SOVIET FOREIGN ECONOMIC PROGRAMS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004200080002-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 19, 2016
• Sequence Number: 2
• Content Type: REPORT

lease 2006/11108: CIA-RDP79-00927A004200080002-8
25 October 1963
SOVIET FOREIGN ECONOMIC PROGRAMS
CENTRAL INTELLIGENCE AGENCY
OFFI CE OF RESEARCH AND REPORTS
~10FWCDF Page
GROUP 1 Excluded from automatic
downgrading and declassification
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The Soviet economic offensive of the past dec-
ade has been more successful in establishing a So-
viet presence throughout the free world than in
significantly adding to Soviet prestige. It appears
that the USSR now is more realistically assessing
the impact of aid and trade and their contribution
to long-run policy goals. As a result there are
changes in Soviet tactics and techniques. The USSR's
competition with the West remains not only a contest
for influence in the underdeveloped areas but also
a persistent effort to match Western industry in pro-
ductive capacity. Current economic problems within
the USSR, however, complicate this latter goal and
require increasing Soviet attention.
Soviet Foreign Aid
Despite these domestic eco-
nomic problems, the USSR continues
its relatively limited-scale for-
eign aid program. Its aid com-
mitments are up again this year--
to about $205 million--and its
deliveries under existing pro-
grams--which will remain a drain
on the Soviet economy--are ex-
pected to surpass last year's
$288 million. Credit-commit-
ments had fallen from the peak
year of 1959 when $850 million
was extended--about half for
India's development plan--to a
low of $77 million last year.
The aberrations recently evident
in Soviet aid extensions relate
in part to the lack of simple
impact projects and the outstand-
ing balance of more than $2 bil-
lion in undrawn credits.
Experience derived from
previous aid operations which
have sobered Soviet views as to
costs and returns, new pressing
internal economic considerations,
and requirements to support the
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floundering Cuban economy cur-
rently complicate Soviet for-
eign economic moves.
The extension of economic
aid programs has become a more
studied process. The USSR now
is less likely to pass out $100-
million credits for their imme-
diate political impact without
some attention to longer run
considerations. Where exploit-
able circumstances are presented,
as in Algeria recently, the
USSR still moves quickly. How-
ever, a large Soviet mission
spent nearly a month surveying
the Algerian economy before ex-
tending a $100-million credit.
In general, Moscow appears to
be avoiding aid commitments
which might saddle it with re-
sponsibility for the multiplic-
ity of problems which would
arise from underwriting the
economy of an underdeveloped
country.
When the USSR initiated its
aid program in 1954 its lack
of contact with independent
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SOVIET FOREIGN AID TO NON-COMMUNIST COUNTRIES
(MILLION US DOLLARS)
Credit extensions
Drawings
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NO FOREIGN DISSEM
L14
non-Communist countries led it
to hope that it could develop
a meaningful attachment through
the extension of aid. Subse-
quent experience has shown the
USSR that such is not the case.
Even Cuba, almost completely
dependent on Moscow for assist-
ance, does not subscribe fully
to Soviet policies.
However, the USSR, once it
embarked on a foreign aid pro-
gram, found it was desirable
to continue. Moscow appears
to accept the limited leverage
which can be derived from for-
eign aid and to accept rebuffs
* as of 24 Oct 1963
** estimate
from time to time as part of
the game.
As the Soviets have dis-
covered the limitations of their
foreign aid, so have the under-
developed countries. Most have
found that there is no partic-
ular mystique to Soviet aid,
that it, like all external gov-
ernmental aid, does not of it-
self alleviate all economic
pressures or assure meaningful
economic progress.
The USSR finds only limited
opportunity for the blanket
offer that formed the break-through
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ICELAND
SOVIET
ECONOMIC AID EXPENDITURES
in non-Communist countries,
1954 - mid-1963
(Millions of US D.II-)
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$3247.4 million
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for its early aid program. Most
underdeveloped countries now
seek better designed aid offers.
Many of them are so lacking in
technical qualifications that
the USSR must commit increasing
numbers of a wide range of
trained Soviet personnel in addi-
tion to financial or material
aid. The USSR, to avoid tar-
nishing its reputation in Africa,
reluctantly agreed to assume
full responsibility for operation
of its aid program in Guinea
when it became clear that Guin-
eans were unable to administer
the program as they should.
The backlog of unused
credits which measure the future
burden to be placed on the So-
PAKG/
INDIA BURR
1 22b
I"ji1,. I II"." 1'1.,'I
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NO FOREIGN DISSEM
viet economy is largely due to
failures on the part of the
underdeveloped countries rather
than the USSR. A case in point
is Indonesia, where there is
relative indifference to eco-
nomic growth. Of the $370 mil-
lion extended from 1956 to 1960,
only $56 million has been drawn.
Experience in countries such as
Indonesia, where political
frictions and indifference exac-
erbate a deteriorating economy,
presumably has led the USSR to
avoid becoming involved in more
countries where the prospect for
economic improvement is dim de-
spite relatively major aid in-
jections. This probably ex-
plains why Moscow has failed
to become more involved in
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Brazil, despite exploitable po-
litical circumstances there.
In some cases recently the USSR
has discouraged applications for
aid by indicating that only
medium-term credits at rela-
tively high rates of interest
are available.
Moscow has discovered that
the rewards of foreign military
aid tend to be longer lasting
than those from economic assist-
ance. Economic progress in un-
derdeveloped areas may be frus-
trated by many factors--rapidly
expanding populations, uncertain
world commodity markets, weather.
Military development, by con-
trast, is relatively easier to
achieve and has greater impact.
Nationalism prevalent in all
underdeveloped countries, which
see threats to their existence
from all sides, requires the
creation of a military estab-
lishment. The surface-to-air
missile site now has become the
status symbol. The USSR is
aware that the military assume
key roles in political develop-
ments in underdeveloped coun-
tries and is making considerable
efforts in its military program
to train at Soviet academies
those middle-grade officers who
will achieve positions of power
in the next decade. Furthermore,
shipments of military equipment
abroad do not tax Soviet devel-
opment as much as deliveries
of production equipment.
Soviet Foreign Trade
The growth of Soviet trade
from $3.25 billion in 1950 to
over $13 billion in 1962 is a
symbol of growing maturity in
the USSR. Not only has trade
grown, but its composition has
become more diverse and the
number of trade partners has ex-
panded. Soviet export capabil-
ities are chiefly responsible
for restricting the size of
the market made available to
the West. Exchanges with Com-
munist countries probably will
continue to account for over 70
percent of Soviet trade.
At the start of its offen-
sive in the underdeveloped coun-
tries in 1954, the USSR developed
some trade which was of dubious
economic importance but had po-
litical impact. Those economic
benefits which did accrue have
been most significant in the
moderate but continuing growth
in this trade. Moscow appears
satisfied with the limited de-
pendence that arises from trade
exchanges.
Deliveries of aid goods now
account for about 50 percent of
Soviet exports to the non-Commu-
nist underdeveloped countries.
Most of the remaining trade with
the underdeveloped countries
is on a barter basis and will
not be affected to any great
degree by current Soviet efforts
to step up trade with industrial
countries.
Moscow has recently been
reluctant to engage in new
trade gambits in the underde-
veloped countries, and has been
indifferent to some approaches.
This has been particularly no-
ticeable in its trade dealings
with Latin America. To satisfy
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SOVIET FOREIGN TRADE
(BILLION US DOLLARS)
with Communist Countries
I? with Industrial West
with Underdeveloped
Countries
the efforts of a Chilean mis-
sion, Moscow agreed only to buy
copper directly from Chile
rather than through West Ger-
many where the metal is proc-
essed. Although this estab-
lishes a new contact, it does
not increase Chilean export
earnings. Only minor trade was
developed with British Guiana
this year, but the USSR an-
nounced that it was "ample"
when Jagan began to seek addi-
tional trade and assistance.
This year's trade agreement
with Brazil was concluded only
after weeks of intense nego-
tiations, and it may founder if
the USSR is unable to provide
wheat--l.3 million tons during
the next two years--or feels
compelled to find a hard-cur-
rency buyer for the 5 million
tons of oil promised in 1964-65.
Soviet attention now seems
firmly riveted on expanding
trade with the industrial coun-
tries to obtain equipment and
technology to speed internal
economic expansion. To procure
such goods the USSR has tried
to expand exports of oil and
materials to the West or to
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seek credits for significant
plant purchases.
The current Soviet effort
is to pit industrial suppliers
against one another in an at-
tempt to get the best possible
credit terms. Now that the ex-
tension of sizable credits is
established practice, Moscow is'
seeking to lengthen credit terms
from five years to ten or twelve
for its industrial purchases.
Despite the cash drain in
the next year occasioned by
the extraordinary need to im-
port as much as $1 billion
worth of grain, there is no
evidence that the USSR intends
any serious modifications in
its plan to buy advanced West-
ern chemical and other indus-
trial equipment. The appetites
of Western manufacturers is
whetted by continuing propa-
ganda that the USSR seeks bil-
lions of dollars'worth of equip-
ment.
The American Embassy in
Moscow points out that Moscow
may plan to place tentative
orders with Western business-
men, who would then bring pres-
sure on their governments to
provide adequate financing.
Another effort to lengthen credit
terms has arisen in the negotia-
tion of the Soviet-Italian trade
agreement. Here talks have been
prolonged by the issue of the
nonavailability of long-term
credits to the USSR. A common
policy on credits now is under
discussion in Western Europe,
and the USSR may be faced with
a united front in its negotia-
tion of major trade pacts with
West Germany and the UK next
year. Moscow is certain, how-
ever, to garner support from
industrialists in Western Europe
and Japan who have become con-
vinced that a vast new market
is opening up.
In this trade campaign the
USSR has attracted Western offi-
cials to Moscow. Leading polit-
ical, trade, and financial per-
sonalities have been invited
and are visiting Moscow. Brit-
ish, Canadian, West German, and
Japanese figures have recently
visited the USSR, and France's
finance minister is scheduled
to go in January. There seems
little question that Moscow will
step up its purchases of chemi-
cal plant equipment, but it
apparently will bargain hard
for the best possible terms.
(SECRET NO FOREIGN DISSEM)
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