Section 6. Soviet Union and Eastern Europe


1. Soviet Union


(1) Internal and External Situation

(a) Domestic Politics

(i) The Gorbachev regime, in its fourth year or 1988, embarked on a full scale upon political reform, which is a major pillar of the perestroika policy, and implemented measures to strengthen the power of the Soviet (parliament) and reform the party structure. Moreover, the leadership centering on Gorbachev was strengthened further through the dismissal of old leaders at a plenary meeting of the Communist Party's Central Committee late in September and the assumption of the concurrent post of chairman of the Presidium of the Supreme Soviet by General Secretary Gorbachev. Moreover Gorbachev was elected chairman of the Supreme Soviet, further solidifying the political foundation of the Gorbachev regime.

Glasnost (openness), the most advanced of Gorbachev's reform measures, took fairly firm root during the four-year rule of the Gorbachev regime. But limits to glasnost also became gradually visible as indicated by the authorities' criticism of the progressive press and curbs on gatherings. In particular, "democratization" and glasnost heightened the selfconsicousness of ethnic minorities in provinces, sharpening ethnic movements in Caucasia and three Baltic republics.

(ii) In accordance with a program for political reform, adopted at the party conference in June 1988, the plenary meeting of the party's Central Committee and the Supreme Soviet, convened from September to October, announced the reorganization of the party's central structure and a constitutional amendment for strengthening the power of the Soviet and democratizing the electoral system under the slogan of the "functional separation between the party and the Soviet" and the "bolstering of the power of the Soviet." After a nationwide debate, these plans were adopted in December. As for the senior personnel of the party and the Soviet, all old leaders were dismissed, including Gromyko and Solomentsev, both Politburo members, and Demichev and Dolgikh, both candidate members of the Politburo. On the other hand, General Secretary Gorbachev assumed the chairmanship of the Presidium of the Supreme Soviet, which gained in importance as the authority of the Soviet was strengthened. At the same time, as a result of the organizational reform of the party's Central Committee, the functions of the secretariat were divided among six newly formed committees, and the secretaries were named to head these committees. Moreover, at a plenary meeting of the Central Committee in April 1989, 110 persons, already receiving pension, were dropped out of a total of 540 members or candidate members of the Central Committee and the Central Auditing Commission. At the same time, 24 of Gorvachev's brain trusters and aides were promoted from the status of candidate members of the Central Committee to full membership. He thus further strengthened his power at the center of the party.

(iii) Under the new Constitution, an election for the Congress of People's Deputies was held in March 1989. Unlike the past elections, this election reflected the "democratization" of the Soviet electoral system as typified by the multiple candidacy system, secret voting, voluntary voting (freedom of abstention) and glasnost in the election campaigns (TV broadcast by candidates).

In the election, Boris Yeltsin of the radical reform faction (former First Secretary of the party of Moscow city) was elected with overwhelming support, while a considerable number of prominent figures in the party and administrative bodies suffered defeat in three major cities, Moscow Leningrad and Kiev. Among them were Solovjov, First Secretary of the party in Leningrad Oblast (candidate member of the Politburo) and Saikin, Moscow city mayor. The election results thus strongly reflected Soviet people's dissatisfaction with slow progress in perestroika.

(iv) The first session of the Congress of People's Deputies was held from May 25 to June 9. Important figures elected at the meeting included General Secretary Gorbachev (named chairman of the Supreme Soviet), Lukyanov, candidate member of the Politburo (first deputy chairman of the Supreme Soviet), Ryzhkov, Politburo member (chairman of the Council of Ministers, or Prime Minister), Primakov, Central Committee member and former director of the Research Institute on the World Economy and International Relations (chairman of the Soviet of the Union of the Supreme Soviet), and Nishanov, First Secretary of the party in the Uzbek Soviet Socialist Republic (chairman of the Council of Nationalities of the Supreme Soviet). Moreover, 542 deputies of the Supreme Soviet were also elected. Most of them are members of the central and local party and administrative organs, reform-minded brain trusters of General Secretary Gorbachev, and his aides. Among radical reformists, Yeltsin was elected.

(v) In 1988, against a background of "democratization" and glasnost, the Soviet Union was shaken by a series of large-scale ethnic problems, which were far more serious than the problems of Crimean Tartars and Soviet Jews, which had occurred in previous years.

In the Caucasian region, a dispute between Armenian and Azerbaijan people steming from the problem of jurisdiction over the Nagaorno-Karabakh Autonomous Oblast deteriorated from February. Following a "rally of one million," strikes, proclamation of a martial law and deployment of troops, a special control system was introduced into the autonomous Oblast on a provisional basis under the direct control of the central government. In the three Baltic republics, protest rallies and demonstrations against their annexation to the Soviet Union mounted from 1987. From the spring of 1988, the "popular front" movements demanding the drastic expansion of autonomy spread rapidly, and in the process of people's debate about constitutional amendment, scheduled for the latter half of 1988, even demands for the independent control on state-owned assets and the veto right about federal legislation appeared in some republics. Such ethnic movements are spreading to other republics, such as Byelorussia, Georgia, Moldavia and Uzbekistan. In particular, in an uprising in Georgia in April 1989, about 20 people died when troops overpowered demonstrations. Moreover, when violence erupted in Uzbekistan in June 1989, a clash between Uzbeks and Meskhet (compulsorily transferred from Caucasus to Uzbekistan in 1944) claimed about 100 lives.


(b) Diplomacy

From 1988 to 1989, the Soviet Union unfolded active diplomacy toward Western Europe while the United States was going through a political change - the presidential election, formation of a new administration and a policy review by the new government. At the same time, the Soviet Union took positive steps for the normalization of its relations with China. Moreover, confronted with the urgent need to reduce its massive military expenses and trim surplus armament in order to press ahead with perestroika, the Soviet Union announced a series of proposals for armament reduction, including a unilateral cut of 500,000 troops.

(i) Relations with the U.S. and Western Europe

As for the relations with the United States, General Secretary Gorbachev met with President Reagan and President-elect Bush when he attended the U.N. General Asembly in December 1988. On that occasion, it was confirmed to continue the U.S.-Soviet dialogue set up during the reign of the Reagan Administration.

After the inauguration of the Bush Administration, the United States and the Soviet Union held a meeting of their foreign ministers in Vienna in March 1989. In May, the second Baker-Shevardnadze talks took place in Moscow concerning five-part agenda - arms control, human rights, regional issues, bilateral relations and transnational issues.

On that occasion, the Soviet Union informed the United States of its decision to withdraw Short-Range Nuclear Forces (SNF) with 500warheads from Eastern Europe by the end of 1989.

Earlier in a speech delivered at the U.N. General Asembly in December 1988, General Secretary Gorbachev announced plans for curtailment of the Soviet forces, including a unilateral cut of 500,000 troops and the pullout of six tank divisions from Eastern Europe.

From the second half of 1988 to the first half of 1989, the Soviet Union intensified its diplomacy toward Western Europe with great vigor.

At a series of top-level talks with West European leaders, the Soviet Union appealed for the strengthening of bilateral relations and economic cooperation with the Soviet Union in an effort to promote the introduction of capital and technology from the respective countries for the purpose of revitalizing the Soviet economy. It concluded many agreements on trade and economic relations, while securing new credit lines from such countries as West Germany and Italy. On the other hand, the Soviet Union expressed strong concern over West European moves toward complete integration, and appealed for the construction of a "common European house." As for arms control, the Soviet Union denounced the concept of nuclear deterrence voiced opposition to the modernization of SNF, called for denuclearization of Europe and reduction of the U.S. military presence, and showed moves aimed at weakening the solidarity of NATO countries.

(ii) Relations with Eastern Europe

From 1988 to 1989, the Soviet relations with Eastern Europe were marked by a series of visits to the Soviet Union by East European leaders- that is, Honecker, chairman of East Germany's Council of the State (September 1988), Ceausescu, president of Romania (October), Karoly Grosz, general secretary of the Hungarian Socialist Workers Party (March 1989), Jakes, general secretary of the Czechoslovak Communist Party (April) and Jaruzelski, chairman of the Polish Council of the State (April), In his talks with these leaders, Grobachev explained the Soviet Union's domestic and foreign policies, particularly perestroika for political and economic reform. He also showed understanding on the moves for political reform in Poland and Hungry, and in talks with Poland also referred to historical problems, such as investigation of the wartime massacre of Polish officers in Katyn. In the field of arms control and disarmament, the political consultative committee of the Warsaw Pact held a meeting in Bucharest in July 1989 and adopted a joint communique and a political declaration calling for "a stable Europe free from nuclear and chemical weapons and a drastic reduction of armament and military expenses," appealing to NATO for a positive approach to disarmament.

(iii) Relations with Asia

In May 1989, General Secretary Gorbachev visited China as the first top Soviet leader to do so in 30 years, and held talks with Deng Xiaoping and Chief of State Yang Shangkun. As a result, the state- and party-level relations between the two countries were normalized. A joint communique issued on that occasion specified five principles, including peaceful coexistence, that should govern the bilateral relations.

In his speech at Krasnoyarsk in September 1988, Gorbachev again gave a comprehensive account of the Soviet policy on Asian and the Pacific as in the case of his Vladivostok speech in 1986. In the speech, he called for economic cooperation for the development of Siberia and the Soviet Far East and referred to the possibility of forming economic relations with South Korea for the first time. However, his seven-point proposal on security was basically a repetition of his past assertions.

In November 1988, General Secretary Gorbachev visited India for the second time, following the first visit in 1986, and declared there is no change in the Soviet policy of attaching importance to its relations with India. Among other positive diplomatic moves of the Soviet Union toward the Asia-Pacific region were the visit to the Soviet Union of Deputy Prime Minister Geoffrey Palmer of New Zealand (November 1988),the visit of Foreign Minister Shevardnadze to Japan, the Philippines and North Korea (December), and the visit to the Soviet Union of Indonesian Foreign Minister Ali Alatas (May 1989) and Philippine Foreign Secretary Raul Manglapus (July).

(iv) Relations with the Middle East

As for the Afghan problem, the withdrawal of Soviet troops from that country, started in May 1988, was completed in February 1989.However, even after the withdrawal of Soviet troops, fierce fighting continues in Afghanistan. The Soviet Union has repeatedly denounced Pakistan for alleged violation of the Geneva agreement through the supply of weapons to antigovernment guerrillas.

The Soviet Union has all along called for an international conference on Middle East peace. In february 1989, Foreign Minister Shevardnadze visited Syria, Jordan, Egypt, Iraq and Iran to appeal for convening such an international conference, and also exchanged views on the Iran-Iraq conflict.

The Soviet Union is seeking to improve its relations with Persian Gulf nations. It established diplomatic relations with Qatar in August1988, and sought to promote exchange with Saudi Arabia. It is also striving to strengthen its ties with Iran through economic exhcange and the mutual visits of prominent figures.

(v) Relation with Latin America

The Soviet Union supports the Nicaraguan government. In April 1989, General Secretary Gorbachev visited Cuba as the first Soviet leader to do so in 15 years, and signed a 25-year treaty on friendship and cooperation. The Soviet Union is making efforts to reinforce its relations with Latin American nations, as instanced by the visit to the Soviet Union of Brazilian President Jose Sarney (October 1988).

(c) Economy

(i) General Trends

In 1988, the fourth year after the inauguration of the Gorbachev regime, the Soviet Union failed to achieve economic targets on the whole. As for the economic mechanism, a qualitative aspect of the economy, the Soviet Union was still unable to get rid of the inertia of centrally controlled mechanism as it is symbolically indicated in the embodiment of the State Enterprise Law, and failed to produce desired results. More over, there have emerged deep-rooted structural problems, such as a huge fiscal deficit, which exceeds 20 percent of the revenue total, and inflation. Gorbachev himself has even said the present economic situation is " taking on a political character. "

At present, the Soviet government is taking steps to restore fiscal health, including reduction of military spending. At any rate, it is getting more and more evident that the reconstruction of the domestic ecnomy is anything but easy.

(ii) Trends in the Private Sector

The expansion of the privately managed sector, a major pillar of economic reform along with the improvement of the mechanism of the state-run sector, couldn't achieve the desired results in both individuals business and cooperatives' activity. In particular, cooperatives, originally counted upon as a prime mover for economic revitalization, have spread to some extent, but they are still faced with many problems, such as resistance by administrative and management personnel, and the general public's antipathty to high prices and high incomes of cooperatives' personnel. In 1988, cooperatives had a total work force of about 1.36 million, and produced goods and services worth about 6.1 billion rubles (just under 1 percent of the national income).

(iii) Agricultural Problem

Under the Gorbachev regime, new forms of management have been promoted in agriculture as well, such as the strengthening of the autonomy of kolkhoz and sovkhoz, the collective farming contract system, and the family contract system. But they have failed to overcome structural drawbacks peculiar to Soviet agriculture. Moreover, they cannot fully meet rising demand for the sophistication of people's dietary life. In recent times, the food situation has particularly worsened. When Gorbachev visited Krasnoyarsk in September 1988 and talked directly to local residents, the latter expressed strong dissastisfaction with the food situation.

If such a situation is left as it is, course of perestroika could be adversely affected. Therefore, the Gorbachev regime has listed the food problem as a top priority task, and placeds strong emphasis on the problem of agriculture, In March 1989, the party Central Committee held a plenum for an intensive debate on the agricultural problem. In additin to various steps so far taken for agricultural reform, General Secretary Gorbachev is actively promoting the "lease contract system" as a "trump card" for farm reform. Under this system, land and means of production are leased to farmers for a long period. However, there is still discussion going on in the party regarding this system that could in effect lead to a" private ownership system." Moreover, farmers themsevles have become strongly accustomed to the non-competitive method of farming. Therefore, the new system is not always spreading smoothly.

The Soviet Union's grain production in 1988 sagged to 195 million tons owing partly to drought (about 210 million tons in both 1986 and 1987). As a result, the country imported about 36 million tons of grains from abroad.

In addition to problems in the aspect of production, losses of over 20 percent are said to occur in the course of harvesting, transport, storage and processing. Therefore, how to reduce such losses is also an important problem.

(iv) Reform in External Economy

From January 1, 1987, the state monopoly of foreign trade underwent a change, empowering some government agencies and enterprises other than the foreign trade ministry to directly engage in external trade. Moreover it has become possible to set up joint ventures. But as a result of the revision of rules in December 1988, all production enterprises and cooperatives, if they file an application, are virtually empowered to conduct foreign trade. Besides procedures and conditions for the establishment of joint ventures have been partially improved. Furthermore, it has been decided to create an auction system for foreign currency and rubles, and to increase by 100 percent the exchange rates of foreign currencies as against the ruble mainly in inter-enterprise transactions.

In addition, plans are under study to set up special economic zones in the Far East.


(2) Relations with Japan

(a) Overview

Since Soviet Foreign Minister Shevardnadze visited Japan in December 1988, active political dialogue has continued between the two countries to achieve a true improvement in the bilateral relations. This has served to deepen mutual understanding, but no substantive change has so far been seen in the Soviet stance on the northern territorial issue, which is a major impediment to the development of the Japan-Soviet relations. Therefore, it is necessary to expand and deepen the bilateral dialogue and continue pertinacious negotiations with the Soviet Union.

When Foreign Minister Uno visited the Soviet Union in May 1989, he explained Japan's policy of expanding the bilateral relations as a whole on a balanced basis in order to improve them, while tackling it as the most important task to conclude a peace treaty through the settlement of the territorial problem. The Soviet leadership endorsed this policy. This is of great significance in that it determined the direction of striving for better relations, between the two countries.

The mutual visit of Japanese and Soviet leaders is also important as a major impetus to the development of the bilateral relations as a whole. When foreign Minister Shevardnadze visited Japan in December 1988, it was agreed to make preparations for the visit of General Secretary Gorbachev to Japan mainly through talks at the foreign minister's level. Moreover at the Uno-Gorbachev talks in May 1989, it was agreed to discuss the specific timing early in 1990.

(b) Talks on Peace Treaty

New progress was achieved in the Japan-Soviet negotiations on a peace treaty, including the northern territorial issue, when Foreign Minister Shevardnadze visited Japan in December 1988. On that occasion, both sides held detailed discussion on the territorial issue tracing the history of the problem, and it was agreed to set up a working group on a peace treaty at vice foreign minister's level. After that, negotiations were conducted with greater frequency than ever before. In these negotiations, the Soviet side departed from the past practice of refusing any discussion on the territorial issue, and in effect agreed to discussion on the historical and legal aspects of the issue. In actuality, however, the Soviet Union still adheres to a rigorous position and has made a rebuttal to every substantive point raised by the Japanese side.

(i) When Deputy Vice Foreign Minister Kuriyama attended the U.N. General Assembly in September 1988, he met with Foreign Minister Shevardnadze and Vice Foreign Minister Petrovski, and agreed on the timing of Shevardnadze's vsit to Japan. He also conveyed the Japanese government's desire to conduct defailed discussion on the territorial issue by tracing the relevant history on the occasion of Sbevardnadze's visit to Tokyo.

(ii) At the regular meeting of Japanese and Soviet foreign ministers, resumed in Tokyo in December 1988 for the first time in two years and seven months, both the foreign ministers' talks and negotiations through a working group on a peace treaty (between Deputy Foreign Minister Kuriyama and Soviet Vice Foreign Minister I. A. Rogachev) were taken up mainly with the problem of the northern territory. The Japanese side gave a detailed account of its positions, based on the relevant history   since the conclusion of the Russo-Japanese Treaty of Commerce, Navigation and Delimination in 1855. The Soviet side went no further than to repeat all the points so far raised by the soviet Union in its past pronouncements.

The joint communique, issued by the two countries on December 21, clearly stated that "regarding the removal of difficulties existing in our bilateral relations, both sides stated their respective perceptions on the historical and political aspects of the matter." This set for the the substance of the abovementioned negotiations on a peace treaty more clearly than ever. Moreover, it was agreed to establish a permanent working group on a peace treaty to facilitate talks on this matter.

(iii) At the meeting of the Japanese and Soviet foreign ministers, held on the occasion of the International Confernece on the Prohibition of Chemical Weapons in Paris in January 1989 , Japanese Foreign Minister Uno conveyed Tokyo's basic stand that in order to develop the Japanese-Soviet relations in a balanced manner, the Soviet Union should give serious thought to achieving progress on the territorial issue. But the Soviet side insisted that it is not a good idea to relate everything to the territorial issue. Thus a difference between the Japanese and Soviet positions was clearly expressed again.

(iv) When Prime Minister Takeshita met with A. I. Lukjyanov, first vice chairman of the Presidium of the Supreme Soviet, who came to Japan in February 1989 to attend a funeral ceremony for the late Emperor Showa, the Prime Minister said that it is impossible to advance talks on a peace treaty while sidetracking the territorial issue. He expressed belief that a difference between the two parties on the difficult issue will be narrowed through talks. Lukjyanov, however, replied that it is not reasonable to make the territorial issue a stonewall that cannot be avoided on the path of developing the bilateral relations.

(v) At meetings of the working group on a peace treaty, held in March and April 1989, detailed discussion took place on the territorial issue from the angles of history and international law. Moreover, both sides stated their views on the concept of a peace treaty. The Japanese side emphasized that the most important problem related to a peace treaty to be concluded between the two countries is the settlement of the problem of the northern territory.

(vi) At the regular consultation between the Japanese and Soviet foreign ministers, held in Moscow in May 1989, the Japanese side stressed that the conclusion of a peace treaty, based on the settlement of the territorial issue is the most important task for improving the bilateral relations, and that it is high time that the territorial issue were solved without shelving it. The Soviet side said that it is possible to conclude a peace treaty even under the Japan-U.S. Security Treaty, and made it plain that there is no change in the Soviet position on the territorial issue. Both side agreed to accelerate talks on a peace treaty.

(c) Economic Relations

In 1988, the bilateral trade reached a record $5.9 billion both ways (up 19.9 percent from the previous year).

By commodity, Japan's exports in 1988 showed gains in steel and machinery, both traditional export items to that country. Imports showed a general increase, with particularly big gains noted in nonferrour metals (platinum, palladium, nickel, aluminum, etc.), coal and foods centering on fish and shellfish. Lumber increased in terms of value, but declined in quantity. Imports of gold, which rose substantially in 1986 and 1987, showed a drop in 1988.

Since a decision regarding the establishment of joint ventures, made by the Soviet Council of Ministers, was implemented from January 1987, a total of 14 Japan-Soviet joint ventures have been set up in the Soviet Union, centering on lumber processing fisheries and service trades.

(d) Fishery Relations

Japan and the Soviet Union held annual talks in Tokyo from later November 1988 to determine each other's fish catch quotas for 1989, in the 200-nautical-mile waters of the two countries. In December, agreement was reached on the same quotas as in 1988 (free quotas of 210,000 tons each for both sides; a Japanese quota of 100,000 tons, which requires payment to the soviet side). Separate talks to determine a salmon catch quota for Japanese fishing boats in the northern waters in 1989 were suspended in late march as the Soviet side insisted on a sharp cut in the Japanese quota on the basis of its statement issued in 1988, which called for a total ban on Japan's salmon fishing in the international waters. The talks were resumed inn late April, but the Soviet Union would not make any concession. Agreement was finally reached on a quota of 15,000 tons (20,826 tons in 1988, which was later cut to 17,668 tons because of adjustment needed due to problems in the 200-mile waters of the United States). But Japan's payment of the so-called "fishery cooperation fees" to the Soviet Union was pegged at the previous year's \3.35 billion.

(e) Scientific and Technological Cooperation

The bilateral committee on scientific and technical cooperation met in Tokyo in December 1988, and agreed to add two new fields - the environment and earthquake forecasing - to five fields of coopeation for 1988, such as agriculture and forestry, nuclear fusion and medical care, which had been agreed upon in 1987. As a result, the bilateral cooperation was expanded to seven fields.

Moreover, when Soviet Foreign Minister Shevardnadze came to Japan in December 1988, the two countries exchanged instruments of ratification on a convention for the "protection of migratory birds." The convention immediately took effect.

Furthermore, when a large earthquake devasted Armenia in December 1988, Japan provided a sum of \1 billion in grant and \230 million worth of medical and other supplies to help victims and cooperate in reconstruction work. Besides, it dispatched a team of quake experts twice.

(f) Cultural Exchange

In line with the Japan-Soviet cultural agreement, which came into fore on December 25, 1987, the first session of the bilateral committee on cultural exchange was held in Tokyo in December 1988. At the meeting, opinions were exchanged on various problems related to the development of bilaterla cultural exchange, and a two-year program for cultural exchange (April 1, 1989-March 31, 1991) was formulated. Moreover, documents for the implementation of the program were exchanged between Foreign Ministers Uno of Japan and Shevardnaze of the Soviet Union.

The regular Japanese Film Festival (November 14-December 4, 1988) and Soviet Film Festival (May 11-19, 1989) were held in the other country. A traveling exhibition of contemporary Japanese pottery (co-sponsored with the Japan Foundation) was held in the Soviet Union, while events for the introduction of Japanese culture were organized mainly under the leadership of the Japanese Embassy and consulate-general.

Moreover, a delegation of the Ura Senke school of Japan's traditional tea ceremony (led by Soshitsu Sen, president of the school) visited the Soviet Union from August 19 to 27, 1988 and held tea parties in Moscow. It also staged a lecture meeting, an exhibition and demonstrations of the tea ceremony, extensively introducing this important aspect of Japan's cultural heritage to Soviet people.


2. Eastern Europe, Yugoslavia, Albania


(1) Warsaw Pact Countries (Eastern Europe)

(a) Liquid Situation in Eastern Europe 

The economies of East European countries continue to be stagnant. The economic situation differs from country to country. In general, however, because of the absence of competition and bureaucratism, which are factors peculiar to the central controlled economic vitality of these economies has been lost, while people in these countries face serious problems in their daily life. And the Soviet Union's perestroika has had a great impact on peoples in Eastern Europe. Eventually movements calling for democracy have gained their momentum especially in the German Democratic Republic, Poland, Czechoslovakia and Hungary, where Western Democracy has taken root traditionally.

(b) Diversification in Eastern Europe

Ties between the Soviet Union and Eastern Europe have become significantly relaxed in parallel with domestic changes in East European countries. The Soviet Union apparently hopes to ensure domestic stability of East European countries which would allow it to devote itself to domestic reforms. It seems to be willing to avoid disturbances in these countries by refraining from forcing any stereotyped line of socialism on them. Now is the time when East-West relations are improving. The Soviet Union seems to find it hard to intervene in East European countries. In the circumstances, East European countries have become independent from the Soviet Union. And, because of the remarkable differences of their domestic conditions, their attitudes toward reforms are surprisingly diversified.

(i) Poland

A series of large-scale strikes occurred in Poland in August 1988 as economic difficulties were becoming serious, due to a heavy external debt and delaying of economic reforms. Workers on strike demanded not only a wage increase but also relegalization of Solidarity (independent trade union) which was once banned in 1981. The strikes lasted for almost one month and finally were cooled as the government proposed holding round-table talks where a wide range of social groups, including Solidarity, would be represented. The round-table talks were started in February 1989. Through two months of discussions until April, the participants agreed on measures for including the relegalization of Solidarity and creation of an upper house through partial free elections.

The free elections for the parliament took place in June 1989 for the first time since the establishment of the Socialist regime in Poland. Solidarity won an overwhelming victory both in the elections and in the Parliament (Sejm).

Western countries welcomed the election results, regarding them as progress in democratization and they set out an aid plan for Poland. As for the Soviet Union, it accepted the results calmly, making remarkable comments in which it recommended cooperation between Solidarity and the Polish government.

The Polish economy, tired with a heavy external debt of aproximately $39 billion, has yet shown no sign of recovery. Worsening inflation has seriously affected the people's daily life. The Polish government has been negotiating with the IMF since the autumn of 1988 to get IMF standby credits. But the negotiations have not made remarkable progress because of Poland's failure in agreeing with the IMF on how to adjust structurally its economy, which is a condition for standby credits.

(ii) Hungary

Hungary launched economic reforms in 1968 ahead of other Socialist countries and has taken some liberalization measures to vitalize the economy, including the introduction of a market economy mechanism and the extension of private enterprises' economic independence. But its economy has fallen into stagnation over the past two years, which has developed into a serious political problem. Janos Kadar, who had been in the seat of power for 32 years from the 1956 Revolt in Hungary, passed his seat of government to Karoly Grosz, the Socialist Workers' Party General Secretary, in May 1988 to take responsibility for the economic difficulties. But as inflation has accelerated on the introduction of the value-added tax from January 1988, economic problems have become even more serious The people have grown dissatisfied with government policies and the deterioration of their life.

Since early 1989, Hungary has embarked on political reforms including the enactment of an association law in January and the resolution of the party Central Committee in February to allow plurality of political parties. On June 16, 1989, the government and the people together reburied former Prime Minister Imre Nagy who declared Hungary's secession from the Warsaw Pact during the 1956 revolt and was later executed for treason. The event was designed to retrieve the honor of those punished in the revolt and review the history including the revolt which had been regarded as the anti-Socialist-revolutional rebellion. Hungary's democratization has thus gained much faster momentum.

The Socialist Workers' Party at the general meeting of the Central Committee June 24-25 elected Rezso Nyers a Politburo member and, the so-called "father of economic reforms," as president of the party and forced a drastic reorganization of the party system, A presidium for collective leadership was inaugurated, consisting of the president, the political reform leader and Politburo member Imre Pozsgay, General Secretary Grosz and Premier Miklos Nemeth. The nine-member Politburo was also reorganized into a 21-member political executive committee.

Hungary has, at the same time, embarked on unique diplomacy, as indicated by its establishment of diplomatic relations with the Republic of Korea in February 1989.

(iii) Bulgaria

In July 1988, Communist Party General Secretary Todor Zhivkov dismissed a Politburo member and Secretary Chudomir Aleksandrov, who had been deemed the party's No. 2 leader, and assigned his old and close aides to key posts indicating his willingness to continue in the seat of power. The Zhivkov government announced economic reform policies in January 1989 to continue to keep close relations with the Soviet Union which has been stepping up domestic reforms. The reforms, as stipulated in a State Council ordinance, included the establishment of joint-stock and private companies and their share and bond issues. But these reforms have not necessarily been fully implemented.

(iv) Czechoslovakia

The current Czech political leaders, who came into power in the 1968 "Prague Spring" crackdown, have been cautious of introducing political reforms which could deny its legitimacy. But the leadership has acknowledged the need for fundamental economic reforms including the introduction of a market economy mechanism and has announced various economic reconstruction measures. However, their effect is doubted.

Lubomir Strougal, who was prime minister and the most radical reformist since the "Prague Spring" crackdown conflicted with conservatives in the party, was replaced by Ladislav Adamec, who has been considered a confidential follower of party General Secretary Miklos Jakes. The reshuffle was designed to strengthen the political power of Jakes, who has been trying to introduce economic reforms gradually while ensuring political stability.

"Chapter 77" and other dissident groups have become more active over recent years. Since the 20th anniversary in 1988 of the Prague Spring, demonstrations and gatherings of several thousand people have frequently occurred.

(v) German Democratic Republic

The GDR is a divided country located next to the FRG. East Germany's introduction of a market economy mechanism or Western democracy can make its differences with West Germany less clear. Because of the powerfulness of its relatively favorable economic performance, the GDR has rejected Soviet-type reforms. It banned the Soviet Union's magazine "Sputnik" in November 1988 as the magazine criticized Josef Stalin. On China's Tiananmen Square incident in June 1989, the GDR has persistently supported Beijing's hard-line policy and issued official statements to criticize Western countries' sanctions on China as intervention with China's domestic affairs. East Germany's attitude has clearly been indicated by these events. But the economy being in a slump since 1987 due to investment shortages, and delayed modernization of equipment and other factors, the GDR has recognized the need for, at least, some economic reforms. It has made some efforts carefully to revitalize the economy, modifying its kombinant system which was introduced in the late 1970s and which has been successful to some extent (see Note).

(vi) Romania

President Nicolae Ceausescu has assigned his family members to key posts and has frequently reshuffled his government to concentrate political power in his hands. Romania has found no need to introduce Soviet-type reforms, saying that democratization and other reforms have already been implemented since six old Communist Party members announced an open letter criticizing President Ceausescu in March 1989, The government has tightened its domestic controls Such tight controls have caused some human rights problems, including a serious dispute with Hungary over the treatment of the Hungarian minority in Transylvania, Romania, in respect to the rural urbanization program, radical and compulsory reorganization of villages. Romania has come under international criticism because of these human rights problems. In March 1989, the United Nations Human Rights Commission adopted a resolution criticizing Romania.

Romania declared in April 1989 that it had completed repayment schedule of its external debt which had amounted to $10.4 billion in 1981. But it is said that the debt repayment has resulted not from any success of economic reconstruction but from the lowering of the people's living standards.

(c) Emerging of Mutual Disputes

Diversification in East European countries has coincided with emerging of mutual disputes between these countries, which had maintained the once so called unity of one state. They have been criticizing each other's attitudes toward reforms. For example, the GDR, Czechoslovakia and Romania criticized Hungary for its reburial of former Prime Minister Nagy. Over the Tiananmen Square incident, Hungary made an official objection to China, but the GDR defended China. In July 1989, the Czech authorities charged Poland's Solidarity legislators with their contact with a Czech dissident group.

Hungary and Romania have been reproaching each other over Romania's radical and compulsory rural urbanization program as mentioned above. The world surprisingly paid attention to Hungary's cosponsoring a resolution against Romania at the United Nations Human Rights Commission.

(d) Response of Western Countries

West European countries and the United States have shown growing interest in dramatic changes which are taking place in Eastern Europe, which is located at the center of Europe and geopolitically very important. These Western countries have welcomed reforms in Eastern Europe as expanding Western values and contributing to security of the West. Especially, they are willing to support the self-help of Poland and Hungary which have gone ahead of other East European countries in reforms. Seven industrialized democracies at their annual summit in Paris in July 1989 devoted the greater part of their declaration on East-West relations to their support to Poland and Hungary. They agreed to hold conferences of Western countries for their coordination over each nation's support to the two countries.

(e) Relations With Japan

(i) Japan's relations with East European countries are not so close as those with Asian nations because of our geographical and historical factors. But we must realize that reforms in Eastern Europe, if developing radically without proportional progress in economic reconstruction, could destabilize the international situation in Europe, to affect overall East-West relations involving Japan.

Japan, as a member of the Western bloc, is interested in these reforms in the meaning related above. Prime Minister Sousuke Uno at the Paris summit announced Japan's readiness of due support to Poland and Hungary for their reforms' soft landing. In May 1989, the Export-Import Bank of Japan signed an agreement on an \8 billion untied loan No. 8 to Hungary, which was to be associated with a World Bank credit.

(ii) Parliamentary Vice Foreign Minister Takujiro Hamada visited Bulgaria and Hungary in August 1988 to deepen Japan's political dialogue with them. In March 1989, Roman Malinowski, marshal of Poland's Sejm parliament, made a visit to Japan.

(iii) As for cultural affairs, in October 1988 Japan Culture Week was held in Poland to introduce a wide range of Japanese culture, winning a good reputation.

(iv) Japan's trade with Eastern Europe in 1988 amounted to $1,457 million totally, up 22.6% from the previous year. Japan's trade surplus with the region declined from $245 million to $94 million as imports from the region scored a sharp 44.5 % increase.


(2) Yugoslavia

(a) Domestic and External Situation

(i) In Yugoslavia where economic difficulties are the greatest problem, the federal constitution was modified in November 1988 to implement economic reforms toward a market economy. But the Branko Mikulic Cabinet resigned in December 1988 to take responsibility for economic difficulties. The new Cabinet of Ante Markovic, inaugurated in March 1989, has gone ahead with large-scale economic reforms toward a market economy, including the introduction of foreign investment and the establishment of a bond market. A racial dispute has grown serious in the Kosovo self-governing province where ethnic Albanians are the majority.

(ii) In its foreign affairs, Yugoslavia has continued efforts to enhance the nonalignment movement. At the meeting of nonaligned foreign ministers in Cyprus in September 1988, Yugoslavia agreed to sponsor the ninth nonaligned summit.

(b) Relations With Japan

(i) Japan has traditionally given political and economic support to Yugoslavia which is located at a strategic point in Southern Europe and which has maintained nonalignment and independence in foreign relations. A seminar on the promotion of Japan-Yugoslavia economic relations was held in Japan in November 1988 as proposed by Prime Minister Noboru Takeshita upon a Japan visit by Yugoslav Premier Mikulic. In February 1989, the Yugoslav trade fair took place in Tokyo at a site provided by the Japanese government. In March 1989, Japan rescheduled about $30.38 million of loans to Yugoslavia to help relieve that country of a heavy external debt burden.

(ii) Japan's two-way trade with Yugoslavia in 1988 shot up 268% over the previous year to $280 million.


(3) Albania

(a) Albania, while maintaining self-help efforts, has gradually developed exchange with neighboring Western countries, especially, with the FRG and France. It has also been improving relations with Eastern countries.

(b) At the meeting of the Development Assistance Committee of the Organization for Economic Cooperation and Development in December 1988 decided to classify Albania as a developing country as proposed by the FRG. Japan supported the decision.

(c) Japan and Albania have greatly enhanced their relations over the past years through exchange of visits by high-ranking officials since the establishment of diplomatic relations. Japan's Parliamentary Vice Foreign Minister Hamada visited Albania in August 1988. Albanian Vice Foreign Minister Muhamet Kapllani and Vice Foreign Trade Minister Kostandin Hoxha made their Japan visits in March 1989.


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Note: The kombinant system means a large-scale monopoly which undertakes all business activities ranging from research and development to production and sales.