SOVIET AND EAST EUROPEAN AID TO THE THIRD WORLD 1981

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00851R000200020006-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 42
• Document Creation Date: December 21, 2016
• Document Release Date: October 15, 2008
• Sequence Number: 6
• Publication Date: August 1, 1982
• Content Type: REPORT

DIA review
completed.
Directorate of Secret
Intelligence
Soviet and East European
Aid to the
Third World, 1981
State Dept. review completed
Secret
GI 82-10175
August 1982
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607
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Directorate of
Intelligence
Soviet and East European
Aid to the
Third World, 1981
This paper has been prepared byl and
Staff, International Security Issues Division, Office of
Global Issues. Comments and queries are welcome
and may be addressed to the Chief, Communist
Activities Branch,
Agency for International Development.
This paper has been coordinated with the
Department of State, the Defense Intelligence
Agency, the Defense Intelligence Agency, and the
Secret
GI 82-10175
August 1982
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Summary
Information available
as of 1 July 1982
was used in this report.
Aid to the
Third World, 1981
Soviet and East European
Warsaw Pact countries signed $8 billion worth of military agreements with
Third World countries in 1981, down sharply from the record $15 billion in
orders in 1980. Soviet and East European economic aid pledges to Third
World countries also declined dramatically in 1981 to a little more than $1
billion. 25X1
The decline in military agreements was entirely attributable to a drop from
$14 billion to $6 billion in Soviet military sales, as major clients absorbed
heavy equipment deliveries under previous contracts. Traditional clients in
Africa, the Middle East, and South Asia accounted for 95 percent of new
Soviet orders, with record Ethiopian and Syrian purchases heading the list.
Moscow added Jordan and Nicaragua to its list of military customers in
1981. Hard currency earnings from arms sales reached an estimated $5
billion, an important consideration in view of the USSR's deteriorating
financial position. 25X1
East European military sales of $2 billion nearly tripled the 1980 sales
record. Iraq's $1.1 billion of purchases for use in the war with Iran
accounted for much of the increase, as East European suppliers-with
Soviet endorsement-moved into the gap left by the USSR's refusal to sign
new arms accords with either belligerent. Libya also placed $650 million of
orders. Romania, the largest seller, accounted for 40 percent of the East
European sales. 25X1
Soviet economic assistance dropped to a four-year low of $450 million as
several major negotiations dragged on without final agreement. This drop
does not reflect reduced Soviet interest in its foreign economic program:
commitments in first-half 1982 already exceed $2 billion. Most of the 1981
Soviet economic credits went to small clients, were trade associated, and
carried harder repayment terms. East European economic assistance also
dropped dramatically, to $665 million, more than one-half from East
Germany. 25X1
While the Falkland Islands dispute and the Israeli action in Lebanon will
undoubtedly cause some Third World countries to rethink their military
supply relationships with Warsaw Pact members, particularly the USSR,
we do not believe that most major recipients of Pact military aid will be
able to shift to Western suppliers because of political or economic
constraints. On the economic side, we expect the USSR to continue
iii Secret
GI 82-10175
August 1982
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focusing its aid on countries (such as the Arab states) that will provide eco-
nomic as well as strategic benefits; East European countries will undoubt-
edly give high priority to assuring strategic minerals supplies for their
beleaguered economics.
The data on economic and military agreements reflect the latest information available and
supersede data in our previous publications. Values of military agreements and deliveries
are based on Soviet trade prices that are usually quoted in rubles and then converted by us
into US dollars at current rates.
The term Communist countries refers to the USSR and the following countries of Eastern
Europe: Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania. Includ-
ed in this edition also are data on Cuban, North Korean, and Yugoslav aid to and personnel
present in LDCs.
The term less developed countries includes all countries of Africa except the Republic of
South Africa; all countries of East Asia except Hong Kong and Japan; Malta, Portugal, and
Spain in Europe; all countries in Latin America except Cuba; and all countries in the
Middle East and South Asia except Israel. Cambodia, Laos, and Vietnam, which became
Communist countries in 1975, are reported on for prior years for historical reasons.
Within the aid context, the terms extensions, commitments, and agreements refer to
pledges to provide goods and services, either on deferred payment terms or as grants.
Assistance is considered to have been extended when accords are initialed and constitute a
formal declaration of intent. For economic aid, credits with repayment terms of five years or
more are included. Where terms are known, the credits are designated as "trade credits" if
amortization is less than 10 years. For military transactions, all sales are included-whether
for cash or provided under credits or grants. The terms drawings and disbursements refer to
the delivery of goods or the use of services
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Eastern Europe's Military Program 2
The Military Assistance Program in 1981 3
Soviet Arms Sales Slip 3
Steady Customers Still Dominate New Order 3
East European Arms Sales Hit Record Levels 5
Military Technical Services: An Expanding Presence 6
Developing Third World Steel Industries: A Prestige 9
Undertaking
Nonferrous Metals Agreements: Designed for 9
Payback
Cuba: Economic Program Turns on Technical Services
Academic Training: The Most Concessional Program
Economic and Military Programs: A Regional Analysis
Eastern Europe: Reversing Aid Flows
15 25X1
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Central America and the Caribbean: Penetration 21
Activities Increase
South America: Trade Considerations Drive Aid 21
Program
Prospects
24
1.
USSR: Military Agreements With LDCs
2.
USSR and Eastern Europe: Military Deliveries to LDCs
5
3.
USSR: Military Deliveries to Major Clients, 1981
4.
Eastern Europe: Arms Sales to LDCs, 1981
5.
Military Technicians in LDCs, 1981
6.
USSR: Economic Aid Extended to LDCs
7.
USSR: Estimated Resource Payback From Aid Programs in LDCs,
as of December 1981
10
8.
Eastern Europe: Economic Aid Extended to LDCs, 1981
10
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1. USSR and Eastern Europe: Military Agreements Concluded 3
With Less Developed Countries
3. USSR and Eastern Europe: Economic Aid Extended to
Less Developed Countries
Middle East and North Africa: Economic and Military
Agreements With the USSR and Eastern Europe, 1954-81
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Soviet and East European
Aid to the
Third World, 1981
Warsaw Pact agreements in 1981 continue a post-
World War II pattern of aggressively building Com-
munist political, military, and economic influence in
the Third World. The Communist programs empha-
size military rather than economic aid and focus on a
few key countries. Throughout the last three decades,
Moscow's basic objectives have remained unchanged:
(a) to erode Western influence and substitute its own,
(b) to persuade Third World countries that the Soviet
economic model offers a solution to their economic
problems, (c) to establish military and political bases
from which to project Soviet power, and (d) to gain
access to strategic raw materials. East European
countries have pursued similar aims in LDCs, and
their economic and military programs have comple-
mented those of the USSR.
The Soviet Military Program
Moscow's $6 billion of new military agreements in
1981 brought the value of its Third World military
agreements to $70 billion over the past 27 years.
Soviet arms sales have been heavily concentrated on a
small number of countries-primarily those that are
strategically situated and/or have friendly govern-
ments. The largest share (95 percent since 1954) has
gone to nations on the Soviet border and to radical
North African and Middle Eastern states such as
Algeria, Libya, and Syria. A number of them-
notably Afghanistan, Algeria, Iraq, Libya, and Syr-
ia-have equipped their military forces largely with
Soviet arms and remain dependent upon Moscow for
parts, supplies, and servicing.
The Kremlin has found the military program of
primary importance in establishing influence because
it: (a) can create dependence more quickly than
economic aid, (b) provides direct access to LDC power
structures (the military in most countries), (c) can be
more readily implemented on a full scale than eco-
nomic agreements, and (d) is financially much more
The economic returns to the USSR of both its
economic and military programs emerged as an in-
creasingly important element during the 1970s. Al-
ways a driving force behind Soviet civilian machinery
and equipment exports to the Third World, the Soviet
economic aid program has begun to pay off in imports
of strategic raw materials such as oil and nonferrous
metals from Soviet-built projects. Military sales gen-
erate an estimated $5 billion in hard currency annual-
ly, an increasingly important factor as the Soviet
economy continues to falter.FI 25X1
The rising oil revenues of Moscow's major Arab
clients after the 1973 Middle East war opened new
possibilities for the Soviet military program. In addi-
tion to using arms transfers as a means of expanding
influence, the Soviets saw they could use sales to
substantially increase hard currency earnings. This
they accomplished by raising prices on most weapons,
requiring more cash payments in hard currency,
demanding advance payments for selected items, and
tightening terms where they did provide credit. Even
though these measures were aimed primarily at
wealthy OPEC clients, Moscow also applied them to
poorer customers, such as Mozambique and Zambia.
25X1
Demand for Soviet arms continues high despite the
more hardnosed, sales-oriented program and the pref-
erence of a number of clients to diversify military
suppliers to reduce their dependence on Moscow. The
list of buyers has continued to expand not only
because of newfound wealth in the case of oil produc-
ers but also because: (a) Soviet terms still are more
lenient than those of many Western suppliers, (b) fast
delivery, (c) practically free technical services, and (d)
access to advanced equipment except for some of the
latest aircraft and missile systems and high-
technology communications and electronics gear.
These latter items are too advanced for LDC use
without Soviet operational personnel and could be
advantageous to the USSR.
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Because of the importance that many leaders of
emerging states attach to the acquisition of modern
weapons, the Soviets have been able to deepen and
prolong the dependence of these countries. In some
instances (such as Egypt and Syria), dependence was
heightened because some of the sophisticated weapons
provided them were kept under Soviet control. The
export of increasingly advanced arms has also gener-
ated a more extensive Soviet military technical pres-
ence abroad as well as an expanded training program
in the USSR. By 1981 about 16,000 Soviet military
personnel were stationed in some 30 LDCs to assem-
ble and service weapons and to train local personnel
on their advanced military equipment, and nearly
50,000 LDC personnel had been trained in the USSR.
At the same time, we know from LDC officials that
Moscow perpetuates dependence on Soviet personnel
by deliberately limiting the development of LDC
capabilities. Soviet advisers in Syria, for example, are
posted as far down as the company level, a policy that
has curtailed development of the skills of middle-
grade officers.
Eastern Europe's Military Program
Over the past three decades, East European countries
have signed $7.6 billion in military agreements for
equipment and services, mostly with Moscow's major
clients. East European sales complement the USSR's
sophisticated weapons packages; in some cases, East
European countries provide technical services to sup-
port the Soviet military presence. We believe that the
USSR strongly influences its allies' selection of clients
and timing of commitments. Like the USSR, Eastern
Europe is using its military program to build up
foreign exchange earnings and to provide access to
critical oil and other resource supplies. Moscow also
orchestrates East European technical service pro- 25X1
grams, although these countries send military special- 25X1
ists abroad to advance their own foreign policy aims
The Economic Program
Moscow still considers economic aid a useful tool for
expanding Soviet influence in the Third World despite
the loss of much of the early political dynamism of its
program, which now focuses largely on economic
rather than political criteria in determining what
countries will receive aid. Because of its early empha-
sis on large, showy projects in the industrial sector-
projects that often had been turned down by Western
donors because of questionable economic returns to
the client-the USSR's aid has often gained a reputa-
tion not warranted by its size. Indeed, the USSR
accounts for less than 3 percent of international aid
flows to non-Communist LDCs. Still, the USSR
gained entree into Egypt, India, Iran, Syria, and a
number of other countries through its economic pro-
gram, and these ties endure even when other relation-
ships wither. 25X1
More recently, Moscow has pressed for broad, long-
term cooperation agreements with all of its major
LDC clients to synchronize their planning cycles with
Moscow's. These open-ended, nonbinding agreements
are designed to provide a firmer economic base for
long-term planning by client countries, while increas-
ing the USSR's assurance of a stable flow of raw
materials. Among the billion dollars in goods that the
USSR reports it receives annually as repayments for
Soviet-built projects are crude oil from Iran and
Syria, natural gas from Afghanistan, bauxite from
Guinea, alumina from Turkey, and steel products
from a number of LDCs.
Over the past 28 years, East European countries have
pledged nearly $12 billion of aid to 64 countries, of
which $4.3 billion has been disbursed. East European
countries have placed even more emphasis than the
USSR on benefits to be gained from the program, and
political goals have been a distant second to business
aims. East European credits, extended to stimulate
trade with LDCs by promoting equipment exports,
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have always carried harder terms than Soviet assist-
ance (five to eight years to repay at market interest
rates), although a few development credits have al-
lowed 10 to 12 year repayments. The commercially
oriented East European program, which usually pro-
vides financing for equipment purchases rather than
large, high-visibility projects, has not had much politi-
cal impact in LDCs.
In the early years, the selection of East European aid
recipients appears to have been heavily influenced by
the USSR. Soviet aid pledges to target countries such
as Egypt, Syria, Iran, and Iraq, were followed within
a few months by East European commitments. Until
1970 major Soviet recipients also accounted for two-
thirds of East European aid. Since then, East Europe-
an countries have distributed their trade credits more
widely, and the old clients account for less than one-
half of total East European aid to LDCs. In the early
1970s East European programs also began returning
strategic materials to their donors, particularly
through repayments in oil from Arab producers and
Iran. Ties with major oil producers, fostered by aid
programs, are proving instrumental in Eastern
Europe's search for suppliers to supplement Soviet oil
deliveries, and East European countries are looking
forward to similar paybacks in coal, phosphates,
nonferrous metals, and other materials.
Like Soviet commitments, the trend for East Europe-
an aid pledges has been distinctly upward, although
they have fluctuated widely (from $500 million to
$1.5 billion a year in the past decade) in response to
opportunities in LDCs. Over the past five years,
average East European commitments have risen by
about 25 percent to $935 million annually compared
with the previous five-year period.
Soviet Arms Sales Slip
Moscow continued to vie with the United States for
first place as the major supplier of weapons systems to
the Third World in 1981,' despite a sharp drop in
contracts to $6 billion from the record $14 billion in
1980 (table 1). Moscow's military sales program
Figure 1
USSR and Eastern Europe:
Military Agreements Concluded
With Less Developed Countries
Billion US $
scored important gains in the Middle East, the Carib-
bean, and in key black African states. The Kremlin
added Jordan and Nicaragua to its list of arms clients
and received record reorders from Syria and Ethiopia.
We had anticipated the falloff in new agreements last
year from the record-shattering 1980 sales of $14
billion since:
Some major buyers stayed out of the market to
absorb large delivery backlogs from record orders
placed in 1979-80.
Moscow announced that it would not sign large new
weapons contracts with Iraq because of the war with
Iran. 25X1
Steady Customers Still Dominate New Orders. Mili-
tary sales to traditional Soviet clients in Africa, the
Middle East, and South Asia accounted for 95 per-
cent of 1981 sales. Together these added more than
$5.7 billion to Soviet order books in 1981; record
Syrian and Ethiopian contracts for upgraded hard-
ware and associated support headed the list. The $3
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Table 1
USSR: Military Agreements With LDCs
billion Syrian package, an outgrowth of the Syrian-
USSR friendship treaty signed in October 1980,
consisted largely of air defense equipment, aircraft,
and T-72 tanks. The Soviets also gained an increased
military presence, demonstrated by the combined
Syrian-Soviet naval exercises off the Syrian coast at
midyear
The new Ethiopian-Soviet arms agreement had been
under negotiation for some time. Little is known
about the new accord-that we estimate to be worth
$1.7 billion-but we believe that it provides Ethiopia's
naval and ground forces with more and better weap-
ons, possibly including newer air defense systems,
larger naval craft, some FROG or SCUD battlefield
missiles, and upgraded military facilities.F
A $300 million addition to India's $2 billion plus 1980
arms package for transport aircraft and a $155
million package to Angola rounded out Soviet com-
mitments to traditional clients.
Sales to New Clients Run Counter to US Interests.
Moscow made inroads into new markets in 1981 with
its first arms agreements with Jordan and Nicaragua.
Russian officials undoubtedly consider their $225
million sale of air defense equipment to Jordan a
major breakthrough among conservative Arab cus-
tomers. Moscow probably hopes that the deal, under
intermittent negotiation for five years, will loosen
Amman's ties with the United States and other major
Nicaragua's first arms agreements with the USSR
calls for more than $100 million worth of transport
aircraft, APCs, artillery, and trucks. We believe that
the agreement will involve Moscow's first direct deliv-
eries to Managua, although the Soviets have trans-
ferred military equipment through Cuba and some
leftist Arab states such as Algeria since at least early
1980. Ongoing military construction activities in Nic-
aragua and pilot training in Communist countries for
Nicaraguan personnel suggest that the USSR may
also provide Managua with the Caribbean's first high-
performance jet fighters.
Arms Deliveries Second Highest on Record. In con-
trast to sales, Soviet equipment deliveries rose slightly
in 1981 to $6.4 billion, pushed by transfers under
multibillion-dollar contracts signed with major clients
in 1979/80 (table 2). Algeria, Libya, Iraq, and Syria
were in the billion-dollar category, accounting for
three-fourths of Soviet arms transfers in 1981 (table
3). Since the mid-1970s, the growing arms buildup in
the Middle East financed by oil money has meant that
Arab countries have overwhelmingly dominated the
Soviet arms supply program. India also received $635
million in Soviet weaponry in 1981.
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Table 2
USSR and Eastern Europe:
Military Deliveries to LDCs
Million US $ Table 3
USSR: Military Deliveries
to Major Clients, 1981
Algeria
1,060
1977
4,740
355
Libya
1,045
1978
5,705
550
Iraq
965
1979
7,615
635
Syria
1
720
1980
6,290
525
Other
,
1
655
1981
6.445
,
several
countries received major new Soviet weapons systems
for the first time, including:
MIG-25 jet fighters to India and Iraq.
c AN-2 transport aircraft, MI-8 helicopters, and an
array of ground force weaponry to Nicaragua.
o Antisubmarine warfare MI-14 helicopters to Libya.
e Natya minesweepers and Nanuchka guided-missile
combatants to Libya.
e A Zhuk patrol boat to Algeria.
SCUD missiles to South Yemen.
Hard Currency Revenues Increase in Importance.
Hard currency earnings from arms transfers played a
more important role in 1981 as Moscow's financial
position continued to deteriorate. In 1981 we estimate
that the USSR earned $5 billion in hard currency on
new transactions and as payments on earlier sales.
Cash sales for spare parts, not included in delivery
figures, could add another $1 billion annually to
Soviet hard currency income. In 1981 military exports
also balanced the Soviet-LDC trade account despite
the USSR's $4 billion deficit with Latin America.'
The residual shown in figure 2 represents Soviet
military exports
East European Arms Sales Hit Record Levels
East European Warsaw Pact members closed $2
billion worth of military contracts with Third World
countries in 1981, nearly tripling their 1980 sales
record (table 4). Much of the increase was caused by
the Soviet decision to withhold arms to the belliger-
ents in the Iran-Iraq war and by ongoing moderniza-
tion by major clients such as Libya. Middle Eastern
states booked two-thirds of the East European orders
in 1981. Yugoslavia, pursuing its own aims outside
the Pact, signed $865 million in new agreements,
mostly with Baghdad.F__~ 25X1
Romania and Poland led the thrust into the Arab
arms market by resupplying Iraq (we believe with
Soviet endorsement), whose military forces were
weakened by a six-month Soviet weapons embargo
that ended in April. Bucharest's $700 million in
contracts for ordnance and support equipment were
three times higher than Warsaw's contracts, but the
Polish deals ($210 million) for T-55 tanks, air defense
guns, and MI-2 helicopters were far more important
for replacing mainline items in short supply. Yugosla-
via agreed to $800 million in military construction
projects to supplement earlier contracts to develop
Iraq's domestic arms industry.FI 25X1
Libya kept its arms procurement high at $650 million
in agreements with five of the six members of the East
European group:
Hungary provided $300 million in contracts for a
mobile alarm and telecommunications network and
associated training and construction.
Bulgaria provided $100 million of unspecified
material.
Czechoslovakia, also a $100 million seller, agreed to
an overhaul facility for L-39 aircraft.
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Figure 2
USSR: Trade Relations With the Third World
? Poland and Romania together agreed to $145 mil-
lion in helicopters, military training, ammunition,
and quartermaster equipment.
East European deliveries to the Third World also rose
to record heights ($775 million) because of the Iran-
Iraq conflict
Like the USSR, Eastern Europe is using its military
program to build up foreign exchange earnings and
weaken Third World military alliances with the West.
Their sales are an important adjunct to the Soviet
arms program, complementing the USSR's sophisti-
cated weapons packages and furthering Moscow's
strategic goals. We believe that the USSR strongly
influences the selection of clients and the timing of
commitments.
apparatus in those countries
In some cases, East European countries have provided
technical. services to support the Soviet military pres-
ence. For example, East Germany provides intelli-
gence advisers to Angola, Ethiopia, Mozambique, and
South Yemen to strengthen the Marxist security
Table 4 Million US $
Eastern Europe: Arms Sales to LDCs, 1981
Total
2,030
Bulgaria
230
Czechoslovakia
125
East Germany
55
Hungary
345
Poland
450
Romania
825
On the economic side, military sales, in addition to
generating important foreign exchange for Eastern
Europe, have provided access to critical oil supplies
from Libya, Iran, and Iraq at a time when the
international community has become wary of new
business with the debt-ridden European Communist
nations. Gloomy economic forecasts presage further
heavy East European competition for an increasing
share of the international arms market, even if it
requires diversion of equipment from their own inven-
tories
Military Technical Services:
An Expanding Presence
Military programs in the Third World required the
services of 57,400 military personnel from the USSR,
Eastern Europe, and Cuba in 38 Third World coun-
tries during 1981, 8,700 more than in 1980 (table 5).
The Cuban presence rose by more than 25 percent in
1981, as Castro sought to enhance his reputation as a
Third World leader and to fulfill Havana's and
Moscow's strategic interests in Africa and Latin
America by:
? Sending an additional 6,000 troops to Angola in
response to South African raids.
? Augmenting the Cuban presence in Mozambique by
800 to suppress insurgents.
? Providing at least 1,500 more military personnel to
help the Nicaraguans with training, security, and
intelligence.
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Table 5 Number ofpersons 'Table 6 Million US $
Military Technicians in LDCs, 11981 a USSR: Economic Aid Extended to LDCs
USSR
Eastern
Europe
Cuba
North Africa
4,000
600
50
Sub-Saharan Africa
4,535
765
36,910
Latin America
165
60
1,715
Middle East
5,425
South Asia
2,155
aNumbers are rounded to the nearest five.
b Includes combat units in Angola and Ethiopia.
Large Cuban contingents also continued to operate in
Ethiopia, where about 12,000 troops support govern-
ment forces, and in South Yemen, where an estimated
500 personnel instruct Yemeni troops.
The Soviet presence continues to focus on advisory
and training functions in Africa and the Middle East.
The Soviets have played a key role in improving the
25X1 capabilities of established clients-mainly Algeria,
25X1 Angola, Ethiopia, Libya, and Syria-with a pervasive
advisory and technical presence that sometimes
25X1 reaches down to the company level. Arms customers
in other regions, particularly India and Peru, have
been unwilling to allow more than a few hundred
Soviets to work with their armed forces (despite large
25X1 arms purchases), and these are generally kept under
close rein. the
number of Soviet military advisers to Afghani units
was cut to about 2,000 in 1981 (down from 4,000), as
Soviet forces took over more direct military opera-
intelligence and police training. The North Korean
presence in LDCs also increased in 1981 to nearly
300, as 150 advisers were sent to Zambia (to help
provide presidential security) and Zimbabwe (in con-
junction with arms deliveries). 25X1
While the number of Communist military advisers
from the USSR and its allies in LDCs has grown in
almost every year since the program began, current
economic constraints, particularly in the USSR, are
threatening to cut the number of Communist military
political difficulties at home if he attempts to expand
the overseas Cuban military (as opposed to economic)
presence, because Cubans are beginning to comment
openly on the casualties sustained in Angola and
Ethiopia 25X1
tions.
The number of East Europeans assigned to military-
related tasks in LDCs grew to an estimated 1,900 in
1981; they were concentrated in Angola, Ethiopia,
Libya, and Syria. East German personnel engaged in
security, intelligence, and communications functions
were most numerous. More than 450 additional East
Europeans were sent to Libya to give military instruc-
tion-a departure from their traditional tasks of
USSR: No New Directions
The USSR's economic program fell to its lowest level
in the past four years with only $450 million in new
credits to a few small recipients (table 6).' Following
' We do not know the value of an agreement to construct a gas
pipeline in Algeria that carries 10-year deferred terms. It could add
up to $500 million in credits to the 1981 tota1F____125X1
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Figure 3
USSR and Eastern Europe: Economic Aid
Extended to Less Developed Countries
recent patterns, the USSR's new credits in 1981 were
designed primarily to promote the sale of Soviet
equipment and were less concessionary than tradition-
al development aid that allows 12-year payments at
2.5- to 3-percent interest.
The decline in Soviet extensions this year does not
reflect reduced Soviet interest in its economic pro-
gram. Rather, negotiations were under way on several
billion dollars in projects at yearend, which, if com-
pleted, could have upped the total close to earlier
levels. For example, various press sources report that
the USSR signed a $2 billion accord with Angola
early in 1982 that calls for large, new credits to
development projects. Recent aid has not reached the
high levels of 1978-79 when record agreements with
Morocco and Turkey pushed annual aid past the
$3 billion mark
The Soviets are probably aware that any drop in
economic aid can only heighten LDC criticism of
their aid program. The USSR's credibility in the
Third World was seriously damaged by its refusal to
attend the October 1981 conference on North-South
relations in Cancun, Mexico. Brezhnev himself
emerged as the authority on the question of which
countries should be represented in the North-South
dialogue; namely, that the developed countries repre-
sent the North, and LDCs should refrain from drag-
ging the socialist countries into the fray. According to
State Department reporting from the conference,
however, the developing countries debated and
rejected Moscow's argument that it cannot accept any
political or moral responsibility for backwardness in
the Third World that has resulted from colonialism.
To Moscow's chagrin, the final declaration at Cancun
incorporated wording that censured the USSR's ab-
sence.
In 1981 the bulk of Moscow's new aid went to four,
hitherto small recipients of Soviet economic assist-
ance-Bangladesh, Ecuador, Mozambique, and Nica-
ragua. The USSR provided a well-publicized grant of
20,000 tons of wheat (to replace US supplies) and $75
million of other aid to Nicaragua-Moscow's largest
economic commitment in 1981-for developing agri-
culture and communications. The development credits
are the first specific allocation of Soviet aid to
Managua and come under the broad open-ended
framework accord of 1980. Moscow also extended:
? A $35 million, 10-year, 6-percent credit to Ecua-
dor-its first development credit to that country- 25X1
for constructing oil storage tanks.
? A 10-year, $70 million credit to Bangladesh, under
their trade agreement, for two 110-MW generators
to expand the Russian-built Ghorosal electric plant.
? A $45 million credit to Mozambique, added to an
earlier $105 million in assistance to finance coal and
agricultural development, oil and gas exploration,
and railway construction.
The USSR signed contracts with India and Turkey,
allocating credits under earlier agreements to projects
in metals processing. India received permission to use
$350 million of outstanding credits to finance a blast
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furnace complex at Visakhapatnam. Moscow ap-
proved $200 million under a 1975 Soviet-Turkish
accord to expand the Soviet-built aluminum complex
at Seydisehir, and Soviet officials continued negotia-
tions with Ankara for expanding the Iskenderun steel
mill. The USSR will receive payment in output from
these plants, an arrangement that is becoming in-
creasingly beneficial to the beleaguered Soviet econo-
my. Moscow's large new allocations to India and
Turkey for steel and aluminum development under-
line the importance the Soviets have long placed on
aiding Third World public-sector minerals and metals
industries.
Focus on Minerals and Metals Development. Moscow
has allocated $12 billion to minerals and metals
development in LDCs, more than half its total eco-
nomic aid to LDCs since the aid program began in
1954. The aid has been concentrated in steel and
aluminum development, with smaller amounts ex-
tended for geological surveys and mining. More than
two-thirds ($8 billion) of Moscow's total commitments
to Third World nonfuel minerals development has
taken place over the past five years.
To support its LDC minerals development program,
the USSR's geological surveys-an early feature of
aid agreements with LDCs-have spread across the
globe. At the end of 1981 the USSR had conducted
surveys-sometimes for a single element-in more
than 50 developing nations. Along with the search for
common industrial metals and minerals (such as iron
ore, phosphates, bauxite, lead, and zinc), the Soviets
also have explored for strategic materials:
Cobalt in Algeria and Morocco (but not in Zaire or
Zambia, which already supply cobalt to the USSR).
Gold and platinum in seven African countries and in
South Yemen.
o Titanium in South Yemen and Sri Lanka.
Tungsten in Algeria and Thailand.
o Uranium in Afghanistan, Ethiopia, Iran, Iraq, and
Libya.
Only in the case of gold was the exploration for
strategic materials followed up (in four African coun-
tries) with accords to exploit the deposits and process
the output.
To some degree, Moscow's prospecting aid to LDCs is
an outgrowth of its expertise in the field. The Soviets
have the largest domestic geological research effort in
the world, employing more than half a million people.
Sending Russian geologists to the Third World is
virtually a cost-free operation since they are paid for
by the host country. It establishes a highly visible
Soviet presence and plays up an area where the
Soviets have established competence. As a spinoff,
Soviet geological work presumably provides Moscow
with useful intelligence. 25X1
Developing Third World Steel Industries: A Prestige
Undertaking. Of Moscow's $12 billion of assistance
for metals and minerals to the Third World, develop-
ment of steel industries has absorbed $7.4 billion or
one-third of its total aid program and nearly two-
thirds of the aid allocated to Third World metals and
minerals development. Capitalizing on LDC desires
for their own steel plants, Moscow offered credits not
available in the West for highly visible, prestigious
projects. Little, if any, of the production from these
plants is intended to meet domestic Soviet needs.
Some of the 1.4 million tons of rolled steel imports
from LDCs, mostly from India and Pakistan, called
for in its present aid agreements may be sold to third
parties.F____1 25X1
Nonferrous Metals Agreements: Designed for Pay-
back. In contrast, the Kremlin's $4.5 billion of assist-
ance for developing other LDC minerals and metals
has been designed primarily for yielding a payback in
products that are scarce or expensive to develop in the
USSR. These agreements have been stepped up in the
past several years because of Moscow's concerns
about declining domestic output and the high cost of
exploiting marginal and distant reserves.
Moscow presently relies on bauxite and alumina 25X1
imports for about one-half of its annual needs and
began importing phosphates this year. The USSR's
$90 million agreement with Guinea to exploit bauxite
serves as a model for Soviet buyback arrangements. It
has led to a stable 25-year supply of bauxite, which
supports 25 percent of Soviet aluminum production.
Table 7 shows returns from the USSR's minerals and
metals program.F___1 25X1
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Table 7
USSR: Estimated Resource Payback From
Aid Programs in LDCs, as of December 1981
Soviet Aid
Extended
Annual Payback
(million US $)
Material
Thousand
Tons a
Algeria
315
Pig iron
100-200
Egypt
230
Rolled steel
100
India
1,400
Pig iron
300
Steel ingots
1,000
Pakistan
650
Iron and steel
200
Rolled products
70
a Indicates maximum amounts available under agreements. Items in
italics indicate amount expected upon completion of plants.
In all, we estimate that nearly $6 billion of Soviet aid
committed to metals and minerals development will
be paid off in plant output (as is usual for such
assistance) and that long-term supply contracts-such
as the 25-year arrangement for Guinean bauxite and
the 30-year deal for Moroccan phosphates-will ex-
tend these relationships to Moscow's advantage
Eastern Europe: Promoting Business Interests
East European economic agreements with 12 diverse
Third World clients totaled $665 million in 1981, one-
half the previous year's level (table 8). East Germany
made more than one-half the pledges. These included
agreements with Algeria ($250 million), Mozambique
Table 8
Eastern Europe: Economic Aid
Extended to LDCs, 1981
Total
665 a
Bulgaria
25
Czechoslovakia
30
250
($75 million), Nicaragua ($13 million), Zimbabwe
($14 million), and four other small recipients. East
Germany has perhaps the most highly politicized of
all the East European programs; aid went mostly to
Marxist-oriented LDCs where the Communist politi-
cal stakes are high. Romania, the other major East
European donor, provided $250 million to Bangla-
desh, where Bucharest has been cultivating business
interests for years. Other East European countries
provided small trade credits to promote equipment
sales.
While East European countries did not provide new
aid to their major Middle Eastern clients, they were
able to capitalize on unsettled events to promote
commercial relationships (according to East European
statements, always the major aim of the aid program)
without the use of credits. At least 100,000 b/d of
barter oil flowed to Eastern Europe in 1981 from Iran
and Iraq (despite their production cutbacks) in return
for military and industrial goods, food, and consumer
items. Growing hard currency shortages, as the costly
war dragged on, assured even more comprehensive
barter deals with Baghdad and Tehran that will help 25X1
alleviate severe hard currency shortages in Eastern
Europe. East European countries also received nearly
$800 million in Arab hard currency bank loans in
1981 and were negotiating up to $1.5 billion in
additional funds at yearend
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Table 9
Economic Aid Deliveries to LDCs
1979
574
289
1980
808
254
1981
716
323
Million US $ Table ll? Number of persons
Economic Technicians in LDCs, 1981 a
Disbursements Still High
Soviet deliveries of project and commodity aid under
earlier agreements sustained their momentum in
1981, although they dipped from the record level
achieved in 1980, when $300 million of grant consum-
er goods and food to Afghanistan raised total aid
disbursements to $810 million (table 9). Support to
Afghanistan ($200 million) and Ethiopia ($80 million)
in oil subsidies and commodities kept disbursements
in 1981 well above levels in previous years. The USSR
did not begin any major new projects in LDCs in 1981
but stepped up deliveries to projects in Iraq and Iran
(after a cutback in 1980 because of the war).
Because of its support to such Marxist-oriented clients
as Afghanistan and Ethiopia, the USSR again is
experiencing a net outflow of aid to LDCs. Since the
early 1970s, repayments by major clients (on debts
estimated at $5 billion) have been more than enough
to cover annual economic aid deliveries. We estimate
that the Afghan relationship is causing an economic
aid drain of at least $200 million annually for the
Soviets.
East European disbursements recovered somewhat
from the five-year low of 1980 but still did not reach
levels set in the mid-1970s, because:
Economic deterioration in Poland forced Warsaw to
renege on some project commitments.
c Romania has completed $350 million worth of
projects in Syria that kept delivery levels high for
several years.
8,065 37,805 5,250 1,050
7,705 7,025 9,435 430
350
580
Middle East
12,780
14,370
3,650
6,050
745
100
15
Programs in Iran and Iraq were curtailed because of
the war.25X1
Technical Services: A Source of Ready Cash .
The Soviet Bloc technical presence in the Third
World rose to a record high of 120,000 personnel in
1981, a 15-percent jump from the previous year. For
the USSR and Eastern Europe, the technical services
program is one of their most profitable undertakings
in LDCs. From a small effort employing only a few
hundred people in the 1960s, it has evolved into a
high-visibility program involving 96,000 Soviet and
East European technicians in 75 countries in 1981
(table 10). About two-thirds of these personnel were
working in Arab and other countries that pay hard
currency for services; another 3,750 were in Afghani-
stan, where the Soviets have placed advisers in most
ministries and have attempted to step up project
construction in spite of the insurgency there. Four of
the Marxist-oriented countries-Angola, Ethiopia,
Mozambique, and South Yemen-employed more
than 10,000 European Communist personnel in 1981.
25X1
The USSR cleared at least $200 million in hard
currency (or its equivalent) from its Third World
technical services program in 1981. Eastern Europe
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received even more-at least $500 million. Except for
a few doctors and teachers provided on a grant basis
(mostly in Africa), European Communist countries
command hard currency payments for their techni-
cians. Moscow requires at least half of technicians'
salaries in hard currency, even from such impover-
ished clients as Guinea and Mali.
Soviet and East European technicians are less expen-
sive than Western personnel, but by LDC standards
they still command fairly high annual salaries. Emi-
gres from the USSR and Eastern Europe report that
the Soviets charge up to $55,000 a year for project
managers and $40,000 to $45,000 for less senior
personnel, while salaries for skilled East European
personnel may range up to $80,000 annually. These
salaries are far higher than those paid to personnel at
home because Communist enterprises, reluctant to
part with skilled workers in labor-short economies,
demand top prices to release a worker for service
Cuba expected to
make at least $200 million in 1981 on its Third World
technical services program-about 10 percent of total
hard currency earnings.
Since Cuba does not export much equipment suitable
for LDC development programs, Havana's economic
program has consisted largely of technical services,
sometimes to support Soviet and East European proj-
ects. Services to LDC construction industries have
been particularly well received, and about two-thirds
of all nonmilitary Cubans abroad are working on
construction projects. Hard currency earnings from
construction contracts in 1981 more than offset any
negative impact that the export of skilled labor might
have had on Cuba's own economy. Chronic foreign
exchange shortages and a work force that is growing
at about 3 percent a year without many chances for
domestic employment will provide incentives to ex-
25X1
25X1
abroad.
Cuba: Economic Program Turns
on Technical Services
Havana has followed the Soviet lead in expanding its
technical presence in the Third World as a quick and
profitable way to increase it influence abroad. Cuba
increased its technical contingent in LDCs by 2,900
personnel in 1981, substantially increasing its pres-
ence in Iraq, Libya, Mozambique, and Nicaragua.
Cuban economic technicians were in 26 LDCs in
1981, as Havana successfully marketed its cutrate
technical services. In Nicaragua, the Cubans beefed
up their work force of teachers, doctors, and construc-
tion workers (provided free of charge) to further their
influence in Managua. About one-fourth of Cuba's
technicians abroad were in Arab countries, with
which Havana has hard currency contracts. Cuba was
able to place an additional 3,500 personnel, mostly
construction workers, in Iraq and Libya, where re-
turns from the program are particularly high. These
two countries pay up to $20,000 a year in hard
currency for the services of a Cuban worker under a
series of development contracts signed in the past few
years. Havana is attempting to divert personnel from
its less profitable African ventures,
pand Cuban economic services programs abroad.
Academic Training: The Most Concessional Program
About 73,000 students from LDCs were enrolled in
universities in the USSR and Eastern Europe at the
end of 1981, over one-half in the Soviet Union (table
11). Students from African countries made up nearly
one-half of the total. Both Soviet and East European
scholarship support was heaviest to Marxist LDCs,
whose personnel accounted for one-third of all stu-
dents from developing nations studying in the USSR
and Eastern Europe
European Communist countries provide most academ-
ic training to LDCs free of charge. Students are
awarded full scholarships, which cover subsistence,
living quarters, tuition, and transportation. Some East
European countries value this assistance at the equiv-
alent of $10,000 per student per year, which would
bring the annual value of European Communist edu-
cational aid to the Third World to more than $700
million.
We believe that the USSR, in particular, views its
academic program as a potentially high-yield effort.
Scholarships have favored African countries (50 per-
cent), touching 48 of them on that continent. For
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Table 11
Academic Students From LDCs
in Training, December 1981
Total
42,800
29,290
North Africa
2,680
1,805
Sub-Saharan Africa
16,645
13,675
East Asia
15
Latin America
4,360
2,440
many African countries, the Soviet scholarship pro-
gram is Moscow's only aid effort. According to Soviet
officials, the USSR plans to expand its effort in
Africa by establishing four regional language centers
to teach Russian to African students. The most gifted
will be provided scholarships to study in the USSR.
Moscow also hopes to offer Russian language courses
in the secondary schools of some African countries to
cut down training costs and to identify candidates for
the regional centers, where heavy doses of Marxism-
Leninism will be part of the curriculum.
Soviet educational programs are adding considerable
numbers to the ranks of professional and skilled
workers in 100 LDCs. Returning students, however,
apparently have not greatly increased Soviet influence
in their home countries. An Afghan official recently
said that before the Marxist takeover, personnel
trained in the USSR were concentrated at lower levels
of the bureaucracy because of poor academic prepara-
tion. They were, therefore, already in place during the
change in government but probably did not play a
major role in causing the revolution
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25X1
Economic and Military Programs:
A Regional Analysis
The Middle East:
New Opportunities for Moscow
Selling arms to Jordan and successfully balancing its
aid program among regional antagonists were the
most notable accomplishments of the USSR's efforts
in the Middle East in 1981. Military sales to the
region, the most important asset of Moscow's Middle
East policy, rebounded strongly to $3.5 billion, the
third-best year ever. Moscow succeeded in:
Closing its first arms sale with Jordan in November
(for air defense equipment), thus breaking the
West's monopoly on arms suppy to Amman without
upsetting the special Soviet relationship with Syria.
Concluding a $3 billion arms reorder with Syria
intended to moderate Damascus's reaction to the
new Soviet-Jordanian arms connection.
o Straddling the fence during the Iran-Iraq war. At
the beginning of the conflict Moscow stopped deliv-
eries to Iran and Iraq while encouraging its East
European allies to supply some critically needed
ordnance and spare parts for Soviet weapons. =
Moscow resumed deliv-
eries to Iraq when it became clear that its policy of
"neutrality" was seriously eroding Moscow's influ-
ence in Baghdad and nudging Iraq toward closer
ties with the West, without improving relations with
Iran. Moreover, the USSR witnessed at least
$5 billion in Iraqi purchases of Western military
equipment and services, a trend, which over the long
term, would reduce Iraq's current dependence on
Moscow.
Maintaining its standing in North Yemen by agree-
ing to reschedule $600 million in arms debts and to
provide $55 million in economic aid for roads and
water source projects. At the same time, the Soviets
maintained favor in South Yemen by signing another
commitment for additional arms supplies.
Table 12
Middle East: Military and
Economic Aid Agreements, 1981
Military 3,507 1,365
Egypt NEGL NEGL
South Yemen NA 2
Syria 3,000 26
United Arab Emirates 1
For the third year, Moscow sent more than $3 billion
worth of modern armaments into the Middle East.
Hardware transfers included nearly $1 billion in arms
to Iraq after the lifting of the embargo in April and
about $200 million in critical spare parts and support
materials to Iran.F__~ 25X1
Desperate for hard currency and backed by the
USSR, East European suppliers eagerly sought to
take advantage of the huge demand for military
equipment-largely expendables and ground weap-
ons-generated by the Iran-Iraq conflict. East. Euro-
pean Bloc countries signed a record $1.4 billion of
arms contracts, with all but $200 million going to
support more than half of Iraq's critical war require-
ments. Encouraging its Warsaw Pact allies to meet
some of Iraq's munitions and spare parts requirements
helped Moscow stay on the military supply sidelines
until late spring. At the end of the year, East European
countries had delivered nearly $400 million worth of
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equipment against emergency contracts. Polish ship-
ments overshadowed all others
Economic Aid Slips to 20-Year Low. Commercial
interests (always close to the surface in Communist
aid relations with Arab countries) took the lead in
Bloc economic relations with Middle Eastern custom-
ers during 1981; for the first time in nearly two
decades, the USSR and its European allies did not
promise new economic aid to a major Middle Eastern
client. Only North Yemen received new aid-$55
million for water resources development. Moscow also
allocated $200 million under an earlier framework
agreement with Turkey to expand the Seydisehir
aluminum complex. Nonetheless, Soviet and East
European willingness to supply food and other con-
sumer goods to Iran and Iraq paid handsome divi-
dends in a resumed flow of oil and burgeoning trade.
Trade data show that Soviet exchanges with Iran
because of production problems.
and military debt. The oil offset an Iraqi cutoff
were restored to prerevolutionary levels-$ 1.1 bil-
lion-and Moscow received 2.5 million tons of Iranian
oil (shipped to India) as repayment on Iran's economic
for the first time in the history of the relationships.
The poor state of their economies make Arab loans
Eastern Europe: Reversing Aid Flows
During 1981 East European countries redoubled ef-
forts (first observed in 1974) to obtain aid from richer
countries in the area. In 1974 we noticed a reverse
flow of aid from the Middle East to Eastern Europe
The growing financial relationships between Bloc and
Persian Gulf countries could assist Soviet efforts to
normalize relations. Kuwait is pushing hard for such a
rapprochement, believing that a dialogue with the
USSR will strengthen the Gulf countries' voice in
Moscow on such questions as the Iran-Iraq conflict,
the South Yemen-Oman controversy, Afghanistan,
and other regional matters. Kuwait also hopes that
the USSR can restrain Iranian or Iraqi ambitions in
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25X1
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the Gulf, where it believes Soviet influence is consid-
erable and growing. Press stories surfaced that Saudi
Arabia was moving toward opening diplomatic negoti-
ations with Moscow, but no significant action was
noted in 1981. (S NF)
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While the role of high-technology weapons in the
Falkland Islands dispute and the poor performance of
Soviet equipment in Lebanon will probably cause
some Third World countries to rethink their military
supply relationships with the USSR, most major
recipients of Soviet military aid will not be able to
shift to Western suppliers because of political or
economic constraints. Indeed, the USSR could benefit
from additional purchases by the losers in these
disputes. Syria, for example, will need at least several
billion dollars worth of equipment to replace losses in
Lebanon and to upgrade air defense capabilities.
Furthermore, major deals to replenish inventories in
Iraq and possibly Iran seem likely once that war ends.
For their part, East European countries will compete
vigorously for a larger share of the international arms
market. Poor prospects for traditional exports, a
growing hard currency bind, and a gloomy economic
outlook will prompt these countries to pursue in-
creased sales, even if it means diverting equipment
from their own inventories. (s NF)
On the economic side, we believe that the USSR will
continue to focus its aid on countries that will provide
economic, as well as strategic, benefits. Moscow is
aggressively pushing sales of power equipment in
Latin America to help finance grain imports from the
area. Moscow's new agreement with Angola will
provide hard currency and possibly some strategic raw
materials as repayments. At the same time, the USSR
will undoubtedly continue its historical proclivity to
promise aid to countries that have adopted Marxist
systems-such as Afghanistan, Ethiopia, South Ye-
men, and, more recently, Nicaragua. Some of these
countries will continue to be dissatisfied with Soviet
performance, as the USSR moves more rapidly on
more profitable agreements with other LDCs. We
expect that Eastern Europe will follow the USSR's
lead in providing nominal assistance to fraternal
Marxist states; they also will give higher priority to
assuring strategic material supplies for their belea-
guered economies through other long-established rela-
tions with major clients. (c)
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Appendix
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25X1
Aid to Selected Third
World Countries, 1981
Egypt
Just before his death, President Sadat surprised Mos-
cow in September by expelling some 400 Soviet
economic and some diplomatic personnel for alleged
involvement in subversive activities. Sadat also an-
nounced the canceling of all outstanding contracts
between the two countries and closed military offices
President Mubarak has largely abandoned Sadat's
anti-Soviet rhetoric and at the end of the year re-
quested the return of Soviet personnel needed for the
operation of Soviet-built facilities, such as the Aswan
dam, the Asyut cement plant, and the aluminum plant
at Nag Hammadi. Mubarak also lifted the ban on
cotton sales to the USSR and Eastern Europe im-
posed by Sadat in 1977 to dispose of Egypt's large
surpluses.
Iran
Tehran guardedly expanded its relations with the
USSR to gain access to badly needed military equip-
ment and technical assistance, industrial products,
and commodities for its faltering economy. F
INon-
military trade was restored to prerevolutionary levels
because Iran sold its first oil to the USSR (40,000 b/d
for India) as a substitute for gas that was used until
1980 to settle accounts. Press reports indicate that
North Korea emerged as Tehran's largest source of
arms last year, concluding an additional $565 million
worth of agreements.
Iran's inability to procure arms from Western supp125X1
1 11 1. 1
While Iran and the USSR were not able to resolve 25X1
pricing problems to restore gas deliveries to the
USSR, the two sides resumed discussions on develop-
ment projects under at least $1 billion in agreements
signed with the Shah. According to the Soviet news
agency TASS, work will begin soon on two power and
irrigation dams on the Araks border river, a mining
machinery plant at Kerman, and a welding electrodes
plant. Soviet offers are pending on new chemical and
water projects.F___1 25X1
More than 2,000 Soviet personnel were back at work
after Iranian forces managed to secure Soviet project
sites that were under attack by Iraq. They activated
two smelters at the Isfahan steel plant, stepped up
work on the Isfahan power plant, and completed
electrification of the Tabriz-Julfa railway under a
1968 agreement. Press reports indicate that the
USSR agreed in May to accept more transit goods for
Iran, and assigned personnel and locomotives to the
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Iranian railway organization to help clear backlogs at
the Iranian border and to get Soviet and Western
transit goods flowing more smoothly into Iran. Im-
proved transport facilities, along with the USSR's
first Iranian oil deliveries to replace natural gas used
for repayments, restored trade to $1 billion in 1981,
about the level reached before the Khomeini takeover.
Because of Iran's hard currency shortage, East Euro-
pean countries also found Tehran more willing to
barter arms, food, and industrial products for oil.
Romania's economic involvement deepened with the
conclusion of a trade agreement to exchange about $1
billion worth of equipment for 80,000 b/d of oil in
1982, reported by the Romanian press. Romania will
participate in petroleum and petrochemical projects,
power development, port construction, and the provi-
sion of agricultural machinery and equipment.
Even though East European countries have managed
to increase their share in trade with Iran, they still
accounted for only about 15 percent of Tehran's total
trade in 1981.
Iraq
By the end of 1981 the international press was
reporting that the USSR's influence with the ruling
regime in Iraq was severely eroded by Baghdad's
belief that Moscow had let it down at a time when its
arms requirements had been most urgent. In fact, the
Soviets maintained a complete embargo on arms
shipments until the earl s rin
By early 1981 Soviet officials evidently realized that
the arms embargo imposed on Iraq was backfiring:
? Soviet "neutrality" had seriously damaged relations
with Baghdad without gaining significant influence
with Tehran.
? Western arms deliveries, including sophisticated
French Mirage F-Is and Crotale SAMs, were pos-
ing serious long-term competition in this key Soviet
arms market.
? Baghdad was ardently pursing closer alignment
with conservative, Western-oriented Arab states, as
well as seeking a modest improvement in relations
with the United States.
Once the embargo was lifted in April, the USSR
instituted an airlift and sealift of heavy weapons to
Iraq-deliveries in the remaining eight months of the
year were worth almost $1 billion. Baghdad received 25X1
its first MIG-25 fighters and AS-9 air-to-surface
missiles, more than 200 T-72/5-62 tanks, and huge
amounts of critically short spares and special muni-
to hard currency customers in Europe and elsewhere. 25X1
Hastening to cash in on lucrative trading opportuni-
ties, the USSR and Eastern Europe concluded several
large commercial contracts with Iraq in 1981. Soviet
exports topped $1.2 billion in spite of Iraq's refusal to
allocate any of its limited oil exports to the USSR in
return. The two countries ended their longstanding
barter relationship on 1 April by instituting hard
currency payments, an arrangement that attracted
increased Soviet exports in spite of the termination of
oil deliveries. In the past, Moscow had made a
considerable profit in reexporting barter oil from Iraq
Moscow probably was able to clear the 10,000-ton
backlog of Iraq-bound equipment that piled up after
the closure of Iraqi ports in 1980. Still, activity on
projects did not reach prewar heights as Iraq's costly
war with Iran (estimated at $1 billion a month)
drained resources from development. An estimated
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Near-record weapons systems deliveries valued at
more than $1.7 billion-more than to any of Mos-
cow's other Third World customers in 1981. 25X1
scoring the dimensions of the closer relationship, the 25X1
two countries also carried out a joint naval-amphibi-
ous landing exercise at midyear involving large forces
from both countries. 25X1
The Soviet-Syrian relationship has remained strong
enough to survive political challenges from both sides.
Syria did not raise serious objections to the USSR's
sale of air defense equipment to Jordan-a country
Syria suspects of complicity in attempts by Syrian
dissidents to overthrow the Assad regime. On the
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5,000 Soviet personnel stepped up activity at Soviet
power and petroleum projects under a June agreement
to extend oil prospecting to Iraq's southern field, to
construct a gas liquefaction plant and oil pipeline, to
reconstruct power plants damaged by Iranian air
raids, and to construct a $3.3 million earth satellite
station. Negotiations neared completion on a $1.2
billion contract to develop the West Qurna oilfields.
The terms of the agreements were not announced, but
the USSR may have provided some credits to finance
equipment imports.
Romania maintained the fast pace of activity that has
made it Baghdad's most important East European
According to press reports from Sofia, Bulgaria
The sale of SA-8 surface-to-air missiles and
ZSU-23-4 air defense guns to Jordan complicates
Moscow's relations with Damascus. We believe that
Syria is aware that the emerging Soviet-Jordanian
arms relationship could enable King Hussein to call
upon Moscow for assistance if Damascus again
threatens to attack Amman as it did in 1980. Moscow
has attempted to allay Syrian reservations by arguing
that the Jordanian deal strengthens Arab defenses
against Israel. 25X1
Syria
Damascus remained one of the most important ele-
ments in Moscow's Middle East policy in 1981. The
mutually supportive relationship, formalized in the
long-term Treaty of Friendship signed in October
1980, was reinforced by: 25X1
offered aid to airport construction and other commu-
nications projects and signed a trade protocol callin
Jordan
Moscow's $225 million hard currency sale of air
defense equipment to Jordan, funded by Iraq, provid-
ed the USSR with a long-sought breakthrough in
relations with this moderate Arab state. We believe
that the Israeli raid on Iraq's nuclear facilities at
midyear reinforced Jordan's decision to acquire a
mobile low-to-medium air defense system, which the
United States has for years refused to supply. Moscow
is expected to begin military deliveries to Jordan in
second-half 1982 and to complete them in late 1985.
Only a few Soviet personnel will accompany the
equipment; Jordanians will be trained in the USSR or
in Iraq. While King Hussein maintains the Soviet
order was a one-time purchase to fill a specific
requirement, more purchases are possible if the Soviet
equipment performs well, and the United States and
Western suppliers fail to meet Jordan's perceived
military hardware needs.
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other hand, Moscow did not criticize Syria's deploy-
ment of missile equipment in Lebanon in the spring of
1981 without prior consultation. The Soviets correctly
feared Israeli reprisals but belatedly endorsed the
Syrian move. Israel's annexation of the Golan Heights
in December and the Israeli advance into Lebanon are
testing the depth of Soviet commitment to Syria,
particularly in the realm of interpreting the mutual
defense aspects of the Friendship Treaty.' Moscow is
responding to the Syrian-Israeli conflict with a limit-
ed arms resupply effort, heavy political support, and
probably an increased naval presence in the region but
did not go so far as to send Soviet troops to the battle
area. It is likely that in the aftermath of the fighting
in Lebanon, Moscow will agree to make good all
equipment losses and to upgrade air defense capabili-
ties
Syrian financial problems and Eastern Europe's re-
quirement for hard currency payments again kept
military purchases from Eastern Europe at a low ebb.
Small orders totaling $26 million-mostly Air Force
related-were placed with Bulgaria, Czechoslovakia,
Poland, and Romania.
Communist countries continued their broad-based
effort in Syria's economic sector with 4,125 personnel
working on projects under $740 million of outstanding
credits. European Communist countries also signed
agreements for trade valued at more than $3 billion
over the next five years, and an estimated $500
million in new development contracts, repayable in
Syrian goods such as petroleum, phosphates, and
cotton. Highlighting the new agreements were:
? A Soviet pact to increase trade to $2.7 billion over
the next five years, $150 million in contracts to
provide railroad equipment, and an agreement to
study a gas pipeline project.
? A five-year Bulgarian trade agreement valued at
$500 million.
? A $150 million Czech contract to expand the Horns
oil refinery.
' In spite of Syria's disappointment with the performance of Soviet
equipment, we have not detected any changes in the direction of the
The USSR also signed protocols to continue prospect-
ing for the Communist-built oil industry, handed over
the 750-kilometer Latakia-Qamishlie rail line built
with $40 million of credits, and began negotiating
further rail construction that will enable Syria to
develop the port of Banias. Moscow reneged, however,
on an earlier promise to bid jointly with Poland on a
$500 million power plant contract.
Romania, Syria's largest Communist donor, put fin-
ishing touches on the Banias oil refinery and the
Horns triple superphosphate plant, for which it provid-
ed $275 million in credits. The refinery eventually will
more than double Syria's product output. With the
completion of these major projects, Romania's heavy
industrial program is drawing to a close. Both Syria
and Romania have been unable to reach agreement on
new projects, because Romania has increased the
interest rates on new credits to 5 percent. East
Germany, with $350 million of outstanding credits,
also was active in the construction of a huge cement
plant at Tartous and the negotiation of a $30 million
contract, not yet final, to build 10 flour mills. 125X1
The Yemens
Moscow's ability to work both sides of a conflict is
particularly evident in the strategically located
Yemens. Capitalizing on the mutual suspicions be-
tween North and South Yemen and Saudi mistakes,
the USSR has created military dependence in both
countries
North Yemen. Sana has increasingly turned to Mos-
cow for military supplies and training since the late
1970s because the US program to upgrade the YAR
forces (dependent on Saudi financing) has fallen far
short of President Salih's expectations.
25X1
25X1
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25X1
Moscow's $55 million in new economic pledges to
upgrade the Soviet-built Hodeidah-Mocha road, to
25X1 carry out an extensive water resources survey, and
eventually to build two dams should revive the flag-
25X1
ging Soviet economic effort in Sana.
25X1 Moscow's only sizable
project in North Yemen-expanding the Bajil cement
plant-has caused much local friction because of its
slow pace.
25X1
25X1
South Yemen. The USSR did not sign any major
military agreements with South Yemen in 1981 but
consolidated its already close, single-source arms sup-
plier relationship with $120 million in deliveries under
earlier contracts and a military advisory presence that
reached 1,000 personnel. Aden has received more
than $850 million in modern Soviet military equip-
ment in the last five years. In addition, new East
European accords this year included a 20-year
Friendship Treaty with Bulgaria and East German
protocols calling for closer economic ties.
Sana and Somalia's major port, Berbera
Moscow's interest and presence in South Yemen has
grown steadily since the Soviets lost their logistic
support facilities in Somalia in 1977. South Yemen
has allowed the Soviets access to naval and airbase
facilities and the use of communications facilities.
The closeness of Soviet-South Yemeni ties was dem-
onstrated early in 1980, when it provided Aden with
SCUD surface-to-surface rockets capable of reaching
25X1
As one of four fraternal socialist states in the Third
World singled out for a special aid effort by CEMA
members, South Yemen hosted nearly 3,000 economic
personnel from the USSR, Eastern Europe, and Cuba
in 1981. Together, European Communist countries
have pledged $325 million in assistance for South
Yemeni development, and Aden also expects eventu-
ally to receive Libyan funding for Soviet-built projects
under its trilateral agreement with Libya and Ethio-
pia signed in 1981. Still, Yemeni officials have ex-
pressed annoyance over Moscow's lagging economic
program. The USSR has agreed to accelerate con-
struction of a power plant in Aden and rescheduled
South Yemen's outstanding debt.FI 25X1
Algeria
The USSR attempted to use its economic and military
programs in Algeria to stem a deterioration in rela-
tions caused by differences over Afghanistan and the
taking power (in 1979) of an Algerian Government
less sympathetic to Soviet policies. Military deliveries
surged to their highest level last year, exceeding
$1 billion, the result of the $3 billion accord signed in
Despite its dependence on the USSR, Algiers pursued
talks with other suppliers to expand its sources of
arms over the long term. Even though Algerian
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officials want to diversify to improve their nonaligned
image, logistic, financial, and integration problems
make the cost extremely high.
Moscow's economic relationship with Algeria took on
new dimensions with several hundred million dollars
of agreements to construct priority projects in Alge-
ria's current five-year development plan. Terms for
these new agreements were not revealed, but Moscow
probably will provide trade credits (possibly with
10-year repayments) to cover Soviet participation. We
have not been able to confirm rumors that the Soviets
agreed eventually to provide $3 billion in credits
under the 1976 framework agreement between the
two countries. Major projects agreed to during 1981
included:
? A 420-km pipeline from Alrar to Hassi R'mel.
? Four, large irrigation dams in northern Algeria.
? A 500,000-ton cement plant at Djerjela.
? Forty vocational training centers.
? A spare parts shop at the Annaba steel plant.
? A comprehensive water-use plan for the Annaba
and Saharan Atlas regions.
? Housing construction in Algiers and Tlemcen.
The USSR also is considering aid to Algeria's exten-
sive planned railway construction and to the minerals
industry.
East Germany, one of Algeria's major Communist
donors, provided $250 million in new credits in 1981
for projects in the engineering industry. Communist
countries also provided nearly 12,000 project techni-
cians, teachers, and doctors to Algeria in 1981.
Libya
Libya imported more than $1 billion in Soviet arms in
198 1, bolstering each branch of its military establish-
ment and enhancing Qadhafi's role as a leading arms
supplier to insurgent movements. The array of new
equipment, sold under a 1980 agreement valued at $8
billion, included advanced Soviet fighters, IL-76
transports, assorted naval craft, tanks, and missiles.
East European countries signed nearly $650 million of
25X1 new agreements with Tripoli.
Libya is by far the USSR's largest Third World arms
client, having purchased about $15 billion of military
materiel from the USSR since the 1973 Middle East
war. About one-half of these purchases have been
delivered and include a wide variety of advanced
ground forces weapons, fighter aircraft, air defense
systems, and naval vessels. Deliveries of about
$2 billion annually over the next several years proba-
bly will include higher performance MIGs and more
lethal ground weapons, and will be accompanied by
an increase in the Soviet military presence. Currently,
an estimated 2,000 Soviet advisers and technicians
are in Libya. While Colonel Qadhafi's massive de-
fense procurement project has given Libya one of the
largest and most modern inventory of arms and
equipment in Africa, shoddy maintenance and storage
practices seriously impair its operational readiness.
In addition to large hard currency earnings generated
by arms sales to Libya (boosted by higher prices than
Moscow charges most other clients), the USSR has
acquired access to Libyan port facilities for its mer-
chant vessels, gradually expanded the Soviet presence
in Libya, and developed a viable working relationship
with the Libyan leadership. Moscow has supplied
materiel far in excess of Libya's legitimate defense
needs, thus providing most of the wherewithal for
Qadhafi's role as an arms supplier to other states and
to insurgents.
The Communist economic effort in Libya has been
nearly as large as the military program and just as
profitable. Commercial construction and services con-
tracts are valued at several billion dollars, and there
were no cutbacks in development projects in 1981 in
spite of Libya's worsening cash flow problems.F___1 25X1
Even as several major projects drew to a close,
Moscow deepened its involvement in Libya's economy
with the conclusion of contracts to construct a nuclear
power plant at Surt and to participate in the second
stage of the Misurata steel complex-projects that
could require more than $1 billion in Soviet equip-
ment and services. Terms of the new agreements were
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25X1
not announced, but current Libyan financial difficul-
ties, and Moscow's reluctance to accept more Libyan
barter oil, may make it necessary for the USSR to
extend its first economic credits to Libya. Previous
deals have been for cash. Meanwhile, work neared
completion on: (a) the $500 million nuclear research
complex at Tajura, (b) a 570-kilometer gas pipeline to
feed the Misurata steel plant, and (c) a comprehensive
development plan for the gas industry. Soviet techni-
cians also were active in petroleum operations at the
Sarir field.
East European technicians employed in Libya soared
to 30,200, supplementing lucrative equipment sales to
Tripoli with hard currency earnings from technical
services that reached at least $300 million a year.
President Qadhafi's whirlwind trip to Hungary and
Romania in the fall resulted in wide-ranging agree-
ments with Bucharest on trade, petroleum prospect-
ing, production, marketing, and construction projects.
Czechoslovakia signed a $180 million hard currency
technical assistance agreement, its first such pact with
Libya. Yugoslavia, a major partner since the early
I 970s, signed contracts to construct an additional
$2 billion in projects and also maintained 7,000
technicians incountry
Morocco
Deepening strains in the Soviet-Moroccan relation-
ship over the Polisario's use of Soviet missiles and
other equipment (supplied by Libya and Algeria)
against Moroccan forces translated into a growing
chill in political relations during the year. East Euro-
pean countries have adopted a noncontroversial pos-
ture on the Western Sahara and pursued low-key
commercial exchanges of goods and services for Mo-
roccan phosphates.
During the year, the USSR focused on economic
matters. By yearend it had performed about a third of
the surveys for the $2 billion Meskala phosphate
project; feasibility and engineering studies are to be
completed sometime in 1982. Moscow also handed
over a feasibility study on a 1,000-MW direct com-
bustion power plant at the Timahdit oil shale depos2'
r-VII
f 25X1
Soviet-Moroccan trade, however, is in doubt since the
two countries abandoned clearing arrangements in
favor of hard currency settlements at yearend. Fric-
tion already has arisen over Soviet insistence on hard
currency payment for some of the 500,000 tons of oil
promised in 1981 because of the termination of the
agreement to barter oil for Moroccan citrus. Moroc-
co's seizure of Soviet fishing boats in restricted West-
ern Saharan waters in January also contributed to
strains in the relationship. 25X1
Technical assistance was the mainstay of most East
European programs as more than 2,160 teachers,
doctors, and other personnel worked in Morocco
during the year.
25X1
25X1
Afghanistan
The military takeover in Afghanistan has forced
Moscow to augment its already large aid commit-
ments to shore up the Afghan economy and rebuild
the military structure. Since the December 1979
invasion, the USSR has provided more than $1 billion
in new Soviet grant aid to Kabul, about one-half for
military improvement and the rest for consumer goods
and other commodities. The Soviets also increased
their troop strength in Afghanistan during the year as
the war of attrition intensified. 25X1
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The USSR signed pacts for $230 million in new
military aid with Kabul last year, including transport
aircraft, helicopters, tanks, and a military training
center f f han officers
Identified deliveries to A g an orces as
year included 15 Fitter aircraft, transport aircraft,
helicopters, and other equipment. Soviet military sup-
ply agreements with Kabul since the Marxist takeover
have reached $2 billion.
Moscow's political stake in Afghanistan is underlined
by its unprecedented $860 million of economic sup-
port to the Marxist government, one-half of it free of
charge. Moscow is refashioning Afghan Government
institutions along the Soviet model by placing hun-
dreds of advisers in ministries and financial institu-
tions with varying degrees of success. The USSR also
has tied Afghanistan's economy more closely to its
own by monopolizing trade, connecting northern Af-
ghanistan to the Soviet power grid, and developing
industries whose production is oriented toward the
Soviet economy. Among the hundreds of agreements
announced during the year, the most notable were:
? A five-year trade agreement (1981-85) designed to
triple trade over the 500-million-ruble level of 1980.
? An agreement to proceed with transportation and
servicing facilities that will almost certainly be used
to supply Soviet troops
? A contract to deliver 150,000 tons of wheat as a
grant.
? An agreement to suonly 300,000 tons of petroleum
25X1 products.
In spite of a slowdown on development projects in
1981 because of widespread insurgent activity in the
countryside, disbursements of economic assistance
totaled $215 million, reflecting heavy Soviet commod-
ity deliveries under grant agreements. The USSR also
continued work on oil and gas development, the half-
billion-dollar Ainak copper complex, and agricultural
development and processing projects. Soviet techni-
cians also started work on a $200 million power
transmission project; on straightening border rivers;
and on truck maintenance, bridge, railway, and oil
storage facilities that will support the Soviet military
presence.
East European countries have actively supported Sovi-
et aims in the country with $170 million of credits
since the Marxist takeover to finance agriculture and
industry. Czechoslovakia agreed to refurbish the US-
built Helmand Valley irrigation project and had
delivered half of the equipment necessary by yearend.
Bulgaria worked on agriculture and processing proj-
ects, while East Germany delivered communications
and power equipment. About 250 East European
advisers supplemented the 3,500-man Soviet econom-
ic presence in Afghanistan during 1981, and 8,700
Afghans attended Soviet and East European educa-
tional institutions.
India
Political differences between India and the USSR
because of Afghanistan were overshadowed by the
fundamental strength of their military and economic
relationships. Relations deepened with a $300 million
contract for transport aircraft that will further tie
India's Air Force inventory to Moscow, while long-
term economic protocols prescribe a Soviet presence
in Indian industry for the next decade.
Moscow remains India's primary arms supplier.
Although Western arms suppliers are making some
inroads into the Indian arms market, including the
recent French sale of Mirage 2000s, Moscow is likely
to retain its leading supplier role through the 1980s.
The Soviets sell to the Indians on easy credit terms,
and New Delhi finds repayments in rupees for Soviet
weaponry very attractive. New opportunities for Mos-
cow have been opened by the US commitment to
rearm Pakistan. Indian military planners (claiming
that India will be the ultimate target for Pakistan's
new US aircraft) will probably accelerate purchases of
advanced MIG aircraft and air defense systems.
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Under its economic program, the USSR focused on
projects to be constructed during India's Sixth Plan
(1980-85) with some $800 million of outstanding
Soviet credits. Contracts were signed for: (a) $200
million of equipment for a 3-million-ton steel complex
at Vishakapatnam, (b) a dam and irrigation project
using experimental blasting techniques in Himachal
Pradesh, (c) oil prospecting over the next 10 years, (d)
a comprehensive power development plan for Madhya
Pradesh that will take five years to complete, and (e)
coal development that could result in an annual
production increase of 50 million tons. Work proceed-
ed on modernization of the Bhilai and Bokaro steel
plants, and the 6-million-ton Mathura oil refinery-
which will increase India's refinery capacity by al-
most 20 percent-began trial production. The two
countries also continued to explore opportunities for
Indian participation in Soviet projects abroad. New
Delhi has signed agreements to supply equipment to
Soviet projects in Algeria, Egypt, Iraq, Libya, Nige-
ria, and Turkey.
East European countries focused on expanding trade
by selling industrial plants. Czechoslovakia offered to
participate in metallurgy and power development
projects, particularly through the Czech-built Bharat
heavy electrical equipment plant-one of the world's
10 largest power equipment manufacturers. Romania
won a $90 million contract to build an ore pelletizing
plant at the Kudremukh iron deposits, but offers to
construct a 1.5-million steel plant and power plant
were turned down. Hungary plans to build a heavy
truck manufacturing facility, while Bulgaria agreed
to expand economic and commercial ties
Pakistan
Despite high-level contacts, the USSR has not been
able to persuade Pakistan to moderate its vehement
anti-Soviet stand on Afghanistan. With firmer finan-
cial backing from Arab supporters, Pakistan stepped
25X1 up its search for more and better armaments in the
West and from its traditional Chinese source
In the absence of a military relationship, the USSR is
using economic offers in an attempt to convince
Pakistan to adopt policies friendly toward Moscow.
A high-level Soviet 2
delegation attended the inauguration of production at
the Karachi steel complex-the largest construction
project in Pakistan, with more than 800 Soviet techni-
cians at the plant site. The USSR also began con-
struction of an $18 million tractor station under
credit 25X1
East European relations with Pakistan were lacklus-
ter. Poland was forced to cancel a $90 million credit
for eight ships because of the economic situation at
home. Only Romania signed a new agreement-to
construct an oil refinery in Karachi on undisclosed
terms.
Burma, always closer to Eastern Europe than to the
USSR, hosts one of Czechoslovakia's largest aid
programs in the Third World. Under agreements 25X1
valued at $180 million, Czechoslovakia is building
several plants to produce automotive equipment.)
Indonesia's active participation in ASEAN and its
opposition to the Soviet role in Afghanistan brought
political relations to a standstill. Jakarta blocked
Soviet participation in the Mrica hydropower project,
for which the Soviets have offered equipment credits
after completing a feasibility study last year. A
Romanian offer to assist in oil exploration and mining
met with a warmer reception, as did East Germany's
efforts to expand activity under $75 million of trade
credits provided in 1977F____1 25X1
Moscow's offers to increase contacts with the Philip-
pines met with unwavering resistance during the year,
but political differences did not affect commercial
relationships. A Soviet offer to finance a power plant,
Moscow's only offer of economic aid to an East Asian
nation this year, was turned down because it would
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bring Soviet technicians into the country. Nonethe-
less, the USSR was Manila's largest Communist
buyer, taking $200 million worth of agricultural
products in 1981 against negligible exports
Grenada
Grenada's close alignment with the Castro govern-
ment is turning the island toward Communist sources
for military assistance, highlighted last year by the
first direct delivery of Soviet military equipment.
Since May 1981 Managua has received a wide variety
of increasingly modern Soviet-made equipment to
supplement earlier deliveries of vintage World War II
arms. Most of the Soviet small arms deliveries have
been funneled through Cuba, because of Castro's
assertive policy in the region and Moscow's desire to
assume a low profile. The latter circumstance also has
led the Soviets to pressure Algeria to transshj-p
heavier Soviet-made weapons to Nicaragua.
5X1
5X1
helping to construct a large airfield at Pointe Saline
(under a $10 million economic agreement) with a
potential to accommodate Soviet MIG-23s. A high-
level government official publicly stated that the new
airfield would be open to use by both Cuba and the
USSR and could support Soviet/Cuban high-
performance aircraft operations and give Cuba a
refueling stop for military flights to and from Africa
and elsewhere in Latin America. About 500 Cuban
construction personnel are in Grenada in connection
with the airport project
Nicaragua
The Soviet Union actively exploited new opportunities
to forge military and economic aid ties with Nicara-
gua in 1981, signing new military agreements and
providing $80 million in economic aid.
Other Communist
military pledges included $2 million from East Ger-
many for unspecified goods, a Vietnamese accord to
supply about 10 US-made helicopters, and Czech and
Cuban agreements for ground forces equipment-
mainly small arms and ammunition.
25X1
Deliveries from Cuba in the past few years have
included small arms, antiaircraft guns, and light
artillery pieces. Some Soviet arms deliveries to Cuba
in 1981 probably included replacements for Cuban
arms shipped to Nicaragua. We are convinced that
some older type Soviet artillery pieces recently identi-
fied in Nicaragua were previously delivered by the
USSR to Cuba for transshipment.
The following are among items of military equipment
of Soviet or East European origin currently in Nicara-
gua, most of which were delivered in 1981:
? 2 MI-8 helicopters.
? 6 AN-2 Colt transport aircraft.
? 25 T54/55 tanks.
? 12 BTR-60 armored personnel carriers.
? 48 ZIS-2 57-mm antitank guns.
? 12-16 152-mm howitzers.
? 88 ZPU-4 and ZU 23/2 antiaircraft guns.
? 60 SA-7 antiaircraft rocket systems.
? 800 trucks and numerous small arms of Soviet,
Czechoslovak, and East German make.
For the near term, efforts to expand Nicaraguan
airfields, coupled with reports of Sandinista air force
personnel in training in Cuba and elsewhere to fly
MIGs, strongly suggest that Moscow is planning
future deliveries of fighter aircraft, probably by way
of Cuba
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25X1
Cuba provides the largest number of military and
security personnel-estimated at about 1,700. The
USSR maintains about 65 personnel in country to
advise key members of the Nicaraguan armed forces,
and pilots and technicians to fly and maintain the
MIG-8s and the AN-2s. East Germany has provided
60 advisers to work directly with Nicaraguan state
security organizations
Moscow's economic aid reached $80 million under a
1980 framework agreement that calls for assistance to
agriculture, fisheries, mining, and energy. In an un-
usual move, the Soviets provided 20,000 metric tons
of wheat in the spring as a grant, which together with
60,000 tons of free grain from Bulgaria and East
Germany more than made up for the cancellation of
P.L. 480 grain deliveries for 1981. In July the USSR
allocated $50 million in 10-year credits for the pur-
chase of agricultural, roadbuilding, and communica-
tions equipment, which already has begun to arrive in
Nicaragua. The USSR also has sent six research
vessels to conduct an extensive survey of Nicaraguan
fisheries resources. Nicaraguan press reports indicate
that Managua is negotiating for Soviet participation
in an 180-MW hydropower project, for which it
expects $150 million in Soviet trade credits.
Clearly supporting Moscow's initiatives, East Europe-
an countries provided upward of $40 million in new
economic commitments as well as an estimated $20
million in short-term financing for commodities and
raw materials. The new pledges bring Communist
commitments since the leftist takeover in 1979 to
$170 million. East Germany has been the most active
under a $35 million program that began in 1979,
providing food and aid to public health. Bulgaria
appears ready to move rapidly on $25 million in aid
for agriculture, industry, and mining promised in
1981 and is negotiating an additional $30 million for
power development. While commodity grants have
taken up a higher proportion of aid than is usual for
European Communist programs, all of the credits
have been heavily oriented toward equipment sales
and have carried harder terms than Communist devel-
opment credits. An estimated 125 East European
technicians and 75 Soviets are presently in Nicaragua
in connection with the aid program. Cuba provided
$70 million in new aid, mostly to support the activity
of 4,000 teachers, doctors, and other civilian person-
Argentina
Argentina's growing economic relationship with the
USSR has not yet been translated into broader
political support for Soviet policies by the anti-Com-
munist regime, but it is likely that concern for its
grain market will be a major factor in Argentine
policies toward Moscow. In 1981 Buenos Aires was
the main beneficiary of the US embargo on Soviet
grain purchases with sales to the USSR that reached
10 million tons valued at $3.2 billion. The USSR also
signed agreements to buy a minimum of 5 million tons
of grain annually over the next five years. F__125X1
At the same time, Argentina resisted Soviet pressures
to redress the $3.2 billion trade imbalance in 1981
(Moscow's largest ever with any Third World country)
by accepting Soviet financing for hydropower equip-
ment. According to press reports, Argentina agreed to
let the Soviets supply 15 percent of the equipment for
the multibillion-dollar Yacyreta hydropower project,
but Moscow is pressing for more meaningful partici-
pation in Argentina's power development program.
Moscow may also hope that Argentina's recent defeat
in the Falklands may open the door for military
exports to Argentina, but we have seen no movement
so far in that direction. The USSR also signed
agreements to supply enriched uranium and heavy
water to the nuclear industry, and has begun fishing
research under an agreement ratified in 1981
Brazil
Brazil, the largest Latin American recipient of Com-
munist economic aid ($925 million), also has empha-
sized the commercial side of its Communist relation-
ship. Brazil's view of European Communist countries
as promising markets for Brazilian goods was rein-
forced in 1981 by major Soviet purchases of grain and
the conclusion of a long-term trade agreement that
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ian exports.
A number of smaller agreements, however, assure
growing Soviet ties with Brazil, including: (a) a $55
million credit repayable over 10 years to finance
technical services for 10 methanol plants; (b) a $3.5
million oil-exploration project in Sao Paulo; (c) licens-
ing of Soviet shale-oil-processing techniques to pro-
duce oil and gas; (d) licensing for coal gasification,
coke quenching, and synthetic rubber technology; and
(e) sales of railroad equipment and a floating drydock.
The Brazilian press reports that the USSR also is
exploring provision of aid to the massive Carajas
mining development project in return for mineral
deliveries, but Brazil has not been responsive, prefer-
ring collaboration with Western suppliers.
Brazil maintained cordial relations with East Europe-
an governments during the year. Expressing a willing-
ness to help Poland through its economic crisis and to
avoid triggering a default, Brazil accepted a Polish
rescheduling proposal for $1.6 billion in debt. Brazil
also provided an additional $220 million in credits to
cover Polish imports (in spite of Polish defaults on
$100 million of payments in 1981) that has reversed
the traditional flow of aid from Eastern Europe to
Brazil. Romania diverted an unused $150 million,
1975 credit to Brazil's Carajas minerals development
project in an attempt to encourage credit use. Other
East European countries worked on power develop-
ment and transportation projects
Peru
Peru's most important relationship with Moscow is a
military one, a legacy of the USSR's successful effort
in the early 1970s to provide arms to Peru on
Since 1973, Peru has acquired a wide variety of Soviet
equipment for its Army and Air Force. In addition to
SU-22 fighters armed with AS-9 tactical air-to-
surface missiles, Peru has T-54/55 medium tanks,
SA-3 and SA-7 surface-to-air missile systems,
ZSU-23/4 radar-controlled antiaircraft gun systems,
helicopters, transport aircraft, and various logistic and
support equipment. On the economic side, there was
no progress on the Olmos irrigation project, for which
Moscow has provided $250 million credits.
Angola
The USSR largely ignored Angola's requests for
better air defense weapons after South African cross-
Angolan President dos Santos also ap-
proached several East European countries for hard-
ware, but by yearend only Hungary came through
with an agreement to provide communications equip-
ment. In contrast, Cuba responded to Luanda's re-
quests by sending 6,000 additional troops to Angola,
raising the Cuban military presence there to a record
23,000. Moscow probably sanctioned this increase in
an effort to ensure the continued viability of the
Angolan Government without increasing its own mili-
tary commitment.
Moscow's decision to turn down Luanda's request for
additional defensive weapons may have signaled Sovi-
et displeasure with Angola's economic rapprochement
with the West. A 10-year trade and economic cooper-
ation agreement signed early in 1982 and valued at $2
billion should sweeten relations, although it has be-
come obvious to Angolan officials that the Commu-
nist countries will not commit sufficient resources to
assist economic recovery as military expenditures
continue to drain the economy. Even with 10,400
Communist personnel, Angola has not been able to
restore production of basic necessities to prewar lev-
els; Luanda now is attempting to hire Portuguese
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experts to rebuild the country's basic infrastructure.
According to foreign businessmen, most Angolans
strongly resent the Communist, particularly Soviet,
exploitation of their economy. Moscow has been
harshly criticized for causing domestic shortages by
overfishing Angolan waters under their fishing treaty
and for siphoning off hard currency to pay for inferior
goods and services.
Nonetheless, Angola signed agreements with several
Communist countries to move ahead with economic
projects that have been under discussion for some
time. Bulgaria agreed to build assembly and mainte-
nance shops for road transport equipment and com-
pleted a project to process rock phosphates. Czecho-
slovakia agreed to provide credits for unidentified
projects, while East Germany signed protocols to aid
energy and mining. Soviet technicians were involved
in oil projects, agriculture, power development, and
The Soviet and Cuban military presence in Ethiopia
in 1981 remained at about 1,700 and 12,000 person-
nel, respectively. The Soviets are mainly involved in
advisory functions and overseeing the integration of
new weapons systems, while most of the Cuban troops
still are deployed in the Ogaden region.F__~25X1
There was also some movement in the economic aid
program where earlier Ethiopian expectations have
been dashed by the Soviet performance. Under a
series of protocols, the USSR agreed to:
c Sell Soviet oil at a reduced price that saves Ethiopia
$20 million on its oil bill in 1982.
Provide nearly $30 million of commodities for 1982.
c Build vocational training facilities valued at $11.5
million free of charge.
o Go ahead with the multimillion-dollar Gambella
irrigation scheme and Melka Wakana dam and
hydropower project.
public health
Ethiopia
Moscow's continuing strategic interest in the Horn of
Africa and Red Sea was demonstrated dramatically
by its new economic and military commitments to
Ethiopia also employed 1,000 Soviet technicians on
smaller projects, such as mechanization of gold mines
at Adola, construction of grain and refrigerated stor-
age facilities, and expansion and overhaul of the
Soviet-built oil refinery. 25X1
grant technical assistance program.
East European countries have thrown their support
behind the Soviet effort in Ethiopia with almost $360
million in credits since the revolution and 800 techni-
cians in 1981. East Germany worked on port develop-
ment and a cement plant, as well as a textile complex
in collaboration with Czechoslovakia. At least 1,000
Cubans provided service as doctors, teachers, veteri-
narians, and construction workers under Havana's 25X1
Mozambique
According to the US Embassy in Maputo, Mozam-
bique considers Communist countries its natural allies
and has relied on them to fill its defense needs. South
African cross-border raids and intensified South Afri-
can-supported dissident activities in 1981 pushed
Mozambique toward greater dependence on the
USSR and its allies for more advanced support and
security assistance. The number of Cubans rose to
1,000, and the Soviets were increasingly active in
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planning counterinsurgency operations, in spite of
Mozambique's dissatisfaction with earlier advisory
support
European countries have not gained as much influ-
ence over Mozambique's economic affairs because
Maputo has followed more pragmatic policies and has
encouraged Western aid, trade, and investment. Still,
the economy was the focus of Communist attention in
1981, as the USSR and Eastern Europe took steps to
enhance their presence with $120 million in new
economic pledges (twice as much as to any other
African country in 1981) and a 10-year Soviet-
Mozambican economic cooperation agreement. Ac-
cording to the US Embassy in Maputo, the USSR
and East European countries refused Mozambique's
application to join the Council for Mutual Economic
Assistance, however, fearing a drain on their limited
multilateral aid resources.
Moscow's new long-term economic agreement, signed
in May, adds $45 million in credits to the $130
million already extended. The USSR agreed to: (a)
rehabilitate the Moatize-Beira rail line, (b) expand
agriculture, (c) provide a $13 million floating dock to
repair Soviet and Mozambican fishing vessels, and (d)
to build coal mines, agricultural stations, and a
tractor assembly plant. The USSR also was preparing
bids to develop the aluminum industry and provide
equipment for the 1920 MW Cabora Bassa hydro-
power plant expansion. These projects could require
several hundred million dollars of Soviet financing.
About 500 Soviet personnel already are working in 17
sectors of Mozambique's economy, and a June agree-
ment brought additional Soviet geologists to search
for nonferrous and rare metals, precious and semipre-
cious stones, bauxite, coal, and gas.
Czechoslovakia, Hungary, and Romania also signed
wide-ranging new economic and technical agreements
with Maputo. Czechoslovakia agreed to cooperate in a
metallurgical project that will involve sending 1,200
Mozambicans to Prague for training. East Germany,
already heavily involved in the coal industry, provided
$75 million for equipment purchases and power proj-
ects and agreed to build a high school in East
Germany to train 1,000 Mozambican students annu-
ally. East Germany came under fire in the Mozambi-
can press for the poor quality of its trucks and
agricultural equipment, which have delayed progress
at the Limpopo Valley agricultural project. About
1,300 East European personnel were working on
projects in Mozambique in 1981.
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