Current Support Brief
A CRACK IN THE CEMA FACADEUMANIA
CIA/RR3
CENTRAL INTELLIGENCE AGENCY Office of Research and Reports
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A CRACK IN THE CEMA FACADE -- RUMANIA
Significant conflicts of interest over economic policy appear to have arisen between Rumania andembers of the Soviet Bloc's Council for Mutual Economic Assistance (CEMA). The precise nature of these conflicts is not known, but clearly they are related to Ihe direction of future Rumanian industrialization. In particular, they appear to involve Soviet opposition to the Galati steel combine and possibly also pressure on Rumania to take measures to help relieve Bloc agricultural problems. Rumania's leaders apparently regard such developmentshreat to their plans for rapidly broadening the industrial base of the country and consequently are resisting the tendencies in CEMAeduction in national sovereignty over economic policy.
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The strengthening of CEMA raises the possibility of conflict and has caused some adverse reaction throughout the Satellites, butonly in Rumania has the regime gone on record in opposition to prevailing CEMA doctrine.
Evidence of Conflict
, Since the Moscow Economic Conference of2 and Khrushchev') visit to Rumania at about the same time, there hasiscerniblebetween the tone of Rumanian and other Satellite pronouncements
on economic cooperation. Bucharest's press release on the Centralplenumovember, which apparently was concerned with
both3 plan and CEMA matters, was limitedrief communique.
in contrast to the more extensive discussions published by other Soviet
Bloc countries.
More recent actions by the Rumanian Communist Party have even more directly revealed the regime's discontent with CEMA policies. -An enlarged plenary session of the Rumanian Central Committee, heldarch, dealt exclusively with CEMA problemsa very unusual circumstance. The communique' issued at Ihe end of the session
ignored the proposalsnew stage" of economic cooperation that were made at the Moscow conferences and in subsequent statements by Khrushchev and other leaders. In addition, the communique' pointedly emphasized the "national independence and sovereignty" of CEMAand approved the activities ol Birladeami, the Rumanianto the CEMA Exocutive Committee. By contrast, official statements of the other Satellite regimes have emphasized (although somewhat less strongly than Khrushchev) the need to treat the Blocreater extent as an organic economic entity.
AccordingCEMA Executive
Committee at its3 meeting asked Rumania to makemodifications in its economic plansino abandon plans for most major new industries and lo concentrate on petroleum products, fertilizers, and agriculture. " It is reported that Birladcanu opposed this proposal and that he later was supported by the Rumanian Central Committee and by Party and government chief Gheorgiu-Dej, who agreed totrong letter of protest to Khrushchev. Tills position is believed to have been discussed and endorsed by Party organizations throughout the country.
Reports that Rumania was to emphasize mainly agriculture and supporting industries date from Khrushchev's visit to Rumania In And, according to the Neue Zuercher Zeitunghe areas of disagreement at the2 and3 CEMAcentered around proposals to make the decisions of the CEMACommittee binding on all members and tooint planning organ.
Another indication of disagreement over Rumania's economic role in the Bloc is the virtual absence of references in Rumanian publications or in those of other Bloc countries to Rumania's specific role in intra-Bloc specialization. All of the other Satellites (except Albania) arc said to have agreed, under CEMA recommendations, to "specialize"ariety of products, but there is no such information on Rumaniawith the exception of petroleum equipment.
2. Doctrinal Issues
The disagreement between Rumania and CEMA probably stemmed originallyonflict of interest on concrete economic issues, but now also involves the interpretation of CEMA economic doctrine. Rumanian statements in this regard are not in direct contradiction to those of Soviet or other Satellite leaders. They differ noticeably in emphasis, however, and in particular seem to demur fromthe "new stage" of economic cooperation announced in Moscow last June.
In its Marchhe Rumanian Central Committee,agreeing with the CEMA "Basic Principles" adopted at the2 Moscow Conference, chose to interpret this document as being "in the spirit of0 Moscow declaration ofommunistocument that stressed the coordination of national plans. Totally ignored were the aspects of the "Basic Principles" that could becontrary to the Rumanian position and the communique" of the2 Moscow conference of Representatives of the Communist and Workors' Parties, which even went somewhat further than the "Basic Principles" in emphasizing the dominance of "organic" development over the mere coordination of national plans. Even in their references to0 declaration, the Rumanians were certainly engaging in se-lective amnesia. The final phrases of the March communique seem to give the Rumanian view of priorities as (a) the development of each socialist country, (b) the gradual reduction of differences in theirlevels, and (c) general progress of the entire socialist camp.
Rumanians are certainly not alone in their opposition to theof CEMA. Measures intended to develop the supranational character of CEMA and correspondingly weaken national sovereignty carry the seeds of dissension in all the Satellites. There has alwayside gap, however, between principle and implementation in CEMA matters, and CEMA cooperation can bring some real benefits to the member countries. The tendency, therefore, has been to proclaim general agreement on the principles of cooperation so long as these were expressed vaguely enough
to leave tome loopholes, and to deal with each concrete case on Its merits. Only in Rumania has the regime itself expressed open opposition to Soviet doctrine on intra-Bloc economic cooperation. 3. Economic Issues
The exact nature of the concrete economic issues in this dispute can only be surmised. It has been alleged that the USSR wishes to prevent Rumania's further industrialization, or. which comes to nearly the same thing, that CEMA has asked Rumania to limit its future development to petroleum refining, fertilizers, and In fact, CEMA is probably opposing some aspects of Rumanian plans for industrialization, but not the rapid development of industry as such. The principles of CEMA and Soviet doctrine both call for rapid industrialization of all Socialist countries. Moreover, ountry even less developed than Rumania,wenty Year Plan, which was announced after the June Moscow Conference and whichfor an industrialization rapid and broad enough to satisfy all but the most rabid economic nationalist. Quite possibly Rumania, because of its relatively low level of industrialization, is much more interested in diversification of production and in developmental aid from abroad than in product specialization, but the difference in emphasis need not cause overt conflicts except under special circumstances. One plausible set of circumstances wouldoviet decision to reduce or withhold support from the planned Galati steel combine and, possibly. Blocon Rumania to increase its allocations for agriculture and to shift part of its agricultural exports from the West to the Soviet Bloc.
a. Galati Steel Combine
The Galati steel combine is scheduled to be by far the largest project of the forthcoming Rumanian Five Year. after all of the various stages have been completed, the plant is supposed to be one of the largest in Europe. Plans for the Galati combine, which would nearly triple the present capacity of the Rumanian steel industryasic element of Rumanian objectives for industrial development. In particular, future plans for the machineindustry probably depend to an important extent on the steel to be
obtained from Galati, for thciie amounts of steel arc so large that Rumania would have great difficulty earning enough foreign exchange to Import them. Consequently, the Rumanian regime probablythe Galati combine to be one of the main pillars fortrong industry and views it with fond nationalistic attachment. It seems certain that the original planning for the Galati plant waswith Soviet blessing and that the USSR promised to deliver much of the equipment for the plant.
In the past year, there haveumber of reports that the USSR has refused to give the support for the Galati plant that it had promised at the outset. Moreover, the Rumanians have signed contracts with French and British firmsillion worth of equipment for Galati, to be delivered. and are negotiating additionalof comparable size with Western suppliers. This information strongly suggests that the'USSR has put pressure on the Rumanians to curtail the scope or modify the timing of the Galati project, if not to abandon it. Soviet objection toey project would inevitablyconsiderable anger and dismay within the Rumanian regime.
The apparent Soviet opposition to Rumanian plans for Galati raises questions as to what direction Rumanian Industrial expansionuestion on which Soviet and Rumanian interests might beto differ from time to time. It is likely that the USSR has always had doubts as to the economic soundness of the Galati plant and thatdevelopments in the Bloc have further lowered the priority given to this plant by the USSR. Construction at Galati is just getting under way while emphasis throughout the Bloc is shifting away from theof new construction to the completion of existing Investment projects and Bloc production of metallurgical equipment is lagging, thus making the supplying of equipment for Galati difficult. Moreover the principal Bloc producers of steel may now bearder look at long-range plans for expansion, with tbe growing realization that long-term trends in technology are likely to slow the rise in demand for steel. Whatever the causes, the Rumanian regime probably feels that its national interests arc being slighted.
b.
Rumanian Trade with the West
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Rumania may also be under attack in the Soviet Bloc lor not doing its part to relieve the shortage of agricultural products,grains, in the Soviet Bloc. There is no direct evidence of such an attack, but one would be plausible under the circumstances. 9 the share of the West in Rumanian trade has risen from about one-fifth to about one-third. arge part of the increased trade with the West involved an exchange of Rumanian grain for Western machinei and equipment, the share of Western Europe in Rumanian grain exports having risen from aboutercent9 to more thanercent Although the Bloc probably favors Rumanian imports of machinei from the Westspecially when these imports consist of products that are in very scarce supply in the Bloc and in which Western technology is superior Rumania may have been under some pressure to redirect some of its grain exports to the Bloc. Such pressure is most likely to have come from East Germany and Czechoslovakia, both of which have had to pay for growing imports of foods with scarce Western exchange. 4. Prospects
There are good economic roasons for both Rumania and CEMA toompromise solution to their apparent dispute, but considerable-political difficulties stand in the way ofompromise. Increased trade with the West has given Rumania more flexibility in its dealings with Soviet Bloc countries than itew years ago. but, because two-thirds of its trade is still with the Bloc, this flexibility necessarily is limited. For their part, other CEMA members have no reason to oppose Rumanian Industrialization and probably would be prepared toolution that would satisfy Rumanian aspirations for rapid industrial growth forarger role for Rumania in chemicals and larger exports of steel to Rumania to compensatelower growth of the steel iriiiustry than originally planned. However, the Rumanian leadership would find it difficult to agreeompromise, because it is politically committed to the rapid broadening of the country's indus-Irial base, and in particular to the construction of the Galati combine. The regime may also believe that, within limits, its bargaining position
is favorable. The USSR's determination to exert strong pressure on Rumania is open to question, and. although the other Satellites may dis agree with Rumania on particular economic issues, they would beto support any strong sanctions against Rumania out of concern for their own future position.
Even if the dispute Is quickly resolved, however, the apparent Soviet conflict with Rumania presages similar tensions with other Satellites in the future if the USSR is not extremely careful in Its use of CEMA as an instrument of Soviet policy. Economic nationalism is by noumanian monopoly, and rumblings of opposition to any restriction of economic independence are frequently heard in other Satellites. The Satellite regimes on the whole appear to favor closer economic cooperation within tho Bloc, feeling that their countries gain on balance, but it is not difficult to imagine situations in which they would strongly oppose CEMA proposals in order to protect their national interest.
Original document.
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