ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000500140011-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 19, 2016
• Document Release Date: June 9, 2005
• Sequence Number: 11
• Publication Date: March 19, 1975
• Content Type: REPORT

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Economic Intelligence Weekly
Secret
ER EIW 75-11
19 March 1975
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Developed Countries: Impact of Income Maintenance Programs . . . . . . 3
Soy Prices Weaken . . . . . . . . . . . . . . . . . . . . . . . . . 6
CIPEC Countries Seek Buffer Stock Agreement . . . . . . . . . . . . . 8
Chile: Sinking 1 -ade-and-Payments Position . . . . . . . . . . . . . 10
China: Falloff it Imports of US Farm Products . . . . . . . . . . . . 12
Eastern Europe: Economic Slowdown Ahead 13
OPEC Countries: Current Accounts Trend Through 1977 . . . . . . . . .15
OPEC Countries: Tanker Fleet Expansion . . . . . . . . . . . . . . 19
Rapid Wage Increases and Income Maintenance Programs have been cushioning
the recession in the major developed countries. Real disposable income in these
countries fell less than 0.5% in 1974, compared with a 0.9% drop in GNP. The
United States experienced the largest decline, with real income falling 2.6%; a lesser
decline was recorded in the United Kingdom. Despite surging inflation and rising
unemployment, real income rose in all other countries, led by a 4.6% increase
in Canada.
Money wage hikes that outstripped inflation were the major factor holding
up income. Wage rates were up about 20%, on average, an increase of more than
4 percentage points above the jump in consumer prices. West German workers
had the largest increase in real wages; their wage rates climbed 16%, compared
with a 7% price rise. In the United Kingdom, real wage rates were unchanged
from 1973. In the United States, real wages fell about 2.5%.
Note: Comments and queries regarding the Economic Intel igence Weekly are welcomed. They may be directed
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As the year progressed, income maintenance programs increased in importance
as a prop to real income. In Japan, the lifetime employment practice kept many
workers on th,r payroll at 90% of normal s?lary. I n West Germany, government
unemployment payments rose 150%, income supplements to workers on short time
800%.
Real disposable income is unlikely to change much in 1975. Real wage rates
will move up only slightly as recession in the industrial world polices wage demands.
At the same time, unemployment -- already up substantially (see the new appendix
chart, "Unemployment") -- could average 50% above 1974 levels. Expanded
unemployment benefits will cushion much of the fail in wages, at the cost of
increased government deficits and increased assessments on business firms and
still-employed workers.
Buffer Stock Schemes are being promoted by primary commodity producers
to bolster prices and improve foreign exchange earnings. Malaysia, Indonesia, and
Thailand, which account for 80% of natural rubber production, are moving toward
an agreement to set up buffer stocks to stabilize prices. Chile, Peru, Zaire, and
Zambia, members of the Intergovernmental Council of Copper Exporting Countries,
also favor creation of a buffer stock; participation by consuming countries, crucial
to obtaining financing, will be difficult to secure.
Soybean Prices, off 40% since October, have declined even more sharply than
those for grain and remain under downward pressure. In prospect are a largo
Brazilian soybean harvest, good anchovy fishing off Peru, and a 6% increase in
US soybean acreage, Although the US soybean harvest dropped 20% in 1974, the
crop plus stocks is more tharr sufficient to meet depressed domestic and foreign
demand.
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DEVELOPED COUNTRIES: IMPACT OF INCOME
MAINTENANCE PROGRAMS
Mounting unemployment benefits are serving as an important prop to real
disposable income in the recession-hit developed countries. At the same time,
income maintenance programs are enlarging government deficits and squeezing
business profits.
Scope of Programs
Income maintenance programs cover most industrial and commercial workers
in all the major developed countries and agricultural laborers in a few.
Unemployment payments for workers with families range from about 15% of gross
wages in Italy to 100% of take-home pay in France. Benefits can continue for
up to one year in Canada, France, West Germany, the United Kingdom, and the
United States and six months in Italy and Japan.
Workers on short time also receive substantial income supplements in France,
Italy, West Germany, and Japan. In France, workers on short time receive benefits
that raise take-home pay to at least 80% of normal, compared with the 100%
received by tLe unemployed.
Union-negotiated benefits play a large role in supplementing formal
unemployment compensation programs in the United States aiid Canada. These
take the form principally of payments from company funds under the labor
contract. In several industries, including the US auto industry, these benefits push
the income of laid-off workers up to 85% of normal take-home pay. Contracts
generally do not cushion income losses of workers on short time. In a few cases,
unions provide limited supplemental payments out of their own funds.
The governmental income maintenance programs usually are financed by
fixed-share contributions from workers' earnings and employers' payrolls plus a
government contribution. The funds are collected and disbursed by a public agency.
In times of heavy layoffs, these funds almost always are depleted, and their
replenishment from the public treasury or by increases in employer/worker
contributions becomes a political issue.
In the case of income supplements for workers on short time, firms may
bear a disproportionate share of the burden. In France, for example, a firm makes
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50% of the short-time supl;lemcntary payments directly to the worker. In spite
of the high cost, French employers are opting for short-timing their work forces,
in order to maintain their labor supply. This preference has recently caused unrest
among union members, since fully laid-off workers now obtain greater remuneration
than those on short time.
The burden of income maintenance programs on the firm is greatest in Japan,
which favors a lifetime employment concept. The unique Japanese system softens
the impact of declining demand for labor by having firms maintain workers at
90% of their salaries even if they are not needed.
Income and Cost Effects
Unemployment and short-time compensation helped hold the drop in real
disposable income in the major developed countries to less than 0.5% in 1974
in spite of rapid inflation and an 18% rise in unemployment. The supportive effect
of income maintenance programs was strongest in West Germany, where
unemployment and short-time benefits rose 150% and 800%, respectively, and in
Japan, where the lifetime employment practice kept large numbers of unneeded
workers on near-full salaries.
So far, increases in unemployment compensation payments have had few
wrenching effects on government finances and business profits. The role of
government in these programs is one aspect of countercyclical fiscal policy. Only
in Japan, where retention of redundant workers on 90% salary contriauted
substantially to the 25% drop in business profits last year, have compensation
programs hurt business.
Income maintenance programs will come under growing strain in 1975. A
40%-50% jump in the number of unemployed in the seven countries will increase
the payments of burden while eroding the base of contributions.
? In West Germany, the federal government will have a $2.5 billion deficit
in the national unemployment fund to cover this year, compared with
a $900 million deficit last year and a $600 million sdrplus in 1973.
? In France, business, government, and the still employed have to increase
their contributions to pay for the recent expansion in unemployment
coverage and benefits.
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? In Italy, business costs will rise considerably if proposed legislation
whereby employers pay the difference between full salaries and
unemployment compensation is adopted
Prices of soybeans and soybean oil and meal have declined shafply during
the past four months.
The price of US soybeans - pace setter for world oilseed export prices -
has declined about 40% since October 1974 to a level somewhat below a year
ago. Meal prices, on a downward trend for the past 18 months, are near the low
points of the last two years. Oil prices, although down, are still relatively high.
The steady decline in soy prices since the October 1974 peak reflects
? the effect of the worldwide economic recession on demand, for example,
on the demand for livestock feed;
? the fading away of the threat of US export controls;
? the pressure from unexpectedly large supplies of Brazilian soybeans and
of competing products, particularly palm oil;
? the drawdown of oil and meal inventories; and
? the sudden retreat from doomsday speculation in agricultural commodity
markets.
Observers last fall were hardly predicting a sharp price decline, in view of
the reduction in US and world supplies anticipated for the marketing year ending
August 1975. They knew the US 1974 soybean harvest - source of nearly half
of the world oilseed output - was down substantially, 20% as it turned out. Soviet
sunflower seed and Indian a?id Nigerian peanut crops also had declined. As of
now, only a 7% drop in world production of oilseeds and meals - on a meal
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basis - is projected by USDA, because of the continuing recovery of Peru's anchovy
catch and an expected 20%-25% increase in Brazil's soybean harvest. Import demand
has apparently fallen more than production, however, depressing oilseed prices.
Prices of Soybeans, Meal, and Oil
S 0 N O J F M A M J J
1972 1973
I Marketing Year t 1972/73
Foreign Demand for US Soybeans
Demand for US soybeans and meal by the EC and Japan - normally
^-nunting for 60%Q-70% of US exports - has declined since October, following
a.rapid buildup in stocks. Last summer these countries - the Netherlands, West
Germany, and Japan, in particular - contracted for more than they could use;
they expected that the United States might institute export restrictions as in 1973,
when supplies also were tight. Because the threat of controls has diminished, orders
for 1.9 million tons of beans and 1.3 million tons of meal have been canceled
44% Protein, f. o. b.,
Decatur
A S 0 N 0 1 J F M A M J J A S 0 N 0 J F M
1974 1975
-I Marketing Year 1973/74 -lMarketing Year 1974/75
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Estimated World Production of Selected Oilseeds and Fishmeal
Million Tons
(Meal Equivalent)
Percent Change
Estimate
1974/ i 5 over
1972/731
1973/741
1974/751
1973/74
Total
56.1
65.7
61.4
-7
Soybeans
32.8
40.7
35.6
-13
United States
25.8
31.5
25.1
-20
Brazil
3.7
5.5
6.8
24
Other
3.3
3.7
3.7
Other than soybeans
23.3
25.0
25.8
3
Fishmeal
5.1
S.8
6.8
17
Sunflower seed
3.2
4.0
3.6
-10
All others
15.0
15.2
15.4
1
1. Marketing year beginning 1 September for soybeans and 1 October for meal and oil.
in the past eight weeks. We expect additional cancellations in the coming weeks
of at least 3 million tons of beans and 3.5 million tons of meal to bring exports
in line with current demand.
further depress prices of soy products
We estimate now that depressed world demand for US soybeans may result
in exports reaching only about 12.5 million tons in the current marketing year,
16% below last year; soybean meal about 4.5 million tons, 10% below last vicar.
This projected lower level of exports, together with the 11% reduction in
domestic meal consumption predicted by the USDA, would leave US soybean stocks
at the end of August 1975 at 4 million tons - down slightly from a year ago
but more than dou9e the level in 1973. This comparatively comfortable stock
level, combined with an expected 6% boost in US soybean acreage in 1975, could
r
CIPEC COUNTRIES SEEK BUFFER STOCK AGREEMENT
Chile, Peru, Zaire, and Zambia, members of the Intergovernmental Council
of Copper Exporting Countries (CIPEC), are seeking the cooperation of producers
s
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and consumers to stabilize world copper prices. CIPEC is unlikely to win the support
of importing countries, which do not want to help finance an expensive buffer
stock to hold up prices.
Lacking enough control over copper exports to establish an OPEC-like cartel,
the CIPEC producers want an organization patterned after the International Tin
Council. The Council attempts to maintain agreed floor and ceiling prices through
manipulation of buffer stocks. CIPEC nations are considering a new organization
that would include major copper exporters and importers and allow participation
of private copper companies.
The groups of exporting and importing countries would each control 50%
of the vote; each country's vote would reflect the size of its copper exports or
imports. The CIPEC countries therefore would control two-thirds of the producers'
votes, and Canada, the Philippines, Papua New Guinea, and Australia would have
the remainder. The importing countries visualized as members are Japan, West
Germany, the United Kingdom, Belgium, France, and Italy.
Members of the organization would establish a buffer stock, buying copper
on the London Metal Exchange when the price falls below the floor and selling
when it rises above the cei'.ing. CIPEC has in mind floor and ceiling prices of
68 and 89 cents a pound, compared with the current LME spot price of 59 cents
and the record high spot price of $1.52 reached in April 1974. To raise the price
to 68 cents, the organization would have to purchase an estimated 500,000 tons
in 1975, at a cost of perhaps $750 million. Member countries would share in
financing the buffer stock with the aid of loans from the IMF, if necessary.
The CIPEC nations are now interested in an international pricing scheme
because their efforts to restrict exports have not raised copper prices enough to
increase export earnings. They are warning the importing countries that prolonged
low prices will discourage investment and possibly cause shortages and high prices
during the economic upturn. Nonetheless, the importers - currently benefiting from
low prices - have little interest in raising prices through a costly buffer stock
scheme. Most international copper firms prefer further production cuts *-1 the
complexities of financing international buffer stocks.
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CHILE: SINKING TRADE-AND-PAYMENTS POSITION
The drop in world copper prices and a reduction in foreign assistance will
saddle Chile with a large balance-of-payments deficit this year. Since extensive
commercial financing is precluded by Chile's enormous debt, a large cut in imports
and some default on obligations will be required to cope with the payments
problems. A slash in imports would reverse the economic recovery under way since
the Allende period and could derail the military government's program of economic
reform.
Export earnings are likely to drop about 30% in 1975. Foreign aid is
contracting to a trickle because of international distaste for the junta's tre^ anent
of its political opponents. Moreover, rising prices are increasing the co i of imports
by about 10%. If the junta meets the required 1975 service payment on its foreign
debt, the emerging payments crunch will force the government to cut imports by
as much as $900 million from the present rate, a drop of about 40% in volume
from a year earlier. So far, no steps to restrict imports have been taken.
The junta is scheduled to meet late in March with the Paris Club to negotiate
Chile's request for relief fron-, the $565 million debt service payments due members
in 1975. The prospect of help from this quarter is poor. Under Club rules, only
$200 million in the payments are eligible for renegotiation. One-fifth of this amount
is in doubt because the United Kingdom and Italy plan to boycott the meeting;
moreover, the United Kingdom is attempting to persuade other members to join
in refusing to renegotiate. Faced by refusal to roll ever these payments, the junta
might default on amounts due countries unwilling to discuss renegotiations. The
junta would resort to default reluctantly, given its strong desire to improve Chile's
credit standing.
Selective defaults and other debt measures would still leave a $700 million
payments gap to be closed by reducing imports. A cut of this magnitude would
have a harsh impact on the economy. Although the prob.!:': imposition of gasoline
rationing this year will permit some relatively easy savings in oil imports, deep
cuts would have to be made in purchases of industrial materials, intermediate
manufactured goods, and capital equipment. Such a reduction would fall most
heavily on industry and the urban wage earner.
The consequent decline will endanger the regime's promising reform prograins
and its attack on Chile's triple-digit inflation. Further rises in unemployment and
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CHILE: Economic Indicators
Inflation Rate
Percent, Dec/Dec
Unemployment Rate
Annual Average, Percent
4.7
Real CDP Growth
Percent
7.7
Real Wage Changes
Percent, Jan/Jan
4.9
Public Sector Deficit
as a Percent of Expenditures
24.4
Net Foreign Reserves'
Million US$ at Yearend
1971 1972 1973
505374 3.75
-615.2
1971 1972 1973 1974
1. Total reserves minus short-term liabilities.
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declines in real wages will (a) heighten public unrest and (b) increase pressure on
the government from populist elements within the military to abandon its eccnomic
programs.
CHINA: FALLOFF IN IMPORTS OF US FARM PRODUCTS
Sino-US agricultural trade is winding down, almost as abruptly as it began.
China first entered the US commodity market in the fall of 1972 because
of poor domestic crops and the uncertainty of supplies from traditional markets.
By the end of 1974 the PRC had contracted for larger quantities of agricultural
commodities than it could absorb financially or logistically. Furthermore, improved
crops in 1974 allowed the PRC to reduce its forward purchases. By yearend, all
contracts for delivery of US wheat in 1975 - - about 1.1 million tons - had been
canceled.
In September 1974, Peking liquidated all contracts for US soybeans - about
600,000 tons. Subsequently, contracts for almost one-half of the US cotton on
order were also canceled. Delivery of the balance of the cotton - about 290,000
bales - is to be stretched out.
Peking has paid the trader the difference between the contract price and the
world price on the day of liquidation. At the same time, China has claimed damages
for unsatisfactory grain and cotton already delivered, so that actual payments by
the Chinese have been small.
The People's Republic has long-term agreements with traditional suppliers -
Canada, Australia, and Argentina - for up to 4.8 million tons of grain annually
through 1976. It thus is unlikely to return to the United States for agricultural
commodities unless it suffers a string of poor harvests and alternative sources
are unable to provide grain.
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China: Imports of Agricultural Commodities
1971
1972
1973
1974
19751
All commodities
(million US $)
345
550
1,300
1,600
1,200
From the United States
(million US $)
....
61
578
656
84
Percent
....
11
44
41
7
Total grain
(million tons)
3.0
4.8
7.7
7.0
5.4
From the United States
(million tons)
1.0
4.1
2.8
Percent
21
53
40
Total cotton (thousand
bales)2
433
787
1,944
1,655
1,000
From the United States
(thousand bales)
583
894
320
Percent
30
54
32
Total soybeans (million
tons)
From the United States
(million tons)
198
626
Percent
....
100
100
Total soybean oil
(thousand tons)
From the United States
(thousand tons)
10
58.3
7.0
Percent
100
100
100
I. Projected.
2. Year beginning 1 August of previous year.
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We expect lower growth rates in Eastern Europe* for the next several years
as a result of higher prices for Soviet imports and the Western inflation and
recession. The timing and severity of the slowdown will depend mainly on the
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extent of concessions from the USSR and credits for imports from the West. Slower
growth will mean the end of the era of notable advances in consumer welfare,
an era that began in the early 1970s, following the disturbances in Czechoslovakia
and Poland.
Purchasing power will shift from Eastern Europe to the USSR. Higher
industrial costs will be a major problem now that the USSR has jumped the prices
of its oil and other raw materials deliveries. Only Romania, a net exporter of
petroleum, and Poland, with ample coal resources, will be relatively untouched
by this development. Although the USSR is now charging its East European
customers only two-thirds of the world price :-)r oil, the new pricing formula for
1976-80 means that the price almost certainly will rise further. For those years,
the East Europeans have agreed to pay the USSR a price based on the average
world price in the preceding five-year period. The higher costs to the East Europeans
will be only partially offset by price hikes for their exports to the USSR or by
concessions.
The shrinking of export markets in the West will strain Eastern Europe's hard
currency payments situation. In 1974, Romania achieved a growth of roughly 10%
in export volume and Poland 5%, thanks mainly to their exports of petroleum
and coal, respectively. At the same time, the other countries registered little if
any increase, and their terms of trade with the West worsened. Eastern Europe's
hard currency trade deficit soared to $4.5 billion, compared with $2.3 billion in
1973. Poland accounted for almost half the deficit as it continued to draw heavily
on its favorable credit rating in Western banking circles.
Imports from the West will level off unless additional credits are forthcoming.
Much of the financing of the expected 1975 trade deficit has already been obtained
in the form of syndicated Eurodollar loans and credits guaranteed by West European
governments. Beyond 1975 the extent to which Eastern Europe can expand its
exports to the West and find new sources of long-term financing will determine
its ability to continue to increase imports from the West. Some of the best hard
currency earners - such as processed foods and low-sulfur Polish coal - may have
to be redirected partly to the Soviet market.
If imports from the West must be reduced, economic growth plans will have
to be trimmed. The sectors hit hardest by cutbacks in imports would be agriculture,
chemicals, metallurgy, and food processing, which rely heavily on Western
technology, equipment, and basic materials. Moreover, investment would have to
be diverted to such industries as textiles and other consumer goods to meet
Moscow's demands for goods to pay for its higher priced raw materials.
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Slower growth will mean the end of substantial gains for the consumer in
Eastern Europe. The need to boost exports to both the West and the East will
leave fewer goods for domestic consumption. Planners will have to slow down the
growth of real income and increase some retail prices to discourage consumption
of scarce commodities. Already the Hungarians in January 1975 and the Poles
in February 1975 have raised retail prices for certain goods t
high-priced Western materials; other countries are likely to follow
OPEC COUNTRIES: CURRENT ACCOUNT TRENDS
THROUGH 1977*
We estimate that OPEC member states will run
current account surpluses (in current prices) of about
$60 billion annually in 1975-77. As a result, the
countries will amass $265 billion in foreign assets by
the end of 1977, compared with the $25 billion held
at the end of 1973.
Seven of the 12 OPEC states-Saudi Arabia,
Iran, Kuwait, Nigeria, the United Arab Emirates, Iraq,
and Qatar-should have large current account sur-
pluses throughout the period. Saudi Arabia's surplus
is expected to reach $30 billion in 1977, nearly half
the OPEC total. Despite a reduced volume of oil ex-
ports and rapidly rising imports, the Saudi surplus
will continue to rise because of the substantial growth
of investment income. By the end of 1977, Saudi
earnings from investment will be approaching the pro-
jected value of imports.
OPEC Countries:
Projected Current
Account Trends
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OPEC Countries.
Estimated Current Account Balances in 1977
Billion US $
Saudi Arabia
Iran
Kuwait
P:igeria
United Arab Emirates
Iraq
The remaining five countries-Algeria, Libya, Indonesia, Venezuela, and
Ecuador-will experience balanced current accounts or small deficits. None are likely
to encounter serious balance-of-payments problems. To break even, Libya will be
forced to raise oil exports by adopting competitive pricing policies. Venezuela's
projected deficit of $1.6 billion in 1977 can readily be financed by capital inflows
and a drawdown of reserves-or can be avoided by an easing of conservation efforts.
Algeria, Indonesia, and Ecuador probably will be able to cover their deficits with
capital inflows; if not, they probably will export more oil than we have projected.
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OPEC Countries:
Estimated Foreign Assets
End of 1973 and 1977
Billion US S
2
4
1973 ~ '~-~'?3 .. ~s; ~w
Saudi Iran Kuwait Nigeria UAE Iraq Qatar Venezuela Libya Ecuador' Indonesia'Algeriat
Arabia
1. The level of foreign assets is not expected to change much
as current account deficits are largely offset by capital inflows.
Key Assumptions
These projections reflect the following key assumptions:
? Demand for OPEC oil will decline 8% from 1974 to 1975 because of
slackening economic activity and large oil inventories. The restoration of
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economic growth will result in increases in demand for OPEC oil of 2% in
1976 and 7% in 1977.
v The average nominal price of oil in 1975 will equal the price on 1 January
1975. The price will rise by 8% in 1976 and 5% in 1977-slightly less than
our projected rate of inflation for OECD countries.
? Growth in the value of OPEC im_'orts will slacken from the torrid 1974
pace of 65% to 27% in 1976 and 23% in 1977, because of physical and
human constraints in absorbing foreign goods. Prices of OPEC imports will
rise by 9% in 1976 and 6% in 1977, compared with 30% in 1974.
? OPEC countries will earn 8% on the value of their foreign assets.
Sensitivity to Alternate Assumptions
Given the uncertainties concerning the recovery in world economic growth and
possible variations in our other key assumptions, numerous alternate projections can
be devised. The more plausible variations do not change our basic conclusion that
OPEC can withstand any likely financial strains. We see no damaging stress on the
cartel through 1977 so long as Saudi Arabia is willing to absorb the bulk of any
necessary cuts in oil production and supports OPEC pricing policy-circumstances
that seem likely.
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OPEC COUNTRIES: TANKER FLEET EXPANSION*
OPEC states, long interested in increasing their role in downstream operations
of the petroleum industry, are expanding their tanker fleets through cooperative
arrangement;, national programs, and joint ventures with foreign maritime powers.
Th" countries plan to invest $4-$6 billion to expand their combined fleet from
2.3 million deadweight tons in 1975 to 30.5 million DWT by 1980. A fleet this
size will be able to carry about 22% of OPEC's estimated exports in 1980.
Implementation of these ambitious plans is proceeding slowly. About 7.6
million DWT are on order at Japanese and West European yards for delivery by
1979, leaving OPEC 20.6 million DWT short of its 1980 goal. Among the reasons
for this cautious approach are
? uncertainty in the world tanker market and a growing tanker surplus,
? the likelihood that prices for used tankers will continue their sharp
decline,
? the shortage of trained personnel, and
? the prospect that the reopening of the Suez Canal and the likely
construction of the SUMED pipeline will change tanker size requirements
and the composition of the world tanker fleet.
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National Programs
Each OPEC nation, except Qatar, has national tanker fleet development plans.
Arab countries - particularly Iraq, Saudi Arabia, and Kuwait - will account for
more than. 26 million DWT of the planned 1980 fleet, while Iran and Venezuela
are expected to lead the non-Arab producers.
Cooperative Arrangements
In addition, Arab oil producers, under the leadership of Kuwait and Saudi
Arabia, have formed the Arab Maritime Petroleum Transport Company. A 10
millio.1-DWT fleet costing more than $2 billion is planned by 1980-82. The
company has ordered six VLCCs* in the range of 300,000 to 400,000 DWT from
West Germany and France at a cost of almost $400 million. These vessels are
believed to be in addition; to ships ordered by individual Arab countries and will
be registered under Saudi, Kuwaiti, Libyan, Iraqi, and Algerian flags.
Because of a lack of experience, management expertise, and crews in producer
countries, many OPEC nations are forming joint ventures with foreign firms. At
least 10 joint ventures have been arranged or are being negotiated. These include
deals between Saudi Arabia and American, Japanese, and Spanish firms. Many OPEC
members are being bombarded with offers for fleet development aid from
international oil companies, independent tanker owners, management firms, and
consumer governments.
Training
Although currently lacking required crews and management talent, OPEC
countries are starting to train local manpower. The Arab Maritime Transport
Academy, sponsored by the UN Intergovernmental Maritime Consultative
Organization (IMCO)**, is being upgraded with a $2.6 million loan. This school,
which will become fully operational by 1977, will train Arabs in the administrative,
financial, and support areas of international shipping. Furthermore, many OPEC
nations, particularly Kuwait and Saudi Arabia, are sending trainees abroad.
* Very Large Crude Carriers - tankers of more than 175,000 DWT.
** The Academy was established to train personnel from Bahrain, Egypt, Iraq, Jordan, Kuwait, Libya, Oman,
Qatar, Saudi Arabia, Sadan, Sy.ia, and Yemen.
Secret
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Secret
Cargo Preference Legislation
To ensure greater use of their merchant fleets, many OPEC nations have
enacted cargo preference legislation requiring that a stated portion of their seaborne
trade be carried in their ships. In January, Saudi Arabia enacted legislation requiring
that 5% of its oil exports be shipped in Saudi ships, with 25%-50% expected by
1980. Algeria reserves 50% of its oil and LNG exports, and Venezuela's graduated
cargo preference law will eventually reserve 50% of exported oil for Venezuelan
ships. AMPTC, Kuwait, and Libya have indicated that their tankers would receive
preferential treatment.
As of 1 January 1975
Current Fleet
(Thousand
DWT)
Thousand
DWT
Cost
(Million
US $)
1980 Goal
(Thousand
DWT)
Total OPEC members
2,305
7,577
1,494
30,455
Arab producers
1,520
6,170
1,294
26,024
Kuwait
793
1,344
250
2,657
Iraq
269
1,781
400
4,350
Libya
263
754
184
1,467
Algeria
149
....
....
949
Saudi Arabia
27
80
16
4,132
United Arab Emirates
19
....
....
1,019
Abu Dhabi 1
....
269
54
1,300
Arab Maritime Petroleum
Transport Company
....
1,942
390
10,0002
United Arab Maritime
Company
....
....
....
150
Other producers
785
1,407
200
4,431
Venezuela
420
335
67
1,000
Iran
183
860
100
2,331
Ecuador
100
72
5
250
Indonesia
82
140
28
350
Nigeria
....
....
....
500
1. Although part of the Uni?ed Arab Emirates, Abu Dhabi plans a fleet of its own in addition to the UAE fleet.
2. By 1980-82.
21
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Producer Options and the World Tanker Market
The OPEC tanker fleet will represent less than 10% of the world tanker fleet
and will be able to carry about 22% of its estimated exports by 1980. However,
the methods by which OPEC obtains its tankers will have an impact on the world
tanker market. If OPEC countries continue to order new tankers, the existing tanker
glut will intensify and push tanker rates lower. As charter rates are currently at
or below break-even costs, such a situation could force many tankers into layup
and several hard-pressed tanker owners into bankruptcy.
OPEC could shift purchases to used tankers or to the acquisition of rights
to tan;,ers under construction. OPEC appears to be waiting for further declines
in tanker Y - ces before moving in this direction. OPEC members seem to be least
interested in chartering tonnage from foreign owners, except as a short-term
expedient. In fact, OPEC nations probably will choose to charter their tankers
to foreign operators. Arab producers must also decide whether to continue to
purchase VLCCs or switch to smaller crude oil and products tankers that can transit
the Suez Canal when it is reopened.
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India: Another Step Backward in Wheat Marketing
thereby causing farmers to shift to production of lower yielding coarse grains.
Marketing controls recently announced will reduce farmers' profits from the
approaching spring wheat harvest and limit wheat production next year. To promote
government grain procurement, New Delhi has extended the requirement that
private traders in the five northern wheat-surplus states sell the government (at
controlled prices) half of their purchases from farmers and has banned private
interstate wheat shipments. The measures will severely curb profits on wheat,
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5X1
Soviets Negotiate for US Color Television Technology
The USSR appears r ady to sign contracts with two US firms for color TV
picture tube technology. 'Valued at about $130 million, the contracts provide a
complete technology package that will support an annual output of 1.5 million
picture tubes. Soviet problems with volume production of good quality color picture
tubes span many years. Most of the 500,000 tubes now produced each year in
the USSR are based on an unhappy marriage if Soviet and US technology. The
USSR purchased a complete line to make one component part (shadow mask)
from the United States in 1969 after efforts to produce the French-designed
"chromatron" tube failed.
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INDUSTRIAL PRODUCTION
INDEX: 1970 Monthly Average-100
1 1973 Average
GNP'
Constant Market Prices
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Average Annual Growth Halo Since
Percent Change
latest Iran] Previous I Year 3 Months
Muntl: Month 1970 Earlier Earlier 2
~
Feb 75
-3.0
Jan 75
D
-4.2
oc 74
-1.7
-a Dec 74
-3.4
0.7 -11.5 -28.7
1.9 -17.9 -26
.
7
RETAIL SALES'
Average Annual Growth Rate Since Constant Prices
n.._.___ a
l G__
h
Latest
from Previous
Quarter
Quarter 1970
74 IV
-2.3
2.5
74111
i
-0.2
5.3
74 IV
-1.6
2.4
74111
0.8
5.4
74 IV
-1.0
2.3
74 II
0.2
3.8
74 IV
-1.3
4.7
Approved
Office of Economic Research/CIA
19 MARCH 1975
nnua
wt
R
Percent Change
I Year Previous
Latest from Previous I Year 3 Months
Earlier Quarter Month Month 1970 Earlier Earlier 2
-5.0 -9.1 United States Jan 75 0.3 1.3 1 -6.2 1 -21.7
-3.9 -0.8 Ja pan Sep 74 4.7 2.0 -7.9 2.4
-1.5 -6.3 West Germany Nov 74 -3.6 1.8 -0.9 6.3
4.3 3.1 France Nov 74 -15.0 2.1 -8.1 -2.6
0.1 -3.9
United Kingdom Jan 75 2.0 2.9 3.5 1.4
4.6 .;.7 Italy Sep 74 -8.2 4.2 1 -8.2 : 3.3
0.1w -w5.1 w. wCanada wwTwwwww^ww Nov74 , -3-k .I. 3.1 3.3 -15.4
Note: US data provided by US government agencies
Footnotes appear on page A-4.
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UNEMPLOYMENT
Percent of Labor Forco
8 United States
4 West Germany
7 Canada
1972 1973 1974. 1975
Number of Persons Unemployed
(Thousanls)
Latest Period 1 Year 3 Months
Earlier Earlier
Jan 75 7,529 4,732 5,513
Dec74 830 612 714
Jan 75 786 415 805
Jan 75 699 437 557
Jan 75 709 561 637
741V 611 592 582
Jan 75 860 520 522
NOTE: Data are seasonally adjusted. Unemployment rates for France are estimated. The rates shown for Japan. Italy,and Canada are roughly comparable
to US rates. The rates for France and the United Kingdom should be increased by about 67% and 15%, respectively, and those for West Germany
decreased by 17% to be roughly comparable with U S rates.
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DOMESTIC PRICES'
INDEX: 1970 Monthly Average-100
WI 1019saIe
134
United States.
106
Japan
108
157
Average Anneal Growth note Since
Lanni
Iva llIII
Feb 15
Jan 75
Percent Change
from Previous
Month
0.5
0.5
1970
9.6
9.7
I Seat
Earlier
21.9
11.7
3 Months
Earlier
6.4
0.4
Jan 75
0.5
11.7
17.4
6.5
Jan 75
0.8
6.7
9.8
3.7
Jan 75
0.9 '
6.2
6.1
8.0
Dec 74
-1.7
10.6
14.8
- 9,9
Jan 75
1 .1
83
14.5
12.1
Feb 75
1 .4
12.8
26.2
26.9
Jan 75
2.6
11.5
19.9
25.9
Jan 75
-0.1
15.1
27.6
-49
Feb 75
' 1 .1
11.5
24.4
13,3
Dec 74
-0.9
111.2
15.7 '
-2.7
Feb 75
0.8
7.1
11.8
9.3
Average Annual Growth Rate Since
Perc:nl Change
Latest Irani Previous
1 Year
3 Months
Latest
Percent Change
train Previous
I Year
3 Months
mail III Month 1970
Earlier
Earlier 2
Morph
Period
1970
Earlier
Earlier 2
United States
Feb 75
0.4
6.1
4.0
1.9
United States
Dec 74
0.5
7.2
10.3
11.3
Japan
Oct 74
0.6
16.4
10.0
0.4
Japan
Sep 74
-2.1
21.7
33.7
34.5
West Germany
Dec 74
1.5
9.8
12.1
14.3
West Germany
74 III
2.0
10.9
10.8
8.2
France
Dodo
94
13.3
140
14 IV
3.7
13.9
20.4
15.6
United Kingdom
Jan 75
3.4
9.3
9.3
15.5
United Kingdom
Oct 74
0.6
14.1
17.9
41.0
Italy
Aug 74
1.1
20.7
19.2
16.7
Italy
Nov 74
4.5 1
18.0
20.5
17.2
Canada
Dec 74
-0.7 It
11.1
5.0
-1.8
Canada
Oct 74
2.2
10.7
18.5
24.1
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 FOR EIGN -I-F W For Release 2005/06/13 : CIA-RDP86TOO608ROO0500140011-1
INDEX: 1970 Monthly Avernge= 100 )Ln Or /I a 6) Latest Maulh Cumulative IM011011USS)
Millinn US S 19'5 1974 Chuu e
Jan 75 9.112 9,412 7.1 50 316),
9,1122 9,022 6.4 97 48.1'H
Lalest Perierl conlulanve (Million US $)
Million US S 1974 1973 Change
74111 -3,581 -4,265 ' -287 -3,978
Jan 75 7,432 7,432 5,312 17.8'.",
5,482 5,482 4,676 17.2%
62.5",.
37.65,
35.5".,
16.3';X,
Jan 75 2,796 2,796 2,444 14.4`.:
2,886 2.806 2,243 28.65,
BASIC BALANCES
Current and Long?Term-Capital Transactions
Japan Jan 75
-1,310 -8,642 -9.374 732 Japan
West Germany Jan 75 : 398 7,702 9,102 -1,400 West Germany
France 741V
Italy
Canada
-1.011 ; -4,281 -1,842 -2,439 France
74 III ; -1,248 -4,052 -1.485 -2,567 United Kingdom
Jan 75
'1,4113
4,470
4.41)3
4,470
3,460
3,562
Jan 75
3,657
3.657
2,251
4.274
4,274
3,105
2.783
2,783
2,053
2.889
2,889
2.484
lineal Mouth
Evil Of
0dlimr US S Jun 1970
Jan 75
15.9
14.5
Jan 75
13.5
4.1
Jan 75
33.1
8.8
Jan 75
9.0 '
4.4
Feb 75
7.1
2.8
Approved P&& Rd11Vh9e3'O6O5/N/h3?48V.IA-I P86TOO6O8ROOO5iOO14OOI1-14.7
7n III 237 ! Ana !
C
! - -- - -
271 97
ana a
I Year 3 Mouths
Earlier iorliei
14.6 15.9
11.6 13.5
32.2 32.0
8.3 8.9
6.0 7.9
6.0 6.9
19 MARCH 1975 A-4
 Approved For Release 2005/06/13 : CIA-RDP86T00608R000500140011-1
United States
Japan
West Germany
France
United Kingdom
Canada
Eurodollars
EXPORT PRICES
National Currency
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
EXPORT PRICES
us S
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Ileluesunlativr. lutes
Dealer-placed finance paper
Call money
Interbank loans 13 ntanllis)
Call money
Sterling interbank Iaansl3 mantis)
Finance paper
Three-month deposits
1 Ycai 3 Mnmhs I Munlh
blest elate I i,Iier Earhw Earlier
Mar 5 6.25 8.15 9.00 0.60
Fab 21 13.00 12.00 13.00 12.75
Mar 5 6.16 10.48 8.62 7.28
Fab 21 9.75 12.00 12.00 10.75
Mar 5 10.81 15.35 12.75 11.65
Mar 5 6.68 8.53 10.60 7.00
Mar 5 7.35 8.66 10.21 7.25
IMPORT PRICES
National Currency
Average Annual Growth Rate Since
Pene it Change
Lntest from Pnevmus I Year 3 Munlhs
Month Manlh I!I711 Gather Earlier
Doc 74 -0.9 9.8 25.3
Doc 74 1.0 6.0 17.7
Sep 74 -3.5 10.5 25.4
Nov 74 1.9 13.6 29.4
Oct 74 1.6 16.9 50.7
Oct 74 1.8 12.9 35.9
United States
-8.0 Japan
6.1 West Germany
2.7 France
8.4 United Kingdom
43.2 Italy
21.3 Canada
Average Annual Growth Hale Since
Percent change
Latest hum I'revmus I Year 3 Munlhs
Munlh Month 19111 Earlier Earlier
Jan 75 2.0 13.0 24.6 27.4
Dec 74 -1.0 14.4 16.8 -5.8
Dec 74 3.1 15.8 27.3 45.0
Sep 74 -3.9 14.4 11.3 11.8
Nov 74 1.7 12.8 26.0 5.1
Oct 74 0.8 15.2 27.9 24.6
Oct 74 2.5 14.3 37.0 17.9
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Percent Change fi urn
Uec GG I H Uec 71 19 Mar 73 7 Mar 75
-18.37 -8.90 -2.23 0.18
14.06 0.44 -11.42 -1.06
34.11 16.85 11.71 0.11
-13.23 0.11 -2.36 -0.03
-38.73 -24.20 -9.59 0.70
-31.78 -30.33 -23.27 0.02
4.61 -1.93 -0.27 -0.20
EXCHANGE RATES
Spot Rare
As of 14Mar75
Avergle Annual Growth Hale Since
Peel cent Change
1 ,1,51 from Previous I Year 3 Months
hlunlh Mouth 19711 Ear he.r Earlier
Jan 75 3.1 20.0 40.7 30.8
Dec 74 -0.5 16.9 57.8 4.1
Dec 74 -1.1 5.9 13.9 -8.8
Sep 74 -7.6 14.3 45.8 1.0
Nov 74 1.0 20.9 43.1 25.8
Oct 74 Negl 25.1 67.8 29.8
Oct 74 2.6 12.5 37.5 28.3
us S
Per Unn Dec 66 IH Dec 71 19 h1., 13 7 Mar 75
Japan jyen) 0.0035 25.55 6.68 -8.91 -1.03
West Germany (oevlsche math) 0.4312 71.52 38.96 21.77 0.14
France (franc) 0.2378 17.78 20.77 7.89 0
United Kingdom (pound sterling) 2.417;, 13 39 -7.24 -1.79 0.75
Italy (lira) 0.0016 -1.19 -8.02 -10.62 0.06
Canada (dollar) 1.0001 8.42 0.23 0.24 -0.19
FOOTNOTES FOR WEEKLY INDICATORS
1. Seasonally adjusted.
2. Average for late., 3 monlhs compared with average far previous 3 months.
3. Wholesale price indexes cover industrial goods
4 Hourly earnings for fire United States, Japan, and Canada:
hourly wage rates for others. West German and French data
are for the beginning of the quarter.
5. Converted to US dollars at the current market rates of exchange
6. Weighting is based err each listed country's trade with 16 other industrialized countries
to reflect Iho cmnpetitive impact of exchange rate variations among Uo major currencies
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INDUSTRIAL MXfERIALS PRICES Monthly Average Cash Price
ExchanjeI
LME US
17 Mar 24.4 24.5
10 Mar 24.6 24.5
Feb 75 24.5 24.5
Mar 74 32.1 19.5
SELECTED MATER
Aluminum Major US Prod., cu.
Steel Composite, S/LT
Iron Ore Non-Bessemer Old He
Chrome Ore Russian, S/MT
Chrome Ore S. Africa, S/.1
Ferrochrome US Chorec, C/Lh
Nickel Major US Prod. Colhode,
Manganese Ore 40%Mo,S/
Tungsten Ore 65%W03, S/S1
Mercury NY, S/70Lh Flask
Silver LME cash, drroy Or
LME US
17 Mar 330.2 363.5
10 Mar 332.3 367.8
Feb 75 340.8 372.1
Mar 74 374.6 389 .4
10 "
INDUSTRIAL
MATERIALS
July 1972 1973 1974 1975 July 1972 1973
t Approximates world market price frequently used by major world producers and traders,
Feb 75 81.60 125 r7
LME
17 Mar 59.8
10 Mar 59.6
Feb 75 57.3
Mar 74 124.4
10 Mar 84.17
MP USD
17 Mar 170.0 153.0
1 O Mar 170,0 154.5
Feb 75 179.0 152.3
Mar 74 190.0 215.1
3 Noted on Now York market. 4 Composite price for Chicago. Philadelphia, and Pittsburgh,
5 S-type styrene, US I.a.s. export priApproved For Release 2005/06/13 : CIA-RDP86T00608R000500140011-1
 Approved For Release 2005/06/13 : CIA-RDP86T00608R000500140011-1
PRICES Monthly Average Cash Price
LME
17 Mar 59.8
10 Mar 59.6
Feb 75 57.3
Mar 74 124.4
LME
17 Mar 36.0
10IM nr 36.1
Feb ,5 35.9
Mar 74 73.8
US
63.6
63.6
63.6
68.0
US
38.0
38.0
38.0
32.6
35 r
LME US
17 Mar 24.4 24.5
10 Mar 24.6 24.5
Feb 75 24.5 24.5
Mar 74 32.1 19.5
LME US
17 Mar 330.2 363.5
10 Mar 332.3 367.8
Feb 75 340.8 372.1
Mar 74 374.6 389.4
SELECTED MATERIALS
Aluminum Major US Prod., c/tb
Steel Composite, $0.T
Iron Ore NomBossamor Old Range, $/LT
Chrome Ora Russian, SMMT
Chrome Ora S. Africa, SILT
Ferrochromo US Charge, c/Lb
Nickel Major US Prod. Cathode, $0.b
Manganese Ore 48%Mn., $/LT
Tungsten Oro 05%W03, $/ST
Mercury NY, S/76Lb Flask
Silver LME cash, c/rroy Or
INDUSTRIAL
MATERIALS
13 Mar
10 Mar
Feb 75
Mar 74
traded on the LME.
ited States.
100
July 1972 1973 1974 1975
17 Mar
10 Mar
Feb 75
Mar 74
MP USD
110.0 153.0
170.0 154.5
179.0 152.3
190.0 215.1
Current
39.00
289.63
17.53
135.00
57.50
53.50
2.01
67.20
6,087.90
190.00
443.34
Oct 74 Jan 74 Jon 73
39.00
29.00
25.00
278.43
212.13
209.66
16.00
12.16
11.96
55.50
38.00
45.75
49.50
33.50
26.50
38.52
22.50
20.00
1.85
1.62
1.53
54.72
52.80
31.40
6,704.10
2,872.40
2,241.20
265.36
215.54
282.50
480.20
360.29
200.15
NR SR
17 Mar 29.0 N.A.
10 Mar 29.0 N.A.
Feb 75 29.9 N.A.
Mar 74 48.8 23.1
This is a compiled index
by the Economist for 19
raw materials which
151.9 enter international trade.
Commodities are
wei,,hied by 3-year moving
averages of imports into
industrialized countries.
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A-6
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AGRICULTURAL PRICES Monthly Average Cash Price
7.5 r- 5
WHEAT
Kansas City No. 2 Hard Wiator
17 Mar 3.06
10 Mar 3.59
Feb 75 3.95
Mar 74 5.25
SOYBEANS
Chicago No. 1 Yellow
SUGAR
World Raw New York No. 11
17 Mar 2.96
10 Mar 2.86
Feb 75 2.97
Mar 74 2.99
27.90
17 Mar
5.58
17 Mar
28.75
10 Mar
5.28
10 Mar
26.00
Feb 75
5.68
Feb 75
33.89
Mar 74
6.23
I-17 Mar
Mar 74
21.30
I I I
0 July 1972 1973 1974 1975
17 Mar
0.3975
10 Mar
0.4055
Feb 75
0.3930 55
Mar 74
0.6410
50
July 1972 1973 1974 1975 July 1972 1973
17 Mar 50.25
10 Mar 50.00
Feb 75 57.05
Mar 74 71.26
FOOD INDI
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37.5
$ Per Bushol
30.0
17 Mar 2.96
10 Mar 2.86
Fab 75 2.97
Mar 74 2.99
RICE
No. 2 medium grain, 4% brokons
July 1972 1973 1974 1975 July 1972 1973
75 r- 125
~WGAR
World Raw New York No. 11
$ Per cwt.
f.o.b. mills, Houston. Tex.
10 Mar 19.50
3 Mar 19.50
Fab 75 19.75
Mar 74 29.00
C Per Pound
New York price
27.90
17 Mar
28.75
17 Mar
81.00
10 Mar
26.00
10 Mar
82.25
Feb 75
33.89
Feb 75
87.24
Ma. 74
21.30
1.1
7 Mar
Mar 74
87.70
17 Mar 0.3975
10 Mar 0.4055
Feb 75 0.3930
Mar 74 0.8410
17 Mar 50.25
10 Mar 50.00
Feb 75 57.05
Mar 74 71.26
100L I I I
July 1972 1973 1974 1975
Approved For Release 2005/06/13 : CIA-RDP86T00608R000500140011-1
This is a compiled index
by the Economist for 16
food commodities which
enter international trade.
Commodities are
weighted by 3-year moving
averages of imports into
industrialized countries.