East Europeans Consider New Ties With Soviets After Drop in Trade
THE Soviet Union and its Eastern European neighbors are struggling to find a way to jump-start economic relations since a breakdown in the old barter system brought trade to a virtual halt. The collapse of Communism in Eastern Europe brought about the demise of the Council for Mutual Economic Assistance (Comecon), the trade bloc that grouped the Soviet Union with its East Europe allies, Cuba, Vietnam, and Mongolia. Representatives of Comecon nations will meet later this month in Budapest to discuss the group's dissolution, which could take place as early as September.
Launched in 1949 to serve as an alternative to the Marshall Plan in Western Europe, Comecon conducted business largely on a barter basis. Five years ago, members conducted about 60 percent of their foreign trade with each other. But starting this year, the onset of political democratization in Eastern Europe caused a switch in relations to a hard-currency system of payment at world prices. There was a problem, however, in that no nations had any cash to spare. The result was a drastic drop in trade.
"Our partners [in Eastern Europe] wanted ... to have free hands in order to quickly integrate with Western Europe," wrote Soviet economists Ruslan Greenberg and Konstantin Legai in last month's Nezavisimaya Gazeta newspaper. "On the other hand, the reform government of the Soviet Union was toying with the hope of earning a lot of cash exporting fuel and raw materials, which they used to supply for rubles. It turned out, however, that most of these plans weren't realistic over the short term."
Because the countries' economies were integrated so tightly for more than 40 years, the drop in trade has greatly exacerbated an already deep economic crisis throughout the region. Many factories in Eastern Europe, for example, produced products specifically for the Soviet market and are faced with bankruptcy now that their traditional markets have nearly dried up. The crisis is causing everyone to rethink his future economic strategies.
The prevailing feeling in the Soviet Union is the hard-currency system should be reviewed.
Many Soviet experts apparently would like to introduce a variation of the old form of barter payment - at least for the time being.
"There can only be a revival of mutual trade in any significant form if the national [nonconvertible] currencies are used as a means of payment," Mr. Greenberg and Mr. Legai said.
Moscow is already allowing individual enterprises to arrange barter deals, a move that is welcomed by Czechoslovakia, Hungary, Bulgaria, and Romania. But at least one nation, Poland, appears opposed to an outright reversal of the current course.
IT was not a mistake to move to hard-currency payments. The trade crisis isn't the result of the switch to hard-currency payments," says Jaroslaw Sieradzki, an economic attache at the Polish Embassy in Moscow. "The problem lies in the economic situation of the USSR."
The Soviet crisis seems to get worse each day the government delays in embracing wide-ranging political and economic reform. The oil and gas industry, the country's main hard-currency earner, is in chaos, according to a report issued by the Soviet Academy of Sciences. A lack of investment and aging equipment could cause Soviet oil exports to fall to between 70 and 90 million tons by 1995 - almost half the 1989 level. In addition, experts are warning of a shortage during this summer's harvest, which woul d
cause Moscow to divert precious hard-currency reserves to buying grain on the world market to make up the shortfall.
With no easy way to pull out of the downward spiral, some Soviet specialists are hoping the West will help get regional trade going again. Economists, including Greenberg and Legai, urge the foundation of an international bank to monitor economic relations - something akin to the European Payments Union, which helped get Western European economies, devastated by World War II, back on their feet.
'I THINK the East European countries must try to create a payments union and it's possible that Western countries will participate," says Vitaly Khokhlov, chairman of the International Bank for Economic Cooperation.
In the meantime, the search goes on for a way to build a new sort of trade alliance to take the place of Comecon. The Soviet economy may be in ruins, and Eastern European countries may resent the Kremlin for decades of oppression that wrecked their economies, but they still recognize Moscow as their preeminent trading partner, experts say.
"The Soviet Union today is very necessary to Poland as a trade partner," Mr. Sieradzki says. "It would be difficult to get by without Soviet oil and gas."
There are wide differences on the future shape of any successor organization to Comecon, however. Some Eastern European nations would like to exclude Cuba, Vietnam, and Mongolia. Also, some nations want a new trade association to be purely consultative, while others would like to see it play a prominent role.
"Whether or not there will be a new organization is unclear," Sieradzki says.
"If it does come about, it should be consultative in nature and under no circumstances should it resemble the present Comecon."