COMMUNIST AID AND TRADE ACTIVITIES IN LESS DEVELOPED COUNTRIES, SEPTEMBER 1975

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000500230030-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 9, 2016
• Document Release Date: February 14, 2000
• Sequence Number: 30
• Publication Date: November 1, 1975
• Content Type: REPORT

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Corrfim. Aid 8' Trade Act; less ;Devil. Count, Se~.'~,19?5 ' ' ~R RP
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Secret
NUI~UHN
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Corrc~r~u~~ur Aicl crn~~ Tr~idc~ ~clivitic.r iii
Derr Dc~>>clopr~f Cvui~tric;r, Si~lc'>~hcr 197
Secret,
ER RP 75-31
November 1975
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NATIONAL SECURITY INFORfNATION
Unauthorized Disclosure Subject to Criminal Sanctions
DISSEMINATION CG~dTROI AUBREVIA'i IONS
NOFORN- Not Roloasallle to Foreign Nationals
NOCONTRACT?- Not Reloasaulo to Contractors or
Contractor/Consultants
PROPIN ? Caution-Proprietary Information
Involvad
U5130NLY USIb Departments Only
ORCON- Dissemination and Extraction of Infor-
mation Controlled by Originator
REL -- This Information has boon Authorized
for Release to .
Classified by 01319
Enempr from General peclassificalian Schedule
of E.O. 116SY, eeampllon rale0oryi
y30(1), (2), and (~)
Aulmnmicallr dorlacsified on:
dale inrp~subls to delermins
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N~l~'or. n
CUN'1'IsN'I'S ANU SUMMARY U1.~ I.VI;N'l'S
~SCptCrnbeC' 11)70))
Ili[;f~ligllts
? Libya become the second LUC to receive the Soviet 'I'U-22
rnediurn-range bomber.
? The USSR pledged $18 million in new credits for housing in Iron.
? L'hinrz declined to pnrticipute in the long-discussed $3G5 rnil.lion
Manuntrzli Durn in Mtzli.
? Peking has renewed r; $5U rnil!,ion development credit to Chile.
? 'Cambia began shippirl; copper over the recently completed
Cf~inese-built Tun-Gam Iauilroud.
First Zambian Coppor Shipme~zts on the 'I'an-Zam Kailroad 1
Assesses the just completed Chinese-built 'I'an-Znrn Railroad.
Soviet Aid to LDC Oil and Gas Industries 4
Examines Soviet aid to LDC petroleum and gas industries and indi-
crztes the benfits accruing to the USSR and aid recipients.
Communist Arms Transfers to Mayor Arab C,~untries in 1975. 7
Details Communist arms deliveries to major Arab states in the first
nine months of the year.
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Cyti;;'r Activiticti
Economic L0
Militciry '. 1G
ii
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COMMUNIST Ally AN1)'I'ItAUI~ AC'I'IVI'I'I!:5
IN LESS UliVI,I,UPIiI) CUUN'I'ItIES
SIsP'I'hM I31:1i. 197;'i
First %rtrnbirtn Copper Shipments on the 'l'un-%rtm ltrtilroud*
;[n September, %rtrnbia began diverting sornc west-bound copper ship~-
rn~?~~t,s to the 'Tanzanian pert of Dar es Salaam over the Chinese-guilt 'I'an-
lr; ~t Railroad, although the rail line is not scheduled to begin rrornutl
cc~,r~mercirtl operation until early ].97ti, %ambirt's move came after rebel
u,~.:tivity cai.rsed the suspension of service on the 13engucia rail line through
/:c~gola, u route over which half of %ambitt's export traffic moves. Port
~~ongesticn at liar es Salrtrtm will limit the divet?sion of large amounts of
;.raffic over the 'I'an-%am Railroad for some time, but the availability of
interim service on the line points up the potential importance of the project
as an altet?nativc to Zambia's existing transport arrangements.
Peking undertook this massive project in 1970 after conducting
extensive surveys. It financed the project with a $402 million credit that
covered construction of the rail line and ancillary facilities, the Purchase of
comrcrodities to finance local costs, and the procurement of some Chinese
rolling stock. Repayments on the 30-year loan are to be made equally by
`fanzania and 'Cambia with income from rail operations. An estimated 16,000
Chinese personnel were present in Tanzania and 'Cambia at the height of
construction.
* The classification of this article is Confidential.
Note: The substance of this publication has been coordinated with the
Bureau of Intelligence and Research of tl~e Department of State, witJt the
Defense Intelligence Agency, and with the Agency for International
Development. Comments and queries re ardin this publication are
welcomed. They may be directed to of the Office of
Economic Research, Code 143, Extension .~
25X1A
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'1'hc '1'ruclc Record
'1'racklaying on tfre 1,1~i0-mile rail line was completed in Jr;rc 1975, a
year ahead of schedule. Western experts assess the railroad as high quality in
design and execution.
When the railroad is formally turned over to the 'I'anzuniun tmdLambiar.
governments some tirnc in 197G, it will be ooerating at an initial annual
capacity of 1 million tons each way. '1'l~is capacity will accommodate two-
thirds of 'Tanzania's total transport ~ equirements and 50?6 of Zambia's,
including three-fourths of its copper exports. At. full capacity, 7 million tons
to be reached in 1978, the railroad will meet all Zambian and 'Tanzanian rail
transport needs. About 300 Chinese personnel are expected to remain
through 1978 to provide technical services. Repayment of the loan will not
impose a hardship on the two countries. An operating :surplus of $27 million
annually is projected by 1983, when repayments totalir:g $14 million annually
are scheduled to begin.
Potential Benefits
'The railroad is expected to have spinoff economic and social benefits.
For 'Tanzania, it will stimulate agricultural development in the western
region and provide access to coal and iron ore reserves in the Southern
Highlands. For its part, China recently extended a $75 million loan for
exploitation of iron ore deposits at Cfrunya and coal deposits at '1'ukuyu. A
feeder line from the deposit sites to the ma?n l~:re will also be financed
under this credit.
The Tan-Zam Railroad will provide landlocked 7_,ambia with a major
alternative foreign trade transport option and will increase access to
northern Zambia, where their; is some opportunity to expand cattle raising,
dairy farming, and production of coffee, tea, corn, and rice. China recently
extended a $50 million credit to Zambia for rural development projects.
Zambia also could exploit ~irangane5e and copper ore deposits near Mktrshi,
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which have rcrnaincd undeveloped bccrur~~c essential transport~rtion Cac~ilitics
were lacking (see the rnup).
Sovin_t Aid to LI)C Oil and Cas Industries
Soviet aid to LllC oil raid gas industries -- until now about 1096 of
Moscow's total aid program -- probably will decline over the next few years
a~ major clients turn to the West for more advanced technology. Moscow's
most important contribution will be to LDCs with limited output potential
thin are unrible or unwilling to obtain Western equipment, technical services,
and training. (Secret)
LDCs Profit from the Aid
The USSR originally provided aid to national oil industries in LDCs as
part of its overall effort to expand economic relations with the Third World.
In the mid-1960s Moscow hegan to focus this aid on a few Middle Eastern
and South Asian countries. fiy taking repayment in orl and gas, Moscow
hoped to expand its ability to meet Communist Gauntries' growing energy
needs. Out of the ~1 billion in assistance provided since 1y56, three-quarters
went to five countries -Iraq, Iran, Syria, Afghanistan, and India. Smaller
scale aid also was provided to 18 other countries. The USSR constructed
refineries in Ethiopia, Egypt, and Turkey and built and ,taffed training
institutes in Algeria and Nigeria. Some 2,500 Soviet technicians have been
assigned to LBC gas and oil industries in recent years; about 1,100 1,DC
personnel have received training in petroleum technology in tiro USSR.
(Secret)
Soviet oiI development aid has filled an important gap for many LDCs,
particularly the poorer nations. It came at a time when Western oil
companies were unwilling for political or economic reasons to invest in these
countries. Now, however, the major Soviet clients are finding that they
need more sophisticated Western technology to accelerate their develop-
ment. (Secret)
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The Tarp-Zam Railraa~l
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sccnrr
In S ritt, now a net oil exporter, Soviet nid Ruts been almost. c;~tire~y
responsible i'ot? the devclopn?~ent of crude crtpr.tcily. Ur--nascus
recently announced, however, that Soviet exploration will bi
terminated in frtvor of Western pttrticipalion. (l~or Officirl Use
Only)
[n India, the USSR provided the impetus fora stntc-owned oil
Industry. Production from Soviet-devclaped fields now accounts for
one-half of Indittn output, and Soviet-built refineries satisfy one-
third of Indian product needs. Although New Delhi has been
satisfied with Soviet onshore development, it is turning to US firms
for the larger offshore effort. (For Cfficial Use Only)
Ir. Ir~ca ,although Soviet-aided output contributes less than 10~, to
total production, Soviet assistance fined an important void in 1969.
Moscow provided aid after private comps :es refused to expand
output in the wake of nationalization. '!'he USSK also purchased
Iraq- crude after Baghdad's t^aditional market outlet4 were
threatened. Since the October war, Soviet purchases have dropped
65% because of Baghdad's insistence on receiving world market
prices (Secret Noforn)
In Afghanistan and Iran, the USSR was largely responsible for
creating national gas industries -- in the Iranian case, by establish-?
ing a market for gas previously fla~?ed. The two countries are
shipping natural gas as payment for economic and military aid. (For
Official Use Only)
Soviet Benefits Persist
1'he USSR will continue to profit from repayments in kind for its
assistance to LDCs. In 1975, Iran and Afghanistan will provide 460 billion
cubic feet of natural gas valued at $240 million to the USSR. These receipts
facilitate Soviet gas exports to Westerr- Europe for which Moscow receives
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hard currency and prices neru?ly twice what it nays t:he L,DC; suppliers.
Moscow also benefits from repayments in oil. Iraq is expected to provide less
than 20,000 b/d of crude oil, viilued at under $80 million, as reprtyt~tents
during 1975, about '104f, of total Soviet oil imports from the Middle last this
year. The USSR has been diverting increasing shares of this oil to fulfill
contracts wi!h LDCs, -1?ecing nn equivalent amount of Soviet-produced oil
for shipment to cash customers in Western 1.uropo. (Secret Noforn)
Communist Arms '1'runsfers to Major Arab Countries in ].975
Communist countr. ies delivered over $600 million in arms to major Arab
countries in the first nine months of 1975 (see 't'able .1 ). roe the full year the
tl.muunt a likely to reach the $1 billion 1974 level.
Libya has omerged as the largest Arab recipient of Communist arms.
rrorrr January through September 1975, Libya's share was slightly above the
combinad total for Iraq and Syria. Shipments to Egypt continued at a high
rate until midyear, when apparently they were cut off.
Table 1
Value of Communist Equipment Deliveries to Major Arab States
Million US $
1 Jan - 30 Sep 1975
1974
Total
610
967
Egypt
155
91
Iraq
125
337
Libya
230
90
Syria
100
449
Libya
The $230 million worth o:' equipment received by Libya reflects
deliveries in response Yo the nearly $840 million in cash orders placed since
1 January 1974. These purchases are designed to bring Libya's military
* The classification of this article in Secret Noforn.
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inventories into line with those vl' Syrin and Egypt. Libya is receiving MIG-
'L3 jet fighters and '1'tJ-22 mediurn-range bornbcrs (sec 'I'tzblc 2).
25X1 B
Libya hopes a large ar,enal of Communist weaponry will enhance its
prestige among Arab states. It will allow Libya to use its inventory to
replace equipment lost by Arab combatants sho-rld new hostilities break out
in the Middle East. Soviet equipment clearly will increase Libya's depend-
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~CCRr:T
enec~ on lltc~ USSR for technical anc) other support per;!onnel. The few Soviet
milis.r~,~y instr~rclorw left in Igypt are being; lrara~rferred to I,ibyn ns their
cxmtrru~l:, in I;(;ypt exph?c.
Ir~rc ni::! S~rirr
Itacluced Communist shipments to both Syrirt rind Iraq in 1975 largely
reflect the end cf the post-October 1973 Wr.u? deliveries. Uarnascus has
replaced its war losses and hrrs expanded and upgraded uir and ground forces
units. 13rrghcJrrd!s ncecl for Cortrrnunist equipment and spare parts also
cJcclined rtftcr settlement of the f(urdish conflict early this yc!u?. Both
countries must now absorb the military equipment they hr-ve received.
Syria -- the ntrtjor object of Sovic,t militru?y supply activity since the October
War -- will have to assimilate more than $1 oillion worth of military
hardware; Iraq, $700 million from Cornm;rnis', countries and $1 billion in
Western and Yugoslav arms ordered in the past taro years.
D;~liverics of $1'l5 million to Iraq and $1(lU million to Syria in 1975
include rnineswecpers artd ~)sa II class guided missile patrol boats for Iraq
and a Petyr~. class destroyer escort for Syria. Negotiations with Moscow also
begun for two more squadrons of MIG-23s for Syria, v>lued at about $100
milion.
Egypt
Soviet military deliveries to L'gypt apparently were halted at midyear.
25X1 B _ Soviet aircraft, including Egypt's first MIG-23s, had been transferred
before that time under a 1973 contract. The value of 1975 deliveries was
$155 million, or nearly twice last year's level. Egypt may have paid cash for
both tFre 1974 and 1975 shipments. The drop off in 141oscow's military support
to Cairo Itas led to intensified negotiations with Western military suppliers.
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SLCRCT
o'rltr.tt Ac;'1'tyt';'tts
lsc~nornic
Afr?icri
General. 'l'hc Ur(trrnirrrtion of Senegal River States has announced that rr
combination of Western raid OPEC countries and rnultilrrtcrnl institutions
will finance the $3G5 million Mnnantali Dum project, ending speculation lhrrt
Chinn would construct the project. (Unclassified)
Al eria. I3ulguria is to finance and construct a drrrn near Algiers to
irrigate 100,(100 acres and is studying participation in two other dams. The
activity probably will be financed under ttrc $40 million credit provided in
1970. (Unclassified)
Gabon. A team of Rornuniun geologists arrived in Gabon to study
development of local uranium deposits. (Unclassified)
Ghana. A Chinese trade delegation arrived in Accra on 18 Sept~mbcr
for two weeKs of discussion on expanding trade relations with Ghana. 'I'hc
delegation previously had visited Nigeria. (Unclassified)
Ghana and )last Germany are negotiating a trade agreement under
which Ghana will sell cocoa ut below the world market price in return for
$8.5 million worth of Last German equipment for developing facilities to
produce chocolate and chocolate beverages. (Secret Noforn)
A high-level Ghanaian economic delegation was :n Moscow negotiating
the resumption of Soviet aid projects. A contract was signed to build a
prefabricated housing plant. (Unclassified)
Morocco. In late September, a Moroccan delegation departed for
Moscow to conclude negotiations on Soviet development of the Meskale
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phosphrtte deposits, under discusylon for more than n ycru?. (Conficfrnlial)
Ni er. '1'hc USSR and Niger sif;ned an agrncrncrrt on rcouornic and
technical cooperation on 12 September. '1'hc torn:; were not announcecl.
(Unclassified)
Ni, ,I;er?irx. Nigeria and 13ulguriu sil;ned a Ionl;-term lrrrcJe rrl;recment to
exchan{;c Nigerian raw nurtcr?iuls for I3ulgarirur light industrial equiprncnl
and chcrniculs. '1'hc agrccrnent is the latest in a series of heels desil;ned to
upgrade Ni ;erin's commercial relations with [?aslcrn l;uropc. T.atc last ycrrr,
long-terra agreements were signed with Czcchoslovakirr rrnd East Germany.
(Unclassified)
Somalia. A Chinese trrrdc delegation concluded a $2.5 rniliion contract
to purchase hides and skins from Somalia. Chino apparently will pay in hard
currency. (Unclassified)
'laire. '['hc PRC sign~^d contracts to purchase an undisclosed gwrntity of
'Zairian copper in 1976. (Unclassified)
Laos. lluring recent talks in Vientiane, Ilungury agreed to provide
technical assistance to agriculture. 'The two sides also agreed on methods to
expedite Hungarian si~ipments of textiles, food, and medical supplies being
provided as emergency aid. (Unclassified)
Male sia. The Malaysian Minister of 'T'rade and Industry was in
Bucharest during September presumably to discuss Romanian participation in
development projects. (Unclassified)
Papua New Guinea. A Chinese trade delegation agreed to buy $3.5
million worth of cocoa and copper from the newly independent government
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cal' I'npua Ncrw (iuincrt. 'I'hc two rountr'ic;. have heat sUrclyinl; Uncle
Ix~ti;,ihilities sinctc~ early lhi~: year. (Uru~lnssifir,cl)
I'ttili~~i~inc~s. I)urinl; Scptcrnhcr, I'hilippinc ol'1'icials si(;necl nl;r?cc-ncnts
wilt 13ulltru?irr nncl Il.ontrtnin to fncililnte trade exchanl;es under nl;reernents
sil;necl en;Mier thiti ,yeru?. (Unclrissifircl)
I',tlr'c~hc
S ~nin. Spain and the USSR si(;necl nn alp?eemcnl to set up n joint
company cnpilalired at rthout $~i110,00(1 to service Soviet ships, pr?esumnhly
fishin(; vessels. Shnin nlr?endy provides the Soviet fleet with extensive
scrvicin(; fncililics in the Cr~nnr?y IslancJs. The USSR pw?chased its first
Spanish fishing vessel in Aul;ust. (Unclassified)
Latin America
Argentina, Two Kornnnian officials arrived in Argentina on ~ September
for talks on constructing rt coke oven plant. '1'hc total cost of the 240,000 ton
plant is estirnrtted ut $30 million. ltomaniu will supply equipment under rc
$I00 million credit signed last your. (Unclassified)
13alivia. On 1G September the Czcclt-built antimony smelter at Vinto
began opera;ions. Czechoslovakia extended $3.2 million in Long-term credits
in 1971 to cover equipment for the project. garly this year, Prague signed a
$1.5 million contract for a second aid project in [3olivia, a ferroalloy plant.
(Unclassified)
Chile. A Chilean delegation to Peking negotiated renewal of a $50
million three-year credit provided to the Allende government in 1972. The
loan will be used to purchase industrial plants from China. Peking also
agreed to increase its purchases of copper and nitrates in 1976 and possibly
to exchange petroleum for Chilean iron ore. (Secret Noforn)
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I;ucrrclor. I',ur;t (;crnrany will exchanl;c~ educatiurutl ccluipntcnl worth
$:1 million I'or I:cuaclorean bananas unclc~r rut alrreunrenl sil;rtc~cl on I~-
Sc.;tlcnthcr.'I'hc Laic is in aclclition to annual Inst. ';erntan imports of I ~i11,11011
ions. (Urtclnssi f iecl}
(;uyanrt. A hil;h-level officirtl will travel to (;hinn in nticl--Ocloltcr? t.o
discuss trade rtnd aid implentc;rttntion prohlc?-ns. (;corl;ctowrt is clissatisl?icd
wilh the rrttc of constrr~~~tion on (;hinese aid praJects ns well as prices
chat?t'ed for eduiprrtr.nt used to finnn~sc local cods. (;uyann also hopes to
negotirtle aclditionn~ sales of sugar nncl bauxite. (Confidential)
Mexico. Mexico and the I'(tC concluded rt five ,year technicrtl and
scientific cooperrttion al;recment on 10 September. (Unclnssificcf)
l'cru. Uuring Septcrnbcr, Itomrtnirt made a test purchase of 3;'i,00U tons
of iron ore from tho recently nationrt]ized Mrtrconrr mines. The availability
of additionrtl arnounis of ore for side to Itornanirt depends on the outcornc of
pending Pcruvirut negotiations with Mrtrcorza'~ former US owners. (Unclassi-
fied)
Ncrtr Eiast and South Asia
Afghanistan. The USSK recently agreed t~ begin electric power surveys
in northern Afghanistan under rtn open ended cr ^.dit agreement signed early
in 197.`i. The USSR has tentatively agreed to a:::;ist in the construction of
several major hydroelectric power generating and transmission projects in
Afghanistan aver the next 10 years. (Unclassified)
C rus. Cyprus teas invited Bulgaria to bid on construction of a 20,000
ton capacity desalination plant. Bulgaria probably has been asked to finance
the project under long-term credits (Secret Noforn)
India. Beginning in 1976, India will provide and install equipment for a
640,000 ton capacity coke oven at the Danube Iron Works in Hungary. This
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iti India's first nutjo~~ steel construcllon conlrru~t otrlsicle its national
bounclru?ies. Muclt of the Indian firm's previous cx;~eriencc sterns front work
on Soviet-aiclcd steel stills at 13hilai rtnd Iloltru?v. ((;anfidcntir!,l)
On I(i Septernhcr, Iselin anc) tl-c USSR sil;ned contracts to study a
;~ million ton open cast rninc nt Sinl;rauli arul two projects using; experi-
mental mining; techniducs nt Itrutigang. 'I'bis is the first activity on rt Soviet
prc~pvsrrl to finance the development of India's ~~crtl resources corder a IJGti
trade credit. (l)nclassificd)
lrrrn. On 14 Scpternbcr, Ilult;ru?ia ,tad Iran agreed to set up rr joint
economic commission to expand rnulual trade and economic cooperation.
Only snu?I1 amounts of SoCiu's $2U million in rtid to Iran have been used to
date. The two sides also held talks on establishing rt joint trrtnsport company.
(Unclassified)
Iran and Poland plan to cxprtnd annual trtrdc by 259G to $100 million in
197G. The ~icw protocol signed on 17 September calls for increased sales of
Iranian light manufactures in exchange for Polish agricultural goods,
machinery, and chcrnicaL~. !Unclassified)
Moscow aFparently agreed in July to provide $18 million in new aid to
build housing rtt lt,hwaz in southern Iran, bringing total Soviet aid to that
country to $800 million. The new credit, which is repayable over seven
years, covers tl~e foreign exchange costs of the $3G million project. (Secret
Noforn)
Irate. On 14 September, Iraq and the USSR signed contracts to establish
two vocational training centers for the chemical, petrochemical, mechan-
ical, and mineral industries in Iraq. The centers, to accommodate about
1,200 students, will cost $25 million and will be completed by 1978. The
USSR has contracted to build a minimum of 10 training complexes in Iraq.
(Unclassified)
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Kuwait. The I{uwrrit Investment Company is hnncllia{; the sale of rr $Ii0
million Ilungarian bond issue to I{uwniti subscribers. In 1 J74, Kuwait
managed a sirnilur U?ansaction for $4l1 million on Ilungru?,y'a behalf. In
addition, ru,r agreement for the sale of 2 million barrel.; of I