CIA HISTORICAL REVIEW PROGRAM RELEASEAS SANITIZED
Yugoslavia:
An Approaching Crisis?
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YUGOSLAVIA: AN APPROACHING CRISIS?
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CONTENTS
Page
SCOPE
KEY
The Economy Whal To
The FtttaardaJ
The Dorarstic. .
Tl* Deadlocked
The Polilical
fthaif Ttiwlniat
Olher Pohtical
The
Fot.
For the
For lhe VVeM
'ii
THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL INTELLIGENCE.
THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS.
The following intelligence organizations participated in the preparation of the Estimate:
The Central Intelligence Agency, the Dtierne Irrrolliriertce Agency, the National Security Agency, ond the intelligence organisation! ol the Deportments of Stole and the Treasury.
Also Participating:
The Awiitont Chief ol StoH (or mtelligenee, Dapartment of tbe Army The Director et Naval IntrrSgsnce, Deportment of the Novy The Assistant Chief of Stoif. InteUigenee. Deportment ol the Air Force The Director of Intelligence, Heodqoorters, Morine Corps
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SCOPE NOTE
CO
Developments in Yugoslavia since Tito's death have created doubts bout thc country's ability to overcome domestic political disputes and 'valries in the interest of maintaining the economic viability and Ivesivcness of the statehole This Estimate examines the nature of Yugoslavia's problems and the current and likely fuiure post-Tito leadership responses. It Idols al the ways in which the USSR and thc West could influence the situation and assays the country's prospects for the nextoonths
i
KEY JUDGMENTS
Yugoslavia's independent Communist regime is entering one of its most difficult periods since it broke with the Soviet Blocconomicorsening credit situation, deep-seated ethnic tensions, and political ineptihide seriously threaten the post-Tito system of^
Two grave problems now challenge both the new leadership's abilities and lhc posl-Tito leadership system: an economic slowdown exacerbated by efforts to dealinancial crisis, and lhe reemer-gence of ethnic strains, mosl seriously evident inhe Albanian minority, that bring into question the validity of existing constitutional mechanisms for compromising ethnic differences,f)
But Yugoslavia's principal problem is the weakness ol 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 lo rival regional mien-sis. The consequence hasailure to agree on ways out ol lhcir economic fix and an inability torowing pattern of ethnic strains in the fractious multinational stateesult. Yugoslaviarolonged period of increasing polilical and economic instability,rowing riskerious internal crisis^H^
We believe, however, that Belgrade, because of deep diffeiences in the leadership and between Belgrade and the regions, will attempt to muddle thiough without adequate systemic changes. If so, Yugoslavia would beigh-risk course Indicatorseepening crisis wouldoiilinued deadlock aboul 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 ecoiK>rnic problems, would be even more hard premised to make requisite course corrections And. in the longer term, there would be growing risks tbat unrest over economic conditions and resurgent ethnic disputes would move toward violent domesticy
Should the civilian leaders coniinue lo function ineffectively, greater involvement in polilics bv the military is likely. In the unlikely worst case of an imminent disintegration of thc system, the military
would impost? order, but il would he no more effective iltan others in solving long-rangei)
The West ran help Yugoslavia through its immediate financial problems Western government aid ofillion, in coniunction2 billion from international financial institutions and if accompanied by rnore effective stabilization measures in Yugoslavia, can help Belgradeajor financial crisisonditioned financial assistance would not only demonstrate continued Weslern support for Yugoslavia's independence bui could also assist the Yugoslavs to devise more rational domestic policies. Even this government assistance will not be enough if kinks do not roll over maturing obligations and extend new credits. Further, neither governments nor lunks can insulate Yugoslavia from much tougher economic and political problems in thc months and vears ahead. Long-term austerity and growing hardships arc likely to be lhe rule well into the
Moscow will judge lhe Western financial initiative according to its likely impact on Soviet long term objectives toward Yugoslavia. These are:
To move Yugoslavia buck into thc Soviet camp
Short of that, to get Yugoslavia to move closer to Soviet positions on international issues
To strengthen Soviet influence in Yugoslavia and acquire greater use of Yugoslav ports and airspace for the Soviel military.
The USSH is not likely to see the Weslern financial inilialivc asor liable lo bring about changes so fundamental thai they would undermine these Soviel objectives. Consequenily. Moscow is not likely to see the initiativehallenge to which it must react direct I
But, if Yugoslavia should be facedisintegrating political system. Moscow would work hard to defend its interests and acquire greater influence In live 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 ofIrade is with the Soviet Union andercent of ils exports go to that country. In keeping with tougher trading policies toward its CEMA partners, Moscow already is trying lo improve its own terms of trade with Belgrade It could go even further by curtailing lhat trade andthe Yugoslav economy.*
But. short of thc worst case, the Soviets will noi pull out all theslops to destabilize the couniry because it would almost certainly
SaafKcI
be seen by the Yugoslav people. Its leaders, and its military fotces as an act of de facto aggression against Yugoslavia. The political effect would be lo reinforce Yugoslavia's already well-developed antipathy loward the USSR. Moreover, lhe Soviets probabK view any increased instabilily in Eastern Europe as highly risky, given theprecariotis financial and economic situation of the CEMA states
Yugoslavia will remain troubled and vulnerable to outsidefor al least the next year and athat heighten its potentialource of great-.powerayor crisis is unlikety wilhin the nexl year, whether Belgrade makes significant changes or not Rather, the evolution of the situation is likely to be gradual. Allhough the post-Tito leadership seems to have grasped the nature of thc problems, its performance lo date leads us lo believe that it may not be capable of acting on themimely and effective eiKHigh way to prevent the country fiom entering an advanced slate of crisis,f)
I
Bfsrcopy
DISCUSSION
Yugoslavia! strategic importance rests on its status as an independent state capable oi facilitating or impeding Soviet access to (tie Adriatic and the Medi tenanean. Although Communist in orientation and occasionally troublesome in its support oi Third World "liberationhe regime in Belgrade has made independence of Soviet dictates its too priorityhc Soviets recognized these facts only grudgingly, but were unalde to prevent Yugoslavia from building up its economic tiesrosperous West
2 Although Yugoslavia's quarrelsome peoplesefforts to achieve solid stability. Yugoslavia under Titos leadership enioved increasing prosperity, relative calm at home,idely recognized roleeading nonaligned nation Yugoslavia's principal problem is lhe weakness of the national leadership led in place by Tito Two grave problems now challenge bolh the post-Tito leadership and lhe post-Titosystem- an economic slowdown exacerbated by efforts to deal with the financial crisis, and the lecmergence of regional rivalries and ethnic strains, most seriously evident in demands bv the Albanian minority that bring into qisesrion the validity of eaisting corrUitutional mechanisms fot compromising ethnic differences
The Economy, What Io Do?
ince Tile's death, llie interplay of the chronic mismanagement of the eennomy. the depressed world economy,etrenchment in in let national foreign lending has led to serious economic decline and moved Yugoslavia close to insolvency in (he firsl Quarter of this year Policymakers in Belgrade ate squeezed between dorneslic pressures lo maintain regiemland lo loster prosperity and international banking pressures to change practices lhatillion debt burden aja^
4he economy main it especially vulnerable to cihocks ln tho late
. Tito defused potential regional rivalries by permitting foreign borrowing (see figurepaying sufficient attention lo improvingto feed high growth rates in which all the regions shared. During thai period lhe decent rallied economic system evolvedechanism serving more to distribute Ihan to create wealth Althoughin theory permits workers Io own andtheir enterprises, In (act the leaders in the tn republics and two provinces thai make tip the Yugo sbv Federation, using thenpowers in lhe decentralized economy, became the dominantdecision makers. They grew increasinsdvand isolated Irom each other in pursuing local interests Ignoring national economics of tease and ultimate profitability, ihey built redundantblocked competition on the "unifiednd granted unrealisticet eases and subsidies to favored industries. Thus, by thenflation inpercent range became chronic, eipnrts lost iheir competitiveness on Western markets, and balance of-pa* ments deficitserious burden, foreshadowing debt repayment problems In effect Yugoslavia eiperienced the worst of two worlds: the stifling effect of ovetcentralized control al the regional level and lhe anarchic situation resultingenter lhal wai responsible for maintaining the country's credil rating bul had little control over lhe volume or end use of foreign loans
Ine Financial Crisis
Yugoslavia's economic crisis emerged full blown2 aftet Poland's financial collapse1 sensitired international lenders to economicthroughout the soriallsl economiesstern Eu-
racM
b YuCOsJavsa is no* approaching insolvency after Irvine unsuccessfully Inst year to secure adequate new Western credits and to roll over its short-term credit lines Ilsigher
euirent account delicti thanforced Bel-
1
Yugoslavia's International Financial Position: The Trends
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71 IJ II 74 7ft )) 7K 79 Ml
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aliKr NikoiiIir-cnil
iKhinhniaimi.inanHniin U" IMF.
Ic to draw down reserves ami augment auslcrilv measures iu an attemptcoverinancing renuiremenl. By the endflicialchdiice reserves hail diiindlcd In less0 million tlic cquh aleut uf less tlr.ni tlirceeili of Iwrd eurreiicv imports
n the first halfugoslavia laces heavs debt service obligationseasonally tow* inflow of loreien eschange receipts. Tlte resulting financial gap will probably exceed its remaining hard currenct rescues in (lie Yugoslav National Bank ami regional commercial banks.'
S Belgrade. however, has implerneiilrd uusterits measures aimed primarily at securing Western loans and at conserving hardrest ricl ions, devaluation of the dinar to boost exports, energy conservation measures, and militaiy budget cuts While these measures cannot solve Yugoslavia's long-term economic crisis, they have met with grudging acceptance from lhe Yugoslav people but have not revived sufficient lender confidence toayments crisis in^
a revrval ryj bank lending and financial Support by Western governments will permit Belgrade to clear up and prevent largeebtor eventual default. Tlie magnitude nf go'Cin-ment financialtlie order3 billion from governments within the next six months and an2 billion from international financial insUiations* mease Yugoslavia's current problems, but ihis aid will not relieve Belgradeihe need to reduce ils payments deficitsore ef Ecciivc stabilization program. The aid package might Still isnl work if commercial banks fail to renew credit lines, and. even if lhe aid package works, financial problems could svell icappear in li
lhe Domestic Impact
deal with these financial difficulties.introduced severe import restrictions insucceeded in reducing the country'sdeficits bul not as mucheeled,earnings Irnm hard currency trade and invssi-
uirtninoojl Haul Imnd Dttehximmi tltUlOX il*il. Ii'i-rniiionil(BISI. to)
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I our ism -also declined Worse, llie restrictions had an advene riled on economic growth industrial output stagnated as films suffered materia' shortages, and gro*vtli in thr "socialellercent,ercriH average of lhe previous five years. (See^
he pool economic peifotmance caused liaid-ships for Ihe population. Tliere were shortages of consumerIy gasoline, coffee, ano" medicine. Unemployment increased- hilling harrjetf at nihan populations, young people, and residenti of less developed regions in Ihe soulh The impact on consumers would have been worse had not local olficlah. wary of popular resentment, ignored fedetal austerity goals in Ihe first luif the year and allowed investment and wages to increase faster than originally decreed. Even afler freezing prices in late July, lhe federal authoritiesiage freeze it llie urging ol normally quiescent trade unions.
he population has alto attenuated theof the government! belt lighteninghriving "secondnrcpoited in comes soften the blow of statistical declines in real income And many urban Yugoslavs depend onon farms foi foodstuffs not available, or loo erpensive. through the fuemal distribution systemovernment imposed deposit ofortravel and severe customs lestriclions this fall sharply limited lhe option of shopping trips lo lhecustomary supplementary source ofand luiuryabo violated an unwrillen political compact granting Yugoslavs full freedom travel ^
lhe De^sdhxled Debate
I'l Thc downturn in tbc economy has given rise to inconclusive and divisive debates aboul how to gel out of lhc economic/financial fii. which are eroding confidence in lhe regime Several bruad reform direc lions arc under discussion
H The official Kraitcher Commission Report ol1 miird general calk lor more market reforms with insistence that the ensling economic
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ena.linc all mim- trtivdr nixui icilin anil Mtim <u)
syslem be preserved Lack of dear goals has impeded achievement of consensus on any of its rccommr-rida irons Seteral federal governmentamong tlDeputyneIrting to adiance the market reform cause, bui thev lace strong opposition from entrenched Inteiests lhat rels mi state subsidies,%j
IS Proposals for retrenchment to centralizeddirection are even more unpopular. Memories of (he meffieienl, centralized Stalinist system of lhe postwar era Still make Yugoslavs wary ol reinvesting authority in llcigrade Kqually important aredeep seated amongBelgrade, which is simullaiicoutly lhe Serbian capital can fall too easily undei die sway of thecountry's Urges! ethnic "
roponents of pure self-management argue lhat tlie republics' authority in economic decisions should devolve to the workers, as tlse conslilulion requires The idea has an attraction, particularly for Yugoslavs trapped in now-meaningless posts in lhestructure Qui beyond Upset vice lo Ihis goal, there is no strong support for lhe idea in the leadership, which apparently (ears further diffusion of authority as an irmutiun lo anarchy. ^
The Politico! Stroins.
ugoslavia during Tito's lifelime was able lo function successfufls. despite weaknesses in its system of governance, because Tilo had llie personal authority in iiiicri'cne al critical junctures to impose remedial measures. In kis final years, with no one of sufficient stature in the wings lo assume hit role, he attempted lo create andew svstein of collective political rule thai would preclude struggle* or one-ma"ulr and guarantee that none of Yugoslavia's majoi etlinonalioual groups would have cause lo challenge the integiily of lhe Yugoslav stale The resultumbersome system lhat has obstructed timely9^
18 he inception - in .:
they "would never stray Irom Tilo'sself-management al home and nonalignment in foreign policy Their adherence to his policy legacy has been almost total Bui Tilo's legacy included uniesolved piolslems requiring constant policy adfusl-
eadirscsi lo make major changes when necessary. The collective leaden in Belgrade Iiave not mattered lha critical corollary and the rrjio.it are SQiiabblirvg over sharing economic Ivardships Tl*it lhal ccnttifugal political iiiictesls are now-gaining strength and popular confidence in Belgrade it waning Atide from Indecisive and ineffectiveno single polilicalet paramount, bul problems are buildingumber of fronts*Ma
Ethnic Tensions
among lhe Hhnonationalhaveecurienl feature ofhistory and sometimes forced even Titodefensive. Economic stringencies areconflicts of intetest among Yugoslavia'sproVinccs Following Tito's death, thelost the prestige it derivedesult ofauthority and unimpeachable reputationethnic nonpartisan None of his successors hasremotely comparable reputation
tinder these conditions, tl-ci* hatiadu al but steady increase in ethnic assettivencss in several Quaitert Several ofuslim leaders,m-ple. are suspected ofuslim secular movement aimed al monooolmng power in their republic More iccenlly. there have also been snonla-neous-though sldlof violence, probably aggravated by the diminished chances for sobs, among young Croat and Serbian naliorulists Croat Serbian nvalriet are still far fiom lhe crisis pioportions they reached in the, bul, il these (tends conlmue. grave disputes between thc two largest ethnic groups in Yugoslavia (see map on pageould break into the open again
Tlie most serious ethnic strile to date lias been the violent rioting by (he Albanians In the coonlrvs Kosovo Autonomous Province lessear after Tito's death- Special police, mililia. and some Army units restored order, but lhe Albanians are fir from pacified 4^
he Albanians aie restive because thev believe, at non-Slavs, in in overwhelmingly Slavic stale and residents of Yugoslavia's least developed region (see figurehey have been relegated lo the botlom of the economic heap. Therescript inn for re-
drevs ui their grievances it that their region's status be deviledullat
it The larger import of llie Albanians' demand is llkil one of Yugoslavia'i niaior nationalities islhe distidxihnai of isuwer bcQueatlicd by Tito The events in Kosovo kindled fears, mainly in Serbia, but also in ihe Slavic republics ol Montenegro andthat republic status for Kosovo would lead lo increased migration of non Albanians and calls for redrawing republic borders lo create an "ethnically pure" Albanian icpublic that might eventually seek reunion with Albania ^
ome Serbian politicians are using en flamed ethnic tension lo si lengthen their personal power. Thus far unsuccessfully, Serbia has revivedby Tito inrcassertlon of Serbia's de ture powers over Kosovo and the VojvodinaProvince Serbian asscrtiveness. in (urn. has aroused fears of other nationalities thai their interests loo are at risk Non-Serbs continue to block efforts by lhe Serbs to eipand their authority at the etpense ot tlse balances of power in the federal system (c)
hese dispules on tlte Albanian minorityalsotrategic dimension The Hotha regime in neiihboeing Albania, which vocally supports the Albanian minority cause in Yiigoslavia and rejects ties io the great powers, svill probablv soon facencertaintiesolitical succession This prospect ol change poses In mam Yiagosiav minds the likelihood thai Albania will break- out of its isolationism Recent effotts bs Moscow to woo Tiratte show that the USSK wants very much to reestablish its influenceulnerable Yugoslav flank These fears augmentYugoslavorMoscow mighl allow its Bulgarian allies lo revive their chums on Yugoslavia's Macedonian Republic, which abuts Kosovo andestive Albanian minority of its Own ^
Other Polilical Rifts
he difficulty Yugoslav leaders have lad in addressing the country's economic prnblems and llie Albanian minority issue rellrets the fact lhatis tendingoose confederation of eight ir publican and provincial power centers Often even members of llie leadership in Belgrade are loyal pitmoiily lo thetr various home regions And federal
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mum
Figure 3
Yugoslavia: Regional Disparities
iilii kmmw
Fitimilf* PtrS S
SSain ot Cmt Niliomt PtoJiM
PtfCTIll
UmlaMificil
proposals can be blocked in llie Federal Asscm-blv or ignored with impunity bv republican or piovin-cial governments, because the federal authorities are too divided to enforce their
ito's old euard aboeneration gap The younger, bettei educated pany membership isof their prolonged dominance. During theh Congress. In June, Ihe pressecurring complaint about "horizontallhat is. that the same senior officials move endlessly among key icpublir and federal
ugoslavia's increasingly open media have been making much of the corruption andthat pervades the Yugoslav hierarchy. Thcreputation has sufferedesult because, with Yugoslavia's austerity programs nnw taking their loll oo lower and middle income groups, anger has been growing oi'cr thc privileged Status of the hierarchy
en though members of thc old guard kept their grip on most senior posts during thc Congress in June, no one in the party Presidium hasapacity to be primiu interin Belgrade. But
SEjftf 1
failing health and the mechanic* of political rotation have eroded the core of experienced party leaden once thought likely tn dominate the coalition of old-guard Tiloisls within the collective leadeidiip Vladimir Bakartc of Croatia, bented toey stabilizing figure in post-Tito Yugoslavia, died reeenl-lyink. Tito's main expert on foreign affairs, lot) hb key federal postserbian power struggle last spting bccauie he was perceived as actingugoslav rathererb Ei-Defense Minister Nikola Lrabicic "rotated" to the Presidency of Serbia, an important republic post but one with limited national visibility Of Tito's closest aides, oniv Stane Dolanc. who lost his Presidium seat lasl June, stillotentially significant federal post Dolanc is an able and pragmatic politicianeputation forof Soviet intentions. As Interior Minister, lie knows tlie details of corruption allegations and couldecisive roleower straggle*!^
he chances for younger federal leaders aivd technocrats from the republics and provinces to claim mote influence seem lo be growing as their elders' performance draws increasing criticism. Even under normalush for power would be lilely from this Quarter within theew years But. as far as we know, thc neat generation remains anpotential forceoliiical program orleader with national recognition laj,
Ibe Military
he Yugoslav military, representing the most stronglyperhaps the only trulyIn the country, may welley factor. Some Yugoslav generals are openly critical ol the economic situation andaboul the potential for unrest. Bui, although thev helped Tito thwart poliiical challengers on sever al occasions, they have avoided choosing sides In today's policy debates. We believe that Ihe generals give high priority to maintenance of law and order and national independence and would move speedily and ruthlessly if serious unrest should deslabilirr? the countiy^^j^
owever, while the Army's ioie in managing lhe crisis would probablytabilizing one over thr short lerm. tbe Army probably could not wield the reins of power for any protracted period of tune
without serious problems Many of the non-Serbregard the Army as antipathetic to their special inleresls Mnreover. the cohesivencss of lhe miliiary williout Tilo as an anchor poinl for its loyalty has yet to be proved Past factional behaviorinority of generals and certain vcteiam groups, with power bases in the regions and provinces, suggests potential fissures that could deepen over boih policy issues and ethnic rivalries *^
Implications
For Yugoslavia
ugoslaviarolonged period ofdecline with growing risks of political Instability Belgrade's current polky of belated ad hocno' matter how rigorous and iustere their eventual dimensions, will themselves not improve Yugoslavia's chances of economic recovery. Moreover, the current financial crisis, which could continue Intos encouraging Belgrade to addresssscjknesses in its economic and political
o begin maslerimj its problems. Yugoslavia must soon start Io make fundamental systemicfor ihese changes to lake place, several developments are necessary
Belgrade must overcome its differences and give lhe lead lo market reformers in lhe current leadership
Tlieie musl be speedy passage of clfective new banking and financial arrangements
Tlie Yugoslavs musionsensus soon on an effective economic stabilization and recovery program
Westernprivatemust recognire these achievetnents and agree to roll over debts and reopen ciedil lines lo Yugosla-
e believe, however, that Belgrade, because nf deep differences in the leadership and betweenand thr regions, will attempt to muddh* through without adequate systemic changes and will not regain the confidence of Western banks The ensuingensrs mightrce leadership changes
XgKET
financial mnsJiamls will grow more rigorous and live regions will gain in powrr and do facto autonomy. Under these conditions, the new leadership's dunce to be effective would be tenuous at best In slwri. Yugoslaviarolonged pciiod ol increasing political and economic instability,rowing riskenous internal crisis Itasaatv
36ajor crisis is unlikely within the neat vear.
whether BelgradeignifKanl changes or not.
Hather, the evolution of the situation is likdy to be gradual The main indicators of increasing instability.
In order of their likelihood and our rough sense of their sequence, are;
inability of the leadership In agree on how to implement either the KraighcrReport or other meaningful reforms
, orsening economic titration and growing problems in managing the foreign debt
Reticence of foreign lenders to make new loam, leading either to urgent rescheduling or default.
leadership instability, with new leaders even less able to cope with regional factions
Increased political impoitance of the Yugoslav military as the only institutional bulwark of thc federal system.
serious dissatisfaction over economiccausing untest. particularly in the least developed regions, where austerity cuts deepest,omparable backlash in the more affluent
regions
Widening but conflicting demands for sweeping political ledums and requests by some dissidents for Western support
Senous ethnic disputes, wtth renewed violence In Kosovoeturn to the virulent Serb-Croat rivalry, the most serious polarity of all
This postulated deepening crisis could be halted or at least cased at various points if the urgency of ihe situation prompted Belgrade to undertake the neces sary reforms If the more serious of these protections come to pass the Yugoslav Federation svould in very real termbegin'. ^tajsj,
he military is not eagei to arbitrate lheof the fractious Yugoslavs Never!heless. It is likely lo be thtust to the fore if the political leaders perform
so ineptly that internal stability is threatened In fact one mighl eapect lhat some political leaders would seek to call in the military in an effort to support then positions However, it is unlikely tliat tlie miliiary would respond toall, particularly if itto have been prompted principally bv political partisanship. On Ihe other hand, if thc critii reached lhe stage ol violence or destabilizing Serb-Croattlse Yugoslav military would probably intervene to restore order However, military intervention would beemporary palliative and the deeper crisis would continueta,)
For Iho Soviets
ugoslavia has never lost its importance to the Kremlin, despite its break fiom Soviet dominationears ago Belgrade has helped to frustrate Moscow's dforts lo eontiol the Communist movement and to spread ils influence in the Nonaligned Movement Its eiamplc still challenges the permanence of the Soviets' East European empire. And It* strategic significance has if anything increased as recurrent crises in lhesl emphasise the need for improved Soviel access to the Mediterranean**^
hus, despile lhc Soviets' reluctantwith Yugoslavia's independent status, the USSR's long-ramie goals toward Yugoslavia have remained constant
ultimately end lhe schism and get Yugoslavia back into tlie Soviet camp
-Siiori of that, to gel Yugutlavia to move more, closely toward Soviet positions on international issues
slrengthen Soviet influence in Yugoslavia in general and to acquire greater use ol Yugoslav potts and airspace by tlse Soviet military
The relative, stability of Ihc Tito era offered Moscow few opcxKtunities to advance these goab For esample it has been forced to expend most of its energy trying to prevent tlse West from increasing itselgrade and attempting to thwart any developments that mighl set back its own long-term plans
s Yugoslavia enlcna period of possibly serious instabilily. the worst development from the Soviet standpoint would be the emergenceegime that
favor Western-oriented reformsro-Western foreign policy. On the other hand, slwuld tbc Fcdciation disintegrate, lhc Soviet* would (ace lhc threat of apossibly spreading instability in lhc Balkans and particularly on Hie southern flank of the Warsaw Pact, where Romanian stability iserious question mark.*!
n worst case scenarios such as these, tlse Soviets would work hard to defend their interests and to achieve at least scene of their long-term goab but would probably try to avoid direct militaryThey might, for example, wish to sponsor elements In Yugoslavia that sought to restoic national unity and enhance Communist power, particularly if backing by the Army and an important ethnicthe Serbs andthe effort credible. Orituation of total turmoil, in which they could find no viable homegrownthe Soviets might consider the use of military force to protect their interests and lo sponsor the formationovernment sympathetic or beholden to the USSR But the use of military force outside Ihe Warsaw Pad in Europe, as well as the magnitude of the effort required, would give the Soviets serious pause has not considered Yugoslavia to be a vital national Interest foi almostears, and II Is well aware that the Weil does noi tacitlyoviet right to move militarily against Yugoslavia- Thus, as was not the case concerning, for eiample. Cxeeboslo-vakia8 and Polandhe Soviets must ponder military adion 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 tbe Soviets cannot be predicted with any real certainty, the temptation to lake action, short of military intervention, will beif Yugoslavia veers strongly to the West It is thus possible that dthcr the Soviets or the West could find themselves involved in Yugoslaviaegree not initially contemplated*
n any event, because the situation in Yustusla via is not likdy lo reach crisis stage In lhe next yearalf. Moscow's more immediate concerns will be thc consolidation ol Andropov's leadership at home, serious domestic economic problems, rivalries with the Uniied States and China, and difficultiesastern Europe Nonetheless. Yugoslavia will remain an aiea of continuing interest, and, il it drifts into
much greater instability. Moscow will perforce seek to protect its pout ton there and could find itsell drawnole il would prefei not to play ^Kaj,
ver the pastears the USSR's economic tics lo Yugoslavia have been growing monger, and they offer thc Soviets some leverage. (Seeboulercent of Yugoslavia's exports go to tlie USSR, up fiom ercent ears ago, ander cent of Yugoslavia's imports come from the USSR. Wclhat2 Yugoslaviarade surplus with the USSR of0 million. Yugoslavia sells to theInflatedsuch as clothing, shoes, and heavy machinery that it cannot markd in the West fot the same kind of financial return. On the import side. Yugoslavia is particularly dependent on Soviet energy, which fillsercent of its total need, and pays for its imports with e> ports, rather than with scarce haid currency. (Sec
Prompted by theit own economic problems, the Soviels are likely to make tougher economic demands on live Yugoslavs (as indeed they already haveis their Bloc atliei) Among other things thev probably will use then economic leverage to remind the Yugohe importance of maintaining lies to the East and minimizing relations with llie West They may aho try to use economic pressures to constrain any Yugoslav movement loward reformsestern -character. Some Soviet pressure is already apparent in the USSR's current demands for belter price arrange-menn its bilateral Irade with Yugoslavia and in its insistence on increased deliveries of goods that the Yugoslavs need in sell for hard currency in the Writ
We do not believe, however, that the Soviets will pull out all thc economic slops in an eMorl to deslabiliie Ihe Yugoslav economy. This would almost certainly be seen as an ad of de facto aggressaon b* Yugoslavia's peoiile and by the national political and military leaderships as well. And tho Soviels would (ear that the West would in these circumslances trv to strengthen its influence in Belgrade bv stepping up its-own programs of economic and political aid Overall then, while likely to continue to offer some economic inducements to Yugoslavia, the Soviets will probably moveoughen their lermi of trade with Belgrade
X
Figure 4
International Distribution of Yugoslav Trade by Region
'inihj'f in Vuiotli'ii'i
USS*
ii(ice'
The Soviel Union hastudied silence aboul the widely reported Western aid package and otherwise nm offered any prescription toabouto solve its economica marked contrast to its behavsor visaPoUnd As the Western aid package is currently structured. Ihe USSR ilo Dndermiae Western efforts lo prevent Yugoslavwhich, if successful, could improve the attitude of bankers toward Eastern Europehole. Al the same time. Moscow will attempt lo profit from this assistance by intensifying Its efforts to improve its own terms of trade with Belgia.li-%1
he Soviets have some limited military leverage. The Yugoslavs are largely independent producers of miliiary hardware: they arc dependent on lhe USSH only lot advanced military equipment, such as anliau-crafl missiles, tanks, and Kl fighters, and lhe sparr parts
needed lo maintain and operate Ihis equipment.could slow down deliveries of miliiary equipment and spare parts This would force Belgrade lo seek other suppliers ol Soviet weaponry or compel them to find Western replacements or even to go without fc
X
owever, Yugoslavia produces moil of ils giound forces equipment: thoae items deemed bv the Yugoslavs to be ciucial to theii military strategy Thii strategy relies on partisan warfare fought fromin the mountainous countryside Alio, lhe Yugoslavs have some miliiary leverage ovei Moscow Tin- use of Yugoslav repair facilities tol diesel submarines each year allows the Sovicls In significantly increase lhc on-station lirne olpatrols in lhe Mediterranean The use of Yugoslav airspace has been very valuable in helping Moscow assist in allies in Middle East crises
5
Yugoslavia's Energy SourcesiK.ii itiinuniniHin
he Soviets have only limited resource! lor applying polilical pressures in Yugoslavia They do not. in tact, possess anyolitical assets in the country
No Yugoslav leaders are known to (ivorlo Soviet foreign policy gnah
The reserve ol avowedly pro-Soviet sympathizers inside Yugoslaviamallhat has been driven underground
Soviet elterit over the years to seek special influence with the secret police have not borne (ruil, and are not likely to do so in thelulure
Thc Yugoslav* remain sensitive and vigilant to any Soviet clandestine activities, and their security service seems to think that it can maintain controlwe would eapect the Soviets to attempt lo strengthen then covert assetsrolonged crisis
oscow could, to be sure, make trouble by helping lo eaacerbate national and ethnic tensions It could, fot instance, play on Serbia's fears of Croatian nationalism or encourage lite Kosovo Albanians Bul playing the ethnic game would be very ritkv Thus, if Moscow is seen to be tiding with tbe Serbs. Il loses ground with Yugoslavia's non-Serb majority, which fears Serbian dominance. Supporting the Albanians, on Ihe other hand, would undermine Moscow's efforts lotrrjnger relation with lhe Serbs and possibly Other Slavs Moscow could also encourage Bulgarian claims on Yugoslavia's Macedonian Republic. Bul.it mutl be wary ol fomenting Bulgarian Irredentism on tlse Macedonian issue lest latent problemsimilar nature erupt elsewhere in its East European cmpiie. *^
verall, under the gradually deterioratingwe see most likely lo hold sway in Yugoslavia over die not yearall, we would expect the USSH lo apply some economic and other kinds of pressure on Yugoslav leaders,eminder lhal Moscow's interests mint be taken into serious account Butoubt that the Sovtets will go much further than this, principally be cause their tanoble support inimited and because blatant pressure is likelyounterproductive.
for the West
United Stales and its Weal European0 help Yugoslavia through itsover the next sit months In some ways theis as important ai Its results, itign toleaders and its people lhat lhe Weiland its international poslure. However,ih' assistance is provided, Yugoslavia's financial and
ic problems are far from over and ils leaden will be looking lo Ihe West for continued aid
continuing need (or Western financialmaintain pressure In Yugoslavia to correctpractices and hold lo more severeOne particular sector, Ihe decentralizedwill come under pressure from abroadwill have to better control lhe hardin reganal banks in order lo repay foreignfedeial leadership's limited powers over thealso will be sorely tested in holding down local
demand (ni nonessential impotti, higher wages, and industrial subsidies Thc iiK-cdtr, vlioK. lerm reforms and austerity meavuics will lair poliiical power and will, hul, on lhc basis ol Ihc austerity measure* uheady laken, thev aie not beyond^
SI Even underst oland properly conditioned nulude support and improved domestic leadership Yugoslavia's economic problems will certainly continue4 The Wesl will be able
lo encourage Yugoslav decisionmakingore rational economic course and help maintain Yugosla-via'scurrcnt inlcrnational alignment However, it can neither guarantee tbc political courage to make the additional unpalatable and difficult decisions nor rapidly restore economic prosperity and political stability The achievement of these two goals will depend on Yugoslavia's own leadership and will, al best, take years to achieve
SVREI
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