ECONOMIC COSTS OF U.S.S.R. SANCTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000601460026-2
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 3
• Document Creation Date: December 20, 2016
• Document Release Date: May 29, 2007
• Sequence Number: 26
• Content Type: MEMO

Approved For Release 2007/&12+lA
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sTATES OF
UNITED STATES DEPARTMENT OF COMMERCE
The Under Secretary for International Trade
Washington, D.C. 20230
MEMORANDUM FOR: Dr. Norman Bailey
Director of Planning
National Security Co
FROM: Raymond J. Waldmagale
Acting Under Secre for International
SUBJECT: Economic Costs of U.S.S.R. Sanctions
You requested an estimate of the economic cost to the U.S.
Government and economy of possible sanctions taken with respect
to the U.S.S.R. as a result of the events in Poland. The
following presents Commerce's analysis of economic costs; also
included are comments on effects on the U.S.S.R. The estimated
costs are yearly costs with no accounting for inflation,
interest lost, etc. The costs reflect lost sales (exports) by
U.S. Industry without taking into account downstream effects.
1. Expulsion of Soviet Commercial Officers in the U.S. and
Recalling U.S. Commercial Officers in Moscow.
The direct cost to the U.S. Government is small. Retaliation
against 28 U.S. company offices in Moscow--if offices closed
down, loss of perhaps $10-15 million investment, and some
administrative costs, plus loss off future business generated
by offices. The indirect costs to the U.S. Government are
difficult to estimate. The major indirect cost is tax revenues
on export sales.
The cost to the U.S. economy is equally difficult to estimate.
The commercial offices do generate trade but estimates vary
from 1% to 10% of U.S./U.S.S.R. two way trade.
2. Halt Exporting of Oil and Gas Equipment.
The cost to the U.S. Government of halting the export of oil
and gas equipment and technology is small (tax revenues on
sales).
The cost to the U.S. economy would be approximately $210
million per year. In 1981 we approved approximately $90
million with $120 million still pending. The pending figure
includes the Caterpillar license for 200 pipelayers. Another
$80 million worth of oil and gas technology cases were denied
in 1981 for the USSR. This $80 million is not included in the
$210 million since it is unlikely that we would approve
technology in the near future.
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SECRET
The effect of halting shipments to the U.S.S.R. will have a
significant short term impact. The U.S. sells the best
equipment, which the Soviets prefer. For certain
applications--corrosive and high pressure environment--the U.S.
has unique capabilities. The Soviets will have some problems
to compensate for the losses. Most of the equipment can be
purchased outside the U.S. (pipelayers, larger diameter pipe,
pumps, etc.).
3. Rescinding International Harvester License.
Cancellation of the IH license will cost $300 million over a
five year period. It will result in a loss of about 300 jobs
and affect the financial standing of IH. The technology is
available from Klaus in West Germany. Little cost to U.S.
Government.
4. Impose Embargo on All High Technology.
Embargo of all high technology will cost the U.S economy
approximately $80 million in 1982. We approve approximately
$200 million per year in validated licenses but only $100
million is classified as "high technology." The rest is oil
and gas equipment.
The Soviet Union will be affected by this move, especially if
supported by our Allies. A multi-lateral embargo would slow
down their economy. Most of the equipment can be acquired from
non-U.S. sources; multi-lateral cooperation is imperative.
5. Total Embargo of Exports and Imports (1982).
Cost to U.S. Government approximately $1 billion to $4 billion
because of price supports for agricultural programs.
Cost to U.S. economy is projected at $3.7 billion in export
sales plus $1 billion to $2 billion in governmental outlays.
Exports are divided into $2.5 billion in agricultural
commodities and $1.2 billion in non-agricultural commodities.
The import embargo costs are difficult to estimate since this
could result in liabilities due to broken contracts. The U.S.
imports approximately $450 million from the U.S.S.R., mostly in
raw materials. Firms requiring these commodities must find
alternate suppliers, especially in strategic minerals.
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The top ten U.S. imports from the USSR are:
1980
Commodity
Value (Millions)
Ammonia
95
Gold Bullion
Palladium
9
55
Uranium flourides
35
Nickel
35
Metal coins
18
Palladium bars
12
Naphtha
10
Uranium compounds
9
Platinum bars
7
453
Our dependency on the U.S.S.R. for the critical minerals
whether among top 10 or not was in 1980:
Chromite
28%
Graphite
6%
Nickel
3%
Platinum
1%
Palladium
26%
Titanium
11%
The highest dependency is in chromite, palladium and titanium
sponge. U.S. suppliers would have to seek supplies from South
Africa, the Phillipines (chromite) to make up for the
disruptions at premium prices. The disruptions would affect
catalytic converters for cars and specialty steel production,
but supplies can be compensated from within 3 to 9 months. The
other dependencies are small and can be compensated from within
3 months.
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