Created: 9/1/1989

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Key Judgments

The crisis, precipitated b> long-simmering problems and Gorbachev's policies to address them. will continue over the neat two years and beyond and could threaten the system's viability

Ethnic problems arc endemic conflict between the center and region* will increase as will mierethnic stnfe. and the regime can at best hope to manage and cope with ihcse problems, net resolve them.

lls arc deep'y rooted intem. and efforts io reform it will be slowed b> (heiven to stabilizing the

At the same lime change* in ihe Soviet leadership during the last year have made Gorbachev's positionecure over the neat two years andore radical approach to addressing the nations daunting problems We believe:

power has been tigmncaitly enhanced *uh the weakening of the leadership's orthodoA wing and the developmentecond power base in the legislature.

The coming local and republic legislative elections and the party congress next October will probably further undermine the role of the party apparatus, increase the power of the legislature in decisionmaking, ande facto multiparty sysiem to some republic*.

stringentincluding some retail price increasesomestic currencylikely to be imposed as pan of the current economic stabilization program. Although the need to stabilize the economy has slowed the economic reform effort, we expect to sec the introductionumber of controversiala redefinition of propertyew taxation system, and antitrustare designed to enlarge the role of the free market and private enterprise.

pursue this course and arrest the growing fear of anarchy tn the country. Gorbachev wjl! try to rein in somewhat the now freewheeling Soviet press and be tougher in denning the boundaries of the political and economic autonomy for the country's minority nationalities; he already has and will continue to use repressiveecessary to control communal vjoler.ee or prevent secession


Approved for Reieas*

In view of ibe continuing turmoil, whether Gorbachev caneformat course with some tactical retrenchment is uncertain and open to considerable debate. Theears will undoubtedly be one of the most tumuhaous periods in Soviet history

Tangible benefits from peresiroyka will be relative:*although intangibles (greater freedom and religious| be mereOverly ambitious targets for the production orconscmer goods are unlikely to be met. Labor strikes are certain The enhanced rote of thewill make needed austerity measures more difficult to pursue and likely compromises will reduce economicn 1

Under these conditions, several scenarios are in the realm of possibility, but two are considered to be much more likely than the others. Most Community analysts hold the viewontinuation and initnsificalion of iht current course is most likely and believe that, despite the obvious difficulties, the turmoil will be manageable without the need for repressive measures so pervasive that the reform process is derailed

Theii3ixn of the populace along wuh the expanding authority of the legislature are changing the system, giving politicalroader and deeper base, and making it much more difficult and costly to turr. back the dock

Although eihnic assertiveness will continue and Baltic peoplestrive for self-determination, the drive for secession will probably be blunted in this period by the regime's more sophisticated use of concessions and warnings and the desire of Baltic leaders lo negotiate rather than confront.

As difficult as the economic situation will be. the regime probably can prevent the supplies of food and consumer goods ftom declining to the point of provoking large-scale unrest. IflVPJ

ess likely scenario that all acceptossibility, the ongoing turmoil will get only worse and lead the regime, with or without Gorbachev, ro use massive force to hold ihe country logtiher and save ihe regime:

Democratization will accelerate system fragmentation and make it impossible to take necessary austerity and economic reform measures

An exacerbation of supplyan upsurge in strike activity, transportation bottlenecks, cr severeincrease shortages and leadocial upheaval.

void confrontation, the interests of thec peoples and Moscow arc bound to clasheading lo much harsher measures by the center to regain control

Events in Eastern Europe are certainole in determining which scenario che LSSR follows in thewo years. As long as ihe transformations tn Eastern Europe do not spiral out of control. they willthe trend toward radical reform in the Soviet Union. In the unlikel> event that Moscow deems it necessary to use Soviet troops to restore order and present the disintegration of the Warsaw Pact, pewimyka in the USSR wouid beerious, if not fatal* blow

Either scenario points toward the continuation of current foreign andolices, at !east forears of this Estimate. Gorbachev will still push hard for various arms control agreements Eastern Europe will continue to have heretofore un:hinkable lcc*a> to democratic. effectively changing the Warsaw Pact into moreolitical alliancee Evenrackdown occurred under Gorbachev or another leader, (he preoccupation with internal problems would be paramount, the ddire to ivotd increased tensions high, and the ciTonhift resources toward :onsumpl*onifferent regime would not. however, be as inclinedake major concessions tc ICtfteve various arms control agreementss accommodating to centrifugal trend* in Eastern Europe

Alternative View

The CI Vs Deputy Director for Intelligence believes that :hc Estimate doei not adequately capture the likely scope of change in the USSR over the next two year*

Assuming Gorbachev holds on to power and refrains from repression, the next two years are likely toignificant progression toward asystem, accompaniedigher degree of political instability, social upheaval, and intcrethmc conflict thar this Fatimate judges probable. In these circumstances, we believe thereignificant chance that Gorbachev, during the period of this Eatimalc, wi] progressively lose control of events. The personal political strength he has accumulated ishkely to erode, and his political position will be severely tested

The essence of the Soviet cruit is that neither the political system that Gorbachev is attempting to change rwr the emergent system he is fostering is likely to cope effectively with newly mobilised popular demands and the deepening economic crisis

Original document.

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