ECONOMIC DISASTER HITS COUNTRIES IN EASTERN EUROPE

Moscow says Iraq's invasion of Kuwait has transformed eastern Europe's critical liquid fuel shortage into a pervasive financial catastrophe. The result could be a slowing of the region's progress toward democratization. Soviet reports say if the price of crude exceeds $25/bbl in 1991, payments for imported oil will absorb 30% of Poland's export revenues, 75% of Czechoslovakia's, and 100% of Bulgaria's.

Sept. 17, 1990

2 min read

Moscow says Iraq's invasion of Kuwait has transformed eastern Europe's critical liquid fuel shortage into a pervasive financial catastrophe.

The result could be a slowing of the region's progress toward democratization.

Soviet reports say if the price of crude exceeds $25/bbl in 1991, payments for imported oil will absorb 30% of Poland's export revenues, 75% of Czechoslovakia's, and 100% of Bulgaria's.

With Soviet oil deliveries to eastern European nations drastically reduced, those countries turned to Iraq for crude. But the embargo against Iraq, in which eastern Europe is reluctantly participating, prevents either delivery of oil already contracted for or payments on the $5 billion debt that Baghdad owes eastern European countries.

Bulgaria is hardest hit.

Iraq owes Bulgaria $1.2 billion. Apparently no more Iraqi oil will be delivered to Bulgaria this year. Bulgaria will lose another $160 million in embargoed exports to Iraq and Kuwait.

The U.S.S.R. had signed a contract to deliver 2.5 million metric tons of Iraqi crude to Bulgaria during the final 5 months of 1990.

But with no Iraqi crude being provided to the U.S.S.R., Moscow probably won't be able to make up the shortfall in supplies to Bulgaria from its own declining production.

Iraq owes Yugoslavia $1.5 billion, with Belgrade expecting repayment in crude. Not only are Iraqi crude deliveries now impossible, but Yugoslavia is unable to export $1 billion in goods ordered by Iraq.

Faced with unexpected cuts in Soviet oil deliveries, Hungary also turned to Iraq for oil as payment on Baghdad's $150 million debt to Budapest. Some of this oil was received prior to the August embargo.

Hungary, Bulgaria, Czechoslovakia, Poland, and Romania are operating their refineries far below capacity because of crude shortages.

Meanwhile, Cuba, which depended almost entirely on the U.S.S.R. for imported oil, is experiencing a severe liquid fuel squeeze. Motorists are unable to obtain even the miserly gasoline rations prevailing earlier this year because of delayed arrivals of Soviet tankers.