EASTERN EUROPE: INCREASED EMPHASIS ON ARMS SALES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00851R000400100003-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 20
• Document Creation Date: December 21, 2016
• Sequence Number: 3
• Content Type: REPORT

Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
DIA review
completed.
Directorate of op Secret
Intelligence
on Arms Sales
Eastern Europe:
Increased Emphasis
State Dept. review completed
Top Secret
GI 82-10278C
December 1982
Copy L U 8
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Directorate of Top Secret
Intelligence
Eastern Europe:
Increased Emphasis
on Arms Sales
This paper was prepared byl of the
Office of Global Issues. It was coordinated with the
Directorate of Operations. Comments and queries
are welcome and may be directed to the Chief,
Communist Activities Branch,
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Eastern Europe:
Increased Emphasis
on Arms Sales
Key Judgments East European military sales are a key element of Warsaw Pact foreign
Information available policy and provide an important dimension to the Soviet Union's growing
as of 10 December 1982 arms export program. East European countries have complemented the
was used in this report.
USSR's sophisticated fighter aircraft, naval combatants, and surface-to-air
missiles by supplying much of the ground combat equipment, including
tanks and APCs, to key clients. Bulgaria and Czechoslovakia have also
been extremely active in the covert arms market, using state trading
companies that are overtly responsible for normal trade.
Since 1977 Eastern Europe has supplied less than 10 percent of the arms
bought by the Third World, with sales averaging some $860 million a year
during 1977-80. Overall sales have been erratic in this period, with record
sales ($2.9 billion including Yugoslavia) in 1981, primarily because of
heavy Iraqi demand caused by the war with Iran and by Moscow's refusal
to supply Baghdad with arms in the war's initial phases. Eastern Europe
quickly responded to the demand-in Yugoslavia's case independently and
in the case of the other East European states, probably with encourage-
ment from the Soviets, who undoubtedly saw arms exports by their
Warsaw Pact allies as a "low profile" means of maintaining their
influence. 25X1
East European governments have diverted some arms from the reequip- 25X1
but this decision and the surge in
arms sales in 1981 have not significantly reduced current Warsaw Pact
capabilities. Most of the equipment was East European-including tanks,
armored vehicles, and artillery. Moreover, the amounts involved were
relatively minor compared with total East European and Soviet inventories.
Sales would not have been permitted if they were perceived by Moscow as
significantly reducing Pact capabilities.
Although East Europe's need for hard currency will lead it to attempt sales
of arms and technical services above the levels recorded in the 1970s and
early 1980s, we do not believe that the record 1981 sales pace will be
maintained because it was the result of the Iran-Iraq war. In the absence of
a similar situation, we expect East European sales to decline in the short
iii Top Secret
GI 82-10278C
December 1982
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
term. Should Eastern Europe adopt a more aggressive stance in the world
arms market, Western suppliers will over the long run face increased
Communist competition for conventional weapons technology.
East European manufacturers have developed specialties that will aid a
sales campaign: Czechoslovakia, for example, produces small arms and
ammunition, and East Germany can provide high-quality technical and
intelligence services.
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Top Secret
Organization and Capabilities of East European 5
Arms Programs
Bulgaria
East Germany
Technical Services
East European Administration of Arms Export Programs
2. East European Arms Agreements With LDCs, by Region 2
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Top Secret
Eastern Europe:
Increased Emphasis
on Arms Sales
Introduction
East European arms exports are an important adjunct
to the Soviet arms export program,' complementing
Moscow's sophisticated weapons packages. Generally,
the USSR produces and exports advanced weapons,
while Eastern Europe provides simpler combat equip-
ment and support materiel. East European Warsaw
Pact arms sales are coordinated with and, in some
instances, orchestrated by Moscow, according to State
Departmen he
amount of Soviet control varies with the size of the
order, the type of equipment involved, and the politi-
cal importance Moscow attaches to the client/supplier
25X1 relationship.
Eastern Europe, like the Soviet Union, has used its
military aid as a foreign policy tool to earn hard
currency and weaken alliances between the Third
25X1 World and the West.
25X1
East European sales, traditionally less than 10 percent
of arms sales to all LDCs, are highly concentrated in
the lucrative Middle East market. Working closely
with the Soviet Union, the Warsaw Pact states have
initiated a number of important military contracts in
the Middle East, including partially filling Iranian
and Iraqi requirements during the Soviet embargo,
and have assumed important surrogate roles,
' Includes Poland, Hungary, Czechoslovakia, East Germany,
Romania, and Bulgaria. Yugoslavia is discussed in this paper
because it is a major Communist East European arms supplier. Its
arms sales policies, however, are formulated independently of
Moscow's direction or approval. This also applies to a lesser extent
Arms Sales and Deliveries
Sales. East European Warsaw Pact members closed
$4.6 billion worth of military contracts with develop-
ing countries from 1977 through 1981; Yugoslavia
added another $1.7 billion. Last year's sales of
$2 billion (excluding Yugoslavia) were triple the level
averaged in recent years (table 1). East European
arms commitments amounted to 15 percent of total
Communist arms sales to LDCs and 10 percent of
global LDC orders in 1981. 25X1
Middle Eastern and North African states booked 25X1
more than 85 percent of East European sales in-the
five years ending in 1981 (table 2). Almost half of the
sales during this period took place last year
25X1
25X1
25X1
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Table 1
East European Arms Agreements With LDCs, by Supplier
Total
6,344
811
675
1,092
870
2,896
Yugoslavia
1,706
159
109
415
158
865
Romania
1,268
100
26
153
162
827
Czechoslovakia
1,066
371
131
383
58
123
Poland
812
23
110
100
130
449
Table 2
East European Arms Agreements With LDCs, by Region
Deliveries. East European arms deliveries to the
Third World totaled $4.1 billion in 1977-81; last year
they exceeded $1 billion almost double the 1977
value (tables 3 and 4 .
East European cotintr
exceptions, have supplied ground combat equipment,
including tanks and APCs, whereas Moscow has sold
sophisticated armaments, fighter aircraft, naval com-
batants, and surface-to-air missiles. Most major mili-
tary equipment exported from Eastern Europe has
consisted of Soviet-designed and manufactured weap-
ons such as T-55 tanks
its own munitions industries and, according to both
State Departmen has been a
source of ammunition, communications equipment,
vehicles, and quartermaster supplies (table 5). More
advanced weapons exports from East European pro-
duction lines have included armored personnel carri-
ers and jet trainers. The enhanced production capabil-
ity and aggressive sales promotion in the Middle East
have enabled Eastern Europe's arms exports to grow
steadily over the past five years.
25X1
25X1
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Top Secret
Table 3
East European Arms Deliveries to LDCs, by Supplier
4,134.4
588.5
733.2
798.6
870.9
1,143.2
1,301.1
236.4
185.2
166.2
344.2
369.1
904.2
126.6
214.3
239.8
257.1
66.4
646.9
51.9
74.0
175.7
19.2
326.1
367.3
24.5
64.4
74.3
54.5
149.6
365.4
83.7
55.9
42.3
101.2
82.3
Table 4
East European Arms Deliveries to LDCs, by Region
Economic Motivations Current account balances have improved in 1982, but
While small compared with sales by the United States deficits remain. Increased arms exports represent an
or the USSR, arms sales represent an important opportunity to expand one of the area's few means of
source of hard currency earnings for most East Euro- earning hard currency. 25X1
an nations faced current account deficits in 1981:
Bulgaria 559
Czechoslovakia -150
East Germany -1,315
Economic constraints and the desire to increase hard
currency earnings from weapons sales to the Third
World are complicating efforts by East European
countries to modernize and expand their own defense
forces,
increasing pressure to promote military equipment
sales is causing East European governments to divert
25X1
25X1
25X1
25X1
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83BOO851 R000400100003-9
Table 5
Eastern Europe: Selected Arms Production a
Czechoslovakia
Poland
Romania
Armored vehicles
Bulgaria
Czechoslovakia
Hungary
Poland
Romania
Artillery and rocket launchers
(greater than 100-mm)
Bulgaria
Czechoslovakia
Hungary
Poland
Romania
Tactical combat aircraft
Czechoslovakia
Poland
Military helicopters
Poland (civil production)
a Yugoslavia not included.
MTLB APC
BMP, AICV OT 64, APC
D-944, APC
OT-64, APC
TAB-71/72/77APC, TAB-77ARC
M-1974, 122-mm, SP
Wheeled 152-mm, SP 122-mm,
RM-70 rocket launcher
M-1979, 122-mm, MRL
122-mm, RML RRT 21/74
M5 3/70, 30-mm, Twin, SP
30-mm, Twin, SP
S-60, 57-mm
ZU-23, 23-mm
30-mm
Aero L-39
TS-11 Iskra
arms, resulting in slippages in domestic procurement
programs. For example, the retention of some older
T-34 tanks in Polish inventories, while newer T-55
tanks are being exported, suggests that earning hard
currency from the export of T-55 tanks to the Third
World is taking priority over domestic tank inventory
modernization. We doubt, however, that Moscow
would permit a trade-off between sales and domestic
military upgrading that would significantly reduce
Pact capabilities.
East European credit arrangements for military sales
are more stringent than Soviet terms and again reflect
the need to generate hard currency earnings.
quired in three to five years, sometimes in hard
currency, with no discounts from list prices. There are
no reports that Eastern Europe reschedules debts or
offers concessionary terms. The Soviets, on the other
hand, offer credit or price concessions to at least some
clients to gain political leverage, and they will some-
times agree to repayments in local currency, as in
India, or in commodities, as in Zambia, according to
State Department reporting.
Moscow will often reschedule a mili-
tary aid debt and has done so with most of its African
clients.
Political Motivations
Except for Yugoslavia and Romania, Eastern
Europe's foreign policy has followed that of the Soviet
Union, and its sales program is consistent with Mos-
cow's overall objectives. The USSR, without assum-
ing formal control over Eastern Europe's military
sales programs, strongly influences the selection of
targets and the timing of commitments. Limited State
Department eporting implies
that in military sales there is a relatively high degree
of consensus and coordination between Moscow and
to reduce its military aid profile it has sometimes
elected to work through East European intermediar-
ies. Such was the case when Bulgaria and Poland
began training Nicaraguan Air Force personnel. Also,
recipient states have sometimes felt they could com-
promise their "neutrality" by too close an involvement
with the Soviet Union, and embassy reporting indi-
cates that they have occasionally preferred to accept
Soviet-backed assistance from Eastern Europe rather
than receive support directly from Moscow. These
motivations led to the accord between Egypt and
Czechoslovakia in 1955. This accord was quickly
25X1
25X1
25X1
25X1
25X1
Approved For Release 2008/08/11: CIA-RDP83BOO851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Top Secret
followed by Soviet aid in 1956 and set the stage for
further Soviet and East European aid to the region in
the next decade. Most recently, the Soviet decision to
stay out of the resupply effort in the initial phases of
the Iran-Iraq war promoted a quick increase in East
European arms sales to both combatants.
Limited reporting suggests that Moscow exercises
some direct leverage over East European arms sales
programs:
within
Czechoslovakia authorization for sales to Third
World countries of certain military equipment, such
as T-54 tanks, must be obtained from the Soviet
Union as well as from the appropriate Czechoslovak
ministries.
through the Soviets. Policy decisions regarding arms
transfers are made at the highest political levels and
coordinated with the Ministry of Defense and the
Ministry of Foreign Trade. The prospective client 25X1
usually deals with the representatives of a trading
corporation-for example, OMNIPOL in Czechoslo-
vakia or CENZIN in Poland. The trading corporation
handles the negotiations, shipping, and training as-
pects of the program through representatives located
in client countries. 25X1
Yugoslavia. Yugoslavia is Eastern Europe's leading25X1
arms supplier, with 1981 sales and deliveries of $865
million and $370 million respectively. The Yugoslavs
openly assert that they are "an alternative" source to
the great powers and do not attach "political strings"25Xl
to arms deals. Belgrade, for example, has supplied 25X1
Egypt with arms and helped maintain Soviet-built
Yugoslavia can supply a wide range of gear to any 25X1
Third World buyer, but its defense industry does not
have an extensive scientific and technical base upon 25X1
which to develop sophisticated air, ground, or naval
weapons. While the Yugoslav Government is striving
to improve its defense industry, in part to lessen its
dependence on foreign sources, re- 25X1
porting indicates technological constraints will limit
this effort in the near future. 25X1
Organization and Capabilities of
East European Arms Programs
Except for those of Yugoslavia, the administrative
structures of the various East European arms transfer
programs are believed to be similar to those of the
USSR. The East Europeans are either contacted
directly by a prospective arms client or indirectly
Yugoslavia produces most of its own ground forces
materiel, including the antitank missile AT-3/Sagger
and the SA-7 Grail,
Domestic naval production has included several coast-
al submarines, coastal patrol craft, mine and amphibi-
ous warfare craft, auxiliaries, and service craft. Some
25X1
25X1
25X1
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9 .-X1
tactical aircraft such as the GALEB and JASTREB
are produced indigenously. Originally, the Jurom
multirole jet fighter agreement called for joint Yugo-
slav-Romanian development and- production. Dissatis-
faction over Romanian production of major aircraft
components may, however, lead the Yugoslavs to
independently develop a modified version, the Orao B,
Czechoslovakia. Prague ranks as Eastern Europe's
second leading arms exporter to the Third World.
type) and surface-to-air (SA-7/Grail) missiles.
igm scant quantities of ground force materiel, as
well as both the L-39 trainer and L-410 transport, 25X1
exported.
According to State Department reporting, the Polish
aircraft industry ranks among the largest in Poland,
with about 19 factories and 100,000 employees.
About 60 percent of total production is exported,
primarily to the Soviet Union and other CEMA
members. The industry designs and produces a variety
of light aircraft but has little capability to develop and
produce heavier aircraft. Current production consists
of Colt (AN-2) small transports, Hoplite (MI-2) turbo-
shaft helicopters, TS-11 Iskra jet trainers, and the
PZL-104/Wilga communications /utility aircraft.
25X1
The first Communist arms agreements concluded
with Third World countries-Egypt, North Yemen,
and Syria-were signed by Czechoslovakia, which,
can produce
large quantities of military equipment and has a
reputation for quality products. Prague is the most
self-sufficient of the East European Communist coun-
tries in armaments production,
It produces medium tans, armored person-
nel carriers, the L-410 light transport, truck-mounted
rocket launchers, and some small antitank (AT-3
25X1
Although Polish shipyards can produce principal sur-
face combatants, naval production has been limited t25X1
coastal patrol craft, mine and amphibious warfare
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Top Secret
25X1
25X1
25X1
ships and craft, auxiliaries, and service craft
o is armaments
supplied to the Third World include T-55 medium
tanks deliveried to India, Egypt, Libya, Syria, and
Iraq, among others. Infantry weapons have also been
extensively exported to Third World clients
25X1 Romania. Bucharest's arms sales program is the least
influenced by Soviet direction-or wishes-of any of
the Warsaw Pact countries,
25X1
25X1
25X1
China to Egypt.
even though the rest of Egypt's former Warsaw Pact
allies suspended arms trade with Cairo in 1975, the
Romanians continued and even expanded arms sup-
ply Romania also acts
as a broker for MIG-21 spare parts shipments from
military equipment, and war machinery,
The Foreign Trade Directorate (DCE-Directia de
Comert Exterior), possibly related to the foreign trade
enterprise Romtehnica within the Ministry of Nation-
al Defense, handles the export and import of arms,
The DCE is
subdivided into geographic sections. A representative
of the DCE is usually attached to the Romanian
Embassy in countries that buy military equipment
from Romania. Trade agreements are negotiated by
military attaches or special visiting delegations. The
directorate has close connections with Romanian en-
terprises and factories that manufacture military
goods such as light infantry arms, torpedo boats,
Military production facilities in Romania are operat-
ed by the Ministry of Machine Building Industry with
the cooperation of the Ministry of National Defense
(MND),
These facilities are run in conjunction with
and under the cover of Romanian machine-building
factories. The Romanian armaments industry is char-
acterized by its diversification, its partial integration
with civilian industry, and its reliance on foreign
technology in many fields of specialization. The Ro-
manians have created research institutes designed to
25X1
improve their own technical knowledge, but we be-
lieve efforts to achieve the current state of the art in
military technology will be long and costly.
Romania produces
an expanding range o military equipment including
armored personnel carriers, tanks, truck-mounted
rocket launchers, antitank launchers, artillery, infan-
try weapons, and ammunition. Recent naval ship
production is limited to various types of coastal patrol
craft (some of which are built under license agree-
ments with the People's Republic of China) and mine
warfare craft. Romania is assembling French helicc25X1
ters and producing small British transports under
license,
Hungary.
Hungary ranks fifth among East European arms. 25X1
suppliers in the sale of military equipment to the 25X1
Middle East; only Bulgaria and East Germany have
sold less to Middle Eastern clients. The Middle East
nonetheless accounts for 85 percent of Hungaria25X1
military sales worldwide, largely because of Lib;
orders. Libya is Budapest's most important buyer,
having purchased a $300 million early warning radar
system. Iraq is also an important buyer.
Bulgaria. The Bulgarian armaments indus25X1 [sists
of industrial enterprises and research estabiisnments
subordinate to the Metallurgy and Chemistry State
Economic Trust (DSO Metalkhim) of the Ministry of
DSO Metalkhim employs about
70,000 persons in a chemical plant, a scientific 25X1
25X1
25X1
25X1
Top 25X1
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
research institute with an experimental plant, a scien-
tific-production enterprise, a foreign trade organiza-
tion, and about 10 small plants. DSO Metalkhim is
the largest state economic trust in Bulgaria, with 65
to 70 percent of its production for military use.F
The foreign trade organization KINTEX represents
DSO Metalkhim abroad. It has about 200 employees,
most of them trade specialists.
KINTEX han-
dles all Bulgarian exports and imports of military
equipment z plus some civilian foreign trade, but the
latter is probably less than 25 percent of total turn-
over.
The production technology used by DSO Metalkhim
industries is in general 15 to 20 years behind that in
the West, and labor productivity is very low
Despite these shortcom-
ings, DSO Metalkhim is the most profitable state
economic trust in Bulgaria in terms of hard currency
earnings.
weapons and ammunition and is believed to be assem-
bling the SA-7/Grail surface-to-air missile with Sovi-
et help and imported components. Naval ship con-
struction has been limited to coastal patrol rivercraft,
minesweepers, amphibious warfare craft, and small
service and auxiliary units.
East Germany. Fragmentary information indicates
that an organization that may be involved in East
German arms exports, Ingenieur Technischer Aussen-
handel, is in the Ministry of Foreign Trade in East
Berlin. More detailed information is unavailable. F
Africa and a leader in developing and training local
intelligence services, according to usually reliable
sources. the 25X1
types of equipment exported include vehicles, artil- 25X1
l
ll
d
i
i
E
G
h
ery, sma
arms, an
ammun
t
on;
ast
ermany
as
not become an important provider of critical or
sophisticated arms to any recipient. In Sub-Saharan
Africa, where it is the largest East European supplier,
East Berlin has furnished less than 3 percent of the
arms bought from all sources. East Germany's mili-
tary technical assistance program traditionally has
been more extensive than equipment supply.
Production of East German ground forces combat
materiel is limited to infantry weapons, small arms
25X1
25X1
25X1
25X1
ammunition, light and medium trucks, and some 25X1
engineer equipment. The GDR also has extensive
facilities for the production and repair of naval ships.
Production in recent years has included amphibious
warfare ships, minesweepers, patrol craft, and various
types of auxiliary ships. Aircraft production was
terminated in 1961.
Technical Services
East European countries have provided technical serv-
ices to LDCs, again largely to supplement the Soviet
25X1
25X1
25X1
25X1:
East Germany ranks last among Communist countries
in military sales. Nevertheless, it is probably the
largest East European arms supplier to Sub-Saharan
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Top Secret
The East European Role in the Gray Arms Market 3
Bulgaria and Czechoslovakia are extremely active in
the worldwide covert arms market through state
trading companies overtly responsible for normal
trade activity,
Although lacking the industrial base for large-
scale weapons production, Bulgaria has successfully
capitalized on the highly lucrative illicit international
arms trade by combining the roles of arms dealer and
middleman with the long-established Balkan tradition
of smuggling. As a recognized government, Bulgaria
can acquire huge quantities of small arms and ammu-
nition-far more than its domestic needs-from both
the USSR and Western c n
' "Gray arms market" refers to any transfer or offer to transfer
weapons, ammunition, or related military items on other than a
direct government-to-government basis.
' While it is common for states exporting military weapons to
impose some sort of end-use controls, these controls vary widely.
Some suppliers, such as the United States, insist that recipients
agree not to retransfer any weapons without the consent of the
original supplier. Other suppliers assume no responsibility for
the eastern entrance to the Mediterranean.
domestic violence in Turkey, Sofia has sought to keep
a traditional enemy off balance. At the same time, it
appears that Sofia may have been able to curry favor
with Moscow by fostering instability within the coun-
try guarding NATO's strategic southern flank and
25X1
25X1
25X1
In addition to earning hard currency without having
to divert its own scarce industrial resources, Bulgaria
has probably used arms trafficking to pursue Soviet 25X1
Bloc foreign policy goals,
By contributing tote instability and
able, even if politically suspect, deals.
Open-source reports indicate that the state-owned 25X1
OMNIPOL Trading Corporation in Czechoslovakia
offers a vast selection of guns from the huge state-
owned Brno arms complex-Skorpion machine pis-
tols, Model 58 assault rifles, rockets, pistols, and
ammunition. OMNIPOL can also provide artillery
pieces from the Skoda works at Plzen. We believe that
Czechoslovakia asks few questions of buyers and
OMNIPOL treats as a mere formality the end-user
certificate requirements. Prague rarely rejects profit-
been equipped with Czechoslovak arms.
The press has indentified Czechoslovak weapons in 25X1
almost every hot spot in the world, often on both sides
of the conflict. The Nigerian Government and the 25X1
Biafrans both used Czechoslovak weapons in the 25X1
Nigerian civil war as do the Ethiopians and the
Eritrean revolutionaries in their civil war. The guns of
Brno also have been used by nearly every faction in
the Angolan dispute. The Iraqi Government spent 25X1
millions on Czechoslovak weapons to battle Kurdish
rebels armed with the same equipment. Greek Cypriot
fighters and Venezuelan and Bolivian rebels have also
supplement their relatively small military sales pro-
grams by expanding high-quality training and support
to LDC clients. An effort to increase sales is also
Prospects
Eastern European countries, acting with the Soviet
Union, will continue to use their military sales pro-
grams as key elements of foreign policy. Their suc-
cesses suggest that the Warsaw Pact members will
25X1
25X1
25X1
25X1
25X1
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
likely, given Eastern Europe's hard currency needs,
although preliminary military reporting indicates that
East European arms orders were down in the first half
of 1982 and future sales will most likely drop from
1981's record pace.
As an arms supplier to the Third World, Eastern
Europe does not compete directly with the United
States either in terms of clients or in major equipment
exports. East European customers in the Middle
East-Iraq, Iran, Syria, and Libya-are not US
customers. Moreover, Eastern Europe does not com-
pete with the United States in the export of advanced
fighters, missiles, and naval combatants. Future
trends in the high-technology weapons market gener-
ated by the Lebanon and Falklands crises should
reduce even further the weak competitive links be-
tween the United States and Eastern Europe. Never-
theless, because more than 85 percent of East
European military trade is with the politically and
strategically sensitive Middle East, the United States
will continue to maintain a strong interest. US con-
cern will also remain high over any East European
activities as surrogate for Moscow, and over arms
shipments from Bulgaria and Czechoslovakia aimed
at the international terrorist market.
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Appendix
Table A-1
East European Current Account Balances
1980
Current account balance
940
Trade balance
997
Exports
3,056
Imports
2,059
Net invisibles (excluding
255
1980
-1,732
-1,722
5,898
7,620
900
1982-
590
1,050
4,800
3,750
- 30
Net invisibles (excluding
interest)
1982-
475
800
6,900
6,100
1,075
Net interest -910 -1,500 -1,400
1980
Current account balance -2,600
Trade balance -700
Exports 7,400
Imports 8,100
Net invisibles (excluding 300
interest)
Net interest -2,200
Current account balance -2,258
Trade balance -5,720
Exports 5,600
11,320
1981 1982a
559 770
615 700
3,092 3,200
2,477 2,500
287 320
1981
1982,
-2,247
-2,600
-433
500
4,971
5,400
5,404
4,900
479
200
-2,293
-3,300
-1,821
-980
-4,880
-3,181
5,720
5,846
10,600
9,027
4,649
4,028
Net invisibles (excluding 4,542
interest)
1980 1981 19826
-364
-727
-162
279
445
808
4,911
4,877
4,921
4,632
4,432
4,113
-234
-72
20
-409
-1,100
-990
1980
1981
1982 a
-2,399
-818
250
-1,534
204
1,200
6,503
7,216
7,000
8,037
7,012
5,800
-77
25
90
-788
-1,047
-1,040
11 Top Secret
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9 25X1
Next 1 Page(s) In Document Denied
Iq
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Table A-3
East European Administration of Arms Export Programs
Country Organizational Element
DIRPROM, The Directorate of Supply and Procure-
ment within the Federal Secretariat for National
Defense
Czechoslovakia OMNIPOL functions as the official state trade
organization for sales and contracts.
The Central Engineering Directorate (CENZIN) of
the Polish Ministry of Foreign Trade is responsible for
handling Polish arms trade with foreign countries.
The Directia de Comert Exterior-DCE (a foreign
trade directorate) within the Ministry of National
Defense handles the export and import of arms,
military equipment, and war machinery.
Hungarian military exports are handled by the foreign
trade enterprise TECHNIKA, with Hungarian mili-
tary attaches acting as the authorized representatives
of TECHNIKA.
The Bulgarian armaments industry consists of indus-
trial enterprises and research establishments subordi-
nate to the Metallurgy and Chemistry State Econom-
ic Trust (DSO Metalkhim) of the Ministry of Machine
Building. The foreign trade organization KINTEX
represents DSO Metalkhim abroad.
Within DIRPROM a military materiel Export Office
acts as a national-level control point to centralize
Yugoslavia's sales efforts. The defense industry of
Yugoslavia does not have an extensive scientific and
technical base to develop highly sophisticated weap-
ons. Most complex systems are supplied by other
countries.
Czechoslovakia has a capacity to produce large
quantities of military equipment, a reputation for
quality products, and a chronic need for foreign
exchange. Requests for military aid are coordinated
with the Czechoslovak Ministry of Defense.
CENZIN consists of several offices which handle
imports and exports for various regions of the world,
including the Warsaw Pact countries. All sales of
Polish military equipment are coordinated by CEN-
ZIN with the Main Technical Inspectorate of the
Ministry of National Defense.
A representative of the DCE is usually attached to
Romanian embassies in countries with which foreign
military trade occurs. Agreements for military equip-
ment are routed through military attaches or special
visiting delegations. The range of export goods include
light infantry arms, torpedo boats, quartermaster
equipment, vehicles, ammunition, and other
equipment.
Hungary ranks fifth among East European arms
suppliers in the sale of military equipment to the
lucrative Middle East arms market. Libya is Buda-
pest's most important buyer and is largely responsible
for the Middle East accounting for 85 percent of
Hungarian military sales worldwide.
KINTEX handles most of Bulgarian exports and
imports of military equipment plus some civilian
foreign trade, although the latter is probably less than
25 percent of total turnover. KINTEX is also heavily
involved in the private arms market as well.
East Germany We have virtually no information on the organization-
al element responsible for East German exports-
Ingenieur Technischer Aussenhandel-other than its
possible location in the Ministry of Foreign Trade in
East Berlin.
East Germany is a small military supplier. East
Germany's military technical assistance program
traditionally has been more extensive than equipment
supply. East German personnel have assumed respon-
sibility for a growing number of support tasks in Third
World countries.
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
 Top Secret
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9
Top Secret
Approved For Release 2008/08/11: CIA-RDP83B00851 R000400100003-9