An Effective US Response To Soviet Economic Warfare Against Lithuania

In the aftermath of Mikhail Gorbachev’s declaration of economic war against Lithuania unless its recent legislative measures bolstering the 11 March 1990 declaration of independence are rescinded, the Bush Administration and Senate Majority Leader George Mitchell have begun publicly to discuss a U.S. response. The Center for Security Policy applauds this welcome — if belated — step on behalf of the beleaguered Lithuanian people.

Unfortunately, the specific actions now being backgrounded by Administration sources and mentioned by Sen. Mitchell appear to have as their common thrust an effort to protect Gorbachev at all costs. As a result, they run the risk of having no more dissuasive effect on the Kremlin’s increasingly draconian techniques of repression than the half-hearted and largely ineffectual "sanctions" taken against Beijing in the aftermath of the Tiananmen Square massacre.

Beware "Potemkin" Sanctions

While the Center agrees with the approach of responding to the Soviet threat of economic warfare against Lithuania by acting in the area of U.S.-Soviet economic, financial and technology relations, some U.S. actions would impose genuine costs on Moscow while others would be largely cosmetic in nature. At this moment, it is imperative that a distinction be drawn between the two.

The Bush Administration is floating the following as appropriate U.S. responses in the event Gorbachev carries out his threatened economic embargo:

  • Postponing completion of the bilateral U.S.-Soviet Trade Agreement;
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  • Delaying accords on civil aviation and landing rights and maritime procedures; and
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  • Putting off completion of bilateral investment and tax treaties.

 

On the face of it, these actions would seem to exact a significant price for Moscow’s coercive behavior. In fact, they offer substantial room for obfuscation and dilution. For example, the broad banner of the "Trade Agreement" actually has a number of component parts that may or may not be included in the Administration’s emerging strategy. Depending upon what is affected, the real message to the Kremlin may simply be: Business as usual.

Real Economic Sanctions

The key elements of the Trade Agreement and other bilateral economic initiatives which should be explicitly at risk in the event of a Soviet economic blockade of Lithuania should include — in addition to recognition of that nation’s freely elected government and independent, sovereign status — the following:

  • All energy cooperation, notably the U.S.-Soviet Energy Working Group charged with enhancing Soviet development and production activities, should be suspended at once. Beyond the present crisis, this collaboration — which will simply enhance Soviet energy-related leverage against those aspiring to freedom not only in the Baltic States but possibly in Eastern Europe, as well — is ill-conceived and potentially dangerous from a national security perspective.
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  • The United States should urgently convene a meeting of allied nations to develop a Contingency Energy Fund to help cushion nations — like Lithuania — whose pursuit of genuine structural transformation results in economic dislocation and hardship, especially that precipitated by Moscow’s policy machinations. The Lithuanians are especially in need of fuel for tractors and other mechanized farm equipment needed for the crucial spring planting.
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    The same meeting could address alliance-wide efforts to offset Soviet supply shortfalls to Lithuania in other areas.

     

  • The International Energy Agency Agreement of May 1983 should be reaffirmed by its signatories. This major agreement, reached as a precondition to resolving the Siberian gas pipeline controversy, commits OECD signatories not to permit undue West European dependency on Soviet gas supplies (i.e., beyond a 30 percent share of total West European gas requirements). The caution reflected in this accord about possible future use by Moscow of its energy leverage for political purposes — particularly in Eastern Europe — is more warranted than ever in light of events in Lithuania.
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  • No action should be taken under these circumstances to grant the Soviet Union most-favored nation status. The Jackson-Vanik Amendment, after all, directly conditioned Soviet MFN on Moscow granting its people the right to leave the Soviet Union. It would be the height of irony, not to say ludicrous, were the Bush Administration now to assert that the USSR had met this important test at the very moment that it is denying 3.4 million Lithuanians such a right.
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  • Restored Soviet access to U.S. Export-Import Bank credits and loan-guarantees through the waiver of the Jackson-Vanik Amendment should be indefinitely postponed. The Center has long viewed taxpayer-subsidized credits to Moscow as an imprudent liability and strategic mistake prior to systemic economic reform and free and fair national elections in the USSR.
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  • Liberalization of controls governing the transfer of militarily relevant high technology to the Soviet Union should be suspended immediately. Specifically, this should apply to steps now being contemplated that would enable Moscow to obtain such technology indirectly through Eastern Europe — thanks to the continued partnership between the Soviet KGB and most (if not all) of its former client states’ intelligence services — or directly by granting the USSR the same access to dual-use technology as that granted to reforming East European nations.
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  • Deferring indefinitely settlement of defaulted Czarist and other Soviet debt obligations to the United States (including Lend-Lease). Such a settlement would remove Moscow from the restrictive provisions of the Johnson Debt Default Act of 1934, thereby permitting the Soviet issuance of bonds and other debt instruments in the United States and on a dollar-denominated basis.
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  • The Bush Administration should at once repudiate its recent concession to Moscow which would permit the Soviet Union to obtain observer status in the General Agreement on Tariffs and Trade (GATT) before the Kremlin adopts price reform and other market practices needed to make its economy more compatible with the GATT system.
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  • Soviet participation should be dropped in the European Bank for Reconstruction and Development, participation that will permit it to act both as a member of the institutionborrower (however limited) of its funds. The looming problems associated with such an arrangement (for example, Soviet diversion of desperately needed hard currency from reforming East European states to its own coffers) underscore the wisdom of Senators Robert Kasten (R-WI) and Robert Dole (R-KS) — and presumably of organized labor — who believe that another method to assist economic revitalization in Eastern Europe should be pursued, i.e., a East European development "window" at the World Bank. as well as a

 

In addition, the Center believes that such non-governmental actions as consumer boycotts of Soviet goods and U.S. longshoremen refusing to load and unload Soviet ships can bring important presssure to bear on Moscow.

Not a Moment to Lose

On 8 January 1990, the Center warned of the coming Soviet crackdown on Lithuania in a paper entitled Soviet Economic Leverage: Moscow’s Tool for Denying Baltic Independence Without Using Force. Even then, it was obvious that economic warfare would be the Kremlin’s weapon of choice against those seeking independence from its rule. Accordingly, the Center urged the Bush Administration to work with the allies to "establish unmistakably that the Kremlin’s use of energy and other economic leverage — like the use of force — to stifle political and economic autonomy in Eastern Europe, the Baltics and elsewhere will entail real and lasting costs in terms of Soviet access to Western economic, financial and technological resources."

Unfortunately, the Bush Administration did not heed that advice then. Now, as the reports of devastating Soviet economic warfare against Lithuania begin to reach Washington and other Western capitals, President Bush must delay doing so no longer.

 

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