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Soviet Union [USSR] Chapter 15. Foreign Trade
TRADE HAS TRADITIONALLY played only a minor role in the Soviet
economy. In 1985, for example, exports and imports each accounted
for only 4 percent of the Soviet gross national product. The Soviet
Union maintained this low level because it could draw upon a large
energy and raw material base and because it historically had
pursued a policy of self-sufficiency. Other foreign economic
activity included economic aid programs, which primarily benefited
the less developed Council for Mutual Economic Assistance (Comecon)
countries of Cuba, Mongolia, and Vietnam, and substantial borrowing
from the West to supplement
hard-currency (see Glossary) export earnings.
The Soviet Union conducted the bulk of its foreign economic
activities with communist countries, particularly those of Eastern
Europe. In 1988 Soviet trade with socialist countries amounted to
62 percent of total Soviet foreign trade. Between 1965 and 1988,
trade with the Third World made up a steady 10 to 15 percent of the
Soviet Union's foreign trade. Trade with the industrialized West,
especially the United States, fluctuated, influenced by political
relations between East and West, as well as by the Soviet Union's
short-term needs. In the 1970s, during the period of détente, trade
with the West gained in importance at the expense of trade with
socialist countries. In the early and mid-1980s, when relations
between the superpowers were poor, however, Soviet trade with the
West decreased in favor of increased integration with Eastern
Europe.
The manner in which the Soviet Union transacted trade varied
from one trade partner to another. Soviet trade with the Western
industrialized countries, except Finland, and most Third World
countries was conducted with hard currency, that is, currency that
was freely convertible. Because the ruble was not freely
convertible, the Soviet Union could only acquire hard currency by
selling Soviet goods or gold on the world market for hard currency.
Therefore, the volume of imports from countries using convertible
currency depended on the amount of goods the Soviet Union exported
for hard currency. Alternative methods of cooperation, such as
barter, counter trade, industrial cooperation, or bilateral
clearing agreements were much preferred. These methods were used in
transactions with Finland, members of Comecon, China, Yugoslavia,
and a number of Third World countries.
Commodity composition of Soviet trade differed by region. The
Soviet Union imported manufactured, agricultural, and consumer
goods from socialist countries in exchange for energy and
manufactured goods. The Soviet Union earned hard currency by
exporting fuels and other primary products to the industrialized
West and then used this currency to buy sophisticated manufactures
and agricultural products, primarily grain. Trade with the Third
World usually involved exchanging machinery and armaments for
tropical foodstuffs and raw materials.
Soviet aid programs expanded steadily from 1965 to 1985. In
1985 the Soviet Union provided an estimated US$6.9 billion to the
Third World in the form of direct cash, credit disbursements, or
trade subsidies. The communist Third World, primarily Cuba,
Mongolia, and Vietnam, received 85 percent of these funds. In the
late 1980s, the Soviet Union reassessed its aid programs. In light
of reduced political returns and domestic economic problems, the
Soviet Union could ill afford ineffective disbursements of its
limited resources. Moreover, dissatisfied with Soviet economic
assistance, several Soviet client states opened trade discussions
with Western countries.
In the 1980s, the Soviet Union needed considerable sums of hard
currency to pay for food and capital goods imports and to support
client states. What the country could not earn from exports or gold
sales it borrowed through its banks in London, Frankfurt, Vienna,
Paris, and Luxembourg. Large grain imports pushed the Soviet debt
quite high in 1981. Better harvests and lower import requirements
redressed this imbalance in subsequent years. By late 1985,
however, a decrease in oil revenues nearly returned the Soviet debt
to its 1981 level. At the end of that same year the Soviet Union
owed US$31 billion (gross) to Western creditors, mostly commercial
banks and other private sources.
In the late 1980s, the Soviet Union attempted to reduce its
hard-currency debt by decreasing imports from the West and
increasing oil and gas exports to the West. It also sought
increased participation in international markets and organizations.
In 1987 the Soviet Union formally requested observer status in the
General Agreement on Tariffs and Trade and in 1988 signed a
normalization agreement with the European Economic Community.
Structural changes in the foreign trade bureaucracy, granting
direct trading rights to select enterprises, and legislation
establishing joint ventures with foreigners opened up the economy
to the Western technical and managerial expertise necessary to
achieve the goals established by General Secretary Mikhail S.
Gorbachev's program of economic restructuring
(
perestroika-- see Glossary).
Data as of May 1989
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