INTERNATIONAL ECONOMIC & ENERGY WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-00798R000100020007-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 22, 2016
• Document Release Date: September 28, 2010
• Sequence Number: 7
• Publication Date: April 12, 1985
• Content Type: REPORT

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Directorate of
Intelligence
Weekly
International
Economic & Energy
DI IEEW 85-015
12 April 1985
Copy 8 3 2
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Secret
Weekly
International
Economic & Energy
12 April 1985
iii Synopsis
1 Perspective-Iran: The Economy and Near-Term Instability
NESA
Persian Gulf Pipelines: Energy Security in an Era of Austerity
7 Summit Issues: Big Six Unemployment Continues To Rise
EURA
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directed to Directorate of Intelligence,
OEA
OGI
Energy
International Finance
Global and Regional Developments
National Developments
Comments and queries regarding this publication are welcome. They may be
Secret
12 April 1985
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International
Economic & Energy
Weekly
Synopsis
Perspective-Iran: The Economy and Near-Term Instability 25X1
Dwindling oil income, increased domestic unrest, and the protracted war,
combined with Khomeini's failing health, are confronting the regime with its
greatest challenges. Possible radical changes in oil policies, war strategy,
relations with the USSR, or terrorism could have major implications for the
West
Economic pressures are unlikely by themselves to bring down' the Khomeini
regime or force an end to the war with Iraq. Combined with recent battlefield
defeats and the ongoing succession struggles, however, they pose the most
serious threat to the regime since it consolidated power in 1981.
Summit Issues: Big Six Unemployment Continues To Rise
Economic recovery in the Big Six countries was considerably stronger in 1984
than in 1983 but remained too weak to keep the overall unemployment rate
from increasing further.
15 Persian Gulf Pipelines: Energy Security in an Era of Austerity
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Continued instability in the Persian Gulf has led to renewed momentum for
construction of alternative oil export outlets. The prospective pipeline capacity,
in combination with the surplus productive capacity outside the region, will
substantially reduce the vulnerability of major importers to a disruption of
Persian Gulf oil exports into the 1990s.
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DI IEEW 85-015
12 April 1985
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Secret
International
Economic & Energy
Weekly
12 April 1985
Dwindling oil income, increasing domestic unrest, and the protracted war,
combined with Ayatollah Khomeini's failing health, are confronting the
regime with its greatest challenges. As a result, Tehran is losing its margin of
error-both economic and political-in meeting popular expectations, and
serious instability could occur before Khomeini dies. If the clerics believe their
control is seriously threatened, they would likely attempt radical changes-in
oil policies, war strategy, relations with the USSR, or terrorism-that would
Perspective Iran: The Economy and Near- Term Instability
have major implications for the West
The regime's economic troubles stem largely from sharply reduced oil income
caused by the soft oil market and by Iraqi attacks against oil tankers. Readily
accessible foreign currency reserves are down to roughly half the level a year
ago, the lowest level since the revolution. Long-term foreign credits are not
available. Consequently, Tehran can no longer rely on oil-financed imports to
maintain consumption levels or provide materials for domestic industry and
has reimposed strict foreign currency and import controls.
economic austerity is adding to domestic unrest.
Regime spokesmen are now warning publicly that the populace must lower its
expectations-a sharp contrast to past promises of a better future. Air attacks
have shaken the regime, lowered morale, and, further disrupted the economy.
Even the lower class-the base of the clerics' support-has begun to show open
dissatisfaction. Tehran probably is particularly concerned about labor unrest
in Esfahan, the second-largest city and an industrial center, where there is
longstanding leftist strength.
Infighting among factions within the regime. is increasing, partly because
leading Iranians realize that Khomeini may not live much longer. Radicals are
trying to win Khomeini's endorsement of their views, but he generally has
supported the moderates by allowing more foreign contacts and an increased
role for the private sector. Moreover, moderates are trying to expand their
mid-1984 gains in the Consultative Assembly where they have both deputy
speaker positions.
Although the Khomeini regime has lost its margin for error in meeting popular
expectations and in dealing with further economic and military reversals, it
does retain important assets. The regime's most significant strength may be
the recognition by Iran's leaders that unbridled competition among themselves
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DI IEEW 85-015 .
12 April 1985
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Secret
production and discount prices to try to generate greater revenues.
If the clerical regime concludes that its control is seriously threatened, it would
look for ways of regaining support that would have major implications for the
West.-To`ease,its economic' crunch, Tehran could- sharply increase oil
hesitate to use them against opponents.
could be disastrous. Moreover, the Iranian people are unlikely to shift their al-
legiance until another strong' individual emerges who is an alternative to
Khomeini. Finally, Tehran controls the_ means of "repression and does not
there is increased dissatisfaction within the er regime
Secret
12 April 1985"
gain.
collapse of-prices. Iran-the second-largest OPEC oil producer-could cause a
strong, downward pressure on prices if it tries to undersell its competitors.
Given the soft oil market, however, such a move would risk competitive
discounts by other OPEC members that would more than offset any revenue
of the few OPEC countries to remain within its production quota since last
summer' because its professional oil industry managers fear a disastrous
overt he ina i ity o ranianoil officials to-maintain revenue. Iran has been one
Outside the economic realm, Tehran's options include:
? Attempting another 'final offensive. " In the unlikely event that Tehran
achieved its political aim-the removal of President Saddam Husayn-on
-the- battlefield, the influence of Iranians advocating radical foreign and
domestic policies would, be greatly increased. Other regional regimes'
confidence in the United States would be seriously eroded.
?-Ending-the war by negotiating. This probably would provide only a brief
-respite because popular morale is likely to fall again unless the regime
reverses the economic decline. Some economic resources could be reallocat-
ed but peace would not improve the soft world oil market.
? "Approaching Moscow. Significant moves in this direction would increase
Soviet chances of penetrating the government and revolutionary organiza-
tions and of building popular networks that could eventually be used to try to
.install a: regime sympathetic to the USSR.
'-`Staging a terrorist spectacular. A broad program of strikes against US and
other Western interests in the region- and in Western Europe might be staged
to -rally ,the populace
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Iran's Economic Slide
Iran's economy is sputtering. War-related disrup-
tions, ideological rigidities, massive corruption, and
mismanagement have stifled production since the
revolution. These problems worsened in 1984 as the
soft world oil market and Iraqi attacks on shipping
depressed export earnings. This, in turn, has led to
a sharp drawdown of foreign exchange reserves.
Domestic economic problems are adding to popular
unrest, and the regime is warning the populace to
lower its expectations. Economic pressures are un-
likely by themselves to bring down the Khomeini
regime or force an end to the war with Iraq.
Combined with recent battlefield defeats and the
ongoing succession struggles, however, they pose
the most serious threat to the regime since it
Iran: Oil Revenues, 1979-84
Billion US $
consolidated power in 1981.
Lower Oil Revenues
Monthly oil revenues from August 1984 through
March 1985 averaged about 30 percent less than
they did during the previous year and a half.
Despite efforts to diversify the economy, Iran still
depends on oil for 98 percent of its foreign earnings
and 30 percent of GDP. Iraqi attacks on shipping
have contributed substantially to lower Iranian oil
exports and revenues. On top of market-related
discounts, Iran has had to cut prices up to $3 per
barrel to offset the increased costs of transporting
and insuring its crude.
Iran continues to have difficulty forming an oil
policy to balance its need to finance the war with its
fear of putting downward pressure on oil prices. As
the second-largest OPEC producer, Iran recognizes
that, if it increased production substantially and
offered large price discounts, it probably would end
up losing revenue in a resulting oil price war.
Moreover, according to public statements by senior
I I I I I I
0 1979 80 81 82 83 84
officials, Tehran believes that low oil prices help its
Western enemies and that the current soft oil
market is a Western plot to break OPEC.
Desperate financial conditions, however, appear to
be moving Tehran toward a strategy of price
cutting to keep exports high. Recently, the Oil
Ministry has come under intense criticism within
the government for its inability to maintain reve-
nues. In addition, Tehran is unlikely to sit by idly
as Iraq opens additional export capacity in the next
year. We estimate Iran is capable of producing up
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21.9
20.6
13.6
11.7
18.9
19.8
16.9
14.9
21.2
20.2
12.8
10.9
18.6
19.5
16.5
14.5
0.7
0.4
0.8
0.8
0.4
0.3
0.4
0.4
17.8
7.8
10.7
10.8
9.7
15.3
15.0
12.5
a Projected, assuming oil exports for the year average about 1.55
million b/d, 10 percent higher than in the period August 1984-Feb-
ruary 1985. This projection also assumes oil prices remain at
current levels and Iraq continues attacks on shipping at the same
level as the first two months of 1985.
to 3.2 million b/d; current production is about 2.2
million b/d including 700,000 b/d for domestic
consumption.
Foreign Payments in the Red
Low oil revenues and an unwillingness to slash
imports left Iran with a current account deficit last
year.of $3.9 billion-nearly five times the 1983
deficit and the largest since the revolution. Lacking
access to long-term credit, Tehran drew down
liquid reserves to an estimated $2.5 billion-only
two months' import coverage. (Total foreign ex-
change assets at yearend 1984 are estimated at $5
billion, but about half is in escrow to meet US
claims to-be settled by-the International Court or in
accounts receivable from Third World nations that
are unlikely to be repaid soon, if at all.) The regime,
wary of another credit crunch like the one that
occurred in 1981; has repeatedly emphasized its
desire to maintain reserves sufficient to cover at
least` six months of imports
Iran is finding it increasingly difficult to pay its
bills. According to press reports, Iran has accumu-
lated foreign obligations of up to $6 billion, mostly
in the form of short-term trade credits. In May
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12 April 1985
1984 and again in January 1985, Iran's central
bank temporarily discontinued issuing letters of
credit, according to press reports. Iran's failure to
make timely payments to foreign firms has caused
some of them to discontinue or scale back business
in Iran.
Despite efforts to hold down imports, Iran still
must continue the war effort, feed the population,
and maintain industrial production. We estimate
Iran imported at least $2.5 billion worth of food,
about $2.4 billion in raw materials, and $1.4 billion
of military supplies last year. Iranian officials have
estimated that Iran needs at least $6 billion worth
of imported raw materials for industry to operate
near capacity, according to press reports. In. addi-
tion, the oil industry depends on foreign equipment
and services to maintain long-term production ca-
pacity.
Assistance to Syria and war-induced transportation
problems are additional burdens. Maintaining Syr-
ia's commitment to keep Iraq's 1.2-million-b/d
pipeline through Syria closed, costs Iran about
$700 million a year in oil aid and credits. The war
has closed much of Iran's port capacity, resulting in
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Iran: Official Foreign Exchange Assets,
Yearend 1974-84.
large demurrage charges at clogged entry points.
Iran's merchant fleet losses have forced Iran to use
scarce hard currency to hire ships, and war risks
have raised insurance rates for ships calling on
many Iranian ports.
Iran's diplomatic isolation has left it without bene-
factors willing to help finance its current account
deficits. Potential lenders are reluctant to offer
unsecured long-term credit because of the war and
revolutionary turmoil inside the country. Iran has
only been able to obtain small loans at high interest
rates that are secured by its gold holdings.
Effects of the Deteriorating Economy
Financial problems and the war are aggravating
already serious domestic economic problems. Ideo-
logical conflicts have paralyzed economic policy
making. For example, political stalemate on land
reform has created uncertainty over land owner-
ship, stifling agricultural investment and produc-
tion. Rampant corruption has also caused ineffi-
ciencies and undermined public confidence in the
regime. Rapid urbanization caused by rural migra-
tion and war refugees has overloaded public ser-
vices, particularly in Tehran. Shortages of trained
technicians are hindering production.
have come from development spending.
The government depends on oil receipts for more
than half of its revenues, and depressed earnings
have led to cuts in spending and tax increases. The
government accounts for 40 percent of GDP, and
controls investment and foreign trade, so budget
austerity is having a widespread depressing effect
on economic activity. Planned spending for the
fiscal 1986 budget is down 13 percent from an
already scaled back 1985 budget; taxes are up 30
percent; and the prices of heating fuel and gasoline
are likely to be increased. War spending accounts
for at least one-third of the budget, so most cuts
Inflation and shortages are rampant in Iran. Al-
though the official inflation rate was only 13
percent, according to press reports, actual inflation
is running closer to 40 percent. Many consumer ,
goods are unavailable except on the black market
for four to eight times their official price. The
quality of most goods, particularly those sold at
official prices, continues to decline. Moreover, in-
comes have not kept pace with prices, especially
among government and factory workers. With in-
dustry operating at less than full capacity and cuts
in development programs, unemployment remains
high despite war recruiting.
the jobless rate is as high as 35 percent in some
cities.
Popular Reaction
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growing war weariness and disenchantment over
the government's handling of the economy. There
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are reports of labor unrest and protests over prices
and shortages. The middle class, which never had
much affinity for the revolution, is especially vocal
in its grumblings. More important, demonstrations
and strikes among the working class-the back-
bone of the 1979 revolution-are increasing.
In the past several months, strikes have occurred in
cities throughout Iran to protest rising prices,
shortages, and working conditions.
strikers in several cities
recently timed their actions to support each other.
Iranian exile press reports claim that a secret labor
organization-the Solidarity Committee of Iranian
Workers-is responsible for the strikes.
the opposition press report several
cases where strikes have been suppressed violently
by the Revolutionary Guards.
Outlook
Iran's economy will get worse in 1985. We estimate
oil revenues will fall to about $14.5 billion in 1985
if exports average 1.55 million b/d and prices
remain at current levels. Imports will have to be cut
by at least 15 percent and even this reduced level
assumes that Tehran is willing to reduce foreign
exchange holdings still further and can arrange at
least some credits to fund a projected $2.7 billion
current account deficit. Lower imports will cause
further declines in industrial production and more
delays in development projects. Iran's economic
circumstances would get much worse if it is unable
to fund the deficit or if oil prices unravel.
After years of hardship, we believe that further
declines in living standards will lead to increased
domestic unrest. The regime is now publicly warn-
ing the populace to become more self-reliant and
lower its expectations. This contrasts with earlier
advice to endure present sacrifices in expectation of
better times. Higher taxes and fuel price increases
are potential rallying points for popular dissent. In
addition to low oil revenues, the poor health of
Khomeini and the consequent struggle for power
will continue to prevent decisive action on domestic
economic problems.
Secret
12 April 1985
Iran's weak economy makes it vulnerable to attacks
on economic targets. Destruction of Khark Island's
oil terminal or other key oil facilities could serious-
ly impair Iran's ability to export oil and wreak
havoc with Iran's finances. Furthermore, Tehran is
ill prepared to offset lost output or repair damage
to factories, power generators, and other economic
facilities.
We expect Iran will try. to climb out of its economic
morass by raising exports and pricing its oil com-
petitively, and this.could_put strong downward
pressure on.global oil prices. Furthermore, moder-
ate factions within the-regime.are advocating stron-
ger ties.with Western Europe and Japan in an
effort to strengthen the-economy: Financial prob-
lems; however,. also-are encouraging-the regime to
strengthen trade relations with Eastern-Europe,
and the Khomeini regime could -soften its strong
anti-Soviet stance to help reduce external political
pressures.
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Summit Issues:
Big Six Unemployment
Continues To Rise
Economic recovery in the Big Six countries was
considerably stronger in 1984 than in 1983 but
remained too weak to keep the overall unemploy-
ment rate from increasing further. Among the Six,
only Canadian and West German unemployment
declined. Japanese unemployment remained stable,
but the overall rate for the Big Four West Europe-
an countries rose to a record 10.3 percent. Big Six
economic growth in 1985 is expected to slow slight-
ly from last year's rate, and we expect unemploy-
ment to increase again. Efforts by West European
governments to make labor markets more flexible
in the long run may be tempered over the next
couple of years as leaders in all the Big Four
countries face national elections during 1986-88.
Factors Influencing Unemployment
Big Six: GNP Growth in Percent, 1980-84
I I I I 1
-6 1980 81 82 83 84
Western Europe's relatively poor GNP growth
performance last year continued to hurt progress in
reducing unemployment, but strong growth in Ja-
pan and Canada improved the unemployment pic-
ture for both countries. Japan's GNP growth-the
highest among the Big Six-kept unemployment at
the already low 1983 level. The Canadian economy losses in many sectors.
grew nearly 5 percent during the year and posted a
0.6-percentage-point decline in unemployment. F
West European businessmen have reacted cautious-
ly to the mediocre economic recovery and, despite
larger back orders, continue to shed labor in an
effort to reduce costs and restructure operations to Demographic factors in Western Europe will work
improve efficiency. Italy lost over 250,000 manu- to continue to boost the supply of labor and raise
facturing jobs in 1984. Manufacturing employment unemployment until nearly the end of the decade.
dropped by 214,000 in France last year, and the Increased female participation rates in all age
French Government has projected an additional groups have strongly outweighed the significant
100,000 drop by the Summit. The United King-
dom, where restructuring has been in full swing for
several years, is likely to continue experiencing job
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Big Six: GNP Growth,
Percent
1980-85
2.4
1.4
1.0
1.9
3.6
3.3
1.0
-0.2
0.6
1.1
2.3
2.4
1.1
0.2
, 2.0
0.7
1.6
1.3
Italy
3.9
0.2
-0.4
-1.2
2.8
2.6
Japan
4.9
4.1
3.3
3.1
5.7
5.0
Canada
1.0
3.3
-4.4
3.3
4.7
3.7
Big Six: Unemployment Rates, Percent
1980-84
4.7 5.8 6.9 7.5 7.8
Big Four 6.0 7.7 8.9 9.8 10.3
West Germany 3.8 5.6 7.5 9.2 9.1
France 6.3 7.6 8.0 8.5 9.6
United Kingdom 6.4 10.0 11.5 12.3 12.6
Italy 7.6 8.4 9.1 9.9 10.4
Japan 2.0 2.2 2.4 2.7 2.7
Canada 7.5 7.5 11.0 11.9 11.3
a OECD forecast.
b OECD data at market prices.
increase in the number of early male retirees in the
60 to 64 age group. Moreover, the number of young
people seeking jobs continues to boost the labor
supply
Moderate wage gains over the past five years have
been an important mitigating factor in stemming
the increase in unemployment in 1984. For the Big
Four, real wage increases have averaged only f.7
percent per year since 1980 compared with 3.4
percent in the 1970s; the increase in unemployment
last year was the lowest it had been since 1980. The
one exception was the United Kingdom where real
wages rose nearly 4 percent. Japan's better than
3-percent rise in real wages was offset by gains in
'
productivity.
Government and Labor Response
Most Big Six governments agree that high unem-
ployment remains their number-one problem.
Moreover, in contrast to last year, most West
European leaders are now pointing to labor market
rigidity as a major cause. Besides success in moder-
ating wage costs in most countries, however, at-
tempts to introduce more labor market flexibility
have been piecemeal:
? West Germany has narrowed labor law defini-
tions of unfair dismissals and is subsidizing early
retirement when new or laid-off workers are
hired.
? The French Government is granting aid to com-
panies who encourage part-time or temporary
work and promote early retirement.
? Britain has passed laws to reduce the power of
unions, including limits on strike activity and
closed shops, and has empowered employers to
Nonwage labor costs-taxes paid by employers for
social welfare benefits-continue to act as a disin-
centive to hiring new workers and add 80 percent to
wage rates in West Germany and 60 percent in
France-versus about '20 percent in Japan and 28
percent in the United States. The French have
trimmed unemployment benefits, and most other
governments have stopped adding to payroll taxes.
Only in the United Kingdom, however, have these
taxes actually come down, and there only by a
sue unions that conduct illegal strikes.
Ottawa remains convinced that the private sector
can create jobs without any change in government
policy, and Tokyo has not found it necessary to
address the question of market flexibility given the
low number of unemployed.
token amount.
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Big Six: Unemployment and
Real Wages, 1980-84
Percent
Real Wage Growth
Real wages were moderate
the 1984 labor agreement on increasing employ-
ment. Instead, companies got greater flexibility in
arranging work schedules, which should help to
increase productivity now but employment only in
the long run.
Prospects
Unemployment Rate
and unemployment remained high
I I' I I I
0 1980 81 82 83 84
We believe the Big Six unemployment rate will
edge up even higher over the next 12 months.
Although GNP growth will be slightly weaker in
Canada and Japan this year, unemployment in both
should remain stable. In West Germany and Italy,
where GNP growth is expected to hover around 2.5
percent, the extent of real wage increases will be an
important factor in containing the rise in unem-
ployment. New entrants to the work force in West
Germany may on balance push the unemployment
rate slightly higher. In France and Italy, shedding
of labor will probably continue through 1985. 25X1
Union wage demands in the United Kingdom are
likely to remain strident and will continue to have a
negative impact on the employment outlook.
Continued efforts to encourage more labor market
flexibility through the end of the decade should
help the overall unemployment picture in Western
Europe. Between now and 1988, however, Big Four
leaders face national elections and may come under
increasing pressure to slow or halt the restructuring
process in favor of short-term measures aimed at
helping affected segments of the work force. Stimu-
lative programs to boost growth would provide only
temporary improvement in the unemployment pic-
ture and would probably delay the restructuring
effort.
Organized labor in Western Europe and Canada
has offered few of its own solutions and has thus far
grudgingly accepted the necessity of restructuring
traditional industries even as efforts result in job
losses. Nowhere among West European workers,
for example, did the British miners' strike find
substantial support. The West German metalwork-
ers union did not press very hard for a statement in
Western Europe
Big Four
Canada
Western Europe
Big Four
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Summit Issues: Western Europe
Coping With Adverse
in, High-Tech Trade
Western Europe' is falling further behind the
United States and Japan in producing and selling
high-technology goods on international markets.
This generally poor performance in high-tech trade
indicates difficulties turning technological know-
how into successful products. West European lead-
ers acknowledge that structural impediments large-
ly account for the problem. We believe efforts to
improve technology-such as EC research pro-
grams, government subsidies to high-tech indus-
tries, development of a venture capital market, and
commercial joint ventures-will not be enough to
dramatically improve Western Europe's high-tech
trade picture soon. As a result of this growing trade
gap, protectionist pressure is likely to increase in
some high-tech areas, and West European coun-
tries will probably take a go-slow approach to the
idea of including high-technology goods in a new
GATT round
West European Perception of the Problem
Government and business leaders are now more
aware of and concerned about the possibility of a
"technology gap" than they were in the 1960s when
rapid economic; growth, low unemployment, and a
thriving welfare state overshadowed these fears.
Since the oil price shock of 1973/74, however,
Western Europe has fallen into an extended period
of economic stagnation. Economic growth over the
past decade has averaged only 1.7 percent, and
employment in the European Community has fall-
en by 2 million; the unemployment rate, currently
11.2 percent, has risen in each of the past 12 years.
Furthermore, Western Europe now faces growing
high-tech competition from Japan as well as the
United States.
' Much of this article focuses on the Big Four West European
countries-France, Italy, the United Kingdom, and West Germa;
What Is High Tech?
There is no clear-cut way of defining and selecting
high-tech trade categories. We selected 10 broad
categories as high tech based on the share of direct
and indirect research and development costs in
total product cost. The dividing line between high-
tech and other categories was drawn at the point
where R&D costs accounted for roughly 5.5 per-
cent of output costs; this is 30 percent hi her than
the next-lowest categor
Although these categories include some items that
are clearly not high tech-the semiconductors
category, for example, includes both the latest
microchips traded internationally as well as tran-
sistors-we believe technological advance is a sig-
nificant factor in determining a country's perfor-
mance in them
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LOA-1
Emerging technologies in which little trade is
presently conducted are not fully captured in these
statistics. Western Europe is technologically ad-
vanced in some of these areas such as aerospace
and advanced materials 25X1
The High-Tech Trade Gap
Export/import (E/I) ratios show adverse trade
trends in selected high-tech areas. E/I ratios indi-
cate that the Big Four's total trade surplus in these
areas has remained small and stagnant over the
past 10 years. The US surplus has been declining
recently, in part due to the strength of the dollar,
but the Japanese, not the West Europeans, have
been the main beneficiary of this decline. The trade
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Big Foura: Export/Import Ratio in High-
Technology Products, 1974-83
Export/import ratio
Medicine and
pharmaceuticals,
plastics, jet
engines, telecom-
munications,
scientific
instruments.
Aircraft, chemical
elements.
Semiconductors,
business machines
and computers,
consumer
electronics.
performance of the major West European countries
is particularly poor in electronics categories-semi-
conductors, business machines and computers, and
consumer electronics-a trend that began 10 years
ago. Their trade performance has been improving
in only two areas: chemical elements and aircraft.
This success reflects the strength of the large West
European chemical firms in world markets and the
sales of Airbus. In five other categories, which are
of growing concern to West Europeans, the Big
Four's E/I ratio is positive but has fallen steadily
since 1974
Trade statistics also indicate that the Big Four have
become less specialized 2 in high-tech trade relative
to the United States and Japan over the past 10
years. Within the high-tech sector, the Big Four
appear to be losing their relative specialization in
electronics as well as telecommunications and sci-
entific instruments, but have increased their
' As measured by the share of high-tech products in total, Big Four
country exports relative to the comparable shares for the United
Secret
12 April 1985
Export/Import Ratio in High-Technology
Products, 1974-83
United States
I I i
0 1974 75 80 83
strength in aircraft and jet engines, and are holding
steady in plastics and pharmaceuticals
Reasons for Trade Gap
We believe the inability of Western Europe to
market high-tech products internationally is largely
because of structural and institutional problems
rather than purely technological ones. Western
Europe is still a collection of national markets, and
no one West European country provides a home.
market as large as those available to US and
Japanese firms. Differences in consumer tastes,
trade documentation requirements, and varying
product, legal, professional, and accounting stan-
dards raise the costs for West European firms
seeking to expand beyond national boundaries-
even if their product stays within the European
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Secret
Community. Thus, high-tech firms, which are fre-
quently small companies and whose products often
have high-development costs and short lives, are
less able to exploit other markets. In addition:
Specialization in High-Technology
Products, 1974-83
Ratio a
? Western Europe lacks a class of entrepreneurs, 1.50
and businessmen are generally risk averse.
Many West European executives view innovation
as a way to cut costs rather than develop new
products.
? Firms are financed mostly by debt because equity
markets are relatively thin; despite the lower tax
burden of debt finance, the need to constantly
service debt reinforces conservative attitudes.
Western Europe has a very small venture capital
market, in contrast to the United States where it
has been key to high-tech growth.
I I I I I I I I I I
0 1974 80 83
? West European universities produce relatively
fewer research scientists and engineers than the
United States and Japan, and the academic-
business link, is practically nonexistent.
? Strict labor and bankruptcy laws discourage new
business formation, and subsidies to business in
many cases-most most notably in France and Italy-
have gone to support employment rather than
productive investmen
Actions To Bolster Technology
West European leaders generally believe that
European-wide cooperation among governments
and private firms is necessary to move ahead in
high technology. The EC Commission is serving as
the focal point for passing on recommendations to
integrate Community national product and finan-
cial markets. The EC Commission president has
also set the goal of eliminating all trade barriers
within the European Community by 1992. In terms
of direct support, the Community plans to spend
$1.35 billion on research over the next five years,
including support to the major government-
industry program in information technologies
called ESPRIT
a The ratio of high-technology exports to total exports for each country
divided by the ratio of high-technology exports to total exports for all
six countries.
b West Germany, United Kingdom, France, and Italy.
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West European governments are also implementing
their own programs to promote technological devel-
opment and are working with private firms to 25X1
conduct joint ventures outside the EC framework:
? West Germany and the Netherlands are contrib-
uting $150 million to a joint plan between Sie-
mens and Philips to develop advanced integrated
circuits.
? The United Kingdom is contributing to a
government-industry, five-year, $430 million re-
search program in computer science called Alvey
that focuses on artificial intelligence.
? France began a five-year program to advance
their electronics industry in 1982 that included
grants to nationalized firms and an ambitious
program to familiarize the French public with
computers
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12 April 1985
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West European companies, for their part, are fur-
ther developing strategies of global manufacturing
and marketing to cope with problems in the high-
tech sector. Over the last two years, West European
giants have been linking up with US and Japanese
firms through joint ventures, acquisitions, and li-
censing arrangements. The aim is to expand their
markets and acquire technology. Philips, for exam-
ple, has agreed to a joint venture with AT&T that
trades access to American technology for market-
ing skills in Western Europe. Also, AT&T bought a
25-percent share in Olivetti of Italy, allowing Oli-
vetti to market more of its products in the United
States. CII-Honeywell Bull of France has entered
into a joint arrangement with NEC of'Japan to
manufacture and market NEC supercomputers and
to cooperate in technology exchange, including
cross-licensing of patents and copyright
Outlook and Implications
Although the efforts by the West Europeans to
improve technological development are a step in the
right direction, we believe the bulk of the work is
still ahead of them if they are to improve their
relative trade position in high-tech markets. Joint
programs among governments, firms, and foreign
companies have thus far produced disappointing
results. Western Europe must make its labor and
capital markets more flexible to improve its techno-
logical development. Changes in attitudes toward
risktaking, greater labor mobility, and a more
homogeneous West European market, if they oc-
cur, will improve West European prospects to
innovate and market new products over the medi-
um term. Some of these changes may conflict with
the philosophy of those who support a strong
welfare state. The alternative strategy is greater
centralization in industrial policy decision making.
Although this approach often has worked well in
Japan, it is probably a poor option for Western
Europe given the large number and the diverse
nature of its economies
Secret
12 April 1985
Almost all West European leaders will,be cautious
about including high tech in a new GATT round
and defining the categories for negotiation. The
French, in particular, have been reluctant to con-
sider high tech a separate group in international
trade discussions and have been expressing support
for protectionism in key industries to build compet-
itive strength. We do not expect Western Europe to
carry protectionism too far, however, for fear of
retaliation that would cut them off from the US
market and the best sources of technology. Still,
additional protectionism can be expected. in areas
where Western Europe is doing particularly poorly
such as microelectronics and consumer electronics.
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Secret
Persian Gulf Pipelines:
Energy Security in an
Era of Austerity
Continued instability in the Persian Gulf has led to Saudis' 1.85 million b/d East-West Petroline, aver-
renewed momentum for construction of alternative
oil export outlets, despite spending cutbacks. In .
Saudi Arabia and Iraq, completion of projects by
1987 to further expand the Iraqi-Turkish pipeline
and the Saudi East-West line will increase by two-
thirds the current 2.8 million b/d capacity of
pipelines bypassing the Strait of Hormuz. Other
Gulf exporters, however, are likely to remain tied to
shipments through the strait. The prospective pipe-
line capacity, in combination with the surplus
productive capacity outside the region, will sub-
stantially reduce the vulnerability of major import-
ers to a disruption of Persian Gulf oil exports into
the 1990s.
Gulf Oil Exports and
the Strait of Hormuz
Persian Gulf countries produced about 25 percent
of the non-Communist world's oil supply in 1984,
accounting for a large share of total oil imports by
Western Europe (32 percent), Japan (66 percent),
and the United States (13 percent), roughly 85
percent of this oil is shipped through the Strait of
Hormuz. Continued Iraqi tanker attacks and Iran's
threats to disrupt Arab oil flows through the
strait-heightened by the indefensibility of Gulf.
export facilities' and shipping-spurred Persian
Gulf governments' interest in developing alterna-
tive ways of exporting oil from the region.
Existing Export Alternatives
Only two large-diameter pipelines with a capacity
of about 2.8 million b/d currently provide an
alternative to the Strait of Hormuz. The 40-inch
Iraqi-Turkish line, Baghdad's only operating export
pipeline, shipped an average of about 850,000 b/d
in 1984-about 70 percent of daily production. The
aged about 840,00,0. b/d throughput in 1984, with a
peak of 1.3 million-b/d in June. Most of this crude,
however, was delivered to Riyadh's west coast
refineries and crude exports were about 400,000
b/d-about 10 percent of Saudi daily production.
We believe a reopening of;Tapline and the Iraqi-
Syrian-Lebanese pipeline .'for exports is unlikely
because of the military-political situations in Leba-
non and Syria, deterioration of equipment, and the
application of portions of these lines to other uses.
Expansion Under Way
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The prolonged Iran-Iraq war has focused the atten-
tion of Persian Gulf countries on strategic projects,
involving larger, more flexible oil export systems
bypassing the Strait of Hormuz. Numerous propos-
als have been made, but we judge only a few have a
realistic chance. The present soft world oil mar-
ket-as well as export losses caused by the Gulf
war-have cut revenues and forced Gulf producers
to dip into reserves over the past several years. The
recent austerity measures undertaken in many Gulf
countries suggest that only strategically important-
Iraqi-Turkish Pipeline. Iraq has initiated plans for
construction of a pipeline parallel to the recently
expanded Iraqi-Turkish line that would boost the
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system's capacity to. 1.5 million b/d.
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the line's capacity wi e
increased by 550,000 b/d. The prime contractor, ,
the Italian firm Snamprogetti, will-award,construc-
tion contracts by May 1985, with the pipeline
scheduled to be operational by mid-1987'at_a cost
of $600 million. Iraq's portion of the project costs
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Major Oil Pipelines in the Middle East
*ANKARA
?Ceyhan
Tripoli
Mediterranean BEIRUT
V1
TI
db
Gulf of
Aqaba
Saudi
Arabia
Secret
12 April 1985
Tel Aviv-Yafo' *4Az Zarga
Y ( AMMAN
Yanbu'
al Bahr . 1.85
ro line
estipeline- Pet
Saudi
Boundary representation is
not necessarily authoritative
- Oil pipeline
O Oilfield
try Oil terminal
It Pump station
0.9 Oil-pipeline capacity
(million b/d)
Note: Pipeline alignments are approximate.
0 340
Kilometers
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Secret
Proposed Oil Pipelines in the Middle East
rke Pi elln e
Ceyhen Ir
Iraq turkey Pipeline est. 0.95
NI OS IA
* sip BeniYlls
Syria
Mediterranean Tripoli
a~ r raq? viia- aben asap.
LebanHn~
Sldona
Israe T
-Yefo~l 1
Tel Aviv
? Gull of
Aqaba
2
*
AMMAN ippf
rl9rdan
Armistice
WA Line
I'Aga It
Ethiopia
Iraq-Jordan
Pipeline est. 1.0
Iraq-Saudi Ara
Neutral Zone
a
Yenbu- 1.6
el BOrP=ase1111-fra -Saudi Pipeline
~~ aline est. 1.25
1ndS aSt:West PiP
Phase 1-Iraq-Saudi
Spurline 0.5-1.6
under construction
Saudi Arabia
*SANAA
Y.A.R.
(N. Yemen)
Aw6r
F _2
RIYADH
P. D. R.Y.
(S. Yemen)
Caspian
Sea
Iran
Pena//e/ /rgp/Bp Pi
Egyp
`~rAdministrative
Boundary
Sudan
Turkey
*KUWAIT I~
DEN _4 Aden
i5
Boundary representation is
not necessarily authoritative
Beheehtl
Gulf of Oman
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Secret
12 April 1985
lazfrat
(/Maylrah
Arabian Sea
Proposed oil pipeline
Existing oil pipeline
O Oilfield
.&- Oil terminal
2.0 Proposed pipaline capacity
(million bd)
Note: Pipeline alignments are approximate.
9 400
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Crude Oil Flows From the-Persian Gulf million b/d - Projected Persian Gulf Oil Thousand b/d
in 1984 Pipeline Capacity
Via Strait of
Pipeline
Hormuz
11.0
7.5
1.3
2.4
1.7
0
Iraq a
1.2
0
0.9
Saudi Arabia
4.4
3.1
0.4
Qatar
0.4
0.4
0
UAE
1
2
1
1
0
.
.
Bahrain
NEGL
0
0
will be about $200 million. Although construction
bidders have been asked to provide financing pro-
posals, we do not foresee either Iraq or Turkey
having difficulty funding their portions of the
project
Iraqi-Saudi Pipeline. Baghdad's highest priority
oil export expansion project is the construction of a
spurline linking Iraq's southern oilfields to the
Saudi East-West Petroline. Construction of the
640-kilometer, 500,000-b/d line began in Iraq in
October 1984. Initial throughput will be limited to
350,000 b/d until additional pumping capacity is
installed at Az Zubayr-about four to six months
after startu A
source of the US Embassy in Baghdad reports a
Japanese firm won a $200 million contract to build
storage facilities near Az Zubayr for about 4
million barrels of crude oil scheduled for shipment
through the new line. Another 2 million barrels of
storage is being constructed where the spurline
connects with Petroline and is on schedule for
completion no later than October 1985.
Iraq views the link to Petroline as only the first
phase of the expansion project; it envisions .phase II
to include construction of a separate Iraqi line
Secret
12 April 1985
Current.1990
Capacity
Capacity
Total
Iraq-Turkey
950
1,500
Iraq-Syria
0
0 .:..
Iraq-Jordan
0-1,000
East-West Petroline a
3,100
a Iraqi-Saudi spurline (phase I) 500,000-b/d capacity included.
running parallel to Petroline. This line, which
reportedly will take 30 months to construct, would
connect the spurline to Red Sea export facilities
and triple Baghdad's export capability through this
line to 1.6 million b/d of crude oil. Riyadh, howev-er, has yet to authorize this part of the project:.:.
According to an Embassy source, Saudi Arabia is
reluctant to approve the added export capacity,
because it continues to regard Iraqi facilities in
Saudi territory with concern and it sees the added
Saudi East-West Pipeline. Riyadh's desire to re-
duce the vulnerability of its oil exports has led"'
Saudi Arabia to expand Petroline.
ramco has been '
instructed by the government to construct,_a-parallel
line that will use existing pumps. The maximum
sustainable capacity of the system will be 3.1
million b/d. In addition,
under consideration are expanded termma acl 1-
ties at Yanbu' al Bahr costing about $100 million. ;
will allow.transport of Saudi heavy- and medium-
grade'crude'oil to Yanbu' al Bahr as the export
refinery increases production.. These alternative
feedstocks are now shipped around the peninsula.
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Secret
Other Proposals
The resolve of the Gulf countries to diversify their
export facilities will depend largely on their securi-
ty expectations for the Gulf and the Strait of
Hormuz but will also be influenced by world oil
market conditions. Over the years, a number of
other export pipeline proposals have been discussed,
including:
? Construction-strongly supported by Jordan-of
a 1-million-b'/d export pipeline connecting Iraq's
southern oilfields to the Jordanian coast on the
Gulf of Aqaba.
? A 500,000 to 800,000 b/d pipeline, backed by the
UAE, running from Abu Dhabi to Al Fujayrah.
? The often discussed Gulf Cooperation Council
pipeline to Oman. Endorsed by the UAE as an
extension of its proposed Al Fujayrah line, it
would eliminate 2.5 million b/d in shipments
through the Strait of Hormuz.
? A $2 billion line from Saudi Arabia to Jazirat
Masirah off the Omani coast.
? Iranian plans for two 1,000-kilometer pipelines
with a combined capacity of 2 million b/d from
southwestern Iran to the Gulf of Oman.
? Tehran's revival of a 1982 proposal for an oil line
through Turkey from Iran's Ahvaz oilfield to
either the Mediterranean or Black Sea.
Alternative Persian Gulf pipeline export capacity
projected for 1990 is likely to amount to about 4.6
million b/d under normal operating conditions.
This projection includes 2.8 million b/d of existing
capacity plus 1.8 million b/d of new capacity from
the Iraqi-Turkish and Petroline expansions. Con-
struction of the Jordanian line could add 1 million
b/d to this total. We do not now foresee any new
capacity being added by 1995 or 2000 that is not
well under way by 1990
Although construction of the Iraqi-Saudi spurline
has been slowed by unexpected technical prob-
lems-defective pipe and difficult trenching condi-
tions-as well as contractor manpower limitations
imposed by Baghdad, Iraq's persistence and over-
riding economic needs make completion of the
project by early 1986 highly likely, in our view.
Similarly, strong support from the Turkish Govern-
ment and accommodating construction contract
arrangements make completion by mid-1987 of the
parallel Iraqi-Turkish pipeline likely. Despite some
delay by the Saudi Ministry of Finance in releasing
funds for expanding Petroline-until it is certain
costs are the lowest possible-we believe construc-
tion of the new pipeline could begin as early as the
third quarter of 1985 with completion possible by
early 1987
In our judgment, slack oil market conditions, high
project costs, and unsettled political issues make
construction of the other proposed lines for bypass-
ing the Strait unlikely over the next 10 years. The
Iraqi-Jordanian line, however, remains a wild card.
Despite Jordanian prodding, Iraqi officials are be-
lieved to have only a slight interest in the project. If
talks with Riyadh on phase II of the spurline
founder, however, and, if Baghdad can obtain
ironclad guarantees against financial losses from
Israeli attacks on the pipeline, Iraq may exercise
this option.
Secret
12 April 1985
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Secret
Energy
Ottawa Announces On 26 March, Ottawa announced a new energy agreement with Alberta,
Energy Accord Saskatchewan, and British Columbia that will radically change the pricing
With Provinces and taxation provisions of the National Energy Program (NEP). The arrange-
ment will end federal regulation of oil prices on 1 June; establish a new natural
gas pricing regime by 1 November; phase out the Petroleum Incentive
Program (PIP) next year; and eliminate several energy taxes by 1988-
including the Petroleum and Gas Revenue Tax. In ending the PIP, exploration
off the Atlantic and Arctic coasts probably will be curtailed. The energy sector
will receive $740 million in tax relief over the next two years that Ottawa
hopes will promote investment in the industry, generating up to 300,000 new
jobs by 1990. Nevertheless, Ottawa, facing a $26.5 billion budget deficit, will
have to find the means to recoup its lost energy revenue
Soviet Oil Exports Finland's state-owned oil company learned in mid-March that Soviet oil
to Finland deliveries to Finland will increase sharply in the second quarter of this year,
Return to Normal Shipments during April-June are
scheduled at over 20D,00U b/d-hrst-quarter shipments averaged just over
50,000 b/d, with almost negligible deliveries during February. Finland
imported about 250,000 b/d in.1983 and probably close to that last year. The
tightness in Soviet energy supplies during the first quarter appears to have
eased considerably, but the decline in domestic oil production in recent months
will probably make it difficult. to match last year's oil exports to the West.
Mexican Debt Now that Mexico's $48 billion public debt has been rescheduled, the
Rescheduling Update
government is reportedly trying to obtain a similar rescheduling for private-
Mexico City has begun to pressure foreign commercial banks by threaten-
ing a takeover for nonpayment. of taxes of some Mexican businesses owing
money to these banks if a more generous debt rescheduling is not forthcoming.
Mexico City's threat, which implicitly includes cancellation of corporate debts,
is probably intended to intimidate the commercial creditors-the administra-
tion is likely to take over indebted businesses only as a last resort. In the near
term, Mexico probably could stall bank repayments by refusing to provide
foreign exchange to private businesses until taxes are paid.
Secret
12 April 1985
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Hungary's Success Hungary is continuing to have success in raising money on Western credit
in Credit Markets markets to help cover its estimated 1985 debt service payments of $2.6 billion.
by the end of March, Budapest had already
lined up at least $680 million in loans from US, Canadian, West European,
and Japanese banks. Budapest is also completing negotiations for a $650
million World Bank cofinancing development package. Lack of an IMF
standby facility for this year apparently has not hurt-the new loans carry
relatively favorable interest rates and maturities of at least six years.
Moroccan Bread Morocco faces serious flour shortages, according to the US Embassy, and
Problems supply problems are expected to worsen through May because of the shortfall
in US CCC grain credits. Cereal shipments under this program are unlikely to
resume soon because Morocco probably cannot meet the $32 million CCC loan
payment due this month. Moreover, to help finance grain imports, Rabat may
renege on the $55 million first installment on its 1983-84 London Club
commercial debt rescheduling. This will complicate urgent debt rescheduling
talks with Paris Club members scheduled for next month, according to the US
Embassy. These shortages, coupled with declining grain harvest prospects and
pending food subsidy cuts, heighten prospects for unrest over the next several
months.
Thailand Deflates Bangkok appears to be succeeding in phasing out chit funds-financial
Financial Pyramid pyramid schemes that peaked at an estimated $750 million last year. Despite
Schemes strong opposition from influential military and political figures-many of
whom reportedly invested large amounts at interest rates exceeding 100
percent annually-the government declared the funds illegal last fall and is
taking steps to shut them down. The largest fund last month failed to pay divi-
dends for the first time in 10 years and smaller funds are also folding,
according to the US Embassy. Nonetheless, there is a chance that news of
these losses could lead to a run on the country's troubled finance companies-
which are unprotected by deposit insurance-necessitating a government
bailout.
Global and. Regional Developments
China and South According to the US Consulate in Hong Kong, the chairman of Daewoo, a ma-
Korea Expanding jor South-Korean conglomerate, traveled to China late last month to check on
Economic Contacts the assembly of refrigerator kits in Fujian Province and to prepare for color
television assembly. Other large South Korean firms reportedly plan to
propose coal mining, construction, textile, and consumer electronics assembly
ventures. Seoul is encouraging these activities to expand bilateral contacts. It
remains sensitive to China's concerns about North Korean reactions and has
tried to avoid excessive publicity. Although these ventures are being handled
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by provincial-level authorities, Beijing clearly has given its blessing. With
inter-Korean contacts set to resume next month, it now may believe it can take
a higher profile in economic relations with Seoul.
Disputes Over Consumer country concerns over high prices, producers' failure to meet quota
Coffee Market shipments, and sales to nonmembers are not likely to be resolved at next week's
International Coffee Organization council meeting. Despite a good 1984/85
global coffee crop and prospects for an excellent 1985/86 coffee harvest in
Brazil (April-August), prices remain at over $1.40 per pound. Contributing to
high prices is the producers' failure to fulfill quarterly quota shipments to ICO
members. In contrast, the high volume of sales to nonmembers at less than a
dollar per pound is sustaining a two-tier market. A producers' faction led by
Brazil might propose stronger trade-reporting rules to help track sales to
nonmembers. This would likely be opposed by Europeans whose trading would
be more carefully, scrutinized and by LDC exporters who depend on non-ICO
National Developments
Developed Countries
Less Developed Countries
Venezuela's Cautious Caracas is easing its austerity program to prevent economic stagnation from
Economic Stimulus spurring political discontent. According to the US Embassy, President Lusin-
chi recently approved increases in public spending to support private invest-
ment and.to create public jobs. Unemployment is 15 percent, and excess plant
capacity is growing. The administration also has imposed interest rate ceilings
to stimulate construction and is trying to rescue troubled banks. Lusinchi's
moves are likely to blunt growing discontent temporarily but are unlikely to
end the two-year recession. Labor probably will intensify its demands for wage
increases and price restraints. This modest stimulation, however, will not
undercut Venezuela's strong payments position or damage negotiations on
multiyear debt rescheduling.
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Brazil To Limit Brazil's recent decision to restrain 1985 tin export growth to 10 percent should
Tin Export Growth temporarily aid International Tin Council (ITC) efforts to support tin prices.
Weak demand, substitution, and huge stocks, however, will continue to plague
the industry worldwide. Tin exports from Brazil, a non-ITC member, jumped
by 50 percent last year and have more than tripled since 1982. Meanwhile,
harsh ITC controls have forced members such as Malaysia, Indonesia, and
Thailand to cut exports b more than one-third and to fund an expensive
buffer stock program. Brazil is losing confi-
dence in the ability of the ITC to maintain tin prices and realizes that
continued growth in its own exports will only accelerate a price collapse.
Libyan Water IQadhafi's priority Great Manmade River
Project Update project is falling behind schedule. The waterline serving the primary concrete
pipe plant is only 70 percent complete-two months behind the May 1985
completion date. The pipe plant, scheduled for late 1985, will not begin
operation until March 1986. Survey work on future pipeline routes has been
halted by World War II minefields. Moreover Libyan of-
ficials have not begun planning critical secondary water storage and distribu-
tion systems. Delays in this extremely costly scheme probably will heighten
disgruntlement over declining living standards and Qadhafi's grandiose devel-
opment program.
More Algerian Algiers has stepped up its land distribution to private farmers in desert.regions.
Agricultural Reforms The US Embassy says demand for state land in southern regions-over 3,000
farmers are on waiting lists-exceeds the government's ability to provide
tractors and water pumps. The local press has extolled the sharp increases in
production by these pioneer desert farmers. Although yields probably are
overstated, they emphasize the regime's efforts to improve woeful agricultural
production and reverse the rural exodus. The media blitz probably is designed
to offset the weak response to the program in heavily collectivized farming
regions. Should these private farmers realize better yields than socialist farms
in Algeria's fertile northern tier, they would provide a strong case for further
decentralization of agriculture and for Bendjedid's economic reform program.
Mauritania Mending Mauritania is rapidly restoring relations with neighboring states partly to halt
Regional Relations its economic decline. The US Embassy in Nouakchott says that Algeria has re-
scheduled $59 million of Mauritania's foreign debt and may help finance the
upgrade of the nation's only oil refinery.
Libya has offered about $35 million in project aid in return or
allowing Tripoli to reopen its People's Bureau and establish an Islamic
association in Mauritania. Warming ties with Morocco probably will cause
Rabat to drop claims to $50 million in assets held in escrow since the 1981
coup attempt allegedly sponsored by King Hassan. Although the Taya regime
is aware of the ulterior motives of its. neighbors, it probably will accept all of-
fers of aid because of its desperate economic straits.
Secret 28
12 April 1985
25X1
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Secret
Tunisian Labor The government's compromise offer on wages probably will fall on deaf ears.
Strife Resumes The proposed 7-percent hike in the minimum wage and indexation of future in-
creases to productivity gains contrasts sharply with labor's demand for a 10-
percent across-the-board raise and claims that the government is obliged to
maintain purchasing power. Because most workers earn more than the
minimum wage, the government offer will have little impact on wages or the
budget. The national airline was struck on 4 April, and strikes are planned for
the transport sector, public-sector offices, and banks later this month. The
government's decision to stand firm on wages and internal labor divisions,
however, limit prospects for a general strike as occurred in 1978.
High Bride Price Omani officials are increasingly concerned that the rising payments demanded
Concerns Muscat by brides' families-as much as $18,000-are causing many men to put off
marriage. Muscat is worried that the resulting slower population growth will
inhibit its efforts to reduce reliance on foreign labor. Oman established special
loan funds for husbands to cover marriage costs, but the rising prices have out-
paced available resources. Bride prices rose steeply in the early 1970s when the
government prohibited Omanis in high-level or sensitive positions from
marrying foreigners. In 1981 the Sultan issued a royal decree limiting the
bride price, but, without an enforcement mechanism, it has been ignored. With
limited resources to add to the loan fund and little help from the Islamic
clergy, Muscat is unlikely to resolve this problem.
Wheat Shortages Pakistan's wheat production probably will be down for the second consecutive
in Pakistan year because of heat and drought. Government officials are projecting this
year's crop at 10.6 million metric tons, about 300,000 tons less than last year.
If conditions do not improve, the government probably will have to import
about 2 million tons of wheat at a cost-at current world prices-of $300-400
million. Given Pakistan's tight foreign exchange position, US Embassy
officials believe Islamabad will request emergency US food or financial
assistance to meet part of the shortfall.
Soviet Five-Year The preliminary Soviet economic plan for 1986-90 apparently sets ambitious
Plan Outlined goals for growth that are unlikely to be achieved.
the preliminary draft of the next
five-year plan calls for annual increases in both national income and industrial
production of about 4 percent. Investment is planned to increase even more
rapidly than the almost 3.5-percent annual rate achieved in 1981-84. A
growing share will go to machine building, and new construction will be cut
back. problems will continue in the consumer
sector. The targets for economic growth
are optimistic, perhaps reflecting a belief that the improved performance of the
last two years can be sustained. A larger share of investment for machine
Secret
12 April 1985
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bottlenecks.
building-agriculture and energy are to retain their already large. share-will-;
limit resources for other critical sectors and may cause new economic .
Massive Soviet Wheat A large-scale program in intensive wheat cultivation sponsored by General
Production Experiment Secretary Gorbachev is being undertaken this year on some 17 million
hectares-nearly 15 percent of the area sown to grain. According to
Soviet press reports, Moscow has purchased large amounts
Decline in Chinese
Foreign Exchange
Reserves
inadequate fertilizer deliveries already are jeopardizing the program:
are also being shifted from regions of marginal productivity. It is doubtful that
the planned increase of 16-18 million tons will be fully achieved. Untimely and
of Western insecticides, herbicides, and fungicides to raise average yields by 1
ton per hectare in the Ukraine and the RSFSR. Fertilizer and irrigation funds
China's foreign exchange reserves probably fell to,roughly $12 billion at the
end of March from the $17 billion peak last September. Contrary to Western
press rumors of a much greater decline caused by. accounting errors or foreign
exchange speculation, the drop results largely from increases in imports of
capital goods and consumer durables. Imports from Japan, Hong Kong, and
the United States-China's top three trade.partners-are running at nearly
twice last year's levels. Beijing probably will move to tighten controls over
purchases of Western consumer goods by local enterprises and provincial .:.
.governments. Although foreign exchange reserves are still healthy, covering _,
more than four months of imports, Beijing wants. to- conserve hard currency for
.key projects under the Seventh Five-Year Plan (1986-90)-since November
China has signed contracts worth more than $10 billion with Western firms.
Chinese. Commercial China has announced that it will enter the field of.commercial space launch
Space Launch Service services. China probably will offer launch services to Western countries at
prices below the US shuttle or the European Ariane. The commercial launch
services market, however, amounts to only some 20 satellites per year, and
Secret 30
12 April 1985
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both the US shuttle and the Ariane will be able to handle the market with
ease. Some Third World countries may find the Chinese launcher a politically
attractive alternative, but US technology transfer restrictions may prevent the
carrying of US-built components. Moreover, the Chinese are inexperienced in
international marketing and will need time to prove the reliability of their
launch vehicles.
China To Build Work began last week in Qinghai Province on what is to be China's largest
Aluminum Plant aluminum plant. The first phase, scheduled to be completed in 1987, will add
100,000 metric tons to China's present aluminum capacity of more than
400,000 tons. The plant's capacity will double when the final phase is
concluded, possibly by 1990. Although these additions will help ease China's
aluminum imports, which more than doubled between 1979 and 1983, China
will remain dependent on foreign aluminum. Chinese aluminum consumption
is expected to continue to expand through 1990 as China develops its canning
industry. This is particularly good news for Canada, which has accounted for
more than two-fifths of all Chinese aluminum imports in recent years.F 25X1
31 Secret
12 April 1985
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Secret
Secret
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Dilectorate of
Intelligence
Economic & Energy
Indicators
DI EEI 85-008
12 April 1985
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This publication is prepared for the use of US Government
officials, and the format, coverage, and content are designed to
meet their specific requirements. US Government officials may
obtain additional copies of this document directly or through
liaison channels from the Central Intelligence Agency.
Requesters outside the US Government may obtain subscriptions to
CIA publications similar to this one by addressing inquiries to:
Document Expediting (DOCEX) Project
Exchange and Gift Division
Library of Congress
Washington, D.C. 20540
or: National Technical Information Service
5285 Port Royal Road
Springfield, VA 22161
Requesters outside the US Government not interested in subscription
service may purchase specific publications either in paper copy or
microform from:
Photoduplication Service
Library of Congress
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or: National Technical Information Service
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(To expedite service call the
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Comments and queries on this paper may be directed to the DOCEX
Project at the above address or by phone [phone]), or the
NTIS Office of Customer Services at the above address or by phone
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Central Intelligence Agency.
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Economic & Energy
Indicators
Gross National Product
Consumer Prices
Money Supply
Unemployment Rate
Foreign Trade
Current Account Balance
Export Prices in US $
Import Prices in US $
Exchange Rate Trends
Money Market Rates
Agricultural Prices
Industrial Materials Prices
Page
Energy World Crude Oil Production, Excluding Natural Gas Liquids 8
Big Seven: Inland Oil Consumption 9
Big Seven: Crude Oil Imports 9
OPEC: Crude Oil-Official Sales Price 10
OPEC: Average Crude Oil Official Sales Price (Chart) 11
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Industrial Production.
Percent change from previous period
seasonally adjusted at an annual rate
United States
2.6
-8.1
6.4
10.7
-2.2
3.0
1.5
3.7
-5.6
Japan
1.0
0.4
3.5
11.1
11.6
4.1
-7.7
-2.0
-8.3
West Germany
-2.3
-3.2
0.4
3.1
8.8
-22.1
-5.8
France
-2.6
-1.5
1.1
2.6
-9.5
-16.5
-24.1
-17.1
United Kingdom
-3.9
2.0
3.3
0.9
4.9
6.0
6.0
17.4
Italy
-1.6
-3.1
-3.2
3.0
-7.0
-11.9
5.2
Canada
0.5
-10.0
5.7
8.7
0.7
20.2
6.0
United States
2.5
-2.1
3.7
Japan
4.1
3.3
3.1
West Germany
-0.2
-1.1
1.3
France
0.2
2.0
0.7
Percent change from previous period
seasonally adjusted at an annual rate
Annual
1st Qtr
2d Qtr
3d Qtr
4th Qtr
6.8
10.1
7.1
1.6
4.2
5.7
5.9
7.6
2.6
9.6
2.6
5.0
-7.7
9.0
5.8
4.3
1.7
3.0
Percent change from previous period
seasonally adjusted at an annual rate
United States
10.3
6.2
3.2
4.3
3.7
3.5
2.3
4.2
Japan,
4.9
2.6
1.8
2.3
1.3
3.3
4.4
-3.2
West Germany
6.0
5.3
3.6
2.4
0.6
2.8
4.3
5.3
5.8
France .
13.3
12.0
9.5
7.7
7.3
6.5
5.1
5.8
United Kingdom
11.9
8.6
4.6
5.0
5.5
6.0
6.8
10.1
Italy
19.3
16.4
14.9
10.6
8.0
6.0
10.0
10.7
14.4
Canada
12.5
10.8
5.8
4.3
3.3
3.3
6.1
5.6
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Money Supply, M-1 a Percent change from previous period
seasonally adjusted at an annual rate
Annual
3d Qtr
4th Qtr
Jan
Feb
Mar
United States b 7.1
6.6
11.0
6.9
4.6
3.3
9.4
15.0
Japan 3.7
7.1
3.0
2.9
6.6
2.2
-8.6
West Germany 1.1
3.6
10.3
3.3
2.3
8.4
-20.8
-3.7
France 12.2
13.9
10.0
1.1
United Kingdom NA
NA
15.1
14.6
10.1
24.2
-22.6
-2.4
Italy 11.2
11.6
15.3
Canada 3.8
0.6
10.2
2.4
-0.2
3.1
-35.9
-29.2
19.7
a Based on amounts in national currency units.
b Including M1-A and M1-B.
Annual
4th Qtr
Dec
Jan
Feb
Mar
7.5 9.6 9.4 7.4 7.1 7.1 7.2 7.2 7.2
2.2 2.4 2.7 2.7 2.7 2.7 2.6
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United States b
Exports
233.5
212.3
200.7
217.6
53.1
55.5
55.9
19.4
17.9
Imports
261.0
244.0
258.2
325.6
79.3
86.6
80.0
28.3
28.0
Balance
-27.5
-31.6
-57.5
-107.9
-26.2
-31.1
-24.1
-8.9
-10.1
Japan
Exports
149.6
138.3
145.5
168.2
42.5
42.2
43.2
14.2
13.2
Imports
129.5
119.7
114.1
124.0
31.7
32.1
29.8
9.6
9.7
Balance
20.1
18.6
31.5
44.2
10.0
10.0
13.4
4.6
3.6
West Germany
Exports
175.4
176.4
169.4
172.0
42.4
43.3'
42.3
14.2
13.6
Imports c
163.4
155.3
152.9
153.1
39.2
38.3
36.4
12.8
12.0
Balance
11.9
21.1
16.6
18.8
3.2
5.0
5.9
1.5
1.6
France
Exports
106.3
96.4
95.1
97.5
25.0
24.5
23.9
7.1
7.6
Imports
115.6
110.5
101.0
100.3
26.1
24.1
24.4
7.5
8.2
Balance
-9.3
-14.0
-5.9
-2.8
-1.2
0.4
-0.5
-0.4
-0.6
United Kingdom
Exports
102.5
97.1
91.8
93.8
23.6
22.6
23.5
7.4
7.6
Imports
94.6
93.0
92.7
99.5
25.3
24.7
25.1
7.5
7.9
Balance
7.9
4.1
-0.8
-5.7
-1.7
-2.1
-1.6
-0.1
-0.3
Italy
Exports
75.4
74.0
72.7
73.6
17.1
19.2
18.1
5.7
Imports
91.2
86.8
80.7
84.4
20.3
20.9
21.9
6.9
Balance
-15.9
-12.8
-7.9
-10.7
-3.2
-1.7
-3.7
-1.2
Canada
Exports
70.5
68.5
73.7
86.8
21.7
22.5
21.8
7.3
Imports
64.4
54.1
59.3
70.8
17.5
18.4
17.4
6.2
Balance
6.1
14.4
14.4
16.1
4.1
4.1
4.4
1.1
a Seasonally adjusted.
b Imports are customs values.
c Imports are c.i.f.
Current Account Balance a
Japan
4.8
6.9
20.8
35.0
11.6
3.9
2.9
4.8
0.8
2.5
West Germany
-6.8
3.5
4.1
5.9
6.0
2.0
2.0
2.1
-0.2
0.6
France
-4.7
-12.1
-4.6
-0.5
0.1
United Kingdom
15.3
9.8
4.3
0
0.8
0.2
0.4
0.2
0.4
0.1
s Seasonally adjusted; converted to US dollars at current market
rates of exchange.
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Export. Prices in ;US $ .
Percent change from previous period
at an annual rate
1985
Annual
3d Qtr
4th Qtr
Nov
Dec
Jan
Feb
United States
9.2 ?
1.5
1.0
1.4
-2.2
-3.7
-8.4
-2.5
-2.6
Japan
5.5
46:4
-2'.4
.0.2
-14.9
-4.7
-0.2
-17.0
-14.8
West Germany
-14:9
?2:8
=3.2
-7:1
-23.0
-12.8
35.8
-33.4
-17.8
-34.0
France
-12.0
=55
-5.0
-21.6
43.8
United Kingdom
NA
X7.:3
-5.9
-4.8
-17.2
-16.0
33.8
-39.2
-34.0
-11.2
Italy
-7.8
=3 i2
-5.8
-17.8
Canada
3.9
2.0
-1.2
-3.7
-5.2
-6.3
0
6.5
14.0
Import Prices in US $
Percent change from previous period
at an annual rate
Japan
3.6
-7.3
-5.1
-2.8
-5.2
-8.4
-6.5
-71.3
West Germany
-8.6
-4.7
-5.2
-4.8
-22.5
-11.1
-32.6
-13.2.
-23.8
France
-7.8
-7.2
-7.0
-22.9
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Exchange-Rate Trends . Percent change from previous period
at an annual rate
United States
10.5
10.6
5.8
.9.1
26.2 13:7
34.3
Japan -
9.3
-5.7
10.4
6.2
-5.3 5.4
? -3.1
West Germany
-2.1
7.0
5.8
1.0
-2.0 -0.3
: 5.2
France
-5.1
-6.1
-4.7
-2.1
-1.4. . 0.1.
4.2
United Kingdom
2.5
-2.1
-5.0
-2.5
-3.0 -9.6
-27.2
Italy
-9.2
-5.1
-1.6
-3.1
-0.3 -2.3
9.5
Canada
0.3
0.2
2.3
-2.3
1.3 3.6
. 8.5
Japan
2:7-
-12.8
4.5
-26.1 ` '-4.4'
--33:5
-32.5
9.0
West Germany
-24.6
-7.2
-5.2
-11.5
-33.8 -20.4
-26.3
-58.7
-2.5
France
-28.7
-20.8
-15.9
-14.7
-33.2 -19.9
-26.1
-54.7
-2.8
United Kingdom
-13.2
-13.4
-13.3
-11.9
-25.2 -23.3
-28.9
-28.9
37.1
Italy
-32.8
-18.8
-12.3
-15.6
-32.5 -22.1
-25.0
-66.8
-31.1
Canada
-2.5
-2.9
0.1
-5.1
-6.6 -1.7
' -1.8
-28.2
-31.9
United States
90-day certificates of
deposit, secondary market
16.24
12.49
9.23
10.56
11.66
9.52
8.41
Japan
loans and discounts
(2 months)
7.79
7.23
NA
6.66
6.64
6.60
6.56
6.55
West Germany
interbank loans
(3 months)
12.19
8.82
5.78
5.96
5.95
5.93
France
interbank money market
(3 months)
15.47
14.68
12.51
11.74
11.37
10.83
United Kingdom
sterling interbank loans
(3 months)
13.85
12.24
10.12
9.91
11.10
10.00
Italy
Milan interbank loans
(3 months)
20.13
20.15
18.16
15.92
15.18
15.22 '
Canada
finance paper (3 months)
18.46
14.48
9.53
11.30
12.56
11.19
Eurodollars
3-month deposits
16.87
13.25
9.69
10.86
11.93
9.89
8.58
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Australia
(Boneless beef,
f.o.b., US Ports)
United States
(Wholesale steer beef,
midwest markets)
Cocoa
(0 per pound)
Coffee
($ per pound)
Corn
(US #3 yellow,
c.i.f. Rotterdam
$ per metric ton)
Cotton
(Memphis middling
1 1/16 inch, $ per pound)
Palm Oil
(United Kingdom 5% bulk,
c.i.f., $ per metric ton)
US
(No. 2, milled,
4% c.i.f. Rotterdam)
Thai SWR
(100% grade B
c.i.f. Rotterdam)
Soybeans
(US #2 yellow,
c.i.f. Rotterdam
$' per metric ton)
Soybean Oil
(Dutch, f.o.b. ex-mil.
$ per metric ton)
Soybean Meal
(US, c.i.f. Rotterdam
$ per metric ton)
Sugar
(World raw cane; f.o.b.
Caribbean Ports, spot
prices 0/lb.)
Tea
Average Auction (London)
(US 0 per pound)
Wheat
(US #2. DNS
Rotterdam c.i.f.
$ per metric ton)
104.3 100.0 101.4 97.6 100.9 97.2 100.0 97.4 94.2
1.54 1.28 1.40 1.32 1.44 1.44 1.45 1.45 1.41
598 632 481 514 514 496 496 496 496
101.4 91.0 89.9 105.2 156.6 126.9 143.1 127,.3 110.4
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Major US producer
71.6
77.3
76.0
77.7
81.0
81.0
81.0
81.0
81.0
LME cash
80.8
57.4
44.9
65.1
56.8
49.2
48.3
50.0
49.5
Chrome Ore
(South Africa chemical
grade, $ per metric ton)
55.0
53.0
50.9
50.0
50.0
49.9
49.7
50.0
50.0
Copper a (bar, 0 per pound)
98.7
79.0
67.1
72.0
62.4
62.1
60.8
63.5
62.2
Gold ($ per troy ounce)
612.1
460.0
375.5
424.4
360.0
300.0
302.8
302.1
295.3
Lead a (? per pound)
41.1
32.9
24.7
19.2
20.0
18.9
17.2
Manganese Ore
(48% Mn, $ per long ton)
78.5
82.1
79.9
73.3
69.8
69.6
69.8
69.8
69.4
Nickel ($ per pound)
Cathode major producer
3.5
3.5
3.2
3.2
3.2
3.2
3.2
3.2
3.2
LME Cash
3.0
2.7
2.2
2.1
2.2
2.2
2.2
2.2
2.3
Metals week,
New York dealers' price
677.0
446.0
326.7
Rubber (0 per pound)
Synthetic b
40.6
47.5
45.7
44.0
44.4
NA
47.0
47.7
NA
Natural c
73.8
56.8
45.4
56.2
49.6
42.0
42.0
42.0
42.0
Silver ($ per troy ounce)
20.7
10.5
7.9
11.4
8.1
5.9
6.0
6.1
5.7
Steel Scrap d ($ per long ton)
91.2
92.0
63.1
73.2
86.4
NA
82.5
82.0
NA
Tina (0 per pound)
761.3
641.4
581.6
590.9
556.6
501.1
504.7
499.0
499.7
Tungsten Ore
(contained metal,
$ per metric ton)
18,219
18,097
13,426
10,177
10,243
11,515
10,952
11,568
12,025
US Steel
(finished steel, composite,
$ per long ton)
Zinc a (? per pound)
34.4
38.4
33.7
34.7
41.5
40.0
38.9
40.0
41.1
Lumber Index e
(1975=100)
167
159
140
190
176
177
169
180
182
Industrial Materials Index f
184
166
142
152
138
123.0
124.9
122.7
121.4
(1975= 100)
a Approximates world market price frequently used by major world
producers and traders, although only small quantities of these
metals are actually traded on the LME.
b S-type styrene, US export price.
c Quoted on New York market.
d Average of No. I heavy melting steel scrap and No. 2 bundles
delivered to consumers at Pittsburgh, Philadelphia, and Chicago.
e This index is compiled by using the average of 11 types of lumber
whose prices are regarded as bellwethers of US lumber construction
costs.
f The industrial materials index is compiled by The Economist for
18 raw materials which enter international trade. Commodities are
weighted by 3-year moving averages of imports into industrialized
countries.
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World Crude Oil Production
Excluding Natural Gas Liquids
World
59,463
55,827
53,014
52,588
53,718
53,195
53,661
Non-Communist countries
45,243
41,602
38,810
38,228,
39,257
38,711
38,952
Developed countries
12,859
12,886
13,276
13,864
14,302
14,216
14,618
United States
8,597
8,572
8,658
8,680
8,735
8,776
8,807
8,737
Canada
1,424
1,285
1,270
1,356
1,411
1,397
1,448
United Kingdom
1,619
1,811
2,094
2,299
2,535
2,451
2,646
Norway
528
501
518
614
700
681
764
Other
691
717
736
915
921
911
953
27
Non-OPEC LDCs
5,443
6,036
6,633
6,823
7,515
7,565
7,704
Mexico
1,936
2,321
2,746
2,666
2,746
2,724
2,723
2,644
Egypt
595
598
665
689
827
833
890
Other
2,912
3,117
3,222
3,468
3,942
4,008
4,091
OPEC
26,941
22,680
18,901
17,541
17,440
16,930
16,630
14,591
Algeria
1,020
803
701
699
638
650
633
600
Ecuador
204
211
211
236
253
261
253
260
Gabon
175
151
154
157
152
157
150
150
Indonesia
1,576
1,604
1,324
1,385
1,466'
1,400
1,411
1,160
Iran
1,662,
1,381
2,282
2,492
2,187
2,002
2,299
1,400
Iraq
2;514
993
972
922
1,203
1,249
1,233
1,200
Kuwait b
1,389
947
663
881
912
933
834
800
Libya
:1,830
1,137'
1,183
1,076
1,073
1,027
1,000
1,000
Neutral Zone c?
544
370
317
390
410
386
380
380
Nigeria
2,058
1,445
1,298
1,241
1,393
1,232
1,600
1,400
Qatar
471
405
328
295
399
440
317
280
Saudi Arabia b
9,631
9,625
6,327
4,867
4,444
4,338
3,699
3,300
UAE
1,702
1,500
1,248
1,119
1,097
1,012
1,056
1,106
Venezuela
2,165
2,108
1,893
1,781
1,813
1,843
1,765
1,555
Communist countries
14,220
14,225
14,204
14,360
14,461
14,484
14,709
14,042
USSR
11,700
11,790
11,750
11,820
11,870
11,864
12,067
11,400
China
2,113
2,024
2,044
2,120
2,280
2,200
2,222
2,222
Other
407
411
410
420
420
420
420
420
a Preliminary.
b Excluding Neutral Zone production, which is shown separately.
c Production is shared equally between Saudi Arabia and Kuwait.
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Thousand bld
Annual
Oct
Nov
Dec
Jan
Feb
United States a
17,006
16,058
15,296
15,184
15,708
15,631
15,602
15,353
16,150
16,630''
Japan
4,674
' 4,444
4,204
4,193
4,349
3,880
4,373
5,029
West Germany
2,356
2,120
2,024
2,009
2,014
1,877
'2,693
1,856
France
1,965
1,744
1,632
1,594
1,531
1,587
1,530
1,577
2,024
1,738
United Kingdom
1,422
1,325
1,345
1,290
1,621
1,830
' 1,981
1,850
Italy b
1,602
1,705
1,618
1,594
1,513
1,502
1,560
1,558
:1,763
Canada
1,730
1,617
1,454
1,354
1,348
1,410
1,423
1,311
1,363
a Including bunkers, refinery fuel, and losses.
b Principal products only prior to 1981.
Big Seven: Crude Oil Imports Thousand b/d
Annual
Oct
Nov
Dec
Jan
Feb
United States
5,220
4,406
3,488
3,329
3,402
3,751 ;
3,552
3,126
2,560
2,160
Japan
4,373
.3,919
3,657
3,567
3,664
3,405
3,489
3,722
3,194
West Germany
1,953
1,591
1,451
1,307
1,332
1,060
1,366
1,328
1,395
France
2,182
1,804
1,596
1,429
1,395
1,346
1,325
1,502
1,494
United Kingdom
893
736
565
456
482
506
478
486
Italy
1,860
1,816
1,710
1,532
1,416
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OPEC: Crude Oil Official Sales Price a
Algeria
42? API 0.10% sulfur
19.65
37.59
39.58
35.79
31.30
30.50
30.50
Ecuador
28? API 0.93% sulfur
22.41
34.42
34.50
32.96
27.59
27.50
27.50
Gabon
29? API 1.26 % sulfur
18.20
31.09
34.83
34.00
29.82
29.00
29.00
Indonesia
35? API 0.09% sulfur
18.35
30.55
35.00
34.92
29.95
29.53
29.53
Light
34? API 1.35% sulfur
19.45
34.54
36.60
31.05
28.61
28.00
29.11
Heavy
311 API 1.60% sulfur
18.49
33.60
35.57
29.15
27.44
27.10
27.55
Iraq ?
35? API 1.95% sulfur
18.56
30.30
36.66
34.86
30.32
29.43
29.43
Kuwait
310 API 2.50% sulfur
18.48
29.84
35.08
32.30
27.68
27.30
27.30
Libya
40? API 0.22% sulfur
21.16
36.07
40.08
35.69
30.91
30.40
30.40
Nigeria
34? API 0.16% sulfur
20.86
35.50
38.48
35.64
30.22
29.12
27.90
Qatar
40? API 1.17% sulfur
19.72
31.76
37.12
34.56
29.95
29.49
29.49
Berri
39? API 1.16% sulfur
19.33
30.19
34.04
34.68
29.96
29.52
29.27
Light
34? API 1.70% sulfur
17.26
28.67
32.50
34.00
29.46
29.00
29.00
Medium
311 API 2.40% sulfur
16.79
28.12
31.84
32.40
27.86
27.40
27.65
Heavy
27? API 2.85% sulfur
16.41
27.67
31.13
31.00
26.46
26.00
26.50
UAE
39? API 0.75% sulfur
19.81
31.57
36.42
34.74
30.38
29.56
29.31
Venezuela
26? API 1.52% sulfur
17.22
28.44
32.88
32.88
28.69
27.88
27.88
a F.o.b. prices set by the government for direct sales and, in most
cases, for the producing company buy-back oil.
b Weighted by the volume of production.
? Beginning in 1981 the price of Kirkuk (Mediterranean) is used in
calculating the OPEC average official sales price.
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OPEC: Average Crude Oil Sales Price
30.8
7
29.31
18.67
12
88
12
93
11.29
11.02
11.77
.
.
3.39
n
E
R
n
P
v y
oO `o e e
m o A
11- ^
28.70
N N
r r
W W
07 R
06
N N o0
1 II III IV I II 111 IV 1 11 111 IV 1 II 111 IV I II 111 IV 1 11 111 IV J F
1979 1980 1981 1982 1983 1984 1985
The 1973 price is derived from posted prices, not official sales prices.
34.50 33.63
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