EVALUATION OF THE SOVIET-EAST GERMAN ECONOMIC AGREEMENTS SIGNED IN MOSCOW, 3 AND 8 JANUARY 1957

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00246A034400730001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 22, 2016
• Document Release Date: May 20, 2010
• Sequence Number: 1
• Publication Date: May 14, 1957
• Content Type: REPORT

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rl COUNTRY East Germany
SUBJECT Evaluation of the Soviet-East German
Economic Agreements Signed in Moscow,
3 and 8 January 1957
DATE OF
INFO.
PLACE &
DATE ACQ.
NO. PAGES
NO UIREMENT
evaluation of the Soviet-East German
c c Agreements s ned in Moscow during the period -8 y 1957 25X1
ues
discussed by the delegation o Germany and the USSR.
S-E-C-R-E-T
NOFORN
CENTRAL INTELLIGENCE AGENCY
This material oontalas Information affecting the National Defense of the United States within the meaning of the Espionage Laws, Title
18, U.S.C. Sees. 793 and 794. the transmission or revelation of which in any manner to an unauthorized person is prohibited by law.
S-E-C-R-E-T
NOFORN
X ARMY X NAVY AIR
(Not. Washington distribution indicated by "X"; Field distribution by
FBI I AEC
INFORMAT-ION REPORT __ INFOR
14 MAY ?957
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Evaluation of the Economic Agreements Between East Germs. and the ,
Signed During the Negotiations in Moscow Between 3 and 8 January 1957
The negotiations regarding an official trade agreement between East
Germany and the OM are currently still in progress. In connection with
the additional economic aid, which the USSR found it suddenly necessary to
render to East Germany because of the decline in Polish and Hungarian
deliveries, a protocol was signed between East Germany and the USSR on 7
January 1957, during the Moscow negotiations, which were held between 3
and 8 January 1957. In addition to settling several questions, this protocol
contains the terms of the mutual economic relations between the USSR and
East Germany for 1957.
The following main topics are contained in the protocol:
1. A 30-percent increase in deliveries of t SR goods to East Germany
during 1957 comQar.d to 1956, particularly concerning increased deliveries
of Soviet metallurgical coke, rolled steel, sawn timber, grain, meat, butter,
on the other hand, a definite increase in the quo_deliveri is of
Bast German goods to the WSR during 1957 is not specifically established
in the protocol. In connection with the increase of USSR goods to be shipped
to East Germany, however, mention is made of the fact that these shipments
are to be made "in exchange" for deliveries of capital and consumer goods.
Another part of the protocol speaks of preparations to be made in 1957
for the utilization of free capacities in machine building in East Germany
to provide for production of equipment required by the USSR.
A specific commodity list for the 1957 exchange of goods will be
attached to the still-to-be-negotiated trade agreement for 1957.
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2. The granting to East Germany of a frecurrency credit for 1957,
amounting to 240 million rubles, by the W SR; this credit is to be granted
at a 2-percent interest rate and is to be repaid by last Germany in 1959
and 1960 through deliveries of goods. The credit is specifically intended
to permit East Germany to purchase essential goods for her economy, that
is to say,those goods which the TISSR is unable to deliver at all or only
in insufficient quantities.
3. Agreements for negotiations between pertinent organs of the 1 SR
and East Germany on the one side, and Poland on the other side, in connection
with introducing measures to eliminate bottlenecks In goods traffic via the
Polish railroads.
In addition to provisions for continued planned close technical and
scientific cooperation between the WSR and East Germany, the remaining
articles of the protocol contain provisions for regulating technical,
financial, and juridical questions connected with the Soviet occupation
fordes, re-state the terms of accountability for uranium ore deliveries
made to the USSR, and cover a number of political points.
An evaluation of the accords contained in the document is necessarily
limited by the fact that even in the case of purely economic agreements,
these are of a steletal nature. The methods of implementation are currently
still =der negotiation and the details which have thus far become known
do not suffice to provide for a final evaluation.
Temporarily, however, the following conclusions are apparent:
al
a. East Germany can count on the 'USSR to contribute to the aviation
of the worsened supply situation, to support the fulfillment of the economic
plans for 1957, and, through deliveries of agricultural products, to endeavor
to effect some degree of stability in the Communist regime; the above
difficulties being caused by the events in Poland and Hungary. In this
connection, and as was apparent from the early February 1957 speech by
Bruno Leusohner, Chief of the East German State Planning Commission, the
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USSR had indicated that she could not fully compensate East Germany for
the losses resulting from the failure of Poland to meet delivery commitments.
Lenschner ordered the East German economy to institute drastic consumption
cutbacks in 1957 for coal and coke and to produce at least [illegible]
million tons of brown coal brioquettes, 3 million tons of sifted coal,
and 100,000-200,000 tons of hard coal above the plan in 1957, to assure
adequate supplies. In addition, a part of industry is to be converted to
burning masout and fuel oil, since these fuels are more easily obtained.
In the case of fuels, and similar bulk goods delivered by the USSR, the
problem seems to be one of transportation, whereas in the delivery of semi-
finished goods, such as rolled steel, the difficulty lies in the preparation
of adequate technical specifications and the assortment of deliveries.
Also, the USSR has only limited delivery possibilities in a number of
commodities which are important to her own economy.
The volume of goods to be delivered by East Germany to the USSR depends
to such an extent on the regulation of all above questions and on the
agreement concerning mutual demands, that the absence of any definite
numerical and quantitative agreements in the subject protocol is absolutely
understandable. Indications are, home. r., that the USSR will accept a
certain lag in delivery of East German goods, so that the planned exports
from East Germany during 1957 will not experience the same ratio of growth
as imports from the UM.
b. The 3140-million ruble credit granted East Germany by the USSR for
1957 is intended for the purchase of such goods which constitute bottlenecks
in the UM and is of great significance. It is most probable that East
Germany will endeavor to use this credit to make purchases in the Sterling
area and that increased efforts will be made to circumvent embargo obstacles.
The quantity and method of repayment permit the conclusion that the SR
believes that the current difficulties in the Satellites will be overcome
in 1957 and 1958.
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c. One of the main difficulties in implementing the planned rise in
the shipment of bulk cargo and goods from the TISSR to East Germany lies in
the limited capacity of the transloading stations, where goods have to be
transloaded from wide to standard gauge track in the Polish-USSR border
area, and in the overtaxing of Polan?s east-west transit lines. Additional
transloading of some 750 extra railroad cars per day can be anticipated
for 1957 in USSR-East German transit. In view of the heavy Polish-USSR
traffic at PRZF ffSL and MM-DORCHUSK, and the inadequate capacity for
traneloading along the northern routes, the bulk of this increase would
have to be handled at the already over-loaded transloading points along
the BREST-FRANKFURT line. However, this is impossible without provisions
for expansion. Negotiations with Poland are already under way, but the
extent to which a rapid alleviation of the situation can be brought about
is questionable. The problem become more complicated since the USSR is
likewise limited in the choice of delivery routes on her own territory and
must avoid any unnecessary detours in transporting mass goods. Similarly,
the use of sea traffic provides only limited relief. Without solving the
transportation difficulties, realization of the 1957 economic agreements
between the USSR and East Germany is not feasible.
Economic Bottlenecks in East GermM
A precise presentation of the economic bottlenecks in East Germany,
which also takes the effect of the absence of selected items which are in
short supply into account, is being prepared [by the originating office?].
A preliminary list of bottleneck goods, which, according to all indications,
will not be available from the USSR or other bloc nations at all, or only
in part, is presented below:
1. Hard Coal and Hard Coal Coke
No solution of the supply situation for 1957 is as yet apparent.
It can be anticipated that East Germany will attempt to create a stockpile
of metallurgical coke
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2. Mining Prod_
Iron ore, titanium ore, pyrites, mica, raw phosphate, feldspar,
graphite.
3.
Pig Iron and Raw Steel
Foundry pig iron 1956 Import Plan
:
170,000 tons
Open-earth pig iron 1956 Import Plan
s
180,000 tons
Ferrosilicon 1956 Import Plan
s
1,900 tons
Ferrovanadium 1956 Import Plan
s
20 tons
Raw steel 1956 Import Plan
:
500,000 tons (approx.)
Forging or mill scale for production of domestic ferrochrome; special
steel from GLTJ 1ER and COMPANY, WBPPERTAL-EBMFELD; all alloy steels,
particularly ST45, ST52, 20 Mn-5 Cr; Cr Si 34; V 2 a; Ferroohrome, and
Ferromanganese.
4. Semi4inished Steel Goods
All rolled, forged, and cast alloy steels; automatic steel of all
kinds, up to 5 millimeters in diameter; nitriding steel; rolled shapes for
light4cnsstruction; heat-resistant screw stock; deep drawing sheet metal,
particularly less than 1 millimeter thick (shortage for camera industry);
ball bearing steel rods and pipe; cold-rolled strip steel of Krupp quality;
refractory steels for turbines and boilers, capable of resisting from 200-
300 atmospheres at 600 degrees centigrade. (Only if East Germany receives
these steels, can she produce electric parer with high-capacity power-
producing equipment, as called for in the Second Five Year Plan).
Chrome-nickel steel for turbine blades, to be purchased from the Alloy
Steel Mill at Krefeld. Large forgings for turbines, especially made by
the VEQ Bergmann-B orsig Enterprise in Berlin-Wilhelmsruh, purchased from
the Bochumer Verein and Rheinstahl Union Company; Crankshaft steel for
turbogenerators; Krupp spring steel strips; high-quality dynamo sheets;
high-quality transformer sheets, with a watt leakage of 0.6-0.7 watts per
kilogram. (East Germany is only able to produce transformer sheets with a
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watt leakage of 1.1-1.3 watts per kilogram. Without low watt-leakage
transformer sheets, the East German electrical industry will soon not be
capable of producing for export):
Spring steel; autoclaves; EHNITO pipe fittings (screw-type closures
for hydraulic installations which are not produced at all in East Germany).
Highly-alloyed high-pressure pipes; V 2 A steel sheets, rods, angle, and
specially seamless pipe and high-pressure pipe.
5. lion-Ferrous and Precious Metals
There are bottlenecks in almost all sectors of this industry,
both in raw materials, as well as in semi-finished products. The shortage
of copper is so great, for example, that copper cable not suitable for
East Germany is being purchased in the west for re-melting. There is a
particular shortage of lacquered copper wire in various sizes.
Similarly, fine zinc is also a bottleneck area, since Polish deliveries
of this item are wholly inadequate. A decided shortage is evident in bi-
metals for electrical repairs
The same situation holds true for East German supplies of beryllium.
6. Machines and Equipment, Including Spare Parts and Accessories
The following are needed:
Mining equipment, including hoisting cables and cables in general, as
well as pumps; a modern direct process oil-feed installation (Rennanlage)
for the plaimed,Rfckel smelter at St. Egidien; special assortments of
heavy presses and boring mills; lathes and planing machines, as well as
precision machine tools for the metal working industry; special machines for
watch factories; selected types of cutting and stamping tools; grinding and
SEGRETAOFORN
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polishing disks of the highest quality for precision parts; chemical
apparatus, including equipment for the rubber industry, including urgent
needed equipment for the development and expansion of the plastics industry,
including mixing machines; heavy duty extrusion presses; high-quality
calendars; vacuum deep-drawing machines; forming machines for fiber-glass
materials, and high-frequency heating generators.
Other equipment required includes individual types of machines for
the food-processing and luxury goods industries; universal hoisting equipment
and high-capacity cranes; tropical insulation for exported transportation
equipment and other products for tropical countries; gears; clutches;
roller bearings; non-ferrous metal bearings; roller chains; steel bottles
and containers, and raw diamonds for wire drawing enterprises.
7. Electrotechnical, Precision Mechanical and Optical Products and
Auxiliary Materials
Special assortments of electric motors, transformers, and high-voltage
equipment; cables and conduits, including special cables for automotive
electrical equipment, as well as various dimensions of lacquered wire;
cable paper, particularly for the Berlin Cable Plant
Import lags in this field
have already caused repeated production standstills.
Switches; regulators; meter boards; "Schuko" sockets; high-wattage
light bulbs; X-ray machines and accessories, as well as other medical
electrical equipment; various types of control and measuring instruments;
crystals for the optical industry; photographic shutters (no East German
camera can be sold abroad unless it has a western-type shutter
Also watches and watch
SEC FUE T/ NO FO 10111'
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8. Chemical Products, Including Rubber, Cellulose, and Paper, and
Auxiliary Materials
Fine chemicals (reagents); bleaching earths; kieeelguhr; borax; boric
acid for the production of optical glass (a lack of western deliveries
could cause production cutbacks); zinc oxide; freons; acid-resistant stone
wear made of spar, of which there is a shortage in East Germany; dyes and
pigments; theobromine, pyramidon, codein, and vitamin B; essential oils;
glycerin; photogelatine; natural rubber; best-quality active rubber fillers,
particularly for the manufacture of protective rubber clothing; vulcanizing
pigments for rubber products, since East German production of this item
is inadequate both in quality and quantity; solvents for porous crepe and
foam rubber; rubber gaskets, particularly driveshaft gaskets; numerous
synthetic resins; fatty acids; lacquer oil; various kinds of cellulose,
particularly acethylcellulose; celluloid; cellophane; technical paper;
cartons, and cardboard.
To What Extent is the USSR Able to Live up to Contractual Commitments Made
With East Germany?
Since the t!