The price of loyalty

Episode 06 · Period covered: 1944–1989 · Reading time: 4 min

Companion article to episode 06 of the Cold War Bulgaria podcast.

The relationship between Sofia and Moscow rested on a one-way economic connection, favourable to Bulgaria in exchange for absolute political obedience. Where Poland or Hungary periodically sought to loosen the Soviet grip, Todor Zhivkov embraced the role of the most loyal satellite, and drew considerable material benefit from it.

It is this economic dimension, often neglected in favour of military and ideological questions, that explains why Bulgarian loyalty was so constant.

The initial problem

The Bulgaria of 1944 was a poor country. Agrarian, without capital, without major natural resources: no oil, no quality coal, no iron ore in sufficient quantity.

Any policy of industrialisation therefore required massive imports of energy and raw materials, which a country without hard currency could not finance. The regime's central question, from the outset, was that of access to resources.

The Soviet alliance provided the answer.

The oil mechanism

The Bulgarian economic model ran on what Mikhail Gorbachev would later describe as "artificial respiration" provided by Soviet injections.

The principal mechanism was the supply of cheap raw materials, first among them oil and electricity. Bulgaria received Soviet crude at subsidised prices within the framework of Comecon (СИВ), the Council for Mutual Economic Assistance.

The most lucrative arrangement came next: Bulgaria refined this Soviet oil and re-exported it to Western markets for convertible currency. Between 1981 and 1983, these re-exports generated some 2.2 billion dollars in receipts, used to finance industrialisation and to maintain a relatively high standard of living compared with neighbouring countries.

It is this mechanism that explains the scene of 1980: at the moment when Poland was experiencing shortages and rationing, Bulgaria was living through its period of highest consumption.

The proposals for incorporation

Zhivkov's strategy went so far that on two occasions, in 1963 and in 1973, he secretly proposed that Bulgaria formally join the Soviet Union as its sixteenth republic.

These proposals, politically spectacular, were for the most part economic stratagems: the aim was to obtain broader access to Soviet resources and to ensure that Moscow would continue to cover Bulgarian debts.

This policy of loyalty in exchange for oil allowed the country to move from a poor agrarian society to an industrialised nation with an elaborate manufacturing base.

The cancellation of debts

The Soviet Union also played the role of lender of last resort.

In 1979, at a summit meeting with Leonid Brezhnev, Zhivkov obtained the cancellation of one billion roubles of Bulgarian debt. The USSR moreover paid an annual subsidy of 400 million roubles intended specifically to support Bulgarian agriculture, essential to the country's export profile within Comecon.

This financial support shielded the Bulgarian economy from the global shocks of the 1970s, the oil crisis in particular, which struck the Western economies hard and left Poland gravely indebted.

The reverse side

This protection had a price, deferred but heavy.

It created a profound dependence, which became a major obstacle during the transition to a market economy in the 1990s. More than nine tenths of Bulgarian foreign trade was conducted with the Soviet bloc; the collapse of that bloc deprived the country of its outlets, its suppliers and its model within a few months.

It masked the inefficiency of the productive system. The 83% of investment directed towards heavy industry built complexes sized for a captive market, and not competitive.

It was already eroding. Declassified CIA analyses from 1984 suggest that by the end of the Cold War this subordination was beginning to produce internal tensions. The USSR, confronted with its own economic decline, was setting about reducing the "cost of empire" by demanding higher-quality Bulgarian exports and an increased defence effort.

A reading of loyalty

The contribution of this economic dimension is to make intelligible what would otherwise look like servility.

Bulgaria was not loyal by temperament. It was loyal because loyalty paid: oil at knock-down prices, debts cancelled, guaranteed outlets, agricultural subsidies. Zhivkov did not merely obey: he traded on an obedience he knew to be precious to Moscow, on account of his country's geographical position facing NATO's southern flank.

That is also what explains the fragility of the edifice. When the supplier collapsed, the model collapsed with it.

Sources

• Minutes of the Zhivkov–Brezhnev meetings, Central Committee archives
• Declassified CIA economic analyses
• Archives of the Council for Mutual Economic Assistance (СИВ / Comecon)

Translations of the documents cited are the author's own.