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- ON
YUGOSLAVIA: AN APPROACHING CRISIS?
THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL INTELLIGENCE.
THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS.oraor"'otl'oos participate in the preparation of the
Thency, ,h. Dt(w.
ofo.tm.nt, ol
Participating:
, ChiefStoH tor taH-^nc.l thaofDeportment of it,
The Autoa*l Stoff, mtefco^nce. DeporWnt el the Air Fore. Th. Dvoctorjfcj|im,Morir, Corp,
CONTENTS
Page
SCOPE NOTE
- 1
KEY
DISCUSSION...
TV Economy What To
The Financial
The Doaaeatk
The Deadlocked
Tne Political
Ethnic
Other Political
The
For
For the
For the West
NOfOto^DccwWAcr
SCOPE NOTE
Developments in Yugoslavia since Tito's death have created doubts about thebility to overcome domestic political disputes and rivalries in the interest of maintaining the economic viability and cohesive ness of the statehole. This Estimate examines the nature of Yugoslavia's problems and the current and likely future post-Tito leadership responses. It looks at the ways in which the USSB and the West could influence the situation and assays the country's prospects for the nextoonths-Ja^
KEY JUDGMENTS
Yugoslavia's independent Communist regime is entering one of ill mostiods lince it broke with the Soviet Blocconomicorsening credit situation, deep-seated ethnic tensions, and politicaUneptitudc seriously threaten the post-Tito system ofSSt
Two grave problems now challenge both the new leadership's abilities and the post-Tito leadership system: an economic slowdown exacerbated by efforts to dealinancial crisis, and the reemer-gence of ethnic strains, most seriously evident in demands by the Albanian minority, that bring into question the validity of existinmechanisms for compromising ethnic differences
con
r
But Yugoslavia's principal problem is the weakness of the national leadership left in place by Tito Trappedolitical system that requires elusive consensus on all important decisions, the leaders in Belgrade are increasingly hostage to rival regional interests The consequence hasailure lo agree on ways out of their economic fix and an inability torowing pattern of ethnic strains in the fractious multinational stateesult, Yugoslaviarolonged period of increasing political and economic instability,rowing riskerious internal crisi
We believe, however, that Belgrade, because of deep differences in the leadership and between Belgrade and the regions, will attempt to muddle through without adequate systemic changes. If so, Yugoslavia would beigh-risk course. Indicatorseepening crisis wouldontinued deadlock about meaningful reforms, urgent rescheduling or default, and increasing leadership instability, with new leaders moving into the center of power. The new team, being untried and facing worsened political and economic problems, would be even more hard pressed to make requisite course corrections. And, in the longer term, there would be growing risks that unrest over economic conditions and resurgent ethnic disputes would move toward violent domestic confrontation- '
Should the civilian leaders continue to function ineffectively greater involvement in politics by the mili.ary is likely. In the unlikely worst case of an imminent disintegration of the system, the military
noi qagtmoco^TKACT
would impose Order, bu( il would be no more effective than Others in solving long-range problems ^mum>
The West can help Yugoslavia through its immediate financial problems. Western government aid3 billion, in conjunction withillion from internaiional Financial institutions and if accompanied by more effective stabilization measures in Yugoslavia, can help Belgradeajor financial crisisonditioned financial assistance would not only demonstrate continued Western support for Yugoslavia's independence but could also assist the Yugoslavs to devise more rational domestic policies. Even this government assistance will not be enough if banks do not roll over maturing obligations and extend new credits. Further, neither governments nor bunks can insulate Yugoslavia from much tougher economic and political problems in the months and years ahead. Long-term austerity and growing hardships are likely to be tbe rule well into thejjsfi,
Moscow will Judge the Western financial initiative according to its likely impact on Soviet long-term objectives toward Yugoslavia. These are.
To move Yugoslavia back into the Soviet camp
Short of that, to get Yugoslavia to move claser to Soviet positions on international issues.
To strengthen Soviet influence in Yugoslavia and acquire greater use of Yugoslav ports and airspace for tbe Soviet military.
The USSR is not likely to see the Western financial initiative asor liable to bring about changes so fundamental that they would undermine these Soviet objectives. Consequently, Moscow is not likely to see the initiativehallenge to which it must react di recti vsstC
But. if Yugoslavia should be facedisintegrating political system. Moscow would work hard to defend iu interests and acquire greater influence. In the process, it might become more deeply involved than originally contemplated. Just as in the case with the West, Moscow's primary leverage would be economic:ercent oftrade is with the Soviet Union andercent of its exports go to that country. In keeping with tougher trading policies toward its CEMA partners. Moscow already is trying to improve its own terms of trade with Belgrade. It could go even further by curtailing that trade andthe Yugoslav economy ajgatfgS
But. short of the worst case, the Soviets will not pull out all thestops to destabilize th* country because it would almost certainly
4
StCA
TaI I 'eaderS- and itsrV forces as an
act of de facto aggression against Yugoslavia. The political effect would
V'aS fllreadr ^ll-developed antipathy So^ietsorobably view any increased instability
?iskV'arious financial and
W? remfl'n 'r0UbIed and vu|nerable to outside pres.eW' T onditions 'hat heighten*ajor crisis is unlikely
no ' "Vhor
eemsave grasped the nature of
economic situation of the CEMA states.
- li . i sid^pea tne r
bef Performfnces to believe .hat it may not be capable of acting on themimely and effective enough way to prevent the country from entering an advanced state of crisis ttasti
5
Yugoslavia: Regional Ethnic Makeup
SEfiHeT
NOfoejffNOCONiffAcr
DISCUSSION
strategic importance rests on ilj status as an independent state capable of facilitating or impeding Soviet access to the Adriatic and theAlthough Communist in orientation and occasionally troublesome in its support of Third World "liberationhe regime in Belgrade has made independence ot Soviet dictates its top priorityhe Soviets recognized these facts only grudgingly, but were unable to prevent Yugoslavia from building* uo its economic tiesrosperousm
Although Yugoslavia's Quarrelsome peoplesefforts lo achieve solid stability. Yugoslavia under Tito's leadership enioyed increasing prosperity, relative calm at home,idely recognized roleeading nonallgned nation. Yugoslavia's principal problem is the weakness of the national leadership left In place by Tito. Two grave problems now challenge both the post-Tito leadership and the post-Titosystem: an economic slowdown exacerbated by efforts to deal with the financial crisis, and the reemergence of regional rivalries and ethnic strains, most seriously evident in demands by the Albanian minority that bring into Question the validity of existing constitutional mechanisms for compromising ethnic differences.
The Economy: What To Oo?
ince Tito's death, the interplay of the chronic mismanagement of the economy, the depressed world economy,etrenchment in international foreign lending has led to serious economic decline and moved Yugoslavia close to insolvency in the first Quarter of this year. Policymakers in Belgrade are squeezed between domestic pressures to maintain regionaland to foster prosperity and international banking pressures to change practices thatillion debt burden-tk^L
ast mismanagement of the economy makes it especially vulnerable to external shucks. In the late
. Tito defused potential regional rivalries by permitting foreign borrowing (see llgurcpaying sufficient attention to improvingfeed high growth rates in which all the regions shared. During that period the decentralized economic system evolvedechanism serving more to distribute than to create wealth. Althoughin theory permits workers to own andtheir enterprises, in fact the leaders in the six republics and two provinces that make up theFederation, using their extensive powers in the decentralized economy, became the dominantdecision makers. They grew increasinglyand isolated (rom each other in pursuing local interests. Ignoring national economies of scale and ultimate profitability, they built redundantblocked competition on the "unifiednd granted unrealistic price increases and subsidies to favored industries. Thus, by thenflation inpercent range became chronic, eiportj lost their competitiveness on Western markets, and balance-of-paymenls deficitserious burden, foreshadowing debt repayment problems In effect Yugoslavia experienced the worst of two worlds: the stifling effect of ovcrccntralized control at the regional level and the anarchic situation resultingenter that was responsible for maintaining the country's credit rating but had little control over the volume or end use of foreign -flpm
Tne Financial Crisis
Yugoslavia's economic crisis emerged full blown2 after Poland's financial collapse1 sensitized international lenders to economicthroughout the socialist economies in Eastern
Yugoslavia is now approaching insolvency after trying unsuccessfully last year to secure adcQuatc new Western credits and lo roll over its short-term credit lines, lisigher current account deficit thanBel-
Figure I
nlcrnaiional Financial Position: The- Trends
Ciou Debt
Mili.un lis s
rr-
10
,j
Curtail Acrotni Bilanc*
Billion US S
4 li7-' < .
eradr lo draw down reserves aiMl augment austerity measuresn attempt lo coverinancing reyu.remeni. By the endfficii lorclen exchange reserves hadess0healCni of less thai, ih.ee weeks' worthhard currency imports.
n Ihe first half ofhea.y
debt service obligationseasonally low inflow of foreign exchange receipts. The resulting financial gapprobably eiceed its remaining hard currenci reserves in the Yugoslav National Bank and regional commercial banks
8 Belgrade, however, has implemented austerity measures aimed primarily at securing Western loans and at conserving hardrestrictions, devaluation of ihe dinar to boostenergy conservation measures, and mililar* budget cuts While these measures cannotYugoslavia's long-term economic crisis, thei have met with grudging acceptance fromgoslav people but have not revived sufficient lender confidence to prevent pat menlv crisis in early I'
J5 ?ftM jo^sTl?
Minx Gold*
Miliinn US $
Kill
}J 7i U ^ !9I*ioa
9evival of bank lending and financial support bv Westernll permit Belgrade to clear up and prevent large arrearages, debtor eventual default The magnitude offinancialIhe order ofillion from governments within thev months and anillion from international financial institutions' inease Jugoslavia's current problems, but this aid will not relieve Belgrade of the need to reduce its payment! deficitsore effective stabilization program. The aid package might still not work ff commercial banks fail to renew credit lines, and. even if the aid package works, financial problems could well reappear
Th* Domestic Impoci
o deal with these financial difficulties.introduced severe import restrictions2 Thei succeeded in reducing the country's balance-of-pavments deficits but not as much as expected,earnings from hard currenci trade and invisi-
' Thr Ini'riuiiiiiul Rtii4Hn*urt>ifiiiluin nnltfcr Findheior
liitiiiMlmrul vi' aUBk
SECMa^^
NO.-oe^ajRoNreACr
declined Worse, ihc restrictions had an adverse effect on economic growth induslnal output stagnatedfirms suffered material shortages, and growth in the "socialellercent, well belowercent average of (he previous live yean {Seegftcft.
he poor economic performance causedfor ihe population There were shortages of consumergasoline, coffee, and medicine Unemploymenthardest at urban populations, young people, and residents of less developedhe south The impact on consumers would have been worse had not local officials, wary of popular resentment, ignored federal austerity goab in the first half of ihe year and allowed investment and wages to increase faster than originally decreed Even after freezing prices in late July, the federal authoritiesage freeie al the urging of rtormally quiescent trade unionsagjph
he population has also altenuated the conse-Quencea of the government's belt tighteninghriving "secondnreportedsoften the biow of statistical declines in real income And many urban Yugoslavs depend onon farms for foodstuffs not available, or too expensive, through the formal distribution systemovcrnmenl-imposed deposit of aboul SbO fortravel and severe customs restrictions this fall sharply limited the option of shopping trips lo thecustomary supplementary sourcesuryalso violated an unwritten political compact granting Yugoslavs full freedom to travel aaahk.
TheDenote
he downturn in Ihe economy has given rise to inconclusive and divisive debates about how to get out of the economic/financial fix. which are eroding confidence in the regime Several broad reformare under discussion ttfm
he official Kraigher Commission Report of1 mixed general calls for mote maiket reforms with insistence that the Misting economic
jaadardar- -ill|JBBY
system be preserved. Lack of clear goals has impeded achievement of consensus on any of itsSeveral federal government officials-chief among them Deputy Premier Zvonetrying lo advance the market reform cause, but Ihey laoc strong opposition from entrenched interests that rely on state subside
roposals for retrenchmenl lo centralizeddirection are even more unpopular Memories of the inefficient, centralized Slalimsi system of the postwar era still make Yugoslavs wary of reinvesting authonty in Belgrade Eouallv important aredeep seated amongBelgrade, which is simultaneously the Serbian capital, can iall too easily under Ihe sway of thecountry's largest ethnic group aajfjj
roponents of pure self-management argue lhat the republics* authority in economic decisions should devolve to the workers, as the comtilution rrquires. The idea has an attraction, particularly for Yugoslavs trapped in cow-meaningless posts ini dure. But beyond llpservice lo ibis goal, there is no strong support for the idea in the leadership, which apparently fears further diffusion of authonty as an invitation lo anarchy.
The Politkol Strains
ugoslavia during Tito's lifetime was able to function successfully, despite weaknesses in its system of governance, because Tito had the personal authority to intervene al critical junctures to Impose remedial measures. In his final years, with no one of sufficient stature in the wings to assume his role, he attempted to create andew system of collective political rule that would preclude struggles or one-man rule and guarantee lhat none of Yugoslavia's major dhnonationa! groups would have cause io challenge the integrity of the Yugoslav state The resultumbersome system that hai obstructed timelyaajtsi
t the inception of their rule. Tito's heirs vowed they "would never stray from Tito's path'self-management at home arid nonallgnmenl In foreign policy. Their adherence to his policy legacy has been almost total. But Titos legacy included unresolved problems rcQuiiing constunt policy adlust-
men!eadiness to make maun changes when necessary The collectiveelgrade have not mastered this critical corollary, and the regions are squabbling over sharing economy hardships Theis that centrifugal political imeresu are now-gaining strength and popular confidence in Belgradewaning. Aside from indecisive and ineffectiveno single political issue is vet paramount, but problems are buildingumber of
Ethnic Tensions
onfrontations among the ethnonationalhaveecurrent feature ofhistory and sometimes forced even Titodefensive Economic stringencies areconflicts of interest among Yugoslavia'sprovince* Following Tito's death, thelost the prestige it derivedesult ofauthority and unimpeachable reputationethnic nonpartisan. None of his successors hasremotely comparable
nder these conditions, there has been abut steady Increase in ethnic assertlveness in several quarters Several of Bosnia's Muslim Waders, forare suspected of encouragingMuslim secular movement aimed at mooopoliiinc power in their republic. More recently, there have also beenstillof violence, probably aggravated by Ihe diminished chances for jobs, among young Croat and Serbian nationalists. Croat-Serbian rivalries are still far from the crisu proportions they reached in the,f these trends continue, grave disputes between the two largest ethnic groups in Yugoslavia (see map on pageould break into the open gaaft*
The most serious ethnic strife to date has been the violent rioting by the Albanians in the country's Kosovo Autonomous Province lessear after Tito's death. Special police, militia, and some Army units restored, order, but the Albanians are far from
The Albanians are restive because they believe, a* non-Slavs in an overwhelmingly Slavic slate and residents of Yugoslav.*'* least developed region (seehey have been relegated to the bottom of the economic heap The Albanians' prescription lor re-
drrss of their grievances Is that their region's status be elevatedull republic
he larger import of the Albarians' demand is that one of Yugoslavia's major nationalities isthe distribution of power bequeathed by Tito The events in Kosovo kindled fears, mainly in Serbia, but also in the Slavic republics of Montenegro andthat republic stains for Kosovo would lead to increased migration of non-Albanians and calk for redrawing republic borders to create an "ethnicallylbanian republic (hat might eventually seek reunion with Albania.
ome Serbian politicians are using enflamed ethnic lension to strengthen their personal power. Thus far unsuccessfully. Serbia has revived demands-rejected by Titofor reassertion of Serbia's de lure powers over Kosovo and theoivodinaProvince Serbian assertlveness. in rum. has aroused fears of other nationalities that their interests loo are al risk. Non-Scrt- continue to block efforts by the Serbs to expand Iheir authority at the expense of ihe balances of power in Ihe federal svstem.ajjj^
hese disputes on the Albanian minorityalsotrategic dimension The Hoxha regime in riessdiboring Albania, which vocally supports ihe Albanian minority cause in Yugoslavia and rejects ties to the great powers, will probably soon face (he uncertaintiesolitical succession- This prospect of change poses in many Yugoslav minds the likelihood lhat Albania will break out of its isolationism. Becent efforts by Moscow lo woo Tirane show that the USSR wants very much to reestablish iu influenceulisetable Yugoslav Mink These fears augment tradi-tional YugoslavorMoscow mighl allow its Bulgarian allies lo revive iheir claims on Yugoslavia! Macedonian Republic, which abuts Kosovo andestive Albanian minority of its own*
Other Political Rifti
he difficulty Yugoslav leaden have had in addressing the country's economic problems and ihe Albanian minority Issue refleels the fact lhatis tendingoose confederation of eight republican and provincial power centers Often even members of the leadership in Belgrade are loyal primarily lo their various home reoons And federal
3
Yugoslavia: Regional Disparities
proposals can be blocked in Ihe Federaloe ignored with impunity by republican or provin-cial govcrnmenti, because the federal authorities are too divided to enforce their polioetaj^l^
ito's old guard alsoeneration gap. The younger, better educated parly membership isof their prolonged dominance During theh Congress, in June,ecurring complaint about "horizontalis. thai the same senior officials move endlessly among key republic and federal p ^aajgas.
increasingly open media havemuch of the corruption andthai pervades live Yugoslav hierarchy. Thereputation has sufferedesult because,austerity programs now taking theirlower nnd middle income groups, anger hasover the privileged status of the hierarchyaajjjjf
though members of the old guardgrip on most senior posts during the Congressno one in the party Presidium has shownto be pnmui inrer pares in Belgrade But
ins health and ihe mechanic* o( political rotation have eroded the core of eiperienced party leaden once thought likely to dominate the COaaMoa oi old guard Titoitts within the collective leadersLp Vladimir Bakaric ol Croatia, looked toey' stabilizing figure in post-Tito Yugoslavia, diedMilos Minie, Tito's main expert on foreign affain. lost hts key federalerbian power struggle last spring because he was perceived as actingugoslav rathererb.Minister Nikola Liubicico the Presidency of Serbia, an important republic post but one with limited national viability Of Tito's closest aides, only Starve Dclanc. who lost his Presidium seat last June, stillotentially significant federal post Dolync is an able and pragmatic politicianeputation forof Soviet intentions As Interior Minister, he know, the details of corruption allegations and couldecisive roleower sir
he chances for younger federal leaders and technocrats from the republics and provinces to claim more influence seem to be growing as their elders* performance draws increasing criticism Even under normalush for power would be likely from this quarter within the nett few yean. But. as far as we know, the DM generation remains anpotential forceolitical programeader with national recognitionmm
The Military
The Yugoslav military, representing the most stronglyperhaps the only trulyution in the country, may welley factor.goslav generals are openly critical of the economic situation andabout the potential for unrest But. although they helped Tito thwart political challengers onoccasions, they have avoided choosing sides in today's policy debates. We believe that the generals give high priority to maintenance of law and order and national independence and would move speedily and ruthlessly if seriou. unrest should destabilire the country aaata.
However, while the Army's role in managing the crisis would probablyiabihiing one over the ihort term, the Army probably could not wield the reins ol power for any protracted period of lime
without serious problems Many of the non-Serbregard ihe Army as antipathetic to their special interests Mceeo-er.hesiveness of the military without Tito at an anchor point for its royalty has yet to be proved Past factional behaviorinority of generals and certain veterans groupi. with power bases in the regions and provinces, suggests potential fissures thai could deepen over both policy issues and ethnic rivalries
Implkotions
crWa
ugoslaviarolonged period ofdecline with growing risks of political instability. Belgrade's current policy of belated ad hoc adjust-menti. no matter how rigorous and austere their eventual dimensions, will themselves not improve Yugoslavia's chances of economic recovery. Moreover. Ihe current financial crisis, which could continue Into earlys encouraging Belgrade lo addressweaknesses in its economic- and political
o begin mastering Its problems, Yugoslavia must soon start to make fundamental systemic changes For these changes lo lake place, several developments are necessary-.
Belgrade muil overcome its dllferences arid give Ihe lead to market reformers in the current leadership
There must be speedy passage of effective new banking and financial arrangements.
The Yugoslavs mustonsensus soon on an effective ecotsomic via Initiation and recovery program.
Westernprivate banks-must recognize these achievements and agree lo roll over debts and reopen credit lines to Yugosla-
e believe, however, thai Belgrade, because of deep differences in ihe leadership and betweenand the regions, will attempt lo muddle through without adequate systemic changes and wiJJ not regain [he confidence of Western banks The ensuingcrisis might well force leadership changes. Neveithe-
financial constramb will grow more rigorous and Ihe regions wiU cam u, powrr and de facto autonomy Under these cond-noos, the ne- leadership', chance to be effective would be tenuous at best In short Yugoslaviaxolooged period of mcieanng political and economsc instabilitv.rowing riskerious internal crisis
M Acrisis is unlikely within theear, whether Belgrade makes significant changes or not Rather, the evolution of the situation is likely to be gradual. The mam indicators of inc teasing instability, in order of their likelihood and our rough sense ol their sequence, are
inability of the leadership lo agree on how to implement either the Kraigher Commis-noei Report or other meaningful reforms
worsening economic situation and growing problem*managing the foreign debt.
of foreign lenders to make new loans, leading either to urgent rescheduling or default.
Leadenhjp lability, with new leaden even less able to cope with regional factions
Increased political importance of the Yugoslav military as the only institutional bulwark of the federal system.
More serious dissatisfaction over economiccausing unrest, particularly In the least developed regions, where austerily cuh deepest,omparable backlash in the more affluent regions.
Widening but conflicting demands for sweeping political reforms and requests by some drnxlenu for Western support
Serious ethnic disputes, with renewed violence in Koaovoeturn to the virulent Serb-Croat rivalry, the most serious polaniy of all
This postulated deepening crisis could be hailed or at leasl eased al various points if the uigency of the situation prompted Belgrade to undertake Ihereforms If the more serious ol these projection* came to pan (he Yugoslav Federation would in veryterms begin to unr3vc!gaMtBna>
he military is not eager lo arbitrate the quar-rcb of Ihe fractious Yugoslavs. Nevertheless, it is likely to be thrust to the fore if the political leaders perform
so ineptly that internal stability is threatened. In fact one might expect that some political leaders would seek to call in the military in an effort to support their positions However,nlikely thai the military would respond toall, particularly U* j, ap. oeared to have been prompted principally byisanahip On the other hand, if the crisis reached the stage of violence or destabilizing Serb-Croatthe Yugoslav military would probably intervene to restore order. However, military inlerveniion would beemporary palliative and the deeper crisisminue aflggfglgft
For the Soviets
ugoslavia has never lost Us importance lo the Kremlin, despite its break from Soviet dominationears ago. Belgrade has helped to frustrate Moscow's efforts to control the Communist movement and lo spread its influence in the Nonaltgned Movement Its example still challenges the permanence of tbe Soviets-East European empire And its strategic significance has if anything increased as recurrent crises in the Middle East emphasize ihe need for improved Soviet access to the Mediterranean fmutt
hus, despile the Soviets' teluclaniwith Yugoslavia's independent status, the USSR's long-range goals toward Yugoslavia have remained constant:
To ultimately end ihe schism and get Yugoslavia back into Ihe Soviet camp
Short of thai, to get Yugoslav ia to move more closely toward Soviet positions on international
To strengthen Soviet influence in Yugoslavia in general and to acquire greater use of Yugoslav ports and airspace by the Soviet military.
The relative stability of the Tilo era offered Moscow few opportunities to advance ihese goals. For example, it has been forced to expend most of its energy trying to prevent the West from increasing its influence in Belgrade and attempting lo thwart any developments lhat might set back its own long-term pbr
s Yugoslaviaeriod of possibly serious instability, the worst development from the Soviet standpoint would be the emergenceegime that
wouldWestern-oriented reformsro-Weslern foreign policy. On the other hand, should the Federation disintegrate, the Soviets would face the threat of aposubly spreading instability in the Balkans and particularly on the southern flank of the Warsaw Pact, where Romanian stability iserious Question mark.n*
n worst case scenarios such as these, the Soviets would work hard to defend their interests and to achieve at least some of their long-term goals but would rxot>abry try to avoid direct militaryThey might, for example, wish to sponsor elements in Yugoslavia ,ha, ^ugh, to restore national unity and enhance Communist power, particularly if backing by the Army and an important elhmcIhe Serbs andthe effort credible. Orituation of total turmoil, in which they could find no viable homegrownthe Soviets might consider the use of military force lo protect their interests and to sponsor Ihe formationovernment sympathetic or beholden lo ihe USSR. But the use of military force outside the Warsaw pact in Europe, as well as the magnitude of the effort required, would give the Soviets serious pausehas not considered Yugoslavia toital national interest for almostean, and it is well aware thai the West does not tacitlyoviet right to move militarily against Yugoslavia. Thus as was no* th* ease concerning, for example. Caechotlo-vakia8 and Polandhe Soviets musl ponder military action in Yugoslavia in the context of strong and declared Western interests and in the light of the East-West competitionhole. In short, while the actual behavior of the Soviets cannot be predicted with any real certainty, the temptation lo take action, short of military intervention, will beif Yugoslavia veers strongly to the West It Is thus possible that either the Soviets or the West could find themselves involved in Yugoslaviaegree not initially contemplated gaassjgaav
n any event, because the situation inb not likely to reach crisis stage in the next yearalf. Moscow's more immediate concerns will be the consolidation of Andropov's leadership at home, serious domestic economic problems, rivalries with ihe United Stales and China, and difficulties elsewhere in Eastern Europe. Nonetheless. Yugoslavia will remain an area ol continuing imcresl, and. if it drifts Into
much greater instability, Moscow will perforce seek to piotcct ils position there and could find Itself drawnole it would prefer not to play
Over the paslears the USSR's economic ties lo Yugoslavia have been growing stronger, and they offer tbe Soviets some leverage (Seeboutercent of Yugoslavia's exports go to the USSR, up fromercentears ago. andercent of Yugoslavia's imports come from the USSR Wethat2 Yugoslaviarade surplus with the USSR of0 million Yugoslavia sells lo theinflatedsuch as clothing, shoes, and heavy machinery thai il cannot market in the West for the same kind of financial return. On the import tide. Yugoslavia is particularly dependenl on Soviet energy, which fillsercent of its total need, and pays for its imports with eiports. rather than with scarce hard currency. See
Prompted by their own economic problems, the Soviets are likely to make tougher economic demands on ihe Yugoslavs (as indeed they already haveis their Blocmong other things, ihey probably will use their economic leverage to remind theof the importance of maintaining ties to the East and minimizing relations with the West. They may also try to use economic pressures to constrain any Yugoslav movement toward reformsestern character. Some Soviet pressure is already apparent In the USSR's current demands for better pricein its bilateral trade with Yugoslavia and in its insistence on increased deliveries of goods that the Yugoslavs need to sell for hard currency in the West.
e do not believe, however, thai the Soviets will pull out all the economic slops in an effort to destabilize the Yugoslav economy This would almost certainly be seen as an act of de facto aggression by Yugoslavia's people and by the national political and military leaderships as well And the Soviets would fear lhat ihe Weal would in these circumstances try to strengthen its influence in Belgrade by stepptng up its own programs of economic and political aid Overall then, while likely to continue Io offer some economic inducements to Yugoslavia, ihe Soviets will probably move lo toughen their terms of trade with Belgrad
15
Thr Soviet t'nton hastudied silence about the widely reported Western aid package and otherwiie not offered any prescription toabout how to solve its economicmarked contrast to its behavioris Poland. Ai the Western aid package is currently structured, the USSR is not likely to undermine Western efforls to prevent Yugoslavwhich, if successful.
could improve the attitude of bankers toward Eastern Europehole At the same time. Moscow will
attempi to profit from this assistance bv Intensifying
its efforts lo improve Its own lerrm of trade with
Belgrade^
he Soviets have some limited mihiary leverage The Yugoslav* are largely independent producers of military hurdware: they are dependent on the USSR only for advanced military equipment, such asmtsniei. tanks. and wi fsghters. and the spare parts
needed to maintain and operate this equipmentcould slow down deliveries ol military equipment and spare parts This would force Belgrade to seek other suppliers of Soviet weaponry or compel them to find Western replacements or e'en to go without Jgg%
owever. Yugoslavia produces most of its ground forces equipment: those .irm* deemed by the Yugoslavs to be crucial to their military strategy This strategy relies on partisan warfare fought fromin Ihe mountainous countryside. Also, ihc Yugoslavs have some militan leverage over Moscow The use of Yugoslav repair facilities to overhaul several diesel submarines each tea- allow* the Soviets lo significantly increase iheime ol lubma-rme palroU in (he Mediterranean The use of Yugoslav airspace has been very valuable in helping Vloscow assist its allies in Middle East ermrtgO^
V
oscow could lo be sure, male trouble by helping Io eiacerbate national and ethnic tensions It could, (or instance, play on Serbia's (ears ol Croatian nationalism or erscourasje the Kosovo Albanians. But playing the ethnic game would be very risky Thus, if Moscow is seen lo be siding with the Serbs, it loses ground with Yugoslavia's non-Serb majority, which fears Serbian dominance Supporting the Albanians, on the other hand, would undermine Moscow's efforts totronger relation with the Serbs and possibly other Slavs Moscow could also encourage Bulgarian claims on Yugoslavia's Macedonian Republic But il must be wary of fomenting Bulgarian irredentism on the Macedonian issue lesl latent problemsimilar nature erupt elsewhere tn Its East European empire
he Soviets have only limited resources for applying political pressures in Yugoslavia. They do not in fact possess any strong political assets in the country;
No Yugoslav leaden are known lo favorlo Soviet foreign policy goals.
The reserve of avowedly pro-Soviet sympathizersYugoslaviamallCorn-informhas been driven underground.
Soviet efforts over the years lo seek special influence with the secret police have not borne fruit, and are not likely to do so in thefuture
The Yugoslavs remain sensitive and vigilant to any Soviet clandestine activities, and their security service seems to think that it can maintain controlwe wouldthe Soviets lo attempt to strerigtben their covert assetsrolonged crisis
verall, under the gradually deteriorating condi-tions we see most likely to hold sway in Yugoslavia over the next yearalf, we would expect the USSR to apply some economic and other kinds of pressure on Yugoslav leaders,eminder that Moscow's Interests must be taken into serious account Bui we doubt that the Soviets will go much further than this, principallyiheir tangible support inimited and because, blatant pressure is likely to be counterproductive.
For the Weil
he Umled Stales and its West European allies are already moving lo help Yugoslavia through Ut liquidity crisis over the nexl si* months In some ways the effort itself is as important as its results, itign to the Yugoslav leaders and its people that tbe West supports Yugoslavia and iu international posture. However, even If the assistance is provided, Yugoslavia's financial and economic problems arc far from over and its leaders will be looking to the West for continued nld^/^
be continuing need for Western financial support will maintain pressure in Yugoslavia to correct misman-agemenl practices and hold lo more severe austerity goals. One parlicular sector, the decentralized banking system, will come under pressure from abroad because Belgrade will have to better contiol ihe hard currency flow in regional banks in order to repay foreign debts The federal leadenhip's limited powers over thealso will be sorely tested in holding down local
demand for nonessential imports, higher wages, and industrial subsidies The specific, short-term reforms and austerity measures will take political power and will, but, on the basis of the austerity measures already taken, they are not beyond Belgrade's
ven under the best ofand properly conditioned outside support and improved domesticeconomic problems will certainly continuehewill be able
ONTIWCT
to encourage Yugoslav decisionmakingore rational economic course and help maintaincurrent international alignment However, it can neither guarantee the political courage to make the additional unpalatable and difficult decisions nor rapidly restore economic prosperity and political stability The achievement ol these two goals will depend on Yugoslavia's own leadership and will, at best, take yean to achieve aaaaW
ae*
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