QUARTERLY REPORT TO THE COUNCIL ON FOREIGN ECONOMIC POLICY SINO - SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000100210006-1
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 23, 2016
• Document Release Date: June 5, 2013
• Sequence Number: 6
• Publication Date: July 1, 1975
• Content Type: REPORT

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QUARTERLY REPORT
to the
COUNCIL ON FOREIGN ECONOMIC POLICY
SINO - SOVIET BLOC
ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 July 1957-30 September 1957
NUMBER 2
PREPARED JOINTLY BY
THE CENTRAL INTELLIGENCE AGENCY
AND
THE DEPARTMENT OF STATE
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WARNING
THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE,NATIONAL DErENpE, pF THE UNITED STATES
WITHIN THE. 'MEANING OF THE ? -ESPIONAGE LAWS,
TITLE 18, U.S.C., SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JULY - 30 SEPTEMBER 1957
1. Principal Developments.
An aid agreement signed by Syria and the Soviet Union and a Soviet
decision to set forward construction dates for projects in Yugoslavia
were the leading events in the Bloc economic offensive during the period
1 July - 30 September 1957. The credit to be extended to Syria was the
first provided by the Soviet Union to any non-Bloc nation since Novem-
ber 1956 and was the fruition of an opportunity that the Soviet Union had
been nurturing for some time. Rescheduling of Soviet projects in Yugo-
slavia, on the other hand, was probably a direct outcome of the June
shakeup in the Soviet Communist Party Presidium. In addition to these
developments, the Bloc was active in other countries, including Western
Pact countries ? notably Turkey, Iran, and Iceland -- and there was
continued activity in the implementation of earlier trade and credit agree-
ments . There was further evidence during the quarter of the importance
attached by the Soviet Bloc to expansion of its civil air activities in the
Free World.
2. Syria.
In August, following discussions in Moscow, the Soviet Union agreed
to provide extensive economic assistance to Syria and stated its willing-
ness to collaborate with Syria in railway and road construction, irriga-
tion projects, and construction of hydroelectric power stations, as well
as in a number of industrial projects. Long-term credits will probably
total $100 million to $150 million, and negotiations are currently under
way in Damascus on the specific projects to be undertaken. The interest
rate will be 2-1/2 percent, with repayment at least partially in Syrian
exports over a period of 10 years or more. Inadditionto this economic
aid, there have been reports that Syria will receive further military
assistance from the Bloc.
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SEC-R-E-T
The promise of Soviet economic assistance has greatly strengthened
the pro-Soviet Syrian government, improving markedly its chances of
survival. For this reason, the present government is politically indebted
to the Soviet Union. Many of the projects envisaged under the Syrian
government's $180 million 6-year development plan are expected to be
included in the Soviet aid program. Repayment of the Bloc credits will
tie up an important portion of Syrian exports for some years to come.
Furthermore, in view of the large military burden and certain weak-
nesses of the domestic economy, Syria may well seek still further eco-
nomic aidfromthe Bloc. Thus the political and economic support given
by the Soviet Union will undoubtedly result in greater ? Soviet influence
over future Syrian policies.
3. Yugoslavia.
Following the June shakeup in the Presidium of the Soviet Com-
munist Party, which eliminated the leading anti-Tito elements, discus-
sions held in July between high Soviet and Yugoslav officials resulted in
the reestablishment of construction dates for previously postponed de-
velopment projects in Yugoslavia. The cost of these projects is esti-
mated to be about $245 million. Although the agreement is probably in
the nature of a compromise, and the starting dates for the projects are
later than originally planned, Soviet-Yugoslav relations are now clearly
more cordial than earlier in the year.
4. Western Pact Countries.
The Soviet Union continued its policy of cultivating and expanding
economic ties with Free World countries which are members of Western
pacts. The Soviet Union and a Turkish private bank, in which the Tur-
kish government has a one-third share, have recently signed a contract
for the construction of a glass factory under a Soviet credit of $10 mil-
lion to $14 million. Subsequently the Turkish government also agreed
in principle on Soviet assistance for building a caustic soda and calcium
plant. In Iran, Soviet engineers discussed improvements of Iranian ports
on the Caspian Sea, and a joint Soviet-Iranian commission was estab-
lished to draw up plans for developing hydroelectric and irrigation proj-
ects on border rivers. A Soviet offer to Iceland of up to $24. 5 million
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in financial assistance, in part to refinance a previous Icelandic purchase
of East German fishing vessels, was under consideration. Other NATO
countries, however, were exploring ways to alleviate Icelandls eco-
nomic difficulties and thus forestall acceptance of any part of the Soviet
offer.
5. Other Countries.
Other countries were also involved in important economic transac-
tions or negotiations with Bloc countries during the past quarter. In
Sudan, cotton marketing difficulties and the prospect of large carryover
stocks provided an occasion for a Soviet offer to purchase additiOnal
cotton. At the same time, the Soviet Union made a general offer of de-
velopmental assistance. The Tunisian government in September stated
its willingness to accept Bloc arms if arms could not be obtained from
Western countries, although there was no evidence that Tunisia had re-
ceived such a.noffer from the Bloc. Ceylon renewed for 5 years its rice-
rubber agreement with Communist China without receiving the premium
rubber payments which it obtained in the past. Under this agreement.
the quantity of rubber was reduced, possibly to enable Communist China
to increase purchases from Malaya. At the same time, Communist China
awarded Ceylon a grant of $15.6 million.
6. Air Agreements.
Over the last few years, there has been an impressive increase in
Bloc civil aviation activity inthe Free World. A reversal of the policy,
which until 1954 had excluded from Soviet airspace all foreign airlines,
permitted negotiation of agreements for extension of Bloc air routes in-
to the Free World. The increased prestige accruing to the Bloc from
the recent development of modern jet airliners is also spurring the Bloc
to seek new routes. Poland and Czechoslovakia as members of the Inter-
national Civil Aviation Organization (ICAO) should have somewhat less
difficulty in reaching agreement with Free World ICAO members than
the Soviet Union and other non-member Bloc countries. The contrast
between these activities in 1953 and 1957 is shown onthe attached chart.
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SECRET
SINO-SOVIET BLOC AIR ROUTES TO THE FREE WORLD
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26266 9-57
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SECRET
SECRET
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