Appendix B: The Council for Mutual Economic Assistance -- Soviet Union

The founding of the Council for Mutual Economic Assistance (Comecon, also referred to as CMEA or CEMA) dates from a 1949 communiqué agreed upon by Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the Soviet Union. The reasons for the creation of Comecon in the aftermath of World War II are complicated, given the political and economic turmoil of that time. The primary factor in Comecon's formation, however, was Joseph V. Stalin's desire to enforce Soviet domination of the small countries of Eastern Europe and to deter some states that had expressed interest in the Marshall Plan (see Glossary). The stated purpose of the organization was to enable member states "to exchange economic experiences, extend technical aid to one another, and to render mutual assistance with respect to raw materials, foodstuffs, machines, equipment, etc." Although in the late 1960s "cooperation" was the official term used to describe its activities, improved economic integration was always Comecon's goal.

Soviet domination of Comecon was a function of its economic, political, and military power. The Soviet Union possessed 90 percent of total Comecon land and energy resources, 70 percent of its population, 65 percent of its total national income, and industrial and military capacities second in the world only to those of the United States. The location of many Comecon committee headquarters in Moscow and the large number of Soviet citizens in positions of authority also testified to the power of the Soviet Union within the organization.

Soviet efforts to exercise political power over its Comecon partners sometimes were met with determined opposition, however. The "sovereign equality" of members prescribed in the Comecon Charter assured members that they could abstain from a given project if they did not wish to participate. East European members frequently invoked this principle when they feared that economic interdependence would further reduce their political sovereignty. Thus, neither Comecon nor the Soviet Union as a major force within Comecon had supranational authority. Although this arrangement provided the lesser members some degree of freedom from Soviet economic domination, it also deprived Comecon of the necessary power to achieve maximum economic efficiency.

In 1989 the full members in Comecon consisted of Bulgaria, Cuba, Czechoslovakia, the German Democratic Republic (East Germany), Hungary, Mongolia, Poland, Romania, the Soviet Union, and Vietnam. (For the purposes of this appendix, the phrases the "six European members" or the "European members of Comecon" are used interchangeably to signify Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania.) The primary documents governing the objectives, organization, and functions of Comecon were the Charter (first adopted in 1959 and subsequently amended; all references herein are to the amended 1974 text); the Comprehensive Program for the Further Extension and Improvement of Cooperation and the Further Development of Socialist Economic Integration by the Comecon Member Countries, adopted in 1971; and the Comprehensive Program for Scientific and Technical Cooperation to the Year 2000, adopted in December 1985. Adoption of the 1985 Comprehensive Program and the rise to power of Soviet general secretary Mikhail S. Gorbachev increased Soviet influence in Comecon operations and led to attempts to give Comecon some degree of supranational authority. The 1985 Comprehensive Program sought to improve economic cooperation through the development of a more efficient and interconnected scientific and technical base.

Membership, Structure, Nature, and Scope


In a January 1949 meeting in Moscow, representatives of Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the Soviet Union reached the formal decision to establish the Council for Mutual Economic Assistance. The communiqué announcing the event cited the refusal of these countries to "subordinate themselves to the dictates of the Marshall Plan" and their intention to resist the trade boycott imposed by "the United States, Britain, and certain other countries of Western Europe" as the major factors contributing to the decision "to organize a more broadly based economic cooperation among the countries of the people's democracy and the USSR."

Albania joined the six original members in February 1949, and East Germany entered Comecon in 1950. (Although it did not formally revoke its membership until 1987, Albania stopped participating in Comecon activities in 1961.) Mongolia acceded to membership in 1962, and in the 1970s Comecon expanded its membership to include Cuba (1972) and Vietnam (1978). As of 1987, the ten full members consisted of the Soviet Union, the six East European countries, and the three extraregional members (see table A, this Appendix).

There were four kinds of relationships a country could have had with Comecon: full membership, associate membership, nonsocialist "cooperant" status, and "observer country" status. Yugoslavia was the only country considered to have associate member status. Finland, Iraq, Mexico, Mozambique, and Nicaragua, had a nonsocialist cooperant status with Comecon and, together with Yugoslavia, had concluded formal agreements of cooperation with Comecon. Since 1957 Comecon has allowed certain countries with communist or pro-Soviet governments to attend sessions as observers. Delegations from Afghanistan, Angola, Ethiopia, Laos, and the People's Democratic Republic of Yemen (South Yemen) have attended Comecon sessions as observers.


Although not formally part of the organization's hierarchy, the Conference of First Secretaries of Communist and Workers' Parties and of the Heads of Government of the Comecon Member Countries was, in fact, Comecon's most important organ. These party and government leaders met regularly to discuss topics of mutual interest. Decisions made in these meetings had considerable influence on the actions taken by Comecon and its organs.

The official hierarchy of Comecon consisted of the Council Session, the Executive Committee, the Secretariat, four council committees, twenty-four standing commissions, six interstate conferences, two scientific institutes, and several associated organizations.

The Council Session, officially the highest Comecon organ, examined fundamental problems of socialist economic integration and directed the activities of the Secretariat and other subordinate organizations. Delegations from each Comecon member country, usually headed by prime ministers, met in the second quarter of each year in a member country's capital. Each country appointed one permanent representative to maintain relations between members and Comecon between annual meetings. Extraordinary sessions were held with the consent of at least one-third of the members. Such meetings usually took place in Moscow.

The highest executive organ in Comecon, the Executive Committee, elaborated policy recommendations and supervised policy implementation between sessions. It also supervised plan coordination and scientific-technical cooperation. Composed of one representative from each member country, usually a deputy chairman of the country's Council of Ministers, the Executive Committee met quarterly, usually in Moscow. In 1971 and 1974, the Executive Committee acquired economic departments that ranked above the standing commissions. These economic departments considerably strengthened the authority and importance of the Executive Committee.

Four council committees were operational in 1987: the Council Committee for Cooperation in Planning, the Council Committee for Cooperation in Science and Technology, the Council Committee for Cooperation in Material and Technical Supply, and the Council Committee for Cooperation in Machine Building. Their mission was "to ensure the comprehensive examination and a multilateral settlement of the major problems of cooperation among member countries in the economy, science, and technology." All four committees were headquartered in Moscow and usually met there. These committees advised the standing commissions, the Secretariat, the interstate conferences, and the scientific institutes in their areas of specialization. Their jurisdiction was generally wider than that of the standing commissions because they were empowered to make policy recommendations to other Comecon organizations.

The Council Committee for Cooperation in Planning was the most important of the four because it coordinated the national economic plans of Comecon members. As such, it ranked in importance only below the Council Session and the Executive Committee. Made up of the chairmen of the Comecon members' national central planning offices, the Council Committee for Cooperation in Planning drew up draft agreements for joint projects, adopted resolutions approving these projects, and recommended approval to the concerned parties.

The Secretariat, Comecon's only permanent body, was the primary economic research and administrative organ. The secretary, who was always a Soviet official, was the official Comecon representative to Comecon member states, other states, and international organizations. Subordinate to the secretary were his deputy and the various departments of the Secretariat, which generally corresponded to the standing commissions. The Secretariat's responsibilities included preparation and organization of Comecon sessions and other meetings conducted under the auspices of Comecon; compilation of digests on Comecon activities; economic and other research for Comecon members; and preparation of recommendations on various issues concerning Comecon operations.

In 1987 there were twenty-four standing commissions, set up to help Comecon make recommendations pertaining to specific economic sectors. The Secretariat supervised the actual operations of the commissions, which had authority only to make recommendations, subject to the approval by the Executive Committee and ratification by the member countries involved. Commissions usually met twice a year in Moscow.

The six interstate conferences (on water management, internal trade, legal matters, inventions and patents, pricing, and labor affairs) served as forums for discussing shared issues and experiences. They were purely consultative and generally acted in an advisory capacity to the Executive Committee or its specialized committees.

The scientific institutes on standardization and on economic problems of the world socialist system (see Glossary) concerned themselves with theoretical problems of international cooperation. Both were headquartered in Moscow and were staffed by experts from various member countries.

Several affiliated agencies functioned outside the official Comecon hierarchy and served to develop "direct links between appropriate bodies and organizations of Comecon member countries." These affiliated agencies were divided into two categories: intergovernmental economic organizations (which worked on a higher level in the member countries and generally dealt with a wider range of managerial and coordinative activities) and international economic organizations (which worked closer to the operational level of research, production, or trade).

Nature of Operation

Comecon was an interstate organization through which members attempted to coordinate economic activities of mutual interest and to develop multilateral economic, scientific, and technical cooperation. The Charter stated that "the sovereign equality of all members" was fundamental to the organization and procedures of Comecon. The 1971 Comprehensive Program emphasized that the processes of integration of members' economies were "completely voluntary and [did] not involve the creation of supranational bodies." Hence, under the Charter each country had the right to equal representation and one vote in all organs of Comecon, regardless of the country's economic stature or its contribution to Comecon's budget.

The "interestedness" provisions of the Charter reinforced the principle of "sovereign equality." Comecon's recommendations and decisions could be adopted only upon agreement among the interested members, each of which had the right to declare its "interest" in any matter under consideration. Furthermore, in the words of the Charter, "recommendations and decisions shall not apply to countries that have declared that they have no interest in a particular matter."

Although Comecon recognized the principle of unanimity, disinterested parties did not have a veto but rather the right to abstain from participation. A declaration of disinterest could not block a project unless the disinterested party's participation was vital. Otherwise, the Charter implied that the interested parties could proceed without the abstaining member, and the abstaining country could "subsequently adhere to the recommendations and decision adopted by the remaining members of the Council."


Early Years

During Comecon's early years (through 1955), its sessions were convened on an ad hoc basis. The organization lacked clear structure and operated without a charter until a decade after its founding. From 1949 to 1953, Comecon's function consisted primarily of redirecting trade of member countries toward each other and introducing import-replacement industries, thus making members economically more self-sufficient. Little was done to solve economic problems through a regional policy. Because of Stalin's distrust of multilateral bodies, bilateral ties with the Soviet Union dominated the East European members' external relations. Each country dealt with the Soviet Union on a one-to- one basis. Although reparations transfers (extracted by the Soviet Union in the immediate postwar years from those East European states it regarded as former World War II enemies) had been replaced by more normal trade relations, outstanding reparations obligations were not halted until 1956. In these circumstances, there was scarcely the need nor the scope for multilateral policies or institutions.

Rediscovery of Comecon after Stalin's Death

After Stalin's death in 1953, the more industrialized and more trade dependent East European countries (Czechoslovakia, East Germany, and Poland) sought relief from their economic isolation in new forms of regional cooperation. For countries with small, centrally planned economies, this meant the need to develop a mechanism through which to coordinate investment and trade policies.

In the 1950s, instability in Eastern Europe and integration in Western Europe increased the desirability of regularizing relations among the Soviet Union and Eastern Europe in a more elaborate institutional framework. The 1955 Treaty of Friendship, Cooperation, and Mutual Assistance, which established the Warsaw Pact, and its implementing machinery reinforced political- military links (see Appendix C). On the economic front, Comecon was rediscovered.

Rapid Growth in Comecon Activity, 1956-63

The years 1956 to 1963 witnessed the rapid growth of Comecon institutions and activities. Comecon, for example, launched a program to unify the electrical power systems of its member states and in 1962 created the Central Dispatching Board to manage the unified system. The organization took similar steps to coordinate railroad and river transport. In 1963 a special bank, the International Bank for Economic Cooperation, was created to facilitate financial settlements among members. In this period, Comecon also undertook a number of bilateral and multilateral investment projects. The most notable project led to the coordinated construction of the Friendship (Druzhba) oil pipeline for the transport and distribution of crude oil from the Soviet Union to Eastern Europe. The joint Institute for Nuclear Research, established in 1956, initiated cooperation in another area of long-term importance.

Parallel to these developments, the Soviet Union led efforts to coordinate the investment strategies of the members in the interest of a more rational pattern of regional specialization, increased productivity, and a more rapid overtaking of the capitalist economies. These efforts culminated in 1962 with the adoption at the Fifteenth Council Session of the Basic Principles of the International Socialist Division of Labor, which called for increased economic interdependence. Furthermore, Soviet party leader Nikita S. Khrushchev proposed a central Comecon planning organ to implement the Basic Principles and to pave the way for a "socialist commonwealth" based on a unified regional economy.

These proposals provoked strong objection from Romania, which charged that they violated the principle of the "sovereign equality" of members. Romania's opposition (combined with the more passive resistance of some other members) deterred supranational planning and reinforced the interested-party provisions of the Charter. The institutional compromise was the creation of the Bureau for Integrated Planning, which was attached to the Executive Committee and limited to an advisory role on the coordination of members' development plans. The Basic Principles were superseded several years later by the 1971 Comprehensive Program.

Inactivity and Subsequent Revitalization in the Late 1960s

After the fall of Khrushchev in 1964, a comparative lull in Comecon activities ensued, which lasted until well after the 1968 Soviet-led intervention in Czechoslovakia. By the end of the 1960s, Eastern Europe, shaken by the 1968 events, recognized the need to revitalize programs that would strengthen regional cohesion. Disillusioned by traditional methods and concerned with the need to decentralize planning and management in their domestic economies, reformers argued for strengthening market relations among Comecon states. Conservatives, however, continued to advocate planned approaches that would involve supranational planning of major aspects of members' economies and the inevitable loss of national control over domestic investment policy.

The 1971 Comprehensive Program

The controversy over supranational planning led to a compromise in the form of the 1971 Comprehensive Program, which laid the guidelines for Comecon activity through 1990. The program incorporated elements of both market and plannned approaches. From the former, the program advocated a stronger role for money, prices, and exchange rates in intra- Comecon relations and incentives for direct contacts among lower level economic entities. From the latter, the program called for more joint planning on a sectoral basis through interstate coordinating bodies for activities in a given sector. In addition, international associations would engage in actual operations in a designated sector on behalf of the participating countries. Finally, the program emphasized the need for multilateral projects to develop new regional sources of fuels, energy, and raw materials. Such projects were to be jointly planned, financed, and executed.

The 1971 Comprehensive Program introduced a new concept in relations among members: "socialist economic integration," whose aim was "to intensify and improve" cooperation among members. The program avoided, however, the suggestion of ultimate fusion of members' economies that had been contained in the 1962 Basic Principles. It set limits on the integrative process in the following terms: "Socialist economic integration is completely voluntary and does not involve the creation of supranational bodies."

Comecon members adopted the 1971 Comprehensive Program at a time when they were actively developing economic relations with the rest of the world, especially with the industrialized Western economies. The program viewed the two sets of policies as complementary and affirmed that "because the international socialist division of labor is effected with due account taken of the world division of labor, the Comecon member countries shall continue to develop economic, scientific, and technological ties with other countries, irrespective of their social and political system."

In the years following the adoption of the 1971 Comprehensive Program, Comecon made some progress toward strengthening market relations among its members. The objectives of the program proved somewhat inconsistent with the predominant trends within members' economies in the 1970s, which was a period of recentralization--rather than decentralization--of domestic systems of planning and management. The major exception to this lack of progress lay in the area of intra-Comecon pricing and payment, where the expansion of relations with the West contributed to the adoption of prices and extra-plan settlements closer to international norms.

A number of projects formulated in the years immediately following the adoption of the 1971 Comprehensive Program were assembled in a document signed at the Twenty-Ninth Council Session in 1975. Entitled the Concerted Plan for Multilateral Integration Measures, the document covered the 1976-80 five- year-plan period and was proclaimed as the first general plan for the Comecon economies. The joint projects included in the plan were largely completed in the course of the plan period.

By the end of the 1970s, with the exception of Poland's agricultural sector, the economic sectors of all Comecon countries had converted to the socialist system. Member states had restructured their economies to emphasize industry, transportation, communications, material, and technical supply, and they had decreased the share of resources devoted to agricultural development. Within industry, member states devoted additional funds to machine building and the production of chemicals. Socialist economic integration resulted in the production of goods capable of competing on the world market.

The 1980s

Most Comecon countries ended their 1981-85 five-year plans with decreased extensive economic development (see Glossary), increased expenses for fuel and raw materials, and decreased dependency on the West for both credit and hard-currency (see Glossary) imports. The sharp rise in interest rates in the West resulted in a liquidity shortage (see Glossary) in all Comecon countries in the early 1980s and forced them to reduce hard- currency imports. High interest rates and the increased value of the United States dollar on international markets made debt servicing more expensive. Thus, reducing indebtedness to the West also became a top priority within Comecon. From 1981 to 1985, the European members of Comecon attempted to promote the faster growth of exports over imports and sought to strengthen intraregional trade, build up an increased trade surplus, and decrease indebtedness to Western countries.

In the 1980s, Comecon sessions were held on their regular annual schedule. The two most notable meetings were the special sessions called in June 1984 and December 1985. The first summit- level meeting of Comecon member states in fifteen years was held with much fanfare June 12-14, 1984, in Moscow. The two fundamental objectives of the meeting were to strengthen unity among members and to establish a closer connection between the production base, scientific and technological progress, and capital construction. Despite the introduction of proposals for improving efficiency and cooperation in six key areas, analysts from East and West considered the meeting a failure.

The ideas and results of the June 14 session were elaborated at a special session held December 17-18, 1985, in Moscow. This special session featured the culmination of several years of work on the new Comprehensive Program for Scientific and Technical Cooperation to the Year 2000. It aimed to create "a firm base for working out an agreed and, in some areas, unified scientific and technical policy and the practical implementation, in the common interest, of higher achievements in science and technology."

The 1985 Comprehensive Program laid out sizable tasks in five key areas: electronics, automation systems, nuclear energy, development of new materials, and biotechnology. It sought to restructure and modernize the member states' economies to counteract constraints on labor and material supplies. The need to move to intensive production techniques within Comecon was evident from the fact that from 1961 to 1984 the overall material intensiveness of production did not improve substantially.

Cooperation under the 1971 Comprehensive Program

The distinction between "market" relations and "planned" relations made in the discussions within Comecon prior to the adoption of the 1971 Comprehensive Program remained important in subsequent Comecon activities. Comecon was in fact a mixed system, combining elements of both planned and market economies. Although official rhetoric emphasized regional planning, intra-Comecon relations were conducted among national entities not governed by any supranational authority. They thus interacted on a decentralized basis according to terms negotiated in bilateral and multilateral agreements on trade and cooperation.

Market Relations and Instruments

The size of the Soviet economy determined that intra-Comecon trade was dominated by exchanges between the Soviet Union and the other members. Exchanges of Soviet fuels and raw materials for capital goods and consumer manufactures characterized trade, particularly among the original members. The liquidity shortage in the early 1980s forced the European members of Comecon to work to strengthen intraregional trade. In the early 1980s, intraregional trade rose to 60 percent of foreign trade of Comecon countries as a whole; for individual members it ranged from 45 to 50 percent in the case of Hungary, Romania, and the Soviet Union, to 83 percent for Cuba, and to 96 percent for Mongolia.

Trade among the members was negotiated on an annual basis and in considerable detail at the governmental level and was then followed up by contracts between enterprises (see Glossary). Early Comecon efforts to facilitate trade among members concentrated on the development of uniform technical, legal, and statistical standards and on the encouragement of long-term trade agreements. The 1971 Comprehensive Program sought to liberalize the system somewhat by recommending broad limits on "fixed-quota" trade among members (trade subject to quantitative or value targets set by bilateral trade agreements). There is no evidence, however, to indicate that quota-free trade grew in importance under the program.


The 1971 Comprehensive Program also called for improvement in the Comecon system of foreign trade prices. Administratively set prices, such as those used in intra-Comecon trade, did not reflect costs or relative scarcities of inputs and outputs. For this reason, intra-Comecon trade was based on world market prices. By 1971 a price system governing exchanges among members had developed, under which prices agreed on through negotiation were fixed for five-year periods. These contract prices were based on adjusted world market prices averaged over the immediately preceding five years. Under this system, therefore, intra-Comecon prices could and did depart substantially from relative prices on world markets.

Although the possibility of breaking this tenuous link with world prices and developing an indigenous system of prices for the Comecon market had been discussed in the 1960s, Comecon prices evolved in the opposite direction after 1971. Far from a technical or academic matter, the question of prices underlay vital issues of the terms and gains of intra-Comecon trade. In particular, relative to actual world prices, intra-Comecon prices in the early 1970s penalized exporters of raw materials and benefited exporters of manufactures. After the oil price explosion of 1973, Comecon foreign trade prices swung further away from world prices to the disadvantage of Comecon suppliers of raw materials, in particular the Soviet Union. In view of the extraregional opportunities opened up by the expansion of East- West trade, this yawning gap between Comecon and world prices could no longer be ignored. Hence in 1975, at Soviet instigation, the system of intra-Comecon pricing was reformed.

The reform involved a substantial modification of existing procedures (known as the "Bucharest formula"), but not their abandonment. Under the modified Bucharest formula, prices were fixed every year and were based on a moving average of world prices for the preceding five years. The world-price base of the Bucharest formula was thus retained and still represented an average of adjusted world prices for the preceding five years. For 1975 alone, however, the average was for the preceding three years. Under these arrangements, intra-Comecon prices were more closely linked with world prices than before, and throughout the remainder of the 1970s they rose with world prices, although lagging behind them. Until the early 1980s, this new system benefited both the Soviet Union and the other Comecon countries since Soviet oil, priced with the lagged formula, was considerably cheaper than oil from the Organization of Petroleum Exporting Countries (OPEC), which charged drastically higher prices in the 1970s. By 1983-84 this system turned to the Soviet Union's advantage because world market oil prices began to fall, whereas the lagged Soviet oil prices continued to rise.

Exchange Rates and Currencies

Basic features of the state trading systems of the Comecon countries were multiple exchange rates and comprehensive exchange controls that severely restricted the convertibility of members' currencies. These features were rooted in the planned character of the members' economies and their systems of administered prices. Currency inconvertibility in turn dictated bilateral balancing of accounts, one of the basic objectives of intergovernmental trade agreements among members. As of mid-1989, the transferable ruble remained an artificial currency functioning as an accounting unit and was not a common instrument for multilateral settlement. For this reason, this currency continued to be termed "transferable" and not "convertible."

The member countries recognized that the multiplicity and inconsistency of their administered exchange rates, the separation of their domestic prices from foreign prices, and the inconvertibility of their currencies were significant obstacles to multilateral trade and cooperation. In 1989 Comecon lacked not only a flexible means of payment but also a meaningful, standard unit of account. Both problems vastly complicated the already complex multilateral projects and programs envisaged by the 1971 Comprehensive Program. The creation in 1971 of the International Investment Bank provided a mechanism for joint investment financing, but, like the International Bank for Economic Cooperation, this institution could not by itself resolve these fundamental monetary problems.

Recognizing that money and credit should play a more active role in the Comecon system, the 1971 Comprehensive Program established a timetable for the improvement of monetary relations. According to the timetable, measures would be taken "to strengthen and extend" the functions of the "collective currency" (the transferable ruble) and "to make the transferable ruble convertible into national currencies and to make national currencies mutually convertible." To this end, steps would be taken to introduce "economically well-founded and mutually coordinated" rates of exchange between members' currencies and between 1976 and 1979 to prepare the groundwork for the introduction by 1980 of a "single rate of exchange for the national currency of every country." This timetable was not met. Only in Hungary were the conditions for convertibility gradually being introduced by reforms intended to link domestic prices more directly to world prices.

Cooperation in Planning

Since the early 1960s, official Comecon documents have stressed the need for a more cost-effective pattern of specialization in production. Especially in the manufacturing sector, this "international socialist division of labor" would involve specialization within major branches of industry. In the absence of significant, decentralized allocation of resources within these economies, however, production specialization could be achieved only through the mechanism of the national plan and the investment decisions incorporated in it. In the absence at the regional level of supranational planning bodies, a rational pattern of production specialization among members' economies required coordination of national economic plans, a process that posed inescapable political problems.

The coordination of national five-year economic plans was the most traditional form of cooperation among the members in the area of planning. Although the process of consultation underlying plan coordination remained essentially bilateral, Comecon organs were indirectly involved. The standing commissions drew up proposals for consideration by competent, national planning bodies; the Secretariat assembled information on the results of bilateral consultations; and the Council Committee for Cooperation in Planning (created by Comecon in 1971 at the same session at which the Comprehensive Program was adopted) reviewed the progress of plan coordination by members.

In principle, plan coordination covered all economic sectors. Effective and comprehensive plan coordination was significantly impeded, however, by the continued momentum of earlier parallel development strategies and the desire of members to minimize the risks of mutual dependence (especially given the uncertainties of supply that were characteristic of the members' economies). Plan coordination in practice, therefore, remained for the most part limited to mutual adjustment, through bilateral consultation, of the foreign trade sectors of national five-year plans. Under the 1971 Comprehensive Program, there were renewed efforts to extend plan coordination beyond foreign trade to the spheres of production, investment, science, and technology.

Plan Coordination

According to the 1971 Comprehensive Program, joint planning--multilateral or bilateral--was to be limited to "interested countries" and was "not to interfere with the autonomy of internal planning." Participating countries were to retain, moreover, national ownership of the productive capacities and resources jointly planned.

The Comprehensive Program did not clearly assign responsibility for joint planning to any single agency. On the one hand, "coordination of work concerned with joint planning [was to] be carried out by the central planning bodies of Comecon member countries or their authorized representatives." On the other hand, "decisions on joint, multilateral planning of chosen branches and lines of production by interested countries [were to] be based on proposals by countries or Comecon agencies and [were to] be made by the Comecon Executive Committee, which also [was to determine] the Comecon agencies responsible for the organization of such work." Finally, mutual commitments resulting from joint planning and other aspects of cooperation were to be incorporated in agreements signed by the interested parties.

It is extremely difficult to gauge the implementation of plan coordination or joint planning under the 1971 Comprehensive Program or to assess the activities of the diverse international economic organizations. There is no single, adequate measure of such cooperation. The results were inconclusive, at best.

Joint Projects

The clearest area of achievement under the 1971 Comprehensive Program was the joint exploitation and development of natural resources for the economies of the member countries. Particular attention was given to energy and fuels, forest industries, and iron and steel and various other metals and minerals. Most of this activity was carried out in the Soviet Union, the great storehouse of natural resources within Comecon.

Joint development projects were usually organized on a "compensation" basis, a form of investment "in kind." Participating members advanced materials, equipment, and manpower and were repaid through scheduled deliveries of the output resulting from, or distributed through, the new facility. Repayment included a modest "fraternal" rate of interest, but the real financial return to the participating countries depended on the value of the output at the time of delivery. Deliveries at contract prices below world prices provided an important extra return. No doubt the most important advantage from participation in joint projects, however, was the guarantee of long-term access to basic fuels and raw materials in a world of increasing uncertainty about the supply of such products.

The Concerted Plan

The multilateral development projects concluded under the 1971 Comprehensive Program formed the backbone of Comecon's Concerted Plan for the 1976-80 period. The program allotted 9 billion rubles (nearly US$12 billion at the official 1975 exchange rate of US$1.30 per ruble) for joint investments. The Orenburg project was the largest project under the Comprehensive Program. It was undertaken by all East European Comecon countries and the Soviet Union at an estimated cost ranging from the equivalent of US$5 billion to US$6 billion, or about half the cost of all Comecon projects under the Concerted Plan. It consisted of a natural gas production facility at Orenburg in western Siberia and the 2,677-kilometer Union (Soiuz) natural gas pipeline, completed in 1978, linking the Orenburg facility to the western border of the Soviet Union. Construction of a pulp mill in Ust' Ilimsk (in eastern Siberia) was the other major project under this program.

These two projects differed from other joint Comecon investment projects in that they were jointly planned and jointly built in the host country (the Soviet Union in both cases). Although the other projects were jointly planned, each country was responsible only for construction within its own borders. Western technology, equipment, and financing played a considerable role.

The early 1980s were characterized by more bilateral investment specialization but on a much smaller scale than required for the Orenburg and Ust' Ilimsk projects. In these latter projects, Eastern Europe provided machinery and equipment for Soviet multilateral resource development.

Cooperation in Science and Technology

To supplement national efforts to upgrade indigenous technology, the 1971 Comprehensive Program emphasized cooperation in science and technology. The development of new technology was envisioned as a major object of cooperation; collaboration in resource development and specialization in production were to be facilitated by transfers of technology between members. The 1971 Comecon session, which adopted the Comprehensive Program, decided to establish the Council Committee for Cooperation in Science and Technology to ensure the organization and fulfillment of the provisions of the program in this area. Jointly planned and coordinated research programs extended to the creation of joint research institutes and centers. In terms of the number of patents, documents, and other scientific and technical information exchanges, the available data indicate that the Soviet Union has been the dominant source of technology within Comecon. On the whole, it provided more technology to its East European partners than it received from them. Soviet science also formed the base for several high- technology programs for regional specialization and cooperation, such as nuclear power and computers.

The 1985 Comprehensive Program, adopted in December, was intended to boost cooperation in science and technology. Under this program, enterprises and research institutes were established throughout the East European member countries and assigned particular research and development tasks. Each project was headed, however, by a Soviet organization, which awarded contracts to other Comecon member organizations. The Soviet project heads, who were not responsible to domestic planners, were given extensive executive powers of their own and closely supervised all activities. The program represented a fundamentally new approach to multilateral collaboration and a first step toward investing Comecon with some supranational authority. Genuine economic benefits of this program were marginal, however, since prices and exchange rates were artificially set and currencies remained mutually inconvertible.

Labor Resources

Just as the 1971 Comprehensive Program stimulated investment flows and technology transfers among members, it also increased intra-Comecon flows of another important factor of production: labor. Most of the transfers occurred in connection with joint resource development projects, such as Bulgarian workers aiding in the exploitation of Siberian forest resources or Vietnamese workers helping on the Friendship pipeline in the Soviet Union. Labor was also transferred in response to labor imbalances in member countries. Hungarian workers, for example, were sent to work in East Germany under a bilateral agreement between the two countries. Such transfers, however, were restricted by the universal scarcity of labor that emerged with the industrialization of the less developed Comecon countries. Moreover, the presence of foreign workers raised practical and ideological issues in socialist planned economies.

Power Configurations Within Comecon

The Soviet Union and Eastern Europe

Between Comecon's creation in 1949 and the anticommunist revolutions in 1989, the relationship between the Soviet Union and the six East European countries generally remained stable. The Soviet Union provided fuel, nonfood raw materials, and semifinished (hard) goods to Eastern Europe, which in turn supplied the Soviet Union with finished machinery and industrial consumer (soft) goods.

This kind of economic relationship stemmed from a genuine need by the Comecon members in the 1950s. Eastern Europe has poor energy and mineral resources, a problem exacerbated by the low energy efficiency of East European industry. As of mid-1985, factories in Eastern Europe still used 40 percent more fuel than those in the West. As a result of these factors, East European countries have always relied heavily on the Soviet Union for oil. For its part, in the 1950s Eastern Europe supplied the Soviet Union with goods otherwise unavailable because of Western embargoes. Thus, from the early 1950s to the early 1970s, during the time when there was no world shortage of energy and raw materials, the Soviet Union inexpensively supplied its East European clients with hard goods in exchange for finished machinery and equipment. In addition, Soviet economic policies bought political and military support. During these years, the Soviet Union could be assured of relative political tranquillity within Eastern Europe, obedience in international strategy as laid down by the Soviet Union, and military support of Soviet aims. By the 1980s, the members of Comecon were accustomed to this arrangement. The Soviet Union was particularly happy with the arrangement because it still could expand its energy and raw materials sector quickly and relatively cheaply.

Mongolia, Cuba, and Vietnam

Soviet-initiated Comecon support for Comecon's three least- developed members--Cuba, Mongolia, and Vietnam--clearly benefited them, but the burden on the six East European Comecon members was most unwelcome. Comecon was structured in such a way that the more economically developed members provided support for the less developed members in their major economic sectors. Initially, the addition of Mongolia in 1962 brought no great added burden. The population of Mongolia was relatively small (1 million), and the country's subsidies came primarily from the Soviet Union. The addition of Cuba (9 million people) in 1972 and Vietnam (40 million people) in 1978, however, quickly escalated the burden. In 1987 three-fourths of Comecon's overseas economic aid went to Cuba, Mongolia, and Vietnam.

Comecon had invested heavily in Mongolia, Cuba, and Vietnam; and the three countries benefited substantially from these resources. In 1984 increases in capital investments within Comecon were highest for Vietnam and Cuba (26.9 percent for Vietnam and 14 percent for Cuba, compared with 3.3 percent and less for the others, except Poland and Romania). Increased investments in Mongolia lagged behind those in Poland and Romania but were nevertheless substantial (5.8 percent). In 1984 the economies of the three developing countries registered the fastest industrial growth of all the Comecon members.

Given their locations, Comecon membership for Mongolia, Cuba, and Vietnam served principally to advance Soviet foreign policy interests. Among the Comecon members, the Soviet Union contributed the most to the development of the three poorer Comecon members, and it also reaped most of the benefits. The Soviet Union imported most of Cuba's sugar and nickel and all of Mongolia's copper and molybdenum (widely used in the construction of aircraft, automobiles, machine tools, gas turbines, and in the field of electronics). In return, Cuba provided bases for the Soviet Naval Forces and military support to Soviet allies in Africa. Vietnam made its naval and air bases, as well as some 100,000 guest workers, available to the Soviet Union.

Support for Developing Countries

Comecon provided economic and technical support to 34 developing countries in 1960, 62 developing countries in 1970, and over 100 developing countries in 1985. As of 1987, Comecon had assisted in the construction or preparation of over 4,000 projects (mostly industrial) in Asia, Latin America, and Africa. A monetary figure for this assistance is difficult to estimate, although a June 1986 Czechoslovak source valued the exchange between Comecon and developing countries at 34 billion rubles per year (US$48.3 billion at the official June 1986 exchange rate of US$1.42 per ruble). The precise nature of this aid was unclear, and Western observers believe the data to be inflated.

From the 1960s to the mid-1980s, Comecon sought to encourage the development of industry, energy, transportation, mineral resources, and agriculture of Third World countries. Comecon countries also provided technical and economic training for personnel in Asia, Africa, and Latin America. When Comecon initially lent support to developing countries, it generally concentrated on developing those products that would support the domestic economies of the Third World, including replacements for imports. In the 1970s and 1980s, assistance from Comecon was directed toward export-oriented industries. Third World countries paid for this support with products made by the project for which Comecon rendered help. This policy gave Comecon a stable source of necessary deliveries in addition to political influence in these strategically important areas.

Trends and Prospects

Comecon served for more than three decades as a framework for cooperation among the planned economies of the Soviet Union, its allies in Eastern Europe, and Soviet allies in the Third World. Over the years, the Comecon system grew steadily in scope and experience.

This institutional evolution reflected changing and expanding goals. Initial, modest objectives of "exchanging experience" and providing "technical assistance" and other forms of "mutual aid" were extended to the development of an integrated set of economies based on a coordinated international pattern of production and investment. These ambitious goals were pursued through a broad spectrum of cooperative measures extending from monetary to technological relations.

At the same time, the extraregional goals of the organization also expanded; other countries, both geographically distant and systemically different, were encouraged to participate in Comecon activities. Parallel efforts sought to develop Comecon as a mechanism through which to coordinate the foreign economic policies of the members as well as their actual relations with nonmember countries and with such organizations as the European Economic Community (EEC) and the United Nations.

Asymmetries of size and differences in levels of development among Comecon members deeply affected the institutional character and evolution of the organization. The overwhelming dominance of the Soviet economy necessarily meant that the bulk of intra- Comecon relations took the form of bilateral relations between the Soviet Union and the smaller members of Comecon.

The planned nature of the members' economies and the lack of effective market-price mechanisms to facilitate integration hindered progress toward Comecon goals. Without the automatic workings of market forces, progress depended upon conscious acts of policy. This fact tended to politicize the processes of integration to a greater degree than was the case in countries with market economies.

By 1987 Comecon's 1971 Comprehensive Program had undergone considerable change. Multilateral planning faded into traditional bilateral cooperation, and the Bucharest formula for prices assumed a revised form. The 1985 Comprehensive Program or, as some Western analysts call it, the "Gorbachev Charter," became Comecon's new blueprint for taking a firm grip on its future. The purpose of the 1985 program was to offset centrifugal forces and reduce Comecon's vulnerability to "technological blackmail" through broadened mutual cooperation, increased efficiency of cooperation, and improved quality of output.

Additional progress in this direction was made at the Forty- Third Council Session held in Moscow in October 1987 and the Forty-Fourth Council Session held in Prague in July 1988. As a result of these sessions, all Comecon members, with the exception of Romania, reached an agreement on the necessity within Comecon of a "unified market," which would lead to the "free movement of goods, services, and other production factors." They also agreed to work toward a genuine multilateral convertibility of their currencies, recognizing, nevertheless, that achievement of such a goal was some ten to fifteen years in the future.

Members attending the Forty-Third Council Session also agreed to changes in Comecon's organizational structure. Some Comecon bodies were abolished, others were reorganized or merged, and new bodies were created. The aim of these changes was to streamline and improve their performance. At the same time, however, as meaningful changes were being made within Comecon, the rapidly changing political climate of Eastern Europe and the pressure for economic reforms within each of the Comecon member states were not only threatening the unity of Comecon but also raising serious doubts about any further need for its existence.

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Although the selection is still rather sparse, several English-language works on Comecon appeared in the early 1980s. Socialist Economic Integration by Jozef M. van Brabant discusses in great detail the mechanisms and operations of socialist economic integration in general and Comecon in particular. It is perhaps the most comprehensive English-language work on the subject. Analysis of Comecon's operations and development in the modern economic and political arena is provided in Paul Marer's "The Political Economy of Soviet Relations with Eastern Europe." The best sources for up-to-date political and economic analysis are the Radio Free Europe background reports. Articles by Vladimir Sobell, in particular, provide useful information about the 1985 Comprehensive Program.

Russian-language sources provide useful information on Comecon procedures and structure in addition to insight into the Soviet and East European view of Comecon's goals and shortcomings. Articles in this vein can be found in Voprosy ekonomiki and in Ekonomika. Translations of selected articles from these publications can be found in the Joint Publications Research Service's USSR Report on Economic Affairs. The Comecon Secretariat publishes a bimonthly bulletin (Ekonomicheskoe sotrudnichestvo stran-chlenov SEV), which has a table of contents and a summary in English; the annual Statisticheskii ezhegodnik stran-chlenov SEV; and various handbooks. (For further information and complete citations, see Bibliography.)