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Soviet Union [USSR] TRADE WITH WESTERN INDUSTRIALIZED COUNTRIES
The Western industrialized countries include the countries of
Western Europe, as well as Australia, Canada, Japan, New Zealand,
South Africa, and the United States (see
table 47, Appendix A).
Soviet trade with industrialized countries, except Finland,
consisted of simple purchases paid for on a cash or credit basis,
direct exchange of one good for another (Pepsi-Cola for Stolichnaya
vodka, for example), or industrial cooperation agreements in which
foreign firms participated in the construction or operation of
plants in the Soviet Union. In the latter instances, payments were
rendered in the form of the output of new plants. By contrast,
trade with Finland, which does not have a convertible currency, was
conducted through bilateral clearing agreements, much like Soviet
trade with its Comecon partners.
In the 1970s and 1980s, the Soviet Union relied heavily on
various kinds of fuel exports to earn hard currency, and Western
partners regarded the Soviet Union as an extremely reliable
supplier of oil and natural gas. In the 1980s, the Soviet Union
gave domestic priority to gas, coal, and nuclear power in order to
free more oil reserves for export. This was necessary because of
higher production costs and losses of convertible currency
resulting from the drop in world oil prices. The development of
natural gas for domestic and export use was also stimulated by
these factors. Between 1970 and 1986, natural gas exports rose from
1 percent to 15 percent of total Soviet exports to the West.
Because of the inferior quality of Soviet goods, the Soviet
Union was unsuccessful in increasing its exports of manufactured
goods. In 1987 only 18 percent of Soviet manufactured goods met
world technical standards. As an illustration of these problems in
quality, Canadian customers who had purchased Soviet Belarus
tractors often found that the tractors had to be overhauled on
arrival before they could be sold on the Canadian market. In 1986
less than 5 percent of Soviet exports to the West consisted of
machinery. Other Soviet nonfuel exports in the 1990s included
timber, exported primarily to Japan, and chemicals, the export of
which grew substantially in 1984 and 1985.
In the 1980s, Soviet imports from Western industrialized
countries generally exceeded exports, although trade with the West
decreased overall. One-half of Soviet agricultural imports were
from developed countries, and these imports made up a considerable
portion of total imports from the West. Industrial equipment formed
one-quarter of Soviet imports from the West, and iron and steel
products, particularly steel tubes for pipeline construction, made
up most of the rest. Over the course of the 1980s, high-technology
items gained in importance as well.
In the 1970s and 1980s, Soviet trade with the Western
industrialized countries was more dynamic than was Soviet trade
with other countries, as trade patterns fluctuated with political
and economic changes. In the 1970s, the Soviet Union exchanged its
energy and raw materials for Western capital goods, and growth in
trade was substantial. Soviet exports jumped 55 percent, and
imports jumped 207 percent. The Soviet Union ran a trade deficit
with the West throughout this period.
In 1980 the Soviet Union exported slightly more to the West
than it imported. After a temporary shortage of hard currency in
1981, the Soviet Union sought to improve its trade position with
the industrialized countries by keeping imports at a steady level
and by increasing exports. As a result, the Soviet Union began to
run trade surpluses with most of its Western partners. Much of the
income earned from fuel exports to Western Europe was used to pay
off debts with the United States, Canada, and Australia, from which
the Soviet Union had imported large quantities of grain.
In 1985 and 1986, trade with the West was suppressed because of
heightened East-West political tensions, successful Soviet grain
harvests, high Soviet oil production costs, a devalued United
States dollar, and falling oil prices. Despite increases in oil and
natural gas exports, the Soviet Union's primary hard-currency
earners, the country was receiving less revenue from its exports to
the West. The Soviet Union sold most of its oil and natural gas
exports for United States dollars but bought most of its hardcurrency imports from Western Europe. The lower value of the United
States dollar meant that the purchasing power of a barrel of Soviet
crude oil, for example, was much lower than in the 1970s and early
1980s. In 1987 the purchasing power of a barrel of Soviet crude oil
in exchange for West German goods had fallen to one-third of its
purchasing power in 1984.
With the exception of grain, phosphates used in fertilizer
production, and high-technology equipment, Soviet dependence on
Western imports historically has been minimal. A growing hardcurrency debt of US$31 billion in 1986 led to reductions in imports
from countries with hard currencies. In 1988 Gorbachev cautioned
against dependence on Western technology because it required hard
currency that ""we don't have."" He also warned that increased
borrowing to pay for imports from the West would lead to dependence
on international lending institutions.
Data as of May 1989
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