Correspondents' Correspondence Oil for the Communists

...Yugoslavia, whose inflation hit a record 20 per cent last year, has imposed restrictions on the importation of consumer goods following recent price rises for most basic foodstuffs...

...Starting at the Yugoslav island of Krk, the line is to run to a refinery near Zagreb, cross over to Hungary, and then join the existing "Friendship 1" pipe line extending to Czechoslovakia...

...At the same time, Comecon governments are seeking improved trade relations with the Middle East producers...

...And for Central European consumers the hare...

...Indeed, the old-fashioned Communist dogma of invulnerability to recession (discounting the complex interrelationship of all countries in the modern world regardless of ideological barriers) seems to be given more credence by Western economists than by their colleagues on this side of the Iron Curtain...

...Can the Kremlin be expected, Central Europeans are asking themselves, to continue financing an enormous price discrepancy indefinitely-especially when the energy-hungry West is sitting with hard currency-in order to back the outdated principle of economic self-sufficiency...

...This makes Central Europe's current oil imports from the Soviet Union phenomenally cheap, though some readjustments are due this year...

...Hungary, for example, derives two-fifths of its national income from foreign trade, much of it with the West, and has just been forced to announce a 100 per cent rise in the price of fuel and a range of raw materials essential to industry...

...Moreover, the Central Europeans have cause to fear that Moscow will increasingly look to the West for export markets...

...Fuel price increases in Czechoslovakia are in the region of 90 per cent...

...Friendship 1 is a branch of the international conduit linking Central Europe with the oil fields of the Soviet Union...

...Oil for the Communists Budapest-The construction of a major pipe line from the Adriatic to the heart of Communist Central Europe for the import of Middle East oil effectively refutes persistent arguments that the centrally planned economies can somehow remain immune to the inflationary pressures plaguing the capitalist nations...

...The USSR, self-sufficient in energy, exports oil to its Comecon partners...

...Adria's $350-million first section, one meter in diameter, will carry 34 million tons of oil annually?4 million to Yugoslavia, and 5 million each to Hungary and Czechoslovakia...

...But Soviet supplies are expected to soon lag well behind demand...

...Their answer is apparent from the construction of the pipe line...

...The new line thus represents a declaration of lack of faith in the Comecon countries' ability or willingness to meet each other's needs through orderly trading while the capitalist world goes about destroying itself in a crisis of economic confidence...

...There are good reasons for this...

...facts of the ailing world economy will be registered by both rising prices and the declining quality of goods.-Thomas Land...

...Officials in all three countries point to long-term savings in oil costs when the 457-mile "Adria" pipe line becomes operational in 1977...

...The general effect of their actions, however, will be to open the region directly to the same inflationary pressures that have bedeviled the West since the 1973 October War...

...Comecon prices are fixed every five years, based on the average world price level of the previous five-year period...

...At present, Hungary imports some 6 million tons of crude oil from the Soviet Union annually, and it is anticipated that this will be increased to 8.5 million tons by the end of the decade...

...Urgent projects to find alternative energy sources in new coal mines and atomic reactors, various conservation measures, and efforts to drastically increase trade within the Communist bloc as a means of cutting down on expensive Western goods are unlikely to offset inflation to any great extent...