DEAR BILL:

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78T02095R000800020011-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 16, 2016
• Document Release Date: November 23, 2004
• Sequence Number: 11
• Publication Date: March 14, 1987
• Content Type: LETTER

Approved For Release 2005/04/4%CIA-
~/ ~) C,2 / &
I Elr"i 1967
for rotor a tto I rei m
of 1ttr
D. C. 20523
Deis. Z111:
'7D/ 359-67
DP78T02095R000800020419--- -'. ';Y,;;,
F Your 23 February request. I
s . tiku_ on Cambodian elan in .sales. and
r-ost t N-ce to o ia m and the "4
t tt that thiro is fc x .r t oars together with
th Spoclax 113 .td na ( Celli e t e Z"Pal-mate tin
:;:b ;i *,mt to you 3 wig .eat your
u ? : . SboI*i.d you mg rs a eiti a details
X10 se lot m-0 4o+. .
Sincerely.
Vs% Richard Helma
Director
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CONCUR:
Acting Deputy Ur actor for Intelligence
I 1v.ce +cLtt ~ ; istry WIene
&IM (11 ?arch 1967)
Original and 1 - .Addressee wr/enc
I - .rector's Chrono w/enc
I - DD v,/enc
1967
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 Approve
Cambodian Ship Sales, and Assistance to North
Vietnam and the National Front for
Liberation of'South Vietnam
Summa
The value of trade between Cambodia and North Vietnam has
ranged between $US 2 and 2.5 million in recent years. This trade
is less than 5 percent of the value and less than 10 percent of the
volume of trade of either country. Large sales of Cambodian rice
raised the value of trade with North Vietnam to'over $L million in
1965 but preliminary estimates indicate that trade in 1966 appears
to have returned to average levels.
Trade between Cambodia and North Vietnam is conducted under
trade and. payments agreements recorded in pound sterling. Cambodia's
indebtedness under these agreements is estimated at about $2 million
at present. The prices, of goods moving in this trade do not differ
greatly from world market prices. All of the trade is carried on
foreign flag ships, either Communist flag ships or Free World ships
under charter to North Vietnam.
Smuggling between Cambodia and South Vietnam is traditional and
the Communists in South Vietnam have taken advantage of the poorly
controlled border to obtain a variety of goods. Sihanouk became
concerned about the smuggling'of rice and the consequent loss of
foreign exchange in 1965. He then made an agreement to sell to the
Communists in Laos and South Vietnam 20,000 tons* or possibly. 30,000
tons of rice. This rice which was paid for by Communist China and
transported overland, was important to the Communist forces in the
rice deficit areas of southern Laos and the central highlands of
South Vietnam. Cambodia has made no real effort to stop smuggling,
but even the best efforts by Cambodia would serve only to make the
smuggling more difficult, and a. fair amount of goQds would continue
to move.
The Communists use Cambodian territory to infiltrate personnel
from North Vietnam, as a sanctuary to evade allied forces and as a
refuge for rest, training, medical care, and the storage of supplies.
Sihanouk and other senior officers are aware of the general nature
but not the full extent of Communist activities in Cambodia.
Sihanouk has issued orders that the Communists cannot use Cambodian
territory for bases'or sanctuary. Recently there have been some
indications of increased vigilance by the Cambodians, but Cambodia
lacks the military capability to effectively close its border with
Vietnam.
* Metric tons are used in this memorandum.
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 Approved For Release 2005/04/21 : CIA-RDP78TO2095R000800020011-8
Cambodian Trade with North Vietnam
1. Trade between Cambodia and North Vietnam has been relatively
unimportant to both countries, accounting for considerably less than
10 percent of the total value or volume of the trade of either coun-
try. Cambodia has had to restrict trade severely with all countries
in 1966 because of shortfalls in the production of rice, its principal
export item, and it appears that further contraction will be necessary
,in 1967. As a result of?the decrease in Cambodian rice exports, most
of which go to Free World countries, the North Vietnamese share of
total Cambodian trade may have increased slightly in 1966. Cambodian
exports to North Vietnam consist mainly of corn and lumber; Cambodian'
imports from North Vietnam are principally cement, raw sugar, and
paper.
value series for Cambodian -Ora de wi 1
0
?
Million $US
di
b
61
1962
1963
196?
1965
Jan-Sep 1966
an:
o
Cam
D
Exports
1.17'
0.26 .
0.57
1.19
2.16
o.81
Imports
o.86
1.91
1.43
1.27
1.98
1.25
l
t
T
03
2
2.17
2.00
2.46
4.14
2.06
a
o
.0
During 1961-64 the value of the trade fluctuated between $2 and 2.5
million. Trade increased sharply.to-over $4 million in 1965 and in
1966 apparently returned to the 1961-64 average-level. The sharp
increase in the trade figures for 1965 is explained principally by
a major export sale to North Vietnam of rice valued at $1.7 million.
The volume of Cambodian trade with North Vietnam in 1966,
is shown below:
1,000 Tons
Total 88.6
Cambodian exports: 26.4
Rice 10.0
Timber 15.3
Miscellaneous and unidentified 1.1
'Cambodian imports: 62.2
Cement - 51.0
Sugar 7.6
Miscellaneous and unidentified
(including paper)
3.6.
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These data, which are preliminary but believed to be quite complete,
indicate that the volume of Cambodian trade with North Vietnam is
relatively small. It makes up less'than 10 percent of the total
trade volume of either country.
4. We estimate that none of the legitimate trade between
Cambodia and North Vietnam-is carried by means of land or air
transport. All of Cambodia's seaborne trade with North Vietnam is
transported by foreign shipping, either Communist fl.g ships or
Free World ships under charter to North Vietnam. One of the two
Chinese ships noted transporting goods between Sihanoukv .lle and
North Vietnam in 1966, however, normally participates in service
provided by a joint shipping company agreement signed in 1960
between Cambodia and Communist China.
5. About 15,400 tons of the'26,400 tons of cargo exported
from Cambodia to North Vietnam during 1966 were carried on Free World'
ships under charter to North Vietnam, 8,800 tons were carried on
Soviet ships, and 2,200 tons were carried on a Communist Chinese ship.
Chartered Free World ships also carried 36,300 tons of the 62,200 tons
imported from North Vietnam, Soviet ships carried 22,800 tons and
3,100 tons were carried on a Communist Chinese ship.
6. Cambodian trade with North Vietnam is conducted under a
trade and payments agreement in which the amounts are recorded in
pound sterling. The bilateral payment agreement obviates the need
for foreign exchange transfers except possibly when the accounts
are settled. It is doubtful that settlement in foreign exchange as
occurred, and Cambodia's indebtedness on the clearing account has
probably built up to the equivalent of about $2 million.
7. The price of Cambodian rice exported to North Vietnam in
1965 averaged $80 per ton -- about the same as for rice of equal qual-
ity sold to Hong Kong and the Philippines, suggesting world market
prices are used in pricing commodities exchanged between Cambodia
and North Vietnam. When prices listed in the bilateral exchange vary
from world market quotations, they usually are higher than world
market prices. Cambodian trade officials have complained that in the
bilateral trade agreements with some Communist countries export prices
are sometimes inflated by both parties but that the Communist inflate
their export prices more.
8. We have no information to confirm any donations or gifts
by Cambodia to North Vietnam or to the National Front for the Libera-
tion of South Vietnam since April 1966. The gifts, known to date,
consist of medicines presented in September 1965 and dried fish in
March and April 1966. Cambodia on the other hahd has'reportedly
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received gifts from North Vietnam -- 10 tons of sugar in July 1966
and 1,510 tons of coal in August 1966.,
Smuggling
to make extensive private purchases of rice in Cambodia, and this,
rice was smuggled through northeastern Cambodia to Communist forces,
in Laos and South Vietnam. It is not certain how much this addi-
tional smuggling'amounted to in 1965,,but the total was probably
around'5,000 tons. It is known that this smuggling was on a large
enough scale to disturb Sihanouk because of the loss of tax revenues
9. Food. There has always been a good deal of private trading
and smuggling of rice back and forth across the Cambodian-South
Vietnamese border, particularly in the delta region. In 1965,,how-
ever, coincident with the buildup of North Vietnamese Army units
in the rice-deficit South Vietnamese highlands, the Communists began
and foreign exchange earnings involved.
food supplies smuggled from Cambodia include dried fish, salt, beef,
pork, and milk, but the quantities of these items are not large.,
Sihanouk made a deal late in 1965 for an official sale of as
much as 20,000 and possibly 30,000 tons of rice for delivery to the
Vietnamese Communists in 1966. It is believed that this rice sale
was financed by Communist China and not by North Vietnam. Other
10. Chemicals and' Munitions. Some drugs, medical supplies, and
chemicals useful in the manufacture of explosives are imported into
Cambodia through normal commercial channels and smuggled forward
into South Vietnam to the Communists. The quantities obtained by the
Communists from Cambodia are difficult to establish. Between March
1963 and February 1961+ at least 23 tons of explosive chemicals, 95
percent of which was potassium chlorate, were captured on delta
waterways near the Cambodian border, some with Cambodian markings
and obtained in Cambodia. In addition, small quantities were seized
in.1966 which clearly came from Cambodian sources. On the other
hand, bulk chemicals, including potassium chlordte, are available
in Saigon, which would.generally be a more accessible source than would
Cambodia. Small amounts of arms and ammunition drawn from military
aid deliveries to Cambodia and from stocks of old weapons in Cambodia
probably have been smuggled to the Vietnamese Communists. This traf-
fic probably results from the procurement activities of the Communist
party apparatus in Cambodia and from illegal sales by local military
commanders in border areas.
11. The Cambodian government appears to want to stop at least
that smuggling that results in large losses of revenue and has
established road blocks on some of the major roads'leading to the
Vietnamese borders. On occasion, cargoes have been confiscated by
border or customs officials., The general tenor of information on
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 Approved F
this subject in the past six months indicates that such efforts have
been stepped up by the Cambodian government. However, the Cambodian-
South Vietnamese border is about 700-miles long and is difficult to
control, and past activities and attitudes are difficult to change.
Sihanouk has for several,years foreseen a Communist victory in Viet-
nam (although he may now be having second thoughts); he has'feared
Communist intentions against his own regime; and he has felt it
necessary to maintain cordial relations with them. To this end, he
has been publicly sympathetic to the Communist cause and critical of
the GVN and the US. He has also given the'Communists those forms of
material aid which are generally consistent with neutrality, which
could be defended on commercial or humanitarian grounds, and which
he would consider unlikely to provoke a military response from US-
ARVN forces.
12. Businessmen in Cambodia, particularly Chinese merchants,
have been quick to take advantage of this situation. Aside from
the official rice sales, most of the support obtained by the Com-
munists in Cambodia is in fact accomplished through commercial and
private transactions, handled primarily by Chinese and Vietnamese
businessmen in Cambodia who import materials, smuggle rice, and
occasionally even use Cambodian Army trucks to effect deliveries.
Sihanouk?s political attitude provides little incentive for medium-.
and low-level government officials and military personnel to resist
the temptation and opportunity for personal profit. The Cambodian
Army, security forces, and local officials are poorly paid, and
dealing with the Vietnamese Communists represents the chance of a
life time to make money. As a result, there is much local.collu
sion along the border, including the sale of supplies to the Com-
munist and the occasional use of army trucks to deliver them. While
Sihanouk and senior officials in Phnom Penh probably are generally
aware of what is going on, they have apparently chosen generally to
close their eyes to mos' of it.
13. If the Cambodian Government chose to, it could probably do
more to limit the shipment of rice, chemicals, and other goods to
the Communists. Sihanouk could change the prevailing climate, and
the bureaucratic and military apparatus could'exert tighter con-
trols over rice shipments and the import of goods from, abroad. At
best, however, smuggling, false manifesting, bribery, and other
tricks of the trade would serve to permit a fair amount of goods to
move.
Communist Use of Cambodian Territory
14. The extent to which Cambodian territory is used for Communist
bases, for sanctuary, and for infiltration is difficult to determine.
The Vietnamese Communists have established several important base
areas in South Vietnam next to the Cambodian border. There ip consider-
able evidence, however, that some of these bases extend into Cambodia)'
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where they form part of the logistical system for the acquisition
and storage of supplies obtained from or through Cambodia. The
bases also provi1e facilities for sanctuary, hospitalization, rest,
and training. Sanctuary is probably the most important use made of'
Cambodia by the Vietnamese Communists in their combat, operations.
As the war has intensified, VC and NVA units ha?ire resorted more
frequently to border crossing to avoid detection by or combat with
US-ARVN forces. The main use of Cambodian territory is for infil-
tration by North Vietnamese Army troops who normally walk all the
way to South Vietnam. The main infiltration trails generally run on
Vietnamese territory after leaving the Laotian Panhandle, but they
follow close to the border and cross into Cambodia in many places,
in one instance utilizing Cambodian territory for some 50 kilometers
or so. There is some evidence that Communist groups may have been
making more extensive use of the trails in Ratanakiri and Mondolkiri
Provinces over the past year.
15. Sihanouk and other senior Cambodian officials almost cer-
tainly have a general knowledge of Vietnamese Communist military
activities in Cambodia, although perhaps not to their full extent.'
Communist activities are almost certainly better known along the
more populous and politically sensitive southern half of the frontier,
where Cambodian border posts are concentrated. The RKG is probably
much less informed of Communist activities in the desolate and
unsettled northeast.
16. Sihanouk dislikes and distrusts all Vietnamese,. including
the Communists, and is unhappy about their presence and activity ,
in and on the borders of Cambodia. He also fears involvement in the
war and has attempted to maintain an official posture of correct
neutrality. He has issued instructions that no Vietnamese forces
be permitted sanctuary or bases on Cambodian territory, and 'Cambo-
dian border forces have in fact skirmished with the VC, but until
recently there has been no determined effort to police the border.
During the past six months there has been definite interest expressed
by the central authorities of making an attempt to police their
Vietnamese border.
17. In any event, Cambodia's Armed Forces are far too small to
seal Cambodia'.s borders and to effectively deny Communist use of
Cambodian territory. Deployments along the troubled border with
Thailand and in the southern central part of the country leave less
than 5,000 regular troops along the entire 700-mile border with
South Vietnam. There are only 1,300 Cambodian regular soldiers,
deployed in three locations, to cover some 300 miles of wild and
inaccessible border in the northeastern provinces of Ratanakiri and
Mondolkiri. There are about 12,000 Communist main force troops on
the South Vietnamese side of this border region. -While,a firmer
attitude and increased vigilance by the Cambodians might serve to
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discourage Communist use of Cambodian territory, Cambodia's
capability to detect and resist sizable Communist forces or
inhibit Communist activities, particularly in the northeast, is,
extremely limited.
CIA/ORR
March 1967
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