FINAL REPORT TO NATIONAL COUNCIL FOR SOVIET AND EAST EUROPEAN RESEARC H TITLE : Economic Relations betwee n Third-World Marxist Nation s and the Soviet Bloc : A Case Study of Grenada : 1979 - 198 3 AUTHOR : Frederic L . Pryo r CONTRACTOR : Swarthmore Colleg e PRINCIPAL INVESTIGATOR : Frederic L . Pryor COUNCIL CONTRACT NUMBER : 800-2 2 DATE : April, 198 6 The work leading to this report was supported by funds provided by the National Council for Soviet and East European Research . TABLE OF CONTENT S EXECUTIVE SUMMARY . ii i A . Introduction 1 B . Research Materials 2 C . Background on Grenada, 4 1 . The Coup 2 . Events Leading to the Coup D . The Economic Context of Events 1 4 1 . Background 2 . PRG Economic Policie s 3 . Some Basic Political Factors E . The Quest for Foreign Aid 1 9 1 . Background 2 . The Diplomatic Offensiv e 3 . The Strategy of the Ques t 4 . A Perspective F . Technical Assistance 3 6 1 . Planning 2 . Specialist s 3 . Other G . Trading with the Soviet Bloc 4 0 1 . Sale s 2 . Prices H . Some Conclusions 46 1 . Soviet Bloc Relations with th e Marxist Third World as a Whole 2 . A Perspective on Grenad a ii EXECUTIVE SUMMARY On March 13, 1979, the New JEWEL Movement overthrew Eri c Gairy, Prime Minister of Grenada, and established a Marxist-Leninist government on this, one of the smallest , poorest, and most densely-populated Caribbean Island . Committed to the construction of communism in their island nation, th e leaders of the People's Revolutionary Government inherited a weak agricultural economy which depended primarily on the expor t of tree products (nutmeg, cocoa, and bananas) and tourism fo r hard currency . To finance the transformation of Grenada's Thir d World culture into a modern socialist state, the leaders turne d to outside sources of funding . First and foremost, they turne d to their elder brothers in socialism, the Soviet Bloc . Traditionally the Soviet Bloc has given few trad e concessions and relatively small amounts of economic aid t o their Third World allies . They are thus able to hold thes e allies rather inexpensively . Military aid is considerably mor e important than such economic aid and appears to be heavil y concentrated in a few countries . This military aid has provide d the USSR with the leverage to maintain discipline among it s allies in various international forums . Unlike most Third World Marxist nations, Grenada from 197 9 to 1983 was able to obtain considerable amounts of foreign ai d from the Soviet Bloc . The PRG, under the direction of Prim e iii Minister Maurice Bishop and Minister of Trade, Planning, an d Finance Bernard Coard, may be characterized as "foreign ai d socialism ." That is, Grenada's short-live Marxist experimen t under Bishop was an attempt to introduce socialism by a government that was completely dependent on foreign grants an d concessionary loans of like-minded nations to achieve it s economic aims . Grenada's experience with the USSR and othe r socialist nations provides insight into the process by whic h Soviet Bloc economic ties are structured with Third Worl d nations with a socialist orientation . Internationally, the PRG reoriented Grenada's foreign polic y to forge close links with Cuba and the Soviet Union . A usefu l indicator for this change is its voting pattern in the U .N . General Assembly in 1980, the year after the coup . Grenad a voted with Cuba 92 percent of the time (and never in opposition ) and with the Soviet Union 79 percent of the time (and only 6 percent in opposition .) The PRG's foreign relations were a crucial part of its economic strategy since it attempted to us e its political services to the Soviet Bloc and the radical Thir d World as a lever with which to obtain foreign aid . The PRG was extremely successful in this strategy . Cuba wa s the most important patron to the island, giving about 30 percen t of the total economic and military aid . It is noteworthy tha t most of the aid from other Marxist nations came in the form o f grants and that the Soviets contributed much more military tha n economic aid . Aid from Western nations was quite small and, i n the case of British and Finnish loans, was tied to the purchas e iv of equipment from these countries . U .S . aid came primaril y through the Caribbean Development Bank, a multilateral lendin g agency which did not accede to U .S . requests to limit aid t o Grenada, even though the U .S . was the principal donor to th e Bank . Average annual grants and loans were about U .S . $25,000,000 . For a nation with a population of roughly 90,000 , this is quite significant, for the ratio of such aid to th e average gross domestic product was roughly 30 percent for th e five year period . Since it actually took the PRG almost a yea r to get the flow started, the actual ratio of foreign ai d received to gross domestic product was much higher than 3 0 percent in the early years of the regime . Cuba's major support of Grenada consisted of EC $82,000,00 0 for the construction of a modern airport to attract mor e tourism, given in the form of both manpower and equipment . Bu t Cuba also gave EC $17,000,000 for other projects . At the tim e of the intervention there were about 784 Cubans on the island , of which about 636 were working on the airport, 22 served a s military advisors, 17 worked as physicians and dentists, an d others worked as teachers, advisors to the Ministry of Interior , and other governmental bureaus . The Cuban aid was said to be given without strings and wa s particularly helpful to the PRG because it was continuous , responsive to the PRG's needs of the moment, directed at a variety of problems, and given as grants . It seems that th e Cubans made few demands of the Grenadians . They did, of course , v keep a close eye on them, and it is alleged that in the firs t years of the revolution the Cuban ambassador attended cabine t meetings . Further, the Cubans placed technicians in some ke y ministries . In any case, the PRG appeared most willing t o coordinate its foreign policy efforts with the Cubans and t o draw lessons from the "Cuban experience ." Although the Cuban s occasionally manifested displeasure in the course of Grenadia n events, they tried for the most part to maintain their role as a wise and generous uncle with considerable tolerance . The U .S .S .R . was a rather phlegmatic partner in Grenada' s construction of socialism . The stinginess of Soviet aid may b e attributed to two causes . First they did not wish to rile th e United States by developing unnecessarily close relations with a nation close to its shores . Second, they preferred to let Cub a carry the brunt of the aid, especially since Cuba had mor e experience in dealing with Caribbean conditions . In 1980, th e Soviet Union signed an agreement to send arms to Grenada durin g the 1980 - 1983 period . However, they did not prove ver y generous with regard to economic aid . Although scholarships an d military grants were forthcoming, it was difficult for Grenad a to obtain much economic aid from the U .S .S .R . With regard t o agriculture, the Soviets noted that their aid efforts i n mechanized tropical agriculture had not been very successful an d had resulted in a loss of prestige ; therefore, they recommende d that the Grenadians try the Bulgarians and Hungarians for suc h aid . They also refused to help with the design of buildings , noting that the U .S .S .R . generally built much larger building s vi than those requested by the PRG ; again they recommended th e Bulgarians . They said further that they did not want to set an y precedents with Grenada . They stressed that the Sovie t bureaucracy needed a great deal of time to study various ai d requests . In 1981, 1982, and 1983, the Soviet Union did make severa l small grants for economic purposes, but these amounted to onl y EC $7,000,000 (US $2 .5 million) . The Soviets did not appea r interested in helping to finance the airport and they seemed t o respond slowly to the PRG's perceived economic needs . Nevertheless, the Soviet Union did send a series of missions t o Grenada, and they also established an embassy on the island . By 1983, Soviet interest had finally been seriously aroused : a t the time of the intervention, 49 Soviet diplomats and advisors , headed by a three-star general, were on the island . In sum , Grenada was a political plum which unexpectedly fell in the la p of the Soviet Union and it took them considerable time t o appraise its worth . The other major figure in Grenada's network of socialis t financing was the GDR, which provided the PRG with a series o f grants, concessionary loans, and some technical assistance . I t seems that the GDR profited much more than did Grenada in thi s relationship, as the GDR foreign trade enterprises took grea t advantage of Grenadian incompetency or ignorance to obtai n highly advantageous import prices from the PRG, and at the sam e time, to sell obsolete equipment to them . Such other states a s North Korea, Czechoslovakia and Hungary offered technica l vii advice, but little else .