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-RDP92B01090R000100210007-0
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 23, 2016
• Document Release Date: June 5, 2013
• Sequence Number: 7
• Publication Date: June 30, 1957
• Content Type: REPORT

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N? 74
QUARTERLY REPORT
to the
COUNCIL ON FOREIGN ECONOMIC POLICY
SINO - SOVIET BLOC
ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
30 JUNE 1957
NUMBER 1
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 DEFENSE OF 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
30 JUNE 1957
A. Summary of Bloc Economic Activities.
1. The Soviet Union, in accordance withits mostlinmediate polit-
karobjectiires in the underdeveloped areas of the Free World, has con-
tinued to direct the main thrusts of the Bloc economic offensive toward
India, Egypt, Syria, Afghanistan, and Yugoslavia and, to a lesser ex-
tent, toward Indonesia, Burma, and Iceland. Although the magnitude of
the Bloc program is small in global terms, its impact has been intensi-
fied by a concentrated exploitation of specific opportunities in a few se.-
lected areas.
2. Neutral countries have generally been the principal targets of
Bloc offers, but other countries, including some allied to the West, :have
also been the object of Communist approaches. For example, the Bloc
has become an extremely important trading partner of Iceland. More-
over, Iran, Turkey, and Pakistan have received attractive Soviet credit
offers, although as yet few have been accepted.
3. Eventhough the economic offensive is a relatively recent addi-
tionto Soviet foreign policy, Communist nations since 1955 have extended
more than $1.4 billion in credits to the underdeveloped countries. Grant
aid has been negligible. Of the credits extended, about $350 million has
been for military purchases, and the remainder -- more than one billion
dollars -- has been for economic activity. Definite obligations (includ-
ing arms contracts)under these lines of credit are more than $700 mil-
lion, about $200 million of which is obligated for 1957. Drawings to date
have been about $400 million. (See attached chart.)
4. With the exception of a small Czechoslovak credit to Syria, the
Bloc has extended no new credits since November 1956. Inasmuch as the
countries which have been most susceptible to Soviet inducements have
already Laccepted its offers, and many countries allied with the West
have been unwilling to take significant Bloc credits, recent probings for
new credit outlets by the USSR have found few rewarding opportunities.
In view of growing demands within the Soviet and Satellite economies,
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Bloc leaders may be more careful in allocating additional resources for
use outside the Bloc; however, the emergence of opportunities to achieve
important political benefits in the underdeveloped countries would almost
certainly prompt additional credit offers.
5. The Bloc offensive has increased in tempo in other respects
during recent months. Specifically, work on Bloc projects under way
before November has continued; construction of several additional proj-
ects has begun;- and surveys for still other new projects have been made.
By the end of 1957 the Bloc probably will be active on considerably more
projects than at present. The number of Bloc technicians in the under-
developed countries has also increased as Bloc assistance has been im-
plemented: more than 2,100 have been employed thus far in 1957 com-
pared with 1,400 in 1956. This number is expected to increase as credits
are further implemented. Moreover, since 1954, more than 80 new
trade agreements between the Bloc and underdeveloped countries have
been signed. Trade turnover betweenthe Bloc andunderdeveloped coun-
tries in 1956 was more than $1.4 billion, or 60 percent greater than in
1954.
6. There is no doubtthat the Bloc, or the USSR alone, can support
an offensive of considerably greater potential impact in the underde-
veloped countries. The USSR produces annually goods and services in
excess of $150 billion, while the output of the entire Sino-Soviet Bloc is
valued at about $250 billion. Anticipated 1957 deliveries under the ex-
isting credit programs will be only a fraction of 1 percent of the Bloc's
gross national product. Moreover, the trade aspect of the economic of-
fensive produces substantial economic benefits, particularly for the
European Satellites.
B. Significance of Sino-Soviet Bloc Economic Offensive,
1. The Bloc economic offensive is an integral part of post-Stalin
strategy generally designed to encourage an atmosphere of detente in
which Soviet objectives can be advanced without serious risk of general
war. Soviet protestations of common interest in expanding trade and in
assisting economic development have done much to dispel the image of
Communism as an aggressive force -and to gain for the USSR a position
of greater respectability. Although brutalities in Hungary have offset
some of this gain, Bloc offers of trade and assistance still have great
pragmatic appeal to countries hard pressed to achieve more rapid eco-
nomic growth.
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2. Bloc economic diplomacy has reinforced neutralist positions in
the Near East and Asia (India, Indonesia, Burma) as a first step toward
gaining greater latitude for Communist diplomacy, propaganda, and in-
filtration ? all aimed at reducing Western influence and developing op-
portunities for eventual subversion. Closely allied is the objective of
disrupting Western alliances (for example, those with Turkey, Iran, and
Iceland). In pursuing this objective, the Bloc has had little real success,
although its offers tend to enhance the bargaining power of target coun-
tries in negotiations with the US on bases and military assistance.
3. Bloc aid -- particularly for arms -- has also been used to fa-
cilitate their fishing in troubled waters where the USSR has seen an op-
portunity to attain particular foreign policy objectives. Soviet economic,
military, and political support for anti-Western elements in the Near
East has helped to bring about a critical situation in that region and has
provided the USSR with beachheads in a vital area of the world. Eco-
nomic agreements with Yugoslavia produced some temporary gains for
the USSR but were followed in late 1956 by a slowdown of aid implemen-
tation when political controversy recurred. Military and economic aid
to- Afghanistan -- combined with political support in its disputes with
Pakistan -- has been an important factor in enhancing the Soviet position.
In no country, however, has economic influence been sufficient to per-
mit the Bloc to control or to dominate the policies of these countries.
4. In most countries, Bloc assistance to non-Communist regimes
has not notably enhahced the prospects of local '.Communist parties. Prin-
cipal exceptions are Syria and Iceland. In at least one instance, India,
the economic offensive has created internal difficulties -- probably tem-
porary ? for the local Communist party.
5. In the long run, expanded economic relations, particularly the
increase in contacts with Bloc advisers and technicians, provide an op-
portunity for increasing acceptance of Communist products,,ecanomid
techniques, and institutions. Despite some, complaints about the quality
and price of Bloc goods, they seem to be fairly satisfactory to the under-
developed countries, and Soviet technicians sent abroad have generally
been considered competent. Even where Soviet political oppression is
recognized, there is often widespread admiration for the Soviet economic
model. There is a very real danger that the strains and -pressures 'in-
herent in the drive for rapid economic progress would provide an in-
creasingly receptive atmosphere for Communist alternatives, particu-
larly if a country already had a few examples of successful Bloc-con-
structedprojects and can obtain essential imports by expanding sales to
the Bloc of products which face difficulties in world markets.
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Millions
of dollars
400-
300-
200-
100 ?
0 -
24565 6-57
Credits from the Soviet Bloc
to Principal Free World Recipients
EGYPT
AS OF 30 JUNE 1957
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