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CIA HISTORICAL REVIEW PROGRAM RELEASE IN FULL
SIGNIFICANCE OF THE COUNCIL OF ECONOMIC MUTUAL ASSISTANCE
CENTRAL INTELLIGENCE AGENCY
mSSKMLNATION NOTICE
I. This copy of this publication is for thc information and use of the recipient designated on the front cover and of individuals under thc jurisdiction of thc recipient's office who require the Information for the performance of their official duties. Further dissemination elsewhere In the department to other offices which require thefor the performance of official duties may be authorized by the following:
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of Intelligence, USAF, for tbc Department of the Air Force
eputy Director for Intelligence, Joint Staff, for the Joint Staff
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his copy may be either retained or destroyed by burning in accordance with applicable security regulations, or returned to the Central Intelligence Agency by arrangement with the Office of Collection and Dissemination, CIA.
of Security and Intelligence, AEC, for thc Atomic Energy
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SIGNIFICANCE OF THE COUNCIL OF ECONOMIC MUTUAL ASSISTANCE
SUMMARY
The lormaUon of thc Council ol Economic Mutual Assistance (CEMA)urther step toward the ultimate Integration of the satellite economics by thc Soviet Union.acade ofetween the members, necessitated by the strong nationalism of the individual Eastern European countries, thc Kremlin will utilize the Council to coordinate economic plans for the entire Orbit to conform to theof thc Soviet Union. Future industrialization in the satellites will undoubtedly no longer be based on national lines, but on considerations of Soviet strategy and location of natural resources. As satellite economies become increasingly specialized, individual economic dependence on the Soviet Union will tend to increase, economic boundaries will become blurred, and tbe ability of any satellite to free Itself from thc Kremlin influence will diminish still further.
Supplementing its goal of coordinating orbit-wide industrial planning through the Council, the Kremlin will probably use the organization to establish closerover orbit trade by meansruble clearingeanwhilepropaganda. In order to counter the growing economic stabilization ofEurope and to placate satellite nationalism, will portray the Council to the satellite peoples as an organization toeans of raising their low standard of living through "mutual cooperation.*'
The Council is likely to constitute an increasingly useful Instrument for the extension and coordination of Soviet economic control over the satellite nations.
Note: The InteUlgence oreanizaUons of the Departments ol State. Army. Navy, and Lhe Air Force have concurred In Uils report. It ls based on Information available to CIA as ol
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SECRET
SIGNIFICANCE OF THE COUNCIL OF ECONOMIC MUTUAL ASSISTANCE L nd Aims.
On9 Moscow announced the formation ol the Council of Economic Mutual Assistance. Original members were Uie USSR, Poland, Czechoslovakia,Hungary, and Bulgaria, with Albania admitted later. Its announced aimshe exchange of experience in thc economiche rendering of mutual technical assistance;he rendering of reciprocal assistance in regard to raw materials, foodstuffs, machinery, and equipment. It will meet periodically, In Uie capitals of the signatory countries, in turn, under the chairmanship of theof the host nation. According to thc public announcement Uie Council will make its decisions only with the consent of thc country concerned. Membership is open to other European countries which subscribe to thc principles of the organization, and have thc desire to participate in broad economic cooperation with the member nations.
Accordingeported secret protocol of the agreement forrning the CEMA, it will act to supervise Uie consolidation and development of the Industries and natural resources In the member countries so that they will no longer be competitive. Member countries are required to submit to Uie Council detailed monthly reports on their economies.0 all economic planning In thc Orbit Is to come under the direct supervision of theermanent Secretariat General will be located in Moscow to serve as the Executive Body. This Secretariat, under strict Kremlin direction, will assume complete authority over all CEMA activities. Furthermore, the decisions of the Council arc, according to the same report, to be binding on themembers, and the organization has the right to send inspectors to ascertain compliance with its directives.
2, Neeu ron Soviet Economic Action in Eastern Europe.
The formation of the CEMAurther move toward implementing Soviet long-range plans for the complete economic integration of Eastern Europe. Thc growing stability of Western Europe under the Marshall Plan and the concurrent difficulties of Uie satellite economies have forced the Kremlin to take acUon to preserve the important segment of Soviet economic potential represented by the Satellites. Thc USSR,revented its puppets from Joining thc European Recoverybut liad little economic aid to offerubstitute. Furthermore, the USSR was probably none too anxious to see rapid postwar economic stabilization in Eastern Europe until Soviet control over the region had been assured.esult, with their economies wrecked by Uie war and further depleted by Soviet exploitation, theof Eastern Europe have, from the Moscow viewpoint,oint of diminish, ing economic returns. Now, with effective opposition submerged or destroyed, the
SECBBT
USSR can attempt to revitalize thc economy of the region to serve its own ends, and in its own fashion In the early stages of Uiis program, thc CEMA canseful purpose-Many of the announced provisions of the plan Slave already been Implemented, to some extent, through the system of bilateral agreements previously entered into by thc various governments of the Soviet orbit. Under these agreements provision has already been made for the extensive exchange of technical and economic assistance and of raw materials, foodstuffs, machinery, and equipment. In addition, thc Kremlin exercises extensive control over satellite economies by such means as direction of trade policies, economic planning, and joint ownership of enterprises. The New Council, however, will probably serve better to integrate the economic effort of the area, and lo insure that the exchanges more effectively contribute to long-range Moscow plans. Moreover, under the facade ol "mutuality" andhc future mlensincation of this process can be accomplished and Soviet plans can be better concealed.
or Coordinated Oriut Industhiauzatton.
Because of the nationalism prevalent in Eastern Europe, effective Industrialhas been absent, even under the postwar puppet Communist regimes. By subordinating the individual satellite economies to Soviet direction, and bya more dominant role in making future plans, the Kremlin, acting through thc medium of the Council, will eventually bring about more effective industrialand thus Increase the Eastern European economic potential. With the current shortage of Industrial goods and skilled technicians In the Soviet orbit, coupled with the announced Soviet dptcrmlnation to raise its economic potential beyond that of the West ln the shortest possible lime, thc desire for rationally planned Industrialization ls understandable.
Moreover, the Soviet goal of orbit-wide industrial specialization will serve the further purpose of rendering the individual satellites more economically dependent on the USSR. Since plans for industrialization will be based primarily onof Soviet strategy and location of natural resources, instead of on national self-sufficiency, lhe individual satellites will lose all semblance of economic independence.
Council aa an Instrument fobRuble Clkaiung System."
Formation of thc CEMA could facilitate the USSR's establishmentruble clearingentrally controlling thc foreign trade of the entire Soviet orbit. Through its domination of the Council, the Kremlin would exercise thLi controlneedlessly Intensifying the nationalistic resentment already existent throughout the satellites.ystem would be designedommon pool of foreign exchange and gold reserves permitting more efficient utilization of such assets under Sovietrovide for an improved accounting of balance of payments among thc orbitermit more effective Kremlin control over the orbit's foreign trade;nhance the prestige of the ruble by substituting it for thenit of accounting ln the inlra-sateUilc trade agreements. Evi-
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denes of this last trend is already available in9 Soviet trade agreements with Poland and Rumania.
On thc other hand, in spite of persistent rumors, it is considered improbable that the USSR will attempt, in thc immediate future, to use thc Councilehicle for the creation of an internationally acceptable ruble. It is extremely doubtful that the Kremlin will permit the exposure of the ruble to the pressures and manipulations of the international market, in view of the constant Soviet desire to maintain absolute control over all phases of Soviet foreign trade.
Councilrop to the East German Economy.
Recent developments point to the possible future participation of the Soviet Zone of Germanyember of the Council. In order to counterbalance the effects of the Western blockade and the relative Improvement of economic conditions in thc Western zones, the Kremlin must bolster the sagging economy of eastern Germany. Because of the general poverty of its economy and its economic commitments, the USSR cannot provide effective economic assistance to this key area withoutcontributions from neighboring Czechoslovakia and Poland, whose populations, even among the Communists, still retain an inherent fear and distrust of theThe inclusion of eastern Germany in the Council would help to overcome this hostility, and would afford the Soviets Increased opportunity to aid the ailing German economy.
Council's Propaganda Value.
Finally, while thc material benefits to the USSR derived from thc formation of CEMA will not be apparent until its coordinating and planning functions take effect, the organization provides the Kremlinotent propaganda weapon. Soviet spokesmen are contending that the Council will afford higher living standards to the satellite peoples. They depict the Council as the "democratic" reply to theERP.
of the Council's Role.
As an instrument for tightening and coordinating thc Kremlin's economic control over Its Eastern European empire, the Council is likely to prove generally successful, and its importance and effectiveness may be expected to increase in the future. The Kremlin has in the Council an organization for more efficiently exploiting thcpossibilities of the Orbit for ultimate Soviet advantage. In order to obtain maximum benefits from the orbit economies, however, the USSR must provideraw materials and equipment which the satellites cannot obtain from other sources. With the USSR unable to obtain from the West the industrial equipment with which rapidly to expand its economic potential, it must utilize the highly important satellite facilities to the utmost. The USSR, moreover, has already attempted to obtain scarce materials from the West, through the satellites. For such operations the Council should prove of great value to the Soviet Union.
SIX'KET
Original document.
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