SOVIET ECONOMIC POLICY IN EAST GERMANY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000600360662-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: July 22, 2011
• Sequence Number: 662
• Publication Date: December 6, 1950
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/07/22 : CIA-RDP80-00809A000600360662-7
DATE
PUBLISHED 24 Sep 1950
LANGUAGE German
WQQf
CLASSIFICATION CONFIDENTIAL
CENTRAL INTELLIGENCE AGENCY REPOR
INFORMATION FROM
FOREIGN DOCUMENTS OR RADIO BROADCASTS CD NO.
COUNTRY German Democratic Republic DATE OF
SUBJECT Economic - Soviet financial and trade control INFORMATION 1950
HOW DATE DIST.
PUBLISHED Daily newspaper Dec 1950
WHERE
PUBLISHED Buenos Aires NO. OF PAGES 3
THIS DOCUMENT CONTAINS INFORMATION AFFECTING THE NATIONAL DEPRESS
OF THE UNITED STATES WITHIN THE MEANING OF ESPIONAGE ACT SO
Y. S. C., SI ANO El. AS AMENDED. ITS TRANSMISSION ON THE REVELATION
Oi ITS CONTENTS IN ANY WARREN TO AN UNAUTHORIZED PERSON IS PRO.
VISITED MY LAW. REPRODUCTION Of THIS FORM IS PRONISITED.
Argentinisches Tageblatt.
THIS IS UNEVALUATED INFORMATION
SOVIET ECONOMIC POLICY IN EAST GERMANY
The East German finance budget has been transformed in a manner to centralize
and also to conceal the flow of money into Soviet hands. The financial authority
of individual Laender has vanished, just as the heads of VEB (people-owned enter-
prises) have no authority to dispose of any of the capital of the firms they lead.
All financial authority is centralized with the government of East Germany, to
which all Laender must turn over 50 percent of their income. The East German govern-
ment controls the VEB in regard to the disposition of profits as well as in regard
to investments and subsidies. Financial surpluses of VEB are used for investments
to enlarge their plant facilities as provided for in the investment plan. The same
holds true for profits made by HO (free trade) stores, which amounted to 1.5 billion
East marks in 1949. Most important to the Soviets, however, is to insure that their
demands will be satisfied even in the event of decreasing tax income, VEB losses,
or smaller profits in HO stores.
The Soviets use the Garantie and Kreditbank as a means to control the money
and credit system in East Germany. This bank has reserves running into billions,
the exact amount being unknown. These reserves were established with the money
found by the Soviets in bank vaults in Poland, East Germany, and especially in
Berlin. During currency reforms these sums are not devalued,- which is also true
for-the money held by SAG (Soviet corporations) and trade companies. These sums
make it possible for the Soviets to influence currency circulation in an inflation-
ary as well as deflationary manner. Such reserves also enable them to continue
their purchases of land; houses, and other valuable objects which had been started
on a large scale before the currency reform. This, in turn, will enable the So-
viets to maintain demands running into astronomical figures even after their oc-
cupation troops have left East Germany; they can also use their property in Germany
for the financial support of Communism.
It is known that the Central Bank figures for East Germany of 30 September
1950 show deposits of 3,756,000,000 Deutsche marks for the Central Credit Insti-
tutes. Since the deposits of the Land Credit Institutes amount to less than 200
million Deutsche marks, the credit balance of the Garantie and Kreditbank must
amount to at least 3,500,000,000 Deutsche marks.
CLASSIFICATION CONFIDENTIAL
NSRB
FBI
CD1FIDENT L
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Investments for East Germany's industry are channelled in a direction to
conform with changed Soviet reparation demands. Whereas during the first years
of occupation the demand for consumers' goods was stressed, Soviet interest
later changed to emphasize the demand for capital and investment goods. There-
fore, basic industries, e.g., the machine-building and metallurgical indu:7tries,
are being given priority over light idustry at present. In 1949, East Germany's
light industry received a total of 114 million Deutsche marks, the electric
power industry 60 million, and the chemical industry 19 million, while heavy in-
dustry -- the main source of reparations -- received 215 million Deutsche marks;
of this sum the machine-building industry alone received 86 mil-ion and the
metallurgical industry 61 million.
The Soviet Handelsgesellschaften (trade companies are usually referred to
as SHG; however, in official Soviet German-language communications they are
referred to as "All -Unionsvereinigungen " (All-Union Companies), or V/0 trans-
literation of the Soviet abbreviatio7. These V/0 are part of the far-reaching
network of the Soviet Foreign Trade Ministry. Abroad, the main representatives
of this ministry are Soviet trade delegations, which are also diplomatic repre
sentatives from the Soviet point of view. Subordinate to them, though not offi-
cially, are the V/0 and in addition, the representatives of the variety of Soviet?
trade companies which have their central office in Moscow. The V/0 in East Ger-
many receive their instructions from the Soviet Foreign Trade Ministry, via Foreign
.Trade Departments in the Soviet Control Commission, with which they collaborate
closely.
The following trade companies exist in East Germany at present:
1. Raznoeksport - for export and import of drugs, medical equipment, foods,
raw materials for the food industry, tobacco and tobacco products, leather goods,
construction materials, and similar goods.
2. Raznoimport - for-export and import of nonferrous metals, rubber, rubber
goods, and similar items.
3. Tekhnoeksport - for export and import of machines for the automobile in-
dustry, agricultural machinery, tractors, electrical industry goods, metal-processing
machines, and similar goods. In addition, the company participates in technical
assembly work and construction projects abroad.
4. Soyuzpromeksport - for export and import of industrial and handicraft
products.
5. Tekhnopromimport - for export and import of equipment for the chemical,
construction, food-processing, paper, rubber, textile,, printing) leather goods,
and other industries; telephone and telegraphic equipment, control and precision
machines, and laboratory, X-ray, and optical equipment,
6. Promsyr'yeimport - for export and import of ferrous and nonferrous metals,
iron alloys, cable equipment, and similar goods.
7. Mashinoimport - for export and import of mining equipment, metallurgical
machinery, power plant installations, elevators, transportation equipment of all
types, rolling stock, and similar goods.
8. Eksportlen - for export and import of flax, yarn, fibers, jute, cotton,
wool, products made of these materials, and similar goods.
9. Eksportles - for export and import of wood in all stages of processing,.
paper and paper products, cellulose and similar goods.
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10. Soyuzpushchina - for export and import of furs and pelts, semifinished
and finished, live animals and similar items.
The "Osobtorg" and "Voyentorg" are being dissolved, but "Derutra" (German-
Russian Transportation Company), "Derunapht" (German-Russian Petroleum Company),
and "Intourist" (Russian tourist agency which operates hotels, restaurants, etc.)
are being expanded.
As can be seen from the above, all the trade companies deal in exports as
well as in imports. The main objective of the V/0 at present is to channel ex-
ports from East Germany to the USSR as-well as to other countries. The Soviet
Control Commission gives the V/0 licenses to buy goods from German firms, which
are paid for at 1941+ ceiling prices. Another function of the V/0 is the processing
of products; e.g., they buy raw materials abroad, have them processed in Germany,
and re-export them. The profit remains with the V/0 while the remuneration for
processing is paid to German firms at 1944 ceiling prices. All foreign exchange
deriving from these business deals goes to the Garantie and Kreditbank, whereby
extraordinary profits accrue to the Soviets. The actual delivery firms never
learn the prir:s which were paid abroad for their products.
Essentially, the following types of transactions are engaged in by the V/O:
1. Delivery against foreign currency.
2. Delivery against other goods.
3. Processing contracts to be paid in
a. foreign currency,
b. raw materials or other goods.
Black-market activity is a special field of the V/O. Raznoeksport and Razno-?
import in particular have been charged with this activity. They bought gold,,porce
lain, carpets, furs, and similar items during the currency reform, and have sold
cigarettes at black market prices. The profits gained from these black market-activ-
ities can hardly be estimated.
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CONFIDENTIAJ.
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