Foreign economic policies for small states: The political dimension of Polish-Soviet economic relations in the years 1945-1995

After the political transformation of Central and Eastern Europe in 1989-1991, one of the most important security concerns for states in the region has been the fear of political domination through economic means by Russia and Germany. Until now little systematic research has been done to illuminate and guide the efforts of these and other small states to prevent the extraction of political concessions in unequal bilateral economic relations. The existing research on the security dimension of economic relations in bilateral relationships between states of unequal economic size has focused on various ways in which the large state may use trade as a means of political leverage. As a result, we know much about the possibilities for predatory policies of the large state and little about the possibilities for countermeasures by the small state.;This study uses as a case the history of Poland's relations with the Soviet Union and Russia from 1945 to 1995. It includes new material on how the USSR used economic leverage during the Solidarity crisis of 1980-1; and on how the dynamics of Poland's debt problem in the 1980s contributed to the benevolent Soviet attitude to Solidarity in 1989, when Solidarity took over the government. The study also shows how the political transformation of 1989 was accompanied by the adoption of economic strategies which countered any possible attempt by a large state to use political leverage through economic means. The study examines the political and strategic consequences of policies concerning currency convertibility, ownership, prices, and external debt management.