Comecon

Comecon, organization established in January 1949 to facilitate and coordinate the economic development of the eastern European countries belonging to the Soviet bloc. Comecon’s original members were the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. Albania joined in February 1949 but ceased taking an active part at the end of 1961. The German Democratic Republic became a member in September 1950 and the Mongolian People’s Republic in June 1962. In 1964 an agreement was concluded enabling Yugoslavia to participate on equal terms with Comecon members in the areas of trade, finance, currency, and industry. Cuba, in 1972, became the 9th full member and Vietnam, in 1978, became the 10th. Headquarters were established in Moscow. After the democratic revolutions in eastern Europe in 1989, the organization largely lost its purpose and power, and changes in policies and name in 1990–91 reflected the disintegration.

Comecon was formed under the aegis of the Soviet Union in 1949 in response to the formation of the Committee of European Economic Cooperation in western Europe in 1948. Between 1949 and 1953, however, Comecon’s activities were restricted chiefly to the registration of bilateral trade and credit agreements among member countries. After 1953 the Soviet Union and Comecon began to promote industrial specialization among the member countries and thus reduce “parallelism” (redundant industrial production) in the economies of eastern Europe. In the late 1950s, after the formation of the European Economic Community in western Europe, Comecon undertook more systematic and intense efforts along these lines, though with only limited success.

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international trade: Comecon

The economic integration envisaged by Comecon in the early 1960s met with opposition and problems. A major difficulty was posed by the incompatibility of the price systems used in the various member countries. The prices of most goods and commodities were set by individual governments and had little to do with the goods’ actual market values, thus making it difficult for the member states to conduct trade with each other on the basis of relative prices. Instead, trade was conducted mainly on a barter basis through bilateral agreements between governments.

Comecon’s successes did include the organization of eastern Europe’s railroad grid and of its electric-power grid; the creation of the International Bank for Economic Cooperation (1963) to finance investment projects jointly undertaken by two or more members; and the construction of the “Friendship” oil pipeline, which made oil from the Soviet Union’s Volga region available to the countries of eastern Europe.

After the collapse of communist governments across eastern Europe in 1989–90, those countries began a pronounced shift to private enterprise and market-type systems of pricing. By January 1, 1991, the members had begun to make trade payments in hard, convertible currencies. Under agreements made early in 1991, Comecon was renamed the Organization for International Economic Cooperation, each nation was deemed free to seek its own trade outlets, and members were reduced to a weak pledge to “coordinate” policies on quotas, tariffs, international payments, and relations with other international bodies.