Recent Soviet Purchases of and Negotiations to Obtain Natural Rubber

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A000200140002-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: November 9, 2016
• Document Release Date: August 17, 1998
• Sequence Number: 2
• Publication Date: October 21, 1948
• Content Type: IM

111-73
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CFA{TF'AL INTEL;LICE `CE AGENCY
.LNTELLI Gti1TCE N12,7ORANUUM NO. 73
SUBJECT: Recent Soviet Purchases of and Negotiations to Obtain
Natural Rubber
1. Amounts purchased.
The USSR has greatly increased its purchases of natural
rubber during the current year. Reliable trade estimates indicate
that by mid-July the Soviets had purchased 80,000 long tons of
rubber for delivery in 1948, and that by the end of the year
total purchases from rubber-producing areas would be about 100,000
tons. From a study of many secret reports, CIA believes that
this estimate is substantially correct; a figure of 105,000 tons
might be more accurate, however, inasmuch as it includes a ship-
ment of 5,000 tons not reported by regular sources.
This estimate of total Soviet purchases compares with
43,046 tons exported by producing areas to the USSR in
1947,
and
an average of 30,000 tons exported in each of the ten
years
pre=
ceding World guar 11.
The USSR is reported to be negotiating for the purchase
of rubber in Siam and Ceylon, but it appears unlikely that agree-
ments will be concluded. If, however, these agreements should be
consummated and some quantities of rubber are purchased this year,
it is probable that Soviet purchases in P,alaya will be correspondingly
reduced.
As of 1 October, 76,600 tons of the 1948 purchases had
been shipped, leaving 28,400 tons still to be transported this
year.
NO CHANGE in Class.
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2. Sources of purchases.
The sources of natural rubber purchase by the USSR during
the current ;;Tear are as follows
Shipped during
first 9 months
of 1948
Estimated shipments
during last 3 months
of 1948
Total shipments
1948
Malaya
70,406
2 3, 500
93, 906
Indonesia
6,000
11,000
United Kingdom*
200
200
Total
76,606
28,500
105,106
The bulk of the purchases of Malayan rubber in 1948 were
placed through London dealers; with one small exception, however,
shipments were made directly from Malaya.
Re-exports of natural rubber from the United Kingdom to
the USSR during the first nine months of 1948 amounted to only 200
tons in July. Statistics of exports of natural rubber from Indonesia
by countries are not available, data on exports to the USSP having
been obtained from a secret report and from the trade.
Numerous reports have been received concerning purchases in
Malaya for Soviet account in 1948. The fact that many of these trans-
actions are more or less clandestine and usually provide for future
delivery, however, prevents accurate reporting of purchase dates.
Because of the impossibility of eliminating duplications as well as
mere inquiries to buy, the task is rendered especially di"ficult.
The most reliable data on Boviet takings of natural rubber from
Malaya are the official Malayan export statistics. In this connection
it is important to note that Malaya produced about half of the world's
natural rubber in 1947. Its exports of that commodity to the USSR in
1948 by months were as follows:
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Month
Long Tons
January
4,725
February
1,225
March
3,700
April
4,251
May
5, 266
June
5,531
July
13,359
August
18,086
September
14,263
263
Total, 9 months
70,406
Information on the purchase dates of Indonesia rubber is
not available, but of the 6,000 tons involved, 6,000 tons are known
to have been loaded prior to 2 July; the remaining 1,000 tons were
purchased after that date.
4. Where shipments are loaded.
Most of the Malayan rubber for delivery to the USSR is loaded
at Singapore, but some ships load part of their cargoes at Penang,
Malacca, and Port Swettenham, all in Malaya.
A cargo of 5,000 tons of Indonesia rubber for the USSR was
loaded at Menado (Celebes) during the early summer. Data are not
available on the loading point of the remaining 1,000 tons shipped
to the USSR from Indonesia. during the first nine months of 1943.
Re-exports of rubber from the United Kingdom to the USSR are presumably
loaded at London. _
5. Where shipments are unloaded.
Of the nine vessels carrying rubber from Malaya to the USSR
during the first nine months of 1948, the destination of seven was
Odessa, although two of them may have unloaded part of their cargoes
at Batum. Both of these ports are convenient for rail trans-shipment
to rubber processing factories in the USSR. The port of destination
of the remaining two vessels have not been reported, but it is reasonable
to assume that they are in the Black Sea. The destination of the vessel
transporting rubber from M enado was Odeasa. Destinations of the
remaining shipments fro Indonesia and the United Kingdom have not been
ascertained.
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A small portion of the recent heavy Soviet purchases of
natural rubber may be intended for resale to Satellite countries,
It is possible, therefore, that some of the vessels transporting
rubber from southeast Asia to the USSR may have unloaded part of
their cargoes at Bulgarian or Rumanian ports for transshipment.
Czechoslavakia and Poland, the principal consumers of rubber among
the Satellites, however, normally receive their requirements via
Hamburg.
6. Other pertinent data
Reasons for increased Soviet purchases of natural rubber.
There are nunerous reasons why the USSR has so greatly
increased its purchases of natural rubber:
a. Soviet desire to utilize accumulated sterling
and dollar credits,.
b. Fear of embargo or restriction of rubber exports
to the USSR under the export control program
sponsered by the United States.
c. Stockpiling. This motive is suggested by: current
practice of paying premium prices; concentration
of buying on the top grades especially suitable
for stockpiling; and extra payment for special
packing to permit longer storage. Moreover, the
quantities of natural rubber currently being
purchased are greatly in excess of pre-war and
post-war purchases through 1947, and are believed
to exceed greatly the USSR's capacity to process
together with its large output of synthetic rubber.
d. Desire of the USSR to obtain as much rubber as
possible from Malaya and elsewhere in southeast
Asia before Communist-instigated uprisings in that
area begin to disturb production and exports.
Growing interest of the USSR for economic and
political expansion in southeast Asis.
f. Soviet resale of part of the purchases to Orbit
countries or for use in the Soviet Zone of Germany.
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United Kingdom - USSR trade a&reejaent
The trade agreement between the United Kingdom and the USSR,
which became effective 27 December 1947, provides among other things
that: "negotiations will be immediately commenced with the object
of supplying to the Union of Soviet Socialist Republics wool,
rubber, aluminiii, cocoa beans, coffee and other goods to be agreed."
25X1X7
Natural rubber is one of the commodities whose exportation
from the United States to the USSR and its Satellites is to be
held to small quantities. The ECA, through the Department of State,
is ecpected to request the United Kingdom and other countries
participating in its recovery program, to take parallel action
insofar as possible without actual violation of existing trade
agreements.
Netherlands - USSR trade agreement
The Netherlands and the USSR signed a trade agreement
effective 2 July 1948 which permits the exportation of 18,000
tons of natural rubber by the Netherlands to the USSR in the ensuing
twelve months. According to a British trade report, only 1,000 tons
of rubber have thus far been exported in accordance with the agreement.
It is estimated that additional shipments in the remaining months of
1948 will be in the order of 5,000 tons. Although the Netherlands'
commitments in the compensation-clearing agreement permit the
exportation of 18,000 tons of rubber and although it has been reported
from trade sources that some contracts for delivery have actually been
placed under the agreement, the Dutch Goverment recently denied that
the USSR was negotiating to buy 18,000 tons of rubber from the
Netherlands. Mere is no conclusive evidence, therefore, to indicate
the extent to which contracts for delivery will actually be placed
under the agreement.
The Netherlands will be requested, as in the case of the
United Kingdom, to take action to hold exports of rubber to the USSR
to reasonably small quantities to the extent possible without
violation of existing trade agreements.
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USSR - Siam Negotiations
Teports have recently been received by CIA indicating that
the USSR is attempting to negotiate a "closed agreer,nment" with the
Government of Siam for the purchase of crude rubber. One of these
reports states that the Soviets are seeking 2,000 metric tons of
rubber per month, and another, 3,000 tons per months. CIA -does not
believe that such an arp:reement has been consumrsated. The Siamese
0soverniient does not engage in the purchase and sale of rubber, and
is therefore unlikely to enter into this type of business by reason
of negotiation of an agreement with the USSR. Furthermore, the
Siamese dTovernment is sufficiently oriented towares the Viest as to
render acceptance of the rumored Soviet offer unlikely if eeually
favorable prices for rubber can be obtained from the United States
or the United Kinfi,dom.
Inasmuch as the USSR opened a legation in Siam in.Narch
1948, it is not unreasonable to assume that the Soviets may purchase
natural rubber from private Siamese interests, which produce about
50,000 tons per year. It is believed that Soviet inquiries for
rubber in Siam and in Ceylon (discussed later) are motivated by
the same reasons indicated for its activities in the Far East.
Statistics of Siamese rubber exports by countries of
destination are inadequate, but the Embassy in Bangkok reported in
May that there have been no direct shipments from Siam to the USSR.
Some Siamese rubber, however, is shipped to the tSSk via Singapore
and the nuantities are presumably included in the official Malayan
export figures. Lalayan import statistics show only 4,264 tons of
rubber imported from Siam in the first six months of 1948.
There is some indication that Chinese intermediaries
are smuggling ik_alayan rubber to the USSR via Siam, thus avoiding,
the ldalayan export tax. These shipments ma,,' leave.Siam from the
southern ports of Songkhla or Pattani where clearances may not be
rigorously enforced, and go thence to Bong Kong whence the- could
-be smug-,led directly or indirectly to Vladivostok or other convenient
ports. Some vessels clearing Hong Kong for Tacao are believed never
to reach that destination. The bulk of the re-exports of rubber
from Hong Kong ordinarily tgo to China, and the probabilities are
that the volume of rubber smuggled from Siam to Hon; Kong, and thence
ultimately to the USSR is not large.
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Ceylon - USSR Negotiations
The USSR has recently made inquiry regarding the direct
purchase of 30,000 tons of Ceylonese rubber this year and all of
next year's output. Because of the strategic importance of the
material, the Government of Ceylon has withheld reply until the
offer could be discussed at the conference of Prime Ministers in
London in October 1948. A Government spokesman has indicated that
its decision "will be based on three main factors - price offered
in relation to the world price, long range trade possibilities, and
the world situation."The Government of Ceylon has asked whether
the United States is prepared to make a purchase offer for all or
part of the output. CIA has received no report of any decision
of the Ceylon Government on the matter.
CIA believes that the Covernment of Ceylon's current
pro-u'restern attitude should result in Ceylon's denial of the Soviet
offer provided the United. States and the United Kingdom make
reasonable arrangements for the purchase of current as well as
future production of rubber. A; possible factor in this situation
may be the recent Soviet veto of Ceylon's application for membership
.in the United Nations.
It is not probable that USSR purchases of rubber in Ceylon
this year will increase its total purchases above the estimated
105,000 tons; rather it is believed that any Soviet buying of rubber
in Ceylon will probably constitute a switch of buying from ialaya
to that area. Reports have been received that not all of the Soviet
purchases of TL.alayan rubber have conformed to specifications. This
difficulty would account in part at least for the sudden interest of
the USSR in Ceylonese rubber.
Ceylon did not export any rubber to the 'USSR. in 1947
or during the first nine months of 1948. Its production, which
reached a maximum of 105,000 long tons during the war and declined
thereafter to 89,000 tons in 1947, is estimated at 80,000 tons in
1948.
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