Cough Up, Comrades

Hungary's Communist Chief Janos Kadr had just begun the keynote speech at the party congress in Budapest last week when he turned to the guest of honor and expressed his "sincere thanks" for the Soviet Union's "readiness to help" Hungary in its serious economic plight. It was an ironic gesture. Kadar was expressing gratitude to Soviet Party Chief Leonid Brezhnev for extending a loan of perhaps $40 million that Hungary urgently needs--to meet the newly increased price of Soviet oil and gas.

Bargain's End. Like the other Eastern European members of Comecon,* Hungary is reeling under the impact of the sudden 130% rise. Except for Rumania, which has its own oilfields, the Eastern bloc depends almost entirely on Soviet energy supplies, and it had been getting a bargain. Though the world price of oil quintupled to more than $10 per bbl., the Soviet Union continued to sell to its allies at $3 per bbl. Since Comecon prices are adjusted only once every five years, Eastern European leaders believed they would enjoy that deal, at least until 1976.

They were wrong. In raising the per-barrel price to $6.90 in January, the Soviets placed self-interest above one of Communism's cherished tenets: social priorities, not market forces, should determine prices. Though the Soviet Union is the world's leading oil producer (averaging 9 million bbl. per day last year, v. 8.5 million for Saudi Arabia), domestic and Eastern European demand will outstrip output by 1980. The Soviet Union and its Comecon partners are already importing small quantities of high-priced Middle Eastern oil, mainly from Iraq, Iran and Libya. Hence the Soviets are in a rush to develop new Siberian fields. They must invest lavishly in expensive Western equipment and drill in a remote region where operating costs will be high.

The Eastern Europeans are being forced to foot part of the bill. They will pay $3.3 billion for Soviet gas and oil this year compared with $1.2 billion in 1973. Furthermore, prices of oil and other key Soviet export commodities (nonferrous metals, iron, cotton) will now be reviewed each year and will be brought in line with world prices, perhaps by 1978. That will hurt Rumania too.

The Communist leaders are painfully aware of the possible consequences of the price increases. Of the five uprisings that have shaken Eastern Europe since 1953, three stemmed directly from unpopular economic measures. Once again, Eastern European workers will be asked to make sacrifices. The increased fuel costs are bound to retard the growth of Eastern Europe's fertilizer, petrochemical and synthetic textile industries, and limit supplies of some consumer goods. Those goods will have to be sold to the Soviet Union to raise rubles, but Moscow is insisting on terms of trade that are likely to anger Eastern Europeans. Though the Soviets have more than doubled the fuel bill, they are offering to pay only 25% more for Eastern European imports, which cover a wide range of products, from industrial machinery to pantyhose.

*Bulgaria, Czechoslovakia, East Germany, Poland and Rumania.

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