Troubles of Socialist Economic Integration: Czechoslovakia and Joint Projects within the CMEA in 1970s and 1980s

Troubles of Socialist Economic Integration: Czechoslovakia and Joint Projects within the CMEA in 1970s and 1980s1 jan Lomíček KEY WORDS Socialist Economic Integration — CMEA — The Comprehensive Program — Czechoslovakia — Joint Projects — Orenburg Gas-Pipeline INTRODUCTION Czechoslovak participation in international joint projects within the Council of Mutual Economic Assistance (CMEA) demonstrated analogous problems, which during the seventies and eighties accompanied multilateral attempts to integrate socialist economies of CMEA-member countries on a large scale. On one hand there was an image of CMEA (widely spread through official discourse) showing organization as institution which was successfully functioning and was suffering only from „particular organizational imperfections“. On the other hand in contemporary archives we can find a description of many systemic difficulties caused by the settings of the organization itself.2 Difficulties that originated out of the nature of a socialist economic system, or more precisely planned national economies, were particularly connected with coordination problems of the national five-year plans, fulfilment of contracted terms of delivery, fixing of long-term prices, credit repayment etc. In the same way on one hand CMEA was representing the organisation (based on the hegemony of formal language)3 which was unselfishly fullfiling principles of socialistic mutuality and ideas of proletarian internationalism. On the other hand we can find large volume of archivals of legal character as a result of long-lasting negotiations of national expert groups whose aims were to guarantee (despite mutuality and unselfishness) that no country would be put in disadvantage. In case of many projects within the CMEA (integration joint projects, economic organisations) these negotiations were the only result of their functioning, whereas other real outcomes were at least disputable. The following paper will at 1 This article has been published as a part of the research project GAUK 2012, No 501312 “The role of the Czechoslovak Socialist Republic in the structures of Council for Mutual Economic Assistance 1971–1991 as it appears in archival documents” at the Faculty of Social Sciences, Charles University, Prague. 2 Some selected problems are further discussed in Randall W. Stone, Satellites and commissars. Strategy and conflict in the politics of Soviet-bloc trade, Oxford: PUP, pp. 3–71. 3 See Alexej Yurchak, Soviet Hegemony of Form. In: Comparative Studies in Society and History 45, No. 3, July, 2003, p. 480–510. 62 WISOHIM/ESHP 19 first outline development of multilateral economic integration attempts within the CMEA during the seventies and eighties. After that it will focus on questions of the motivation of Czechoslovak side and role of its industry in participation in integration joint projects on given examples. Alongside it will deal with issues connected with dichotomy of medial discourse of socialistic economic integration and problems that were accompanying it in real. Problems connected with „double image“ of CMEA functioning are reflected also in the case of so called integration joint construction projects, in which Czechoslovak Socialist Republic participated in during the 1970s and 1980s. The topic of this paper focusing on international joint projects within the CMEA was selected because of necessary specification as it was impossible to cover the problems of Czechoslovak role in CMEA in toto. Integration joint projects as such also repetitively appear in contemporary papers and publications from that period. Besides so called international organizations were above mentioned integration projects within CMEA one of the branches in which socialist cooperation and integration on multilateral level was (according to the official discourse) to a certain extent successful. This hegemony of formal language lasted until the year 1989, but in contemporary non-public documents the reality appeared considerably different.4 As a historical source for this paper were used sources deposited in archival collections of the National Archives of Czech Republic in Prague, particularly collections Presidium of the Central Committee of the Communist Party of Czechoslovakia, Office of Presidium of Czechoslovak Government and Gustav Husák and from Slovak National Archives, collection Presidium of Central Committee of the Communist Party of Slovakia. Reconstruction of contemporary official discourse was based on publications dealing with history of CMEA in general,5 from the Czechoslovak point of view6 and from the point of view of Czechoslovak media, where the main source was daily Rudé Právo as the official newspaper of the Communist Party of Czechoslovakia. Besides it there is also literature which records the point of view of direct participants of these integration projects (workers, project architects, consultants), either contemporary (of official propagandistic character)7 or of memoir character originated in the following period,8 but the second category is in the case of Czechoslovak participants so far limited. 4 Public discourse concerning successes of socialist economic integration changed immediately also in public propagandistic press. Good example is monthly journal Maják: celostaveništní noviny pracujících KTUK Dolinská, where problems of construction appeared almost overnight. See Maják, Prague, 1989, no. 1–12 and 1990, no. 1–3. 5 See Boris Djakin, RVHP: problémy a perspektivy integrace, Prague 1980, 199 p. 6 See Bohumil Lehár, Rada vzájemné hospodářské pomoci, Prague 1989, 192 p.; Vaclav Libánský, Mezinárodní socialistické organizace pro hodpodářskou a vědeckotechnickou spolupráci, Prague 1980, 260 p.; Miloslav Jenšík, Progress, Karačaganak, Dolinská: Československý podíl na integračních stavbách v Sovětském svazu, Prague 1988, 30 p.; Josef Smrčka, International Economic Organizations and Multinational Corporations, Prague 1986, 52 p. 7 See Jiří Stano, My z Orenburgu, Prague 1979, 192 p. 8 See Rolf Junghans et al., (eds.), Geheim! — Das eiserne Problem des Sozialismus, Berlin 2009, 515 p. jan LOMíčEK 63 SOCIALIST ECONOMIC INTEGRATION ATTEMPTS During the sixties the attempts to implement multilateral economic cooperation within CMEA began. This process enabled the first joint construction of huge industrial and transportation projects. Overall it included construction of more than 20 objects with total amount of 2 billions of transferable rubles. These objects included for example the Druzhba pipeline, Transcontinental gas pipeline, Hungaro-Polish joint company Haldex etc.9 Well-known is the fact that until the beginning of the seventies was within CMEA between officials for the joint activity of socialist countries in the field of economy promoted the term cooperation. Only few economic experts advocated the term socialist integration. Certain turning point on this field (and pronouncement of new course) represented The Comprehensive Program for the Further Extension and Improvement of Cooperation and the Further Development of Socialist Economic Integration, which was approved in the year 1971.10 At the time of its approval on the XXV. session of CMEA in Bucharest this program defined a new concept of creating interconnected economic area of Eastern bloc countries, which would enable economic integration based not only on bilateral economic relations of individual countries. Comprehensive program aimed to reform the dismal state the socialist cooperation showed. The signers of this program also hoped to achieve competitive ability of integrated socialist economies in relation economic communities of so called developed capitalistic countries. In this meaning the program represented kind of delayed reaction against development of western markets. The term cooperation was finally substituted in official terminology with integration and with that turn a new period of economic experiments from rhetorical as well as practical perspective started.11 In the realm of economy and science the integration based on Comprehensive program found the expression in establishing new types of transnational collaboration. Those involved so called International economic organizations within CMEA which were further divided into interstate organizations and international organizations. The whole system of CMEA-related international economic organizations was a bit unsystematic, but it is essential to explain it a little. According to economic experts interstate organizations were divided into two groups: a) organizations with general authority, which was in fact CMEA in general and b) organizations with special authority (those included for example Joint rolling stock, Intersputnik, Interelektro, Intermetall, the International Investment Bank, the International Bank for Economic Cooperation, international scientific institutions etc.). These organizations were established by individual states which acted as members. They were functioning as interstate institutions established to accomplish specified goals in various areas of 9 Joint investmennts in CMEA in pursued period are analyzed in László Csaba, Eastern Europe in the World Economy, Cambridge, 1990, pp. 99–124. 10 For further analysis see Randall W. Stone, Satellites and commissars. Strategy and conflict in the politics of Soviet-bloc trade, Oxford 2002, pp. 115–147. 11 In media discourse process of term substitutions lasted much longer. See L. Hrudka, Ve štábu Orenburgu, Rudé Právo, 11. 5. 1975, p. 3. 64 WISOHIM/ESHP 19 economic activity. In particular they were acting on fields where fast solution rather than ungainly procedures carried by CMEA apparatus was necessary. Therefore these organizations according to their characteristics (field of activity, organizational structure, seat, legal basis, financing) constituted a highly heterogenous complex.12 The second category according to Comprehensive program was made of so called international socialist economic organizations. They were based on (mainly bilateral) interstate agreement or established after the agreement of other interested economic institutions. Their aims were at first coordination of activities of their members, or their own economic activity, namely in the areas of material production, architect projects and construction, foreign trade and scientific research. International economic organisations were supposed to operate on the level of domestic economic institutions. Unlike interstate economic organizations they shouldn’t participate in relations defined by international law and their expected members were first of all economic institutions. In general those organizations were further divided into international economic associations, joint enterprises and international economic partnerships.13 The category of international economic associations included for example Interatominstrument, Intertextilmash, Interchimvolokno and others, joint enterprises were Haldex, joint german-polish spinning mill Druzhba, Erdenet, in category of international economic partnerships were included for example Internephtprodukt, Dunajtrans etc. Besides these there was one special category, so called „other international economic organizations“ which included especially institutions engaged in geological surveying or solving other scientific problems. The above mentioned text showed that the system of so called international economic organizations within CMEA was at least quite heterogenous. In spite of several unifying regulations of these organizations approved repeatedly by the CMEA Executive Committee (in 1973 and 1976), the situation hasn’t changed.14 As it was written above, international socialist organizations issues were little bit disorganised. Some of them were active on the field of activity why they were constituted, and their successor organizations have been in some form functioning up to the present. Others remained only in the form of their legal base. Besides international economic organizations was the realization of accepted Comprehensive program expressed namely in the form of integration arrangements which led to mutual investment and economic activity of CMEA states, thus also to the cooperation in so called integration construction projects. The Comprehensive Program for Further Extension and Improvement of Cooperation suggested the set of measures which were according to the contemporary materials divided into three spheres: 1) measures improving the system of cooperation, 2) mea12 See Václav Libánský, Mezinárodní socialistické organizace pro hospodářskou a vědeckou spolupráci, Prague1980, pp. 12–36. 13 Ibid. For another approach see Harriet Matejka, More joint enterprises within CMEA. In: John P. Hardt, Carl H. Mc Millan, Planned Economies: Confronting the Challenges of the 1980s, Cambridge 2010, pp. 171–189. 14 Ibid, p. 27. jan LOMíčEK 65 sures focused on intensifying cooperation of CMEA member states in the material sphere which were supposed to put the integration of particular branches of production into practice and 3) set of measures in legal and institutional sphere to gradually enhance the activity of existing CMEA authorities. The adoption of Comprehensive program started a new period in investment activities of CMEA members. During the seventies and eighties the mutual investment activity was supposed to exceed from industrial branches of mining, processing and transportation of fuel and raw materials to manufacturing industry and should be ensured both legally and institutionally. This process was to be provided by the approval of Arranged plan of multilateral integration measures for the period 1976–1980 accepted by XXIX. CMEA session in Budapest and second Arranged plan for period 1981–1985 accepted by XXXV. CMEA session in Sophia. In the first period the value of investment activities of CMEA states reached the level of 9 billions of transferable rubles, in the following period the value of investments doubled. The plan itself for the years 1981–1985 contained approximately 200 measures of various scale. Compared to the sixties, interested states began to participate in more joint investment actions beyond their own borders. That is why the International Investment Bank was established in 1970 in Moscow. It was supposed to enable these investment activities of CMEA members. A significant part of these projects was to be realized in the Soviet Union. According to the measures adopted on the basis of Comprehensive Program to the focus of attention should come the sphere of manufacturing industry, but most significant investment actions from the Czechoslovak point of view were realized in heavy industry.15 Particular examples of joint investment actions during the seventies, in which Czechoslovakia took part, were on the first place gas pipeline Soyuz (Czechoslovak participation was 10% of budget price, which was around 460 millions of transferable rubles), in addition other projects were asbestos processing plant in USSR (Czechoslovakia — 3% of budget price), power line from Vinnytsya (USSR) to Albertirsa (Hungary) (Czechoslovak part — 10% of budget price), feeding yeast processing plant in Mozyr (USSR) (Czechoslovak part — 6,6% of budget price), airline personnel education centre in USSR and so called Mutual Complex Automatic Telecommunication System. Without Czechoslovak participation were at the time realized projects such as constructing cellulose processing plant in Ust-Ylim and also some projects of joint enterprises such as soviet-mongolian Erdenet.16 In the first half of the eighties the key investment issues from the Czechoslovak point of view were especially cooperation in the construction of Khmelnytskyi Nuclear Power Plant (USSR) (Czechoslovak participation — around 15% of budget price) and cooperation in power line construction from Khmelnytskyi Power Plant to Rzeszow (Poland). Also investments into construction facilities realized in Mozyr and in Mutual Complex Automatic Telecommunication System continued. Following objects of mutual investments within CMEA were investment activity in reconstruction and further construction of international railway and road network. 15 See Bohumil Lehár, Rada vzájemné hospodářské pomoci, Prague 1989, pp. 136–158. 16 See Vratislav Válek, Společná investiční činnost členských států RVHP, Prague 1984, pp. 42–54. 66 WISOHIM/ESHP 19 Further progress in integration attempts within CMEA was The Comprehensive Program for Scientific and Technical Progress up to the Year 2000 which was ratified in December 1985 during XLI. extraordinary CMEA Session in Moscow. The general secretary of Communist Party of the Soviet Union (CPSU) Mikhail Gorbachov on that occasion said: “In today’s world with complicated conditions of economic growth, steep drop of economic boom and severe competition have clear perspective and security great importance for the future. And such perspective and security gives to the comrade countries socialist economic integration and thei bilateral and multilateral cooperation within CMEA. But this wealth doesn’t lay on the surface. We have to do a lot of work to take advantage of it. We have to accomplish collectively a lot and carry out many large tasks.” As it was from the speech despite formal stereotypized language clear, CMEA members started to realize the necessity of closer cooperation as an escape route from difficult economic situation. Integration attempts found expression also in the adopted formal rhetoric of Communist party of Czechoslovakia. In the document called Principal directions of economic and social development of Czechoslovakia for years 1986–1990 and prospects to the year 2000, which was ratified on XVII. congress of Communist party of Czechoslovakia in year 1986, it is mentioned not only the necessity of securing 22% growth of foreign trade with CMEA member countries, but also the necessity “…to develop first of all interbranch and intersectoral exchange. Special attention must be paid to integration joint projects, which provide supplies of fuels, energies and raw materials and strenhgten economic resistance of the partnership.”17 This started a bit hectic endeavour to catch up with western economies which included intensifying the integration attempts. It was manifested by accelerated realization of further joint integration projects, such as gas pipeline Progress and iron ore processing combined plant in the area of Krivoy Rog in Ukraine. INTEGRATION CONSTRUCTION PROJECTS The principle of so called integration construction projects was in fact partial involvement of CMEA members in project realization in exchange for the percentage share of the final production during the given period. Integration participants in fact provided with their construction capacities, machines, facilities and manpower an investment credit to the target economy (above all to the USSR). This credit had to be subsequently repaid for the contract period in the form of mined fuel, raw materials or final products. Out of joint integration projects of the seventies and eighties were in Czechoslovak media and official materials accented first of all projects of gas pipeline Soyuz (gas mining and gas transportation from the reservoir in Orenburg), gas pipeline Progress (gas mining and transportation from reservoir in Jamburg), gaswork compound Karachaganak and iron ore processing combined plant in the area of Krivoy Rog, site Dolinska. 17 See Miloslav Jenšík, Progress, Karačaganak, Dolinská: Československý podíl na inte gračních stavbách v Sovětském svazu, Prague 1988. p. 3. jan LOMíčEK 67 1) Soyuz. Project Orenburg (which was also a popular name of the whole gas pipeline) included participation of all CMEA European countries in the construction of gasworks complex in Orenburg and 2677 km long gas pipeline Soyuz from Orenburg to the western borders of the USSR. The construction ended in year 1979. 2) Project Progress. In case of Progress gas pipeline (from Jamburg) Czechoslovakia took part in construction of a 300km long section overcoming the Carpathian mountains and four compression stations in years 1986–1988, participation also included a supply of construction facilities (materials, portable buildings and means of transport). 3) Project Karachaganak. Participation included the construction of section of Ural gaswork complex Karachaganak in Aksay locality during the period planned at first for the years 1986–1990. It included namely construction of building facilities — communications, construction bases and central offices of Soviet companies, housing constructions and public facilities. Construction was planned to be extended also after 1990. 4) Project Dolinska. Iron ore processing (enriching) combined plant in Dolinska locality in the area of Krivoy Rog in Ukraine represented one of the last huge investment projects just immediately before the start of the period of economic transition of centrally planned economies of Eastern Bloc. Czechoslovak participation included construction of magnetic separation shed, 1500 apartments, kindergarten, school and other public facilities (Czechoslovak investments made 13,7% of total costs of construction), around 200 Czechoslovak builders took part in construction works.18 The following part of this paper will examine some problems arising from Czechoslovak participation in two integration joint projects mentioned above — project Soyuz and enriching combined plant in Dolinska. Soyuz (Orenburg) gas pipeline was later promoted by Soviet party as a model type of integration project and was used also as a contractual pattern in the case of other integration construction projects. In some ways it also prefigured the problems which accompanied the Czechoslovak participation in CMEA integration attempts in next period. PROJECT ORENBURG In years 1970 and 1971 the intergovernmental agreements between Czechoslovakia and USSR and Czechoslovakia and GDR over contracts for capacity extension of so called Transit gaspipeline were already concluded. The gaspipeline in question transported Soviet gas in western direction. According to these agreements the supposed transporting capacity till 1980 should reach 28 billions m3, where more than one half (16,5 billions m3) was destined for the transport of Soviet gas to the countries of Western Europe (Austria, Italy, France, West Germany).19 18 Ibid, p. 5–28. 19 See The National Archives (NA), Prague, Presidium of Government, cart. 189, 203/1/33, 1975, Report from bargaining over import of natural gas to Czechoslovakia, construction of Transit pipeline. 68 WISOHIM/ESHP 19 Project Orenburg was designed to tie together the finishing network of Transit gaspipeline and Orenburg natural gas reservoir and supplement in this way required capacity of Soviet natural gas for the export (not only) to the western countries. General agreement on cooperation during utilization of Orenburg gas reservoir and construction of long-distance gas pipeline Orenburg — western borders of USSR was signed in the summer of 1974. The Content of above mentioned agreement is important particularly because of later references during bargaining with Soviet party about following integration projects. It is logical that in the case of Orenburg project what was emphasized was its integration function with respect to the socialist system rather than mentioning the priorities of Soviet energetic export. A similar situation can be found with machine equipment used during the construction — emphasized was the fact that the construction is almost self-sufficient using machines from Eastern Bloc, not mentioning the inevitability of utilization of machinery from developed capitalist countries. General provider of Czechoslovak section of construction was Transit gas pipeline Prague, national corporation (n. c.), which was to provide handover of turnkey constructions, foreign trade activities were under the competence of Foreign trade organization Simex. According to the original agreement the Czechoslovak party was supposed to provide a completed construction of the second section of gas pipeline from Alexandrov Gay to Sokhranovka in the lenght of 562 km, including the construction of five compressing stations (localities Kalininskaya, Antipovka, Pallasovka, Frolovo, Sokhranovka) and other related constructions, period of handover was fixed on the third quarter of 1978. The project was from the very beginning facing several troubles; first of all it was a difficulty with meeting the deadlines of the project, which was on the other hand de facto the problem of the whole system of planned economies. Five-year plan setting didn’t count too much with ”sudden actions” which weren’t planned sufficiently in advance and that was also the problem of Orenburg project. The project was running late from the very beginning, in fact from the phase of project documentation authorizing which was completed by the Soviet party behind schedule. On the other hand the Soviet party demanded one-year shortening of construction period of Czechoslovak section, which meant finishing in autumn 1977. This was not the only demand Soviet party had. They also requested the increase of Transit gas pipeline transportation volume (from 28 bil. m3 to 37 bil. m3 till 1980), which meant not only extending of pipeline itself, but also construction of compressing stations. What was behind it was clear — declared internationalism had to stay back behind, the growth of Soviet foreign trade demands was above all. At the same time Czechoslovak party got into problems in the sphere of machine provision of the construction. The Soviet Ministry of Foreign Trade declared that for the year 1975 (in spite of the demand for shortening of the construction) the Czechoslovak section could count only with approved supplies and in the case of acquisition of foreign specialized machinery from capitalist countries it was to expect delay of supplies both in the matter of capacity and the date of delivery (according to the General agreement was Soviet party supposed to maintain the equipment of the construction site with specialized machinery). Czechoslovak party was in that way forced to jan LOMíčEK 69 try to maintain supplies on its own. In addition during Czechoslovak-Soviet negotiations Czechoslovak leadership put a strain on administration and organization of Czechoslovak providers related to the resources saving, especially in the sphere of machine equipment supplied to the Czechoslovak section of Soyuz construction. Prolonged negotiations were conducted because Soviet side was to take on some of the Czech obligations due to the shortening the construction period of the project. In these negotiations Czechoslovakia methaphorically got a raw deal. Soviet partners insisted on disadvantageous compensational conditions for Czechoslovakia. In given speech minister of oil and gas facilities construction Scherbina said that “demands of Soviet party are adequate, because Czechoslovak partners would have to buy in any case all demanded (and even more) machinery and would have much higher costs connected with realization of contracted works, demand of several thousand of workers, housing capacities and realization of construction in difficult climatic conditions.”20 After the negotiations the Soviet side after all agreed to take on the construction of the part of the Czechoslovak section of pipeline. The sections involved the passage over the Volgograd dam, over the Don river and part of pipeline ranging from 150–200 km. All with one condition — that Czechoslovak partner will request the Soviet help. However this required appropriate compensation from the Czechoslovak side worth 30 millions of Soviet rubles (or in the form of transfer of already purchased construction machinery from capitalist states) and in addition supplies of 1000 Tatra trucks during period of 1975–1978.21 After the Czechoslovak-Soviet negotiations project Orenburg got dispensations in miscellaneous sectors — in case of construction materials supplies, supplies of construction facilities, construction equipment, including supplies from domestic production and from production of capitalist countries. And finally the project got also exception of the Czechoslovak centrally-planned economy in general. The report on Orenburg project from January 1975 for Presidium of government stated: „It is expected that necessary equipments (of the project) will be not possible to cover from planned production without disruption of already made contractor-customer contracts. Therefore it is necessary (for the project) for the State Arbiter of Czechoslovakia to exempt contractors in substantiated cases from financial sanctions resulting from non-realization of earlier made economic contracts with regard to high priority provision for construction of Czechoslovak section of gas pipeline Orenburg.“22 The 20 See NA Prague, Presidium of Government, 203/1/33, 1975, report Construction of Czechoslovak section of Orenburg gas pipeline, 28. 5. 1975, p. 4. 21 This term appeared as one of the biggest problems, because during 1975–1976 were these vehicles taken from supposed capacity designated for the domestic market, during following period thereafter from the export capacities designed for the western countries. Earlier Soviet suggestion demanded supplies even higher up to 2500 trucks in that period beyond standard export rates to the USSR. For illustrative purposes 1000 trucks of contemporary produced model T148 represented one sixth of overall year export of these trucks. 22 See NA Prague, Presidium of Government, 203/1/33, 1975, Report on preparation and realization of Czechoslovak section of Orenburg gas pipeline, 31. 1. 1975, p. 6.