Clausewitz observed that it is human nature to exaggerate the strength of an opponent.  Certainly that tendency prevailed throughout most of the Cold War and not least in the early 1980s, when concern about "the window of vulnerability" and the shifting military balance precipitated the largest peacetime build-up in American history.  Evidence of a crisis in the USSR--infant mortality rising, male life expectancy plummeting, economic growth stagnating--was mounting in the late Brezhnev years.  But the signposts were largely discounted as Washington coped with the invasion of Afghanistan, the INF challenge, and sundry Third World trouble spots.  Today we have gone to the opposite extreme and greatly underestimate the potential strength of the Soviet Union.  We are like the drunken man that Martin Luther once saw trying to mount a horse: first he fell off one side, then, leaping back on and overcorrecting, he fell off the other.

The news reports from Moscow are of little help in correcting our balance.  Invariably written in the style of weather reports, they are at best barometers of Gorbachev's personal standing, revealing little about the underlying forces that will shape Russia's future.  The impression in the West that Russia has entered into permanent decline is based on three assumptions: First, the Soviet economy is in such bad shape that it will take years to recover and will never again provide an adequate base for a military threat to the West.  Second, the loss of Eastern Europe confirms the USSR's decline and greatly reduces its influence in Europe as a whole.  Third, rising nationalist strife inexorably will pull the Soviet Union apart, leaving Russia a mere rump of its former empire.  All three assumptions deserve scrutiny, for they ignore critical reserves of Soviet economic, political, and military strength.

The Economy and the Military

That the Soviet economy is in very bad shape is beyond dispute.  But the picture of utter disaster that is now routinely drawn is exaggerated.  Glasnost, the need to make the case for reform, and the wish to attract Western aid all combine to produce horror stories disproportionate to the actual decline.  The inordinate publicity given to Soviet food shortages is a case in point.  Such shortages are a perennial fact of Soviet life, but despite the much freer access they now enjoy, Western diplomats and journalists have been unable to find any evidence of starvation or severe deprivation in Gorbachev's Soviet Union.  The fact that the 1990 grain harvest was the largest in Soviet history makes the point that much of the trouble stems from the deterioration of the Soviet transport system, a non-systemic problem susceptible to remedy by targeting investment.

Second, Moscow has certain substantial economic assets that make it absurd to treat it as one of the world's out-and-out basket cases, and make the outpouring of official and charitable food aid from the West--and even India!--seem strange.  These assets include massive diamond and gold reserves, the latter alone being estimated by the CIA as around $34 billion.  Combined with a relatively low level of hard currency debt (some $54 billion), these assets give Moscow considerable borrowing potential in international credit markets.  Further, the USSR has the world's largest natural gas reserves, and produces nearly as much crude oil as the United States and Saudi Arabia combined.  The recent jump in oil prices and the decision to put oil deliveries to Eastern Europe on a dollar basis will strengthen Moscow's hard currency position significantly.

Third, the Soviet Union has always had two substantially separate economies--the consumer and the military-industrial.  The latter is in much better shape than the former, enjoying first claim on both human and material resources.  The Kremlin asserts it has cut defense spending by 10 percent a year for the past two years.  U.S. intelligence agencies concede there had been a decline, but believe it is far smaller, perhaps 4-5 percent at most.  Given the changing security outlook and other pressing needs of the Soviet Union, it would be logical to expect some reduction.  It would be a mistake, however, to conclude that such reductions, even if they continue, must result in the comparative military weakening of the Soviet Union.  For one thing, the rate of defense spending in most Western countries is dropping as fast or faster (the U.S. defense budget declined by 4.5 percent in real terms in 1990).  For another, the Soviet Union started its cuts from a much higher level than its Western rivals.  Thus, even after cutting its output of tanks by half, the USSR still produces twice as many battle tanks annually as all NATO countries combined.  And in 1989 it easily outproduced the United States in a range of important categories: ICBMs, 140 to 9; SLBMs, 100 to 21; SLCMs, 1300 to 600; artillery pieces, over 1500 to 100; fighters and fighter-bomber aircraft, 625 to 470; military helicopters, 400 to 280; armored fighting vehicles, 5,700 to 650.  Soviet strategic weapons testing and modernization programs, as well as its research and development of ASAT and ABM systems, are accelerating, not declining.  Despite Moscow's announced intention to convert military to civilian production, not a single major weapons facility has yet been converted.  In short, the Soviet military-industrial economy remains intact, and retains the potential for rapid expansion of output.

Whether the Soviet economy can be reformed successfully in the next few years remains an open question.  But whatever Gorbachev's shortcomings, he has already accomplished one important thing: the Soviet economic debate has been de-ideologized and is currently being conducted in more rational economic terms than in the past.  It is now widely accepted that the only workable economic system, at least in the consumer sector, is a market economy.  The small businesses or cooperatives legalized under Gorbachev have flourished and now engage over five million employees.  Their rapid growth suggests that the rest of the Soviet economy, free of its ideological straightjacket, can grow rapidly.  But it is important to stress that the Soviet leadership need not achieve a Western-style consumer cornucopia in order for economic recovery to take place.  The number of Soviet-produced luxury sedans, VCRs, microwaves, and upscale fashions will be no measure of prowess in the military arena.  The USSR need only improve its consumer economy enough to maintain the modicum of public support necessary for internal stability.  It appears increasingly evident that Gorbachev and his political allies intend to couple a liberalized consumer economy with an authoritarian political system and a command economy in the military-industrial arena.  From their vantage point, this is the ideal formula for a resurgent Russia.

Abandoning Eastern Europe

Even more than Soviet economic problems, the loss of Eastern Europe has been widely interpreted as a portent of Russia's decline.  Yet the political, economic, and strategic benefits that Moscow gained by leaving Eastern Europe and consenting to a reunified Germany have far outweighed the region's value as a buffer zone against a Western invasion that was never going to happen.  Soviet diplomatic stature in Europe has increased, not diminished, as a result of the withdrawal, and Moscow has gained access to vital Western credit, economic aid, and high technology.  By settling in one stroke its most long-standing issues with the West, the USSR enhanced its own security--a point Soviet defenders of the withdrawal make again and again.  Shevardnadze put it bluntly in July, 1990: "What is best, to be facing a half million soldiers from the Bundeswehr or, let us say, an army of half that size in a united Germany?"

Even by 1980, when labor strikes in Gdansk gave birth to Solidarity, Eastern Europe had lost its economic utility to the USSR and become a diplomatic albatross.  Illegitimate governments propped up by the threat of Soviet intervention faced unruly populations and deepening economic troubles.  To preserve regional stability, Moscow was forced to subsidize the Eastern European economies, particularly in the energy sector.  Despite these costs, the Brezhnevite leadership, suspicious of any change, clung to its security blanket.  It took a younger leadership to recognize the advantages of a European settlement and abandon the region in 1989-90 with hardly a whimper.(1)

Throughout the postwar period, the Soviet Union has had three long-standing policy objectives in Europe: 1) American military withdrawal from Europe; 2) the dissolution of NATO; and 3) the neutralization of Germany.  Ironically, by yielding Eastern Europe, the USSR is closer than ever to obtaining all three objectives.  The level of American troops in Europe is declining already, with few likely left by the end of the decade.  The recent European settlement undermines the raison d'[cir]etre of NATO, whose vitality will surely diminish as the decade proceeds.  As for Germany, though not yet neutral, its relations with Moscow have become exceptionally warm, reminiscent of the diplomatic pattern created by the Rapallo Treaty in 1922.

The Soviet loss of Eastern Europe has also contributed to the current decline in Western defense spending, which, as already noted, is keeping pace with the reduction in Soviet military spending.  Barring drastic and disproportionate unilateral defense cuts by Moscow, which seem entirely unlikely, Russia in the year 2000 will remain the dominant power on the Continent even if resurgence never occurs.  From this perspective, the retreat of Soviet troops from 3 percent of the territory controlled by Moscow since 1945 does not appear quite so consequential.