The Soviet Union Underground Economy

In the 1960s, the Soviet Union began prohibiting typical goods, common to most middle class consumers, that prompted most citizens to seek goods and supplies via other means. An underground market came to fruition to meet the people’s demands.

The government began penalizing people for purchasing common necessities, “Involvement in the underground economy had become a fact of Soviet existence by 1980. Economic activities regarded as normal in market economies not only were prohibited under Soviet law, but also carried heavy penalties. The acquisition of consumer services (repairs of appliances and autos, medical services) and residential housing, the resale of scarce consumer goods, trade in western consumer goods such as blue jeans or cigarettes were on a par with criminal activities such as the narcotics trade and moonshine liqueur. Virtually every citizen became a de facto criminal in the quest for a more comfortable life” (Geldern).

Anything citizens couldn’t get their hands on on the Black Market, the Soviet Union hacked up the prices for most other goods. But it did not necessarily help the Soviet Union, “The underground economy both aided and impeded the growth of the Soviet economy. The system was more efficient when independent agents circumvented artificial price and production controls, thus buffering average citizens from the inefficient allocation of resources by central planners. Growth in the unofficial sector far outstripped growth in the stagnant official economy. Yet obligatory law-breaking had a corrosive effect on society, and undermined the legitimacy of the state” (Geldern).

Following the fall of the Soviet Union, most of the citizens who participated in the Black Market turned into criminals and racketeers.


Underground Economy

Nuclear Non-Proliferation Treaty (NPT)

In 1968 The Nuclear Non-Proliferation Treaty was signed by several of the major nuclear and non-nuclear powers that pledged their cooperation in limiting the spread of nuclear technology.

“After the United States and the Soviet Union signed the Limited Test Ban Treaty in 1963, leaders of both nations hoped that other, more comprehensive agreements on arms control would be forthcoming. Given the excessive costs involved in the development and deployment of new and more technologically advanced nuclear weapons, both powers had an interest in negotiating agreements that would help to slow the pace of the arms race and limit competition in strategic weapons development. Four years after the first treaty, the two sides agreed to an Outer Space Treaty that prevented the deployment of nuclear weapons systems as satellites in space. Of far greater import, Soviet and U.S. negotiators also reached a settlement on concluding an international non-proliferation treaty” (

U.S. Ambassador Llewellyn E. Thompson, signs nuclear non-proliferation treaty as Soviet Foreign Minister Andrei A. Gromyko watches in Moscow, Russia, on July 1, 1968.

“By the beginning of the 1960s, nuclear weapons technology had the potential to become widespread. The science of exploding and fusing atoms had entered into public literature via academic journals, and nuclear technology was no longer pursued only by governments, but by private companies as well. Plutonium, the core of nuclear weapons, was becoming easier to obtain and cheaper to process. As a result of these changes, by 1964 there were five nuclear powers in the world: in addition to the United States, the Soviet Union, and the United Kingdom, all of which obtained nuclear capability during or shortly after the Second World War, France exploded its first nuclear bomb in 1960, and the People’s Republic of China was not far behind in 1964. There were many other countries that had not yet tested weapons, but which were technologically advanced enough that should they decide to build them, it was likely that they could do so before long” (

The Treaty opened for signature in 1968 and entered into force in 1970. On 11 May 1995, the Treaty was extended indefinitely. More countries have adhered to the NPT than any other arms limitation and disarmament agreement. North Korea announced its withdrawal from the Treaty in 2003. India, Israel, Pakistan, and South Sudan are the only UN member states that have never officially joined the Treaty. While the U.S., Russia, U.K., France, and China are the only states officially recognized as nuclear weapon states, it is believed/known that India, Pakistan, Israel, and North Korea have nuclear weapons and capabilities as well.

“The final treaty involved a number of provisions all aimed at limiting the spread of nuclear weapons technology. First, the nuclear signatories agreed not to transfer either nuclear weapons or nuclear weapons technology to any other state. Second, the non-nuclear states agreed that they would not receive, develop or otherwise acquire nuclear weapons. All of the signatories agreed to submit to the safeguards against proliferation established by the International Atomic Energy Agency (IAEA). Parties to the treaty also agreed to cooperate in the development of peaceful nuclear technology and to continue negotiations to help end the nuclear arms race and limit the spread of the technology. The treaty was given a 25-year time limit, with the agreement that it would be reviewed every 5 years” (

Critiques have argued that the Treaty will not stop the proliferation of nuclear weapons or the motivation to acquire them. It is extremely difficult to monitor other countries nuclear development and capabilities, especially if those states are not part of the NPT. Another concern to the international community is if a terrorist organization manages to get its hands on nuclear weapons. However, having nuclear weapons is not the same as being able to launch those nuclear weapons.

Nuclear Non-Proliferation Treaty Map

Nuclear Non-Proliferation Treaty Map


Spy for a Spy

*This post was recognized in the Comrades’ Corner (week 9)

On February 10, 1962, American U-2 pilot Francis Gary Powers was released from the Soviets in exchange for Rudolf Abel (real name Vilyam Genrikhovich Fisher), a Soviet spy convicted of espionage.

Rudolf Abel worked in Soviet intelligence during World War II. After the War, he began working for the KGB and was later sent to New York City, amongst several other Soviet spies, in order to obtain vital intelligence for the Soviet Union. The FBI received a tip from another Soviet spy, who had turned himself in, regarding Abel and his illegal actions. The FBI began surveilling Abel and his residence in New York. On June 21, 1957 Abel was arrested by FBI Agents for allegedly spying for the Soviet Union. He was later tried in Federal Court on three counts of conspiracy. An insurance lawyer from New York, James B. Donovan, who also served as a wartime counsel for the Office of Strategic Services (OSS) during World War II, accepted the case and successfully defended Abel in preventing him from receiving the death penalty. Donovan made the claim that Abel might be needed as leverage in future negotiations with the Soviets.

On May 1, 1960, pilot “Francis Gary Powers took off from Peshawar, Pakistan, at the controls of an ultra-sophisticated Lockheed U-2 high-altitude reconnaissance aircraft. Powers, a CIA-employed pilot, was to fly over some 2,000 miles of Soviet territory to Bodo military airfield in Norway, collecting intelligence information en route. Roughly halfway through his journey, he was shot down over Sverdlovsk in the Ural Mountains. Forced to bail out at 15,000 feet, he survived the parachute jump but was promptly arrested by Soviet authorities” ( The US Government released a statement saying the plane was collecting weather data and veered off course after the pilot reported issues with his oxygen equipment. However, Powers was unaware with the statements the US was making, and admitted to Soviet authorities he was on a mission to collect intelligence. The Russians also collected the wreckage of the downed U-2 and found evidence to support Powers’s confession.

This event had numerous catastrophic consequences. Immediately following the U-2 crash, there was a Four Powers Summit on May 15, 1960 in Paris, it was attended by then president of the United States Dwight D. Eisenhower, Soviet premier Nikita Khrushchev, French president Charles de Gaulle, and prime minister of the United Kingdom, Harold Macmillan. Going into the meeting, many people were optimistic, as this could have been an event to ease tensions between the US and the Soviets. It even had the potential of shortening the length of the Cold War. However, “in the wake of the Soviet downing of an American U-2 spy plane on May 1, Russian leader Nikita Khrushchev lashed out at the United States and President Dwight D. Eisenhower at a Paris summit meeting between the two heads of state. Khrushchev’s outburst angered Eisenhower and doomed any chances for successful talks or negotiations at the summit . . . Tensions from the incident were still high when Eisenhower and Khrushchev arrived in Paris to begin a summit meeting on May 16. Khrushchev wasted no time in tearing into the United States, declaring that Eisenhower would not be welcome in Russia during his scheduled visit to the Soviet Union in June. He condemned the ‘inadmissible, provocative actions’ of the United States in sending the spy plane over the Soviet Union, and demanded that Eisenhower ban future flights and punish those responsible for this ‘deliberate violation of the Soviet Union.’ When Eisenhower agreed only to a ‘suspension’ of the spy plane flights, Khrushchev left the meeting in a huff. According to U.S. officials, the president was ‘furious’ at Khrushchev for his public dressing-down of the United States. The summit meeting officially adjourned the next day with no further meetings between Khrushchev and Eisenhower. Eisenhower’s planned trip to Moscow in June was scrapped . . . The collapse of the May 1960 summit meeting was a crushing blow to those in the Soviet Union and the United States who believed that a period of ‘peaceful coexistence’ between the two superpowers was on the horizon. During the previous few years, both Eisenhower and Khrushchev had publicly indicated their desire for an easing of Cold War tensions, but the spy plane incident put an end to such talk, at least for the time being” (

Upon the capture of Gary Powers, the US began negotiations with the Soviet Union to release Powers. As Donovan had argued, Abel would be used as leverage in the negotiations. Donovan became a key player in the negotiations, his role was displayed in the movie Bridge of Spies. “On Saturday, February 10, 1962, twenty-one months after his capture, pilot Francis Gary Powers was exchanged in a spy swap for Soviet KGB Colonel Vilyam Fisher (aka Rudolf Ivanovich Abel) at the now famous Glienicke Bridge. American student Frederic Pryor was also released at the same time at Checkpoint Charlie” ( Donovan became a key factor in future US negotiations.