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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00443R000200330003-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 51
• Document Creation Date: January 12, 2017
• Document Release Date: October 1, 2010
• Sequence Number: 3
• Publication Date: April 1, 1984
• Content Type: REPORT

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Directorate of
Intelligence
Secret
USSR Monthly Review
-Seeret
SOV UR 84-005X
April 1984 /~
Copy 5 9 0
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Directorate of
Intelligence
USSR Monthly Review
The USSR Monthly Review is published by the
Office of Soviet Analysis. Comments and queries
regarding the articles are welcome. They may be
directed to the authors, whose names are listed in the
Secret
SOV UR 84-005X
April 1984
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Secret
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Contents
The USSR and Perspective
Latin America
Standing in the shadow of US political, economic, and military
power, Latin America has been a difficult target for major or
sustained Soviet inroads. Nevertheless, over the past 25 years, the
USSR has made some significant gains: it has formed a strong-
albeit costly-patron relationship with Cuba, established diplomatic
relations with all the key regional states, and expanded trade tenfold
since 1970, primarily through its dealings with Argentina, Brazil,
and Peru. More recently, the Soviets have exploited revolutionary
ferment in Central America, establishing close ties to the Sandinista
regime in Nicaragua and providing assistance to the insurgents in El
Salvador.
Since the US intervention in Grenada, Soviet propaganda has
frequently raised the specter of a similar US move against Nicara-
gua. While Moscow is evidently determined to avoid provoking
direct US military action against the Sandinista regime, it has
provided increasing amounts of military and economic assistance to
bolster the government in Managua.
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Secret
SOV UR 84-005X
April 1984
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The level of Soviet intelligence activity in Latin America directed
toward the support of foreign policy objectives-as opposed to
information gathering-is low when compared with that in some
other regions of the world. This apparently is because Moscow has
proxies-principally Cuba-that regularly undertake political influ-
ence operations whose purposes largely coincide with Soviet objec-
tives. The Soviets also wish to avoid antagonizing the most impor-
Soviet economic ties to Latin America have expanded rapidly in
recent years, but the trade relationship has been mainly one sided.
Moscow turned to the region for essential agricultural commodities
to offset domestic shortfalls, and growth in trade with the USSR has
become a highly profitable venture in the last few years, especially
for Brazil and Argentina. The USSR has enjoyed only limited
success in expanding its exports to the region, however, even when
goods were offered on favorable terms.
Soviet Economic Aid to Cuba: Patterns and Prospects I 23
Moscow's commitment to sustain a troubled Cuban economy has led
in recent years to rapidly rising economic costs for the USSR. As
long as Moscow continues to derive significant political and military
benefits from its preeminent Third World client, we judge that the
USSR will continue to provide large amounts of aid to Cuba. The ?
Kremlin has made it clear to the Cubans that there are limits to So-
viet largess, however, and we believe that, unless the pricing
formulas used in Soviet-Cuban trade are altered, the annual aid
flows will decline slightly over the next two years.
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Other Topics
USSR-South America: Looking Ahead
opportunities for expanded Soviet influence in the region.
Moscow's pessimism about prospects for revolutionary change in
South America suggests a continued focus on expanding commercial
and political ties with Argentina, Brazil, Bolivia, and Peru. The
Soviets will not jeopardize good state-to-state relations by offering
strong public support for local radicals but are likely to continue
offering such elements discreet encouragement to undermine pro-
US regimes. Suriname, Guyana, and Chile may offer the best
The USSR's Favorable Hard Currency Position
restricting growth in imports.
In 1983, as in 1982, the USSR succeeded in holding down its hard
currency borrowing needs by boosting military deliveries to less
developed countries, increasing the volume of oil exports, and
The USSR's New Long-Term Energy Program
Moscow's recently published 20-year energy program is an ambi-
tious set of objectives and plans for improving all aspects of the
Soviet energy system, but it appears to rely heavily on improvements
in capital and labor productivity that we believe are beyond reach.
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Soviet involvement in Cuban civil defense has increased over the
past few years as Havana has tried to improve the civilian sector's
preparedness for a major military crisis. Although the future of the
effort is unclear, a strong civil defense program would contribute to
overall Cuban defensive capabilities. The Soviets probably view
support of this effort as a low-cost means of extending influence
throughout the Cuban Government.
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Possible Changes in Soviet Export Policy
Prospects for Sino-Soviet Consultations
Viewpoint Party-Military Relations: Who Is in Charge?
An examination of recent Soviet speeches and events suggests
that-contrary to speculation Hthe
military has not encroached on the prerogatives o t e party
leadership
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The USSR and Latin America
Perspective 25X1
Standing in the shadow of US political, economic, and military power,
Latin America has been a difficult target for major or sustained Soviet
inroads. Nonetheless, over the past 25 years the USSR had made some sig-
nificant gains: it has formed a strong-albeit costly-client relationship
with Cuba, establi?hed diplomatic relations with all the key regional states,
and expanded trade tenfold since 1970, primarily through its dealings with
Argentina, Brazil, and Peru.
Because Latin America is geographically remote from Soviet borders,
however, it has not been a priority security concern for Moscow except
when Cuban-related issues have promoted major US-Soviet confrontations,
as in the 1962 missile crisis. The main Soviet objectives there have been to
neutralize US influence in the region, promote leftist change, and cultivate
beneficial state-to-state relationships.
Since the demise of the Somoza government in Nicaragua during the late
1970s, the USSR has exploited the growing opportunities for revolutionary
change in Central America. In Nicaragua, the Soviets have established an
arms supply relationship and have recently begun providing oil to the
Sandinista regime-a move that could signal a greater and more open
Soviet commitment. Moscow also continues its aid and training efforts to
support insurgents in El Salvador.
Apart from its commitment to leftist change, Moscow views its activities in
Central America as a relatively inexpensive way of diverting US attention
and resources from other regions of the world more central to Soviet
security concerns. The Soviets also recognize that tensions in Central
America can raise controversy in the United States and sow divisions
between Washington and its allies. Toward this end, Soviet media and
propaganda have focused on US support of the anti-Sandinista insurgents,
the US military buildup in Honduras, and the war in El Salvador.
1 Secret
SOV UR 84-0O5X
April 1984
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Soviet Diplomatic Relations in Latin America and the Caribbean
United States
North
Atlantic Ocean
Th
as
ff
e
a are
Dominican
f R?iblka
Haitie
p_- - (~ Antigua
Jamaica Si. Christopher(E) nd Barbuda
South
Pacific Ocean
Established since January 1969
Established before 1969
Never established
a Relations maintained 1945-47; no
missions exchanged since.
b Relations established April 1945; legation
opened in Moscow but closed July 1946; no
missions have been exchanged since.
`Relations established 1944; broken off 1947;
reestablished 1964; broken off again 1973
after ouster of Allende.
dRelations broken off following US intervention
in October 1983.
Falkland Islands
(Islas Malvinas)
(administered by U.K..
claimed by Argentina)
South
Atlantic Ocean
Secret 2
(aD ominica
e
St. Vincent and faktl cia
the Granatlines 4J iitarb dos
COrenada I?
ID Trinidad and Tobago
Boundary representation is
not nacesearily authoritative.
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Secret
While seeking to. exploit revolutionary ferment, the Soviets have proceeded
with some degree of caution. For example, Moscow has tried to play down
the extent of its arms supply relationship with Nicaragua. The USSR's
overriding concern is that Soviet actions could prompt US countermeasures
against Nicaragua or Cuba-Moscow's most important assets in the
Western Hemisphere. The US intervention in Grenada has reinforced this
concern.
Nonetheless, Moscow has publicly signaled its growing concern and
sensitivity to US policy in Nicaragua. General Secretary Chernenko met
with Sandinista chief Daniel Ortega in mid-February and condemned US
interventionism in Central America. He also mentioned Washington's
"undeclared war" on Managua in a 29 March dinner speech. High-level
Soviet concern was also reflected in a formal protest note-personally
delivered by Foreign Minister Gromyko-over the March mine incident
involving a Soviet tanker in Nicaraguan waters (see "Soviet-Nicaraguan
Relations After Grenada").
Cuba remains the cornerstone of Moscow's position in Latin America.
Havana receives more financial support-currently some $4-5 billion a
year-than any other Soviet Third World client (see "Soviet Economic Aid
to Cuba: Patterns and Prospects"). This large investment has paid consi-
derble dividends for Soviet foreign policy; Cuba has promoted Soviet
interests within the Nonaligned Movement, collaborated with Moscow in 25X1
Angola and Ethiopia, and served as a conduit and springboard for Soviet
efforts to further penetrate Latin America.
As elsewhere, however, Moscow does not want its support of leftist parties
in Latin America to jeopardize important state interests. Indeed, the
Soviets' state-to-state relationships in the region have brought important
benefits, particularly in the area of trade (see "Soviet Economic Relations
With Latin America"). Moscow has developed major trade relationships
with Argentina and Brazil, which account for 90 percent of Soviet trade in
the region. Although Latin America has accounted for only 2 to 3 percent
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of total Soviet trade in recent years, food imports from Latin America have
played an important part in Moscow's efforts to avoid excessive depend-
ence upon US suppliers. In 1980, for example, the USSR upped its grain
purchases from Argentina tenfold to offset the US grain embargo imposed
after the Soviet intervention in Afghanistan.
The Falklands war opened up new opportunities for Moscow to pursue its
longstanding goal of undermining and neutralizing US influence in the
region. Soviet propaganda focused on Washington's backing of the British
"colonialists" in an effort to arouse latent anti-US sentiments. The US
move in Grenada has also prompted a good deal of Soviet propaganda and
disinformation (see "Soviet Active Measures in Latin America").
In addition to Moscow's continued relationship with all the Latin Ameri-
can Communist parties and its material assistance to insurgents in Central
America, other indicators attest to a concerted, long-term Soviet effort to
cultivate influence in the region. The USSR, for example, has greatly
expanded its number of Spanish-language publications and is working to
enhance the expertise of diplomats and media personnel assigned to Latin
America. in recent years the Soviets
have established two new Novosti centers-in Nicaragua and Argentina-
and three regional bureaus for the journal Latinskaya Amerika. In the
early 1980s the Soviets also established a visitors' program through which
Latin American journalists and opinionmakers are invited on all-expense-
paid trips to the USSR with the tacit understanding that they will portray
their visits in a favorable light. These innovations and changes signal
Moscow's long-term intention of increasing its visibility and undercutting
Washington's position among its Latin neighbors.
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Secret
Soviet-Nicaraguan
Relations After Grenada
Since the US intervention in Grenada, Soviet propa-
ganda has frequently raised the specter of a similar
US move against Nicaragua. While Moscow is evi-
dently determined to avoid provoking direct US mili-
tary action against the Sandinista regime, it has
provided increasing amounts of military and economic
assistance to bolster the government in Managua.
Soviet Policy Toward Managua
Since the Sandinista revolution of July 1979, the
Soviets, mindful of the value of a leftist regime in
Managua for promoting leftist change in Central
America, have had a strong interest in consolidating
the Sandinistas' position. At the same time, memories
of US efforts to oust Castro in the early 1960s have
led the USSR to proceed with care in Nicaraguan
The Soviets have avoided any gestures or agreements
that could be construed as a commitment to military
defense of the Sandinista regime. Even though the
Sandinistas are approaching their fifth year of power,
Moscow has yet to send a high-level delegation to
Managua. By way of contrast, in February 1960-
just 13 months after Castro seized power-then Dep-
uty Premier and Politburo member Anastas Mikoyan
was in Havana to sign a host of agreements that
symbolized the emerging Soviet-Cuban relationship.
Most of the authoritative Soviet statements on Nica-
ragua have focused on Managua's ability to defend
itself, reflecting Moscow's apparent desire to avoid
tying its prestige to the survival of the Sandinistas.F_
Moscow's overriding concern reportedly has been that
Washington might be provoked to undertake direct
US countermoves against Nicaragua, or even Cuba-
the USSR's most important asset in the Western
Hemisphere. Even before the Grenada invasion,
Soviet officials
in Latin America maintained that the United States
was seeking a pretext to invade Nicaragua.
Military Assistance
Moscow's cautious approach toward Nicaragua has
been most apparent in the way the Soviets have
handled their arms relationship with the Sandinistas.
From the first secret visit of Soviet generals to 25X1
Managua just one month after the Sandinista take-
over-Moscow has sought to obscure and play down
its military dealings with Nicaragua. There have been
no public military supply agreements between the
Soviets and Nicaraguans, although it is likely that
such agreements exist secretly; captured documents
from Grenada, for example, revealed the existence of
such accords between Moscow and the Bishop regime.
Although deliveries of Soviet military equipment have
been under way since 1981, this equipment frequently
is transported by third parties. The initial delivery of
T-54/55 tanks, for example, was made by Algerian
ships. The most recent delivery of Soviet PT-76
amphibious tanks-in March 1984-was handled in a
similar fashion with Bulgarian ships transporting the
equipment. Small arms and military-related equip-
ment, however, are often transported by Soviet ves-
sels.
While taking steps to minimize and obscure their
direct involvement, the Soviets nonetheless seek to
provide the Sandinistas with enough military assist-
ance to sustain and consolidate their power. Some 100
Soviet military and security advisers continue to work
with the Sandinista security service and the general
staff. Moscow presumably views such assistance as
essential in the struggle against the anti-Sandinista
insurgents, and as a way of further consolidating the
leftist regime in Managua against potential domestic
political opponents
Economic and Diplomatic Support
While playing down their military aid to Managua,
the Soviets have trumpeted their food and relief
donations. Soviet media seek to contrast Moscow's
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generosity with US cutbacks of aid and alleged
attempts to destabilize the Nicaraguan economy.
Overall, the USSR has offered some $250 million in
aid since 1981 and is currently negotiating a new
$150 million accord, most of which is for a long-term
dam project. To date, some $125 million of Soviet aid
has been drawn. Other Soviet assistance includes
agricultural machinery, road construction equipment,
The Salvadoran Connection
Since Washington identified Nicaraguan support for
the Salvadoran guerrillas as the reason for US sup-
port of anti-Sandinista insurgents, Moscow has been
circumspect in its dealings with the Salvadorans but
continues to facilitate the insurgents' efforts to obtain
trucks, and food.
The USSR has promoted international support for the
Sandinistas through diplomacy and media campaigns,
particulary since the Grenada episode. These efforts
have focused largely on Mexico, which has been
sympathetic to the Sandinista cause.
lauded President de la Madrid's position on Central
America.
The Soviets also have tried to drum up international
criticism of US involvement with the Nicaraguan
insurgents. Following release of the Kissinger Com-
mission report in January, the Soviets launched a two-
week media blitz on the report's recommendations for
increased military aid to the Salvadoran Government
and its implicit call for continued support of the
Nicaraguan insurgents. Similarly, the Soviet press has
highlighted international criticism of the US role in
mining Nicaraguan harbors. Pravda also carried an
interview with Sandinista junta coordinator Daniel
Ortega, in which he described the impact of US
pressure on the Nicaraguan economy
Moscow has
also tried to "internationalize" the Nicaraguan situa-
tion by seeking Third World "volunteers" to fight
alongside the Sandinistas in the event of a US
invasion. This would presumably reflect Managua's
"broad" external support in its battles with Washing-
Despite all this, Moscow has not officially endorsed
the efforts by the Contadora group to negotiate a
regional settlement. This may reflect a Soviet concern
that such a regional settlement might limit Mana-
gua's maneuverability and policy options.
The USSR has also backed the guerrilla cause with
international propaganda campaigns and promotion
of local "Solidarity With El Salvador" committees in
Eastern Europe and Third World countries. Propa-
ganda efforts also have been directed at the Salvador-
an armed forces.
As in the case of Nicaragua, the Soviets have also
conducted a propaganda campaign to garner interna-
tional support for the Salvadoran insurgents and to
focus attention on US involvement in El Salvador.
Soviet commentary, for example, described the recent
Salvadoran elections as stage-managed by Washing-
ton and claimed that many citizens did not vote as a
protest against the "disgraceful farce." Authoritative
statements continue to support Cuban and Nicara-
guan calls for a negotiated settlement in El Salvador.
Straws in the Wind?
Despite the Soviets' continued low profile in Nicara-
gua itself, the USSR has signaled greater concern and
interest in Nicaragua's situation. General Secretary
Chernenko, for example, met privately with Daniel
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Ortega following the Andropov funeral, an opportuni-
ty not afforded Ortega by Andropov at the time of
Brezhnev's funeral in November 1982. Soviet com-
mentators described the meeting as a sign of Mos-
cow's solidarity with newly liberated peoples, "espe-
cially those who are forced to repel attacks from
imperialist forces," adding that "actions and deeds
will follow." Chernenko also noted Washington's "un-
declared war" on Nicaragua during a dinner speech
on 29 March. High-level Soviet concern over develop-
ments in Nicaragua was also suggested by the fact
that Foreign Minister Gromyko personally handed to
US officials the Soviet protest note over the Lugansk
Another indicator of Moscow's growing concern and
interest is an apparent decision to provide Managua
with oil. The first delivery, in December 1983, was
apparently intended to help offset an anticipated
shortfall. Since then Soviet tankers have made several
additional oil deliveries.
Moscow has provided an
estimated 900,000 barrels of crude oil and refined oil
products. This represents an estimated 58 percent of
Nicaraguan consumption for the first four months of
1984; payments are to be made in sugar and coffee.
Past comments from Soviet officials clearly indicate
Moscow's desire to avoid having to underwrite yet
another Latin client. Cuba currently receives over $4
billion a year from the USSR. Compared to Cuba,
however, Nicaragua has a smaller population (2.9
million versus 10 million), is less industrialized, and
would require less financial support to sustain its
economy. Moscow could supply Nicaragua with all of
its current oil needs, for example, by exporting only
some 14,000 barrels per day-equivalent to roughly
$150 million a year. Thus far, the Soviets have not
offered. the concessionary prices that have been a
crucial element in Moscow's economic relationship
with Cuba. But looking back at their experience in
Cuba, the Soviets may view growing economic ties as
a pragmatic way of strengthening their position and
influence in Managua and one that would not under-
cut Moscow's desire to maintain a low profile on
military aid.
The upcoming fifth anniversary of the Sandinista
revolution will presumably shed some light on Soviet
perceptions of Nicaragua. The visit of a high-level
delegation headed by a ranking Politburo member,
such as Aliyev or Gorbachev, would clearly signal
Moscow's growing interest in-and commitment to-
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Secret
Soviet "Active Measures"
in Latin America
Moscow's use of active measures' to advance its
foreign policy goals in Latin America appears far less
extensive than in some other regions of the world. For
example, forgeries and disinformation do not appear
nearly as frequently as they do in Europe or Africa.
Also, Soviet political influence operations in Latin
America are generally mounted on a smaller scale.
Only within the pro-Soviet Communist parties and
front groups of Latin America does the Soviet Union
appear to be operating in a consistently determined
manner.
We believe the comparatively low frequency and
intensity of Soviet active measures in Latin America
can be explained in large part by the significant role
played in this regard by Moscow's surrogates in the
region, principally Cuba and Nicaragua. The Soviets
may also believe that active measures are less suited
than traditional diplomacy to advancing their policy
objectives in this region. Apart from the demands of
the USSR's unique relationships with Cuba and
Nicaragua, the overriding Soviet objectives in Latin
America are supporting the Central American revolu-
tion, undermining US influence in the region, and
encouraging nonalignment or a pro-Soviet stance.
These predispositions notwithstanding, Moscow has
undertaken active measures in a number of Latin
American countries, and we have sufficient evidence
to describe the nature and extent of this activity.
The Role of Soviet Proxies
So far the Soviets appear to have allowed Cuba to
assume most of the responsibility for active measures
in the region. The other Soviet proxy in the region is
Nicaragua. There is evidence that some Cuban opera-
tions are conducted independently.
one reason or t to
lack of close Soviet-Cuban cooperation on active
measures is that the comparatively informal Cuban
approach to such operations is incompatible with the
' For a definition of active measures, see the inset on this page.
The term active measures is a translation of the
Russian phrase aktivnyye meropriyatiya. Although it
does not include paramilitary operations, it covers a
broader range of activities than the US term covert
action. It refers to certain. campaigns undertaken by
the intelligence services or other institutions of the
Soviet Government and Communist Party in support
offoreign policy objectives. Distinct from information
gathering and counterintelligence, active measures
constitute an unconventional adjunct to traditional
diplomacy; they are an offensive (that is, "active')
instrument of Soviet foreign policy and include:
? Forgeries.
? Oral and written disinformation.
? Manipulation of the local media.
? Use of local Communist parties and front
organizations.
? Manipulation of mass organizations and non-
Communist political parties.
? Clandestine radiobroadcasting.
? Destabilizing economic activities.
? Military deception or threats.
? Use of agents of influence.
? Other political influence operations.
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The concept of active measures does not encompass
overt Communist propaganda. Similarly, we do not
consider as active measures press placements which 25X1
are clearly pro-Soviet and explicitly attributed to
TASS, Novosti, or other Soviet institutions or per-
sonnel. Although some past analysis has employed a
somewhat broader definition, the term active meas-
ures in this study refers to deceptive Soviet attempts
to influence policies of foreign governments and the
political opinions of both governments and publics.
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more centralized Soviet style. Whereas Soviet active
measures policy is formulated at the highest levels of
the party and strictly followed by officers abroad,
Cubans in the field have much more freedom to
improvise operations.
IICastro does not wish to appear a "mouthpiece"
for the USSR should an operation backfire.
The Sandinistas use techniques similar to those of the
Cubans and have independently established interna-
tional solidarity and front groups, such as the Anti-
Imperialist Tribunal of Our Americas, to elicit sup-
port for Nicaragua and to promote criticism of US
policies in Latin America. Managua also originates
and repeats disinformation about US activities to
complement the efforts of such groups. In December
1983, for example, the Sandinistas reprinted a story
alleging US use of chemical weapons during the
intervention in Grenada.
Nonetheless, the independent active measures opera-
tions of Cuba and Nicaragua are almost always in
accordance with Soviet interests in Latin America. In
the Soviet view, these operations are perhaps suffi-
ciently numerous and effective to allow the Soviet
Union to devote most of its own active measures
resources to other continents.
Soviet Activites
In Latin America, Moscow undertakes active meas-
ures both in coordination with Havana and on its own.
There is evidence, for example,
coordination between the Soviets and Cubans in
planning active measures aimed at supporting the
insurgents in El Salvador
An examination of those active measures that Mos-
cow conducts for itself suggests that the Soviets
distinguish between at least two groups of countries
when planning such operations in Latin America. In
1982 the chief of the Foreign Policy and International
Relations Department of the USSR's Latin America
Institute, Anatoliy Glinkin, stated that the "key"
countries of the region are "Brazil, Mexico, Argenti-
na" followed by "the countries of the so-called second
echelon: Colombia, Venezuela, Peru.'
The evidence suggests that, in the key countries of
Brazil, Mexico, and Argentina, Moscow prefers to
maintain correct relations because it has important
interests at stake, especially that of improving bilater-
al trade. Since active measures play a minimal role in
achieving this objective and since the exposure of any
covert operation could damage state-to-state relations,
the Soviets largely avoid activities that entail this risk.
Nonetheless, the Soviets are willing to conduct active
measures in the key countries in certain circum-
stances. During the Falklands campaign, for example,
a forged US Defense Department document was
surfaced-probably by the Soviet Union-that aimed
at worsening US-Argentine relations. In Mexico, the
USSR uses international and local fronts to push pro-
and other active measures.
Communist, anti-US lines.
In the "second echelon" nations the Soviets appear
even more willing to undertake such operations. Their
efforts, however, are largely confined to supporting
pro-Moscow leftist parties-extensively in Peru, for
example-and attempting to covertly stage anti-US
demonstrations. Moscow also tries to cultivate assets
in the local media. In other countries, including
Suriname, Jamaica, Ecuador, and Costa Rica, the
USSR makes use of disinformation, press placements,
Effectiveness of Soviet Active Measures
Soviet active measures in Latin America have several
advantages, including the chance to capitalize on the
open exchange of ideas characteristic of free societies.
In these countries Moscow can readily identify groups
that can be exploited or manipulated and disseminate
Soviet views through a variety of channels. In promot-
ing its objectives, Moscow typically employs certain
standard themes. First, it continually boasts that the
Soviets have no colonial tradition in the Western
sense. Moscow attempts to use this supposed anti-
colonial history to present itself as the defender of the
"oppressed" nations of the world. Moreover, much of
Soviet propaganda in Latin America is aimed at
contrasting Soviet behavior with the alleged excesses
of past and present US "imperialism" in the region.
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To a limited degree, this image of a benevolent USSR
and an evil United States is accepted in some Latin
American circles.
These advantages notwithstanding, Soviet active
measures efforts in Latin America are impeded by
other characteristics of the operating environment.
The most important of these is that Communist
ideology in general and Soviet atheism in particular
do not serve to advance Moscow's influence in this
overwhelmingly Catholic region. Moreover, Moscow
apparently is sensitive to the risk that exposure of any
active measures operations in these relatively open
societies could contradict the "peace-loving" image
that Moscow tries to project through the more con-
ventional instruments of its foreign policy program for
Latin America. Exposure could damage more funda-
mental Soviet objectives than those served by particu-
lar active measures programs
It is difficult in any event to evaluate the scope and
effectiveness of Soviet active measures in this or any
other region of the world. Our knowledge of these
operations is incomplete, and, more important, the
best active measures-like the "best" examples of
currency counterfeiting-are those that go undetect-
ed. Also, since active measures are carefully coordi-
nated with other foreign policy instruments, it is
difficult to discern the exact degree of influence of a
particular operation. Assessing the effectiveness of
Soviet efforts of this sort is particularly difficult in
Latin America because of the generally low-key na-
ture of the initiatives. Many are of the "gray" variety,
such as making attributed press placements and pro-
viding overt guidance of local Communist parties.
The impact of Soviet active measures in Latin Ameri-
ca is mixed. Those of the gray variety often have little
or no impact owing to the lack of credibility accorded
to the Soviets generally and to certain Latin Ameri-
can media vehicles and political organizations that
peddle the Soviet line. Others, such as Moscow's
active measures support of the Salvadoran insurgency,
have indeed furthered Soviet foreign policy objectives.
However, as much as Moscow attempts to mitigate it,
the prevailing perception in many less developed
countries is simply that the USSR-as a superpow-
er-is bent on furthering its own aims at the expense
of less powerful nations.
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Soviet Economic Relations
With Latin America
Soviet economic ties to Latin America have expanded
rapidly in recent years, but the trade relationship has
been mainly one sided. Moscow turned to the region
for essential agricultural commodities to offset domes-
tic shortfalls, and growth in trade with the USSR has
become a highly profitable venture in the last few
years, especially for Brazil and Argentina. The USSR
has enjoyed only limited success in expanding its
exports to the region, however, even when goods were
offered on favorable terms.'
Emerging Trade Patterns
Soviet trade with Latin America has always been
unbalanced, with imports exceeding exports by a wide
margin. Since 1979 this imbalance has grown as sharp
increases in Soviet purchases of agricultural products
from the region have resulted in large Latin American
trade surpluses (see table 1). The ability of Latin
American countries to supply Moscow with large
quantities of desired agricultural products ensures
that the region plays an important role in total Soviet
trade with the less developed countries (LDCs). The
region has accounted for 18 to 26 percent of the
USSR's trade with LDCs in the last several years but
only 2 to 3 percent of global Soviet trade.' This trade
has been highly concentrated, however, with Argenti-
na and Brazil now accounting for roughly 90,percent
of total Soviet-Latin American trade.
Agricultural Imports Dominate. The USSR's attitude
toward Latin America as a supplier of agricultural
products has changed radically since 1979. Prior to
that time, Latin America was largely a residual
' Moscow's economic relations with the Marxist regimes in Nicara-
gua and Cuba differ from those with other Latin American
countries and are discussed in separate articles. Trade statistics in
this article do, however, include trade with Nicaragua.
' The importance of these economic ties is understated because
Soviet trade statistics do not include all Latin American trade
partners or all transactions. Significant Soviet imports such as
bauxite and alumina from Jamaica and sugar from the Dominican
Republic are not reported in Soviet data. Soviet reporting also
excludes oil swap deals with Venezuela whereby Caracas supplies
Cuba with oil while Moscow meets some of Venezuela's commit-
supplier to the USSR, supplementing imports from
the major Western exporters, particularly the United
States. The January 1980 US partial embargo on
exports of grain and other agricultural products to the
USSR forced Moscow to look to other suppliers for
essential agricultural imports. Consequently, the
USSR's imports of these commodities from Latin
America rose dramatically, pushing total imports
from less than $800 million in 1979 to over $4 billion
just two years later (see table 2). Argentina, which
had previously provided 10 percent or less of total 25X1
Soviet grain imports, supplied 36 percent of total
Soviet imports in 1981 and 23 percent in 1982. To
assure access to guaranteed supplies of essential com-
modities, Moscow has signed Long-Term Agreements
(LTAs) with both Argentina and Brazil for the pur-
chase of grain, meat, soybeans, soybean meal, and
Total Soviet imports from Latin America have tended
to fluctuate over time because imports of agricultural
commodities are used to supplement domestic agricul-
tural production and to compensate for domestic
production shortfalls. Following years of poor domes-
tic agricultural production-such as 1972, 1975, and
1979-81-imports increased. Conversely, when do- . 25X1
mestic production improves, imports seem to fall
fairly quickly. Improved domestic agricultural output
in 1982, for instance, allowed the USSR to reduce
imports that year to a level 40 percent below that for
1981. We do not expect Soviet purchases to increase
in 1984, but Moscow's desire to retain diversified
sources of agricultural imports, especially for grain,
ensures that the USSR's purchases from Latin Amer-
2~DAI
In contrast to the robust trade that has developed in 25X1
farm products, imports of nonagricultural commod-
ities account for only 2 percent of total Soviet pur-
chases from the region. Most of these imports consist
of raw materials-primarily tin from Bolivia and lead
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Table 1
USSR: Trade With Selected Latin American Countries,
1970-82
1975
1981
Exports
Imports
Exports
Imports
Exports
Imports
Exports
Imports
Exports
Imports
Total non-Communist LDCs a
1,183
1,241
2,649
4,089
5,306
7,667
6,587
10,450
7,340
9,118
9
79
204
1,067
155
2,293
146
4,207
396
2,497
Argentina
2
31
15
408
47
1,790
43
3,297
38
1,746
Brazil
3
23
130
421
34
389
23
742
248
573
Peru
NEGL
NEGL
39
125
5
16
18
31
20
15
0
3
4
13
8
31
14
13
4
26
NA
NA
NA
NA
NEGL
8
7
8
51
8
a Excludes Soviet exports to the LDCs which are not specified by
country; these are believed to consist largely of arms. Thus the
actual level of trade with both Latin America and all LDCs is
understated.
and zinc from Peru. Despite repeated claims that
Moscow provides a market for LDC exports of non-
traditional commodities, imports of manufactured
commodities are almost negligible. They were under
$30 million in 1982 and consisted almost entirely of
steel products from Argentina and Brazil and chemi-
cals from Argentina. In contrast, 17 percent of Latin
American exports to the Developed West in 1982
consisted of manufactured commodities including a
7-percent share for exports of machinery and trans-
port equipment.
In the last few years, Soviet officials have expressed
some interest in the purchase of Latin American
manufactured goods but have yet to follow up with
large purchases:
? Brazilian firms are to participate with the Soviets in
the construction of the Kapanda Dam and hydro-
power station in Angola.
In the past, the Soviets have shown a preference for
purchasing from established trading partners. Conse-
quently, if the recent signs of interest in Latin Ameri-
can sources of manufactured commodities are trans-
lated into large or sustained purchases, it would be a
marked departure from past practices.
Slow Export Growth. In constrast to imports, Soviet
penetration of Latin American markets has remained
small, accounting for only about 5 percent of reported
Soviet exports to LDCs.3 Equally important, Soviet
exports to Latin America have fluctuated considera-
bly since the early 1970s, largely in proportion to the
' A large share of reported Soviet exports to the LDCs is not
specified by partner country. If this residual-believed to be largely
arms exports-were included, the share of Latin American trade in
total Soviet exports to the LDCs would be in the range of 3 to 4 per-
cent because the region is only a minor recipient of Soviet arms
? Small starting devices manufactured in Brazl are
being used on the Siberia-to-Western Europe gas
pipeline.
? The Soviets have expressed interest in Mexican oil
technology.
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Table 2
USSR: Imports From Latin America
1970
1975
1976
79
1,067
869
657
772
796
2,293
4,207
2,497
72
995
806
528
656
688
2,142
3,933
2,350
0
417
277
70
313
219
1,163
2,384
1,184
0
89
330
145
7
21
210
576
418
Sugar
0
259
0
0
0
15
169
130
145
Meat
0
33
4
42
0
66
232
320
154
4
12
17
30
16
32
26
41
28
3
43
33
55
68
53
31
51
41
44
32
23
94
182
78
level of oil exports to Brazil (see table 3). Although
exports of machinery and equipment have grown
substantially since 1970, their total value remains
small. Such exports amounted to only $126 million in
1982, up from $61 million in 1975 and $4 million in
1970. Moscow has been most successful in selling
electric power generating equipment to the region-
one of the few items of Soviet equipment competitive
with that of Western suppliers. Aside from power
projects, the only other major Soviet sale was for
construction of tin-processing facilities in Bolivia.F_
Moscow usually offers attractive trade credits to
facilitate its exports of machinery and equipment, but
these have been largely unsuccessful in Latin Ameri-
ca. Agreements with Argentina, Brazil, Peru, Bolivia,
Colombia, and Mexico have set the general terms for
credits extended on Soviet sales of machinery and
equipment. Generally, these agreements set credit
terms of up to 10 years for repayment at interest rates
of 4.5 percent for state organizations and 5 percent
for private firms with a 15-percent downpayment.
Although these terms are not as favorable as those
offered for many of the USSR's economic aid projects
with other LDCs (10 to 12 years at 2- to 3-percent
interest with little or no downpayment), they are more
favorable than most credits obtainable from Western
commercial sources
25X1
25X1
In contrast to Soviet trade with the LDCs as a whole,
military exports have played only a minor role in
Moscow's Latin American trade. Between 1971 and
1982, deliveries of military equipment to Latin Amer-
ica accounted for only 2 percent of total Soviet
military deliveries. In value terms, military sales
totaled $1.2 billion in this period. Peru and Nicaragua
are Moscow's only non-Communist clients in the
region. Moscow has had to sweeten its arms deals
with low prices, sophisticated equipment, and attrac-
tive financing. Peru, for example, has received
10-year credits at 2-percent interest, and Moscow has
twice rescheduled Peruvian military debt, most re-
cently in September of last year.
Moscow is aware, nonetheless, that Latin America is
potentially a lucrative market for its arms exports and
has actively attempted to expand its sales.
ments in the region are wary of Soviet motives, and
25X1
25X1
25X1
25X1
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Table 3
USSR: Exports to Latin America
7
204
157
221
139
114
155
146
396
Machinery and equipment
4
61
38
61
83
83
92
87
126
Petroleum and petroleum products
NEGL
123
93
130
28
NEGL
NEGL
NEGL
233
3
20
26
30
28
31
63
59
37
Moscow will find it difficult to make substantial
Uncertain Future Directions
The LTAs which the USSR has concluded with
Argentina and Brazil are scheduled to expire at the
end of 1985 and 1986, respectively, and discussions
for new agreements could begin in the near future.
With a new, larger LTA with the United States,
Moscow would appear to be in a good position to press
for a more balanced exchange with Argentina and
Brazil. The USSR in mid-1983 rejected an Argentine
request to increase the LTA commitment level on
grain deliveries.
Soviet demands that Brazil and Argentina increase
purchases of Soviet goods, particularly machinery and
equipment, to reduce the trade surpluses will probably
be the crucial element for any trade discussions,
including negotiations for new LTAs. Moscow has
implied that future Soviet purchases are contingent
upon increased Brazilian and Argentine purchases.
This stance has already had some success. In 1982,
Brazil resumed buying of Soviet oil, and, according to
Soviet success in expanding exports to Latin America,
however, is likely to be limited. The poor quality of
most Soviet machinery and equipment and dissatis-
faction with past Soviet performance make most
Latin American businessmen reluctant to do business
with the USSR.
trade with Latin America will continue along past
patterns; that is, it is likely to be more favorable for
the Latin American countries than for the USSR.
Soviet economic ties with Latin America are unlikely
to expand much for the remainder of the 1980s, unless
substantial Soviet harvest shortfalls force Moscow to
increase agricultural imports on a scale similar to the
US Embassy sources in Buenos Aires, Argentina is
actively directing purchases by government enter-
prises and agencies to the USSR and Eastern Europe.
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Soviet Economic Aid to Cuba:
Patterns and Prospects
Moscow's commitment to sustain a troubled Cuban
economy has led in recent years to rapidly rising
economic costs for the USSR: Soviet economic sup-
port of Cuba-trade subsidies, development aid, and
balance-of-payments assistance-totaled an estimated
$4.1 billion in 1983. Since 1960, the cost has been
equivalent to nearly $33 billion, making Cuba the
largest recipient of Soviet aid. Moscow also helps
Havana by paying hard currency for some of its
purchases of Cuban sugar and other commodities. In
addition, as Cuba's principal trading partner, Moscow
supplies Havana with a large share of imported food,
oil, and capital goods.
The Soviet Trade and Aid Record
Cuba depends on the Soviet Union for 60 to 70
percent of its total trade. Moscow supplies Havana
with nearly all of its crude oil, petroleum products,
grain, and lumber, and much of its industrial, agricul-
tural, and transport equipment (see figure 1). In turn,
Cuba exports one-half its sugar crop as well as the
bulk of its nickel and citrus production to the USSR.
Nearly all of this trade is conducted in soft currency
through a bilateral clearing account.
Trade subsidies-totaling about $23 billion since
1960-are the principal component of Soviet aid to
Cuba; Moscow pays artificially high prices for Cuban
sugar and nickel while pricing its oil exports to Cuba
below world market levels (see table 1 and figure 2).
The general pricing formula established in Cuba's
current five-year (1981-85) trade agreement with
Moscow is designed to maintain the purchasing power
Havana had in the mid-1970s-a period of high world
sugar prices and relatively low oil prices-by adjust-
ing the "price" of Cuban sugar upward as the price
for Soviet oil automatically increases. In 1983 the
USSR paid almost six times the world market price
for the more than. 3 million tons of sugar it bought
from Cuba and charged Havana about 15 percent less
than the OPEC benchmark price for oil.
Figure 1
Cuba: Imports From USSR as a Share of
Cuban Consumption, 1980
Tractors
Bulldozers
Oil
Automobiles
Lumber
Wheat
Cranes
Steel
Tin
Whole plants
Rubber
Trucks
Spare parts
Lard
Ball bearings
Corn
Machine tools
Fertilizers -
Buses
Conserved meat
Tires
Motors
Beans
F=P
25X1
25X1
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Table 1
USSR: Estimated Economic Assistance to Cuba a
Total
32,992
338
1,064
1,569
2,270
2,946
3,178
3,463
4,438
4,561
4,100
Development aide
9,555
295
150
185
230
329
459
830
1,415
975
1,000
Trade subsidies
23,437
43
914
1,384
2,040
2,626
2,718
2,633
3,023
3,586
3,100
Sugar d
16,600
-408
577
989
1,638
2,427
2,324
1,165
1,366
2,580
2,800
Petroleum a
6,592
411
310
374
378
164
381
1,480
1,657
1,006
300
Nickel d
245
40
27
21
24
35
13
-12
0
0
0
Another major category of Soviet aid-totaling near-
ly $10 billion since 1960--consists of development
assistance and favorable credits to finance Havana's
trade deficits with the USSR. Both directly and
through the Council for Mutual Economic Assistance
(CEMA), which Cuba joined in the early 1970s,
Moscow provides materials, equipment, and advisers
for projects relating to export development and import
substitution. This aid comes in the form of long-term
credits (up to 25 years) at no more than 4-percent
interest with grace periods for repayment of up to 10
years. over 200 projects
valued at 1.2 billion rubles ($1.7 billion) were complet-
ed during Cuba's first five-year plan (1976-80). We
estimate that plants built or modernized with Soviet
assistance since Castro took power in 1959 account
for 100 percent of the output of sheet metal, 95
percent of steel, 50 percent of fertilizers, and 40
percent of the electricity generated in the country.
Moreover, that part of Cuba's annual, ruble trade
deficit with the USSR not covered by development
credits is financed on favorable terms.
d Sugar and nickel subsidies are estimated as the difference be-
tween the price Moscow pays for these commodities and their world
market value. The difference is considered a grant and not subject
to repayment.
e The petroleum subsidy reflects the difference between the value of
petroleum purchased from the USSR and the value of these imports
at world market prices. It is considered a grant and not subject to
repayment.
resold to Cuba. These payments, which totaled nearly
$5 billion in 1961-83, were especially high in 1981
and 1982 (see table 2). Soviet outlays dropped in 1983
because the poor sugar harvest prevented Cuba from
making any hard currency sales of sugar to the
USSR. In any event, without these substantial cash
infusions, Cuba would be having even more difficulty
managing its hard currency position than it is current-
Limits to Soviet Support
For the most part, the levels of trade and aid the
USSR has agreed to provide Cuba through 1985 have
already been established as part of the five-year trade
agreement. We believe Moscow is likely to meet the
basic commitments set out in this agreement, but we
doubt that it will do much more than this. Unless
Cuba's economic position deteriorates as a result of
natural disasters or Western-imposed sanctions, Mos-
cow probably will look for ways to make Cuba a less
expensive client. The Soviets are reportedly irritated
with Cuba's inefficient use of resources.
Moscow also helps Havana by ,purchasing some Cu-
ban sugar and other goods for hard currency and by
making hard currency purchases of grain that is then
25X1
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Figure 2
Cuba: Subsidized Versus World
Market Prices, 1971-83
Sugar
Cents per pound
I I I I I I I I I. I .I I
1971 72 73 74 75 76 77 78 79 80 81 82 83b
Petroleum
US $ per barrel
I I I I I I I 1 I
75 76 77 78 79 80 81 82 83b
a Includes only soft currency sugar purchases.
b Preliminary.
c Based on crude product ratio of 60 to 40.
Moscow apparently has been
pressing Havana to meet soft currency sugar con-
tracts even at the expense of hard currency sales to
the West. The Soviet stance reportedly forced Cuba to
make hard currency sugar purchases in late 1983 and
early 1984 to fulfill its soft currency sugar contracts
with the USSR. 25X1
Soviet trade subsidies to Cuba will probably decline
slightly to a level of $3-4 billion annually by 1985,
primarily because of the way Moscow and Havana
price their trade. In particular, the price Cuba pays
for the approximately 200,000 b/d of oil imported
from the USSR is based on a moving average of the
world price of oil over the previous five years. The
recent softness in the world oil market means the
subsidy could be eliminated by 1985. Because sugar
prices, in turn, are linked to oil prices in Cuban-Soviet
trade, the price Moscow pays for Cuban sugar is
likely to increase by only a few cents per pound. If
world sugar prices rebound from the low levels of the
past two years, this subsidy could even be reduced.
In contrast, the level of development and general
balance-of-payments assistance provided by the
USSR will be somewhat higher in 1984 and 1985.
According to public statements by Soviet officials,
project aid was scheduled to rise by 80 percent during
1981-85 to roughly $3 billion. Important aid projects
include a nuclear power plant that will decrease
Cuba's oil needs by about 10 percent-in the late 1980s
and a new plant that will double Cuba's output of
nickel. In addition, Cuba's soft currency trade with
the USSR is likely to remain in deficit-probably on
the order of $500 million annually-through 1985,
and Moscow will have to continue to provide favor- 25X1
ZoAI
repayments of Soviet devel-
opment aid are scheduled to begin in 1985. Havana
may be able to expand its exports enough to make the
$125 million payment that falls due to the USSR that
year, but the problem will worsen in 1986 when the
grace period on Cuba's recently rescheduled hard
currency debt due to Western creditors expires. We
believe Havana is likely to give these latter debts
priority to preserve its reputation for honoring com-
mitments to the West. In this event, Moscow may
have little choice but to agree to reschedule, or
perhaps even forgive, Cuba's debt.
25X1
25X1
25X1
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Table 2
USSR: Estimated Hard Currency Support to Cuba a
Soviet sugar 1,525 0 424 159 223
purchases
174
3
Moscow's hard currency contribution to Cuba will
remain at about $450 million in 1984, then return to
$700-800 million in 1985, assuming a recovery in
sugar production. Cuban trade projections indicate
that Soviet hard currency purchases in the category of
unspecified goods will continue at the 1982 level of
$200 million annually through 1985. Part of this
amount, however, could represent supplemental incen-
tive payments for petroleum Cuba did not consume.
the Cuban press, reported
that a 1981 agreement offered Havana convertible
currency payments for oil saved from its protocol
allotment. This Soviet incentive, which is unique to its
trade with Cuba, probably represents an effort to
lessen Havana's energy dependence without imposing
the hardships of major cuts in oil shipments. In
addition, Soviet hard currency grain purchases on
Cuba's behalf will probably remain close to current
levels over the next two years. Since 1981 the USSR
has been transhipping more than 1 million tons of
Canadian grain to Cuba. The Soviets may encourage
Cuba to use its $70 million Argentine credit line for
corn purchases in order to decrease Moscow's burden.
The expected decline in Soviet aid in 1984 and 1985
could cause problems for the Cuban economy by
forcing Havana to slow the growth of its imports from
the USSR. The volume of Soviet oil deliveries has
been leveling off in the past few years, and, if it should
remain at the 1983 level, economic activity could be
affected. Moreover, imports of consumer and capital
goods not connected to certain Soviet-funded projects
will probably increase less rapidly than Havana would
like, and growth beyond 1984 could slow, especially if
investment projects have to be delayed.
Prospects for Continued Aid
We believe that Moscow will continue to provide large
amounts of aid to Cuba as long as Cuba reciprocates
with the kind of political and military benefits it has 25X1
provided in the past. Havana has been a valuable ally
in assisting the USSR in its Third World policies,
providing Cuban military personnel for sponsoring
and preserving pro-Soviet regimes, and playing an
important supporting role in the Sandinista victory in
Nicaragua. Castro has promoted the USSR's political
position on various international issues, and Cuba
continues to afford the Soviets valuable military
facilities in the Western Hemisphere. As long as
Castro's position is not endangered by sharper eco-
nomic difficulties than we now foresee, we believe he
will continue to be valued for the benefits he can
provide. Nevertheless, the Kremlin has made it clear
to the Cubans that there are limits to Soviet largess,
and we believe that, unless the pricing formulas used
in Soviet-Cuban trade are altered, the annual aid 25X1
flows will decline slightly over the next two years.
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USSR-South America:
Looking Ahead
Soviet
media commentary suggest Moscow remains pessi- ?
mistic about the prospects for revolutionary change in
South America. In the absence of strong radical
South American political movements, the Soviets'
principal efforts are directed toward expanding com-
mercial and political ties with key governments.
While they continue to back local elements' attempts
to undermine pro-US regimes, they will not hesitate
to discard local Communists when expedient. Mos-
cow's hopes for expanded influence center on the new
civilian governments in Argentina and Bolivia, but its
efforts have been hindered by suspicions of Soviet
intentions. The Soviets also are wary of challenging
US interests in a region where they have few assets
and cannot directly employ their military power._1
The Soviet focus on developing relations with existing
governments in South America is based on a pragmat-
ic calculation of commercial as well as political self-
interest and an appreciation for the limited strength
of the region's Communist parties. Soviet media
commentaries indicate that Moscow believes difficult
economic conditions-for which many Latin Ameri-
cans blame the United States-will aid the USSR
and local Communist parties in advancing their objec-
tives. Moscow probably also calculates that its low-
keyed strategy is less likely to provoke a strong US
Brazil and Argentina
Midlevel Soviet officials late last year characterized
Brazil and Argentina as the countries most vital to
Soviet interests in South America,
The USSR will continue to
push for a further expansion of its commercial deal-
ings with Brazil-one of its major Latin American
trade partners-while counseling the Brazilian Com-
munist Party to work for change within the existing
political structure.
Moscow has indicated I (that
it hopes to make gains in Argentina under the center-
left civilian government of Raul Alfonsin. A top-level
Foreign Ministry expert on South America told a US
diplomat last December that the Soviets expected
Alfonsin to broaden relations with the Communist
countries and to pursue a more nonaligned foreign
policy. The Soviet official seemed particularly hopeful
about economic relations, especially in the energy 25X1
field. The Soviets have long been pushing for partici-
pation in large energy projects in Argentina as one
way to redress the huge trade imbalance resulting
from Moscow's large grain purchases.
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the leftist government of President Siles.
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to increase to the point where it will bring down the
Moscow would like to regain the position it lost in
Chile with the fall of Allende but appears to believe
that its only option is to wait for domestic opposition
Peru
The Soviets want to ingratiate themselves with either
a civilian or military government in Peru. They have
used arms sales as the entree with the military.
Suspicion of Soviet motives and dissatisfaction in the
military with the quality-of Soviet equipment have
produced frictions. in the relationship, but the Soviets
have been careful not to provide Lima a pretext for
severing ties. They have distanced themselves from
the radical left and are broadening their contacts with
the establishment parties. Soviet diplomats in Lima
have been cultivating the leaders of the American
Popular Revolutionary Alliance (APRA), the moder-
ate leftist coalition party.
Outlook
Moscow's position in South America will continue to
depend less on its own actions than on local develop-
ments and US policies. The Soviets will continue to
look for low-cost opportunities to exploit anti-US
sentiments but will remain reluctant to commit im-
portant economic or military resources to the region
because indigenous radical movements remain weak.
They probably expect to expand commercial ties with
Argentina, Brazil, and other states, but Peru is likely
to remain for some time the only significant customer
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Targets of Opportunity
While still open to low-cost opportunities in South
America, .the Soviets have moved cautiously since the
US action in Grenada. The leadership conflict in
Grenada that precipitated the US move probably
made them more skeptical of becoming involved with
self-proclaimed Marxist states that lack internal
strength or cohesion. For example, Moscow thus far
has shown no signs of providing Suriname and Guy-
ana the support they want. Instead, the Soviets have
focused on low-level, relatively inexpensive efforts to
develop long-term influence in both countries.
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Other Topics
The USSR's Favorable
Hard Currency Position
Soviet trade data for 1983 indicate that the USSR
held its h rd currency borrowing last year to a
minimum despite a fall in oil prices. This was
achieved by holding down import growth, maintaining
a high level of military deliveries to the less developed
countries (LDCs), and increasing the volume of oil
exports enough to offset the drop in prices. Thus, the
net hard currency debt remained at about the $10
billion level (see table 1). Moscow's hard currency
position is likely to remain good at least through 1984.
Background
Moscow has successfully pursued a policy of limiting
its hard currency debt since 1976 after a surge in
borrowing to finance imports of Western technology
and equipment caused its payments position to deteri-
orate. The USSR slashed imports of Western equip-
ment-which in real terms fell by one-fifth between
1976 and 1980=and benefited from spiraling world
prices for its oil exports. Thus, the Soviets were able
to limit borrowing in spite of sizable increases in
agricultural imports in 1979-80.
In 1981, however, Moscow was hit by even greater
agricultural import needs and stagnating oil prices. As
a result, the trade surplus plunged in spite of another
large cut in machinery and equipment imports, and
debt rose sharply. Although imports of machinery
rose substantially in 1982 as deliveries for the pipeline
from Siberia to Western Europe began, Moscow was
able to turn its payments positions around by sharply
boosting the quantity of oil exported and taking
advantage of an improved harvest to reduce agricul-.
tural imports.
Current Account
Soviet data show that in 1983 the USSR's hard
currency merchandise trade surplus rose more than
$200 million, to $4.7 billion, as exports and imports
grew at about the same rate (see table 2). The small
rise in export earnings appears to have been primarily
due to a slight increase in the value of Soviet exports
of crude oil and petroleum products. We estimate that
hard currency oil exports totaled 1.37 million barrels
a day in 1983, about 135,000 b/d above the previous
record high in 1982. With the average price of crude
oil and oil products down about 10 percent, the value
of Soviet hard currency oil exports for the year
probably remained at about the $15 billion level of
1982. The rise in the volume of Soviet oil sales was
made possible by an increase in oil imports from the
OPEC countries in partial payment for past arms
deliveries and perhaps by some drawdown of domestic
stocks. As far as we now know, the USSR did not
again reduce its oil exports to the Communist coun-
tries.
Military exports to the LDCs rose sharply in the first 25X1
nine months of the year as the USSR moved to
resupply both Iraq and Syria with military goods ' but
plummeted in the last quarter. As a result, arms
exports-which account for roughly one-fifth of total
Soviet hard currency receipts-probably leveled off or
even declined. Western data indicate that the value of
nonoil, nonmilitary exports such as natural gas, chem-
icals, and timber were below the 1982 level.
' Syria is considered to be a hard currency customer for arms but
not for other commodities.)
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Table Il
USSR: Estimated Hard Currency Debt to the West
Million current US $
(yearend)
10,577 14,707
15,609
16,375
18,050
17,865
20,865
20,100 20,400
Commercial debt
6,947 9,662
9,858
9,515
10,480
10,015
13,015
11,500 11,000
Government and government-backed
debt
3,630 5,045
5,751
6,860
7,570
7,850
7,850
8,600 9,400
Assets in Western banks
3,125 4,735
4,425
5,975
8,800
8,565
8,425
10,000 10,500
Net debt
7,452 9,972
11,184
10,400
9,250
9,300
12,400
10,100 9,900
Moscow was able to limit the growth of hard currency
imports in spite of substantial increases in purchases
of machinery, equipment, and crude oil. Soviet hard
currency imports of Western machinery and equip-
ment rose roughly 15 percent, with most of the
increase coming from France, Italy, and West Ger-
many. Much of the 1983 increase in such imports
probably reflects deliveries of equipment contracted
for in 1981-82 (see table 3). Among the more impor-
tant orders in these two years were:
c Roughly $4 billion worth of compressors and other
equipment for the Siberia-to-Western Europe gas
pipeline.
c Some $600 million in equipment for the Astrakhan'
sour gas project from French and West German
firms.
u A turnkey steel plant from Austria for $540 million.
c A rolling mill, worth $287 million, from West
Germany for the Oskol steel complex.
o A polyester fiber plant from West Germany for
$290 million.
c A diazinon insecticide plant from French and West
German firms for $165 million.
e Two butadiene plants from Japan for $110 million.
West Germany, France, Japan, and Italy continued to
account for the bulk of the orders. At the same time,
the US share of orders dropped from about 10 percent
in 1980 to 2 percent in 1982, reflecting US sanctions
and Soviet concern about the reliability of the United
A roughly $500 million jump in oil imports from Iraq,
Libya, Saudi Arabia, and Venezuela, largely in repay-
ment for Soviet deliveries of arms, explains part of the
increase in imports. (The oil from Saudi Arabia was in
payment for Iraqi obligations to the USSR.) We
estimate the volume of these imports at about 190,000
b/d as compared with 145,000 b/d in 1982. In
addition, the USSR imported in 1983 about 55,000
b/d of crude oil from soft currency countries (Syria
and Iran) as compared with 32,000 b/d the previous
year.
Agricultural imports, on the other hand, may have
fallen to $9 billion or less in 1983, compared with $10
billion in 1982. Most of this reduction was in imports
from the United States. Hard currency imports of
grain dropped by an estimated 4 million tons to 32
million tons worth about $5 billion, and imports of
sugar also declined.
Imports of large-diameter pipe fell last year after
increasing substantially in 1982 when construction
began on the Siberia-to-Western Europe gas pipeline.
Imports of nontubular steel also were down.
States as a supplier.
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Table 2
USSR: Estimated Hard Currency Balance of Payments
Current account balance
-4,607
1,904
-100
4,083
4,495
Merchandise trade balance
-4,797
1,714
200
4,483
4,695
Exports, f.o.b.
9,780
27,784
27,978
31,977
32,392
Of which:
Additional military deliveries to LDCs,
f.o.b.b
1,500
Imports, f.o.b.
14,577
26,070
27,778
27,494
27,697
Net interest
-570
-710
-1,300
-1,500
1,300
Other invisibles and transfers
760
900
1,000
1,100
1,100
Capital account balance
6,522
1,630
5,840
-1,240
550
Gross drawings c
6,371
2,865
6,200
2,650
3,900
Government backed
1,972
2,195
2,000
2,850
3,100
Commercial
4,399
670
4,200
-200
800
Repayments
969
3,050
3,200
3,415
3,600
Government backed
730
1,915
2,000
2,100
2,300
Commercial
239
1,135
1,200
1,315
1,300
Net change in assets held in Western banks
-395
-235
-140
1,575
500
Gold sales
725
1,580
2,700
1,100
750
Net errors and omissions d
-1,915
-3,534
-5,740
-2,843
-5,045
a Preliminary estimate.
b These estimates exclude the value of arms-related commercial
exports included in the reporting on Soviet exports to individual
LDCs, which we estimate at about $2 billion in 1982. They are
based on the reported export residuals in published Soviet data on
trade with LDCs (that is, the difference between Soviet reported
aggregate exports to the LDCs and Soviet reporting on exports to
individual LDCs). The export residuals were reduced by the
estimated value of Soviet exports of major arms systems to soft
currency LDCs on an f.o.b. basis. The estimates exclude the value
of follow-on services, which may be substantial.
c Including additions to short-term debt.
d Reflects hard currency assistance to other Communist countries,
hard currency trade with other Communist countries, hard curren-
cy credits to LDCs to finance Soviet sales of machinery and
equipment (including military equipment), credits to developed
Western countries to finance sales of oil and other commodities,
and errors in other line items of the accounts.
With a total hard currency trade surplus of $4.7
billion and net expenditures on interest and other
invisibles at about $200 million, the USSR realized a
current account surplus of $4.5 billion, about 10
percent higher than in 1982. Gold sales-which hit
200 tons valued at $Z.7 billion in 1981-probably
totaled about 55 tons worth an estimated $750 million
The "errors and omissions" category rose substantial-
ly, in part reflecting increased credits and deferred
payments to cover military and other sales to the
LDCs.z Moscow also apparently rescheduled some
2 This category represents the residual after all of the hard currency
items are added up and net financing received is taken into account.
as Soviet financing needs remained small.
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Table 3
USSR: Equipment Orders Placed With Hard Currency
Trading Partners
Chemical and petrochemical
equipment
Metalworking and metallurgical
equipment
4,650
6,000
3,800
2,800
2,675
2,600
6,870
3,745
2,100
525
1,700
300
825
190
400
4,320
1,330
810
4,125
4,300
3,500
1,975
2,485
2,200
2,550
2,415
1,290
1,660
1,020
1,630
305
1,820
640
a The total for 1981 includes about $4 billion in orders for the gas
export pipeline project. Some of this-such as pipelayers-is
included under categories other than oil and natural gas equipment.
b Because of lags in reporting, information for 1983 is not complete.
LDC debt. According to press reports, for example,
the USSR agreed in September 1983 to allow Peru to
postpone for six years repayment of $167 million due
in 1983.
Financing
Moscow probably was able to reduce its net hard
currency debt slightly in 1983. (It had fallen by $2.3
billion in 1982.) Although the USSR's net liabilities
to commercial banks rose by more than $1 billion in
the first nine months of the year, mainly due to a $1.5
billion drop in Soviet assets, it is likely that as in
previous years the USSR sharply boosted its assets in
the last quarter of the year. The Soviets apparently
are reluctant to end a year with bank de osits equiva-
lent to less than four months of imports
Assuming the fourth-quarter growth in assets approx-
imated the $2.6 billion increase in the last quarter of
1982, Soviet assets would have hit a record $10.5
billion by the end of 1983, up from $10 billion at the
end of 1982. Gross commercial debt-which declined
slightly in January-September--could well have re-
mained below the yearend 1982 level. Western-
government-backed debt, on the other hand, probably
rose as machinery and equipment imports continued
to rise. Thus, total gross debt is estimated to have
increased somewhat to $20.4 billion, whereas net
debt, because of the probable increase in assets, is
estimated to have dropped slightly to $9.9 billions
Outlook for 1984
Moscow's favorable hard currency position is likely to
continue at least another year. The 1984 foreign trade
plan announced last December implies that for the
second year in a row Moscow intends to reduce trade
with the West-perhaps by as much as 10 percent.
Although the USSR probably will not achieve the
reduction in imports from the West implied in the
plan, we believe it will-barring a bad harvest-be
able to hold the line or even reduce hard currency
imports in 1984. Agricultural import requirements
could remain at about the 1983 level if the harvest is
fair to good this year.
Purchases of Western machinery and equipment
could level off or decline. Although substantial deliv-
eries of equipment for projects contracted for in the
past few years are still to be made, deliveries for the
Siberia-to-Western Europe gas pipeline are virtually
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completed. Ongoing negotiations for Western equip-
ment for the Tenghiz natural gas facility are unlikely
to be concluded soon, ruling out sizable deliveries this
year. Moreover, orders for nonenergy equipment fell
in 1983 to $1.3 billion-not much more than half the
average for 1979-82. Soviet purchases of large-diame-
ter pipe are unlikely to increase unless additional
pipeline construction is initiated. The Soviets may be
aided in holding down imports of pipe by bringing on
stream their first domestic facility for producing
large-diameter pipe
On the export side, Moscow could well experience
some difficulties. Net hard currency oil sales are
likely to level off, or even decline somewhat, as
domestic production stagnates and deliveries to East-
ern Europe remain high. In fact, since the beginning
of the year the Soviets have reneged on some ship-
ments of oil to Western Europe.
suggests the USSR, which reduced oil exports to
Eastern Europe-in 1982, will not make further cuts
for the time being. Although exports of natural gas
could increase as deliveries begin through the new
pipeline, other commodity exports are likely to show
little if any growth in 1984. In a number of industries
(for example, nonferrous metals and timber), domestic
production is stagnating and domestic requirements
are rising, reducing the exportable surplus.
Even if hard currency exports stagnate or drop some-
what and a poor agricultural year necessitates higher
imports than now foreseen, the Soviets can manage.
With substantial gold reserves-estimated in excess
of $20 billion at current prices-and production run-
ning in excess of consumption and exports, Moscow
could cover a sizable portion of its financing require-
ments through increased gold sales should the need
arise. Moreover, the USSR has already lined up
substantial Western-government-backed and com-
mercial credits to support imports of plant and equip-
ment and large-diameter pipe.
In addition, after a five-year absence, Moscow has
recently made a series of successful forays into the
Euromarket.
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The USSR's New Long-Term
Energy Program
The recently published Long-Term Energy Program
of the USSR reflects an ambitious set of objectives
and plans for improving all aspects of the energy
system. Although the program cites no specific output
targets, the trends described indicate rising produc-
tion. Generalized goals are laid out for energy produc-
tion, conservation, and substitution and for specific
sectors of the economy-machine building and trans-
portation, for example-that support the energy sec-
tors. The importance of continued energy exports is
noted, but no goals are stated.
The program, first previewed in mid-1983, was pub-
lished in March in the economic weekly of the Central
Committee of the CPSU, Ekonomicheskaya Gazeta
apparently after long debate within policymaking
circles. Like other recent Soviet plans, it appears to
rely heavily on improvements in capital and labor
productivity. In view of the economy's poor record in
achieving productivity increases since the mid-1970s,
we believe that many of the program's goals are
beyond reach, although substantial progress can be
expected in some energy sectors.
The 20-year program is divided into general objec-
tives for two periods, 1981-90 and 1991-2000. The
first phase focuses on energy production, principally
oil and gas; the second phase concentrates on energy
conservation, interfuel substitution, nuclear power
production, and expansion of the coal industry. The
principal objectives of the program (in the order they
appear, which may give some indication of relative
importance) are shown in the inset on page 36.C
As is evident from the major points of the program,"
none of the energy-producing sectors has been ne-
glected. Each of them-oil, natural gas, coal, and
electric power-will require an increase in invest-
ment. The Soviets, however, have never been able to
expand rapidly the output of all energy sectors simul-
taneously. We do not believe they can do so in this
program without a substantial increase in investment
at the expense of other sectors of the economy-an
increase greater than that indicated by the published
Oil
The program's references to oil production are some-
what vague. Phrases such as "securing a stable, high
level of oil output" and "an increase in liquid fuel"
are difficult to translate into output targets.' More-
over, there appears to be a major inconsistency be-
tween the program's target for drilling and recently
discussed goals. The "stable, high" level of production
will require, according to the program, a doubling of
drilling capacity by 1990 (compared with 1980). But
recent Soviet press articles indicate that drilling me-
terage must double every five years to maintain stable
output. This five-year doubling of drilling implies an
annual rate of at least 70 million meters in 1990, far
more than the 35-40 million meters the energy pro-
gram suggests.
The program is relying on improving production in
existing oilfields by raising well flow rates and ulti-
mate oil recovery through better equipment and tech-
nology. A program to improve substantially the opera-
tion of the oil ministry's 100,000 wells will be highly
capital intensive-with an emphasis on pumping 25X1
equipment-and require a dramatic improvement in
labor productivity. The new energy program also
stresses broad introduction of enhanced oil recovery
(EOR) methods. The Soviet FOR effort to date has
been beset by problems. These projects are expensive,
require long leadtimes, must be tailored to individual
fields, and yield uncertain results. Current oil produc-
tion by FOR methods is only about 60,000 barrels per
day (b/d). We estimate that by 1990 FOR production
will be no more than 200,000 b/d-a substantial gain,
but not enough to exert a major influence on the level
of Soviet oil production, even by 2000.
Natural Gas
The energy program touts gas as the growth fuel, at
least until coal, nuclear energy, and renewable energy
sources can be?in to take over in the 199f1s Urns
' "Oil output" includes gas condensate as well as crude oil, and
"liquid fuel" includes an unspecified quantity of synthetic fuel.
program.
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Main Objectives of the Long-Term Energy Program
? Energy savings through accelerated scientific and
technical progress in all spheres, of the economy to
reduce energy use per unit of economic output.
? A speedup of technical progress in machine building
and related branches of industry in order to supply
the energy branches with the appropriate equipment
and materials.
? Growth rates for electricity output that are higher
than those for primary energy production.
? Accelerated development of the natural gas indus-
try to satisfy domestic consumption and export
needs.
? Provision of a "stable, high level" of oil output
partly by increasing the amount of oil ultimately
recovered from oil deposits.
? "Early preparation" of industrial stocks of fuels,
especially oil.
? A sharp increase in drilling meterage and a gain in
the efficiency of deep exploratory drilling for oil,
primarily in the most promising areas.
? Assured growth in the supply of motor fuels, main-
ly through "deeper" refining of oil and a substan-
tial reduction in oil used at electric power stations.
? Production of synthetic liquid fuels from gas, coal,
and oil shale.
?. "Forceful " development of nuclear energy for the
production of electricity and thermal energy (steam
output is to rise to an unspecified maximum level in
the mid-1990s and then stabilize. Such production
levels will, according to the program, require increases
in development and exploratory drilling, construction,
and improved equipment. In the 1991-2000 phase of
the program, West Siberian fields smaller than those
now in production will be developed, and this will
and hot water) to release significant quantities of
fossil fuels.
? Construction of pumped-storage hydroelectric
plants in the European part of the country.
? Development of the coal industry, principally
through increased output of open pit mines in
eastern regions and accelerated construction of
large thermal power plants using this coal.
? "Economically justifiable coordinated develop-
ment " of hydroelectric resources in Siberia, the Far
East, and Central Asia.
? Creation of the technological and material base
necessary for the development of new energy
sources such as fast breeder reactors and thermo-
nuclear fusion.
? Expanded use of renewable energies (solar, geother-
mal, tidal, wind, and biomass).
? Optimal combination of different modes of trans-
port in the European USSR for moving large
quantities of energy resources from eastern regions,
above all from Siberia where most of the growth in
fossil fuel output will take place.
? Guarantee of the necessary amounts of fuels and
electricity for export, primarily for the solution of
energy problems in "socialist" countries but also
for "effective participation in the international divi-
sion of labor. "
raise investment requirements. The program also
raises the possibility of a new West Siberian export
pipeline to supply additional gas to Eastern Europe.
This pipeline would be built with the participation of
East European countries.
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Coal
The Soviet coal industry has been plagued with
problems since the mid-1970s. The energy program
apparently recognizes the difficulty of quickly raising
production and indicates that the first phase (1981-90)
will be used to lay the groundwork for an acceleration
of coal production in the 1990s. By the end of this
century, 56 to 60 percent of Soviet coal is to be
produced by open pit mining (mainly in Siberia),
compared with 38 percent in 1980. According to the
program, the development of Siberian coal mining,
particularly in the Kansk-Achinsk basin, will require
the expansion of construction organizations and infra-
structure, as well as improved mining, transport, and
beneficiation equipment. A number of thermal power
plants to be built will use Kansk-Achinsk coal. Each
will have a total capacity of 6,400 megawatts (MW).
Plans also call for a 50-percent increase in coal
cleaning plant capacity between 1980 and 2000. All
of these efforts will be expensive and will require a
higher priority for coal industry investment, which
has been nearly stagnant since 1977.
Electric Power
One of the energy program's main objectives is to
guarantee growth rates for electricity production that
are higher than those for primary energy production.'
We believe this may be, in part, an attempt to
eliminate the effect of electric power outages on oil
and gas production. To assure strong growth of
electricity output, the Soviets intend to:
? Rapidly expand nuclear electricity production.
? Lower the share of oil used to produce electricity
through substituting natural gas, constructing nu-
clear heating plants, using inexpensive coal from
open pit mines, and building large hydroelectric
plants in eastern regions of the country.
? Complete the country's Unified Electric Power Net-
work, add more plants to generate electricity during
peak demand periods, construct ultra-high-voltage
transmission lines, and increase the quality (stability
of voltage and frequency) of electricity.
' In recent years electricity production has not grown rapidly
enough to avoid a strain on available power supplies, particularly in
key fuel-producing regions of the USSR, where power shortages
and electricity disruptions can significantly affect oil and gas
? Further develop combined heat and power plants.
? Modernize or retire small, inefficient power plants.
In the 1981-90 period, plants with a total capacity
of 55,000 to 60,000 MW (20 percent of current
installed generating capacity) are to be modernized,
and, in 1991-2000, plants with a combined capacity
of 70,000 to 80,000 MW are to be rebuilt or
replaced.
The most ambitious of these efforts is the expansion of
the nuclear power program. Plans call for the equiva-
lent of 6.3 million b/d of fossil fuel to be replaced by
"other energy sources" by the year 2000. Given Soviet
expectations for hydroelectricity and unconventional
energy sources, we calculate that about 85 percent of
this "saving" is expected to come from nuclear power.
This implies production of about 1.3 trillion kilowatt-
hours (kWh) of nuclear electricity in 2000, 12 times
the 1983 level.' We are currently projecting nuclear
electricity output to be less than 300 billion kWh in
1990. We do not believe the Soviets can build enough
nuclear power plants to more than quadruple output
between 1990 and 2000.
Energy Conservation and Substitution 25X1
Despite the many references to energy savings, the
basic approach of the program is production oriented.
Conservation targets, although significant, represent
no improvement from savings of 2 million b/d oil 25X1
equivalent already on the books for 1981-85. Total
annual savings of fuel and energy resources by 2000
are given as 7.6-8.1 million b/d oil equivalent (com-
pared with 1980) or an average of 1.9-2.0 million b/d
per five-year period. The program seems to imply that
most of these savings will come in the 1990s.
To prepare for transferring the Soviet economy to an
"energy-conserving development path," the program
calls for reducing the "energy intensity" of the
economy-as measured by the ratio of total energy
consumption to national income-by 12 to 17 percent
over the 20-year period. Here again the Soviets do not
' This total includes the electricity equivalent of the output of
nuclear heating plants.F___1
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show the same optimism associated with expanded
energy production. This decline in the energy-to-
national-income ratio (as calculated by the Soviets)
averages only 0.6 to 0.9 percent per year, compared
with actual reductions averaging 1.3 percent annually
in 1981-82.
Energy conservation, however, will not be cheap. The
program calls for "massive" production of energy-
conserving equipment and equipment for regulating
and measuring energy use. Little "conservation equip-
ment" is now produced in the USSR. A nationwide
program of intensive energy conservation will require
either large amounts of imported equipment or the
establishment of new plants to produce this equip-
ment. Either alternative will be expensive. A Soviet
energy official has stated that 80 percent of conserva-
tion gains will be due to investment.
Interfuel substitution also plays a role in the energy
program. During the 20-year period the energy bal-
ance is expected to shift dramatically, principally
because of a decline in the use of oil and a rise in the
use of coal, nuclear power, and natural gas. The share
of electricity produced by oil in thermal power
plants-35.7 percent in 1980-is to be reduced by
more than half by 1990. We calculate that the Soviets
expect to cut annual heavy fuel oil use by about
1 million b/d in 1981-90. Here, too, investment will
be required. For example, investment in oil refining
will have to rise. The long-postponed investment in
cracking equipment needed to boost output of light
petroleum products (gasoline, diesel fuel, and jet fuel)
by processing the fuel oil displaced by other energy
sources will be expensive, and much of this equipment
may have to be imported.
Investment Implications
The energy program estimates that energy's share of
total capital investment will average 20 to' 22 percent
over the 20-year period-a slight increase from the
present share. We believe that the Soviets, relying
heavily on the achievement of unrealistic productivity
goals, have underestimated total investment require-
ments. The new energy program anticipates that oil
investment will continue to grow, while coal, oil
refining, machine building, and other relatively ne-
glected branches are to also receive substantial in-
creases in investment.
We do not believe the Soviets can achieve all of these
ends with only a slight increase in the share of
investment devoted to energy. Under less demanding
conditions in recent years, energy investment has risen
rapidly-at an average annual rate of 8.1 percent
between 1977 and 1982, compared with total invest-
ment growth of only 3.3 percent. Oil investment,
which nearly doubled during these years, was a
principal cause of the increase.
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Cuban Civil Defense:
The Soviet Connection
In December 1983 the Chief of USSR Civil Defense,
Gen. Aleksandr T. Altunin, arrived in Havana for
meetings with top Cuban officials. It was his first
known visit to Cuba and underlined previous indica-
tions of renewed Cuban interest-and greater Soviet
involvement-in the Cuban civil defense program.
Havana is refocusing its civil defense objectives and
increasing training in an effort to improve the ability
of the leaders and the general population to respond to
a major military crisis. It is unclear how much the
modest but discernible increase in Soviet involvement
will improve the effectiveness of the Cuban program,
which will depend on both continued internal momen-
tum and on external support. Altunin's visit signals
that support probably will be forthcoming in this area.
Shift in Cuban Defensive Posture
The Cuban civil defense program, initiated in 1962, is
modeled after the Soviets' but is far more rudimenta-
ry. Civil defense cadres have been active for many
years in the area of public health, but until recently
preparations for defending the civilian sector in time
of war have been limited.
Since 1980, Cuban leaders have shown increasing
concern over a perceived toughening of US attitudes
over Cuba's role in fomenting and supporting insur-
gencies in Latin America:
? In 1980 Havana stepped up its propaganda offensive
against the United States, with leadership state-
ments continually stressing the need to improve both
military and civilian preparedness. A 600,000-man
territorial troop militia was formed for home
defense.
? In November 1981 the government sent diplomatic
notes to foreign embassies, urging them to take
action to prevent US military intervention, and held
a major mobilization exercise in Havana. (These
actions followed a controversial speech by the Secre-
tary of State and US military maneuvers in the
region.)
? In early 1982 the Cubans initiated new island-wide
defensive preparations, including a major military
bunker construction program and deployment of
antiaircraft batteries. The activities coincided
roughly with US and NATO naval exercises in the
Caribbean and a marine landing at Guantanamo. 25X1
Recent US actions in Nicaragua and Grenada have
further heightened Cuban leaders' concern.
The Soviet Connection
During the 1960s and 1970s, Soviet support was
25X1
25X1
limited to providing training in the USSR for Cuban
civil defense technicians and sending advisers to sup-
port the Cuban program. In the 1980s, however, there
has been a modest but discernible increase in Soviet
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involvement, highlighted by General Altunin's arrival
last December for what Cuban media called a friend-
ly and working visit. It lasted for over a week and
included meetings with Fidel Castro and top Cuban
military officials.
The first indication of this new trend came in 1981,
when the chief of Cuban civil defense reportedly
traveled to the USSR. Some of the innovations intro-
duced into the Cuban program probably resulted from
his consultations. The chief was assigned a new Soviet
aide, Col. Petr Orlov, in place of his reportedly
have made the trip without concrete proposals in
mind. We believe the Soviets have trouble financing
their own shelter program, however, and probably
would not provide substantial funding for a personnel
shelter program in Cuba unless they believed that the
United States was planning to target Cuba with
nuclear weapons. The Soviets are more likely to
devote their financial backing to programs for leader-
ship continuity and wartime management, which re-
ceive high priority throughout the Soviet Bloc. They
probably will also continue to train Cubans to handle
medical, evacuation, mobilization, and economic
problems.
ineffective adviser.
The nature of future Soviet support probably was
worked out during Altunin's visit.We do not know the
purpose or outcome of the visit, but believe it is
unlikely that the Chief of USSR Civil Defense would
ernment.
Increased Soviet support of Cuban civil defense may
be part of the broader effort to strengthen Havana's
military capability. Arms deliveries to Cuba in 1981
were the highest since the Cuban missile crisis of
1962, and military-related support continued to be
high in 1982 and 1983. This increase probably was
prompted by several factors, including the onset of the
new improvement and replacement cycle for the
military and a desire to meet Castro's concerns about
the perceived US threat. In this context, the civil
defense program has the military benefit of helping
make an invasion of Cuba a potentially difficult and
protracted operation. In a broader context, the pro-
gram as currently designed is a relatively low-cost
venture through which the Soviets could hope to
increase their influence throughout the Cuban Gov-
maintain an active program.
The effectiveness of these activities is hard to predict.
The Cuban civil defense program is in many respects
in the early stages of development and has many
problems. Its future will depend heavily on continued
internal momentum and on the quality and quantity
of external support. The Soviets' willingness to pro-
vide that support could encourage Castro's regime to
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Secret
Briefs
Possible Changes in A senior Soviet academic at the Institute of the World Economy and International
Soviet Export Relations recently told a US Embassy officer in Moscow that his institute is
Policy studying ways to restructure exports in the economic plan for 1986-90. A high-
level Soviet energy official also said in late March that the USSR should seriously
consider proposals not to expand natural gas exports and that it should concentrate
on exporting chemical products made from gas. Soviet officials previously have
indicated concern about the bleak prospects for increasing demand for gas in
Western Europe during the next few years and for the USSR's ability to continue
large oil exports to hard currency countries.
In the near term, the USSR could .increase exports of higher valued petrochemical
products. Because of its limited production capacity, however, these earnings
would not be enough to offset a large decline in earnings from energy exports. Al-
though the prospects for growth of gas demand in Western Europe may improve in
the longer run, the USSR may still choose to diversify its exports by increasing
petrochemical production. Nonetheless, this effort would be expensive, and the
Soviets would be gambling that a large market for such products would exist.F_
Soviet Concerns Over Novosti director Pavel Naumov told a Japanese newspaper in late March that 25X1
Korean Contacts= Moscow is concerned that diplomatic moves involving the two Koreas could lead to
broader new coalitions and thus increase tensions in northeast Asia. He noted that
North Korea has proposed tripartite talks with the United States and South Korea
and that there are efforts to arrange visits between China and South Korea for hu-
manitarian purposes. He also observed that moves to settle the Korean question
may only complicate the situation.F___1 25X1
Naumov expressed nominal approval for P'yongyang's proposal for tripartite talks
but also indicated that he had serious reservations about it and Beijing's dealings
with Tokyo and the two Koreas. Moscow has never enthusiastically endorsed the
North Korean proposal, and it apparently is troubled by the prospect of being left
out if a substantive dialogue on Korean issues develops. The Soviets, however, have
little leverage in the current situation. They have only a lukewarm relationship
with the North Koreans, who give no sign of including the USSR in their proposal.
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USSR: Oil Production, 1980-84
IiiillillliiIilliiiiiiiiIiiiiiiiiiiIIIIIIIIiiiiiIi
J M M J S N J M M J S N J M M J S' N J M M J S N J
1980 1981 1982 1983 1984
a Because the sharp drop in oil production in September 1982 was clearly
an aberration, the data point for this month was not used in calculating the
moving average.
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Soviet Oil An article in Pravda on 3 April stated that the USSR is having serious problems
Production with oil production in West Siberia, which accounts for 60 percent of the country's
Problems oil output. The article noted that the main problem is the increasing difficulty in
tapping wells, but it also indicated that low-quality equipment, poor planning, and
declining labor morale are contributing factors. It stated that oil planners already
are talking of lowering their targets for this year and for the plan for 1986-90. So-
viet energy leaders have been trying since last fall to reverse the situation. Special
measures have been introduced to increase output, including the ordering of some
400 submersible pumps from the United States.
This is not the first time that the Soviets have publicly discussed their problems in
West Siberia, but this is their bleakest description. The article suggests that
production problems may intensify and that oil production may have peaked. Data
for October 1983 through February 1984 show that oil output has fallen 200,000
b/d from the record level of 12.4 million b/d attained during the previous 12
months. This is the first time since World War II that oil production has fallen
over such an extended period. The USSR may have reached a limit in its ability to
cope with the operational problems in West Siberia, although the effects of any
emergency allocations and new investment may not be clear for some time.
Prospects for A Chinese official told a US Embassy officer in Beijing in early April that China
Sino-Soviet remains interested in political consultations with the USSR at the foreign minister
Consultations level, but he did not indicate when such a meeting might occur. He also said that
the Soviets, at the annual trade talks in February, had again proposed that
bilateral trade be increased to $5 billion by 1990 and that China is not opposed.
Although he noted that Beijing might sign a five-year trade agreement, he said
this would have to be discussed further when First Deputy Premier Arkhipov visits
China in May. The feasibility of such an agreement, he added, would depend on
the types of goods to be traded.
The timing of a foreign ministers' meeting probably will depend on Arkhipov's
visit. Both foreign ministers have busy schedules, however, and it may be difficult
to find a suitable neutral site. Although both sides have an interest in increasing
bilateral trade, it is questionable that the $5 billion level could be achieved by the
end of the decade.
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Secret
Viewpoint
This views expressed in the following article are the author's; they do not
necessarily represent a CIA consensus.
Party-Military Relations:
Who Is in Charge?
Has the relationship between the Communist Party
and the military in the USSR been fundamentally
altered, and is the military now "in control"? Some
have been led to this conclusion in
the last six months by developments such as the Soviet
shootdown of a South Korean airliner (KAL), the
increased prominence of Defense Minister Dmitriy
Ustinov in the leadership, and the higher visibility of
officers of the General Staff. A close examination of
speeches and events during this period, however,
suggests a different conclusion: that there has been
tension on some issues between these two powerful
institutions, but on matters of crucial importance to
the military-such as resource allocation and national
security policy-the party is still the final arbiter
Background
The party's traditional concern with maintaining con-
trol over other Soviet institutions has been particular-
ly evident with respect to the military. Uncomfortable
with the presence of another large, highly disciplined
organization, the party leadership has devised a num-
ber of ways to deal with it:
? The Administrative Organs Department of the
CPSU Central Committee must approve all military
promotions.
? The Defense Ministry's Political Directorate, oper-
ating as an arm of the party, has representatives in
the armed forces and handles troop indoctrination.
? The party maintains surveillance over the military
through the KGB's Third Chief Directorate.
? The party dominates the policy-level Defense Coun-
cil, which prepares national security decisions for
Politburo approval. The council's membership in-
cludes several senior party leaders but probably only
one professional soldier (Chief of the General Staff
Nikolay Ogarkov).
The chief focus of the party's control effort, however,
has been on the prevention of military involvement in
leadership politics. That such involvement is always
possible was illustrated in 1957, when Marshal Zhu-
kov threw the military's support to Khrushchev during
his fight with the "antiparty group" and Khrushchev
paid off the debt by elevating Zhukov to full member-
ship in the Politburo. The pivotal role played by a
military leader in this political struggle made the
25X1
25X1
party leadership nervous, and Zhukov was ousted 25X1
three months later, ostensibly for attempting to re-
duce the party's controls over the military.
Despite their restrictions on military involvement in
higher politics, party leaders have always recognized
the military's right to be heard on policy issues that
affect its interests. As national security issues have
assumed more importance on the leaders' agenda, the
military voice in decisionmaking inevitably has be-
come stronger. The party's acceptance of the mili-
tary's position on such issues has not been automatic,
however, and this has at times produced some tension.
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This tension probably would have been greater in
recent years if Ustinov had not been Minister of
Defense. Although the high command may initially
have been unhappy with the appointment of a "civil-
ian" to the post,' Ustinov has been in a favorable
position to promote the military's interests in the
Politburo and to vote its stock on sensitive political
issues-without causing some of the concerns that
such actions by a professional officer (like Zhukov)
would prompt. On the other hand-given their fears
about military influence in higher politics-it has
served the party leaders' interests to have a "civilian"
rather than a professional soldier re resenting the
military in the Politburo.
This arrangement, nonetheless, has not prevented
occasional military unhappiness with leadership deci-
sions. In late 1982, for example, there were indica-
tions that the Brezhnev regime had to make some
difficult economic policy decisions-possibly affecting
resources budgeted for military programs. Brezhnev
and his Defense Council colleagues (including Ogar-
kov) called an unusual conference of top military
officials, at which they seemed to emphasize that the
military should do a better job with what it already
had and to assure the officers of the wisdom of the
party's decisions. The high-level attendance at the
meeting was unusual-and reminiscent of other meet-
ings called by the party leadership during periods of
apparent tension (in 1967, at the time of the debate
over Malinovskiy's successor, and in 1972, before the
Nixon-Brezhnev summit and the signing of SALT).
The KAL Incident
Signs of strain between the military and party leader-
ship reappeared in September 1983, during the after-
math of the KAL shootdown. We have no evidence
that the military exceeded its authority in this inci-
dent, but at least some party officials indicated that
there was considerable dissatisfaction in the Kremlin
with the way it had been handled. For example:
Viktor Linnik, an official of the Central Commit-
tee's International Information Department, told a
Western interviewer that the Soviet pilot had made
a "mistake" in downing the airliner. (Linnik later
claimed he had been misunderstood.)
' Although Ustinov was closely involved with the Soviet military-
industrial complex and attained general officer rank during World
Viktor Afanas'yev, Pravda's editor in chief, pointed
his finger at "our military" in explaining why the
Kremlin had taken six days to admit the airliner
had been shot down. He appeared to be hinting that
the military had been unable to establish that the
plane was a passenger aircraft until an investigation
was ordered by the Kremlin.
In a possible response to such criticism from party
officials, a January 1984 article in Red Star, while
endorsing swift military action in these situations,
noted the need for more training in identification and
warning procedures.
The evident party dissatisfaction suggests an alterna-
tive view of the prominent role assigned to General
Staff chief Ogarkov and his deputy, Sergey Akhro-
meyev, at the Soviet press conference on the KAL
incident: it may have indicated an effort by the party
leadership to distance itself from the military's action
rather than an increase in military influence,
(The military, For-
eign Ministry, and party apparatus were represented
at the conference, but it was not attended by Ustinov.
or any other Politburo member.) More generally, the
higher visibility of top military leaders did not origi-
nate with the Andropov regime but started under
Brezhnev, when arms control and national security
issues, which fall in the military's sphere of profes-
sional competence, began to receive greater emphasis.
The INF Deployment
The tensions generated by the KAL incident appear
to have been exacerbated by the impending INF
deployments in Western Europe. A review of articles
and speeches by military officials and party leaders
since the June 1983 plenum shows an increase in
September and October of public discussion about the
nature of the "US threat" and the resources necessary
to meet it. This was followed in November by:
c An unusual meeting of the Defense Ministry's
central apparatus that Ustinov called to endorse
Andropov's 28 September statement on those issues.
c Subsequent meetings called by the force command-
ers for the same purpose.
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Secret
Publication of an article (discussed below) that
criticized military pressure on political leaders.
? A spate of military pledges of loyalty to the party.
These events suggest that the scheduled INF deploy-
ments produced some additional tension, if not de-
bate, between the party leadership and the military
that was at least smoothed over by November, when
the INF talks were ended.
Which issue or combination of issues caused this
tension is not clear. The military may have felt some
nervousness. about the INF negotiations themselves-
some concern, perhaps, that party leaders, in their
eagerness to keep the negotiations going, might dis-
la too much flexibilit .
The imminent deployment of what the Soviets consid-
er first-strike nuclear weapons in Europe might also
have brought some recriminations from the military
over the Soviet pledge of "no first use," which may
itself have been a subject of earlier party-military
debate. In July 1982 Ustinov wrote that "it was no
simple matter" to make a "unilateral commitment"
against the first use of nuclear weapons, adding that
"quite naturally, the Soviet people ... our friends ...
are asking whether the right moment was chosen for
Some military officials may also have been concerned
about the adequacy of the measures that were
planned to counter the INF deployment. Writing in
late September 1983, Ogarkov hinted that the Soviet
response might not yet have been determined. Refer-
ring to countermeasures that would threaten the
United States and basing countries, he wrote that
"such possibilities, of course, will be found." Ogarkov
stressed that the Soviet Union would not blindly copy
the United States in the arms race, but would follow
"its own course." This hint that the Soviet response
would be different from the US deployments may
have been designed to prepare the ground for counter-
measures that some military officials might regard as
The increase in September and October of public 25X1
discussion about the resources needed to meet the
"US threat" also suggests that the INF issue may
have been seized upon by those calling for increased
defense expenditures. This issue might even have
contributed to the delays in scheduling the Central
Committee plenum and Supreme Soviet session that
were to approve the annual economic plan (which 25X1
Andropov in his December plenum speech acknowl-
edged was "not easy" to balance).I 25X1
The official line throughout has been the same,
however-that the Soviets should not "react emotion-
ally," as Andropov said in his 28 September state-
ment, and that they "have everything necessary" to
meet the challenge. Party leaders and defense officials
alike have called for "increasing our defense capabili-
ties." When they spell out what this means, however,
they emphasize increased combat readiness, better
training, and more efficiency-not increased re-
sources.
In sum, the message conveyed to domestic audiences
has been not that more resources must go to defense,
but that building a stronger economy will ultimately
increase defense capabilities-the same message
Brezhnev conveyed in responding to what may have
been similar pressures at his meeting with military
officials in October 1982. In the leaders' Supreme
Soviet "election" speeches in February 1984, there
was virtual unanimity on the need to improve the
country's defense capability, but most speakers de-
scribed this as a longstanding concern-not one that
required any new diversion of resources. Ustinov, for
example, said that the Soviet armed forces already
had "everything necessary" to defend the country and
then gave considerable attention to economic prob-
lems, noting that a stronger economy would strength-
en Soviet prestige in the international arena. General
25X1
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Secret
Secretary Chernenko, a longtime booster of the con-
sumer sector, said that the Soviet Union had diverted
considerable resources to defense during the past five
years but "did not even think of curtailing social
Burlatskiy's article conveyed the clear message that
the military should not be allowed to exercise undue
influence over sensitive political decisions. His imagi-
nary dialogue had US leaders using strong language
to condemn the military's role in decisionmaking and
to question its judgment in times of crisis. He attrib-
uted to President Kennedy several comments that
appeared to reflect the 1983 Soviet context, bringing
to mind Andropov's remark in September that "we do
not build our policy on emotions":
programs."
Other evidence also suggests that the party leadership
has been more successful than the military at using
the "US threat" to its advantage. Party leaders, for
example, have used it in the campaign to increase
labor discipline and performance throughout the
economy.
In a speech delivered in Kharkov in late October
1983, Ukrainian party leader Vladimir Shcherbitskiy
expressed this formulation most clearly: "The better
we work, the richer will be our country, the stronger
will be its economic and defense potential, the stron-
ger will be its defense capacity, and the better and
safer will be our lives."
In a similar vein, Moscow party chief Viktor Grishin
said at a "unified political day devoted to study of
comrade Andropov's 28 September statement":
The international situation that has developed
requires further improvement of work in all sectors
and the insuring of high standards of organization
and order in every -labor collective and in places of
residence. Today it is especially important for
every Communist and every working person to be
profoundly aware of his personal involvement in
everything that happens in the country and to work
with total devotion.
Allegorical Criticism
An article published in late November by Fedor
Burlatskiy, a longtime associate of Andropov, seemed
designed to suggest that party leaders had been under
exceptional pressure from the military. The ostensible
subject was the alleged military pressure on President
Kennedy during the 1962 Cuban missile crisis. That
Burlatskiy was writing allegorically was underlined
by the parallels he drew between the situations in
1962 and 1983 and by his sweeping condemnation of
the military's instincts in such situations.
"In the conditions of an acute crisis, we have seen
that the military is the first to lose its head."
"The generals are simply furious.... The crisis has
shown that the most terrible thing there can be is to
allow the military to take part in political deci-
sions.... Not only political decisions, military ones
too."
"The first advice I will give to my successor will be
to keep an eye on the generals and not to think that
because they are military men, their opinion on
military matters is worth a cent."
Andropov may have shared the skepticism expressed
in this article about the wisdom of military profession-
als.
Burlatskiy's criticism appeared to focus primarily on
the force commanders. In his missile crisis scenario,
most of the military pressure on US political leaders
came from the "joint military staffs command." If
Burlatskiy was in fact alluding to the Soviet situation,
it may be significant that it was the force command-
ers who were called upon to repeat Ustinov's pledge of
support for Andropov's statement in the series of
meetings in late November.
25X1
Burlatskiy may also have been alluding to some
pressure on Andropov from those in the Politburo who 25X1
are sympathetic to military interests. In the fabricated
dialogue, President Kennedy is asked if he anticipates
impeachment and answers: "Anything is possible. 25X1.
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Passions are white hot (nakalennyy)." This is an
uncommon term that Burlatskiy may have used delib-
erately to point the finger at one-source of opposition
to Andropov on defense-related issues. A few weeks
earlier, Grigoriy Romanov, a hardline Politburo mem-
ber and party secretary responsible for military and
defense industry matters, had described the interna-
tional situation as nakalennyy-a view that appeared
more extreme than that offered by other leaders.C
Conclusions
Whether the issue was national security policy, re-
source allocation, or both, the unusual series of meet-
ings called in November 1983 to demonstrate military
fealty to the party and its policies suggest that
military interests continue to be subordinate to the
party's. Ustinov, in remarks that may have been
intended for some dissenters in the defense establish-
ment, has been in the forefront of those endorsing
Andropov's statement that the Soviets should not
react emotionally to the US challenge and that they
"have everything necessary" to meet it. Ustinov also
has suggested that the defense industries will have to
increase their output through greater efficiency-
possibly an oblique way of telling the military not to
expect any substantial increases in resources. Ustin-
ov's increased visibility, therefore, seems to have been
in the service of the Politburo and,its policies and
appears to reflect his personal political power rather
than the ascendancy of the military as an institution.
In sum, the events of recent months do not indicate
any significant encroachment by the military on the
prerogatives of the party leadership, which-despite
the policy drift of Brezhnev's last years and Androp-
ov's prolonged illness-appears to remain in full
control of the decisionmaking process.
53 Secret
Sanitized Copy Approved for Release 2011/03/01: CIA-RDP86T00443R000200330003-8
 Sanitized Copy Approved for Release 2011/03/01: CIA-RDP86T00443R000200330003-8
Sanitized Copy Approved for Release 2011/03/01: CIA-RDP86T00443R000200330003-8
 Sanitized Copy Approved for Release 2011/03/01: CIA-RDP86T00443R000200330003-8
Secret
Secret
Sanitized Copy Approved for Release 2011/03/01: CIA-RDP86T00443R000200330003-8