Communist Aid and Trade

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01045A000100040002-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: December 16, 2016
• Document Release Date: September 14, 2004
• Sequence Number: 2
• Publication Date: March 8, 1976
• Content Type: FORM

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Secret
Communist Aid and Trade Activities
in Less Developed Countries, January 1976
Secret
ER CAT 76-003
March 1976
Copy N2
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CONTENTS AND SUMMARY OF EVENTS
(January 1976)
Page
Communist Military Relations with Major Arab Countries in 1975 . . . . 1
Details changes- in Communist military activities among major Arab client
states in 1975.
Presents statistics on Communist oil and gas procurement from Third
World suppliers in 1975.
Morocco: Lingering Suspicions over Soviet Intentions . . . . . . . . .
Discusses the effect on Moroccan-Soviet economic relations of Soviet
support for Algeria in the Spanish Sahara dispute.
Military . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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COMMUNIST AID AND TRADE ACTIVITIES
IN LESS DEVELOPED COUNTRIES
January 1976
COMMUNIST MILITARY RELATIONS
WITH MAJOR ARAB COUNTRIES IN 1975
Although agreements declined from 1973-74 crisis level highs, Soviet military
transactions with Arab clients remained brisk in 1975. The USSR signed new
accords worth more than $300 million and delivered equipment of similar value.
Moscow continued its established policy of supplying Arab clients with some of
the most modern, sophisticated military equipment produced in the Soviet Union.
Eastern Europe's transactions with Arab countries also reached record levels.
About $160 million was committed and $190 million delivered in 1975. Deliveries
included support materiel and ground forces equipment of an older design than
that usually provided by Moscow. Czechoslovakia, however, provided L-39 advanced
jet trainers to Iraq.
An Expanding Relationship with North Africa
The USSR reportedly concluded an agreement with Algeria late in 1975. The
agreement may include missiles and modern tanks that could be used as a
psychological or real threat to deter Moroccan moves in Spanish Sahara.
Although Libya placed no new orders in 1975, it received more than $200
million in hardware from the Soviets under a 1974 agreement. As a consequence,
Libya was Moscow's second largest arms customer in 1975 and the second LDC
after Iraq to receive the TU-22 bomber. Other equipment included MIG-23 fighters,
T-62 tankers, armored personnel carriers, and SA-2 missiles. Deliveries from Eastern
Europe added another $70 million of equipment to the Libyan inventory and
included more than 400 tanks from Czechoslovakia and Poland. Soviet technical
assistance and training programs were also accelerated, as Moscow tried to reduce
strains on Libya's ability to absorb the new arms deliveries.
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High Level of Peacetime Support to Middle Eastern Belligerents
A $300 million military agreement with Damascus was the largest Soviet
accord with an Arab country in 1975. Deliveries to Syria declined in 1975 to
one-half the 1973-74 average level, although 1975 deliveries did include a Petya-class
destroyer escort, the largest combat unit in Syria's inventory. Syria signed
agreements totaling $60 million with Czechoslovakia, which included Syria's first
L-39 advanced jet trainers. East European countries delivered about $30 million
of equipment, including tanks and armored scout cars, during 1975.
New Iraqi orders from the USSR fell to less than $30 million in 1975
from $650 million the year before. Deliveries, however, continued at a level of
more than $250 million, Moscow's largest to Arab countries. East European
deliveries to Iraq reached a record high of $80 million and included Czech L-39
jet trainers and armored personnel carriers and Hungarian armored vehicles. East
European countries concluded more than $50 million in new arms agreements with
Iraq in 1975. Hungary, with agreements to provide armored vehicles, tanks, and
antiaircraft and field guns, accounted for more than three-fourths of the new
commitments. East Germany concluded a cash deal for vehicle-related goods.
Before major Soviet military deliveries to Egypt were again cut off in
mid-1975, Cairo received $150 million of arms, including its first MIG-23s.
Moscow's arms embargo has clearly affected Egypt's military readiness. Cairo is
turning to East European countries to provide replacements and spare parts for
its Soviet equipment.
Military Technicians
Soviet and East European military technicians assigned as advisers and to
assemble equipment and train personnel in the major Arab countries reached 5,080
in 1975. Syria, which has had the largest Soviet contingent since 1972, accounted
for most of the increase over the previous year as a large number of new entrants
were assigned to air defense-related functions. The number in Libya also increased
in 1975, from 145 to 345, as equipment delivered under the 1974 agreement
accelerated. The Soviets maintained 1,000 technicians in Iraq.
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Training for Military Personnel
Soviet and East European training programs that accompany military
equipment sales to LDCs increased as arms deliveries expanded and more advanced
weapons systems were supplied. In 1975 about 1,300 Arab personnel went to the
USSR and Eastern Europe for advanced technical training in new systems - Libya
sent the largest group (625), to be trained to operate air defense systems,
submarines, MIG-23s, and TU-22s.
COMMUNIST OIL AND GAS TRANSACTIONS
WITH THE THIRD WORLD IN 1975
Communist petroleum imports under agreements concluded with the Third
World in 1975 declined for the second consecutive year. Planned imports totaled
only 275,000 b/d in 1975 compared with a record 515,000 b/d in 1973. Although
Soviet purchases increased slightly in 1975, the volume of East European imports
under 1975 contracts decreased by 45%.*
Under 1975 agreements East European countries were to receive 135,000 b/d
of Middle Eastern and North African oil, reflecting reduced 1975 contracts by all
countries except Czechoslovakia and Hungary. Both of these countries were able to
? Import figures for 1975 are derived from contracts known to have been signed between Communist
and Third World countries in 1975. An additional 50,000 b/d of petroleum may have been available to East
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continue their favorable barter
arrangements with Iran and
Iraq. Libya refused to reduce
its prices in 1975 contract ne-
gotiations under long-term bar-
ter agreements, and no Libyan
oil moved to Eastern Europe in
1975. Libya had been Eastern
Europe's major supplier in
1974.
Moscow: Both Seller and Buyer
The USSR increased its
total liftings from the Third
Wo.rld slightly to about
135,000 b/d in 1975, still little
more than half of its 1973 take.
Iraq, which we believe is honor-
ing agreements to repay some
of its long-term debt to Mos-
cow in oil as well as fulfilling
old commercial barter pacts
(albeit at higher prices), ac-
counted for 90% of Soviet oil
imports in 1975.
Most Soviet liftings from the LDCs probably were shipped to other LDC
clients, to which Moscow provided 135,000 b/d of crude and oil products in 1975.
Twenty countries shared in the take, but three quarters of the oil went to Brazil,
Greece, India, Spain, and Portugal, each receiving 20,000 b/d.
Natural Gas to Moscow Still Mutually Beneficial
Moscow's relationship with its natural gas suppliers, Iran and Afghanistan-an
arrangement characterized by clear-cut benefits to both seller and buyer-proceeded
smoothly. An increase in price and slightly higher purchases meant the value of gas
shipments rose about 20% to $240 million. This amount fully covered Iran's and
Afghanistan's 1975 debt service payments to the USSR. Last April Tehran and
Moscow further expanded their profitable relationship under a trilateral agreement
with a Western consortium to sell gas to Western Europe.
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The new 20-year sales contract calls for Iran to deliver an additional 470
billion cubic feet of Iranian gas to the Soviet border. The USSR will consume
the gas and supply Western Europe with equivalent Soviet gas (less 15% for pipeline
charges). Deliveries are scheduled to begin in 1981, with a new 930-mile pipeline
to be built from the Kagan gas field in Iran (or a nearby offshore field) to the
Soviet border at Astara.
Chinese Oil Sales - Trouble Ahead?
China entered the LDC oil market in 1974 and in 1975 sold 20,000 b/d
each to the Philippines and Thailand - its only Free World LDC oil clients. Manila
has become increasingly dissatisfied with erratic delivery schedules and the poor
quality of Chinese shipments. Thailand, which concluded a $100 million barter
agreement to exchange oil for rice during 1975, has found Chinese crude oil
unsuitable for processing in its refineries
MOROCCO: LINGERING SUSPICIONS OVER SOVIET INTENTIONS
Morocco, irritated by Soviet support for Algeria in the Spanish Sahara dispute,
stalled decisions in 1975 on long-term Soviet economic involvement in Morocco.
Commercial and military relationships, however, were not affected.
Military Relations Expand
During 1975, as Moroccan-Algerian tensions heightened over the Spanish
Sahara issue, Rabat expanded its search for weaponry in anticipation of an armed
clash with Algeria. In August, Moscow agreed to provide six OSA II patrol boats
under a $34 million agreement. Moroccan naval personnel departed for the USSR
immediately afterward. Meanwhile, the USSR continued delivery of antiaircraft
guns, artillery pieces, and rocket launchers to a value of $6 million under earlier
credits. Moscow also sent 10 military advisers in 1975, the first since 1973.
Economic Relations: Setbacks for Moscow
By October, Soviet-Moroccan relations were severely tried as the Moroccan
government perceived more vigorous Soviet support for Algeria's position on the
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Sahara question. Morocco canceled the meetings scheduled for October to sign
the final agreement on the $5 billion Miskalas phosphate deal.
The draft agreement on Miskalas called for Soviet financing and construction of
a phosphate mine, processing facilities, and a 20-mile railroad to the port of
Essouira. Moscow also was to install phosphate-handling equipment at the port.
In return, the USSR agreed to annual purchases of a 2 to 5 million tons of
phosphate rock during 1980-90 and 10 million tons annually over the subsequent
15 to 20 years. The phosphate development package is the largest single deal the
USSR has ever proposed to a Third World country. The Miskalas project is to
be the linchpin of Soviet economic policy in Morocco.
Previous Soviet economic activity has focused on implementation of $100
million of Soviet credits provided during the past ten years. Half has been drawn
for the construction of dams, irrigation facilities, cold storage plants, and power
plants. About 450 Soviet personnel were in Morocco in 1975 in connection with
the Soviet economic program.
In spite of political frictions, commercial relations have been correct. Moscow
agreed in December 1975 to increase its 1976 oil exports to Morocco to 13,000
b/d in exchange for citrus fruit. One-third of Morocco's 1976 oil imports will come
from the USSR and one-third of its citrus crop will be shipped to the USSR.
OTHER ACTIVITIES
Africa
Algeria. Preparatory sessions for the fourth Soviet-Algerian joint commission
meeting reportedly have produced new economic agreements to be signed soon
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Mauritius. Mauritius plans to sign a new protocol with the USSR to establish
a joint fishing venture to operate in Mauritian territorial waters. The company
will be capitalized at $2.2 million. The USSR will provide equipment and technical
services as well as half of the cash.
Mozambique. The first group of Soviet doctors has begun work at a hospital
in Maputo (Lourenco Marques.)
Sudan. Khartoum claims that Chinese geologists, working under a 1971 aid
agreement, have located large oil deposits in Sudan. China reportedly advised the
Sudanese to seek Western assistance in developing the fields.
Sudan and the USSR signed an agreement in December for Soviet construction
of a 700-bed military hospital in Khartoum. This is the first new project agreement
between the two sides in several years.
Tanzania. Tanzania and Romania plan to establish a joint company to exploit
titanium deposits recently discovered at Msimbati. The new company is expected
to begin operation next year with initial output scheduled for sale to Romania.
Thailand. Bangkok has accepted a Soviet offer to send two or three technicians
to survey Thai shale oil deposits
Colombia. Colombia's Economic Development Minister announced a $50
million credit offer during a trip to East Berlin in December. The credit would
be repayable over 10 years at 6% interest.
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Ecuador. The USSR has shelved a November offer of economic assistance
to Ecuador in the wake of the recent military takeover. 25X1
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proposals to mance power development and modernization of Ecuador's fishing
fleet were under consideration when the government changed hands on 11 January.
The Soviets also have deferred plans to expand commercial relations with Ecuador.
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Jamaica. Kingston is interested in selling bauxite and alumina to Hungary
and is considering the import of Hungarian technology for processing low-grade
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General. Hungary's Foreign Minister left for visits to India, Iran, and Singapore
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Afghanistan. The USSR will collaborate with a West German firm in
constructing a textile project at Kandahar. The total value of the contract is
$21 million. Spinning and weaving equipment will be furnished by the USSR, while
West German technicians will supervise and install equipment at the plant.
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Egypt. Poland has agreed to provide Egypt with 150,000 tons of coke in
addition to the 250,000 tons specified in the 1976 trade protocol signed last
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The Egyptian-Soviet planning committee resumed meetings in Cairo on
8 January to discuss cooperation in drawing up the Egyptian five-year plan for
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Soviet specialists arrived in Suez in mid-January to begin rehabilitation of
the Soviet-built powerplant destroyed by Israeli forces in 1967.
Greece. Greece purchased 3.7 million barrels of ;rude oil worth $42 million
from the USSR. Half of the oil will be paid for in convertible currency and half
in Greek agricultural products over six months at 4% interest.
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India. A two-year protocol for Soviet-Indian cooperation in agriculture and
animal husbandry was signed in New Delhi on 12 Januar ailing for a continuation
of activities begun under a 1971 agreement. 25X1
The USSR reportedly has agreed to permit India to repay its first installment
on the 1973 wheat loan in commodities other than grain. The original agreement
specified repayment in grain over five years beginning in 1976.
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The Soviet Minister for heavy industry visited India to discuss progress on
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Iran. Hungary is constructing meat processing facilities and a model farm
in Iran, as part of a comprehensive cooperation program for agricultural
development. Hungary will provide additional food processing equipment and
technical assistance to the livestock industry.
Iraq. Bulgaria's minister of agriculture agreed to expand assistance to animal
husbandry and agricultural production in Iraq. Bulgaria also plans to provide
food-processing plants under 1970 credits.
Hungary and Iraq are discussing expansion of the $2 million Hungarian-built
electric lamp factory in Baghdad.
Kuwait. Hungary received a $5.7 million Kuwaiti order for five complete
transformer stations, for 1977 delivery.
North Yemen. The USSR reportedly has offered to buy a million tons of
Yemeni salt annually, valued at up to $7 million. Moscow has suggested that
one-fourth of the shipments be applied to repayment of Yemen's debt to the USSR.
If the Soviet offer is accepted, it would take all of Yemen's salt exports.
Sri Lanka. China signed an agreement with Sri Lanka on 28 January to
provide $3 million in interest-free foreign exchange credits. The loan is repayable
in five years, including two years grace, in convertible currencies or commodities.
China has extended $30 million in foreign exchange credits to Sri Lanka over the
past five years with similar terms. All of the previous credits have been drawn
down.
Syria. The USSR and Syria signed a new long-term trade agreement that
reportedly provides for increasing Soviet equipment deliveries throughout Syria's
fourth five-year plan.
Turkey. Czechoslovak President Strougal signed a long-term economic and
industrial and technical cooperation agreement in Ankara on 6 January. The
Czechoslovak President had been invited to Turkey to discuss increased Czech
participation in Turkish development projects and means of balancing trade flows,
which now heavily favor Czechoslovakia.
The new pact is described as a framework agreement and calls for cooperation
in machinery manufacture, heavy industry, and metallurgical, energy, and
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commitments to projects after feasibility studies are completed.
petrochemical projects. The terms of the agreement were not announced, but it
probably is similar to a 1975 Soviet economic agreement that calls for financial
Military
Africa
Mali. Moscow delivered 15 T-34 tanks and 6 trucks to Mali during January.
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December 1974 agreement for ground equipment. This brings the number of T-34
tanks delivered to Mali since 1974 to 25.
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Egypt. Moscow delivered two MI-8 helicopters to Egypt in January.
India. The East German Minister for National Defense headed a delegation
to India in early January, the fourth Warsaw Pact defense minister to visit India
in the past year.
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