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SECRET 4 tionism" among the local Communist leaders c. The Problems of the Western Powers. most certainly restricted Soviet freedom of It was generally assumed that the Western action in the CFM. The USSR could not Powers entered the CFM in a stronger bar- make a long-term play for a united Germany gaining position than ever before. On the partly because its control over the satellites surface this was true. They had made sub- was not strong enough to risk the antago- stantial progress in political, military, and nisms that such a policy would arouse in Po- economic consolidation in Western Europe. land and Czechoslovakia. Before it can make Confidence throughout Europe had generally this play it must eliminate, if it can, all traces replaced uncertainty and despair. At the of "deviationism" among the satellite Com- same time, the USSR was obviously somewhat munist leaders. on the defensive in consequence of weaknesses The second basic weakness in the Soviet within its own sphere of influence. position at the CFM was economic. Its own This advantage, however, was only momen- economic development has not been proceed- tary-a matter of time rather than of funda- ing as rapidly as desired, and the satellite mentals. The basic economic difficulties fac- economies were in some instances actually ing the Western Powers had not been solved deteriorating. The satellites have recognized and the problems of a revived Germany were that they have suffered substantially from in the offing. their economic orientation toward the USSR (1) The Economic Problem. and this has further stimulated nationalist The fundamental economic weaknesses in "deviationism." The USSR thus had need of the Western position-not in terms of mili- a relaxation in tension that would facilitate tary potential but of healthy international increasing East-West trade. It has now given economic relationships-have suddenly burst the satellites a freer hand in making what into full view. It has always been question- economic deals they can with the West. The able whether the ERP program would succeed USSR is clearly counting on a US depression in restoring the viability of the economies of and a world-wide buyer's market to force the the UK and Western Europe in terms of a Western Powers and West Germany to seek a prewar standard of living. The sudden dollar market for their surplus production in the crisis of the UK, following SO quickly upon East. only a moderate business recession in the US Nationalism and economic weaknesses, and a general shift from a seller's to a buyer's therefore, stand out at the moment as basic market, serves to emphasize the magnitude deterrents to direct Soviet aggression, either of the problems still facing the Western Pow- political or military. Soviet leaders in the ers in their efforts to recreate a healthy inter- period ahead will undoubtedly concentrate on national economy. These problems derive finding solutions to these problems. The primarily from the operation of long-term problem of nationalism is of particular sig- forces within Western society which have in- nificance, if, as it appears, their long-term creasingly affected the stability both of the objectives envisage complete Soviet domina- internal structure of individual states and the tion of a Communist world. However, if they 19th century system of international eco- fail to resolve it in terms of a Soviet interna- nomic relationships. World Wars I and II tional dictatorship they have an unpalatable merely accelerated a basic trend toward dis- alternative solution in terms of an alliance equilibrium. They further reduced the invis- of states bound closely together by the com- ible income of the UK and the colonial powers mon bond of Communism and an antipathy of Western Europe, dislocated established pat- toward the non-Communist world. In the terns of trade, and accelerated changes in the meantime, they can take comfort in the hope that the serious problems facing their adver- competitive positions and economic structures saries in the West may open up to them op- of the various states. The dollar shortage portunities that are not now clearly present and the patent impossibility of maintaining or that they are not strong enough to create. free convertibility of currencies are merely SECRET E. O. DECLASSIFIED 11652, Sec. 3(E) 3.312,274 and 5(D) of (E) letter, NARS Date 4-4-77 By NLT-

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    "ocrText": "SECRET\n4\ntionism\" among the local Communist leaders\nc. The Problems of the Western Powers.\nmost certainly restricted Soviet freedom of\nIt was generally assumed that the Western\naction in the CFM. The USSR could not\nPowers entered the CFM in a stronger bar-\nmake a long-term play for a united Germany\ngaining position than ever before. On the\npartly because its control over the satellites\nsurface this was true. They had made sub-\nwas not strong enough to risk the antago-\nstantial progress in political, military, and\nnisms that such a policy would arouse in Po-\neconomic consolidation in Western Europe.\nland and Czechoslovakia. Before it can make\nConfidence throughout Europe had generally\nthis play it must eliminate, if it can, all traces\nreplaced uncertainty and despair. At the\nof \"deviationism\" among the satellite Com-\nsame time, the USSR was obviously somewhat\nmunist leaders.\non the defensive in consequence of weaknesses\nThe second basic weakness in the Soviet\nwithin its own sphere of influence.\nposition at the CFM was economic. Its own\nThis advantage, however, was only momen-\neconomic development has not been proceed-\ntary-a matter of time rather than of funda-\ning as rapidly as desired, and the satellite\nmentals. The basic economic difficulties fac-\neconomies were in some instances actually\ning the Western Powers had not been solved\ndeteriorating. The satellites have recognized\nand the problems of a revived Germany were\nthat they have suffered substantially from\nin the offing.\ntheir economic orientation toward the USSR\n(1) The Economic Problem.\nand this has further stimulated nationalist\nThe fundamental economic weaknesses in\n\"deviationism.\" The USSR thus had need of\nthe Western position-not in terms of mili-\na relaxation in tension that would facilitate\ntary potential but of healthy international\nincreasing East-West trade. It has now given\neconomic relationships-have suddenly burst\nthe satellites a freer hand in making what\ninto full view. It has always been question-\neconomic deals they can with the West. The\nable whether the ERP program would succeed\nUSSR is clearly counting on a US depression\nin restoring the viability of the economies of\nand a world-wide buyer's market to force the\nthe UK and Western Europe in terms of a\nWestern Powers and West Germany to seek a\nprewar standard of living. The sudden dollar\nmarket for their surplus production in the\ncrisis of the UK, following SO quickly upon\nEast.\nonly a moderate business recession in the US\nNationalism and economic weaknesses,\nand a general shift from a seller's to a buyer's\ntherefore, stand out at the moment as basic\nmarket, serves to emphasize the magnitude\ndeterrents to direct Soviet aggression, either\nof the problems still facing the Western Pow-\npolitical or military. Soviet leaders in the\ners in their efforts to recreate a healthy inter-\nperiod ahead will undoubtedly concentrate on\nnational economy. These problems derive\nfinding solutions to these problems. The\nprimarily from the operation of long-term\nproblem of nationalism is of particular sig-\nforces within Western society which have in-\nnificance, if, as it appears, their long-term\ncreasingly affected the stability both of the\nobjectives envisage complete Soviet domina-\ninternal structure of individual states and the\ntion of a Communist world. However, if they\n19th century system of international eco-\nfail to resolve it in terms of a Soviet interna-\nnomic relationships. World Wars I and II\ntional dictatorship they have an unpalatable\nmerely accelerated a basic trend toward dis-\nalternative solution in terms of an alliance\nequilibrium. They further reduced the invis-\nof states bound closely together by the com-\nible income of the UK and the colonial powers\nmon bond of Communism and an antipathy\nof Western Europe, dislocated established pat-\ntoward the non-Communist world. In the\nterns of trade, and accelerated changes in the\nmeantime, they can take comfort in the hope\nthat the serious problems facing their adver-\ncompetitive positions and economic structures\nsaries in the West may open up to them op-\nof the various states. The dollar shortage\nportunities that are not now clearly present\nand the patent impossibility of maintaining\nor that they are not strong enough to create.\nfree convertibility of currencies are merely\nSECRET\nE. O. DECLASSIFIED 11652, Sec. 3(E) 3.312,274 and 5(D) of (E)\nletter,\nNARS\nDate\n4-4-77\nBy\nNLT-"
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