This paper looks at the end of the Cold War as the end of a monumental competition. Until 1981, the United States competed mainly on own its side of the playing field. It was a good defensive effort called Containment, but it avoided taking the competition into the Soviet side. The Reagan Administration changed the policy. It would undertake to "win the cold war" by taking advantage of every Soviet weakness and every U.S. strength to force a change in the Soviet bloc system,
After 23 months of effort, President Ronald Reagan received a report that "the combined weight of the burdens being created will cause the Soviet system to implode in this decade". On October 14, 1986, Soviet General Secretary Mikhail Gorbachev speaking on Soviet TV told his people: "The U.S. wants to exhaust the Soviet Union economically…to wreck its plans…of improving the standard of living…thus arousing dissatisfaction with their leadership."
That is what the Reagan administration intended. That is what happened.
In 1980 the Soviet Union and its ruling elite felt their country was winning the Cold War. The USSR had good hard currency earnings and high expectations of much more. It was buying and smuggling Western Technology; it had taken over Afghanistan and was in a position to press on in the Middle East. The Soviets had updated their weapons, "secretly deployed SS-20 missiles in Europe unilaterally," according to Anatoly Dobrynin, Soviet Ambassador to the United States from 1962 to 1986, and had support in the West for disarmament and a nuclear freeze. (Dobrynin, 1995, p. 430)
The incoming Reagan Administration had campaigned on changing this, but it faced many challenges:
·-Western Europe was making loans to the USSR at half the normal interest rate.
· Sweden was buying restricted high technology needed by the Soviets and reselling the items with all the necessary instructions.
· Many western firms were selling restricted technology to companies fronting for the USSR.
· The technologies the Soviets could not buy, they were trying to steal.
· The USSR was earning hard currency by selling oil at three times its production cost.
· The USSR was earning hard currency by selling weapons to oil rich countries like Iran, Iraq and Libya.
· Europe was financing two gas pipelines from Siberia. If completed, West Germany, for instance, would become dependent on Moscow for 60% of its energy and Soviet hard currency earnings would double to $60 billion per year.
· The Soviets had effectively taken over Angola and Mozambique, and the Soviet military
was providing aid and advice to many countries in Africa.
· U.S. military spending had declined from 9.2 % of Gross Domestic Product (GDP) under President John Kennedy in 1962 to less than 4.6% under President Jimmy Carter in 1979. (Federal Government Historical Budget, Tables 3.1 and 10.1)
· In Nicaragua, the USSR financed equipment and thousands of trainers to build an army of 60,000 regulars and 60,000 militia, armed with tanks, helicopters and jet fighters. The plan was to expand to 500,000 men under arms. (Singlaub, 1991, p.444)
· The Soviets were positioning themselves to threaten Western Europe into less cooperation with the United States.
· The USSR had invaded and was winning in Afghanistan. (Cold War Seminar, 1999)
In 1999, I had the opportunity to join a group celebrating the fall of the Berlin Wall. It brought together former leaders from the Reagan Administration: Secretary of Defense Caspar Weinberger, Secretary of State Alexander Haig, Ambassador-at-Large Vernon Walters, National Security Adviser Richard Allen, National Security Adviser William Clark, Personal Adviser and later Attorney General Ed Meese, and James Buckley, President of Radio Free Europe and Radio Liberty. It also included National Review editors and writers: William Buckley, Kate O\’Beirne, Peter Rodman and John Sullivan. During the two-week Baltic cruise, the group spent 21 hours in formal sessions and talked individually with the speakers.
They described in detail how the Reagan Administration implemented a many-faceted strategy that abandoned the policies of Containment and Détente and used our competitive strengths to take advantage of what they saw as moral, economic and systemic weaknesses in the Soviet bloc. The policies, now declassified, were spelled out in many secret National Security Decision Directives (NSDD). (Cold War Seminar, 1999)
These directives had many specific steps, but the broadest of them were the following:
· NSDD 32 – Goal to "neutralize efforts of the USSR" to maintain its hold on Eastern Europe. (Schweizer, 1994, p. 76-7, interview with William Clark)
· NSDD 66 – Cut off access to Western technology and reduce the USSR\’s hard currency earnings. "NSDD-66 was tantamount to a secret declaration of economic war on the Soviet Union." (Ibid.1999, p. 126, interview with Roger Robinson, its principle author)
· NSDD 75 – Roll back the Soviet sphere by exploiting economic weaknesses and its evil reputation and bring about changes in the Soviet system by creating crises. (Ibid., p. 32, interview with Robert McFarlane) (Shattan, 1999, p. 250-4)
· NSDD 166 – The new goal was to win in Afghanistan. (Lucier, 1999, p. 9, 44)
Reagan entered office in 1981 with a clear strategy in mind. His objective was to find weak points in the Soviet structure, to aggravate these weaknesses, and to undermine the system. He believed the proper strategy was one of clearly gaining the upper hand, and then negotiating from a position of strength. The aim was to convince the Soviets that it would be hopelessly expensive, even impossible, to keep abreast of the U.S. Only then would the Soviets agree to negotiate verifiable agreements. (Allen, 1996, p. 62)
Reagan\’s strategy was not lost on his closest ally, Margaret Thatcher, Prime Minister of Great Britain. She wrote in her memoirs, "…From the first I regarded it as my duty to do everything I could to reinforce and further President Reagan\’s bold strategy to win the Cold War, which the West had been slowly, but surely losing". (Thatcher, 1993, p.157)
SOVIETS\’ VIEW IN 1980
The Soviet leaders viewed their position vis-a-vis the West favorably – except for the USSR\’s low economic growth, reliance on foreign sources for critical equipment and technology, and its low labor productivity. The USSR was again set to expand its empire. Afghanistan would soon be under complete control; then the Soviets could exert more pressure on Iran and Pakistan. Mozambique came under Soviet control without opposition, except by internal guerillas. The Communist government of Angola had 12,000 black Cuban troops and thousands of Soviet Bloc advisers. Neighboring African countries supported the non-communist guerillas, but the American Congress had prohibited U.S. assistance since 1976.
Underway were a gas and oil project with Japan and a dual gas pipeline from Siberia to Western Europe that would greatly increase Soviet hard currency earnings. The USSR, because it had three times as many tanks as the West, felt it could easily overrun Europe in a non-nuclear war. The new SS-20 missiles could threaten Europe with a nuclear war separately from the U.S. These would help make Europe vulnerable to pressure. Soviet agents and advisers were active in many countries working to extend the Soviet Empire or at least its influence.
The Soviets\’ ability to buy or steal Western technology was not only saving billions of dollars but also providing what the Soviets were not capable of building themselves. Overall, the Soviet elite felt that they were winning and they could continue to postpone making good on their many promises to improve the standard of living of the average Soviet citizen.
CASEY AND THE CIA
In February 1981, William Casey, the new Director of the Central Intelligence Agency (CIA) called for two initiatives. The first was: pay attention to worldwide "intangible threats" like subversion and terrorism with special attention to the degree they were supported by those hostile to the U.S. The second was: develop new intelligence estimates that would enable the administration to take advantage of U.S. strengths and the weaknesses of its adversaries. (Gates, 1996, p. 203)
Robert Gates, whose CIA career extended from 1966 to being Director in 1991, wrote, "Casey quickly put his finger on a serious deficiency in the CIA\’s collection and analysis of information on the Soviet Union…While CIA Operations reported on Soviet covert…and (spy) actions around the world…these reports were regarded as operational…and were rarely shared with the analysts and even more rarely…outside…" "Because of Casey, a CIA ability to monitor Soviet covert action in an organized and thorough manner at last was born – 35 years into the Cold War." (Ibid. p. 202, 203, 207)
SOVIETS SUPPORT TERRORISM
CIA analysts had neglected the seamier side of Soviet activities. In March, Secretary of State Al Haig asked for a CIA analysis of how the USSR was sponsoring terrorism around the world. The report that came to Casey for signature concluded that the USSR did not. The evidence submitted were quotes by Soviet leaders publicly condemning terrorist groups. Casey wrote the head of the analytical section that the draft was deficient in intellectual rigor and overly reliant on Soviet statements. He asked another group to conduct a new study using historical records of the CIA that the analysts did not have or request. (Ibid. p. 203-4)
After negotiations on the wording, the report was eventually issued in May 1981 as a joint report by the CIA and the DIA (Defense Intelligence Agency) entitled The Soviet Role in
Revolutionary Violence. It described a worldwide effort to weaken unfriendly societies, destabilize hostile regimes and advance Soviet interests. The Soviets had no scruples about using terrorist tactics. Even many terrorist groups without a political agenda had individuals who had been trained by Soviet friends and allies who also provided those groups with weapons and safe transit. The Soviets often publicly condemned such groups, which is what the first study was quoting. (Ibid. 1996, p. 205)
After the collapse of the Warsaw Pact countries, the CIA learned even the second report understated the support to terrorists. These governments, especially East Germany, supplied not only sanctuary, but also training, false documents, weapons, and funding to many groups such as West German Red Army Faction. Gates writes, "It is inconceivable that the Soviets…did not know and allow if not encourage these activities…As it turns out, Casey had been more right than the others." (Ibid. p. 206)
In 1958, General Secretary Nikita Khrushchev had begun to proclaim publicly that the Soviet Union would soon "bury" the United States in an economic competition. The party actually adopted as part of doctrine, that: "In the current decade – 1961-1970 – the Soviet Union, while creating a material-technical base for communism, will surpass in per capita production the most powerful and richest capitalist country – the United States." The party program went on to proclaim that in the subsequent decade: "…an abundance of material and cultural wealth will be ensured for the entire population…" (Brzezinski, 1989, p. 34, 35)
The CIA had estimated the per capita GDP of the USSR at 37% of that of the U.S., in 1965, 45% in 1970, 49% in 1975 and 46% in 1980. (Ibid. p. 259) The CIA relied on published Soviet statistics and on estimates based on photo reconnaissance. Both overstated output. The photos missed the losses resulting from uneconomic designs, inefficiency and waste. Poor quality and a very short useful life were characteristic of the Soviet non-military economy products. (Cold War Seminar, 1999)
There were disputes over the CIA estimates. In 1974 the CIA had estimated that Soviet military spending was 6% of GDP, about the same percentage as the U.S. The Soviet buildup made this estimate indefensible and it was raised to 9%. When Brezhnev used 15% in a secret speech the CIA estimate increased again to 12%, despite the Defense Intelligence Agency arguments for 30%. (Hayward, 2001, p. 423-4) At the same time direct evidence that Soviet spending was 25% of GDP was provide by a defector whose job had been to integrate the secret Soviet military budget with the team doing the Five-year plan. (Graham, 1995, p. 87) Neither President Reagan nor Casey believed the previous CIA reports on Soviet GDP or its estimate of Soviet military spending. They reviewed the raw data on manufacturing bottlenecks, shortages, factory closings for lack of spare parts, hard currency shortages, food lines and the burdens of empire. Herb Meyer, Special Assistant to Casey, told him that Moscow was, "…terribly vulnerable economically…It should be a matter of high national policy to play to these vulnerabilities". (Schweizer, 1994, p. 21, interview with Meyer) A private Reagan diary entry after a Casey briefing in March 1981 read, "If we can cut off their credit, they\’ll have to yell \’uncle\’ or starve." (Cold War Seminar, 1999)
Casey was not an ordinary director of the CIA. He was in the Cabinet, on every foreign policy decision making body and on the decision making five-member National Security Planning Group (NSPG). He had an office in the Old Executive Office Building, met with the President twice a week, often alone, and was guaranteed open access to him. (Schweizer, 1994, p. 3 & 6, interview with Herb Meyer) "Push. Push. Push. Casey never stopped coming up with these ideas-or forwarding those of others-for waging the war against the Soviets more broadly, more aggressively and more effectively," writes Robert M. Gates. (Gates, 1996, p. 256)
The CIA had estimated 1980 per capita Soviet GNP at $6,500/year vs. $14,000/year for the U.S. However, instead of looking at Soviet statistics and articles by economists enamored with the efficiency of a centrally planned economy, Reagan and Casey asked themselves what the USSR was like and what GDP level was consistent with these observations.
In 1980, except for the elite, most Soviets were inadequately housed. Not only were apartments small, but only two-thirds had running water and only half of those had hot water. Only 18 households per 1000 owned a car, and there were fewer than 9 telephones per 100 people. (Roberts, 1990, p. 32, 40, 54)
Every Soviet employee of an international organization had to surrender to Moscow two-thirds of his monthly salary and in addition the money paid into the pension fund for him. Despite this, Soviets working in Geneva, even members of the elite, were far better off than if they had lived in the Soviet Union. All tried to stay overseas, even in Khartum. (Dzhirkvelov, 1987 p. 364)
In 1986 the Soviet Union produced 27.5 tons of paper and cardboard from 1000 cubic meters of timber while Finland got 155 tons and Sweden 144, more than five times as much. (Rowen, 1990, p.22) This is an example of what caused the CIA to overstate Soviet GDP.
Gorbachev has written, "We are spending far more in materials, energy, and other resources per unit of output than other developed countries. Our country\’s wealth…has spoiled us…even…corrupted us." (Gorbachev, 1987, p. 19)
With no incentive to compete, to rationalize or to innovate, the Soviet Bloc countries had become monuments to bureaucratic inefficiency and counter-productive extravagance. Recent data show that Soviet-type economies consumed three times the energy per unit of production than those of market based France or West Germany. (Brzezinski, 1990, p. 36)
The lack of a market economy meant artificial prices, which resulted in the unavailability of low priced items. There was no stimulus to make spare parts. A plant manager needed approval to buy supplies, but the approval was only a hunting license – and he could not reject defective material sent from other plants. Often he had to pay "experts" to find the item needed. In these cases, "expertise" meant using bribes, connections or buying stolen materials, parts and equipment. (Roberts, 1990, p. 14-5)
The Soviet government subsidized food prices to discourage civil unrest. Yet, at the same time, private plots were limited to only 4% of arable land even though they were producing 25% of the food. In 1987, the new Soviet health minister said a large percentage of Soviet hospitals lacked hot water, basic sanitation and adequate sewerage. (Brzezinski, 1992, p. 37)
The distribution system was poor, with crops left rotting in rural areas while the urban population endured shortages and empty grocery shelves. Fuel scarcity during the legendary Russian winters meant inadequate heat for much of the population despite immense reserves of oil and gas. (Bush and Scowcroft, 1998, p. 14)
Exports into the free market (not state controlled transnational organizations) consisted mostly of natural resources and weapons. But the hard currency earnings critical to the Soviets were only $32 billion in 1980. (Schweizer, 1994, p. 42, interview with Yevgenny Novikov, former member of senior staff of the Communist Party Central Committee)
Richard Pipes, a Harvard historian and the Soviet specialist on the National Security Council, wrote, "Anyone who spent an hour walking the streets of Moscow, the Soviet Union\’s richest city, with open eyes would have dismissed as preposterous CIA statistics showing the
GDP as well as its living standards to be nearly half of the United States. Talking to Soviet citizens with an open mind would have revealed that the appearance of wide spread support for the regime was fraudulent." (Edwards, 1999, p. 47)
The National Intelligence Council, headed by Henry Rowen and with Herb Meyer as Vice Chairman, analyzed the raw data on the Soviet Union from a different perspective, in a series of studies. These provided new views of the Soviet economy.
William Casey and the NSPG came to the conclusion, based on extensive studies, that instead of being nearly half of the U.S. economy, the Soviet Economy was about one-sixth. (Cold War Seminar, 1999) Clearly, the cost of the Soviet military was a great drag on its economy. Based on Casey\’s GDP estimate and the CIA\’s estimate of Soviet military spending, the military was consuming 33% of the Soviet GDP in 1980.
ESTIMATING THE 1980 USSR ECONOMY BILLIONS OF U.S. DOLLARS, 1980
GDP MILITARY GDP MILITARY
1980 2,732 134 1257 150**
CASEY\’S ESTIMATE in 1981**
1980 2,732 134 455*** 150*
MILITARY AS % of GDP 4.9% 33%
*GDP and National Defense from Federal Budget Historical Tables 10.1 and 3.1.
**After the collapse Soviet officials admitted that previously reported military spending
covered only a small portion of actual, so its numbers were understated. (Rowen, 1990, p.3)
***New estimate that Soviet economy was about one-sixth of U.S. (Cold War Seminar, 1999)
ENDING CONTAINMENT AND DETENTE
The Reagan Administration came in believing that the Containment policy embraced since Truman was taking too long and would eventually work against the United States. Democracies are very effective when focused, but too many people were so used to the long lasting Soviet threat that they felt it was overstated. The Europeans were very interested in loaning money to the USSR to improve Europe\’s own sales. Robert Gates wrote, "Reagan, nearly alone, truly believed in 1981 that the Soviet system was vulnerable, not in some vague, long range historical sense, but right then. And he was determined to move the United States and the West from defense to offense." (Gates, 1996, p. 197)
Reagan\’s first National Security Adviser, Richard Allen, wrote: "He never believed as did many Western observers–including alleged experts–that the Soviet economy had the capacity to extract from its citizens limitless sacrifice for the sake of maintaining invincible military power. He knew…that a…productive American economy with its scientific and technological excellence would easily outpace the bankrupt \’scientific socialist\’ system of the Soviet Union." (Allen, 1996, p. 63)
The secret NSDDs signed over the next few years became the Administration\’s approach to the Soviet Union. The emphasis would be to avoid helping the rigid Soviet economy and let it exhaust itself competing with the U.S. This would undermine the belief of Soviet elite that they could win. Russians and East Europeans would see their lives as unfree and poor and getting poorer compared with the West. The Radios, Radio Free Europe, Radio Liberty and Radio Afghanistan, would carry the truth to their people. The overarching strategy was to win the Cold War through competition. (Cold War Seminar, 1999)
The U.S. economy was strong and the Soviet economy, for all its bragging and foreign adventures, was weak. The U.S. could use its competitive strengths such as: its identification with freedom, including religious freedom; a lead in most technologies; a market that other countries needed; a strong military; and a history of not taking over other countries and not starving and killing its own citizens, against the major areas of Soviet weakness. The long-term plan that evolved was to:
· Support internal disruptions with special emphasis on Poland. Sell Freedom.
· Dry up sources of hard currency so the USSR could not buy or pay its debts.
· Overload the economy with a technology-based arms race.
· Stop the flow of any Western technology with economic value.
· Weaken support for leaders of the "evil" Soviet empire.
· Raise the cost of the various wars the USSR was supporting.
· Demoralize the Soviets and generate pressure for change in their system
(Cold War Seminar, 1999)
GETTING FREEDOM FOR POLAND
The stability of the Polish government depended on preventing any political activity and making its people feel that they faced the government alone. Reagan and Casey saw Poland as the key to disrupting the Soviet hold on Eastern Europe. The Soviets were concerned that if Poland broke away others would follow. Poland, the leading eastern bloc country, was strongly Catholic and had a history of a desire for freedom. The labor union, Solidarity, led by Lech Walesa had become a political movement challenging the government. (Schweizer, 1994, p. 58)
President Reagan emphasized to his Cabinet the evils of the Soviet system and wanted to help Poles in their struggle for freedom. During 1981, the U.S. pointedly warned the Polish and Soviet governments not to take action against Solidarity, but the Soviet leaders were terrified that the virus of freedom would spread. (Ibid. p. 57-8)
On December 12, 1981, General Kulikov, commander of the Warsaw Pack forces, oversaw the imposition of martial law, forcing Solidarity underground. Initially, 6,000 and over time 40,000 Poles had been detained and hundreds were imprisoned. The government held Lech Walesa. President Reagan called Pope John Paul II for his advice. As a result, both agreed to support Solidarity and focus on the Soviets denial of freedom. (Ibid. p. 67)
Reagan wanted to penalize Moscow for imposing martial law. The Western European leaders were mute or worse. European bankers favored the institution of martial law, because they thought it assured repayment of the $28-30 billion the Polish government had recently borrowed. Instead of calling Polish loans, which some advocated, Roger Robinson, formerly a Chase Manhattan VP, suggested hitting Moscow by delaying and reducing the Siberian pipeline and halting subsidies and technology transfers. His view was adopted and proved crucial. (Ibid. p. 72-3, interview with Roger Robinson)
The imposition of martial law in Poland forced Moscow to bankroll a huge outflow of subsidized loans in the early 1980\’s to Poland, East Germany and Bulgaria. (Brown, 1988 p. 138 op. cit. Brooks & Wohlforth, 2000, p. 23)
Declassified Politburo documents now show that General Secretary Leonid Brezhnev, KGB head Yuri Andropov and Ideology Czar Mikhail Suslov privately had revoked the Brezhnev Doctrine in 1980-81 when they ruled out direct intervention in Poland. (Shakhnazarov, 1993, p. 115 op. cit. Brooks & Wohlforth, 2000, p. 30) Under Gorbachev, the Soviets continued this policy. But the Soviets did try military force in 1991 in Lithuania on January 2, 7, 11 and 13 (14 killed) and on January 20 in Latvia. In Moscow, 100,000 people protested these killings and called on Gorbachev to resign. (Crozier, 1999, p. 441-444)
REAGAN AND POPE JOHN PAUL II
On June 7, 1982, President Reagan and Pope John Paul II met in the Vatican for six hours including fifty minutes without advisers. Almost all the private discussion focused on Poland and the Soviet domination of Eastern Europe. Richard Allen, Reagan\’s first National Security Adviser, is quoted as declaring, "This was one of the great secret alliances of all time." Reagan and the Pope agreed to undertake a clandestine campaign to hasten the dissolution of the Communist Empire. Both were convinced that Poland could be broken out of the Soviet orbit if the Vatican and the United States committed their resources to destabilizing its government and keeping Solidarity alive. (Bernstein, 1992, p.28) (Schweizer, 1994, p. 107)
Casey decided that the relationship of the American labor movement with Solidarity was so good that much of what the CIA wanted done could be accomplished through AFL-CIO channels. The AFL-CIO officials were never aware of the extent of clandestine U.S. assistance or the guidance received from the church. (Bernstein, 1992, p. 34)
In October 1982, Poland outlawed Solidarity. With wide support, President Reagan suspended Poland\’s Most Favored Nation trading status, resulting in a 300%+ increase in tariffs, which priced Poland out of the U.S. market. This cost Poland $6 billion/year in U.S. sales. Thus, Poland required even more help from the Warsaw Pact. (Schweizer, 1994, p.120 & 265)
Until 1989, when it was legalized, Solidarity was kept alive by the U.S. and the Vatican. A total of $50 million in secret American aid kept the underground leaders functioning, and the U.S. made the concept of freedom a major point of competition with the Soviets. High-tech communications equipment was smuggled in with Danish and later Swedish help. This was followed by advisers and copying machines, printing equipment, supplies, VCR\’s, freedom tapes and technical aid to help start publications. (Shattan, 1999, p. 260) (Bernstein, 1992, p. 28)
This aid created a flood of underground publications. Some 1500 newspapers and journals and 2,400 books and pamphlets were generated between 1981 and 1987. These were not merely anti-communist and anti-totalitarian. They presented specific programs of political, economic and social reforms prepared by study groups. On many issues, such as the ecological devastation of the country or the backwardness of Polish agriculture and the management of industry, these thinkers had more to offer than the government. (Brzezinski, 1990, p, 120)
Armed with equipment provided by the CIA through church channels, Solidarity would break into both radio and television programming. Slogans and messages were often inserted at breaks during soccer matches. (Bernstein, 1992, p. 35)Almost everything having to do with Poland was handled outside of normal State Department channels. National Security Advisor William Clark met the Catholic Archbishop Poi Laghi in Washington D.C. many times, and they met at least six times with President Reagan at the White House. Laghi facilitated many meetings between the Pope and Ambassador-at-Large Vernon Walters. Former Congressman Edward Derwinski told Bernstein: " Casey was convinced the Soviet system was failing and doomed to collapse…and Poland was the force that would lead to the dam breaking. (emphasis added) He demanded constant CIA focus on the major front, Eastern Europe." It went unnoticed because the American media were focused on Nicaragua and El Salvador. (Ibid. p. 33)
SPOILING SOVIET OIL PLANS
After martial law was instituted in Poland, President Reagan on December 29, 1981 ordered all U.S. firms to break any contracts involving the Siberian pipeline and not to enter any new ones. (Shultz, 1993, p. 5) This order also halted the seven-year old Japan-Soviet oil and gas venture, which was to have started drilling in 1982. Japan accepted the embargo and the Soviets immediately knew there would be several billion dollars less in hard currency than planned for each year in the late 80\’s. (Schweizer, 1994, p. 72).
After first agreeing to honor U.S. sanctions, the Europeans bypassed them with a new interpretation. At a June 1982 meeting in Bonn, President Reagan made an impassioned speech to curtail the Siberian pipeline, restrict subsidized credits and resist normal business with the Soviets. Germany\’s Chancellor Helmut Schmidt deliberately ignored Reagan during his plea, despite the fact that the pipeline would make Germany 60% energy-dependent on Moscow and would double Soviet hard currency earnings to $60 billion per year. Schmidt was hiding this from his people. The U.S. responded in June by extending the sanctions to include European firms operating under American licenses. The outcry from Europeans was loud, and the European leaders indicated they would defy Reagan\’s decision. (Ibid. p, 43, 108-109, interviews with Roger Robinson and William Clark)
The French government threatened any company that did not ship the pipeline equipment anyway. (Ibid. p. 111) Reagan signed a NSD Memo that any company that used U.S.-licensed technologies would be denied U.S. markets. Most of these companies could not survive closure of the U.S. market. (Ibid. p. 124, interview with Robert McFarlane) This led to a compromise by November 13, 1982 that cut the pipeline to half its planned capacity, limited the maximum dependence to 30%, put stronger restrictions on selling technology and restricted the credit extended to the Soviets. (Ibid. p. 125, interview with George Shultz)
Casey assured his colleagues \’not to worry\’ about the pipeline even after construction resumed. The pipeline suffered further delays from turbine breakdowns and fires. There was a minimum two year delay that cost the Soviets over $15 billion and a permanent loss of $15 billion in hard currency per year in the 1990\’s. (Ibid. p. 216, interview with Roger Robinson)
The Siberian Pipeline delay and reduction was a critical turning point in the Cold War. The hard currency it would have brought to the USSR would have funded its military research, funded more overseas expansion efforts and eased the pressure on its economy.
BY 1983, SUCCESS IS ALREADY IN VIEW
Despite the many obstacles that faced the administration in January 1981, it soon saw that the new approach was working. In late November 1982, Henry Rowen presented to a NSPG meeting his assessment of Soviet economic vulnerabilities. Rowen, the head of the new National Intelligence Council and former President of the Rand Corporation, stated: "We have simply got to sustain our military challenge to Moscow and cut off its Western life support, because in this
decade we are going to see the combined weight of that burden cause such stress on the system that it will implode." (Ibid.1994, p.127 interview with Robert McFarlane)
ARMS UPGRADE TRAPS SOVIETS
The Soviet elite had a compulsion to stay ahead of the United States in weapons.
When the U.S. built the C-5A, a very large military transport plane, the Soviets built one like it but six inches longer. In 1980, since the Soviets believed they were far ahead in military capability, they helped peace groups push for a nuclear freeze and disarmament.
The United States had to catch up, but the Reagan administration decided to emphasize weapons that would make obsolete what the Soviets had built in quantity. This would both make U.S. non-nuclear ability credible and put an additional burden on the Soviet economy. The Soviets\’ compulsion, to be first militarily where possible and at least equal elsewhere, would lead them to match U.S. defense spending even if it would damage their economy and thereby lose the support of the average Soviet citizen. With massive repression, this was not overly important until Gorbachev until he switched from force trying to increase productivity by having a less repressive system. (Cold War Seminar, 1999)
Public support for defense spending in a democracy in peacetime is always very shallow. America had not supported defense increases for more than 20 months. With President Reagan\’s support, the Defense Budget Authorizations went up 13%, 12%, 8%, 5% and 7% from 1981-85, for an increase of 53%. (Weinberger, 1990, p. 68)
United States defense procurement allocations doubled by 1985, while research and development almost doubled. New anti-tank weapons, anti-submarine sensors and weapons were being deployed and a start on the Strategic Defense Initiative (SDI) was well underway. General Snow, head of NATO, reported on a speech given by a top Soviet Defense official in 1985. It stated that the new weapons being adopted by the West meant that Western Europe could no longer be overrun by Soviet tank armies in a non-nuclear conflict. The Soviet official\’s comments showed the respect he had for the new U.S. weapons being developed and deployed in the early \’80s. He was removed shortly thereafter. (Meeting author attended)
At this time the Warsaw Pact countries had a 3,875 to 2,200 advantage in aircraft over NATO and a 29,000 to 9,770 advantage in tanks. (Garrity, 1986) The Soviets based their military strength on quantity and were not prepared to compete against fewer, but far superior weapons. The Soviets had planned to increase military spending 45% between 1981 and 1985, but the new competition made even more necessary. (Schweizer, 1994, p.197)
Oleg Gordievsky, a KGB officer in London, provided British intelligence with documents showing that Soviet military officials believed the SDI system might prove 90% effective. Moscow acted as if success was assured. It shifted more resources to the military industrial sector in an attempt to maintain Soviet competitiveness. (Ibid. 1994, p. 215)
Having started exploring new missile defenses in 1981, Caspar Weinberger was a strong supporter. After negotiations, the U.S. signed SDI collaborative agreements with England, Dec.1985; Germany, March 1986: Israel, May 1986; Italy, Sept.1986; and Japan, July 1987. (Weinberger, 1990, p. 302-315) This further increased a research effort the Soviets knew they could not match. Executives, of three European companies, working on SDI were assassinated and four facilities were bombed. But Soviet spies (with U.S. help) reported greater progress to Moscow in SDI research than existed. (Schweizer, 1994, p. 226, 274-5) In March 1985, when Mikhail Gorbachev succeeded Konstanin Chernenko who died after only 14 months in office, he knew the economy was in trouble. From the summer of 1984, Gorbachev increasingly dominated the Politburo, often chairing Politburo meetings during Cherenko\’s illness. (Dobrynin, 1995, p. 479)
The party had promised never to let the capitalists regain military superiority but this pledge would prove very costly. Military expenditures rose another 45% in the years under Gorbachev. (Ibid.1994, p. 240)
Gorbachev continued Yuri Andropov\’s policy of trying to force labor to be more productive, with little success. He seemed to want the West, particularly the U.S., to ease up the competitive pressure on the Soviet Union. In June Reagan told his staff, "Mr. Gorbachev may or may not be a new type of Soviet leader. Time will only tell and it may not be for a decade. But I want to keep the heat on the Soviets. I don\’t want to let up on anything we are doing." (Ibid. p. 236, interview with Ed Meese)
Gorbachev badly needed to cut spending. In February 1985 the Soviets had had to temporarily stop paying foreign suppliers because of a hard currency shortage. The empire had become a financial drain. At the Reykjavik Summit in October 1986, Gorbachev offered Reagan cuts in missiles and a substantial reduction in Soviet military power. This was seen as a big concession, since the Soviet Union was a superpower because of its military. The disarmament expert, Paul Nitze, was very excited. But the Soviet concessions were further proof that the change in U.S. strategy was succeeding. (Ibid. 1994, p. 277-8, interview with John Poindexter) Gorbachev would offer more concessions. He had no choice. (Gates, 1998 p. 409)
U.S. & ESTIMATED USSR GDP & MILITARY EXPENDITURES
(IN BILLIONS OF US DOLLARS)
GDP MIL. GDP MIL. %INC %GDP
1980 2,732 134 455 150 33 %
1985 4,137 253 553* 217 45%** 39 %
1990 5,736 299 673* 315 45%*** 47 %
1999 9,130 275 314 Russia ****
482 Russia plus 14 former Republics ****
*Assumes a 4% increase in Soviet GNP.
**45 % planned for 1981 to 1985 was the minimum spent. (Schweizer, 1994, p. 197)
*** Gorbachev raised it 45% in next five years. (Ibid. p. 240 – Gorbachev speech to
Nizhniy Tagil Workers, April 27, 1990)
*** *Estimate of 1999 GDPs reported in 2001 Index of Freedom. (O\’Driscoll, Jr. 2000)
SOVIETS NEED TECHNOLOGY
The Soviets had been saving resources by buying or stealing technology whenever possible instead of doing their own research and development. Dr. Lara Baker of the Los Alamos National Laboratory said: "The Soviets purchased everything they needed…for high quality integrated circuits…" (In 1977-1979) She noted that they were careful to get four of each item. (Barron, 1983, p. 177-8)
Lieutenant General Ion Mihai Pacepa, head of the DIE, the Romanian equivalent of the KGB, revealed the Romanian successes when he defected in July 1978. The CIA spent three years debriefing him. In October 1977, General Secretary Leonid Brezhnev and head of the KGB Yuri Andropov had praised Romanian President Nicolae Ceausescu for acquiring the latest American microelectronic equipment. The DIE had the American equipment sent to a dummy firm in a non-communist country where it was redocumented as something else and placed on Romanian carriers. Every kind of embargoed Western equipment from robotics to military avionics was obtained this way. (Pacepa, 1987, p. 42, 43, & 45)
The first warning of one effort by the KGB came from an anonymous letter in June 1977, which accused California Technology Corporation of heading a group of front companies. Another letter in February 1978 went into greater detail. Both letters were sent to the Compliance Division of the Commerce Department. (Barron, 1983, p. 172)
In 1978 the Compliance Division had 10 inspectors and 25 personnel of its own, but could call on the FBI, Defense Department and Customs Services for help. However, by law, it
held the responsibility for export control and if it did not act, nothing happened. As late as the spring of 1979, the Commerce Department was far more interested in promoting "trade" and détente with the Soviets than risking an incident over trade. (Ibid. p. 173)
Then strong warnings came from the Perkin-Elmer Company in April 1979 and later from other companies. Finally, the Commerce Department assigned an experienced investigator whose evidence of over 100 shipments of embargoed electronic equipment got the smugglers five years in prison. (Ibid. p. 174-5)
In the spring 1981, the French passed to the CIA 4,000 documents it received from a source in a technical branch of the KGB. These showed the KGB was seeking specific technical items and had set up the Soviet Military Industrial Commission and Soviet companies" to deploy agents abroad to buy or steal the embargoed scientific material. (Schweizer, 1994, p. 47)
HOW THE U.S. STOPPED THEM
By April 1982, a vulnerability assessment by experts brought in by Casey showed the Soviet economic system was "rigid and inflexible" and that an infusion of technology and equipment from the West was absolutely critical to alleviating the many bottlenecks. Cutting off critical technologies would severely damage the Soviet economy. Tighter restrictions were implemented. (Ibid. 1994, p.102, 140)
Prosecution of American firms which violated the export restrictions or did not sufficiently check out whom they were supplying increased from only three high-tech cases in the previous ten years to, at one point, dozens of new prosecutions started in one month in the eighties. (Cold War Seminar, 1999)
The U.S. market is the world\’s largest. It leads in both the depth and breadth of its technology. Many overseas companies depend on U.S. licenses for some of the technology they use. These are strong competitive positions, especially when combined with the U.S. Export Act of 1979 which gave the President the option of restricting access to American technology from any foreign country or company which did not cooperate on export issues. (Schweizer, 1994, p. 162)
Through a series of bilateral and multilateral agreements, a variety of countries were brought into the technology control alliance. At the same time, the list of technologies restricted for export was being expanded. In early 1984, the U.S. State Department developed new restrictions on technology exports to cut off even the latest Soviet transshipment schemes. Anyone in a NATO country who wanted to reexport a U.S. controlled item had to certify that it would absolutely not get to the USSR. Any use of a controlled American technology made the item subject to certification and gave Washington control of the worldwide movement of technology. The new restrictions upset the Europeans. (Ibid. p. 194-5)
Sweden had been buying and reselling technical hardware to the Soviets on a regular basis and felt that Western security was not its problem. But Sweden needed U.S. technology to stop intrusions by Soviet submarines into Swedish waters. In addition, the risk of lower Swedish sales to the U.S. and possible loss of access to many U.S. technologies led the Swedes to decide to end their sales to the Soviets. The negotiations with the Swedes also led Sweden to take the lead in smuggling supplies to Solidarity in Poland. (Ibid. p. 162-3)
The restrictions on technology transfers forced the Soviets to increase their expenditures on R & D in areas they had decided to get by buying or stealing Western research. They now decided to increase their efforts to steal technology. However, in 1984 the U.S. already had a program underway to combat stealing and the stepped up Soviet effort had an unexpected and devastating result. The U.S. engaged engineering firms to design defects, into technologies it knew the Soviets wanted. It led them to make the wrong technological decisions. (Ibid. p. 187)
Sabotaged electronic computer chips ended up in factory equipment it took months find. They stole plans for a deep oil drilling rig that froze after being built and installed at a cost of 100 million dollars. Defective technology mix in with good greatly harmed their ability to use any stolen technology. The program proved to be a powerful weapon (Ibid. p. 188-9) 200 major corporations helped the CIA by their knowledge of the needs and weaknesses of the Soviet economy and provided cover for CIA agents. (Ibid. p. 186-7)
"EVIL EMPIRE" TALK WEAKENS USSR
No sooner had Soviet historians acknowledged the extent of Stalin\’s terror than
Alexander Tsipko charged in the Moscow monthly, Science and Life, that Stalinist terror was not an aberration but a product of Marxist doctrine itself. He argued that the suppression of a free market and the imposition of a centrally planned economy led directly to tyranny. Lenin, not Stalin, was the first leader to resort to terror. (Kirkpatrick, 1990, p. 278)
In 1974, Alexander Solzhenitsyn, the famous Soviet author, wrote, "The Soviet Union was doomed, provided the West held firm, prevented it from expanding further and refrained from providing the regime with the economic assistance it needed to maintain its precarious hold on life." He felt détente was a fraud and a sham. Neither President Gerald Ford nor Jimmy Carter would meet with him, fearing it would offend the Soviets. (Shattan, 1999, p. 170, 173-5)
President Reagan did not hesitate to call the Soviet Union what he felt it was: \’The Evil Empire\’. The word spread quickly through the USSR even to the Siberian labor camps. Selling freedom became a major competitive weapon against a system that had none. Against the advice of the State Department, he issued a challenge that became both effective and famous: "Mr. Gorbachev, Tear Down This Wall". Many in the USSR reacted to President Reagan\’s statements as proof that their system was as different and as bad as they thought it was. (Reagan, 1989, p. 351 op. cit. Shattan, 1999, p. 286) Robert Gates wrote, "Ironically, many Russians a decade later would acknowledge that, yes, it had been an evil empire". (Gates, 1994, p. 263)
In April 1981, Reagan had written a personal letter to Brezhnev that was warm and exploring. He reminded Brezhnev of their meeting in the sixties when they talked of people\’s hopes that depended on their leaders. He asked Brezhnev to help him eliminate the obstacles to peace. Brezhnev\’s reply blamed the U.S. for starting and perpetuating the Cold War and said the U.S. had no business telling the Soviets what they could or could not do anywhere in the world. (Noonan, 2001, p. 218-220)
Since World War II, Soviet leaders had gained respect and prestige at home by meeting with Western leaders as moral equals. The U.S. media never referred to Soviet leaders as dictators and the Soviet military stances were not condemned as hard-line or bellicose. Reagan, however, wanted to deny them this respect and refused to meet with them for the first four years of his administration. (Cold War Seminar, 1999)
At their first meeting in November 1985, Gorbachev pressed the U.S. to stop SDI and threatened a new arms race. Reagan shrugged off the threat (he knew they already had an all-out effort) and restated the morality of defensive weapons and the immorality of Mutual Assured Destruction. Gorbachev\’s continued emphasis on SDI confirmed the desperation reported by Oleg Gordievsky. When the subject turned to regional issues, Reagan asked: "Why are you practicing genocide? Why are your planes dropping booby-trapped toys? Why are you fighting national groups that just want freedom?" He then asked a visibly upset Gorbachev, "Are you still trying to take over the world?" (Schweizer, 1994, p. 245-6)
Of the nine Cold War presidents, none was as committed to the missions of the Radios as Ronald Reagan was. He wanted a vigorous offensive in the global war of ideas emphasizing freedom. The era of staff reductions came to an end. The Radios were able to upgrade antiquated equipment, hire more staff and have correspondents cover the war in Afghanistan. (Puddington, 2000, p. 253-4)
The United States increased its efforts to bypass Soviet radio jamming. Senator James Buckley, brother of William Buckley, founder of the National Review, became President of Radio Free Europe (RFE) and Radio Liberty (RL). RFE, aimed at Eastern Europe, broadcast in six languages. RL was aimed at the USSR in fourteen languages to reach that diverse audience. The Radios were known for telling the truth. James Buckley said, "The function of RFE and RL is to serve as surrogates for a national free press, where it does not exist. Polish TV showed pictures of the Pope but only RFE broadcast every word as well as the sounds of the crowds. RFE also described the size of the crowds." (Ibid. p. 268-9) (Cold War Seminar, 1999)
The Radios told people about protests, described the strikes in the Soviet Bloc and told the people the truth about the shortages. Soviet leaders continually underestimated the extent to which President Reagan could make freedom a competitive weapon against them. (Cold War Seminar, 1999)
In mid-1986, a letter was being drawn up and signed by dissident groups behind the Iron Curtain. It would call for joint action to fight Soviet oppression. Casey and the NSC decided to give money to those groups. By late October, 122 people representing groups in Poland, East Germany, Czechoslovakia and Hungary, including Lech Walesa, President of Solidarity, signed the letter. It was issued as Hungary marked the 30th anniversary of the 1956 invasion by the Soviets. (Schweizer, 1994, p. 267)
SOVIET WARS MADE COSTLY
The Reagan Administration continued Carter\’s policy of helping the Afghan guerillas so they could harass the Soviets and prevent a complete takeover. Saudi Arabia agreed to match U.S. expenditures. Soviet casualties were mounting and efforts were made to hide this. In 1984, the Soviets conducted massive bombings in an effort to kill the population or force it to leave. This was to deprive the guerillas of a population on which they would depend. This war was now costing the Soviets three to four billion dollars per year. (Ibid. p. 206, 214)
Pakistani President Mohammad Zia ul-Haq was very committed to the Afghan cause. The Soviets started funding three political groups to encourage dissent in Pakistan and the KGB offered arms to border tribes. In retaliation, Pakistan trained hundreds of mujahedin to run military operations inside Soviet territory. Korans, weapons and literature on the atrocities against the Moslems in Afghanistan were smuggled in. ((Ibid. p. 150, 177-8, 193)
The Afghans needed Stinger missiles to continue to oppose the Soviets, but State and some Defense officials were opposed. They feared that the weapons might fall into the wrong hands. When the Afghan guerrillas requested sniper rifles, U.S. lawyers refused. Casey changed the request to 100 hunting rifles, since \’what they hunt is their decision.\’ (Ibid. 1994, p. 93-5, 207-8 & 229)
In January 1985, the U.S. got detailed information from a spy on the Soviet General Staff that the Soviets were going to use specially trained troops to make an all-out effort to win using night attacks, mines, liquid explosives and equipment to track down guerrilla radios. The U.S. military was asked to plan countermeasures. In late January, Reagan opened the NSPG meeting with his decision to help the Afghan guerillas win. NSDD 166 stated the specifics. (Ibid. p. 212-4) (Cold War Seminar, 1999)
The Afghans now received detailed satellite intelligence on the Soviet positions and were given burst communicators that allowed the guerillas to hide and still communicate. More equipment, including 10,000 rocket propelled grenades and 200,000 rockets supplied by China, allowed the Soviet bases to be attacked. (Schweizer, p. 230-1 & 251)
In 1986, after the success of the Stingers in Angola, the U.S. really raised the cost with Stinger missiles. The Afghans had been routinely hit by bombers and attack helicopters with few Soviet aircraft lost. But with the arrival of the Stingers, a fire and forget missile, the odds changed dramatically. The first 200 missiles downed 150 Soviet aircraft. For each confirmed kill, a unit commander got two more. The cost of the war to the Soviet Union now spun out of control. (Ibid. p. 268-70) (Cold War Seminar, 1999) (Gates, 1996, p. 346-8)
In December 1986, Pakistan\’s Foreign Secretary, Abdul Sattar, was invited to Moscow. He was told categorically, "We are leaving" and that \’the price is too high.\’ The Soviets wanted help in withdrawing without a bloodbath. As the retreat took place, the capital of their Kazakhstan Republic erupted in violence with signs saying: "America and China are our friends". The unrest then spread throughout the Soviet republics, thanks to earlier efforts by the U.S. and Pakistan. (Ibid. p. 272, interview with senior Pakistani official)
THE FIGHT FOR AFRICA
In 1975, Luanda, the capital of Angola, a former Portuguese colony on the West Coast of Africa, was seized by the Soviet controlled MPLA. (Popular Liberation Movement of Angola) and hundreds of Cuban troops. In 1980, Cuba was providing 12,000 troops; by 1985, it had increased its commitment to 45,000. Cuba was being paid $ 12,000 per soldier/year. Between 1976 and the summer of 1985, the MPLA launched 10 major offensives against UNITA, (National Union for the Total Independence of Angola). Its leader, Dr. Jonas Savimbi, when looking for training in how to be a guerrilla leader settled on Communist China in 1965. UNITA was aided by China, Arab nations, other black African countries and South Africa. The aid had to be funneled through Namibia or flown in from South Africa. (Savimbi, 1986, p. 18 & 19)
On June 12, 1985, freedom fighters from Angola, Laos, Afghanistan and Nicaragua met in Jamba, the guerrilla capital, at the invitation of Dr. Savimbi. They signed the Jamba Accord and announced the formation of the Democratic International. It stated: "We who fight for Western values of democracy and freedom including the right to own one\’s home and some land have joined together. Now we ask the West to join us." (Ibid. 1986, p. 24)
In August 1985, the Soviet-backed forces launched the largest offensive yet and nearly defeated UNITA. If the MPLA had won, Soviet-backed tanks, jets, helicopters, artillery and trained solders would have been on the borders of Zaire, Zambia, Namibia and Botswana. They were stopped short of Jamba. (Ibid. p. 23) From 1976 until its repeal in August, 1985, the Clark amendment had prevented the U.S. from aiding such groups. Soviet helicopters came out each day to shoot anyone seen farming. In February, 1986, when the NSC approved, Stingers were sent to Angola and illiterate guerillas shot down 24 Soviet aircraft with the first 27 missiles used. This was a weapon the American press had condemned as too difficult for the American soldier to use effectively. This war became another burden on Gorbachev. (Gates, 1996, p. 346-8)
Nevertheless, Gorbachev tried again during the Bush Administration to overwhelm UNITA with over 200 tanks and many jets and helicopters. The guerillas called the private organizer of the Jamba accord, and this resulted in an emergency meeting called by the White House. That night, the critically needed gasoline and weapons, which had been withheld by the State Department to force UNITA to form a coalition government with the Communist regime, were finally released. With the weapons and gasoline for their armored vehicles, UNITA won this critical battle despite the equipment and officers the Soviets had sent. Mozambique\’s close relationship with Moscow resulted in Reagan reducing the aid Mozambique had been expecting. The Ethiopians wars were also a drain on the Soviets.
CUTTING OFF HARD CURRENCY
Casey worked to stop Western Europe from making very low interest loans to Moscow. Casey kept calling the international bankers he knew and chatting about the Soviet economy. They were pleased to hear from the head of the CIA, and his stories over time increasingly worried the bankers about their loans. The bankers had believed that the USSR stood behind any loans to the Eastern Bloc, but the U.S., following Roger Robinson\’s advice, forced a test of that theory. The USSR\’s growing economic weakness, was clearly exposed when it would not stand behind the $30 billion in Western loans to Poland in the spring of 1982. (Schweizer, 1994 p. 74, interview with Vladimir Kutinov a senior staff member on the Central Committee). Hungary lost $1.1 billion and Bulgaria lost $1.5 billion in short term credits right away. The Eastern Bloc started having trouble making loan repayments. (Ibid. 1994, p. 73-4) After the Cold War ended, Germany was left with $50 billion in loans that Russia refused to pay.
The crowning factor in cutting off the USSR\’s hard currency was the sudden increase in oil production by Saudi Arabia. Production went from 2 million barrels /day in August 1985, to 6, and then to 9 by the fall of 1985, and finally to 10 million barrels/day. The large oil surplus dropped the price from $35 to below $12 per barrel. Soviet oil cost $12 and Saudi oil cost $1.50 to produce. For practical purposes, Soviet oil revenues disappeared. The revenue from Soviet arms sales dropped when oil rich countries like Libya, Iran and Iraq had very steep drops in oil revenue. (Ibid.1994, p. 243) (Cold War Seminar, 1999) (Allen, 1996, p. 64)
When the European bankers saw the drop in Soviet exports, they stopped new loans. Dozens of large-scale industrial projects in the USSR were cancelled for lack of funds. A Renault automobile plant refit project and two British chemical plants at a planned cost of 2.2 billion dollars were three of those. (Schweizer, 1994, p. 263) The price drop by Saudi Arabia was encouraged by a number of American actions that asked nothing in return. But Casey knew the favors would be appreciated and they would rebuild a strong relationship that had deteriorated.
The Reagan Administration:
· Sold Saudis AWACS to warn them of any air attack from nearby enemies.
· Created a new military command to meet the needs of the Persian Gulf.
· Warned the King of a coup that planned to kill the Saudi leaders.
· Sent a personal note from President Reagan that guaranteed U.S. commitment.
· Sold Saudis advanced fighters and provided a staff of hundreds for training.
· Used special Presidential authority to supply 400 Stinger missiles in May 1984.
· Installed the most advanced air defense outside NATO in 1985.
· Helped the Saudis profit when the U.S. devalued the dollar.
(Schweizer, 1994, p. 52, 93, 180, 190, 202-3, 256)
Some reasons that encouraged the Saudis to raise crude oil production were:
· The beneficiaries of high oil prices were a number of Saudi enemies.
· The high price was paying for Soviet military presence in South Yemen, Syria,
Ethiopia and Afghanistan.
· The high price enabled Iraq, Iran and Libya to buy weapons.
· Natural gas pipelines were being built that would replace oil.
· Current high oil prices were hurting the U.S. economy. Each $5 drop per barrel would
increase U.S. GDP by 1.4% and reduce inflation. (Ibid. 1994, p. 205, 218)
SOVIET NEED FOR HARD CURRENCY
The use of U.S. competitive advantages, both economic and moral, drained the Soviet\’s ability to pay for foreign purchases and expenditures. The Soviets needed hard currency, not the overvalued ruble, to buy or pay for: 1. technology from the West and machinery it didn\’t make; 2. high quality items it could not make, such as complex integrated circuits; 3. better manufacturing systems; 4. what it lacked to solve crises; 5. luxury items to motivate the elite; 6. its extensive system of foreign embassies, military advisers and spies; and 7. the burden of empire, as shown below.
AID TO CLIENT STATES – THE BURDEN OF EMPIRE
in Billions of U.S. Dollars
80 85 86-89 \’90s
Aid to client States
1. Cuba 4 to 5 0
2. Nicaragua 0.7 0
3. Ethiopia and Mozambique 3 0
4. Vietnam 4 to 5 0
Total 10* 15** 11.7 – 13.7**
*(Brown, 1988, p. 138 op. cit. Brooks, p. 23
**The Rand Corporation estimated that support of client states and KGB operations were
3% of the Soviet GNP in the mid 1980\’s. (Rowen, 1990, p. 9)
***(Crozier, 1999, p.507)
While Soviet Defense Expenditures were rising from 33% to 47% of GDP, the Rand Corporation estimated that about 3% of GDP were being used to prop up client states. The
Soviets\’ concern about holding onto the non-Russian Republics led them to spend more per
capita on subsidies of non-Russians than they spent on Russians. The poor living standard of the average Russian became an increasing problem. Even the elite began to question the system.
Soviet expected hard currency earnings decreased significantly starting in 1982, fell in 1985, and dropped sharply in 1986. (See below.) The Soviets had heavily counted on these
earnings to finance items such as the $51 billion Gorbachev put in his five year plan to maintain and increase oil production and to finance the expansion of its military and the empire. (Schweizer, 1994, p. 262)
ADDED COSTS & LOSS OF PLANNED HARD CURRENCY
IN BILLIONS OF US DOLLARS
82 85 86-89 \’90s
New Costly Problems
1. Increase in Oil Field Maintenance 3 3 3
2. Aid to Poland 1 2 3 Left
3 War in Afghanistan 3 4 4+ Left
4. Cost to Replace Western Tech. 2 5 5+
Subtotal 9/yr 14/yr 15+/year
Loss of Expected Hard Currency from Foreign Investment, Credits, Loans and Oil Sales
1.Japan-Soviet Oil & Gas Venture Stopped 4 4
2. Siberian Pipeline Delayed 1 8 2
3. Loss of Second Pipeline 15
4. Soviets had to make loans to Warsaw
Pact that West no longer made 8 8
5. Price of Oil – $30+ to $12/barrel 13+
6. Lost Arm Sales 2
7. Foreign Inv. Stopped 1 5+
8. Foreign Credits Stopped 2 8
9. Drop in Gas Revenue 2
10.Devaluation of U.S. Dollar 2
(Soviet Sales in Dollars)
Subtotal 9/yr 21/yr 36+/year 19
Planned on Hard Currency Missing 18/yr 35/yr 51+/year 19
(Schweizer 1994, p. 72, 120, 194-5, 214-6, 262-5, 273-4) (Cold War Seminar, 1999)
These estimated decreases were economically overwhelming compared with the $32 billion in hard currency the Soviet Union earned from exports in 1980. They forced large reductions in the non-military part of the GDP that averaged under $350 billion/year in the 80\’s. It is easy to see the terrific financial strains the U.S. caused. Soviet leaders struggled against them, spoke out against them and finally gave up trying to hold onto their empire that had become, under Reagan\’s efforts, an unsustainable on the Soviet economy. (Cold War Seminar, 1999)
FREEDOM BEATS THE COMPETITION
Moral, economic and political pressures forced the Polish government to relax its crackdown, which then led to more strikes and demonstrations. By February 1987, in return for Warsaw opening a dialogue with the Catholic Church, Reagan lifted the U.S. economic sanctions on Poland. In May 1987 Pope John Paul II traveled across Poland demanding human rights and praising Solidarity. By July 1988, Gorbachev gave Moscow\’s agreement that Solidarity\’s cooperation was needed to rule Poland, and it was finally legalized on April 5, 1989. In December 1990, Lech Walesa – the man behind Solidarity – became President of Poland. (Bernstein, 1992, p. 35)
Gorbachev remained a socialist, but tried to increase productivity through Glasnost (openness) and Perestroika (reform). Glasnost revealed the distortions and corruptions in the Soviet system. Perestroika met resistance from ideology, politics of bureaucracy, corruption and ignorance of market economics. To overcome these, Gorbachev instituted democratic reforms that led to demands for more freedom. (Bush & Scowcroft, 1998, p. 17)
On November 29, 1988, Gorbachev promised the Soviet Republics that his reforms
would bring them more independence. "The strength of the union," he said, "must rely on the strength of its constituent republics as sovereign socialist states." But his changes would have absorbed the Republics. Force had been necessary to create the Soviet Union and when Gorbachev invalidated Estonia\’s declaration of home rule, it was a reminder of this. Thousands protested in Georgia and Lithuania and greater turmoil occurred in the Azerbaijani and Armenian Republics. (Kirkpatrick, 1990, p. 48-51)
SOVIETS OVERLOADED THEIR ECONOMY
Comments made by Soviet officials during the Cold War and since confirm the effect
of the actions of President Reagan\’s administration and by President George Bush on bringing the Cold War to an end. Soviet Ambassador and later Politburo member, Anatoly Dobrynin wrote: "… between 1989 and 1991 the political frontiers (of the Soviet Union) were rolled …from the center of Europe to those of Russia in 1653". (Dobrynin 1995, p. 615)
On October 14, 1986 just after Reykjavik, Mikhail Gorbachev spoke on Soviet TV and told his people: "The U.S. wants to exhaust the Soviet Union economically through a race in the most up-to-date and expensive space weapons. It wants to create various kinds of difficulties for Soviet leadership, to wreck its plans…of improving the standard of living of our people, thus arousing dissatisfaction among the people with their leadership." (Schweizer, 1994 p. 240)
William Odum finds, "In interviews and in their memoirs senior former Soviet military officers uniformly cited the burden of military spending as more than the Soviet economy could bear." (Odum (1998) p. 225 op. cit. Brooks, (2000, p. 31)
On February 17, 1988, Soviet leader Mikhail Gorbachev told the Central Committee of the Communist Party, that, except for vodka sales and higher prices for Soviet oil, the Soviet economy had not grown for 20 years. Pravda and Izvestiya 2-18-1988. (Roberts, 1990, p. 1)
Eduard Shevardnadze, the Soviet foreign minister under Gorbachev, stated in May 1990, "The Kremlin\’s expansionist military first policies throughout the Cold War "made our people, the whole country, destitute." (Friedenberg, 1990, p. A1)
REAGAN\’S COMPETITION DID IT
In 1980, Carter charged that: "Reagan would re-ignite the \’arms race\’ and would increase the risk of war." Reagan didn\’t make the slightest concession to the conventional wisdom on the \’arms race\’. "We\’re already in an arms race", Reagan remarked, "but only the Soviets are racing." He also stated: "…there\’s…every reason… to believe the Soviet Union cannot increase its production of arms…They\’ve diverted so much to the military that they can\’t provide for the consumer needs…" (Hayward, 2001, p. 691-692)
Strobe Talbott, Clinton\’s deputy Secretary of State, has tried to sell that the Reagan administration actually aggravated and prolonged the Cold War through constant provocation and mindless hostility. (Allen, 1999, p. 1)
However, until Reagan took steps, often opposed by a majority of his Cabinet, by many in Congress, by many in the media and by some European leaders, the Soviet Union endangered the world with its behavior. The West would periodically tire of the continuing effort required. A friendly gesture by Moscow would raise hopes and those with short memories would pressure the West to encourage the supposed new behavior by spending less on defense and granting more trade credits to the Soviets. (Cold War Seminar, 1999)
When the Soviet Union felt strong enough, it would then make moves such as: Korea, missiles in Cuba, Angola, Mozambique, Nicaragua, El Salvador, Yemen, Ethiopia, Afghanistan and Grenada. Commenting on this history, Brent Scowcroft, President Bush\’s national security adviser, wrote, "The Soviet leaders periodically hit us between the eyes and reminded us of their aggressive ambitions". (Bush & Scowcroft, 1998, p. 13)
This aggression would result in more defense spending by the West and an effort to stop Soviet expansion. Then, when challenged, the Soviets would respond with a softer tone, expecting the West to relent. This time, however, the West, with Ronald Reagan\’s determination and vision, played the game to the end.
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Copyright 2001 by Warren E. Norquist. All rights reserved.