC
over iheir regions. To dale, these efforts arc mostly declaratory; actual control over institutions and resources in the republics is still to be tested.
In an effort to cope with the nationalist forces strain-ins the fabric of the union. Gorbachev nowubstantially widened scope for market forces and the conclusionew union treaty by1 that would establish new power-sharing relationshipsMoscow and each republic. We doubt, however,ew union treaty can bc concluded within the nest year. Gorbachev has indicated he willeduction in the center's authority bul so far is attempting to bold on lo more authority than most
republics waol to concede. The initiative now resides mainly with the republics, and any new treaty is likely to be driven more by what powers they are willing to pant the center than by what Gorbachev wants (sec figure 61
Because of Ibe disproportionate size and influence ofew union treaty will not be concluded unless Ycl'isia and Gorbachev work together. How far many of the other republics go in demanding sovereignly will bc directly affected by Russia'sin negotiating with the center and wiih the other republics.
USSR: Soviel Republic Sovereignly
ho
Unknown
(in Older of declaration) / / / /
baaonf all Audeu tobnt and aMiRiuctioaQpfnlton <ilma ii- wripoa* et aua dotiMlon
I Im-lauifM
The Range af Republic Demands
Tbe two largest and most powerful republics, Russia and the Ukraine, noweverely limited central government and union as they demand substantial control over their ownThe Russian Republic legislature Isfor primacy of its own laws over Soviet ones, control of theand and naturalfiscal policy, police and internalforces, moat economic enterprises, foreign trade, and some role In foreign and monetary policy. The Ukraine has gone further, asserting the right to establish Its own army, and Belo-russla and the Central Asian republics are also making far-reaching demands. The three Baltic republics are flatly rejecting political affiliation with the center before achieving independence Georgia. Armenia, and Moldova, in whichit ionitt sentiment is especially strong, appear unwilling tonion treaty but areradual transition to Independence.
Wliii Kind of Union?
The process: of reshaping lhe union will vary accord-ins le the republic over the next year,inimum, Ihc cenler willramatic reduction in
Thereetter than even chance lhal Moscow and certainBetorussia, Azerbaijan, and the Central Asianmoveoosely affiliated union of republics. We believe that Gorbachev will ultimatelyong way to meet Russia't autonomy demands as long as the central governmenteaningful rote in tbe new union. Considerable difficulties and hard bargaining remain; but so far the demands of Russia and these other republics do not appear irreconciliable wilh Gorbachev's (see insets).
The Ukraine's future status is more uncertain.radicahzaiion of the nationalist organization Rukh and lhe population generally has pushed the Ukrainian legislature to lake increasingly assertive
The Union Treaty: Areas Over Which the Center Seeks Control
Gorbachev apparently wants to maintain the primacy of union laws over republic ones and to preserve substantial centra! control of:
Natural resources and land.
Defense and state security.
Foreign polley.
Maeroeconomic policy.
Foreign trade and customs.
Border control.
Science and technology policy.
Power supply.
' Transportation.
of Individual rights.
steps in defining the republic's relationship villiRukhomplete break wilh the central government, but more traditionalist forces in the Russified eastern pan of tbe republic are likely to try to impede any abrupt declaration of independence.
Thus, there isignificant chance lhal Moscow will be unableutually acceptable division of responsibilities even with the core Slavic republics. Moscow could reject their current demands, or the RSFSR or Ukraine could escalate demands in areas such as defense and monetary policy to Ihe point where Gorbachev would fed he had no choice but toumber of factors could contributereakdown in negotiations,ontinued rise in Ukrainian nationalism, worsening of relationsGorbachev and Yd'tsrn. or rising popular unrest directed against central authority. In these circumstances, struggle for control of key' institutions and enterprises in lhe republics would ensue, leading towilh Ibe very existence of Ibe union at slake. The advantage in this scenario would belong to lhe "locals."
The Central Asian republics appear ready lo tryeformed unionay of addressing their economic
diflicullies. Markci reform will create ditpropori ion-ate economic pain in ihc region, however, and could eventually produce disillusion wtihooser union.
Although no republic is likelyecome officially independent wiihin the nest year, 'Ae Baltic republics are almost certain to bold out for full independence and will be on (heir way to getting it. Latvia and Estonia will probably be willing lo consider some kind of voluntary economic association with tbe Soviet Union now, but Lithuania is likely to be willing to do so only after achieving complete independence,Armenia, and Moldova will probably reject any union treaty but willore gradual approach to independence than tbe Baits. Al Georgia and Moldova press for independence, ethnic minorities there arc likely to intensify calls for autonomy. This probably would not deter republic efforts. Butmay yet be ablelay on Georgian and Armenian conecrnt about .susceptibility to potential Turkish or other Muslim aggression without the protection of the Soviet security umbrella.hift in Romania toward greater authoritarianism would probably make the Moldovans more willing to stay in the union.
The Ecowoaac Variable
Last year the Soviet economy slumped badly, and official statistics for the first nine months0icture of an economy in accelerating decline. Output is down comparedear ago, inflation is up, and shortages arc widespread and increasing. Even though imports and productioa of somegoods are up (such as In agriculture and consumerransportation bottlenecks and systemic inefficiency are denying consumers much of tbeMeanwhile, continued rapid growth in persdnal money incomesuge backlog of excesspower have combined to undermine the ruble and
icious circle of shortages and binge buying, enflaming consumer anger and leading io violence.
In tbe year to come, lhe economy's performance will depend on how central authorities manage erosion of their control over the economy, ibe level of labor and ethnic strife, the success of regime efforts io overcome the acuie financial imbalance, and the course of market nation. In view of our assessment of the prospects for each of these variables, we believe that the economy will continue declining at an accelerating rale and thereossibility of an economic(sec inset,
Erosion of Central Control
The transition from the command economyore decentralized market system will ultimately yield major gains in performance. In ihe short run,central controls have begun lo wither before an effective new system has been put in place. Tbe Communist Party is no longer able to enforce Ibe state's economic orders; economic reforms have given state enterprises and farms the legal basis lo resist tbe center; and Ihc pursuit of independence and autonomy at Ihe republic and enterprise levels have disrupted old supply and demand relationships.
Over (he next year, ihese trends arc almost certain io continue, and lhe center could be weakenedoint where it would lose control of the allocation of vital goods such as energy, key industrial materials, and grain. Attempts by regional authorities to protect their populations from rampant shortages will worsen tbe current economic turmoil. At the same lime, the interdependence of the republics and localities and lhe
Knight Transportation*1
esi imates
i officul slis-jtii:
NOTE: January-Septemberompared win, January Sq*cmt>cr im
of the regional authorities in avoiding ceo-nomk chaos will continuergue foe restraint againil levering old relationships
Labor and Ethnic Strife
Labor and ethnic problems over the past year have been major contributors to tbe USSR's ccooornic turmoil Poor living and working conditions,shortages, and greater awareness of the workers of Iheir lot have led to failing worker motivation and fueled Ubor and ethnic unrest. Because theseare certain lo get worse in the year lo come, labor strife will continue, and faith in government solutions to labor problems will remain low.
The economy is most vulnerable to work stoppages in the transportation and energy sectors. The railroad system has virtually no slack capacity or substitutes Strikes in this sector would imrnediately damage the already fragile supply network, grinding other sectorsalt and probably leading Io Ibe use of the miliury to run ibe railroads. Similarly, an upsurge in unrestarge republic such as ihe Ukraine or in the Great Russian heartland would be especially damaging to the economy.
Economic Breakdown
A severe breakdown in lhe coordination between supply and demand is rare historically and hasesult of revolution, war. or disastrous economic policies. Under present circumstances,reakdown could be precipitated by massive popular unrest, regional autarky that destroys tradeadical economicor prolonged strikes of transport workers or workers In basic industries such as steel and energy.
Indicators ofreakdown would be.'A decline in GiSP of at leastercent.
Hyperinflation, massive bankruptcies and unemployment.
Paralysis of the distribution system for both Industrial and consumer goods.
Dramatic flight from the ruble that results in barter trade or payment in hard currency.
l Imbalance
Moscow has struct led unsuccessfully in lhe past two years to stew or reverse ibe growth of lhe excess purchasing power that has destabilized consumer markets. The key to reducing the dangerous backlog of excess purchasing power io the year ahead is to lower the budget deficit and proceed with price reform. Despite tbe stated intention of ibe Gorbachev reform program, however, it is doubtful that Moscow will move quickly In either area.ent in this problem will require further cuts in stale spending for investment and defense and reductions in socialparticularly ibe huge subsidies for food. Moscow still fears popular reaction to price increases, however,arge safety net it an integral part of the Gorbachev program. If the government continues to defer decisive action oo these issues, the threateal financial crisis will deepen considerably and further complicate reform efforts.
Market Reform
Tbe Gorbachev program approved by the Supreme Soviet in October endorses markettotion but fail* lo cut the bureaucracy immediately, thus nuking it easy for recalcitrants lo block progress (seebe plan also sets no specific goals or timetables forof stale assets. Although Gorbachevs advisers indicate thai this lack ofesignedeave tbe republic* free to work out the specifics oftbe program's reliance on state orders and administered prices for at least another year will sharply limit the number of enterprise* that could be denationalized. In addition, (he plan's measures to stabilize the economy arelarge increases in wholesale prices and continuation of subsidies lo consumers3 will spurand undercut deficit reduction.
Overall, Gorbachev's programeavily political document aimed al garnering republic support while retaining substantial power for the center. Itlower, more cautious approach Co movingarket than the Shaialinby the Russian and otherthereby probably runs less risk in the short term. The limitations of the Gorbachev program are such, however, that it is unlikely to deliver the promised economic gains and,esult, over (he longer term it will court greater political problems than the Shaialin Plan would have. As the program's deficiencies become apparent in tbe months ahead, the leadership is likely to coniidcr more radical measures loransitionarket under even more dire economic conditions. With this program or any other that may be adopted. it is impossible to overstate how difficult, painful, and contentious it will before large multinational state to moveommandarket economy.
Saw*-
Key Elements af Gorbachevs Market Reform Program
Center-republic powers
Stablliratlc
month conversion to market period in four stages butefinite schedule for each stage.
Both center and republics have budget and laxcenter taxationrepublic concurrence. Center retains control over key exports for someshares hard currency revenues with republics.
Reduce deficitdefense,enterpriseMaintain key consumer subsidies.deficit with bonds. Absorb ruble overhang with bond, consumer warrant tales; rales of tome other state assets; and throughin saving Interest rates.
reform
Foreign economic relations
wholesale prices according to government* schedule; enterpriseto use these prices. State orders and central distribution, not prices, to determine most
Moves gradually toward ruble ccnvertibility. Calls for increasedon foreignincludingforeign ownership of firms.
Scenarios
/ wouldn'tuess.
Izvestiya commentator's answer to US Embassy officer'! question in July about how he envisioned Ihe USSR in two to three years.
The interaction of political, ethnic, and ccooornic variables will determine tbe fate of the country over the next year: major deterioration in any one iPM
would severely strain the current system; breakdowns in all three would mean anarchy. Economicin particular, would makeew center'republic relationship ncit to impossible and markedly increase the likelihood of serious societal unrest.
A further diffosion of power from the center in all threeeconomic, andcertain. Gorbachev's authority will continue to
ei
Sooiol
although he will probably remain inear from now. Even under ihe most optimistic scenario. Ihe Soviet domestic crisis will be fir from resolved in one year's lime Tbe turmoil will continue regard lets of the policies pursued. Progress could be made in some areas. Bu! lhe risk of sudden major disconlinuiiies will remain, and it will lakeleastdecade orfind lasting solutions to the country's ills.
Given Ihe unpredictable nature of events in the volatile situation that prevails in tbe USSR today, we believe that four scenarios capture the range of possibilities during lhe nest year: deterioration short of anarchy; anarchy; military inlerventioei; ana" "light as tht end of thtee figure IV These scenarios arc analytical constructs describing overall directions the country could take over the nest year and arc not mutually exclusive. Some would be most likely to develop from one of the others We believe that the "deterioration short of anarchy" scenario, which develops out of current trends, is more likely than any of the other three. There is,ignificant potential for dramatic departures along ihe lines of (he "anarchy" or "military intervention" scenarios. Conditions are such lhat the odds strongly favor some form of these ihree "bad news" scenarios during ihe coming year.
Deterioration Short of Anarchy Current trends in the country and the enormous problems facing ii in every sphere make this the most likely scenario over the next year, in ourtelti-gence Community analysts give thislose to even probability. The economic, political, ethnic, and societal problems would continue lo get worse at an accelerating rate. This scenario would beby:
Failure to agree upon and implementar-reaching marketiraiion program; or the broad resistance of the population toourse
Failure of the center and the republics to move to new mutually acceptable political and economic relations.
Inability of political institutions to adapt lopolitics) realities and ineffectiveness of new democratically elected leaden in governing.ombination of the remaining powers of the oldparty and government machinery and the securityIbe limited reforms the regime implements would prevent tbe entire system from collapsing
Some positive trends could also occur under this scenario bui would not be likely to develop sufficiently to stem the country's rapidly declining fortunesthe next year. Gorbachev's ambivalence toward radical transformation of the system would end up delaying decisive action and diluting the effectiveness of step* his government takes. Tbe oon-Communist forces both in and out of government would not be able to form coalitionsationwide scale to give clear-cut direction. The complexities and social pain associated witharket reform plan in place would not even begin to restore confidence in the currency, reverse autarkic trends, or revitalizenot lo mention improve eeoncenieThe growing autonomy and self-confidence of non-Russians throughout the country would lead to escalating demands and make the achievementoluntary union iiuich more complicated.
This diffusion of power would lead during the next year to an increasing power vacuum. With thedeterioration of central control andweaknesses of the opposition, more power would be likely to move into the streets. Strike* andunrest would almost certainly grow, the more so the more rapidly the economy declines. Ethnic unrest and violence would also increase. The security services and the military would be able to manage as long a* protests remain scattered and uncoordinated.
The key determinant of bow long this scenario would persist is how long (be economy can keep from collapsing under (hese conditions. The longer this scenario prevailed, the greater the prospects would be for anarchy or military intervention.
b
.Wri-T
An accelerating deterioration is unlikely lo coniinue indefinitely and could, during the next year,ree fall ihat would resulteriod of anarchy. Ojrnmunity analysts generally believe Ihat Iheof this scenario isr less. Anarchy would be characterizedreakdown of thesystem, collapse of ceniral political iuihority, and widespread social upheaval.
Such an outcome could result from tbe interactionumber of developments. In fact, any onecouldascade Ihat eventually leadsf the system:
sharp acceleration of negative ccooornic trends already inautarky, severe food shortages this winter, numerous plant closings dueack of fuel and supplies.
Massive social protests or labor strikes that proved to be beyond the security and armed services' abilityontrol or resulted in large-scale civilian casualties.
The assassinationey leader, such asor Yel'tsin.
The complete breakdown of relations between Ihe center and theIhe Russian Republic.
The outbreak of sustained, widespread intercthnic violence--especially if directed against Russians.
There are several likely consequences ofcenario:
Gorbachev would nol politically survive such an upheaval.
The potential for severe food shortages andwould bc high.
Tbe union would disintegrate Most republics would break away from the center, potentially setting off civil wars and massive migrations.
There probably would be various political outcomes (authoritarian, military dominated, democratic) in different regions of what is now the USSR.
T^impactof their sudHen departure from iheTl&Swould vary accordingc-
curred via assasslnatlortgdeath by natural causes, orion undoubtedlyBut leaving aside the circumstances, what -
would their absence mean?
w
Gorbachevs departure twoeven ernewhile the traditionalists still re-tained considerable strength In the leadership and the democratic reforms had barely begunet off the ground, probably would have get . ack those reforms many years. His demisenext year would be certain to throw the ountry Into/lux. The CPSU has no obvious who could wield the Influencehev has. and the presidency would not be asost withouttrong leader. At the same time, traditionalists could see ampportunity toomeback. Theand market reforms have now takenife of their own. however, beyond the control of even asigure as Gorbachev. They transformation cf the Soviet system would take placeore uncertain atmosphere in the Immediate aftermath of Gorbachevs departure^-bul he Is no longer "the Indispensablet'.*
and no one the stature toXver the
Yeltsin has become the unofficiol head of the
democratic reform
In the movement
challenge Gorbachev. HI
major setback to the yedr'hut probably not Vongeherm. There art
jemocratic-
opular appeal bu'imave other strengti
that over time might enable them to play a
Military Intervention
Community analysts believe that the prospect* for military intervention in politics are roughly the tame as thoser less. Besides Gorbachev's apparent extreme reluctance to useforce to deal with the country's problems, most Soviet leaders probably believe theretrong danger that military intervention could accelerate the trend toward chaos and lead to the outbreak of virtual civil war. Problems in society, moreover, haveebilitating effect upon Ihe military, making itless suitable and reliable for use in putting down social unrest or enforcing unpopulardirectives.
Even so. under conditions of continuing Oct cn oration, the likelihood of ihe military's becoming morein internal politics will grow as the leadership becomes more dependent on the Armed Forces and security services to maintain control. The traditional Russian desire for order could evenerception of tbe military among elements of the population as the key to national salvationime of growing chaos. Many senior military leaders share this view of the Armed Forces as (he conservator of the Soviet state. The chances for mtliiary intervention would increase markedlycenario where lhe country was on lhe verge of. ortale of anarchy.
Military intervention could lake severaltliiary coup against the constitutional order, rogue activity by individual commanders, or' martial law ordered by Gorbachev. Of these. Community analysisoup -either ihe military acting alone or in conjunction with the security services and CPSUbe lhe least likely variant- Such an attempt would have to overcome numerous obstacles, including Ibe difficulty of secretly coordinating .'he activities of the many units requireduccessful putsch, the increasing political polarization of Ihc Armed Forces, the military leadership's professional inhibitions againstrastic Hep, and tbe fear of large-scale resistance by Soviet society.
military districtof Moscow and possibly at the request of besieged regionalorder bis forces to restore control locally. Whether troops would obey under these conditions would depend greatly on locallacking clear direction and coordination, such independent military actions probably would not succeed for very long, except perhapsituation of countrywide anarchy.
We believe that lhe most likely variant of military iniervenlion would be one in which Ihe centralin Moscow, believing it was losing all control of events and wanting lo stabilize the situation, called on the military to impose martial law in selected areas and enforce government directives in the name of salvaging reform. Such an effort probably would be limited to Russiaew other keyhe High Command would try to execute such orders, seeing this as it* duty to the stale. If the conditions are severe enough, such military intervention mighl be welcomed by Ibe local population and could stabilize the situation temporarily. Unless accompaniedrogram offering solutions to lhe country's political, ethnic and economic crises, however, the benefits fromtep would be transitory and probably counterproductive in the long run.
-Light a( the End of the TurtneT
The prospects that progress toward the creationew system over the next year could outpace Ihe breakdown of the old are alsor less, in our view. This scenario would develop out of current pressureluralistic political system, self-determination, and marketization. Such (rends, while not ending the societal turmoil, might gather suflt-cient steam to improve prospects for long-term social stability. Economic hardship would increasearket economy began and enormous difficulties inew politcal order would lay ahead,sychological corner would be turned to give the population some hoperighter future.
slightly more probable, in our view, would be independent action by local military units in the face of widespread violence thai threatens or causes the collapse of civil government. In such an event, a
/
I"
fi.mrwt-
order for ihii scenario to play out, there would have to be substantial progress toward:
ew set of relationships that would allow the republics to deal constructively with each other, the center, and the outside world.
The fillinc of the political power vacuum by new political institutions and patties. Key politicalwould need to work together constructively.
Establishing new economic relations based on the market.
Changing the mood of the Soviet population from one of fear of impending disaster to one of hope. Withouthange in the psychology of the population,successful transition to the market and democracy would be almost impossible.
The economy would also haveecline so precipitous as to cause unmanageable social unrest. Progress toward market reform and republicwill be difficult enough to achieve with the cenain dropoff in economicramatically shrinking economic pie would make unilateral steps by Ihe republicsssert (heir economicmore likely. I( would also increase Ihe prospects for widespread consumer and labor unreal. If not effectively managed, such developments could break any government.
Implication* for the United Stales
Whichever scenario prevails, the USSR during the neat year wilt remain an inward-looking, weakened gianteclining ability to maintain its roleuperpower. The domestic crisis will continue loany Soviet leadcix and prompt them to seek,inimum, to avoid confrontation wilh the West But the particular foreign policies they pursue could vary significantly depending on lhe scenario.
Under ihc "deterioration short of collapse" or "light al the end of Ihe tunnel" scenarios, Moscow's West-cm orientation probably would be reflected inpossibly greater, Soviet willingnessange of international issues. The Soviets would belikely lo continue
Deepening lhe growing economic and politicalwilh the Uniled Slates. Western Europe, and,esser extent. Japan
Negotiating ongoing and new arms control agreements.
Cooperating iaew European security order.
Reducing military and economic commitments in (he Third World and expanding cooperation with the Uniled Stales there.1
In these scenarios. Soviet as well as republic interest in Western economic involvemeni would continue to expand rapidly. Tbe liberalization of laws on joint ventures, property ownership, and personal en tic pen-curs hip create improved conditions for WesternHowever, uncertainties over prospects for market reform, the role of the central versus the republic governments in such areas as banking and foreign trade, and the ongoing turmoil in Soviet society will make significantiskyfor Western firms and make it unlikely that many will commit much to lhe effort.
The central and republic leaden abo appear not to have thought through what forms of Western aid or invesimeni ihey would like, lhe scale of assistance, or lhe liming. Proposals rangemodern Marshallo Soviet inclusion in international financial organizations, to technical assistance for marketiza-lion. The USSR face* serious structural and societal obstacles, however, that would dilute the impact of most forms of foreign aid except for technicalRecenl experience ha* shown thai the country's iransportatiori and distribution networks are ill equipped lo move large quantities of importsWide-scale corruption and black-markeieeringdiminish ihc system's capabilities lo get goods to their destinations. If Moscow moves decisively toward
' Tfcocin beon* Nay la iht tetacemaa. nicl.&mrr thttmal SermHySirmrryit ia# fau-CoM-Wai
a market economy. Soviet leaden will press tne West and Japan even harder for assistance to cushion tbe transition.
Internal political developments may also pushto conclude agreements with the West as quickly as possible. Assertions of autonomy by republics in the areas of economics and defense will increasingly challenge his authority to speak on behalf of the USSR. Ihe diffusion of power is bringing new actonbe scene who will attempt to develop their own relations with Western states, especially in tbesphere Special requests for consultations,assistance, emergency aid. and trade fromgovernments are likely to increase. Unless political conflict over who owns resources and controls foreign trade is resolved, both US governmental and private business relations with the USSR and iu republics will be complicated. Those direct Western contacts with the republics disapproved of by Moscow wauld be perceived as interference and could result in steps by the central government to block Western assistance to republics and localities
An "anarchy" scenario would crrate precariousfor relations with the West and would present the United Sutes wilh some difficult choices Various factions would declare independence orentral government and push for Western recognition andmilitary aid. Each Western government would be faced with lhe dilemma of which factions to deal with and support. If the situation evolved into civil wan. the fighting could spill over into neighboring countries. Eastern Europe and Western countries would be inundated withand there would be enormous uncertainties over who was in control of the Soviet military's nuclear weapons.
Under conditions ofoherent Sovietpolicy would be highly unlikely, and Soviet ability to conclude ongoing arms control negotiations, implement accords already reached, and carry out troop withdrawals from Eastern Europe would be
undercut. Troop withdrawals from Germany, forcould be delayed or stymied by transport disruptions or by wholesale defections of Soviet troops eager to escape the turmoil awaiting them in the USSR.
military intervention"ilitary-dominaied regime wouldess conceuionary approach than Gorbachev's on foreign policy issues andougher line on arms control issues because of the military's current misgivings about CFE, START, and the changes in Eastern Europe. Moreover,egime probably would diverge significantly from current policy on Jewish emigration and be less inclined to support the presence of US military forces in the Persian Gulf region. Such policy shifts could undermine tbe entire panoply of Soviet political, economic, and military lies to theilitary regime, however, would be tooold the USSR together toostile military posture toward lhe West, although further shifls in resources away from the defense sector could be halted.egime would be unable to restore Soviet influence in Eastern Europe but would be likely loougher line on economic issues and would make East-Wesi cooperalon in the region more difficult.
in
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Annex A
Emerging Democratic Leaders
Vjactinia' Saosiakosskly
A member at* tbe Coordinating Council of the Democratic Platform. Sbosukow kiy advocates creatingpost-Communist parliamentary party thai will cooperate with democratic forces both within and outside tbe CPSU. Sbostakovskiy an-nounccd ath CPSU Congress in July that the Democratic Platform was withdrawing from the CPSU toew party, and shortly thereafter was fired from his post as rector of the Moscow Higher Party School,f)
Anatoliy Sobchak
A legal scholar and radical reformer, Sobchak was elected chairman of the Leningrad city council in May. Sobchak may have first met Gorbachev in the
, when he practiced law in the President's home region of Stavropol.
Sobchak is an outspoken critic of Premier Ryzbkov and his ideas on economic reform.esigned from tbe Communiit Party in July. He ii currently
cooperating with Ycl'tain. but policy and ego clashes probably will occur in the
coming year.c)
Gavrtil
Popov, who resigned from the Communist Party in July, has long been one of the USSR's most outspoken economists. Since becoming chairman of Moscow's city council in April, be has energetically worked to implement radical market reforms in tbe cityas been called shy but has also been accused of having an authoritarian management style. As mayor. Popov has cooperated with Moscow party boss Yuriyoderate reformer, andey adviser to Yel'tsin. N
Nikolay Traikin
Travkinadical reformer who favors immediate privatization of Soviet state enterprises and rapid legalization of privateember of both the RSFSR and USSR Supreme Soviets. Travkin advises Yel'tsin. Travkin, who left the CPSU in March, was elected chairman of the Democratic Party of Russia at its founding conference in May (not to be confused with broader "Democratic Russia" movement, of which Travkin isravkinc NF)
Annex B
Emerging Traditionalist Leaders
Y'cniamia Yarin
Yarin has emerged as an energetic, popular, and effective right-wing leader wiihin the USSR Supreme Soviet and now abo sits on tbe Presidential Council. Influential among tbe working clasself-avowed Russian nationalist, be opposes market-oriented reforms such at cooperatives and has called for price freezes on food and consumer goods. Yarin, SO. is cochairman of the United Russian Workers Front, which opposes pcrestroyka as harmful to workers' interests,i)
haa Poloilto*
poiozkovoderate traditionalist who nonetheless supports tome important aspects of Gorbachev's reform program. FJected first secretary of the Russian Republic Communist Party in June, he is an old acquaintance of Gorbachev- from their days as party officials in neighboring regions. Poiozkov has been reviled by the reformist intelligentsia and has been the objcei of an ongoing media diatribe.asesire to cooperate with Yel'tsin but has had virtually no influence over the program being put forward by Yel'tsin and the Russian Supreme Soviet. Conflicts between the two men arc likely over the coming year. Although his formal position appear*akeajor player, divisions within tbe new Russian Communist Party and tbe fact that tbe program of Ihe party's traditionalist majority rs out of touch with trends in tbe country, are already limiting his influence and relevance.)
-Sacral.
Original document.
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