CHAPTER SIX

The Origins, Dynamics, and Termination of the Cold War, 1942–91

THE GOAL OF THIS CHAPTER is a broad, probably overly ambitious one. I will try to sweep across five decades of post-1941 great power politics to examine one simple question: What was the relative causal importance of economic interdependence and changes in commercial expectations to the ups and downs of Cold War history? This chapter provides a detailed but summary answer to this question. A companion book on commerce and US foreign policy offers a more complete explication, and readers keen on post-1941 US statecraft will want to consult that volume as well (Copeland, forthcoming).1

At first blush, it would seem self-evident that economic interdependence could have had little to do with the origins of the Cold War or the crises and tensions that pockmarked its history until the late 1980s. After all, US-Soviet trade from late 1946 onward remained at very low levels given what seemed to be strong geopolitical reasons for not trading, particularly US fears that trade would promote Soviet relative economic growth. It would seem, then, that economic interdependence drops out as a causal variable that might explain not only the start of the Cold War but also its occasional though intense crises and its final termination in 1989–91. Indeed, both realists and liberals usually completely ignore the economic aspects of the US-Soviet relationship from 1945 to the 1980s, presuming that consistently low or almost nonexistent trade could not possibly have had much of a role in explaining variations in the intensity of the Cold War struggle. The two camps thus tend to fight over the relative salience of other variables: realists stress the significance of power and nuclear technology in shaping arms-racing dynamics along with the competition for territorial position, while liberals argue for the importance of ideological and domestic motivations as well as the role of international arms control regimes.² When it comes to the underlying causes of the Cold War itself, liberals typically align with the traditionalist argument that Moscow’s drive to spread Communism led to the spiral of hostility between the two wartime allies. Systemic realists generally adopt the postrevisionist view that both sides brought on the Cold War spiral out of fear of the other side’s present and future territorial intentions. Yet the economic dimensions of great power politics have typically played little or no role in either camp’s analyses.3

To garner any insight into the role of economics in the Cold War, one has had to fall back on so-called revisionist scholars—that is, scholars who argue that the United States started and sustained the Cold War in order to prop up capitalism as well as ensure US control of foreign markets and raw materials. Revisionists have uncovered crucial documents that force us to rethink the nature of the US-Soviet conflict.⁴ Unfortunately, they are led off track by their neo-Marxist starting point. By typically presuming that US elites sought global domination to increase the wealth and power of their capitalist class, revisionists ignore the profound national security implications of economic interdependence that arose for the United States as World War II wound down and a new era began. Moreover, their focus on Western capitalism leads them to miss a key fact: Russia also had strong economic needs that made its leaders quite concerned about Soviet ties with new spheres of influence in Eurasia and Africa along with the United States itself.

This chapter seeks to rectify the lacuna in the international relations field by showing the truly powerful impact of commercial factors on the dynamics of US-Soviet relations after 1941. The problems with realist and liberal thinking about economic interdependence are starkly revealed by the Cold War case. The theoretical logics for both camps are based on the actual present trade between great power spheres. But in situations where current trade is low or nonexistent, leaders’ expectations of future trade and commerce can be still critical to their decision-making processes. So even when there is little present trade, if a state needs what the external system has to offer, the other’s commitment or lack of commitment to providing future economic benefits may be critical to a leader’s assessment of the state’s future security.

The first half of this chapter will discuss the start of the Cold War and crises of the early Cold War period (1945–56). The origins of the Cold War itself are deeply rooted in both sides’ concerns about economic developments within their own and the other’s sphere coupled with their expectations for future trade and commerce. The Soviets in the last years of World War II had become highly dependent on US lend-lease aid not only to fight the war but also to rebuild their devastated country as the Nazis retreated. They therefore looked to US willingness to keep trade and loans flowing as signs of Washington’s attitude toward economic cooperation in the postwar era. The United States was also concerned about the postwar trade environment, but for quite different reasons. Some US officials, following Secretary of State Hull’s lead, did believe that freely flowing global trade might help keep the peace, largely for Wilsonian reasons (Layne 2006). Yet as Melvyn Leffler has forcefully shown, the question of US access to markets, raw materials, and investments was driven more by realpolitik logic: without such access, US officials believed that US power would decline, leaving the country vulnerable to the rising Soviet colossus. To maintain power preponderance and security into the future, then, it was critical to ensure continued access to the states of the Eurasian periphery—states that held the bulk of global production and resources outside Russia and the United States per se.5 This overriding concern, present from the start, would overshadow the whole of the Cold War era, making American expectations sensitive to any political or economic developments that might threaten the future economic viability of the US sphere.

The second half of this chapter will examine the economic determinants of the various efforts after 1956 to moderate the tensions of the Cold War and perhaps end the conflict altogether. Both sides by the mid-1950s understood the horrors of thermonuclear war, and had good reasons to find ways to increase trust and to avoid the arms buildups and crises that might push the superpowers into actual war. Yet despite two major attempts to secure a stable détente—an initial effort in the late 1950s and a more promising one in the early 1970s—Washington and Moscow failed to find a true end to the Cold War until the late 1980s. Why did these early attempts prove ephemeral (and indeed often seem to lead to greater hostility), and why did the policies of the 1980s finally “work”?

Because there were so many factors, not just commercial ones, shaping the behavior of the superpowers, this chapter’s goal is not to prove that the trade expectations approach provides a definitive answer to the questions posed above. Rather, I seek to show the underappreciated and often surprising significance of economic factors in both the causes of conflict and the creation of a lasting superpower peace. While not denying the importance of realist and liberal factors such as power, ideology, and domestic politics, I demonstrate how expectations of future trade at important moments significantly exacerbated the intensity of tension and risk of superpower crisis. We will see, for example, that trade concerns interacted with military fears to undermine the chances for peace during the most dangerous period of the modern nuclear era—from 1956 to 1962. We will also see just how important trade expectations were to the unwinding of Cold War hostility, both in the early 1970s and 1980s.

THE BEGINNING OF THE COLD WAR

The causes of the Cold War can be traced to the trade and financial expectations held by both the Soviet Union and United States as they emerged from World War II. Four years of German occupation had left the Soviet Union in tatters, with thousands of villages flattened, a quarter of its industrial capacity destroyed, and twenty-seven million dead. To rebuild, Moscow desperately needed to keep US trade and loans flowing after war’s end (Congress having approved lend-lease aid only for wartime). It also needed reparations from Germany, and a reorientation of Eastern Europe toward Russia and away from traditional trading partners in Western Europe. Finally, it wanted access to potential oil supplies in Iran, given Russian import needs. By 1944–45, the Soviets were worried: Would Washington facilitate or hinder the realization of these ends?

US concerns, especially by April–June 1945, were of a different sort. Washington feared that war-devastated peripheral states, even without Moscow’s active encouragement, would fall to Communism. The Americans knew that any small state that “went Communist” would likely realign its foreign-economic policy toward Moscow’s sphere, seeing the Soviet economic model as the wave of the future. And precisely because of Russia’s great needs, Moscow would welcome such states and then sever their commercial ties with the West.

The threat of fragile peripheral states in Western Europe going Communist was real. Communist groups that had played critical roles in wartime resistance movements were poised to exploit domestic conditions to seize power—by either the rifle barrel or ballet box. Key states such as France, Italy, and Greece were particularly vulnerable. Through 1945, US leaders looked to Eastern European states as litmus tests of future Soviet economic policy, and did not like what they saw (Leffler 1992). The Americans could understand why Moscow needed to keep Poland, the historical invasion route to Russia, so firmly within its grasp. But Russia’s tight neomercantilist policy toward Romania and Bulgaria in 1945 suggested that if other European states fell to Communism and were pulled into the Soviet sphere, the US economy would be severely undermined.6 Should these effects snowball across Eurasia, the Soviet Union might find itself the dominant global superpower without having to fire a shot.

Given these threats, any responsible US statesperson had but one option: contain Russia’s growth by restricting its access to trade and loans while redirecting US goods to the faltering Western economies, notwithstanding the risks of provoking a trade-security spiral. I show that US leaders began to take such measures as early as April–June 1945—a good two years before the Marshall Plan and Truman Doctrine were announced. The United States also built up a strong position in the Middle East to help reduce Russia’s influence in this vital region. These shifts in behavior were already well under way by the time of President Roosevelt’s death in April 1945. US policy from May to August 1945, however, took a decidedly hard-line turn, driven by one major fact: by spring 1945, it was clear to every key official, including Truman, that if Washington did not act forcefully to rebuild Western Europe, states in the US sphere would soon start falling to Communism.

The emerging threat to US access to resources and markets was thus a fundamental cause of its switch to harder-line policies by mid-1945, and the subsequent spiral into Cold War hostility. This was not the only cause, though. Also important was the simple need to maintain the United States’ ongoing power preponderance given Russia’s vast potential for future growth. There is overwhelming evidence that through the summer of 1945, Truman liked Stalin and believed he could do business with him. Yet he also worried that if the United States did not act to constrain Russia, it would grow significantly, and future Soviet leaders might not be as restrained in their behavior. Because I have detailed this evidence elsewhere, I will not repeat it here.⁷ Rather, my goal is to extend this work by showing that Truman and his advisers in 1945 were equally worried about the economic implications of the immediate loss of peripheral states to the beguiling appeal of Soviet Communism.

As for the age-old question of who started the Cold War, let me make my position clear up front. In terms of simple chronology, the United States was the first to shift to a grand strategy designed to reduce the strength of the other side. By July–October 1945, US leaders had surrounded Russia with air and naval bases, made a firm decision to deny atomic secrets to Moscow, initiated the rebuilding of Western Europe (including Russia’s archenemy Germany), ended aid to Moscow, restricted reparations from Western Germany, and sent US marines into China and Manchuria to prevent Communist consolidation of these critical areas.8 Russian policy, on the other hand, remained cautiously inward looking, and for a good geopolitical reason: the Soviets needed to appear reasonable to buy time to rebuild their devastated society.⁹

This chapter thus challenges the traditionalist and liberal thesis that it was Soviet aggression in 1945–46 that forced Washington by 1946–47 to switch to a hard-line containment posture. But my argument should not be seen as putting moral “blame” on Truman for starting the spiral of hostility we now call the Cold War. Truman did exactly what was required of him given the uncertain circumstances he faced, including the unknown future intentions of Russian leaders. Furthermore, Truman’s pessimism regarding the future system was shaped by the nature of the Soviet state—its mercantilist economic practices and authoritarian structure. From a theoretical perspective, however, Russia’s Communist regime type can be said to have had only an indirect impact. It was not Soviet “aggression” in 1945–46 that sparked the Cold War (more expansionistic Soviet behavior came only after the US policy shift). It instead was the US worry that revolutions would lead to further losses to the closed Soviet economic sphere combined with the concern that Moscow’s intentions might not stay moderate that led to the hardening of US behavior. In this sense, both states can be held “responsible” for the Cold War, but for different reasons: the United States because it was the first to turn to hard-line policies known to be provocative; and the Soviet Union because its regime type and intrasphere economic policies undermined US confidence in the future.

Roosevelt and the Iranian Oil Crisis, 1943–44

In the first decade after World War II, the notion emerged that Roosevelt had been a naive leader who had allowed Stalin to expand his empire at little cost. While many international relations scholars still hold to this view, it has little remaining sway among historians. With the seminal work of Warren Kimball (1991, 1997) and Robert Dallek (1979), we can now see that Roosevelt was far more the Machiavellian realist than the Wilsonian idealist, and indeed saw himself that way. To centralize power, he would allow factions to fight and then mediate between them. In diplomacy, he would avoid hard-and-fast statements of doctrine, thereby increasing the flexibility needed to realize his postwar agenda. He was the master of subtle deception that came in the form of a jovial cajoling and affable willingness to bargain even at the expense of stated principles. As he described himself in mid-1942, “I am a juggler, and I never let my right hand know what my left hand does.… I am perfectly willing to mislead and tell untruths if it will help win the war” (quoted in Kimball 1991, 7).

Roosevelt’s larger strategic objective from 1943 to 1945 was a simple one: build a peaceful postwar order through the recognition of clear Soviet and American “spheres of responsibility.” In particular, by reassuring Moscow that Eastern Europe would be within its sphere and no longer a conduit for invasion, the Soviets would have an incentive not to interfere in the US sphere (ibid.). But Roosevelt also hedged his bets. In December 1942, he asked the military to investigate the United States’ postwar basing needs. The Joint Strategic Survey Committee sent him a report in March 1943 arguing that overseas bases were essential to US security, given that international institutions could not be counted on to keep the peace.10 In November Roosevelt approved JCS 570, which stressed the importance of bases in West Africa, the Pacific, Iceland, and Japan as well as on the East Asian mainland to the countering of any rising and future Russian threat (Sherry 1977, 44–47; Copeland 2000b, 152–53).¹¹

For Roosevelt, however, the question of bases went beyond merely projecting air power to keep Russia cooperative. In February 1944 he told Hull to push the state, war, and navy departments to examine how overseas bases could be used for naval and ground forces as well.¹² Since his time as assistant navy secretary under Wilson, Roosevelt had internalized the Mahanian view that states must project global power to both maintain security and build power through access to foreign markets and raw materials (Ninkovich 1994, 101; Mahan [1890] 1987). His fateful decision in 1943–44 to build a web of overseas bases was driven by both military concerns and the more general need to improve US commercial ties around the world.¹³

Roosevelt’s concerns about economic access came to a head over the issue of which great power would control Iranian and Middle Eastern oil after the war. During the interwar period, US oil firms had entered the Middle East in a big way. While Britain dominated Iranian oil through its government-owned Anglo-Iranian Oil Company, US firms by 1942 controlled a quarter of Iraqi oil, half of Kuwaiti oil, and the majority of Saudi oil concessions. But the future was uncertain. Britain and Russia had occupied Iran in August 1941, splitting it into spheres. Although the US army entered Iran in 1942 to help manage lend-lease shipments to Russia, the dominating presence of the British and Soviet armies led US officials to worry that Moscow and London might seek to extend their influence, either within Iran or toward US-dominated areas such as Saudi Arabia.

The problem facing the Roosevelt administration by 1942 was a simple one: domestic oil supplies were peaking but demand was skyrocketing, driven by the United States’ industrial recovery and the needs of its now-huge overseas military machine. The trends were not encouraging. In October 1941, a State Department study had concluded that the US’s proven reserves were declining faster than new reserves were being discovered. If the trends continued, the United States, the world’s largest oil producer, would move from a position of net exporter to net importer. The study concluded on a prescient note: as the United States becomes a net oil importer, its foreign policy “will probably become more aggressive and will come more and more to resemble Great Britain’s policy of the past thirty years” (quoted in Miller 1980, 49). A subsequent study by the Board of Economic Warfare in July 1942 reinforced the value of increasing the US foothold in the Middle East, given that the region’s reserves were probably as great as those in the United States (at a time when the United States produced almost two-thirds of the world’s crude) (ibid., 55, 57–58; Yergin 1991, 395–96).

Given such assessments, it is not surprising that Roosevelt decided in 1943 to make Iran his “test case” for the policy of protecting US access to postwar resources, notwithstanding the risk of hurting Moscow’s expectations about its own access (RC, 650–51). The Soviets and British in 1941 had divided the country into northern and southern spheres. Britain’s main goal was to safeguard Anglo-Iranian Oil Company oil in the south, while the Soviets hoped to exploit the potential oil resources of northern Iran. Wartime oil production had proved inadequate, and Moscow needed to seek new sources outside the country (see Yegorova 1996). In late 1942, the Iranians asked Washington to increase its involvement to counterbalance the Anglo-Soviet presence. In January 1943, a State Department report recommended that Washington strengthen Iran’s political and economic organizations to prevent instability as well as ensure its independence vis-à-vis Britain and Russia. Iran, it argued, constituted a test of Atlantic Charter principles, especially the protection of sovereignty and trade openness (Kuniholm 1980, 156–63; Rubin 1980, 20).

Hull enthusiastically forwarded these recommendations to Roosevelt, noting both the idealistic and self-centered reasons for acting. The United States had a vital interest not only in establishing a lasting regional peace but also in ensuring that “no great power be established on the Persian Gulf opposite the important American petroleum development in Saudi Arabia” (quoted in Kuniholm 1980, 159–60). By US actions over the next two years, it is clear Roosevelt strongly concurred with Hull’s conclusions. Washington quickly became heavily involved in the direct running of the Iranian state. Most surprisingly, and notwithstanding Iran’s nominal status as an independent sovereign state, US officials, with the shah’s approval, were appointed to major positions in the Iranian government. Most important of these was Arthur Millspaugh’s insertion as Iran’s director general of finance. In this role, Millspaugh not only guided Iranian economic reforms; he oversaw the use of US military advisers in the reshaping of Iran’s army, too (Kuniholm 1980).

At the Tehran Summit in November 1943, Roosevelt convinced Churchill and Stalin to accept the Tehran Declaration reassuring Iranians that full sovereignty would be restored after the war. By that point, US advisers were fully entrenched, backed by thirty thousand US troops. Roosevelt now saw Iran as a test case for his postwar vision of stable peripheral states connected to an open global economy. While in Tehran, Roosevelt had told his roving ambassador Patrick Hurley to prepare an analysis on Iran to guide US relations with weaker nations. Hurley’s January 1944 report stressed the need to fight Soviet and British “imperialism” in Iran, and ensure that free enterprise took root in the country, as per Atlantic principles. Should this plan work, Iran would serve as a template for Washington’s dealings with all nations fighting monopolies, oppression, and imperialist aggression (ibid., 168–69).14

Roosevelt forwarded Hurley’s analysis to Hull, noting that he was “rather thrilled with the idea of using Iran as an example of what we can do by an unselfish American policy” (quoted in Kuniholm 1980, 169). Considering it was Hull who, in early 1943, had first told Roosevelt that Iran was important from a selfish perspective to protect the United States’ Saudi interests, this was obviously a disingenuous statement. But Iran had already become much more than a mere buffer for Saudi Arabia. In December 1943, the Iranians sent formal invitations to two US oil companies to begin negotiations on the first US oil concession in Iran. Despite warnings from US officials in Tehran that such negotiations might harm allied unity, the firms were allowed to start the talks. The British immediately got wind and pressed Tehran to be included in any new concessions. By February 1944, Moscow was concerned enough to send word to Iranian officials to remind them of its “prior rights” to northern Iranian oil (McFarland 1980, 341). The scramble to secure new oil concessions in Iran, sparked by US action, was now on.

Initially the Soviets were a side player in this scramble. Until September 1944 the United States’ main competitor was Britain, the traditionally dominant player in Iranian oil politics. Through the first half of 1944, in fact, Moscow was loath to get directly involved. The Soviet government had received an analysis of the oil resources of northern Iran in January 1944 that recognized Iran’s strong potential but also cautioned that more geologic exploration was needed, requiring both large investments and the likely annexation of part of Iranian territory (Yegorova 1996, 2–3).

The signing of the Anglo-American Oil Agreement in early August 1944, though, changed Soviet calculations. The agreement established rules for comanaging Anglo-American global production—some 80 percent of the world’s total—to ensure stable prices and distribution.15 For Moscow, however, it smacked of a deal to divide global oil into US and British spheres of influence. Lavrenty Beria, deputy chair of the Council of People’s Commissars, sent a report to Stalin on August 16 stating that Britain and the United States were working together against Russia, specifically “to prevent the transfer of the oil fields of Northern Iran [into Soviet hands].” Moscow must insist on participation in the Tehran talks “to defend Soviet interests in the sphere of international oil affairs” (quoted in Yegorova 1996, 3). In September, Moscow sent a high-ranking envoy to Iran to negotiate a Soviet concession. The Oil Crisis of 1944 had begun.¹⁶

The declassified Russian documents show, as Natalia Yegorova (1996, 3) summarizes in her seminal analysis, that Moscow was concerned not only with immediate security (the Caucasian land-invasion route) but also its ability to “participate on a par in the postwar competition … for the right to possess the new oil fields of the Middle East.” It was the new threat of an Anglo-American condominium, just when Soviet dependence was rising, that led the Soviets to jump into the scramble, notwithstanding the clear risks of a spiral.

What happened in response is instructive. On October 11, just days after Moscow’s official request for a concession, the Iranian government announced that it was postponing all negotiations on new concessions until after the war (ibid., 6). Washington supported the decision, and for good reason. Although it delayed a US concession, it would prevent concessions going to either Britain or Russia while their soldiers exercised predominant influence in Iran. By waiting until all foreign troops had left—by agreement, they were to be gone within six months after the war’s end—Washington stood a better chance of shaping Iran’s postwar development and its oil trade. With the United States’ economy globally dominant and its firms technologically superior, Iran would naturally gravitate to its economic sphere if given a choice. Conversely, Moscow’s only bargaining tool was the presence of Soviet troops in the north and the implied threat that they would not withdraw until an oil concession was offered.

The details of the fall 1944 crisis need not detain us. The Soviets reacted angrily to the postponement of negotiations. They encouraged the Communist Tudeh (“Masses”) Party, established through Comintern support in 1941, to organize strikes and demonstrations—pressure tactics that would frighten the Iranian government while sheltering Moscow from direct responsibility. Yet the tactics failed to sway the majority in the Majlis (parliament). To reiterate Iranian determination, the Majlis passed a law in December making it illegal for government officials to engage in even informal talks about oil concessions. By early January 1945, with Moscow needing to avoid further escalation prior to Yalta, the crisis petered out. The Soviets would not push hard for an oil concession until early 1946, at a point when US-Russian relations had already taken a dramatic downward turn.

The 1943–44 struggle over Iran suggests two important conclusions. First, it was Washington’s effort to insert itself into the running of the Iranian state and the slicing up of oil concessions that caused Moscow to act. The decline in Soviet expectations regarding their economic position had turned British-US competition over Middle East oil into the first superpower crisis of the emerging Cold War era. Trade expectations theory thus does a good job explaining Soviet behavior and the onset of the crisis.

This is not the whole story, however. Roosevelt and Hull knew the risks of seeking more influence in a country viewed by Russia and Britain since 1907 to be part of their geopolitical spheres. American leaders went in with their eyes open, meaning we need an explanation of US and not just Soviet behavior. This leads to the second conclusion: economic realism ultimately covers US behavior better than trade expectations theory. The Americans saw a threat, but it was more the threat of anticipated future oil dependency than fear of immediate British and Soviet moves to restrict US oil access. The Roosevelt administration worried that the British and Russians would gain undue influence in Iran if Washington did not act. All this was happening just when Roosevelt was seeking to encourage peripheral states to join the global economy. As economic realism would predict, by grabbing an opportunity to project power into the Iranian power vacuum, US leaders believed they could reduce Soviet and British influence while securing access for their own state—and despite the risks of sparking a trade-security spiral. As a result, the Middle East became the center of a geopolitical competition that would continue until the present day.

EUROPEAN INSTABILITY AND THE START OF THE COLD WAR STRUGGLE, JANUARY−JULY 1945

By January 1945, Roosevelt’s policies had left the United States in a highly favorable position—one that would allow his successor to begin shifting to a protocontainment stance by late June–early July. The United States now had a string of bases around the Eurasian perimeter, and it had helped resurrect the Iranian state to block further Soviet penetration. Moreover, by rejecting extreme versions of Morgenthau’s plan to break Germany into small agricultural provinces, Roosevelt had laid the basis for integrating Germany’s coal and industry into the larger Western European economy. It was this integration that proved essential to preventing Western Europe’s fall to Communism. At Yalta in February, Roosevelt conceded what he could not prevent: Moscow’s hold over Eastern Europe. But Yalta allowed him to get Stalin’s assurance that he would not insist on a Soviet role in Italy’s recovery. Stalin also agreed to enter the Pacific conflict three months after the European war ended, thereby minimizing American military losses that might hurt US postwar power. Stalin’s terms were moderate. In return for recognizing the KMT as China’s legitimate government and agreeing to hand Manchuria over to Chiang after Soviet troops withdrew, he sought only the use of a warm-water port on the Liaodong Peninsula and a role in running the trans-Manchurian railway (see Plokhy 2010; Harbutt 2010).17

Two main economic issues nevertheless hovered over US policy discussions from January to September 1945. The first was a Soviet request for a six billion dollar postwar loan to facilitate Russia’s rebuilding process. The second was Western Europe’s devastated economy and the fear that simple hunger and cold might cause its states to fall to Communism, either through elections or revolution. Two other economic issues were tied to these primary concerns: the reparations policy toward Germany, and question of US access to Eastern European trade and investments.¹⁸

On January 3, 1945, Soviet foreign minister Vyacheslav Molotov met with US ambassador Averell Harriman to request a six billion dollar loan to enable Russia to rebuild its industrial structure (FRUS [1945], 5:942–43). From spring 1944 onward, Harriman had been pushing Roosevelt to use postwar loans as a diplomatic tool. In Harriman’s oft-repeated language, Washington should adopt a “firm but friendly” stance, exacting political concessions as a “quid pro quo” for US loan guarantees.19 Roosevelt accepted this view, telling the new secretary of state, Edward Stettinius, on January 10 that it was “very important that we hold back on [the loan] and don’t give them any promises of finance until we get what we want” (quoted in Herring 1973, 170). Agreeing with Stettinius that the issue should not be raised at Yalta, Roosevelt studiously maintained his silence when the conference began a month later (Paterson 1973, 39–40; FRUS [1945], 5:967–68). The loan would not be approved during his remaining time in office, and Truman’s administration would delay dealing with it until 1946, at which time the idea was finally rejected for good. Needless to say, for a Soviet nation that had borne the brunt of Nazi aggression, this was a major disappointment as well as an early sign of the United States’ emerging economic grand strategy.

Yet the most important event in 1945 that would directly shape US policy and, as such, Soviet commercial expectations was the realization in April that Western Europe was suffering an economic crisis of epic proportions. On April 4, 1945, Harriman warned Roosevelt that Western Europe’s situation was giving Moscow an ideal vehicle to trumpet the superiority of its economic system. If the United States did not act soon, all of Europe might fall to Soviet domination. Thus US policy should shift to one of “taking care of our Western allies … first,” and only after that “allocating to Russia what may be left.” More than two years before the Marshall Plan, Harriman saw what had to be done. To stop Communism’s spread, Washington must use economic aid “to reestablish a reasonable life” for peoples who shared the United States’ liberal values (FD, 39–40).

Harriman’s report did not have its full impact until mid-April, when Assistant Secretary of War John McCloy returned from Europe to inform his colleagues that the conditions were far worse than thought, especially in Germany. In his diary on April 19, Stimson noted that Germany’s situation was “worse than anything probably that ever happened in the world. I had anticipated the chaos, but the details of it were appalling” (quoted in Leffler 1996b, 16). US officials knew that without a viable Germany, the whole operation in Europe would be compromised. Western European homes and factories needed German coal, especially if Russia restricted exports from Eastern Europe. McCloy and Stimson used their frequent meetings with Truman in April to keep him informed of European developments as well as warn him of the implications of inaction. One report to Truman was particularly direct, declaring that “there is complete economic, social, and political collapse going on in Central Europe, the extent of which is unparalleled” since Rome’s collapse. Countries such as France and Belgium “[could] very well be torn apart by the collapse now in effect over [central] Europe” (quoted in ibid., 16–17).

The new president was clearly absorbing these concerns and adjusting his behavior accordingly. On April 20, Harriman told Truman that a “workable basis” for US-Soviet relations was still possible, but Washington had to adopt a strong posture, which it could do because Moscow “needed our help in order to reduce the burden of reconstruction.” Truman agreed, stating that he intended to be “firm but fair” to get 85 percent of what he wanted.20 Two days later, Truman began two days of talks with Molotov. While pleasant on day one, on the second day Truman forcefully argued that Stalin must uphold his Yalta promises on Poland, and that without this, Congress was unlikely to approve of any legislation providing economic aid to Russia.²¹ Through straightforward linkage politics, he was now making it clear that to receive valuable postwar aid, the Soviets would have to start playing ball in Eastern Europe.

Despite his new rhetoric, Truman at this stage still sought US-Soviet postwar cooperation. His objective regarding Poland was quite moderate. Truman knew as well as anyone that he could not prevent Soviet domination of the country. Given this, over the next two months he pushed Stalin to make enough cosmetic concessions on Poland’s internal makeup to keep domestic public opinion on Truman’s side. Presumably Stalin, after hearing Molotov’s report, would see that placating public opinion was key to the securing of postwar loans. In late May he sent Hopkins to Moscow. He told Hopkins before he left that he wanted a “fair understanding” with Stalin, and Hopkins should make Stalin aware that what transpired in Eastern Europe “made no difference to US interests” except in terms of the larger peace structure. Hopkins should try to get Stalin to make some gesture, “whether [the Soviet leader] means it or not,” to “keep it before our public that he intends to keep his word” (quoted in Maddox 1988, 65).²²

Contrary to many accounts, Poland was not the deal breaker that led to the spiral of Cold War hostility. Indeed, the very agreement that Hopkins reached with Stalin in June 1945 demonstrates that Truman’s primary concern was getting a fig leaf for domestic consumption. Stalin agreed to include London Poles in the interim Polish government until elections were held, but only as a minority part of the government. In early July, Truman publicly announced with “great satisfaction” Washington’s recognition of the new Polish government. He did this even before he received any guarantee that elections would be held (they never were) and before recognizing the other Eastern European governments under Soviet control. More telling still, Truman made no objections in July when Stalin proceeded to try sixteen leaders of the Polish opposition.23

The true point of contention that would divide the two superpowers and lead to the Cold War was something broader and more geostrategic. This was the question of Western European stability and its link to Stalin’s economic plans, both for the Soviet Union and Eastern Europe. Washington would not only have to divert money and goods away from the emerging Eastern bloc toward Western Europe but it would see Stalin’s policy of binding states such as Romania and Bulgaria to Russia as a clear sign that East-West trade could not be used to prop up Europe’s Western half. As with so many cases in this book, it was the political realities of third parties that would lead to declining relations between great power protagonists.

Already by the end of April, US policy was becoming more at odds with Soviet interests as Washington scrambled to address Western Europe’s economic crisis. On April 30, the White House issued a long press release detailing a new internal report on Europe. The situation was grave. The “future permanent peace of Europe” depended on restoring this region’s economy, and the US economy itself would be deeply affected unless Western Europe could trade. Furthermore, “a chaotic and hungry Europe is not fertile ground in which stable, democratic and friendly governments can be reared.”²⁴ Truman’s message was obvious: without active US assistance, Western Europe might soon be lost to Communism.

As a first act, lend-lease aid would have to be diverted from supplying Washington’s key wartime ally—the Soviet Union—to the countries of Western Europe. On May 12, Washington announced the immediate ending of all lend-lease aid to Russia. Traditionalists might argue that this action could not have been seen as terribly unfriendly, given that the blanket denial of all aid was reversed the next day and US goods for Russia’s anticipated war against Japan were reinstated. As we will see, however, the Soviets correctly interpreted US behavior as indicating a disturbing shift in US strategic thinking.

On May 9, Secretary of State Stettinius had written his undersecretary, Joseph Grew, to contend that programs to assist what were already being called Western allies should have priority over aid to Russia, and that the United States should immediately curtail lend-lease shipments to Russia. US policy should be one of “firm[ness] while avoiding any implication of a threat” (FRUS [1945], 5:998). On May 11, Stimson met with Truman to convince him of the need for “a more realistic policy” regarding lend lease—namely, that this aid should end. Truman was “vigorously enthusiastic,” telling Stimson (diary, LC, May 11, 1945) to write up a memorandum on the subject. After talking with Stimson, Grew later that day presented Truman with a report underscoring that Washington was formally committed to keep some aid flowing until June 30—that is, supplies for a Soviet entry into the Pacific War. Yet all other lend-lease deliveries to Russia should end immediately and the goods “diverted to the approved supply programs for Western Europe.” Truman formally approved the memorandum.25 The next day, after internal debate within the committee managing lend lease, it was decided to interpret the Grew memo aggressively and instantly stop all shipments to Russia. Later that day, not only were ships at ports unloaded and those at sea turned around, but even goods slated for the Pacific war were blocked, too (Herring 1973, 204–5).

The Russian embassy reacted immediately. When Harriman and Assistant Secretary of State William Clayton got word, they secured Truman’s permission to countermand the order and allow supplies already loaded or at sea to proceed to Russia. Clayton explained to the Russian ambassador that the total cutoff had been a bureaucratic mistake that was now corrected (ibid., 205–6). But the sense that US policy had shifted was reinforced by a memorandum that Grew sent to the Soviet embassy that same day, May 12. It stressed that future lend-lease deliveries had to be “justified” based on Soviet military need and “in the light of competing demands for such supplies in the changed military situation.” (The actors making competing demands were obviously the Western Europeans.) The Russians were then told bluntly that any future aid—including goods for Moscow’s entry into the Pacific War—would not be covered by formal contract but instead simply provided to meet new military situations “as they arise” (FRUS [1945], 5:1027–28). The message was clear: the Soviets would get no more aid to facilitate reconstruction in Western Russia, and lend-lease assistance for the war against Japan would be dispensed on an ad hoc basis—that is, at Washington’s discretion.

As the above shows, the May 12 incident was not merely some administrative snafu. While the officials that day certainly went too far, there is little question that Truman and State Department hard-liners were pushing US policy in a new, significant direction. Lend lease was now going to be used to help struggling Western European states, most of which had played little or no role in the defeat of Nazism. The damage to Soviet expectations was significant. As George Herring (1973, 206) summarizes it, the “sudden, drastic, even rude, stoppage of shipments on May 12—without warning and without consultation—needlessly antagonized the Russians at a critical juncture in Soviet-American relations.”

There is little doubt that Soviet perceptions of US economic policies were certainly hurt by the May 12 incident. This quickly became apparent when Hopkins met with Stalin in late May. After controlling the first day’s proceedings, Hopkins on the second day asked if Stalin had any concerns.26 Stalin began by stating that recent US moves had created a “certain alarm” regarding Washington’s attitude now that the European war was over. One of the most obvious examples, Stalin continued, was the curtailment of lend-lease aid. If the United States was no longer able to supply such aid, that was one thing. But “the manner in which it had been done had been unfortunate and even brutal.” If the refusal to continue lend lease was designed to “soften [Russia] up,” then the Americans had made a fundamental mistake. Hopkins obfuscated, arguing that the May 12 cutoff was only a “technical mistake,” not a “decision of policy,” and there was no attempt “to use [it] as a pressure weapon.” Stalin refused to be placated. It was the action’s form that he objected to, and if only proper warning had been given, there would be no ill feeling. In a rare admission of the Soviet need for what the United States had to offer, he noted that such a warning “was important to [the Soviet government] since [its] economy was based on plans” (FRUS [1945], Potsdam 1:31–41).

One might dismiss Stalin’s words as simply an effort to guilt Washington into restoring the flow of what were, after all, essentially free goods. Yet Stalin’s admission that lend-lease goods were critical to Soviet planning and his larger recovery effort suggests that the Soviets were genuinely shocked as well as angered by the May 12 cutoff along with what it signified about the future. Through late May and June, the Soviets continually complained to Harriman about their inability to secure critical lend-lease goods and the diversion of aid to Western Europe.27 The State Department had no intention of moderating its policy, however. On June 26, Grew told the Russians that lend-lease supplies not only had to be justified by military requirements but also could now only be secured by “cash payment.” If the Soviets could not purchase the goods, Washington would take steps “to protect the interests of the United States by diverting machinery and equipment to other requirements”—meaning, most obviously, Western Europe (FRUS [1945], 5:1027–28). Hence by late June, Moscow understood that even lend-lease goods destined for the Pacific would be diverted to states in the US sphere playing little or no role in the war against Japan. Grew did not mention whether these states were more able to pay cash for such goods, for the simple reason that he knew they would be receiving them under the old lend-lease terms—free of charge. The new policy of building up the Western sphere at the expense of the Soviet recovery was clearly well under way.

Let me now turn briefly to the role played by Germany in the hardening of Truman’s foreign policy between April and July 1945. The redirecting of lend-lease aid and delaying of loans to Moscow were only two steps in the larger strategy to prevent Western Europe from slipping into the Soviet sphere. Equally important was the need to reestablish trade between Germany/Eastern Europe and the Western European states.²⁸ On May 16, Stimson held a critical meeting with the president on Germany—a meeting that Truman (1955, 235–36) would later recognize as a turning point in US policy. Stimson told Truman that

all agree as to the probability of pestilence and famine in central Europe next winter. This is likely to be followed by political revolution and Communistic infiltration. Our defenses against this situation are the western governments of France, Luxembourg, Belgium, Holland, Denmark, Norway, and Italy. It is vital to keep these countries from being driven to revolution or Communism by famine.

The immediate problem was that a food shortage would likely begin by summer 1945 and get much worse by the coming winter. It was therefore critical to make sure Germany was allowed to rebuild its industry and play its necessary role in the European economy. The fate of eighty million Germans along with their ability to form a wealthy and democratic society, Stimson stressed, would “necessarily swing the balance on [the European] continent.” Given what Germany had just done to Europe, reintegrating it into Europe was a touchy issue, requiring Russia’s cooperation. A revitalized German industry would need Eastern European food, and the Soviet army, after all, was sitting on the best agricultural lands of Central Europe. Washington “must find some way of persuading Russia to play ball” (Stimson diary, LC, May 16, 1945).

After that meeting, a new and radical policy shift was implemented. The nation that had just plunged Europe into the bloodiest war in world history was now to be quickly reintegrated into the European economy and allowed to restore its industrial base. For a Soviet government that had been promised at Yalta a weak and subdivided Germany as a necessary foundation for Russia’s long-term security, this was a highly problematic shift in US policy, to say the least. But with Truman now on board, there was no going back. On May 22, Truman sent a letter to the war agencies in Europe noting that the future peace of Europe depended on restoring the economies of liberated countries (Leffler 1996b, 17). On June 24, he wrote a detailed letter to Churchill arguing that the “coal famine” that threatened Europe meant that every effort had to be exerted to increase German coal exports. “I believe that without immediate concentration on the production of German coal we will have turmoil and unrest in the very areas of Western Europe on which the whole stability of the continent depends” (FRUS [1945], Potsdam 1:612–14). In a meeting on July 3, when Stimson (diary, LC, July 3, 1945) reiterated the importance of rehabilitating Germany, Truman said that was exactly the way he thought it should be.

Part and parcel of the new policy was a decision to deny the Soviets reparations from the western half of Germany. At Yalta, Stalin, Churchill, and Roosevelt had agreed that Germany would be forced to pay twenty billion dollars in reparations—ten billion of which was to come from the Western zones to help the Soviets rebuild. Through June and into July, however, knowing that reparations would undermine Germany’s ability to play its new role in Western Europe, US officials made it clear that any reparations from Germany’s western half would be forthcoming only after it had paid for necessary imports. The Soviets could see that this principle could be used to justify no reparation transfers at all. They fought back, but Washington refused to budge.29 At the Potsdam conference in July, after much discussion, the Russians were forced to concede. Despite Molotov’s willingness to reduce the ten billion dollar figure down to two billion—but as a guaranteed amount—the final agreement specified only a figure of 10–15 percent of Western Germany’s surplus industrial production (i.e., after imports) (Copeland 2000b, 155–56). The agreement essentially ensured that there would be little coordination between the Western and Eastern German zones. The Soviets could take what they wanted from Eastern Germany—a policy that of course would only hurt their sphere’s overall strength. But they would receive little from the West. Since the West held most of Germany’s industrial strength, this was a major blow to Soviet efforts to rebuilt Russia’s industrial infrastructure.

As Carolyn Woods Eisenberg (1996) observes, Washington’s policy constituted a clear breach of the Yalta commitment regarding reparations, which was designed to recognize the great sacrifice made by Russia in defeating Nazi Germany. Now, just three months after Hitler’s defeat, Washington was helping to build up the western part of Germany as well as what were now called the United States’ Western European allies. To be sure, the financing that was supplied to Germany and the other Western European states was not ultimately as substantial as the billions of Marshall Plan dollars that flowed to Europe after spring 1948. Still, because it bypassed Congress and was not held up by legislative wrangling, it was immediate and decisive in reversing the economic chaos threatening to undermine the Western sphere. The West would be saved from the specter of Communism. If the Soviets found as a result that their economic recovery was impaired, they would just have to learn to live with it.30

THE CRISES AND TENSIONS OF THE EARLY COLD WAR, 1946–56

As we have seen, declining expectations regarding future trade with Western Europe if it fell to Communism played a critical role in driving US actions that in turn greatly damaged Soviet expectations about future trade and credit coming from the West. The United States, as a result, must be seen as the superpower most causally tied to the onset of Cold War tension, even if one can applaud Truman’s actions as the prudent response to a deteriorating situation. Stalin had hoped to use negotiations through the first half of 1945 to rebuild his nation and consolidate his sphere. But by the fall, he began to react to Washington’s strategic shift. We first see Stalin’s change of policy with regard to Far Eastern questions. After Hiroshima, Truman had not only used US marines to help Chiang retake Manchuria. He had acted to exclude Russia from the occupation of Japan’s four main islands, despite the fact that Moscow’s entry into the war gave it a claim to share in occupational duties. With Japan having attacked Russia in 1904, 1918, and the late 1930s, Stalin had reason to fear a renewal of Japanese militarism. So he had Molotov demand a role in Japan’s occupation at the foreign ministers’ meeting in September. Secretary of State James F. Byrnes held firm, however. In October, Stalin told Harriman that if Moscow was denied its rightful role regarding Japan, it would be forced to pursue a “unilateral course” in Asia. Harriman, worried that US policy had become too hard line, warned Washington that US intransigence would only heighten fears that the United States was using Japan to contain the Soviet Union.31 His warnings were ignored, setting the stage for the first crisis of the Cold War era.

The Iranian Crisis of 1946

It was soon after tensions flared over the Far East that Stalin began to take a more assertive stance with regard to the long-simmering question of Iran. In late 1944, one will recall, Tehran had postponed discussion of oil concessions until the great powers removed their troops as promised—that is, within six months after the war’s end. US troops were largely gone by December 1945. The Soviet forces, though, were still in the north by year’s end, and seemed to have no intention of leaving by the early March deadline. For Moscow, the reality of the situation was clear: while the United States and Britain could promise large infusions of advanced technology and connections to world markets, the Soviet Union had few bargaining tools in its favor. Its only point of leverage was the threat to continue military occupation until Tehran agreed to an oil concession. Thus from late November 1945 onward, Moscow blocked all efforts by Tehran to quell unrest in the Soviet-occupied northern provinces while refusing to remove Soviet troops until a concession was granted (Yegorova 1996).

The maneuvering turned into a low-level crisis in March 1946 when the Iranians, with US support, presented their case to the UN Security Council. The Soviet delegates walked out of the proceedings. A few weeks later, on April 4, Moscow and Tehran signed an oil agreement promising an oil concession in the north in return for a troop evacuation. By May 9, Soviet forces had been withdrawn. US officials celebrated what they saw as the first use of hard-line pressure to coerce a Soviet pullback from a key strategic area. Yet in reality, as Yegorova’s work shows, the results obtained were close to what Moscow had been seeking for almost two years. Moscow was still importing oil in 1945–46 from Eastern Europe, and was still far from achieving the strong export position in oil and natural gas it would enjoy by the late 1950s. The agreement of April 1946 was certainly not a clear-cut victory for Moscow. But it did seem to ensure that the northern provinces would have a Soviet rather than British-US presence into the future (ibid.).

This crisis, like the Iranian one of 1944, was fundamentally the result of great power maneuvering for economic position in the postwar world. As in 1944, Washington wanted to block Soviet penetration of Iran as it increased its own control in the region. The State Department emphasized to Truman through summer and fall 1945 what it had told Roosevelt for two years: that Saudi oil—what one report to Truman called “a stupendous source of strategic power, and one of the greatest material prizes in world history”—had to be protected (FRUS [1945], 8:45–48; Leffler 1992, 80). While Washington was ultimately prepared to give London primary control of Iran’s oil, it could not allow Russia to have any role—military or economic—in such a pivotal state. Yet Moscow’s fears of being denied access to Iranian oil made it essential to maintain at least some presence in the country. Trade expectations, therefore, were driving both sides to struggle over Iran’s future. The economic realist perspective also has some validity here, since both superpowers saw Iran as a power vacuum that had to be filled. That Iran in the end reneged on its promise of a concession does not mean the Russians did not believe in April 1946 that they had secured economic access and could withdraw Soviet troops. Indeed, the crisis resolved itself precisely because Tehran had played on Soviet expectations of future access in order to achieve an agreement that undercut Moscow’s only bargaining tool—its military presence on Iranian soil. Once Soviet troops were gone, Iran could break the agreement and seek better deals from the West, knowing that Moscow would fear that reoccupation might spark a larger war. Tehran won this round. But as we will see, the Soviets were not through with Iran by any means.

The Berlin Crisis and Korean War

The years 1947–48 saw another jump in overall Cold War hostility. In February 1947, the British government informed Washington that it could no longer support Turkey or Greece given its severe budget deficit. The Truman Doctrine of March and Marshall Plan of June borrowed directly from the strategic logic set down in 1944–45: if the Soviets were able to pull peripheral nations such as Turkey and Greece—or worse, Western European states—into their sphere, the United States would lose access to the trade and investments needed to sustain long-term power. Diplomat George Kennan’s arguments in 1946–47 about the importance of US dominance over the “military-economic potential” of Eurasia only reinforced these fears (Leffler 1992, 143; Gaddis 1972). As Leffler (1992, 146) puts it, while Truman had domestic reasons to couch his doctrine in stark ideological terms, the intensified crusade to protect the periphery was driven by “deeply rooted geopolitical convictions that defined national self-interest in terms of correlations of power based on the control of critical resources, bases, and industrial infrastructure.” In April 1947, for example, the State-War-Navy Coordinating Committee (forerunner to the National Security Council [NSC]) stressed the significance of global economic and military aid. “It is important to maintain in friendly hands,” the committee report argued, “areas which contain or protect sources of metals, oil, and other national resources” and that represent “substantial industrial potential” (ibid., 147–48).

Russia was an authoritarian state that had been practicing hard-core neomercantilism for 150 years. The United States, conversely, was a democratic state that could not simply coerce allies into handing over goods or accepting US products. Peripheral states could only help sustain high US economic growth through ongoing trade ties. Yet by 1947, it was apparent that many states around the world could no longer afford to trade: they simply lacked the dollars to buy US goods. Western Europe was a case in point. In 1946, the Western Europeans imported approximately $4.4 billion of US goods, but exported only $900 million back. Bridging loans had helped in the short term. But by early 1947, US officials expected that the Europeans would have to reduce US imports by as much as 80 percent unless larger cash infusions were provided. Greater central planning and relative autarky would follow, and perhaps Communist revolutions. As the State Department’s committee on the European Recovery Program noted, Western European states falling to Communism would set up restrictive trade treaties with Russia. The Soviets would then leverage this trade to control the region’s vital resources. Scandinavia, North Africa, and the Middle East, given dependence on Europe, would then have to follow suit, radically shifting the overall economic balance of power in Russia’s favor (ibid., 159–63).

The Marshall Plan and Truman Doctrine were, as Truman famously remarked, two halves of the same walnut; both were essential in the maintenance of US economic and geopolitical strength over the long term. The Berlin Crisis of 1948 arose out of this general context of economic competition, although it was not directly a function of economic dependence per se. Because I have covered this case elsewhere (Copeland 2000b, chap. 7), I will only briefly summarize its security-driven roots.

By winter 1947–48, Germany’s importance to Western European recovery loomed larger than it had even in 1945. At the London Conferences of January–March 1948, Britain, France, and the United States agreed to unite their German occupation zones, and hand control over to an independent West German government.32 For Moscow, this was highly problematic. A resurgent West Germany not only posed a long-term military threat but in the short term, large flows of refugees from the Soviet zone had been increasing the economic strain on the overall Eastern bloc. When Britain and the United States announced currency reforms in mid-June 1948 as a preparatory step to creating a unified West German state, the Soviets reacted. They blockaded all ground traffic to Berlin, hoping this would pressure the West into reversing its recent decisions. The United States understood that the Soviet Union was reacting defensively to Western moves. As Moscow ambassador Walter Smith wrote to Washington in July, the Soviets desired “a return to [the] status quo,” and would forgo a battle for Berlin if the London agreements were canceled (FRUS [1948], 2:984–85).

In discussions over the next two months, the constant Soviet demand was for the agreements’ reversal, but Washington held firm. By June 1949, the Soviets ended their blockade and accepted the new status quo, ending the first Berlin Crisis. Economic factors were a primary force in the Soviet initiation of the crisis. Moscow foresaw that the unification of Western Germany would cause a relative loss of economic power for Russia. But it was not Eastern German dependence on trade with the West that made the Soviets fear the London agreements. They simply knew that these agreements would create a strong West Germany, improve Western growth, and fuel the exodus of East German citizens to the West. In short, fears of economic decline drove the process, but these worries were not a function of interdependence per se.

Berlin 1948 is a problematic case for liberalism. US-Soviet trade levels had been plummeting. US exports to Russia had dropped from $3.5 billion in 1944 during the height of lend lease to $149 million in 1947, and a mere $28 million in 1948 (FCY).³³ With economic realism, such low trade by 1948 would make dependence fall out as an important variable. With liberalism, in contrast, the ending of any economic restraint on Soviet behavior should mean that at least in the short term, unit-level drives such as greed and ideological expansion should become the primary propelling forces behind Soviet actions. Yet it is clear that Moscow was reacting out of security fears, desiring only a return to the status quo prior to the London agreements. The case also poses problems for trade expectations theory. Falling Soviet expectations for future trade should have pushed Moscow into trade-related expansion to recoup economic losses caused by US sanctions. Soviet coercive behavior, however, was focused on the economic implications of the London agreements for Eastern Germany and the Soviet bloc, independent of East-West trade per se. The fact that security fears were determinative of Soviet action aligns with the assumptions of trade expectations theory. But the case shows that in certain situations, other sources of decline can overwhelm trade expectations in relative salience.

The next big crisis of the Truman era was the outbreak of the Korean War in June 1950. As with Berlin 1948, if we were to rely only on correlation, the Korean War might appear to be a good case for both trade expectations theory and liberalism. The former would see declining Soviet trade expectations leading to security fears that pushed Stalin to accept the risks associated with a North Korean attack. The latter would stress that the low trade level reached by 1949–50 helped unleash preexisting pathologies in the Soviet regime. Yet the evidence suggests that changing superpower trade was not part of Stalin’s calculus over Korea in 1949–50. Thus like the Berlin case, the trade expectations argument lacks salience, even if it is not wrong per se. Still, the traditional view of the Korean War, which sees Stalin grabbing an opportunity to expand once Washington placed South Korea outside the US defense perimeter, seems to fit liberalism nicely. In the low-trade environment reached by 1949–50, Soviet greed and ideological motives were unleashed as the economic restraints on Soviet behavior were removed. The fact that the Communist bloc was seeking a distinct territorial gain in 1950, while in 1948 Stalin was only trying to counter Western moves, lends even more credence to the perspective that Moscow was aggressively seeking to expand Communism’s scope for reasons going well beyond “security.” While Korea 1950 seems like the only good case for economic liberals across the entire Cold War era, new evidence from Soviet archives suggests that Stalin was driven more by defensive motives than by greed or ideological ends.

Trade did indeed keep falling after Berlin, from $28 million in US exports to Russia in 1948 to $7 million in 1949, to a mere $700,000 by 1950 (FCY). This reflected Washington’s imposition in 1948–49 of formal barriers to US-Soviet trade and the establishment with Western allies of the infamous CoCom restrictions on East-West trade. As Michael Mastanduno (1992) has argued, these actions were pure economic warfare: the United States and its allies were seeking to block the sale of almost any product that might increase Soviet economic and thus military power. This declining trade, though, had apparently no impact on Stalin’s decision making regarding Korea.

Arguments for the Korean War typically center on Secretary of State Dean Acheson’s important foreign policy speech on East Asia on January 12, 1950 as the trigger for war. The speech was designed to describe a new intensified program of containment for East Asia. A “defense perimeter” existed from Japan through the Philippines, he noted, with Washington committed to defending the states within it. According to most accounts, by leaving South Korea outside the perimeter, Acheson gave the Soviets and North Koreans a green light to invasion. Extended deterrence cannot operate, after all, if the United States refuses to commit itself to a state’s defense.34

The Soviet documents nonetheless indicate that Moscow was already switching to a more hard-line policy in Asia ten days before the Acheson speech and in fact saw the speech as a sign that Washington was becoming more involved in East Asian affairs, not less. Mao had arrived in Moscow in mid-December 1949 with the hope of negotiating a Soviet-Chinese alliance, only to be told bluntly that he should expect no such thing. All the senior Russian officials then summarily ignored him until a bizarre Soviet volte-face on January 2. That day, out of the blue, the Soviets reversed themselves and agreed to work toward the immediate conclusion of an alliance. This dramatic shift cannot be explained as some bargaining tactic. The Soviets arriving at Mao’s door that day (Molotov and an associate) did not ask for anything in return but instead merely caved to Mao’s primary demand. And they did so despite the obvious risks of inflaming US-Soviet relations—the concern that had previously been holding them back. The best explanation for the policy shift seems to be the startling revelations in the New York Times on January 1, 1950 that Washington was embarking on new hard-line policy in East Asia. At the time, the New York Times was the dominant US newspaper for foreign news, serving as a critical source for Soviet leaders. Its primary reporter was James Reston, an individual known to have personal connections with key players such as Acheson and Truman. The front-page article by Reston on January 1 provided leaked details on a December 29 NSC meeting in which Truman approved of a more aggressive Far Eastern containment policy.

According to Reston, the new strategy was designed to “widen the breach” between Stalin and Mao. It would also stop Communism in Southeast Asia and establish via treaty US military bases in Japan.³⁵ As part of the deal, Truman would likely allow Japan to remilitarize. Next to Reston’s piece was another article discussing General Douglas MacArthur’s address to the Japanese people, in which he suggested that with Communism on the march, Japan could not be expected to accept complete disarmament.36 The direction of the shift seemed clear. As yet another Times article that day opined, Washington was embarking on “a more vigorous Oriental policy,” with Japan as its critical link.³⁷

Such news, given past Japanese aggression, would have been enough to push the Soviets to change direction and agree to a Soviet-Chinese alliance. Such an alliance would keep China in the Soviet fold and help deter US attacks from future bases in Japan.³⁸ Supporting this interpretation is the fact that no other changes in US or Chinese behavior occurred between late December and January 2 to explain the shift in Soviet behavior. By the process of elimination, we can say with fair confidence that it was Stalin’s fearful reaction to the revelations in the New York Times that provoked the policy change.

Yet if Stalin was reacting defensively, then the January 12 speech still seems like a puzzle for any theory emphasizing Soviet security concerns: if South Korea was placed outside the US defense perimeter on January 12, why would the Soviets worry about this tiny nation? It now seems clear, however, that the Soviets did not even know Korea was outside the perimeter when they formulated their key decisions in January. Since the text of Acheson’s speech was not released for eleven days, Moscow had to rely on US press reporting, with the New York Times once again the best source. The New York Times article on January 13 covering the speech mainly focused on Acheson’s charges of Russian imperialism in East Asia, specifically against China. Russia was trying to annex four northern areas of China in an act, Acheson said, that must bring on the Russians “the hatred and righteous anger of the Chinese people.” Such statements supported the previous reports in the New York Times that Acheson and Truman were striving to divide China from Russia.

The article later briefly covered Acheson’s discussion of the so-called defense perimeter running from Japan to the Philippines. Acheson commented that with regard to other parts of Asia, “no person can guarantee these areas against military attack.” After North Korea’s attack on June 25, critics and historians used such lines to argue that Acheson had given Moscow a green light to invasion.³⁹ Yet Acheson went on to stress that should any area outside the perimeter be attacked, this would invoke “the commitments of the entire civilized world under the Charter of the United Nations.” In short, even if the Soviets had believed Korea was outside the perimeter, this statement would have been a red flag: at this time the United States clearly dominated the United Nations, often using it to promote US interests in Korea.40 To say that the United Nations would resist any aggression was close to saying, from Moscow’s point of view, that the United States was committed to Korea.⁴¹

But here is the real shocker: the New York Times (January 13, 1950, A1) mistakenly reported Acheson as saying that “in the southern part of Asia, unlike Japan or Korea,” the United States was just one of many nations that would provide assistance through the UN mechanism. Thus, according to the New York Times, South Korea was actually inside the defense perimeter! The newspaper’s reporters continued to hold to this position through winter and spring 1950, even after the complete text of the speech was released.⁴²

A detailed record of Molotov and Mao’s conversation on January 17 shows that the Soviets did indeed have a different impression of Acheson’s speech than is commonly supposed. Not only did Molotov make no mention of the defense perimeter or Korea, he was totally preoccupied with Acheson’s hostile remarks on Russian imperialism. Mao said that he was puzzled by the speech: was it a “smoke screen” to facilitate a US occupation of Taiwan? Molotov replied that “the Americans [were] trying, with the help of slander and deception, to create misunderstandings” between Russia and China. He asked Mao to denounce the speech as an “insult” to China. Mao agreed to do so. The Russian fear that Washington might detach China from the Soviet bloc, as it had with Tito’s Yugoslavia, is tangible. It is thus not surprising that on January 22, Stalin made yet another unilateral concession, telling Mao he would jettison the 1945 agreements so distasteful to Chinese leaders (the ones giving Russia a port in Manchuria and joint control of its railways) (CWIHPB, 8–9:232–35).

Acheson’s strategy had backfired: instead of detaching China from Moscow, the secretary’s comments had led to a Russian-Chinese alliance and increased suspicions of US intentions. The Korean Peninsula now had more direct salience for all involved. Back in March 1949, Kim Il Sung had first appealed to Stalin to support a war on South Korea. Stalin had rejected the idea, telling the North Koreans “that they need [to exercise] caution” (ibid., 5:5). The Soviets pushed Kim to achieve victory through subversion, not war. In September 1949, Kim again sought a go-ahead, since the southern insurgency was failing. He was again told to exercise caution (ibid., 5:6–8).

Through fall–winter 1949–50, the South completed its annihilation of the insurgency. Then on February 9, after appeals from Truman, Congress approved another $60 million in economic aid for South Korea in addition to the $60 million already earmarked (New York Times, February 10, 1950, A1). On March 7, Truman asked Congress for another $100 million for South Korea for fiscal year 1951, starting July 1, 1950. Translated into current dollars, these were significant injections of aid: the equivalent of more than $1.4 billion by July 1, 1950, and another $1.1 billion thereafter. Acheson told the Senate Foreign Relations Committee in early March that this assistance symbolized US support for emerging democracies. Moreover, “it was generally recognized … that [the United States] had ‘special responsibilities’ in South Korea” due to the 1943 Cairo Conference “just as it had [with] Japan” (ibid., March 8, 1950, A6).

The US public commitment to South Korea was not only strong; it was growing. For Stalin, who doubted North Korea’s ability to survive, this could only have suggested one thing: if he continued to hold Kim back from war, South Korea would grow to dominate the peninsula (see Goncharov, Lewis, and Xue 1995, 140). It had twice North Korea’s population, and with US economic help it would surely overtake it in the long term. Yet in the short term, according to embassy reports, North Korea had significant military superiority. As historian Charles Armstrong (2003, 238–39) relates, in Kim’s view South Korea “was vulnerable at the moment, but might be more formidable in the future,” and as such, needed to be defeated now.

By mid-March, Stalin had made up his mind. On March 18, he wrote Kim directly to inform him that he could now supply the arms needed for an attack. A few days later, Stalin agreed to meet Kim in Moscow to finalize the details. Kim had his go-ahead by mid-April for the war, pending Mao’s approval. On May 13, Kim met with Mao in Beijing, telling him that he had received a directive from Stalin “that the present situation had changed.” Puzzled by this abrupt policy shift, Mao asked the Soviet ambassador for clarification. Stalin wrote Mao directly the next day, confirming that he had told the North Koreans that given the changed international situation, they could proceed with reunification (CWIHPB, 4:61). Kim left Beijing with Mao’s approval, and on June 25 the invasion of South Korea began.

The origins of the Korean War thus appear to be quite similar to those of the Berlin Crisis of 1948. The Soviets acted more out of fear than from a desire for gain or to exploit a perceived Western weakness. Stalin had been cautious about a North Korean attack from April 1949 onward. But with new evidence that the United States was poised to increase its Far Eastern military presence and build its sphere’s strength through aid to frontline countries such as South Korea, the Soviets had to act. The evidence offered here only briefly summarizes the documentary support I provide elsewhere (Copeland, forthcoming). It shows, however, that fear of the future rather than greed or ideological motives was primary in the Soviet leadership’s thinking. The argument that falling trade can unleash domestic pathologies is called into question, notwithstanding that Korea constitutes a “most-likely” case for liberalism. Yet the case, as with Berlin 1948, also demonstrates that the trade expectations argument can lack salience when other powerful determinants of decline are hanging over a decision maker.

The Iranian and Suez Crises, 1951–56

The Iranian Crisis of 1951–53 and Suez Crisis of 1955–56 should be analyzed together. Both were part of a larger geostrategic struggle over the Middle East, and unlike the Berlin and Korean crises, dependence and trade expectations did play important causal roles in shaping US behavior. There are many commonalities across the two cases. Both crises were fundamentally about the flow of Middle Eastern oil. And as in so many of our cases, it was exogenous third-party concerns that drove the great powers. Iran and Egypt were led by nationalistic leaders wanting control over something of significant value to a US ally: in the Iranian case, the British-owned Anglo-Iranian Oil Company; and in the Egyptian case, the British-dominated Suez Canal Company. Moreover, in both cases there were worries that Soviet ties to the key leaders in power might permit Moscow ultimately to deny US access to the region’s oil and its most important producer, Saudi Arabia. Finally, when the crises reached their heights in 1953 and 1956, respectively, the United States was led by the same individual, Dwight D. Eisenhower, supported by almost the exactly the same set of advisers, including the influential secretary of state John Foster Dulles.

Yet despite these similarities, US responses to the two crises were radically different. In the Iranian case, Eisenhower authorized a coup against the government. In August 1953, a military general with active Central Intelligence Agency (CIA) support overthrew the Iranian leader Mohammed Mossadeq—a risky move that could have sparked a larger superpower escalation. Eisenhower’s behavior in the Egyptian case was much more moderate. He rejected any effort to overthrow the government, and took a strong stance against any intervention by Britain, France, or Israel—the states most interested in using force. When these states did in fact attack Egypt in late October–early November 1956, Eisenhower joined Moscow in condemning their actions in the UN Security Council, and then applied economic sanctions so devastating that Britain and France soon ended their occupation.

What explains why the US government would adopt such different stances to deal with two seemingly similar problems? To my knowledge, there is no political science work comparing the two cases on this issue. And while historians of US Middle East policy have covered these crises thoroughly, they typically treat them separately and fail to answer the posed question. I show that differing trade expectations for the future, filtered through fear of Soviet advances in the Middle East, explain the differing US responses across the cases. In both instances, US elites were wary of overreacting to the nationalizations undertook by the particular governments of the time. They worried that a strong response in support of Britain would only fuel anti-Western hatred, hurting the United States’ position just as Moscow was posing as the champion of “anti-imperialist forces” around the world. In Iran, however, the domestic situation was in chaos by 1952 as British oil sanctions destroyed Iran’s economy. By the end of Truman’s presidency, there was a tangible fear that if Washington failed to act, the country would fall to Communists already aligned with Moscow. With Iran and its oil in their control, the Soviets would then be poised to go after other regional actors whose oil went largely to the United States and continental Europe. Given this threat, Eisenhower chose to implement a plan for Mossadeq’s overthrow first discussed in the waning days of Truman’s presidency.43

In the Egyptian case, in contrast, there was never any serious risk that Communists would seize control of the government. Egypt’s president, Gamal Abdel Nasser, was certainly viewed as an unpredictable leader who employed Arab nationalism to build his domestic and regional popularity. But there was no evidence that Egyptian Communists were strong enough to overthrow him. Indeed, despite accepting military and economic aid from the Soviet bloc, he had successfully repressed the Communist Party at home. When Britain began pushing for military action to counter Nasser’s announced nationalization of the Suez Company, therefore, Eisenhower saw the risks as much greater than any benefits. A British-led attack or coup effort would enflame Arab sentiments across the Middle East, and if Washington was seen to support such moves, its reputation would be greatly damaged. Moreover, Nasser was acting quite moderately: he offered compensation for the nationalization of the Suez Company; assured the world that the canal would be kept open; and in September, proved that Egypt could pilot ships through the canal without European help. In short, from Eisenhower’s perspective, Nasser did not pose a threat to European or US oil, even if the president and his secretary of state personally disliked the leader and what he stood for.

The British strongly disagreed with Eisenhower’s assessment and believed the threat to trade was high. Yet Eisenhower saw more clearly than London that Nasser had every interest in keeping trade flowing—especially since he needed the canal’s revenue to fund his Aswan Dam project. The Egyptian situation was therefore quite different from Iran in 1953, where the threat to oil was real. Different expectations of future trade across the two cases explain nicely the different postures assumed by the US government. As we will see, economic realism and economic liberalism fail to explain either case, let alone the variation between them. Contrary to economic realism, the United States was dependent in both cases, yet it acted only in Iran, and only when things got bad. And US behavior was propelled by security fears, not the unit-level factors that liberals propose.

The US postwar obsession with the Middle East, as we saw earlier, can be traced to Roosevelt’s concern with growing US energy dependence and renewed Russian interest in the region. After India’s independence in 1947, the impending collapse of European imperial influence around the world foreshadowed an ominous new chapter in the superpower struggle. In September 1948, the CIA distributed its first major analysis of this new situation. The report’s opening paragraphs sketched the logic that would guide US thinking about the so-called third world for the next three decades. The breakup of the colonial system had “major implications for US security, particularly in terms of possible world conflict with the USSR.” If the United States did not play its cards right, it could easily be “[deprived of] assured access to vital bases and raw materials in these areas.” The Soviet Union, as a noncolonial and newly industrializing power, was effectively positioned to “champion the [anti]colonial cause,” meaning that emerging states might align with Moscow, “adversely affect[ing] the present [East-West] power balance” (CIA [HT], 219–34).

Given this new reality, Washington had to act carefully with regard to growing Middle East nationalism or else it would be seen as “just another imperialist power.” In 1948–49, major Middle Eastern oil producers, including Iran and Saudi Arabia, began to renegotiate agreements with foreign multinationals to increase their share of oil profits. In July 1949, Tehran and London’s Anglo-Iranian Oil Company negotiated an initial deal seen by most Iranians to fall far short of Iranian demands. The Majlis refused to ratify the agreement. In June 1950, the issue was referred to a special committee chaired by Mossadeq, the leader of the National Front, a coalition of nationalist groups. In November, the committee repudiated the agreement, announcing that only nationalization would secure Iran’s interests (Painter 1986, 172–73).

The Truman administration was concerned that Britain’s refusal to accept even limited nationalization would cause unrest that Moscow could exploit via the Communist Tudeh Party. A July 1950 memorandum to Truman from R. H. Hillenkoetter, CIA director, stated the problem starkly. Soviet forces were “in a position to overrun Iran without warning.” Should things get worse and Tudeh assume power, the Soviets would gain access to Iran’s great oil resources, and be positioned to penetrate the rest of the Middle East and the Indian subcontinent.44 And things did indeed begin to deteriorate. Prime Minister Ali Razmara, who had supported a go-slow approach, was assassinated on March 7, 1951. Eight days later, the Majlis voted to nationalize the Anglo-Iranian Oil Company. On April 28, Mossadeq was chosen as Iran’s new prime minister, and three days after that the new law went into effect with the shah’s approval (Painter 1986, 171). London rejected the nationalization, kicking the crisis into high gear.

Truman’s position over his last two years in office remained consistent. Britain should accept nationalization to avert unrest that might bring the Communists to power, but Iran should provide compensation as well as assure British and US companies that they could still sell Iranian oil around the world. Iran and the Middle East had simply become too important to the world economy. A January 1951 National Intelligence Estimate noted that if Middle Eastern oil were cut off, not only would the United States suffer “substantial rationing” but Western Europe would have its industrial expansion halted, too, leading to “profound changes” in its economic structure.⁴⁵ The latter implication was of particular concern, given that Washington’s primary goal since 1944 had been to stabilize Western Europe to prevent it from going Communist.

Through summer 1951, Truman attempted to broker a deal between Iran and Britain via envoy Harriman, but London and Tehran remained intransigent. Churchill’s return to power in October only made things worse. Exports of Iranian oil had already fallen off, but Churchill acted to ensure Iran could not sell oil to non-British oil companies. By year’s end, a total blockade of Iranian oil was in place. This would have an absolutely devastating impact on the Iranian economy through 1952 and into 1953.

The Truman administration was now caught between a rock and a hard place. Through 1952, Truman would continue his efforts to broker a British-Iranian agreement. The diplomatic discussions went nowhere, however, and Iran continued its descent into domestic chaos (Yergin 1991, 465–66). In August 1952, Secretary of Defense Robert Lovett began to push for a dramatic change in policy. With Britain no longer powerful in the region, he argued, the United States must accept new political, economic, and military commitments to prevent Iran from going Communist (Leffler 1992, 483). By fall 1952 Acheson and Truman, fed up with British and Iranian intransigence, came around to Lovett’s point of view. When the two met with president-elect Eisenhower on November 18, Iran was second on the agenda. Acheson told Eisenhower that both London and Tehran were being “wholly unreasonable,” and their standoff had led to the “very grave disintegration” of Iran’s political structure. Acheson vaguely stated that he and Truman were therefore “going forward under the President’s authority to consider what [Washington] alone might do to solve the problem.”46

What Acheson did not tell Eisenhower is that the State Department was already gearing up to implement Lovett’s radical shift in policy—one that would leave no options off the table, including military force. The day after meeting Eisenhower, Truman met with his NSC. The defense department’s deputy secretary, filling in for Lovett, told Truman that it was now necessary for the United States “to proceed unilaterally … to get Iran back on our side.” While he hoped nonmilitary measures would work, his department had already reached tentative conclusions on the feasibility of military options (FRUS [1952–54], 10:526). The next day, a NSC document on Iran, NSC 136/1, was issued for Truman’s approval. The loss of Iran to the Soviet bloc, it contended, would allow Moscow to seriously threaten Middle Eastern oil. Thus, if Communists try to seize power, the United States should support the non-Communist side via actions that included “military support” (ibid., 10:529–34). Planning for a covert operation began that November through contacts with the British government, such that by the first month of Eisenhower’s administration, London and Washington had agreed on the details of a coup plan and had selected Teddy Roosevelt’s grandson, Kermit Roosevelt, to oversee its implementation (Painter 1986, 189–90; Rubin 1980, 77–79).

The deteriorating situation in Iran and threat to oil had, by the end of the Truman administration, caused it to shift toward risky military and subversive options. While everyone still hoped the problem could be solved without war, the final section of NSC 136/1 showed the true seriousness of the problem. Should Moscow move forces into Iran, Washington would have to assume that “global war is probably imminent.” It would then have to “[take] action against the aggressor … in the manner which would best contribute to the security of the United States” (FRUS [1952–54], 10:533–34). With the resources of not just Iran but also the whole of the Middle East at stake, the United States was ready to go to war should Russia try to muscle its way into the region.

The end of the story can be told in short order. Even before Eisenhower (1963, 160–61) came into office on January 20, 1953, he was already working on a solution to the problem. London and Washington had a coup plan in place by February. By early March, it was clear that even if Mossadeq managed to hold on to power, he could only do so with Tudeh support.47 At a NSC meeting on March 4, Dulles told Eisenhower that if Iran succumbed to Communism, “there was little doubt that in short order the other areas of the Middle East, with some 60% of the world’s oil reserves, would fall into Communist control.” The talk around the table was extremely pessimistic. The secretary of the treasury asked Dulles if he already believed Iran would go Communist. Dulles replied affirmatively, prompting Eisenhower to argue that US forces could be moved into neighboring states. The risks were obvious. If the United States was compelled to move forces into Iran itself, Eisenhower noted, Moscow would invoke its 1921 treaty of alliance, and “then we would find ourselves at war with Russia.” Yet if the United States failed to act, he “feared that the United States would descend to the status of a second-rate power” (FRUS [1952–54], 10:692–701).

In April, a million dollars was sent to CIA operatives in Tehran to bring about Mossadeq’s fall. In mid-July, Kermit Roosevelt entered Iran from Iraq to finalize arrangements for “Operation Ajax.” Street demonstrations in mid-August were going in Mossadeq’s favor, and the shah fled the country. But on August 18–19, with CIA help, General Fazlollah Zahedi was able to arrest Mossadeq and assume control of the state. The shah returned triumphantly to Iran, and the Soviets wisely chose not to contest the outcome. Within two years a consortium made up of US, British, and Dutch oil firms agreed to share profits with Iran’s nationalized oil company, thereby paralleling similar recent deals with other key oil-producing states, including Saudi Arabia (see Kinzer 2003; Yergin 1991).

The Iranian Crisis was ultimately resolved without an escalation to regional war, or worse. Yet both Truman and Eisenhower were willing to risk such an escalation to prevent Moscow from gaining a foothold in the Middle East. Third-party instability had created a situation where a negotiated solution had become highly unlikely. Declining expectations of future trade, tied to the West’s growing dependency on Middle East oil, drove the increasingly severe policies of both presidents. With dependence levels constant, economic realism cannot explain the shifts in US policy. Liberalism cannot explain US leaders’ risk-taking behavior during a period of high dependence, or the fact that security objectives were predominant. That the world avoided a war has more to do with Soviet caution, perhaps facilitated by Stalin’s death in March 1953, than with US restraint. Truman and Eisenhower were preparing themselves for a big fight, and economic fears for the future were determinative.

The Suez Crisis of 1955–56 mirrors the above, with the United States again finding itself in a crisis because of Britain’s unwillingness to accept the loss of a Middle Eastern asset. On June 26, 1956, President Nasser of Egypt announced the nationalization of the Suez Canal Company, the organization that had run the canal for almost eighty years. The British government under Prime Minister Anthony Eden instantly began to organize a military response, drawing into its plan the governments of France and Israel. Some two-thirds of all oil consumed by Western Europe passed through the canal. The British were worried that if they allowed Nasser to grab the waterway, not only would Britain’s economy suffer, but its regional position would deteriorate rapidly as well.48 Eisenhower tried to restrain Eden from taking military action, but Eden was hell-bent on safeguarding European control of the canal. When the Israelis launched a preventive attack on October 29, 1956, British and French forces invaded the canal zone soon after. With the Soviet bloc supplying arms to Nasser through Czechoslovakia, Premier Khrushchev felt obliged to hint that Britain and France might be hit by Russian missiles should they not retreat. In late November, London and Paris did decide to end their occupation. Yet the deeper reason for their exit was not Russian coercion but instead the economic devastation created by Eisenhower’s refusal to send Latin American oil to Europe or support their rapidly falling currencies. As with Iran 1953, however, the situation was a highly dangerous one. One misstep by either side—say, a US decision to support Britain’s use of force, followed by a Soviet decision to deploy conventional forces in the area—could have easily spiraled to a full-scale superpower confrontation.⁴⁹

The question before us is why Eisenhower chose such a moderate stance in this crisis despite the apparent challenge to the economic health of the Western world. Eisenhower and his secretary of state were indeed concerned about developments in Egypt after the 1952 military coup that overthrew King Farouk and put a regime of generals in his place. Colonel Nasser emerged as the sole leader by early 1954, and then proceeded over the next two years to establish an image as head of pan-Arab nationalism and a driving force behind the so-called nonaligned movement. For Eisenhower and Dulles, nonalignment in a struggle of such importance as the Cold War was more than mere nuisance; it was a betrayal of the US cause. Nevertheless, the stakes were too high to simply write Nasser off. By February 1955, the new Soviet politburo (now known as the presidium) under the leadership of Khrushchev and Nikolai Bulgarin was determined to increase Soviet influence in the south. Moscow began an “economic offensive” (so named by Washington) to draw away key third world states through the promise of aid and trade. Moscow’s initial focus was on newly independent states in Asia, including India, Burma, and Indonesia. But in mid-1955, Khrushchev and Bulgarin turned their attention to Egypt as the one major Arab state not in the clutches of either Washington or London.

An Israeli attack on the Egyptian-controlled Gaza Strip in early 1955 combined with Britain’s formation of the Central Treaty Organization convinced Nasser of the need to increase Egypt’s military strength. In September 1955, he shocked the Western world by announcing a major arms purchase from Czechoslovakia. The US government was worried, but unlike the Israelis and British, still believed that Nasser was a rational leader who would keep his radical nationalism within bounds. Moreover, Eisenhower and Dulles thought they had much bigger fish to fry: as long as Nasser continued to repress Communism within Egypt and did not directly threaten commercial access through the canal, he could be tolerated. Seeing that Nasser was setting Moscow against Washington to get the best deal, Eisenhower decided to play the game. When Nasser signaled that he wanted massive foreign funding for the building of the Aswan Dam, Washington was supportive. In December, Dulles indicated that the US government would provide a substantial loan to supplement what the US-dominated World Bank had already offered.

By that point, the United States’ Cold War strategy had undergone a visible shift in focus. Until late 1955, the series of Basic National Security Policy papers that oriented US foreign policy had still placed primary emphasis on the strategic military struggle and competition over Europe. On October 3, though, the State Department distributed a memorandum arguing for a new policy direction. Because the Soviets saw general war as irrational, they were now concentrating on the “nonmilitary competition” in the developing world, especially in the Middle East and Latin America. To counter this, Washington had to increase efforts to foster economic growth in these areas. This new view would be incorporated into revisions of the Basic National Security Policy document undertaken over the winter and approved on March 15, 1956.50

We can thus see why Eisenhower and Dulles became so keen to maintain relations with Nasser in late 1955–early 1956, notwithstanding his pan-Arab nationalism and purchase of Soviet bloc arms. Unfortunately, Nasser played his hand too hard: he was unwilling to make peace with Israel, continued his buildup, and signaled he would turn to Moscow for economic aid should Washington continue to hold up US and World Bank assistance for the Aswan Dam. His recognition of Communist China and announcement of a new arms deal with Poland in May 1956 were the final straws. National Security Council and State Department officials now agreed that the carrot of US and World Bank money could not dissuade Egypt from aligning more closely with the Soviet bloc. On June 19, Dulles told the Egyptians that the United States could not supply aid for the dam, nor would it encourage the World Bank to do so. A week later, on June 26, Nasser announced the canal company’s nationalization in a highly charged speech in Alexandria, noting that monies raised through transit fees would be used to fund the dam (Hahn 1991, 203–10).

Nasser’s move took Eisenhower by surprise. On the morning of Friday, July 27, he held an emergency meeting with CIA director Allen Dulles and Undersecretary of State Herbert Hoover Junior (Dulles being out of town). Hoover asserted that Nasser’s move violated international law and might result in interference with the canal through which two-thirds of Middle Eastern oil passed. Eisenhower agreed, stating that “we and many others have a concern over [the canal’s] operations,” and Washington should issue a statement that it viewed the matter “with grave concern” (FRUS [1955–57], 16:5–6). Soon after the meeting, Eisenhower received a letter from Prime Minister Eden, emphasizing that Egypt was incapable of running the canal and Britain was developing a military plan to counter the threat to the European economy (Hahn 1991, 212; FRUS [1955–57], 16:9–10).

Eisenhower called Hoover back to the White House late that afternoon to discuss the letter. Hoover declared that the United States must move strongly or face a decline in the “whole Western position.” Eisenhower, still feeling his way toward a position, stated that the situation was so troubling that Congress might need to be called back from summer recess. Its leaders must be told that “this development has the most serious implications for the Western world. If the movement of oil were interfered with, or if the pipelines were cut, we would be faced with a critical situation” (FRUS [1955–57], 16:11–12). That afternoon, Eisenhower sent a vague reply to Eden, telling him that he agreed with many of Eden’s points, but that other steps should be considered first, including consultations with affected maritime nations. Eisenhower’s initial posture was to slow down British decision making to give diplomacy a chance, even as he kept the military option on the table. Over the next two days, however, as the costs of military action rose and risks of not acting began to appear slight, his perspective moderated substantially. Critical to Eisenhower’s moderate stance by late July was his understanding that Nasser’s action was not only legal but also that the Egyptians were signaling they would keep the canal open and operate it efficiently.

On Friday, a State Department legal adviser had written a memorandum underscoring that Nasser’s nationalization decree agreed to provide compensation at full market value to the canal’s European investors (ibid., 16:16). At a meeting the next morning (July 28), Eisenhower was informed that Egypt had agreed to abide by the 1888 convention guaranteeing states free use of the canal. Hoover also noted that Admiral Arleigh Burke, the Joint Chiefs of Staff’s chief of naval operations, had said that piloting ships through the canal was not as difficult as had been previously reported. The president summarized the costs and risks of the two main options. It would not be difficult for Western states to retake the canal militarily. Yet there was no real basis for such action in terms of global public opinion. Accordingly, he agreed with the State Department that Egypt “was within its rights, and that until its operation of the Canal was proven incompetent, unjust, etc. there was nothing to do” (ibid., 16:26, 28).

Hoover quickly tried to back away from such an interpretation of State Department briefings, saying that he felt action was necessary or else the Western position would be gravely undercut. But the president had now arrived at the policy logic he would hold on to for the remainder of the crisis. The impact on global and especially Middle Eastern public opinion of any form of Western military action would be huge. Even if only Britain acted, the United States would likely be excused of aiding and abetting old-style European imperialism against a developing nation that was acting within its legal rights. And if the Egyptians were not only willing to keep the canal open but also proved more than capable of piloting the ships, then what was the real concern? Nasser was certainly a firebrand nationalist, but he had good self-interested reasons in keeping the canal open to maximize revenue for his Aswan project. As Eisenhower summarized his thinking in late July, the weight of world opinion was that Nasser had a legal right to nationalize the canal, and this right “could scarcely be doubted” as long as just compensation were provided. “The main issue at stake, therefore, was whether or not Nasser would and could keep the waterway open for the traffic of all nations, in accordance with the [convention] of 1888,” Eisenhower (1965, 39) continues, and “This question could not be answered except through test.”

Everything that happened over the next two months only reinforced for Eisenhower that a US “do-nothing” policy was the best of many distasteful options. A telegram from the US ambassador in Cairo arrived on July 30 describing his conversation with Nasser. Nasser underscored that he had only taken the action to finance the dam, and would have greatly preferred US and World Bank funding. The ambassador replied that Washington’s main concern was whether the canal would remain open for international use. Nasser reassured the ambassador that he was committed to the canal’s openness and had affirmed this in his recent declarations (FRUS [1955–57], 16:55–56).

This information may have helped Eisenhower relax somewhat, but his own military was proving a problem. The Joint Chiefs of Staff had submitted a study on July 28 specifying three options, from diplomatic support for British military action to actual US military participation (ibid., 16:21). At a White House meeting on the morning of July 31, the president and his advisers were told that Eden had made a firm decision to initiate hostilities to “break Nasser,” probably after six weeks of preparation. Eisenhower opened the discussion by saying this was a unwise decision that was out of touch with present circumstances in the developing world. He and CIA director Dulles agreed that precipitous action would cause the whole Arab world to unite against the West, Middle East oil would “dry up,” and the United States would have to divert oil to Europe, leading to rationing at home. Burke countered that it was the Joint Chiefs of Staff’s opinion that Nasser must indeed be broken, and if diplomacy failed and Britain used force, Washington should support its action. The president gave no ground. Convinced that the British were making a deep error, he asked Dulles to go to London to explain his view. Asked what would happen if this caused a rift between London and Washington, Eisenhower agreed that this would a serious development, although “not as serious as letting a war start and not trying to stop it” (ibid., 16:62–68).

Later that day, a Special National Intelligence Estimate on the crisis was issued supporting Eisenhower’s reasoning. While Nasser was committed to reducing Western influence in the Middle East, his decision to nationalize the canal was apparently taken on short notice in reaction to Washington’s decision not to fund the Aswan Dam. But the action was legal, and should Egypt fulfill its promise to abide by current rules and practices, there was “little basis for legal action by the using powers” (ibid., 16:78–93). This seemed to seal it for Eisenhower. He immediately wrote Eden, telling him that despite the canal’s importance, concerned nations could exert enough pressure on Egypt to assure “the efficient operation of the Canal … [into] the future.” The canal’s openness and efficiency were the key issues, not who controlled it, Eisenhower stressed. Then came his warning. If the British went ahead with military action, “the American reaction would be severe,” and most of the world would share that reaction (ibid., 16:69–71; Eisenhower 1965, appendix B).

The events of August to November can be covered in short order, given that Eisenhower never wavered from his fundamental position that a British-led attack would be disastrous for both Britain and the United States. He held to this in spite of the arguments of his advisers, including at times Secretary Dulles, that British action should be given at least implicit support.51 In mid-August and again in mid-September, two separate multiparty conferences were held in London to coordinate the key maritime nations’ response. The British were adamant that an international consortium of non-Egyptian states should assume control of the canal zone. During the August conference, Eisenhower told Dulles, who was acting as US envoy, that the group must not adopt a position that was impossible for Nasser to accept. Thus, instead of an international consortium assuming operational control of the canal, it should have merely a “supervisory” role (Fursenko and Naftali 2007, 104). This suggestion, similar to Moscow’s proposal, was summarily rejected by London. After an eighteen to four vote in favor of the British position, Australian prime minister Robert Menzies traveled to Cairo with what amounted to an ultimatum: Egypt had to accept international control of the canal or face attack. As Eisenhower had predicted, Nasser rejected the terms as incompatible with Egypt’s sovereign rights. A follow-up conference of the Western states in mid-September proved equally fruitless. The conference focused on Dulles’s new proposal for a Suez Canal Users Association, a loose organization that would coordinate traffic through the canal, collect tolls, and pay Egypt its fair share of the revenues. Despite majority agreement in favor of this plan, it too was dead in the water, given luke-warm British support and Egyptian resistance (see Hahn 1991, 220–21).

Eisenhower himself saw little value in the Suez Canal Users Association by the end of the month. And yet he was still resolute in his opposition to the use of force. The events of September 14 proved decisive. That day, London and Paris ordered their canal pilots to leave the canal zone, hoping that this would expose the inability of Egypt to operate the canal. Over the next seven days, Egyptian pilots stepped in to guide 254 vessels safely through the canal—a new one-week record. This achievement not only showed the hollowness of the British and French arguments for action but also verified that Egypt was more than capable of running the canal by itself (ibid., 219). Eisenhower (1965, 51) in his memoirs states his reaction in no uncertain terms:

As it [turned] out, not only were the Egyptian officials and workmen competent to operate the Canal, but they [demonstrated] that they could do so under conditions of increased traffic and with increased efficiency.… The assumption upon which the Users Association was largely based proved groundless. Furthermore, any thought of using force, under these circumstances, was almost ridiculous.

Positive trade expectations were playing their anticipated causal role. Eisenhower had no reason to push for force if the Egyptians were perfectly willing and able to keep commerce flowing through the canal zone and had every rational reason, including the funding of the Aswan Dam, for wanting to keep toll revenues flowing in. British fears of a cutoff might be driving them into war, but these worries were simply irrational from Eisenhower’s perspective; they had no basis in fact, as the events of September 14–21 showed. Yet if Britain did go ahead, and if Washington was seen to be supporting such holdovers from a dying imperialist era, the United States’ global position would suffer a dramatic decline.

Hence when Israel, Britain, and France ignored his warnings and entered the canal zone in late October–early November, Eisenhower knew that he had to stand symbolically against the “aggressors.” The United States and Soviet Union, for the first time since the founding of Israel, stood together in the United Nations and condemned the attacks. Washington’s subsequent unwillingness to provide oil to Western Europe or support the British and French currencies signaled to the world that European imperialism would no longer be tolerated, and that the United States stood on the side of progress in the developing world.

Trade expectations theory does a solid job explaining US moderation in the Suez Crisis. Unlike Iran 1953, there was little fear of Communism taking over in Egypt and little fear that the nationalist government in power would restrict the flow of oil. Economic realism cannot explain this moderation in the face of the West’s high and growing dependence on Middle East oil. And it certainly cannot explain the variation in US behavior across the Iran and Suez cases. Economic liberalism might try to explain the moderation in 1956 through the fear of a widening war that might lead to even greater costs to US multinational oil firms and the US lifestyle back home. But the documents show Eisenhower carefully calculating the risks of Nasser severing oil traffic through the Suez Canal in terms of the larger issue of national security and Cold War struggle. In addition, he was more than willing to assume large risks of superpower war in 1953 given the security implications of losing access to oil. We can thus safely conclude that it was strategic dependence tied to trade expectations that drove his decision making, not domestic-level concerns.

TRADE EXPECTATIONS AND THE STRUGGLES TO END THE COLD WAR, 1957–91

The last part of this chapter discusses the considerable efforts made by both superpowers after 1956, if not necessarily to end the Cold War, at least to reduce its intensity and the probability of nuclear war. By the mid- to late 1950s, it was perfectly clear to both sides that any major war would mean the destruction of their civilizations, if not the planet. Yet until the late 1980s, Washington and Moscow proved unable to secure a true peace that would keep their leaders’ fingers far away from the nuclear button. Why did their efforts at peace initially prove fruitless and then by 1989–91 succeed? The first such attempt from 1957 to 1961 “ended” with the two most intense crises of the whole Cold War era. The puzzle to explain here is why the crises over Berlin 1961 and Cuba 1962 would occur despite efforts by both sides, but particularly Soviet leader Khrushchev, to establish a trade-based détente. The second try was from 1963 to the US-Soviet détente of 1972–74, and this one did have some limited successes, especially in moderating the risk of superpower war during the 1973 Middle East Crisis. Yet détente fell apart by 1975, leading to the so-called Second Cold War of 1979–83. What happened in 1974–75 to shift the superpower relationship back to one of tension and hostility? Finally, of course, we have the riddle of the end of the Cold War itself: the surprising about-face by both actors from 1984 to 1991 that led, even before the collapse of the Soviet Union, to a peace both countries knew would be truly a “new era” of stability and reduced mistrust.

This part differs from others in this chapter. Because liberals and economic realists both argue that when trade has been low for some time, it falls out as an important causal variable, there is little point in trying to test trade expectations theory against their assertions. My goal therefore is simply to demonstrate the surprising impact of changing trade expectations on great power behavior even in environments where trade is essentially nonexistent.

A Lost Opportunity? The Missing Détente of 1956 to 1962

In the late 1950s, the superpower competition over the third world was intensifying. In March 1956 Eisenhower approved Basic National Security Policy NSC 5602/1, which placed new emphasis on blocking Moscow’s ability to draw developing nations into its sphere through offers of trade and aid (FRUS [1955–57], 19:242–68). In the struggle for the third world, the United States possessed some powerful tools. The main one was simply the continuation of severe restrictions on direct US-Soviet trade as well as trade between Western Europe and the East. By restraining Soviet economic development, Washington could hurt Moscow’s ability to assist the third world or develop a strong base for its military.52 Other tools included increased US trade and economic assistance to emerging nations, binding alliances, and military aid to combat internal Communist threats.

In a fundamental sense, Washington always retained the upper hand when it came to the economic side of the Cold War. The United States’ economy and its global trade connections were always far stronger as well as more technically advanced, meaning that the Soviets were typically working against a stacked deck, both in their negotiations with Washington and their relations with emerging nations. But the dilemma facing Russia after 1956 was more complicated than merely the need for more power. Soviet decision making was pulled by two contradictory forces. On the one side, Khrushchev and his advisers knew that the high growth rates of the early 1950s could not be sustained without the creation of a stronger technological base, particularly in the chemical, electronic, and oil industries. To achieve his goal of catching up to the United States, Khrushchev needed the West to relax its restrictions on trade and issue trade credits in the process. CoCom’s move away from pure economic warfare by 1954 had helped to build some trust with Western Europe. Yet constraints on high-tech exports from Western Europe remained. More important, because the United States was still clearly the world’s most technologically advanced state and imposing near-total trade restrictions, to grow the Soviets needed to moderate the direct relationship to permit the purchase of high-tech exports from the United States itself (Parrott 1983, 1985; Fursenko and Naftali 2007).

Pulling from the other side was Moscow’s precarious strategic situation. The United States had possessed military superiority since 1945. The Soviets needed to not only close the gap but also deter Washington during the transition. But actions to create a strong nuclear deterrent would work against the larger effort to relax tensions, increase trade, and improve economic growth. In the late 1950s, military technology was changing so fast that each side constantly worried about its ability to maintain a second-strike capability that would dissuade the other side from contemplating a first strike. To speed up his economic reform program while protecting Soviet security, Khrushchev had decided in 1955 to reduce spending on conventional forces and increase funding for his missile program. The strategy worked. By the end of 1957, the Soviets appeared to be ahead on missile technology: they had successfully tested the first ICBM in August, and in October launched the world’s first satellite (Sputnik). Knowing that B-52 bombers that could deliver an overwhelming strike ringed Russia, Khrushchev chose to encourage the perception that the USSR was rapidly turning out missiles that could hit not just Western Europe but the US homeland. As a result, fears of a “missile gap” that might give Moscow a first-strike opportunity dominated public discussions of US foreign policy from October 1957 to the end of 1961 (Ambrose 1984; Taubman 2003).

Eisenhower in late 1957 knew that the United States was ahead in deliverable nuclear weapons. Yet he worried that a future missile gap might arise if Washington was too complacent. At a November 4 meeting, he told his advisers that the true critical period was not now but rather five years hence (FRUS [1955–57], 19:621). To prevent a future gap, Eisenhower accelerated US missile programs while redirecting substantial resources to the training of more engineers and scientists. US superiority on deployed missiles was maintained because of these efforts—a fact John F. Kennedy learned only after assuming office. Still, the net result of this new arms buildup was that Washington was unwilling to provide any kind of trade that might accelerate Soviet economic power.

Ironically, this happened just as the Soviet need for US technology was rising and Eisenhower’s desire for a superpower détente was peaking—that is, just as the opportunity for a trade-based peace was presenting itself. By 1958–59, Soviet agricultural and industrial reforms were losing momentum, and Soviet economic technology (if not military technology) was falling even further behind the United States (Parrott 1983, 1985; Zubok 2009). For his part, Eisenhower wanted to leave a legacy of peaceful superpower relations, including a slowing of the arms race. And he understood, as we will see, that the carrot of increased trade was one of the few levers that might help buy Soviet cooperation.

The period from January 1958 until the collapse of discussions in May 1960 thus constitutes a strange blend of acute arms racing and a genuine attempt on both sides to create a stable peace. Adding to the mix was Washington’s fear that if Russia kept growing, third world states would see socialist planning as the wave of the future and gravitate toward Moscow’s sphere. Eisenhower tried to square the circle by seeking détente even as he maintained the United States’ dominant economic and military position around the world. But without a willingness to relax restrictions that were impeding Soviet economic development, this strategy was bound to fail.

In mid-February 1958, in discussing trade controls with the British, Undersecretary of State for Economic Affairs Douglas Dillon summarized the new significance of the global economic struggle. The relationship of trade controls such as CoCom to Russia’s economic penetration of the underdeveloped areas was “the most serious aspect of our struggle with the Soviet Union at this time.”53 In his State of the Union speech of January 1958, Eisenhower had talked about the need to win “a different kind of war”—namely, the conflict set in motion by the “massive [Soviet] economic offensive” against free nations.⁵⁴ On March 3, Dillon explained to the Senate Foreign Relations Committee that this economic offensive was gaining momentum and the key issue was this: To what extent can Moscow use Soviet bloc economic power to advance the political objectives of international Communism? In this regard, the expanded Soviet aid program was “a new, subtle and long-range instrument directed toward the same old purpose”: “drawing its recipient … into the Communist orbit.”⁵⁵

The Soviets by this point, however, were keen to improve US-Russian relations in order to moderate the arms race and secure high-tech goods. On June 2, 1958, Khrushchev sent a long letter to Eisenhower. It was of great importance that the two take advantage of “unused opportunities” to improve relations, Khrushchev wrote in the opening paragraph. For twenty-three of the next twenty-five paragraphs, his letter focused solely on the question of US-Soviet trade relations. With the Soviet people wanting increased consumer goods, opening trade would “further the cause of world peace.” Khrushchev provided a long list of desired purchases—everything from chemical products to the equipment necessary to manufacture refrigerators and televisions. While Russia could export raw materials to buy these goods, Khrushchev indicated that some long-term trade credits and loans would be needed. He ended the letter by noting that a “positive solution” to the trade question would constitute “an important step toward a rapprochement between our two countries.”⁵⁶

Eisenhower’s reply to Khrushchev on July 15—a short one-page letter that he made public—did not help matters. While expressing Washington’s ongoing interest in trade, he disingenuously argued that the Soviets were free to sell their goods to the United States with few restrictions.57 This ignored the thrust of Soviet complaints: that they were not free to buy US goods. A memorandum circulated at this time by Eisenhower’s Council of Foreign Economic Policy—an organization with powerful influence over US-Soviet and third world trade policies—observed that many of the items listed in Khrushchev’s letter were still under explicit “embargo”—things such as pumps and compressors, television equipment, and mining machinery. Sixteen of the eighteen other items, while not explicitly banned, required licenses from the US Department of Commerce and were under the “presumption of denial,” including items as seemingly innocuous as air-conditioning equipment and pipes for city gas lines.⁵⁸

Eisenhower had little choice but to continue restricting Soviet purchases of even relatively low-tech goods, though. Another Basic National Security Policy review had been completed in May 1958. Eisenhower’s national security adviser Robert Cutler had told him on May 1 that as the Soviets moved toward strategic parity, there was not only increasing doubt among allies as to whether Washington would defend them but Moscow also was becoming bolder in its economic and political policies toward developing nations. The final policy document circulated on May 5 argued that the United States had to counter Russia’s economic offensive against the developing world even as it maintained US nuclear superiority. So while Washington should remain open to negotiations, the United States should not make concessions “in advance of similar action by the Soviets” simply from a hope of inspiring Soviet compromises (FRUS [1958–60], 3:78–79, 98–116).

For the next two years, Eisenhower took this advice to heart. He did want a modus vivendi to reduce the risks of nuclear war. But he continually refused to make concessions, particularly on trade, until he had first seen large concessions or improved behavior from Moscow. This bargaining strategy differed substantially from the one adopted by Henry Kissinger in the early 1970s. Kissinger sought to link Soviet military and political concessions to US concessions on trade; that is, the two sets of concessions would occur simultaneously and be enshrined in written agreements to bind both sides. Eisenhower, however, remained unwilling to adopt such a “linkage” strategy. He wanted to see clear evidence of better Soviet behavior prior to accepting increased trade. As we will see, the adoption of this posture effectively sunk any hope for a détente before he left office.

It is hard to believe that a person of Eisenhower’s intelligence and experience would not have seen the advantages of practicing such a tried-and-true tactic as linkage. Something was clearly holding him back. This something, in essence, was the strategic situation the United States faced in 1958–60—a problem much more acute than the one confronting Kissinger and Richard Nixon in 1970–72. In the 1958–60 period, there was no certainty that both sides could maintain a secure second strike to ensure deterrence. There was also great uncertainty as to whether newly independent third world states would lean toward Moscow and start restricting access to critical raw materials. Finally, it was unclear whether Russia might indeed catch up to and even overtake the United States in total economic strength, given that its growth rates were twice the United States’ average. By the time Nixon assumed office, these concerns had been ameliorated: mutual assured destruction (MAD) was a reality, third world alignments were clear, and the Soviet economic system was stagnating.

The United States of Eisenhower’s era, in contrast, could not simply begin free trading without expecting the Soviets to grab technologies that might catapult them to predominance. This created a tragic feedback loop: Washington could not afford to relax economic restrictions without first seeing major Soviet concessions. Yet continued restrictions only hurt Soviet expectations of future trade, increasing Moscow’s own fears for the future. This in turn led to more hostile Soviet behavior, making it even harder for Washington to offer substantial trade concessions.

Concern about Soviet economic catch-up permeated the key internal analyses of the Eisenhower administration’s last three years. On November 16, 1958, a report to Eisenhower from the CIA’s deputy director underscored that Moscow’s new thrust was the “creation of the material-technical basis” for Soviet power. Moscow was investing heavily in chemicals, but success depended on its ability to develop the petrochemical industry. This would be difficult “unless substantial assistance [in] petrochemical technology and equipment is procured from the West.”59 This report came right when Moscow was engaged in what Bruce Jentleson (1986, 81–83) calls the “Soviet Oil Offensive” toward Western Europe. Russian oil production had doubled from 1953 to 1958, and the country had suddenly gone from a net importer to a net exporter of oil. Moscow wanted to sell large quantities of oil to Western Europe in return for higher-tech items still denied by the United States (see Mastanduno 1992, 109; Jentleson 1986, 80–87). US officials worried that the Soviets were using cut-rate oil prices to increase Western Europe’s dependency, obliging it to realign eastward.60

These concerns coincided with Khrushchev’s announcement in November 1958 that he would make Berlin a “free city” within six months if the wartime allies could not establish a new arrangement. Notwithstanding this unsettling development, Moscow kept pressing Eisenhower to reduce export restrictions. In December, Anatas Mikoyan, Russia’s second in command and overseer of Soviet trade, asked if he could make an “informal” visit to Washington. This prompted Council of Foreign Economic Policy chair Clarence Randall to write Gordon Gray, Eisenhower’s new national security adviser, to explain his evolving position on East-West trade. While there were government officials who wanted even harsher economic restrictions, Randall noted, US-Soviet strategic relations were “already too delicate” to take this risk. Hence “the time has come to let peaceful trade develop as it will.”⁶¹

Randall’s memo was the first to suggest a tension among Eisenhower’s advisers. The Council of Foreign Economic Policy and the State Department had come to believe that increased trade might indeed moderate relations as well as help establish a détente. The Department of Commerce, however, was adamant that restrictions were critical to preventing US relative decline. The approaching Mikoyan visit exposed this interagency division. At the January 8, 1959 council meeting, Dillon emphasized that Eisenhower himself was now “very clearly in favor” of developing “peaceful trade” with Moscow. Randall pointedly asserted that “certain agencies” were dragging their feet here, even though trade “would help the cause the peace.” Secretary of Commerce Lewis Strauss countered that even simple items like carbon black, used in tire production, could increase Russia’s strength by helping it transport troops.⁶² A follow-up State Department memorandum on “Peaceful Trade” with Russia outlined the competing arguments, but leaned toward trade. Although increased trade might help the Soviets convince “uncommitted countries” that Communism was the fastest route to industrialization, trade was also an “important way of avoiding war” and “relaxing tensions.”⁶³

When Dillon met Mikoyan on January 19, he began by stating that his government understood that better commercial relations might help reduce tensions, but that “political complications” made it difficult to expand trade. Mikoyan quickly saw this as a statement that should Moscow improve its behavior, more trade would be forthcoming. He replied that while poor relations may not lead to greater trade, “trade expansion does contribute to good political relations,” and US-Soviet trade was still very low. He went after the licensing system that restricted what Russians could buy. The meeting ended in a deadlock, with Dillon contending that the Soviets needed to resolve outstanding issues such as lend-lease payments, and Mikoyan maintaining that the sacrifices made by the Soviet people during World War II were payment enough.64

Despite the failure of the Mikoyan talks, the next nine months of 1959 showed promise. A new State Department memorandum sent to Eisenhower in early March stated that it was now an assumption of US economic defense policy that East-West commerce should be encouraged because “the benefits from peaceful trade” outweighed any impact it might have on Soviet economic, technological, and industrial growth.⁶⁵ Officials favoring trade still wanted to see concessions on Berlin and other issues before allowing Moscow to buy more goods.⁶⁶ But there was now for the first time in the Cold War a distinct possibility of using commerce and changing trade expectations to moderate the superpower conflict.

Eisenhower’s strategy over the next five months was to dangle the possibility of future credits and relaxed trade restrictions to leverage the Soviets into concessions on Berlin and disarmament. He knew Moscow needed what Washington had to offer and was prepared to withhold all trade commitments until he got progress on security issues. By May, Eisenhower could see that the Soviets were already softening on the Berlin question; he was informed through British prime minister Harold MacMillan that Khrushchev did not view his original May 27 deadline as an ultimatum.⁶⁷ This deadline did indeed pass without incident, suggesting that the Soviets would not press the issue in the short term.

The two sides restarted foreign minister talks in Geneva in May. The president believed these conversations might lead to a broad set of agreements on outstanding issues: not just Berlin and strategic disarmament, but also a test ban treaty, assurances against surprise attack, and perhaps even limitations on the deployment of intermediate-range missiles (Ambrose 1984, 524–25). Hopes therefore were high when, in late September, the Soviet leader arrived for a prearranged two-week tour of the United States, with direct talks with Eisenhower at the front and back ends.

State Department briefing papers for Eisenhower emphasized that trade would be high on Moscow’s wish list. A September 8 paper reported that trade was a “major Soviet preoccupation” and Moscow wanted not just reduced restrictions but also loans to fund purchases. If Russia continued to threaten the United States, though, the “confidence” needed for long-term trade was not yet there.68 Three days later, Eisenhower was told that Khrushchev would push for peaceful coexistence, using the argument that “expanded trade is the best road to improved U.S.-Soviet relations.” The president was advised to tell the Soviet leader that history would see him as a great statesperson if he helped reduce the burden of the arms race.

The U.S. and U.S.S.R. would then be able to confine their competition to peaceful fields. Of course, the ground rules would have to be agreed—and the competition, in ideas as well as the economic and cultural fields, would have to take place within the Communist as well as in the non-Communist world. The prospects for expanded economic relations … would then be bright.⁶⁹

The repeated use of the word “then” in the above quotation is instructive. It underscores the overall orientation of the US bargaining strategy: trade could expand, but only after major shifts in Soviet behavior on arms and the “ground rules” of competition. Eisenhower, in short, should not enter summit negotiations with the intention of securing a quid pro quo deal. Moscow would have to move first to build the confidence needed for improved relations and trade.

Khrushchev arrived in Washington on September 15, and three hours later the two leaders held their first meeting. With both sides aware that the true give-and-take would come only after Khrushchev’s ten-day tour, the first meeting was taken up with generalities about their mutual desires to build trust (Ambrose 1984, 541–42; Eisenhower 1965, 435–37). When Khrushchev returned to Washington on September 25, he and Eisenhower left for Camp David for two days of talks. Once there, perhaps sensing Eisenhower’s need for something concrete up front, Khrushchev quickly made a key concession: he agreed to withdraw his ultimatum on Berlin and allow the status quo to continue, at least for the near term. Eisenhower in return acknowledged that the current Berlin arrangements were abnormal and could not be maintained indefinitely. They also agreed to meet again in four-power talks that would include Britain and France (Taubman 2003, 437–38). On the second day of conversations, Khrushchev pushed hard on the trade issue. In a meeting with Dillon, when Dillon tried to encourage Russia to buy US machinery to make shoes and textiles, the Soviet leader angrily cut him off, saying he was not interested in discussing minor items. He wanted one thing and one thing only: an across-the-board end to discriminatory practices. If the United States refused to end these practices, “this would mean that it wants a continuation of the Cold War.” Dillon replied that if Khrushchev wanted action on trade, he must realize that it depended on Congress along with “the general state of the relations between the U.S. and the U.S.S.R.” The message was clear. There could be no progress on the trade question until there was a noticeable improvement in Soviet behavior.70

Other than the informal agreement on Berlin, the Camp David talks led to few concrete achievements. Yet for the next few months, a “spirit of Camp David”—the sense, at least, that the two superpowers could sit down as equals and work toward compromise—infused both sides with an optimism that an agreement on key issues might be possible by the time that the four-power summit convened in May 1960. Khrushchev in particular came away from Camp David energized and optimistic, telling advisers that the two sides had turned the corner and a peace deal could be reached (Fursenko and Naftali 2007, 241–42). Such a peace was critical to reducing the economic strain of the arms race. He knew from internal reports that the growth rate of the Soviet economy was slowing. Moreover, his US visit had convinced him that the United States was still far ahead in technology and industrial techniques. Much like Mikhail Gorbachev in the 1980s, Khrushchev understood that unless he got the arms race under control, Soviet economic performance would always lag considerably behind the United States. As he told his son, “If we are forced into [running this arms race], we will lose our pants” (quoted in ibid., 242–43).

Khrushchev’s solution was a radical and bold one. He would dramatically cut the size of the Soviet conventional army, hold to a bare minimum the installations of first-generation ICBMs, and continue to seek to acquire technology from abroad. In January 1960, building on Camp David’s afterglow, he publicly announced that the Soviet army would be cut by 1.0 to 1.2 million troops, or about a third of its active force. This would not only reduce costs but also signal the new Soviet spirit of cooperation and trust building—just the sort of thing the United States had said it was looking for (ibid., 246–47; Montgomery 2006).

The decision to forgo a massive ICBM buildup and wait for second-generation ICBMs to come online was a huge strategic gamble. Khrushchev knew better than anyone that Russia was still not equal in strategic military power, despite his well-publicized claims to the contrary. But he hoped that he could get through the interim period of inferiority without a war so that secure, second-generation missiles could establish a viable deterrent within three to four years. This move would save money and avoid redundancies. On the other hand, it entailed an enormous risk: it would leave the Soviets vulnerable to US blackmail and even war should Washington discover Russia’s temporary inferiority.

The Soviets would also keep pushing for a relaxation in US economic restrictions. And to get it, they were now willing to change their negotiating tactics. Most important, for the first time Moscow stated its willingness to resolve the ongoing lend-lease debt accrued during the war. Formal talks on lend lease began in Washington on January 11, 1960. Even allowing such conversations to take place was a hugely symbolic concession. The Soviets had always found it insulting that despite having paid the highest blood price in the war, Russia was the only power asked to pay back a large percentage of the lend-lease loans—and without any compensating assurances of nondiscriminatory trade. Dillon’s argument that resolving the lend-lease issue was critical to progress on trade had obviously bent Moscow to Washington’s will. Yet the Soviets wanted something in return. In a February press release, they noted that any lend-lease agreement must be concluded “simultaneously” with a trade deal offering Russia most-favored-nation status and trade credits.71 Moscow was countering Washington’s bargaining strategy with good old-fashioned linkage politics.

For the first four months of 1960, Eisenhower remained hopeful that by the end of May, a peace deal could be secured at the Paris Summit. Then he made a fatal error of judgment. Despite the known risks, he allowed one more flight of a U-2 spy plane over Russia to help determine the true extent of the Soviet ICBM buildup. The U-2 plane was shot down on May 1, with the pilot captured alive. Khrushchev was in a quandary: he could not allow such flights to continue without exposing Soviet strategic inferiority, but if he pressed too hard for the flights’ termination, the United States might become less inclined to compromise on the larger strategic and economic issues on the table. In the end, he decided to announce publicly that a US spy plane had been shot down and the pilot captured, apparently believing that Eisenhower wanted peace and would use the incident to chastise hawks within his administration. Eisenhower, however, refused to distance himself from the spy missions or agree to curtail them. In the first two days of the Paris Summit, Khrushchev kept pressing for a commitment to stop the flights, and when it was apparent that Eisenhower would not budge, the Soviet premier walked out of the meeting. The U-2 crisis was a classic example of an action-reaction spiral that produced a result that neither side had wanted or foreseen.72

Eisenhower quickly understood the implications. In late May, he told his main scientific adviser “with much feeling … how he had concentrated his efforts [over] the last few years on ending the cold war, how he felt that he was making big progress, and how the stupid U-2 mess had ruined all his efforts. He ended very sadly that he saw nothing worthwhile left for him to do now until the end of his presidency” (quoted in Ambrose 1984, 580). We will of course never know what might have occurred had the U-2 incident not destroyed the May talks. Yet the deeper dilemma hanging over Eisenhower’s last two years in office was the problem of trying to engage in economic diplomacy during a period of strategic uncertainty. Because neither side had guaranteed second-strike capability, neither could relax its guard in a way that might allow positive expectations of future trade to do their work. The US government believed it could not offer trade until it had seen significant concessions. The Soviets, painfully aware of their strategic inferiority, believed that major concessions now—including allowing U-2 flights to continue—might increase the United States’ perception of its advantage, leading to coercive diplomacy or worse. With MAD not yet in place, both sides feared that even minor shifts in the nuclear balance might give the other an incentive for a first strike.⁷³ Trade thus could not be expanded until Soviet behavior improved, yet Moscow had little incentive to improve its behavior if Washington was so mistrustful it would not sell even low-tech industrial goods. Both sides were trapped in a vicious conundrum that could not be resolved until MAD became a reality in the late 1960s.

The Berlin Crisis of 1961 and Cuban Missile Crisis of 1962 under Kennedy’s tenure arose out of the failure of the talks of 1959–60 to curb arms spending as well as achieve a preliminary trade-based détente. In the last six months of his tenure, Eisenhower continued to push forward with the US arms buildup. By the end of 1960, his administration had planned for eleven hundred ICBMs—a total that had been jumping each year since 1957 (Prados 1986, 114). The Kennedy administration, despite discovering the extent of US nuclear superiority in its first month, continued this buildup, given the worry that Moscow might still achieve temporary superiority before new US ICBMS were deployed in quantity.74

The same dilemma that plagued Eisenhower hung over the Kennedy administration. Kennedy wanted a reduction in the intensity of the Cold War. But given the possibility of a future strategic deficiency, Washington could not afford to offer economic concessions, or at least not without evidence of increasing moderation in Soviet foreign policy.⁷⁵ In the short term, it was clear to US officials that the Soviets wanted peace.⁷⁶ Unfortunately, an exogenous third-party problem was putting Khrushchev under intense pressure. In June 1961, Khrushchev announced that a new six-month deadline existed to solve the Berlin question. As I show elsewhere, the Soviet leader’s move was driven primarily by fears that the exodus of refugees into West Berlin was causing the economic decline of his most important Eastern European ally, East Germany. If East Germany collapsed, the Soviet bloc’s power and global image would be greatly undermined (Copeland 2000b, 181–86).

Although the Berlin Crisis was the immediate result of a fear of economic decline, the larger context is important. Had the United States and Russia been able to reach a deal in 1959–60 that would have promised increased US exports, Khrushchev would have had a stake in fostering future good relations. He would have worried that any new crisis over Berlin would have led to the hardening of Washington’s position on trade restrictions (as his up-front concession on Berlin at Camp David suggests). Moreover, the promise of trade would have given him greater confidence in Moscow’s ability to overcome East German economic decline through transfer payments. In a meeting with East German leader Walter Ulbricht in November 1960, for example, Khrushchev had agreed to “take over almost completely the East German economy … in order to save it” (Harrison 1993, 28). Khrushchev knew that this would cost Russia in the short term. But had the Soviet economy itself not been slowing down, or at least had Khrushchev believed that US technology would give it a badly needed boost, he would have had more options and thus likely would have been more cautious in dealing with the exodus problem.

Such a counterfactual argument is, like all such claims, ultimately unprovable. Still, as I show in detail elsewhere, Kennedy’s officials, especially in the State Department, were well aware from the get-go that continued trade restrictions were exacerbating tensions and limiting the chances for détente (Copeland, forthcoming). In late February 1961, for instance, Secretary of State Dean Rusk told Kennedy that it was of “great importance” to reduce restrictions to provide “a tangible demonstration of our desire to improve relations” during a time of high tension.77 Rusk’s assertion reinforced the findings of a task force appointed by Kennedy during his transition period and headed by George Ball, Kennedy’s undersecretary of state. The so-called Ball Report, completed just before Kennedy took office, contended that a more relaxed approach to trade would give Washington a critical bargaining chip in future negotiations with Russia (Funigiello 1988, 125–26).

The State Department kept pressing this issue throughout 1961–62, and even in summer 1962, amid worrisome reports of a Soviet ICBM buildup, Rusk saw the dangling of trade carrots as a way to moderate Soviet behavior.⁷⁸ On July 10, he presented a memorandum to the NSC arguing that continuing to deny license applications worked at cross-purposes with efforts to improve relations. Because Moscow attached great significance to trade, US trade policy would shape whether it moved toward détente or increased pressure on the West.⁷⁹ In a follow-up memorandum, Rusk noted that he was “completely in accord with the often expressed premise” that trade was one of the few means to push Russia toward more peaceful behavior.⁸⁰

When he wrote these words, Rusk was of course unaware that Moscow was already starting to deploy medium- and intermediate-range missiles in Cuba. The Cuban Missile Crisis, as I show elsewhere, arose from one overriding two-way dynamic. When the United States publicly exposed Soviet nuclear inferiority in late 1961 and then began to talk about a “no-cities” counterforce strategy in the first half of 1962, Khrushchev believed he needed a stopgap measure to provide basic deterrence until his second-generation missiles came on line. So he copied the US technique of deploying intermediate-range missiles near the Soviet Union by convincing the Cubans to accept Soviet missiles on the island. Yet the very act of deploying such missiles caused the United States to worry not only about a loss of superiority but also a potential short-term gap of inferiority—one that might tempt the Soviets to launch a first strike as the United States rebuilt its power. In short, the dynamics of adverse power oscillations were at the heart of the crisis (see Copeland 2000b, 186–208, 297n71; Copeland 1996b.).

Economic interdependence was not directly driving this process of fear, action, and reaction. As with Berlin 1961, though, we can pose the counterfactual: Would Khrushchev have been as concerned about a short-term Soviet position of inferiority had he been more confident that the United States was not seeking to drive Russia into the ground economically? I would contend that similar to the Berlin case, had Soviet trade expectations been substantially improved by a 1960 or early 1961 trade deal, Khrushchev would have felt more confident about Washington’s willingness to accept peaceful coexistence as Russia built up its deterrent force. According to Alexandr Fursenko and Timothy Naftali (1997), Soviet leaders saw Kennedy’s trumpeting of US nuclear superiority in late 1961 as a sign of the opposite intent: Washington would not allow Soviet growth and might even choose a preventive war to take advantage of short-term US strength.

As with Berlin, we can never know if a trade deal would have smoothed the waters enough to prevent the most dangerous crisis in world history. And I do not want to push the trade expectations argument too far: fears of losing one’s second-strike capability were so strong on both sides that even with a new US commitment to trade, it is quite likely that the 1961–62 period would still have witnessed some form of existential crisis. But such a crisis would probably not have pulled the two actors so close to the edge of ultimate destruction. Had an initial détente been established by late 1960 or early 1961, both sides would have been more relaxed about the strategic balance. Greater caution during the transition period to MAD would likely have prevailed. Supporting this conclusion are Rusk’s statements to the NSC showing that US officials were greatly aware of two things: the Soviets needed increased trade to remain confident about long-term growth, and trade was one of the few tools Washington possessed to influence Soviet behavior one way or the other.

What we can conclude from the above analysis is that the lack of progress on opening up US-Soviet trade and concomitant effect on Russian trade expectations played a far bigger role in the dynamics of Cold War politics during the Eisenhower and Kennedy eras than has been previously understood. Given Soviet need, trade was a powerful bargaining chip, and the United States was prepared to use it for good measure. But the fragility of the nuclear balance forced Washington to insist on Soviet concessions before trade restrictions would be relaxed. This strategic conundrum proved a constant roadblock to what Kissinger would later call a stable “structure of peace.”

In the next section, I show that Nixon and Kissinger were willing to build such a structure through the negotiating strategy of linkage—mutual concessions that would move the superpower relationship forward across many issues simultaneously. The option of such a strategy was facilitated by the new reality of MAD and sense on both sides that with the Soviet economy stagnating, Russia was unlikely to catch up in overall economic power. This realization allowed the United States to feel more relaxed about providing the Soviets with limited relative gains through trade. And if Washington could get major concessions in return—concessions that would help the United States sustain its dominant position at a time when the Vietnam War was reducing the perception of US vitality—then the linked deal was more than worth it.

The Emergence and Breakdown of Détente, 1963–83

The theory of this book has stressed that actor behavior can be changed even when there is little real trade between them, as long as needy states have expectations that the future trade environment will improve and remain open for some time. This was clearly the case as the two superpowers maneuvered toward a true peaceful coexistence in the late 1960s. Variations in the Kremlin’s trade expectations after 1965, combined with the increasing Soviet need for Western goods to overcome internal stagnation, directly shaped the peacefulness of Soviet behavior, even when actual trade levels did not change significantly. Since I have covered the period 1963–83 in some detail elsewhere, I will only summarize the basic findings here (Copeland 1999–2000).81

By the mid-1960s, the need to secure US trade to revitalize the flagging Soviet economy was becoming apparent. From average annual growth rates of 6 to 11 percent in the first decade or so after the war, the economy was registering only 5 percent growth from 1961 to 1965 (Aslund 1989, 15). At the root of this was what Soviet analysts were now labeling the “scientific-technological revolution”—the move away from heavy industry based on extensive production (increasing labor and capital inputs) to efficient, intensive development driven by computerization and miniaturization (see Hoffman and Laird 1982, chap. 1). After Khrushchev’s ouster in 1964, Premier Alexei Kosygin led the charge toward technological improvement. By 1965–66, he was arguing that the scientific-technological revolution was now the crucial dimension of the superpower competition and Russia’s “essential inadequacies” were having serious effects on economic growth (quoted in Parrott 1983, 186). For Kosygin, the easiest solution was more trade with the West, since foreign technology would save millions of rubles that would otherwise go into scientific research. Kosygin’s efforts to encourage greater trade were initially resisted by the majority of politburo members, given their concern that trade dependence would leave the state vulnerable to Western political pressures. By 1969–70, however, Party Secretary Leonid Brezhnev came over to Kosygin’s side. Internal economic reforms begun in 1965 were having little effect, and something had to be done. At the party congress of March 1971, a new orientation was formally codified in a “Peace Program” linking increased trade and the slowing of the arms race to Soviet long-term economic growth. The scientific-technological revolution must go forward, Brezhnev argued, and in this greater trade was essential.82

The Soviet need for trade gave Nixon and his national security adviser Kissinger the opening they were looking for. To build their structure of peace, trade would be offered in return for a moderation of Soviet behavior (including an arms control agreement, help in resolving Vietnam, and restraint in the third world) (Kissinger 1979, 152–53, 1203, 1254–55). The new US willingness to trade with Russia was signaled by a series of deals and agreements in 1971 and 1972. In November 1971, a grain deal and industrial contracts worth $261 million were worked out, and by February 1972, another $400 million in licenses for truck manufacturing equipment were approved. The Moscow Summit in May focused on the signing of the Strategic Arms Limitation Treaty, but the two sides also announced they would work actively to increase economic ties.⁸³ In October 1972, a formal trade agreement was signed, promising the Soviet Union most-favored-nation status and the extension of large trade credits. Both elements were important to the Russians: being short of hard currency, they could not afford to buy US goods unless they could both sell Soviet products and secure the short-term credit needed to expedite their purchases.

The impact of the new commercial spirit was felt quickly. Between October 1972 and May 1973, restrictions were removed on 477 of the 550 categories of banned exports. The Export-Import Bank extended a $202 million loan, and a trade council of three hundred US firms opened a Moscow office. US companies, needed for their technology, became involved in joint plans to develop the vast Siberian oil and gas fields (Mastanduno 1992, 147; Jentleson 1986, 139–141, 147). Overall, the trend was definitely upward: total Soviet trade with United States grew from an annual average of $60–100 million in the 1960–1970 period to $649 million in 1972, and then $1577 million in 1973 (see Mastanduno 1992, 112, table 4; 158, table 5). Even more significant, however, was the impact of the new relationship on Soviet expectations for the future. In February 1973, Brezhnev wrote Nixon of his confidence that their upcoming June summit in Washington would lead to even more commercial agreements. An internal Central Committee report written on Brezhnev’s return stated that the summit had provided “new prospects for the development of [US-Soviet] economic-trade relations … on a long-term large-scale basis” (quoted in Garthoff 1994a, 366–67, 389).

If anything, Brezhnev’s expectations for future trade with the West during 1972–73 were, as Peter Volten (1982, 112) and Raymond Garthoff (1994a, 389) note, overly optimistic. The Soviets were slow to wake up to the implications of Watergate for Nixon’s ability to control domestic opposition to US-Soviet trade. When the trade deal was signed in October 1972, both sides committed to a tripling of bilateral trade over next three years. Given that trade in 1972 had already reached $649 million, this effectively meant an anticipated jump to approximately $2 billion a year by 1975 (see Mastanduno 1992, 146; 158, table 5). But the Soviet expectation—never realized, of course—was for even more. A senior Soviet official during this time has revealed that Soviet leaders “expected that annual trade with the United States would reach $10 billion by the end of the decade.”84 Indeed, by 1973, Brezhnev was staking the very success of his revitalization program on the continuation of a stable US-Soviet relationship. Détente had to be made “irreversible,” he argued through that year, since it was key to solving outstanding Soviet domestic problems (Volten 1982, 108–9, 111, 234).

As I discuss shortly, growing domestic opposition to détente inside the United States would ultimately destroy the prospects for future trade by January 1975. This led, as trade expectations theory would predict, to an abrupt shift toward a much more assertive Soviet foreign policy in the third world. But during the period when Soviet expectations were still positive (1972–73), there was clear moderation in Moscow’s behavior. As Kissinger had hoped, the Soviets proved willing to sacrifice the periphery to gain the benefits of US-Soviet trade. Two examples stand out. Moscow used diplomatic pressure and the termination of military supplies to push North Vietnam to make the concessions that led to the Paris Accords of January 1973 (Parrott 1985, 38). Even more significantly, the Soviets proved accommodating during the 1973 Israeli-Egyptian conflict, thereby allowing Washington to control both the diplomatic process and final outcome.

The superpower crisis ignited by the Yom Kippur War in October 1973 might suggest that détente had not moderated Soviet behavior. Careful analysis leads to the opposite conclusion. The Soviets not only did not want a Middle East war and acted to prevent it; they also sought to end it quickly, before too much damage to détente was done. Kissinger acknowledges that he acted to exploit Moscow’s evident caution in order to increase US influence in the region. In sum, the Middle East Crisis was provoked by the independent decisions of Egypt and Syria, despite Soviet efforts to dissuade them from war. Once under way, the economic incentives embedded in détente significantly moderated Soviet behavior—much to the delight of Kissinger and Nixon.

By spring 1973, Brezhnev could see that despite his entreaties, Egypt and Syria were preparing for war against Israel. Brezhnev told Nixon of this fact at the June summit. Over the next three months, notwithstanding repeated Russian pleas to deal with the situation, Nixon (1978, 884–86) and Kissinger kept shrugging them off (see Garthoff 1994a, 408–9). While they may have seen war as unlikely given Israeli superiority, it is also apparent, as Kissinger admits, that they viewed war, if it occurred, as a perfect opportunity to reduce Soviet influence in the Middle East. With détente serving as “a tranquilizer” for the Soviet Union and “cover” for the United States, Kissinger could draw the Middle East “into closer relations with us at the Soviets’ expense.”85

The Soviets did indeed find themselves trapped between their need for a trade-based détente and their obligations to Egypt and Syria. According to insider Victor Israelyan, Brezhnev and his politburo colleagues were unhappy that their effort to restrain Egypt and Syria had failed to prevent war. A few hours after Syria and Egypt’s surprise attack on Israel, Brezhnev told the politburo that this action “would whip up international tensions and complicate the Soviet Union’s relations with the West, especially with the United States” (quoted in Israelyan 1995, 31, 2). In a hurried note to Anwar el-Sādāt, Brezhnev wrote that Arab leaders were “interfer[ing] in the process of the development of political cooperation between the USSR and the USA,” and asked for an immediate cease-fire (quoted in Lebow and Stein 1994, 201).

In essence, Kissinger’s strategy during October was to “induce Soviet caution by threatening the end of détente,” thereby enacting a regional solution that best suited US interests.86 Even Kissinger’s dramatic move on October 25—the placing of US forces on temporary nuclear alert (DEFCON 3)—had little to do with fear of a superpower clash and almost everything to do with reducing Moscow’s diplomatic standing. With Egypt’s army on the ropes, Brezhnev had been warning that he might have to send Soviet forces to Egypt unilaterally should Washington reject his idea of a joint US-Soviet peacekeeping force. Kissinger (1982, 579, 584) worried that if Washington accepted a joint operation, it would legitimize a role for Moscow in Middle Eastern affairs, and thus he escalated the crisis to deter Soviet action.⁸⁷

The above analysis shows the strong moderating effect of détente on Soviet behavior during October 1973.⁸⁸ Without the incentive of high expected US-Soviet trade, essential to Russia’s reforms and continued superpower position, Moscow would have been more likely to have intervened actively in the Arab-Israeli dispute, and the probability of a dangerous superpower clash would have been that much greater. In the end, it is the US leadership that must bear most of the blame for the October crisis, since it was Nixon and Kissinger who, out of a desire for geopolitical gain, did so little to avert or moderate the conflict.

While positive trade expectations in 1972–73 were moderating Soviet behavior, trouble was brewing within the United States. Liberal and conservative critics of Nixon’s presidency found a common ground on which to oppose his foreign policy: they would attack it as insensitive to human rights, particularly regarding Jewish emigration. In March–April 1973, Senator Henry Jackson formally introduced an amendment linking most-favored-nation status to significant increases in Jewish emigration as part of the 1973 Trade Reform Act (a similar amendment was introduced in the House by Representative Charles Vanik). Through 1973, the Jackson-Vanik Amendment slowly gathered momentum as the Nixon administration sank into the swamp of Watergate. In December, the House passed a bill containing the amendment, and in June 1974, Senator Adlai Stevenson III added a further amendment, limiting credits offered to Russia by the federal Export-Import Bank (see Jentleson 1986, 136–42).

The Soviets struggled hard to satisfy congressional critics at a price that would not damage Russia’s global reputation. In April 1973, just as Jackson was introducing his amendment, Brezhnev rescinded the exit tax that was restricting Jewish emigration, and had so upset Jackson and his supporters. Jewish emigration rose from four hundred in 1968 to almost thirty-five thousand in 1973. For Jackson, however, this was not sufficient. In September 1974, he publicly indicated that he sought seventy-five thousand per year, and would press for at least sixty thousand. The Soviets made it known through back channels that they would go as high as fifty-five to sixty thousand, as long as the deal was kept private.89 Yet Jackson, as Kissinger laments, “wanted an issue, not a solution.” On October 18, 1974, just after Jackson and Vanik signed letters at the White House apparently resolving the dispute, Jackson used the occasion to trumpet his victory, arguing that the Soviets had completely caved to his demands (Kissinger 1982, 996; Garthoff 1994a, 509). The Soviets were outraged at this public humiliation. The trade bill with the Jackson-Vanik Amendment was passed on December 13. On January 3, 1975, President Gerald Ford reluctantly signed the Trade Reform Act into law. Ten days later, the Soviets signaled that the 1972 trade treaty was now null and void.

Hence by early 1975, as Garthoff (1994a, 512–13) summarizes, “the heart of the official American-Soviet trade component of détente had collapsed.”⁹⁰ This domestic interference in the Nixon-Kissinger plan represented an exogenous blow to Soviet trade expectations.⁹¹ Moscow now understood that there was little it could do, short of appearing to capitulate to ever-increasing demands, to save the 1972 trade treaty. And given the evident weakness of the US executive in the wake of Watergate, by December 1974 it was clear that further negotiations would serve no purpose.

What is significant is how quickly Soviet behavior on the periphery moved back toward the previous policy of “adventurism.” Reversing its two-year policy of restraining North Vietnam, in December 1974 Moscow reinstated weapons shipments to Hanoi. Four months later, North Vietnam launched its decisive assault on South Vietnam, undoubtedly with at least the tacit approval of Moscow. In 1973–74, the Soviets had only provided the barest of aid to leftist forces in Angola, and only after US aid to antileftist groups grew. This restraint vanished in 1975, when Soviet support for Angola increased dramatically (Garthoff 1994a, chap. 15). By the late 1970s, Moscow made significant inroads in Somalia, followed by Ethiopia and Nicaragua. Then in 1979, with the invasion of Afghanistan, Russian forces for the first time in the Cold War invaded a country not formally part of the Soviet sphere.

Although the internal documents on politburo decision making for the 1975–83 period are still sketchy, it is surely no coincidence that Soviet behavior changed so suddenly after the failure of the trade treaty.92 As Bruce Parrott (1985, 38–39) observes, “Soviet willingness to accept implicit linkages between trade and Soviet political behavior depended on how the prospective economic benefits fitted into a larger balance of political opportunities and risks.… By 1975, however, the balance of benefits and costs had shifted.” In sum, the end of the trade treaty represents a major reason for the collapse of détente and a return to a more conflictual superpower relationship.⁹³ Trade expectations theory supplies a simple but powerful explanation for this. Without the anticipation of a stream of increasing trade benefits accruing from US-Soviet cooperation, the Soviets no longer had the incentive to moderate their actions in the third world, as they had in 1972–73. While this explanation also may seem to align with liberal theory, note that it not current trade that constrained Soviet policy but rather the expectation of high trade in the future. Moreover, Moscow was propelled by purely power-political considerations. This again demonstrates the value of taking a dynamic approach to great power security within enduring rivalries.

Economic Relations and the End of the Cold War, 1984–91

For many, the end of the Cold War is rooted in one fundamental fact: the ascendancy of Mikhail Gorbachev along with his his new liberal vision for Soviet society and its place in the world. By this account, Gorbachev’s belief that his country had to become an open and democratic society translated into a desire to integrate Russia into the Western liberal system, thereby ending nearly half a century of mistrust and tension. This section shows that to the extent that this interpretation emphasizes ideational epiphany over self-interested material calculation, it is inadequate.⁹⁴ Gorbachev’s reforms, at least for the first two years, were not that new. They were extensions of the reform plan set down during the brief tenure of his mentor Yuri Andropov from 1982 to 1984. This plan in turn was based on the same goal that had driven the Kremlin toward reform in the late 1960s: the need to overcome economic and technological stagnation. Gorbachev’s “new thinking” became progressively more radical only after 1986—that is, only after the failure of his initial reforms. But even here his actions were largely materially driven: only by democratization within along with greater peace and interdependence without did he believe that his country could reverse its decline and remain a superpower. The growing expectation that the United States—and after US approval, Europe—would offer the kind of trade and credits needed to further his reforms was an integral part of Gorbachev’s larger strategy for peace.

While estimates vary, all accounts agree on one thing: by the late 1970s–early 1980s, the Soviet economy was in deep trouble. Annual GNP growth rates, which had been 5 percent in the 1960s, were now at best 0 to 2 percent. Productivity was flat, the quality of Soviet products far below the West, and inefficient factories were using up energy resources at rates many times greater than comparable Western figures.95 Soviet leaders were not unaware of the problem. Before he came to power, while still head of the KGB, Andropov established a secret department within the KGB to study what was seen, according to one official, as “the coming economic catastrophe” (quoted in Kaiser 1991, 57, 59). A report in 1983 by the Soviet Academy of Sciences indicated that the centralized system was “incredibly … outdated” and the primary cause of Soviet decline.⁹⁶ In a June speech, Andropov emphasized the importance of reforms to increase technology-based productivity (Doder 1986, 182, 185).

Given Andropov’s poor health, his protégé Gorbachev was primarily responsible for implementing the reforms. Gorbachev was fully supportive of Andropov’s efforts, which at this stage were modest, focused mainly on greater workplace discipline. Gorbachev was well aware of the problem of relative economic stagnation. By 1982–83, he saw that “time was running out.” The world was experiencing a sweeping scientific transformation. Yet while Western states were rising to the challenge, the Soviet system “spurned innovation.” Not only was the West ahead, Gorbachev (1996, 135; 1987, 18–19) maintained, but the gap in advanced technology “[had begun] to widen, and not to our advantage.” That Gorbachev’s primary obsession was sustaining the Soviet Union as a superpower is revealed by his speech at a conference of party officials in December 1984. Outlining his strategy for economic reform, he argued that “we have to achieve a breakthrough. Only an intensive and highly developed economy can ensure the strengthening of the country’s position on the world scene and enable it to enter the next millennium in a manner befitting a great and prosperous country.… There is no alternative.”97

By 1985, the question of decline was assuming overwhelming significance. On assuming power in March, Gorbachev was handed a top secret KGB report that alleged that unless the country began fundamental reform, “[it] could not continue as a superpower into the twenty-first century.”⁹⁸ In late February 1986, Gorbachev told the Twenty-Seventh Party Congress that should technological trends continue, the capitalist world might achieve “social revenge”—“[its] recovery of what had been lost” (Walker 1987, 51).⁹⁹ To ensure Soviet economic and territorial security, Gorbachev had three priorities. First, he had to end the arms race to free up resources for consumer goods. Economic reform could not succeed if the Soviet Union continued to devote 20 percent of its GNP to the military.¹⁰⁰ Second, he needed to stop the US effort to build a space-based missile defense system. This system, even if not successful, would force Moscow to squander precious investment capital needed for economic growth. And if it did work, it would undermine deterrence and spark a new arms race.¹⁰¹ Third, and increasingly important as his reforms progressed, Gorbachev had to convince the United States to relax restrictions on trade and economic credits. Like Brezhnev, Gorbachev understood that integral to overcoming economic decline was access to superior Western products and technology.

These three elements were essential to furthering a domestic reform program that was Leninist in its foundations, not liberal, as Gorbachev freely acknowledges. He sought not a revolution but rather an improvement of the existing socialist system, which he saw as having distinct moral and organizational advantages.¹⁰² As with Lenin’s effort in the early 1920s to use trade and diplomacy to rebuild Russian power, Gorbachev saw the importance of reestablishing good relations with the West. In May 1986, he spoke to six hundred foreign aid and trade officials from the Foreign Ministry. Soviet diplomacy “must contribute to the domestic development of the country.” Thus the primary goal of foreign policy was to “create the best possible external conditions” for internal growth (quoted in Oberdorfer 1991, 159–62). While Gorbachev’s subsequent actions indicate that ending the arms race was the key initial step, securing trade was also critical. In his first meeting with Secretary of State George Schultz and Vice President George H. W. Bush immediately after assuming power, Gorbachev lamented the low level of contacts between the two countries. “Technology can be transferred only with the express approval of the president. Trade is not permitted” (quoted in Schultz 1993, 530). Two months later, in May 1985, Gorbachev told Secretary of Commerce Malcolm Baldrige that it was “high time” to improve economic ties—a theme he reiterated when the two met again in December (Garthoff 1994b, 218, 249).

The Soviets had reason to believe the United States was open to greater commerce. President Ronald Reagan had sent a personal letter to Andropov in July 1983 expressing hope for greater discussion on arms control and expanded trade. Five months earlier, Reagan had signaled that he believed the Jackson-Vanik Amendment was wrong and should be revoked. Beginning in late 1984, the commerce department had started to relax some intra-Western export controls—a crucial initial signal since much of the technology desired by the Soviets was being garnered through Western Europe.103 But Gorbachev knew that much more was needed. In a statement of “fundamental principles” coming out of the Twenty-Seventh Party Congress in February 1986, the first principle in the economic sphere was the ending of “all forms of [trade] discrimination” (quoted in Gorbachev 1987, 231n1). In his book Perestroika, released in mid-1987, Gorbachev (ibid., 126, 222–23) offered a message to Western leaders: “don’t be scared by perestroika [restructuring] … but rather promote it through the mechanism of economic ties.” Such ties “[will help] build confidence between our countries.”

Unlike the early 1970s, however, it was clear that the Reagan administration was unwilling to sign a quid pro quo deal linking arms control and better Soviet behavior to increased US trade commitments. Reagan and his associates were simply too mistrustful of Soviet intentions.¹⁰⁴ Consequently, the Soviets understood that they would have to make a number of dramatic gestures to show that the new leadership was different.¹⁰⁵ Gorbachev received a report in April 1985 from adviser Georgi Arbatov (1993, 321–22) arguing that the changing of the guard in Moscow opened up significant opportunities for better relations. Yet to avoid disappointment, “we [must] change our negotiating style and take unilateral measures,” including the reduction of Soviet forces in Europe.

Gorbachev took this counsel to heart. In January 1986, he publicly proposed a three-stage plan for the elimination of nuclear weapons by the turn of the century. At the Reykjavik Summit in the fall, Gorbachev was willing to accept far-reaching reductions in strategic missiles in return for limitations on space-based weapons. While no agreement was reached, Schultz (1993, 775–80) saw the meeting as demonstrating Moscow’s seriousness regarding fundamental change. This view was reinforced in late 1987, when Moscow agreed to a nuclear weapons treaty that entailed significantly disproportional cuts in intermediate-range missiles from the Soviet side (ibid., 1011–12).

These dramatic gestures led to some moderation of US trade policy. At a special CoCom meeting in January 1988, Washington accepted a relaxation of controlled items, including computers and telecommunications (Mastanduno 1992, 306; Garthoff 1994b, 342). Overall, though, the Soviets remained frustrated. At the Moscow Summit in May 1988, when Reagan asked about perestroika’s progress, Gorbachev quickly turned to how the United States “persisted in maintaining a discriminatory trade policy towards the Soviet Union.” Reagan’s refusal to budge whenever Gorbachev raised the issue only led Gorbachev to believe that even more dramatic steps were needed to break the logjam.106 In December, in a speech to the United Nations, Gorbachev took his most radical step yet. He stated that the Soviet Union would unilaterally reduce its troop presence in Eastern Europe over the next two years by five hundred thousand. The connection between this move and Gorbachev’s economic goals was indirect but hard to miss. The global economy was becoming one organism, he told his audience, “and no state, whatever its social system or economic status, can normally develop outside it” (quoted in Oberdorfer 1991, 316–18). As Gorbachev (1996, 608) later described it, one of the primary themes of this speech was that “perestroika … required a change in the way we conducted our foreign trade, an organic integration with the world economy.”

This speech, combined with the Soviet agreement to withdraw from Afghanistan, led Schultz to discuss further relaxations of controls with the defense department in the waning days of the Reagan administration (Mastanduno 1992, 308). Once George H. W. Bush assumed power, however, he decided to undertake a full review of US policy toward Russia. A number of his advisers were worried that Soviet concessions were simply a ploy to give Russia the breathing space needed to restore its power (see Beschloss and Talbott 1993, 17–25). For many months, aside from vague US statements applauding Soviet reforms, there was little concrete progress in normalizing relations. The Soviets were concerned. In September, Foreign Minister Edvard Shevardnadze met with Secretary of State James Baker and stressed that the Soviet Union was going through an important stage and needed to overcome the incompatibility of its economic system with Western states. Moscow did not want aid but rather “economic cooperation” to help perestroika succeed (quoted in Baker 1995, 144–45). To further the negotiations, Shevardnadze offered two more critical concessions: the Soviets would delink arms control talks (START) from discussions on space-based weapons, and dismantle a radar station that Washington saw as a violation of previous treaties (Garthoff 1994b, 384–85; Beschloss and Talbott 1993, 117–21).

This additional evidence of Soviet cooperation seemed to do the trick. By late 1989, the Bush administration made a definitive decision that Gorbachev’s reforms must be supported.107 Baker made a major speech in mid-October confirming that Washington was prepared to provide technical assistance for Soviet reforms (Garthoff 1994b, 386–87; Baker 1995, 156). When Bush and Gorbachev met at Malta in December 1989, the Berlin Wall was down and the Soviet position in Eastern Europe was quickly unraveling. These developments gave new urgency to the need to help perestroika succeed in order to keep Gorbachev in power. Bush made the promise that Gorbachev had been waiting more than four years to hear: the White House would seek to secure most-favored-nation status for the Soviet Union and end legislative restrictions on economic credits. Bush also suggested that the two sides begin discussions on a new trade agreement, to be signed at the next summit.¹⁰⁸ The atmosphere at Malta turned optimistic, almost jubilant, with Gorbachev announcing, “The world is leaving one epoch, the ‘Cold War,’ and entering a new one” (quoted in Garthoff 1994b, 408). Positive Soviet trade expectations were reinforcing the wisdom of the new peace program. A month later, when Gorbachev submitted his report to the politburo, he welcomed the US “readiness” to aid Soviet economic reforms, stressing the necessity of cooperation as a “stabilizing factor” during this crucial stage of world history (quoted in Dobrynin 1995, 634).

Despite the new atmosphere, when Bush and Gorbachev met for the Washington Summit in late May 1990, no formal trade agreement had yet been signed. The United States was still seeking to use Gorbachev’s desperate need for trade and technology as leverage in realizing US ends, especially the unification of the two Germanies within the North Atlantic Treaty Organization alliance and a moderation of Russia’s presence in Lithuania. Despite the great sensitivity for Russians of the first issue, Gorbachev chose the summit to make the dramatic move of allowing Germany to make up its own mind on which alliance to join. But he had a price. The next day, June 1, at a televised meeting with top congressional leaders, the Soviet leader stressed that the present trade relationship was “very primitive” and appealed for a “favorable gesture … on trade” from the US Congress. This gesture, he noted, was “very important … from a political standpoint.”109

Both sides were up against the clock: they had committed to a signing ceremony late that day. When Bush met Gorbachev after the televised meeting, he told him that he was still unsure about the trade agreement. Gorbachev reiterated its critical importance (Bush and Scowcroft 1998, 283–84; Oberdorfer 1991, 419–20). The president kept Gorbachev hanging to the last minute. Just before entering the East Room for the signing ceremony at 6:00 p.m., Gorbachev asked, “Are we going to sign the trade agreement?” Bush replied that they would. Beaming, Gorbachev told the president, “This really matters to me.” Bush also agreed that he would not explicitly link the deal to Soviet behavior on Lithuania (Beschloss and Talbott 1993, 223; Zelikow and Rice 1997, 280–81). Gorbachev thus came away with the deal he wanted. The United States was now committed to the normalization of trade relations in return for the Soviets’ quiet acquiescence to the US position on Germany and private suggestions of moderation regarding Lithuania.¹¹⁰

It is clear that the Washington Summit of May–June 1990 was a significant moment in the unwinding of the Cold War. From Gorbachev’s (1996, 542) perspective, the trade agreement of June 1 represented a “turning-point” in US-Soviet relations, in which the United States went “from verbal support for our perestroika to real action.” On the day of the signing, he spoke of the body of agreements as a step toward a “new world.” Bush’s speech that day noted that while the two superpowers did not agree on everything, “we [do] believe in one great truth: the world has waited long enough; the Cold War must end” (quoted in Oberdorfer 1991, 423).¹¹¹

Cooperation did indeed become the norm after this point. Most surprising and immediate was the way both sides worked together during the eight-month crisis to end Iraq’s occupation of Kuwait, which began less than two months after the Washington Summit. By October 1990, the two Germanies were united, with the understanding that the new larger Germany would remain a part of the North Atlantic Treaty Organization. By spring 1991, East-West relations were hardly recognizable. Gorbachev received an invitation in June to the July G7 Summit of industrialized nations. On July 11, Gorbachev (1996, 612) sent a personal letter to the Western powers, stating that the Soviet people “feel that the time has come to take resolute steps … for a new type of economic interaction that would integrate the Soviet economy … into the world economy.”

In one of the most remarkable events of the post-1945 period, the leader of the Soviet Union—still dedicated to the principles of socialism—arrived in London on July 16, 1991 to hold talks on international trade and investment with the seven leaders of the capitalist world. At a special meeting designed to represent the “7 + 1” formula, Gorbachev told the G7 leaders that the Soviet leadership now believed that “positive processes in the world could be sustained if the political dialogue we had established were to become rooted in the new economic cooperation.” Of course, integration could be achieved only by “the lifting of legislative and other restrictions on economic and technical ties with the Soviet Union” (ibid., 613–14).112 The G7 countries agreed to build a “special association” between the Soviet Union and International Monetary Fund/World Bank, while expressing their resolve to reestablish full access to trade and investment. From his perspective, Gorbachev came away from the G7 meeting “with a significant gain.” He had achieved “a fundamental political agreement about the integration of our country [into] the world economy,” thereby “fulfill[ing] the national and state interests of our country” (ibid., 617).

The above analysis demonstrates the profound importance of improving Soviet trade expectations on the winding down of the Cold War. Gorbachev recognized the need for trade and investment early on, and worked tirelessly to secure US and Western European agreement to a relaxation of existing restrictions. He understood that the probability of future trade was partly endogenous: unless he offered dramatic concessions in arms control and geopolitics, Reagan and Bush would be unlikely to use their political capital to press for the changes in CoCom along with domestic legislation. But he also used the promise of better behavior—and implicit threat of the reversal of new gains and a return to an intense Cold War—as a tool to secure Western commitments to future trade. As a result, a virtuous cycle of political concessions, signals of future Western trade, and further political concessions could be set in motion. The trade-security spiral that had initially been activated in 1945 had finally been reversed, leading to the ending of nearly a half century of intense cold war.

CONCLUSION

This chapter has reinforced a key theme of the book: across all eras, great powers, even those with access to nuclear weapons, are obsessed with access to markets, finance, and raw materials. As table 2.7 summarizes, for nine of the eleven case periods analyzed in this chapter, economic interdependence played a significant role in shaping the intensity of superpower conflict. And in eight of the nine positive cases, trade expectations theory beat economic realism and commercial liberalism hands down. Economic realism outshone trade expectations theory for Iran 1944, at least in explaining Washington’s behavior, while liberalism proved inadequate across the board. Even in what should have been its “best cases”—Berlin 1948 and Korea 1950—liberalism could not explain the security- and power-driven calculations of the Soviet leadership.

Trade expectations theory also fell short for Berlin and Korea, even if its assumption that states are security maximizers worried about decline was upheld. Such contrary cases help us understand the conditions under which trade expectations may not have causal salience. When actors perceive their decline to be primarily the result of actions taken by the other to strengthen its sphere, such decline can overshadow trade concerns and push them into risky, destabilizing behavior. Yet as chapter 2 noted, we should not expect any single causal logic to be implicated in all events. For complex phenomena such as global conflict, the relevant question is how often a theory is right, as opposed to whether it is always right. And on this front, trade expectations theory does very well indeed.

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¹ For a summary of the eleven case periods covered below, see table 2.7.

² The literature here is too vast to cite, but for a general overview of the two sides’ positions and references, see Buzan 1984.

³ For overview articles on debates regarding the Cold War’s origins, see Gaddis 1983; Jones and Woods 1993; Leffler 1994a. Neoclassical realists, because of their emphasis on unit-level factors, have typically sided with liberals (Kydd 2005; MacDonald 1995–96). Marc Trachtenberg (1999) provides a systemic realist account stressing the impact of the competition over the control of postwar Germany. The only realist scholar focusing a great deal of attention on economic factors is historian Melvyn Leffler (1984, 1992, 1996a, 1996b), and my perspective has been strongly influenced by his writings.

⁴ See, in particular, Kolko 1990; Paterson 1973; Williams 1962; Hearden 2002; Gardner 1972, 1993, 2009.

⁵ See especially Leffler 1992; see also Leffler 1984, 1994b, 1996b.

⁶ For a detailed look at the importance of Romania and Bulgaria through 1945, see Copeland, forthcoming.

⁷ See Copeland 2000b, chap. 6, which draws on the seminal work of Leffler (1984, 1992, 1994b, 1996b).

⁸ For a detailed discussion of these actions, see Copeland 2000b, 149–75.

⁹ I set aside here the much-debated question of whether “deep down” the Soviets still had expansionist future intentions (see, for example, Gaddis 1997). The point is simply that in concrete terms, Stalin was moderate in his behavior through 1945, and was seen as such by Truman and his key advisers.

¹⁰ “Post-War Military Problems—with Particular Relations to Air Bases,” NA, JSSC 9/1, RG 218, CCS 360 (12–9–42), sec. 1.

¹¹ Roosevelt’s thinking was shaped by a remarkably prescient analysis presented to the president in January 1943 by adviser William Bullitt, his former ambassador to the Soviet Union. Almost two years before similar arguments by Averell Harriman and George Kennan, Bullitt stressed the importance of using the United States’ superior military power and economic largesse as tools to keep the Russian “amoeba” from extending its tentacles beyond its current sphere of influence (FTP, 576–90).

¹² “Supplemental Instructions to the State Department concerning Post-War Military Bases,” NA, JCS 570/4, RG 218, CCS 360 (12–9–42), sec. 2.

¹³ This dual vision extended to Roosevelt’s interest in building a system of international airports to serve the US air force and facilitate global commerce (Kimball 1991).

¹⁴ On Roosevelt’s language on Iran as a test case, see RC, 650–51.

¹⁵ Yergin 1991, 402–3; Painter 1986, 64.

¹⁶ So named in Kuhiholm 1980.

¹⁷ Truman and Stalin confirmed this arrangement for the Far East the day before the Potsdam conference began in mid-July (FRUS [1945], Potsdam 2:43–46:1585–87).

¹⁸ For coverage of the latter two in detail, see Copeland, forthcoming.

¹⁹ See Paterson 1973, 35–36; Herring 1973; Harriman and Abel 1975; Martel 1979.

²⁰ “Memorandum of Conversation,” HSTL, April 20, 1945, Papers of HST, PSF: Subject File Foreign Affairs, Russia: Molotov.

²¹ “Memorandum of Conversation,” HSTL, April 23, 1945, Papers of HST, PSF: Subject File Foreign Affairs, Russia: Molotov. See also FRUS (1945), 5:256–58.

²² This aligns with Chief of Staff Admiral Leahy’s advice to Truman that Washington should focus simply on giving Poland the “external appearance” of independence (Leahy Diary, LC, April 23, 1945).

²³ See FRUS (1945), Potsdam 1:735; Davis 1974, 237–48; McJimsey 1987, 386; Trachtenberg 1999, 12–14.

²⁴ HSTL, April 30, 1945, Papers of HST, Office File 426 (1945–46).

²⁵ HSTL, May 11, 1945, Papers of HST, PSF: Subject File, 1945–53, Foreign Affairs, Lend Lease; see also FRUS (1945), 5:999–1000.

²⁶ On the first day, which focused on Poland, Hopkins told Stalin, per instructions from Truman, that even though US public support was declining for Russia, Truman wanted to work with Moscow. Stalin indicated that the Polish issue could be easily solved, and over the next week the Soviet leader made the cosmetic concessions that Truman sought (FRUS [1945], Potsdam 1:24–31).

²⁷ See, for example, Grew’s “Memorandum for the President” from early June, in Papers of HST, PSF: Subject File Foreign Affairs, Reports: Current Foreign Developments; FRUS (1945), 5:1018–20. Harriman himself wrote Hopkins on June 21 that he was “gravely concerned” over delays and hoped Hopkins could use his connections (i.e., to Truman) to rectify the problem immediately (FRUS [1945], 5:1020).

²⁸ For the importance of Eastern European trade, see Copeland, forthcoming.

²⁹ FRUS (1945), Potsdam 1:477–79, 491–93, 510–11, 528–37; Copeland, forthcoming.

³⁰ Elsewhere I detail Truman’s strategy at Potsdam in mid-July to press Stalin to open Romania and Bulgaria to trade to help stabilize Western Europe and avoid its Communization (Copeland, forthcoming).

³¹ For more detail on US Far Eastern policy, see Copeland 2000b, 159–61, 169–70.

³² On the London Conferences, see FRUS (1948), 2:867–86.

³³ Because data are reported only yearly, the low figure for 1948 is partly the result of the crisis itself. But even if we assume trade fell to zero after the start of the crisis in June, the fact that only around $28 million in exports was sold to Russia in the first half of the year shows that monthly figures had already dropped precipitously before the crisis began.

³⁴ For the seminal version of this argument, see George and Smoke 1974.

³⁵ New York Times, January 1, 1950, A1.

³⁶ Ibid.

³⁷ Ibid., A20.

³⁸ The alliance document, released February 14, 1950, emphasized the need to prevent the revival of Japanese aggression as well as imperialism from any state collaborating with Japan (see Goncharov, Lewis, and Xue 1995, 260–61, doc. 45).

³⁹ I have not found any statement by analysts prior to June 25 interpreting Acheson’s speech in this way. For a discussion about the fact that no one except the South Korean ambassador was concerned, see McLellan 1976, 210–11.

⁴⁰ Dobbs 1982, chaps. 5–7; Lee 1995, chap. 2; Cumings 1990.

⁴¹ Indeed, given South Korea’s ambiguous status—a creation of the United Nations but not yet a member—Acheson could hardly have said otherwise. The United Nations was thus the perfect cover to protect the fledgling state while maintaining the posture of impartiality.

⁴² DSB, vol. 22, January 23, 1950; Cumings 1990, 423–38.

⁴³ On the continuity between the Truman and Eisenhower presidencies regarding Iran, see Gavin 1999.

⁴⁴ “Memorandum for the President,” HSTL, July 27, 1950, Papers of HST, PSF: Intelligence File, 1946–53, Central Intelligence.

⁴⁵ “The Importance of Iranian and Middle East Oil to Western Europe under Peacetime Conditions,” NIE-14, HSTL, January 8, 1951, Papers of HST, PSF: Intelligence File, 1946–53, Central Intelligence Reports. See also an undated NSC memorandum circulated sometime probably in March making similar points (FRUS [1952–54], 10:12).

⁴⁶ “Memorandum of Meeting at the White House between President Truman and General Eisenhower,” HSTL, November 18, 1952, Student Research File (File B), Oil Crisis in Iran, 1951–53.

⁴⁷ See memorandums on March 1 and 2, 1953, in FRUS (1952–54), 10:689–92.

⁴⁸ Given space limitations, I will not cover British decision making during the crisis, but suffice it to say that declining trade expectations were a determinative force.

⁴⁹ My summaries above and below are drawn largely from Hahn 1991; Freiberger 1992.

⁵⁰ FRUS (1955–57), 19:123–25, 242–68, versus NSC 5501 of January 1955, ibid., 24–38.

⁵¹ On August 9, for example, Dulles contended at a NSC meeting that the United States should not restrain the British and French if they attacked Egypt. Eisenhower rejected such a policy, and by mid-August, Dulles was towing the president’s line in discussions with London (Hahn 1991, 214–15).

⁵² East-West trade had been devastated by the formation of CoCom in 1949, which blocked the sale of even the most basic products from Western Europe. By 1954, in the post-Stalin era of “peaceful coexistence,” Western European capitals had been able to pressure Washington to halve the number of products restricted by CoCom, and further reductions were agreed on in 1958. But tight US restrictions on exports remained in place. The total US exports to Russia had fallen to a mere seven million dollars by 1959, and would hover between twenty and forty-five million dollars until the late 1960s—at a time when British and West German exports to Russia together averaged between seven and eight times this amount. See Mastanduno 1992, 93–118, including the table on 112.

⁵³ “Memorandum of Conversation,” DDEL, February 18, 1958, US Council on Foreign Economic Policy, Records, 1954–61, Policy Papers Series.

⁵⁴ Quoted in a secretary of commerce memorandum to Clarence Randall, in DDEL, January 28, 1959, Council of Foreign Economic Policy (CFEP), Records, 1954–61, Policy Papers Series.

⁵⁵ “Statement,” DDEL, March 3, 1958, CFEP, Records, 1954–61, Policy Papers Series.

⁵⁶ See letter with Dillon’s note, in DDEL, June 4, 1958, US CFEP, Records, 1954–61, Policy Paper Series.

⁵⁷ See letter released by James Hagerty, Eisenhower’s press secretary, in DDEL, July 14, 1958, CFEP, Records, 1954–61, Policy Papers Series.

⁵⁸ See “Control Status of Categories Mentioned in Khrushchev Letter of June 2, 1958,” DDEL, n.d., CFEP, Records 1054–61, Policy Papers Series.

⁵⁹ “Memorandum for Director of Central Intelligence,” DDEL, November 16, 1958, Eisenhower, Dwight D., Records as President, White House Central Files (Confidential File), 1953–61.

⁶⁰ “Soviet Attempts to Penetrate West European Oil Market,” DDEL, December 29, 1958, CFEP, Records 1954–61, Policy Paper Series.

⁶¹ See “Randall’s Memorandum for Mr. Gordon Gray,” DDEL, December 16, 1956, CFEP, Records 1954–61, Policy Papers Series.

⁶² “Extended Minutes of CFEP Meeting of January 8, 1959, with Attached Letter of January 9, 1959,” DDEL, CFEP Records 1954–61, Policy Paper Series. See also FRUS (1958–60), 4:749–53.

⁶³ “Outline for a Study on Peaceful Trade Relations,” DDEL, n.d., CFEP Records 1954–61, Policy Papers Series.

⁶⁴ See “Memorandum of Conversation, January 19, 1959, Attached to Letter from Dillon to Randall, January 23,” DDEL, CFEP Records 1954–61, Policy Paper Series.

⁶⁵ “Outline for a Study of the Advantages and Disadvantages to Be Derived by the United States from Peaceful Trade with the Soviet Bloc,” DDEL, March 5, 1959, CFEP Records 1954–61, Policy Paper Series.

⁶⁶ Even Randall, the individual most in favor of increased trade, understood the tension between buying peace and relative gains. Randall’s briefing notes for a critical April NSC meeting indicated that despite trade’s ability to reduce mistrust, there could be no major changes in policy as long as the Sino-Soviet bloc posed a “continued threat” to the West. “Memorandum for Mr. Randall,” DDEL, April 29, 1959, CFEP Records 1954–61, Chronological File; FRUS (1958–60), 4:770–71.

⁶⁷ “Summary of Exchange of Communications between the President and Prime Minister MacMillan,” DDEL, n.d., DDEL, CFEP Records 1954–61, Policy Paper Series.

⁶⁸ “Major Themes of Khrushchev’s Public and Private Statements and U.S. Counter-Arguments,” DDEL, September 8, 1959, Eisenhower, Dwight D., Records as President, White House Central Files (Confidential File), 1953–61, Subject Series.

⁶⁹ “U.S. Objective in Khrushchev Visit and Suggested Tactics for Conversation with Him,” DDEL, September 11, 1959, Eisenhower, Dwight D., Records as President, White House Central Files (Confidential File), 1953–61, Subject Series.

⁷⁰ “Memorandum of Conversation, September 27, 1959, in Letter to Randall from Robert Brewster, October 8, 1959,” DDEL, CFEP Records 1954–61, Policy Papers Series.

⁷¹ “On Lend-Lease Negotiations,” DDEL, February 4, 1960, CFEP Records 1954–61, Policy Papers Series.

⁷² My short summary of the crisis is drawn from Fursenko and Naftali 2007; Beschloss 1988; Ambrose 1984.

⁷³ On the problem of adverse power oscillations in bipolarity, see Copeland 2000b, 25–27, 47–48, 186–206.

⁷⁴ See “Memorandum for Mr. Bundy,” JFKL, January 30, 1961, NSF, box 275, folder “Department of Defense, Defense Budget FY 1963 1/61–10/61”; “Memorandum for the President,” JFKL, NSF, January 31, 1961, box 313, folder 2; “Record of Actions by the National Security Council,” JFKL, NSF, February 6, 1961, box 313, folder 2.

⁷⁵ For a detailed discussion, see Copeland, forthcoming.

⁷⁶ See “Notes on Discussion of the Thinking of the Soviet Leadership,” written by Bundy on February 13, 1961, NSA (BC).

⁷⁷ “Memorandum for the President,” JFKL, February 26, 1961, NSF, box 176, folder: “U.S.S.R. General 2/21/61–3/1/61.”

⁷⁸ “National Intelligence Estimate,” 11–8–62, NSA (SE), July 6, 1962, doc. 372.

⁷⁹ “Memorandum for the National Security Council,” JFKL, July 10, 1962, NSF, box 313, folder 35.

⁸⁰ “Memorandum for the National Security Council,” JFKL, July 16, 1962, NSF, box 313, folder 35.

⁸¹ Table 2.7 treats 1963–83 as two separate case-periods, given that the years 1963–83 encompass both the arising of détente by 1972–73 and renewal of Cold War after 1974.

⁸² Anderson 1993, 127; Aslund 1989, 15; Volten 1982, 64–67; Parrott 1983, 243–49.

⁸³ FRUS (1969–76), 4:349–52; Stevenson 1985, 155; Jentleson 1986, 139.

⁸⁴ Based on information given to Garthoff (1994a, 102n70) by this official.

⁸⁵ Kissinger 1982, 594, 296, 299. Internal analyses at the time noted that Brezhnev’s conciliatory posture reflected Moscow’s stake in détente (Garthoff 1994a, 409–20, 434–41).

⁸⁶ Kissinger 1982, 467–69; see also Lebow and Stein 1994, 210.

⁸⁷ Declassified documents support Kissinger’s recollections (KT, 155).

⁸⁸ Kissinger would admit to his colleagues in a private meeting on March 18, 1974 that recent Soviet behavior had been “fairly reasonable all across the board. . . . Even in the Middle East where our political strategy put them in an awful bind, they haven’t really tried to screw us” (KT, 225).

⁸⁹ Kissinger 1982, 249; Garthoff 1994a, 506; Jentleson 1986, 143.

⁹⁰ See also Mastanduno 1992, 150.

⁹¹ This is the sixth of six types of exogenous factors shaping expectations; see chapter 1.

⁹² For a few initial documents, see CWIHPB, nos. 8–9 (winter 1996–97).

⁹³ For scholars agreeing with this view, see Garthoff 1994a, 513; Njolstad 2010, 155–53; George 1983, 22; Jentleson 1986, chap. 5. Even right-of-center historian Adam Ulam (1983, 93–94, 134–35) notes that with the end of the trade treaty, Soviet behavior became more assertive.

⁹⁴ Stressing the former are Wendt 1992; Risse-Kappen 1994; Kydd 2005; Haas 2005. On the latter, see Jervis 1996, 224–25; Copeland 1999–2000; Brooks and Wohlforth 2000–2001.

⁹⁵ See Aslund 1989, 15; Doder 1986, 177–78; Gorbachev 1987, 18–19; Ellman and Kontorovich 1992.

⁹⁶ Doder, 1986, 111, 169–70, 186–87; Walker 1987, 47–48. Many similar studies were undertaken during 1983 (Oberdorfer 1991, 63).

⁹⁷ Quoted in Walker 1987, 58–59; see also Brown 1997, 79–81.

⁹⁸ For a summary of the document, see Coleman 1996, 224. For a similar report at this time, see Arbatov 1993, 322.

⁹⁹ On Eastern Europe’s role in Soviet decline and revitalization, see MH, especially docs. 4–9, 39–42, 48.

¹⁰⁰ See UECW, docs. 19, 25, 32, 40, 52; Gorbachev 1996, 215, 401; Dobrynin 1995, 570.

¹⁰¹ On Gorbachev’s effort to counter the US Strategic Defense Initiative (“Star Wars”), see Gorbachev 1996, 407, 417–18, 455; Schultz 1993, 477–79, 577, 592, 768–69.

¹⁰² Gorbachev 1996, 217–18, 250; UECW, docs. 44, 52; MH, 118.

¹⁰³ Dobrynin 1995, 531, 518; Mastanduno 1992, 300; Garthoff 1994b, 249, 198.

¹⁰⁴ For documents revealing the depth of these suspicions, see RF, especially 2–79, 176–284.

¹⁰⁵ These were “costly signals” too hard for traditional Soviet leaders to make. Fearon 1995; Kydd 2005; Glaser 2010; Copeland 1999–2000.

¹⁰⁶ See Gorbachev 1996, 456−57; Garthoff 1994b, 358.

¹⁰⁷ See Oberdorfer 1991, 376; Matlock 1995, 271–72; Bush and Scowcroft 1998, 41.

¹⁰⁸ See MH, 619–46; Garthoff 1994b, 406–7; Beschloss and Talbott 1993, 151–55; Bush and Scowcroft 1998, 162–63, 173.

¹⁰⁹ Oberdorfer 1991, 415–19; Zelikow and Rice 1997, 276–79; Beschloss and Talbott 1993, 210–22; Baker 1995, 248–49.

¹¹⁰ On the tie to subsequent Soviet moderation in the Baltic, see Matlock 1995, chap. 14; 380–81.

¹¹¹ As Baker recounts, the June agreements had an immediate effect on third world issues. “It was almost as if Gorbachev’s acceptance of Germany in NATO, and the President’s decision on the trade agreement, had moved our relations to a higher, more cooperative and personal plane.” Baker 1995, 254.

¹¹² These are Gorbachev’s own paraphrases from his actual speech.