JPRS ID: 9930 USSR REPORT INTERNATIONAL ECONOMIC RELATIONS BOOK EXCERPTS: 'FOR THE MATERIALIZATION OF DTENTE'

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JPRS L/9930
24 August 1981
USSR Re ort
_ p
INTERNATIONAL ECONOMIC RELATIONS
. (FOUO 2/81)
Book Excerpt s: 'FOR THE MATERIALIZATION OF DETENTE' ~
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, ~ .
JPRS L/9930
24 August 19~1
USSR R~PORT
INTERNATIONAL ECONOMIC RELATIONS
- (FOUO 2/81)
BOOK EXCERPTS~ 'FOR THE MATERIALIZATION OF DETENTE'
Moscow ZA MATERIALIZATSIYU RAZRYADKI in Russian 1980 (signed to press
22 Aug 80) pp 3-4, 5-22, 137-188, 189-222, 296-301)
[Foreu~ord by N.S. Patolichev, USSR Minister of Foreign Trade; chapter 4
_ by VoN. Sushkov, USSR Dej~uty Minister of F~re.ign Trade; chapter 5 by
V.G. Morozov, First Deputy Chairman of the USSR National Committee on
Foreign Economic Relations; conclusion; and table of contents from
- book "For the Nlaterialization of Det~nte" , edited by V. A. Brykin,
"Mezhdunarodnyye otnosheniya", 17,000 copies, 301 pages]
" CONTENTS
1~notation 1
- Table of Contents 1
~oreword 2
Qlapter 4. The USSR's LonQ Term Industrial Cqoperation With thE
Developed Capitalist Countries : Status, Prospects,
Problems.....~ 17
Cliapter 5: The USSR's Economic and Technological CooF~eration W~th
Foreign Countries in the Contemporary Stage. Status of
and Prospects for Cooperation With Capitql.ist Countries........... 59
Conclusion 88
- a - [III - USSR - 38a]
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Annotation
[Text] This book synthesizes the experience g3ined from the Soviet
Union's equitable, mutually advantageous economic cooperation with
_ the industrially developed capitalist countries; it contains a com-
prehensive analysis of current problems related to the~campaign
for the materialization of detente.
Table of Contents
Foreword: The CPSU's Foreign Economic Strategy for the
Contemporary Stage--N. S. Patolichev, USSR Minis*er
of Foreign Trade . . . . . . . . . . . . . . . . . . . . . . . 5
. Chapter l. The USSR's Policy.of Detente and Economic
Cooperation with Capitalist Countr3.es--V. A. Brykin
Deputy Rector, National Foreign Tr~de Academy . . . . . . . . . 23
Chapter 2~ The Soviet Union's Growing Economic,Scientific
and Technologica~. Potential: A Firm Foundation for
Cooperation--D. M. Gvishiani, Academician and Deputy
Chairman, USSR National Committee on Science and
~ Technology . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Chapter 3. The USSR's Com~erical and Economic Relations with the
Industrially Developed Capitalist Countries--Yu. V.
Piskulov, Doctor of Economics and Deputy Chief, USSR
Ministry of Foreign Trade's Administration for Trade
with Western Counrries . . . . . . . . . . . . . . . . . . . . 81
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_ Chapter 4. The USSR`s Long-Term Industrial Coopexation
with the Developed Capitalist Countries: Status,
Prospects, Problems--V. N. Sushkov, USSR Deputy
Minister of Foreign Trade . . . . . . . . . . . . . . . . . . 137 ~
Chapter 5. The USSR's Economic and Techr.ological Cooperation
with Foreign Countries in the Contemporary Stage. Status
of and Prospects for Cooperation with Capitalist ~
Countries--V. G. Morozov, First Deputy Chairman, USSR
National Committee on Foreign Econom3,c Rel~.l~ians 189
Chapter 6. European Congresses or Interstate Meetings on
Environmental Protection and Development of T:�ansportat-~.~n
and Power are of Mutual Interest--D. M. Gvishiani,
- Academician and De~uty Chair~an, USSR National Committee
on Science and Technology . . . . . . . . . . . . . . . . . . 223 ~
Chapter 7. COMECON-EEC: Problems in Developing Cooperation--
V. G. Moiseyenko, Candidate of Economics . . . . . . . . . . 249
Chapter 8. Commercial Arbitration in Trade with Capitalist
- Countries--V. S. Pozdnyakov, Chairman, Foreign
Trade Arbitration Commission, and Prafessor, ivational
~ Foreign Trade Academy . . . . . . . . . . . . . . . . . . . . 283
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 '
Foreword: The CPSU's Foreign Economic Strategy for the Contemporary
Stage
The general, theoretical principles fer our party~s strategy in the
area of the socialist nation's foreign economic activities were dev~lop-
ed by V. I. Lenin. A brilliant theoretician and strategist, V. I.
Lenin understood that the Communist Party would be able to successfully
consolidate the socialist revolution's victo~y and begin to build a
communist society with a scientifically based, historically long-term
strategic policy in fo~eign economic relat:tons with other countries.
V, I. Lenin developed this policy during the severe destruction in-
herited by Che republic from World War I, the Civil War and the
foreign intervention. ,
The difficulty of setting this policy lay not only in the fact that
. there was a pexsistent, protracted campaign'ahead in establ3.shing
economic relations with other countries but~also in the fact that
the economic relations of the world's first socialist nation should
be fundamentally new in nature.
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For a long time after it emerged as an ir~dependent economic sector,
foreign trade served the interests of the ruling exploiting classes
and during the formation and functioning of the world economy it
was used by militarally and economically strong nations to sub-
ordinate,weak ~nes and to exploit, enslave and oppress colonial
and denendent geoples.
The Soviet socialist state faced the goal of organizing its
economic relations with other countries on fundamentally new
principles which would tie �respons~ve to the interests of building
communism in the USSR and which would introduce new, progressive
trends in world economic relations as a whole. For the first time
in man's history, foreign trade would be executed on hehalf of
all the people and for the good of the toiling masses and not on
behalf of individual classes.
The USSR's foreign trade has honorably accomplished this goal and
continues to accomplish it primarily because it is based upon un-
shakeable principles developed by V. I. Lenin.
Our economic relations with foreign countries are based on pririciples
of true equality, respect for sovereignty,,non-interference in
domestic affairs, mutual advantage and strict observanc:e of
contractual commitments. The pursuit of these principles ia
necessitated by the very nature of a socialist nation; they are
being steadfastly and persistently implemented by the Communist
Party and-the Soviet government in our relations with all nations,
- without exception.,
V. I. Lenin foresaw that as other socialist nations amerged, the
Soviet Union's relations with them would be based on proletarian
internationalism, which inherently includes the above-cited principles~
along with mutual, fraternai assistance, cooperation and ~o3nt respon-
sibility for achieving the common goal--building a communist society.
With the formation of a world socialist system, economic cooperation
with the fraternal countries--coaperation which is an intergral
part af inter-state relations in their totality--has been perm~ated
by socialist inL-ernationalism and a profound interest in each other's
success; this cooperation harmonizes each count.ry's naCional interest
with tl~e common interest of the entire socialist community.
A ~~sition cf p.roletarian internationalisr.m marked V. I. Lenin's
approach toward the establishment and development of economic relations
- with Asian, African and Latin America?: countries. He pointed out tfiat
the Soviet nation's policy toward these countries was based "on a
' total break with the barbarian policies of bourgeois civilization,
policies which based the well-being of exploiters in a few selected
nations on the enslavement of hundreds of millions of working people
= in Asia, the colonies in general and in small countries."1
1. Lenin, V. I. "Poln. sobr. soch." (Complete Collected Works), vo1 35,
p 222.
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V. I. Lenin attached a great deal of importance to the establishment
and development of economic relations with capitalist countries.
The basis of an economic policy ~toward these countries, as was
brilliantly foreseen by V. I. L~:nin, had to be an ob~ectiive, commercial
requirement for economic ties between nations which belonged to
different socio-economic systems.
Today, there is a special force to the ring of V. I. Lenin's words--
the founder of our party and nation--wards which were spoken 3n 1921
at the Ninth All-Russian Congress of Soviets: "There is a force greater
than the desire, ~~illpower.or resolve of any hostile government or
class; this force is total, world-w~de eeonomic re..lations which will
force them to engage in dealings with us."2 Experience has completely
corroborated the correctness of this conclusion and, today, each and
every attempt to subvert equal, mutually advantageous economic rooper-
ation between ~ap3talist and socialist countries appears flimsy.
During t:~e years of the Soviet regime, our nation has been through an �
entire historical era. A deve~Loped socialist society has been built
in the USSR. At present, within the entire economic mechanism's
operations and progressive development, there has been an immeasureable
increase in the importance and role o~ foreign trade and other types
of foreign economic activities. From purchases of basic nece~sities,
the conclusion of the simplest buy-sell contracts , a small number of
contractors and a turnover of goods ccunted in millions of rubles to
inter-state treaties and agreements on trade, econumic, ~cientific
and technological cooperation with many of the worldts nations, to
a commodity turnover of tens of billions of rubles, the ernergence
of new functions to implement foreign trade, the appearance of new
types of foreign economic activities, a broader and morP systematic
invfllvement of the Soviet Unior in the international division of
labor and the participaticn of hun3reds of thousands of the national
economy's employees in executing forei.gn economic ties--this is the
path covered by the Soviet Union in its foreign economic acti~ities
during the years of its existen^e.
We are completely 3ustified in saying that the CPSU's f.oreign economic
strategy, whose basic directions were brilliantly outlined by V. I.
Lenin, is be~.ng implemented an~ has an increasing effe~t on the pace
, of building communism in our country aad on carrying out the new
~ USSR Constitu~:ion'~ goals of a socialfst nation of all the people to
strengthen peace and develop international cooperation.
� TheCPSU's foreign sconomic strategy for the modern stage was developed
by the party, t1~e CPSU Central Committee, the PoliCburo and Comrade ~
L. I. Brezhnev, general secxetary of the CPSU Central Committee and '
chairman o.f the USSR Supreme Soviet Presidium, based on a creative ~
2. Lenin, V. I. "Poln. sobr. soch.," vol 44, pp 304-305.
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extension of Lenin's teachings to the new conditions. "The
power of Marxism�-Leninism," L. I. Brezhnev pointed out in the
CP~U Central Committee's Keynote Report to the 25th Par~y Congress,
"is under continual, creative evolution. This was Marx's
teaching. This was Lenin's teaching. Our party will always be
true to their Iegacy!"3
What are the basic features of the ~iartv~'s foreign economic
strategy for the modern stage, the features which have been
formulated in the 24th and 25th CPSU Congress decisions, in
CPSU Central Committee General Secretary and USSTt Supreme Soviet
Presidium Chairman L. I. Brezhnev's works and in CPSU Central ~
Committee Plenum decrees?
First of all, it should be poi~ted out t~at, in managing the Soviet
nation's foreign economic ac~ivities, the party proceeds from the
need for persistent implementation of the principle of statE monopoly
of the Soviet Union's ~oreign trade and other types of foreign economic
activities. As is well known, this principle was legisl,ative.ly
incorporated in the new USSR Constitution which was adopted at the
7 October 1977 Extraordinary Seventh Session of the USSR Supreme
Soviet.
The Soviet state's practical activities in the field of foreign economic
relations not only corroborate the correctness and vitality of this ~
principle but also continually expand its scope and make full use
of the resources ;ahich it uncovers as new goals and needs of a socialist
society emerge. This especially applies to cooperation among CMEA
member countries. The state monopoly of foreign trade and other types
of foreign economic activities.is an indispens3ble condition of success-
fuI cooperation within the CMEA framework. The retention and improve-
ment the mechanism of state monopoly for foreign trade and other
types of foreign economic activities make it possible to coordinate
the national economic development plans of CMEA member countries, to
- successEully advance along the path of socialist economic integration
and promotes a merger of the economic systems of the socialist commun-
ity's nations.
By building uur commercial and ecor.omic relations with the capitalist
c~untries on the foundation of this principle, we are protecting our
economic systems from the economic shocks in the world capitalist
_ system, With the current size of economic xelations with capitalist
countrics, we would hardly 1ie able to avoid the negative impact of
inflation and the other phenomena of capitalism's overall crisi:s
if the Soviet nation did not have an effective tool at its dispo~al
like state monopoly. This is why the interest in the Soviet Union's
experience in foreign trade shown by many developing countries in
3. "Proceedings of the 25th CPSU Congress," Moscow, 1976, p 72.
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their search for ways and methods to avoid or reduce the ruinous
effect of the capitalist crisis on their economic systems ~s under-
standable.
In the contemporary environment, the principle of state monopoly
is taking on new mea~ning in the USSR's relations with the industri311y
developed countries of the West. There are unwarrante3 statements
- whieh are heard at times to the effect that this principle supposedly
slows down the development of economic relations with western
countries and to the effect that if the Soviet Union would use
_ their methods and means in its relations with them, then commerical
and economic relations between us and our western partners would
develop faster and more successfully. Many years of practice refute
these statements. As is widely recognized in the West, the Soviet
Union is a reliable, stable partner and, with the instability which is
characteristic of the contemporary capitalis.t system, relations with
the Soviet Union play the role of a stabl3zing factor in international
economic relations. This is the prestige gained by the Soviet Union
precisely because of state monopoly. Furthermore, without state
monopoly, it would have been totally impossible to change over to the
. long-term commerical and economic cooperation which is becoming
- broader in scope in ~+.ar relations with western countries and which
is gaining its merited recognition within political and economic
circles as a positive event with far-reaching, favorable consequences
for international economic cooperation and for strengthening peace
and security.
A ma~or feature of the party's foreign economic strategy for the
contemporary stage is that the development of foreign economic ties
is becoming more and more important amon~ the key economic problems
of building communism in our country. This proposition was formulated
in the CPSU Central Committee's Keynote Report to the 25th P~rty
Congress an3 it is of ma3or theoretical and practical importance.
As emphasized in the report, this is a direct result of the swift
growth of our national economy and of the major changes taking place
in the world, the successes of the policy of peace and detente.
The inc~-easing role of foreign economic ties within the USSR's overall
national economic system is convincingly shown by the size of foreign
trade turnover in the lOth Five-Year Plan. In 1979, the Soviet Union's
foreign trade turnover was 80.3 billion rubles. Suc~essful fu~~.fillment
of the lOth Five-year Plan's targets for foreign economic ties gives
reason to assume ~hat the subsequent, llth Five-Year Plan's foreign
trade turnover will continue to gi:.:�.* at a swift pace.
Moreover, it is not just the absolute size of foreign trade turnover
that is importan*_ in itself. At present, it is hard to find a
. sector of the country's 2conomy which has not been linked to foreign
trade and other types of foreign economic activities. It has become
normal for our country's for.eign trade to develop at advanced rates
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compared to the growth of total social output. This shows the
USSR's continual, intensified participation in the international
divison of labor and the ever-increasing role of foreign econo~ic
ties in national economic development.
Another major feature of the party's foreign economic strategy
for the contemporary stage is the increased international political
significance of the USSR's foreign economic ties. L. I. Brezhnev's
re~ort at the 25th CPSU Congress pointed out: "We see foreign
economic ties as an effective means of faeilitating the accomplish-
ment of both political and economic goals. The path of 4conomic
integration Gtrengthens the power and unity of the socialist
_ community's countries. Cooperation with dev2loping coun~ries fdcili-
tates a reorganization of their economic systems and public affairs
on a progressive basis. Finally, economic, scientific and techr_o-
logical ties with capitalist nations firmly establish and expand
the economic base for the poLicy of peaceful coexistance."4
The party's foreign economic strategy is characterized by a desire
to integrate the advantages of socialism with the gains af the
scientific and technolugical revolution both in the area of foreign
economic ties--which is specifically re~lected in the change in
the pattern of exports and imports--and in the appeaxance of new
types of economic, scientific and technological cooperation.
The Soviet Union's foreign economic activities are acquiring braader
and broader aspects. They ;~re directed at a further, active inclusion
of the country in the international division of labor and at solving
such current problems as developing long-term industrial cooperation
between East and West; the socialist countries' participation in
- a solution to world power and raw materials problems; implementation
of major European projects in the area of economic and technological
cooperation; a unification of all interes~..ed countries' economic,
scientific and technological resources to solve the urgenC problems
of contemporary civilization--controlling the most dangerous and ~
widespread diseases, environmental protection, utilization of ocean
resources and many others.
As shown by the experience of recent years, there is an objective
i.ncentive for soc3alist and capi`calist countries to develop stable,
long-term mutual cooperation. This incentive will increase as the
international division of labor intensifies and as scientific and
technological progress accelerate. The elimination of discriminatory
restrictions on trade with socialist countries--restrictfio.ns.: which
still occur in capitalist countries--improvement of~ the pattern and
c:ompetitiveness of the SoJiet Union's exports, the establishment of
contacts between tlie Counca.l of Mutual Economic Assistance and the
European Economic Community, and expansion of the practice of cooperation
~ 4. "Proceedings of the 25th CPSU Congress," p 56.
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on a European basis--a solutioi~ to these problems and a number of
others which are of great importance and mutual interest will
greatly facilitate an intensification o= economic ti~s between nations
with different socio-econo~ric systems.
The CPSU's decision to develop and improve foreign economic ties en~oYs.
the unanimous support of al:i_ Soviet people. The party's policy
of developing mutually advantageous cooperation with all the world's
countries w~s approvingly received by progressive forces abroad
and by all serious public figures; it is totally respoasive to the
interestsof strengthening peace and international security and to tiie
workers' interests. The western European countries economic ties
with the socialist countries guarantee work for hundreds of thousands
or ever millions of people in the environment of economic crisis
and unemployment in Western Europe. It is hard to overrate the
Soviet Union's impact on international economic relations when you
consider that our country now produces over 20 percent of world
_ industrial output.
The Soviet Union's persistent policy of securing peace and cooperation
among nations--a policy which was developed further at the 25th
CPSU Congress--has been reconfirmed by the position adopted by the
CPSU at thP June 1976 Conference of European Communist and Workezs
Parties held in Berlin. In presenting ~he CPSU's pvsit~on on the
problems of peace, security, cooperation and social progress in
Europe, L. I. Brezhnev dwelt on the close relationship between the
campaign for peace and economic cooperation. "It is also exceptionally
impoxtant to establish," he emphasized, "a so-to-speak economic
fabric for peaceful cooperation in Europe, a fabric which would streng-
then ties between European peoples and nations and make tiiem morQ
interested in keeping peace for many years in the future. I have
in mind all kinds of mutually advantageous cooperation--trade,
industrial cooperation, scientific and technological con~tacts."5
The primary position in our commercial and economic relations is
ocaupied by ~MEA members. The Soviet Union's trade with these nations
is steadily developing and becoming stronger. Since the establishment
of CMEA in 1949, the USSR's foreign trade turnover with this group
of countries has increased by more than 20 times and reached 41;6
billion rubles in 1979. At present, our. trade with a number of
socialist conntries has reached the scale which occurs between major
industrially developed capitalist countries.
But, it ~s necessary to emphasize an important distinction of foreign
trade between ~%MEA member countries compared to foreign trade between
industrially .dil~veloped capitalist countries, a distiriction which result~
from the pattern of foreign trade. This distinction is especially
visible in a comparison of the patterns of b arter b.etween Western
European countries and lietween GMEA member countries. While the pattern
5. Brezhnev, L. I. "Leninskim kursom, Rechi i stati;" (Foll~�.~ing
Lenin's Course: Speeches and Articles), vol 6, Moscow, 1978, p 55.
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of foreign trade between ~Testern European countries consists of
an exchange af the same mix of products, foreign trade between
CMEA member coun~ries meets the goal of an exchange of goods whereby
one country`s economic system supplements another's system.
The uniformity of the patte.rn of commodity turnover.in the uncontrol-
led capitalist economy exacer~ates competition and results in so-called
"trade wars" which destabllize econ~mic relatians and reduce their
effectiveness. To a significanr ex~ent, the effectiveness of mutual
trade achieved by the industrially developed capitalist countries
- results from their exploitation of developing countries.
The mutually complementary nature of the CMEA member countries
economic systems improves the environment for their integration and,
through foreign trade, leads to higher efficiency in the~international
division cf labor which develops on socialist planning principles.
The 1971 Comgrehensive Program for Further Intensification and
Improvemen,t of CMEA Cooperation and for the Development of CMEA
Socialist Economic Integration raised the fxaternal countries
cooperation to a new, higher level. The measures executed to implement
it have already led to a significantly greater growth in Sov~.et
foreign trade with CMEA member countries.
The expansion and intensiEication of the socialist countries commercial
and economic eooperation are being achieved by an ever-increasing
coordination of national economic plans. In 1975, a plan of multi-
lateral integration for 1975-1980 was drawn up ~or the first time.
This made it possible to combine the, efforts and resources of the
socialist community to construct major economic facilities which are
very important to the development of all the CMEA member countries
economic systems.
Further stages in the development of socialist economic integration
are the target programs being developed; these programs are directed
at solving the socialist countries fundamen*_al national economic
problems for the long term, As noted in USSR Delegation Head and
Chairman of the USSR Council Qf Ministers A. N. Kosygin's ad~ress at
the 33rd ~~ti Session dedicated to the 30th anniversary of the CMEA,
cooperation between this organization's member countries has ~.aid
the f.oundation for a new, socialist international division of labor.
This cooperation is characterized by a relationship of equality and
mutual assistance. "The deliberate implementation of this policy
has increased the effect of socialism's objective advantages in
each country. It has accelerated fundamental social changes and ~
has facilitated industrialization and a socialist transformation
of the village. It has'made it possible for our r..oi~ntries to
strengthea our common positions in the campaign for peace an3 social
progress.
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Zhe ma~or achievement of this policy has been a stronger,
systematic foundation not only in domestic economic development
but also in international cooperation. This has also been a
new page in the history of world economic development."6
An important position in the US~R's commercial and economic poiicy
is set aside for relations with devel~oping countries. In 1979,
their share of the USSR's total foreign trade turnover was approx-
imately 12 percenC. ~
The Soviet Union supplies developing countries with many types of
industrial machinery and equipment, raw materials and consumer goods
which are of ma~or importance in accomplishing the tasks they are
faced with of developing a national economic system.
In building its economic relations on a mutually advantageous founda-
tion, the Soviet Union buys various commodities in these countries,
both their usual, traditional exports and the output of Cheir young,
national industries. These goods are of major importance for many
sectors of our national econo~y and for enhancing the Soviet people's
well-being.
The Soviet Union actively supports the demands of the developing
countries on the need for reorganizing international economic relations
on democratic, just bases and on eliminating all types of discrimin-
ation, inequality, exploitation and plunder resulting fro~n the
_ imperialist nations' neocolonialist policy.
The USSR provides broad economic and teehnical assistance to developing
countries in building industrial, power, agricultural, scientific
and cultural facilities and in trair~ing national specialists.
The Soviet Union does not intend to take root in the developing
countries economic system^ as the industrially developed capitalist
countries do. Our party's fundamental Leninist position i: economic
cooperation with developing countries is to help them strengthen
their political independence and win their economic independence.
This major tene~ is the point of departure for resolving all the
concrete issues of developing and inrensifying commerical, economic,
technical and other types of cooperation with developing countries.
The 25th CPSU Congress set two primary goals for developing economic
relations with industrially developed capitalist countries.
6. "CMEA Economic Cooperation," INFORMATION BYULLETEN', Moscow, No 4,
1979, p 43.
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- The first is to improve the effectiveness, pattern and balance of
foreign trade, specifically by increasing the percentage o� the most
profitable types of raw matezials in exports, ensuring more intense
processing of raw materials being sold and ~ncreasing the manufactur-
ing industry's share of exports. Our import policy must be
targeted toward accomplishing the ma~or tasksfacing the economy
and toward increasing the economy's efficiency to an even greater
extent.
~ The other goal is ~o develop new types of foreign economic relations
which go beyond normal trade and which, as a rul~, have a greater
impact. Specifically, we mean offset agreements, extending their
area of operation to the manufacturing industry and looking for
new approaches to industrial cooperation with capitalist countries.
In describing the CPSU's foreign economic strategy for the modern
sta.ge, it should be especially emphasized that it completely meets
the spirit and the letter of the Final Act of the Conference on
European Security and Cooperation which gave new i~mpetus to the
- development of trade and various types of economic cooperation on
the European continent. Signed on 1 August 1975 in Helsinki, the
conference's Final Act expanded opportunities to resolve important
issues of economic cooperation directly at summit meetings and talks
between the USSR and capitalist nations. After the Final Act was
signed by the heads of 33 European nations, the U.S.A. and Canada,
there were a number of ineetings which ended with the adoption of
joint documents opening the way to a significant expansion and
' intensification of economic cooperation between the members of
the European conference.
Western ~uropean countries occupy an important position in the USSR's
commercial and economic relations with industrially developed capitali`st
nations; three-fourths of the Soviet Union's trade with these nations
goes to them.
At present, the Soviet Union's commercial and economic relations
with Western European countries are typified by qualitatively new
features, such as permanence, large in scale and the development of
industrial cooperation, including a number of offset projects. These
relations are based on long-rerm intergovernmental agreements and
programs for commercial, economic, industrial, scientific and techni-
cal cQope~ati;on.After the European conference, the USSR signed agree-
ments and programs on economic cooperation with many Western European
countries.
In his 2 March 1979 address to the voters of Moscow's Bauman Electoral
District, L. I. Brezhnev not~d tnat tfie Soviet Union had concluded
long-term econornic agreements with a number of Western European
cauntries and then emphasized: "Such agreements are unique capital
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invesCments by the East and West for an extremely necessary and
mutually advantageous cause--maintaining and strengthening inter-
natioaal peace."~
Experience shows that long-term agreements and programs establish
a firm foundation fo~r expanding economic cooperation and they pro-
mote an improvement in the pattern of trade and an increase in
~table relations. At present, the USSR has long-term agreements
and programs of cooperation with practically all Western European
countries.
In May 1977, L. I. Brezhnev, general secretary of the CPSU Central
Committee and chairman of the USSR Supreme Soviet Presidium, and
U. K. Kekkonen, Finland's president-~-who was on an official visit
to the USSR--signed a Long-Term Program for Developing and Intensify-
ing Commerical, Economic, Industrial, Scientific and Technical
Cooperation bet~;een the USSR and Finland until 1990. In its scope,
this program was a qualitatively new level in the development of
economic relatYOns between countries with different social systems.
It encompasses practically all areas af economic cooperation between
two nations and outlines specific areas of cooperation.
Of great importance were L. I. Brezhnev's visits to France in June
1977 and to the FRG in May 1978; during these visits, serious atten-.~,
tion was also devoted to issues of commercial and economic cooperation.
Diiring the visit to France, a number of commerci.al and economic
documents were signed and an agreement was reached on the development
of a new long-term program for in~ensifying Soviet-French economic
and industrial cooperation up to 1990. Both countries did a lot of
work preparing this program and it was signed during French President
Giscard d'Estaing's visit to the USSR in April 1979.
- As pointed out by L.I. Brezhnev, developed and mutually advantageous
trade, economic cooperation and, on a broader scale, an exchange of
industrial experience and the fruits of scientific and technological
thought promote material progress in both countries and provide
tangible benefits to both the Soviet Union and France: "We are in
favor of a further increase in the level and quality of our econom~c
exchange. Evidently, it is necessary to undertake promising types of
cooperation more boldly, types such as industrial cooperation and
specialization, putting as much as possible of all this on a long-
term basis by concluding the appropriate agreements."8 Giscard
d'Estaing also gave a positive evaluai.ion of the status of and pros-+
pects for Franco-Soviet relations in all areas, including economic
- 7. Brezhnev, L. I. "Leninskim kursom. Rechi, privetstviya, stat'i,
vospominaniya," vol 7, Moscow, 1979, p 625.
8. PRAVDA, 26 March 1979.
]2
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- cooperation. "I'urthermore," he pointed out, "the orderly growth
of the Soviet economy, the steady modernization of it and the USSR's
enormous natural wealth should ensure permanent technological and
industrial ties between the USSR and the West in the future."9
The development of the USSR's long-term commerc.~.al and economic
cooperation with Western European countries ob~ectively leads to
an increase in mutual trade.
During the IOth Five-Year Plan, the turnover with the industrially
developed capitalist countries increased by approximately one-third.
- During the 4 years of the lOth Five-Year~Plan, the Soviet Unio~'s
turnover volume with the industrially developed capitalist countries
was 25.76 billion rubles.
The USSR's major trading partners among the Western European countries
are the FRG, France, Finland and Italy.
The Soviet Union supplies Western Europe with petroleum and petroleum
derivatives, natural gas (Austria, Italy, the FRG, France, Finland),
timb.er and paper products, various machinery and equipment, cotton,
solid fuel, metal ores, non-metallic minerals and many other
commodities. It should be mentioned that Western Europe is a major
market for many Soviet commodities; it specifically receives approx-
imately one-half of all Soviet exports of petroleum, petroleum
- derivatives and natural ga5; 30 percent of chemical exports; and
over 20 per.cent of motor vehicle, photographic equipment,.cotton and
solid fuel exports.
Among Soviet imports from Western European countries, the primary
po~ition is occupied by machinery and equipment, basically complete
sets uf equipment for various industrial sectors, which comprise
over one-half of total imports from these countries. As a whole,
Western Europe provides 30 percent of total Soviet machinery and
equipment imports. ~Jther major items of import are ferrous metal
plates, pipes, variuus chemicals and consumer goods.
= A major role in the development of trade, economic, industrial,
scientific and technological cooperation and in preparing and
implementing programs of cooperation in these areas is played by
joint intergovernmental commi~sions which have now been established
with a majurity of the Western European countries. These commissions
emerged relatively recently but they have already gained a certain
amount of experience in the field of comprehensive development of
- commercial and economic cooperation among countries with differing
socio-economic systems. The working groups and groups of experts
operating within the commissions are doing a lot of work in specific
areas of economic and industrial cooperation between Soviet organiza-
tions and Western European companies.
9. Ibid.
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In recent years, our relations with Western European countries have
seen the evolution of such a promising form of economic relations
_ as industrial cooperation, which encompasses the execution of large-
scale projects, includi~.ng those on an offset basis.
There has been an expansion in the Soviet Union's industrial coopera-
tion with Weste rn European countries in the manufacturing industries.
Industrial cooperation is a long-term area of commercial and economic
cooperation, an area which contemplates the establishment of long-
term, stable relations and which makes it possible to make better use
of the advanta ges of the international division of labor.
The~e has been a rather stable developmenC in the Soviet Union's
commercial and economic relations with Japan. From 1975 through
1979, trade turnover with Japan increased from 1,922 million rubles to
2,605 rubles; the growth in commodity turnover remained stable.
~ On the Soviet side, there is a readiness to establish the proper
atmosphere fo r future development of commercial and economic
relations. Th e party's plans to develop natural resourcES in
Siberia and the Far East and to build powerful industrial and
power complexes in these areas are opening up new prospects for
an expansion of commercial, industrial, scientific and technological
cooperation between both countries. A lot in this area depends upon
the Japanese side, considering the fact that the Chinese hegemonists
are trying to give the recently concluded Sino-Japanese agreement an
an~i-Soviet focus.
There was an uneven flow, with peaks and troughs,in commereial and
economic coope ration between the USSR and U.S.A. in the 70's.
In analyzin g the status of commercial and economic cooperation
between the USSR and U.S.A., it should be no~ed that the Americar~
side is completely responsible for the lack of progress and in-
stability in this cooperation. It should be completely clear
to all U.S. political and business circles that they should not
expect that the large, potential opportunities for mutually advantage-
ous commer ci al, industrial, scientific and technological cooperation
b etween the wo rld's two economically largest countries will be
realized without a readiness to meet the USSR half way.
As far as the steps taken by President Carter's administration to
curtail econo mic, scientific and technological contacts between
both countries are concerned, the Soviet Union's attitude toward
these_steps was clearly set out in the 7 January 1980 TASS dispatch.
"It is hardly possible that these steps," the TASS dispatch pointed
out, "will be greeted with approval by broad circles of the U.S.
population which has given numerous demonstrations of its interest;
in cooperation with the Soviet Union and in expanding business contacts
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with it, correctly believing that this is beneficial to the United
States itself.
"As far as the Soviet side is concerned, it has never fished for
~ such contacts itself, for exampl?, commereial, economic or cultural
- contacts. It has always emphasized that the development of particular
contacts, just like maintaining good relations between the USSR and
U.S.A. a~ a whole, is a mutual matter."10
Along with the di.rect attacks against commercial and economic cooperation
with the USSR, attacks which are stimulated by recidivists of "coid
war" policies, many western countries are not completely carrying
out the measures incorporated in the Final Act of the European
conference to eliminate discriminatory restrictions which hinder
normal development of trade. '
All the practical activities of Soviet organizations to implement
the CPSU's policy of developing mutually advantageous, equal com-
mercial and economic relations with western countries objectively
pr~mote the implementation of the European conference's Final Act's
- recommendations in all the areas stipulated by it. Our economic
cooperation with western countries is targeted at unconditionally
accomplishing the goals set by the Final Act to strengthen security,
- expand the scope of commercial industrial, scientific and techno-
logical cooperation, enrich the types of ccoperation and expand con-
tacts between countries wiCh different socio-economic systems.
At the same time, it would be possible to cite a number of cases which
testify to the fact that influential circles, primarily in the U.S.A.,
are doing everything possible to hinder the development of business
contacts with the Soviet Union and are thereby hampering implementa-
ticn of the Final Act's recommendations. Practical experience
requires that such interference be eliminated and we can hope that
thi~ will be done.
While talking abouC the CPSU's foreign economic strategy for the
modern stage, we should dwell on another major aspect of it, an
aspect whose importance increases as the scale of the USSR's foreign
er_onomic relations with foreign countries increases. The issue is
one of a comprehensive approach to managing and organizing foreign
economic relations.
Pursuant to the 25th CPSU Congress d~cisions, the lOth Five-Year
Plan will not only ensure a significant growth in foreign trade
turnover and the development of industrial, scientific and techno-
logical cooperation with foreign countries, but it will also succeed
in achieving izaproved indicators of quality and an increase in
effecti-veness in all areas of foreign economic activ3ty. The accom~+
- plishment of the foreign trade goals set by the party and government
10. PRAVDA, 7 January 1980.
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will require organized and coordinated activities by a11 work groups
in industrial sectors, transportation and foreign trade organizations.
- It is ~nly by close coordination of production and trade that these
goals can be successfully accomplished. �
The implementation of the party's policy of the Soviet economy's
intensified participation in the international division of labor
is decisively dependent upon building up the country's export
potential. This is why the 25th Congress decisions attach special
importance to increasing~product3.on for export, improving the
pattern of exports and enhancing product quality.
Improved effectiveness of our imports is dependeni upon improved
planning and upon careful, zealous use of everything we purchase
abroad. This requires bringing enterprises outfitted with imported
equipment on-line in a timely manner and i~t also requires thrifty,
economical use of all imported commodities.
The development of foreign economic contacts is targeted at safe-
guarding our homeland's fundamental political and economic interest.
This is why successful development of the USSR's commercial and
economic cooperation with other countries is a common cause for all
the people, the nation and the party.
jJe cannot help but recall L. I. Brezhnev's words at the 25th CPSU
Congress: "Foreign economic relations binds together politics and
economics, diplomacy and commerce, industrial production and trade.
Consequently, the approach to these relations and the management of
them must be comprehensive, tying together into a single package
the efforts of all departments and our political and economic
interests. This is preciselyliow the Party Central Committee
frames ti:is important issue.
The party's development of the Soviet nation's foreign economic
strategy for the modern stage is a new, outstanding contribution
to the storehouse of Marxist-Leninist doctrine. The party has
set the country's fundamental, long-term goals in foreign economic
relations and it has defined the primary areas for additional
improvement and enhanced effectiveness in the work of all ministries,
departments and organizations engaged in this 5ector of the country's
economy.
The development of the Soviet Union's foreign economic relations
along the path outlined by t1~e party serves the cause of building
communism in our country and is responsive to the interesLS of peace
and strengthening peaceful cooperation for the good of all people.
The CPSU's foreign economic strategy is therefore of great interna-
tional importance.
11. "Proceedin gs of the 25th CPSU Congress," p 58.
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QiAPTER FOURt ~iE USSR' S. LONG TERM INDUSTItCAL . COOPExATION WITfi. THE.. DL~'VEEOPED
CAPITALIST COUNTRIES : STATUS; "PROSPECTS, PROB.LEPIS
The USSR's long-term industrial cooperation with industrially
developed capitalist countxies was stimulated by the fundamental
- changes in international relations which took place in the world
in the 70's. An outstanding contribution to the development of
' such cooperation was made by the CPSU's persi~tent campaign to
implement the 24th and 25th Congress decisions~. In implementing
the congress decistons, the CPSU was very successful in beginning
to strengthen the basis for broader development of long-term
commercial and industrial relations betwee~ the USSR and capitalist
countries. As these relations expanded, new forms of economic
cooperation emerged, including long-term economic cooperation to
carry out large-scale operations in the USSR on an offset basis.
Moreover, it is important t~ point out that, along with the already
- weZl-knopn, so-called traditi~nal forms of trade, the appearance
and establishment of new forms and methods of coop~ration have
led to the development of relations into broad, long-term economic
cooperation and have occurred on a mutually advantageous basis
~ for the tiSSR and its capitalist partners. This completely applies
to cooperation with capitalist country companies and organizations
to execute long-term, large-scale pro~ects in the USS~ oz~'an offset
baais. This is precisely the type of cooperation which emerged
at the beginning of the 70'~ and which is receiving additional
development.
In his remarks at the 25th CPSU Congress, A. N. Kesy.gin, chairman
of L'r.e USSR Council of Ministers, pointed out that the Soviet Union
will continue the pract3ce of "concluding large-scale, cooperative
agreements to build industrial facilities i.n our country and
agreements on the participation of Soviet organizations in the
construction of industrial enterprises in western countries. Promising
types of cooperation are: offset agreements, especially with short
repayment periods for new enterprise~,and various types of industrial
_ cooperation."1 Typical of large-scale, long-term cooperative agreements
- 1. "Proceedings of the 25th CPSU Congress," pp 135-136.
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to build industrial facilities is the fact that they lay a good
foundation for. expanding industrial cooperation in the most diverse
areas. The large-scale and long-term nature of the offset trane-
actions, combined with the traditional principles of Soviet foreign
- trade--the partners mutual advantage and quality--open up large
opportunities for arranging new types of commerical and economic
relations between socialist and cap.italist countries.
The offset agreements are characterized by such common features as
the long-term nature of the loans granted to the Soviet side,
loans required to import the necessary tecr.nical manuals, machinery,
equipment and materials; by offsetting the import costs with deliver-
ies of products for export from the enterprises being built or
updated in the USSR; and by the possibility of continued exports
aft~r the loans are paid off.
The offset type of cooperation with capitalist couatries makes it
possible to accelerate the exploitation of natural resources--which
is especially important in hard to reach areas--to huild oz
update individual industrial facilitie~s with the least expenditure
of domestic capital investment, to attract the latest developments
in world technology to develop individual sectors of the country's
national economy and to improve the pattern of Soviet expor.ts. The
ultimate results are: accelerated rates of the Soviet Union's
socio-economic development, better utilization of developments in
the scientific and tectinological revolution and deeper inclusion
_ of our country in the international division of labor by using all
the advantages and benefits of this division both for ourselves and
for our partners in cooperation.
The offset agreements are mutually advantageous; this is why
statements by individual western political figures that these
agreements are a one-way street which only benefits the Soviet
Union are completely unwarrantedf. Capitalist country companies
and organizations are showing a greater, ever-increasing interest
in this type of cooperation. In the acute competitive enyironment
of weak~ned demand in capitalist markets, capitalist country companies
are getting major orders for deliveries of complete plants, equipment,
machinery and materials to the USSR over a period of several years.
On the other hand, ~apitalist countries are getting a lung-term
- opportunity, including after the offset deliveries are made, to
secure many types of the frequently scarce products they need from
sources which are free of the crisis-like shocks characteristic
of capitalist markets.
'Western business circles' interest in developing cooperation on
an offset tiasis with the Soviet Union is shown by numerous polls
_ conducted in Western European countries, Japan and the U.S.A.
18
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- New impetus was given to the development of cooperation in building
facilities on an offset basis by tk?e signing of the Final Act of
Che Conference on European Security and Cooperation. It specifically
states that the participating nations "recognize...that, given their
mutual interests, such concrete forms of industrial cooperation as
that to build industrial complexes with the idea of obtaining
part of the output manufactured by these complexes, would be bene-
ficial to the development of industrial cooperation...."2 The
conference outlined several specific areas for cooperation on large-
scale economic projects and it established a model list of projects
where such cooperation would h ave the greatest economic impact.
In the opinion of the conference's members--an opinion which was
recorded in the Final Act--industrial cooperation makes it possible�
to establish stable, long-term economic relations, promote the
development of international trade and widespread employment of
modern technology, accelerate the industrial development of nations
participa~ing in such international cooperation, provide incentives
for the development of scientific and technological contacts between
competent organizations, enterprises and companies of the countries
and ensure the devel.opment ~f relations by considering mutual �
benefits. This is precisely the direction in which the Soviet Union
is developing industrial cooperation with capitalist countries.
The proper consideration of the benefits and advantages of offset
agreer~ents for the Soviet side is not possible without an under-
standing of the economic and financial concepts guiding the business
circles, companies ana banks of capitalist countries when they
conclude such agreements with the Soviet Union. It is clear that
the mutually advantageous nature of offset agreements results from
a most thorough analysis of all att~endant circumstances. Each offset
agreement is strictly balanced; it must exhaustively reflect the '
mutual interests of botY~ parties and ensure equival~ent benefits
and advantages to both. If we approach the question of what benefits
our partners receive frorn offset agreements and why they are interest-
ed in them from this point of view, then we will primarily note
that the offset agreements represent an extremely advantageous
investment far them, an investment where payment of the loans and
t~he interest on them is reliably guaranteed. Moreover, it is
~ extremely important that the loan and interest payments are
primarily made with commodities which make it possible t~o ~meliorate
the effect of the inflation in the world capitalist market. �
Also attractive to the western business world is the fact that offset �
agreements with the Soviet Union are,as a rule,large-scale agreements.
As a result of this, a large number of very diverse large and small
companies are participating in the implementation of cooperation
based on offset agreements.
2. "On Rehalf of Peace, Security, and Cooperation," p 39.
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_ By the end of the 70's, the total amount of mutual deliveries
made according to offset agreements and contracts between the
Soviet Unian and western countries reached several tens of billiona
of dollars. These agreements and contracts make provisions for the
construction of over 60 major facilities. Right now, offset
agreements and contracts basically cover industrial sectors for
raw materials,~fuel and chemicals. But, talks are already underway
for a number of offset projects in manufacturing; interest in these
projects is being shown by many capitalist country companies.
Large-scale, long-term offset agreements which were not possible
15-20 years ago graphically demonstrate the broad opportunities
opened up for mutually advantageous commerc~.~.al and industrial co-
operation by the political relaxation of international tension.
But, as shown by current experience, the realization of these
opportunities is not a simple matter. The western countries declara-
tions of their readiness for international long-term cooperation
are frequently not supported by practical steps. ~n many cases,
- deliveries of Soviet goods, especially highly processed ones to these
- countries are restrained by tariff restrictions, licensing and
quotas on exports from socialist countrie3. There are also difficul-
ties in making purchases in capitalist countries: refusals to grant
bank loans which have become the major instrument of machinery
and equipment trading in recent years, the existence of lists of
goods banned to the socialist countries and others.
However, the long-term nature of cooperation on an offset basis is
beyond doubt. It is not only mutually advantageous economically but
it also promotes the strengthening and intensification of detente and
serves the noble cause of furthering mutual understanding and confidence
between peoples.
The time which has passed since the conference in Helsinki is the
best possible confirmation of this. In its foreign economic rela-
tions, the Soviet Union is firmly following the policy outlined in
the Final Act of the Conference on European Security and Cooperation
and is doing everythin~ in its nower to ensure that these relations
. are steadily expanded and intensified.
As pointed o~ut by A, N. Kosygin in his remarks at the ceremonial
~ meeting in honor of the 61st Anniversary of the Great October
Socialist Revolution, "The party and government are conducting
' their foreign policy with due regard for both the positive and
negative aspects of the contemporary international environment,
for the realistic possibility of achieving step-by-step changes
for the better in this environment, for improvement in it....
"...We are in favor of widespread development of political, econom3.c,
cultural, scientific and technological ties between all the world's
countries and we are in favor of uniting the efforts of nations on
an international scale to solve the most difficult world problems
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connected with rapid population growth, satisfying the growing needs
for food, raw materials and sources of power, environmental pro-
tection and disease control. Naturally, as communists, we have our
views on the socio-economic and other prerequisites required for
the most successful solution to these problems. But, we are ready
� for equal, mutually beneficial cooperation with other countries,
regardless of their social system. A major, necessary condition
for this is detente and cooperation between nations has been and
' will be the reliable foundation for it."3
The USSR's economic interrelationships with capitalist countries via
. joint execution of major projects on an offset basis have set a number
of new, complex legal, commercial and organizational. tasks for
Soviet organizations and for their partners.
The decisive factor for Soviet organizations in accomplishing
these tasks is the future improvement in our country's level of
economic development. This is why the development of new types of
economic ties and new forms of cooperation in the area of industrial
production are pursuing the goal.of providing maximum economic
impact and of opening vp additional prospects for integrating the
advantages of the socialist systea!'s economy with the scientific
and technological revolution which is unfolding in the mo@ern world.
This also takes into account the special featur�e of the contemporary
phase of the USSR's economic relations with developed capitalist~
counCries, a phase which is characterized by a transition to com-
pxehensive economic and industxial cooperation based on long-term
agreements.
In evaluating the importance of the offset-based cooperation which
provides for the construction of major industrial facilities .and
complexes in Che USSR, it is necessary to emphasize an important
~ f.eature from the point of view of national economic development.
In a rapidly growing socialist economy, the size of the industrial
savings fund is determined by the level of national income growth
to a great extent. Therefore, economic cooperation which increases
the return on investmenC and the possibility of increasing invest-
ner.ts by expanding commercial and economic relations within the
framework of the country's current industrial savings fund must
ensure an acceler.ated growth of physical resources and nationa].
income.
The facilities being built on an offset basis make a definite con-
_ tribution to the Soviet Union's economy. Besides expanded produc-
tion and the development of new capacity at these facilities, they
solve the problem of improved labor productivity by using the
latest technology and scientific and technolo~ical achievements to
~ reducc~ product manufacturing costs, increase the�return an and '
size of investments with the same producer goods, establish pro-
duction of new product types, expand the country's export b ase by
3. PRAVDA, 5 Novemi~~: 1978. 21
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producing goods in demand on the world market which, in turn,
leads to an increase in the country's foreign exchange. Within
the framework of offset agreements, there is two-way movement of
physical value (both imports and exports) counted in billions of
rubles. This is an important advantage of offset pro3ects since
as they are accomplished the Soviet Union's exports increase signi-
ficantly. This is the source of their high effectiveness.
As is well known, thE extraction of raw materials requires signi-
ficant capital investments. By using cooperation to build facili-
ties on an offset basis, the Soviet Uni~n has an opportunity to
purchase equipment for capital intensive sectors, thereby creating
the possibility of investing its ow�a investment resources in
less capital-intensive sectors, specifical~y in manufacturing.
The ultimate impact is additional acceleration of the country's
rate of economic developrnent.
- Economic cooperation on an offset basis is developing extremely
dynamically. As a rule, the agreements which have already been
signed have provisions for long-term loans granted by our foreign
partners, deliveries of licenses, equipment, machinery and materials
to the USSR to build major industrial facilities on the loan account
and purchases of part of the output of these facilities in the
USSR on a long-term basis (10-15 years) in an amount which completely
covers the loan principal and interest. Moreover, the facilities
- being built are totally under the Soviet side's ownership. As far
- as the share of output to be delivered for export as an offset goes,
it is, as a rule, 20-30 percent in the agreements.
When offset agreements are prepared, of major importance are: the
definition of agreement facilities, their o~timal size and selection
of the final output for future enterprises.
_ At the present time, there are agreements and contracts for deliveries
= of equipment and materials to the USSR on an offset basis for indus-
trial facilities in the chemical and petrochemical, petroleum-gas,
timber, paper and coal industries, ferrous and non-ferrous metallurgy
and the food industry.
As a result of the implementation of offset agreements, production
of important chemicals--such as ammonia, carbamide, methanol,
polyethylene, styrine, polyvinyl ..:chloride, nitrile acrylic acid,
benzene, ethylene oxide, dimethyltereftalate--has significantly
increased in the USSR. These are important products which signif-
icantly determine the possibility of producing goods needed for
the country and, therefore, the national economic importance of these
_ goods is very high. Let's cite several examples. The primary con-
sumer o� methanol in the national economy is the chemical industry.
~ The rnajority of the mc~thanol goes to produce formalin, formaldahyde,
resin and plastic which is used widely in the building materials
industry. It is the basis for thermo-hardening molding powders which
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are in widespread use in producing consumer goods and in the
el.ectronics and engineering industries. Methanol is being used
, more and more to~produce chemicals like acetic acid and poly-
formaldehyde. As~'~,a direct product, methanol is used widely in
the paint and other industrial sectors as a solvent. Recently,
methanol has been mixed with gasoline as a motor vehicl.e fuel.
Of the above-cited products, ammonia is very important to the
national economy. Over 90 percent of the ammonia is used to
produce nitrogen.(ammonium nitrate, carbamide) and complex, com-
pound (ammophos, nitrofoska, nitroammofoska) fertilizers.
Ammonia-is also widely used in a number of chemical industries
for amination and neutralization, to obtain a strong nitric acid,
etc. ~
The carbamide produced in enterprises built on an offset basis is
primarily used in agriculture where it is employed as a highly
effective nitrogen fertilizer with a high nutritive content (46
percent N). Carbamide is also used as a nitrogen food additive
- in cattle feed. In industry, carbamide is used to make
carbamide resins and to produce melamine.
The offset basis was used to build enterprises to produce plastics ~
(high and low pressurE polyethylene, polynroprolene,polyvinylchloride) .
_ Due to a number of valuable properties, these polymers are finding
more and more widespread use in the national economy. At present,
the level of plastics used in a particular sector of the national.
economy almost totally determines the feasibility of using scientific
and technological achievements in that sector.
F'or light industry, additional facilities are being built to produce
g~lyester fibers (staple). The main area of polyester fiber use is
in producing consumer goods mixed with cotton, wool and synthetic
fibers.
Cooperation to build facilities on an offset basis has developed
gradually. France is one of the countries with whom cooperation
. on large-scale projects has reached ma~or dimensions. The most
irnportant agreements on Soviet-French cooperation are: �
agreements on deliveries to the USSR of equipment, pipe and
, materials for gas mains with bank loans and the purchase of Soviet
natural gas on a long-term basis;
agreement on deliveries to the USSR of equipment for the Ust'-
Ilimskiy Integrated Pulp and Paper Mill with an annual capacity of
550,000 tons of pulp and on purchases of pulp ia the USSR;
agreement on deliveries to the USSR of equipment to produce
polystyrene and styrene and deliveries of polystyrene to France;
agreement on deliveries to the USSR of equipment for ammonia
production plants;
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agreement on deliveries to the USSR of technical manuals and
equipment for aluminum oxide production plants and others;
, agreement on deliveries to the USSR of equipment and pipes
for the iol'yatti-Gorlovka-Odessa Ammonia Pipeline.
- In Paris in November 1976, the USSR Ministry of Foreign Trade and
the French ('Ron-Pulenk) Cr~mpany signed a general agreement on
cooperation with Soviet foreign trade organizations to build
- chemical production plants in the USSR, specifically to produce
fertlizers ~.nd insecticides, on deliveries of a numb er of chemica.ls
to the USSR by (Ron-Pulenk) and o.n delive~`ies of several chemica.l
and petroleum derivatives from the USSR to (Ron-Pulenk). To
~mplement this agreement, the All-Union Tekhmash-:
import Association and the French (Speyshim) Company signed
contracts for delivery of 3 complete complex fertilizer production
plants, each ~aithan 800,000 ton annual capacity. The French
(Krebs) Company signed a contract to deliver a wet-p rocess
phosphoric acid production plant with an annual capacity of
150,000 tons. To offset the French party's expenditures for
delivery of the cited equipment, a long-term, base-line contract
- was signed between the Soyuzkhimeksport Association and~
� the (Ron-Pulenk) Company; according to the contract, 40,000 tons
of ammonia and methanol and 10,000 tons of orthoxylylol will b.e deliver-
e~ to France each year. Deliveries of these goods will continue until the
r
equipment purchased in France is completely foffset.
- This agreement also provides for deliveries of petroleum and
petroleum derivatives to the (Ron-Pulenk) Company b ut, the
contracts for 3elivery will be concluded two months before the
beginning of each calendar year. In addition, beginning in
- 1981, Soviet foreign trade organizations will purchase various
goods from.the (Ron-Pulenk) Company in an amount specified in the
- agreement every year for a 10-year period.
The agreement provides that lists of specific goods will be submitted
for mutual agreement by the parties for a yearly or any other period
two months before the beginning of each delivery year.
~ To offset the equipment purchases the Soyuzkhimelc~port and Soyuznefte-
~ksport .associatiqn. signed contracts to export Soviet petroleum
derivatives and chemicals in an amount equal to the cost of the
equipment purchased from the grennh (Ron-Pulenk) Company plus
the loa:. cost .
At the end of 1977, the largest contract in the histary of Franco-
Soviet commercial and economic relations was signed with (Teknip)
Company to deliver equipment to the USSR for headquarters plants,
a so-called polyester system--the Ufimskiy ar.d Omskiy paraxylylol,
orthoxylylol and benzene production plants which provide the raw
material to produce polyester fiber and yarns: In addition to
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(Teknip) Company, the contract will be carried out with the parti-
cipation of (Litvin) and (Prokofrance) (France), Eurotechnika
(Italy), UOP (U.S.A.) companies. .
In all the examples cited, the issue is one of large-scale,
long-term industrial coope ration with large volumes of goods
- moving ~o and from the USSR which increases the opportunity and
interests of the parties to the agreement.:to furCher increase
trade volume and strengthe n economic and industrial cooperation.
The FRG has a significant number of large-scale projects. Among
the largest is the agreement on cooperation to build an integrated
electrometallurgical plant at the Kursk iron ore deposits to pro-
duce 5 million tons of ine t al coated pellets by the direct iron
. reduction method and appro ximately 2.7 million tons of high-quality
slieets and bars annually. In addition, West German companies have
sold us equipment for polyvinylchloride resin and vinylchloride
production plants and two high-pressure polyethylene production
plants and have signed con tracts to export the output of these
~nterprises from the USSR to offset the equipment purchases.
J
In February 1976 at Frankfii'rt-am-Main, the West German companies Salzgitter and
(Bokhako) signed some majdr eontracts with tlie All-Union Tekhmashimport Association.
The USSR would receive com plete equipment and technical manuals
with a capacity of produci n g 200,000 tons of ethyl~ne oxide
per year and with a capacity of processing 120,000 tons per year
into monoethylene glycol. Part of the output of these plants will
be exported from the USSR until our equipinent costs are completely
_ offset. ~
In 1976, an agreement on cooperation to build a major chemical com-
plex in the USSR was signe d with (Kext), Frederick Udeh, (Krupp-
Koppers) and other compan i es; this complex will include dimethyltere-
phthalate, Polyester staple fiber, polyester yarn and polyethylene
teriftalate production pla nts. The cost of the plants, technology,
know-how and licenses will be paid for with deliveries of
Soviet chemicals to the companies, specifically, dimethylterephthalate,
parar.ylylol, ort~~oxylylol, acetic acid and meth~nol.
Major contracts have alxeady been signed to implement this agreement.
Plants have been purchased to produce dimethylteiephthalate, phthalic
_ anhydride, polyethylene terephthalate, polyester fiber and yarn and
vinylchloride. At the same time these contracts were concluded,
contracts were signed for deliveries of goods to offset the total
costs of these plants pius loan costs.
To finance the obligations under this agreement, a loan agreement for
a 775 million ruble loan t~ the Soviet Union was signed in March 1977
with the West German Dresdner Bank and the Westdeutsche Landesbank.
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A contract was concluded with Tissin Plastic Maschinen Company in
1978 for a 50,000 ton capacity low-pressure polyethylene pipe
and pip^ fitting plant. High pressure polyethylene was sold as
an offset.
In 1978, contracts were concluded for deliveries of technical
manuals and equipment for the first stage of the first phase of
the Oskol'skiy Integrated Electrometallurgical Plant. In the
opinion of the Soviet and West German parties, there are prospects
for further cooperation in this area.
A major order for deliveries of large diameter pipe to the USSR
has been received and undertaken by the West German concern Klekner
und Ko. Payment for the pipe will be made with deliveries of
S~viet natural gas to the FRG. Other contracts signed with this
concern provide for deliveries o~ vinyl and polyvinylchloride,
certain types of inechanical equipment and other goods and for
deliveries of chemical equipment, metallurgical products and chemi-
cals to the USSR.
In evaluating the development of industrial cooperation with the
FRG and considering that the FRG occupies first place based on
commodity turnover in the Soviet Union's trade with capitalist
countries, it can be confidently stated that the 25-year agreement
on economic cooperation established the requisite political and
commercial basis for the subsequent, swifter development of indus-
trial cooperation between the 2.countries on a long-term basis.
ere is
successful realization of the offset pro~ects w th '
Italy through loans granted by leading Italian banks. Not only
major Italian companies, such as Montedison, ENI and (Snia-Viskoza)
~ but also small specialized companies like (Pressindustriya),for
example, are participating in the implementation of the agreements
and contracts which have been signed. Productive cooperation is
promoted by the .fact ~.hat, for example, ties between the Italian
and USSR chemical industries are traditionally old. This
especially applies to the Montedison group which was a pioneer
in the chemical industry in establishing technical cooperation
with the USSR. Montedison's first technological contribution to
the USSR chemical industry occurrel in 1931 when the Montedison
company (then Montekatini) built the ammonia synthesis plant at
Gorlovka in the Ukraine. This cooperation was developed further,
especially at the end of the 50's. Altogether, the former
Montekatini, the subsequent Montedison and then (Teknimont)--an
engineering company within the Montedison group--supplied the
USSR with 31 plants. These plants include, among others, plants
to produce ammonia and fertilizer, tiCanium dioxide, synthetic
dyes and intermediate products, melamine, acrylic nitrile,
flourochlorQmethane, polyprop~p~.ene., and fibers.
Right now, Soviet organizations have contracts with (Teknimont) for
delivery of over half a billion dollars worth of plants to the USSR.
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A major factor in the development of commerical and industrial
relations between the USSR and Italy was the conclusion of agree-
ments on scientific and technological cooperation between the
National Comrnittee on Science and Technology and the Montedison
group, agreements which have alrea~y had positive results.
Montedison's interest in scientific and technological cooperation
with Soviet organizations should be viewed in the overall context
of the continually increasing ties between Italy and the USSR. It
would be useful, for example, to recall that over the last 15 years
various Italian and USSR organizations have concluded a number of
agreements which subsequently turned into long-term cooperation
between the parties. The most vivid examples were the 1963-1969
- agreement between ENI and'Soviet organizations on the purchase of
crude oil and natural gas from the USSR and on the construction of
a pipeline from the USSR to Italy via the CSSR and Austria and the
agreament concluded in 1973 between Montedison and Soviet organizations
on the construction of chemical plants in the USSR and long-term
purchases of the finished products. The same kind of agreement was
also concluded in 1974 with ENI.
It is interesting to note that this kind of agreement has an
appreciable, favorable impact on the Italian economy since they
not only concern ma~or industrial groups but also a large number of
medium and small companies. As an example, it can be pointed out _
that hundreds of companies were engaged in the construction of the
USSR-Italy gas line.
When, for example, Montediso;z supplies a major plant to the USSR,
it recruits approximately 400-500 medium and small companies to
collaborate witfi it.
The development of Soviet-Italian relations, specifically between
the Montedison and liSSR organizations, in the direction of searching
for models and types of cooperation based on long-term offsets
represents indisputable advantages for the partners in cooperation
compared to conventional types of commerical relations since it
provides an opportunity for more rational industrial planning and
balanced development of trade relations. Moreover, based on their
own experience, Italian companies are convinced that contacts with
USSR organizations are especially promising since the Soviet Union's
potential domestic market is very large and centralized planning of
the economy matces it possible to determine the nature of future pro-
jects in advance.
Overall, pursuant to current agreements and contracts, Italy is present-
ly supplying the USSR with complete packages of equipment for 12
chemical plants on an offset basis. To pay for the equipment supplied
to the Soviet Union, deliveries of ammonia to Italy are underway.
In February 1979, the routine XIV General Assembly of the Ttalian-
Soviet Chamber of Commerce was held in Moscow. The assembly noted
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that the mutually advantageous and promising Soviet-Italian commercial
and economic relations could serve as an example of positive cooper-
ation between nations with different social systems.
- As far as the development of.new types of industrial economic coopera-
tion between the Soviet Union and England is concerned, an increased
interest on the part of English companies in concluding agreements
on the construction of large-scale, offset projects can be noted
~nd there is an increase in their activities in this area. To
a certain degree, this is related to the worsening situation with
the world's sources of raw materials.
Major British companies have a significant amount of experience witli
building, mining and manufacturing enterprises in many of the world's
countries. Of the capitalist world's 200 largest non-American
companies, England has 37 of them, the FRG has 29, and Italy and
Holland have 5 apiece. In addition, approximately one-third of all
the West'European branches of American corporations are concentrated
in England; these branches use the scientific and technological
potential of their parent companies in the U.S. Lngland has the
necessary financial resources at its disposal to carry out large-
scale projects.
Also o� definite importance is the fact that I.ondon is a center for
all kinds of trade operations. Several so-called trade houses
specializing in barter operate in England. Therefore, it seems that
the English market with its developed system of specialized trading
companies and its continuing demand for many Soviet exports which can
be accepted in payment for offset deals is interested in cooperation
with the Soviet Union.
Of course, different English companies do not have the same attitude
toward participation in offset projects. The most active English
companies in this area are those engaged in the extraction of minerals
and those companies which make ~idespread use of intr.asector
international industrial specialization in their activities and which
have a widespread marketing system within the country and abroad;
it is therefore easier for them to accept the conditions of offset
agreements for counter deliveries of finished products and semi-finished
items on a long-term basis.
The Soviet Union foreign trade organizations have four major joint
offset projects with British companies; one of these projects has
already been realized. This was the contract with the English
John Brown Contraction Company to deliver a complete package of
equipment, technical manuals and licenses to produce low-pressure
polyethylene at the 200,000 ton capacity Prikumskiy Plastic Plant
in Budennovsk. All the deliveries for this project have been com-
pleted. Another contract was made with the same firm to deliver
- a second~'complete package of equipment for the 200,000 ton capacity
Kazan' Orgsinte2 Plant to produce low-pressure polyethqlene.
Polyethylene was sold to ogfset tfie equipment purchases.
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The largest offset deal in the history of Soviet-English economic
relations is the agreement witfi the (Davie Powergas) Company, in
conjunction with Klekner Industrial Plants Limited (the English
branch of the West German Klekner Company), to deliver a complete
package of equipment for two methanol production plants with a
total capacity of 1.5 million tons per year. Equipment deliveries
to the USSR under this contract will be completed in 198Q.
Plans call for deliveries of inethanol by Soviet organizations
to ACA and Klekner Chemical Companies to offset the total amount
of approximately 400 million dollars.
There is also a rather small current agreement with the (Combacks)
MarX Company; contracts have been made to implement this agree-
ment for deliveries of toys to England in an amount to offset the
cost of the molds and matexials delivered.
In evaluating the status of Soviet-English large-scale industrial
cooperation and in pointing out certain beneficial shifts in this
cooperation, one cannot fielp but conclude that the volume of this
cooperation does not tota~.ly meet the potential or possibilities
of the two countries. This is explained by the fact that there
are still obstacles to a broader development of this new type of
cooperation for both countries in Great Britain.
In most cases, these obstacles are not caused by trade practices
but frequently bj~ the position taken by th.e adm3nistration in
its relations with the Soviet Union.
If we turn to trade practices, we can note that English co~mpanies
are frequently late submitting proposals on requests from Soviet
foreign trade organizations compared to firms from other countries
and the terms of these proposals submitted by British co~panies
a:e frequentl~ ~ess comper_iti:C ~i~a� similar ~roposais irom compan--
ies of other Western countries. And, if we turn to a discussion of
the position taken by the administration, then, as is well known,
there has been an increased trend toward political confrontation
since the Conservative Party took power in Great Britain. This
fact cannot help but have a negative effect on the possibility
of concluding major long-term agreements since it evokes a lack
of confidence in Soviet organizations that they will be carried
out by English companies. However, it should be po3nted out that
English commercial and induatrial circles provided a linkage between
trade and political relations throughout the entire history of
Anglo-Soviet commercial relations and commercial relations with
British companies ~ontinue to increase. In January 1980, the
largest chemical concern, Imperial Chemical IndusCries, opened
peru~anent representation in Moscow. The possibility of concluding
a long-term, 10-year balanced offset agreement is being discussed
with the concern.
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Offset arrangements should not be equated with barter. The principle
of totally offsetting import costs by exporting part of th~.e output is
. economically and legally distinguishable from a barter arrangement.
For cooperation on an offset basis, two sep arate contracts are
made at the same time as a rule: one for equipment imports to the
USSR and the other for offsetting commodity exports from the USSR.
To ensure financing for the offset arrangement, a loan agreement is
also entered into to pay for the equipment imports. Moreover, the
obligation to pay back the loan is not directly linked to deliveries
of commodities manufactured at the facilities to be built and it
_ is paid back regardless of the progress of deliveries of products
to oe manufactured at the cooperative facilities. Tt is also
important to bear in mind that the partners do not establish any
joint enterprises during their cooperation to execute offset .
arrangements with foreign company participation. The Soviet party
is the awner of the facility. The foreign company provides the
loan, sells the equipment and licenses, supplies the equipment
and contract supervision of it and receives a guarantee of deliveries
of commodities it is interested in for a long period of time (this
may be recorded by agreement or contract). The joint work, research'~.
and consultation provided for by the agreement are exe~uted within
the framework of the areas recorded in the agreement itself. The
foreign country does not have a right to participate in the operating
profits from the facility being bu31t.
, Many of the leading capitalist country~companies are correctly
assessing the prospects of the opportunities opening up for them
and they understand the benefit of them. However, not all represent-
atives of the Western business world have a sufficiently clear idea
of the advantages of offset transactions for both parties. It is
possible that a certain novelty and laek of exper3ence in this kind
of cooperstion plays a role at this point. This is.understandable
since all undertakings take time to prove their vitality.. But,
even today, the experience ga3ned in implementing large-scale pro-
jects makes it possible to solve the emerging problems and to
rapidly accomplish the preparatory and organizational work. The
systematic development of the Soviet economy, the clarity of the
terms and the trustworthiness of the parties in carrying out their
committments create good prerequisites for further development
and expansion of large-scale economic cooperation. Western
companies are beginning to recognize th.is more and more clearly.
Besides the West European companies, the Soviet Union also has
commercial and industrial cooperation with Japanese and U.S.
coznpanies . ' ~ .
We have already successfully accomplished the first General Agreement
on deliveries of equipment, machinery, materials and other commodities
from Japan on credit terms to develop Soviet timber resources in
the Far East and on deliveries of timber from the USSR to Japan, an
agreement which was signed on=29 June, 1968.
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The agreement was realized with the participation of 10 Soviet
foreign trade organizations and 14 Japanese commercial and industrial
companies. On 30 June 1974, we signed the 2nd General Agreement
to exploit timber resources; the volume of mutual deliveries under
this agreement exceeded the volume under the first agreement by
over a factor of 3. In addition, a special loan agreement was
signed to finance Japanese exports to the USSR. The 2nd
General Agreement has also been carried out.
Iz:teresting and promising areas of cooperatio~i are the joint
geological explorations for petroleum and gas on the ocean
shelves. An agreement on thi.s kind of cooperation has already
been concluded with Japan for the Sakhalin Island shelf.
As a result oi the work done in 1975, the parties concluded an
agreement wtiich represents a progra~ document with provisions
for a package of long-term, large-scale ~obs in specific areas of
the Sakhalin Island shelf; these jobs include geological explor-
ation, rigging for and exploitation of deposits, extraction of
oil and gas, c3eliveries of the necessary equipment, transportation
of extracted minerals to the loading site, delivery of them to
Japan and financing of the prograzn~
According to the agreement, all work will be conducted by Soviet
organizations, using foreign specialists in isolated cases. The
Japanese side is financing the geological exploration for an
estimated 10 years (two 5-year periods) by granting an 18-year
100 million dollar loan for the first 5-year period with a
favorable annual interest rate. This loan does not have gro-
visions for ~dvance payments. If the parties decide to continue
~eological explorations after the first 5-year period expires,
the Japanese side wi11 grant the USSR a new 100 million dollar
loan with the same terms. With this loan,~the Japanese side is ~
renting to the Soviet side geological engineering, geophysical
- and auxiliary transport vessels; fldating, sea-going, self-raising
or semi-s~bmerged drilling rigs or drilling ships. The Japanese
side will also provide equipment, material and services xequired to
execute the geological explorations. This loan, which is called
"a loan to be repaid if successful," wi'll be paid off along with the
interest on it by the Soviet si3e only if profitahle deposits of oil
and gas are discovPred and developed. The loan and interest will
be paid off caith deliveries of oiI from the jointly discovered
and jointly exploited profitable deposits. The Japanese party
has our consent to sell up to 50 percent of the annual oil e~tracted
to Japan at world prices for 10 years after the loan is paid off.
The discqvery of industrial oil in the very first ocean well con-
firmed the forecast by specialists that the Sakhalin Island
' shelf contained petroleum deposits which may become a source of
oi.l s~pplies for the Far East economic region and a source of
oil eXports for Japan. All the work has been conducted using equipment
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rented or purchased with the credits from the loan agreements signed
with the Japanese party.
This agreeme~it is vivid testimony to the mutually advantageous nature
and stability of economic ties between Soviet organizations and
Japanese companies, ties which are evolving based on confidence
between the partners.
In December 1974, the USSR Ministry of Foreign Trade, American
companies-~American Natural Gas Company and Occidental LNG--and the
Japanese company Siberian Natural Gas signed a General Agreement
on cooperation to conduct geological explorations of the Yakutsk
gas deposits. According to the agreement between the part3cipating
parties, the list of equip~ent and instruments to be delivered to
the USSR was divided into two parts according to the country of
purchase based on the actual capabilities of U.S. and Japanese
industries. Part of the instruinents and eq~uipment are b.eing
bought in the U.S. while heavy and conventional drilling pipes
and bits, well survey equipment, and ambient air monitoring labor-
ato:.ies and instrument.s are tieing bought in Japan. To finance
these punc~ases, Bank of America (U.S.) and Japan's Export-Import
Bank have granted individual loans to the Soviet side. Equipment
and instrument deliveries from the American loan have already
been compZeted and equipment deliveries from the Japanese loan
are being wrapped up.
In addition to the companies listed, a numlier of other specialized
companies are participating in the Xak~tsk pro3ect. Por exa~ple,
_ a contract was signed with Geosource company to delivex 2 seisznic
vibration systems and 10 wide.band gravimeter syste~ms to the USSR
_ for 9 million dolla-rs. A contract was signed with Control Data
to deliver a computer system for 13.5 million. The Japanese
companies engaged in this. pro3ect include firms such as Mitsui,
Nissho-Iwai, Mitsubishi and (Kokho Ts.usel , which are supplying
the heavy and conventional drilling pipes,~and Sumitomo, wfiich
is supplying the pre�ssurized b.its~ and other equipment.
It is anticipated that the cost of the equipment and instruments
supplied to the USSR from the U.S..and Japan will fie of#set by total
exports of 20 billion cubic meters of liquified natural gas per year
' to Japan and the U.S. for 25 years.
The level of industrial development achieved tiy the USSR and the U.S.
opens up tne possibility of organizing cooperation with Aznerican
companies on a cooperative industrial basis�. Moreover, it would ~ie
logical to examine types of industrial cooperation which.wonld ~make
it possib.le to ensure balanced accounts betw-een the partners. The
development of offset trade would also be promoted by tfie practic.e
of concluding long-term (up to 5 years) agreements to e~port Soviet
commodities to the U.S. and to import the sa~e total a~ount o~
American commodities into the USSR wfien necessary. Such agree~ents
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would greatly facilitate business planning both for Soviet
trade organizations and for American companies. Moreover, it
should naturally be borne in mind that the areas selected for
cooperation should be advantageous both for the Soviet and American
_ parties. Actually, in contrast to the USSR's economic relations
with other wastern countries, major offset arrar.gements have not
been concluded with American companies since 1975.
As of 1 January 1980, Soviet organizations and American companies
had general agreements on five offset projects: construction of
a mineral fertilizer production complex near Kuybyshev in the
USSR and an exchange of chemicals with Occidental Petroleum Corpor-
ation; construction of the Genter for Interna.tional Trade and
Scientific and Technological Relations in Moscow with the same
companies; prelirninary exploration of the Yakutsk gas deposits
by American and Japanese companies; production of Pepsi Cola
soft drinks in a number of USSR cities in exchange for vodka
with Pepsico; growing American Virginia and .Burley tobaccos in
the Moldavian SSR and production of American cigarettes in the
USSR in exchange for tobacco with Phillip-Morris Company.
The issue of concluding new offset agreements between the USSR
and U.S. was discussed within the American-Soviet Commerce and
Economics Co~ncil. Based on a proposal by the American side,
28 projects were cited for possible cooperation. Review and
implementation of these proposals, as u~ell as others, for large-
scale projects wi~l be possible if the U.S. administration re-
_ nounces its attempts to use commercial and economic relations
to put pressure on the US.SR and if discriminatory legislation and
the compecitive nature of proposals from American Companies are changed.
While talking about the obstacles created by the U.S. administration
for economic relations with the USSR, we should note the extent
- to which performance of agreements depend~ upon the partners
who sign them and the extent to which II.S. companies which have
signed contracts tr~ed to per.form their obligations. This is
undoubtedly proof of our American partners interest in cooperating
with the USSR and of the advantages to thezn in this cooFeration.
As an example, we can cite the agreement with Occidental Petroleum
Company to build a chemical complex.
On 23 August 1978, a representative of the company's management was
present at the commissioning of an enormous ammonia storage complex
near Odessa. Its construction fulfilled pa~t of the committ~ment
_ under the agreement cited above.
We should also note the major contracts concluded in Tnid-November
1978 for reciprocal delivexies of chemicals in I979 at a total
amount of approxirnately 250 million doYlars to iznplement the first
major offset agreement in American-Soviet trade with Occidental
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Petroleum to build a cheiaical prod~ction complex in the USSR and
to provide for mut+ial delive.ries of chemicals from the U.S. and
USSR. The conclusion of these contracts in the world market's
depressed environment for these commo3ities testifies to the fact
that the offset principle is proving itself and that, in spite of
all the difficulties in trade due to the U.S. administration's
position, the parties which signed the agreement are doing every-
ttiing possible to thoroughly fulfill their committments under the
agreement. It is not the company's fault that the Carter admin-
istration imposed a ban on exports of superphosphate acid.
Now, the first section of the ammonia line (Gorlovka-Odessa)
and the ammonia plants in Gorlovka, Odessa and Tol'yatti have
come on line.
Naturally, any type of cooperation, including new types, znust
develop on a mutually advantageous and economically efficient
basis for the partners and it must.promote suc.cessful accomplish-
ment of national economic development progr~ams. Soviet foreign
trade organizations must guarant~e the advantageous nature and
high efficiency of such operations for our country. ,
The evolution of offset agreements, the problem of a scientific
organization for long-term forecasts of cominodity market competition
_ and trends in price movement5 in the world market are becoming
more and more critical.
Since offset agreements make provisions for an extended period of
cooperation and for firm commit~ents by the pa~tners, research
on international market trends and a study of the factors operating
in the unstable capitalist economic environment--specifically
market supply and demand changes and fluctuations in ~market prices
in relation to actual commodity costs--are taking on ma~or importance.
Capitalist country comp.anies conduct scrupulous, thorough analyses
and forecasts of industry developments for several years in the
future using the most up-to-date forecasting mefhods.in order to
have, as a rule, several alternative forecasts of a deal's e~fective-
ness,depending upon changes in individual market factors.
Improved long-term forecasting of individual industrial sectors as
well as the application of modern forecasting methods to the world
market environment and of world price trends for individual com-
modities have now become practical necessities. It is not possible
to have confidence in the correctness of offset pro3ect efficiency
estimates without long-term planning and without compiling forecasts
and trends in price, demand and supply movements for a particular
industry both in the USSR and in the wo.rld market.
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So, cooperat?on with coiapanies in western countr3es to build major
industrial cc-nplexes ia the USSR has developed significantly. This
type of economic relationship is becoming more and more important
and it has been possible due to the USSRTs increased economic poten-
tial and expanded participation in the international economic
' system`s division of labor. Increase.d foreign economic ties in-
evitably presuppose the emergence of new types of long-term economic
cooperation.
Thus, during the modPrn stage of development of the Soviet Union's
economy, we should consider the most widespread utilization .-f the
entire package of elements comprising the scieritifically-founded
Soviet foreign economic policy as important in foreign economic ~
relations. Applied to relations with industrially developed
capitalist countries under offset agreeznents, the issue is actually
one of executing a long-term, multi-purpose economic and industrial
program with the participation of USSR organizations and capitalist
country banks and companies. Each program (agreeznent) includes
the creation of new industrial capacity in the USSR and delivery
of the output produced for USSR domestic needs and for export.
Practical experience has confirmed that the realization of offset
agreements makes it possib:le to develop individual domestic
industrial sectors at accelerated rates based on the world'a
most advanced technology and up-to-date imported equipment which
meets the latest state-of-the-art in those specific fields of
science and technology. The development of new capacity will.not
only make it possible to supply the needs of the national econovay
- with high-quality products but also to establish a stable base
for significant amounts of product exports. The possibility of
paying off purchased equipment with exports of part of the output
fron these complexes reduces foreign exchange outlays while foreign
exchange receipts to the USSR from deliveries of the additional
output for export may be bbtaine.d until the loans are completely ~
- paid off.
- In discussing the effectiveness o� these agreements, it should be
pointed out that it depends upon a large number of factors. A
- change in any of these factors during performance of the agreement
may result in reduced effectiveness of the project as a whole.
The size of an agreement's impact is determined by the construction
estima te and performance environment, the extent of favorable commercial
terms which Soviet foreign trade organizations are able to get from

~ the foreign countries and banks providing the loans, and equipment
and industrial experience (technology, know-how, training for.
Soviet specialists, etc.). The shorter the construction period,
' the more productive the equipment, the higher the quality of the
products, the lower the cost of the loans and the cost of experience
b eing transferred, the more effective the agreement.
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This is why the issue of the effectiveness of foreign economic
relations with capitalist countries is a major one for the USSR.
This is the source of the urgent requirement for Soviet organiza-
tions to uncover the factors upon which their effectiveness
depend,and possible steps to increase the efiectiveness of
- operations under the agreements concluded.
The 25th CPSU Congress devoted a great deal of attention to
this issue. In the CPSU Central Committee's Keynote Report
to the 25th Party Congress, L. I. Brezhnev pointed out: "The
widespread development of offset agreements required increased
responsibility for everybody participating in their implementation:
not just the foreign trade organizations but also the ind~,:strial
ministries and enterprises, especially the bui,lders. Buil.ding
and bringing projected capacity on-stream by the deadline and
providing high quality pro~ects--without this, there cannot 4
even be any discussion of the advantages of~industrial cooperation."
Beaides a favorable commercial and political climate in the
capitalist country from which financing and equipment are being
obtained, the complexity of offset projects, the significant
work volume and the large number of Soviet economic organizations
participating in the construction of industrial enterprises .
entail a great deal of ~ommercial experience and faultless team-
work by the Soviet organizations participating in the agreement.
The requirement for precise performance of commitr~ents under
- offset agreements stems from the very nature of these agreements
which determine the party's increased responsibility.
In contrast to the conventional commercial deal where a delay in
the construction and commissioning of a complex will primarily
be reflected in a delay in the production of finished goods for
the domestic market, not meeting the deadline for commissioning
facilities built on an offset basis may entail--in addition to
the damage caused b y the delayed output to the national econo~y--
non-performance of commit~nents by the Soviet side in deliveries
of finished goods from these enterprises to foreign companies
and, consequently, may entail a possible loss of foreign currency
and damage to Soviet organizations as first-class trading partners.
So, the completion of large-scale, offset complexes is an economically
efficien~ matter and requi-res an especially urgent establishment
- of clear-cut w~rk procedures to complete them. ~
It should not be thought that capit-alist companies have advantages
over the Soviet side in carrying out commitments under long-
term, offset pro~ects.
4. "Proceedings of the 25th CPSU Congress," p Sg.
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Practical experience with negotiations and the realization o~
- agreements concluded demonstrate that the companlPS. have, as
- a rule, insufficient capital available to carry out their com-
mitments under ma~or agreements and are dependent upon banks,
monopolies, various organizations and, finally, governmental
agencies.
The capabilities of USSR organizations are so great that there
have not yet been any projec.ts which have been beyond the capa-
bility of Soviet industry. This;is the Soviet side's advantage
oyer capitalist ~ompanies. There has not yet been a case of
Soviet foreign trade organizations refusing timely and complete
performance of all their commitments.
The growth in the number of offset agreements and the develop-
ment of long-term industrial cooperation with a number of
industrial.ly developed capitalist countries testify to the
capitalist countries interest in developing offset relationships
with the USSR. Foreign companies are interested in executing
offset agreements not simply because there is a significant
increase in their income-producing export opportunities but also
because there is an assurance of long-term employment for these
companies' workers and engineers and, in addition,
in the unstable market environment, crisis in the financial
system and energy crisis, there is an opportunity to have rela-
tions with a stable market which does not have crises. These
agreements also provide foreign companies with a reliable source
of commodity supplies (raw materials, semi-finished items and
products).
The Western countries' interest in developing economic cooperation
on an offset basis is shown by the statements of the participants
of the llth Conference on East-West Relations held in Vienna
in 1979. The conference discussed prospects for industrial
cooperation between West and East in the chemical sector.
As the director of Montedison's foreign relations department
pointed out, "This topic should be examined much more broadly
and forwar~-looking than it has until now. Actually, it is
necessary to include the problem of offset agreements in the
concrete industrial reality characterizing these two geographic ~
areas and include cooperation in the prospects for the future,
cooperation which, we hope, can be developed on a mutually
widespread basis and which, we believe, iC is necessary to
suFport in every way possible if we want to avoid more serious
economic repercussions in the near term." 5
As is well known, after pointing out the majox importance of
offset agreements, the 25th CPSU Congress set a goal of
expanding the operating areas of these agreements~of including
manufacturing in them and of searching for new approaches
to industrial cooperation.
S. "Proceedings of the 25th CPSU Congress,: pp 57~58,
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"Right now, these kinds of agreements primarily affect sectors
producing raw materials and semi�-finished items. But, perhaps
it is already time to expand their areas of operation, include
manufacturing in them and search for new approaches to industrial
cooperation," b noted L. I. Brezhnev at the 25th CPSU
Congress. An analys.is of the indicators of the 9th Five-
Year Plan and the