SOVIET USE OF ECONOMIC RELATIONS FOR POLITICAL PURPOSES

Created: 5/9/1983

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DIRECTORATE OFay 3

Soviet Due of EcodobIc Relations for Political Purposes

t>y Judgments

The Soviets never lose sight of possible political, gains thstbe realized through economic .relations.

In trade with Western countries they seek direct political concessions from governments vhen they think they have leverage and*judge that the effort will not backfire. ew known occasions such pressure has been successful. Bovever, they also seek political profit indirectly through trade by:

Strengthening the Soviet domestic economic

foundation for meeting both military production and consumption needs, thereby buttressing the USSR's Jnt[ national power position.

einforcing those International economic and military trends and lnterdependencies which, lo their own right, have favorable long-term political consequences for the USSR.

ncouraging tbe emergence in foreign countries of lobbies pushing governments for political as well as economic actions consonant with Soviet interests.

Because the USSR presently does not enjoy great market power is the West, it generally concentrates on these Indirect paths to advance Soviet political interests and avoids jeopardizing its political-strategic interests by provocative attempts to exert leverage directly for political purposes.

Tht Soviets lo tbe past have applied heavy ecoconlc preseures for political endsommuniet reglaei vhoee leaders have Dot bje ct to direct Soviet control "but only vlth mixed succese. They have alao blun tly uaed economic leverage agaloat Connllt revisea vlthin their aphe re of direct control even though they have other hidi of Influence and suet take Into account the possible destabilisingf such actions*

The main Soviet Instrument of pressure agalnat Third World countries has been the military aupply relationship, and hoacov has frequently tried to use it eg*lnst recipients of its military assistance In order

to gain political or military-security objectives.

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sovietsroad view of possible political (including military-security) gain* from foreign economic relations* eninist standpoint, "politics* and vtcodoalcift are two aides of the ease coin* economic relations necessarily have political consequences, just as political actions have economic consequences. not to perceive that trade has politicalations la thus, from the soviet standpoint, naive. bow to exploit trade relationships for political payoff a, and how publicly to talk about economic/political linkages, is for hoscowatter of tactical expediency dictated by current strategic objectives and the local situation.

policy toward developed countries

soviet exercise of economic leverage for political purposesn5f. in the west has been cautious. overall, the soviet union does

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not enjoy great market poweris the vest, although certain western industries are disproportionately dependent upon sales to it.hare of total trade turnover, western trade with the ussr is quite low (seehe ussr is currently mora dependent on the west economically than tbe west is on it*

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moscow assigns a high priority to imports from the west of advanced technology, machinery, and foodstuffs--and to credits that facilitate these imports and make possible such critical hard currency-earning projects as the gaa export pipeline* .the soviets also have key political/security equities at stake in relations with the west that could be endangered by too open and belligerent an attempt to exploit for political purposes those western interests in trade that do exist. tbua, moscowtrstegy has generally been to avoid provocative attempte to exercise political leverage,oviet imports and technology acquisition, and--to the extent pocsible--work to we aken wee t european and japanese economic ties with tbe united states and to develop stronger west european energy dependence on the ussr.

where the soviets have tried to apply economic leverage for political purposes, they have of ten sought to do so indirectly by working through industrial, business, and banking groups. thus, for example, they:

harply increased trade with and aid to iceland in when the issue of us base was being hotly

debated .

have for years dangled the lure of trade before japanese busines smen in order to weaken us-japanese ties, sidetrack japanese demands for the return of the disputed

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territories, and undercut between tokyo and washington.

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threatened an italian business delegation in late 2 that italian coamercial interests would suffer if tbe italian government did not takeant econonlc "normaliastion" steps. bhbj

is difficult to assess how successful these efforts have been, since the influence process is diffuse and bard to trace.

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on other occasions the soviets have resorted to aore direct use of leverage. for exaaple:

in 8 moscow cut purchases frost finland in a successful bid to force the esclu'sion of conservatives fros the finnish cabinet.

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he soviets strongly hinted at harsb sals against finland if the floss did not improve tbe trade baladcej

in3 moscow offered large-scaleto tbe turkish government

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Pollcyountries

Historically, the Soviet leadership has exerted heavy economic pressure upon soac communist regimes in order to achieve political gains. In most of the known cases in which this has occur red* the countries Involved weariety of reasons--less susceptible to direct Soviet ml11tary/policeoviet success has been mixed. For example:

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an attempt to topple Tito and draw Jugoslavia hack into the Soviet camp, Moscowotal economic embargo against Jugoslavia

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responding to the Chinese challenge to Soviet ideological and political leadership of the International communist movement, Hoscow abruptly canceled Soviet technical assistance in August0 and withdrewxperts, together with their blueprints-

program.

very core of China's industrialization

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" In dealing with what they regarded as Fidel Castro's harmful revolutionary advent uri sm abroad and grismanagement at home, tbe Soviets began to applyophisticated fuel (but not military supply) squeeze against Cuba in By early summer 8 Castro wa ready to mend his fences with Moscow and bring his foreign policy into line with that of the USSR.

recently, Moscow has*ighter touch with communist states out side its physical control, example:

dealing Thus, for

has potentially strong leverage over Hanoi because it is the source of all military aid received by Vietnam, and also provides aboutercent of Vietnam's foreign economic aid (seeietnamese leaders have felt keenly their dependence on Soviet aid since the* cutoff of Chinese assistance6 endedtrategy of

rs Moscow off against Beijing. Nevertheless,have apparently not extracted great political

mileage from this dependency. They have gained milltary base visitation privileges (less than they probably wanted) and Vietnamese support of general Soviet foreign policy, but seem to have been refused a greater presence in Vietnamese planning organs and line ministries*

USSR's rejection of mounting Romanian requests for preferential economic treatment may be intended to force the Romanians back Into line. The Romanians appear to believe this is the case* and have tried the last few years to win Soviet economic concessions by restraining

Table

USSR: EconomicMiliury Aisisumtt to Uoocblu

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cconomx aidonly. No uafc aubwliet ban been okuLa lad.

fttrmforeign bandboofc wadetifh aauaaau cJuomwMaid.atchicIni gnna and amion

' Batedponion of (ratiU in nponit tixnmiimnita.lachnKum in Vannaiiiaatl in mini ofin ii* USSR.

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behavior. They have refused, however* to give way on issues key to their berd-won--ifdependente*

Since the, theconomic ties to Yugoslavia have steadily Increased, despite political differences on major issues such as the Soviet invasion of Afghanistan. Tet the Soviets have apparently refrained from serious attempts to apply economic leverage against Belgrade. They probably seek to increase long-term Jugoslav dependence on trade with tbe USSR and to stave off increased Western influence that might arise from Yugoslavia's current economic plight.

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record of Moscow's readiness to apply economic pressure for political purposes against communist countries whose leaders are subject to direct Soviet control la more ambiguous. Two key however, clearly affect Soviet calculations about

factors.

leverage. On the one hand, there is the massive economic reliance of these regimes on thethus the potential for leverage. The cost of Moscow's direct and indirect assistance to all communist countries Increased dramatically in thesee Tables 3 and reaching an astoundingillion in The economic burden can now be considered sliable--equivalent to moreercent of Soviet GNP ubstantial portion of the costs represents foregone earnings of hard currency that the USSR increasingly needs to sustain its modernisation and consumer programs. Support tor Eastern Europe* is tbe heaviest burden and is largely responsible for the phenomenal gr owth in cost s. It acc ounted forercent of total costs1 but nearlyercent Eastern Europe's heavy dependence on tbe USSR for subsidized fuel deliveries accounts for most of the increase

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the other hand, the East European governments are potentially unstable since these regimes are perceived by their citizens as imposed by the Russians and not authentically national. What popular legitimacy they do enjoy depends largely upon their continued ability to meet at least minimal consumer expectations. egree, then. Moscow ia subject to reverse economic leverage by Its clients, who can argue that failure to meet local economic demands may have untoward political

The Polish case demonstrates nevertheless that when pressed the Soviets may be prepared vigorously to employ economic pressure for political purposes In Eastern Europe. In the fall1 Moscow threatened to cut off supplies of oil and raw materials unless what the Soviet Union sawolidarity-led anti-Soviet campaign was halted

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USSR: Economic Cotu o'. Siipportuti Cocomunis! Ceuimtt

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USSR: Economic aumiro lo Easier*

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Whether the Kremlin more routinely applies economic armtwisting for political/security purposes Ifi Eastern Europe is unclear* Because of Moscow's direct political influence over East European regimes and their leaders, the multitude of economic, political, and military contacts constantly underway between East Europeans and the USSR, and anticipation in East European capitals of political winds blowing from the Kremlin, It is difficult to distinguish economic from other types of pressure*

Pollcy Toward tbe Lass-Devcloped Countries

The Soviets have not enjoyed much economic leverageajority of LDCs:

Economic dealings with LDCs accountelatively

small share of Soviet foreign trade (about J* percent.

less than a dozen cases did trade with the USSR amount

overercent of an LDCs total foreign trade in

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first trying to compete wl th the West In providing development aid during the, Moscow has increasingly turned to military assistance for Its entree to the Third World:

1 Soviet military deliveries far outdistanced other economic aid extended to LDCs (see

The largest share of militaryercent^

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since has gone to nations on tbe Soviet border and to Kortb African and Middle Eastern states such as Afghanistan, Algeria, Egypt, Iraq* Libya, Syria and South Yemen, although Ethiopia and Peru have also been major recipients.

" Many of these countries have equipped their forces

largely with Soviet arms and remain dependent upon Moscow for parts, supplies and servicing. H

The Kremlin has relied primarily on the military program In establishing Influence because It:

an create dependence more quickly thand.rovides direct access to politically powerful elites.

' Bor* readily implement ed than economicre

ls financlaliy mucy> more advantageous to the USSR,

generating an est!matedillion in hard currency annually.

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materials to the US SR.

Nevertheless, Moscow still considers economic eld a useful tool for expending Soviet Influence in the Third World. It has been pressing for broad, long-tern*cooperation agreements with all of its major LDC clients in order to synchronize their planning cycles with Moscow's, encourage formationtate economic bureaucracy less attuned than private entrepreneurs to relations with the West, andtgWlWWii

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Over tbe past decade, as their overseas naval operations have expanded, the Soviets have consistently probed for new or improved access to port facilities and airfields for naval reconaissance purposes:

--As inducements, they have offered naval equipment, training, services, and--in some 1nstances--economic development assistance*

" Tbe main targets have been Indian Ocean and Mediterranean littoral states and West African countries.

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they have not pushed so hard for access as to endsnger broader political object Ives and have generally backed off if their requests for access appeared to threaten their relationship with the boat government.

In pressing for internal changes in LDCs, the Soviets have sought both to Influence the short-term balance of power within regimes and to bring about long-term political and economic structural changes designed to weaken pro-Western forces and strengthen those more sympathetic to the Soviet Union. Thus, for example, the Soviets have used their military supply relet ionship anduch lesser extent) the prospect of economic assistance to;

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for the Inclusion of communists or pro-Soviet elements in the leadership of non-aligned regimes (or for tderation of their activities) or to defend the same groups against active regime repression--as in Egypt In the late, Iraq In, North Yemen ineriod, and Syria In recent yeara*

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regimes of a "socialist orientation* to purge Western-trained and politically-moderate officials from office and to Institute changes In the party, armed forces, and government designed to guarantee Soviet access over the long-haul and prevent new "Sadats* from turning regIces toward the West* This type of pressure has been exerted in recent years, for example, against Ethiopia and possibly Angola*

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Sought to prevent development of closer military (and

thus political) ties between Individual LDCs and tbe Vtat by moving aggreeelvely to preempt sales by other suppliers. Casea here Include India. Syria, Ethiopia, and South Temen.

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diplomatic support In the DR. Non-Aligned Movement, and other international foruma for Soviet* backed posIt 1ons--for example, from Mall and (probably) Angola, Ethiopia, and Mozambique on the Issue of Afghanistan.

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to affect the outcome of regional Issues by influencing, for example, Syria on its military Intervention in Lebanon in Guinea-Bissau'a participationhe West African Non-Aggression and Mutual Defense Agreement, and probably Angola's position on settlement of the Kamiblan

a general rule, most Soviet attempts to apply leverage sgalnst LDCs have been restrainedealistic assessment of the limits of such leverageesire not to put at risk sssets already in hand:

In pro-Soviet countries such as Angola or Ethiopia, tht DSSR has been sfrald of destabilising friendly regimes, weakening these regimes' struggle against foreign enemies, or opening tbe door to renewed Western Influence.

n pro-Western countries such as the moderate Arab states, Soviet policy has been Influenced by lack of market power, a reluctance to jeopardise supplies of rsw materials, fragility of relationships with leaders, and pursuitong-term strategy keyed to separating "politics" and *economlcs. *

" In neutralist countries such as India, Moscow has

somet lmes held back for lack of market powe*r, fear of endangering geoatrateglc Interests, andlah not to be tarred with the same brush as tbe

In ell three sets of countries Moscow has been concerned not to up tbe ante of Soviet economic development assistance in the process of exerting leverage, and regularly has advised LDC leaders not to jeopardise possible development aid from tbe West by precipitate radicalism in domestic economic policy. Cases here include Moitrtbique, Ethiopia, end Njctrtgun.

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