Spying on the World
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61. Czechoslovak dependence on the Soviet Union for supplies of basic raw materials is likely to continue, and in the case of crude oil, will no doubt increase since, under an agreement of September 1966, Czechoslovakia is to deliver on long-term credit machinery and equipment for the exploitation of Soviet oilfields, with eventual repayment in oil deliveries over a long period. Czechoslovakia has also agreed to invest, on similar terms, in the Soviet gas and iron ore industries, and will receive supplies of natural gas and pelletised ores in repayment. A switch in source of supply for such raw materials would in any case not be feasible because of the need to recoup on investments already made.
62. As regards Czechoslovak exports, machinery and equipment form about half of the total; the largest single customer being the Soviet Union. Altogether, the communist countries take nearly 80 per cent of these exports of machinery and equipment. Czechoslovakia would like to expand her machinery exports to the West – at present they form only a small share of the total – but the general quality of such goods makes them in most cases uncompetitive in Western markets. Traditional Czechoslovak manufactures, such as glassware, jewellery and leather goods have a better chance of being accepted in the West, and it is the output and sale of such products, as well as light engineering goods, that Czechoslovakia plans to promote. For advanced technology, Czechoslovakia – like other East European countries and indeed the Soviet Union – will continue to look to the West. So far there is no evidence that the Soviet Union intends to disrupt the normal pattern of Czechoslovakia’s trade with this area. It is indeed ultimately to the Soviet Union’s advantage that not only Czechoslovakia but all the East European countries should continue to import Western technology, since this will improve the quality of the goods these countries deliver to the Soviet Union.
Poland
63. About a third of Poland’s trade is with the Soviet Union and a further third with other East European countries. Poland differs from her East European neighbours, Czechoslovakia and East Germany in that the structure of her trade relations with the Soviet Union shows a greater diversity in both imports and exports. Not only does Poland export industrial and engineering products, especially ships, to the Soviet Union, but she is the Soviet Union’s main external supplier of coal and coke. In exchange, the Soviet Union sends Poland vital raw materials such as oil, pig iron and iron ore and a variety of machinery and equipment. Like other East European countries, Poland would like to increase her trade with the West, but her ability to compete in Western markets is a limiting factor. About one third of her trade is with non-Communist countries (a considerably higher percentage than for Czechoslovakia); she became a full member of GATT in 1967, but it is too soon to assess the effects of her membership on her foreign trade.
East Germany
64. East Germany has the highest total trade turnover of all East European countries and conducts three-quarters of her trade with these countries. She is the Soviet Union’s chief trade partner in East Europe. Complete industrial plants, especially chemical plants, are a major feature of East German exports to the Soviet Union and in exchange she receives raw materials, particularly crude oil and iron ore, and foodstuffs. The Soviet Union makes up most of her deficiencies in raw materials and foodstuffs, and these together with military supplies and small amounts of machinery and equipment, make up the greater part of Soviet deliveries to East Germany. There is no doubt that imports from the Soviet Union have provided the main basis for East Germany’s recovery and growth. Czechoslovakia and Poland are her other main suppliers in East Europe; from Czechoslovakia she receives machinery, industrial consumer goods and certain industrial materials, while Poland sends large amounts of coal and some foodstuffs and machinery. East Germany has a high level of trade with West Germany, particularly in the more specialised varieties of iron and steel products which are unavailable or scarce in East Europe.
Hungary
65. Hungary’s economy is very dependent on foreign trade, since she has few resources of her own. Over two-thirds of this trade is with East European countries, of which the Soviet Union accounts for nearly half. In the current five-year period Soviet-Hungarian trade is planned to increase by some 50 per cent. Nearly all of Hungary’s imports of crude oil, iron ore and crude phosphates come from the Soviet Union. She also receives the greater part of the machinery and equipment she needs from the Soviet Union and the other East European countries, though she has been notably increasing her purchases of Western equipment in recent years. Hungary’s exports to the Soviet Union include machinery and engineering products, particularly chemical plants and telecommunications equipment, and large quantities of alumina which are processed in the Soviet Union and sold back to Hungary in the form of aluminium. Pharmaceuticals are also an important export to the Soviet Union.
Rumania
66. Of all East European countries, Rumania is least dependent on them in her foreign trade. Only about half of her total trade is with East European countries, of which the Soviet share is 28 per cent. Credits to Rumania from NATO countries are higher than those extended to any other East European countries except the Soviet Union. Imports from the Soviet Union are lower than for any other East European country; they include raw materials, especially coal, iron-ore, ferrous and nonferrous metals, and machinery and equipment. Rumanian exports to the Soviet Union consist mainly of plant and drilling equipment for the Soviet oil industry. Within CMEA Rumanian participation is on the basis of national interest; e.g. Rumania does not belong to all the CMEA-sponsored agencies. If Soviet economic sanctions were applied to Rumania, the economy would certainly suffer in the short-term, particularly in the industrial field dependent on Soviet ferrous and non-ferrous metals and on Soviet machinery and equipment. In the long term, however, she would be able to buy these and other goods from the West, depending on her ability to expand exports to the West; of the goods currently exported to the Soviet Union, agricultural products, wood and oil products could probably be easily marketed in the West, while machinery and equipment could be sold to the underdeveloped countries. The Soviet Union would also encounter difficulties if relations with Rumania were severed; in particular, oil-well drilling equipment, oil refinery equipment and steel pipes would be difficult to replace, at least from within Eastern Europe.
Bulgaria
67. In foreign trade, Bulgaria is extremely dependent upon the Soviet Union, both as an outlet for her exports (notably machinery and equipment, and light industrial goods) and as a supplier of capital equipment vital to the implementation of Bulgaria’s economic plans. In addition, the Soviet Union is the main supplier of a number of key raw materials, and has granted Bulgaria very large credit facilities, mainly for the development of large-scale enterprises. Although Bulgaria’s trade with the West has increased appreciably in recent years, she still has difficulty in making competitive any commodities but her foodstuffs.
THE IMPLICATIONS FOR EAST-WEST RELATIONS
68. The invasion of Czechoslovakia has increased the uncertainties about Soviet actions and the situations in which the Russians would be prepared to use force. On the whole the invasion was a move to maintain what they saw as a desirable status quo, but subsequent developments in Eastern Europe could lead them to use force again, perhaps in more dangerous circumstances, and for ostensibly the same motives. Soviet policy in other areas will be governed as before by other factors e.g. the circumstances of the situation, the Russians’ own capabilities on the spot, and the likelihood of a direct confrontation with the United States.
69. There is no reason to believe that the Soviet action in Czechoslovakia has in any way diminished the Soviet leaders’ determination to avoid nuclear war and a direct challenge to the United States or NATO. But the policies they may decide to follow could lead them into situations leading to a confrontation with NATO. This does not mean that the appearance of Soviet divisions where Czechoslovak divisions were formerly deployed indicates an intention to initiate hostilities in the NATO area.
Nevertheless a higher proportion of the Warsaw Pact forces available for rapid action against the West will be Soviet, and NATO forces may have to consider the purely military effect of this on their plans.
70. Negotiations with the United States on political and defence matters in which both sides have lasting interests, such as the Non–proliferation Treaty and the proposed discussions on limiting strategic offensive and defensive weapons, will probably proceed on a strictly practical basis. The Russians will also be anxious to pursue trade and other East-West contacts in a “business as usual” atmosphere, although thanks to the popularity won by the Czechoslovak reform movement in Western Europe and North America, and the wide radio and television coverage given to the Russian invasion and the Czechoslovaks’ non-military resistance, the Russians may not be able to create this atmosphere in the short term as easily as they probably hoped.
71. In the main, however, the greatest upheaval caused by the Czechoslovak crisis is within the Soviet alliance itself, in the relations between the Soviet Union and Czechoslovakia and the other East European countries. It is probable, therefore, that Soviet attention will be focussed very largely on the internal problems of Eastern Europe in the foreseeable future with the intention of restoring orthodox Communist rule to Czechoslovakia and ensuring that economic reform programmes there and in other East European countries are not undertaken in the kind of political atmosphere which grew up in Prague in the first eight months of 1968. The problem of the nationalism of the East European countries will continue to create difficulties for the Soviet Union. At the same time, the Soviet Union will continue to act as a super–power and her policies in Eastern Europe will not necessarily affect her ability or intentions to pursue a policy designed to increase Soviet influence elsewhere in the world, e.g. the Mediterranean area or the Middle East. In practice, therefore, the Soviet Union will strive to isolate her East European policy from her actions in the rest of the world. There should be no doubt, however, that her aim in Eastern Europe is to maintain her grip on the area as long as she can.
APPENDIX A
The Contribution of the Non-Soviet Warsaw Pact Countries (NSWP) to Armaments Production for the Warsaw Pact
Naval
The only naval ships constructed in NSWP countries and supplied to the Soviet Union, are the landing ships built in Poland. The NSWP countries are more or less self-sufficient in the production of the smaller ships of their navies, e.g. minesweepers and landing craft. However, they rely on the Soviet Union for the supply of submarines, most of their escorts and all missile-armed Fast Patrol Boats.
Ground Forces
All of the NSWP countries can produce small arms and ammunition, and between then Czechoslovakia, Poland and Hungary are able to meet most of their needs for AFVs, artillery weapons and soft-skinned vehicles. They do not produce the full range of equipment at present, but they could make themselves self-sufficient without any major expansion of existing facilities. There is reliance on the USSR for some of the heavier kinds of equipment, including large calibre artillery, multi-round rocket launchers, engineer equipment and heavy transport.
Air Forces
The Czechoslovak and Polish aircraft industries are capable of producing combat and military support aircraft, and have in the past made them under licence from the USSR. They are not, however, producing currently any military aircraft. The aircraft industries of the other NSWP countries are negligible.
Missiles
There is no production of missile weapon systems in any NSWP country.
Conclusion
In general therefore the main contribution the NSWP countries make is to the equipment of their own sea and land forces; on the other hand they rely heavily on the USSR for many of their naval units, aircraft and missiles, for some ground forces equipment and for much ancillary electronic equipment. In view of the great preponderance of Soviet forces in the pact, the contribution of these other countries to its armaments production as a whole is therefore very small.
APPENDIX B
TABLE I Growth of Soviet Trade with East European Countries 1962–1967
Million Roubles
Source: Soviet Foreign Trade Yearbook
TABLE II
Growth of USSR Foreign Trade
% change 1961—65 % change 1966–67
(annual % increase)
USSR
Total + 37.27
+ 8.55
Export + 36.3
+ 9.14
Import + 38.27
+ 7.74
Bulgaria/USSR
Total + 76.54
+ 13.65
Export + 68.11
+ 9.41
Import + 89.0
+ 18.12
Hungary/USSR
Total + 54.78
+ 16.26
Export + 52.0
+ 16.07
Import + 57.8
+ 16.48
E. Germany/USSR
Total + 26.95
+ 6.98
Export + 12.78
+ 0.63
Import + 46.6
+ 14.09
Poland/USSR
Total + 49.61
+ 18.08
Export + 36.8
+ 13.55
Import + 63.86
+ 23.03
Rumania/USSR
Total + 33.39
+ 3.37
Export + 38.02
+ 2.01
Import + 29.31
+ 4.67
Czechoslovakia/USSR
Total + 45.26
+ 7.54
Export + 41.90
+ 8.16
Import + 48.4
+ 6.76
Column I: represents the actual growth of USSR trade with partners over the period 1961–65.
Column II: represents the actual growth of USSR trade with partners over the single year 1966–67.
NB: Imports growing at a faster rate than exports in all countries except Czechoslovakia
TABLE III
Planned Increases in Foreign Trade in CMEA 1966–70
Country Overall trade
Trade with USSR
Bulgaria 60–70%
70%
Czechoslovakia 32%
50%
East Germany 42%
43%
Hungary 46%
50%
Poland 40%
50%
Rumania 55%
30%
TABLE IV
CMEA Countries’ Trade with USSR
Sources: 1st column – “Foreign Trade” June 1968
2nd column – Countries’ own statistics for 1967 or for 1966*
% of USSR’s Trade
% of Eas t European countries’ Trade
USSR-Bulgaria Trade 8.4 51.2*
USSR-Czechoslovakia Trade 10.7 35.1
USSR-East Germany Trade 15.5 43.3
USSR-Hungary Trade 6.5 33.0*
USSR-Poland Trade 10.0 36.3
USSR-Rumania Trade 4.5 33.5*
USSR-Yugoslavia Trade 2.8 12.0
58.4
TABLE V
CMEA Countries: Imports of Important Commodities from USSR as % of Total Imports of That Commodity 1966
TABLE VI
CMEA Countries’ Exports to USSR – 1966 Important Commodities as % of total
TABLE VII
CMEA Countries: Imports from USSR – 1966 – Important Commodities as % of total imports from USSR
TABLE VIII
Structure of Imports and Exports of some CMEA Countries (as a % of total import and exports)
Notes
1 . J. W. Young, ‘The Wilson Government’s Reform of Intelligence Co-Ordination, 1967–68’, Intelligence and National Security 16/2 (2001), pp. 133–51.
2 . See especially Günter Bischof, Stefan Karner and Peter Ruggenthaler, ‘Introduction’, in Günter Bischof, Stefan Karner and Peter Ruggenthaler (eds), The Prague Spring and the Warsaw Pact Invasion of Czechoslovakia in 1968 (Lanham, MD: Lexington, 2009), pp. 3–15
.
3 . Percy Cradock, Know Your Enemy: How the Joint Intelligence Committee Saw the World (London: John Murray, 2002), pp. 240, 242.
4 . Geraint Hughes, ‘British Policy towards Eastern Europe and the Impact of the “Prague Spring”, 1964–68’, Cold War History 4/2 (2004), p. 125.
5 . Cabinet minutes, 22 August 1968, CC(68) 38th Conclusions. TNA: CAB 128/43.
6 . Doug Nicoll, ‘The Joint Intelligence Committee and Warning of Aggression’, November 1981, reproduced in Robert Dover and Michael S. Goodman (eds), Learning from the Secret Past: Cases in British Intelligence History (Washington, DC: Georgetown University Press, 2011) pp. 278–80.
7 . Nicoll, ‘The Joint Intelligence Committee and Warning of Aggression’; Cradock, Know Your Enemy , p. 253; Minute from 24 July 1968, FCO 28/48, quoted in Cradock, Know Your Enemy , p. 251.
8 . ‘The Soviet Grip on Eastern Europe’, 2 December 1968, JIC(68)54. TNA: CAB 158/71.
9 . Such action would later become known as the Brezhnev Doctrine.
10 . Hughes, ‘British Policy towards Eastern Europe and the Impact of the “Prague Spring” ’, p. 129.
11 . Ibid.
12 . Cradock, Know Your Enemy , p. 257; Hughes, ‘British Policy towards Eastern Europe and the Impact of the “Prague Spring” ’, p. 127.
13 . Richard J. Aldrich, GCHQ: The Uncensored Story of Britain’s Most Secret Intelligence Agency (London: HarperPress, 2011), pp. 255–6.
14 . Cradock, Know Your Enemy , p. 258; Hughes, ‘British Policy towards Eastern Europe and the Impact of the “Prague Spring” ’, pp. 130, 133.