CONTRASTING US AND GERMAN ATTITUDES TO SOVIET TRADE, 1917-91 Contrasting US and GerlDan Attitudes to Soviet Trade, 1917-91 Politics by Economic Means Helene Seppain M St. Martin's Press ©© HH~eIle~nnee SSeeppppaaiinn 11999922 SSooffttccoovveerr rreepprriinntt ooff tthhee hhaarrddccoovveerr 11ss tt eeddiittiioonn 11999922 AAllll rriigghhttss rreesseerrvveedd.. NNoo rreepprroodduuccttiioonn,, ccooppyy oorr ttrraannssmmiissssiioonn ooff tthhiiss ppuubblliiccaattiioonn mmaayy bbee mmaaddee wwiitthhoouutt wwrriitttteenn ppeerrmmiissssiioonn.. 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HHFF33110055..SS4477 11999922 338822''..00994477--ddcc2200 9922---{6)8811O0 CCIIPP Contents List of Tables xi Preface xii List of Abbreviations xiii Introduction 1 PART I THE ORIGINS OF US AND GERMAN ATTITUDES TO SOVIET TRADE: 'POSITIVE ECONOMIC MEASURES' IN THE INTERWAR PERIOD 1 Changing Communism by Economic Means and the US Grain Factor, 1921-3 9 Direct versus indirect intervention: food as an alternative to guns 9 American 'food power' and the Armistice 12 'Relief-commerce' in Europe 14 'Private relief as an instrument of policy' 17 Non-recognition and famine relief 18 Welfare counter-revolution in Russia 19 The end of the ARA mission in Russia 22 The aftermath of the ARA 24 Beyond recognition 27 1 German Industry and Buying Peace in 1911 30 The Treaty of Rapallo 30 Brest-Litovsk as a prelude to Soviet-German rapprochement 33 From economic domination to economic rapprochement 34 The common enemy 36 Redefinition of the Soviet-German power relationship after the Armistice of November 1918 38 Political primacy for 'die Wirtschaft' and its consequences 39 After Versailles 41 Economic and political preconditions for Rapallo 42 v vi Contents The 'policy of fulfilment' 46 Political primacy for die Wirtschaft - continued 47 Convergence of Soviet and German political and economic self-interests in 1921-2 48 Implications for the interwar period 53 PART II ECONOMIC POWER AS AN INSTRUMENT OF FOREIGN POLICY: 'EMBARGO' IN 1947-53 Introduction: A Link between Trade and Peace? 56 3 The Marshall Plan and US Embargo Policy, 1947-53 59 Extra-territoriality: the concepts 59 1 From supply shortages to security controls 61 The rationale for US export controls in peacetime, 1945-7 61 International polarisation and containment in US foreign policy, 1947-9 64 Embargo and the Economic Co-operation Act of 1948 66 Unilateral controls 68 2 Multilateral controls 70 Multilateral controls and the problem of trans-shipment 70 Rearmament and anti-trade Legislation 71 3 US extra-territorial measures, 1950-3 74 Unilateral controls and US extra-territorial power 74 Emergency economic warfare controls: the Foreign Assets Control Regulations (FA CR) 74 Limits to US extra-territorial power in 1950-1 76 Soviet reaction to the Western Embargo 78 Rearmament and US protectionism 79 The ultimate in extra-territoriality: the Transaction Control Regulations 82 4 The Berlin Blockade and the Politicisation of Interzonal Trade, 1945--9 85 The dual Soviet policy in Germany 86 The importance of interzonal trade 88 The American response to Molotov's speech 90 The advantage of interzonal trade in 1947-8: the (first) Berlin agreement 91 Contents vii Western unity and Soviet belligerency in 1947 93 The artificial division of the German economy 95 The Berlin blockade and West German economic recovery 96 The failure of the Berlin blockade 98 'East is East and West is West, but business is business from Mukden to Brest.' But ... 99 5 The Role of the US Embargo in the Division of Germany, 1949--52 103 The economic element in the East German campaign for German unity 104 Effect of the changing power balance in Soviet foreign policy 107 Interzonal trade and the question of German unity in 1949 108 West German sovereignty and foreign trade 110 The Frankfurt agreement 111 The threat of West Germany's export competition 113 The demise of state-regulated interzonal trade 116 The steel embargo of 8 February 1950 116 The power of illicit trade in 1950 117 The rationale for buying German unity in 1950 119 Western rearmament and the tightening of CoCom 121 Soviet reaction to the prospect of West German rearmament 122 The creeping Soviet blockade 123 The link between West German rearmament and a stricter West German export control policy 124 CoCom and East German integration into the Soviet bloc 125 Contrasting attitudes to interzonal trade 127 The second Berlin agreement 128 Appendix: The Soviet Note of 10 March 1952 129 PART III DIVERSIFICATION IN EAST-WEST TRADE POLICY AFTER 1953 6 CoCom and US Export Control Policy after 1953 133 CoCom in the aftermath of the Moscow economic conference 133 viii Contents The after-effects in West Germany 134 Trade and Malenkov's 'new course' 136 CoCom post-Stalin 137 Trade and peace in 1954 139 The 1954 CoCom list revision 141 Effect of the 1954 CoCom list revision on US export control policy 143 The 1958 CoCom list revision 143 The dual purpose of US export control policy 145 Trade as an instrument of US foreign policy in the 1950s and early 1960s 145 Foreign policy and economic warfare 147 The 1962 amendments to the US Export Control Act 148 The NATO pipe embargo 150 7 Trade as a Bargaining Tool in the Second Berlin Crisis, 1958-61 152 1 Trade as an issue, 1954~ 153 The attitude of West German business to trade with the Soviet bloc in 1954-60 155 Interzonal trade and the Berlin factor 157 Establishment of diplomatic relations between the FRG and the USSR 159 The trade issue continued 161 The 1958 FRG-Soviet trade treaty 162 The end of the transition phase in East Germany 164 2 The Berlin Crisis 165 British attempts at detente and the failure of Four-Power negotiations in 1958-60 165 The question of West German bargaining power in the second Berlin crisis 167 The trade issue in the light of the 'squeeze' 168 The Berlin clause and the renewal of the 1958 FRG-Soviet trade treaty 170 The effect of the FRG-Soviet compromise on the 'squeeze' strategy 172 The role of the Berlin crisis in the 'alte deutsche Wirtschaftseinheit' 173 Bonn's renewed Ostpolitik 175 Contents ix 8 Trade and the new Ostpolitik, 1962-72; The Triangle FRG-GDR-USSR 179 1 The trade issue after the building of the Berlin Wall 179 The East German attempt to depoliticise interzonal trade in 1962 183 The East-West squeeze on West German business: the end of the West German boom and the diversification of East German trade 185 Limits to the political power of Ruhr industry 187 The GDR attempt to repoliticise interzonal trade in 1963 188 Alternative strategies 189 2 The Rapallo approach to trade in action 191 'Regulated coexistence' under the Grand Coalition (1966-9) 193 The downturn in FRG-GDR political relations 194 Trade and the Czechoslovak crisis 195 Trade and Ostpolitik in 1968-72 200 A trade treaty as a link between Soviet guarantees on West German ties to West Berlin and Bundestag ratification of the Eastern treaties 202 Trade and the Four-Power Agreement 204 Brezhnev's visit to the FRG in May 1973 207 'Buying peace' and detente 208 9 Detente and After: Contrasting US and German Attitudes to Soviet Trade in 197~91 210 1 The Soviet problem of 'catching up' with the West and the economic crisis 212 2 Rationale and continuity in contrasting attitudes to Soviet trade: US grain and West German industry 215 2.1 US Grain 215 From detente to the demise of detente 217 US trade and the Carter administration (January 1977-January 1981) 221 The 1980 grain embargo 222 From the demise of detente to the new detente after 1985 224 The new detente and US-Soviet trade after 1985 225 The USA and CoCom, 1982-8 226 The dawning of a new world order 229 x Contents The USA and CoCom in 1990 230 The conflict between trade expansion and national security 231 2.2 West German industry 232 The demise of detente and the re-emergence of the German question 235 The West German 'juggling act' 237 The economic basis for inter-German detente in the 1980s 239 Buying peace under Gorbachev 240 The EC single market and progress towards a 'new' world, 1985-8 241 Helping Gorbachev in 1987-9 242 Buying peace after the Wall 245 Traditional Western fears 246 The motor for the new Europe 247 10 Conclusion and Perspectives 1St The decline of US power to determine East-West trade policy since 1953 253 Economic self-interest and the EAA 1979 254 Towards a new modus vivendi in Europe 255 Buying peace in the new Europe 258 Notes 261 Bibliography 313 Index 325