USSR: COMMERCIAL RELATIONS WITH THE THIRD WORLD AND SOME CONSEQUENCES FOR WESTERN BUSINESS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000200480001-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 32
• Document Creation Date: December 22, 2016
• Document Release Date: April 6, 2012
• Sequence Number: 1
• Publication Date: December 1, 1983
• Content Type: REPORT

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USSR: COMMERCIAL RELATIONS WITH THE THIRD WORLD AND
SOME CONSEQUENCES FOR WESTERN BUSINESS
A submission to the President's Task Force on
International Private Enterprise
(Subcommittee on Trade and Foreign Economic Assistance)
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USSR: Commercial Relations with the Third World
Some Consequences for Western Business
and
Introduction ...........................................
1
Soviet
Goals in the LDCs ...............................
1
Policy
Instruments .....................................
2
Trade ................................................
Importance of Bilateral Trade Relations ............
2
Commodity Composition ..............................
3
Trade
Policy and Operations ........................
6
Economic Assistance Programs .........................
8
Military Arms Trade ..................................
12
Major Clients ......................................
12
Contract Terms ................................ ?
12
Soviet Gains from Arms Trade ......................
13
Other Instruments ....................................
15
Impact of Soviet Activities on Western Business ........
17
Constraints Imposed by LDCs ..........................
19
Constraints Imposed by the USSR ......................
20
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USSR: COMMERCIAL RELATIONS WITH THE THIRD WORLD AND
SOME CONSEQUENCES FOR WESTERN BUSINESS
The purpose of this paper is to present some basic
information on Soviet commercial activities in the Third World
and to evaluate the impact of the Soviet presence in non-
Communist Less Developed Countries (LDCs) on the willingness and
ability of US firms to conduct business in Third World
countries.1 The first two sections describe Soviet goals in the
Third World and the various instruments used by the USSR in its
relations with the LDCs. The concluding section discusses the
effect of Soviet-LDC relations on Western trade and investment.
Soviet Goals in the LDC
Moscow's activities in the LDCs play an important part in
its broader campaign to increase Soviet influence worldwide and
weaken its capitalist adversaries. The Soviets view global
politics in terms of a struggle between socialism and capitalism
and regard the Third World as a key arena in this struggle. They
believe that the radicalization of postcolonial elites,
persistent regional rivalries, economic disorder, and widespread
anti-American attitudes provide abundant opportunities for
exploitation.
In dealing with the LDCs, Moscow tries to affect both the
short-term behavior of the regimes and to bring about longer-term
1 For purposes of this
paper, the terms LDCs and Third World
refer to the non-Communist. developing countries.
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political and economic changes that weaken pro-Western forces and
strengthen its own supporters. Thus, the Soviets pursue both
immediate objectives such as obtaining access to port facilities
and airfields and winning support for Moscow's positions at the
United Nations and longer-term goals such as the development of a
politically dominant communist party and the suppression of the
private economic sector. They also pursue traditional economic
goals such as supplementing domestic production of agricultural
goods and raw materials with imports from the LDCs, acquiring
markets for Soviet products, and earning convertible currency.
Policy Instruments
Trade
The USSR's trade with non-Communist LDCs still runs a poor
third to its ties with Communist countries and the developed
West, but the LDCs have become an important market for Soviet
arms and machinery and a source of grain, foodstuffs, and some
minerals.
Importance of Bilateral Trade Relations. For some LDCs
such as Ethiopia and Afghanistan, which has become a virtual
appendage of the USSR, trade with the USSR is very significant.
In recent years Argentina has also emerged as a key supplier of
agricultural products to the USSR. Argentina and India currently
are the USSR's largest LDC trade partners. Each country accounts
for about one-fifth of total Soviet trade with non-Communist LDCs
(see Table 2).2 India's current position
2 Excludes Soviet deliveries of major weapons systems.
2
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reflects a jump in Soviet imports of Indian agricultural products
since 1979 and a sharp increase in Indian imports of Soviet
oil. In the aggregate, however, total Soviet trade with the LDCs
(including military trade) accounts for only 14 percent of total
Soviet trade and the share of USSR trade in total LDC trade
(nonmilitary) is even smaller, accounting for no more than 5
percent in most cases (see Table 1).
Commodity Composition. Soviet exports to the LDCs consist
mainly of military item (roughly three-fifths on average),
civilian machinery and equipment (about one-fifth), and oil and
oil products (one-seventh). Chemicals and wood and wood products
are of lesser importance (see Table 3). The non-Communist LDC
market provides Moscow --ith its only important outlet, for
machinery and equipment exports outside the socialist bloc. For
some categories of equipment, the LDC share of Soviet exports
ranges from 85 to 100 percent. Most of these deliveries are
directed toward Soviet-assisted projects.
Although much of Soviet machinery and equipment is less
advanced technologically than Western products, Moscow is
competitive with the West in some product lines. In a few, such
as power engineering and metallurgical equipment, the USSR even
enjoys an advantage. Soviet hydroelectric generation equipment,
for example, ranks among the world's best.
As is the case with exports, the range of Soviet imports
from the LDCs is relatively narrow. "Real" imports (i.e.,
expressed in constant prices) from the LDCs actually declined
between 1970 and 1979. The need to import large amounts of grain
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from Argentina after the US embargo in early 1980 was largely
responsible for a jump in Soviet imports from the LDCs in 1980-
81. Of total Soviet imports from these countries, agricultural
products account for about 50 percent, crude oil and natural gas
for 20 percent, and textiles for 6 percent (see Table 4).
Agricultural imports from the LDCs have been particularly
useful in recent years in helping to offset domestic harvest
shortfalls. In 1981, Argentina supplied more than one-third of
the nearly 43 million tons of grain the USSR purchased from
foreign suppliers. Small quantities of grain also were purchased
from other LDCs. Imports of sugar, soybeans, soybean meal, meat,
and vegetable oils from the LDCs also have expanded rapidly since
1979. Moscow has entered into long-term trade agreements with
Argentina and Brazil to ensure continuing access to supplies of
key agricultural commodities.
The Soviets also buy significant quantities of crude oil
from the LDCs. After reaching a peak of 6.5 million tons in
1976, purchases declined steadily through 1980 before increasing
sharply in 1982 to roughly 10 million tons, as Libyan deliveries
soared. Most of the oil imports currently originate in Libya and
Iran in payment for past and current purchases from the USSR.
None of the oil is used by the Soviet Union domestically.
Instead, it is shipped to third countries in fulfillment of
delivery contracts for oil, thus allowing Moscow to reduce
shipping costs and increase hard currency exports of petroleum
beyond domestic capabilities.
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Moscow also has been a steady importer of natural gas from
Afghanistan since the early 1970s, and, before 1980, from Iran.
As in the case of crude oil, the exporting countries use these
exports to repay a combination of past assistance and current
obligations. For Moscow, these imports also allow a more cost-
effective distribution of natural gas supplies to domestic users
in Central Asia.
The Soviet Union buys relatively small quantities of non-
energy raw materials from the LDCs. Because of its own abundant
resources, the USSR is self-sufficient in most minerals and a net
exporter of many, often in direct competition for markets with
the LDCs. Moscow does rely on imports, however, to supply some
of its domestic needs. Imports of bauxite (primarily from
Guinea) and tin (from Malaysia, Singapore, and Bolivia) account
for about 30 percent and 25 percent, respectively, of available
domestic supplies. Moscow also imports substantial quantities of
phosphates--mainly from Morocco--for its fertilizer industry.
Compensation agreements have played an important role in
Soviet trade with the LDCs. A number of arrangements under which
the USSR supplies equipment and technical assistance to the LDCs
have committed the USSR to purchase a specified amount of the
output over time. The Soviets agreed to develop and mine
phosphates in Morocco, for example, in exchange for nearly all of
the project's output over a 30-year period. The USSR similarly
has a 25-year arrangement for Guinean bauxite in exchange for
Soviet assistance in exploiting bauxite reserves. In addition,
the USSR has agreed to "buyback arrangements" as part of
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agreements to install non-ferrous metals processing plants,
including the purchase of alumina from India and Turkey, aluminum
from Algeria and Turkey, and tin concentrates from Bolivia.
Trade Policy and Operations. With some exceptions (see
pages 5 and 9), the USSR generall has tried to avoid relying on
foreign suppliers as a cost-efficient way of freeing up cheaper
and more plentiful productive resources at home. Soviet planners
historically have treated the foreign trade sector as a residual
outlet and supplier for the nation's economy. Imports usually
support large or important industrial projects such as the
Siberian gas pipeline, offset domestic agricultural shortfalls,
or relieve industrial bottlenecks. Exports typically have been
regarded as a means to earn enough hard currency to permit
imports and/or, especially in the case of arms, as a source of
influence or leverage over a prospective client.
The business of exporting and importing non-military goods
is conducted by foreign trade organizations (FTOs), most of which
fall under the control of the Ministry of Foreign Trade.3 Acting
on the basis of annual plans, these FTOs approach foreign firms,
solicit bids, negotiate sales, and supervise the implementation
of contracts. They also have full responsibility for export
trade. All business is conducted through the FTOs; Western firms
and LDC buyers have little direct contact with either the end-user
of the merchandise being sold or the producer of export goods.
3 Military and economic aid deliveries are administered by the State
Committee for Foreign Economic Relations (GKES).
6
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Although the USSR's trade monopoly allows Moscow to control
entry by foreign firms into the internal Soviet market, it does
not allow the USSR to extract similar benefits in external
markets. When FTOs sell abroad, they are not necessarily able to
transform their institutional monopoly over foreign trade into
market power. Even in those few categories where the USSR has a
significant market share, the Soviets seem to have been price
takers rather than price setters.
In addition to the FTOs, the USSR has built in recent years
a growing network of commercial entities whose primary objective
is to expand Soviet-LDC economic relations. Moscow's LDC
ventures reflect long-standing Soviet emphasis on developing
influence by expanding 'ommercial ties. The participation of
Soviet firms in Western markets is important not only for the
access it gives the USSR to foreign markets, but also because it
puts Moscow in a position to collect information about a wide
array of commercial and business practices that it could not
otherwise obtain as easily.
Of the 30 Soviet companies formed in the Third World since
the mid-1960s, more than half have been joint fishing ventures.
Under these agreements, the USSR provides boats, equipment,
expertise, and training in return for the privilege of fishing
within the partner country's territorial waters. Aside from its
joint venture fishing companies, the USSR also has opened:
o Trading and marketing companies in Cameroon, Ethiopia,
Morocco, Nigeria, and Mexico;
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o Branches of Moscow Narodny Bank in Singapore and Lebanon;
and
o Transport companies in Afghanistan, Iran, and Singapore.
Most Soviet joint venture companies in LDCs have been capitalized
at under $1 million and probably are quite profitable. According
to UN statistics, about one-third of the Soviet fish catch comes
from LDC waters, and Moscow earns at least $150 million in hard
currency annually from exports of fish to the West.
Aeroflot, the Soviet airline, also plays a role in
projecting the USSR's commercial image. The world's largest
airline--accounting for a fourth of all passenger-kilometers
flown worldwide--it operates in 94 foreign countries, including
82 non-Communist countries. Because the Soviets view Aeroflot
principally as a political bridge between Moscow and the rest of
the world, they have been willing to operate the airline's
international service as a vast but only marginally profitable
network.
Economic Assistance Programs
Due to its early emphasis on large, showy projects in the
industrial sector--projects that often had been turned down by
Western countries because of questionable economic returns to the
client--the USSR's aid has enjoyed a reputation not warranted by
its size. Indeed, the USSR accounts for less than 3 percent of
international aid flows to non-Communist LDCs; the US share, on
the other hand, is roughly one-fifth. Annual disbursements
average less than 0.1 percent of Soviet GNP compared with 0.4
percent for all Western donors and about 0.3 percent for the
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United States. Still, its economic aid program has helped the
USSR establish commercial relations with Egypt, India, Iran,
Syria, and a number of other countries, and these ties endure
even when other relationships wither.
Moscow still considers economic aid a useful tool for
expanding Soviet influence in the Third World even though much of
the early political dynamism of its aid program is missing. The
USSR now tends to focus largely on economic rather than political
criteria in determining which countries will receive aid. The
economic aid extended by Moscow to LDCs has totaled $23 billion
since the beginning of the aid program in 1954 (see Table 5). Of
total aid offered, about $11 billion had been disbursed by the
end of 1982. Most of the aid has been to LDCs in North Africa,
the Middle East, and South Asia. Since 1970, the USSR has tended
to concentrate on projects and countries that promise the
greatest economic returns, especially in the supply of materials
needed by the Soviet economy. Afghanistan, India, Morocco, and
Turkey have been the largest recipients of Soviet economic
assistance, accounting for nearly half of the total over the past
28 years (see Table 6). Another third of this aid has gone to
Algeria, Egypt, Ethiopia, Iran, Iraq, Nigeria, Pakistan, and
Syria.
Moscow's East European allies have complemented the Soviet
effort by pledging another $12 billion in aid to the LDCs since
1954. Although in the early years Eastern Europe's selection of
aid recipients appears to have been heavily influenced by the
USSR, East European countries in the past decade seem to be
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placing a greater emphasis on the commercial benefits of their
aid programs.
More than three-fourths of the value of Moscow's economic
aid has been used in heavy industry and electric power.
Relatively small allocations have been directed to
transportation, agriculture, geological prospecting, and
education and health. The largest amount of Soviet economic aid-
-$12 billion since 1954, or half of the total--has supported the
development of L DC mineral resources and metals. While steel
($7.4 billion) retains its dominant role--by the end of 1980
Moscow had agreed to build more than 33 million tons of
steelmaking capacity in LDCs--allocations for the development of
LDC aluminum industries ($1 billion) have become important, and
phosphate development ($2 billion) has absorbed a large share of
recent pledges. Other aid has been used for geological surveys
and the development of copper, lead, zinc, gold, and other
mineral deposits.
Soviet aid is in general less liberal than the aid programs
of other major industrialized countries. Outright grants to LDCs
have totaled only about $1 billion over the past 27 years and
have been disbursed to the USSR's staunchest political
supporters. For example, about $750 million of the total grant
aid has'been taken up in commodity support to Afghanistan after
the 1979 invasion and oil subsidies to the Marxist regime in
Ethiopia. The USSR is demanding harder repayment terms than
before under its new agreements--10 years repayment at 4- to 8-
percent interest, compared with earlier accords that called for
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12-year repayments at 2.5-percent interest. Only in the case of
clients such as Afghanistan and Ethiopia is Soviet aid still
highly concessionary.
The USSR's economic development programs have been
accompanied by a comprehensive technical services and training
effort. During 1981, nearly 42,000 Soviet technicians were
employed on development projects and in administrative positions
in LDCs. More than 75 percent of these technicians were at
project sites in major Soviet aid-receiving countries in South
Asia, North Africa, and the Middle East that generally pay cash
for services. Indeed, except for a few doctors and teachers
provided free to poor countries, mostly in Africa, the Soviets
charge heavily for their services--over $50,000 a year for
project managers and nearly as much for geologists, interpreters,
and other less senior personnel.
In contrast, more than 50,000 LDC students attended Soviet
schools last year, and most of these students were on full
scholarships that cover subsistence, living quarters, tuition,
and transportation. This training effort probably costs the USSR
the equivalent of $250-$300 million annually. Moscow has viewed
its academic program as a low-cost, potentially high-yield
effort. Half of all Soviet scholarships have gone to 50
countries in Africa. For many African countries, the Soviet
scholarship program is Moscow's only aid effort.
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Military Arms Trade
Since 1954, Soviet military deliveries to the LDCs have
totaled an estimated $57 billion (see Table 7) and have been
concentrated in the Middle East and North Africa (see Table 8).
Of total agreements amounting to $78 billion, nearly three-fifths
($46 billion) have been signed since 1976. Since 1977, the USSR
has become the world's largest exporter of weapon systems (ground
armaments, air and naval craft, and missiles). Soviet military
deliveries have been supplemented by deliveries from Eastern
Europe--about $7 billion since 1954.
Major Clients. The largest recipients of Soviet military
deliveries among the LDCs have been Iraq, Syria, and Libya, which
account for more than half of the total. Ethiopia, Iran,
Indonesia, and The People's Democratic Republic of Yemen received
about another eighth. Some countries--notably Afghanistan,
Algeria, Angola, India, Iraq, Libya, and Syria--have equipped
their military forces largely with Soviet arms and remain
dependent upon Moscow for parts, supplies, and servicing.
Until the early 1970s, the highly
concessionary nature of Soviet military aid gave Moscow a
substantial edge over Western competitors. Arms agreements
frequently included (a) large discounts from list prices (b)
repayments stretching over 8 to 10 years at 2-percent interest,
and (c) for a number of clients, payment in local currencies and
commodities rather than in hard currency.
In the 1970s, the rising oil revenues of Moscow's major Arab
clients opened up new possibilities for the Soviet military aid
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program. While continuing to use arms transfers to expand Soviet
influence, the USSR was able to rapidly increase the share of
arms shipments sold for hard currency. To increase hard currency
earnings, Moscow:
o Raised prices on most weapons;
o Shortened repayment periods and raised interest rates;
o Required more cash payments in hard currency; and
o Demanded advance payment for selected items.
Even though these measures were aimed primarily at wealthy OPEC
clients (which began to demand the most advanced weapons they
could afford), Moscow also applied these harsher terms to other
clients, including poorer African countries.
Nonetheless, Soviet terms on military sales are still more
lenient than those of Western suppliers. Moscow provides other
concessions to favored clients, and Soviet willingness to
reschedule and sometimes forgive LDC debts makes the arms program
more liberal than the Soviets originally intended. India, for
example, pays for Soviet arms with rupees instead of hard
currency, and Afghanistan still barters goods for military
hardware.
Soviet Gains From Arms Trade. From its inception, Moscow
has viewed its military aid program as the best means of gaining
influence in the LDCs. Soviet leaders perceived a large demand
in the Third World for weapons and military training services--
needs that Western suppliers were not willing to fulfill for
political or financial reasons. Moscow's ability and willingness
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to deliver large quantities of arms rapidly to almost any LDC on
favorable terms have established its place in the market.
Many LDCs received. their first jet fighters, tanks, missile
systems, and modern naval craft from the USSR. Even though some
of these arms were outdated by Western standards, most were well
suited to LDC needs and in some cases represented the most modern
weapons in the Soviet inventory. Because of the importance
leaders of emerging states attached to military acquisitions, the
Soviets were able to deepen and prolong the dependence of these
countries on the USSR. In some instances (such as Egypt and
Syria), dependence was heightened because some sophisticated
weapons were provided but were kept under Soviet control.
In recent years, Moscow has attempted to solidify its
position, especially in some North African and Middle Eastern
states, by meeting requests for top-of-the line Soviet weapons
such as MIG-25 fighters, IL-76 tranports, T-72 tanks, and SA-8
surface-to-air missile systems. In some cases, favored customers
such as Iraq and Libya have received such weapons before Moscow's
Warsaw Pact allies.
The export of increasingly advanced arms has generated an
expanded Soviet advisory and technical service presence, as well
as a large LDC training program in the USSR. The geographical
concentration of the 17,500 Soviet military personnel in some 30
LDCs in 1981 closely paralleled the distribution of arms sales by
value, especially in cases where clients had acquired new
military technology and needed additional training. At the same
time, Moscow has sought to perpetuate dependence on Soviet
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personnel by deliberately limiting the development of LDC
capabilities. Furthermore, Moscow orchestrates East European
technical service programs, although (like Cuba) these countries
also send military specialists abroad to advance their own
foreign policy aims.
Other Instruments
In addition to trade and aid, the USSR employs a range of
other instruments in its attempts to influence the LDCs. These
include diplomacy, propaganda, covert measures, the use of
surrogates, support of insurgent groups, and outright military
intervention. In some cases by design, and in others almost
coincidentally, these instruments are used against Western
business interests.
On the diplomatic front, Moscow regularly uses international
meetings dealing with North-South issues as platforms to attack
Western economic policies--both governmental and corporate--and
has not hesitated to assail Western corporations, even in
technical meetings devoted to solving environmental, public
health, and other international problems. It also has
persistently condemned the role-of multinational corporations in
the Third World and pushed for central economic planning in every
available United Nations or Group of 77 forum. Similarly, on the
propaganda side, the Soviets have arranged seminars and symposia
to criticize the actions of multinational firms, focusing
particularly on US-based corporations and petroleum companies.
Moscow uses its aid programs to train military and civilian
leaders or potential leaders of developing countries, hoping to
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influence them to adopt anti-Western policies. In its training
of officials involved in industry, agriculture, or mining, the
USSR encourages the nationalization of Western business holdings
and the harassment of pro-Western businesses. Moscow presumably
expects that many of the middle- and lower-level LDC personnel in
the military, government, or media who receive Soviet training
also will favor policies and express views detrimental to private
entrepreneurship and Western investment.
The USSR also has made extensive use of surrogates in its
relations with the L DCs. While East European aid (including arms
deliveries and a host of military, technical, and economic
services) to LDCs is not insignificant, by far the most active
Soviet ally today is Cuba. "Of the 40,000 Cubans operating in
Africa, 80 percent are officers and soldiers on active duty,
mainly in Ethiopia (13,000) and Angola (19,000), whereas the
great majority of East [Europeans] are civilians (admittedly
including many police and intelligence experts)."4 Cubans offer
certain advantages to the host country that personnel from major
powers do not. As an LDC and a member of the nonaligned
movement, Cuba's presence can more easily be portrayed as
brotherly aid, not great-power imperialism. Cubans are more
tolerant of tropical conditions and apparently less concerned
4 The Pattern of Soviet Conduct in the Third World, edited by
Walter Laqueur, Praeger Publishers, New York, N.Y., 1983,
page 13.
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with perquisites than their Soviet counterparts. Culturally,
economically, and sometimes linguistically, they are closer to
the LDCs.
Impact of Soviet activities on Western Business
The extent to which the USSR affects the climate in the LDCs
for US or other Western businesses is difficult to measure. In
those instances where Moscow has chosen to support insurgencies
or to intervene militarily, the impact on the investment climate
has been quick and all-encompassing.
Overall trends in Soviet nonmilitary trade with the Third
World, however, show very little displacement of Western firms by
the USSR. Where such displacement has occurred it has been in
countries in which Communists gained control (Cuba, Vietnam) or
which relied very heavily on Bloc military support to stay in
power (Angola, Ethiopia, and Nicaragua). Although a similar
shift in the orientation of nonmilitary trade might have been
expected in countries drawn to the USSR because of hostile
neighbors (such as Syria against Israel and India against both
China and Pakistan), this has not occurred to a significant
extent.
As noted earlier, the Soviet share in the total nonmilitary
trade of LDCs, and in the aid they receive, remains small. Only
in the cases of a few countries has the Soviet share increased
substantially. The rise in imports of Argentine agricultural
products following the US grain embargo resulted in a rise of the
Soviet share in total Argentine exports from less than 2 percent
in 1970-72 to 16 percent in 1979-81. The increase from 1 percent
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to roughly 10 percent in the Soviet share of total Ethiopian
trade, on the other hand, was due primarily to a sharp rise in
Soviet oil exports and the resulting drop in the volume of OPEC
deliveries to Ethiopia. Although the USSR's share in Angolan
trade is small (probably less than 3 percent), the volume of this
trade has grown rapidly since Angola gained its independence in
1975. Soviet trade with Nicaragua also has increased
substantially in the past two years, but still accounts for only
an estimated 3 percent of Nicaraguan trade.
Short of direct intervention, military assistance has been
the most successful tool employed by the Soviets in gaining
leverage in the Third World. The military sector often is the
leading force in the LDCs and Moscow can implement full-scale
military aid programs rapidly. According to Walter
Laqueur,"Soviet arms shipments to the Third World have made
recipients considerably dependent on the Soviets for advice, the
supply of spare parts, and logistic support. . . the more
sophisticated the arms system, the greater the dependence.
Arms deals, as in the case of Egypt in 1955, have been the point
of departure for many Soviet political initiatives in the Middle
East. . . but it is also true that neither arms deals per se, nor
the presence of Soviet military advisers, . . .have created a
secure foundation for Soviet presence in the Third World."5
Moscow's programs for training LDC military and civilian
personnel have achieved some of the political objectives that the
5 Walter Laqueur, editor, op. cit., p. 34.
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Soviets desire. Although few of these students seem to have
changed their political persuasion after four to five years
residence in the USSR (some have become intensely anti-Communist)
most are willing to maintain professional and business ties with
.the USSR._ Only a handful of these Soviet-trained individuals,
however, have attained cabinet level status (except in countries
that have declared themselves Marxist), partly because they
compete with better trained and more numerous professionals who
were educated in the West. According to an Afghan official,
personnel trained in the USSR are concentrated at lower levels of
the bureaucracy because of their poor academic preparation.
Constraints Imposed by LDCs
Among the biggest obstacles to Moscow's attempts to
discourage Western investment in the LDCs has been a well-
deserved LDC distrust of Soviet intentions. In part, this
distrust of Moscow is based on observation of Moscow's role in
Afghanistan and Eastern Europe. In part, the distrust arises
from LDC nationalism. In countries where the Soviets have become
the principal foreign source of support, LDC governments have
also used the USSR as a scapegoat for their economic and security
problems. Sadat's expulsion of Soviet military advisers from
Egypt, for example, was a politically popular move. Similarly,
putting or keeping the Soviets at arms length can help an LDC
improve its relations with politically moderate neighbors.
Ugandan President Obote, for example, had good relations with the
Soviets during his earlier term of office. But he has been
cooler toward them since returning to power, in part because he
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1, 1
needs to stay on good terms with moderate neighboring states
Kenya, Sudan, and Zaire.
The success of Soviet opposition to Western business
interests in the LDCs has also been constrained by the preference
of many, and probably most, LDCs for Western-produced machinery
and equipment. The LDCs simply prefer Western goods because of
the deservedly poor reputation of Soviet manufactures and the
poor service and repair record of Soviet export organizations.
Developing countries with very limited foreign exchange reserves
often choose Western rather than Soviet-bloc equipment, and turn
to Moscow only when low Soviet prices and easy credit terms more
than offset the low quality of Soviet products, or when LDC
leaders want to diversify their suppliers and reduce their
dependence on the West. Even LDC countries politically close to
Moscow have found Soviet trade a poor substitute for economic
relations with the West.
Constraints Imposed by the USSR
Moscow has also placed some limits on its opposition to
Western business interests in the LDCs. However much Moscow may
rail against the "subversive and imperialistic role" of Western
investors in the Third World, Soviet leaders recognize that the
USSR by itself cannot provide the capital that the LDCs want.
Soviet leaders recognize as well that in Third World countries
where Western capital has been pushed out--e.g., Cuba and
Vietnam--the USSR has had to assume a heavy economic burden.
Soviet reluctance to provide substitute aid has extended in some
cases to encouraging LDCs to rely more on Western firms.
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Soviet Share in Exports and Imports of Selected
Non-Communist LDCsa
(In Percent)
Country
Soviet
of LDC
Share
Exports
Soviet Share
of LDC Imports
1970-72
1979-81
1970-72
1979-81
Afghanistan
35.3
20.8b
29.1
25.1b
Algeria
5.5
1.1
3.7
0.9
Argentina
1.5
15.8
0.2
0.2
Bangladesh
4.7c
5.8
--
1.7
Brazil
1.4
1.7
0.1
0.1
Burma
1.4
1.1
2.6
0.1
Chile
0.3
--
0.2
--
Colombia
0.1
0.3
0.2
0.3
Costa Rica
1.6
0.1
--
0.1
Ecuador
0.7
0.2
--
0.2
Egypt
37.6
5.4
12.8
2.1
Ethiopia
1.4
8.4
1.0
12.6
Gambia
--
--
1.9
1.9
Ghana
6.4
7.2
3.5
NA
Guyana
2. 3
1.1
0.4
--
India
14.0
6.0
8.0
7.4
Indonesia
1.1
0.3
0.7
0.2
Iraq
0.3
NA
10.1
NA
Kenya
0.3
0.4
0.3
0.1
Kuwait
--
--
1.1
0.2
Lebanon
1.3
2.1
2.4
0.7
Liberia
--
0.2
0.3
0.1
Libya
0.5
NA
11.3
0.4
Malaysia
3.1
2.3
0.2
0.2
Mali
Morocco
1.4
3. 4
1.0
4. 9
6.2
4. 3
1.9
Nigeria
0.2
--
0.8
0.3
Pakistan
4.6
2.0
2.4
1.0
Peru
0.2
0.7
0.1
0.8
Phillipines
--
2.5
--
0.2
Rwanda
--
--
0.6
0.9
Saudi Arabia
--
--
0.7
0.2
Senegal
--
0.4
0.4
--
Singapore
2.3
1.1
.0.4
0.1
Sri Lanka
4.1
2.9
2.0
0.4
Sudan
10.7
5.7
6.3
0.1
Syria
14.7
5.6
7.1
NA
Tanzania
0.4
2.2
0.3
0.1
Thailand
0.4
2.7
0.4
0.1
(Continued)
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.. 1
Country
Soviet Share
of LDC Exports
Soviet Share
of LDC Imports
1970-72 1979-81
1970-72 1979-81
Togo
8.8 0.2
2.3 0.8
Tunisia
2.6 0.1
1.2 0.7
Turkey
4.9 5.2
6.1 2.1
Uganda
0.4 --
1.7 --
U. Arab Emir.
-- --
0.8 0.1
Upper Volta
-- --
0.1 0.4
Uruguay
0.9 3.8
0.6 0.2
North Yemen
16.5 --
7.7 0.9
South Yemen
-- --
1.6 0.9
Zambia
-- 0.6
-- 0.1
a Calculated from reported trade flows given in Direction of
Trade Statistics, published by the International Monetary Fund'.
Some important Soviet clients such as Angola, Nicaragua, and
Mozambique do not report any trade with the USSR. Data exclude
most, if not all, military related trade.
b Percentage shares are probably understated because the IMF
extrapotates data when information is incomplete.
1972 only.
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Tot ala
Table 2
USSR: Trade with Selected Non-Communist LDCs, 1982
(Million US $)
Exports Import s
13,764 9,115
India 1,435 2,034
Iraq 1,259 25b
Argentina 38 1,746
Brazil 248 573
Iran 797 260
Afghanistan 569 384
Libya 305 1,554
Syria 291 415
Egypt 302 417
Algeria 183 64
Morocco 188 81
Ethiopia 252 18
Angola 84 5
Nigeria 366 19
Pakistan 99 97
Ghana 1 51
Malaysia 22 324
Philippines 18 111
Thailand 12 183
Ivory Coast 1 96
Otherc 7,294 658
a OECD definition of non-Communist LDCs, which includes: 1) all countries of
Africa except the Republic of South Africa; 2) all countries of East Asia
except Hong Kong and Japan; 3) all countries of Latin America except Cuba; and
4) all countries in the Middle East and South Asia, except Israel, Kampuchea,
Laos, Vietnam, and Turkey.
b Imports from Iraq have fallen off sharply since the onset of the Iran-Iraq
war in 1980 due to a cessation of oil deliveries. Imports peaked in 1978 at
$603 million.
c Including trade unallocated by country, which in the case of Soviet exports
includes sales of major weapons systems.
Source: Soviet foreign trade statistics.
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?.
Table 3
USSR:
Exports to Non-Communist LDCs
(Million US $, f .o.b. )
1978
1979
1980
1981
1982
Total
1,976
4,550
4,878
7,121
8,267
9,186
10,0%
11,525
13,764
of which:
Machinery and equipments
626
1,098
1,185
1,361
1,708
1,955
2,036
2,071
2,430
Fuels
67
468
481
653
571
965
1,490
1,689
1,955
Petroleum and petroleum
products
60
422
446
615
543
939
1,455
1,649
1,938
Ferrous metals
94
104
49
50
44
54
92
65
59
Chemicals
16
118
42
71
78
71
182
287
NA
Wood and wood products
59
162
153
169
139
143
239
237
199
Agricultural commodities
94
115
75
74
72
95
114
157
NA
Cbnsu r gods
36
86
87
%
97
105
%
98
NA
Otherb
984
2,399
2,806
4,647
5,558
5,798
5,847
6,921
8,700
a Includes some exports of military-related equipment (e.g., common-use durables such as
trucks).
b The other category is believed to
consist mainly of military shipments.
Source: Soviet foreign trade statistics.
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Table 4
USSR:
Imports from Non-Communist LDCs
(Million US $, f.o.b.)
1970
1975
1976
1977
1978
1979
198D
1981
1982
Total
1,225
4,076
3,618
3,920
3,995
4,702
7,507
10,450
9,115
of which:
Agricultural products
883
2,366
2,054
2,124
1,942
2,322
4,573
6,665
4,560
Petroleum and petroleum
products
25
552
535
538a
749a
925a
831a
1,103a
1,781
Natural gas
22
253
234
260b
265b
178b
254b
269
287
Other raw materials
28
140
108
144
108
195
206
226
191
Manufactured goods
209
550
492
534
523
577
897
1,208
NA
of which:
Textiles
113
332
299
349
314
343
488
590
DIA
Machinery and equipment
3
26
27
32
62
65
65
121
213
Other
93
192
166
153
142
163
344
497
N
Other commodities
58
215
195
320
408
505
746
979
NA
a Estimated from Soviet imports of u
pacified rateWry 2 (fuels, minerals, and metals) from Iraq,
Libya, aril Iran (in 1981-1982).
b Iranian natural gas exports were estimated from the differere between total reported
Soviet imports from Iran and imports specified by type.
Source: Soviet foreign trade statistics.
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a
Table 5
USSR:
Economic Aid to LDCs,
1954-82
(Million US $)
Extended
Deliveries
Total
23,336
11,105
1954-72
8,540
4,465
1973
735
500
1974
815
700
1975
1,955
500
1976
1,030
475
1977
435
550
1978
3,000
480
1979
3,345
575
1980
2,070
810
1981
520
850,
1982
880
1,195
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USSR: Economic Aid Extended to LDCsa
Total
Recipient
1978
1979
1980
1981
1982
1954-82
Total
3,002
3,347
2,071
522
883
23,336
North Africa
2,000
16
315
50
Neg1.
3,299
Algeria
--
16
315
50
--
1,097
Mauritania
--
--
--
--
Negl.
8
Morocco
2,000
--
--
--
--
2,098
Tunisia
--
--
--
--
--
96
Sub-Saharan Africa
13
1,295
310
127
634
3,530
Angola
2
Negl.
--
--
400
438
Benin
--
--
--
4
--
10
Cameroon
--
--
--
--
--
8
Cape Verde
2
N.A.
--
Negl.
--
3
Central African
Republic
--
--
--
--
--
3
Chad
--
--
--
--
--
5
Congo
--
--
Negl.
N.A.
--
46
Equatorial Guinea
--
--
--
--
2
3
Ethiopia
2
94
190
60
150
627
Gambia
--
--
--
--
--
Negl.
Ghana
--
--
--
1
10
106
Guinea
--
--
3
--
--
236
Guinea Bissau
--
--
--
Negl.
15
27
Kenya
--
--
--
--
--
49
Liberia
--
--
Negl.
--
--
Negl.
Madagascar
6
--
50
--
6
76
Mali
1
1
1
6
20
120
Mauritius
--
--
--
--
--
5
Mozambique
--
--
65
45
5
178
Niger
Negl.
--
--
--
--
2
Nigeria
--
1,200
--
--
--
1,207
Rwanda
--
--
--
--
--
1
Sao Tome and
Principe
--
--
--
--
--
N.A.
Senegal
--
--
--
--
--
8
Sierra Leone
--
--
--
2
--
30
Somalia
--
--
--
--
--
164
Sudan
--
--
--
--
--
65
Tanzania
--
--
--
--
5
44
Uganda
--
--
--
--
--
24
Upper Volta
Negl.
--
--
--
--
6
Zambia
--
--
--
6
--
21
Other
--
--
--
--
20
20
(Continued)
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Y .~
Recipient
1978
1979
1980
1981
1982
Total
1954-82
East Asia
261
Burma
16
Indonesia
214
Kampuchea
25
Laos
6
Latin America
15
251
175
173
1,598
Argentina
8
--
--
--
227
Bolivia
--
--
--
100
Brazil
--
55
--
143
Chile
--
--
--
238
Colombia
--
--
--
216
Costa Rica
--
--
--
15
Ecuador
--
35
--
35
Grenada
1
1
10
12
Jamaica
--
--
--
N.A.
Mexico
--
--
--
N.A.
Nicaragua
N.A.
84
163
246
Peru
250
--
--
276
Uruguay
--
--
--
60
Venezuela
--
--
--
N.A.
Middle East
749
1,600
--
55
--
7,927
Cyprus
--
--
--
--
--
14
Egypt
--
--
--
--
--
1,439
Greece
--
N.A.
--
--
--
8
Iran
--
--
--
--
--
1,164
Iraq
--
--
--
--
--
704
Jordan
--
--
--
--
--
31
North Yemen
38
--
--
55
--
197
South Yemen
90
--
--
--
--
204
Syria
--
--
--
--
--
768
Turkey
620
1,600
--
--
--
3,399
South Asia
225
436
1,195
116
75
6,719
Afghanistan
Negl.
435
395
27
75
2,196
Bangladesh
--
--
--
70
--
374
India
--
--
800
--
--
3,082
Nepal
--
Negl.
--
--
--
29
Pakistan
225
--
--
18
--
939
Sri Lanka
--
--
--
--
--
100
a Because of rounding, components may not add to totals shown.
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Agreements
Deliveries
78,475
56,820
1954-72
10, 290
8,130
1973
2,890
3,165
1974
5,735
2,225
1975
3,185
2,030
1976
6, 115
3, 110
1977
9,590
4,820
1978
2,520
5,910
1979
8,410
8,055
1980
14,235
7,000
1981
6,395
6,295
1982
9, 1 20
6, 075a
Preliminary estimate.
Source: US Government estimates.
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Table 7
USSR: Military Aid to LDCs, 1954-82
(Million US $)
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In
USSR:
Military Aid to LDCs, by
Area"
(Million Tons)
Agreements
Deliveries
78,475
56,820
North Africa
20,150
12,265
Sub-Saharan Africa
7,475
5,465
East Asia
890
885
Europe
30
--
Latin America
1,535
1,185
Middle East
35,465
29,990
South Asia
12,935
7,030
a Because of rounding, components may not add to totals shown.
Source: US Government estimates.
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