(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00596R001100020001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 469
• Document Creation Date: January 12, 2017
• Document Release Date: October 29, 2010
• Sequence Number: 1
• Publication Date: November 1, 1984
• Content Type: REPORT

nitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
NONUAI - Ig83
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Directorate of
Intelligence
Countries, 1982 and 1983
Soviet and East European
Economic Assistance Programs
in Non-Communist Less Developed
Seeret
GI 84-10182
November 1984
Copy 4 3 6
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Directorate of Secret
Intelligence
Countries, 1982 and 1983
Soviet and East European
Economic Assistance Programs
in Non-Communist Less Developed
Development
This paper was prepared by Office
of Global Issues. This paper has been coordinated
with the Department of State, the Defense
Intelligence Agency, and the Agency for International
Instability and Insurgency Center, OGI~
Comments and queries are welcome and may be
directed to the Chief, Subversion Analysis Branch,
Secret
GI 84-10182
November 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Secret
Soviet and East European
Economic Assistance Programs
in Non-Communist Less Developed
Summary
Information available
as of 14 September 1984
was used in this report.
Countries, 1982 and 1983
In the past three decades, the USSR and Eastern Europe have provided
nearly $40 billion in economic credits and grants to non-Communist less
developed countries. In tandem with military assistance, the USSR and its
allies have used their economic aid programs to try to replace Western
influence in LDCs, to expand Soviet trade, and to gain access to strategic
raw materials. Initially, the USSR gave preference to emerging states that
were following a noncapitalist path of development. In the 1960s the
program was broadened to include almost any country willing to accept
aid. Today more than 70 countries have accepted economic aid from the
USSR or its allies.
Soviet economic aid since 1954 has never had the dramatic impact of the
military program. It has been far more modest-totaling about $27 billion,
as compared with $83 billion for the military. Moreover, the Soviet
economic program has been small by international standards. Moscow's
disbursements to LDCs over the past few years have accounted for less
than 3 percent of all international aid, compared with a US share of nearly
25 percent. Despite the large number of countries which have received
Communist economic aid, the program is focused on a few countries along
the Soviet border and in the Middle East; Arab and South Asian countries
account for two-thirds of Soviet pledges. East European countries, follow-
ing a similar pattern in their programs, also have concentrated on Arab
and Asian recipients.
Since the start of the 1980s, most Soviet and East European economic
credits have carried somewhat harder terms. This reflects Communist
attempts to minimize the costs associated with the program. The agree-
ments increasingly, for example, call for repayment in hard currency, oil,
and other strategic materials. Grants now go almost exclusively to Marxist
LDCs such as Afghanistan and Ethiopia. Consequently, the spread
between liberal official Western development aid and Communist aid
terms has increased. Still, the new Communist credits provide cheaper
funds than Western market financing and have enabled Communist
countries to compete successfully with Western bidders on lucrative LDC
development contracts. Moreover, the Soviets have been more willing than
other aid donors to build the large industrial establishments demanded by
LDCs, sometimes with little economic justification.
111
Secret
GI 84-10181
November 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
During the past few years, personnel exchanges have become an increas-
ingly important part of Warsaw Pact relations with LDCs, and have
provided good financial and political returns. Nearly 125,000 Soviet and
East European economic project specialists and professionals were in LDCs
in 1983, and nearly 15,000 LDC students departed for academic training
in Warsaw Pact institutions. The technical services and academic training
programs have been broadly based, and Communist countries have person-
nel agreements with 110 countries, 34 of which have not accepted other
forms of Communist aid.
At present, the LDCs employ more than 40,000 Soviet project specialists
and professionals. Originally, LDCs financed the services of Soviet person-
nel under aid agreements. Now, aside from a few doctors and teachers
provided on a grant basis, the USSR charges $40,000 to $70,000 a year for
each of its specialists. Most are located in oil-producing LDCs, which can
pay in hard currency. Because of a skilled labor shortage at home, Moscow
is very reluctant to send civilian personnel to LDCs unless they earn
foreign exchange.
The academic training program has the potential for significant political
payoffs for the Kremlin. In some countries, mostly in Africa and Latin
America, it is Moscow's only ongoing activity. Nearly 100,000 students
from LDCs have attended Soviet universities and technical schools since
the mid-1950s. In Soviet-oriented LDCs, including Afghanistan and
Ethiopia, the USSR has available 15,000 local graduates of Soviet military
or academic programs who can at least speak Russian even if they do not
sympathize with Soviet goals.
25X1
J
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Economic Technical Services: A Growth Industry
6
The Caribbean and Central America: The Newest
Assistance Program
17
South America: Pursuing New Opportunities
20
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Figure 1
Warsaw Pact: LDC Economic Aid Programs
Economic Aid in
Billions of US $
USSR Extensions
4.0
Aid credits
Trade credits 3.S
Grants 3A
Thousands of
Persons
Economic technicians in LDCs
USSR 120
EastEuropean 100
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Soviet and East European
Economic Assistance Programs
in Non-Communist Less Developed
Countries, 1982 and 1983
I: Trends in Soviet and East European Economic
Assistance'
Economic assistance has been an important element
in Soviet foreign policy in LDCs since Moscow pro-
vided its first aid to a few Asian neighbors in the mid-
1950s. The USSR has used its aid program to:
? Create and maintain stable ties with LDCs.
? Demonstrate a continuing commitment to countries
that have a chosen socialist path to development.
? Secure resources for its own and East European
economies.
The Soviet economic aid program has been successful
in gaining increased access to the LDCs for Moscow
through placement of Communist personnel in key
countries, expanded access to strategic commodities,
growing hard currency earnings, and, in some cases,
increased trade dependency. In addition, economic aid
' The data on economic agreements reflect the latest information
available and supersede information in our previous publications.
They are derived from a variety of sources
For the purpose of this report, the term ommunist countries
refers to the USSR and the following countries of Eastern Europe:
Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and
Romania. We have also included data on Cuban economic aid
extensions to LDCs, because Cuba frequently acts in concert with
Warsaw Pact countries and generally supports their political goals
through its aid program.
The term less develope ic s includes all countries of
Africa except the Republic of South Africa; all countries of East
Asia except Hong Kong and Japan; Malta, Portugal, Greece, and
Spain in Europe; all countries in Latin America except Cuba; and
all countries in the Middle East except Israel. Data include about
$50 million in aid to Kampuchea and Laos, which became Commu-
nist in 1975 and are reported on for prior years for historical
reasons.
The term Marxist clients refers to countries that consider
themselves Marxist and that rely primarily or entirely on Commu-
nist military support to maintain their power. They are Afghani-
stan, Angola, Ethiopia, Mozambique, Nicaragua, and South Ye-
men.
i m e aid context, the terms agreements, commitments,
and extensions refer to pledges to provide goods and services, either
on deferred payment terms or as grants. Assistance is considered to
have been extended when accords are initialed and constitute a
formal declaration of intent. For economic aid, credits with repay-
ment terms of five years or more are included. These credits are
designated as "trade credits" if amortization is less than 10 years.
The terms drawings and disbursements refer to the delivery of
has sometimes led to other relations, including mili-
tary assistance; access to ports, repair facilities, and
airfields in LDCs; and an expanded political presence
in some countries through the provision of high-level
advisers to ministries responsible for economic affairs.
The Record on Commitments
Since the start of the 1980s, the Soviet Union has
pledged almost $6.5 billion of economic aid to non-
Communist LDCs. After a severe dropoff in 1981 and
1982, the program recovered in 1983 when total new 25X1
commitments approached $2.3 billion. The earlier
decline may have reflected a retrenchment made
necessary because of increasing demands from all of
Moscow's aid recipients. Along with the resumption
of the historic level of commitments in 1983, a distinct
tier system for countries receiving Soviet aid has
materialized. Key elements are:
? Larger amounts of grant aid and commodity sup-
port for Marxist clients.
? Occasional lenient long-term credits for a few tradi-
tional partners.
? Expanding use of trade credits for the majority of
LDC recipients
Support to Marxist Clients. Moscow made nearly
$1.6 billion in new economic commitments during 25X1
1982 and 1983 to the Marxist LDCs, bringing total
Soviet economic pledges to this group of countries to
nearly $5.6 billion over the past three decades (table
1). In 1982, almost all new Soviet commitments went
to them. For Afghanistan, Ethiopia, and South Ye-
men, the USSR and its allies have almost completely 25X1
displaced bilateral Western aid donors, although sig-
nificant multilateral funds continue to flow to all but
Afghanistan.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Table 1
USSR: Economic Aid
Extended to Non-Communist LDCs a
Total M
S
arxist Non-M
tates States
arxist
Total
26,699 5
,557 21,142
1954-77
13,501 1
,988 11,513
1978
3,002
94 2,908
1979
3,749
530 3,219
1980
2,588 1
,168 1,420
1981
580
218 362
1982
965
890 75
1983
2,314
668 1,646
Of which:
Algeria
Ethiopia
Syria
Afghanistan
India
140
Pakistan
275
Recent Soviet economic aid agreements with client
states have contained some unusual features:
? A $400 million credit to Angola in 1982 for a
hydropower project (extended under a 1982 frame-
work agreement that could eventually provide $2
billion in financing) calls for Brazil's participation in
construction of the Capanda dam and powerplant,
the first instance of a Soviet joint venture with an
LDC in a third country.
? The $170 million in aid to Ethiopia financed oil
purchases from the USSR for 1983. Moscow has
never before underwritten oil purchases by a non-
Communist country.
? The $165 million credit extension to Nicaragua
provided some $50 million for technical services and
project studies, for which Moscow usually requires
hard currency on a cash basis.
These agreements were politically and strategically
motivated and will provide few economic returns in
the form of raw materials or foreign exchange, which
the USSR usually seeks in its aid agreements. Only
the Angolan agreement offers Moscow the prospect of
breaking even financially. Such aid, however, deepens
LDC ties with the USSR and opens opportunities for
Moscow to extract concessions such as port and air
facilities in Ethiopia and access to petroleum and
strategic materials in Angola and Mozambique. In
the case of Nicaragua, Moscow is supporting the first
viable Latin American Marxist regime since Cuba
changed governments in 1959. This aid also repre-
sents the price Moscow must pay to retain its influ-
ence in these states.
Commitments to Non-Marxist LDCs. Aid to this
group consists principally of long-term credits used to
finance major development projects and trade credits
to facilitate the purchase of Soviet goods. Trade
credits are the most vigorous and fastest growing
element of the Soviet economic program in these
countries (table 2). Both categories essentially dried
up in 1982 as extensive project studies and contract
negotiations dragged on with a number of recipients;
in 1983, of the $1.6 billion of total Soviet economic
aid commitments to non-Marxist LDCs, $1.1 billion
represented trade credits to recipients with long-
established political, military, or business ties with the
Kremlin.' Among the major allocations were:
? $325 million to Syria for thermal power plant
construction and commercial aircraft acquisition.
? $200-400 million to Greece for an alumina plant.
? $275 million to Pakistan for a thermal power plant.
? An estimated $250 million to Algeria for railroad
construction. The actual value of these. credits could
be much higher.
? Credits in the $70-80 million range to Argentina,
Bangladesh, and Bolivia for equipment purchases.
' Our figure for Soviet trade credits in 1983 is probably understated
because we have been unable to ascertain the scope of Soviet credits
J
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Secret
Table 2
USSR: Trade Credits to
a
In addition to tightening credit terms, Moscow also
has moved to broaden its participation in the imple-
mentation of projects undertaken in non-Marxist
Non-Communist LDCs
states. Moscow is
25X1
getting more extensively involve in turnkey projects,
Total
Extended
Trade
Credits
Total
26,699
4,975
1954-73
9,275
980
1974
815
5
1975
1,970
205
1976
1,005
290
1977
435
1978
3,002
225
1979
3,749
1,200
1980
2,588
640
1981
580
285
1982
965
50
1983
2,314
1,095
The allocations in 1983 underlined the near-commer-
cial nature of Soviet development activities in this
group of countries. About $1.1 billion of the new
credits carried 10-year repayments with interest rang-
ing from 4 to 6 percent. These terms, assuming a
grace period, barely meet standards for aid as defined
by the international community.' Although Western
donors also expand exports by tying some aid funds to
procurement from the donor country, the USSR is
devoting almost all of its financing for non-Marxist
LDCs to promote sales of Soviet equipment. The
proportion of these export-type credits in new Soviet
pledges has grown steadily in the 1980s. Moreover,
many of the agreements that Moscow concludes with
non-Marxist states call for payback in raw materials:
the 1983 credit to Greece for an alumina plant will be
paid for in alumina. Others are payable in hard
currency.
' Western aid donors use a "grant element" as a common basis for
comparing the concessional nature of aid programs under different
terms of repayment. A 100-percent grant element is an outright
gift, while a 12-year, 2.5-percent loan with a 25-percent grant
element qualifies as official development assistance under mini-
under which the USSR manages all phases of project
implementation, including letting subcontracts, hiring
local labor, arranging for local materials supply, and
the provision of equipment and supervisory technical
services. Turnkey construction generally is more effi-
cient in LDCs than Moscow's more traditional tech-
nique of supplying only equipment and technicians to
supervise installation and startup operations. It also
requires a far more extensive technical presence.
According to the Soviet magazine Foreign Trade,
turnkey activity accounted for 45 percent of the
volume of Soviet assistance in 1982, compared with
only 15 percent in 1975
The East European Program
Our information about East European contracts with
LDCs is extremely fragmentary. In many instances 25X1
we cannot determine whether a contract is a straight
commercial deal or one involving East European aid
to the Third World country involved in the transac-
tion. In 1982 and 1983, some $3.5 billion in East
European-LDC contracts fell into this uncertain area.
These contracts include:
? A $185 million Bulgarian contract with Syria for
petroleum gas development.
? A $130 million Czechoslovak credit to Syria for a
gas treatment plant and pipeline.
? A $100 million Czechoslovak agreement with Iraq
to reclaim 13,000 hectares of desert land.
? A $1.5 billion Romanian contract to build houses in
Algeria.
? A $1 billion Bulgarian contract with Syria for
further gas development.
? A Romanian agreement to assist Turkey with a
$500 million power plant.F__1 25X1
At least some of these deals may in fact have provided
some aid. So far, however, we are able to identify only
about $950 million in new East European deals with
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Moscow has become more concerned about its inter-
national image as an aid donor. For the first time in
1982, the USSR responded to criticism by Western
countries and LDCs of its meager aid performance.
At the July 1982 meeting of the UN Economic and
Social Council, the Soviet Ambassador to the United
Nations announced that net Soviet aid disbursements
to LDCs in the period 1976-80 amounted to 30 billion
rubles ($40-45 billion at average annual exchange
rates), and accounted for 1.3 percent of Soviet GNP in
1980.
According to our estimates, Soviet gross disburse-
ments could have reached at least half of the claimed
level if, in addition to some $3 billion in aid to non-
Communist LDCs, Moscow also included the follow-
ing components:
? More than $13 billion of aid to Cuba (most of it in
the form of subsidies that do not conform to
international definitions of aid).
? $3.4 billion of aid to Vietnam.
? $4.0 billion to other Asian Communist LDCs.
? Up to $1 billion for academic assistance to all
Third World countries.
LDCs in 1982/83 that clearly constitute aid pledges
(table 3). Although most East European countries
have preferred to provide the bulk of their assistance
to wealthier LDCs to promote hard currency exports,
two-thirds of East European 1983 aid commitments
went to Marxist states. These countries have rarely
accounted for more than 25 percent of annual East
European pledges, and overall they account for just
over 10 percent of total pledges.
East Germany, whose aid program has traditionally
been driven by its own political interests-especially
the desire to establish its worldwide status and legiti-
macy vis-a-vis West Germany-made the best show-
ing in 1982 and 1983 with more than $300 million in
? Several billion dollars in grant technical assistance
subsidies (the difference between what the USSR
charges and what Western technicians performing
similar services would receive) to Communist and
non-Communist LDCs.
It is probable that the Soviets placed an unreasonably
high value on their technical services and included
unsettled trade deficits and possibly even military
debt rollovers in their claimed aid totals. Our esti-
mates show that the aid the USSR claims for 1980
would account for about 1.4 percent of national
income or about 1 percent of GNP, as measured by
the West. We believe, however, that net aid is sub-
stantially lower than the Soviet estimate.
In addition to carrying hard terms for most non-
Communist recipients, the USSR's aid is narrowly
focused. Of the estimated $23.6 billion in Soviet
economic aid disbursements between 1976-80, 85
percent went to the USSR's Communist allies outside
the Warsaw Pact, and another 4 percent went to
Marxist LDCs such as Angola, Ethiopia, Mozam-
bique, and South Yemen. Since 1981, more than 90
percent of the USSR's estimated $16.4 billion of aid
to both Communist and non-Communist developing
nations has gone to Communist LDCs and other
Soviet client states.
new commitments (table 4). More than 70 percent
($220 million) of its new aid pledges were directed to
countries targeted for special attention by the War-
saw Pact-Grenada, Mozambique, and Nicaragua.
Because of its longstanding policy of aiding "frater-
nal" states, East Germany has responded more will-
ingly than other East European states to Moscow's
call for both political and material support to Marxist
clients; it accounts for more than half of East Europe-
an pledges to them-chiefly to Ethiopia, Nicaragua,
and Mozambique. Furthermore, Bulgaria devoted
0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 3
Eastern Europe: Economic Aid
Extended to LDCs a
Total
Marxist
States
13,120
1,567
1954-77
7,883
239
1978
1,598
417
1979
646
95
1980
1,322
192
1981
723
173
1982
1983
nearly 60 percent ($87 million) of its new aid to
Marxist states in 1982 and 1983; Czechoslovakia
directed about 70 percent ($48 million) to these
countries.
Among the East European allocations to other LDCs,
Romania made the largest single commitment-$250
million to Bangladesh as a second tranche of a $500
million credit to finance projects in virtually every
area of Dhaka's public sector. Always sensitive to the
question of maximizing benefits to its own economy,
Romania has consistently refused to devote aid re-
sources to Marxist clients who cannot afford repay-
ment. Other East European donors made allocations
in the $50 million range to traditional clients. Poland
did not conclude any new development agreements
with LDCs; potential recipients are concerned that
Warsaw cannot meet contract obligations because of
domestic political and economic problems.
The Record on Disbursements
Soviet and East European aid disbursements reached
a record $1.8 billion in 1983, driven by Soviet deliver-
ies of nearly $1.3 billion (table 5). Major recipients of
Soviet aid in 1983 included:
? Ethiopia, with $235 million of oil and project
assistance.
? Afghanistan, with more than $200 million in com-
modities and other assistance.
Table 4
Eastern Europe: Economic Aid
Extended to Non-Communist LDCs,
1982 and 1983 a
560 388
52 95
21 47
101 205
125 10
261 30
? Nigeria, which received an estimated $150 million
of steelmaking equipment for the Ajaokuta project.
? Pakistan, whose Karachi steel plant absorbed $110
million of equipment.
The high level of Soviet disbursements reflects Mos-
cow's unprecedented volume of grant commodity sup-
port to Marxist states-over $300 million in 1983.
This type of aid is delivered very quickly, compared
with project assistance that may be disbursed over a
decade or more. Afghanistan has been the largest
beneficiary, receiving commodity shipments to help
stabilize the regime. Ethiopia also has required petro-
leum subsidies and shipments under credit because of
foreign exchange shortages. It is likely that Soviet
support is even more extensive than we know. For
example, we do not include possible budgetary sup-
port to South Yemen, whose annual trade deficit with
Moscow has been in the $100 million range for the
past three years. Moscow may be deferring (or possi-
bly excusing) Aden's annual trade settlements.
Recent East European disbursements of close to $500
million in 1983 regained the levels of the mid-1970s
after three sluggish years that generally coincided
with the outbreak of the war between Iran and Iraq
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP9O-00596RO01100020001-0
Table 5
USSR and Eastern Europe:
Economic Aid Deliveries to
Non-Communist LDCs
Million US $ Table 6
Economic Technicians in
Non-Communist LDCs, 1983 a
USSR
Eastern
Europe
Total
Deliveries
Of which:
Grants
1979
574
30
305
1980
812
306
298
1981
853
198
384
1982
1,162
152
485
Total
USSR
Eastern
Europe
124,470
41,085
83,385
69,155
11,625
57,530
17,870
11,315
6,555
40
15
25
1,365
515
850
28,125
10,465
17,660
7,840
7,150
690
(where major East European development programs
were in progress) and the troubles in Poland. The
acceleration of Bulgarian and East German deliveries
to Nicaragua and Mozambique under recent agree-
ments were responsible for much of the increase.
Economic Technical Services: A Growth Industry
A key feature of Soviet and East European economic
aid to LDCs continues to be extensive technical
support. A record 124,500 Warsaw Pact economic
technicians were posted to 74 LDCs in 1983-50
percent more than in 1980. The programs are focused
on a few clients-particularly Algeria, Iraq, and
Libya-with more than three-fourths of all techni-
cians working in Middle Eastern and North African
oil-producing states that pay hard currency or oil for
services (table 6). About 15,000 were in countries that
have received large amounts of Soviet development
aid, such as India, Syria, and Turkey. Another 15,000
were in Marxist states and were employed under a
mix of terms that ranged from hard currency pay-
ments for Angola and Mozambique to deferred
charges under development credits to Afghanistan,
Ethiopia, Nicaragua, and South Yemen.
We estimate that Soviet and East European hard
currency earnings from their economic technical serv-
ices programs have been close to $2 billion annually in
the past few years-as much as $500 million for
USSR and $1.5 billion for Eastern Europe. Even the
poorest African states, such as Guinea and Mali, must
remit half of the charges for Soviet services in hard
currency from their very limited foreign exchange
reserves; the requirement causes considerable friction
in their relationships with Moscow. The balance is
paid in local currency or goods. The Soviets charge
$40,000 to $70,000 annually for technicians, based on
their skills and seniority, while East European coun-
tries charge up to $80,000 a year. Communist coun-
tries, which originally provided services at bargain
rates, recently have brought technicians' salaries clos-
er to Western levels.
Academic Programs: Showing Continued Dynamism
The number of students from non-Communist LDCs
being trained in Soviet and East European academic
institutions grew to more than 90,000 in 1983
(table 7). Nearly 15,000 of these students were enter-
ing Communist universities for the first time. Afghan-
istan, whose educational system is being revamped
along Marxist lines by Communist educational plan-
ners, had 11,000 nationals in the USSR and Eastern
Europe under agreements signed in 1980. Jordanians
0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP9O-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 7
Academic Students From LDCs
in Training, December 1983 a
USSR
Eastern
Europe
Total
56,070
34,785
North Africa
3,355
1,940
Sub-Saharan Africa
17,915
12,645
East Asia
60
35
Europe
15
20
Latin America
7,590
2,975
As a payoff, they hope to establish ties to persons who
may eventually obtain influential positions in their
home countries. East 25X1
European countries also hope to establish lasting
relationships with LDC nationals who they can use to
promote business relations.
The Soviet program has been showing some success.
One of the members of the ruling Directorate in
Nicaragua is a Soviet graduate, according to the US
Embassy in Managua. Other Soviet-trained LDC
officials include four cabinet ministers, three sub-
cabinet directors, several ambassadors, and thousands
of government bureaucrats, professors, and doctors.
Some are willing to serve Soviet ends. For example,
the new Soviet-trained geology minister in Zambia is
trying to introduce Soviet technicians into the copper
industry, an area Moscow has been trying to pene- 25X1
trate for years.
made up the second-largest national grouping (8,500)
under a large-scale training program that began
about five years ago. Some 40 percent of the LDC
students in Communist countries were from Africa,
dominated by contingents from Marxist nations such
as Ethiopia (5,000), Madagascar (2,325), Mozambique
(2,775), Algeria (2,350), Congo (1,800), and Angola
(1,900). Nigeria was the only moderate African state
with a large student population in Communist coun-
tries (2,500).
The continued popularity of European Communist
scholarships stems from the dearth of educational
opportunities in most LDCs, as well as from the fact
that the Warsaw Pact states cover most expenses,
(transportation, room and board, tuition, medical ex-
penses, and pocket money) and sometimes accept
dubious academic credentials. These scholarships are
valued at about $5,000 annually
Academic and technical training have long been the
most concessional feature of Soviet and East Europe-
an aid programs and often represent the only assist-
ance provided to some LDCs. We estimate that the
Warsaw Pact countries spend the equivalent of $400-
500 million a year to maintain these educational ties.
The Program Ahead
The Soviet economic aid program seems to be on a
dual track. A core effort is devoted to providing
financial support for Marxist LDCs. We see no
decline in the need for such assistance in the years
immediately ahead. Most of these countries have
weak economies, and frail linkages to the Western
economic system. Consequently, they are becoming
increasingly dependent on Soviet largesse. Moscow,
however, will not be willing to provide much more
funding than it has during the recent peak years.
Although the Kremlin would like to minimize the
financial drain these countries impose, it does not
want to give the impression that it is letting its
Marxist allies down. For example, Moscow is study-
ing a large hydropower project in Nicaragua, an oil
refinery in Angola, and an aluminum plant and 25X1
railroad construction in Mozambique. Some of these
contracts could carry 10-year repayment terms
The more dynamic element of the Soviet economic aid
program will involve Moscow's efforts in non-Marxist
LDCs. These countries will receive expanded Soviet
credits for their ambitious development plans, as
Moscow moves to enhance or protect its presence.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Figure 2
Major Soviet Offers of Aid for Projects in Less Developed Countries (LDCs), 1983
Type of project
0 Nuclear power plant D Heavy industry
North Atlantic
Ocean
Moscow also sees the program as a way to boost hard
currency revenues. Indeed, Kremlin officials have
recently shown greater interest in export-type devel-
opment financing for both old and new non-Commu-
nist recipients. In 1982 and 1983 Moscow was negoti-
ating 10-year repayment terms for:
? $500 million for electrification and transportation
projects in Argentina.
? A $500 million hydropower plant in Mexico.
? A $250 million cement plant in the Philippines.
? A multipurpose dam and power plant in Pakistan
that will cost $3.7 billion.
The USSR also has recently begun a push to sell
nuclear power plant equipment to LDCs. India, Iraq,
Morocco, Pakistan, Syria, and Turkey have received
Soviet offers for nuclear plants, and Libya may
already have concluded a contract. Moscow probably
will have to provide substantial financing to clinch
these deals, since price tags on this equipment range
from $1.7 to $3.5 billion. Because of cast advantages,
nuclear power development seems a most promising
? Transportation and
communications
Boundary representation is
not race ..arily authoritative
area of the LDC market for the USSR to exploit, if it
can convince LDCs that Soviet-made equipment is as
reliable and safe as that from Western suppliers.
We expect Moscow to bring many of these contract
offers to a successful conclusion. They would keep
annual Soviet extensions well over the billion-dollar
level through the end of the decade. Through these
contracts, Moscow will gain:
? Expanded equipment markets, particularly in the
Middle East and Latin America.
? Increased hard currency repayments as it phases out
amortization in many traditional local agricultural
products.
? Strategic raw materials that will alleviate shortages
in CEMA countries through aid repayments and
associated buyback arrangements.
? Expanded hard currency payments for technical
services that accompany development programs.
J 25X1
0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Soviet Credits Still Popular
For their part, developing countries continue to seek
Soviet development credits for several reasons:
? The USSR still quotes terms that are below market
rates for construction financing and that are cheap-
er than most Western construction loans. For exam-
ple, recent World Bank loans extended for similar
projects were repayable over 10 to 15 years at 7.5-
to 8.5-percent interest.
? The USSR is willing to finance extensive infrastruc-
tural projects in the public sector (completely owned
by the state), an area that many of Moscow's
recipients are trying to develop. Most loans from the
World Bank and associated agencies and the US
Eximbank go to the private sector.
? The USSR is willing to accept goods, such as
strategic raw materials, in repayment for its loans.
Western financial institutions will not do so.
? The USSR has been helped by the debt-related
problem in a number of LDCs of securing Western
funds for development.
East European commitments will probably remain
low unless promotion efforts in Arab countries begin
to pay off. East European countries are fighting their
own poor reputations for product reliability, spare
parts supply, and service, as well as a general prefer-
ence for traditional suppliers in their attempts to
break into Arab (particularly Gulf) markets. One
bright note: East European countries stand to gain
when the Iran-Iraq hostilities end because both sides
have indicated that they will favor supplier bids by
East European countries that supported them in the
war. Given the deterioration in some East European
economies, we do not foresee any more major alloca-
tions to Marxist states in the next few years
II. Communist Economic Programs: A Regional
Analysis
Middle East and North Africa: Moscow's Largest
Economic Stake
Since 1980, the USSR's support of Marxist LDCs has
diverted some of its energies away from its important
traditional clients in the Middle East and North
Table 8
Middle East and North Africa:
Economic Agreements With
Non-Communist LDCs a
Turkey
9
1983
600
50
Algeria
250
Africa (table 8). Nonetheless, Communist economic
activities in the area accelerated in 1982 and 1983
with the conclusion of several large new development
contracts, including:
? Some $325 million in Soviet credits to Syria for civil
aircraft purchases and power development:
? A $1.2 billion ? Soviet contract with Iraq to develop
the West Qurnah Oilfields. The Iraqi deal probably
involves Soviet credits because of Baghdad's
strained finances.
? Multibillion-dollar infrastructure development con-
tracts with Algeria and Libya and more than $250
million in financing for Algiers.
? New East European credits-85 million to Egypt
from East Germany and Hungary for equipment
purchases and $9 million to Turkey from Romania
for power equipment.
According to the press, the USSR also began prelimi-
nary construction work on the joint Khoda Aferin
dam on the Soviet-Iranian border and turned over
designs for expensive industrial complexes promised
to the Shah.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Figure 3
Middle East and North Africa:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954-83
Boundary representation is
not necessarily authoritative.
More than $1 billion
$500 million-1 billion
$100-500 million
Less than $100 million
P.D.R.Y.-PEOPLES DEMOCRATIC REPUBLIC OF YEMEN
U.A.E. -UNITED ARAB EMIRATES
Y.A.R. -YEMEN ARAB REPUBLIC
J
Nearly 100,000 Communist economic personnel were
employed in the Middle East and North Africa by the
end of 1983, almost 80 percent of all Warsaw Pact
economic technicians in non-Communist LDCs.
Nearly 55,000 technicians were in Libya, which has
employed large numbers of East Europeans on devel-
opment projects since the early 1970s, nearly 18,000
were in Iran and Iraq, and more than 11,000 were in
Algeria.
Several conservative governments in the Persian Gulf
have appeared more receptive to overtures by Com-
munist states in the past two years, possibly because
of Kuwait's support for relations with Communist
countries. The Saudi Foreign Minister paid a visit to
Moscow in February 1982 as a member of an Arab
delegation but denied to US officials that the visit
moved Riyadh closer to the establishment of diplo-
matic ties with Moscow. The smaller Gulf states have
received bids from East European countries to partici-
pate in development projects, most of which are still
pending.
Algeria. There has been little discernible change in
Algeria's relations with the USSR and Eastern Eu-
rope over the past two years. The five-year-old Benje-
did government, with its insistence on a neutral
political stance and an economic development strategy
that emphasizes sophisticated Western technology,
has continued to distance itself somewhat from the
USSR. Still, relations have been good, and Commu-
nist countries were able to close several billion dollars
worth of contracts for housing and other projects
under Algeria's $100 billion 1980-84 development
plan. The USSR provided at least $250 million in new
credits to finance construction of the High Plateaus
railway. We have no firm information on the terms of
other contracts, but open sources report that the
USSR is offering 10-year repayment terms on agree-
ments that probably run into several hundred million
dollars. Projects to be constructed under Soviet con-
tracts signed in 1982 and 1983 include:
? Three-fourths of the 1,000-k?llOf Alrar-Hassi R'Mel
gas pipeline, for which the USSR is acting as
general contractor.
? Four major dams.
? A 500,000-ton-per-year cement plant.
Some 6,000 Soviet personnel supported Soviet proj-
ects in Algeria in 1983 (the largest Soviet economic
contingent in any LDC), and about 1,600 Algerians
were being trained in the USSR
0
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Secret
East European countries also emerged as substantial
participants in Algerian development, with large
agreements in 1982-83 to support Algeria's building
boom:
? Bulgaria negotiated a contract to construct a $50
million forklift plant and to send more agricultural
experts to work in several provinces.
? East Germany, Algeria's largest East European
donor with $375 million in pledges, agreed to build
32 vocational training centers, a teacher training
institute, 280 training workshops to accommodate
20,000 students, a cement plant, 30 opthalmology
centers, 5,000 housing units, and several more un-
identified industrial projects. East Germany also
completed an industrial complex at Berrouaghia
under a $95 million credit agreement.
? Hungary began work on 4,000 apartment units, 10
poultry farms, and four plants for animal feed, and
agreed to supply 8,000 buses, under contracts val-
ued at more than $300 million.
units, valued at $1.5 billion.
Iran. Despite the Ayatollah's continuing suspicions
about Soviet intentions toward Iran, the expulsion of
18 Soviet diplomats, and the arrest and public trial of
leading Iranian Communists, Tehran's economic rela-
tions with the USSR and East European countries
improved in 1983. Iran increased oil exports to
160,000 b/d in payment for Communist-supplied
commodities and technical support, employed 2,600
Communist technicians at development projects, and
exchanged a record $1.3 billion of goods with the
USSR.
Moscow's heightened project activity was largely re-
sponsible for the record $750-800 million in annual
Soviet exports to Iran over the past two years. The
USSR:
? Accelerated work on the Esfahan power plant.
? Completed a second blast furnace and a rolling mill
at the Esfahan steel complex.
? Finished repairs on the war-damaged Ramin power
plant.
Soviet personnel also worked on grain silos and flour
mills, coal mines, and prefabricated housing plants,
and began construction of the Khoda Afarin dam and
power plant on the Iranian-Soviet border. Moscow
presented plans for mining machinery and metal
casting plants in Kerman, first agreed to under a
billion-dollar prerevolutionary agreement to develop
industrial zones in the northern provinces. In contrast,
the triangular deal with the Shah to sell Soviet gas to
Western Europe in return for Iranian gas shipments
to the USSR-in limbo since the Khomeini take-
over-died quietly as Iran planned construction of a
gas pipeline to Western Europe through Turkey.
The USSR remained instrumental in transporting
Communist and Western goods overland to Iran. The
USSR also instituted tanker service to Baku from the
Iranian port of Now Shahr (an arrangement that
could also serve West European oil customers) and
began the study of possible new transit routes through
the USSR to carry cargo to Iran. Tehran's depen-
dence on Soviet road and rail links because of Iraqi
attacks on Iranian shipping in the Persian Gulf
emphasized the weakness of Iran's transportation
networks and may result in speedier implementation
of Soviet agreements to construct additional rail 25X1
capacity at several border crossing points. According
to the press, the Soviets still are periodically forced to
turn away cargo for Iran because of severe congestion
at the border.
The Iranian-East European relationship is still cen-
tered on the exchange of Iranian oil for commodities
and technical services. Tehran has become heavily
dependent on Eastern Europe for medical equipment,
supplies, and services to support the war with Iraq.
Iraq. Communist participation in Iraq's economy has
continued in spite of Iraqi financial strains caused by
the four-year-old war with Iran (estimated to cost
$700 million a month), and the near cessation of oil
shipments to traditional East European importers.
Under a $1.2 billion contract signed in 1983 to
develop the West Qurnah Oilfields, the USSR is to
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
drill 100 producing wells to shore up Iraq's declining
production capacity. We believe the USSR may have
provided some credits for this project because of
Iraq's deteriorating finances, but press reports have
not mentioned financial terms. Some 5,000 Soviet
civilian technicians in Iraq worked on several petro-
leum transport and storage projects and power and
irrigation schemes, the largest of which is the Haditha
dam in northern Iraq, designed to produce 570 mega-
watts of power.
Bulgaria, East Germany, and Romania signed wide-
ranging, long-term economic cooperation agreements
with Iraq in 1982 and 1983 that call for participation
in all economic sectors:
? Czechoslovakia signed a $100 million pact to re-
claim 13,000 hectares of land over the next four
years and agreed to repair the war-damaged Sala-
huddin refinery.
? Hungary, together with a West German firm, will
build a $165 million poultry complex, housing for
agricultural workers, and a new bus assembly plant.
? Poland, with 9,000 specialists in Iraq, signed a $50
million contract for a ground water survey and
began work on 80 transformer stations.
? Romania was awarded a $450 million contract to
build a lubricating oil plant and was approached to
build a multibillion-dollar oil pipeline through Tur-
key to service East European customers. Romania
would have to fund the project.
The East European development effort in Iraq was
supported by more than 10,000 technicians in 1983.
Iraq has indicated that it expects to award more and
larger contracts to Eastern Europe in appreciation for
its support during the war.
Libya. Difficulties in meeting hard currency pay-
ments for Soviet arms and other Communist debts
have dominated Tripoli's economic relations with
Communist countries over the past two years. Libya's
massive $1.5-2 billion scheduled annual debt payment
to the USSR for weapons has been a source of friction
between the two countries for several years. Moscow
has tried to hold out for hard currency payments as
specified in most of Libya's military contracts, but in
1982 it was forced to begin accepting several million
tons of Libyan oil annually to prevent a default. The
USSR ships most of the oil to West European custom-
ers for hard currency, a move Tripoli has protested
because it undercuts Libyan sales. Diplomatic sources
report that, in spite of the difficulties, the two coun-
tries may have agreed in principle in 1983 to sign a
long-term friendship treaty that could further formal-
ize economic, technical, and military relations.
The USSR has also maintained a fairly rapid pace on
development projects, with more than 5,000 Soviet
technicians in Libya, and was preparing to undertake
several new projects, including:
? New power transmission lines.
? An extension of the $3.8 billion Soviet-built Brega-
Misratah gas pipeline to al Khums.
? A nitrogen fertilizer plant.
? A chemical complex at Maradah.
? A hospital.
Soviet personnel put the finishing touches on the
billion-dollar nuclear research laboratory at Tajura,
and the USSR, as general contractor for a nuclear
power plant at Surt, began to solicit equipment bids
from West European and Japanese suppliers. A final
contract on the power plant reportedly was expected
in mid-1984.
Among East European countries, Bulgaria and Roma-
nia signed new long-term friendship and cooperation
agreements. Libya also used oil shipments to resolve
payment problems with Bulgaria, Hungary, Poland,
and Romania. Libyan obligations to East European
countries stem from nearly 50,000 technicians work-
ing on development contracts worth several billion
dollars. East European countries are active in road
and housing construction, agricultural development,
and the oil industry. New contracts have been signed
with East Germany to construct agricultural and
training facilities and with Hungary for railroad
design.
25X1
25X1
0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Morocco. Morocco's relations with Communist coun-
tries, always concentrated in the economic sector,
remain low key. In spite of the chill over the Polisario
issue that has permeated exchanges for the past
several years, economic relations with the USSR
proceeded at a normal pace. Rabat continued to buy
Soviet oil, and the Moroccans awarded the USSR a
contract under negotiation since 1978 to build an
experimental power station fueled by oil shale. The
USSR also completed surveys for the Meskala phos-
phate development project, which will be financed
with $2 billion in Soviet credits extended earlier, and
reportedly contracted to build a superphosphoric acid
plant at Jorf Lasfar to supply the Soviet market. In
addition, the Soviets agreed in principle in 1983 to
begin a feasibility report on a fish processing plant to
be supplied under a joint fishing agreement. Moscow's
reluctance to move ahead with fisheries development
under a 1978 accord has generated considerable
acrimony in the relationship between the two coun-
tries.
Recent East European relations with Morocco were
highlighted by Romania's plans for a 1.1-million-ton
steel complex at Nador, including blast and oxygen
furnaces, a steel bar casting facility, rolling mills, a
thermal power plant, and a coke facility. Bulgaria has
agreed to finance development of a magnesite mine at
Boudkek (probably under a 1979 credit of $45 mil-
lion), and Rabat requested $40 million in aid projects
from Poland to develop water purification and supply
systems in several cities. More than 2,300 East Euro-
pean economic personnel were in Morocco in 1983 in
connection with an extensive technical services pro-
gram that has spanned two decades.
Syria. The upgrading of the Syrian-Soviet military
relationship in 1983 has been paralleled by new
directions in the economic program. The USSR pro-
vided $325 million in new financing for several pro-
jects and by yearend had begun engineering studies
on a 600-megawatt nuclear power plant and on
Syria's first nuclear research center. Several hundred
million dollars of new financing would be required for
these nuclear projects if they reach the implementa-
tion stage, which could double Moscow's $1.1 billion
in standing economic assistance pledges. The more
traditional allocations under the 1983 agreements
were:
? A $150 million credit for a thermal power plant.
? A $130 million credit for gas treatment plant and
pipeline.
? A $46.5 million credit for civilian aircraft.
? A contract to increase the storage capacity of Lake
Asad and the power output of the Soviet-built
Euphrates hydropower project.
The USSR also completed the 108-kilometer Hims-
Damascus railroad, and continued work on the expan-
sion of the Latakia port and the al-Kebir dam and
power ect downstream from the Euphrates Dam.
Eastern Europe, which has provided nearly $1.2 bil-
lion in aid to Syria over the past two decades, won
several contracts by offering below-market financing:
? Bulgaria signed a $200 million contract to drill as
many as 150 gas wells and develop a gas-gathering
system.
? Czechoslovakia agreed to build a $130 million sour
gas treatment plant and associated pipeline.
The new agreements will maintain the pervasive
presence of the USSR and Eastern Europe in the
Syrian development program. More than 3,500 Soviet
and East European nonmilitary technicians were in
Syria in 1982, and the US Embassy in Damascus
reports that all East Bloc countries except Poland are
involved in large-scale, multiyear, turnkey projects.
Egypt. Under President Mubarak, Cairo's relations
with Communist countries have recovered from the
near break in the Egyptian-Soviet relationship 25X1
brought about by Sadat. Egypt received almost all of
the known East European economic aid to the Middle
East in 1982 and 1983. The new economic commit-
ments-$50 million from Hungary and $35 million
from East Germany-were bank credits designed to
finance Egyptian imports of capital goods from the
two countries. Hungary will provide power, agricul-
tural, and light industrial equipment, while East
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
J
Germany will increase its participation in Egyptian
power development by rebuilding a power grid. Ro-
mania allocated $100 million of an old $300 million
credit for electrification projects in the Sinai and
agreed to send technicians to correct problems at a
phosphate plant (built under an earlier aid agree-
ment), whose products are of such poor quality that
even Bucharest refuses to buy them.
The USSR signed new economic contracts in 1982
and 1983 and returned some Soviet specialists to
Egypt in response to President Mubarak's invitation
to install equipment (ordered several years ago) at the
Helwan steel plant, the cement plant at Asyut, and a
generator at the Cairo power station. Some 200 Soviet
personnel were in Egypt at the end of 1983 under the
new contracts. Egypt also agreed to sell about $6
million worth of cotton to the USSR in 1982, the first
such sale since 1978.5
South Yemen. Economic realities strained South Ye-
men's relations with the USSR and its East European
allies in 1982-83. Dismayed by the lack of economic
progress made since the revolution in the late 1960s,
President al Hasani has begun to seek economic
investment from the West and Saudi Arabia. Even
though the USSR and its allies have promised nearly
$1 billion in economic aid to Aden, Communist-
sponsored projects have suffered compared to the
limited Western effort in South Yemen. For example,
in 1982 an Italian firm discovered oil in Aden's
territorial waters; long-term Soviet and Romanian
land-based efforts have turned up nothing. In addi-
tion, the USSR has not built long-awaited power and
cement production facilities;
the cost of the power plant has increased three-
fold since the original agreement was signed. Still, in
1982 and 1983 the USSR signed pacts to improve
Aden port and construct a satellite receiving station as
part of the Intersputnik network. Work continued on
a fishing port, irrigation projects, a hospital, and the
power plant, while Moscow promised action soon on
the cement plant.
Table 9
South Asia: Economic Credits
and Grants, 1982 and 1983 a
Million US $
USSR Eastern
Europe
1982 93 252
Afghanistan 90
Bangladesh .. 252
Nepal
1983
Afghanistan
Bangladesh
India
860
371
73
140
South Asia: Deepening Communist Involvement
The Soviet occupation of Afghanistan has dominated
Communist relations with South Asia since 1981. The
USSR's commitment to shore up Kabul's Marxist
government and its desire to maintain friendly rela-
tions with South Asian countries have moved them
into the limelight among Moscow's aid recipients. In
1982 and 1983, the USSR provided nearly a billion
dollars in assistance on very liberal terms to South
Asian recipients; this was about 30 percent of its total
program in those years (table 9). India, still a major
Russian customer despite frictions over the Afghan
invasion, received $140 million in Soviet financing for
a steel plant, and Pakistan took up some of the $2
billion in credits offered by the Kremlin to mend the
rift caused by the Soviet presence in Afghanistan. F-
Afghanistan. Since the Marxist takeover in 1977,
Afghanistan has become one of the USSR's largest
economic aid beneficiaries (after India and Turkey) in
the non-Communist world. The USSR provided $460
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Figure 4
South and Southeast Asia:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954-83
More than $1 billion
$500 million-1 billion
$100-500 million
Less than $100 million
Boundary representation is
not necessarily authoritative.
million in new assistance to Afghanistan in 1982 and
1983; most of it was grant aid to finance the delivery
of commodities. More than $800 million of Moscow's
$1.1 billion in economic aid deliveries to the Marxist
government have been in the form of grants, generally
to cover the delivery of food and other basic commod-
ities. The USSR reportedly also has been forced to
provide $75-100 million in hard currency loans to
procure consumer goods from third countries.
Through 1983 disbursements have averaged nearly
$300 million per year since the December 1979 Soviet
invasion. In addition to its fairly generous commodity
support, the USSR has permitted Afghanistan to
defer payments on the services of Soviet technicians,
for which the USSR usually demands cash payments.
Deliveries to projects also have continued at about
$75-100 million annually as the Soviets expedited
work on transport and military-related projects that
will facilitate logistics for Soviet troops. For example,
the Afghan press reported that Soviet personnel com-
pleted a bridge across the Amu Darya river at the
border well ahead of schedule. Moscow also has:
? Built two oil-products pipelines to service Soviet
units in Afghanistan.
? Recently agreed to build Afghanistan's first rail-
road, linking Pul-i-Khumri and Kabul with the
Soviet border and possibly extending to Iran and
Pakistan.
? Agreed to finance expansion of the Kabul airport.
In contrast, the war has impeded Soviet efforts to
move forward with other major development projects
such as the Ainak copper complex, the Hajigak iron
ore scheme, and natural gas exploration in the north.
The only major development contract announced be-
tween Moscow and Kabul in the past two years was a
$200 million project to link Afghanistan to the
USSR's power grid, to be financed under old agree-
ments. Moscow also signed protocols in 1983 to
continue oil and gas exploration and exploitation, to
complete the Mazar-i-Sharif thermal power plant,
and to reconstruct the Torgundi railway station. The
Soviet program in 1983 was supported by 5,000
technicians in Afghanistan and a burgeoning training
effort that saw nearly 9,000 Afghans in Soviet educa-
tional institutions at yearend.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Until the invasion, Moscow's economic program in
Afghanistan was self-sustaining. Commercial deliver-
ies and aid flows were nearly balanced by Afghan
exports of three billion cubic meters of natural gas
annually through a pipeline built by the Soviets in the
mid-1960s. With gas deliveries, Kabul financed a
Soviet program that over the past 25 years has
accounted for two-thirds of Afghanistan's 21,000
kilometers of roads, nearly all of its major airfields,
two-thirds of its electric generating capacity and an
extensive transmission network, 40,000 hectares of
land cultivable through irrigation and reclamation,
and the entire natural gas industry, which produces
about 3.5 billion cubic meters of gas per year. Since
the invasion, however, the Soviets have been providing
about $200 million in aid annually that will not be
reimbursed. In addition, rebels have blown up the gas
pipeline several times in the last two years, interrupt-
ing gas supplies to the USSR.
India. Complementing the large new military cooper-
ation agreements signed in the past two years, the
USSR and India announced significant progress in
bilateral economic relations. In addition to $140
million in 17-year loans to finance expansion of the
Vishakapatnam steel plant, Moscow apparently has
offered to provide financing for several other projects,
including:
? A nuclear power plant.
? Onshore oil exploration and secondary recovery
technology.
? An oil refinery.
? Modernization of the Soviet-built antibiotics plant
at Rishikesh.
? Upgrading the Soviet-built Neyveli and Patratu
thermal power plants, and equipping the Kalgaon
power plant.
? Cooperation in building high-technology oil and
coal extraction equipment at Indian plants for use
by both countries.
? Joint ventures in third countries.
Protocols for oil development and the antibiotics plant
were signed in early 1983. Some of these undertakings
could be funded with the $1 billion of Soviet aid in the
pipeline, but massive new credits would be required to
cover costs for such ambitious projects as the nuclear
power plant. The USSR also hinted that it would
finance some equipment for the 600,000-ton Orissa
Alumina Plant, a project held up by Indian budgetary
problems.
The USSR also has deepened its involvement in
India's ongoing project development with major deals
that will fall under earlier aid arrangements,
including:
? A $400 million contract to set up the Vindhyachal
superthermal plant in Madhya Pradesh.
? Protocols to proceed with development of the
Jhanjra coal mine.
? Agreements to assist a synthetic rubber plant and a
hydrogen peroxide facility.
? A protocol to improve the Korba aluminum smelter.
Last year Moscow also concluded a protocol to ex-
change $3.6 billion of goods in 1984, a 6-percent
increase over 1983 that will keep India in first place
among the USSR's LDC trading partners. The new
protocol includes 6 million tons of petroleum and
products from the USSR.
Pakistan. Pakistan's economic relations with the
USSR have improved somewhat (in spite of political
strains over the Soviet occupation of Afghanistan) on
the strength of $275 million in new credits for a
thermal power plant at Multan. The new credit was
part of as much as $2 billion in financing the USSR
offered in 1982 for Pakistani projects, including:
? Downstream industries related to the Soviet-built
Karachi steel plant.
? Additional power capacity.
? Oil and gas development.
In March 1983 the first stage of the Soviet-sponsored
Karachi steel plant, the largest industrial construction
project in Pakistan's history, was officially commis-
sioned. The second stage, to be completed in 1984,
includes a second blast furnace, a hot strip mill, and a
cold rolling mill. The USSR also began construction
of a plant to assemble 51,000 Belarus tractors a year
under an $18 million credit agreement.
East Asia: Suspicious of Soviet Initiatives
Because of evidence of the area's lingering suspicions
about the Soviet military presence in Vietnam, ongo-
ing contention over the Kampuchea issue, and the
general unwillingness of East Asian governments to
J
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 10
East Asia: Economic Credits
and Grants, 1982 and 1983
become involved in a power struggle between Moscow
and Beijing, Moscow has failed to improve its political
fortunes in most of East Asia over the past few years
(table 10):
? Soviet relations with Indonesia were strained by the
exposure of espionage activities by Soviet diplomats
and Aeroflot officials in 1982. The Aeroflot office
was closed, but plans to eliminate the Soviet Consul-
ates in Medan and Surabaya and disband the press
and trade sections of the Jakarta Embassy have not
been implemented. While remaining cool toward
Moscow, Jakarta has sent trade representatives to
the USSR to prevent a further deterioration in
relations because of its interest in expanded trade
with the USSR and Eastern Europe and a desire to
promote Indonesia's nonaligned image.
? The USSR made some progress in the Philippines.
First Lady Imelda Marcos caused a furor in con-
servative quarters in Manila in 1982 by accepting a
Soviet offer of a 1-million-metric-ton cement plant
during a July trip to Moscow. If carried out, the
project would provide the USSR with a long-sought
means to increase its presence in the Philippines.
Soviet technicians already have gathered initial data
for the cement project, together with a related coal
development scheme and power plant. The $200-
250 million cement project may run into trouble,
however, over Manila's request for full Soviet fi-
nancing over 20 years. Moscow also has offered aid
to power development and food processing.
? Singapore's largest shipyard won a $110 million
contract in 1982 to repair and convert two Soviet
whalers to fish-factory ships-the largest single
such contract ever undertaken in Singapore. None-
theless, Prime Minister Lee remains suspicious of
the large Soviet commercial presence in Singapore,
and political relations deteriorated after the expo-
sure last year of Soviet espionage activity in Singa-
pore.
East European countries continued to offer trade
credits to expand commercial dealings in the area.
East Germany discussed reviving its aid program in
Indonesia-dormant for 20 years-while Romania
signed an economic cooperation agreement that estab-
lished a joint commission for cooperation. Romania
and Indonesia agreed to accelerate negotiations on
agricultural, livestock, and forestry projects. The Phil-
ippines accepted $10 million in trade credits from
Czechoslovakia, and Thailand turned down a $22
million Polish bid to build an aluminum sulfate plant
because of its high cost and fears that instability in
Poland could cause a contract default. No decision
was announced on a Romanian offer to provide
equipment and technical assistance to a Thai fertilizer
complex and help for other development projects
The Caribbean and Central America: The Newest
Assistance Program
During 1982 and 1983, Communist countries re-
sponded to opportunities created by the Marxist re-
gime in Nicaragua and continuing turmoil in the
Caribbean and Central America with more than $735
million in new economic agreements. Nicaragua re-
ceived most of the aid as Cuba, the USSR, and East
European donors signed $700 million in agreements to
finance commodities, equipment, and technical serv-
ices. The Communist commitment to Nicaragua was
further demonstrated by Managua's acceptance as an
associate member of CEMA in 1983. Before the US
intervention, Grenada also received its first significant
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Figure 5
Latin America and the Caribbean:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954-83
.. p' ,THE BAHAMAS
CUB
HAITI R OMINICAN
EPUBLIC .ist. CHRISTOPHER AND NEVIS
$100-500 million
Value of agreements
none More than $1 billion
39 $500 million-1 billion
Less than $100 million
aid from the USSR, $10 million in credits for commu-
nications and other projects, and an additional $10
million from Eastern Europe (table 11)
Grenada. In 1983, Grenada was the site of one of the
most dramatic failures for Soviet policy in Latin
America. Prior to the US-Caribbean intervention,
Communist countries had deepened their economic
relationships with the leftist government of Prime
Boundary representation I.
not necessarily authoritative
Minister Bishop with more than $50 million in eco-
nomic commitments that included:
? Soviet pledges of more than $10 million in credits
and grants to finance a deepwater port at Grenville,
a satellite receiving station, agricultural supplies
and services, and commodities. Moscow also partici-
pated in Grenadian economic planning under an
agreement signed in December 1982, and Soviet
technicians had arrived in 1983 in connection with
these projects.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
25X1
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 11
Western Hemisphere: Communist
Economic Credits and Grants,
1982 and 1983
USSR
Eastern
Europe
Cuba
Grenada
10
9
NEGL
Nicaragua
163
84
130
1983
26
255
60
Grenada
? East German promises of $10 million in credits for a
new telephone system, a cocoa processing plant, and
other agricultural and communications equipment.
? Cuban pledges of $30 million for an airport at Point
Salines, fishing trawlers, television equipment, and
40 tractors. More than 700 Cubans, the largest
foreign contingent in Grenada, were associated with
the construction projects.
Nicaragua. Communist countries continued their un-
precedented level of economic support to Nicaragua
in 1982/83 with more than $700 million in economic
pledges. Cuba was the largest donor with $190 million
in commitments designated for a sugar plant, agricul-
tural equipment, medical supplies, consumer goods,
and services. Most of the Cuban program consists of
technical services rather than financial aid. The
USSR ran a close second with $180 million in new
agreements, which included, among other projects:
? Studies for hydropower stations in Matagalpa and
Majolka, for which Nicaragua eventually expects
several hundred million dollars in construction
loans.
? Port construction at San Juan del Sur.
? Five training schools in agriculture, energy, fishing,
and mining.
? A 400-bed hospital.
? Mineral prospecting, gold mine rehabilitation, and
topographical mapping.
Some $30 million of the new aid is allocated to
develop the mining industry; another $50 million is
for technical assistance and feasibility studies, items
for which the USSR generally demands cash pay-
ments. In addition, Moscow is allowing Nicaragua
$30 million in commodity credits-usually reserved
for favored clients.
East European countries pledged almost $350 million
in new aid to Nicaragua. Among these countries' new
agreements (which brought their total pledges since
1979 to $465 million) were:
? $85 million from Bulgaria for hydropower, mining,
and agricultural projects.
? $200 million from East Germany for projects and
commodities, consolidating East Germany's position
as Nicaragua's major East European donor.
Larger Communist economic programs were accom-
panied by an expanded technical presence. The num-
ber of Communist economic personnel assigned to
Nicaragua rose to nearly 7,000 in 1983, more than 90
percent of them Cubans
The USSR and Eastern Europe delivered an estimat-
ed $250 million in aid to Nicaragua in 1982/83,6 but
only about $45 million served as balance-of-payments
assistance compared to Nicaraguan receipts of $500
million in aid annually from non-Communist sources.
6 A January 1984 Soviet agreement to deliver oil in exchange for
Nicaraguan products will mean a greater Soviet contribution to
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
The rest of the assistance was in the form of machin-
ery and equipment and technical assistance. Soviet
officials reportedly have expressed concern over Nica-
raguan expectations of a "bailout" and have voiced
reservations to Western officials over the Sandinistas'
ability to manage the economy. According to the US
Embassy, Moscow has advised Nicaragua to pursue
some policies that will allay the concerns of Western
donors and increase Western aid flows.
Guyana. Guyana's relations with Communist coun-
tries have been generally friendly in spite of George-
town's differences with the USSR over aid and trade
issues. Ties to the USSR cooled because of Moscow's
unwillingness to provide development assistance on
easy terms. The Soviet Ambassador to Guyana pub-
licly stated that Moscow has offered assistance under
a 1977 agreement for bauxite, gold, and aluminum
development as well as "unlimited" credit for equip-
ment purchases such as aircraft, helicopters, bulldoz-
ers, and other machinery. Guyana turned down these
offers because of harsh terms. The USSR required
hard currency payment for a feasibility study on a
proposed aluminum plant and for Soviet technical
services-both standard Soviet practice. Moscow re-
cently renewed its offer to rehabilitate a bauxite
processing facility at Linden in return for bauxite
deliveries.
Jamaica. In spite of the Seaga government's intention
to reduce contacts with Communist countries, the
USSR may have signed a construction contract for a
600,000-ton caustic soda plant (probably under the
credit agreement signed in 1977) and reached an
agreement to buy 1 million tons of bauxite annually
beginning in 1984. The USSR also provided Jamaica
a $10 million trade credit to purchase Lada automo-
biles as part of the new trade agreement.
Mexico. The USSR and Eastern Europe have contin-
ued to pursue economic initiatives individually and
within the framework of the Mexican-CEMA Joint
Commission, established under an agreement signed
in the mid-1970s. The USSR (in a consortium with
Finland) bid on a contract for a joint newsprint
factory in Mexico and has prepared offers on several
power projects valued at half a billion dollars. Mos-
cow also was negotiating for Mexican oil shipments to
Cuba in return for Soviet oil deliveries to Mexican
customers in Europe-a deal that could involve as
much as 60 percent of Cuba's oil requirements.
Mexico has been cool toward this arrangement.
South America: Pursuing New Opportunities
In contrast to expanding programs in parts of Central
America and the Caribbean, longstanding efforts to
increase the Communist economic presence in South
America have had more limited success. This has
prompted the Kremlin to assign high priority to the
expansion of aid and trade relations with major South
American countries to redress the annual $2-2.5
billion hard currency drain on the USSR from its
purchases of South American grain and other com-
modities. In 1982 and 1983, the USSR placed $155
million of credits at the disposal of South American
suppliers to buy Soviet machinery and equipment,
only a fraction of the several hundred million dollars
Moscow has offered for major power and minerals
industry projects. However, Moscow was able to
break new ground with a triangular agreement in
1982 under which Brazilian contractors will provide
construction services for a Soviet-sponsored dam and
hydropower project in Angola. Argentina and the
USSR reportedly are undertaking a similar venture in
Peru. Moscow hopes that these creative approaches to
cooperation will help it break into South America's
Western-dominated private-sector equipment mar-
kets.
Argentina. Moscow hopes that its political support for
Argentina during the Falklands war, its position as
Buenos Aires' major single trading partner (account-
ing for 60 percent of all Argentine export earnings in
1982), and its willingness to offer financing for devel-
opment projects will open opportunities for a more
extensive role in Argentine development projects.
Argentina's acceptance of $68 million in credits for
the Piedra del Aguila power project may signal
reduced Argentine reluctance to Soviet participation
in local projects. Moscow also has threatened a
cutback in agricultural purchases to prod Buenos
Aires into accepting a larger Soviet role. As head of a
multinational consortium, the USSR submitted a bid
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Secret
to construct the $10 billion Middle Parana power
project, for which Moscow has completed feasibility
studies and designs. Other projects under discussion
include:
? The power complexes at Santa Cruz, San Juan,
Parana Medio, and Bahia Blanca.
? A $100 million graphite electrode plant.
? Port construction and modernization at Bahia Blan-
ca, Puerto Madryn, and Ushuaia.
? Electrification of a railroad from Buenos Aires to
Rosario.
? A natural gas pipeline.
? A papermill.
Moscow and Buenos Aires also discussed joint con-
struction of a power project in Peru, and Argentina
began shipping uranium to the USSR for enrichment
under an agreement signed in 1981. In anticipation of
increased business, the USSR renewed a 1980 agree-
ment that provides open-ended trade credits.
There were few significant developments in Argen-
tine-East European relations during the year. East
European countries tried to fill the void caused by the
EC embargo of Argentina during the Falklands con-
frontation. Bulgaria, Czechoslovakia, and East Ger-
many offered unspecified financial support, probably
for commodities, and Sofia offered to provide com-
modities affected by the Western embargo.
Brazil. The USSR has tried to move toward a closer,
more broadly based economic relationship with Brazil
over the past two yeai in spite of Brazil's well-
publicized suspicions about Moscow's aims in the
Western Hemisphere. Fundamental to the growing
relationship were:
? New Soviet agreements to participate in joint power
projects with Brazil in Angola and Mozambique.
? Soviet offers to supply equipment to the Santa
Isobel and Piedra do Cavala power projects.
? Soviet interest in the $900 million project to reclaim
1.5 million hectares of irrigable lowlands in the
Varzeas region.
? Soviet offers to participate in the $650 million
copper segment of the Carajas general development
project.
? Startup on Soviet contracts to install 15 methanol
plants in Brazil and negotiations to sell licenses for
Soviet tin, steel, copper, and iron technologies.
? Soviet offers to enrich Brazilian uranium.
Moscow's large trade deficit with Brazil was eased
somewhat in the past two years by a drop in Brazilian
agricultural commodity prices and by Soviet sales of
oil valued at around $375 million. Deliveries of
equipment, however, remained low in spite of high-
powered Soviet sales efforts over the past two or three
years. According to the US Embassy in Brasilia, the
USSR was disappointed that plans to sell hydroelec-
tric equipment for four or five medium-scale hydro-
power projects under a 1981 agreement fell through,
as did plans to exchange a Soviet roll-on/roll-off ship
for Brazilian agricultural products. Moscow also ex-
pressed interest in Brazilian bauxite and copper in
exchange for Soviet machinery and equipment and
signed a contract for Brazilian sugar valued at $160
million.
The activities of most East European countries contin-
ue to focus on easing their growing trade deficits with
Brazil:
? Bulgaria held talks on possible construction in Bra-
zil of facilities for dehydrating vegetables and man-
ufacturing pharmaceuticals.
? Czechoslovakia agreed to construct two thermal
power plants (including $25 million worth of equip-
ment to the Jorge Lacerda plant) and three cement 25X1
factories, which are to be repaid with iron ore.
? East Germany signed contracts under a 1978 credit
agreement to install $150 million worth of cranes
and to provide technology for Brazil to produce
more. Berlin also offered $20 million in credits for
laboratory equipment.
? Brazil and Hungary established reciprocal trade
credits in the $200 million range and agreed to
cooperate in agriculture, livestock breeding, culture,
and science. In a turnabout, Brazil sought participa-
tion in World Bank-financed projects in Hungary.
? Romania proposed several projects under outstand-
ing credits worth some $150 million, including the
sale of drilling rigs, agricultural and mining equip-
ment, and the construction of an iron ore processing
plant.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Most East European countries explored prospects for
joining with Brazil to construct projects in third
countries, and Czechoslovakia, East Germany, Hun-
gary, and Romania also requested credits to reduce
their commercial settlements burden. Warsaw's nego-
tiations to reschedule its $1.6 billion debt to Brazil
have dominated relations between the two countries
over the past several years.
Bolivia. The major development in Bolivia's economic
relations with Communist countries was $72 million
of Soviet credits for a second tin volatilization plant
(at Marchamarca) in spite of problems and cost
overruns encountered during the construction of a
similar plant at La Palca. The two plants together will
absorb $150 million in Soviet credits, repayable in
nonferrous metals. The La Palca plant, the largest of
its type in the world, was turned over to Bolivia
several years behind schedule in 1982. The Bolivians
hope to buy another $160 million worth of machinery
and equipment from the USSR and Eastern Europe
over the next year or so for the mining industry.
According to the US Embassy in La Paz, this will tie
the strategic tin industry to the USSR for the next
decade. The USSR also is considering assistance for
trolley bus systems for Cochabamba and Santa Cruz,
a prefabricated housing plant, four hydropower
plants, geological prospecting, a tractor plant, and a
cement plant under an open-ended 1976 line of credit.
Bolivian relations with Eastern Europe were high-
lighted by a Romanian offer of as much as $100
million in credits to finance purchases of agricultural
equipment and fertilizer. La Paz also signed an
agreement with Hungary to exchange tin for pharma-
ceutical products.
Table 12
Sub-Saharan Africa: Economic Credits
and Grants, 1982 and 1983 a
USSR Eastern
Europe
1982 696 113
Angola 400
Equatorial Guinea 1
Ethiopia 232
Ghana 10 NEGL
Guinea 20
Tanzania 5 10
Zimbabwe 2
1983 308 72
Ethiopia 266 2
million worth of oil, and also agreed to provide $250
Sub-Saharan Africa: Heightened Economic Support million in new aid for an irrigation project. Moscow
Soviet and East European economic agreements in also was studying the feasibility of several hundred
Sub-Saharan Africa rose to more than $1 billion in million dollars worth of projects for Mozambique
1982 and 1983 as the USSR provided expanded (table 12).
balance-of-payments and development aid to client
states. Angola signed an agreement with the USSR in There has not been a similar increase in assistance for
January 1982 that eventually could provide $2 billion politically moderate countries in the region with the
in credits; $400 million in contracts already have been exception of Nigeria, which pays for Soviet assistance
signed for a dam project the USSR will construct
jointly with Brazil. The USSR agreed to let Ethiopia
defer payments for 12 years on an estimated $150
0
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Figure 6
Sub-Saharan Africa:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954-83
More than $1 billion
$500 million-1 billion
$100-500 million
Less than $100 million
Boundary representation is
not necessarily authoritative.
in hard currency. Until the 1980s, African states had
absorbed only about 10 percent of Soviet assistance,
as Moscow pursued more lucrative interests among
wealthier LDCs. Now that the USSR is supporting
some balance-of-payments needs in African client
states (especially Ethiopia), Soviet aid to Africa in the
1980s has risen to 15 percent of total pledges.
Angola. The USSR moved quickly to implement a 10-
year agreement signed in January 1982 that eventual-
ly could provide as much as $2 billion in economic
development aid. The USSR signed a contract to
provide $400 million in equipment credits for the
Kapanda hydroelectric dam and power plant-an
undertaking that will be Angola's largest construction
project. In an unusual move, the USSR will join with
Brazil to execute this contract. It is part of a compre-
hensive Soviet-formulated development plan under
which Moscow will also construct a 400,000-hectare
irrigation system, bridges, and other projects in Ma-
lanje Province. Angola and the USSR also are dis-
cussing the construction of an oil refinery.
The new Soviet agreement has not appreciably re-
duced the growing tension in relations caused by the
Soviet and East European failure to help reverse the
decline in Angola's economy.
there is a widespread belief among
Angolan officials that nearly 10 years of Soviet
economic aid has been a failure. More than 9,500
Communist economic technicians were present in
Angola in 1983, but industrial production lagged far
behind prewar levels, and only the Western-run oil
industry operated at a profit. Food and consumer
goods shortages have become more pronounced. Mos-
cow has flatly refused to provide emergency food
assistance for war-torn southern Angola. Meanwhile,
Angolan officials are watching the growing Soviet
debt burden with dismay; Angola may have agreed to
settle some of its obligations to Communist countries
by repaying in oil.
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Ethiopia. As a result of lengthy economic negotia-
tions, Moscow made substantial new credits available
in 1982 and 1983 to Ethiopia for oil-its first such
concession to a non-Communist LDC-and for devel-
opment projects. The USSR agreed to provide
500,000 tons of crude oil in 1983 (all of Ethiopia's
requirements) on credit at prices 10 percent below the
world market. The USSR also moved forward on
Chairman Mengistu's repeated requests for project
aid with a $250 million credit for an irrigation project
and for further oil exploration. The Soviets continued
work on:
? A cement plant.
? A farm machinery assembly complex.
? A caustic soda plant.
? Ninety grain and fodder warehouses.
? Oil, gas, and mineral prospecting projects.
Although publicly reaffirming his political commit-
ment to Moscow, Mengistu continues to rely on the
West for economic. assistance. Ethiopia is trying to
increase Western aid for Ethiopian development pro-
jects above the $250 million it now receives annually.
Mozambique. Mozambique's expanding economic ties
with Western powers have not affected its economic
relations with the USSR and its East European allies,
who deepened their economic involvement in Mozam-
bique during 1982 and 1983 with nearly 2,400 War-
saw Pact technicians and $30 million in new aid. The
USSR, already the largest Communist donor with
$140 million in outstanding development credits, pur-
sued several initiatives:
? Participation in a railroad from the Moatize coal-
fields to the port of Beira, using Brazilian firms as
civil works contractors.
? The supply of $150 million worth of equipment for
the second stage of the Cabora Bassa hydropower
project.
? Acceleration of work on mining and agricultural
projects, an aluminum smelting plant at Caia, and
coal exploration.
The USSR also donated $20 million worth of grain,
food, other commodities and seed grain to Mozam-
bique.
Other Communist donors concentrated on implement-
ing projects agreed to earlier. East Germany, under a
new agreement, provided $10 million in grant aid for
commodity purchases. The East Germans also dis-
cussed a 120,000-hectare grain-growing project, ac-
cepted several thousand new students into a program
developed in 1981 to train Mozambicans at home and
in East Germany, sent more agricultural advisers and
equipment, and donated educational materials. Ro-
mania prepared to begin work on a $16 million steel
plant for which it is providing some financing. Some
1,400 East European economic personnel were sta-
tioned in Mozambique during 1983, commanding
hard currency payments estimated at $25 million
annually for their home governments. In addition,
about 1,000 Cubans worked in Mozambique on agri-
cultural, medical, and educational projects, governed
by a series of agreements signed in the mid-1970s.
Ghana. Under Rawlings's leadership, Ghana has
stressed state investment in all economic areas, and
encouraged the USSR and East European countries
to revive aid programs abandoned in the mid-1960s.
Highlights of new commitments are:
? Bulgarian participation in construction of a truck
plant and development of agriculture and
transportation.
? Czechoslovak rehabilitation of a sugar refinery, tire
factory, tannery, and ceramic facilities as well as
construction of a tractor plant and irrigation dams,
probably with credits under earlier agreements.
? Hungarian construction of two brick and tile works
and expansion of a pharmaceutical factory.
? Soviet reactivation of a prefabricated construction
materials plant, construction of a machine-building
and power-engineering center, and rehabilitation of
a gold refinery, with nearly $10 million in credits,
possibly under old agreements.
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
In addition, Bulgaria, East Germany, and Hungary
have provided emergency assistance valued at less
than $1 million, and Cuba has established a joint
commission to study development projects.
Guinea. The USSR's relations with Guinea, its first
African aid client, have deteriorated sharply in the
1980s as former President Toure intensified his search
for Western trade and investment to revive Guinea's
economy. The low level of economic aid and argu-
ments over the price the USSR pays for Guinean
bauxite continued to plague the Soviet-Guinean eco-
nomic relationship. To underline its disappointment
with the Soviet program, Guinea expelled 30 Soviet
technicians from the Kindia Bauxite Plant in 1982,
charging them with inferior performance and smug-
gling, and cut back on the number of students travel-
ing to the USSR. At present, Guinea's reliance on the
Soviets for arms provides the major momentum for
the relationship.
Nigeria. Lagos became the USSR's largest single
economic aid recipient in Sub-Saharan Africa in 1979
with a $1.2 billion credit for the Ajaokuta Steel Plant.
About 5,300 Soviets were at the project site at the end
of 1982, working to complete the first stage of the
plant by 1985. Hungary has been the most important
East European donor: in 1982, Budapest pledged
another $70 million in credits for medical, education-
al, and agricultural equipment, which brought its
credits to Nigeria to more than $190 million. Buda-
pest also offered $150 million for additional projects,
but no agreement has been signed.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Secret Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
0
Secret
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
USSR and Eastern Europe: Economic Penetration Pro rams
in Non-Communist Less Developed Countries ~ 25X1
10 September 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
SECRET
USSR and Eastern Europe: Economic Penetration Programs
in Non-Communist Less Developed Countries
Summary
Communist economic programs in the Third World in the 1980s
reflect decisions by the USSR and its allies to maximize poli-
tical and economic returns with limited aid resources. In
particular, Moscow's program has been refined to target almost
exclusively countries that serve Moscow's political or economic
interests in the Third World. Key elements of the Soviet program
for the 1980s include:
o- Very generous support for Marxist client states, such as
Afghanistan and Ethiopia, whose economies are in
shambles. This group receives large amounts of grant aid
and long-term credits for a variety of uses not usually
financed by Moscow--commodities and fuel, technical
services, and project studies.
o Credits on easy terms to a few favored countries, such as
India, where Moscow is attempting to protect or project
its political and economic influence.
o A growing use of trade credits for most recipients to
promote equipment sales, to earn hard currency, and to
increase the Soviet presence in Third World economies.
In 1983, Conmunist economic credits and grants totaled $2.7
billion, a billion dollar increase from a two-year slump. The
revitalization of the Soviet program was entirely responsible for
the recovery; East European credits sank to a 13-year low--a
downtrend that mirrors the poor economic health of some East
European donors in the 1980s.
Other indicators that the Soviet economic program is on the-
upswing include:
o More than $1 billion annually in disbursements under
Soviet economic assistance agreements in 1982/83, a 50
percent growth over 1980 and more than double
disbursement levels of the 1970s. The record $1.3
billion in 1983 deliveries was heavily weighted by
commodity and other aid to Afghanistan, Ethiopia, and
Nicaragua.
o A strong demand for Soviet technical services: the number
of Soviets-employed in LDCs climbed to a record 41,000 in
1983. Through this program, Moscow not only increases
its presence in LDCs but also earns up to $500 million in
hard currency annually.
SECRET
i
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
LUA 1'
East European programs have also shown some resilience in
these areas. Deliveries under old agreements totaled nearly a
billion dollars in 1982 and 1983, and East European technicians
posted abroad--many working under commercial agreements--jumped
by 15 percent to 83,000 in 1983.
Both political and economic criteria were evident in the
Kremlin's economic aid program in 1982 and 1983.
o In 1982, in a show of political solidarity, Moscow
directed most of its $890 million in new aid to several
Marxist states--Afghanistan, Angola, Ethiopia, and
Nicaragua--whose economies have been impoverished by
continuing insurgencies, as well as their forced
transition to a socialist style economic structure. Aid
included oil credits to Ethiopia that cover all of Addis
Ababa's requirements and wheat shipments to Afghanistan
and Nicaragua to replace grain from Western sources.
Such aid makes the USSR more essential as an economic
partner and enhances its political standing in these
countries.
o In 1983, Moscow's business interests were paramount. The
USSR allocated three-fourths of its $2.3 billion in new
funding to traditional partners such as Algeria,
Pakistan, and Syria. Most of these credits are repayable
over 10 years in hard currency or their equivalent.
While these credits still qualify as aid because they
carry low interest rates, they also are profitable for
the Soviets because they allow the USSR to: (a) stimulate
equipment sales, (b) gain entree into major LDC
development projects at little cost, and (c) increase
hard currency returns through LDC repayments and
associated technical services.
Soviet attempts to penetrate LDC economies with development
financing and commodity assistance almost certainly will not slow
in the future. Over the 30 years of its existence, Moscow's
economic program has proven an effective and low-cost tool for
furthering political and economic aims. Through a sliding scale
of repayment terms for various recipients, Moscow probably has
nearly reached an equilibrium, where repayments from loans to
non-Marxist countries finance grant aid outlays to the USSR's
Marxist recipients.
The resurgence in the Soviet program has depended on the
willingness of Third World countries to accept Moscow's
development offers. Developing countries appear more eager than
before to consider Soviet funding for their development plans,
especially for late-model power equipment. A new (and poten-
tially lucrative) area for Moscow is the nuclear power industry
in LDCs. Over the past two years, the USSR has offered nuclear
power facilities to India, Iraq, Morocco, Pakistan, Syria, and
Turkey. The construction of such facilities would not only
SECRET
ii
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
J r;UKr l'
contribute several billion dollars to Moscow's foreign exchange
earnings, but because of the complexity of the projects would
entail a much higher level of dependence on the USSR for follow-
on support than other development projects. The USSR also is
discussing several billion dollars worth of conventional
projects--such as hydro and thermal power plants, and metals
industry development--with several key LDCs.
For the purpose of this report, the term Communist countries
refers to the USSR and the following countries of Eastern Europe:
Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and
Roman i a.
In this paper, the term less developed countries includes
all countries of Africa except the Republic of South Africa; all
countries of East Asia except Hong Kong and Japan; Malta,
Portugal, and Spain in Europe; all countries in Latin America
except Cuba; and all countries in the Middle East and Africa
except Israel. Cambodia, Laos, and Vietnam, which became
Communist countries in 1974, are reported on for prior years for
historical reasons.
The term Marxist clients refers to countries which have
consider themselves Marxists and which rely primarily or entirely
on Communist military support to maintain their power. They are
Afghanistan, Angola, Ethiopia, Mozambique, Nicaragua, and South
Yemen.
Within the aid context, the terms agreements, commitments,
and extensions refer to pledges to provide goods and services,
either on deferred payment terms or as grants. Assistance is
considered to have been extended when accords are initialed and
constitute a formal declaration of intent. For economic aid,
credits with repayment terms of five years or more are
included. These credits are designated as "trade credits" if
amortization is less than 10 years. The terms drawings and
disbursements refer to the delivery of goods or the use of
services.
SECRET
i i i
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
USSR and Eastern Europe: Economic Penetration Programs
in Non-Communist Less Developed Countries
Communist Economic Programs in Perspective
In the past three decades, the USSR and Eastern Europe have
provided nearly $40 billion in economic credits and grants to
non-Communist less developed countries. In tandem with military
assistance, the USSR and its allies have used their economic aid
programs to try to replace Western influence in LDCs, to-expand
Soviet trade, and to gain access to strategic raw materials.
Initially, the USSR gave preference to emerging states who
were following a non-capitalist path of development. In the
1960s, the program was broadened to include nearly any country
willing to accept aid. Today, more than 70 countries have
accepted economic aid from the USSR or its allies.
Despite the large number of countries which have received
Communist economic aid, the program is focused on a narrow range
of countries along the Soviet border and in the Middle East.
Arab and South Asian countries account for two-thirds of Soviet
pledges. East European countries have followed a similar pattern
in their programs.
Soviet economic aid has never had the dramatic impact of the
military program: it has been far more modest--totaling about $26
billion (compared to $83 billion for the military) and much
harder to implement. In the early years of the program, when
some LDCs were reluctant to accept military aid, economic and
military pledges were roughly equal. The gap widened in the mid-
1960s and now, for every dollar disbursed in economic aid, Moscow
has delivered $5 worth of military equipment.
The Soviet economic program also has been small by
international standards. For example, Moscow's disbursements to
LDCs over the past few years have accounted for less than three
percent of all international aid. Still, the USSR has been a
major donor to a few countries--Afghanistan, Egypt, South Yemen,
Syria, and Turkey--and aid ties have endured despite shifts in
political relations.
Recently, Soviet and East European economic credits have
carried somewhat harder terms, as Communist countries attempt to
maximize returns to their own economies through accelerated
repayments in hard currency, oil, and other strategic
materials. Grants have gone almost exclusively to Marxist LDCs
(such as Afghanistan and Ethiopia), and the spread between
Western and Communist aid repayment terms has increased. Still,
the new Communist credits provide cheaper funds than Western
market financing and have enabled Communist countries to compete
successfully with Western bidders on lucrative Lt)C development
SECRET
1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
SECRET
With economic aid, the Soviets have been more willing than
other donors to build industrial establishments demanded by LDCs,
sometimes with little economic justification. Characteristics of
Moscow's programs that set it apart from other international aid
include:
o A focus on large projects in the public sector,
particularly in mineral and metal exploitation and
processing,
o The tying of all commitments to the purchase of Soviet
goods and services, and
o- Repayments in local currency or the output of Soviet
plants.
Personnel exchanges have become an increasingly important
part of Warsaw Pact relations with LDCs, and have provided good
financial and political returns. The technical services and
academic training programs have been broadly based, and Communist
countries have personnel agreements with 106 countries, 34 of
which have not accepted other forms of Communist aid.
At present, the LDCs employ more than 40,000 Soviet project
specialists and professionals. Originally, LDCs financed the
services of Soviet technicians under aid agreements. Now, aside
from a few doctors and teachers provided on a grant basis, the
USSR charges $50,000 to $70,000 a year for its specialists. Most
are located in oil-producing LDCs, which can pay in hard
currency. Because of a skilled labor shortage at home, Moscow is
very reluctant to send civilian peronnel to LDCs unless it earns
foreign exchange.
The academic training program has the potential for great
political payoffs for the Kremlin. In some countries, mostly in
Africa and Latin America, it is Moscow's only ongoing activity.
Nearly 100,000 LDC students have attended Soviet universities anal
technical schools since the mid-1950s. In the Soviet-oriented
LDCs such as Afghanistan and Ethiopia, the USSR has available
15,000 local graduates of Soviet military or academic programs
who can at least speak Russian even if they do not sympathize
with Soviet goals.
The Changing Soviet Economic Program in LDCs
Economic assistance has been an important element in Soviet
folteign policy in LDCs since Moscow provided its first aid to a
few Asian neighbors in the mid-1950s. The USSR has used its aid
program to:
o Create and maintain stable ties with LDCs.
o Demonstrate a continuing commitment to Marxist LDCs.
SECRET
2
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
v uviti: J.
o Secure resources for its own and Eastern Europe's
economies.
In the 1980s, we have seen an acceleration of trends in the
aid program that first, appeared in the mid-1970s: Moscow began to
harden credit terms for countries that could afford to pay and
attempted to conclude long-term agreements with major clients
that would tie their development planning more closely to the
USSR's. In the 1980s, Moscow's aid allocations disclose'a
distinct tier system for countries receiving its aid. Key
elements are:
o Grant aid and commodity support for Marxist clients.
o Occasional lenient long term credits for a few favored
recipients.
o Expanding use of trade credits for the majority of LDC
recipients.
Support to Marxist Clients. Most of Moscow's grant aid in
the 1980s has gone to Marxist allies such as Afghanistan,
Ethiopia, and South Yemen and other aid has been provided on the
most generous terms ever seen in the Soviet program. Marxist
countries began to absorb a growing proportion of Moscow's aide
resources with the installation of the Karmal regions in
Afghanistan and the Nicaraguan revolution in 1979. New aid in
1982 and 1983 brought total Soviet pledges to this group of
countries to nearly $5.6 billion, one-fifth of total Soviet aid
to all non-Communist LDCs over the past 25 years (table 1). For
Afghanistan, Ethiopia, and South Yemen, the USSR and its allies
have displaced bilateral Western aid donors, although
multilateral funds continue to flow to all but Afghanistan.
Table 1
USSR: Economic Aid Extended
to non-Communist LDCs
Million US $
Total
Marxist
States
Total
26,698
5,557
1954-77
13,501
1,591
1978
3,002
94
1979
3,749
928
1980
2,588
1,168
1981
580
218
1982
965
890
1983
2,314
668
SECRET
3
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
0t' n.n1
In 1982, for the first time, the USSR devoted almost all of
its economic aid to Marxist states. The necessity to bolster the
faltering economies of Afghanistan, Ethiopia and Nicaragua with
food and, (in the case of Ethiopia) petroleum drove the
program. Soviet pledges of $890 million in 1982 represented a
substantial recovery from the previous year's low, but remained
well below averages in the late seventies, when a few billion
dollar credits to a few recipients (such as Morocco and Nigeria)
raised extensions to record levels.
The new agreements with client states in 1982 contained some
unusual features:
o A $400 million credit to Angola in 1982 for a hydropower
_ project (extended under a 1982 framework agreement that
could eventually provide $2 billion in financing) calls
for Brazil's participation in construction of the Kapanda
dam and powerhouse, the first instance of a Soviet joint
venture with an LDC in a third country.
o The $170 million in aid to Ethiopia financed oil
purchases from the USSR for 1983. Moscow has never
before underwritten oil purchases by a non-Communist
country.
o The $165 million credit extension to Nicaragua provided
some $50 million for technical services and project
studies, for which Moscow is usually requires hard
currency on a cash basis.
These agreements were largely politically and strategically
motivated and will provide few economic returns in the form of
raw materials or foreign exchange that the USSR usually seeks in
its aid agreements. Only the Angolan agreement offers Moscow the
prospect of breaking even financially. In fact, this aid
represents part of the price Moscow must pay to retain its
influence in this group of countries.
Long-Term Credits. For a very few recipients (such as India
and Morocco) where political or economic stakes are high, the
USSR has provided credits on unusually lenient terms in the past
five years. India and Morocco have received a total of $3
billion of credits repayable over 17 years at low interest rates,
compared with 10 to 12-year repayments on most Soviet
intergovernmental loans. With its stress on public sector
development, New Delhi has been one of Moscow's showcase
recipients (more than $3 billion in pledges) since it accepted
its first credits 27 years ago. In Morocco, the USSR provided $2
billion in credits to break into the strategic phosphate
production industry, both to increase the Soviet presence in the
Moroccan economy and to insure long-term phosphate supplies.
Trade Credits. Trade credits are the most vigorous and
fastest growing element of the Soviet economic aid program in
non-Communist LDCs. They have been well received and have
SECRET
4
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
SECRET
facilitated Moscow's penetration of non-traditional markets in
Africa and Latin America. Interest charges on these loans are
below international market rates, and Moscow offers large-scale
infrastructural projects such as steel plants and large
powerplants that may not be financially acceptable to the inter-
national banking community. The best terms the Soviets offer
under these trade-type credits are 10 years at 4 percent interest
with repayments in hard currency; Moscow charges cash for
technical services. These credits resemble the export credits of
Western countries. For example, the United States Export-Import
Bank offers similar credits to projects in LDCs on 13-year
repayment terms at eight percent-interest.
In 1983, nearly $1.7 billion' of this export funding went to
a number of traditional Soviet recipients with long-established
political, military, or business ties with the Kremlin. Among
the major allocations were:
o A total of $325 million in mixed credits to Syria for
thermal powerplant construction and commercial aircraft
acquisition.
o $275 million to Pakistan for a thermal powerplant
o An estimated $250 million to Algeria for railroad
construction. The actual value of these credits could be
much higher.
o Credits in the $70 to $80 million range to Argentina,
Bangladesh, and Bolivia for equipment purchases.
The new allocations in 1983 underlined the commercial nature
of Soviet development activities in this group of countries.
About $1.1 billion of the new credits carried 10-year repayments
with interest ranging from 4 to 6 percent. These terms, assuming
a grace period, just met standards for aid as defined by the
international community . Although Western donors also expand
1Our figure for Soviet financing to non-Marxist states in 1983 is
understated, because we have been unable to ascertain the scope
of Soviet credits to Iraq to develop the West Qurnah oilfield.
2Western aid donors use a "grant element" as a common basis for
comparing the concessionality under different terms of repay-
ment. For example, a 100 percent grant element is an outright
gift, while a loan repayable over 12 years at 2.5% has a 25
percent grant element and qualifies as official development
assistance under minimum criteria adopted by the OECD.
25X1
25X1
SECRET
5
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
exports by tying some aid funds to procurement within the donor
country, the USSR is devotes almost all of its financing for non-
Marxist LDCs to promote sales of Soviet equipment. The
proportion of these export-type credits in new Soviet pledges has
grown steadily in the 1980s. Many of the agreements that Moscow
concludes with non-Marxist states call for payback in raw
materials: such as alumina, phosphates and oil; many of the rest
are payable in hard currency.
USSR: Trade Credits to Non-Communist LDCs
Million US $
The USSR is now using trade credits to penetrate more deeply
the economies of countries it has targeted for the past twenty
years. For example, by providing trade-type credits the USSR has
been able to increase its presence in development programs in
countries such as Algeria, Iran, Iraq, and Syria, even though its
liberal aid to most of them has almost disappeared.
Soviet Credits Still Popular
Developing countries continue to seek Soviet development
credits (in spite of hardening terms) for several reasons:
Total
Extended
Trade
Credits
Total
26,700
4,975
1954-73
9,275
980
1974
815
5
1975
1,970
205
1976
1,005
290
1977
435
1978
3,000
225
1979
3,750
1,200
1980
2,585
640
1981
580
285
1982
965
50
1983
2,315
1,095
o The USSR still quotes terms that are below commercial
bank rates for construction financing and that are
cheaper than many official Western construction loans.
For example, recent World Bank loans extended for similar
projects were repayable over 10-15 years at 7.5-8.5
percent interest.
SECRET
6
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
o The USSR is the only bilateral donor willing to finance
extensive infrastructural projects in the public sector
(completely owned by the state), an area that many of
Moscow's recipients are trying to develop. Most loans
from the World Bank and associated agencies and the US
Eximbank go to the private sector.
o The USSR is willing to accept goods, such as strategic
raw materials, in repayment for its loans. Western
financial institutions will not do so.
A Mature Program
Two decades of experience in LDCs have shaped the Soviet
program of the 1980s. Moscow's program in the 1980s is an
outgrowth of its original policy of offering large intergovern-
mental loans for state-owned undertakings. These earlier loans
were offered on 12-year repayment terms at 2.5 percent interest,
but in some cases, the equipment provided was somewhat outdated
compared to Western models. Now, Moscow is pushing its contracts
in areas such as power engineering and metals processing where
Soviet equipment meets world standards at competitive prices. It
has hardened repayment terms and increased prices as the quality
of its equipment has improved. The huge projects that Moscow
offers to promote Soviet equipment sales still tie the recipient
closely to Soviet suppliers.
Because activity in the more affluent non-Marxist countries
offers much better economic payoffs, as well as possible
political gains, Moscow is reserving its large project credits
for this group of states. The USSR has avoided committing itself
to large outlays to develop industry in such countries as
Ethiopia and South Yemen because of their limited resources and
precarious political positions. We believe that the USSR will
continue to expand its development offers to non-Marxist states,
and that this effort will sustain Soviet outlays to Marxist
clients.
The USSR's efforts have been helped by the growth in the
economies of a number of LDCs that are willing to accept Soviet
projects. As countries reach a more advanced stage of
development, they are more capable of providing infrastructure to
serve the large manufacturing facilities that are a Soviet
speciality. Brazil and Mexico, two of the six "newly
industrializing countries" in the Third World, are discussing
Soviet development contracts.
Eastern Europe: A Troubled Program
The East European aid program in non-Communist LDCs
continued its downward drift in 1983 with only $388 million in
new pledges--a 13-year low (table 3). Although most East
European countries have preferred to provide the bulk of their
assistance to wealthier LDCs to promote exports against hard
currency payments, in 1983 aid to Marxist states dominated the
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
program. In a most years, East European allocations to Marxist
states have rarely exceeded 25 percent of the total; overall they
account for just over 10 percent of East European aid over the
past 30 years.
Table 3
Eastern Europe: Economic Aid
Extended to Non-Communist LDCs
Million US $
Marxist
Total States
Total 13,120 1,468
1954-77
1978
1979
1980
1981
1982
1983
7,883 239
1,598 417
646 195
1,322 192
723 173
560 94
388 257
Because of rounding, components
may not add to totals shown.
SECRET
8
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
SECRET
East Germany, whose aid program has traditionally been
driven by political interests, made more than $300 million in new
commitments in 1982 and 1983 (table 4). Nearly 70 percent ($210
million) of its new aid pledges were directed to countries
targeted for special attention by the Warsaw Pact--Grenada,
Mozambique, and Nicaragua. Because of its long-standing policy
of aiding "fraternal" states, East Germany has responded more
willingly than other East European states to Moscow's call for
both political and material support to Marxist clients; it
accounts for more than half of overall East European pledges to
Marxist clients, chiefly Ethiopia, Nicaragua, and Mozambique.
Nevertheless, Bulgaria devoted nearly 60% ($87 million) of its
new aid to Marxist states in 1982 and 1983; Czechoslovakia
directed about 70% ($48 million) to this group of countries.
Table 4
Eastern Europe: Economic Aid Extended
to LDCs,
1982 and 1983
Million US $
1982
1983
Total
560
388
Bulgaria
52
95
Czechoslovakia
21
47
East Germany
101
205
Hungary
125
10
Romania
261
30
Because rounding, components may
not add to totals shown.
Among the East European allocations?to other LDCs, Romania
made the largest single commitment--$280 million to Bangladesh as
a second tranche of a $500 million credit to finance projects in
virtually every area of Dacca's public sector. Other East
European donors made allocations in the $50 million range to
traditional clients. Poland did not conclude any new development
agreements with LDCs; potential recipients are concerned that -
Warsaw cannot meet contract obligations because of domestic
political and economic problems.
East European credits are similar to Soviet trade credits,
but they often carry harder terms. In 1982 and 1983, Eastern
Europe provided only about $35 million in grants, mostly to
Marxist states.
As in the Soviet case, new East European aid conitments may
be understated because we do not know the terms of several major
agreements concluded in 1982 and 1983 that may provide some
aid. These include:
o A $185 million Bulgarian contract with Syria for petroleum
gas development.
SECRET
9
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
o A Czech $130 million credit to Syria for a gas treatment
plant and pipeline.
o A Czech $100 million agreement with Iraq to reclaim 13,000
hectares of desert land.
o A $1.5 billion Romanian contract to build houses in
Algeria.
o A $1 billion Bulgarian contract with Syria for further gas
development.
o A Romanian agreement to assist Turkey with a $500 million
poWerplant.
If some of these contracts provide credits, East European
extensions would approach much higher levels in 1982 and 1983 and
would reflect East Europe's normal practice of providing the bulk
of its development financing to LDCs which maintain extensive
commercial ties.
the decline in
East European economic aid in the 1980s stems from economic
problems in Eastern Europe. These problems have caused Eastern
Europe to try to increase relations with hard currency partners
rather than poor LDCs. Always hardnosed in their business
dealings with developing countries, East European countries have
almost entirely cut off concessional aid for commodities and
capital imports. Important negotiations with major clients have
foundered over the issue of repayment terms. For example, in
1982 Syria rejected Romanian credits because of Bucharest's
demand for near-market interest rates. With Western alternatives
to choose from, most of the wealthier LICs are reluctant to
accept East European project bids unless the terms are extremely
favorable.
None of the major East European credits in 1982 and 1983
carried the kind of economic benefits that these donors usually,
seek. Still, commercial spinoffs from aid relationships were -
beneficial to East European economies. For example, both Iran
and Iraq (major aid recipients in the 1970s) have become
lucrative markets for civilian as well as military goods from
Eastern Europe.
Conmunist Economic Disbursements Set New Records
Soviet and East European aid disbursements reached a record
$1:8 billion in 1983, driven by Soviet deliveries of nearly $1.3
billion against both previous and new pledges. Major recipients
of Soviet assistance in 1983 included:
o Ethiopia, with $235 million of oil and project
assistance,
25X1
25X1
SECRET
10
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
o Afghanistan, with more than $200 million in commodities
and other assistance,
o Nigeria, which received an estimated $150 million of
steel-making equipment for the Ajaokuta project, and
o Pakistan, whose Karachi steel plant absorbed $110 million
of equipment.
Disbursements have been unusually high for the Soviet
program in the 1980s because Moscow has provided unprecedented
levels of grant commodity support to shore up shaky Communist
regimes in Marxist states. This'type of aid is delivered very
quickly, compared with project assistance that requires
considerable local participation by recipients and that may be
disbursed over a decade or more. We estimate that deliveries of
grant aid jumped 10-fold in 1980 over the previous year, and have
remained high ever since.
Million US $
USSR
Total
Deliveries
Of Which
Grants
Eastern
Europe
1979
574
30
305
1980
812
306
298
1981
853
198
384
1982
1,162
152
485
1983
1,300
330
495
Afghanistan has been the largest beneficiary with commodity
shipments to help stabilize the regime. Ethiopia also has
required oil subsidies and petroleum shipments under credit
because of foreign exchange shortages. It is likely that this
Soviet support is even more extensive than we know. For example,
we do not include possible budgetary support to South Yemen,
whose annual trade deficit with Moscow has been in the $100
million range for the past three years. Moscow may be deferring
(or possibly even excusing) Aden's annual trade settlements.
. Recent East European disbursements of close to $500 million
regained the levels of the mid-1970s after three sluggish years
that generally coincided with the outbreak of the war in Iran and
Iraq (where major East European development programs were in
progress) and the troubles in Poland. The acceleration of
deliveries to Ethiopia, Mozambique, Nicaragua, and Afghanistan
were responsible for much of the increase.
SECRET
11
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
Aid Terms
Moscow's continued support of the basic needs of its poorer
client states (such as Afghanistan and Ethiopia) on unusually
easy terms has had a profound short-term impact on the Soviet
program in the 1980s even though trade credits are again gaining
on concessionary aid. Since 1980, the USSR's $540 million of
grant aid to Marxist recipients to fund deliveries of food,
consumer goods, and oil has (a) accounted for 20 percent?of
Soviet aid deliveries, (b) diluted the effect of near-commercial
terms for other recipients, and (c) raised the flow of Soviet aid
resources above repayments made by LDCs for the first time since
the mid-1970s. In addition, the Kremlin has been unusually
flexible in rescheduling payment on the large military and
economic debts run up by this group of countries. Afghanistan,
Ethiopia, and South Yemen recently rescheduled some $3-4 billion
of debt to the USSR. This more liberal aid policy is a product
of the 1980s, and represents a dramatic turnaround for Moscow.
Still, less than 10 percent of total Soviet aid has been in
the form of grants, and for the majority of recipients in LDCs
the Soviet program is characterized by:
o Hard terms (most credits are repayable over 10 years at 4
percent interest or better),
o Expensive technical services payable in hard currency
(most Western donors provide free technicians to aid
projects),
o No hard currency or commodity aid;
o No financing of local costs, and
o Credit tied to procurement from Soviet suppliers.
Economic Technical Services: A Growth Industry
A key feature of Soviet and East European economic aid to
LDCs continues to be extensive technical support. A record
124,500 Warsaw Pact economic technicians were posted to 74 LDCs
in 1983--50 percent more than in 1980. The programs are focused
on a few clients, with more than three-fourths of the technicians
working in Middle Eastern and North African oil producing states
(and Nigeria) that pay hard currency or oil for services (see
table 6). A further 10 percent were in countries that have
received large amounts of Soviet development aid, such as
Afghanistan, India, Syria, and Turkey. Another 10 percent were
in Marxist states and were employed under a mix of terms that
ranged from hard currency payments for Angola and Mozambique to
deferred charges under development credits to Afghanistan,
Ethiopia, Nicaragua, and South Yemen.
SECRET
12
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
Table 6
Economic Technicians in Non-Communist LDCs, 1983a
Number of Persons
Total USSR
Eastern
Europe
Total 124,370
40,985
83,385
North Africa 69,115
11,625
57,530
Sub-Saharan Africa 17,820
11,315
6,555
East Asia 40
15
25
Europe 75
..
75
Latin America 1,365
515
850
Middle East 28,025
10,365
17,660
South Asia 7,840
7,150
690
We estimate that Soviet and East European hard currency
earnings from their services programs have been close to $2
billion--up to $500 million for USSR and $1.5 billion for Eastern
Europe--annually in the past few years. Even the poorest African
states, such as Ethiopia, Guinea, and Mali, must remit half of
the charges for Soviet services in hard currency, a requirement
that causes considerable friction in their economic relationships
with Moscow. Conmunist countries, which originally provided
services at bargain rates, recently have brought technicians'
salaries closer to Western levels. The Soviets charge $40,000 to
$55,000 annually for technicians, based on their skills and
seniority, while East European countries charge up to $80,000 a
year.
Academic Programs: Showing Continued Dynamism
The number of students from non-Communist LDCs being trained
in Soviet and East European academic institutions grew to more
than 90,000 in 1983 (table 7). Nearly 15,000 of these students
were entering Communist universities for the first time.
Afghanistan, whose educational system is being revamped along
Marxist lines by Communist educational planners, had 11,000
nationals in the USSR and Eastern Europe under agreements signed
in 1980. Jordanians made up the second largest national grouping
(7;500) under a large-scale training program that began about
five years ago. More than 40 percent of the LDC students in
Communist countries were from Africa, dominated by contingents
from Marxist nations such as Ethiopia (5,000), Madagascar
(4,225), Mozambique (2,775), Congo (1,800), and Angola (1,900).
Nigeria was the only moderate African state with a large student
population in Communist countries (2,500).
SECRET
13
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
SECRET
The continued popularity of European Communist scholarships
stems from the dearth of educational opportunities in most LDCs,
as well as the fact that the Communist Warsaw Pact countries
cover most expenses (transportation, room and board, tuition,
medical expenses, and pocket money) and sometimes accept dubious
academic credentials. These scholarships are valued at about
$5,000 annually.
Academic Students from Non-Communist LDCs
in Training, December 1983a
USSR
Eastern
Europe
56,560
34,780
North Africa
3,855
1,940
Sub-Saharan Africa
17,915
'12,640
East Asia
60
35
Europe
15
20
Latin
America
7,580
2,975
Middle
East
15,105
13,140
South
Asia
12,030
4,030
Numbers are rounded to the nearest five.
Academic and technical training have long been the most
concessional feature of Soviet and East European aid programs and
often represent the only assistance provided to some LDCs. We
estimate that the European Communist countries spend the
equivalent of $400-$500 million a year to maintain these
educational ties. As a payoff, they hope to establish ties with
personnel who could eventually obtain influential positions in
their home countries. East European
countries also hope to establish lasting relationships with LDC
nationals which they can use to promote business relations.
After two decades, the Soviet program is showing some
success. One of the members of the ruling Directorate in
Nicaragua is a Soviet graduate. Other Soviet-trained LDC
officials include four cabinet ministers, three sub-cabinet
directors, several ambassadors, and thousands of government
bureaucrats, professors, and doctors. Some are willing to serve
Soviet ends. For example, the new Soviet-trained geology
minister in Zambia is trying to introduce Soviet technicians into
the copper industry, an area Moscow has been trying to penetrate
for years.
SECRET
14
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
25X1
25X1
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
SECRET
Prospects Bright for Continued Growth
In sum, the Soviet economic aid program continues to show
vigor as Moscow uses it to support its allies, to bridge gaps in
its own economy, and to create a more favorable climate for
Soviet ventures in the non-Communist LDCs. Since the program
does not entail significant foreign exchange expenditures (and
actually brings in hard currency), it is virtually immune to
budget cuts that may affect other foreign activities during
Moscow's current economic slowdown. Furthermore, many of the
projects offered use equipment from domestic industries (such as
power equipment) which are not operating at capacity.
We expect Moscow to continue its dual approach to LDC aid
matters. Marxist client states will receive commodity support
(even though Moscow appears reluctant to increase the burden),
and they may even receive more development aid.
concentrate on those with the infrastructure and
Moscow will
funds to support
local costs. For example, Moscow is studying a
large
hydropower
project in Nicaragua, an oil refinery in Angola,
and
an aluminum
plant and railroad construction in Mozambique.
Some
of these
contracts could carry 10-year repayment terms.
Other
LDCs will
receive expanded Soviet credits for their ambitious development
plans. Kremlin officials have recently shown greater interest in
export-type financing for both old and new Free World
recipients. In 1982/83, Moscow has been negotiating 10-year
credits for:
o $500 million for electrification and transportation
projects in Argentina.
o A $250 million cement plant in the Philippines.
o A multipurpose dam and powerplant in Pakistan that will
cost $3.7 billion.
The USSR also has begun a recent push to sell nuclear powerplant
equipment to LDCs. India, Iraq, Pakistan, Syria, and Turkey have
received Soviet offers for nuclear plants, and Libya may already
have concluded a contract for a plant at Surt. Moscow probably
will have to provide substantial financing to clinch these deals
since price tags on this equipment range from $1.7 to $3.5
billion. Moscow also must overcome its reputation for being
technologically inferior to Western nuclear power equipment
suppliers. In addition, Moscow would have to apply appropriate
IAEA safeguards in agreements with countries such as India and
Pakistan which are not parties to the Nuclear Non-Proliferation
Treaty.
We expect Moscow to bring many of these contract offers to a
successful conclusion. They would keep annual Soviet extensions
well over the billion dollar level through the end of the
decade. Through these contracts, Moscow will gain:
SEC1ET
1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
hUKET
o Expanded equipment markets, particularly in the Middle
East and Latin America.
o Increased hard currency repayments as it phases out
amortization in traditional local goods.
o Strategic raw materials that will alleviate shortages in
CEMA countries through aid repayments and associated
buyback arrangements.
o Expanded hard currency payments for technical services
that accompany development programs.
the USSR received about $900
million worth of goods from LDCs in 1981 as a direct result of
its aid program, and this figure probably is well over the $1
billion mark for 1983.
SECRET
16
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
?J L '.. l \ L 1
Communist Economic Programs: A Regional Analysis
Middle East: Moscow's Largest Economic Stake
Since 1980, the USSR's support of Marxist states in the
Third World has diverted some of its energies away from its very
important traditional clients in the Middle East (see figure).
Nonetheless, Communist economic activities in the Middle East
accelerated in 1982 and 1983 with the conclusion of large new
development contracts with Iraq and Syria. Damascus received
$365 million in Soviet credits for civil aircraft purchases and
power development while Baghdad signed a $1.2 billion* contract
with the USSR to develop the West Qurna oil fields. The Iraqi
deal probably involves Soviet credits because of Baghdad's
precarious finances. According to the press, the USSR began
preliminary construction of the joint Khoda Aferin dam on the
Soviet-Iranian border and turned over designs for expensive
industrial complexes promised to the Shah. New East European
credits went to Egypt--$85 million from East Germany and Hungary
for equipment purchases--and $9 million to Turkey from Romania
for power equipment.
Some 18,000 Communist economic personnel were employed in
Iran and Iraq by the end of 1983, raising the number of Soviet,
East European, and Cuban personnel in the Middle East to nearly
30,000 persons. President Mubarak reinstated some 200 Soviet
technicians in Egypt by the end of 1983 to install and service
equipment ordered before Sadat's expulsion of most of the Soviet
diplomatic and technical mission in 1981.
*Middle East: Economic Credits
and Grants, 1982 and 1983
1982
Egypt
Turkey
19 83
Greece
Iraq
Syria
Turkey
Million US $
Eastern
USSR Europe
686
360
NA
326
92
83
9
SECRET
A-1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Iran. Despite the Ayatollah's continuing suspicions about
Soviet intentions toward Iran, the expulsion of 18 Soviet
diplomats, and the arrest and public trial of leading Iranian
Communists, Tehran's economic relations with the USSR and East
European countries improved in 1983. Iran increased oil exports
to dose to more than 150,000 d/b in payment for Communist-
supplied commodities and technical support, employed 2,600
Communist technicians at development projects, and exchanged a
record $1.3 billion of goods with the USSR.
Moscow's heightened project activity was largely responsible
for the record $750-800 million in annual Soviet exports to Iran
over the past two years. The USSR:
o accelerated work on the Isfahan powerplant,
o completed a second blast furnace and a rolling mill at
the Isfahan steel complex, and
o finished repairs on the war-damaged Ramin powerplant.
Soviet personnel also worked on grain siloes and flour mills,
coal mines, and prefabricated housing plants, and began
preliminary construction of the Khoda Aferin dam and power plant
at the Iran-Soviet border. Moscow presented plans for mining
machinery and metal casting plants in Kerman, first agreed to
under a billion-dollar pre-revolutionary agreement to develop
industrial zones in the northern provinces. In contrast, the
triangular deal with the Shah to sell Soviet gas to Western
Europe insreturn for Iranian gas shipments to the USSR--in limbo
since the' Khomeini takeover--died quietly as Iran planned
construction of a gas pipeline to Western Europe through
Turkey.
The USSR remained instrumental in transporting Communist and
Western goods overland to Iran. The USSR also instituted tanker
service to Baku from the Iranian port of Nowshar (an arrangement
that could also serve Western European oil customers) and began
study of possible new transit routes through the USSR to carry
cargo to Iran. Tehran's dependence on Soviet road and rail links
because of Iraqi attacks on Iranian shipping in the Persian Gulf
emphasized the weakness of Iran's transit systems and may result
in speedier implementation of Soviet agreements to construct
additional rail capacity at several cross border points.
According to the press, the Soviets still are periodically forced
to turn away cargo for Iran because of severe congestion at the
The Iranian-East European relationship is still centered on
the exchange of Iranian oil for commodities and technical
services. Tehran has become heavily dependent on Eastern Europe
for medical ecuipment, supplies, and services to support the war
with Iraq.
SECRET
A-2
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
S1 L1 1
Iraq. Communist participation in Iraq's economy continued
in spite of Iraqi budget difficulties caused by the four-year old
war with Iran (estimated by press sources to cost $1 billion a
month), and the near cessation of oil supplies to traditional
East European importers. Under a $1.2 billion contract signed in
1983 to develop the West Qurnah oil fields, the USSR is to drill
100 producing wells to shore up Iraq's declining production
capacity. We believe the USSR may have provided some credits for
this project because of Iraq's deteriorating finances, but press
reports have not mentioned financial terms. Some 5,000 Soviet
civilian technicians in Iraq worked on several petroleum
transport and storage projects and power and irrigation schemes,
the largest of which is the Haditha dam in northern Iraq which is
designed to produce 570mw of power. Moscow also discussed
projects to overhaul the Najibiyah powerplant, and to increase
output at the Rumaila oilfield.
Syria. The upgrading of the Syrian-Soviet military
relationship in 1983 has been paralleled by new directions in
economic programs. By the end of 1983, Moscow had begun
engineering studies on a 600 MW nuclear powerplant and on Syria's
first nuclear research center. Several hundred million dollars
of new financing will be required for these projects, which could
double Moscow's $1.1 billion in standing economic assistance
pledges. Among Moscow's more traditional offerings were:
o A $150 million credit for a thermal powerplant.
o A $130 million credit for gas treatment and transmission
plants.
o A $46.5 million credit for civilian aircraft.
o A contract to increase the storage capacity of Lake Asad
and the power output of the Soviet-built Euphrates
hydropower project.
The USSR also completed the 108-km Hims-Damascus railroad, and
continued work on the expansion of the Latakia port and the
al-Kebir dam and power project downstream from the Euphrates
Eastern Europe, which has provided nearly $1.2 billion in
aid to Syria over the past two decades, won several contracts by
offering below market financing:
o Bulgaria signed a $200 million contract to drill up to
150 gas wells and develop a gas gathering system,
o Czechoslovakia agreed to build a $130 million sour gas
treatment plant and associated pipeline for the gas
production project.
SECRET
A-3
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
.7G__x I
The new agreements will maintain the pervasive presence of
the USSR and-Eastern Europe in the Syrian economy. More than
3,500 Soviet and East European non-military technicians were in
Syria in 1982, and the US Embassy in Damascus reports that all
East Bloc countries except Poland are involved in large-scale,
multi-year, turnkey projects.
Other Middle East
Egypt. Cairo's relations with Communist countries under
President Mubarak have recovered from the near break in Egyptian-
Soviet relationship brought about by Sadat and Egypt received
almost all of the known East European economic aid to the Middle
East in 1982/83. The new economic commitments--$50 million from
Hungary and $35 million from East Germany--were bank credits
designed to finance Egyptian imports of capital goods from the
two countries. Hungary will provide power, agricultural, and
light industrial equipment, while East Germany will increase its
participation in Egyptian power development by rebuilding a power
grid. Romania allocated $100 million of an old $300 million
credit for electrification projects in the Sinai and agreed to
send technicians to correct problems at a phosphate plant (built
under an early aid agreement), whose products are of such poor
quality that even Bucharest refuses to buy them.
There was little progress toward restoration of normal
relations with the USSR, however, in spite of new economic
contracts and the return of some Soviet specialists to Egypt.
President Mubarak invited Soviet technicians to install equipment
(ordered several years ago) at the Helwan steel plant, the cement
plant at Asyut, and a generator at the Cairo power station. Some
200 Soviet personnel were in Egypt at the end of 1983 under the
new contracts. Egypt also agreed to sell about $6 million worth
of cotton to the USSR in 1982, the first such sale since 1978.
South Yemen. Economic realities are threatening to damage
South Yemen's relations with the USSR and its East European
allies. Dismayed by the lack of economic progress made since the
revolution in the late 1960s, President al Hasani has begun to
seek economic investment from the West and Saudi Arabia. Even
though the USSR and its allies have promised nearly $1 billion in
economic aid to Aden, Communist-sponsored projects have suffered
in comparison to the limited Western effort in South Yemen. In
addition, the USSR has not built long-awaited power and cement
production facilities; the cost of 25X1
the powerplant has increased threefold .since the original
agreement was signed. Still, in 1982 and 1983 the USSR signed
pacts to improve Aden port and construct a satellite receiving
station as part of the Intersputnik network. Work continued on a
fishing port, irrigation projects, a hospital, and the power-
plant, while Moscow promised action soon on the cement plant.
SECRET
A-4
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
North Africa: A Growing Communist Presence
Communist countries further increased their presence in
radical North African states in 1982 and 1983. New multibillion
dollar contracts to develop infrastructure in both Algeria and
Libya were signed, and more than $350 million in project
financing was provided. North African countries employed nearly
70,000 technicians from the USSR and its allies in 1983, more
than half of all such Communist technicians in LDCs during the
year. More than 58,000 Communist technicians were in Libya,
which has employed large numbers of East Europeans on development
projects since the early 1970s. Some 6,000 Soviets were in
Algeria, the largest Soviet economic contingent abroad. In
Morocco, the USSR finished surveys on the $2 billion Meskala
phosphate project (being financed with Soviet aid) and signed a
new agreement to construct an experimental shale oil plant.
North Africa: Economic Credits
and Grants, 1982 and 1983
Million US $
Eastern
USSR Europe
1982 Neg l
Mauritania Negl
1983 278 50
Algeria 250 Mauritania 2 Negl
Tunisia 26 50
Algeria. There has been little discernible change in
Algeria's relations with the USSR and Eastern Europe over the
past two years. The 5-year-old Benjedid government, with its
insistence on a neutral political stance and an economic
development strategy that emphasizes sophisticated Western
technology, has distanced itself somewhat from the USSR. Still,
relations have been good, and Communist countries were able to
close several billion dollars in contracts for housing and other
projects under Algeria's $100 billion 1980-84 development plan. 25X1
The USSR provided at least $250 million in new credits to finance
construction of the High Plateaus railway. We have no
information on the terms of other contracts, but
the USSR is offering 10-year repayment terms on 25X1
agreements that probably run into several hundred million
dollars. Projects to be constructed under Soviet contracts
signed in 1982 and 1983 include:
SECRET
A-5
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
SECRET
o Three-fourths of the 1,000 KW Alrar-Hassi R'Mel gas
pipeline, for which the USSR is acting as general
contractor.
0 Four major dams.
o A 500,000 ton a year cement plant.
Some 6,000 Soviet personnel supported Soviet projects in Algeria
in 1983 (the largest Soviet economic contingent in the Third
World) and some 1,600 Algerians were being trained in the USSR.
East European countries also emerged as substantial
participants in Algerian development with large agreements to
support Algeria's building boom:
o Bulgaria negotiated a contract to construct a $50 million
forklift plant and to send more agricultural experts to
work in several provinces.
o East Gemany, Algeria's largest East European donor with
$375 million in pledges, agreed to build 32 vocational
training centers, a teacher training institute, 280
training workshops to accommodate 20,000 students, a
cement plant, 30 opthalmology centers, 5,000 housing
units, and several more unidentified industrial
projects. East Germany also completed an industrial
canplex at Berrouagia under a $95 million credit
agreement.
o Hungary began work on 4,000 apartment units, lU poultry
farms, four plants for animal feed, and the supply of
8,000 buses under contracts valued at more than $3UU
million.
o Romania won contracts to supply 20,000 housing units
valued at $1.5 billion.
Sparked by this dramatic increase in activity, Algerian trade
with the USSR and Eastern Europe nearly doubled to $800 million
in 1982 (the latest year for which we have data).
Libya. Difficulties in meeting hard currency payments on
Soviet arms and other Communist debts have dominated Tripoli's
economic relations with Communist countries over the past two
years. Libya's massive $2 billion scheduled annual debt payment
to the USSR for weapons has been a source of friction between the
two countries for several years. Moscow has tried to hold out
for hard currency payments but in 1982 was forced to begin
accepting several million tons of Libyan oil annually to prevent
a default. The USSR ships most of the oil to West European
SECRET
A-6
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
customers for hard currency, a move Tripoli has protested because
it undercuts Libyan sales. In spite of the difficulties,
diplomatic sources report that the two countries may have agreed
in principle in 1983 to sign a friendship treaty.
The USSR also maintained a fairly rapid pace on development
projects with more than 5,000 Soviet technicians in-country, and
was preparing to undertake several new projects, including:
o new power transmission lines,
o an extension of the S3.8 billion Soviet-built Brega-
Misurata gas pipeline to al Khums,
o a nitrogen fertilizer plant,
o a chemical complex at Marada, and
o a hospital.
Soviet personnel put the finishing touches on the billion-dollar
nuclear research laboratory at Tajura, and the USSR began
preliminary work on nuclear powerplant at Surt. A final contract
on the powerplant reportedly was expected in 1984.
Among East European countries, Bulgaria and Romania signed
new long-term friendship and cooperation agreements. Libya also
used oil shipments to resolve payment problems with Bulgaria,
Hungary, Poland, and Romania. Libyan obligations to East
European countries stem from nearly 50,000 technicians working on
several billion dollars in development contracts. East European
countries are active in road and housing construction,
agricultural development, and the oil industry. New contracts
have been signed with East Germany to construct agricultural and
training facilities and with Hungary for railroad design.
Morocco. Morocco's relations with Communist countries,
always concentrated in the economic sector, remain low key. In
spite of the political chill over the Polisario issue that has
permeated political exchanges for the past several years,
economic relations with the USSR proceeded at a normal pace.
Rabat continued to buy Soviet oil, and the Moroccans awarded the
USSR a contract to build an experimental power station fueled by
oil shale, under negotiation since 1978. The USSR also completed
surveys for the Meskala phosphate development project that will
be financed with S2 billion in Soviet credits extended earlier,
and reportedly contracted to build a superphosphatic acid plant
at Jorf Lasfar to supply the Soviet market. In addition, the
Soviets agreed in principle in 1983 to begin a feasibility report
on a fish processing plant to be supplied under a joint fishing
agreement. Moscow's reluctance to move ahead with fisheries
development under a 1978 accord has generated considerable
acrimony in the relationship between the two countries.
SECRET
A-7
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
v u~.a~u i
South Asia: Deepening Communist Involvement
The USSR's occupation of Afghanistan has dominated Communist
relations with South Asia since 1981. The USSR's commitment to
shore up Kabul's Marxist government and its desire to maintain
friendly relations with other regional powers have moved South
Asia into the limelight among Moscow's aid recipients. In 1982
and 1983, the USSR provided....a billion dollars in assistance on
very liberal terms to South Asian recipients, about 30% of its
program in developing countries. India, still a major Russian
customer despite frictions over the Afghan invasion, received
$140 million in Soviet financing for a steel plant, while
Pakistan took up some of the $2 billion in credits offered by the
Kremlin to mend the rift caused by the Soviet presence in
Afghanistan.
South Asia: Economic Credits
and Grants, 1982 and 1983
Million US $
Eastern
USSR Europe
1982 93 2 52
Afghanistan 90
Bangladesh .. 2 52
Nepal 3
1983
Afghanistan
Bangladesh
India
Pakistan
860
371
73
140
277
Afghanistan. Since the Marxist takeover, Afghanistan has
become one of the USSR's largest economic aid beneficiaries in
the non-Communist world. The USSR provided $46U million in new
assistance to Afghanistan in 1982 and 1983, most of it grant aid
to finance the delivery of commodities. More than $800 million
of Moscow's $1.1 billion in economic aid deliveries to the
Marxist government have been in the form of grants, generally to
cover the delivery of food and other basic commodities. The USSR
reportedly also has been forced to provide $75-100 million in
hard currency loans to procure consumer goods from third
countries. Disbursements have averaged nearly $300 million per
year since the December 1979 Soviet invasion. In addition to its
fairly generous commodity support, the USSR has permitted
Afghanistan to defer payments on the services of Soviet
technicians, for which the USSR usually demands cash payments.
SECRET
A-8
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Deliveries to projects also have continued at about $75-100
million annually as the Soviets expedited work on transport and
military-related projects that will facilitate logistics for
Soviet troops. For example, the Afghan press reported that
Soviet personnel completed a bridge across the Amu Darya river at
the border well ahead of schedule. Moscow also has:
o Built two oil products pipelines to service Soviet units
in Afghanistan.
o Recently agreed to build Afghanistan's first railroad,
linking Pul-i-Khumri and Kabul with the Soviet border,
and possibly extending to Iran and Pakistan.
o Agreed to finance expansion of Kabul airport.) 25X1
In contrast, the war has impeded Soviet efforts to move
forward with other major development projects such as the Ainak.
copper complex, the Hajigak iron ore scheme, and natural gas
exploration in the north. The only major development contract
announced 5etween Moscow and Kabul in the past two years was a
$200 million project to link Afghanistan to the USSR's power
grid, to ,be financed under old agreements. Moscow also signed
protocols in 1983 to continue oil and gas exploration and
exploitation, to complete the Mazar-i-Sharif thermal powe rplant,
and to reconstruct the Torgundi railway station. The Soviet
program in 1983 was supported by 5,000 technicians in
Afghanistan, and a burgeoning training effort that saw nearly
9,000 Afghanis in Soviet educational institutions at year end.
Until the invasion, Moscow's economic program in Afghanistan
was self-sustaining. Commercial deliveries and aid flows were
nearly balanced by Afghan exports of three billion cubic meters
of natural gas annually through a pipeline built by the Soviets
in the mid-196Us. With gas deliveries, Kabul financed a Soviet
program that over the past 25 years has accounted for two-thirds
of Afghanistan's 21,000km of roads, nearly all of its major
airfields, two-thirds of its electric generating capacity and an
extensive transmission network, 40,000 hectares of cultivable
land through irrigation and reclamation, and the entire natural
gas industry which produces about 3.5 billion cubic meters of gas
per year. Since the invasion, however, the Soviets have been
providing about $200 million in aid annually that will not be
reimbursed. In addition, rebels blew up the gas pipeline close
to the border at Jeraqduq in 1982, interrupting gas supplies to
India. Complementing the large new military cooperation
agreements signed in the past two years, the USSR and India
announced significant progress in bilateral economic relations.
In addition to $140 million in 17-year loans to finance expansion
of the Vishakapatnam steel plant, Moscow apparently has offered
to provide financing for several new projects, including:
SECRET
A-9
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
SEUKL'1'
o A nuclear powerplant.
o Indian on-shore oil exploration and secondary recovery
technology.
o An oil refinery.
o Modernization of the Soviet-built antibiotics plant at
Rishikesh.
o Upgrading the Soviet-built Neyveli and Patratu thermal
powerplants.
o Cooperation in building high tech oil and coal extraction
equipment at Indian plants for use by both countries.
Protocols for oil development and the antibiotics plant were
signed in karly 1983. Some of these undertakings could be funded
with the ~l billion of Soviet aid in the pipeline, but massive
new credi,;ks would be required to cover costs for such ambitious
projects ;'as the nuclear powerplant. The USSR also hinted that it
would finance some equipment for the 600,000-ton Orissa alumina
plant, a project held up by Indian budgetary problems.
The USSR also has deepened its involvement in India's
ongoing project development with major deals that will fall under
earlier aid arrangements, including:
o A $400 million contract to set up the Vaiden superthermal
plant in Madhya Pradesh.
o Protocols to go ahead with development of the Jhanjra
coal mine, the largest in India.
o Agreements to assist a synthetic rubber plant and a
hydrogen peroxide facility.
o A protocol to improve the Korba aluminum smelter. I 125X1
Last year Moscow also concluded a protocol to exchange $3.6
billion of goods in 1984, a 15 percent increase over 1983 that
will keep India in first place among Soviet-LDC trading
partners.
Pakistan. Pakistan's economic relations with the USSR have
improved somewhat (in spite of political strains over the Soviet
occupation of Afghanistan) on the strength of $275 million in new
credits for a thermal powerplant at Multan. Moscow has offered
up to $2 billion in financing for Pakistani development. Other
plans under discussion include:
SECRET
A-10
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
J F, %_ i[ C.
l
o Downstream industries related to the Soviet-built Karachi
steel plant.
o Additional power capacity.
o oil and gas development.
In March 1983, the first stage of the Soviet-sponsored Karachi
steel plant, the larest industrial construction project in
Pakistan's history, was officially commissioned. The second
stage, to be completed in 1984, includes a second blast furnace
and a hot strip and cold rolling mill. The USSR also began
construction of a plant to assemble 51,000 Belarus tractors a
year under an $18 million credit agreement.
East Asia: Indifferent to Soviet Initiatives
Moscow has failed to improve its political fortunes in most
of East Asia over the past few years, evidence of the area's
lingering suspicions about the Soviet military presence in
Vietnam, opgoing contention over the Kampuchea issue, and the
general unwillingness of East Asian governments to become
involved In a power struggle between Moscow and Beijing.
o Soviet relations with Indonesia were strained by the
exposure of espionage activities by Soviet diplomats and
Aeroflot officials in 1982. The Aeroflot office was
closed, but plans to elminate the Soviet consulates in
Medan and Surabaya and disband the press and trade
sections of the Jakarta Embassy have not been imple-
mented. While remaining cool toward Moscow, Jakarta has
sought to prevent a further deterioration in relations
because of its interest in expanded trade with the USSR
and Eastern bloc and a desire to promote Indonesia's non-
aligned image.
o The USSR made some progress in the Philippines. First
Lady Imelda Marcos caused a furor in conservative
quarters in Manila in 1982 by accepting a Soviet offer of
a one million metric ton cement plant during a July trip
to Moscow. If carried out, the project would provide the
USSR with a long-sought means to increase its presence in
the Philippines. Soviet technicians already have
gathered initial data for the cement project, together
with a related coal development scheme and power plant.
The $200-250 million cement project may run into trouble,
however, over Manila's request for full Soviet financing
over 2 0 years. Moscow also has offered aid to power
development and food processing.
o Singapore's largest shipyard won a $110 million contract
in 1982 to repair and convert two Soviet whalers to fish
factory ships--the largest single such contract ever
undertaken in Singapore. Nonetheless, Prime Minister Lee
SECRET
A-11
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
remains suspicious of the large Soviet commercial
presence in Singapore, and political relations
deteriorated over the exposure last year of Soviet
espionage activity in Singapore.
East Asia: Economic Credits
and Grants, 1982 and 1983
1982
Indonesia
Philippines
Million US $
Eastern
USSR Europe
10
NA
10
E
uropean countries continued to offer trade credits to
East,
expand cortimercial dealings in the area. East Germany discussed
reviving 'its aid program in Indonesia--dormant for 20
years--while Romania signed an economic cooperation agreement
that established a joint commission for cooperation. Both sides
agreed to accelerate negotiations on agricultural, livestock, and
forestry projects. The Philippines accepted $10 million in trade
credits from Czechoslovakia while Thailand turned down a $22
million Polish bid to build an aluminum sulfate plant because of
its high cost and fears that instability in Poland could cause a
contract default. No decision was announced on a Romanian offer
to provide equipment and technical assistance to a Thai
fertilizer complex and help for other development projects.
Western Hemisphere
The Caribbean and Central America: The Newest Penetration
Program
Over the past two years, Communist countries have responded
to opportunities created by deteriorating US relations and
continuing turmoil in the Caribbean and Central America with more
than $735 million in new economic agreements, mostly to Marxist
states. Nicaragua received most of the aid as Cuba, the USSR,
and East European donors signed $700 million in agreements to
finance commodities, equipment, and technical services. The
Communist commitment to Nicaragua was further demonstrated by
Managua's acceptance as an associate member of CEMA in 1983.
Before the US intervention, Grenada had received its first
significant aid from the USSR--~10 million in credits for
communications and other projects--and an additional $10 million
from Eastern Europe.
SECRET
A-12
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Western Hemisphere: Communist Economic
Credits and Grants, 1982 and 1983
Million
US $
USSR
Eastern
Europe
Cuba
Central America/
Caribbean
1982
173
93
131
Costa Rica
..
..
1
Grenada
10
9
Negl
Nicaragua
163
84
130
19 83
255
60
/Grenada
.
Neg1
Negl
Jamaica
10
..
..
Nicaragua
16
255
60
South America
1982
2
..
..
Bolivia
2
..
..
19 83
156
10
Neg1
Argentina
68
..
..
Bolivia
72
10
Neg1
Brazil
15
..
..
Pe ru
1
..
..
Grenada. In 1983, Grenada was the site of one of the most
dramatic failures for Communist policy in Latin America. Prior
to the US-led intervention, Communist countries had deepened
their economic relationships with the leftist government of Prime
Minister Bishop with more than $30 million in economic
commitments that included:
o Soviet pledges of more than $10 million in credits and
grants to finance a deepwater port at Grenville, a
satellite receiving station, agriculture supplies and
services, and commodities. Moscow also participated in
Grenadian economic planning under an agreement signed in
December 1982 and Soviet technicians had arrived in 1983
in connection with these projects.
SECRET
A-13
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
J 1J \, 1\1J 1
o East German promises of $lU million in credits for a new
telephone system, a cocoa processing plant, and other
agricultural and communications equipment.
Cuban pledges of $30 million for an airport at Point
Salines, fishing trawlers and television equipment, and
40 tractors. More than 70U Cubans, the largest foreign
contingent in Grenada, were associated with the
construction projects.
Nicaragua. Communist countries continued their
unprecedented level of economic support to Nicaragua in 1982/83
with more than $700 million in economic pledges. Cuba was the
largest donor with a $190 million in commitments designated for a
sugar plant, agricultural equipment, medical supplies, consumer
goods, and services. Much of the Cuban program consists of
technical services. The USSR ran a close second with $180
million in new agreements, which included, among other projects:
o Studies for hydropower stations in Matagalpa and
Mpjolka, for which Nicaragua eventually expects several
hundred million dollars in construction loans.
o ,'Port construction at San Juan del Sur.
o Five training schools in agriculture, energy, fishing,
and mining.
o A 400-bed hospital.
o Mineral prospecting, gold mine rehabilitation, and
topographical mapping. 25X1
Some $30 million of the new aid is allocated to develop the
mining industry; another $50 million is for technical assistance
and feasibility studies, items for which the USSR generally
demands cash payments. In addition, Moscow is allowing Nicaragua
$30 million in commodity credits--a feature reserved for favored
clients.
East u European countries pledged almost $350 million in new
aid to Nicaragua. Among Eastern Europe's new agreements (that
brought their total pledges since 1979 to $465 million) were:
o $85 million from Bulgaria for hydropower, mining, and
agricultural projects.
o $200 million from East Germany for projects and
commodities, consolidating East Germany's position as
Nicaragua's major East European donor.
Larger Communist economic programs were accompanied by an
expanded technical presence. The number of Communist personnel
assigned to Nicaragua rose to more than 6,800 in 1983, more than
90 percent Cubans.
SECRET
A-14
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
The USSR and Eastern Europe delivIred an estimated $250
million in aid to Nicaragua in 1982/83 but only about $45
million served as balance of payments assistance compared to
Nicaraguan receipts of $500 million in aid annually from non-
Communist sources. The rest of the assistance was in the form of
machinery and equipment and technical assistance.
Other Central American and Caribbean Countries
Guyana. Guyana's relations with Communist countries were
generally friendly in spite of Georgetown's differences with the
USSR over aid and trade issues. Ties with the USSR cooled
because of Moscow's unwillingness to provide development
assistance on easy terms. The Soviet Ambassador to Guyana
publicly stated that Moscow has offered assistance under a 1977
agreement for bauxite, gold, and aluminum development as well as
"unlimited" credit for equipment purchases such as aircraft,
helicopters, bulldozers, and other machinery. Guyana turned down
these offers because of harsh terms. The USSR required hard
currency payment for a feasibility study on a proposed aluminum
plant and for Soviet technical services--both standard Soviet
practice s- Moscow recently renewed its offer to rehabilitate a
bauxite processing facility at Linden in return for bauxite
deliveries.
Jamaica. In spite of the Seaga government's intention to
reduce contacts with Communist countries, the USSR may have
signed a construction contract for a 600,000-ton caustic soda
plant (probably under the credit agreement signed in 1.977) and
reached an agreement to buy one million tons of bauxite annually
beginning in 1984. The USSR also provided Jamaica a $10 million
trade credit to purchase Lada automobiles as part of the new
trade agreement.
Mexico. The USSR and Eastern Europe have continued to
pursue economic initiatives individually and within the framework
of the Mexican-CEMA joint commission established under an
agreement signed in the mid-1970s. The USSR (in a consortium
with Finland) bid on a contract for a joint newsprint factory in
Mexico and has prepared offers on several power projects valued
at half a billion dollars. Moscow also was negotiating for
Mexican oil shipments to Cuba in return for Soviet oil deliveries
to Mexican customers in Europe--a deal that could involve up to
60 percent of Cuba's oil requirements. Mexico has been cool
toward this arrangement.
lA January 1984 Soviet agreement to deliver oil in exchange for
Nicaraguan products will mean a greater Soviet contribution to
Nicaragua's urgent balance of payments requirements.
SECRET
A-15
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
V LV1\L 1
South America: Pursuing New Opportunities
In contrast to successful programs in parts of Central
America and the Caribbean, long-standing efforts to increase
Communist presence in South America have had more limited
success. This has prompted the Kremlin to assign first priority
to the expansion of aid and trade relations with major South
American countries to redress the annual $2-2.5 billion hard
currency drain on the USSR from its purchases of South American
grain and other commodities. In 1982 and 1983, the USSR placed
$155 million of credits at the disposal of South American
suppliers to buy Soviet machinery and equipment, only a fraction
of the several hundred million dollars Moscow has offered for
major power and minerals industry projects. However, Moscow was
able to break new ground with a triangular agreement with Brazil
under which Brazilian contractors will provide construction
services for a Soviet-sponsored dam and hydropower project in
Angola. Argentina and the USSR reportedly are undertaking a
similar venture in Peru. Moscow hopes that these creative
approaches to cooperation will help it to break into South
America's Western-dominated private sector equipment markets.
Are-Mina. Moscow's political support for Argentina during
the Falk ands war, its position as Buenos Aires' major single
trading partner and its willingness to offer financing for
development projects have contributed to a somewhat more
favorable Argentine view of relations with Moscow.
With the provision of $68 million of credits for the Piedra
del Aguila power project in 1983, the USSR seemed to be close to
overcoming Argentina's reluctance to permit extensive Soviet
participation in development projects. As head of a
multinational consortium, the USSR also bid to construct the $lU
billion Middle Parana power project, for which Moscow has
completed feasibility studies and designs. other projects under
discussion include:
o The power complexes at Santa Cruz, San Juan, Parana
Medio, and Bahia Blanca.
o A $100 million graphite electrode plant.
o Port construction and modernization at Bahia Blanca,
Puerto Madryn, and Ushuaia.
o Electrification of a railroad from Buenos Aires to
Rosario.
o A natural gas pipeline.
o A paper mill.
Moscow and Buenos Aires also discussed joint construction of a
power project in Peru, and Argentina began shipping uranium to
SECRET
A-16
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
the USSR for enrichment under an agreement signed in 1981. In
anticipation-of increased business, the USSR renewed a 1980
agreement that provides open-ended trade credits.
Brazil. Brazil and the USSR have moved toward a closer,
more broadly based economic relationship over the past two years,
in spite of Brazil's well-publicized suspicions about Moscow's
aims in the Western Hemisphere. Fundamental to the growing
relationship were:
o New Soviet agreements to participate in joint power
projects with Brazil in Angola.
o Soviet offers to supply equipment to the Santa Isobel and
Piedra do Cavala power projects.
o Soviet interest in the $900 million project to reclaim
1.5 million hectares of irrigable lowlands in the Varzeas
region.
o Soviet offers to participate in the $650 million copper
segment of the Carajas general development project.
Startup on Soviet contracts to install 15 methanol plants
in Brazil and negotiations to sell licenses for Soviet
tin, steel, copper, and iron technologies.
Moscow's large trade deficit with Brazil was eased somewhat
in the past two years by a drop in Brazilian agricultural
commodity prices and Soviet sales of oil, valued at around $375
million. Deliveries of equipment, however, remained low in spite
of high-powered Soviet sales efforts over the past two or three
years. Moscow also expressed interest in Brazilian bauxite and
copper in exchange for Soviet machinery and equipment.
Bolivia. The major development in Bolivia's economic
relations with Communist countries was $72 million of Soviet
credits for a second tin volatization plant (at Marcamarcha) in
spite of problems and cost overruns encountered during the
construction of a similar plant at La Palca. Together, the two
plants will absorb $150 million in Soviet credits, repayable in
nonferrous metals. The La Palca plant, the largest of its type
in the world, was turned over to Bolivia several years behind
schedule in 1982. According to the Bolivians, they hope to buy
another $160 million in machinery and equipment from the USSR and
Eastern Europe over the next year or so for the mining
industry. According to the US Embassy in La Paz, this will tie
the strategic tin industry to the USSR for the next decade. The
USSR also is considering assistance for trolleybus systems for
Cochabamba and Santa Cruz, a prefabricated housing plant, four
hydropower plants, geological prospecting, and a cement plant
under an open ended 1976 line of credit.
SECRET
A-17
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03 :CIA-RDP90-00596R001100020001-0
Sub-Saharan Africa: Heightened Economic Support
Communist economic agreements in sub-Saharan Africa rose to
more than $1 billion in 1982 and 1983 as the USSR provided
expanded balance of payments and development aid to client
states. Angola signed an agreement with the USSR in January 1982
that eventually could provide $2 billion in credits; $400 million
in contracts already have been signed for a dam project the USSR
will construct jointly with Brazil. The USSR agreed to let
Ethiopia defer payments for 12 years on an estimated $15U million
of oil, and agreed to provide $250 million in new aid for the
Gambella irrigation project. Moscow also was studying the
feasibility of several hundred million dollars worth of projects
for Mozambique.
Sub-Saharan Africa: Economic Credits
and Grants, 1982 and 1983
Million US $
Eastern
USSR Europe
1982 696 113
Angola 400
Equatorial Guinea 1
Ethiopia 232
Ghana 10 Neyl
Guinea .. 20
Guinea-Bissau 15 ..
Madagascar 6
Mali 22
Mozambique 5 10
Niger .. 70
Tanzania 5 10
Zimbabwe .. 2
1983 308 72
Ethiopia 266 2
Ghana Negl Neyl
Kenya 5
Lesotho 5
Mozambique 16
Nigeria 5
Seychelles .6 ..
Somalia .. 25
Uganda 11 ..
Zambia 9
Zimbabwe 30
SECRET
A-18
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
There has not been a similar increase in Communist
assistance for politically moderate countries in the region with
the exception of Nigeria, which repays Soviet assistance in hard
currency. Until the 1980s, African states had absorbed less than
10 percent of Soviet assistance, as Moscow pursued more lucrative
interests among wealthier LDCs. Now that the USSR is supporting
some basic needs in African client states (especially Ethiopia),
Soviet aid to Africa in the 1980s has risen to 15% percent of
total pledges.
Angola. The USSR moved quickly to implement a 10-year
agreement signed in January 1982 that eventually could provide up
to $2 billion in economic development aid. The USSR signed a
contract to provide $400 million in equipment credits for the
Kapanda hydroelectric dam and powerplant--an undertaking that
will be Angola's largest construction project. In an unusual
move, the USSR will join with Brazil to execute this project. It
is part of a comprehensive Soviet-formulated development plan
under which Moscow will also construct a 990,000 acre irrigation
system, bridges, and other projects in Malanje province. Angola
and the USSR also are discussing the construction of an oil
refinery. % 25X1
The 'new Soviet agreement has not appreciably reduced the 25X1
growing tension in relations over the Soviet and East European
failure to help reverse the decline in Angola's economy.
there is a widespread belief among 25X1
Angola officials that nearly 10 years of Soviet economic aid has
been a failure. More than 9,500 Communist economic technicians
were present in Angola in 1983, but industrial production lagged
far behind prewar levels, and only the Western assisted oil
industry operated at a profit. Food and consumer goods shortages
have become more pronounced. Moscow has flatly refused to
provide emergency food assistance for war-torn southern Angola.
Meanwhile, Angolan officials are watching the growing Soviet debt
burden with dismay. 25X1
Ethiopia. As a result of lengthy economic negotiations,
Moscow made. substantial new credits available in 1982 and 1983 to
Ethiopia for oil--its first such concession to a non-Communist
LDC--and for development projects. The USSR agreed to provide
500,000 tons of crude oil in 1983 (all of Ethiopia's require-
ments) on credit at prices 10 percent below the world market.
The USSR also moved forward on Chairman Mengistu's repeated
requests for project aid with a $250 million credit for the
Gambella irrigation project and for further oil exploration. The
USSR also continued work on:
o A cement plant.
o A farm machinery assembly complex.
o A caustic soda plant.
SECRET
A-19
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
o 90 grain and fodder warehouses.
o Oil, gas, and mineral prospecting projects.
While publicly reaffirming his political commitment to Moscow,
Mengistu continues to rely on the West for economic assistance.
Ethiopia is trying to increase Western aid for Ethiopian
development projects above the $250 million it receives annually
Mozambique. Mozambique's expanding economic ties with
Western powers have not affected its relations with Communist
countries. The USSR and its East European allies deepened their
economic involvement in Mozambique with nearly 2,400 Warsaw Pact
technicians and $30 million in new aid. The USSR, the largest
donor with $140 million in outstanding development credits,
pursued several initiatives:
o Participation in a railroad from the Moatize coal fields
to,the port of Beira using Brazilian firms as civil works
contractors.
o The supply of 5150 million of equipment for the second
stage of the Cabora Bassa hydropower projects.
o Acceleration of work on mining and agricultural projects,
an aluminum smelting plant at Caia, and intensified coal
exploration.
The USSR also donated $20 million in grain, food, and seed grains
to Mozambique. 25X1
Other African Countries
Ghana. Under Rawling's leadership, Ghana has stressed state
investment in all economic areas, and encouraged Communist
countries to revive aid programs abandoned in the mid-1960s.
Highlights of new Communist commitments are:
o Bulgarian participation in a truck plant and development
of agriculture and transportation.
o Czech rehabilitation of a sugar refinery, tire factory,
tannery and ceramic facilities as well as construction of
a tractor plant and irrigation dams, probably with
credits under earlier agreements.
o Hungarian construction of two brick and tile works and
expansion of a pharmaceutical factory.
o Soviet reactivation of a prefab construction materials
plant, construction of a machine building and power
SECRET
A-2 0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
lJ 1J\.1% 1
engineering center and rehabilitation of a gold refinery
with nearly $10 million in credits, possibly under old
agreements.
In addition, Bulgaria, East Germany, and Hungary have provided
emergency assistance valued at under *1 million, and Cuba has
established hed a joint commission to study development projects.
Guinea. The USSR's relations with Guinea, its first African
aid client, have deteriorated sharply in the 1980s as President
Toure intensified his search for Western trade and investment to
revive Guinea's economy. A low level of economic aid and
arguments over the price the USSR pays for Guinean bauxite
continued to plague the Soviet-Guinean economic relationship. To
underline its disappointment with the Soviet program, Guinea
expelled 30 Soviet technicians from the Kindia bauxite plant in
1982, charging them with inferior performance and smuggling, and
cut back on the number of students traveling to the USSR. At
present, Guinea's reliance on the Soviets for arms provide the
major momentum for the relationship.
SECRET
A-2 1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 T
Sanitized Copy Approved for Release 2011/03/T
T03: CIA-RDP90-00596RO01 100020001 -0
Chinese Military and Economic Programs in the Third
World: Growing Commercial Emphasis
10 September 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
This report assesses trends in Chinese military
transfers and economic aid to non-Communist less
developed countries with an emphasis on events in the
1980s. The statistical data supersede those in our
previous publications.
The term military transfers includes both the sale
and grant of military equipment and related services,
such as advisory support, training, and construction of
military facilities. Military transfers occur under
signed agreements, commitments, or accords which
constitute a formal declaration of intent. The terms
deliveries and shipments also are used to indicate the
actual movement of foreign military goods and services
to the recipient country.
Within the economic aid context, the terms
extensions, commitments, and agreements refer to
pledges of goods and services, either on deferred
payment terms or as grants. Assistance is considered
to have been extended when accords are initialed and
constitute a formal declaration of intent. Disburse-
ments and deliveries refer to the actual use of goods
and services.
The non-Communist less developed countries
referred to in this report include: (1) all countries
of Africa except the Republic of South Africa; (2) all
countries of East Asia except Australia, Hong Kong,
Japan, New Zealand, and the Communist states of
Kampuchea, Laos, and Vietnam; (3) Malta, Portugal, and
Spain in Europe; (4) all countries in Latin America
except Cuba; and (5) all countries in the Middle East
and South Asia.
i
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Chinese Military and Economic Programs in the Third
World: Growing Commercial Interests
Key Judgments
China's economic aid and military transfer programs in the
Third World have changed dramatically over the past five years.
In the early 1980s Beijing began to emphasize military sales to
earn hard currency and to reduce its economic aid in order to
conserve resources for its own economic development. Since then,
Beijing has emphasized commercial payoffs in almost all of its
dealings with developing countries by:
o Increasing its arms sales almost 10 times over the
previous four years. Since 1979, China has signed
agreements to sell $6.2 billion of weapons, most of them
to Egypt, Libya, Iran, Iraq, and Pakistan.
o Expanding hard currency technical service contracts which
provide economic technicians to LDCs for specific
projects. China now has 29,000 technicians abroad, its
highest level ever and double the number employed in LDCs
in 1980.
o Shifting from the use of grant aid and interest-free
loans in its economic aid programs to an emphasis on
harder repayment terms and some interest charges.
The new policy represents a radical departure for Beijing in
the Third World. Earlier, China had provided both economic and
military aid on generous terms to poor clients who often could
not afford a more costly Western presence. China never attempted
to compete with other military suppliers in the quantity or
sophistication of weaponry. Military agreements featured mostly
small arms and, for some clients, old-model tanks and aircraft.
The economic program highlighted showy projects such as the Tan-
Zam railway in Africa and sports stadiums in a number of
countries.
It may be difficult for Beijing to maintain existing levels
of military sales once the Iran-Iraq conflict is resolved. More
aggressive Chinese arms sales policies could have only marginal
results because of increasing competition among suppliers and LDC
demands for more modern military equipment. China could offset
some of these factors by:
o Specializing in the export of basic military equipment,
support facilities, and spare parts and ammunition for
Soviet-made equipment.
o Aggressively selling a few more advanced weapon systems,
such as MIG-21 jet fighters and improved medium tanks.
Even if military sales levels decline, we foresee an active
military and economic presence for China in the Third World
through the end of the decade, because:
ii
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011103/03: CIA-RDP90-00596RO01 100020001 -0
o Military deliveries will be sustained at an unusually
high rate under contracts still outstanding.
o Beijing sees these programs as an important means of
earning foreign exchange.
Beijing is looking for $500 million to $1 billion in hard
currency earnings annually from its service program by
the mid-1980s, and plans to have 100,000 technicians in
LDCs within a few years. We believe these levels are not
achievable until at least the end of the decade, but are
an important signal of the importance China attaches to
growth of the programs.
Prospects for marketing Chinese civilian technical services
appear almost unlimited because of the low salary rates charged
and China's reputation for quality work. A possible shortcoming
is Chinese inexperience with high technology Western equipment
often used on projects where China is supplying only labor.
China has undertaken a training program that will help it to
overcome this obstacle. We believe that economic and technical
exchanges will continue to be the mainstay of China's program
through the end of the century.
iii
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01 100020001 -0
Page
Key Judgments .................................................ii
The Military Program: A Product of the 1980s ...................1
Agreements Soar ............................................1
Deliveries Hit Record Levels ...............................2
Small Military Technical Presence ................... .......3
Basis for New Policy .......................................4
Economic Relations: Developing Commercial Potential............6
Entering the International Contracting Field ...............6
New Aid Hits Record Low ....................................7
Technical Services: A Hard Currency Resource ...................8
Prospects ......................................................9
iv
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Chinese Military and Economic Programs in the Third
World: Growing Commercial Emphasis
Military Sales: A Product of the 1980s
Agreements Soar
Since Beijing began in 1980 to expand its sales of military
equipment for hard currency, China has signed agreements to sell
$6.2 billion of weapons to LDCs (including a record $3 billion in
1981), five times higher than Chinese military agreements in the
previous 20 years. Opportunities provided by the Iran-Iraq war
have propelled China into second place among Communist military
suppliers, ahead of all of the East European countries combined
(but still far behind the USSR). The new emphasis on financial
returns has changed the direction of the Chinese program away
from traditional Asian and African clients to wealthier Middle
Eastern LDCs (see the figure).
The Soviet Union's refusal to supply Iraq at the beginning
of the Iran-Iraq war provided China with its most important
breakthrough into the international arms market. Since then,
Iraq has become China's best customer, with more than $3.8
billion of orders for 70 F-7 fighter aircraft, antiship missiles,
machine guns, ordnance, and support equipment. A few other major
clients make up the bulk of the remaining orders:
o Egypt has bought nearly $1 billion in Chinese arms,
mostly naval equipment and jet fighters.
o Pakistan has signed a billion dollars in contracts for
FT-6 aircraft, T-54 tanks, A-5 Fantan fighter aircraft,
and other military equipment.
o Iran has purchased ground and air defense equipment,
ammunition, and other supplies worth $500 million, and
o Libya signed agreements worth more than $300 million for
military equipment, including antiaircraft guns and
ammunition.
Deliveries Hit Record Levels
China's drive to fill orders rapidly produced record
deliveries in the 1980s. Average annual arms shipments of $525
million to Third World clients doubled those of any previous
year. Iraq has received about one quarter of the deliveries
since 1980, including China's first export of MIG-21 Fishbed
fighters, substantial numbers of medium tanks, field and air
defense artillery and other military support equipment. Among
the other major hardware transfers were:
o The first Chinese T-69 tanks to Iraq.
o The first F-7 jet fighters to Egypt.
o Shanghai II-class patrol boats, Hainan-class submarine
chasers, and submarines to Egypt.
o The first A-5 Fantan fighters to Pakistan.
1
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
China will probably sustain a high rate of deliveries over the
next few years, since $4 billion is still outstanding on orders
from major clients.
Small Military Technical Presence
Unlike the cases of the Soviet Union and the East European
countries, China's expanding arms sales have not led to a larger
increase in military technicians and advisers. Only about 500
Chinese military personnel were in LDCs in 1983, about the same
level as over the past decade. China generally has been
reluctant to send large numbers of military technicians to LDCs
because they fear potential involvement in conflict. China, on
occasion, has even turned down requests to augment their military
presence in client states. For example, they recently refused to
increase the small military services program in Tanzania (a major
African client) even though they could have, recovered some of the
prestige they lost when the Soviets replaced them as a major
supplier a decade ago. Additionally, the unsophisticated nature
of Chinese military equipment eliminates the need for a larger
advisory presence and keeps training requirements to a minimum.
Finally, China apparently does not use the program for profit.
Beijing provides many services free of charge and where salaries
are charged they are nominal--$5,000 to $8,000 per year for
technicians.
Basis for New Policy
Beijing's new aggressiveness in the international arms
market underscores China's intent to pursue a competitive
commercial arms export policy that emphasizes hard currency
earnings rather than politics as the basic criterion for
concluding agreements. Beijing has made administrative changes
to facilitate such sales. China established special corporations
to represent segments of the Chinese defense industry in
commercial negotiations with LDCs.
China's more hardnosed approach to arms transfers is
reflected in the reduction of grant assistance that was a key
feature of China's program before 1978. We estimate that half of
the $1.4 billion of Chinese military transfers to 39 clients
before 1980 was provided free of charge; since then, we have
documented less than $10 million in military grants.
Economic Relations: Developing Commercial Potential
Entering the International Contracting Field
As with the military program, China is cutting down on
giveaways in its economic aid and is now emphasizing commercial
returns and hard currency earnings from technical services. The
economic program has evolved from a modest effort featuring
liberal amounts of grant aid to a major campaign to sell
technical services and equipment for profit. Beijing's current
leadership is trying to push China into the world economy by
introducing its most saleable items--such as cheap labor--into
2
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
the international market place. In its aid program, China is now
seeking to combine enhanced hard currency earnings with benefits
to LDC economies.
On the commercial side, China is working on housing in
Kuwait, a number of construction projects in Iraq, and a $375
million railway line in Nigeria. Last year, Beijing signed a
$1.6 billion railway construction agreement with Libya and is
negotiating a similar contract with Algeria. Even though they
are newcomers in the international commercial contracting field,
the Chinese have been named general contractor on several major
projects in LDCs, where they select subcontractors (generally
Western or Japanese companies) and arrange for local services.
Since 1980 China has earned $500 million in hard currency through
its construction contracts, has an additional $1.2 billion of
contracts in hand.
New Aid Hits Record Lows
Since 1980, China's new economic aid pledges have fallen
dramatically (table 5), a victim of China's economic retrenchment
in the post-Mao period. Only a few traditional recipients have
received significant new commitments to carry out programs
already in progress. Agreements in the 1980s comprise less than
15 percent of China's total economic aid since 1956 and have
followed a downtrend that began in the mid-1970s. Chinese
economic aid increased somewhat in 1983 over 1982; most was
provided on somewhat harder terms than before--shorter repayment
periods, low interest charges, and almost no grant aid. Chinese
assistance still is far more generous than that of most other
Communist and some Western donors.
In contrast to the decline in new pledges, Beijing has moved
fairly expeditiously to discharge its obligations under old aid
agreements. We estimate that China has disbursed about $250
million a year to ongoing projects since 1980--about the same
level as before. Beijing also has agreed to allocate funds under
earlier agreements for stadiums in the Comoros and Guinea Bissau,
new roads and bridges in Bangladesh, Burma, Nepal, and Sudan,
airport facilities in Mauritius, a coal mine in Tanzania, and
possible railroad rehabilitation in Botswana under earlier
agreements. These projects are worth several hundred million
dollars; they will absorb much of the aid in the pipeline,
causing a decline in disbursements later in the decade if new
pledges remain at current low levels.
Technical Services: A Hard Currency Resource
The provision of project personnel has become the mainstay
of China's economic program in LDCs as commitments of capital to
aid projects dwindle. The number of Chinese employed in the
Third World in 1983 has doubled since 1980--mostly in Iraq,
Jordan, and North Yemen. Beijing also is using a small technical
presence to build relationships with such Soviet-oriented Marxist
states as Angola and Mozambique.
3
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Technical services, which formerly were provided free by
Beijing to almost all aid recipients, are now being promoted to
earn foreign exchange. About half of the 29,000 Chinese economic
technicians employed by Third World countries in 1983 were
serving under commercial contracts with the rest financed through
aid agreements (table 6).
Beginning in 1980, China moved rapidly to export some of its
abundant labor on commercial terms and began to bid on
construction projects in Arab oil states. To handle its new
business in the Middle East and elsewhere, China opened offices
in Dubai, Iraq, Jordan, Kuwait, and North Yemen to manage local
sales. China also merged its Ministry of Foreign Trade with its
Ministry of Economic Relations in mid-1982 to integrate aid and
trade interests more closely. some 25X1
42 companies are involved in construction projects abroad and 40
new labor contracts were signed during the first half of 1983
alone. In 1983, China exploited another potentially lucrative
source of funds for the first time by providing labor to projects
financed by multilateral agencies in Morocco, Nepal, Nigeria, and
Somalia. 25X1
China has been successful in marketing services because of
the reasonable salary rates for personnel--from $2,000 per month
for project managers down to $400 a month for laborers. These
charges compare with as much as $8,000 a month for personnel from
other Communist countries. Another selling point is the
industriousness of Chinese personnel and their ability to endure
difficult working conditions that would not be tolerated by
skilled workers from other countries.
China still is providing a substantial number of technicians
to LDCs under aid agreements. Most of the technicians that China
provides free of charge are delivering basic services in public
health and education. We estimate that 1,200 doctors and at
least 500 teachers from China worked in the Third World (mainly
Africa) in 1983.
most technicians and laborers under this program
cost the LDCs only about $100 to $300 monthly for local
subsistence.
Prospects
China's new approach in its economic aid and military
transfer programs in the Third World will provide Beijing with a
number of opportunities to expand its influence in the LDCs and
strengthen its own domestic economy. We expect the PRC to
continue its opportunistic approach to arms sales, moving in
where a client with a large Soviet inventory--as Iraq--is denied
resupply in a crisis because of political reasons.
It may be difficult for Beijing to maintain its current
level of military sales once the Iran-Iraq conflict is
resolved. Sales to these two belligerents amount to more than
4
SECRET
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
55 percent of Chinese overall sales, and 70 percent of the new
sales in the 1980s. Other limiting factors include:
o Increasing competition among global arms suppliers.
o The accelerated pace of Western arms technology.
o The demand for more sophisticated arms by LDC clients.
Orders will continue, however, to stem largely from traditional
clients such as Pakistan and Sri Lanka. Beijing will also serve
smaller clients, such as sub-Saharan African buyers that depend
on Beijing for small arms and more basic military equipment.
In the future, we believe that China will emphasize the
export of basic military equipment, spare parts--especially for
Soviet equipment--and support facilities. This is the type of
military export commitment that can be readily met by China's
defense industries. China probably will be able to increase
sales to countries like Egypt and Somalia, which receive Arab
funds to maintain their Soviet-built military establishments.
China is a far more desirable supplier then the USSR from the
point of view of the conservative Arab states.
We also believe that China will move aggressively to market
the few competitive weapon systems that it produces, such as its
MIG-21 fighter and improved medium tanks. Weapons like these
will appeal to a wider group of customers and result in a more
stable and predictable flow of orders.
On the economic side, many of PRC's new ventures in LDCs are
commercially oriented and provide the opportunity for hard
currency earnings. The Chinese are now focusing on contracts
with Middle Eastern countries--Algeria, Libya, Iraq, Kuwait--that
can pay hard currency for Chinese services. Beijing will not
abandon the poorest LDCs--its favorite constituency--but by its
own admission will limit aid to modest agricultural projects and
technical assistance.
5
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Military Transfers
China's military program historically has run a distant
second to economic aid as a means of influencing LDC
governments. Hampered by deficiencies in its own military
establishment and committed to a policy of avoiding military
entanglements with LDCs, Beijing responded reluctantly to
requests from LDC clients. China made occasional arms transfers
to Third World countries in the late 1950s and early 1960s, but
did not provide arms as a regular feature of assistance until
1965. Its support for Pakistan when the United States and United
Kingdom cut off deliveries during the Indo-Pakistani war made
China the supplier to whom Islamabad subsequently turned for
rapid delivery during crises. As a result, Pakistan's orders
accounted for more than one-half of China's $1.3 billion of
military commitments to LDCs in 1958-79. Another 10 percent went
to Egypt to fill equipment and spare parts gaps after the
withdrawal of Soviet aid in the mid-1970s. Most of the remainder
went to 28 sub-Saharan countries--the largest share to
Tanzania.
China's small military program never competed seriously with
the USSR or Western suppliers, except in Pakistan and Tanzania,
before 1979. For the most part, China provided small quantities
of outmoded aircraft, ground forces equipment, small arms, and
ammunition to the poorer less developed Third World nations.
Since its decision to sell arms commercially, China has
increased its hard currency sales sixfold, and the focus of the
program has shifted to the Middle East. Giveaways have virtually
disappeared from the program.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Economic Aid in Perspective
China began its aid efforts in the Third World in 1956 with a
few scattered economic commitments to its East Asian neighbors. The
program escalated rapidly in the early 1960s, as China competed with
the Soviets for influence by extending assistance to newly indepen-
dent countries in Africa. Over the past twenty-seven years, China
has used its $6 billion aid program to serve a number of political
ends, including: (a) competing with the Soviets for leadership of
the Communist movement in the Third World; (b) gaining support for
its membership in the United Nations and other world organizations;
(c) competing for leadership among Third World countries; and (d)
rewarding Soviet clients that have made the break with Moscow.
China's economic program historically has been more important
than military sales as an instrument of influence in the LDCS.
Until 1980, China's total economic aid pledges outweighed military
commitments by more than four to one. Several characteristics set
China's economic aid program apart from that of other donors:
o More than half of its aid has been concentrated on Africa,
an area generally neglected by other donors.
o Project implementation is fast. About two-thirds of China's
total commitment since 1956 has been delivered.
o Aid has been focused on infrastructure, primary industries,
and agriculture--prominent areas of deficiency in LDCs.
o Projects are easy to operate and are import saving, such as
simple processing facilities for food and raw materials,
textile plants, and agriculture implements factories.
o Beijing provides adequate technical support and finances
local costs of projects through commodities or cash
transfers under credit or grant agreements.
China's unwillingness--because of competing domestic
priorities--to provide economic aid as it had before marks the
demise of one of the most generous and most popular aid programs in
the Third World. China has never had the resources nor the
inclination to become a major aid patron: its economic aid to the
Third World has accounted for less than 1 percent of total aid to
LDCs over the past two and a half decades. Chinese officials have
always stressed that self-help programs are the only way that LDCs
can improve their economies and care for their growing
populations. Still, China is the most popular donor in many
countries, particularly in Africa, because it has focused on LDC
development objectives often ignored by other countries. China's
assistance has been simple and relevant to LDC needs. Most of the
aid was interest free, repayable over 10-20 years after a 10-year
grace period.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China's "Four Principles" Encourage Profitability
China's new policy has received public endorsement from the
highest levels of government. In a rare interview on China's aid
program with the Paris daily Jeune Afrique in 1983, PRC Vice
Minister Gong Dafei reiterated his country's interest in the
Third World, particularly Africa, but cautioned that the day of
large Chinese aid projects such as the Tanzam railroad is over.
According to Gong, "We are, therefore, obliged to reduce our
foreign aid and modify the nature of that aid. We now prefer to
offer our African friends modest development projects...which
have rapid returns."
Premier Zhao Ziyang further enunciated "four principles" for
aid to the Third World during a trip to Africa in January 1983,
namely:
o "In carrying out economic and technological cooperation
with African countries, China abides by the principles of
unity and friendship, equality and mutual benefit,
respects their sovereignty, does not interfere in their
internal affairs, attaches no political conditions and
asks for no privileges whatsoever.
o In China's economic and technological cooperation with
African countries, efforts will be made to achieve good
economic results with less investment, shorter
construction cycles and quicker returns.
o China's economic and technological cooperation with
African countries takes a variety of forms suited to the
local specific conditions, such as offering technical
services, training technical and management personnel,
engaging in scientific and technological exchanges,
undertaking construction projects, entering into
cooperative production, and joint ventures. With regard
to the cooperative projects it undertakes, the Chinese
side will see to it that the signed contracts are
observed, the quality of work guaranteed and stress laid
on friendship. The experts and technical personnel
dispatched by the Chinese side do not ask for special
treatment.
o The purpose of China's economic and technological
cooperation with African countries is to contribute to
the enhancement of the self-reliant capabilities of both
sides and promote the growth of the respective national
economies by complementing and helping each other."
This new policy updates the eight principles of aid to foreign
countries formulated by Chairman Mao in the early 1960s. It no
longer formally precludes China from profiting from its foreign
aid efforts. China already has proposed joint ventures in
geology and light industry to Nigeria and Tanzania (its first
such offers in the Third World) and appears close to agreement
with Bangladesh on a joint fishing venture.
******************************************** ************
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Hard Currency Earnings
Fragmentary information suggests that China first began
realizing significant hard currency returns from its new programs
last year. In 1983 China reported earnings of $300 million from
its construction services to LDCs, combined with about $150
million from military sales. This compares with overall earnings
from these activities of less than $50 million annually in 1975-
79, and less than $100 million in the early 1980s. We believe
earnings from military sales could realistically rise to $600
million and technical services to $500 million annually by the
mid-1980s. China has received little foreign excahnge from
economic aid repayments because most large debts in commodities
under old agreements: some new aid pledges call for hard
currency repayments, but these probably will not exceed $20
million a year for the rest of the decade.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 SF.C'RF:T
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China: Military Transfers to LDCs, by Year
Agreements
Deliveries
Total
7,524
3,062
1958-73
516
452
1974
91
26
1975
40
101
1976
145
100
1977
74
73
1978
233
96
1979
193
100
1980
940
252
1981
2,964
437
1982
1,556
794
1983
772
631
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
China: Military Agreements
a
with LDCs, 19
80-83
Total
6,232
North Africa
315
Libya
305
Tunisia
10
Sub-Saharan Africa
135
Burundi
NA
Congo
NA
Guinea
3
Liberia
Negl
Mal i
2
Nigeria
12
Rwanda
2
Somal is
7
Sudan
36
Tanzania
18
Togo
3
Uganda
2
Zaire
28
Zambia
NA
Zimbabwe
22
East Asia
1
Malaysia
NA
Thailand
1
Middle East
5,284
Egypt
887
Iran
501
Iraq
3,826
Jordan
8
North Yemen
1
Oman
3
Syria
57
South Asia
497
Bangladesh
60
Pakistan
436
aBecause of rounding, components may not add.
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Q ruk?rP
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China: Military Transfers to LDCsa
North Africa
Algeria
Libya
Morocco
Tunisia
Sub-Saharan Africa
Botswana
Burundi
Cameroon
Central African
Republic
Chad
Congo
Equatorial Guinea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Liberia
Madagascar
Mali
Mozambique
Nigeria
Rwanda
Seychelles
Sierra Leone
Somalia
Sudan
Tanzania
Togo
Uganda
Zaire
Zambia
Zimbabwe
Agreements
Deliveries
7,524
3,062
841
761
349
338 -
12
305
1
31
492
Ty
305
1
20
423
1
2
7
7
1
2
7
5
NEGL
.
10
10
NEGL
NEGL
3
3
7
7
3
3
1
1
11
11
NEGL
NEGL
2
2
6
5
5
5
12
10
10
1
1
3
3
48
44
101
83
129
118
4
4
2
2
63
49
32
32
22
15
East Asia
45
45
Burma
NEGL
NEGL
Indonesia
21
21
b
Kampuchea
23
23
Thailand
1
1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Table 3 (Cont'd)
China: Military Transfers to LDCsa
Middle East
Egypt
Iran
Iraq
Jordan
North Yemen
Oman
South Yemen
Syria
South Asia
Bangladesh
Nepal
Pakistan
Sri Lanka
Agreements
Deliveries
5,409
1,225
1,004
338
501
130
3,832
682
8
1
2
2
3
3
NEGL
NEGL
59
69
1,228
1,031
165
94
6
6
1,034
908
23
23
NOTE: Ellipsis indicates no known deliveries; NEGL refers to less than
$500,000; NA indicates that value is not known.
aIncluding all validated military agreements for military supplies
provided for cash, under credit arrangements, or as grant aid. Values
of military agreements are based on export prices charged LDCs. Because
of rounding, components may not add to totals shown.
bBefore Communist takeover, April 1975.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China: Military Technicians
in LDCs, 1983a
Number of Persons
Total
530
Africa
375
North Africa
20
Algeria
20
Libya
NA
Sub-Saharan Africa
355
Cameroon
35
Congo
100
Rwanda
NA
Somalia
10
Sudan
40
Tanzania
50b
Zaire
100
Zambia
20
Middle East
115
Egypt
65
Iraq
50
South Asia
40
Bangladesh
40
Pakistan
NA
Sri Lanka
NA
aMinimum estimate of the number of
persons present for a period of
one month or more.
bIncludes contingent located in Jordan
assembling Chinese-supplied F-7
fighters for Iraq.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 141 T
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China: Economic Aid to LDCs, by Year
Agreements
Deliveries
Totala
5,921
3,991
1956-73
3,643
1,364
1974
282
277
1975
410
208
1976
196
355
1977
210
277
1978
219
292
1979
177
226
1980
402
228
1981
112
244
1982
41
271
1983
231
249
aBecause of rounding, components may not add
to totals shown.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China: Economic Technicians
in LDCs, 1983a
Total
28,790
Africa
9,485
North Africa
2,205
Algeria
450
Libya
55
Mauritania
700
Morocco
75
Tunisia
925
Sub-Saharan
Africa
7,280
Angola
10
Benin
100
Botswana
40
Burundi
225
Cameroon
450
Cape Verde
155
Central African Republic
75
Congo
450
Djibouti
155
Equatorial Guinea
75
Ethiopia
250
Gabon
70
Gambia
50
Ghana
50
Guinea
100
Guinea-Bissau
75
Kenya
50
Liberia
200
Madagascar
500
Mali
250
Mauritius
15
Mozambique
100
Niger
50
Nigeria
150
Rwanda
700
Sao Tome/Principe
45
Senegal
100
Seychelles
35
Sierra Leone
265
Somalia
450
Sudan
475
Tanzania
600
Togo
200
Uganda
25
Upper Volta
175
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 S F:CRF:T
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Table 6 (Cont'd)
China: Economic Technicians
in LDCs, 1983a
Sub-Saharan Africa
(Continued)
Za ire
300
Zambia
200
Zimbabwe
65
East Asia
375
Burma
375
Europe
300
Malta
300
Latin America
40
Antigua
5
Guyana
10
Jamaica
10
Mexico
5
Peru
10
Middle East
17 , 345
Abu Dhabi
40
Bahrain
30
Egypt
10
Iraq
12,000
Jordan
1,500
Kuwait
250
North Yemen
3,500
Syria
15
South Asia
1,245
Bangladesh
175
Maldives
5
Nepal
350
Pakistan
500
Sri Lanka
215
aMinimum estimates of number present
for one month or more, rounded to
the nearest five.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 SF:CRF.T
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China: Economic Aid Extended to LDCsa
Total
1954-73
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
metal
5,921
3,643
282
410
196
210
219
177
402
112
41
231
Ubrth Africa
331
162
57
35
..
57
20
Algeria
92
92
..
..
..
..
..
Mauritania
87
30
57
..
..
..
..
Morocco
55
..
..
35
.
20
Tunisia
97
40
..
..
..
57
Ste-Saharan
Africa
3,041
1,174
185
284
134
77
86
92
239
57
10
133
Benin
44
44
..
..
..
..
..
..
..
..
..
Negl
Botswana
31
..
..
..
17
..
..
..
..
..
..
14
Burundi
58
20
..
..
..
..
..
38
..
..
..
..
Cameroon
103
71
..
..
..
32
..
..
..
..
..
..
Cape Verde
17
..
..
..
..
15
2
Negl
..
..
..
Negl
Central African
Republic
29
4
..
..
10
..
Negl
..
..
..
..
15
Chad
68
50
Negl
17
..
..
..
..
..
..
..
..
O r?^ros
15
..
..
..
15
..
..
..
..
..
..
..
Co, .)
199
69
..
..
..
6
..
..
36
..
..
88
Dj ibouti
30
..
..
..
..
..
..
..
30
..
..
..
Equatorial
Guinea
27
24
Negl
..
..
NA
..
..
3
..
..
..
Ethiopia
138
86
..
..
17
..
..
..
36
..
..
..
Gabon
25
..
..
25
..
..
..
..
..
..
..
..
Ganbia
27
..
..
27
..
..
..
..
..
..
..
..
Ghana
42
42
..
..
..
..
..
..
..
..
..
..
Guinea
144
97
2
..
..
..
1
..
34
..
10
..
Guinea-Bissau
17
..
..
17
..
..
..
..
..
..
..
..
Kenya
64
18
..
..
..
..
..
..
46
..
..
..
Liberia
23
..
..
..
..
23
..
..
..
..
..
..
Madagascar
89
11
..
58
21
..
..
..
..
..
..
Mali
128
124
2
..
..
..
..
..
Negl
i
Mauritius
35
35
..
..
..
..
..
..
..
..
..
..
Mozanbique
65
..
..
59
..
Negl
..
..
4
..
..
Negl
Niger
52
1
51
..
..
..
..
..
..
..
..
..
Rwanda
56
22
..
..
..
..
34
..
..
..
..
..
Sao Tbme
18
..
..
18
..
..
..
1
..
..
..
..
Principe
Senegal
52
52
..
..
..
..
Negl
..
..
..
..
..
Seychelles
4
..
..
..
..
..
4
..
..
..
..
.
Sierra Leone
61
61
..
..
..
..
..
..
..
..
..
..
Somalia
164
132
4
Negl
..
..
18
10
..
..
..
Sudan
139
82
..
..
..
..
Negl
..
..
57
..
..
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 C F'.C'RRT
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Table 7 (Continued)
lb tal 1
954
-73
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
Tanzania
428
260
75
..
28
..
..
52
6
..
..
8
'bgo
46
45
..
Negl
..
..
..
..
..
..
..
.
Uganda
42
15
..
..
..
26
..
..
..
..
..
Upper Volta
51
49
2
..
..
..
Negl
..
..
.
..
.
Zaire
138
100
..
37
..
..
Negl
Negl
..
.
..
Zambia
345
228
52
24
28
..
..
..
6
..
..
8
Z imbab we
26
..
..
..
..
..
..
..
26
..
..
..
Fast Asia
422
248
25
1
NA
..
NA
64
..
29
..
55
Burma
225
108
..
..
..
..
64
..
..
..
53
Indonesia
47
47
..
..
..
..
..
..
..
..
..
..
Kampuchea
92
92
..
..
..
..
..
..
..
..
..
..
Laos
26
..
25
1
..
..
..
..
..
..
..
..
Philippines
31
..
..
..
..
..
..
..
..
29
..
2
Thailand
NA
..
..
..
..
..
NA
..
..
..
..
..
Western Samoa
NA
..
..
..
NA
..
..
..
..
..
..
..
Vanuatu
..
..
..
..
..
..
..
..
..
..
Europe
45
45
Malta
45
45
Latin America
159
133
8
10
1
..
2
1
..
..
1
2
Ant' iua
Negl
..
..
..
..
..
..
..
..
..
..
Negl
Ch,..s
65
65
..
..
..
..
..
..
..
..
..
..
Ecuador
2
..
.?
.?
.?
?.
?.
?.
?.
??
..
2
Guyana
38
26
..
10
..
..
..
1
..
..
1
..
Jamaica
11
..
8
..
1
..
2
..
..
..
..
..
Peru
42
42
..
..
..
..
..
..
..
..
..
..
Middle East
573
369
2
..
27
12
27
..
96
..
..
40
Egypt
193
97
..
..
..
..
..
..
96
..
..
..
Iraq
45
45
..
..
..
..
..
..
..
..
..
..
Jordan
40
..
..
..
..
..
..
..
..
..
..
40
North Yemen
130
81
..
..
27
..
22
..
..
..
..
..
South Yemen
96
77
2
..
..
12
5
..
..
..
..
..
Syria
70
70
..
..
..
..
..
..
..
..
..
..
South Asia
1,350
942
4
80
34
63
85
20
66
25
30
Negl
Afghanistan
76
76
..
..
..
..
..
..
..
..
..
..
Bangladesh
107
11
..
..
..
63
..
..
33
..
..
..
Nepal
293
128
..
80
30
..
..
..
..
25
30
Pakistan
651
573
..
..
..
..
25
20
33
..
..
..
Sri Lanka
222
154
4
..
3
..
60
..
..
..
..
Negl
aBecause of rounding, components may not add to totals shown.
bIndicates presence of an economic and technical cooperation agreement that
cold eventually provide assistance.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 e PrDG''P
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
China: Economic Credits and Grants
to LDCs, 1956-83a
Million US $
Extended
Drawn
Total
5,921
3,991
North Africa
331
280
Algeria
92
65
Mauritania
87
63
Morocco
55
55
Tunisia
97
97
Sub-Saharan
Africa
3,041
2,052
Benin
44
20
Botswana
31
10
Burundi
58
41
Cameroon
103
96
Cape Verde
17
4
Central African Republic
29
12
Chad
68
8
Comoros
15
5
Congo
199
101
Djibouti
30
3
Equatorial Guinea
27
26
Ethiopia
138
74
Gabon
25
13
Gambia
27
13
Ghana
42
34
Guinea
144
95
Guinea Bissau
lb7
7
Ivory Coast
??
Kenya
64
6
Liberia
23
6
Madagascar
89
80
Mali
128
117
Mauritius
35
5
Mozambique
65
20
Niger
52
30
Rwanda
56
29
Sao Tome/Principe
18
3
Senegal
52
37
Seychelles
4
4
Sierra Leone
61
59
Somalia
164
152
Sudan
139
80
Tanzania
428
365
Togo
46
35
Uganda
42
8
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Table 8 (Cont'd)
Sub-Saharan Africa
(Cont' d )
Upper Volta
51
21
Zaire
138
90
Zambia
345
337
Zimbabwe
26
5
East Asia
422
248
Burma
225
126
Indonesia
47
47
Kampuchea
92
69
Laos
26
5
Philippines
31
Thailand
Western Samoa
NA
Ng
??
Vanuatu
??
Europe
45
45
Malta
45
45
Latin America
159
50
Antigua
Negl
Negl
Chile
65
20
Ecuador
2
Guyana
38
16
Jamaica
11
11
Peru
42
2
Middle East
573
374
Egypt
193
99
Iraq
45
17
Jordan
40
..
North Yemen
130
109
South Yemen
96
79
Syria
70
70
South Asia
1,350
943
Afghanistan
76
40
Bangladesh
107
64
Nepal
293
167
Pakistan
651
514
Sri Lanka
222
158
aBecause of rounding, components may not add
to totals shown.
bindicates presence of an economic and
technical cooperation agreement that could
eventually provide assistance.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
USSR and Eastern Europe: Military Transfers to
Non-Communist Less Developed Countries, 1983
12 September 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
USSR and Eastern Europe: Military Transfers to
Non-Communist LDCs, 1983
Contents
Summary
Soviet Military Accords and Deliveries: The Recent Record
Eastern Europe: Supporting Moscow
Military Advisory Services and Training: Continued Growth
Looking Ahead
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
USSR and Eastern Europe: Military Transfers to
Non-Communist Less Developed Countries, 1983
Summary
Soviet arms agreements with LDCs worldwide plunged to an
estimated $2.7 billion in 1983, a sharp reversal frlom the near
record of $10.5 billion achieved the previous year . Key factors
contributing to the decline included:
o A softening international arms market.
o Growing LDC debt.
o Increased competition from other suppliers.
o Political decisions by Moscow to withhold full support to
key clients, such as Iraq.
o Fluctuations in the arms-buying cycles of the largest
Soviet Third World customers. (
Major structural changes in the LDC market were triggered by
the 1981 global economic recession and massive military sales
during the preceding decade. The across-the-board arms buying
sprees of the 1970s that swelled LDC inventories with modern
tanks, fighters and warships fulfilled the basic modernization
requirements of many governments and set the stage for a general
narrowing of demand. Current demand is primarily for selective
upgrading and follow-on support. Wholesale replacement of large
inventories has become financially and technically difficult,
particularly in light of the dramatic lessons provided by French
Exocet antiship missiles and other advanced weapons used with
great success in the Falklands and the Middle East. As a result,
the marketplace has become increasingly sophisticated, with major
buyers becoming much more quality and dollar conscious, playing
arms suppliers against one another to obtain the most modern
equipment at the best prices and terms.
The decline of LDC buying power has forced the Soviets and
other suppliers to grant somewhat easier credit terms where
necessary during the past several years, although Moscow still
attempts to extract high interest rates, shorter repayment
periods, and trys to avoid grants and discounts. Only the heavy
resupply demand generated by the Iran-Iraq and Lebanese conflicts
and more concessionary credit arrangements have kept overall LDC
arms accords from plunging to new lows. Purchases by Iran and
Iraq alone, accounted for nearly one quarter of the $95 billion
in recorded global Third World arms purchases in 1981-83. War
aside, future opportunities for multi-billion dollar arms
packages have become severely limited by the accumulation of huge
LDC debt burdens and the record low financial reserves of even
1Data was extremely fragmentary in 1983, and we believe that the
value of accords was higher than $2.7 billion. Nevertheless,
undetected accords probably were not sufficient to reverse recent
patterns.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
the wealthiest of Third World arms buyers. Moreover, the
increased competition the Soviets already face from other major
suppliers and new Third World producers such as Brazil
foreshadows additional difficulties for Moscow in maintaining a
high level of sales. The Soviets, however, are showing
increasing willingness to offer their very latest systems (for
example, the MiG-29 fighter and the SA-14 shoulder-fixed SAM)
which are only just entering unit service in the USSR.
Recent actions by the Politburo also are responsible for
slackening Soviet arms sales over the past three years. They
have cost Moscow considerable prestige and billions of dollars in
lost orders from major clients, most notably Iraq and Libya:
o Early Soviet reluctance to respond fully to Iraqi
requests for military and political support provoked a
rift in relations and permitted other suppliers to
undercut Baghdad's dependence on Soviet military
equipment and technical assistance. Relations still are
affected, despite Moscow's renewed support in 1983.
o Likewise, Moscow's repeated refusal to sell Libya
additional advanced weapon systems, partly on the grounds
of delinquent loan repayments, has so far precluded the
signing of several billion dollars in new multiyear
military contracts.
However, even if Moscow had fully complied with Iraqi and Libyan
requests, we believe that the added sales would have only slowed
recent decreases in agreements.
Lower sales, coupled with continued heavy Soviet arms
shipments, also led to an erosion of Moscow's huge arms order
backlog amassed since the mid-1970s. The declining order book
strongly suggests that the Soviet arms deliveries have finally
peaked and, like sales, are headed lower. This will
substantially reduce Soviet returns from the program. Most
significant has been the steady decrease since 1980 in
outstanding orders from Moscow's hard currency-paying Middle
Eastern customers and the accumulation of orders from cash-poor
buyers. At present, less than half of Moscow's shrinking order
backlog is earmarked for the Middle East market, down from 70
percent or more during the 1973-80 growth period.
Third World demand for military enhancement systems, such as
AWACS, early warning radars and, in somecases, more advanced
weapons has forced hard choices on Moscow. To protect its market
position against Western encroachment and to preserve its influ-
ence and presence in strategic areas, the Soviet leadership has
been willing, on a selective basis, to supply export--and in some
cases, Soviet-standard--versions of its best weapons to the Third
World. Despite poor economic conditions in LDCs, the USSR
introduced more of its current generation weapons and support
equipment into Third World inventories (mostly in the middle
East) during the last three years than during any previous
2
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
period. These included air defense missile systems, fighter
aircraft, and communications nets. 25X1
Despite the recent slowdown in Soviet arms sales, military
assistance remains one of Moscow's most successful instruments in
gaining access and influence in LDCs. The program has generated
an estimated $5-7 billion a year in hard currency receipts---the
second largest source of such earnings after oil--and has helped
Moscow underwrite economic and military assistance to economi-
cally strapped clients such as Cuba, Vietnam, Afghanistan, and
Ethiopia. For political and strategic reasons, therefore, we
feel that Moscow will make every effort to maintain and expand
its program. Moscow's recent decisions to supply advanced weapon
systems and its willingness to soften credit terms are indica-
tions that the Soviets intend to respond to changing market
conditions.
3
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
USSR and Eastern Europe: Military Transfers to
Non-Communist LDCs, 1983
Soviet Military Accords and Deliveries: The Recent Record
In 1983, the $2.7 billion in identified Soviet agreements
with LDCs marked a five-year low and were only one-quarter the
annual average for 1980-82. Moreover, the low level continued
the erratic pattern observed since the late 1970s (table 1). For
the first time since the program was initiated in the mid-1950s,
the Middle East failed to provide the bulk of new arms orders.
Instead, commitments to South Asia, Afghanistan, and India
accounted for about 40 percent of the total, with sub-Saharan
Africa (mainly Angola and Mozambique) close behind at more than
one-third. Purchases by Peru, along with Syria and Iraq,
accounted for virtually all the remainder. While prospects for
Soviet arms transfers appear brighter in 1984, the overall
downward trend since 1980 is unlikely to be reversed this year.
Syria and Iraq probably will again move to the forefront of
Soviet clients, while negotiations with Libya also could bear
fruit. We also expect Moscow to continue underwriting Angola
with new hardware, barring a settlement of the conflict.
The value of identified Soviet military deliveries in LDCs
in 1983 fell to $6.4 billion, almost 20 percent below 1982;
deliveries through the first half of 1984 continue to lg well
behind the annual $8 billion pace of 1979-82 (table 2). The
volume of Soviet arms shipped to the Third World changed little
between 1982 and 1983 (about 440,000 metric tons each year), but
last year the composition shifted noticably toward ammunition and
support materiel, such as radars and trucks. Deliveries of major
weapon systems fell markedly in 1983, since many of Moscow's
largest clients have become well-stocked since the mid-1970s.
Deliveries of jet fighter and trainer aircraft, surface-to-air
missile launchers, and tanks, for example, dropped by 20 percent,
15 percent, and about 50 percent, respectively, from 1982. The
Middle East again accounted for over one-half of total deliver-
ies, as Syria and Iraq took nearly half the tanks, jet fighters,
and surface-to-air missile (SAM) systems shipped in 1983. Soviet
efforts to shore up the Marxist regimes in Angola and Mozambique
and continuing shipments to Ethiopia brought overall transfers to
sub-Saharan Africa to $1.25 billion--a five-year high. Else-
where, Soviet deliveries to Nicaragua were a record $45 million,
although they still consisted of support hardware such
transport aircraft and trucks, rather than weapons.
2The actual value and volume of deliveries could be significantly
higher, as concealment efforts (especially in Syria and Iraq)
have proved increasingly successful.
4
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Nort
Sales Mid
of
h
dl
which
Africa
e East
Deliveries
Totala
83,225
57,632
66,813
1955-77
87,722
27,879
24,480
1978
2,679
1,251
6,080
1979
8,830
6,710
8,338
1980
14,236
11,036
7,611
1981
6,499
3,507
7,157
1982
10,520
6,822
7,774
1983
2,740
427
6,373
shown
Eastern Europe: Supporting Moscow
Continued heavy fighting in the Iran-Iraq war generated
another year of large arms orders for East European suppliers.
Accords in 1983 reached about $1.2 billion, the third successive
year that they exceeded the $1 billion mark and nearly three
times the 1970-80 yearly average. About 40 percent of total 1983
agreements were with Iran and Iraq, while Libya made up about
half of the remainder. Bulgaria emerged as the leading East
European supplier for the first time since the late 1970s,
largely on the strength of contracts with Iraq and Libya.
Eastern Europe: Military Transfers
to Non-Communist LDCs
Agreements Deliveries
1955-77
1978
1979
1980
1981
1982
1983
USSR: Military Transactions
Non-Communist LDCs
Total 11,122
3,644
520
746
870
2,549
1,607
1,186
8,116
2,432
551
646
565
1,281
1,758
883
5
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
In sharp contrast to new orders, less than $900 millin in
identified arms deliveries from Eastern Europe last year were
half the 1982 level. Much lower identified shipments to Iraq
($170 million versus over $900 million) accounted for virtually
all the decline. The actual value of East European military
deliveries to Iraq, however, could have been much higher because
of the continued high level of combat
Libya was the largest recipient of East European
hardware-in 1983 (about $50 million worth), a small part of which
probably was appropriated for rebels in sub-Saharan Africa and
Central America.
East European governments provide military assistance to
LDCs to support Moscow and to satisfy their own political and
financial objectives. East European programs typically
complement Soviet efforts by providing items such as outdated
aircraft and combat support equipment like vehicles and
electronics gear which are either of Soviet manufacture or are
compatible with such hardware. Moreover, the East Europeans--
especially the East Germans--conduct training and provide
advisory services to a wide range of LDCs, usually with close
Soviet coordination.
Military Advisory Services and Training: Continued Growth
Advisory services and training, important components of
Warsaw Pact military assistance programs, have continued to
expand sharply in size and scope. Much of the growth derives
from increased transfers of advanced weapons although security
and intelligence support have also become important. Through
personnel assistance, Moscow hopes to expand its influence in
LDCs, a goal most East European countries feel obligated to
support to varying degrees. In recent years, hard currency
earnings from these programs--estimated at some $250 million in
1983--have provided an additional incentive.
Table 3
USSR and Eastern Europe Military Technicians
in Non-Communist LD
Cs, 1983a
Number of persons
To
tal
USSR
Eastern
Europe
Total 20,
180
17,525
2,655
North Africa
3,
590
2,775
815
Sub-Saharan Africa
5,
540
4,370
1,170
Latin America
310
250
60
Middle East 8,
260
7.675
585
South Asia 2,
480
2,455
25
' Minimum estimate of the number of persons present for a
period of one month or more.
25X1
25X1
6
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
over 20,000 Warsaw military personnel (excluding troops)--
along with more than 43,000 Cubans--were stationed in 34 LDCs in
1983, 10 percent above the 1982 record:
o The sharpest gain occurred in Syria, where some 2,000
additional Soviets were sent primarily to man and
maintain the SA-5 missiles. As a result, the Soviet
military presence in Syria grew to at least 5,500.
o The Soviet presence in Iraq increased by one-fifth to
some 1,200 experts in connection with continuing large
arms deliveries.
o on the debit side, Algeria's disillusionment with various
aspects of Moscow's military assistance program led to a
halving of the Soviet military-related personnel in that
country to about 775.
Large Warsaw Pact contingents--mainly Soviets--also were in
Angola (an estimated 1,700), Ethiopia (2,300), North Yemen (some
1,200), and South Yemen (1,350).
A record 6,000-plus military and paramilitary trainees from
LDCs are estimated to have departed for the USSR and Eastern
Europe in 1983. Nearly three-quarters of these students came
from the Middle Eastern and North African countries--principally
Libya and Syria. Most trainees sent to Warsaw Pact countries
still receive weapons-related and advisory instruction, although
increasing numbers take security and intelligence courses.
Looking Ahead
Soviet military commitments to LDCs in 1984 will rebound as
Moscow regains momentum with key clients. Nevertheless, the
continuing debt problems of many LDCs, coupled with intense
competition, strongly suggest that records will remain
significantly below the $10.5 billion mark of 1982. Sales to the
Middle East, the regional focus of Soviet efforts to restablish
their reputation as a reliable supplier, are expected to show the
most improvement:
? Syria probably will order a large arms package, including
additional T-72 tanks and air defense weapons.
? Iraq is on the verge or may alrady have signed a
multibillion dollar accord.
? Jordan and Kuwait are in advanced stages of discussion
for air defense hardware, butt these accords are not
expected to develop into comprehensive packages like
those supplied to Libya or Syria.
These and other accords, if concluded, could easily double the
$2.7 billion in identified global Soviet accords in 1983, but
even this would not approach the record $16 billion in sales in
1980. (
Elsewhere, the Soviets are likely to continue efforts to
build on recent pledges.
o Commitments to Sub-Saharan Africa will, to a large
extent, depend on developments in the Angolan and
7
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Mozambique insurgencies. Barring resolution of either
conflict, the'Soviets undoubtedly will continue their
recent high level of support.
o Soviet accords with India in 1984 could include provision
of advanced MiG-29 and MiG-31 fighters, the first Soviet
cruisers since the mid-1960s, and a new export class of
diesel submarine very likely with associated production
technology.
o In Central America, Soviet support for the Sandinistas in
Nicaragua is likely to remain undiminished, although
Moscow still will distance itself as a military supplier
and restrain Cuba from provoking the United States. One
result will be the continued use of Bulgaria, Cuba, and
others as surrogates.
East European sales of over $1 billion annually to the Third
World to a large extent hinges on continuation of the Iran-Iraq
war. Even if the war ends, however, these suppliers can meet
Iraq's requirements to rebuild stocks of munitions, spare parts
and selected weapons sytems. Moreover, they have been
establishing increasingly strong positions as reliable
alternative suppliers of hardware and technical expertise in
countries such as Libya.
8
SECRET
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Directorate of Secret
Intelligence
Chinese Military and Economic
Programs in the Third World:
Growing Commercial Emphasis
Secret
GI 84-10090
May 1984
Copy 5 12
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Intelligence 25X1
Directorate of
Chinese Military and Economic
Programs in the Third World:
Growing Commercial Emphasis
An Intelligence Assessment
This paper was prepared by 25X1
the Office of Global Issues. Comments and 25X1
queries are welcome and may be directed to the
Chief, International Security Issues Division, on
C
Secret
GI 84-10090
May 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
nist Aid to Non-Communist Less Developed Countries.
This report assesses trends in Chinese military transfers and economic aid
to non-Communist less developed countries with an emphasis on events in
the 1980s. The statistical data supersede those in our previous publications.
This publication supplements the annual statistical reference aid Commu-
the movement of foreign military goods and services to the recipient.
The term military transfers includes both the sale and grant of military
equipment and related services, such as advisory support, training, and
construction of military facilities. Military transfers occur under signed
agreements, commitments, or accords, which constitute a formal declara-
tion of intent. The terms deliveries and shipments also are used to indicate
Within the economic aid context, the terms extensions, commitments, and
agreements refer to pledges of goods and services, either on deferred
payment terms or as grants. Assistance is considered to have been extended
when accords are initialed and constitute a formal declaration of intent.
Disbursements and deliveries refer to the use of goods and services.F 25X1
and South Asia.
The non-Communist less developed countries referred to in this report
include: (1) all of Africa except the Republic of South Africa; (2) all of East
Asia except Australia, Hong Kong, Japan, New Zealand, and the Commu-
nist states of Kampuchea, Laos, and Vietnam; (3) Malta, Portugal, and
Spain; (4) all of Latin America except Cuba; and (5) all of the Middle East
iii Secret
GI 84-10090
May 1984
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Chinese Military and Economic
Programs in the Third World:
Growing Commercial Interests
Key Judgments China's economic aid and military transfer programs in the Third World
Information available have changed dramatically over the past five years. In 1979 Beijing
as of I May 1984 decided to emphasize military sales to earn hard currency and to reduce
was used in this report.
economic aid to conserve resources for its economic development. Since
then, Beijing has emphasized commercial payoffs in almost all of its
dealings with developing countries by:
? Increasing its arms sales almost 10 times over those of the previous four
years. Since 1979 China has signed agreements to sell $6.2 billion of
weapons, 95 percent of them to Egypt, Libya, Iran, Iraq, and Pakistan.
? Expanding hard currency technical service contracts that provide eco-
nomic technicians to LDCs for specific projects. China now has 29,000
technicians abroad, its highest level ever and double the number
employed in LDCs in 1980.
? Shifting from the use of grant aid and interest-free loans in its economic
aid programs to an emphasis on harder repayment terms and some
interest charges.
The new policy represents a radical departure for Beijing in the Third
World. Earlier, China had provided both economic and military aid on
generous terms to poor clients who often could not afford a more costly
Western presence. China never attempted to compete with other military
suppliers in the quantity or sophistication of weaponry. Military agree-
ments featured mostly small arms and, for some clients, old-model tanks
and aircraft. The economic program highlighted showy projects, such as
the Tan-Zam Railway in Africa, and sports stadiums in a number of
countries.
It may be difficult for Beijing to maintain existing levels of military sales
once the Iran-Iraq conflict is resolved. More aggressive Chinese arms sales
policies could have only marginal results because of increasing competition
among suppliers and LDC demands for more modern military equipment.
China could offset some of these factors by:
? Specializing in the export of basic military equipment, support facilities,
and spare parts and ammunition for Soviet-made equipment.
? Aggressively selling a few more advanced weapon systems, such as
MIG-21 jet fighters and improved medium tanks.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Secret Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Even if military sales decline, we foresee an active military and economic
presence for China in the Third World through the end of the decade:
? Military deliveries will be sustained at an unusually high rate under
several billion,of contracts still outstanding.
? Beijing sees these programs as an important means to earn foreign
exchange. According to the Chinese News Agency, Beijing is looking for
at least $1 billion in hard currency earnings annually from its service
program by the mid-1980s and plans to have 100,000 technicians in
LDCs by 1986. We believe these levels are not achievable until at least
the end of the decade but are an important signal of the importance
China attaches to growth of the programs.
Prospects for marketing Chinese civilian technical services appear almost
unlimited because of the low salary rates and China's reputation for
quality work. A possible shortcoming is Chinese inexperience with the
high-technology Western equipment often used on projects where China is
supplying only labor. China has undertaken a training program that will
help it overcome this obstacle. We believe that economic and technical
exchanges will continue to be the mainstay of China's program through the
end of the century.
Secret vi
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Page
iii
Military Sales: A Product of the 1980s
1
Agreements Soar
Small Military Technical Presence
2
Basis for New Policy
2
Economic Relations: Developing Commercial Potential
7
Entering the International Contracting Field
7
Technical Ser
vices: A Hard Currency Resource
10
Prospects
10
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Figure 1
China: Third World Agreements and Deliveries, 1956-83
s
~lturr~ R~1aVER~~s
1956-69 1970-75 1976-79 1980 1981 1982 1983 0 1956-69 1970-75 1976-79 1980 1981 1982 1983
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Chinese Military and Economic
Programs in the Third World:
Growing Commercial Emphasis
Military Sales: A Product of the 1980s
Agreements Soar. Since Beijing's policy decision in
1979 to expand its sales of military equipment for
hard currency, China has signed agreements to sell
$6.2 billion of weapons to LDCs (including a record
$3 billion in 1981), 10 times higher than Chinese
military agreements in the previous four years. The
Iran-Iraq war has propelled China into second place
among Communist military suppliers, ahead of all the
East European countries combined (but still far be-
hind the USSR). In addition to Iran, Beijing has
picked up several other clients in the 1980s-includ-
ing Jordan, Libya, and Liberia-bringing its custom-
er list to 49. The new emphasis on financial returns
has changed the direction of the Chinese program
away from traditional Asian and African clients to
Table 1
China: Military Transfers
to LDCs, by Year
wealthier Middle Eastern LDCs (figure 2).
The Soviet Union's refusal to supply Iraq at the
beginning of the Iran-Iraq war provided China with
its most important breakthrough into the internation-
al arms market. Since then, Iraq has become China's
best customer, with more than $3.8 billion of orders
for 70 F-7 fighter aircraft, antiship missiles, machine-
guns, ordnance, and support equipment. A few other
major clients make up more than 75 percent of the
remaining orders:
? Egypt has bought more than $1 billion in Chinese
arms, mostly naval equipment and jet fighters.
? Pakistan has signed a billion dollars in contracts for
FT-6 aircraft, T-54 tanks, A-5 Fahtan fighter air-
craft, and other military equipment.
? Iran has purchased ground and air defense equip-
ment, ammunition, and other supplies worth $500
million.
? Libya signed agreements worth more than $300
million for military equipment, including antiair-
craft guns and ammunition.
These deals have included newer, more sophisticat-
ed equipment than China had traditionally been
able to supply. For example, T-69 tanks were first
deployed with Chinese forces in 1981, and MIG-21
jet fighters have been exported for only two years.
Total
7,524
3,062
1958-73
516
452
1974
91
26
1975
40
101
1976
145
100
1977
74
73
1978
1979
1981
2,964
437
1982
1,556
794
1983
772
631
Record Deliveries. China's drive to fill orders rapidly
produced record deliveries in the 1980s. Average
annual arms shipments of $30 million to Third World
clients doubled those of any previous year. Iraq has
received about one-fourth of the deliveries since 1980,
including China's first export of MIG-21 Fishbed
fighters, substantial numbers of medium tanks, field
and air defense artillery, and other military support
equipment. Among the other major hardware trans-
fers were:
? The first Chinese T-69 tanks to Iraq.
? The first F-7 jet fighters to Egypt.
? Shanghai-11-class patrol boats, Hainan-class sub-
marine chasers, and submarines to Egypt.
? The first A-5 Fantan fighters to Pakistan.
China will probably sustain a high rate of deliveries
over the next few years because $4 billion is still
outstanding on orders from major clients.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Figure 2
China: Military Agreements by Major Clients, 1958-83
1958-79
Total: 1.3 billion US $
1980-83
Total: 6.2 billion US $
Other
Egypt
Sudan-
Tanzania
Other-
0 South Asia
C Sub-Saharan Africa
C Middle East/North Africa
O Other
Other-
Pakistan
Other-
Libya-
Small Military Technical Presence. Unlike the cases
of the Soviet Union and the East European countries,
China's expanding arms sales have not led to a larger
increase in military technicians and advisers. Only
about 500 Chinese military personnel were in LDCs
in 1983, about the same number as over the past
decade. China generally has been reluctant to send
large numbers of military technicians to LDCs be-
cause they fear involvement in conflict. China, on
occasion, has even denied requests to augment its
military presence in client states. For example, it
recently refused to increase the small military services
program in Tanzania (a major African client) even
though it could have recovered some of the prestige
lost when the Soviets replaced them as a major
supplier a decade ago. Additionally, the unsophisticat-
ed Chinese military equipment eliminates the need for
a larger advisory presence and keeps training require-
ments to a minimum. Finally, China apparently does
not use the program for profit. Beijing provides many
services free and where salaries are charged they are
nominal-$5,000 to $8,000 per year for technicians.
Basis for New Policy. Beijing's new aggressiveness in
the international arms market underscores China's
intent to pursue a competitive commercial arms ex-
port policy that emphasizes hard currency earnings
rather than politics as the basic criterion for conclud-
ing agreements. Beijing has made administrative
changes to facilitate such sales. By early 1980,
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 2
China: Military Agreements
With LDCs, 1980-83 a
North Africa 315
Libya 305
Tunisia 10
60
436
seven corporations to represent segments of the Chi-
nese defense industry in commercial negotiations with
LDCs. The corporations were willing to sell to all
governments except Israel, South Africa, Taiwan, and
South Korea and were instructed to be flexible on
China's military program historically has run a
distant second to economic aid as a means of influ-
encing LDC governments. Hampered by deficiencies
in its own military establishment and committed to
avoiding military entanglements with LDCs, Beijing
responded reluctantly to requests from LDC clients.
China made occasional arms transfers to Third
World countries in the late 1950s and early 1960s,
but did not provide arms as a regular feature of
assistance until 1965. Its support for Pakistan when
the United States and United Kingdom cut off deliv-
eries during the Indo-Pakistani war made China the
supplier to whom Islamabad subsequently turned for
rapid delivery during crises. As a result, Pakistan's
orders accounted for one-half of China's $1.3 billion
of military commitments to LDCs in 1958-79. Anoth-
er 10 percent went to Egypt to fill equipment and
spare parts gaps after the withdrawal of Soviet aid in
the mid-1970s. Most of the remainder went to 28
Sub-Saharan countries-the largest share to Tanza-
nia.
China's small military program never competed seri-
ously with the USSR or Western suppliers, except in
Pakistan and Tanzania, before 1979. For the most
part, China provided small quantities of outmoded
aircraft, ground forces equipment, small arms, and
ammunition to the poorer less developed Third
World nations.
Since its decision to sell arms commercially, China
has increased its hard currency sales sixfold, and the
focus of the program has shifted to the Middle East.
Giveaways have virtually disapeared from the pro-
gram.
both prices and repayment terms. Because sales to
Iraq have become so important to China, Beijing
opened its first overseas arms sales office in Jordan in
May 1982 to facilitate weapons transactions with
Baghdad.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Iq
Next 1 Page(s) In Document Denied
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Figure 3. Chinese F-7 fighter
aircraft.
China's more hardnosed approach to arms transfers is
reflected in the reduction of grant assistance that was
a key feature of China's program before 1978. We
estimate that $615 million of the $1.3 billion of
Chinese military transfers to 39 clients before 1979
was provided free; since then, we have documented
less than $10 million in military grants.
China does still seek political gains. Beijing is provid-
ing grant aid for dissident groups that have little
prospect of buying equipment elsewhere.
China also has remained somewhat flexible in its
dealings with old customers and has exempted some
of its long-time African clients from its cash-and-
carry terms. China's offers of military aid to Zaire in
1982, for example, carried 10-year repayments in
goods or hard currency, after a nine-year grace
period. No other military supplier offers such gener-
ous terms.
encourage larger production runs.
lower unit costs for some military items if they
In addition to financial returns, Chinese arms sales
sometimes benefit China's domestic weapons develop-
ment program by allowing access to foreign military
technology. Pakistan, for example, has allowed
Beijing to study advanced French weapons and possi-
bly US Sidewinder missiles in its inventory. China
and Pakistan also have agreed to joint weapons
development and production using Western technol-
ogy. Investments in Chinese defense industries to
modernize facilities and procure new technology and
equipment from the West could be facilitated by
earnings from arms sales. Sales to LDCs could also
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Secret
Table 4
China: Military Technicians
in LDCs, 1983 a
Number of persons
355
35
a Minimum estimate of the number of persons present for one
month or more.
b Includes contingent located in Jordan assembling Chinese-
supplied F-7 fighters for Iraq.
Economic Relations: Developing Commercial
Potential
Entering the International Contracting Field. As
with the military program, China is cutting down on
giveaways in its economic aid and is now emphasizing
commercial returns and hard currency earnings from
technical services. The economic program has evolved
from a modest effort featuring liberal amounts of
grant aid to a major campaign to sell technical
services and equipment for profit. Beijing's current
leadership is trying to push China into the world
economy by introducing its most salable items-such
as cheap labor-into the international marketplace.
In its aid program, China is seeking to combine
enhanced hard currency earnings with benefits to
LDC economies.
Table 5 Million US S
China: Economic Aid to LDCs, by Year
Total a
5,921
3,991
1956-73
3,643
1,364
1974
282
277
1975
410
208
1976
196
355
1977
210
277
On the commercial side, China is working on housing
in Kuwait, a number of construction projects in Iraq,
and a $375 million railway line in Nigeria. Last year,
Beijing signed a $1.6 billion railway construction
agreement with Libya and is negotiating a similar
contract with Algeria. Even though they are newcom-
ers in the international commercial contracting field,
the Chinese have been named general contractor on
several major projects in LDCs, where they select
subcontractors (generally Western or Japanese com-
panies) and arrange for local services. According to
Chinese news sources, since 1980 China has earned
$500 million in hard currency through its construction
contracts, has an additional $1.2 billion of contracts in
hand, and expected to sign $1 billion in new contracts
in 1983.
New Aid Hits Record Lows. Since 1980 China's new
economic aid pledges have fallen dramatically (table
5), a victim of China's economic retrenchment in the
post-Mao period. Only a few traditional recipients
have received significant new commitments to contin-
ue programs. Agreements in the 1980s comprise less
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
l1
Figure 4
China's Expanding Relations With the Third World, 1973 and 1983
'4- OT
Rwanda
, y
Zaire
Senegal
Cape Verde The Gambia"'
Guinea- Bissa?
Sierra Leone-
J Niger
re
Nige,rjt1
Liberian Tdao
Sao Tome 'oil
Pe Equatorial "''
Guinea
C.A.R.-Central African Republic
P.D.R.Y.-People's Democratic Republic of Yemen
Y.A.R.-Yemen Arab Republic
Economic agreement
Military agreement
Military and economic agreement
9'
n N, 'China
Ir
r,4
a
Pakjsta . Nepal
ardan' Kuwat
gman ~ABenglade
Y
A...R.
a
J
N 1 P DR.Y.
. Yemen)
llurur i
Tandania
alBjiboutiias
rm
Western Samoa, not shown on
this map, has an economic
agreement with China.
Boundary representation is
not necessarily authoritative.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Secret
China began its aid efforts in the Third World in
1956 with a few scattered economic commitments to
its East Asian neighbors. The program escalated
rapidly in the early 1960s, as China competed with
the Soviets for influence by extending assistance to
newly independent countries in Africa. Over the past
28 years, China has used its $6 billion aid program to
serve a number of political ends, including:
? Competing with the Soviets for leadership of the
Communist movement in the Third World.
? Gaining support for its membership in the United
Nations and other world organizations.
? Competing for leadership among Third World
countries.
? Rewarding Soviet clients that have made the break
with Moscow.
China's economic program historically has been more
important than military sales as an instrument of
influence in the LDCs. Until 1980, China's total
economic aid pledges outweighed military commit-
ments by 4 to 1. Several characteristics set China's
economic aid program apart from that of other
donors:
? More than half of its aid has been concentrated on
Africa, an area generally neglected by other donors.
? Project implementation is fast. About two-thirds of
China's total commitment since 1956 has been
delivered.
? Aid has been focused on infrastructure, primary
industries, and agriculture prominent deficiencies
in LDCs. .
than 15 percent of China's total economic aid since
1955 and have followed a downtrend that began in the
mid-1970s. Chinese economic aid increased in 1983
over 1982; most was provided on somewhat harder
terms than before-shorter repayment periods, low
interest charges, and almost no grant aid. The terms
of Chinese assistance still are far more generous than
those of most other Communist and some Western
donors
? Projects are easy to operate and are import saving,
such as simple processingfacilitiesforfood and raw
materials, textile plants, and agriculture imple-
ments factories.
? Beijing provides adequate technical support and
finances local costs of projects through commod-
ities or cash transfers under credit or grant agree-
ments.
China's unwillingness-because of competing domes-
tic priorities-to provide economic aid as it had
before marks the demise of one of the most generous
and most popular aid programs in the Third World.
China has never had the resources nor the inclination
to become a major aid patron: its economic aid to the
Third World has accounted for less than 1 percent of
total aid to LDCs over the past two and a half
decades. Chinese officials have always stressed that
self-help programs are the only way that LDCs can
improve their economies and care for their growing
populations. Still, China is the most popular donor in
many countries, particularly in Africa, because it has
focused on LDC development objectives often ignored
by other countries. China's assistance has been sim-
ple and relevant to LDC needs. Most of the aid was
interest free, repayable over 10 to 20 years after a 10-
year grace period.
In contrast to the decline in new pledges, Beijing has
expeditiously discharged its obligations under old aid
agreements. We estimate that China has disbursed
about $250 million a year to ongoing projects since
1980-about the same as before. Beijing also has
agreed to allocate funds under earlier agreements for
stadiums in the Comoros and Guinea Bissau; new
roads and bridges in Bangladesh, Burma, Nepal, and
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Hard Currency Earnings
suggests that China first
began realizing significant hard currency returns
from its new programs last year. In 1983 China
reported earnings of $300 million from its construc-
tion services to LDCs, combined with about $150
million from military sales. This compares with
overall .arnings from these activities of less than $50
million annually in 1975-79, and less than $100
million in the early 1980s. We believe earnings from
military sales could realistically rise to $600 million
and technical services to $500 million annually by
the mid-1980s. China has received little foreign ex-
change from economic aid repayments because most
large debts have been rescheduled and China accepts
repayments in commodities under old agreements:
some new aid pledges call for hard currency repay-
ments, but these probably will not exceed $20 million
a year for the rest of the decade.
Sudan; airport facilities in Mauritius; a coal mine in
Tanzania; and possible railroad rehabilitation in
Botswana under earlier agreements. TEe.;e projects
are worth several hundred million dollars; they will
absorb much of the aid in the pipeline, causing a
decline in disbursements later in the decade if new
pledges remain at current low levels.
Technical Services: A Hard Currency Resource
The provision of project personnel has become the
mainstay of China's economic program in LDCs as
commitments of capital to aid projects dwindle. The
number of Chinese employed in the Third World in
1983 has doubled since 1980-mostly in Iraq, Jordan,
and North Yemen. Beijing also is using a small
technical presence to build relationships with such
Soviet-oriented Marxist states as Angola and Mozam-
bique.
Technical services, which formerly were provided free
by Beijing to almost all aid recipients, are now being
promoted to earn foreign exchange. About half of the
29,000 Chinese economic technicians employed by
Third World countries in 1983 were serving under
commercial contracts with the rest financed through
. aid agreements (table 6).
Beginning in 1980, China moved rapidly to export
some of its abundant labor on commercial terms and
began to bid on construction projects in Arab oil
states. To handle its new sales in the Middle East and
elsewhere, China opened offices in Dubayy, Iraq,
Jordan, Kuwait, and North Yemen. China also
merged its Ministry of Foreign Trade with its Minis-
try of Economic Relations in mid-1982 to integrate
aid and trade interests more closely. According to the
Chinese press, some 42 companies are involved in
construction projects abroad and 40 new labor con-
tracts were signed during the first half of 1983 alone.
In 1983, China exploited another potentially lucrative
source of funds for the first time by providing labor to
projects financed by multilateral agencies in Morocco,
Nepal, Nigeria, and Somalia.
China has been successful in marketing services be-
cause of the reasonable salaries-from $2,000 per
month for project managers down to $400 a month for
laborers. These charges compare with as much as
$8,000 a month for personnel from other Communist
countries. The Chinese are also industrious and able
to endure difficult working conditions that would not
be tolerated by skilled workers from other countries.
China still is providing a substantial number of
technicians to LDCs under aid agreements. Most of
the technicians that China provides free are delivering
basic services in public health and education. We
estimate that 1,200 doctors and at least 500 teachers
from China worked in the Third World (mainly
Africa) in 1983. most
technicians and laborers under this program cost the
LDCs only about $100 to $300 monthly for local
subsistence.
Prospects
China's new approach in its economic aid and military
transfer programs in the Third World will provide
Beijing with a number of opportunities to expand its
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
China's "Four Principles" Encourage Profitability
China's new policy has received public endorsement
from the highest levels of government. In a rare
interview on China's aid program with the Paris daily
Jeune Afrique in 1983, Vice Minister Gong Dafei
reiterated his country's interest in the Third World,
particularly Africa, but cautioned that the day of
large Chinese aid projects such as the Tan-Zam
Railway is over. According to Gong, "We are, there-
fore, obliged to reduce our foreign aid and modify the
nature of that aid. We now prefer to offer our African
friends modest development projects ... which have
rapid returns. "
During a trip to Africa in January 1983, Premier
Zhao Ziyangfurther enunciated `four principles "for
aid to the Third World:
? "In carrying out economic and technological coop-
eration with African countries, China abides by the
principles of unity and friendship, equality and
mutual benefit, respects their sovereignty, does not
interfere in their internal affairs, attaches no politi-
cal conditions and asks for no privileges
whatsoever.
? In China's economic and technological cooperation
with African countries, efforts will be made to
achieve good economic results with less investment,
shorter construction cycles, and quicker returns.
offering technical services, training technical and
management personnel, engaging in scientific and
technological exchanges, undertaking construction
projects, and entering into cooperative production
and joint ventures. With regard to the cooperative
projects it undertakes, the Chinese side will see to
it that the signed contracts are observed, the
quality of work guaranteed, and stress laid on
friendship. The experts and technical personnel
dispatched by the Chinese side do not ask for
special treatment.
? The purpose of China's economic and technological
cooperation with African countries is to contribute
to the enhancement of the self-reliant capabilities of
both sides and promote the growth of the respective
national economies by complementing and helping
each other."
This new policy updates the eight principles of aid to
foreign countries formulated by Chairman Mao in
the early 1960s. It no longer formally precludes
China from profiting from its foreign aid efforts.
China already has proposed joint ventures in geology
and light industry to Nigeria and Tanzania (its first
such offers in the Third World) and appears close to
agreement with Bangladesh on a joint fishing venture.
? China's economic and technological cooperation
with African countries takes a variety of forms
suited to the local specific conditions, such as
influence in the LDCs and to strengthen its domestic
economy. We expect Beijing will continue its opportu-
nistic approach to arms sales, moving in where a client
with a large Soviet inventory-as Iraq-is denied
resupply in a crisis because of political reasons.n
Beijing may have trouble maintaining its current level
of military sales once the Iran-Iraq conflict is re-
solved. Sales to these two countries account for 55
percent of Chinese overall sales, and 70 percent of the
new sales in the 1980s. Other limiting factors include:
? Increasing competition among global arms suppli-
ers.
? The accelerated pace of Western arms technology. 25X1
? The demand for more sophisticated arms by LDC
clients.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Table 6
China: Economic Technicians
in LDCs, 1983 a
Total
28,790
Seychelles
35
Africa
9,485
Sierra Leone
265
North Africa
2,205
Somalia
450
Algeria
450
Sudan
475
Tunisia
925
Upper Volta
175
Sub-Saharan Africa
7,280
Zaire
300
Angola
10
Zambia
200
Benin
100
Zimbabwe
65
Botswana
40
East Asia
375
Burundi
225
Burma
375
Cameroon
450
Europe
300
Cape Verde
155
Malta
300
Central African Republic
75
Latin America
40
Congo
450
Antigua
5
Djibouti
155
Guyana
10
Equatorial Guinea
75
Jamaica
10
Ethiopia
250
Mexico
5
Gabon
70
Peru
10
50
Iraq
12,000
200
Jordan
1,500
500
Kuwait
250
250
3,500
15
15
Mozambique
100
South Asia
1,245
Niger
50
Bangladesh
175
Nigeria
150
Maldives
5
Rwanda
700
Nepal
350
Sao Tome and Principe
45
Pakistan
500
Senegal
100
Sri Lanka
215
a Minimum estimates of number present for one month or more,
rounded to the nearest 5.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 7
China: Economic Aid Extended to LDCs a
Total 5,921 3,643 282 410 196 210 219 177 402 112 41 231
North Africa 331 162 57 35 57 20
Algeria 92 92
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Table 7
China: Economic Aid Extended to LDCs a (continued)
422 248
25 1 NA NA 64 29 55
225 108
64 53
47 47
Philippines 31
29 2
Thailand NA
NA
Nepal 293 128
80 30 25 30
Pakistan 651 573
25 20 33
Sri Lanka 222 154
4 3 60
aBecause of rounding, components may not add to totals shown.
bindicates presence of an economic and technical cooperation
agreement that could eventually provide assistance.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 8
China: Economic Credits and Grants
to LDCs, 1956-83 a
Total
5,921
3,991
North Africa
331
280
Algeria
92
65
Mauritania
87
63
Morocco
55
55
Tunisia
97
97
Sub-Saharan Africa
3,041
2,052
Benin
44
20
Central African Republic
29
12
Chad
68
8
Comoros
15
5
Djibouti
30
3
Equatorial Guinea
27
26
Ethiopia
138
74
Gabon
25
13
Gambia, The
27
13
Ghana
42
34
Kenya
64
6
Liberia
23
6
Madagascar
89
80
Mali
128
117
Rwanda
56
29
Sao Tome and Principe
18
3
Senegal
52
37
Seychelles
4
4
Sierra Leone
61
59
Somalia
164
152
Sudan
139
80
a Because of rounding, components may not add to totals shown.
b Indicates presence of an economic and technical cooperation
agreement that could eventually provide assistance.
Tanzania
428
365
Togo
46
35
Uganda
42
8
Upper Volta
51
21
Zaire
138
90
Zambia
345
337
Zimbabwe
26
5
East Asia
422
248
Philippines
31
Thailand
NA
Western Samoa
NA
Europe
45
45
Malta
45
45
Latin America
159
50
Antigua
NEGL
NEGL
Chile
65
20
Ecuador
2
Middle East
573
374
Egypt
193
99
Iraq
45
17
Jordan
40
South Asia
1,350
943
Afghanistan
76
40
Bangladesh
107
64
Nepal
293
167
Pakistan
651
514
Sri Lanka
222
158
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Secret Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Orders will continue, however, to stem largely from
traditional clients such as Pakistan and Sri Lanka.
Beijing will also serve smaller clients, such as Sub-
Saharan African buyers that depend on Beijing for
small arms and more basic military equipment.
We believe that China will emphasize the export of
basic military equipment, spare parts-especially for
Soviet equipment-and support facilities. This is the
type of military export commitment that can be
readily met by China's defense industries. China
probably will be able to increase sales to countries like
Egypt and Somalia, which receive Arab funds to
maintain their Soviet-built military establishments.
The conservative Arab states view China as a far
more desirable arms supplier than the USSR.
We also believe that China will aggressively market
the few competitive weapon systems that it produces,
such as its MIG-21 fighter and improved medium
tanks. Weapons like these will appeal to a wider group
of customers and result in a more stable and predict-
able flow of orders.
On the economic side, many of China's new ventures
in LDCs are commercially oriented and provide the
opportunity for hard currency earnings. The Chinese
are now focusing on contracts with Middle Eastern
countries-Algeria, Libya, Iraq, and Kuwait-that
can pay hard currency for Chinese services. Beijing
will not abandon the poorest LDCs-its favorite
constituency-but by its own admission will limit aid
to modest agricultural projects and technical assis-
tance.
i 25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Secret
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Communist Military Transfers
and Economic Aid to
Non-Communist Less
Developed Countries, 1983
Secret
GI 84-10089
May 1984
Copy 4 7 4
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Directorate of Secret
Intelligence
Communist Military Transfers
and Economic Aid to
Non-Communist Less
Developed Countries, 1983
Development.
International Security Issues Division, Office of
Global Issues. It was coordinated with the
Department of State, the Defense Intelligence
Agency, and the Agency for International
This paper was prepared by
OGI,
Comments and queries are welcome and may be
directed to the Chief, Communist Activities Branch,
Se'xet
GI 84-10089
May 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Preface
Information available
as of 4 May 1984
was used in this report.
Communist Military Transfers
and Economic Aid to
Non-Communist Less
Developed Countries, 1983
covers.
This handbook provides data on Communist military transfer and econom-
ic aid to the less developed countries (LDCs). It serves as a supplement to
assessments of major developments in Communist-LDC military transfer
and economic aid relationships in 1993, which will be issued under separate
The statistics in this handbook update and supersede those in our previous
publications. Values of military agreements and deliveries are based on
Soviet trade prices, which are quoted in rubles and then converted into US
dollars. In early 1980, as part of a general review of Soviet pricing
procedures, military aid figures were updated to reflect new information on
prices for 1974 onward. That information indicated that ruble prices of
Soviet military equipment exported to LDCs had been raised on the
average by 80 percent between 1973 and 1980. The new ruble values were
adjusted for annual changes in the dollar value of rubles used in foreign
trade transactions.
The term Communist countries refers to the following donor countries: the
USSR, China, Bulgaria, Czechoslovakia, East Germany, Hungary, Po-
land, Romania, Cuba, North Korea, and Yugoslavia.
torical purposes.
The term less developed countries includes the following recipient coun-
tries: (1) all countries of Africa except the Republic of South Africa; (2) all
countries of East Asia except Hong Kong and Japan; (3) Malta, Portugal,
and Spain in Europe; (4) all countries in Latin America except Cuba; and
(5) all countries in the Middle East and South Asia, except Israel.
Although Kampuchea, Laos, and Vietnam have been Communist countries
since 1975, data prior to this date are included in this compendium for his-
or the use of services.
The term extension refers to a commitment to provide goods and services,
either on deferred payment terms or as grants. Assistance is considered to
have been extended when accords are initialed and constitute a formal
declaration of intent. For economic aid, credits with repayment terms of
five years or more are included. Where terms are known, the credits are
designated as "trade credits" if amortization is less than 10 years. For
military transactions, all sales are included-whether for cash or provided
under credits or grants. The term drawings refers to the delivery of goods
Secret
GI 84-10089
May 1984
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Secret Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
As to individual table entries, the term NEGL refers to a value of less than
$500,000; NA indicates an agreement was signed, but the value was not
known; two dots (. indicate we have no information and presume the
value is 0.
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
Secret
25X1
Contents
1. Communist Military and Economic Agreements Concluded 1
With LDCs, 1954-83
2. Communist Military and Economic Deliveries to LDCs
3. Communist Military and Economic Agreements Concluded 4
With LDCs, 1983
4. Communist Military Agreements Concluded With LDCs, 1983 7
5. Communist Military Agreements With LDCs: Agreements 10
Concluded and Equipment Delivered, 1955-83
6. Communist Military Agreements Concluded With LDCs, 1955-83 14
7. USSR: Military Agreements With LDCs
8. Eastern Europe: Military Agreements With LDCs
9. China: Military Agreements With LDCs
10. USSR: Major Military Equipment Delivered to LDCs, 1983 67
11. Other Communist Countries: Major Military Equipment 68
Delivered to LDCs, 1983
12. Communist Military Technicians in LDCs, 1983
13. Communist Training of LDC Military Personnel in
Communist Countries, 1955-83
15. Communist Economic Credits and Grants to LDCs: Extensions and 76
Drawings, 1954-83
18. Eastern Europe: Economic Aid Extended to LDCs
21. Technical Trainees From LDCs Departing for Training in 93
Communist Countries, 1956-83
22. Academic Students From LDCs Trained in Communist
Countries, 1956-83
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Summary of Economic Project Information by Area
26. : Europe
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 1
Communist Military and Economic
Agreements Concluded with LDCs(a)
Million US $
Military Agreements(b)
Economic Aid Agreements(c)
Total
USSR
Eastern
China
Total USSR
Eastern China
Europe
Europe
TOTAL
101,871
83,225
11,122
7,523
45,740.6 26,698.9
13,120.4 5,921.3
1954-73(d)
15,094
13,178
1,400
516
17,910.4 9,275.7
4,992.0 3,642.7
1974
6,426
5,733
602
91
1,935.6 815.5
838.6 281.5
1975
3,860
3,185
635
40
2,924.5 1,968.5
545.6 410.4
1976
6,636
6,136
355
145
2,192.5 1,006.3
990.6 195.6
1977
10,216
9,490
652
74
1,159.9 434.2
516.2 209.5
1978
3,432
2,679
520
233
4,819.8 3,002.3
1,598.2 219.3
1979
9,769
8,830
746
193
4,571.8 3,748.9
645.6 177.3
1980
16,046
14,236
'870
940
4,311.2 2,587.7
1,321.9 401.6
r
1981
12,012
6,499
2,549
2,964
1,415.1 580.4
723.0 111.7
1982
13,682
10,520
1,607
1,556
1,566.6 965.1
560.4 41.1
1983
4,698
2,740
1,186
772
2,933.2 2,314.3
388.3 230.6
a. Because of rounding, components may not add to the totals shown.
b. An additional $6.0 billion in military agreements has been committed by other
Communist countries: (a) Cuba ($178 million), (b) North Korea ($1,809 million),
and (c) Yugoslavia ($3,974 million). The Cuban figure excludes $147 million
committed to Angola in 1975 before independence. After independence, $117
million was recommitted and is included in the 1976 agreements. Note table below
for agreements in 1976-83:
MILLION US $
TOTAL
CUBA
NORTH
KOREA
YUGOSLAVIA
1976
759
117
81
561
1977
178
15
5
158
1978
241
..
131
110
1979
552
NA
137
415
1980
584
5
421
158
1981
1,513
18
613
882
1982
772
NA
97
675
1983
582
22
274
286
L
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
25X1
Table 1
Communist Military and Economic
Agreements Concluded with LDCs (Continued)
c. Economic agreements provided by other Communist countries are not available,
with the following exceptions:
Million US $
Tota
l Cuba North
Korea
Yugoslavia
1976 3
.7 8 13
16
1977 19
5 NA 5
190
1978 18
6 58 NEGL
128
1979 19
2 36 3
153
1980 24
5 70 40
135
1981 27
9 73 31
175
1982 44
0 147 13
280
1983 17
6 60 36
80
d. The first military agreement was signed in 1955.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 I
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Secret
Table 2
Communist Military and Economic
Million US $
Deliveries to LDCs(a)
Under Military Agreements
Under Economic Aid Agreements(b)
Total USSR Eastern Chi
na
Total USSR Eastern China
Europe
Europe
TOTAL 77,991(c)
66,813 8,116 3
,062
21,838 12,374 5,473 3,991
1954-73(d)12,991
11,298 1,241
452
7,991 4,965 1,662 1,364
1974 2,460
2,224 210
26
1,215 702 236 277
1975 2,407
2,032 274
101
981 502 272 208
1976 3,560
3,110 350
100
-1,232 474 403 355
1977 5,246
4,816 357
73
1,331 548 507 277
1978 6,727
6,080 551
96
1,201 482 427 292
1979 9,084
8,338 646
100
1,105 574 305 226
1980 8,428
7,611 565
252
1,338 812 298 228
1981 8,875
7,157 1,281
437
1,482 853 384 244
1982 10,326
7,774 1,758
794
1,918 1,162 485 271
1983 7,887
6,373 883
631
2,044 1,300 495 249
a. Because of rounding, components may not add to the totals shown.
b. Data for economic deliveries by Cuba, North Korea, and Yugoslavia are not
available.
c. An additional $4.2 billion was delivered by other Communist countries: (a) Cuba
($190 million), (b) North Korea ($1,652 million), and (c) Yugoslavia ($2,413
million).
The Cuban figure excludes $30 million delivered to Angola in 1975 before
independence. Deliveries from these Communist countries in 1976-83 are shown below:
M
illion US $
Total Cuba North
Korea
Yugoslavia
1976 357 117 79
161
1977 270 14 21
235
1978 274 .. 88
186
1979 261 NA 91
170
1980 541 2 194
345
1981 848 12 467
369
1982 602 10 472
120
1983 531 34 232
265
d. The first military deliveries were in 1955.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Table 3
Communist Military and Economic
Agreements Concluded with LDCs, 1983
Total
USSR
Eastern
Europe
China
Total
USSR
Eastern
Europe
China
TOTAL(b)
4,698
2,740
1,186
772
2,933.2
2,314.3
388.3
230.6
NORTH AFRICA
386
3
383
..
328.7
278.2
50.5
ALGERIA
..
250.0
250.0
LIBYA
374
3
371
..
(c)
(c)
MAURITANIA
..
..
2.0
1.5
0.5
MOROCCO
12
..
12
..
TUNISIA
..
..
..
76.7
26.7
50.0
SUB-SAHARAN
AFRICA
1,054
981
36
37
513.6
308.1
72.3
133.2
ANGOLA
817
805
13
..
..
BENIN
..
..
..
..
0.1
..
0.1
BOTSWANA
..
..
14.0
..
(c)
14.0
BURUNDI
2
2
..
..
..
CAPE VERDE
..
..
..
..
0.3
..
..
0.3
CENTRAL AFRICAN REPUBLIC
..
..
15.0
..
..
15.0
CONGO
NA
..
..
NA
87.5
87.5
ETHIOPIA
..
..
..
..
268.1
266.1
2.0
GHANA
..
0.2
0.1
0.1
GUINEA
NA
NA
..
NA
..
KENYA
..
..
..
..
5.0
..
5.0
LESOTHO
..
..
..
..
5.0
..
5.0
MALI
..
..
0.8
..
..
0.8
MAURITIUS
NA
NA
..
MOZAMBIQUE
157
150
7
16.5
16.0
0.5
NIGERIA
28
..
16
12
5.2
..
5.2
RWANDA
1
..
1
(c)
(c)
SAO TOME PRINCIPE
2
2
SEYCHELLES
2
2
..
..
6.0
6.0
SOMALIA
..
..
25.0
- ..
25.0
SUDAN
6
..
6
..
TANZANIA
29
18
..
11
7.5
..
7.5
UGANDA
..
..
11.0
11.0
ZAIRE
Negl
..
..
Negl
ZAMBIA
NA
..
NA
16.4
8.9
7.5
ZIMBABWE
10
3
..
7
30.0
..
30.0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
r Secret
25X1
L
U
U)
O0
CJ
O
UL
W L1
l0 ~
L C
+J U
C
-0
U
N
N
U) C
M ?- 0)
C E
Ea)
a E L
1-. 0 <
C
L a)
ma
+j o
U) L.
cc J
W W
MM O
'OHO O U
-XN ? N N U1 tr1
O O
0 . . . .0 . . . .
-Z :r
N N
o oOM ?fir`
N ?a0Nt11 ? ? ?Ot110
CO 'or--
U1, 0 < U11
Z . . .
co .O N
'O'O O COMOOM OM C0N-
?N . N ?-~ Os000c\J A ?N0000
U1 tr\ -Z ~O CO r?
?7 N
M ? z . o) ?
a) a)
Z Z
u1 O Z O tt1 Q
tl1 ? 0 . 0 . ? ? ? tr1 Z
N 'O Zr N
N M M
U1- ??NIA ? . ? ?< .
N N
M- ? O . Q ?\O ? N \.O ?
tr\ N ? n Z ? ? r? N
~o M
N ? ? ?-O
N' N
- ?< - ? CO . . < . . - -r
of ?Z . cn CO . . . .Z . . ?NO
0) a) N N
Q Q-0 W Z < 5
_aZ, EQ-< -~
- ?- a) C O w
m O U m 4- U ?-
0 - E - +'
OIL L E C E C
COO. 00 0a)
U?- CO
41 0-
m a) L L- U
-O o a)?- d+.
C 7 X +?) E C O
- a) 00 QL
a.)
?.OC ??
m-0 .tA U >
25X1
Secret `
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP9O-00596RO01100020001-0
Secret
op of < ?00 ? ?N\O-
N O
N-
N
C~
.O
O
.
CO CO
cc
?
%0
M.N
U1N
r- ~O
ao
CO N N.
M
r-
~
M M
N.
N N
CO tl1 \0
? O
NN n NON
O~NrO- ~OONMN - - ~Op
. . . . . . . . .
rrO\zr 0t11-t11~O NCO OCO
CO ~tb?~O Mr tflr r
~~tnr ~M r
Z Z Z
W W <
F- f f ^ N
V) WW L'(nW
Z}}' -0
w Zr0 LoZQ
H- ,G) N
L L. C
cC 0m 0) 0
4- CC L -
?- L
E m C f
~+ O
L?- ?-
0- -
E
N E
N 4-
C O N
G) 00
so U
() G) V>
E 3
Y
0) 0
cC > c0
cow a~
4.3
?- W
- L
?-Y 4
E C L
cc 0
L.
;
o)
N
cc N 4-)
cc C
E
CO N
L
- L 0)
O c6
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
N
co
tf'
0.
a)
L
a)
N?-
U-
O a)
J o
Z 4J
+J C
3a
C d?
a) W
E
Q) 'D
0) C
L. c0
O)
a)
>
L 3
C
- O
L O)
a) 0.
430
y L
W
W W
L a)
d a
Y O
W, L.
W W
N 00 Ntf1 ?.-O M ? ?'-NN ?tf\ ?0-MNC), -NU- ?Ifl ?O
)O M '- O ? N N ? ? ? '- O) '- ? ? rn
O M M (D 0)
Z Z
U
0\ O N )0 If O) ? O ?'- ?~ M
0 - 0) )O N a) '-
M 0))0O\ ?~ ? N~MN.~-OMN ~N ?-O)ON- :ON ?tf1O0 ?.
D\NN ?~ CMU N 0"o ANN O).-O? O) ?M ?)O-
a0 a) - O) a) - N - )0 N
Z Z Z
N
- NM~.7'-O rn~~aoNNOaoroo.- (~MMrM--NN ?.7MO~
0) If '-N 0)000 N )0 If N co NNE 0)0)-M ? O tf\r
C% '- N N '- N CO - .- 0 .- a) 0 -,- 11-N
N
M O)Ntf\ N ? ?'-NN ?N-O-MNM~'? -N)O ?UNO
t11 M M a) O N
N 0)CO N?t1' ? r' ?N- ? ?0)Q ?~~'~ ?U, ? -T co
NOS 0 ? C\ r- 0- ? ? ? ?OZ ?.- ? ? ? ?tf1M
N N d
z
N 0.00 ?N
N MO)N
M 0 ? tf\
CO N
NMN0-NON)O0N ?-OO)N- ?O--QD\- ?4?
. N 00 .7 O)'O N N E ? 0).- O 0) ?'- )O Z O ?-
CO )O r a) '- 0) a) N
Z Z Z
aD.- M
~Lt1N~N )On --T 00?(I- NnN0 0 ~NMn ~M--NNQaD~O-T
N OO)ON )0M N.70 . )0r- O)Ntf\ N0? 0)0)-)0Z?)0r
CO O\ O N - O)- r- 0 N co-- 00 N
0 Z Z
Mtf\00 '-
O N
U
U Q
fr z
-- ~a Q0Q
d Q - H U -
frQ Utn
J 2 W } 0 -
Q E-00DfrZ
I- J - W-QQQO-3Q
~Qmmm000UUWWUl.7UUUYJffZFZCrV)
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP9O-00596RO01100020001-0
Secret
L,
.~-M. MCO . NO\Nto
CO, ?M-
? ?-'O~OUI ?~---
z ? mom.-rte. o
N ()
Z Z
?ONNOM ?M ?.
? 0000 ?N ~
r M - N
? r an N ~ ~ ~ ~ 0\I~ D\
Zr ?OO~N M~rr
Iran r M
?rCO COrON_* NMNN
-.r 04 .OMN
< ?-I000M ?r-O\?
Z Olrrrn ?r rn-T Z
0.) 0)
?ONNOM ?.7 ?rM
?r OOO ?~ ?tn
'T r M r N
?r an"OO\an~I-mNan
-Zr ~0 -0 an%OMN
-7 N V r M
N
C
C
0
0
< w
Z
Z (nO
< ww
< J J J < ? 3
x ? W ? - Z < < CO
?oxoJZ? ow-?
WW0 > > > > >
O 0 0 0 0 0,
U) U) N N U) U)
0 0 0 0 0 0
U) W N W U) W N U) U) V) V) N V) N W N W V) V) V) W V) V) V) wow U) U) woo U)
W NU)NU)NU)UU) U)NU)U)U)NNNU)U)NNU)U)U) UU)U) U)U) U)U)0 U)
H a`
U- U- it LL LJ
JJ Li -1 0: W } Q WUJ ..J W} 0]4_J
QQHmQ Q W CO C: O com QQQ co d: N f W Q
Z U)fx coZ < O ff>x ZQ x V) WM= x J
mw ).=Ow MU)- w w== } W= U W } O - O U
Z0(7>a-imI-> Z=J}x )->0--.J0 C}Z JU C. 1-0
Q U) ZDO ZD W U O -
I~ E U fl
tC 0 a) C
I~- U o
............................
............................
?0 ?o ? ?00 ?00
:C. . . . . :C. . . . . :C. . . .
N .7 ? N U1 r 0 M CO
CO Cr) QO M CO m ' .7
O ?C ?QO ? ? ? ? ?Q ?oaarn'0 ?ww< < 0
0 )4.Z>Il=m=wm ]OUOUOfr0002wCL 0U0U0UfLOxU=uCL CL ==CL =
x
W Li fL' ~? L. W > W W W
W CJ W J J fY J -j -j
CO fa CO < < < < < as
Z W 2 f 2 x x x x x
> W W >W> =UW fY
Z> - - J>J C C ZO - C HI-
0 W(0000 w?=Z Cl) W Cl) V) V)
Z N --)Z n W F 7 N r- L.. r- r- r-
t0 aO 0 - N M ? LfA 1.0 N 0 ON 0 N M ? LA SO N 00
u1 Lf1 \0'0 'O 'O tO \0 ~O ~O tO tO N N N N N N N N r
O_ O1 m 0' (71 O\ Ct Ct 0) 0% O, 0) ON ON 0t Ct 0` Ct 0' 0) Ot Ct
0 E 0 'O } > - -- - -- - --- - r- r- r- r- -- -- r-
~ 0 u a: La I 0
Secret Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596R001100020001-0
25X1
 P
r '
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP90-00596RO01100020001-0
aao<
3
V
a)
V
U
C
0
U +j >,
y L
0
C W
N E co
E E rn
0) 0
d U Cl)
L
rn
t
>) 4
L. C
c O
N V
- a)
- V C
C rn
E n3
4-3 AJ
t/) C L
~O - a) cc
C ?- d
y E 0. }
Io E U V
cc 0 N C
H U w ni
N N
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . :c. . . . . . . . . . . . . . . . . . . . . .
rn ? rn
N d
Z ? Z
00 ?O ?O-O ?O -00 ?00 ? ? ? ? ? ?0' 00
O~ 111Z ZOD M N
N
-
00 ?O . . . ?0-00 ?O . . CO ~rr}Z0
zU2aa>
0