THE SOVIET BALANCE OF PAYMENTS IN HARD CURRENCIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP70T00666R000200110020-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 12, 2016
• Document Release Date: August 23, 2002
• Sequence Number: 20
• Publication Date: April 21, 1966
• Content Type: BRIEF

SEC IN" f
Approved For Release 2002/09/05 ; CIA-RDP7000666R000200110020-0
21 April 1966
5-1857
25X1A9A
DCI Briefing
THE SOVIET BALANCE OF PAYMENTS IN HARD CURRENCIES
20 April 1966
The Soviets' problem with their hard
currency balance of payments is how to
finance the trade deficit, that is, how
to pay for the chronic surplus of imports
over exports in the most important part of
their trade with the West.
This has become an increasingly serious
problem as the level of these deficits has
plunged from some $300 million in 1960 to
some $600 million in 1964, and in 1965 the
deficit was again a sizeable $300 million.
It is the trade deficit which has
necessitated the large sales of gold, which
in turn have depleted the stock of the gold
reserve to a point which the Soviets
themselves must now regard as precariously
low.
HARD CURRENCY TRADE: To turn to the board of basic facts, we are
talking about a small but significant
segment of Soviet trade.
(Note the typical trade deficit)
THE PAYMENTS BALANCE: The hard currency balance of payments of the
USSR has an essential simplicity in that
only two items in the current account and
only two items in the capital account make
up so large a portion of the total value of
all transactions.
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25X11A9A
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FINANCING THE DEFICIT: The capital account shows the two principal
means of financing the trade deficit,
namely, gold sales and Western credits.
THE BALANCE IN 1964: This chart brings together in a simplified
statement the USSR's balance of payments in
196+ with hard currency trade partners.
Breakdown of the Current Account: 3
entries--EXPLAIN
*The main point is the overwhelming
importance of commodity trade transactions
in the Current Account. (As we saw on the
board of basic facts, trade and transport
together account for 95% of the value of
all Current Account transactions).
Breakdown of the Capital Account: 3
entries--EXPLAIN
*The main point is the predominance of
gold sales in capital transactions. (As
we saw on the board of basic facts, gold
sales and credits together account for
over 95% of the value of all Capital
Account transactions).
FINANCING THE DEFICIT: This chart shows the trends since 1959 in
the deficit on trade and transportation and
the trends in the principal means of
financing the deficit, namely, gold sales
and credits.
(1) Trends in the trade and transportation
deficit--EXPLAIN
(2) Trends in gold sales--EXPLAIN
Note that as the deficit descends,
sales of gold soar to offset it.
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 BEGET
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Accumulated sales totalling $2.3
billion from start 1959 to end 1965
represent 80% of principal means of
financing the deficit.
The resultant impact on gold reserves:
from $2.7 billion at start 1959 to
$1.3 billion at end 1965-
(3) Credits from the West: $600 million
net received from start 1959 to end
1965, or 20% of the principal means
of financing the deficit.
Note that net credits exceed gold
sales in only one year, 1960.
Note how net benefits from such credits
have continually diminished because of
tendency for repayments to offset new
drawings.
The continuing existence of this deficit is
a constraint on Soviet economic performance
and growth.
The Soviets both want and need more Western
equipment.
The recent slowdown in economic growth
has made them acutely aware, Mr. Director,
of the technological gap between their
own equipment and that of the industrial
West.
The problem is, however, how to pay for
the imports.
As we saw, they cannot continue selling
gold at past rates.
And, credit-financing all to quickly leads
to offsetting repayments burdens.
So, the only good solution is to expand
the rate of growth of exports, and so far
we have seen no signs of decisive progress
in that endeavor.
3
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THE SOVIET BALANCE OF PAYMENTS I N HARD CURRENCIES
HARD CURRENCY TRADE:
$2.5 billion in 1965, or 15% or total Soviet trade
Imports: $1.4 billion in 1965, including
machinery from West Europe and Japan
grain from Canada
rubber from Southeast Asia
Exports: $1.1 billion in 1965, including
petroleum, wood, and metals to
West Europe and Japan
THE PAYMENTS BALANCE
Current Account: trade and transportation account for over
95% of value all current receipts and payments
Capital Account: gold sales and credits account-for over
95% of value all capital transactions
FINANCING THE DEFICIT:
Gold Sales: $310 million in 1965; accumulated total
of $2.3 billion from start 1959 to end 1965
Credits from West: $50 million net received in 1965;
accumulated total of $600 million from start
1959 to-end 1965
SECRET
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secrae-r
Tile sovIeT BaLance OF PavmenTs
in H ?
(in millions opus $)
I.cURRenT accounT
1.COMMODITY TRADE
2.TRANSPORTATION, N ET
3 0TH ER CURRENT RECEIPTS
BALANCE ON CURRENT ACCOUNT
IIBapITaL accounT
4. MEDIUM-TERM CREDITS
5 REPAYMENTS ON MILITARY
CREDITS
BALANCE ON CAPITAL ACCOUNT
111OTaL Balance
MDIT DEBIT Balance
- 53
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FINANCING THE SOVIET HARD CURRENCY DEFICIT
ON TRADE AND TRANSPORTATION, 195965
-TRADE
- T PAN SPOPTATION
THE DEFICITS ON TRADE AND TRANSPORTATION
v
0
3
z
0
600PRINCIPAL MEANS OF FINANCING THE DEFICIT
SALES OF GOLD
19,59 19,60 1961 1962 1963 1964 1965
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