SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00006A000100020034-7
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 12, 2016
• Document Release Date: May 15, 2002
• Sequence Number: 34
• Publication Date: March 1, 1960
• Content Type: REPORT

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SECRET
N? 63
QUARTERLY REPORT
to the
COUNCIL ON FOREIGN ECONOMIC POLICY
SINO - SOVIET BLOC
ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 January-31 March 1960
State Dept. declassification & release instructions on file
PREPARED JOINTLY BY
THE CENTRAL INTELLIGENCE AGENCY
AND
THE DEPARTMENT OF STATE
SECRET
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECS. 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JANUARY - 31 MARCH 1960
Principal Developments
1. During the first quarter of 1960 the Sino-Soviet Bloc demon-
strated unequivocally that its economic assistance program in underde-
veloped countries of the Free World was to continue its vigorous role in
Bloc foreign policy. A total of $563 million in new credits and grants,
all nonmilitary, was the largest amount extended during a single quarter
since the beginning of the program. Sino-Soviet Bloc aid to underde-
veloped countries of the Free World now amounts to $3. 8 billion, more
than 80 percent of which is economic assistance.
2. The economic offensive of the Bloc in underdeveloped countries
continues to be directed toward consolidating past successes as well as
seizing new opportunities. By providing an additional sum of $187 mil-
lion for the completion of the Aswan Dam in. Egypt the USSR indicated its
eagerness to preserve its monopoly in this high-prestige project. Al-
though Indonesia canceled the $30 million developmental credit extended
by Communist China in .1959, acceptance of a. Soviet credit for $250 mil-
lion insures an important role for the Bloc in Indonesia's economic de-
velopment. Inasmuch as only one-fourth of the $118 million in previous
Soviet credits to Indonesia has been utilized, however, the new credit is
not likely to be drawn upon for some time., Similarly, Communist China
granted Nepal an additional sum of $21 million, although only one-third
of a 1956 Chinese Communist grant of $13 million has been utilized.
3. The flexibility of the Bloc in pressing its economic offensive into
other key areas was again demonstrated during the quarter. In Guinea,
Bloc technical and administrative personnel now occupy key positions in
development planning, finance, transportation, and communications. A
second Soviet wheat grant has been extended to Afghanistan to help meet
local costs of Soviet-assisted projects. Pushing its economic offensive
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close to the shores of the US, the USSR has adroitly exploited Cuba's un-
certain international position by means of a long-term trade pact and a
developmental aid agreement and has established economic ties that may
persist for many years. Negotiations underway late in the first quarter
indicated that the USSR will be joined by the Satellites in a coordinated
program of expanded economic and political relations with Cuba. Com-
munist China also is increasing its activities in Cuba, but its role is
largely an independent one.
Soviet-Cuban Trade and Credit Agreements
4. While in Havana to open the Soviet exposition in February, Soviet
First Deputy Premier Mikoyan signed with Cuban Premier Castro two
agreements that reflect a significant departure from Cuba's traditional
foreign policy. Under the first, a bilateral trade agreement that covers
the period 196064, the USSR will purchase at world market prices 1 mil-
lion tons of sugar annually. This quantity compares with ave rage annual
Soviet purchases of 300, 000 tons for the years 1955-59. The Soviet share
of Cuba's total sugar sales will therefore increase from 6 percent in the
period 1955...59 to about 20 percent for the period covered by the agree-
ment. Because the agreement contains a Soviet commitment not to re-
export the sugar to Cuba's traditional customers, the increased imports
canbe presumed to reflect Soviet plans to increase domestic sugar con-
sumption. The USSR will pay for the sugar largely (80 percent) in com-
modities and only partially (20 percent) in convertible currency. Pre-
viously all foreign purchases of Cuban sugar have been on convertible
currency account. Soviet commodity exports under the agreement will
average $55 million annually at present sugar prices, or approximately
7 to 8 percent of Cuba's total imports.
5. Even though the Soviet trade agreement almost certainly will
result in net benefits to Cuba, the commercial accord by itself cannot
directly increase Cuba's total sugar exports, because these exports are
controlled by the International Sugar Agreement. In fact, on 30 March
the International Sugar Council rejected, at least temporarily, a Cuban
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application to have its 1-million-ton annual export to the USSR placed
outside the Agreement. An immediate advantage of the Soviet trade ac-
cord could be the indirect benefit that will accrue to Cuba if Soviet sugar
purchases sufficiently increase world demand to raise the world market
price of sugar. Furthermore, the substantial increase in sales to the
USSR that is called for in the new agreement may result in an upward re-
vision of the world sugar export quota, in which Cuba presumably would
retain its present percentage share of a larger total world quota. Against
these indirect benefits of the Soviet agreement, Cuba faces the disadvan-
tage of exporting sugar against commodities instead of convertible cur-
rency. Only 16 percent of Cuba's total sugar exports, however, are to
be exported to the USSR in exchange for Soviet commodities. Moreover,
Cuba may choose from a list of raw materials and industrial goods that
appears sufficiently long and varied to enable Cuba to find adequate sub-
stitutes for essential commodities now imported from the Free World.
6. At the same time that the trade agreement was concluded, the
USSR extended to Cuba a $100million credit for economic development,
payable in 12 years with interest at 2. 5 percent per year. This line of
credit, the first extended to Cuba by a Bloc country, is to be used for
the establishment of new industrial enterprises. A steel mill and the
enlargement of a petroleum refinery probably will be the first major
projects undertaken. Extensive Soviet technical assistance is called for
under the terms of the credit in what will be the first large-scale influx
of Bloc technicians into the Western Hemisphere. The credit is to be
utilized during the period 1961-65, and Cuban payments in goods or con-
vertible currency are to begin 1 year after the termination of deliveries
of equipment or as projects are completed. The dates of these payments
are expected to fall in the latter part of the 1961-65 period, and most of
them will occur after 1964, when the. trade; agreement expires. Con-
tinued economic relations between Cuba and the USSR. will therefore be
insured throughout the period 1966-75.
7. Soviet actions in concluding the recent economic accords with
Cuba are more than a reward for Castro's anti-US policies. Heavily
tinged with political opportunism, these pacts demonstrate to other Latin
American peoples the willingness of the USSR to assist tangibly those
who make a successful start at divesting themselves of their ties with
Free World capital. The Kremlin clearly is looking beyond Cuba.
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