International relations within the Comecon
Encyclopedia
The "Council for Mutual Economic Assistance" (Comecon) was an economic organization of communist state
s, created in 1949, and dissolved in 1991, with the collapse of the Soviet Union
. International relations within Comecom is best discussed under three separate categories, as the nature of the relationships between the Soviet Union and its constituent members were not homogeneous.
and the six East European countries had generally remained the same. The six countries were: Albania
, Bulgaria
, Czechoslovakia
, Hungary
, Poland
, and Romania
. The Soviet Union had provided fuel, non-food raw materials, airplane and helicopter designs and semi-manufactures ("hard goods") to Eastern Europe
, which in turn, had supplied the Soviet Union with finished machinery, and industrial consumer goods ("soft goods").
This kind of economic relationship stemmed from a genuine economic problem within the Eastern communist states in 1950s. Eastern Europe has poor energy and mineral resources, a problem exacerbated by the low energy efficiency of East European industry. As of mid-1985, factories in Eastern Europe still used 40% more fuel than those in the West. Eastern European countries have always relied heavily on the Soviet Union for oil
. During the 1950s, Eastern Europe supplied the Soviet Union with those goods, otherwise unavailable, because of Western embargo
es.
Thus, from the early 1950s to the early 1970s, the Soviet Union inexpensively supplied its East European clients with hard goods in exchange for finished machinery and equipment. Soviet economic policies also brought with them, political and military support. During these years, the Soviet Union could be assured of relative political tranquillity within the bloc
, obedience in international strategy, as laid down by the Soviet Union, and military support of Soviet aims. By the 1980s, both parties were accustomed to this arrangement, which was still particularly advantageous to The Soviet Union, as it could expand its energy and raw materials complex quickly, and relatively cheaply.
In the 1970s, the terms of trade
for the Soviet Union had improved. The OPEC
price for oil had soared, placing the oil-rich Soviet Union in an advantageous position. The soaring price increased the cost of providing Eastern Europe with oil at prices lower than those established by OPEC. In addition, extraction and transportation costs for oil, much of which originated in Siberia
, was also rising. In response to the market, the Soviet Union decreased its exports to its East European partners, and increased its purchases of soft goods from these countries. This policy forced the East European countries to turn to the West for hard goods, despite the fact that they had fewer goods to export in return for hard currency.
Any hard goods supplied to Eastern Europe by the Soviet Union were sold essentially at a discount price, as Comecon prices lagged behind, and were lower than those of the world market. Developments in the 1980s made this situation even more complex. The 1983–84 decline in international oil prices left the Soviets with large holdings of oil that, because of the lag in Comecon prices, were still rising in price. The "non-market gains from preferential trade" became quite expensive for the Soviets. East European profits from the implicit subsidization were almost US$102 billion between 1971 and 1981.
, Mongolia
, and Vietnam
, benefited them, but the burden on the six East European Comecon members had been most unwelcome. Comecon was structured in such a way that the more economically developed members provided support to the less developed members in their major economic sectors. When Mongolia initially joined the Comecon in 1962, there was no great added burden. The population of Mongolia was relatively small, and the country's subsidies came primarily from the Soviet Union. But the addition of Cuba in 1972, and Vietnam in 1978, quickly escalated this burden. As of early 1987, three-fourths of Comecon's overseas economic aid went to Cuba, Mongolia, and Vietnam: almost US$4 billion went to Cuba, US$2 billion to Vietnam (half in military aid), and US$1 billion to Mongolia.
Although the Soviets carried most of the burden since 1976, the East Europeans had been persuaded to take part in projects to boost the developing countries' economies. East European countries imported Cuban nickel
, and Mongolian molybdenum
and copper
. They were also pressed to buy staples, such as Cuban sugar (80 % of Cuba's exports), at inflated prices. Eastern Europe also contributed to the International Investment Bank, from which the underdeveloped three could acquire loans at lower interest rates than the East Europeans themselves. The Soviets also sold their fuel and raw materials to Cuba, Vietnam, and Mongolia for less than it was sold to the six East European members. Hence, the former had become competitors for the slowly diminishing Soviet resources. In the late 1980s, the only benefit accruing to the East Europeans was the services provided by Vietnamese guest workers. However, the majority of the Vietnamese had worked primarily on the Friendship pipeline in the Soviet Union.
Comecon was investing heavily in Mongolia, Cuba, and Vietnam, and the three countries had benefited substantially from its resources. In 1984, increases in capital investments within Comecon were the highest for Vietnam and Cuba — coming to 26.9 % for Vietnam, and 14 % for Cuba, compared with 3.3 % and less, for the others, except Poland
and Romania
. Increased investments in Mongolia lagged behind Poland and Romania, but were nevertheless substantial, at 5.8 %. In 1984, the economies of the three developing countries registered the fastest industrial growth of all the Comecon members.
Given their locations, Comecon membership for Mongolia, Cuba, and Vietnam principally served Soviet foreign policy interests. The Soviet Union contributed the most to the development of the three poorer Comecon members, and it also reaped most of the benefits. It imported most of Cuba's sugar and nickel, and all of Mongolia's copper and molybdenum (widely used in the construction of aircraft, automobiles, machine tools, gas turbines, and in the field of electronics
). Cuba had provided bases for the Soviet Navy
, and military support to Soviet allies in Africa
. Vietnam made its naval and air bases, as well as some 100,000 guest workers, available to the Soviets.
At the June 1984 Comecon economic summit, and at subsequent Council sessions, the policy of equalizing the levels of economic development between Comecon member countries was repeatedly stressed. At the November 1986 Comecon session in Bucharest
, the East European members "outlined measures to further improve cooperation with Vietnam, Cuba, and Mongolia with a view to developing the main sectors of these countries' national economies". Moreover, the Soviets have repeatedly stressed their earnestness in "normalizing the situation in the Asia-Pacific region
, and in including that region in the overall process of creating a universal system of international security".
, Latin America
, and Africa. A monetary figure for this assistance was difficult to estimate, although a June 1986 Czechoslovak source valued the exchange between Comecon and developing countries at 34 billion rubles
per year, the equivalent of US$44.2 billion. The precise nature of this aid was unclear, and Western observers believe the data to be inflated.
From the 1960s to the mid-1980s, Comecon had sought to encourage the development of industry, energy, transportation, mineral resources, and agriculture of Third World countries. Comecon countries had also provided technical and economic training for personnel in Asia
, Africa, and Latin America
. When Comecon initially lent support to developing countries, it generally concentrated on developing those products that would support the domestic economies of the Third World, including replacements for imports. In the 1970s and 1980s, assistance from Comecon had been directed toward export-oriented industries. Third World countries had paid for this support with products, produced by the project for which Comecon rendered help. This policy had provided Comecon with a stable source of necessary deliveries, in addition to political influence in these strategically important areas.
Communist state
A communist state is a state with a form of government characterized by single-party rule or dominant-party rule of a communist party and a professed allegiance to a Leninist or Marxist-Leninist communist ideology as the guiding principle of the state...
s, created in 1949, and dissolved in 1991, with the collapse of the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
. International relations within Comecom is best discussed under three separate categories, as the nature of the relationships between the Soviet Union and its constituent members were not homogeneous.
The Soviet Union and Eastern Europe
Since Comecon's creation in 1949, the relationship between the Soviet UnionSoviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
and the six East European countries had generally remained the same. The six countries were: Albania
Albania
Albania , officially known as the Republic of Albania , is a country in Southeastern Europe, in the Balkans region. It is bordered by Montenegro to the northwest, Kosovo to the northeast, the Republic of Macedonia to the east and Greece to the south and southeast. It has a coast on the Adriatic Sea...
, Bulgaria
Bulgaria
Bulgaria , officially the Republic of Bulgaria , is a parliamentary democracy within a unitary constitutional republic in Southeast Europe. The country borders Romania to the north, Serbia and Macedonia to the west, Greece and Turkey to the south, as well as the Black Sea to the east...
, Czechoslovakia
Czechoslovakia
Czechoslovakia or Czecho-Slovakia was a sovereign state in Central Europe which existed from October 1918, when it declared its independence from the Austro-Hungarian Empire, until 1992...
, Hungary
Hungary
Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
, Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
, and Romania
Romania
Romania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea...
. The Soviet Union had provided fuel, non-food raw materials, airplane and helicopter designs and semi-manufactures ("hard goods") to Eastern Europe
Eastern Europe
Eastern Europe is the eastern part of Europe. The term has widely disparate geopolitical, geographical, cultural and socioeconomic readings, which makes it highly context-dependent and even volatile, and there are "almost as many definitions of Eastern Europe as there are scholars of the region"...
, which in turn, had supplied the Soviet Union with finished machinery, and industrial consumer goods ("soft goods").
This kind of economic relationship stemmed from a genuine economic problem within the Eastern communist states in 1950s. Eastern Europe has poor energy and mineral resources, a problem exacerbated by the low energy efficiency of East European industry. As of mid-1985, factories in Eastern Europe still used 40% more fuel than those in the West. Eastern European countries have always relied heavily on the Soviet Union for oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
. During the 1950s, Eastern Europe supplied the Soviet Union with those goods, otherwise unavailable, because of Western embargo
Embargo
An embargo is the partial or complete prohibition of commerce and trade with a particular country, in order to isolate it. Embargoes are considered strong diplomatic measures imposed in an effort, by the imposing country, to elicit a given national-interest result from the country on which it is...
es.
Thus, from the early 1950s to the early 1970s, the Soviet Union inexpensively supplied its East European clients with hard goods in exchange for finished machinery and equipment. Soviet economic policies also brought with them, political and military support. During these years, the Soviet Union could be assured of relative political tranquillity within the bloc
Eastern bloc
The term Eastern Bloc or Communist Bloc refers to the former communist states of Eastern and Central Europe, generally the Soviet Union and the countries of the Warsaw Pact...
, obedience in international strategy, as laid down by the Soviet Union, and military support of Soviet aims. By the 1980s, both parties were accustomed to this arrangement, which was still particularly advantageous to The Soviet Union, as it could expand its energy and raw materials complex quickly, and relatively cheaply.
In the 1970s, the terms of trade
Terms of trade
In international economics and international trade, terms of trade or TOT is /. In layman's terms it means what quantity of imports can be purchased through the sale of a fixed quantity of exports...
for the Soviet Union had improved. The OPEC
OPEC
OPEC is an intergovernmental organization of twelve developing countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC has maintained its headquarters in Vienna since 1965, and hosts regular meetings...
price for oil had soared, placing the oil-rich Soviet Union in an advantageous position. The soaring price increased the cost of providing Eastern Europe with oil at prices lower than those established by OPEC. In addition, extraction and transportation costs for oil, much of which originated in Siberia
Siberia
Siberia is an extensive region constituting almost all of Northern Asia. Comprising the central and eastern portion of the Russian Federation, it was part of the Soviet Union from its beginning, as its predecessor states, the Tsardom of Russia and the Russian Empire, conquered it during the 16th...
, was also rising. In response to the market, the Soviet Union decreased its exports to its East European partners, and increased its purchases of soft goods from these countries. This policy forced the East European countries to turn to the West for hard goods, despite the fact that they had fewer goods to export in return for hard currency.
Any hard goods supplied to Eastern Europe by the Soviet Union were sold essentially at a discount price, as Comecon prices lagged behind, and were lower than those of the world market. Developments in the 1980s made this situation even more complex. The 1983–84 decline in international oil prices left the Soviets with large holdings of oil that, because of the lag in Comecon prices, were still rising in price. The "non-market gains from preferential trade" became quite expensive for the Soviets. East European profits from the implicit subsidization were almost US$102 billion between 1971 and 1981.
Mongolia, Cuba, and Vietnam
Soviet-initiated Comecon support for the Council's three least-developed members, CubaCuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
, Mongolia
Mongolia
Mongolia is a landlocked country in East and Central Asia. It is bordered by Russia to the north and China to the south, east and west. Although Mongolia does not share a border with Kazakhstan, its western-most point is only from Kazakhstan's eastern tip. Ulan Bator, the capital and largest...
, and Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...
, benefited them, but the burden on the six East European Comecon members had been most unwelcome. Comecon was structured in such a way that the more economically developed members provided support to the less developed members in their major economic sectors. When Mongolia initially joined the Comecon in 1962, there was no great added burden. The population of Mongolia was relatively small, and the country's subsidies came primarily from the Soviet Union. But the addition of Cuba in 1972, and Vietnam in 1978, quickly escalated this burden. As of early 1987, three-fourths of Comecon's overseas economic aid went to Cuba, Mongolia, and Vietnam: almost US$4 billion went to Cuba, US$2 billion to Vietnam (half in military aid), and US$1 billion to Mongolia.
Although the Soviets carried most of the burden since 1976, the East Europeans had been persuaded to take part in projects to boost the developing countries' economies. East European countries imported Cuban nickel
Nickel
Nickel is a chemical element with the chemical symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel belongs to the transition metals and is hard and ductile...
, and Mongolian molybdenum
Molybdenum
Molybdenum , is a Group 6 chemical element with the symbol Mo and atomic number 42. The name is from Neo-Latin Molybdaenum, from Ancient Greek , meaning lead, itself proposed as a loanword from Anatolian Luvian and Lydian languages, since its ores were confused with lead ores...
and copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
. They were also pressed to buy staples, such as Cuban sugar (80 % of Cuba's exports), at inflated prices. Eastern Europe also contributed to the International Investment Bank, from which the underdeveloped three could acquire loans at lower interest rates than the East Europeans themselves. The Soviets also sold their fuel and raw materials to Cuba, Vietnam, and Mongolia for less than it was sold to the six East European members. Hence, the former had become competitors for the slowly diminishing Soviet resources. In the late 1980s, the only benefit accruing to the East Europeans was the services provided by Vietnamese guest workers. However, the majority of the Vietnamese had worked primarily on the Friendship pipeline in the Soviet Union.
Comecon was investing heavily in Mongolia, Cuba, and Vietnam, and the three countries had benefited substantially from its resources. In 1984, increases in capital investments within Comecon were the highest for Vietnam and Cuba — coming to 26.9 % for Vietnam, and 14 % for Cuba, compared with 3.3 % and less, for the others, except Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
and Romania
Romania
Romania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea...
. Increased investments in Mongolia lagged behind Poland and Romania, but were nevertheless substantial, at 5.8 %. In 1984, the economies of the three developing countries registered the fastest industrial growth of all the Comecon members.
Given their locations, Comecon membership for Mongolia, Cuba, and Vietnam principally served Soviet foreign policy interests. The Soviet Union contributed the most to the development of the three poorer Comecon members, and it also reaped most of the benefits. It imported most of Cuba's sugar and nickel, and all of Mongolia's copper and molybdenum (widely used in the construction of aircraft, automobiles, machine tools, gas turbines, and in the field of electronics
Electronics
Electronics is the branch of science, engineering and technology that deals with electrical circuits involving active electrical components such as vacuum tubes, transistors, diodes and integrated circuits, and associated passive interconnection technologies...
). Cuba had provided bases for the Soviet Navy
Soviet Navy
The Soviet Navy was the naval arm of the Soviet Armed Forces. Often referred to as the Red Fleet, the Soviet Navy would have played an instrumental role in a Warsaw Pact war with NATO, where it would have attempted to prevent naval convoys from bringing reinforcements across the Atlantic Ocean...
, and military support to Soviet allies in Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
. Vietnam made its naval and air bases, as well as some 100,000 guest workers, available to the Soviets.
At the June 1984 Comecon economic summit, and at subsequent Council sessions, the policy of equalizing the levels of economic development between Comecon member countries was repeatedly stressed. At the November 1986 Comecon session in Bucharest
Bucharest
Bucharest is the capital municipality, cultural, industrial, and financial centre of Romania. It is the largest city in Romania, located in the southeast of the country, at , and lies on the banks of the Dâmbovița River....
, the East European members "outlined measures to further improve cooperation with Vietnam, Cuba, and Mongolia with a view to developing the main sectors of these countries' national economies". Moreover, the Soviets have repeatedly stressed their earnestness in "normalizing the situation in the Asia-Pacific region
Asia-Pacific region
Asia-Pacific region may refer to:*Asia-Pacific, a geographic designation*Asia-Pacific Scout Region *Pacific Rim, countries and cities located around the edge of the Pacific Ocean...
, and in including that region in the overall process of creating a universal system of international security".
Support for Developing Countries
Comecon provided economic and technical support to 34 developing countries in 1960, 62 countries in 1970, and over 100 countries in 1985. As of 1987, Comecon had assisted in the construction or preparation of over 4,000 mostly industrial projects in AsiaAsia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
, Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
, and Africa. A monetary figure for this assistance was difficult to estimate, although a June 1986 Czechoslovak source valued the exchange between Comecon and developing countries at 34 billion rubles
Soviet ruble
The Soviet ruble or rouble was the currency of the Soviet Union. One ruble is divided into 100 kopeks, ....
per year, the equivalent of US$44.2 billion. The precise nature of this aid was unclear, and Western observers believe the data to be inflated.
From the 1960s to the mid-1980s, Comecon had sought to encourage the development of industry, energy, transportation, mineral resources, and agriculture of Third World countries. Comecon countries had also provided technical and economic training for personnel in Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
, Africa, and Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
. When Comecon initially lent support to developing countries, it generally concentrated on developing those products that would support the domestic economies of the Third World, including replacements for imports. In the 1970s and 1980s, assistance from Comecon had been directed toward export-oriented industries. Third World countries had paid for this support with products, produced by the project for which Comecon rendered help. This policy had provided Comecon with a stable source of necessary deliveries, in addition to political influence in these strategically important areas.