Trading Group's Last Goodbye Overshadowed by Gulf


LIKE the recession in the West, a pending event of considerable economic significance for the former Soviet bloc has been overshadowed by news from the Gulf. The Soviet and East European prime ministers are set to meet in Budapest later this month to write off 40 years of vain effort by the Soviet Union to match the West economically.

It will be a last good-bye to Comecon, the closed, Soviet-led trading system that collapsed when Eastern Europe seized independence a year ago.

It won't be a tearful farewell. Soviet leader Mikhail Gorbachev will be as glad as anyone to see the back of the Council for Mutual Economic Assistance, as the group is formally known.

The Soviet Union itself has opted for a market-oriented economy, however far behind the most reform-conscious East Europeans. Subsidized cheap oil for former allies does not fit in with its own increasingly desperate need for hard-currency trading to succor its ailing economy.

So Comecon, which once absorbed 50 percent of each East European country's trade, is to be replaced by an Organization for International Economic Cooperation (OIEC).

The difference is this. Comecon had decisionmaking authority, though subject to a Soviet-prescribed centralized system of bilateral trade arrangements.

The new OIEC will have only a low-profile discussion role. Its members' overriding concern will be to tailor trade with the Soviet Union strictly to the requirements of their individual entry into the international trading community of convertible currencies in a competitive market.

At first, it seemed, the OIEC would have no more to do than dispose of Comecon's organizational assets, principally its two banks. That may still be so. But the mid-January outbreak of the Gulf war created a new and menacing dimension to dispel the general euphoria born of the NATO-Warsaw Pact declaration in November, which officially ended the cold war.

At least Poland, Hungary, and Czechoslovakia were skeptical enough to warn the West that, without its speedy help, differences between a ``well-fed'' West and a ``poor'' East could easily become a new economic Iron Curtain, dividing them as before.

In the end, two factors coincided to justify such fears - one in the Gulf region, the other in the Soviet Union.

The turmoil and uncertainty of the war are having a devastating effect. It could not have come at a more difficult time for these new democracies, struggling to make the complex transition from command economies to the open market, with its attendant higher prices, growing unemployment, and consequent threats of new social tensions.

The East Europeans, in fact, see their ever-more pressing need for swift Western backing for the reform process pushed backstage by the West's preoccupation with the costs of war - and of reconstruction promised to the Gulf region once the war is over.

In Paris three months ago, the East Europeans heard Western assurances that membership in the European Community - to which they all aspire - ``is on offer and only a matter of time.''

``But it is still only an offer ringed round with conditions,'' a worried East European economist comments.

Meanwhile, apart from initial assistance for Poland and Hungary, Western aid remains largely a matter of intent and ``poor country'' trade concessions.

Added to these misgivings is the growing state of crisis in the Soviet Union and the hard-liners' threat to perestroika (restructuring).

The East Europeans have far to go before reforms are working so well that they can start orienting trade effectively toward the West. Until then, they must look to the Soviet Union, for example, for most of their oil.

As long as that is the case, any continuation of Comecon methods would further cramp their style. Moreover, a shift of power away from Mr. Gorbachev would intensify their anxieties - with, they predict, undesired results all around.

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