THE SOVIET FOREIGN AID PROGRAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A006000040003-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 19, 2016
• Sequence Number: 3
• Content Type: REPORT

Approved For Release 2006/12/19: CIA-RDP79-00927A006000040003-1
``o Secret
25X1
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
The Soviet Foreign Aid Program
Secret
N2 38
15 September 1967
No. 0307/67A
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S F C R FT
THE SOVIET FOREIGN AID PROGRAM
Since the USSR began providing economic aid to
non-Communist countries nearly 14 years ago, it has
committed a total of $6 billion,* of which nearly
$2.5 billion has been delivered. The substantial
balance outstanding together with Moscow's willing-
ness to begin new programs and to expand others in-
dicate that economic aid will remain a basic feature
of the USSR's relations with less-developed countries.
Military aid also is a prominent feature of So-
viet relations with some of the countries and has
usually had a more immediate impact than economic
assistance. To date Moscow has extended about $4.5
billion in military aid and has become the sole or
major source of armaments to 21 countries. The ma-
jor Soviet effort involved in making up the Arab's
losses from their war with Israel has not prevented
the USSR from beginning new programs elsewhere.
Economic Aid
The Soviet economic aid pro-
gram continues to be focused on
assistance for specific projects,
but as Moscow has gained experi-
ence it has been making more
careful appraisals of a project's
feasibility. Although large
blanket credits, designed chiefly
for political impact, were made
frequently in the early years of
the aid program, they are seldom
extended now. The USSR has also
experimented with trade credits--
shorter term loans to finance
more immediate needs. Several
hundred million dollars worth of
All values given in US dollars.
such credits were made available
last year. The unexpected eco-
nomic burden of making up the
Arabs' losses may inhibit, but
will not prevent, the USSR from
moving forward with economic aid
in other areas.
Soviet economic aid commit-
ments to the less-developed coun-
tries now total $6 billion, of
which $2.8 billion has been ex-
tended to Asia, $2.1 billion to
the Middle East, $896 million to
Africa, and $202 million to Latin
America. Thus far this year aid
extensions have amounted to only
$64 million, all of which was
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SOVIET MILITARY AND ECONOMIC AID TO LESS-DEVELOPED COUNTRIES OF THE FREE WORLD
"Excludes recent resupply of Arab countries
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Economic aid 1954-Aug 1967 (millions US$)
00
Military aid 1955-Aug 1967 (millions US $)*
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for new recipients--Chile, Mauri-
tania, and Zambia. Large aid com-
mitments made in the past three
years to India, Egypt, Iran, and
Pakistan in support of their five-
year plans account for the low
level of new commitments this year.
A Soviet commitment to Afghani-
stan's five-year plan, not yet
worked out, may substantially
raise the total before the end of
the year.
Soviet outlays for short-
term assistance to its older cli-
ents have been considerable in
recent months. Moscow has agreed
to provide over 1.5 million tons
of wheat, worth at least $115 mil-
lion, to Algeria, Egypt, India,
and Afghanistan. In addition,
it has extended small amounts of
emergency relief aid to the Arab
states.
Middle East
Although Moscow quickly ar-
ranged for emergency economic aid
to the Arab countries after their
defeat in June, its primary con-
cern was the resupply of military
equipment. With arrangements for
new military aid now essentially
completed, Moscow's attention
will turn more toward the economic
problems of the area, particularly
those of Egypt.
With the withdrawal of West-
ern aid and the loss of earnings
from the Suez Canal and tourism,
Egypt is heavily dependent on
Soviet assistance, although this
burden may be at least temporarily
alleviated by cash donations from
oil-rich Arab states. Fortunately
for Moscow, its long-range de-
velopment commitments in Egypt--
already subjected to several
downward revisions because of
economic retrenchment--are likely
to be curtailed further by Cai-
ro's current austere budget for
economic development. Some $150
million slated for development
projects that have been canceled
or postponed will be available to
meet Egypt's more immediate needs.
Moscow probably will urge Cairo
to use this to finance imports
from the USSR of raw materials
and equipment previously obtained
from Western suppliers. Moscow
is supplying almost half of
Egypt's wheat imports this year.
Soviet assistance for well-ad-
vanced development projects,
however, probably will be accel-
erated to ensure their rapid com-
pletion, and the major aid proj-
ect--the Aswan Dam--will continue
to receive the highest priority.
The USSR last year agreed to
take on a major water conservation
program in Syria, and heavy con-
struction equipment already has
arrived. It was accompanied by
Soviet advisers and technicians
who will help build a dam on the
Euphrates. The activity in Syria
is spurring Iraq to seek a ripar-
ian rights agreement with Syria,
and probably will encourage the
Iraqis to proceed with their own
plan involving Soviet aid for the
construction of a dam farther down
the river.
The Middle Eastern countries
with conservative regimes also
get Moscow's attention. Soviet
plans to help build a steel plant
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and a gas pipeline in Iran are
moving ahead, and agreement may
eventually be reached for Soviet
exploitation of oil in the Caspian
offshore areas. The USSR has re-
cently signed construction con-
tracts with Turkey for seven in-
dustrial projects that had been
proposed under a 1965 aid agree-
ment. Moscow has just repeated
its $100-million credit offer to
Lebanon, first made last spring,
and may make a similar offer to
Jordan's King Husayn when he
visits Moscow this fall. The oc-
casional exchange of delegations
between the USSR and Kuwait may
result in some arrangement for
Soviet technical assistance, as
envisaged under a 1964 agreement.
The USSR made large commit-
ments last year to India and Paki-
stan for their five-year plans.
Moscow also has committed itself
to participate in Afghanistan's
third five-year plan. The Soviet
contribution to Kabul, which prob-
ably will be announced later this
year, is expected to match ini-
tial Soviet commitments for previ-
ous plans, which have amounted to
$100 million each.
The USSR's efforts in India
are built on its previous large,
successful industrial develop-
ments. Soviet credits for New
Delhi's fourth five-year plan will
SOVIET ECONOMIC AID TO LESS- DEVELOPED COUNTRIES
OF THE FREE WORLD
1954-August 1967 1M
Extensions
(millions US $)
Drawings
(millions US $)
MEEM
"Jan.-Aug.
'"Annual rate
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I
oe used to expand the capacities of
the Bhilai steel plant, two petro-
leum refineries, a heavy machine
building plant, and two electric
power stations. In addition, the
USSR has agreed to build a new
steel plant at Bokaro in Bihar
State. The USSR also is continu-
ing to play the principal role in
the research and exploration ac-
tivities of the Indian National
Gas Commission.
The Soviets have embarked on
new projects in Pakistan. The
first contracts under a credit of
$84 million granted last year
were signed in April. They pro-
vide for Soviet assistance in the
construction of two heavy elec-
trical machinery plants--one in
East and one in West Pakistan.
Significant progress has
been made on Soviet aid projects
in Afghanistan. The natural gas
pipeline from Afghanistan into
Soviet central Asia was completed
in July, and gas deliveries to
the USSR will begin this year.
Under a protocol signed in May,
gas deliveries to the USSR from
1967 through 1985 will yield
Kabul a gross return of about
$320 million. Other recently
completed projects include a pre-
fabricated housing plant in Kabul
and a section of road from Kabul
northward to the Soviet border.
Soviet relations with Indo-
nesia are still strained and con-
struction is suspended on all ma-
jor Soviet aid projects. Although
agreement was reached in November
1966 to reschedule Indonesia's
debt to the USSR, Indonesia has
not ratified the agreement and
is pressing for a longer morato-
rium before beginning repayment.
The USSR continues to make
small commitments to new recipi-
ents in Africa--the latest being
to Mauritania and Zambia--but it
is making little effort to expand
existing programs, many of which
have had only partial success.
One of the difficulties is that
African countries are unable to
provide the necessary local fi-
nancing, thus impeding the prog-
ress of development projects.
Soviet commodities--furnished
under credit arrangements for
sale on the local market to gener-
ate domestic currency--have in
some cases met with consumer re-
sistance and the funds acquired
have been insufficient. Moscow
is unlikely to make cash credits
available to meet local costs of
development.
The USSR is applying more
rigid requirements to its aid
projects in Africa, and is in-
creasingly reluctant to under-
take projects that have little
long-term economic justification.
In Mali and Guinea, both major re-
cipients of Soviet aid in the past,
few new proposals have met the
stiffer criteria, and Moscow has
shied away from providing addi-
tional aid or short-term credits.
Despite some feelers by the new
Ghanaian Government on a partial
resumption of Soviet aid, neither
side has really tried to reactivate
the program.
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Soviet aid programs in east
Africa are moving at a snail's
pace. In Somalia, the Russians
are still trying to get previous
aid projects working rather than
starting anything new. To avoid
repeating mistakes made in So-
malia, Soviet technicians have
spent more than a year studying
the feasibility of projects pro-
posed under the 1966 Soviet-
Tanzania aid agreement, and few
have yet been approved. Neither
the Ethiopians nor the Soviets
have shown any real interest in
negotiating new projects follow-
ing the completion earlier this
year of the Soviet-built oil
refinery.
Moscow is concerned over the
lack of progress in its aid pro-
gram in Algeria, a concern the
Algerians share. In late April,
the Soviets dispatched S.A.
Skachkov, chairman of the State
Committee for Foreign Relations
and one of the highest officials
in the foreign aid field, to
work out the details of Soviet
participation in order to get the
program moving.
Skachkov also stopped in
Morocco to discuss Soviet project
proposals in connection with a
Soviet-Moroccan aid agreement
concluded last fall. Additional
feasibility studies will delay
the start of any projects, however.
Apart from the aid projects, a
Moroccan delegation visited Mos-
cow in July and is believed to
have completed initial negotia-
tions to import Soviet machinery
under a three-year, $10-million
trade credit.
Latin America
Soviet interest in promoting
closer economic relations with
Latin America remains high, but
results to date are small. The
USSR followed up last year's
$100-million credit arrangement
with Brazil with this year's
$57-million agreement with Chile.
A Chilean delegation is scheduled
to visit Moscow in the near fu-
ture to negotiate specific con-
tracts.
There is no reason, however,
to suppose that Soviet-Chilean
economic ties will expand rapidly.
The agreement with Brazil, for
example, called for the $100-mil-
lion trade credit to be allocated
equally in 1967, 1968, and 1969,
but the only deal concluded thus
far has been a $5-million credit
for equipment to be used in the
construction of a petrochemical
plant.
Despite this meager result,
Moscow still sees trade credits
as the best means to foster eco-
nomic relations with the Latin
Americans, most of whom remain
suspicious of the presence of the
large numbers of Soviet techni-
cians required by project-type
economic aid. In May, Moscow re-
newed its $20-million credit offer
to Uruguay, first made in early
1966, and other Soviet trade credit
offers are outstanding to Costa
Rica, Colombia, and Ecuador.
Military Aid
Under its military aid pro-
gram to non-Communist countries,
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the USSR has delivered thousands
of aircraft, tanks, and artillery
pieces, and hundreds of naval
craft. Deliveries are being main-
tained at a steady pace.
Soviet. military aid outlays
to the less-developed countries
had been running at about $400
million annually, but will be sub-
stantially higher this year be-
cause of the additional aid to
the Arab countries. The cost of
this unforeseen requirement--some
$200 million--as well as that of
increased military assist-
ance to North Vietnam will
not appreciably reduce the
USSR's capability to mount
new military aid programs.
Following the pattern
of recent years, the USSR
is delivering more modern
ecrui nment to its clients.
Middle East and Africa
Moscow's most notable
military aid breakthrough
this year has been the con-
clusion of a $110-million
pact with ]:ran, long a
hold-out against any agreement
that established close relations
with the USSR. An arrangement
whereby natural gas that had been
going to waste could be used as
a means of payment helped clinch
this deal. Full details on what
is to be supplied are not known,
but in April the USSR began
delivery of armored personnel
carriers, antiaircraft artillery,
and vehicles.
SOVIET MILITARY EQUIPMENT DELIVERED TO
LESS-DEVELOPED COUNTRIES
OF THE FREE WORLD*
(1955-present)
Land Armaments
Heavy, medium and light tanks
3,700
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Armored personnel carriers
3,450
Artillery
7,000
Naval Ships
Destroyers
20
Submarines
27
Motor torpedo and missile boats
134
Other naval craft
230
Aircraft
Medium and light jet bombers
250
Jet fighters
1,350
Heavy transports
83
Other aircraft
1,000
Missiles
Surface-to-air missile battalions
*A small quantify of East European equipment is included.
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worth of Soviet-supplied military
equipment. Just how much of this
will be replaced is still not
clear. The USSR, however, did
mount a massive airlift and
stepped up its deliveries by sea
in late June and July to re-es-
tablish Arab air defenses and
to replace some ground equipment.
South and Southeast Asia
With their substantial rela-
tionship with India in mind, the
Soviets have moved slowly in
Pakistan. Under an arrangement
publicized as "commercial," how-
ever, they have supplied several
thousand vehicles for the Paki-
stani armed forces, and the first
of six large troop transport MI-6
helicopters was ferried to Paki-
stan in July. Pakistan probably
hopes for further talks on mili-
tary supplies in Moscow this
month, when a mission headed by
President Ayub is scheduled to
visit the USSR.
Soviet military supply of
Indonesia, dormant since the
anti-Communist coup in the fall
of 1965, will be resumed soon.
Moscow now has agreed to supply
spare parts for Indonesia's in-
ventory of Soviet arms which was
originally worth about $1 billion.
For both political and economic
reasons--the latter largely In-
donesia's inability to meet pay-
ments on its arms debt--the USSR
had permitted its military program
in Indonesia to lag. Indonesian
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military students who were training
in the USSR when strains developed
in Soviet-Indonesian relations
were permitted to complete their
courses. No new equipment has
been delivered, but in the inter-
est of maintaining at least minimal
ties the USSR may have relented 25X1
on its earlier unwillingness to
make any further deliveries to In-
donesia on credit.
* 25X1
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