Soviet foreign trade played only a minor role in the Soviet economy. In 1985, for example, exports and imports each accounted for only 4 percent of the Soviet gross national product. The Soviet Union
maintained this low level because it could draw upon a large energy and
raw material base, and because it historically had pursued a policy of
self-sufficiency. Other foreign economic activity included economic aid programs, which primarily benefited the less developed Council for Mutual Economic Assistance (COMECON) countries of Cuba, Mongolia, and Vietnam, and substantial borrowing from the West to supplement hard-currency export earnings.[1]
The Soviet Union conducted the bulk of its foreign economic activities with communist countries, particularly those of Eastern Europe.
In 1988 Soviet trade with socialist countries amounted to 62 percent of
total Soviet foreign trade. Between 1965 and 1988, trade with the Third World made up a steady 10 to 15 percent of the Soviet Union's foreign trade. Trade with the industrialized West, especially the United States,
fluctuated, influenced by political relations between East and West, as
well as by the Soviet Union's short-term needs. In the 1970s, during
the period of détente, trade with the West gained in importance at the
expense of trade with socialist countries. In the early and mid-1980s,
when relations between the superpowers were poor, however, Soviet trade
with the West decreased in favor of increased integration with Eastern
Europe.[1]
The manner in which the Soviet Union transacted trade varied from one
trade partner to another. Soviet trade with the Western industrialized
countries, except Finland,
and most Third World countries was conducted with hard currency, that
is, currency that was freely convertible. Because the ruble was not
freely convertible, the Soviet Union could only acquire hard currency by
selling Soviet goods or gold on the world market for hard currency.
Therefore, the volume of imports from countries using convertible
currency depended on the amount of goods the Soviet Union exported for
hard currency. Alternative methods of cooperation, such as barter,
counter trade, industrial cooperation, or bilateral clearing agreements
were much preferred. These methods were used in transactions with
Finland, members of Comecon, the People's Republic of China, Yugoslavia, and a number of Third World countries.[1]
Commodity composition of Soviet trade differed by region. The Soviet
Union imported manufactured, agricultural, and consumer goods from
socialist countries in exchange for energy and manufactured goods. The
Soviet Union earned hard currency by exporting fuels and other primary
products to the industrialized West and then used this currency to buy
sophisticated manufactures and agricultural products, primarily grain.
Trade with the Third World usually involved exchanging machinery and
armaments for tropical foodstuffs and raw materials.[1]
Soviet aid programs expanded steadily from 1965 to 1985. In 1985 the
Soviet Union provided an estimated US$6.9 billion to the Third World in
the form of direct cash, credit disbursements, or trade subsidies. The
communist Third World, primarily Cuba, Mongolia, and Vietnam, received
85 percent of these funds. In the late 1980s, the Soviet Union
reassessed its aid programs. In light of reduced political returns and
domestic economic problems, the Soviet Union could ill afford
ineffective disbursements of its limited resources. Moreover,
dissatisfied with Soviet economic assistance, several Soviet client
states opened trade discussions with Western countries.[1]
In the 1980s, the Soviet Union needed considerable sums of hard
currency to pay for food and capital goods imports and to support client
states. What the country could not earn from exports or gold sales it
borrowed through its banks in London, Frankfurt, Vienna, Paris, and Luxembourg.
Large grain imports pushed the Soviet debt quite high in 1981. Better
harvests and lower import requirements redressed this imbalance in
subsequent years. By late 1985, however, a decrease in oil revenues
nearly returned the Soviet debt to its 1981 level. At the end of that
same year the Soviet Union owed US$31 billion (gross) to Western
creditors, mostly commercial banks and other private sources.[1]
In the late 1980s, the Soviet Union attempted to reduce its
hard-currency debt by decreasing imports from the West and increasing
oil and gas exports to the West. It also sought increased participation
in international markets and organizations. In 1987 the Soviet Union
formally requested observer status in the General Agreement on Tariffs and Trade and in 1988 signed a normalization agreement with the European Economic Community.
Structural changes in the foreign trade bureaucracy, granting direct
trading rights to select enterprises, and legislation establishing joint
ventures with foreigners opened up the economy to the Western technical
and managerial expertise necessary to achieve the goals established by
General Secretary Mikhail Gorbachev's program of economic restructuring (perestroika).[1]
