THE DEFENCE INDUSTRY WAS ONE OF THE PILLARS of the command economy system. It was the centre and quintessential representation of a classic command economy, with its rigidity, centralised control, strong vertical hierarchy and meticulously elaborated, quantitative, obligatory plans that articulated political and military-technical needs rather than efficiency considerations. Being a specific, closed sector of the economy, the defence industry managed to preserve these basic characteristics practically until the end of the 1980s. Not only in the former Czechoslovakia, but even in reformminded Hungary, defence-related production remained an almost untouched residuum of the classical command economy. Defence industrial production peaked in the late 1980s in East Central Europe. Soon afterwards, however, the sector was hit by an unprecedentedly deep crisis. The first major blow was the sudden end of the Warsaw Treaty Organisation (WTO). The large-scale and lucrative military markets and intense military-economic cooperation networks of the region collapsed. Defence industry enterprises quickly became insolvent. Their financial difficulties were aggravated by the burdens of unsold stocks, cancelled production lines and enormous reserves. The collapse of the WTO military markets took place simultaneously with the collapse of the civilian markets organised within the Council of Mutual Economic Assistance (CMEA) system. Defence industry enterprises in East Central Europe were dual-purpose: in addition to their military-related output, they exported large quantities of civilian goods to the Eastern European markets. The disappearance of the WTO and CMEA meant the collapse of an extended supply system as well. Companies could not rely anymore on large and cheap raw material and energy supplies from the Soviet Union, and lost their stable network of intra-regional subcontractors as well. This was another factor that pushed production costs upwards and caused major practical problems in reorganising the firms' activities. Another unexpected blow was the loss of the traditional Third World markets, principally in the Arab world. This market became an increasingly important source of hard currency for defence industry enterprises from the mid-1970s. The Gulf War and the subsequent US embargo on Iraq, Libya and Syria froze these business contacts.