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Gorbachev's Domestic Gambles and Instability in the USSR (u)

Gorbachev's Domestic Gambles and Instability in the USSR (u)

An Intelliiience Awessmcnt

Gorbachev's Domestic Gamble* and Instability in the USSR (u)


Infinn-ationas oftpitmbtr IVSO wai itstd In this rtpcl.


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and other Soviet leaders are concerned about serious future breakdowns of public order in the USSR. This concern is well justified. The unrest thai has punctuated Gorbachev's rule isransient phenomenon. Conditions are likely io lead in Ihe foreseeable future to continuing crises and instability on an even largerthe form of mass demonstrations, strikes, violence, and perhaps even the localized emergence of parallel centers of power. This instability is most likelyegional basis, noioverlapping crisesinking together of centers of unrest could occur. |

Instability in ihe USSR is notroduct of glasnosi, and some of it is indeed aGorbachevreforms are taking hold. But Gorbachev's claim that instabilily otherwise merely reflects the surfacing of problems that were latent or repressed under Brezhnev is only partly true. The current budget deficit and consumption crisis is largely due to policies Gorbachev himself has pursuednd the prospects for further crises and expanded turmoil in the future are enhanced by key policy gambles he is taking now;

In the nationality arena, Gorbachev is gambling on defusing ethnic grievances andore consensual federative union through unrestrained dialogue, some concessions to local demands aimed at eliminating pastonstitutionalization of union/republic and ethnic group rights, and management of ethnic conflictubstantial degree through the newly democratized Soviets.

In the economic arena, Gorbachev is gambling that, by putting marked-zation on hold through the postponement of price reform, and byhort-term "stabilization" program, he can avoidwith the public and reengage in serious economic reform without steep costsater date.

In the political arena, Gorbachev is gambling that, by transforming the Communist Party from an instrument of universal political, social, and economic managementrain trust and authoritative steering organ, while empowering popularly elected Soviets, he canore effective mechanism for integrating Soviet society and handling social tensions




has no easy choices, and other approaches would not necessarily be safer or more successful. But these gambles, understandable and even desirableemocratic standpoint, arc based on questionable premises and wishful thinking:

The aspirations of many non-Russians will never be satisfied within the framework of maximum rights the Soviet leadership could grant union republics or so-called autonomous ethnic formations within national republics while stilltrong federative USSR. Allowing these people freedom to protest without being able to redress their basic grievancesecipe for escalating crises.

Because the deficit reduction plan is likely to fall far short of plannedand because it is unlikely that supply can catch up with consumer "needs"rice-induced change on the demand side,emergency financial "stabilization" program more likely than not will fail. In the meantime, circumstances for introducing markeiizaiion of the economy will have become even less propitious than they were when this program was introduced, setting the stage for continued corTuplion. protracted economic crisis, and retreat to the old "command-edict" methods.

Gorbachev's attempt to reform the Communist Party is basedisionary notion of what it could become, and is in practice undermining its ability to integrate Soviet society before new political institutions arc capable of coping with mounting popular demands unleashed by glasnost and failing economic performance.

As Gorbachev's various crilics correctly contend, his gambles are likely to generate instability over both the near and the longer tcrm.J

The odds are high lhat labor unrest or ethnic strifeeven within the next sixstrong pressures within ihe Soviet leadership to crack down much harder than il has to date. Soviet leadersroad range of instrumentalities they can employ to dampen instability, ranging from stronger threats, io new restrictions on human rights, to police intimidation, to imposition of martial law. Wc have evidence in at least one case of sharp disagreement within the Politburo over the use of violence. Gorbachev has sought to avoid widespread use of

physical force, probably calculating that the fallout from repression would endanger his entire program of peresiroyka as well as his foreign policy, while perhaps provoking more serious disorders that could leadoss of control. Almost certainly he would be willing to escalate coercionto maintain order and isolate nationalist or others be threaicned to do io his report on nationality policy lo the Central Committee plenum onetertain point, repression would mean abandonment by Gorbachev of his naturaland his entire political program. There is some evidence lhat he might chooseesign rather than assume responsibilityrackdownajor imposition of martial law. Alternatively, ihe imposition

harsh measures could be associatedoup d'eiai or legal removal


Provided he manages to hold onto power, lwo outcomes of Gorbachev'spossible, depending on how successfully ihe economy is markeiized.scenarios, Gorbachev's retention of power depends upon avoidancepolarization of political forces and progress inof political integration. This process would be reflected inof the political order, ihe emergence of some formcompetition,oosening of ihe Soviet multinationalpoliitcal reform were complemented by effective financialmarketizaiion, there might be high instability in Ihe near leimourse could be set towardoears)equilibrium. Without financial stabilization and marketizaiion, onthere would be rising instability in the near-to-medium lerm,

instability in the long term, and likely movement of the Soviet system

towardard-righi takeover, orrelative backwardness of the USSRiecemeal breakofT of the national republic^

Gorbachev's gambles and the centrifugal trends they have set in motion are already viewed with extreme alarm and anger by many members of thepolitical elite. But Gorbachev's major gains in Ihe Politburo al the9 plenum of the Central Committee demonslraled once again how difficult it is to translate conservative sentiment in the ranks into effective opposition to Gorbachev's rule at the lop. For the time being, his power looks secure. If,uccessful challenge were mounted against him over the nexl year or so, the most likely outcome would be a

traditionalist restoration that would attempt to "draw the line" inwith respect to democratization of the parly andin the media, the conduct of informal groups, and expressionwould accept the need for significantreduction in military spending and decentralization ofUnlessegime chose to move ahead vigorously with(nut impossible, but highly unlikely) it would obtain possiblethe near lerm but suffer high medium- to long-term instability,Otlomanization or upheaval from below. If Gorbachevrs overthrown in the near term, an attempt to turn the clock backmorethe reaction of increasingly well-entrenched

pluralisticcould thus also be nastier, possibly involving the armed forces and takingenophobic Russian nationalist coloration.


or not Gorbachev retains office, the United Slates for the foreseeable future willoviet leadership that faces endemic popular unrest and thai,egional basis at least, will have to employ emergency measures and increased use of force to retain domestic control. This instability is likely to preoccupy Moscow for some lime io comeregardless of othera return to ihe arsenal state economy that generaied the fundamental military threat lo the West in ihe period since Worldoscow's focus on internal order in the USSR is likely to accelerate the decay of Communist systems and growth of regional instability in Eastern Europe, pointing to the need for post-Yalta arrangements of some kind and confronting ihe United States with severe foreign policy and strategic challenges. Instability in the USSR will increase uncertainty in ihe West about proper policies to pursue loward Moscow, reflecting nervousness about Soviet developments butabout defense, and will strain domestic and Alliance decisionmaking.

Domestic policy successes or failures will be the paramountdeterminingetention of office, but foreignthat allow him to justify further cuts in military spendingbasiseduction in the external "threat" would give him more room

maneuver. Western actions that could be presented by his opponents as


attempts to "take advantage" of Soviet internal instability could hurt

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By putting economic reform on hold and pursuing an inadequate financial stabilization program, Gorbachev has brought Soviet internal policyateful crossroads, seriously reducing the chances that hisittake the path toward long-term stability. Over the short haul, there appears to be lack of competence among his advisers in the area of monetary and fiscalore fundamental weakness instrategy that will perpetuate instability is its hesitant approach to markeiizaiion and unwillingness to face up to the necessity of real privatization of ownership of capital stock and land. He and his advisers need help with economic theory. Reduction of instability over the long haul requires the steady extensionaw-based private sector J

Harsh repression of labor unrest or of food riots in Russian cities are certainly contingencies that couldesponse from USBut instability provoked by Gorbachev's gambles is likely to present its severest challenge to US policymakingrackdown in the ethnicnot in response to communal violence, but in the contextove by Moscow to intervene in Russian-native clashes or to repress the drive for greater national autonomy.rackdown is most likely in the Baltic region, bul could also come in the Caucasus, Moldavia,

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has said he wants toonstitutionally structured federative union, and movement towardystem would certainlyositive development from the US perspective. Gorbachev, however, is noi interested in greasing the skids for dissolution of the USSR, and this iswhat acceptance of Ihe more radical Baltic demands would imply. Unless Gorbachev is prepared topecial slatus for the Baltic republics, and is able to win necessary political support for such anirect and violent confrontation between Moscow and the Baltic peoples seems likely.B

Scope Note

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reportroad look at Gorbachev's domestic strategy and its implications for stability in Ihe USSR. Descriptive sections of the report take into account the full range of classified and open-source Information available, especially that dealing with Gorbachev's views, and arcwith more detailed analysis produced by the Directorate ofNo systematic attempt is made to source the various judgments which, in ihc projective sections of the report, areIhey are in all estimativea combination of extrapolation and logical|

The reportpeculative paper draftedenior analyst in the Office of Soviet Analysis.eriod of epochal change in the USSR, anticipating ihe futureazardous undertaking, and the issues dealt with in the report hardly invite unanimity of judgment. Although there are differences among analysts on specific issues, the report's conclusions do reflect our sense of the problems and challenges that confront Gorbachev's revolution and the general direction in which it is now




Domestic Gambles and Instability in the USSR (u)

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Despite the increasingly pessimistic tenor of recent assessments in Moscow of Gorbachev's popuUriiy and prospects, and turners of coups or miliuryhis major faint in tbe Politburo atlenum of the Centra) Committeeued once again crest tactical political skill in transforming attacks agatntl hit line into movement forward. For the time being.lent, the future of ptiestroyka would appear to be less dependent on political struggle in (he Politburo than on faltering regime

Many factors will affect this longer termA key one, however, is Gorbachev's broad sense of where he wants the Soviet Union to go and ho* he seek* iohe focus of this paper. Western analysts disagree over the client to which Gorbachevet of liable long-termLike Soviet observers, they arc also uncertain whether Gorbachev's stated objectives arc ahrays neoruaril)eal" objectives. The premise of this paper is thai, while his positions haver lime. Gorbachev docsairly coherent "vision-(butblueprint")of the future ihai is revealed in both classified and unclassifcd sources. The existence ofision docs not. of course, preclude tactical dissembling and ad hoc adjustment to circumstances.

Gorbachev has insisted that ihc domestic revolution that he has launched in the USSR- which involves radically dismantling an existing system of more or less stable, if stagnant and poorly performingthe only paih open. In fact,'lotion, and deriHskratiialilya were not and are not tbe only options open lo the Soviet Union: they represent the ultimate gamble on Gorbachev's partiberal, reformed Communion is possible and that ihe destabiliration brought by change isWhile denying his own fundamentalfor instability, Gorbachev has claimed that some measure of ilecessary corollary af reform. And. in fact, instability arising from certain types of change

undoubtedlyign of progress.atitosi has accelerated the delegitimization of the present system. It has irretrievably destroyed tbe regime's capacity to use MtnfcaVLeninist doctrine as an instrument of political control. And it has weakened popularto

Gorbachev is now embarkedet of related en"iMc* as he seeks to reform ethnic relations, the economy, and ihe general political system. These too arc producing crises, on which Gorbachev hopes to capilaliie lo provide further momentum for pcres-foyka. From these crises new instability will arise, with the key uueslions being: how serious will mani-festaiiont of this instability be. and what types of crackdownit likely lo inspire? To call Gorbachev's chokes |imbks. of course, does not imply that other approaches would necessarily be safer or morein each case, the trade-offs arc not easy J

Nationality Policy Gamble: Concessions Within

ramework for dissolution of the USSR is not on Gorbachev's agenda. Vet he docs seek solutions io ihc naiionnlity problem that enjoyare not simply imposed by Moscow, andlevels of repression that would wreck his overall policy of perestroyka. The vision he has articulated ever the past year orrecently atlenum of ibc Central Committee-encompasses:

Transition of the USSRe facto unitary empire tempered by toleration of local boss ruleore consensual union with real federalivc content,

Constitutional delimitation of Ihc functions of the Center and the national republics, with an increase in the authority allocated to the republics and some decentralization of operational powcis within the Communist Party.

of discriminatory and provocativeto the development of non-Ru^ian languages and cultures, whiletrategic role for Russian as the language ofinicrclhnic communication.

Equalization of the rights of all nations (including minor nationalities andalanced by equalization of Ihe rights of individuals regardless of thctr place of residence.

of the national republicsingle

unionwide economy, in which the "socialist market"

harmonizes the interests of the multiethnic whole

with the interests of the ethnic parts, but in which

there is also some devolution of power to the


The Soviet leadership confronts two quite different types of ethnic crises: the assertion of traditional nationalist demands for greater cultural, political, and economic autonomy from Ihe Center; and rageby economic and social grievances lhat finds an ouilei in communal violence. In principle, ihe first type of crisis can possibly be resolved, if not ihrough political dialogue (ihere are many forms of autonomy and evenhen at leastype of crackdown that does not Involve physical force; whereas the second type requiresontext, of course, that invites more sympathy on the pari of outside observers

In nationality policy, Gorbachev's gamble lies In the scope he has permitted for public expression of ethnic grievances and demands He hoi acquiescedushrooming of "informal" organizations in ihe non-Russian republics that, by any standard,iews He his tolerated substantial absorption of ethnic platforms by republic Communist Party organizations With some exceptions, he has sought to resolve nationality problems throughand has generally exercised restraint incommunal violence or piorutional ethnic demon-stratum. Indeed, there it tome evidence that Moscow may be willing to go very far lo meet Baltic demands, provided there is no deviation from the Center's line un foreign policy, defense policy,lesspolicy.

Gorbachev is evidently convinced that the potential exists for the emergenceroadly shared sense of genuine unionwide community among most Soviet citizens. Ethnic instability, he seems to believe, arises basically from past policy mistakes andThus, ethnic unresl can eventually beif these errors are corrected and legitimate ethnic grievances addressed. He has issued several stern warnings againstt the9 plenum of the Central Committee he observed

lhat "the timeto talk with ihe clear and

forcible language of law about conditions under which nationalist, chauvinist, and other extremistcan and should be banned and disbanded by theul he probably believes that attempts to "draw ihe line" through coercion are likely to trigger still higher levels of ethnic tension and play into the hands of opponents of perestroyka. And he seems to be counting heavily on the reconstituted political institutions of theihe empowered Su pi erne Soviet and localprovide athrough which ethnic interests and demands can be accommodated. He may hope looalition between reformers in Moscow andin the non-Russian republics. In (he Bailie area, he appears lo have gambled that prudence willover passion; that republic party leaders will be able to convince the population that Moscow will ultimately resort to force if compelled to do so. and that the republics shoulda reckless lurch towardwhat they now stand to gain.

However, the radicalizalion of ethnic demands and expansion of the mass popular base for ethnic asser-tivencss wc see occurring, as well as the entrenchment of communal violence, suggest how tenuous theare for Gorbachev's strategy. Lifting the lid on the nationalities has energized ami-Russianamong the titular nationalities after whom the republics are named, created great anxiety among the Russian settlers who constitute large fractions of the populalion in major cities in these republics, andath for cross-republic ethnic strife. It has also activated latent conflict between titular and small

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producedflow uf mOfenternal refugeesnd let ihe stageotentially sharp Russian backlash against"permissiveness" Ib al least one Case.it is possible that ihe republic pany organization may proclaim its independence of ihe CPSU. While security and economic intercut probablysome of the titular nationalities from seeking to secede from the L'SSR. these inhibitions my not apply io Baits. Bckwussians. and Ukrainians.PJ

Kconomic Reform Gambles

In the economic reform area. Gorbachev's vision postulates creationelf-regulating "socialistsystem in which central physical planning has been largely eliminated and enterprises makeessentially by responding to market forces. Decision cues are provided by prices set largely by supply and demand, and inputs are acquired through direct contracts and wholesale trade. In this system the stateoordinating role, sets the "overall normativend takes the lead inscience and technology, infrastructureenvironmental protection, establishmentinancial-banking-lax system, enactment of anlimono-poly measures, and institutionalization of the entire systemtructure of law. Operational control would pass from middle levels of the bureaucracy to the basic production unit, reflected inreakup of large economic conglomeratesransfer offrom the economic bureaucracy to production collectives (especially throughndf enterprise management, in whichcollectives elect their managers and oversee key production decisions. The "socialist" aspect of this postulated system would apparently consist of two features: retention and expansiontrong welfare stale component (Sweden is mentioned as an example tond continued public ownership of at least most Land and capital slock, although leasing and other arrangements would substantially modify the concept" J

Gorbachev's own policies,the steep reduction of revenues from state alcohol sales, the financing from the budget of the crash machine-building program, wage boosts for some categories of

workers, increased spending for social programs, and escalating fooda rapidly rising budgciary deficit and shortage of consumer goods sufficiently ominous to persuade himo agreestabilizaiion" strategy for the next several years. The main elements of this strategy are (a) postponement of retail and wholesale price reform; (b) the adoptionrash budget deficit reduction, resourceocal ion. and consumption program; and (c) continued pursuit of selected elements of structural reform. This change of course has brought Soviet domestic policyateful crossroads, pj

Postpoeemeat of Price Rrfora*

Gorbachev's ilatemenu throughtrongly favoring price reform make it abundantly clear he understands that full transition to an economy in which financial calculations cITcctivcly determine decisionmaking depends on price reform.he has publicly and repeatedly committedsince then to postpone retail price reform "two or threeo discuss il with the public before doing anything, and not lo change prices without public consent. In the absence of retail price reform, planned hikes in wholesale prices would require increased state subsidies that would add to the financial imbalance Moscow is fighting to bring under conirol, andhas also delayed these increases indefinitely. There is no mystery why he ha* agreed to this critical policy position: to proceed wiih price reform at this point would also haveifficult gamble.and hi* advisers were deterred by the prospect of hating to copeossibly violent popularto priceoped to buy social peace, and convinced themselves that conditions to move on prices would be more propitious later once financial "stabilization" had been achieved and hyperinflation averted, the monopoly factor dealt wiih. and otheren |

The costs of this gamble arc likely io be enormous. By largely postponing the establishment of theprerequisite for economically rationalthe gamble blocks workable decentralization, the introduction of genuine wholesale trade, and

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on financial Icveri- ihui effectively putiing markeiizaiion on hold irrespective of other important constraints. Failure to deal wilh wholesale pi ices will intensify Ihe problems und coils in Ihc future of currently under priced nonrenewable resourcesenergy andl will also build further irraiionalily into investment and the slock of fixed capital, imposing still higher economic and social costs downstream for corrective actions^ubsidies to agriculture will the have to rise |

On the rclail side, Gorbachev's talk about price reform has been an imitation lo Ihc population to increase hoarding of consumer goods. The longer retail price* arc frown, the more the pattern of consumer demand is distorted, as faulty signalsproducers and consumers. If food sales increase, so will food subsidies. Most important, delay may make ihe ultimate problem of dealing with retail prices that much more intractable, prices that might only have had to be doubled, lei us say,to be quadrupled. Meanwhile, theof rclail and wholesale price reform will expand corruption throughout the economy,an adverse effcci on popular morale and public tolerance for -' fl

The Crash Hudurt Deficit Reduction. Rrsoarc* Reallocation, and Consumption Program

In thehe average annual budget deficit7 billionhis figure rose7 billion rublesillionillionillionlarmed by the growing financial imbalance in the country, the Soviet leadership has approved anprogram to reduce expcnditBrcs on' defense, subsidies to unprofitable enterprises, administrative costs, and social programs, and to increase revenues from imports of consumer goods, turnover taxes on increased production of consumer goods, and social insurance payments. There isof financing the deficit, in part at least, through the sale of slate securities and bunds bearing an interest raleciccnt. The strategy has also

1 Stole ccniraLijed mxjlmtiU fors loJO percent Ictt lhan ihe laijetnd Ic* tome wsiori or heavy industry Ibe ledbClionbepercent. <U|

accelerated conversion of defense industry for civilian production,rash expansion of consumer goods production by all branches of industry, and reversed signals by accepting ihe recommendation to initiate increased imports of consumer goods.hope is thai he can "saturate" the consumer market, mop up some of the huge cash savings of the population, eliminate shortages, avert hyperinflation or "barlcri/ation" of the economy, head off popular unrest, and create equilibrium conditions under which it will be possible later to initiate full markeiizaiion.

Yet it is highly likely that deficit reduction will fall far short of planned targets. It will be hard to impose investment cuts on ministries and republics, and there isxpressed already through the Supremeblock delays in the implementation of 1 social programs. Inflation iiself will begin feeding rS back to raise the level of government spending. More-over, gains in projected revenues from turnover taxes are based on unrealisiically high targets for ihc production of consumer goods, and subsidies forand other consumer goods willajor drain on the budge

There arc other problems with the "stabilization" formula.rice-imposed change on the demand side, it is unrealistic to hone thai supply can catch up with consumerhe across-the-board campaignthrough the verymethods lhal Gorbachev says helikely to result in inferior products, high costs, and waste. Expansion of consumer-goods imports will impose still greater stress on Soviet hard currency reserves, force acceptance of higher levels of indebtedness, and defer imports for other sectors of the economy. Ai ihe same lime, fear of the economic and political consequencesigher hard currency debt, and recognition that imports would have io be far greater to substantially diminish the savingsre likely lo inhibitentral component of financial stabilization. On the investment side, radical, abrupt shifts in proportions historicallyignoring theof different economic









resources and thrown ihe loscisailspin. It is nut inconceivable ihal Ihe magnitude of cuts projected in heavy industry couldhain reaction of producer-good supply shortages, leading ioa spiraling downturn in production in the economy!

Selective Struetaral Reform

Gorbachev has by no meansdged that his decision on prices and macroeoimornic "stabilization" pals economic icform on hold. He talks as if he wishes tohead. At the9 plenum ol* the Central Coinmiltce he called attention to forthcoming discussion by the Supreme Soviet of draftlaws on ownership, land, leasing, republicrights, the local economy, self-management, and taxation And. in fact, there is momentum to press forward with implcmeniation of7 Law on Ihe Slate Enterprise and elements of reform that are preconditions of markttiration, such as expansion of enterprise rights in selling prices, wages, and output levels; pailial dctationing of industrial supplies; and reduction in the number of plan indicators. In the absence of rational prices and other essentialhowever, these steps have ihe perverse effect of promoting arbitrary' or rntnupolistic price increases rather than coat redaction, wasting "cheap" energy and raw materials, encouraging wage increases not matched by productivity gains, and motivatingto produce tbe wrong outputTheof some economic decision making authority from the Center to the republic and regional levels, which is also being conducted under the rubric of economican have some beneficial effects, but risks simply transferring "command" methods from the Slate Planning Commiltec to local bureaucrats and strengthening autarkic tendencies thai weaken overall market izal ion gVgSgSI

A Gorbachev initiative wiih serious long-termhas been the fostering of new forms ofand management of produciion units.believes that ihe establishment of proprietary interestasic key to economic rcvitalization and ihal this condition cannot be achieved under the present depersonalized stale ownership of ihe means of production. Thus he is pushing strongly forof the proposition that "various" forms of ownership are legitimate underet. at

ihe same lime, he has sharply attacked Western-style private ownership of the means of produciion.this withlthough he supports cooperatives, Ihe solution to this ideological dilemma, he emphasizes over and over,he leasing of capital stock and land io production collectives. He has in mind not just agriculture and services, but large chunks of industry. He clearly hopes lhat leasehold property "ownership" will engender proprietarycombat monopoly, and defeat bureaucraticofavoiding the supposed adverse social consequences of real privatization. In the not too distant future it is quite possible thai Gorbachev willig campaign to shift the economy to leaseholding. despite resistance to it by Yegor Ligachev and perhaps other members of the Politburo.|

The difficulty wiih Gorbachev's calculation is thai experience in both Eastern Europe and the West suggests thai leaseholding docs noi produce the same positive benefits as private ownership, although in certain limited situations the results may be useful. Leaseholding does noi provide the basis for creationrue capital market, with the sale and purchase of production assets. Thus market prices for capital and land cannot emerge. Prices for these resources would still have to be set by planners and could not reflect particular circumstances or changes in values over lime. Nor docs leaseholding creaie the same interest or empowerment of specific individuals to seek to increase the value of enterprise assets. On theit may well make required investment and structural rationalization decisions more difficult by encouraging leaseholders of state-owned propertyto "mine" theirthe ccono-my's production capacity over time.|

Possibly Gorbachev recognizes these problems and sees leaseholding as an ideologicallyonger term transition from collective to private ownership. Reporting! suggests, however, thai hecale private Ownership on ideological grounds and believes that leaseholdingorkablealternative. His attacks on private ownership


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been complemented by hedging in his defense of cooperatives. By nuking these politically convenient acoomrnodations lo ihe dominant colleciiviuof Soviet clilca and ihc population,imecich the absence of Icially regulated markets is spawning growing corruption throughout thesector of the economy. Gorbachev isstrong impulses that exist to reassert "administra-live" controls over ihe econom)

The collcctivist predicament carries over into the sphere of management. Gorbachev has vigorously supported workplace democratization, including the election of managers,eans of breakingto perestroyka within the bureaucracy and overcoming alienation and apathy among the work force. The principle of declivity of managers was codified in the Law on State Enierpriscs, adopted inn combination with collective leasehold-ing, however, workplace dernocraiizaiion wouldpotentially atbe selling ihe Soviet Union on ihc Yugoslav path. It will probablyinvestment by enterprises, encourage unjustified wage increases, make il harderroaden wage differentials, strengthen pressures to continueenterprises operatingoss, and promote inflation.!

Political Reform Gambles

through bureaus selected co-optativcly at all levels of ihe party, representatives of ihe system's key(ihe economic hierarchy, the Soviets, the security organs,the party's ownhave decided policy. In this system the parly bureaucracy- theitself routinely exercised the right to issue binding orders to officials in all other bureaucracies. It bas also controlled the process of personnel appointments to all leadership posts in all institutions, whether these posts are appointive or nominallyhrough Ihesystem. Below ihe central level, the key function actually performed by the party apparatus has been to implement rather lhan make or win converts for policy. Its most important rule in this respeci has been to cope with inconsistencies between enterprise production targets and available inputs caused by incoherent economic plans. (This is why top positions in the party apparatus, at least in the Russian Republic, have generally been staffed withhe real role of the army of "ideological" functionaries in the party has been not so much to argue ihe parly's position and build partyas to communicate what the party leadership's position is on various issues. The problem of party "authority" unlil recently was not parlicularlybecause there was no political compclitltion. few people were prepared to challenge the party line, and those who did were handledifferentKGB H

on the experience of earlier economic reform efforts, Gorbachev has argued that economic reform will fail unless it is underpinned by political reform.7 he has promoted political reform as the key to perestroyka. His aim is to replace theStalinist sysicm of political power wilh an entirely new structure lhat is less centralized, moremore openhe unrestricted flow of political ideas and information, more "constilutionalizcd" through fundamental law, and more protective of the citizen's civil liberties. The key changes are those affecting the demarcation of functions and power between the party apparatus and the popularly elected Soviets.

Gorbachev appears to believe that the party should continuentegrate the entire Soviet system Cfxt-form its vanguarde has an altogethervision, however, of how this function is to be performed. In his view, the party should abandon its dc facto cxcculivc and legislative activity. It should:

rulemaking power to the Soviets and other Slate or public organizations.

issuing binding orders to all other organizations.

dictation of personnel appointments through Ihe nomenklatura system.

iisclf from day-to-day involvement in the implementation of economic plans.

of the Communist Parly

In ihc existing Soviet system the Communist Parly has provided the central mechanism of politicalUnder its aegis, acting more or less collcgially





ihe same time, ihe pany should strengthen its "political" role by:

Servingrain irust at all levelsenerate appropriate macropoticies.

Winning authority for the party and its line by force uf persuasion in ihe emerging competitive political arena.

Influencing elections and personnel appointments in all institutions by cultivating and presenting the "best" candidates.

Incorporating the interests of all strata of the population ihrough broad external dialogue and internal pany democrat Ization.JJ

Gorbachev is, in fact, attempting to implement this model. He has weakened the Central Committee Secretariat and may be reaching policy decisions in an informal group outside the Politburo. He hasthe branch economic departments in theihe organizational base for day-to-day pany intervention in the economy. He has ordered party officials to exert influence through persuasion rather than command, lie has attacked ihe nomenklatura system as prone to error and the perpetuation of mediocrity, lie is urging party leaders at all levels not to wait for instructions from above but lo develop their own "actione is demanding that al! party officials emulate his own example and carry the case for perestroyka to the population through the mass media. He is promoting competitive elections within the party. And he is instigating personnel cuts in the party apparatusarge-scale turnover of pany cadres, to which he attaches great significance.

Essentially, Gorbachev's program implies theof the CPSU as it has existed and the creation of an organization that is new in its functions, structure, personnel, and relationships with other parts of the Soviet system. Through this transformation the party is to regain both the will and the legitimacy lo rule. Wereetamorphosis to succeed, it could in principle create an integrating vehicle compatible with democratized soviet* and other electivell would also clear away resistance in the party apparatus to peresiroyka.M

The odds against the desired transformation of the parly, nonetheless, are formidable. Exhonalionxert influence through persuasion is unlikely to give the party enough moral authority to compensate for loss of ihe operational power to issue orders and diciatc personnel appointments. It is questionable whether purging the party apparatus will increase its ability to operateompetitive politicalas much as Gorbachev seemsope. Pravda complained editorially in June thatonsiderable part of the party apparatus is in total disarray and is unable to find its bearings in ihe newnd it is difficult to identify, beyond presumed psychic tewards. what ihe payoffs are to be that will motivate party officials. Rather, the odds seem much higher ihal Gorbachev's strategy will simply undermine the real-life CPSU, weaken its ability lo bring ordertill nonmarkctized economy, increase uncertainly as to its role, further demoralize both cadres and rank-and-file members, and intensify Ihe already high level of anger of Ihe apparatus toward Gorbachev. |

Cmpo-vring Democratized1 Soviet* Gorbachev is banking heavily on the Soviets being ableimely and effective mannerill Ihe vacuum creaied by his ledefinilion of the partys role. What he seeksechanism thai enjoys legitimacy, is sensitive lo pressures from below, is able toconflicting popular interests and demands, is capable of controlling officialdom) and is nevertheless responsive at least in general terms to party guidance. Wiih the election of the new Congress of People's Deputies and formation of ihe Supreme Soviet, ihe first meeting of Ihe Congress in June and subsequent session of the Supreme Soviet, and the upcoming elections lo local Soviets in the fall, Gorbachev has launched Soviet politicsromising but perilous path.l

We should not exclude the possibility that this venture will eventually succeed. Much of the brief experience of the Congress and new Supreme

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emergenceew corps of middle-classthe frank discussion of formerly laboo topics, the role of deputies in helping io solve ihe miners' strikes, and the rejection of some nominees lo the Council ofgrounds for hope. But the politicizaiion of the Soviei populaiion, the urgency of public needs, and the radicalization of demands made by ihe rapidly growing number of "informal" groups will impose severe strains un Ihese newTolerance and compromise arc not yet part of the political culture uf cither ihe new Soviet electorate or the new deputies. Political competition in this arena, contrary to Gorbachev's calculations, may work against the establishment of market socialism. Conflicts generated over ethnic issues will behardhat workers" politics of unpredictablemay emerge. The new institutions currently lack most of ihe operational attributes of functioning democratic parliaments that help them to conduct business and deal with such pressures, and ihese can develop only with timc.|

Whether multiparty political competition will emerge as the new sovieis evolveritical issue. Wiih the formation of the "Interregional Group" of deputies, ihe collective action of Baltic deputies, and iheof "workers'rganized OppOiiiion has already arrived In Ihe Supreme Soviet. Some participants in these groups visualize the rapidof multiparty politics. And several groupsthe Supremeexample, the Christian Democratic Union, the Social Democraticthe Democratic Perestroyka Club, and iheethnicalready organizing as political parties, or plano so.|

It is conceivable ihat Gorbachev privately welcomes the prospeciive emergence of multiparty competitionong-term stabilizer of the USSR's new mass politics. In this scenario, he might hope simply to preserve the Communist Party's dc jure monopoly long enough to effect ihe transfer of real power from ihe CPSU to the Supreme Soviet, at which point traditionalists in the parly would be unable to prevent recognilionultiparty fait accompli. It is more likely, however,he told Hungarian leaders Nycrs and Grosz. inis prepared to accept multiparty politics in Hungary but does not want such

a system established in the USSR. Publicly, he has repeatedly criticized advocacy of mullipartyism in the SovietIhal this would multiply cleavages in an already "complex" society and, most important, would promote elhnic strife. In thishe would be aware that his invitationnformal groupsarticipate in parliamentary politics could lead to the formation of other parties, as Nikolay Ryzhkov and others have warned, but planned to maintain thereponderant role by somehow taming or co-opting the main opposition groups.|

In the meantime, as Ryzhkov has also observed, the creation of the new activist Supreme Soviei headed by Gorbachev introduces an clement of profoundin the distribution of power and authority between the CPSU Central Committee and Politburo, the Supreme Soviet, and the Council of Ministers at the very lOp of the Soviet system. When local elections arc held and empowered Soviets formed at all lower levels, (his ambiguity will spread throughout the system, potentially setting the stageeneralized "constiiutional" Crisis. Large numbers of partyare likely to be defeated in these elections. To the exlent that election by the populace to thesoviet is seen toecessary validationarty secretary's tenure of office, political reform will sharply hcighien anxiety and promote cleavage wiihin ihe party apparatus. Gorbachev probably hopes lo use the crisis resulting from elections to the Soviets to redefine formally, both constitutionally and ihrough revision of the party rules, the division of labor and respective powers of party, state, and government organs.H

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Implications Stability

Gorbachev's visioniberal Communist future seeks to reconcile satisfaction of ethnic demands with preservation of the Soviet multinational state,introduction of markelization withnd democratization with maintenance of theParly's "vanguardinimizinghas been central lo his tactics. His desire to avoid




confrontation wilh Ihc population andind "political" solutions to problems is reflected in his encouragement of politicization of ihc population and tolerance of social lurbulcncc; his readiness lohostility toward ihe Communisi Parly and the Soviel systemroduct simply of failure by ihe regime to eradicate pas!is propensity to ignore ideologicalis optimism about reaching the "correct" solutions io problems through rational calculaiion, dialogue, and compromise; and his disinclination lo use force Or administrativeijJJJJJJJJB

These qualities are reflected in Ihe gambles discussed in this paper, which in turn are generating major problems:

In the nationality arena, glasnost and Gorbachev's gamble on defusing cihnic grievances andore voluntary federative union through dialogue is activating passions on all sides,erious secessionist challenge, and fueling anbacklash.

In Ihe economic arena, Gorbachev's gamble on postponement of pricerash consumpiion program, and selective pursuit of certain structural changes has placed real markeiizaiion on hold, mortgaged its introductioninancial slabiliza-tion program thai is more likely than not to fail, possibly compromised ils eventual success with strictures against private economic activity, and sel the stage for conlinucd corruption and protracted economic crisis.

In the political arena. Gorbachev's gamble on re-consiiiuiing the Communist Parly along lines that have no parallel in single-parly (or multiparty) systems elsewhere is seriously weakening ihc central existing mechanism for societal integration in the USSR, while the gamble on insiiiuiing guided democracy through the soviet* is likely to impose large new strains on the regime sooner than il provides an effective means for dealing wilh ihcm.

Gorbachev has no easy options, and other eamWes would have produced other problems. Wherever those problems might have led, the set of problems Gorbachev has in Tact rosicred is likely to lead in the foreseeable future lo major instability in the USSR.

So far. neither ihc rioting, nor the communal violence, nor the demonstrations that have occurred in ihc non-Russian republics have compelled Gorbachev to resort to more lhan limited doses of armed repression. The must violent conflicts have largely not involved natives versus Russians. However, with ihe escalation of elhnic asscrtiveness generallyhe radical-izalion of Baltic demands, and the growth of Russian nationalist scniimcnt, the stage is being sel for major Russian/non-Russian conflict. Potentially, the most explosive near-term source of such combustion is the backlash of large numbers of Russians living in the borderlands lo native attempts to assure priority of thelanguage, residency requirements forpailicipaiion. and progress toward autonomy Of even independence. The fears now displayed among Russians in ihc Baltic republics and Moldavia could lead spontaneously to confrontations that wouldlarge-scale intervention by Moscow. But they also provide rerlile soil for provocation byopponents designed to force broad intervention lhat would undermine perestroyka. At some point, even in the absence of settlcr-insligaled conflict, native assertiveness is likely to precipitatewith the Center, however self-disciplined ihc non-Russians may be. One factor that could lead lolash might be Moscow's determination not io allow relaxation of controls in the Baltic republicsrecedent for the Ukraine. |

Gorbachev has sought to replace Brezhnev's tacit understanding with the populaiion. which essentiallyuaranteed minimum living standard and social security benefits in return for political passivity,ew "social contract" that would provide greater economic opportunity and politicalin exchange for harder work and less economic security. Bul his economic gamble is unlikely to generate ihe sustained growth in material rewards necessary to supporlransiiion. Al best, the policy willeteriorating situation; if il fails, the result could be hyperinflation and the emergencearter economy. And the policy still leaves ihc economylate of protracted vulnerability to at leasl three generators of an economic downturn thai

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would fiiTihci enhance ihe likelihood of street politics: the incoherent current blend of "plan" andhe possible chain reaction of producer-good supply shortages noted above;strike aciiviiy^^m

Gorbachev was able in July to deflect blame for the miners* strikes and turn them to his own immediate advantage, bul Only by graniing major concessions to ihc miners that will increase the deficit and may well encourage more groups to use ultimatum politics. jiajjijijjj^pBajj


towns, meeting wilh no resistance from the local party structures. Heady from their success, organizedarc spearheading formationass laborwhich mighi develop widespread support among workers who want the security of the old social contract as well as the improved quality of life perestroyka promises. |

Glasnost, the evaporation of fear of authority, and Gorbachev's attempt to mobilize popular pressure against bureaucratic vested interestswith consumer dissalisfaction and diffuseanger toward thelatent impulses and energized political moods at ihe base of Soviet society. The old "transmissionthe trade unions andthe "masses" with the regime have, in the new competitive environment, become increasinglyElections to ihe Congress of People's Deputies revealed how little confidence the party apparatus itself enjoys among ihc population at large.gamble on radically restructuring Sovielinstitutions is further weakening the oldthat repressed popular unhappiness.|

Opinion polls and abundant evidence from other sources suggest that ihc public's priority concern is improving the standard of living. To the extern that the new Supreme Soviet and local soviet* act as vehicles for absorbing mass unrest, ihey are likely lo press for welfare spending, wage increases, subsidies for unprofitable enterprises, delay of price reform, and other measures lhal will increase Ihe difficulty of moving toward effective markeiizaiion. In this sense, Ihe phasing in of political reform before economic reform may have severe long-term cost!

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But political competition encouraged by reform is giving voice to other concerns as well: about public order, crime, loss of control in the borderlands,destruction, erosion of traditional values, elite corruption, and profiteering by cooperatives. This volatile mixlurc of grievances could, under conditions of continuing consumer deprivation, lead to outbreaks of anarchic violence orocial base for attempts by political elites to reverse Gorbachev's policies.

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Political Outcomes

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Gorbachev's gamblerotracted transition to markeiizaiion, unless modified, is likely lo delay serious economic rcvitalization indefinitely and create conditions of chronic instability irrespective of Ihe destabilizing impact of cihnic conflict. Under these conditions, governing ihe Soviet Union will become progressively more difficult. Yet the fragmentation of political power currently under way will probably continue. Within the party, divisions now visible pilling natives against Russians within the republics, republic party organizations against other republic parly organizations and against ihc Ccnicr, RSFSR oblast party organizations against Ihe Centralapparatus, and liberal against traditionalist factions, will expand. And Gorbachev's personalwithin the party and among ihc populationarge will probably continue to decline, dcspiie his cMS'ISVrS political victory ai the September plenum of the nij Central Committee.

Some observers have speculated that anarchy will be ihe end resull of these developments. Thisighly unlikely outcome: if "anarchy" docs occur, il will simply mark ihc transition from one sci of political arrangements to another. Whal is likely is lhalwill force Ihc Soviet leadership to choose from an array of crackdown measures, ranging fromthreats, to new restrictions on freedom of speech and assembly, io bans on strikes, to personnel purges, lo exertion of economic pressures, to police or military intimidation, to deployment of larger and moresecurity forces, to declaration of states of emergency, lo imposition of martial law. Choices here






will hinge partly on how threatening to regimeconditions of instability arc judged to be, partly on how effective in suppressing disorder given types of crackdown are predicted to be, and partly on how counlerproduciivc the crackdown measures arc held to be in terms of frustrating attainment of other key objectives. |

The record suggests lhat Gorbachevigh tolerance for disorder, will seek as long as possible to find compromise solutions, and, when decisive action becomes necessary, will attempt to select measures at the lower end of the crackdowne seems to fear that bloodshed resultingrackdown would seriously exacerbate conflict situations; he probably has not been impressed by the efficacy of force applied in Central Asia and the Caucasus; and he must fear the consequences for pe'estroyka and his foreign policyroad and extended rcsori to armed might.

reporting icv advocated an immediate Crackdown on the striking miners using local police, the KGB. Ihe militia, and regular armed forces ifGorbachev successfully argued for negotiations.ate July conversation withleaders, Gorbachev reportedly stated thatmeasures" would have been required if his negotiations wiih the miners had failedj

A major escalation of repression, especially if it involved the imposition of martial law, could well pose the question of who should lead the I'SSR. Currently there is much speculation in Moscow about martial law. the acquisition by Gorbachev of unrestrained power, coups, and military takeovers. Gorbachev might be inclined toroad view of his prerogatives as head of stale, and perhaps evenlimited emergency powers in an effort to advance peresttoyka. He would be willing to escalate coercion somewhat to maintain order and isolate nationalist or othert the9 plenum of the Central Committee he condemned "extremist rallies lhat provoke Intcrethnic clashes and terrorize and intimidate people of othernd

declared thathreat to Ihe safety and life of people arises, wc will move decisively using the full force of Soviete also observed, wiih respect to Nagorno-Karabakh, that "we stand before Ihe needake resolute measures: we cannot allow anarchy, alone bloodshed."|

Yet it is highly doubtful lhat Gorbachev would abandon his reform program and his naturalby sanctioning indiscriminate violence, or engageid to seize dictatorial power through an alliance with his political enemies. It is possible, however, thai he might choose lo resign rather thanrackdownajor imposition of martial law. In his conversation with thenoted above. Gorbachev seemed to imply that he would have resigned rather than order force to be used against the strikers. And he appeared to beimilar hintpeech he delivered more recently in Leningrad. Naturally, he could also justify retaining office (if he were indeed inclined to resign) on "lesser evil" grounds.IJ

In Ihe event Ihal Gorbachev remains in power, his rcsorl to force is likely to be limilcd, and instability will not easily deflect processes lhat appear to be heading toward further democratization of theorder, some form of mullipartyism.r. in the Baltic case,reakup) of the Soviet multinationalGorbachev can avoid sharp poliitcal polarization and achieve some reinsiiiuiionalization of political integration Ihrough the Soviets. If there is financial stabilization and markelization, there might be high instability in Ihe near term (two to five years!ourse could be sel towardoears) socialWithout financial stabilization and markelization (which are now in serioushere would be rising instability in the near-to-medium term, high instability in the long term, and likely movement of the Soviet system towardard-right takeover, or what has been termedslow process of imperial decline withpiecemeal emancipation ofonlcxt of growing relative backwardness of the whole in relation to the capitalist West.

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trend toward liberalization and imperialis perceivedlear and present danger by some members of the Soviet political elite, who arc shocked by what they perceivereakdown of social discipline and loss of regime control. Their anxiety, fear, and anger could still crystalize in an aitcmpicd coup, legal removal of Gorbachev, or even assassination. Judging by what is being said publicly by Gorbachev's critics in the apparat, as well as in intelligenceraditionalist restoration would not behrowback to the Brezhnev regime. It would accept the need for significant change, including reductions in defense spending and decentralization of management, but would attempt to "draw the line" in manyof the party and government, the media. Ihe conduct of "informal" groups, and expression of "nalionalist"which Gorbachev's liberalism is seen as outrageous. Although the odds are highraditionalist regime would increase restrictions on private entrepreneurial activity and markelization, it is not altogetheron who waseadership might take advantage of limits on public expression lo move forward vigorously wiih marketization. Barring this slim possibility, the prognosis foregime would be near-term stability but high medium- to long-term instability, leading to Oltomanizalion or upheaval from be I

exist among manyuccessfulor reactionary restoration, however, would solve neither the economic problems nor the nationality problems, and thus would perpetuaterepressed if not open.

Implications for the United States

Under any scenario, economic tensions, acutedissatisfaction, labor unrest, and ethnic strife virtually guarantee that the United States will have to dealoviet leadership that faces endemic popular instability. The chances that economic reform will significantly reduce ihe potential for instability in Ihe foreseeable future are tow, and are certainly less than Ihe chances that Gorbachev's own gambles will foster continuing economic stagnation or decline.will maneuver to dampen instability through compromise and to avoid armed confrontation and bloodshed. He may muddle through more successfully ihan appears likely. But the odds are greatthat labor unresl or ethnic conflicteven within the next sixstrongwithin ihe leadership to crack down much harder than il has to date. Gorbachev may well agree to more repression in order to retain power. It is likely, in this context, that an alternative leader would noi only initiate more brutal repression thanmight, but would cite instability as the pretexteneral attack on Gorbachev's political reforms.



length of Gorbachev's tenure is an imporiant variable. In the event that he is not soon overthrown, his gambles on ethnic and political reform arc likely to increase the social forces of resisiance to an orthodox reaction.evelopment wouldincrease the degree of coercion required to "restorehose intent onourse of action might seek to gain support from (he military or KGB, or to mobilize elements of the working-class population to back their cause. Political maneuvering lo develop andass "workers'" movement is already under way. Gorbachev is seeking to enlist the "workers"orce for ptresiroyka. Populist figures such as Boris Ycl'tsin may seek to appealhe welfare-state preferences of the working class.would espouse neofascisl slogans designed to tap into the ami-intellectual, anti-Semitic, antkapi-talist. xenophobic, Russian nationalist moods that also


Moscow's preoccupation wiih instability is likely for the foreseeableof othertoeturn to the arsenal state economy lhat generated the fundamental military threat to the West in the period since World War II. The Soviet leadership's focus on internal order in ihe USSR will probably accelerate Ihe decay of Communist systems and growth of regional instability in Eastern Europe, pointing to ihe need for post-Yalta arrangements of some kind and confronting the United Stales wiih severe foreign policy and strategic challenges,in Ihe USSR will increase uncertainty in the West about proper policies to pursue toward Moscow, reflecting nervousness about Soviet developments but nonchalance about defense, and will impose stress on domestic and alliance decisionmaking.I






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cope with the crises lhal promote instability. Gorbachev needs lo transfer more resources from military lo consumer needs.ersonalhe needs to defend himself against charges that he is selling out Soviet security interests and has been seduced by praise from ihe "class" enemy. Thus, he needs demonstrable results from the arms talks that will permit him to argue that the external "threat" has receded even further. Likewise, he needs trade and technology transfer from the West to overcome bottlenecks in the Soviet economy. Obviously, he does not need Western actions that call into question the efficacy of "New Thinking" in foreign policy, or that could be interpreted as challenging Soviet security iniercsts globally. In Eastern Europe, or internally, or of "taking advantage" of Soviet internal instability.

The chances that Gorbachev will successfullythe dilemmas (many of his own making) that confront himthe longat best. But the process of pluralistic forces taking root in Soviel society strengthens the rule or law, builds constraints on the exercise of power, and fosters resistance lo any turnaround in military spending andeinvigoration of an expansionist foreignwhich, as argued above, will be strongly inhibited in any event by the insistent demands of consumption and the civilian sector. This process, andilitantly reactionary restoration lhat might aitempt to bringasic shift in the Soviet Union's foreign posture, benefits greatly from each year's prolongation of Gorbachev's rule. H

A key weakness in Gorbachev's strategy that will perpetuate instability is its hesitantnd its unwillingness to face up to the necessity of real privatization of ownership of capital stock and land. Soviel leaders from Gorbachev down arc, at the momenl. uniquely open to contact with the West. Serious privaie Western dialogue with them and their advisers on economic theory could influence their thinking. Reduction of instability over the long term requires the steady extensionaw-based private sector in the Soviet economy. I

Harsh repression of labor unrest or of food riots in Russian cities are certainly contingencies thai could confront US policymakers wilh ihe need io respond. Bul instability provoked by Gorbachev's gambles is likely to present its severest challenge torackdown of some sort in the ethnicnot in response to communal violence, bul in the form of intervention to suppress Russian/native clashes or the drive of non-Russians for greaier autonomy.rackdown is most likely in the Baltic region bul could also come in ihe Caucasus, Moldavia,thethe Ukra) nc

Gorbachev has said he wants to create astructured federative union based on the consent of the constituent republics. Movement away from the heretofore existing situation towardoal would in general be positive from the US standpoint.Gorbachev is not interested in creating afor weak confederation or dissolution uf Ihe USSR, nor would he be able toolitical support wiihin the elite for such an outcome; yet this is precisely what acceptance of the more radical Baltic demands would imply. The new draft CPSU platform on nationality policy hints aiegionally differentia ted approach to Soviet federalism. Il is possible that Gorbachev may be prepared lopecial status for ihc Baltic republics, and ihis couldotential for evolution toward still greateride range of configurations of "autonomy" or "independence" is conceivable. Inontext the Soviets might be interested at some point in discussing withtheir regional security concerns, which would probably bear heavily onecisionj


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