By the time the comparatively youthful Mikhail Gorbachev became General Secretary in 1985, the Soviet economy was stagnant and faced a sharp fall in foreign currency earnings as a result of the downward slide in oil prices in the 1980s. These issues prompted Gorbachev to investigate measures to revive the ailing state.

An ineffectual start led to the conclusion that deeper structural changes were necessary, and in June 1987 Gorbachev announced an agenda of economic reform called perestroika, or restructuring. Perestroika relaxed the production quota system, allowed private ownership of businesses and paved the way for foreign investment. These measures were intended to redirect the country's resources from costly Cold War military commitments to more productive areas in the civilian sector.

Despite initial skepticism in the West, the new Soviet leader proved to be committed to reversing the Soviet Union's deteriorating economic condition instead of continuing the arms race with the West. Partly as a way to fight off internal opposition from party cliques to his reforms, Gorbachev simultaneously introduced glasnost, or openness, which increased freedom of the press and the transparency of state institutions. Glasnost was intended to reduce the corruption at the top of the Communist Party and moderate the abuse of power in the Central Committee. Glasnost also enabled increased contact between Soviet citizens and the western world, particularly with the United States, contributing to the accelerating détente between the two nations.