Seven years after the embargo of Yugoslavia by Stalin's Soviet bloc, trade relations with the Soviet Union began to improve. In 1955 and 1956, the Soviet Union, Czechoslovak, Poland, and East Germany granted credits to Yugoslavia totaling US$40 million, at rates considerably below standard World Bank (see Glossary) rates. By 1964 Yugoslavia had gained observer status in CEMA, and some meetings of that organization were held in Belgrade. Because trade with the Soviet Union consisted mainly of exchanging Yugoslav consumer goods, machines, ships, and transport equipment for critical Soviet oil, Yugoslavia was at the mercy of its larger partner. In the 1980s, the Soviet Union first raised the price of oil independently of world prices, then arbitrarily reduced imports of Yugoslav consumer goods. Continuation of Soviet oil supply arrangements into the 1990s also damaged Yugoslavia's image as a nonaligned country qualified for inclusion in Western economic groupings. Soviet oil supply became less reliable in 1990 when the Soviet economy experienced a domestic oil shortage and cut foreign deliveries. And the machinery and equipment that Yugoslavia exported to CEMA countries required raw and semifinished materials bought with hard currency, making the CEMA connection an indirect hardcurrency drain in this respect. On the other hand, buying oil from the Soviet Union required no hard currency and provided a market for low-quality Yugoslav consumer goods. For CEMA members, trade with nonaligned Yugoslavia was a convenient way of obtaining Western products whose technological restrictions made them unavailable by direct purchase.
Data as of December 1990