WEEKLY SUMMARY SPECIAL REPORT THE SOVIET FOREIGN AID PROGRAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A006500030002-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: December 16, 2016
• Document Release Date: December 29, 2004
• Sequence Number: 2
• Publication Date: June 21, 1968
• Content Type: SUMMARY

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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
The Soviet Foreign Aid Program
Secret
P42 43
21 June 1968
No. 0025/68A
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Moscow's expenditures on foreign aid are holding
at about the $2 billion* per year level reached during
1967. Greatly stepped-up military and economic aid to
North Vietnam and the replacement of military equipment
twat the Arab countries lost during the war with Israel
account for this high level. Expenditures under Soviet
military and economic agreements with non-Communist
countries now average about $700 million annually.
Economic and military outlays for North Vietnam in 1967
amounted to another $700 million and will remain sub-
stantial this year. Aid to other Communist countries
is not as well catalogued, but assistance to Cuba
alone, for example, amounted to $300 million last
year not including an additional $200 million in sugar
export subsidies.
Despite the extraordinary current requirements,
the USSR has met its obligations under long-term aid
programs to non-Communist countries and has exploited
any new situation that turned up. Few did in 1967, but
a number have this year.
Moscow reassessed its foreign aid policy just be-
fore Khrushchev fell in the fall of 1964 and the pres-
ent regime is carrying out the policy set then. Be-
cause most Soviet foreign economic aid has been for
projects to be developed under multiyear plans, new
extensions of assistance tend to be bunched in certain
years. Actual deliveries, however, usually are more
evenly distributed.
The impact of aid deliveries on the USSR is miti-
gated by repayments. In recent years the ratio of re-
payments by non-Communist countries to Soviet aid de-
liveries to these countries has risen and now amounts
to about 50 percent. Some countries such as India have
exceeded this ratio, but others such as Indonepia,
Ghana, and Somalia have fallen behind and may only
make token payments. Soviet aid to North Vietnam and
Cuba probably will never be repaid.
*AZZ vaZuee given in US doZZars.
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Soviet Military and Economic Aid Extensions to less-Developed Countries of the Free World
Economic aid 1954-May1968 (millions US$) ^I,
Military aid 1955-May1968 (millions US $) I_1
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A somewhat tougher stance on extending future
Soviet aid appears in prospect. Soviet Foreign
Trade Minister Patolichev, at the second UNCTAD
conference in New Delhi earlier this year, offered
"full support" to the developing nations but made
no specific offers of new economic assistance.
He stated that the basic responsibility for eco-
nomic development rests on the poor countries them-
selves. This position may stem from the backlog
of $3.5 billion in aid that the USSR has extended
but not yet spent.
This situation has led the USSR to examine more
critically the feasibility of new projects before
extending long-term aid. The USSR also has turned to
offers of shorter term commercial credits, which can be
more quickly implemented.
Moscow has used economic aid to help achieve its
political objectives, but military supply continues to
have a more immediate and widespread impact. About
$4 billion worth of military equipment has been supplied
to the non-Communist less-developed countries, while
$2.5 billion has been delivered under economic aid
programs.
Aid to Non-Communist Countries:
The Middle East
Over the past year, the major
effort of the Soviets in the field
of military aid has been the re-
placement of equipment destroyed
or captured by Israel during the
war in June 1967. Over two thirds
of an estimated $450 million worth
of equipment lost has already
been replaced.
Important changes in the
mechanics of Soviet military aid
programs have emerged from the
Middle East resupply effort. For
example, greater use is being
made^of airlifts to
teriel.
voivea small quantities of equip-
ment to isolated areas, such as
to Yemen following the closure
of the Suez Canal, air transport
may be cheaper than other means.
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The USSR signed its first
arms agreement with the Sudan in
January 1968, but deliveries under
this agreement have not yet begun.
Moscow may also add Southern Yemen
to its list of clients for arms
before the year is over. Delega-
tions were exchanged earlier this
year and negotiations are expected
to continue over the next few
months. Jordan, thus far, has
refused Soviet offers of military
equipment.
The Soviets moved quickly
into the military vacuum left by
the Eqgni-i an withdrawal from
Emergency economic aid ship-
ments were made to the Arabs
immediately after their defeat
but it was not until the end of
the year that Moscow began to
assess its long-term economic
commitments in the area. Then,
in Egypt, Syria, and Iraq, the
Soviets stressed the need to get
projects completed as well as to
get moreproduction from existing
plants.
At Iraq's request, how-
ever, Moscow did offer to help de-
velop its petroleum industry.
Soviet involvement in oil in
other areas of the Middle East
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is limited essentially to explora-
tory activities in Egypt and
Algeria, and in the Iranian ter-
ritorial waters of the Caspian
Sea. Soviet aid to Syria's oil
industry has contributed to a
level of production that exceeds
Syria's needs, and the USSR may
have to assist in the disposal
of some of the surplus.
Work on the Aswan Dam in
Egypt has been accelerated. The
entire project now is expected to
be completed late next year; the
main dam is to be finished this
month. The electric power station
was formally inaugurated in Jan-
uary--a year ahead of the original
schedule--and all 12 turbines
will be installed by the end of
1969. About 330,000 acres of
new land are under cultivation
as a result of the dam's storage
capacity, and a further 450,000
acres are being reclaimed. In
addition, about 765,000 acres,
formerly irrigated only during
the flooding season, have been
provided with the water necessary
for year-round cultivation.
The major Soviet effort in
Egypt is beginning to shift from
the Aswan Dam to the Helwan iron
and steel project, for which the
Soviets have committed about $160
million in credits. Work on this
$800-million project was being
held in abeyance because of heavy
cuts in Cairo's economic develop-
ment budget after the Arab-Israeli
war. The project currently is
scheduled to be started next
month and to be completed by 1975,
when production of pig iron will
reach 1,750,000 tons annually
and steel 1.5 million tons.
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Construction of the Euphra-
tes Dam--the major Soviet aid
project in Syria--began in March
and by the end of this year 320
Soviet technicians are to be em-
ployed at the site. The first
stage of the dam, due to be com-
pleted in 1972, will provide
water to irrigate 570,000 acres
and will produce 300,000 kilowatts
of electricity.
The beginning of work on the
dam in Syria may lead the Iraqis
to accept a long-standing Soviet
offer to help them build a dam on
the Euphrates. The subject may be
raised during the current visit
to Moscow by the Iraqi minister
of industry, whose primary pur-
pose is to discuss once again
ways of meeting the time schedules
of Soviet aid projects. Although
Iraq has drawn down a higher
percentage of Soviet credits than
any other Arab country, progress
on projects has been extremely
slow, in part because of short-
ages of qualified Iraqi contrac-
tors and skilled labor. Bureaucratic
inadequacies and poor planning
by the USSR have also been
factors.
The Soviet economic aid pro-
grams in Iran and Turkey are moving
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ahead and new credits probably
will be extended to both
countries. Construction of Te-
hran's first steel plant started
in March and work is proceeding
on the joint Aras Dam project,
on the development of iron and
coal mines, and on new harbor
facilities at Bandar Pahlavi on
the Caspian Sea.
In the petroleum field, So-
viet assistance was expanded to
include the drilling of an ex-
ploratory well in the Caspian
offshore area, which may even-
tually lead to an agreement for
Soviet assistance in the exploi-
tation and marketing of Iranian
oil from that area. Negotiations
on the Soviet segment of the nat-
ural gas pipeline were pro-
tracted, however, and the So-
viet section will be completed
nine months later than originally
'estimated. Moscow is studying
the feasibility of a variety of
other projects such as the con-
struction of a new port on the
Caspian, development of copper,
lead, and zinc mines, and a net-
work of dams and irrigation proj-
ects on the Atrek River. New So-
viet credits totaling several
hundred million dollars probably
will be forthcoming.
Construction has begun on an
aluminum plant and an oil re-
finery in Turkey, and contracts
have been signed for five other
projects including a steel mill
with a projected annual output of
one million tons. The total costs
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of the projects to be financed by
the USSR exceed the $200 million
specified in the 1967 agreement,
and negotiations to raise the
original credit to $300-350 mil-
lion probably will be held soon.
Moscow took advantage of the
anti-Western sentiment that pre-
vailed after the Arab-Israeli war
to offer economic assistance to
some of the more conservative
Arab states. Soviet delegations
were sent to Lebanon and Jordan
to survey potential aid projects
but, in both cases, the delegation
returned to Moscow without con-
cluding any agreements.
Africa
Last year, Mauritania and
Zambia were added to the list of
Soviet aid clients in Africa and
Chad may soon get some Soviet
assistance. A Soviet economic
delegation is in Chad now to ex-
amine the possibilities.
Apparently after months of
deliberation, Moscow extended a
new credit of $16.5 million to
Guinea in an effort to revitalize
existing aid projects there. Cer-
tain projects--such as a sawmill
and plywood plant, a cannery, and
a fish freezing facility--could
not operate economically because
of a lack of raw materials and
markets. Moscow apparently has
disassociated itself from the
Kamarato hydroelectric project,
as it earlier had done with the
Konkoure complex, consisting of
a dam, a hydroelectric project,
and an aluminum smelter.
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In Mali, work continued on
the construction of a cement
plant. Mali's efforts to obtain
additional Soviet aid apparently
met with no success, although
Moscow reportedly did agree to
ease Mali's debt repayments.
Following up the good will
generated by its supply of mili-
tary equipment to the federal
government of Nigeria, the USSR
revived its offer of a $56 million
credit, gearing it in part for
reconstruction of war damage. The
Russians also completed feasibility
surveys for a steel plant but to
date no agreements have been
signed.
The slow progress of the
USSR's economic aid program in
Algeria continues to plague both
countries. Despite steps taken
earlier this year to accelerate
things--particularly the start of
construction on the Annaba steel
complex--there is still little to
show.
Better progress is being
made in Morocco. A contract was
signed early this year for the
construction of a thermal power
plant. Soviet plans for a.hydro-
electric station on the Dra Liver
were completed and preliminary
studies were conducted for a
metallurgical plant and a train-
ing center as well as for a min-
eral treatment plant.
In East Africa, Soviet eco-
nomic aid programs continue mov
ing,at a snail's pace. The only
activity in Tanzania has been
the arrival late last year of a
geological team to carry out sur-
SOVIET MILITARY EQUIPMENT DELIVERED TO
LESS-DEVELOPED COUNTRIES
OF THE FREE WORLD*
(1955-present)
Land Armaments
Heavy, medium and light tanks
4,700
Armored personnel carriers
3,700
Artillery
7,500
Naval Ships
Destroyers
20
Submarines
28
Motor torpedo and missile boats
140
Other naval craft
235
Aircraft
Medium and light jet bombers
285
Jet fighters
1,600
Heavy transports
87
Other aircraft
1,200
Missiles
Surface-to-air missile battalions
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veys and of a group that came
Several months later to study the
hydroelectric potential of the
Kiwira River. In Uganda, agree-
ment was finally reached on So-
viet assistance for a textile
factory and a training school for
mechanics. Soviet road construc-
tion equipment and supplies have
begun to arrive. Negotiations
now under way in Ethiopia on the
use of $80 million in credit out-
standing since 1959 may result in
the initiation of some new Soviet
projects, particularly the con-
struction of schools and hospitals.
The USSR continued to deliver
military equipment to Nigeria
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under a $5-million arms agreement
signed last July. Moscow enter-
tained military delegations from
Mali, Tanzania, and Guinea, but
only Tanzania is known to have
concluded a new arms agreement.
South and Southeast Asia
In February, the USSR ex-
tended to Afghanistan a credit of
about $127 million for its third
five-year plan (1967-72). The
credit will include $92 million
for new project aid (most of which
has been allocated for geological
surveys), $19 million for com-
modities to generate currency to
cover local costs, and $16 mil-
lion to provide equipment for
Soviet-aided projects carried over
from the second plan.
During Premier Kosygin's
visit to Pakistan in April, the
USSR agreed to conduct feasibility
studies for a steel mill and a
nuclear power plant. In India,
the Soviets finally began work
on the first stage of the giant
Bokaro steel complex. Some 250
Soviet technicians are at the
site and the first stage is due
for completion in 1971. The
Soviets also have offered to train
more Indians in the management of
Soviet-aided projects in the pub-
lic industry sector.
The Soviets have not extended
any economic credits to Southeast
Asia since 1966 but have moved
ahead on existing projects under
outstanding credits.
Indonesia's President Suharto
finally approved a 1966 Soviet-
Indonesian protocol for resched-
uling the payment of about $800
million owed the USSR for economic
and military assistance. The USSR
has dropped a number of aid proj-
ects and postponed the start of
work on a steel mill and a
fertilizer plant until local fi-
nancing is available.
In the military aid field,
the Soviets have agreed to pro-
vide additional supplies to India,
including more MIG-21 jet fight-
ers to meet requirements that
planned domestic production
failed to fulfill. At the same
time, Moscow has concluded a new
commercial contract with Pakistan
covering the delivery of MI-8
helicopters. On his recent visit
to Rawalpindi, Kosygin may have
promised Pakistan more military
assistance. A Pakistani military
delegation is scheduled to leave
for Moscow in late June.
A new agreement with Afghan-
istan, which relies almost ex-
clusively on the USSR for arms,
is valued at an estimated $110
million and probably encompasses
a wide range of equipment includ-
ing MIG-21s and medium tanks.
As a concomitant to closer
relations. with Cambodia, an agree-
ment valued at just under $6 mil-
lion covering the supply of
MIG-17s, some field artillery,
ammunition, and support equipment
was concluded in February.
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MAJOR SOVIET EQUIPMENT BEING DELIVERED TO
UNDERDEVELOPED COUNTRIES
MIG-21 Jet Fighter
SU-7 Fighter Bomber
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TU-16 Jet Medium Bomber
T-55 Medium Tank
OSA Guided Missile Boat
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Soviet military supply to
Indonesia, dormant since the
anti-Communist coup in the fall of
1965, has been resumed on a lim-
ited scale. The Soviets are pro-
viding Indonesia with some $10
million worth of technical as-
sistance and with spare parts on
a cash-and-carry basis. This as-
sistance will enable Djakarta to
keep some of its aircraft and
surface-to-air missile (SAM) equip-
ment operational and will allow
some refitting of naval craft.
Latin America
The Soviets are continuing
their efforts to improve economic
relations with Latin American
countries. A Chilean economic
delegation visited Moscow earlier
this month to discuss implementa-
tion of a $55-million credit ex-
tended over a year ago. Chile is
considering a Soviet offer to
build a fish-processing plant.
Large Peruvian and Venezuelan-eco-
nomic delegations also have re-
cently visited Moscow, although
no Soviet aid offers are known
to have resulted. Uruguay is
planning to sign a long-discussed
$20-million export credit, prob-
ably during a visit of Uruguayan
officials to Moscow next month.
Soviet efforts are not likely
to result in any substantial broad-
ening of Soviet trade in Latin
America during the next several
years. A high-level Soviet eco-
nomic delegation recently in
Brazil failed to interest private
firms in using any of the out-
standing $100-million credit ex-
tended in 1966. The Brazilians
did express interest in receiving
Soviet offers of equipment for
irrigation programs, commercial
fishing, and the construction
materials industry. Even though
the bulk of the commitments to
Chile and Brazil consist of trade
credits and provide for a sub-
stantial part of this aid to be
made available to the private
sector, businessmen's doubts about
the quality of Soviet goods, the
compatibility of Soviet equipment
with that obtained from Western
companies, and the availability
of servicing and spare parts have
prevented the rapid development
of trade and probably will con-
tinue to impede it.
The Soviets have been par-
ticularly active in the past year
in offering civilian transport
aircraft on attractive credit
terms to Colombia, Brazil, and
Uruguay, but no sales have as yet
been concluded. Other Soviet
trade credit offers are outstand-
ing to Colombia and Costa Rica.
Aid to Communist Countries
The USSR furnishes sizable
economic and military aid to its
Communist allies. Moscow remains
the. principal supplier of economic
and military aid to North Vietnam,
which last year totaled about
$200 million and $500 million,
respectively.
The economic aid has been
primarily transportation equipment
and consumer goods, especially
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petroleum and foodstuffs. The
nature of Soviet aid may change,
however, with the bombing suspended
over most of North Vietnam. Just
before the bombing halt, the So-
viets became more involved in
development projects than they
has been in almost two years. The
Soviets are assisting in a port-
improvement project at Haiphong
and are probably helping to re-
construct power plants and the
Haiphong cement plant.
Military aid consists of air-
craft, SAM equipment, armor, and
artillery. This aid has been in-
creasing rapidly since 1965,
primarily because of rapidly grow-
ing ordnance requirements, es-
pecially for SAMs.
North Korea has turned in-
creasingly toward the Soviets for
economic aid since relations began
to improve in 1965. Soviet as-
sistance, however, has been
primarily in the form of equipment
and technical support through bi-
lateral trade. The Soviets have
also increased deliveries of mili-
tary aircraft, naval craft, and
air defense equipment.
Last year, the Soviets
agreed to supply Mongolia with
supplementary aid of about $550
million for its current five-
year plan. Soviet aid for the
plan, which ends in 1970, is now
in excess of $1 billion. A num-
ber of Soviet aid projects were
completed in the past year, in-
cluding a power plant at Darhan
and power lines from the plant
into Ulan Bator.
Major Soviet economic sup-
port to Cuba was assured for an-
other year with the signing of
an annual trade agreement in March
after months of protracted nego-
tiations. A $328-million credit
agreement will help Cuba finance
its imports from the USSR--the
largest annual credit for this
purpose since 1963. No new major
projects have been undertaken
and work on earlier Soviet aid
projects continues to make slow
progress. Soviet technicians are
still working on Cuba's principal
steel mill and are aiding in the
renovation and expansion of Cuba's
sugar mills. Most of the 2,000
Soviet economic specialists now
believed to be in Cuba are
engaged in advisory roles
the general operation and manage-
ment of the Cuban economy. So-
viet military aid to Cuba con-
tinues, but the pace of deliveries
has slackened considerably from
last year.
The USSR has extended no new
economic aid to Eastern Europe
since 1966, except for a $10-mil-
lion gold credit extended to Hun-
gary last year. Outstanding credit
balances at the end of last year,
however, amounted to $340 million
to Poland, Rumania, and Bulgaria;
an additional $160-million credit
balance remained with Yugoslavia
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