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Author(s): Albert Szymanski
Source: Berkeley Journal of Sociology, Vol. 22 (1977-1978), pp. 131-166
Published by: Regents of the University of California
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In recentyearsthe Chineseand theirsupporters aroundthe

worldhavecometo accusetheSovietUnionofbeinga ' 'socialim-
perialistsuperpower.1Bythistheymeanthatthereis no essen-
tial differencebetweeneitherthe causes,or the effects, of the
SovietUnion's international economic,politicaland military
relationsand thoseoftheleadingcapitalist countriesoftheWest,
especiallytheU.S. The Chinesesince1968havebeenarguingthat
theSovietUnionis essentiallya monopoly capitalist
economy ("of
theNazi type"),andthusthatall thebasiclawsofmonopoly cap-
italism,including thelogicofimperialism as outlinedbyLeninin
hisbookImperialism: TheHighestStageof Capitalism, operate.
"Imperialism" meansthepoliticalandeconomicdomination ofa
nationorregioninorderto economically exploititin theinterests
(normally of the rulingclass) of the dominantnation.In the
theuseoftheadjective"social" before

'For the Chinese positionsee, forexample, "How the Soviet RevisionistsCarryout

All-Round Restorationof Capitalism in the U.S.S.R." (Peking: ForeignLanguages
Press, 1968) and "Down with the New Tsars!" (Peking: ForeignLanguages Press,
1969). Perhapsthe two most thoroughargumentsin supportof the Chinese thesis
generallyavailable in English in the U.S.A. are MartinNicolaus, The Restoration
of Capitalism in the U.S.S.R., (Chicago: Liberator Press, 1975); and The
RevolutionaryUnion, How Capitalism has been restoredin the Soviet union and
What this means for the World Struggle, (Chicago: The RevolutionaryUnion,

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a nounindicates thatalthougha socialist ideologyis beingusedto

justifya courseof action,theobjectiveresultsof thatactionare
the same as achieved by the unqualifiednoun, e.g. the
Communist Partiesoftheworldreferred to theSocialDemocrats
as "socialfascists"from1928to 1935.ThustheChineseuse of
"social imperialism"means that althoughthe SovietUnion
justifiesitsinternational relations witha Marxist ideology,object-
ivelyit behavesjustliketheU.S., and forthesamereasons.The
Chinese,following Lenin'sanalysis, claimthatboththeU.S. and
theU.S.S.R. (likeall monopoly capitalisteconomies) aredrivento
imperialism by the need to exportcapitaland to secureraw
materials. In thispaperI willsystematically examinetheChinese
thesislookingin detailat thepatterns of Soviettrade,theSoviet
foreign assistance program, anything thatlookslikeSovietforeign
investments, and the CouncilforMutualEconomicAssistance
Ithasbeenshownelsewhere thatno mechanisms comparable to
thosedescribed by Lenin in his The
Imperialism: HighestStageof
Capitalism operateto forceexpansionism on theSovietsin order
to secureinvestment outletsforsurpluscapital.2Because the
Sovieteconomy reallydoesoperateaccording toan economicplan
rather thanbytheimpersonal logicof market forces,whether or
not its foreignrelationsare aggressive and expansionistic is a
matter o choice(i.e., theyarepolicies)nota matter ofstructural
compulsion, as theywouldbe ifLenin'sargument held.Although
theSovietsystem is notnecessarily imperialisticitcouldneverthe-
lessstillbe imperialistic. Thatis, Sovietforeign policiescouldbe
designedto (1) subordinate working classand progressive forces
aroundthe worldin the interests of a coalitionof local ruling
groupsand Sovietinterests, (2) promoteeconomicgains, (3)
secureself-serving expansionist militaryadvantages fortheSoviets,
and (4) hurtmorethanhelptheadvanceoftheinternational so-
cialistmovement(as the U.S. intervention in Vietnamwas
designedto intimidate liberation movements aroundtheworld).
All ofthesearetruein thecaseofU.S. imperialism, and thusif
thetermused bytheChinese - "SovietSocialImperialism" - is
to haveanymeaningwe wouldexpectthemto be trueforSoviet
foreign relations as well.To provethattheSovietUnionis social
imperialist it would haveto be shownthat(1) itsforeign relations
suppressed working classmovements in favorofconservative class
forces,(2) itgainedeconomically, orhad a reasonable expectation
ofgainingeconomically, (3) itgainedmilitary basesforessentially
expansive purposesbecauseofitsforeign activities,and (4) theef-
fectof itsforeign activities wasto intimidate and discourage the
2Scc Paul Gregoryand RobertStuart,Soviet Economic Structureand Performance ,
(New York: Harperand Row, 1974); JosefWilczynski,The Economicsof Socialism,
(Chicago: Aldine Publishing Co., 1970) and The Movement for a Revolutionary
Left,Neither Capitalist nor the Socialist Model, (Eugene, Oregon, P.O. 30143,

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growthof the international socialistmovement.If thesefour

thingscan not be shown,thenSovietforeignrelationsare not
analogousto U.S. and othercapitalistimperialist
thustheU.S.S.R. can not legitimatelybe labeled "socialistim-
perialist"withoutdoinggreatviolenceto thescientificprecision
oftheterm.Thispaperwillfocuson examining onlywhether or
notthe SovietUniongainseconomically fromitsrelations with
theCOMECON countries and the non-socialist
countries of the
ThirdWorld.The otheraspectsofthequestionof "socialimperi-
alism'' aretakenup elsewhere.3

Allforeign tradein theSovietUnionis carried on bystatetrad-
ingcorporations (in thelate 1960stherewereabout30 of them,
eachspecializing in a differenttypeof commodity overwhichit
hasa completemonopoly) . Theseforeigntradecorporationshave
thesameexclusive rightto buylocallyproducedgoodsforexport
andtopurchase foreign goodsforimport.The Ministry ofForeign
Trademaintains tightcontroloverthestatetradingcorporations
throughdetailed plans for volume, assortment, prices and
transportofcommodities, whichspecifyhowthetrading corpora-
playsno rolein thebehavior
Profitability ofthetrading corpor-
ations.The corporations purchaseSovietgoodsat theprevailing
domesticpricesand sell themoverseasat the prevailing world
market price.The difference betweenthedomesticand external
pricesgoes to the generalreservesof the Soviet state. The
Sovietdomestic industrial haveneither
enterprises knowledge of,
norinterestin,thepriceordisposition ofexportgoods.The state
tradingcorporations purchaseimports abroadat theworldmarket
pricesutilizingfundsfromthe generalSoviet state reserves
and thensell the importedcommodities to the domesticcon-
sumingenterprise at the prevailinginternalprice (if greater
than the world marketprice the enterpriseis thus subsi-
dized by the state,if less,the enterprisesubsidizesthe general
treasury).SincetheSovietproductive haveabsolutely
no connection withforeigntrade,fluctuations in worldprices
haveno impacton theiroutputplans,planswhicharedetermined
bytherequirements of theoveralleconomicplan. Generally the
Sovietstendtosellandbuyin theinternational market wellbelow
theirdomestic prices;thisimpliesa subsidy forexportorientedin-
dustriesanda taxon import oriented

3Sec Albert Szymanski, "Soviet Social Imperialism: A Look at Specific

Countries," mimeographed, 1976.
4Paul Gregoryand Robert Stuart, Soviet Economic Structureand Performance,
Ch. 8; Wilczynski,Ch. 13; Howard Sherman,The SovietEconomy' (Boston: Little,
Brown,and Co., 1969), Ch. 8.
'Gregoryand Stuart,Ch. 8; Sherman,Ch. 8.

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The Soviet economy is isolated from world market forces by the

system of trade planning and centralized prices, domestic enter-
prises being shielded from fluctuations in world market condi-
tions. The lack of correspondence between domestic Soviet prices
and the world market prices more or less requires bilateralism in
trade relations, i.e. , agreements to trade a certain set of commodi-
ties for a certain other set of commodities because there is no com-
mon scale of value that might serve to measure trade volume. This
problem is especially acute in trade relations among socialist coun-
tries, none of whose domestic prices are governed by the law of
value. Socialist countries thus tend to exchange goods among
themselves at the world market price (since deviations from the
world market prices are regarded by one or the other party as evi-
dence that they are losing from the trade, i.e., if they are not
being paid as much as they could get in the West for their exports;
or, if they could get more in imports for less in the West, they feel
exploited). The COMECON countries of Eastern Europe make
certain negotiated standard adjustments in world prices used for
this purpose to cleanse these prices of erraticfluctuations, monop-
olistic elements and the effectof transport costs if the goods were
traded with non-socialist countries. Once a set of prices are negoti-
ated among the COMECON countries they usually stay in effect
for about a five year period.6
The state plan for foreign trade by which the state trading
corporations operate is geared to material balances (i.e., a given
quantity of trade by volume) , especially to insuring appropriate
imports.7 The foreign trade plan starts with an estimate of how
much of what kind of goods are necessary for domestic production
beyond expected domestic resources. The planners then figure out
the quantity of exports that will be necessary to pay for the re-
quired imports at prevailing world prices. They then examine
domestic production to locate those commodities that are either
likely to be produced in excess of domestic requirements or can
easily be expanded to select goods for export. In East-West trade,
because the Soviet trade plan is geared to securing a set level of
imports and to exporting enough to insure these imports, it is
relatively insensitive to world prices, i.e., the volume of imports
fluctuate much less than the prices of either exports or imports.8
The Soviet Union, both potentially and actually, is the most
self-sufficient industrial economy in the world. Total Soviet
imports totaled only 4.7% of its net material product in 1973.
The U.S., the only other industrial country which approaches the

6Grcgoryand Stuart,Ch. 8; Sherman, Ch. 8; Wilczynski,Ch. 13; Guy Gilbert,

"Socialismand Dependency,"LatinAmericanPerspectives (1:1, Spring,1974), p. 114.
7FranklynHolzman, Foreign Trade Under CentralPlanning, (Cambridge, Mass.:
HarvardU. Press, 1974), pp. 53-56. LawrenceJ. Brainand, "Soviet ForeignTrade
Planning," in U.S. Congress,Joint Economic Committee 94th Cong., Second
Session, 1976, SovietEconomyin a New Perspective,p. 698.
Sherman,Ch. 8; Holzman, p. 261.

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SovietUnion in actual self-sufficiency had a ratio of 5.4%

betweenitsimports and itsgrossnationalproductin 1973.9Since
theSovietconcept"Net Material Product,"byexcluding services,
isconsiderably smallerthantheWestern conceptofgrossnational
product,the equivalentdependency on importsof the U.S. is
aboutoneandone-half timesgreater thantheSovietUnion's.
The relativeindependenceof the Soviet Union fromthe
necessityofimports is due bothto thefactthatit has therichest
rawmaterial endowment ofanycountry in theworld(seetheU.S.
Department ofInterior MineralsYearbook)and to itstendency to
plan forminimizing itsdependency on imports, so as to isolate
itselffrompressures thatcan be puton it bycapitalist countries.
Consciousplanningforautarcky wasespecially pronounced from
the 1930sthroughthemid 1950s.Duringtheseyearstradewas
engagedin almostexclusively to obtainthe necessary materials
and machinery fortherapidindustrialization of thecountry. By
1959theSocietUnionwasin a positionto supplyvirtually all the
industrialingredients necessary foritsgrowth without engagingin
anytradeat all. It had an abundanceofcoal,petroleum, ironore,
andvirtually all metalicminerals necessary foran advancedindus-
trialeconomy. To theextentitengagedintrade,itwasbecause:it
could obtain materialsor manufactured goods more cheaply
through tradethanit couldproducethemdomestically and thus
could more efficiently organizedomesticproduction;or for
politicalreasonsofaidingthesocialist orlessdevelopedcountries
itwantedtohelp;ortoserveas a buffer forimbalances in theplan
orunexpected cropfailures (therebysparing theeconomy emergen-
cybelttightening measures andaidingsmoother growth) .10
A fundamental goal ofthe foreigntrade plan is to preserve the
overalleconomicplan byproviding imports to covershortfalls in
domesticproduction whichhave been countedon as inputsto
otherenterprises, i.e., to coverfornon-fulfillment of planned
outputs.11.All Sovietforeigntradeis gearedto imports,rather
thanexports, pretty muchtheoppositeoftradein capitalist coun-
tries on exports andmaintaining an export surplus. In
capitalist profits areto be madebysecuring overseas mar-
ketsforindividual enterprises, whilemaintaining overalleconomic
prosperityand thecontinuation ofthecapitalaccumulation process
requiresfindingexportmarketsforthe systemas a whole to
countertheinherent tendency to underconsumption (promoted
byworkers not beingpaid enoughto buybackeverything that
theyproduce).Exportsfora plannedeconomylike thatof the
SovietUnionarea necessary evil,requiredin orderto secureim-
portsnecessary formorerapideconomicgrowth.Fora capitalist

9SeeThe UnitedNations,Yearbookof NationalAccountStatistics

(1975); The
10Holzman,Ch. 2; Wilczynski,Ch. 13.
"Wilczynski,Ch. 13.

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economy imports tend to be a necessary evil generated by the

money paid for exports. The greater the level of imports the less
the effectof exports in alleviating the economic surplus and there-
fore the less the effectthey have on promoting the continuation of
the capital accumulation process, since the creation of new
markets overseas (i.e., new outlets for surplus production) is
negated by the sales of foreign-produced goods in a capitalist
economy (thus depriving the country's corporations of their pre-
vious markets) .
Because both the overall economy and foreign trade is governed
by a plan, and because prices are not governed by the law of value
(i.e., are somewhat arbitraryin terms of labor time incorporated
in them in relation to world prices) the Soviet Union prefers
simple bilateral (two-party) trade agreements with other govern-
ments or Chambers of Commerce for exchange of goods. There
need be no relation between the amount of imports and exports
between any two given market economies since any deficiency in
one country's trade with any given country can be made up
through multilateral trading, e.g., country "a" exports more
than it imports from country "b", country "b" exports more
than it imports from country "c", country "c" exports more
than it imports from country 'a" . Because of the multilateral and
unplanned nature of trade among market economies money
markets become key in working out the clearing of international
markets, i.e., if an importer in country "a" wants to import
goods from country "b" he will purchase country "b's" currency
on the international money market. The currency of the typical
market capitalist countries is thus "convertible" and each curren-
cy has a fairlystable price in terms of other currencies
' (occasionally
currencies are revalued in terms of each other, i.e. , 'devaluation"
or "revaluation"). The non-market socialist countries do not have
convertible currencies. They cannot generally be purchased and
sold by importers and exporters. Those interested in importing
Soviet goods must enter into a trading agreement stipulating both
imports desired and the exports to be exchanged with the appro-
priate Soviet trading corporations. Inconvertibility of currency,
the corollary of bilateralism and state planning of trade, facilitates
the integration of foreign trade into the overall economic plan.12
Bilateral trade agreements typically cover periods from two to
six years. These agreements normally specify the total value of
trade, the broad classes of goods to be traded, the method of pay-
ment, methods of transport, etc. General trade agreements are
later filled out in detail with specific contracts stipulating exactly
what will be exchanged under exactlywhat conditions of delivery.13
In market capitalist countries chronic trade deficiencies
(importing more than exporting) result in inflation,
Ch. 13; Sherman,Ch. 8.
Ch. 13.

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livingand ofteneconomicchaosbecauselocalindustries tendto

lose out in theircompetitive struggle withforeignenterprises.
Marketmechanisms aided by the stateattemptto lowercosts
(mostlydomesticwages)and increases pricesof imports(witha
secondary effectofincreasing all prices)in orderto "stimulatethe
economy"to counterthetradedeficit.No suchprocessoccursin
non-market economiesfortwosubstantial reasons,(1) bilateral
trade agreements generallyinsurea balance of importsand
exports, and (2) theinsulation of domesticproduction and mar-
ketsfromtheinternational market bytheautonomy oftheforeign
tradingcorporations prevents anytradedeficitthatmightoccur
fromhavinga significant effect on domesticpricing, wages,etc.
(factorswhicharedetermined bythecentral plan).
If,as theChineseclaim,theSovietUnionis a caseofmonopoly
capitalism and consequently behavesaccording to the logiclaid
out in Lenin'sImperialism, we wouldexpectthatthefavorable
balanceoftrade(a surplusof exports overimports) wouldrepre-
senta significant proportion ofcapitalformation. Sinceaccording
to Lenin'smodelprofitable domesticinvestment outletswould
be blocked,thetwomajorchannelsforallowingcapitalaccumu-
lationto continuewouldbe foreigninvestment (perhapsin the
formof "foreign aid"), and a surplusofexports overimports. In
thenextsectionSovietforeign aid, theonlypossiblechannelfor
anything likeoverseasinvestments, is examined.In thissectionit
is shownthatexports areunableto providea significant channel
forcapitalformation. The ratioof theSoviettradesurplusto its
fixedcapitalformation in the period1970-1974was only.8%,
whichis slightly lowerthanin the 1950-1957periodwhenthe
averagewas1.0%. No tendency forthedevelopment ofthemech-
anismssuggestedby Lenin(development of monopolyand in-
creasedimportance ofa tradesurplus)to occuris indicatedbythe
trendsin thedata. If thesimpleratiobetweenexports(notsub-
tracting imports) andfixedcapitalformation is examineditis seen
to be virtually thesamein 1950-1957(16.6%) as it wasin 1970-
1974 (16.0%). l4 Clearly,exportscould playonlya tinyrolein
facilitating the formation of capitalin the SovietUnion. No
supportforthethesisthattheSovietUnionis a capitalist imperi-
alism,at leastof the typedescribedby Lenin,can be foundin
The ratioof rawmaterialimportsto netmaterialproductfor
the period1970-72decreasedby morethanone halffromthe
1950-57period.The SovietUnionhas demonstrated a consistent
tendency to becomelessdependenton rawmaterialimports over
thelast25 years,whileonlyslightly increasing theroleof total
imports in itseconomy.(See Table One.) The trendofdecreasing
14Scc Paul Marcr, Soviet and East European Foreign Trade, (Bloomington, In-
diana: Indiana U. Press, 1972), p. 34; United Nations, Yearbook of National
Account Statistics,(1975), Table 2B (and various); United Nations, Yearbook of
InternationalTrade Statistics,(1974), p. 926.

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dependenceon rawmaterial is hardlywhatwouldbe ex-

pected froma countrywhich was transforming itselffrom

TABLE1. SovietImports Product

RawMaterial /
Imports /
N.M.P. N.M.P.
1950-53 2.0% 3.3%
1954-57 1.9 3.1
1958-61 1.8 3.3
1962-65 1.7 3.7
1966-65 1.4 3.5
1970-72 .9 4.3

Source: Paul Marer,Sovietand East EuropeanForeignTrade, (Bloomington, Indiana:

IndianaUniversityPress,1972),pp. 24, 87. UnitedNations,YearbookofNation-
1975,Table 2B (and various).UnitedNations,Yearbookof
al AccountStatistics,
International 1974,p. 926.

The majorsinglecategory ofSovietimports is industrial

mentandmachinery (35.5% in 1966-1969),fuelsand rawmater-
ials (excludingfoods)are second(24.8%), followedby foods
(15.2%) and manufactured consumer goods(18.6%). The trend
hasbeena consistent in thepercentage
increase ofindustrialma-
chinery and equipmentand a considerable reduction in theper-
centageof fuelsand otherrawmaterials in totalimports, while
foodshavestayedmoreorlessconstant. Thisis notthepattern to
be expectedfroma typicalimperialist country of the advanced
capitalisttypewhichwouldimportprincipally and increasingly
rawmaterials. (SeeTableTwo.)
TABLE2. SovietImports

FuelsandRaw Manufactured
Industrial Materials
Machinery (ex.foods) Foods Consumer

Imports Exports Imports Exports Imports Exports Imports Exports

1950-53 23.2% 15.6% 48.5% 39.7% 16.5% 20.0% 6.9% 2.9%
1954-57 27.1 16.4 44.4 49.7 17.2 14.1 8.2 2.9
1958-61 27.9 19.2 40.0 53.3 13.2 13.6 16.7 3.0
1962-65 34.4 19.4 30.4 53.7 16.4 10.4 16.3 2.5
1966-69 35.5 21.6 24.8 51.2 15.2 10.4 18.6 2.4

Source:PaulMarer, pp. 44, 53.

Over half of all Sovietexportsare fuelsand raw materials

(51.2% of the total in the period 1966-1969)and industrial
equipment andmachinery areonly21.6% (See TableTwo). Since
theearly195O'sthepercentage offuelsand rawmaterialsin total
exports has as
increased, has thepercentageof industrial
mentand machinery, whiletheshareof foodshas gone down.
Againthispatternof exportsdiffers fromthetypically capitalist
imperialistcountrywhichtendstoexport manufactured goods.
It seemsthatSoviettradewiththenon-socialist lessdeveloped
countriesis notcharacterized of
byexploitation thelessdeveloped

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countries. The (netbarter)termsof tradebetweenThirdWorld

countries and theSovietUnionareforthemostpartconsiderably
better(in favorof theThirdWorldcountries) thanthetermsof
tradebetweenthe advancedcapitalistcountries and the Third
World. In otherwordsthe Sovietstend to pay moreforthe
exports of ThirdWorldcountries and chargethemlessfortheir
imports thantheadvancedcapitalist countries.15
The factthatthesocialistcountries tendto use approximations
to worldpricesas the measureof value in tradeamongthem
meansthatthepricesof rawmaterialexports arekeptartificially
lowand thepricesofheavyindustrial products artificially
the monopolypowerof the transnational corporations and the
imperialist policiesof the advancedcapitalistcountries overthe
lessdevelopedrawmaterialexporters. To theextentthatthisis
thecase,thenetrawmaterial exportersamongthesocialist coun-
trieswill suffer(be "exploited") in theirtradewiththe net
exporters ofheavyindustrial goods.As themajorsupplierof raw
materials to theEastEuropeancountries (whichsupplyindustrial
productsin return),the Sovietunion is a net raw material
exporter and a netindustrial good importer, and as suchsuffers
thesametypeofdiscrimination bornebythelessdevelopednon-
countries whichspecializein rawmaterial exports- to the
benefitofEastern Europeancountries.
The Sovietshave used tradeas a weaponagainstrecalcitrant
countries in an attempt togetthemtofollowtheirleader-
ship.Thefirst timethetradeweaponwasusedwasin 1948against
Yugoslavia,whichwascutofffromtraderelations, notjustfrom
theSovietUnion,but also fromall theothersocialistcountries.
This trade embargowas imposedin an attemptto get the
Yugoslavsto acceptSoviethegemony.China and Albania in
I960-1961werethenextsocialistcountries to sufferfromSoviet
economicpressure.Economicand technicaladvisors, withtheir
plans,werewithdrawn fromthesecountries in I960 and 1961and
neverbeensuspendedit wasconsiderably reduced.In 1962-1964
whenNorthKoreawasleaningtowardtheChinesepositionin the
Sino-Soviet disputethe Sovietsrefusedto sell advancedmilitary
equipmentorjet fuelto theKoreans.As soonas theyrenounced
theirsupportof China, Soviet supplies were immediately
resumed.The cutoff oftradeis an especiallystrongweaponsince
boththeindustry and militaryof thesocialistcountries aretypi-
callyverydependenton sparepartsfromtheSoviets.The Soviets
havealso usedthetechniqueofdelayingdelivery as a weaponof
controloverblocmembers whotendto becometoocritical ofthe
SovietUnion,e.g., againstRomaniain 1967. Thus, although
thereis no evidencein thepost1956periodof theSovietUnion
nSee Albert Szymanski,"Soviet Social Imperialism:A Look at Specific
fora thorough
Countries," discussion
withCuba and

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exploiting theothersocialist
throughtrade,thereis evi-
dencethattheyhavestriven forhegemony
countries byusingtradeas a weaponto get theothersto follow
SovietForeign Aid totheLessDevelopednon-Socialist Countries
The "foreign assistance" ofa typical capitalist imperialist coun-
trysuch as the UnitedStates is designed to (1) the
facilitate exports
of themajordomesticcorporations to theThirdWorld("assist-
ance" is almostexclusively in the formof exportcreditswhich
mustbe usedon designated products ofthe"donor's" majorcor-
porations,productswhichare so designatedbecause of their
inabilityto be otherwise competitive); (2) pressure therecipient
countries to followpolicieseconomically favorable to the trans-
nationalcorporations basedin thedonorcountry (e.g. no restric-
tionson therepatriation ofprofits, no discrimination in favorof
locallyownedbusinesses,low wages,etc.), and politically and
militarilyfavorableto the donor state;and (3) very often, resultin
a profitforthetreasury ofthedonornationwhichrequires repay-
mentat interest, usuallyin "hard" currency.16
The totalamountofSovietforeign assistance to thelessdevel-
opedmarket countriesofAfrica, AsiaandLatinAmericahasfairly
consistently averagedonlyabout 10% of U.S. aid in theperiod
1954-1974.In theperiod1955-1965Sovietaid averaged8% of
U.S. aid, whilein theperiod1967-1974it was 10%, a slightbut
notveryimpressive growth. Overthree-fourths ofall Sovietaid to
the less developedmarketeconomiesis to the countries of the
NearEastand SouthAsia.In theperiod1954-1974thelargestre-
cipientsofSovietaid were,inorder:India($1,943million),Egypt
($1,300),Afganistan ($826), Iran ($750), Iraq ($549), Pakistan
($652),Turkey($530), Algeria($425) and Syria($417). The pri-
oritiesforaid forthesecountries werebasicallythesamein the
periods1954-1966and 1967-1974, withtheexceptions thataid to
Turkeyand Pakistanhas been grantedsince 1966, most of
Pakistan's since1971.In thepost-1966periodChile,Bangladesh,
Argentina and Guineahavealso beenmajorrecipients of Soviet
aid.17Anexamination ofthecountries favored bySovietaid seems
to revealtwofactors whichmotivateits distribution: (1) Soviet
strategicinterestsaround itssouthern borders, e.g., Turkey, Iran,
India,Pakistan, Afghanistan, whichseemstodictateaid indepen-
dentofthenatureoftheregimes;and (2) supportofprogressive
anti-imperialist forces,e.g., Iraq, Algeria,Egypt,Syria,Argen-
l6Fordiscussionsof the role of U.S. foreignassistancesee HarryMagdoff,The Age
of Imperialism, (New York: MonthlyReview Press, 1969); Teresa Hayter,Aid as
Imperialism,(Baltimore: Pelican, 1971); Steve Weissman, The Trojan Horse, (San
Francisco:RampartsPress, 1974).
17U.S. Department of State, Communist States and Developed Countries: Aid
and Tradein 1974, Table Two; and U.S. Departmentof Commerce, Bureau of the
Census, StatisticalAbstractof the United States, (1976), Table 1401 (and various).

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Thesetwofactors appearto be equallyimportant in termsof

the totalamountof aid received.India, a mildlyprogressive
regime whichissomewhat toU.S. imperialism
antagonistic andto
theChinese,tendstofitsomewhat intobothcategories, although
not fullyintoeither,and has been the majorrecipientof aid.
RegimeslikeChile,Algeria,Guinea,and Argentina seemto have
received aid forpurelypoliticalreasons;whileregimes suchas Iran
andTurkey seemtohavereceived aid mainlyforstrategic reasons,
withhopeofencouraging someindependence fromtheU.S. It is
of interest to note thatthe Soviets,sincethe independenceof
Bangladeshin 1971,havebeenmostevenhanded in theiraid to
Indiaand Bangladeshon one sideand to Pakistanon theother.
Sincethe 1971 warPakistanreceived$496 million,India $350
million,andBangladesh $299million.18
ItisonlyintheNearEastandSouthAsiathatSovietaid is more
thana quarterofthatoftheU.S. In thepost1967periodSoviet
aid wasgreater thanU.S. aid onlyin Guinea,Mali, the Sudan,
Argentina, Afganistan, Egypt,Iraq,and Syria.It is ofinterest to
notethatin thisperiodU.S. economicaid to Indiawastentimes
greater thanSovietaid, and thatU.S. aid to Bangladesh hasbeen
fourtimesgreater thanSovietaid.
About95% of Sovietaid to non-socialist countries is in the
formofexportcredits, i.e., promisesto deliverSovietproducts in
exchangeforeventualrepayment. As a rulethesedevelopment
creditscallforrepayment overa 12-yearperiodfromone yearafter
completion of a projectat 2.5-3.0% interest. If thecountry has
difficultymakingitspayments theU.S.S.R. typically extendsre-
paymentterms,oftenafterlong graceperiods.Sometimesthe
Sovietscanceloutstanding debtsaltogether. The interest rateon
U.S. loansis nowthesameas on Sovietloans;buttheforms ofre-
paymentare verydifferent. Repayment to the Sovietsis in the
enterprises developedwithforeignassistance.This insuresthat
enterprises builtwithSovietaid aremakinga netadditionto the
local economyand not deprivingthe local countryof either
foreign exchange ortheproducts ofotherenterprises. Repayment
in localgoodsrather thanin foreign currency differentiatesSoviet
aid fromU.S. and most West Europeanaid that requires
repayment in dollarsor theirequivalent.Thisis a moredifficult
taskforThirdWorldcountries, sincerepayment of a loan in
dollarsor anotherhard currency requiresincreasesin exports,
while repaymentin local currenciesand goods does not.
Increasing exports to makerepayments oftenmeansforcing down
theworldmarket priceforrawmaterials and thusthelaborneces-
saryforrepayment is greater thanwouldbe thecaseifthedonor
tooklocal goods or currency. Further,the insistence on repay-
mentin hardcurrency meansthatinternational divisionof labor

18U.S. Departmentof State, Table Two.

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betweenadvancedindustrial exporters and rawmaterial exporters

is aggravated sincetherecipient country mustgearitseconomy to
expanding raw material exports.Repayment in local goods and
currencies, on theotherhand,facilitates industrialization and the
undermining oftheinternational division oflabor.19
Repayment in goodsproducedby the enterprises constructed
withSovietaid has theadditionalbenefitof providing a market
foran industrial enterprise which might otherwise have realdif-
ficultysellingits output.Theremay be insufficient domestic
demand to justifythe project,which may nonethelessbe
important forrapidall-around economicgrowth. Forexample,a
technologically efficient steelmillmighthaveto produce20,000
tonsofsteela yearto be runefficiently, butlocaldemandmight
only be 10,000 tons, not enough to make buildinga local steel
milljustifiable.However,if a local steelmill existedit would
greatlyfacilitate therateofeconomic growth so thatin a fewyears
the local demandforsteelwouldbe 20,000tons.By accepting
paymentin locallyproducedindustrial goods the Sovietsthus
accelerate therateofindustrialization ofa country byallowingit
to increaseits industrialcapacity(and hence its abilityto
accelerate itsall-around economic growth) morerapidly thanlocal
demandwouldallow.By 1971about20% of all Sovietimports
fromthe lessdevelopednon-socialist economieswereindustrial
goods(muchfromplantsbuiltwithSovietaid). Iran,Iraq and
Afghanistan repaymuchof Sovietaid in theformof naturalgas
and petroleum (fromprojects in goodpartdevelopedwithSoviet
aid).20It should be noted thattheSovietUnionis self-sufficient
and actuallya netexporter ofpetroleum, naturalgas and almost
all metalsandthuscannotbe considered to be drivento acquiring
otherwise unobtainable rawmaterials.
Sovietaid generally has fewstrings attached,is efficient, and
allowsforconsiderable flexibility.In the 1950s,whentheSoviet
Unionfirstbegangranting foreign assistanceto non-socialist less
developedcountries, it tendedto specializein highlyvisiblepro-
jectssuchas theAswandam,a majorsteelmillin India,orsports
stadiums.This is no longerthe case, however.Sincethe 1960s
Soviet aid has focusedon the promotionof sustainedand
balancedeconomicdevelopment, rather thanon a fewlargepro-
jects. Sovietprojectsget priority treatment - the best Soviet
engineers, designers and thebest resources available.Emphasisis
givento training localtechnicians (bothon siteand in theSoviet
Union)andturning theoperation ofprojects overtothem.21
19U.S. Department of State, p. 5-6; Leo Tansky, "'Soviet Foreign Aid': Scope,
Direction and Trends," in MorrisBornsteinand Daniel Fusfeld, ed., The Soviet
Economy,(Homewood, Illinois: RichardIrwin,Inc., 1974), esp. p. 457.
20U.S. Departmentof State, p. 6; Tanskv, PP. 460-462.
21Sherman,p. 210; Marshall Goldman, Soviet ForeignAid, (New York: Praeger,
1967), Ch. 11; Elizabeth Kridl Valkenier, "Soviet Economic Relations with
Developing Nations, in RogerE. Kanet, ed. , The Soviet Union and the Develop-
ing Nations, (Baltimore:JohnsHopkins UniversityPress,1974).

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Soviet aid does resultin expanding trade relationswith Third

World countries.On the one hand, once a projectis completed
the U.S. is in a positionto providespare partsand to sell equiva-
lent goods to those who have become used to dealing with the
Soviets;on the otherhand, the local countriesmustexportlocally
produced goods to the Soviet Union in repayment.Once such a
tradepatternis establishedit is likelyto continueafterrepayment
is completed. It is importantto note that the Soviet Union does
not have ownershiprightsin the enterprisesits assistanceestab-
lishes. Ownershiprightsremain with locals (almost always with
the state sector). In 1970, an agreement (with India) for the
establishmentof jointlyconducted enterpriseswas approved for
Soviet aid is exclusivelyto the state sector with very few
exceptions. This allows the local governmentto establish an
economic basis independent of privateenterpriseas well as of
foreign corporations. The Soviets also emphasize industrial
projects(from1955 to 1965, about 55% of Sovietaid was forin-
dustry).This emphasishas become even more pronouncedsince
the mid 1960s. Fromthe mid-1960sto the mid-1970sabout 65%
of Soviet aid has been forindustry.About 20% of all Soviet aid
since 1954 has been committed to the constructionof steel
plants.23In both its almostexclusiveaid to the statesectorand in
its greatemphasison industrializationSoviet aid differsradically
from U.S. aid. The latter emphasizes the private sector both
directlyand in termsof the conditionswhich require the local
government to promote private enterprise, especially U.S.
corporations'investments.Furthermore, U.S. aid almostneveras-
sistsindustrialdevelopment; almost all U.S. aid is for develop-
mentof raw materialproductionor forcreatingan infrastructure
that facilitatesraw materialexports.Needless to say, Soviet aid
encourages all-around economic development, economic
independenceand the strengthening of the statesectorwhile dis-
couragingdependence on foreign-ownedcorporationsand U.S.
imperialism,while U.S. assistanceencourages specialization in
raw materialexportsfacilitatingthe investmentof U.S. corpora-
tionsand generaldependence on theU.S.
One of the major accomplishmentsof Soviet aid is that it has
stimulatedaid by the capitalistcountriesin: (1) amount, (2) will-
ingnessto aid the state sectorand industrialprojectswhich they
previouslywere reluctantto do and, (3) willingnessto offerfar
bettertermsthan theypreviouslywerewillingto, both in reduc-
ing the interestratesto the 2.5% level offeredby the Sovietsand
demanding less as the conditions of loans.24 Thus the actual
impact of Soviets aid has a multipliereffectmeasured by the

"See Valkcnier. Also see the discussionof joint enterprisesin the later pan of this
"Tansky, p. 456; Sherman,p. 208; U.S. Departmentof State, p. 6.
"Goldman, pp. 191-192.

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expansion ofthebeneficial component ofassistance fromtheU.S.

The Sovietsprovideextensive technicalassistance to the local
country trainingmodernskills.In 1975therewereabout 18,000
Soviettechnicians in thelessdevelopedcountries. Through1975
theSovietshad also trainedabout23,000localtechnicians in the
SovietUnionand 450,000on thejob in thelessdevelopedcoun-
The Sovietsprovideelaboratetraining projects farsuperior
to thoseof thetransnational corporations forlocals.The Soviets
trainlocalsforpositions ofresponsibility at all levelsoftheopera-
tionsincelocalswillbe running theenterprises. The Sovietsalso
typicallyintegrate localsintothe designingof the projects.26 It
shouldbe notedthatthecostsoftechnical assistance areconsider-
ed to be partofthecostsofconstruction and thusmustbe even-
tuallyreimbursed bythelocalgovernment.
Bytheend of 1972an estimated $1.4 billionhad beenrepaid
on themorethan$4 billionin actualaid distributed to theless
developednon-socialist countries.Repaymentsreached $260
millionin 1972.27Repayments in locallyproducedgoodsin 1973-
1974accountedforabout 10% of totalSovietimports fromthe
lessdevelopednon-socialist countries. It shouldbe notedthatbe-
causeofreducedeconomicaid to Indiaand Egyptin recentyears
andthefactthatso muchassistance wasgranted tothesecountries
in the 1950sand 1960s,thevalueof thegoodsexportedto the
SovietUnionin repayment forpastaid hasexceededthevalueof
newassistance in themid 1970s.28It shouldalso be notedthat
becausetheSovietUnionoftenagreesto takerepayment in goods
it does notreallyneed, it sometimes resellsthesegoodson the
Sovietforeignassistanceis a realburdenon theSovieteconomy
because,as a plannedeconomy, it has fullemployment and has
no surplusof capacityor workers. Everything producedin the
SovietUnion has an immediatedomesticuse. In a capitalist
economy, however, thereis a perpetual surplusofcapacity which
can be put intoproduction withsubsidizedexportsto the less
developedcountries. U.S. foreign assistance takestheformofthe
U.S. government payingits corporations to ship goods to the
ThirdWorld,i.e., a subsidyto privateenterprise to increasepro-
ductionand profits. Withoutthestatesubsidyto privateenter-
prisethegoodsexported wouldneverhavebeenproducedandthe
profitswould neverhave been gained.Thus foreignassistance
does notreducethe totalconsumption in a capitalisteconomy,
butdoesreducethetotalamountofgoodsavailableto a socialist

"Orah Cooper,"SovietEconomicAid to theThirdWorld," in U.S. Congress,

JointEconomic Committee, in
a NewPerspective,p. 191.
(26:3,April,1974),p. 279.
p. 457; Cooper,pp. 192-195.
28Cooper,pp. 193-5.

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economy.29 Althoughthe less developedcountriesmustpay a

2.5% -3.0% interest rateon 95% ofthecredits theygetfromthe
SovietUnion,a considerable subsidycomponent is containedin
theloans.IftheSovietUniondid notexportadvancedindustrial
equipmentto thelessdevelopedcountries on creditforlocalin-
dustrialprojects,but had insteadutilizedthemin the Soviet
Union,theircontribution to Sovieteconomicgrowth wouldbe far
higher(theSovietrateofgrowth averagesabout7%) thanthetiny
2.5% -3.0% rateofreturn on foreign assistance .
Suggestions thatthe SovietUnion is an imperialist country
drivenby the same economiclogic as a monopolycapitalist
country arenotsubstantiated bythedata on therelativeroleof
foreignassistancein the Sovieteconomy.The value of Soviet
foreignassistancetotalsonly .23% of the SovietNet Material
Product(comparedto .54% of the U.S.'s GNP), .57% of the
valueoftotalfixedcapitalinvestment (comparedto 4.0% of the
U.S.'s) and 4.1% oftotalSovietexports(comparedto 12.2% of
theU.S.'s). In Lenin'smodelofimperialism , foreign investment
servesas theprimary mechanism bywhichthecapitalaccumula-
tionprocesscan continue.Quite clearlynothingliketheprocess
laidoutbyLenincouldpossiblybe operating in theSovietUnion
where200 timesmorecapitalinvestment is occurring domestically
thancouldbe exported overseas in theformofforeign assistance.
It shouldalsobe notedthattherehasbeena slightdecreasein the
ratioof Sovietassistanceto fixedcapitalformation fromthe
period1955-1966to theperiod1967-1974,thusindicating no as-
cendenttendency to needoverseas capitaloutletsto maintainthe
rateofcapitalaccumulation intheU.S.S.R.
It is of interestto contrastSovietassistanceto that of the
People'sRepublicofChina.Anexamination oftheleadingrecipi-
entsofChineseaid revealsthatthemotiveofChineseaid doesnot
appearto be verydifferent fromthatofSovietaid. Bothcountries
seemto combinesupportofprogressive regimes, e.g., Tanzania,
Indonesia(before1965) and Egyptwithstrategic considerations,
e.g., Pakistan, Zaire,and Zambia.30In theChinesecasestrategic
considerations primarily implywinning friends againsttheSoviet
Unionand hencesupporting regimeswhichtendto be, or may
becomehostileto, theSovietsand thosetheSovietssupport.For
theSovietsstrategic interests implyan attemptto neutralize U.S.
influence (e.g., Iran,Turkey and theMiddleEastin general),and
secondarily Chineseinfluence(e.g., supporting an onlymildly
progressive IndianregimeagainstChinaand attempting to neu-
tralizeChineseinfluence inPakistan).
Chineseassistance is moregenerousthanthatof the Soviets,
and dollarfordollarit is probablymoreeffective in winning
friends andencouraging localdevelopment thanSovietassistance.

29Holzman,pp. 27 and 372.

30U.S. Departmentof State, pp. 6, 7.

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However, thedifferencesbetweenChineseand Sovietassistanceis

tocallthefirsttruly and theseconda form
of imperialism.
Sovietassistanceis farmoreadvantageous to the
lessdevelopedcountriesthanthatof theU.S. (dollarfordollar)
andresultsin makingthelessdevelopedcountries lessdependent
on imperialism,promotesindustrialization and assists the
containment ofprivateindustry(localand international)
generatingdependence on theSovietUnion.

Sovietmilitary assistanceto the less developednon-socialist
countrieshas expandedconsiderably in the 1970s.In theperiod
1955-1960Sovietmilitary assistanceaveraged$214milliona year,
in 1961-1964,$628 million;in 1965-1969,$405 million;and in
1970-1974,$1238 million.Thus in the firsthalfof the 1970's
Sovietmilitary assistance hasaveragedovertwiceSovieteconomic
The leadingbeneficiaries of Sovietarmsdeliveries
(salesandassistance) in theperiod1964-1974 were:Egypt($2,305
million),India($1,273),Syria($1,153),Iraq ($742),Iran($438),
Algeria($281), Afghanistan ($246), Indonesia($144), Libya
($125) and Somalia ($69). With the obvious exceptionsof
Indonesiaand Iran(and possiblyof Afghanistan and India) it is
clear that the Sovietstend to militarily supportthe most
progressivelessdevelopednon-socialist countries. In thecasesof
Iran,Indonesia,India and Afghanistan strategicconsiderations,
eitherin trying to neutralize U.S. or,to a lesserextent,Chinese
influence,areclearly operating.32
It shouldbe notedthatin theperiod1965-1974totalSoviet
armstransfers (salesplus grants)to thelessdevelopedcountries
totaled58% of U.S. transfers (ifNorthKorea,Cuba and North
Vietnamareexcluded,39%). The SovietUnionand Czechoslo-
vakiawerein the period 1965-1974virtually the onlyforeign
suppliersofmilitary weaponstoEgypt,Syria,India,Afghanistan,
Iraq,Algeria,Somalia,and Guinea.The U.S. suppliedno, oral-
mostno, military equipmentto thesecountries in theseyears.
ThustheSovietUnionhad a decisiveimpactin armingthemore
progressivenon-socialist countries of theThirdWorldas wellas
Cuba, NorthKorea and Vietnam(who respectively receiveda
totalof $295, $585 and $3,245 millionin military equipment
fromtheSovietUnionduringtheseyears.)33 Sovietmilitary sup-
pliesplayeda decisive roleinkeepingthesecountries independent
of U.S. imperialism withoutproducinga materialgain forthe
The Soviet'smilitary assistance program in theThirdWorld,as

"Ibid., Table Seven.

"Ibid., Table Nine.
33U.S. ArmsControl and DisarmamentAgency, WorldMilitaryExpendituresand
Arms Transfers,1965-1974.

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thecasesof Egypt,Syria,India, Afghanistan, Algeria,Somalia,

Guineaand mostrecently Ethiopiahaveshown,is able to break
thedomination of ThirdWorldcountries exercised
countriesthroughsupplyingor withholdingarms. Modern
militaryestablishments can nowbe createdbythelessdeveloped
countrieswithoutpromoting dependency on theU.S., Franceor
As witheconomicassistance,
Britain.34 theroleof Sovietmilitary
assistanceis considerably greaterthanits totalvalue, since by
makingU.S. military assistance
competitive it forcestheU.S. to
be considerably moreliberalin whomit supplieswhatweapons
to. A givencountry is thusin a positionto bargainwithboththe
U.S. and theU.S.S.R. forweapons,withbothsuppliers knowing
thatifone doesn'tsupplytheweapons,theotherprobablywill.
This means that regimesof whichone or the othercountry
disapproves areable to getweaponswhichtheyotherwise might
not. The riskof not providing weaponsis thatit can forcethe
regimewhichis notapprovedof to becomeevenmorehostileto
theinterests of thepotentialsupplier,as it movescloserto the
othermajorsupplierwho agreesto providemilitary equipment.
Mostimportantly thefactthatthereis nowcompetition between
theU.S.S.R. and theWestas majorarmssuppliersmeansboth
thatrevolutionarymovements canbe regularlysuppliedwitharms
and thatthelessdevelopedcountries havea realoptionto being
dominated byWestern imperialism.
in theThirdWorld
UnliketheWestern countries,
capitalist theSovietUniondoes
notownanybusinessenterprises in ThirdWorldcountries and
consequently doesnothaveanyinterest in promoting theprofits
and protecting thevalueof foreign investments. Thisallowsthe
SovietUnionto givesupportto progressive policiesdesignedto
givelocalsauthentic controlovertheireconomy wheretheimper-
ialistcountriesmustsupportthe interests of theirtransnational
corporationsagainsttheinterests ofthelocalcountries.
However, as an outgrowth ofitsaid program, theSovietUnion
hasenteredintosomejointownership projects withThirdWorld
countries,mostly inshipping, tradingandirrigation and electrical
projectswith adjacent countries.Joint enterprisetrading
companieshave been establishedwith Singapore.Ethiopia,
Nigeria,Iran, Moroccoand some othercountries.They exist
underjointmanagement in ordertofacilitatetradebetweenthese
countriesandtheSovietunion.The SovietUnionentersintosuch
jointagreements (on a 50-50basis)bothwithgroupsof private
businessmen (e.g., Morocco)andwiththelocalstates.35
34JohnWaterburg, "The Soviet Union and North Africa," in Ivo J. Jedererand
Wayne Vucinich, The Soviet Union and the Middle East, (Stanford: StanfordU.
Press, 1974); Ur. Ra'anan, The USSR Arms the Third World, (Cambridge, Mass.:
M.I.T. Press, 1969).
"Cooper, p. 193; Lederer,p. 103; Valkenier,pp. 222-224.

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The SovietUnionassistsin the development of rawmaterial

production in someThirdWorldcountries. An agreement was
signed betweenthe Soviets and Afghanistanin 1963 for
assistance in prospecting forand extracting naturalgas and con-
structing a pipeline.In repayment forSovietaid Afghanistan
agreedto repaytheSovietswithnaturalgas through1985. The
Sovietsdid notmaintain anyownership rights in theenterprise or
anyrights to theproduct.A similaragreement wasreachedwith
Iraq in 1971whentheSovietsgrantedIraq a loan of 200 million
rublesto financea refinery, twopipelinesand severalindustrial
projectsto be repaidovera periodof yearsentirely in oil to be
producedbytheIraqNationalOil Company.Another exampleis
Guinea,wheretheSovietsconstructed a bauxiteminingoperation
in exchange forrepayment in 80 milliontonsofbauxiteovera 30
yearperiod.In neither casedid theSovietsretainanyownership
rights oranyclaimsto theproduction oftheenterprises theybuilt
beyondthestipulated repayments.36
It is possiblethattheSovietsmayenterintoarrangements with
friendly ThirdWorldcountries forthe jointproduction of raw
materials by enterprises permanently underthejointcontrolof
twoormorecountries. Thesearrangements maybe thekindthat
havebeen becomingincreasingly commonwithEasternEurope.
These may be eitherco-operativepacts for exploitationof
resources intheSovietUnion,witha shareoftheproductgoingto
theThirdWorldcountry, or vice-versa.In fact,the firstagree-
mentofthiskindwassigned(withIndia)in 1970.37IftheEastern
European model is followed (see the discussionon joint
enterprises in EasternEuropelaterin thisarticle),as it almost
certainly be if such a patterndevelops,the ThirdWorld
countries shouldexpectto receivemostequitabletreatment from
theSoviets. Jointmanagement is notevidenceofimperialism. In
anyevent,as ofthemid-1970s theSovietshavenotimplemented
such agreementsto an appreciableextent outside of the
In comparison to the virtualabsenseof anything resembling
Sovietownership rightsin enterprises in ThirdWorldcountries
(thejointownership of a fewcommercial companiesbeingthe
closestthingto Westerntransnational styleownership),the
transnational corporations basedin, and ownedbynationalsof,
theU.S. had totalassetsof $27.9 billionin the less developed
countries, and another$74.1 billionin assetsin the developed
countries in 1973.The U.S. transnational corporations extracted
$4.9 billionin profits fromitsinvestments in theThirdWorld(a
rateof 17.6%) and another$4.3 billionon itsinvestments in the
advancedcapitalist countries.38 Thisimmenseeconomicstakeby
theU.S. based transnational corporations, whichdominatethe
3Valkcnier,p. 222.
38U.S. Departmentof Commerce,StatisticalAbstractof the U.S., (1975), p. 801.

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U.S. state,providesa powerfulmotivebehind U.S. governmental

policies designed to guarantee the integrityand profitability
these investmentsagainst the interestsof the people of these
countries. The absence of a Soviet equivalent to U.S. trans-
national investmentmeans that the Soviets have no equivalent
motive and are thus free to support national liberation
movementsdesigned to eliminate foreigneconomic influences.
The Americans,of course,are not.

RelationsbetweentheEasternEuropeanCountriesand the U. S.S.R.

A. Trade Relations
In the period 1970-1972 37.2% of all of the exportsof the
COMECON countriesof Eastern Europe (Bulgaria, Czechoslo-
vakia,Hungary,East Germany,Romania and Poland) wereto the
Soviet Union. This representeda slight decline fromthe 1960s
when total exports to the Soviet Union averaged 41% of all
exports.In 1970-1972 COMECON importsfromthe Sovietunion
totaled 35.5% of all theirimports,down slightlyfroman average
of 37% in the 1960s.39Thus, slightlyoverone-thirdof all Eastern
Europeantradeis withthe SovietUnion.
In the period 1969-73 about two thirdsof all the exportsof the
COMECON countries (plus Yugoslavia) were with other
COMECON countries (including the Soviet union) and
Yugoslavia, one seventhwith the developed marketeconomies
and about a tenthwiththe less developed marketeconomies.This
comparesto the factthata minusculepercentageof Latin Ameri-
can (excluding Cuban), African, Middle Eastern and market
Asian country'sexportsgo to the COMECON countriesand that
about three-quartersof the exports of these areas are to the
advanced capitalistcountries.(See Table Three). Thus comparing
the less developed marketeconomies,generallyconsideredto be
satellitesof the advanced capitalistcountries,to the COMECON
countries,we see thatthe six COMECON countriesare much less
trade dependent on the U. S.S.R. than the Third World non-
socialistcountriesare on the advanced capitalistcountries - only
slightlyover one thirdof exportsfor the six COMECON countries
vs. around threequartersof exportsforthe Third World. While
the COMECON countrieshave alternativeexportmarketsin the
capitalistcountries(over a quarter of total exports), the non-
socialistThirdWorld countrieshave onlya tinyalternativeexport
marketin the COMECON countries(about one twenty-fifth of

39Paul Marcr, Soviet and East European Foreign Trade, p. 33, 43; and United
Nations, Yearbook ofInternationalTrade Statistics,1974, p. 926.

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TABLE 3. Exportsof Various Sets of Countriesto Other Sets 1969-1973

(As Percentageof Total)
To Soviet Union
To Advanced To Less Developed Six COMECON plus
Capitalist Countries Non-Socialist Yugoslavia

plusYugoslavia 15.0% 11.7% 64.2%
LatinAmerica 74.5 19.4 3.6
MiddleEast 75.7 19.8 2.2
Africa 81.1 11.0 6.1
Asia 66.5 28.3 4.2

Source: United Nations, Yearbook of InternationalTrade Statistics,1974, Table B.

It is ofinterestto notethat65.5% of Canada's exportsareto

theU.S. while76.0% ofitsimports arefromtheU.S. Canada,a
country ofcomparable location,economicdevelopment and size
of its economyin relationto the U.S. as the six COMECON
countries areto theU.S.S.R., is thustwiceas tradedependenton
theU.S. as theCOMECON countries areon theSovietUnion.40
Canada, whileits economyis closelyintegrated withthe U.S.
economy, is generally
regarded as nota dependency of theU.S.,
butrather a countrywhoserulingclasshas moreor lessthesame
interestsas theU.S. IfCanadacanremainpolitically independent
of theU.S. it shouldcertainly be expectedthattheCOMECON
countriesof EasternEurope,farless tradedependenton the
U.S.S.R. thanCanadais on theU.S., shouldbe evenmorelikely
In the period 1970-1972the balanceof tradebetweenthe
SovietUnionand thesixEasternEuropeancountries waspositive
- theCOMECON countries exported to the SovietUnion about
4% morethantheyimported fromit. Duringthe1960sthetotal
exportsand importsbetweenthe SovietUnionand the Eastern
EuropeanCOMECON countries almostexactlybalanced,whilein
the 1950sexportsof EasternEuropeexceededimportsby about
2%.42 Clearly,then,thereis no significant imbalancein trade

40UnitedNations, Yearbook of InternationalTrade Statistics,1974, Table B.

41Thc35% of all importsof the six EasternEuropean COMECON countriesfrom
the U.S.S.R. compares as followsto the percentageof total importsof some Third
World countries,oftenregardedas dependencies of the U.S., fromthe U.S. (circa
1973): Columbia 39.6%, Dominican Republic 47.2%, Guatemala 31.9%, Hon-
duras 44.0%, Mexico 62.9%, Nicaragua 34.3%, Panama 35.3% and Venezuela
45.0%. The 37% of all the exportsof the six COMECON countriesto the Soviet
Union compares as follows to the percentage of total exports of some selected
Third World countriesto the U.S.: Columbia 37.4%, the Dominican Republic
73.3%, Guatemala 29.3%, Honduras 56.5%, Mexico 68.8%, Nicaragua 33.3%,
Panama 44.7% , and Venezuela 39-7% . In sum we see that the trade dependency
of the Caribbean "satellites" of the U.S. tends to be somewhatgreaterin both the
case of exportsand importsthan the trade dependency of the Eastern European
countrieson the Soviet Union, although the differencebetween the two sets of
countriesis not extreme.United Nations, Yearbook of InternationalTrade Statis-
tics, 1974.
42Paul Marer, Soviet and East European Foreign Trade, p. 33, 43 and United
Nations, Yearbook of InternationalTrade Statistics,1974, p. 931.

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whichmightreflecta permanentnet flowof resources to the

SovietUnion fromEasternEuropeas measuredby established
pricesof the goods in trade.This leavesopen the possibility,
however,of Soviet exportsbeing overvaluedand Eastern
Europeanexportsundervalued, whichcould also resultin trade
exploitationofEastern Europe theSovietUnion.
The six EasternEuropeanCOMECON countriesprimarily
exportindustrial machinery and equipmentto theSovietUnion
and importrawmaterialsand fuelsin exchange.In 1966-1968
48.2% of all EasternEuropeanexports to theSovietUnionwere
industrialmachineryand equipment and only 26.1% raw
materials,fuelsor food. Duringthe same period62.8% of all
Sovietexports to EasternEuropewererawmaterials and another
10.7% food, and only 24.4% industrialmachineryand
equipmentand 2.1% manufactured consumer goods. The pro-
portionof all EasternEuropean exportswhichis industrial
machinery and equipmenthas tendedto riseslightly overtime,
whiletheproportion thatconsistsof rawmaterialand fuelshas
decreaseddrastically (it stood at 43.7% in 1950-1953).The
proportion ofEastern Europeanexports whichhasbeenmanufac-
turedconsumer goodshas risensignificantly sincethe 1950s(See
Table Four). The proportion of all Sovietexports in theformof
rawmaterials andfuelhasstayedaboutthesamesincethe1950s.
The SovietUnionis theprinciplesupplierof rawmaterials and
fuelsforEastern Europe,whileEastern Europeis a majorsupplier
of capitalgoods,and to a lesserextent,manufactured consumer
goods,fortheSovietUnion.Thisis, ofcourse,exactly theoppo-
sitepatternof tradeobservedbetweenthe advancedcapitalist
countries,whichspecializein capitalgoodsand manufactured ex-
ports,and theThirdWorldlessdevelopedcountries, whichspe-
cializedinrawmaterial andfoodexports.

TABLE4. SovietExports
toandImportsfromtheSixCOMECON Countries
ofEastern Europe
(AsPercentage orImports)
Machinery FuelsandRaw Consumer Goods
andEquipment Material ( Foods (
Exports Imports Exports Imports Exports Imports Exports Imports
1950-53 22.0% 39.2% 51.7% 43.7% 25.2% 7.2% 1.1% 9.9%
1954-57 15.5 46.8 60.7 37.1 21.6 5.8 2.3 10.3
1958-61 13.9 45.8 64.4 27.0 18.6 7.6 3.0 19.6
1962-65 19.7 49.8 65.9 20.5 12.2 7.9 2.2 21.9
1966-68 24.4 48.2 62.8 16.9 10.7 9.2 2.1 25.7

Source: PaulMarcr,
Sovietand EastEuropeanForeignTrade,1946-1969,
In comparisonwith the 26% of total EasternEuropean
COMECON exports to theSovietUnionwhicharerawmaterials,
fuelsor food,thepercentages of totalexportsto theU.S. from
countriesoftenregardedas its dependenciesare considerably
e.g. (circa1973):Columbia88.9%, DominicanRepublic
98.0%, Guatemala84.4%, Honduras97.9%, Mexico54.3%,
Nicaragua82.0%, Panama73.5%, the Philippines95.6% and

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Venezuela 98.8%. There is thus a qualitative difference in the

trade patterns of the COMECON countries of Eastern Europe and
the Soviet Union in comparison with the trade patterns of the
dependencies of the U.S. with the U.S. The U.S. dependencies
almost universally specialize in the export of raw materials to the
U.S. (primarily in exchange for manufactured goods) while the
Eastern European countries export manufactured goods, especially
capital equipment, in exchange for raw materials. Unless the
terms of trade between the Soviet Union and Eastern Europe were
highly imbalanced in favor of the U.S.S.R. (which, being based
on world prices, they are not) it would be very difficult to inter-
pret their relationship as imperialist.
As a rule the prices used in evaluating the commodits
exchanged between the Eastern European socialist countries and
the Soviet Union are approximations of the prices in the world
capitalist market (with minor adjustments made for
transportationcostsfromalternative suppliers and elimination of
monopolyfactors) . Becausethelaw of valueis not the essential
determinantof prices in the planned economiesof these
countries,domesticpricesof commodities arein good partarbi-
trary.Differentcountriesmightthuspricethesamecommodity at
very different
levelsbecause ofvarious or
political long term econ-
omicconsiderations. Becauseoftheirarbitrary naturetheseprices
cannotbe used in inter-socialisttradewithoutone or theother
partyin anygivenexchange complaining of "exploitation."This
becomesapparentif the arbitrary priceof an offeredexportis
higherthanthe equivalentcommodity on the worldcapitalist
market oriftheoffered price for
an import is lower.43COMECON
regulationsspecify thatall pricesof rawmaterials are based on
adjustedworldmarket pricesintheprevious fiveyearperiod.
As is well known,the factthat a few advancedcapitalist
countrieshavea virtualmonopolyon producingtechnologically
advancedcapitalgoods allowsthemto sell thesegoods to the
ThirdWorldat approximately monopolypriceswhile,exceptin
petroleumand a handfulof othercrucialrawmaterials,over-
production,competition andforeign ownership intherawmateri-
al andfoodproducing ThirdWorldcountries depresses theworld
pricesofmostofthesematerials. As a resulta realtransfer ofvalue
occursfromtherawmaterial /foodproducing countries(exceptthe
petroleum exporters)totheadvancedcapitalist countries, i.e., the
poorerThirdWorldrawmaterial supplierscanbe considered tobe
"exploited."The resultofthesocialist countries' usingapproxima-
tionsofworldpricesforcapitalgoodsandrawmaterials is thatthe
exportsoftherawmaterial exporter,theSovietUnion,tendtobe un-
dervalued;andtheexports ofthecapitalgoodsexporters, i.e., most
ofthecountries ofEastern Europe,tendtobe overvalued. In other
words,theSovietUnionmustbe considered to be "exploited"in
43JohnKramer, "The EnergyGap in EasternEurope," Survey(21: 1-2, Winter-
Spring, 1975).

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itstradewithEasternEuropein thesamesenseand to an equi-

valentdegreethattheThirdWorldrawmaterial exportersareex-
ploitedbytheadvancedcapitalist countries.
Although the rule is that exports are exchanged at
approximately worldpricesthe SovietUnion nevertheless has,
sinceat leastthemid-1950s, beensupplying crucialrawmaterials,
especiallypetroleum products, to EasternEuropeat considerably
belowtheworldmarket price.Forexample,thepricechargedthe
EasternEuropeansforSovietoil in 1974wasapproximately one-
fifththeworldmarketprice.Aftera substantial increasein the
priceofSovietoil in 1975thecostto theCOMECON countries in
1976wasstillaboutone-third lessthanthegoingworldmarket
Detailedempirical studiesshowthattheEasternEuropeanspe-
cialistcountriesarenotdiscriminated againstorexploitedin their
traderelations withtheU.S.S.R. One carefulstudyof theprices
forBulgarianand Polishexportsto and imports fromtheSoviet
Union(i.e., theirtermsoftrade)showsthattheytendto be sig-
nificantlybetterthanthoseobtainablefromthemarket capitalist
countries. In 1959 of thirty-
twoleadingcategories of Bulgarian
exports thepricepaid bytheSovietUnionwashigherthanthat
obtainableinWestern Europefortwenty-four andlowerforeight.
In thecaseofPolandtheSovietpricewashigherin twenty out of
twenty-eight and lowerin seven.In thecaseof Soviet
exports to BulgariathepricechargedBulgariain 1959waslower
than that of WesternEuropeanequivalentcommoditiesfor
eighteenofthethirty-two basiccategoriesand higherfortwelve;
ofcommodities andlowerforsix.45
Sinceitis logicallypossiblethatthefewgoodstheSovietstrade
to theiradvantagecouldrepresent themajority of goodstraded,
and thusthattheSovietscouldsecurea netgainfromtrade,it is
important to lookat measures oftradeadvantage whichincorpor-
ate quantity as wellas price.The samestudycitedabovefound
thatoverallPolishexports(measuredby unitvalue, a concept
whichincludesbothpriceand volume)to theSovietUnionwere
purchased at 1.45x theprevailing priceforsimilargoodson the
Western Europeanmarket and Bulgariangoodsat 1.32x . It was
alsofoundthatoverallSovietimports werepurchasedbyPoland
at 81% of thepricesimilargoodswereavailableforin Western
Europeand Bulgarianimportsat 69%.46 Thus the net barter
termsof trade(a conceptwhichincorporates both price and
volume)betweenPolandand theSovietUnionin 1959were1.8
timesbetterforPoland (and worseforthe SovietUnion) than
couldbe obtainedin tradewiththeWest.The termsoftradefor
Bulgariawere1.9 timesbetter.Substantially identicalresults
op cit., p. 71.
Ch. 11.

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foundforI960, indicatingthat 1959 was not a flukeyear.Thus it

seems clear that even though the prices of commoditiestraded
among the non-marketsocialisteconomiesofficiallyapproximate
world marketprices,the EasternEuropean countriesgain at the
expenseof the SovietUnion in thistrade.Partof the advantageof
the EasternEuropean countriesmay be a productof the different
commoditymix, especiallyof differentqualities of goods within
the basic commoditycategoriesemployedin this study,i.e., the
differencein favorof the Eastern European countriesmay not
actuallybe as largeas suggested.But thesedata make clearthatif
thereis anysystematic deviationfromworldmarketpricesin trade
betweenEasternEurope and the SovietUnion it is not in favorof
the SovietUnion.
In addition to complaining about the cost of the subsidy to
Eastern Europe through supplying such cheap petroleum the
Sovietshave also been complainingof an "exploitation" effect
caused by theirhavingto undertakeall the heavyinvestmentex-
pendituresof developing and producing domestic oil. It was
estimatedthat in the late 1960s the capital intensityof the basic
rawmaterialsand fuelsexportedto the COMECON countrieswas
3 to 3.5 timeshigherthan thatof the machinerysupplied to the
U.S.S.R., i.e., the value of materialinvestment(machineryand
fixedfacilitiessuch as pipelines and othertransport)per worker
was considerablyhigherin raw materialproductionthan in the
machine producing sectors. The Soviets have been fostering
integrationin the productionand distributionof raw materials
and fuels such that the EasternEuropean countriesshare in the
costsof producingand acquiringtheirown raw materials.In the
early1970s the COMECON countriesbegan to mutuallyfinance
projectsto producefuel and rawmaterialsmostlyin the U.S.S.R.
In returnforcapitalinvestments in rawmaterialproductionenter-
prises, the investingcountries (mostly Eastern European) are
repaidin rawmaterials.47
Since the mid-1950sthereis no evidencethatthe SovietUnion
obtainsunrequitedgoods fromEasternEurope. In factit appears
that it costs the Soviet Union considerablymore to trade with
EasternEurope than with the West, while Eastern Europe dis-
proportionately benefitsfromtradewiththe SovietUnion. So, if
anyoneis "exploited" it is the SovietUnion. Moreover,the terms
of tradeof the COMECON countrieswiththe SovietUnion have
shiftedconsiderablyin favorof EasternEurope.48
The Eastern European countriesdepend veryheavily on raw
materialexportsfromthe Soviets.For example, around 1970 the
Sovietsprovided100% of Czechoslovakia'simportsof petroleum

47Z.M. Fallcnbuchl, "COMECON Integration," in Bornstcinand Fusfcld, pp.

48Paul Marcr, "The Political Economy of Soviet Relations with Eastern Europe,"
in StevenRosen and James Kurth,ed. , TestingTheoriesof Economic Imperialism,
(Lexington,Mass.: D.C. Heath and Co., 1974).

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(about 97% of its consumption), about 85% of its iron ore

imports (about75% of itsconsumption), 92% of itsaluminum
and 76% ofitscopper.DuringthesameperiodtheU.S.S.R. sup-
pliedabout90% ofEastGermany petroleum,60% ofitsironore
and 70% ofitsaluminumand lead. Hungary importsmostofits
petroleum,ironore, phosphatesand electricpowerfromthe
SovietUnion,etc.49Becauseitis thepredominant supplierofraw
materialsto EasternEuropetheSovietUnionis in a positionto
"exploit"themeconomically. Thatitdoesnottakeadvantageof
ofthelackofa typicalimperialist
itspositionis indicative relation
between thesecountries.50
B. Economic Assistance toEasternEurope
The Sovietsextendedsome economicassistanceto Eastern
Europein theimmediate post-war period(1946-1952)mainlyto
relieveespeciallytroubledsituations and to convincetheEastern
Europeancountriesto rejectMarshallPlan aid, e.g., a $450
millionloantoPolandin 1947-1947.Themostgenerous periodof
Sovietaid to EasternEurope,however, was 1953-1958following
therebellions and riotsin EastGermany, Polandand Hungary,
whichwerein goodpartdirected againsttheexploitative relations
inwhichEastern Europeancountries foundthemselves in relation
to theSovietUnion.The mostcomprehensive aid program ofall
tookplacein the1956-1958periodwhenabout$3.6 billionin aid
wasextended in theformofabout$1.5 billionin loans,$1 billion
in debtcancellations, and $1 billionin freetransfersof jointly-
ownedenterprises to theEasternEuropeancountries. Additional
generous exportcreditsweregranted tothesecountries duringthis
period.51The 1956 periodmarks a watershed in theeconomic re-
lationsbetweenEasternEuropeand theU.S.S.R.: theremaining
jointstockcompanies werehandedovertothelocalcountries, and
muchof theirdebt cancelled,termsof tradefavorableto the
EasternEuropeancountries wereestablished, andgenerous aid ex-
tended.It hasbeenestimated thatthetotalvalueofSovietaid to
EasternEurope(includingdebtcancellations, turnoverof enter-
49EllcnMickicwicz,Handbook of Soviet Social Science Data, (New York: The Free
Press, 1973), p. 215; CurrentDigest of the Soviet Press, "Fuel and Raw Materials
forCMEA lands," (28:33, July7, 1976), pp. 12-13.
50Thingswere not always so advantageous for Eastern Europe. Before the mid-
1950s the terms of trade, essentiallydictated by the Soviet Union, were over-
whelminglyin favorof the Soviets. Trade with the Eastern European countries
duringthe immediatepost World War period was regardedprimarilyas a mechan-
ism to reconstructthe war devastated Soviet economy. One of the clearest
examples of the exploitationof EasternEurope throughunequal exchange before
the mid-1950s was the export of coal from Poland to the Soviet Union. Until
November 1953 Poland was supplyingcoal to the Soviet Union at approximately
one-tenthof the world price. In 1956 the Soviets acknowledged that there had
been "exploitation" of Poland in the coal trade and cancelled the $626 million in
debts owned by Poland to the U.S.S.R. as compensation for the coal subsidy
supplied the U.S.S.R. from1946 to 1953. Goldman, p. 7.
51PaulMarer,Soviet and East European Foreign Trade, p. 237; Goldman, pp. 34-
37; Sherman,p. 194.

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prises,loans and credits)has been of the same orderas thatof the

MarshallPlan aid to WesternEurope, approximately$14 billion
dollars.52The SovietUnion, at leastsincethe mid-1950s,has thus
played a centralrole in acceleratingthe economicgrowthand all
arounddevelopmentof the EasternEuropean economies,hardlya
phenomenon to be expected from an imperialisttype relation
such as existsbetweenthe United Statesand WesternEurope on
the one hand and mostof the countriesof the ThirdWorld on the
In the period 1954-1964 the majorityof Sovietloans and grants
to all the socialistcountrieswent to the COMECON countriesof
EasternEurope- 53% of all aid. But in the period 1965-1972
21% of all loans and grants were to the Eastern European
COMECON countries.In the 1954-1964periodin EasternEurope,
Germanyand Bulgariawerethe principalrecipientsof Soviet aid
in EasternEurope, while China, Mongolia and Cuba were the
principalrecipientsamong ThirdWorld Socialistcountries.In the
1965-1972periodPoland and Bulgaria(twoof the leastdeveloped
EasternEuropeancountries)weretheprincipalrecipientsin Eastern
Europe while Cuba, NorthVietnamand Mongolia (in thatorder)
were the principalbeneficiariesof Soviet aid in the Third World
C. Co-ordinatedPlanning
During the firstdecade of the Council of Mutual EconomicAs-
sistance the joint co-ordination of the economies of these
countrieswas limitedto planningtradeamong themselves.Since
1958, however,therehas been a gradual increasein overallecon-
omic integrationand co-ordinationof productionplans among
the COMECON countries.While the ideal is the eventual total
integrationof the variouseconomies,as nationstateswitheraway,
all partiesare extremelyjealous of maintainingtheireconomicin-
dependenceand all aroundeconomicdevelopment,so the process
No supra-nationalplanning authoritiesexistwhichcan dictate
to any memberstate what to produce or how to distributetheir

"Paul Marcr,Sovietand East European ForeignTrade, pp. 240-241.

J3Tansky, p. 464.
54Theproceduresof economic integrationadopted in 1971, aftermany yearsof
strugglesand compromises,stipulatedthat:
. . . furtherintensificationand improvementand the development of the
socialisteconomic integrationof CMEA membernationswill be carriedout
in accordance with the principlesof socialist internationalismand on the
basis of respectfornational sovereignty,independence and national inter-
ests, of noninterventionin the internal affairsof nations, and of total
equality,mutual advantage, and comradelyreciprocalaid.
. . socialist economic integrationis carried out on an entirelyvoluntary
basis and is not accompanied by the creationof supranationalorgans, nor
does it affectmatterspertainingto internalplanning or the financial,and
cost-calculatingactivitiesof organizations.Fallenbuchl,p. 403.

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been set up to coordinatejoint effortsand integration.A

Committee forCooperationin Planningexiststo promotecoor-
dinationoffive-year and longerplansand exchanges of informa-
tion.Discussions areheldamongtheCOMECON countries while
eachconstructs itsoperativeplans.The primary concerns of the
Committee for Cooperation in planning appears to be
systematicallydeveloping adequatesuppliesofrawmaterials and
energythroughout the COMECON countries,promotingthe
mostadvancedtechnological processes byallowingeconomiesof
scale and developing integratedtransportationnetworks.
COMECON also continues to promote coordination of
production forpurposesof planningtradeamongthe member
countries.Thismostlymeansthe development of intra-industry
e.g., Czechoslovakia
specialization, specializesin metalpipe,East
Germanyin steelforbearings,Poland in thinrolledsteeland
Hungary infineboretubing.Eachcountry decideswhether ornot
to participatein a givenintegration project (of which there are
many) on the basis on what it thinksit would gain from
participation.COMECON rules,deferring to theinterests of the
lessdevelopedCOMECON countries, Rumania,specify
thatone ofitsgoalsis to eliminate differencesin thelevelsofde-
velopmentof the membercountries.Concretely thistakesthe
formof the less developedcountries beinggivenpreference in
developing newlinesof industrial production providingthenew
productsare of sufficiently high quality,and the grantingof
economicassistance to thelessdevelopedbythemostdeveloped
COMECON countries.55
Whileeconomicintegration oftheSocialistcountries waslong
an ideal,littlerealprogress was made in coordinating economic
plansuntilthelate 1960swhentheeconomicadvantages ofecon-
omiccoordination becameclearto all participants.The Sovietshad
longpushedforintegration, withtheEastern Europeancountries,
led by Rumania,resisting out of fearof losingtheireconomic
independence and becomingrawmaterials exporters.The major
forcepressingthe countries to movetowardscoordinating their
economies wastheneedto overcome technological backwardness.
None of the smallEasternEuropeancountries could developa
self-sufficienttechnologically advanced economy.Thus the
variouscountries wereincreasingly forcedto participate in an in-
ternationalexchangeof scientific and technological knowledge
and engagein specialization to acceleratetechnological advance.
The small EasternEuropeancountries,with limitedinternal
markets becameincreasingly unableto efficiently produceall the
technologicallyadvancedgoodstheeconomies ofeachneeded.Ef-
production ofadvancedindustrial goodsrequiredinterna-
tionalmarkets toallowforeconomies ofscaleas wellas topromote

"Brainard; Fallcnbuchl; Wilczynski,pp. 195-203; Goldman, pp. 51-59; Gregory,

pp. 276-8.

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researchand developmentin specializedareas (ratherthan

spreading researchand development effortstoo thin).The econ-
omicadvantages accruing to eachcountry becamemoreand more
as thepotential gainbecamegreater and greater.
It seemsthatthepressures fromtheEasternEuropeancountries
have resultedin international institutions and arrangements
whichrepresent an internationally unifiedsystem au-
tonomous oftheU.S.S.R.56
Thereis a biasamongtheCOMECON countries againstinter-
industry specialization,i.e., specializationalong the lines of
broad economicsectors.Instead, economicintegrationand
specializationamongtheCOMECON countries tendsto takethe
formofintra-industry specialization,e.g., one countrymanufac-
turesone kindoftruck, another, a differentkindoftruckand the
countries tradewitheachother,rather thanone countrybuilding
all thetrucksandtheothermakingall theshoes.All thecountries
are ratherjealous of possessingall aroundbalancedindustrial
economies encompassing all branches ofproduction.57As a result
of the policiesof the EasternEuropecountriesforall around
industrial development, theireconomiesare farmorebalanced,
especiallyin the industrialsectorthan the economiesof the
capitalistcountriesof similarsize and per capitawealth.This
givesthesecountries a considerably betterbaseforpoliticalinde-
pendencebecauseof the more diverseeconomicbasis which
reducescrucialdependenceon foreigners forindustrialimports
(becauseoftheflexibility economically advancedindustrialecon-
omiesprovideforimport substitution) .
D. JointEnterprises
Economiccooperationamong the COMECON countriesof
EasternEurope (includingthe U.S.S.R.) takes a numberof
specificforms:(1) technologicalcooperationwhich includes
exchange ofblueprints,exchange ofknowledge abouttechnologi-
cal processes
and theresultsof scientific
research(no chargesare
madeforsuchexchanges) and trainingofscientistsand specialists
in eachother'scountries;
(2) standardization
of products and parts
that conformto establishedspecifications and quality; (3)
commondevelopment and close coordination of transport and
communications includinga common car
freight pool and canal
and rivernetworks; and, (4) joint undertakings in whichthe
capital,knowhowandmanpower ofseveralCOMECON countries
Increasingly,theCOMECON countries havebeenresorting to
jointenterprises,aftera 10-15yearhiatusin thisorganization
form.While the earlier"joint-stock companies"wereforthe
mostpartdominatedbytheSovietUnionand functioned pretty
muchto exploitEasternEuropeto theadvantageof theSoviets,

^Fallenbuchl; JanTriskaand David Finley,Soviet ForeignPolicy,pp. 223-229.

"Fallenbuchl; Sherman,pp. 192-198; Wilczynski,p. 198.

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thenewjointenterprises seemto be truly joint operations func-

tioning formutualexchange.As theprinciple supplierofrawma-
terialsto theotherCOMECON countries the Sovietshave been
encouraging theformation of jointenterprises to exploitnatural
resources in the SovietUnion. Generalagreements amongthe
variousparticipants in a projectestablishthebroadoutlinesof a
project,thenbilateral agreements betweentheU.S.S.R. and each
participating COMECON country specifytheprecisecontribution
(financing, equipment,construction workers) and productaccru-
ingto eachcountry. Otherjointenterprises includeCzechoslovak
and EastGermaninvestment in Sovietoil production to provide
fortheformer's petroleum needs.
Anotherformof COMECON cooperation involvesleasingof
land in one country by another. Bulgaria and the SovietUnion
have an arrangement whereBulgarialeasesforestland in the
SovietUnionforpurposesof buildingand operatinga forestry
enterprise forexportto Bulgaria.In return forproviding building
materials, land,technical advice,equipmentand transportation,
as well as the trees,the Sovietsget a proportion of the total
Bulgarianenterprise's outputproportionate to therelativevalue
contributions of thetwocountries.(The Bulgarians providethe
lumberworkers.) Thereis beginningto be some labormobility
amongtheCOMECON countries fromareasofrelative laborsur-
plus to relativelaborshortages, e.g., Polishworkers working in
theCzechoslovakia construction industry.58
E. Pre-1956JointStockCompanies
At the conclusionof WorldWar II, the SovietUnionestab-
lisheda considerable numberof important"joint stockcom-
panies" withthe variousEasternEuropeancountries.Normal-
ly the block partnerscontributedlabor and most of the
Normally the blockpartners contributed laborand mostof the
materialinputswhilethe Sovietscontributed the assets,assets
whichwerealmostalwaysformerly Germanownedproperties and
equipmentexpropriated bytheSovietUnionin EasternEurope.
In goodpartGermanreparations tooktheformofequipmentand
factoriesformerly German owned (bothin Germany andthrough-
out EasternEurope)stayingin place and run by the Soviets,
usuallyin cooperativearrangements withlocals. Much of the
industrialoutputofsuchenterprises typically wasexported to the
SovietUnion. When the economiesof the EasternEuropean
countries werenationalizedin thelate 1940s,normally theonly
exceptions to the nationalization degreewerethe Sovietowned
and jointenterprises. The reasonsfortheestablishment of these
enterprises werefearof a German"revanche"and the great
imperative of repairingthe damagedone by Germanyto the

Fallcnbuchl,pp. 404-405; CurrentDigest of the SovietPress,(July7, 1976), p. 13.

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Fromthe400 formerly Germanenterprises in Rumania,sixteen

joint stock companies were formed in such keysectors as oil, civil
aviation, river
transport, bankingandlumber.In 1948-1949eight
new joint stockcompanieswereformedin chemicals,tractor
manufacturing, naturalgas, coal, metallurgy,construction,
moviesand insurance.In Bulgariatherewerefivejoint stock
companies(plus some whollySovietownedpowerstations)in
non-ferrous mining,construction, ship building,civilaviation
and uraniumore. In Hungarythe Sovietsincorporated at least
sixty-nine former Germanenterprises intojointstockcompanies.
Mostofthejointenterprises createdwerein thecountries for-
merly partofor alliedwithNAZI Germany (Bulgaria,Rumania,
Hungary, EastGermany and Austria),butjointstockcompanies
werealso createdin Yugoslaviawiththevoluntary agreement of
theYugoslavs.The agreements signedin 1946and 1947between
the Soviets and Yugoslavs stipulatedthat the joint stock
companies wereto promotetheeconomicdevelopment ofYugo-
slavia and serveas mechanismsby whichthe Sovietswould
channelcapitalgoods and technicalassistanceto thatcountry.
Two jointstockcompanieswereformed,one in civiltranspor-
tationandtheotherinDanubianshipping.In bothcasesthejoint
companiescameto dominatetheirrespective sectorsdrivingout
purelyYugoslaventerprises. The Sovietmanagingoftheseenter-
prisesto the advantageof the SovietUnion overYugoslavia
becamean important issuein thesplitbetweentheYugoslavsand
theSovietUnionin 1948.59
The jointstockcompaniestypically weregrantedconcessions
notavailabletowhollylocallyownedenterprises, e.g., theywould
have specialproperty and legal rights,normallybe freefrom
taxation, customs, dutiesand mostforeign exchangerestrictions.
Thesevariousprivileges virtuallyamountedto extra-territoriality
and gavethema strongcompetitive advantageoverlocal enter-
The joint-stock companywas firstdevelopedwithMongolia,
the world'ssecondsocialistcountry, and withthe Republicof
China,bothinmid-1920s.Amongthefirst jointenterprises to be
establishedin Mongolia were those in wool and leather
procurement and export(tradingcompanies)and the Chinese
Eastern Railway, bothinitiated in 1924.In thepre-WorldWarII
periodnumerous otherjointstockenterprises wereestablished in
all fieldsoftrade,transportation and banking.After thewarjoint
enterprises weresetup to engagein miningand processing ofoil
and minerals. The mutually endorsedpurposesof thenumerous
Mongolian-Soviet joint stock companieswere to forceout
Chinese,Japanese,Britishand Americaninterests and aid the
economic development ofMongolia.60

Marcr; Goldman, Ch. 1.

^Goldman, Ch. 1.

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Following theperiodofovertoppositionto Sovietdomination

in EasternGermany in 1953,theSovietsrapidlybeganto liqui-
datetheirvariousjointstockenterprises, turning all assetsoverto
thelocalcountries, in theprocessrecognizing thedisproportion-
ate and unjustbenefitthe SovietUnionhad beengainingfrom
theiroperation.The earliestliquidations werepartlyin theform
ofoutright giftsto thecountries and partlyas salesto be paid off
gradually. AfterthePolishand Hungarianeventsof 1956,which
indicatedconsiderable resentment againstSovietdominationof
EasternEurope,all remainingjoint stockcompanies(in both
Eastern Europeand Mongolia)wereturnedoverwithout compen-
sationandalmostall ofthedebtsacquiredfromearlierliquidation
ofjoint-stock companies werecancelled.By1957all butperhapsa
singlejoint enterprise withBulgaria(maintainedat Bulgaria's
insistence) had beenliquidatedand all assetsturnedover(almost
always without charge)totheEastern Europeangovernments.61
Itisofsomeinterest to notethataftertheliberation ofChinain
1950 joint Soviet-Chinese stockcompanieswereset up in oil,
uraniumprospecting, civil aviationahd shipbuilding.Unlike
MongoliaandEastern Europe,whentheChinesejointenterprises
wereliquidatedin 1954 the Sovietsinsistedon full payment
countries in thisregard.The Manchurian railway,whichhad been
jointSoviet-Chinese property beforebeingtakenoverbyJapanin
the 1930s (the Sovietssold theirinterests to Manchukuo)and
whichreverted to Sovietcontrol in 1945,wasturnedovertoChina
in 1952.62
The voluntary liquidationof theinequitablejointstockcom-
panies of the 1945-1953 periodand thesubsequentturning over
of their assets to the various socialist countrieswithout
compensation (China excepted)are phenomenaunknownto a
capitalistimperialist country. The onlyknowncasesof liquida-
tionsof imperialist ownedenterprises (e.g., Arabianor Vene-
zuelanoil) occurson thebasisof salesat pricesagreeableto the
imperialist owned transnational corporations. The mid-1950s
massiveliquidationwithoutcompensation, the verytimewhen
theChineseand theirsupporters nowarguethatcapitalism was
beingrestored and theSovietunionwasbecomingsocialimperi-
alist,is a strongargument againsttheChinesethesis.The revival
ofthejoint-enterprise in recentyearson termsmutually agreeable
to boththeSovietsand theCOMECON countries mustbe con-
sidereda qualitatively different phenomenonfromthe Eastern
Europeanenterprises in the ex-Axis countriesin the 1945-53
period.Ratherthanbeingsetup andrunprimarily in orderto aid
thereconstruction of theSovietUnion(as a formof reparations)

6lGoldman, Ch. 1; Marcr,Soviet and East European Foreign Trade, p. 236; Gil-
bert,p. 110.
62Goldman,pp. 20-21.

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thejointenterprises are enteredintovoluntarily by the various

countries bymutualagreement and benefit toall parties.Another
keydifference is thatmostof theseenterprises arelocatedin the
SovietUnionrather thanin Eastern Europeand aregearedto the
production and exportofrawmaterials fromtheSovietUnionto
the otherCOMECON countries(whilethe earlierjoint stock
companies weregearedto exporting machinery and rawmaterial
totheSovietUnion). Thereality thattheCOMECON countries of
EasternEuropefaremuchbetterwiththe newjointenterprises
thanwiththeold jointstockcompanieswouldseemto directly
counterthe thesisthat the SovietUnion has evolvedin the
direction ofcapitalism and socialimperialism fromthepost-War
periodthrough the1970s.The qualitative difference in theecon-
omic relationsbetween the EasternEuropean COMECON
countries, notonlyin termsofjointenterprises, butalsoin terms
oftraderelations, substantially refutestheChinesenotionofthe
developmentof social imperialismduringthis period. The
evidenceclearlyshowsthateitherthe SovietUnion was social
imperialist fromat least1945(and is becomingsubstantially less
socialimperialist overtime)or thatit is notsocialimperialist at
all. It is clearlyincompatible withthenotionthatsocialimperial-
F. Economic Growth
Theliterature on thelessdevelopedcountries andon theeffects
of imperialism in good partfocuseson the effectof capitalist
imperialism in "underdeveloping," blockingthe development
of, or producingeconomicstagnationin, the Third World
satellites of U.S. and Europeanimperialism. It is thereforevery
important in an examination ofwhether ornottheSovietUnion's
relationsto EasternEurope are essentially equivalentto the
advancedcapitalistcountries'relationsto the ThirdWorldto
determine whether or notSovieteconomicrelations withEastern
Europe hinderor promotetheireconomicdevelopmentand
Iftherelationship betweenEastern Europeand theU.S.S.R. is
of the kindthatthe "dependency"literature such
authorsas AndreGunderFrank,Paul Baran,HarryMagdoff,
SamirAmin,TheotonioDos Santos,etc.) describeas existing
between theThirdWorldandtheU.S. andWestern Europe,then
wewouldexpecttheratesofeconomicgrowth percapitaand the
rateof industrialization of EasternEuropeand theThirdWorld
non-socialist countries to be comparable.We wouldalso expect
ratesof growth percapita,therateof industrialization and the
levelofindustrialization to be significantly
higherin theU.S.S.R.
thanin theotherCOMECON countries. None of thesethingsis

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TABLE5. RatesofEconomic
GrowthoftheEuropeanCOMECON Countries

RateofGrowth RateofGrowth per RateofGrowth

(NNPorGDP) Capita(NNP orGDP) Industry
Bulgaria 8.1% 7.3% 11.0%
Czechoslovakia 4.7 4.1 4.9
Rep. 4.8 4.8 5.3
Hungary 5.7 5.3 6.8
Poland 6.6 5.6 8.5
Romania 8.8 7.7 12.8
USSR 7.1 5.9 9.1
USA 4.3 3.1 4.8
ECC 4.6 3.8 5.1
LatinAmerica 59 3.0 7.0
EuropeCOMECON 6.5 5.8 8.2

Source:UnitedNations,Yearbookof NationalAccountStatistics,
1975, Tables 4A, 4B.

The averagerateof economicgrowth in Net MaterialProduct

percapitain thesixCOMECON countries of EasternEuropein
theperiod1960-1973was almostdoublethatof LatinAmerica,
andcompares veryfavorably withtherateofgrowth in theU.S.A
andtheCommonMarket.Further, itwasvirtuallyidenticalto the
rateofgrowth oftheSovietUnion.The averagerateofgrowth of
industry in the 1960-73periodforEasternEuropealso compares
favorably withtherateforLatinAmerica(thatpartof theThird
World mostcomparableto EasternEurope),the rate of the
growth intheU.S.A. , theCommonMarket andtheSovietUnion.
The economiesof the EasternEuropeancountries also differ
considerably fromtheeconomiesofThirdWorldcountries under
theinfluence of the U.S., Japanand WesternEurope,bothin
their overall level of developmentand in their sectoral
distribution. Fifty-fourpoint fivepercentof the net material
productof the EasternEuropeancountriesoriginatesin the
industrialsectorcomparedto around30% (ofGNP) ofthemajor
countries ofLatinAmerica(amongthemoredevelopedand most
influenced by the U.S. countriesof the ThirdWorld).63It is
slightlyhigherthanthatof theSovietUnion(51%). The figures
forEastern Europemustbe reducedsomebecauseoftheexclusion
of theservicesectorfromtheconceptnetmaterialproduct,but
the figuresforLatinAmericamustalso be reducedsomewhat
becauseof theextremely low levelof incomein theruralsector
andhenceunderevaluation oftheproduct ofthatsector.
The percentage oftheeconomically activepopulationengaged
in manufacturing in the six COMECON countriesof Eastern
Europerangefrom36.9% fortheGermanDemocratic Republic
through 34.7% forCzechoslovakia, 30.9% forHungary,25.7%
forBulgaria,24.0% forRumaniaand 23.6% forPoland. This

63U.N., Yearbook of National Account Statistics,1975.

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compares with25.2% fortheSovietUnion,26.1% fortheU.S.,

8.4% forBrazil,10.2% forChile,8.6% forVenezuelaand 8.4%
for Columbia.64The averageof 29.3% for the six Eastern
EuropeanCOMECON countries is higherthanthe comparable
theseindicators of economicdevelopment fortheU.S. (orother
advancedcapitalistcountries) and the non-socialistcountriesof
theThirdWorld.In 1964thepersonalconsumption percapitaof
the GermanDemocratic Republicwas 156% thatof the Soviet
Union,Czechoslovakia 150%, Hungary117%, Poland 103%,
Bulgaria100% and Rumania86%.65In generalit appearsthat
thelevelof economicdevelopment and thestandardof livingis
higherin mostof the COMECON countries of EasternEurope
Thattheperiodofsocialist constructionin thesixCOMECON
countries ofEastern Europehasresulted in bothindustrialization
and economicdevelopment oftheseformerly under-
developedcountries can be seenbycomparing themnowto what
theywerein the1930s.In 1937Czechoslovakia had 17.0% ofits
economically active in
population working manufacturing,
Hungary7.3%, Poland 6.2%, Bulgaria5.9%, and Rumania
2.7%. Thesefigures aregenerally somewhat lowerthanformost
ofLatinAmerican countries ofcomparable sizein the1970s.The
G.N.P. percapitaofthesecountries in 1937(in 1973U.S. dollars)
were$440forCzechoslovakia, $428forHungary, $300forPoland
and$271forBulgaria.Thesefigures arecomparable withorlower
thanmanyThirdWorldcountries today.Forexamplein 1973,the
G.N.P. per capita of Columbia was $400, the Dominican
Republic$480, Guatemala$402, Chile $579, Brazil$723 and
Egypt$245.66In comparison the 1937 G.N.P. capital(in 1973
dollars)oftheUnitedKingdomwas$1,676,and ofItaly$503. In
1974 the per capitanationalincomeof the EasternEuropean
countries wasestimated to be $3,599forEastern Germany, $1,812
forRumania,$2,505 for Czechoslovakia, $1,812 for Poland,
$1,520forHungary and $1,002forBulgaria(and $1,880forthe
SovietUnion). Thesefigures comparewellwiththerelatively less
affluent countriesofWesternEuropetoday,e.g., Spain$1,991,
EasternEuropewastrulya poorand backward areain thepre-
Socialistperiod,fullycomparableto the middlelevel under-
developedcountries of Asia,Africaand LatinAmericatoday.It
was the 25 yearsof Socialistguideddevelopment policiessince
about 1949 thathas modernizedtheseeconomiesand greatly
increased theirstandardof living(especially of theworking and
MU.N., StatisticalYearbook, 1975.
65EllenMickiewicz,Handbook of Soviet Social Science Data, p. 209.
66U.N., Yearbook of National Account Statistics,1975.
Investing, ana TradingConditions

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In summary, weseethatnothing liketheprocesses

described by
"dependency"theoryoperatebetweenthe SovietUnion and
EasternEurope.The SovietUnion does not growrichat the
expenseofEasternEuropeancountries, neitherdoes it developa
in industrial
specialization productionwhilethelaterspecializes
in rawmaterials.In largepart it has been the economicties
betweenEastern Europeand theU.S.S.R. thathavebeenrespon-
siblefortherapideconomicgrowthand industrialization of the
former region.In fact,EasternEuropehas consistentlyhad the
highestrateof economicgrowth,as well as the fastestrateof

A closeempiricalexamination oftheaggregate economicrela-
tionsbetweentheSovietUnion,thecountries oftheThirdWorld
andtheCOMECON countries ofEastern Europe'does notsupport
theChinesethesisof"SovietSocialImperialism. '
Thereareno mechanisms analogousto overproduction operat-
ing in the Sovieteconomywhichforcethe pursuitof overseas
investment outletsor trade surplusesin orderto allow the
accumulation ofcapital;Soviettradedoesnotdisproportionately
benefittheSovietUnionat theexpenses ofothercountries; Soviet
economicassistanceis generousand not used to economically
dominateand exploitothercountries; theSoviets,unlikeall the
Westerncapitalistcountries,do not investin Third World
countriesforprofit;and Sovieteconomicintegration withEastern
Europeis mutuallybeneficialto all partiesand participated in
freelybytheEastern Europeancountries.
That no evidence could be found of Soviet economic
exploitationofeitherThirdWorldorothersocialist countries,or
anydynamic detectedin theorganization of theSovieteconomy
leadingit to be imperialist, does not necessarily implythatthe
SovietUniondoes not intervene in othercountries formilitary
advantage, doesnotsuppress working classand progressive move-
mentsin othercountries and does nothurtmorethanhelp the
advanceoftheworldsocialist movement. Thedemonstration ofa
lackofeconomic exploitation ofothercountries merely showsthat
theSovietUnionis notimperialist in thesamesenseoftheterm
thattheU.S.A. and otherWestern imperialist countries are. The
SovietUnion,althoughnotsocialimperialist, mightwellbe both
hegemonic andoppressive initsrelations withothercountries.
In facttherearenumerous casesofSoviethegemonism, mostly
in relationto othersocialistcountries, butsometimes in relation
to non-socialistThird World countriesas well (e.g., the
constraintsputon Egypt,thesupportto ZAPU butnotZANU in
Zimbabwe).Soviethegemonism was a farmorepotentforcein
thepre-1956periodwhenthedetailsof decisionmakingin the
Eastern Europeancountries weretypically dictatedbyMoscow.In
the1960sthedrastic sanctions againstChinaandAlbaniaand the

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pressureon Korea,Cuba andRomania,as wellas theintervention

in Czechoslovakia, were clear manifestationsof Soviet
hegemonism. Although weakening considerably, Soviet
hegemonism is stillan important forcein theworldCommunist
movementand among the SocialistCOMECON countriesof
EasternEuropeand Mongolia.The Sovietsstillhavea strong ten-
dencyto maintainthattheyhavethebestunderstanding of the
correctroad to socialismand communism, althoughtheyhave
grownmoretolerantof bothoppositionin theWesternparties
and in the EasternEuropeancountries.Soviethegemonism is
gradually beingerodedawayas eachCommunist Partyand Social-
ist regimeincreasingly comesto autonomously decide its own
policiesforitselfalthoughoftenwithconvergent outcomes,e.g.,
toward Euro-Communism ("revisionism")in themajorpartiesin
the advancedcapitalistcountries,"Maoism" in SouthEastern
Asia and pro-Sovietism in muchof EasternEuropeand mostof
thesmaller Communist partiesoutsideofWestern Europe.68
Sovietforeign relations cannotbe totallyexplainedin termsof
hegemonism, however, The Soviets'generousforeignassistance
of progressiveand revolutionary movements in SouthernAfrica,
Cuba and SouthEastAsia (whichoftenundermine itsefforts at
detentwhichwouldguaranteeSovietsecurity vis-a-vis
stronglysuggestthat there is still a strongcomponentof
struggling to advancethe worldsocialistmovement(whichis
compatible withguaranteeing thesecurityoftheSovietUnion)in
In conclusion, an objectiveandempirical examination ofSoviet
foreign relationsmust conclude thatSoviet foreignrelations are
guided by components of hegemonismand proletarian
internationalism, thathegemonism is becomingless important
(evenas theSovietUniongainson theU.S. as a worldeconomic
and military power),and finallythatalthoughthe "Social Im-
perialism"chargeis mostunderstandable, giventhecallousand
hegemonic treatment ChinareceivedfromtheSovietUnion,es-
peciallyin the 1957-1960period,theChinesearewrongin their

^See AlbertSzymanski,"Soviet Social Imperialism:A Look at SpecificCountries."

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