SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN NON-COMMUNIST UNDERDEVELOPED AREAS 1 JANUARY-30 JUNE 1963

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000400010016-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 61
• Document Creation Date: December 19, 2016
• Document Release Date: January 25, 2006
• Sequence Number: 16
• Publication Date: September 1, 1963
• Content Type: REPORT

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SINO-SOVIET BLOC ECONOMIC ACTIV
NON-COMMUNI ' UNDERDEVELOPE )
1 JANUARY 30 JUNE 1963
EIS; R14-S15
ECONOMIC INTELLIGENCE COMM
of the
UNITED _ = ATES INTELLIGENCE BOARD
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN
NON-COMMUNIST UNDERDEVELOPED AREA
1 JANUARY - 30 JUNE 1963
EIC R14-S15
September 1963
ECONOMIC INTELLIGENCE COMMITTEE
SECRET
25X1
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ii?OREWORD
The reports on Sino-Soviet Bloc economic activities in underde-
veloped areas in the EIC-R14 series provide periodic summarie, and
analytical interpretations of significant developments in the econorIc
relations of Bloc countries with underdeveloped countries of the Fr4e
World. These developments are reported on a current, factual basis in
the Biweekly Reports in the EIC-WGR-l series, under the same title.
This report, covering the 6 months from 1 January through '_;O Ju e
1963, constitutes the fifteenth periodic supplement to EIC-R14, the
background report on Sino-Soviet Bloc Postwar Economic Activities i
Underdeveloped Areas, 8 August 1956, SECRET. The present supple-men-
relates noteworthy noneconomic activities, including military aid, ,o
the economic operations of the Bloc in underdeveloped countries in
order to place the economic aspects in the perspective of the over-L.1
programs of the Bloc in these countries. This report was prepared t)y
the Department of State and the Central Intelligence Agency. The
draft was reviewed and coordinated by a Working Group of the Econom C
Intelligence Committee, including representatives of the Department
of State; the Defense Intelligence Agency; the Departments of Commerce
and Agriculture; the Agency for International Development; th( Offi e
of the Secretary of Defense; the National Security Agency; and the
Central Intelligence Agency. The final report was approved by the
Economic Intelligence Committee on 2'( August 1963.
For the purposes of this report, the term underdeveloped areas
includes the following countries of the Free World: 1 all (~oun-
tries in Latin America except Cuba; (2) all countries in the Middle
East, including Cyprus, Greece, the Syrian Arab Republic, Turkey,
and the United Arab Republic (Egypt); (3) all countries in Africa
except the Republic of South Africa; (4) all countries in South and
Southeast Asia; and (5) Iceland, Portugal, and Spain.
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN NON-COMMUNIST UNDERDEVELOPED AREAS
IJANUARY - 30 JUNE 1963
Summary*
Current Trends
Sino-Soviet Bloc economic s id activities in underdeveloped coun';rier
during the first 6 months of 1963 continued to reflect a more criti(?al
appraisal by both lending and recipient countries -- an appra:isal i,
which the Bloc gave evidence of a more realistic assessment of the
politicostrategic returns commensurate with the aid resources commi'.ted
and some underdeveloped countries exhibited a greater appreciation t.f
the limitations of Bloc economic assistance. While both the level -nd
the more selective pattern of new Bloc aid extensions have reflecter
this changing assessment, both the Bloc and the underdeveloped counttriet
have been reluctant to relinquish a program which has hitherto netted
some advantages to both sides.
Sino-Soviet Bloc new economic aid extensions during this 6-mont}
review period totaled $101 rn.illion** -- the smallest Bloc commitment
during any comparable period since 1957. Although the only known
military aid extended during; the first half of 1963 was $16 million
in credits to India, a military agreement of unknown value with Cam-
bodia was concluded in March or April. It is possible that agreements
were also concluded with Algeria, the United Arab Republic (UAR), and
Indonesia. Deliveries of equipment under previous military aid com-
mitments continued unabated.
It is still not possible to state with confidence, however, the
extent to which the lag in new extensions reflects (1) a more cauticis
and selective approach motivated by the apparent feeling in some Bio
circles that economic aid. has not been as effective as had ear!iier been
anticipated in furthering Bloc policy objectives, (2) a decision by the
USSR to lessen the burden of it?; aid program in view of domestic eco-
nomic stringencies and substantial commitments in Cuba and elsewhere,
(3) the large backlog of undrawri credits resulting partly from the
inability of recipient countries to implement their part of thf- program,
or (4) more limited opportunities in newly emergent countries for la.'?ge
scale aid agreements of the kind that the Bloc has hitherto entered nto
See the chart, Figure 1, following p. 2.
All data in this report exclude Cuba and Yu oslavia and thus are not
comparable to aggregative figures in previous i sues of the EIC-R14 ..erica
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When vie:uwed against (1) some disappointing results of the program in
Iraq, Africa, and elsewhere, (2) the simultaneous Bloc commitments in
heavy industry, military, space, consumer welfare, and support for less
developed Bloc members and Cuba, and (3) bitter Chinese and other Com-
rrrunist denunciations of Khrustlchev' s coexistence strategy in under-
dF'veloped areas, foreign aid may well have also generated larger
poLitica:l issues within the Bloc than the actual economic costs of
the aid program would seem to warrant. Indeed, all these factors
probably have contributed to the recent decline, in new Bloc aid com-
luitment~ .
1'h.r- Cir-st half of 1963 was also marked by 3.mbivalent attitudes
toward Bloc aid by many of the underdeveloped country recipients.
Guinea, Ghana, and Mali, countries on which the Bloc had pinned great
hopes for extending its influence in Africa, have been increasingly
vocal in expressing their dissatisfaction with the implementation of
Bloc aid. Ugly racial incidents involving African students in the
USSR, Czechoslovakia, and Bulgaria have also tended to generate
hostile, if only transitory, criticism of the Bloc. In Iraq the
now regime sought to redress the balance of its Bloc-oriented prede-
cessor by seeking to cancel its contract for Soviet missiles and by
."Lnceling, two economic aid projects ancL halting the implementation
'B thruee others pending a more thoroughgoing review. In addition,
fire government has reportedly recalled almost all military personnel
jridergoing training in the USSR and all Iraqi citizens currently
rolled in Bloc academic institutions. However, by the end of the
i portiii period very few o---. the academic stuc._ents had. returned.
Af;hanista.n, Indonesia, and the UAR also have indicated a greater
desire to establish closer relations with the west as a means of
ecreaciug their dependence on the Bloc.
Ii.i-ssponse to such mounting problems and disappointments coinci-
dent with the implementation of its aid program -- difficulties not
r_;e uli as to Bloc programs alone -- the USSR has sought; to adopt a
more tl(2alble and pragmatic approach in order to facilitate more
c.)pid implementation of its aid projects. In Guinea, after talks
r-r-eportedly marked by much mutual recrimination and hard bargaining
and during which Guinean grievances over the cost and rate of imple-
mentatiorL of Soviet projects and the shortcomings of Soviet technicians
were aired along; with Soviet frustration over Guinea's delay in pro-
vi.ding local labor and materials, the USSR agreed to assume full
responsibility for the completion of all Soviet aid projects in Guinea --
a step which Moscow had hitherto been reluctant to take. In Ghana,
similar efforts by the USSR to facilitate lagging implementation of its
cid pro,.iects resulted in a Soviet agreement to allocate $22 million of
previously extended developmental credits for the purchase of Soviet
c,ommodaties, the proceeds of which are to be used exclusively to
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SECRET
BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS
Selected Years, 1954 - June 1963
BLOC ECONOMIC ASSISTANCE
TO UNDERDEVELOPED COUNTRIES
1954 -JUNE 1963
EE3 Communist
"to-
Sbtctiites
USSR
BLOC MILITARY AID TO UNDERDEVELOPED
COUNTRIES, 1955 ? JUNE i 963 "
1954 1955 1956 1957 1958 1959 1960 1%1 1962 1963- 1955 1956 1957 193e 1959 19611 1961 191% 196!
BLOC ECONOMIC AND MILITARY TECHNICIANS
IN UNDERDEVELOPED COUNTRIES.
1955 -JUNE 1963
1955 1957 1959 1961 First Half
1963
STUDENTS FROM UNDERDEVELOPED COUINTROt
TRAINED IN THE BLOC, 1956 - JUNE 1-163
1956 1959 T961 First N.
1963
* P1 o :
1.e,ted of an annual rate {r[be First b
**Since Bloc Milit?ry Assis on, a io1 tome corn, .. s
cannot be distributed by year, : rm nrl , -jur
are only estimates-
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finance the local currency costs of certain Soviet-assisted -;.projects.
In response to Indonesian entreaties, the USSR has reportedly agreed
to a substantial reduction of the annual payments on Soviet military
loans and to a rescheduling of the payments over a longer period. A
similar Indonesian request of Czechoslovakia was, however, rejected.
While the USSR at first seemed eager to salvage what it could e('
its heavy commitments in Iraq, continued Baghdad repression of Irs,ej
Communists and an offensive against the Kurdish minority provoked
strong Soviet reaction. In an unprecedented threat belying the "di;-
interested" nature of Soviet aid, Pravda warned that Moscow's vatieTice and its aid funds -- were not inexhaustible. Pravda asserted that the
rendering of aid to newly independent states did not mean that the TSSR
had "money to spare" or that such funds could not be used pro'ttably
at home. The USSR, therefore, could not remain indifferent to the obje
tives on which its aid funds were being spent.
While Bloc aid programs were meeting delays and dissatisfaction in
some countries, they were apparently making progress in others. Bl,>c
projects in the UAR, particularly the High Dam, were reportedly mov..ng
ahead satisfactorily, and a new economic credit of nearly $15 million
was extended by the USSR during the 6-month period. Construction work
was stepped up on Bloc projects in the Somali Republic and Yemen, and
the number of Soviet technicians in both countries increased ?,ubstan-
tially. Work appeared to be moving ahead at a faster pace, too, in
India and Afghanistan. The USSR widened its commitments to Cambodi.,,
by signing agreements for military aid and for a power dam. F,razil
finally ratified a number of large, medium-term credits from the
European Satellites extended in 1961 and 1962 for machinery and eq_u_p-
ment purchases under bilateral trade agreements.
During the past year, Soviet spokesmen have openly expressed tht
limited foreign aid potential of the USSR and coupled such sta.temenls
with demands that underdeveloped countries rely more on their own
resources or seek more aid from the West and the UN. Moreover, in
contrast to the preeminent role that hitherto has been accorded the
Bloc aid program, Moscow, perhaps under the urgings of its European
Satellites who rely more than the USSR on foreign trade, has tended
to place increased emphasis on trade rather than aid as the more
decisive factor in securing and maintaining the "economic independence"
of new states. There is no firm evidence, however, that the Soviet
leadership has revised any of its fundamental assumptions with respect
to its policies in underdeveloped areas. Indeed, under the pressures
of Chinese criticisms, Pravda on 7 August, in a major exposition of
the USSR's aid program, sought to reassert with increased vigor the
true militancy of the Soviet doctrine of coexistence and the =implicit
connection of its trade and aid program -- with which its prestige seems
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irr.evocai>ly committed -- with the wider political objectives of the
national liberation movement.
Bic Economic Assistance
credits and Grants
!G oc economic aid extensions to underdeveloped countries totaled
$101 million during the first half of 1963, the lowest semiannual aid
commitment since 1957. The UAR, Syria, and Cambodia were the major re-
cipients of new Bloc aid, bringing the cumulative total of Bloc economic
credits extended since the beginning of the program in 1954 to $4.7 bil-
lion. The USSR contributed almost two-thirds of the total of new aid
(extended in the first 6 months of 1963; the European Satellites con-
tributed almost 20 percent, and Communist China the remainder. More
than two-thirds of total Bloc credits extended during this period went
to industry, 12 percent to hydroelectric power development, and approxi-
mately 3 percent to agriculture.
Drawings in the first half of 1963 were $209 million, bringing
the total cumulative drawings on economic credits to $1.5 billion. Dis-
:atisfaction on both sides with the slow progress of many Bloc aid
projects has led the USSR to intensify its efforts to accelerate the
implementation of credits already extended. Recent instances in Guinea,
Ghana, and Afghanistan suggest that even greater emphasis on project
implementation may be anticipated in the future.
Technicians and Trainees
Goc economic technicians employed in underdeveloped countries
during, the first b months of 1963 numbered approximately 11,250, an in-
erease of almost 20 percent over the previous 6-month period. Greater
conomic aid activity in Algeria, India, Iraq, the Somali Republic,
the UAR, and Yemen accounted for about 90 percent of the net increase.
Afghanistan, Algeria, Guinea, India, Iraq, the UAR, and Yemen employed
ulmosi,-r,hree-fourths of the total number of Bloc economic technicians.
Approximately 15 percent of the total technicians were engaged in
medical., education, planning, advisory, and managerial activities not
related to economic aid credits -- indicating a significant growth in
rionproject technical assistance activities.
During the first b months of 1963, approximately 1,400 academic
And technical trainees from underdeveloped countries enrolled in Bloc
institutions, bringing to approximately 12,000 those who are currently
receiving instruction. It is estimated that 18,300 students have under-
taken such training since the inception of the Bloc's aid program.
Complaints of racial discrimination, political indoctrination, dissatis-
faction with academic curricula, and other grievances, however, have
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resulted in some exodus of African students, largely from Bulgaria tut
also in smaller numbers from other Bloc countries. The exacerbatior of
Bloc relations with the new Iraqi regime has prompted Iraq to recall all
Iraqi citizens studying in Bloc academic institutions after the Jant-ary-
Junk 1963 semester.
Military Assistance
Credits and Grants
Two new agreements between India and the USSR for the extenE.ion
of $16 million in military credits brought the minimum cumulative total
of Bloc military assistance to underdeveloped countries to almost $- bil-
lion by the end of June l9b3. New military aid agreements of w deter-
mined value were also reportedly signed with Algeria, Cambodia, Indonesia
and the UAR. The known extensions for the first half of 1963 are it
marked contrast to estimated extensions of more than $400 million it 19t
Deliveries of military equipment to Indonesia, the UAR, Syria, Algeria,
Iraq, and Yemen continued under previous agreements, although the worsen-
ing of Soviet-Iraqi relations led to the cessation of such de.liverits
to Iraq in May.
During the review period the Bloc sought to resolve some of the
problems which have plagued military aid recipients. Bloc countries
entered into negotiations with India, Iraq, and the UAR in an attemlt
to resolve the problems of npares, replacement parts, and maintenance,
and the USSR offered some relief to Indonesia's repayment burden by
lengthening the repayment period so as to reduce Indonesia's annual
repayment obligations.
Technicians and Trainees
Approximately 4,600 Bloc military technicians were assigned to
underdeveloped countries during the first half of 1963, an increase of
almost 40 percent above the second half of 1962. Greater numbers of
technicians were present in Indonesia, Syria, the UAR, and Yemen,
whereas the number in Iraq began to decline at the end of the perioc-
During the first half of 1963, 1,780 nationals from underde-
veloped countries enrolled in military training programs in the Bloc.
This figure is an increase of more than 25 percent above the previous
6-month period and brings the cumulative total of military trainees
to the Bloc to more than 13,000 as of the end of June 1963- Indone?ia,
Algeria, and Afghanistan currently have the largest contingents of mili-
tary personnel training in the Bloc.
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faring the first half of 1963 the Sino-Soviet Bloc continued to ex-
pand its trade with the underdeveloped countries with increased stress,
particularly on the part of the European Satellites, on the close re-
lationship between trade and aid and on the importance of credit exten-
sions a;> a precondition for any substantial expansion. of trade with the
area. The underdeveloped countries, while continuing to recognize the
advantages in trade with the Bloc, displayed an increasing awareness
of some of the difficulties involved in such exchanges.
7,; 19?h2, Sino-Soviet Bloc trade turnover with underdeveloped coun-
tries rose 11 percent above the 1961 level and. amounted to $2.5 billion.
Although this increase was greater than the 3-percent rise noted in
1961, it was still well below the percentage gains of earlier years.
The share of the underdeveloped countries in the total trade of the
Sino-Soviet Bloc in 1962 continued at its recent level of about 7 per-
cent, while the Bloc's share of the aggregate trade of the underde-
veloped. countries remained unchanged at about 5 percent. The Bloc,
however, continued to account for a heavy share of the trade of cer-
tain underdeveloped countries, notably Afghanistan, the UAR, Mali, and
Guinea.
Bloc trade with Latin America remained at about the $300 million
level of 1961, whereas Latin America's share in total Bloc trade with
underdeveloped areas declined slightly to 12 percent. Asia, which re-
corded the largest increase in trade with the Bloc, replaced the Middle
East as the most important area trading with the Bloc. In 1960, Asia
and the Middle East each accounted for about 35 percent of Bloc trade
with underdeveloped countries; by the end of 1962 the share of the
Middle East in this trade had fallen to 32 percent while Asia's share
had risen sharply to 42 percent. Bloc trade with Africa increased
slightly, reflecting increased Bloc imports from Ghana.
E ?' i:`1 America
ti,nre were few instances of significant Latin American responses
to Sine-Soviet Bloc economic overtures during the first half of 1963.
The area as a whole maintained only limited economic relations with
the Bloc; trade between Latin America (excluding Cuba) and the Bloc
amounts to no more than 3 percent of the area's total trade. There
are indications, however, that closer ties with the Bloc are developing
in some countries.
The most important steps toward closer economic relations with the
Bloc were taken by Brazil. In February 1963, Brazil announced ratifica-
tion of a series of 1961 trade agreements with six European Satellite
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nations. The agreements contain provisions for up to $180 million in
long-term credits as well as calling for greatly increased trade levels-;
Brazil also signed a new trade pact with the USSR providing for a tripl-
ing of trade during the next 3 years, including shipment of large q_ian-
tities of Soviet oil. As corollaries to these developments, the Brazil=-
Government set up a coordinating group called COLESTE to promote trade
with the Bloc, and a number of trade missions from the Bloc visited the
country in an effort -- unsuccessful as of the end of June -- o imole-
ment the credits extended.
The Brazilian-Soviet trade agreement does not provide for Long- 'e m.
credits but includes several features considered to be of consdera's>e
importance to Brazil: Strict controls are placed on reexport of gods
exchanged (a measure designed to protect Brazil's position in the wr)rld
coffee market), and provision is made for the transfer, with ~%t-reem nt
of all parties concerned, of balances accumulated in trade will, third
countries. If trade goals set forth in the agreement are met, the
USSR will provide one-third of Brazil's estimated requirement. of crude
petroleum and petroleum products by 1965; at present, Soviet c-oil forams
only a small percentage of Brazil's imports.
Bolivia's negotiations with Czechoslovakia for an antimony smel%er
contract moved somewhat closer to approval with the offer of improved
terms by the Czechoslovaks. Final approval of the contract still ws
being delayed by the Bolivian Government, despite leftist pressures
for its acceptance.
In Chile, there are signs of increased interest in trade with tie
USSR, particularly in regard to copper. Negotiations were commences
for the sale by Chile of up to 21,000 tons of that product.
Uruguay's recurrent foreign exchange problems caused considerabue
pressure to broaden the country's export market. A number of Bloc
proposals for purchases of agricultural products were made, but a
sales agreement with East Germany early in the year was the only
instance of final acceptance of a proposal by Uruguay.
Bloc efforts in other countries of Latin America (with the .xce1-
tion of Cuba) included visits by commercial missions and various trade
proposals. Some sales contract;-, resulted from these approaches. but
significantly closer economic relations between Latin America and the
Bloc have not come about. British Guiana sold some rice to Cuba and
several Bloc countries, received two shiploads of Soviet petroleum
and flour, and sent 60 students to the Bloc on a scholarship basis.
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The Middle East
The chief developments affecting Bloc relations with the Middle East
in the first halt' of 1963 were the following: the coup in Iraq, which
replaced Qasim's regime with an anti-Communist Ba'athi government more
critical of Bloc assistance programs; the buildup of Soviet technicians
in Yemen, associated with UAR and Soviet military support of the Yemeni
Government; and an increase in economic ties with and probably military
assistance to the UAR from the Bloc.
The strong Bloc position in Iraq deteriorated sharply following the
Ba'ath-dominated coup of 8 February 1963. The severe repression of
Iraqi Communists by the new regime was followed by a sharply antago-
nistic reaction from the USSR and the European Satellites and by counter-
propaganda from the Iraqi side. A general review of development plans
and of Bloc-aided projects was initiated by the government; this review
has yet to be completed. A number of Bloc industrial projects on which
little work had been done have been canceled, whereas others well under-
way at the time of the review will probably be completed. Iraqi authori-
ties indicated their interest in developing alternative sources of supply
for military equipment but cannot quickly eliminate their present depend-
ence on Soviet supplies; deliveries of some conventional military items
from the USSR continued, but abrogation of a major contract for surface-
to-air missiles was requested by Iraq. The number of Soviet technicians
in Iraq and Iraqi students in the Bloc will have been substantially re-
duced by mid-summer 1963. On 9 June 1963 the Iraqi Government decreed
that all academic students studying in the Bloc return to Iraq.
In Yemen the number of Soviet technicians more than doubled, rising
to about 1,000: somewhat less than half were working on a military
airfield north of San'a; some were serving as instructors at the mili-
tary academy in 'I'a'izz, and others providing civilian services in the
port of Hudaydah and elsewhere. Under a military assistance agreement
concluded, with Yemen in November 1962, the USSR reportedly provided a
variety of small. arms, antiaircraft guns, grenades and mines, jeeps,
trucks, and ambulances. Although the equipment was used mainly by
UAR troops, it is to remain in Yemen when these troops withdraw. Mean-
while, economic aid was under discussion with several Bloc countries,
but on-[-,)r a Chinese Communist grant of wheat, valued at $200,000, had
been extended by the end of June.
Th lIAR obtained a new $t4i.4 million credit from the USSR in June,
to be used for unspecified industrial projects. In January a protocol
covering; final blueprints and specifications for the Aswan High Dam
was concluded, and work on the dam is proceeding well. The extent of
new mi.itary aid from the USSR is not known, but reports on items con-
nected with development of surface-to-air missiles indicate rapid
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progress toward an air defense system, and it appears likely that tYle
USSR will at least replace Egyptian arms used in the Yemeni civil wer.
Elsewhere in the Near East, the USSR continued its goodwill cam-
paign in Iran, and a Soviet delegation arrived in Teheran late in Jane
to discuss specific proposals for joint economic cooperation.* In
Syria, where a Ba'ath Party coup (like that in Iraq) occurred during
March, the chief new development was the extension of a $16 million
economic credit by Communist China; other Bloc activities, includin?
implementation of existing economic and military aid programs, pro-
ceeded without incident, and Syrian-Bloc trade rose substantially it
1962.
Africa
There were no major changes in the level or pattern of Bloc activi-
ties in Africa during the first half of 1963. The USSR undertook steps
to implement more rapidly its aid program in Ghana and Guinea and iriti-
ated a large-scale military training program for Algeria. There wa
an increase in Bloc diplomatic representation, and the first Soviet
ambassadors to Senegal and Burundi were accredited. Hungary opened
the first Bloc mission in Dahomey, and the Chinese Communists opened
the first Bloc mission in Uganda.
The Bloc continued to place increasing emphasis on the stimulation
and support of nationalist forces in the southern third of Africa.
Here the USSR and Communist China continued to support the same libcr-
ation groups, and both called upon independent Afro-Asian states to
give military and financial aid to these groups.
The Bloc also made some progress in extending its air operation:
in Africa. An agreement with Tunisia in February gave Czechoslovak
Airlines (CSA) the right to fly to Tunis. Mid-March talks in Prague
resulted in the initialing by a Sudanese delegation of an air trans-
port agreement with CSA. The agreement provides rights between Prague
and Khartoum, but the Sudanese have indicated that no onward rights
are to be granted. The Somali Cabinet decided to grant landing rights
to Aeroflot in Somali, but Ethiopia denied the Soviet request for
landing and overflight rights. The USSR attempted to obtain rights
across central Africa in order to be able to fly the circular route
* On 27 July 1963 an agreement was concluded for joint development
of the Aras River in northwestern Iran. The USSR extended a credit
of $38.8 million to cover Iran's share of the foreign exchange costF.
Assistance also will be provided to increase the productivity of
Iran's sturgeon fisheries in the Caspian Sea and for the constructicn
of 11 grain silos.
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Moscow-Cairo-Khartoum-Accra-Conakry-Rabat-Moscow but apparently did not
obtain the necessary overflight rights from Chad and Nigeria. Air Ghana
service to Moscow began in February but was terminated after two flights.
Aeroflot obtained and then apparently lost Guinean permission to use
Conakry as a stopover on flights to Havana, but it did acquire the right
to use Ouargla in Algeria for flights to Cuba.
131-oc prestige in Africa was adversely affected in February when Bul-
garian militia broke up a demonstration of about 200 African students
in Sofia. The students had been prohibited by the Bulgarian Government
from forming a union that would represent them in efforts to alleviate
some of their grievances. Approximately 150 African students left
Bulgaria as a result of the incident.
1:j'mited successes were achieved by some Bloc countries at major
Afro-Asian conferences in early 1963. The Afro-Asian Peoples' Soli-
darity Organization (AAPSO) held its third conference at Moshi,
Tanganyika, in February. Here the USSR and Communist China helped
to give the conference a distinctly anti-Western character. The Chi-
nese had. relative success in posing as "non-white" champions of African
liberation struggles. Two months later, the conference of Afro-Asian
Journalists, from which the Chinese Communists succeeded in having the
USSR excLuded, benefited from contacts built up at Moshi and attracted
delegates from more than 20 African territories to Djakarta. Many of
these delegates, who had also attended the AAPSO conference, went on
to visit Communist China.
'L' bore were few new Bloc credits to Africa in the first half of
1963.* The first long-term development credit from a Bloc country to
Algeria was a $6 million Bulgarian credit for a textile plant, tannery,
and electric motor factory. Under an agreement concluded in February,
Bulgaria also extended a credit of $1.5 million to Tunisia for the
construction of a sports center.
Bloc activity continued at a relatively low level in Ethiopia but
greatly increased in the Somali Republic. The Somalis resisted Bloc
overtures only in the military field, and the USSR moved rapidly ahead
with economic aid, trade promotion efforts, and a relatively massive
k White on a trip to the USSR in June, Senegal's Secretary of State
for Planning and Development signed an agreement that calls for Soviet
aid in expanding the production of an agricultural project which cur-
rently consists of 6,000 hectares. Soviet assistance will be provided
under the terms of a genera- economic and technical assistance agree-
ment signed in June 1962. Whether or not financial assistance has been
extended is not known, but it is estimated that the total cost of the
project is about $16 million.
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scholarship program. Communist China entered into active competition
for Somali favor during the reporting period.
European Satellite activity, particularly by Poland and BuLs;aria,
represented the greatest Bloc initiatives in the field of economic
assistance to Algeria. In addition to its development credit, Bul-
garia also signed technical cooperation and trade and payments aagrec--
ments. Poland signed trade, economic, and scientific and technical
cooperation agreements with that country. The USSR has been the moot
active in military aid and is carrying out de-mining operations on
Algeria's eastern and western borders. More than 350 Algerians weni
to the USSR for military training.
Despite the banning of the Tunisian Communist Party and its publi-
cations in January, the Bloc moved ahead with its economic aid program
in Tunisia. Besides extending a credit for the sports center, Bulgaria
renewed its trade agreement for 1963. Poland completed a spinning rill
and agreed to undertake the study and financing of facilities for croper
atives.
Ghana postponed indefinitely the projected establishment of a trade
mission in East Germany and continued its review of agreements with the
Bloc. Ghana sought to revise its trade and payments agreements with
Bloc countries to permit the periodic settlement of bilateral accounts.
Complaints about the quality of Bloc equipment increased, and work rn
Bloc projects proceeded slowly. Provisions of previous credit extee--
sions were revised in order to facilitate implementation of Soviet
projects. A protocol signed in March earmarked unused portions of
previously extended credits for the import of Soviet commodities valued
at $22.2 million. The local currency generated from the sale of these
commodities will be used for the domestic costs of certain Soviet-
assisted projects in Ghana.
Guinea's relations with Bloc countries continued at a reduced l+vel.
Only Communist China increased its activity as it began to implemen',
its aid program. Economic relations with the Bloc approached a crit'.ica-
point as Guinea sought to make the Bloc implement its aid program a~. a
faster pace while the Bloc tried to enforce overdue payments on trade
accounts. In June an aid protocol provided for the creation of a
Soviet building organization in Guinea to be fully responsible for he
completion of all Soviet aid projects.
Mali's financial situation deteriorated as debts to the Bloc became
due in increasing amounts; the country defaulted on payments, end toe
USSR apparently agreed to ease some of the terms. The Bloc retaine,i
its dominant position in Mali's aviation, but Air Mali continued to
have financial difficulties. The Bloc's major aid projects made li~,-tle
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progress, and no new ones were announced. Some of the Bloc-supported
economic ventures have proved disappointing. Meanwhile, however, the
extensive Malian-Bloc exchange of delegations continued, President
Keith. received the Lenin Peace Prize, and Malian information media
continued to favor the Bloc.
11 East Africa, Bloc efforts consisted primarily of diplomatic,
cultural, and trade relations. The only significant commercial activity
was the Chinese purchase of Tanganyikan and Ugandan cotton, which caused
a price rise in both countries' markets. Uganda and Kenya sent com-
mercial missions to the Bloc in quest of markets, and the Bloc can ex-
pand its presence in the East African economy by purchasing those agri-
cultural products on which export earnings are dependent and for which
the world. market is limited.
The most noteworthy developments in Southeast Asia during the first
half of 1963 consisted of the first acceptance by Cambodia of military
equipment from the USSR, Burma's purchase of additional tractors from
the USSR and Czechoslovakia, and the Soviet accommodation on repayments
on outstanding debts owed by Indonesia. In South Asia, significant
developments included (1) a shift of government in Afghanistan which
appeared favorable to the West and a renewal of economic relations with
Pakistan when the latter opened its borders once again for transit to
Afghanistan and (2) Soviet deliveries of fighter planes to India, fol-
lowed by offers of broader military aid and the conclusion of a trade
agreement calling for expanded commerce between the USSR and India.
IL Lndonesia the Soviet Bloc continued its policy of supporting
President Sukarno and received from him in turn support for a number
of Bloc positions in the international field,. However, Soviet leverage
in Indonesia decreased somewhat as a result of the adoption by the
Indonesian Government in May of an economic stabilization program
along Western lines and predicated upon substantial new economic aid
from the West. The USSR, after prolonged negotiations, agreed to re-
duce the annual payments on Indonesian military indebtedness, a con-
cession the United States had stipulated as a precondition to Western
aid. At the same time,
the way was prepared for more rapid implemen-
tation of Soviet economic aid commitments.
Prince Sihanouk continued to emphasize the special position of
Communist China as a friend. and protector of Cambodia. Sihanouk's
visit to Communist China in February and Liu Shao-chi's return visit
to Cambodia in May were occasions for a reaffirmation of mutual sup-
port, although no new economic credits were forthcoming from the
Chinese. The USSR extended a credit of $12.2 million to Cambodia for
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the construction of a dam on the Kamehay River. The USSR also agreed
to supply four MIG aircraft, 24 37-mm antiaircraft guns, and some ratio
equipment -- the first penetration by the Bloc into the military aid
field in Cambodia.
The major developments in Burmese-Bloc relations during the t'irst
half of 1963 were the Burmese purchase in January of an additional
500 tractors from Czechoslovakia, bringing the total number purchased
from that Bloc country to 2,000, and the purchase of 1,000 tractors
from the USSR in March. The tractors from the USSR were purchased
under a $2.6 million credit to be repaid over 5 years at 2.5 percent
interest. The Bloc will thus play a significant role in the develop-
ment of the agricultural sector in Burma.
Prime Minister Daud of Afghanistan, who had supported the develol-
ment of Afghan relations with the USSR, resigned in March and was re-
placed by a more pro-Western regime. In May, Afghan-Pakistan diplo-
matic relations were restored, and the transit route through Pakistan
was reopened. The latter development provided a significant assist
for the Afghan economy and reduced its dependence on the Soviet transit
route. No change in the Soviet military program was observed, but the
new regime has reportedly shown interest in obtaining some military
supplies and training in the West. New aid agreements concluded durn.ng
the period totaled $5.5 million. Of the total, $1.5 million was for
the import of wheat to generate local currency for use in Soviet
projects and $4 million was for a 5-year trade credit. Weekly air
service between Prague and Kabul was inaugurated by the Czechoslovak
Airlines, and the Soviet-built air terminal at Kabul was opened.. `Vhee
1963 Soviet-Afghan trade protocol provided for an Afghan trade ,:urpl!ts
of $6 million, the bulk of which is indebtedness to the USSR, but it
did not require that Afghan hard. currency earning products -- i,..raku_
and carpets -- be exported to the USSR as the USSR had initially de-
manded.
Soviet willingness to provide military aid to India, thrown into
question in late 1962 after the Chinese Communist attack from the
Tibetan border, was reaffirmed when the first shipment of MIG-,'_:.'s
previously promised was delivered in February 1963. Two further
agreements were signed during the period under review between the
USSR and India -- for military aid valued at $16 million. In June
the USSR and Czechoslovakia offered a wide range of military equip-
ment, and an Indian negotiating mission left for Moscow in July.
There were only minor additions in 1963 to the substantial Blocs eco-
nomic aid program in India, but new agreements with the USSR project
a continuing increase in Indian-Soviet trade and in cultural exchang,s.
Implementation of existing projects progressed without difficuLties.
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Czechoslovakia extended a $5.6 million credit to Indonesia in June
for the purchase of trucks.
In other parts of South Asia, Bloc activities in Ceylon and Nepal
continued at a moderate level but without any significant new develop-
ments. Half of the original 16 Soviet pro,)ects in Ceylon have been
dropped, owing largely to poor Ceylonese planning. Construction was
begun on the Soviet iron and steel mill, and several Czechoslovak
projects were close to completion. Poland extended a credit of
$6.4 million to Ceylon for the purchase of industrial equipment.
Con.iderable progress was made on the Soviet sugar and cigaret fac-
tories and the hydroelectric project in Nepal, and the Chinese Com-
munists completed a survey of the road from Katmandu to the Tibetan
border. Communist China's approaches to Pakistan included a border
agreement (concluded in December 1962 and signed in March 1963), dis-
cussion of a civil air agreement, and a trade agreement which added
little to existing trade.
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SINO-SOVIET ELO 'ECONOMIC ACTI V
NON-COMMUNIUST UNDERDEVELOPED
1 JANUARY - 30 JUNE 1963
UMMARY
(The complete text of reoor has been published sept at-~F
EIC R14-S15
September 1963
ECONOMIC INTELLIGENCE COM
of tie
UNITED STATES INTELLIGENCE BOARD
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FOREWORD
The reports on Sino-Soviet Bloc economic activities in uo erdie--
veloped areas in the EIC-P14 series provide periodic summaries and
analytical interpretations of significant developments in three eceonnnmie
relations of Bloc countries with underdeveloped countries of the Pi-ec
World. These developments are reported on a current, factual basi it
the Biweekly Reports in the EIC-WGR-l series, under the same f-tle
This report, covering the 6 months from 1 January through -O Joe
1963, constitutes the fifteenth periodic supplement to EIC-R-L, t.hs
background report on Sino-Soviet Bloc Postwar Economic Activ`_ties :n
Underdeveloped Areas, 8 August 1956, SECRET. The present su-p Lenient
relates noteworthy noneconomic activities, including militarl' i ,.id, to
the economic operations of the Bloc in underdeveloped countries in
order to place the economic aspects in the perspective of the :ver-,1,11
programs of the Bloc in these countries. This report was prep.=;:red by
the Department of State and the Central Intelligence Agency. ''he
draft was reviewed and coordinated by a Working Group of the Economic
Intelligence Committee, including representatives of the 1)ep,rt.ment
of State; the Defense Intelligence Agency; the Departments of';omm?rce
and Agriculture; the Agency for International Development; the Off-e
of the Secretary of Defense; the National Security Agency; and the
Central Intelligence Agency. The final report was approved try the
Economic Intelligence Committee on 27 August 1963.
For the purposes of this report, the term underdeveloped area,
includes the following countries of the Free World: (1) all crnun-
tries in Latin America except Cuba; (2) all countries in the
East, including Cyprus, Greece, the Syrian Arab Republic, Turkey,
and the United Arab Repub:Lic (Egypt); (3) all countries in Africa
except the Republic of South Africa; (4+) all countries in South and
Southeast Asia; and (5) Iceland, Portugal, and Spain.
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SING-SOVIET BLOC ECONOMIC ACTIVITIES
IN NON-COMMUNIST UNDERDEVELOPED AREAS
1 JANUARY - 30 JUNE 1963
Surnmary*
Sino-Soviet Bloc economic aid activities in underdeveloped nth
review period totaled $101 million** -- the smallest Bloc commi-t.rr.cnt
during any comparable period since 19'57. Although the only known
military aid extended during the first half of 1963 was $16 million
in credits to India, a military agreement of unknown value with Cam-
bodia was concluded in March or April. It is possible that agr(-Enient5
were also concluded with Algeria, the United Arab Republic (UAR), and
Indonesia. Deliveries of equipment under previous military aid com-
mitments continued unabated.
It is still not possible to state with confidence, however, the
extent to which the lag in new extensions reflects (1) a more caution,
and selective approach motivated by the apparent feeling in some 510c
circles that economic aid has not been as effective as had earlier been
anticipated in furthering Bloc policy objectives, (2) a decision by tie
USSR to lessen the burden of its aid program in view of domestic ;co
nomic stringencies and substantial commitments in Cuba and elsewhere.
(3) the large backlog of undrawn credits resulting partly from the
inability of recipient countries to implement their part of the srogrem,
or (4) more limited opportunities in newly emergent countries fcc lark,-
scale aid agreements of the kind that the Bloc has hitherto enter,.-:d irto.
* See the summary chart, Figure 1, following p. 14, and the summary
table, p. 15.
** All data in this report exclude Cuba and Yugoslavia and thus -~.re rut
comparable to aggregative figures in previous issues of the EIC-iiit serie94
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When viewed against (1) some disappointing results of the program in
Iraq, Africa, and elsewhere, (2) the simultaneous Bloc commitments in
heavy industry, military, space, consumer welfare, and support for less
developed Bloc members and Cuba, and (3) bitter Chinese and other Com-
munist denunciations of Khrushchev's coexistence strategy in under-
developed areas, foreign aid may well have also generated larger
political issues within the Bloc than the actual economic costs of
the aid program would seem to warrant. Indeed, all these factors
probably have contributed to the recent decline in new Bloc aid com-
mitmen t:s .
Th first half of 1963 was also marked by ambivalent attitudes
toward Bloc aid by many of the underdeveloped country recipients.
Guinea, Ghana, and Mali, countries on which the Bloc had pinned great
hopes for extending its influence in Africa, have been increasingly
vocal in expressing their dissatisfaction with the implementation of
Bloc aid. Ugly racial incidents involving African students in the
USSR, Czechoslovakia., and Bulgaria have also tended to generate
hostile, if only transitory, criticism of the Bloc. In Iraq the
new regime sought to redress the balance of its Bloc-oriented prede-
cessor by seeking to cancel its contract for Soviet missiles and by
cance_i_i.ng two economic aid projects and halting the implementation
of three others pending a more thoroughgoing review. In addition,
the government has reportedly recalled almost all military personnel
under?~ ' oing training in the USSR and all Iraqi citizens currently
enrolled in Bloc academic institutions. However, by the end of the
reporting period very few of the academic students had returned.
Afghanistan, Indonesia, arid, the UAR also have indicated a greater
desire to establish closer relations with the West as a means of
decreasing their dependence on the Bloc.
In response to such mounting problems and disappointments coinci-
dent with the implementation of its aid program -- difficulties not
peculiar to Bloc programs a__one -- the USSR has sought to adopt a
rrrore flexible and pragmatic approach in order to facilitate more
rapid implementation of its aid projects. In Guinea, after talks
reportedly marked by much mutual recrimination and hard bargaining
and during which Guinean grievances over the cost and rate of imple-
mentation of aoviet projects and the shortcomings of Soviet technicians
were aired along with Soviet frustration over Guinea's delay in pro-
viding local labor and materials, the USSR agreed to assume full
responsibility for the completion of all Soviet aid projects in Guinea --
a step which Moscow had hitherto been reluctant to take. In Ghana,
similar efforts by the USSR to facilitate lagging implementation of its
aid projects resulted in a Soviet agreement to allocate $22 million of
previously extended developmental credits for the purchase of Soviet
commodities, the proceeds of which are to be used exclusively to
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finance the local currency costs of certain Soviet-assisted proiecta.
In response to Indonesian entreaties, the USSR has reportedly agreed
to a substantial reduction of the annual payments on Soviet military
loans and to a rescheduling of the payments over a longer period. A
similar Indonesian request of Czechoslovakia was, however, rejected.
While the USSR at first seemed eager to salvage what it could of
its heavy commitments in Iraq, continued Baghdad repression of Iraqi
Communists and an offensive against the Kurdish minority provoked
strong Soviet reaction. In an unprecedented threat belying the "dis-
interested" nature of Soviet aid, Pravda warned that Moscow's patien,e
and its aid funds -- were not inexhaustible. Pravda asserted that tie
rendering of aid to newly independent states did not mean that the U=SSR
had "money to spare" or that such funds could not be used profitably
at home. The USSR, therefore, could not remain indifferent to the o)jec,-
tives on which its aid funds were being spent.
While Bloc aid programs were meeting delays and dissatisfaction in
some countries, they were apparently making progress in others. Bloi-
projects in the UAR, particularly the High Dam, were reportedly movi:,g
ahead satisfactorily, and a new economic credit of nearly $45 Million
was extended by the USSR during the 6-month period. Construction work
was stepped up on Bloc projects in the Somali Republic and Yenn r_, and
the number of Soviet technicians in both countries increased substan-
tially. Work appeared to be moving ahead at a faster pace, toc, in
India and Afghanistan. The USSR widened its commitments to Cambodia
by signing agreements for military aid and for a power dam. Brazil
finally ratified a number of large, medium-term credits from the
European Satellites extended in 1961 and 1962 for machinery and equit--
ment purchases under bilateral trade agreements.
During the past year, Soviet spokesmen have openly expressed the
limited foreign aid potential of the USSR and coupled such statement?
with demands that underdeveloped countries rely more on their own
resources or seek more aid from the West and the UN. Moreover, in
contrast to the preeminent role that hitherto has been accorded the
Bloc aid program, Moscow, perhaps under the urgings of its European
Satellites who rely more than the USSR on foreign trade, has tended
to place increased emphasis on trade rather than aid as the more
decisive factor in securing and maintaining the "economic indesendence"
of new states. There is no firm evidence, however, that the Soviet
leadership has revised any of its fundamental assumptions with respect
to its policies in underdeveloped areas. Indeed, under the pre=:3.7ures
of Chinese criticisms, Pravda on 7 August, in a major exposition of
the USSR's aid program, sought to reassert with increased vigor the
true militancy of the Soviet doctrine of coexistence and the implicit,
connection of its trade and aid program -- with which its prestige seems
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irrevocably committed -- with the wider political objectives of the
national liberation movement.
Bloc Economic Assistance
Credits and Grants
BLoc economic aid extensions to underdeveloped countries totaled
$101 million during the first half of 1963, the lowest semiannual aid
commitment since 1957. The UAR, Syria, and Cambodia were the major re-
cipients of new Bloc aid, bringing the cumulative total of Bloc economic
credits extended since the beginning of the program in 1954 to $4.7 bil-
lion. The USSR contributed almost two-thirds of the total of new aid
extended in the first 6 months of 1963; the European Satellites con-
tributed almost 20 percent, and Communist China the remainder. More
than two-thirds of total Bloc credits extended during this period went
to industry, 12 percent to hydroelectric power development, and approxi-
mately 3 percent to agriculture.
Drawings in the first half of 1963 were $209 million, bringing
the total cumulative drawings on economic credits to $1.5 billion. Dis-
satisfaction on both sides with the slow progress of many Bloc aid
projects has led the USSR to intensify its efforts to accelerate the
implementation of credits already extended. Recent :instances'in Guinea,
Ghanc:i, and Afghanistan suggest that even greater emphasis on project
implementation may be anticipated in the future.
echnicians and Trainees
Bloc economic technicians employed in underdeveloped countries
during; the first 6 months of 1963 numbered approximately 11,250, an in-
creas:se of almost 20 percent over the previous 6-month period. Greater
economic aid activity in Algeria, India, Iraq, the Somali Republic,
the UAR, and Yemen accounted for about 90 percent of the net increase.
Afghanistan, Algeria, Guinea, India, Iraq, the UAR, and Yemen employed
almost three-fourths of the total number of Bloc economic technicians.
Approximately 15 percent of the total technicians were engaged in
medical, education, planning, advisory, and managerial activities not
related to economic aid credits -- indicating a significant growth in
nonpro.ject technical assistance activities.
During the first 6 months of 1963, approximately 1,400 academic
and technical trainees from underdeveloped countries enrolled in Bloc
institutions, bringing to approximately 12,000 those who are currently
receiving instruction. It is estimated that 18,300 students have under-
taken such training since the inception of the Bloc's aid program.
Complaints of racial discrimination, political indoctrination, dissatis-
faction with academic curricula, and other grievances, however, have
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resulted in some exodus of African students, largely from Bulgaria but
also in smaller numbers from other Bloc countries. The exacerbation of
Bloc relations with the new Iraqi regime has prompted Iraq to recalY all
Iraqi citizens studying in Bloc academic institutions after the January:-
June 1963 semester.
Military Assistance
Credits and Grants
Two new agreements between India and the USSR for the extension
of $16 million in military credits brought Ehe minimum cumulative total
of Bloc military assistance to underdeveloped countries to aLnrost 933 bill
lion by the end of June 1963. New military aid agreements of undeter-
mined value were also reportedly signed with Algeria, Cambodia, Indonesia
and the UAR. The known extensions for the first half of 1963 are ii?
marked contrast to estimated extensions of more than $400 million in l9hs.
Deliveries of military equipment to Indonesia, the UAR, Syria, Algeria,
Iraq, and Yemen continued under previous agreements, although the worsen-
ing of Soviet-Iraqi relations led to the cessation of such deliveries
to Iraq in May.
During the review period the Bloc sought to resolve some of the
problems which have plagued military aid recipients. Bloc countries
entered into negotiations with India, Iraq, and the UAR in an a~tempt
to resolve the problems of spares, replacement parts, and maintenance,
and the USSR offered some relief to Indonesia's repayment burden by
lengthening the repayment period so as to reduce Indonesia's annual
repayment obligations.
Technicians and Trainees
Approximately 4,600 Bloc military technicians were assigned to
underdeveloped countries during the first half of 1963, an increase of
almost 40 percent above the second half of 1962. Greater numbers of
technicians were present in Indonesia, Syria, the UAR, and Yemen,
whereas the number in Iraq began to decline at the end of the period.
During the first half of 1963, 1,780 nationals from underde-
veloped countries enrolled in military training programs in the Bloc.
This figure is an increase of more than 25 percent above the previous
6-month period and brings the cumulative total of military tralriees
to the Bloc to more than 13,000 as of the end of June 1963. Indonesia,
Algeria, and Afghanistan currently have the largest contingents of mili
tary personnel training in the Bloc.
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Trade
luring the :first half of 1963 the Sino-Soviet Bloc continued to ex-
pand its trade with the underdeveloped countries with increased stress,
particularly on the part of the European Satellites, on the close re-
lationship between trade and aid and on the importance of credit exten-
sions as a precondition for any substantial expansion of trade with the
area. The underdeveloped countries, while continuing to recognize the
advantages in trade with the Bloc, displayed an increasing awareness
of some of the difficulties involved in such exchanges.
in 1962, Sino-Soviet Bloc trade turnover with underdeveloped coun-
tries rose 11 percent above the 1961 level and amounted to $2.5 billion.
Although this increase was greater than the 3-percent rise noted in
1961, it was still well below the percentage gains of earlier years.
The share of the underdeveloped countries in the total trade of the
Sino-G:>oviet Bloc in 1962 continued at its recent level of about 7 per-
cent, while the Bloc's share of the aggregate trade of the underde-
veloped countries remained unchanged at about: 5 percent. The Bloc,
however, continued to account for a heavy share of the trade of cer-
tain underdeveloped countries, notably Afghanistan, the UAR, Mali, and
Guinea.
Bloc trade with Latin America remained at about the $300 million
level of 1961, whereas Latin America's share in total Bloc trade with
underdeveloped areas declined slightly to 12 percent. Asia, which re-
corded the largest increase in trade with the Bloc, replaced the Middle
East as the most important area trading with the Bloc. In 1960, Asia
and the Middle East each accounted for about 35 percent of Bloc trade
with underdeveloped countries; by the end of 1962 the share of the
Middle East in this trade had fallen to 32 percent while Asia's share
had risen sharply to 42 percent. Bloc trade with Africa increased
slightly, reflecting increased Bloc imports from Ghana.
America.
':there were few instances of significant Latin American responses
to Sino-Soviet Bloc economic overtures during the first half of 1963.
The area as a whole maintained only limited economic relations with
the Bloc; trade between Latin America (excluding Cuba) and the Bloc
amounts to no more than 3 percent of the area's total trade. There
are indications, however, that closer ties with the Bloc are developing
in some countries.
The most important steps toward closer economic relations with the
Bloc were taken by Brazil. In February 1963, Brazil announced ratifica-
tion of a series of 1961 trade agreements with six European Satellite
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nations. The agreements contain provisions for up to $180 million in
long-term credits as well as calling for greatly increased trace levels.
Brazil also signed a new trade pact with the USSR providing for a tripl-
ing of trade during the next 3 years, including shipment of large gw-izi-
tities of Soviet oil. As corollaries to these developments, the Bra:-:il-,r
Government set up a coordinating group called COLESTE to promote trade
with the Bloc, and a number of trade missions from the Bloc visited -,he
country in an effort -- unsuccessful as of the end of June -- u imp_e-
ment the credits extended.
The Brazilian-Soviet trade agreement does not provide for long-term
credits but includes several features considered to be of cons-iderab__e
importance to Brazil: Strict controls are placed on reexport of goons
exchanged (a measure designed to protect Brazil's position in the world
coffee market), and provision is made for the transfer, with agreement
of all parties concerned, of balances accumulated in trade with third
countries. If trade goals set forth in the agreement are met, the -
USSR will provide one-third of Brazil's estimated requirements cf crude
petroleum and petroleum products by 1965; at present, Soviet oil fonts
only a small percentage of Brazil's imports.
Bolivia's negotiations with Czechoslovakia for an antimony smelter
contract moved somewhat closer to approval with the offer of improve,_
terms by the Czechoslovaks. Final approval of the contract still wa.
being delayed by the Bolivian Government, despite leftist pressures
for its acceptance.
In Chile, there are signs of increased interest in trade with tb
USSR, particularly in regard to copper. Negotiations were commenced
for the sale by Chile of up to 21,000 tons of that product.
Uruguay's recurrent foreign exchange problems caused considerable
pressure to broaden the country's export market. A number of Bloc
proposals for purchases of agricultural products were made, but a
sales agreement with East Germany early in the year was the only
instance of final acceptance of a proposal by Uruguay.
Bloc efforts in other countries of Latin America (with the excep-
tion of Cuba) included visits by commercial missions and various trade
proposals. Some sales contracts resulted from these approaches, but
significantly closer economic relations between Latin America and the
Bloc have not come about. British Guiana sold some rice to Cuba and
several Bloc countries, received two shiploads of Soviet petroleum
and flour, and sent 60 students to the Bloc on a scholarship basis.
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'lre M:i ddle East
The chief developments affecting Bloc relations with the Middle East
in the first half of 1963 were the following: the coup in Iraq, which
replaced Qasim's regime with an anti-Communist Batathi government more
critical of Bloc assistance programs; the buildup of Soviet technicians
in Yemen, associated with UAR and Soviet military support of the Yemeni
Government; and an increase in economic ties with and probably military
assistance to the UAR from the Bloc.
The strong Bloc position in Iraq deteriorated sharply following the
Ba'ath-dominated coup of 8 February 1963. The severe repression of
Iraqi Communists by the new regime was followed by a sharply antago-
nistic reaction from the USSR and the European Satellites and by counter-
propagaxLda from the Iraqi side. A general review of development plans
and of sloe-aided projects was initiated by the government; this review
has yet to be completed. A number of Bloc industrial projects on which
little work had been done have been canceled, whereas others well under-
way at the time of the review will probably be completed. Iraqi authori-
ties indicated their interest in developing alternative sources of supply
for military equipment but cannot quickly eliminate their present depend-
ence on Soviet supplies; deliveries of some conventional military items
from the USSR continued, but abrogation of a major contract for surface-
to-air missiles was requested by Iraq. The number of Soviet technicians
in Iraq and Iraqi students in the Bloc will have been substantially re-
duced by mid-summer 1963. On 9 June 1963 the Iraqi Government decreed
that all academic students studying in the Bloc return to Iraq.
i1.{emen the number of Soviet technicians more than doubled, rising
to about 1,000: somewhat less than half were working on a military
airfield north of San'a; some were serving as instructors at the mili-
tary academy in Tatizz, and others providing civilian services in the
port of Hudaydah and elsewhere. Under a mil-Ltary assistance agreement
concluded with Yemen in November 1962, the USSR reportedly provided a
variety of small arms, antiaircraft guns, grenades arid mines, jeeps,
trucks, and ambulances. Although the equipment was used mainly by
UAR troops, it is to remain in Yemen when these troops withdraw. Mean-
while, economic aid was under discussion with several Bloc countries,
but only a Chinese Communist grant of wheat, valued at $200,000, had
been extended by the end of June.
'Inn UAR obtained a new $44.4 million credit from the USSR in June,
to be used for unspecified industrial projects. In January a protocol
covering final blueprints and specifications for the Aswan High Dam
was concluded, and work on the dam is proceeding well. The extent of
new military aid from the USSR is not known, but reports on items con-
nectet with development of surface-to-air missiles indicate rapid
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progress toward an air defense system, and it appears likely that t1
USSR will at least replace Egyptian arms used in the Yemeni civil wer.
Elsewhere in the Near East, the USSR continued its goodwill cam-
paign in Iran, and a Soviet delegation arrived in Teheran late in June
to discuss specific proposals for joint economic cooperation. In
Syria, where a Ba'ath Party coup (like that in Iraq) occurred during
March, the chief new development was the extension of a $16 million
economic credit by Communist China; other Bloc activities, including
implementation of existing economic and military aid programs, pro-
ceeded without incident, and Syrian-Bloc trade rose substantially in
1962.
Africa
There were no major changes in the level or pattern of Bloc activi-
ties in Africa during the first half of 1963. The USSR undertook steps
to implement more rapidly its aid program in Ghana and Guinea and initi- -
ated a large-scale military training program for Algeria. There was
an increase in Bloc diplomatic representation, and the first Soviet
ambassadors to Senegal and Burundi were accredited. Hungary opened
the first Bloc mission in Dahomey, and the Chinese Communists opened
the first Bloc mission in Uganda.
The Bloc continued to place increasing emphasis on the stimulation
and support of nationalist forces in the southern third of Africa.
Here the USSR and Communist China continued to support the same liber-
ation groups, and both called upon independent Afro-Asian states to
give military and financial aid to these groups.
The Bloc also made some progress in extending its air operations
in Africa. An agreement with Tunisia in February gave Czechoslovak
Airlines (CSA) the right to fly to Tunis. Mid-March talks in Prague
resulted in the initialing by a Sudanese delegation of an air trans-
port agreement with CSA. The agreement provides rights between Prague
and Khartoum, but the Sudanese have indicated that no onward rights
are to be granted. The Somali Cabinet decided to grant landing righLs
to Aeroflot in Somali, but Ethiopia denied the Soviet request for
landing and overflight rights. The USSR attempted to obtain rights
across central Africa in order to be able to fly the circular route
On 27 July 1963 an agreement was concluded for joint development
of the Aras River in northwestern Iran. The USSR extended a credit
of $38.8 million to cover Iran's share of the foreign exchange costs.
Assistance also will be provided to increase the productivity of
Iran's sturgeon fisheries in the Caspian Sea and for the construction
of 11 grain silos.
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Moscow-Cairo-Khartoum-Accra-Conakry-Rabat-Moscow but apparently did not
obtain the necessary overflight rights from Chad and Nigeria. Air Ghana
service to Moscow began in February but was terminated. after two flights.
Aeroflot obtained and then apparently lost Guinean permission to use
Conakry as a stopover on flights to Havana, but it did. acquire the right
to use Ouargla in Algeria for flights to Cuba.
Bloc prestige in Africa was adversely affected in February when Bul-
garian militia broke up a demonstration of about 200 African students
in Sofia. The students had been prohibited by the Bulgarian Government
from forming a union that would represent them in efforts to alleviate
some of their grievances. Approximately 150 African students left
Bulgaria as a result of the incident.
Limited successes were achieved by some Bloc countries at major
Afro-Asian conferences in early 1963. The Afro-Asian Peoples' Soli-
darity Organization (AAPSO) held its third conference at Moshi,
Tanganyika, in February. Here the USSR and Communist China helped
to give the conference a distinctly anti-Western character. The Chi-
nese had relative success in posing as "non-white" champions of African
liberation struggles. Two months later, the conference of Afro-Asian
Journa.L.ists, from which the Chinese Communists succeeded in having the
USSR excluded, benefited from contacts built up at Moshi and attracted
delegates from more than 20 African territories to Djakarta. Many of
these delegates, who had also attended the AAPSO conference, went on
to visit Communist China.
Thrre were few new Bloc credits to Africa in the first half of
1-963.* The first long-term development credit from a Bloc country to
Algeria was a $6 million Bulgarian credit for a textile plant, tannery,
and electric motor factory. Under an agreement concluded in February,
Bulgaria also extended a credit of $1.5 million to Tunisia for the
construction of a sports center.
B,Looc activity continued at a relatively low level in Ethiopia but
greatly increased in the Somali Republic. The Somalis resisted Bloc
overtures only in the military field, and the USSR moved rapidly ahead
with economic aid, trade promotion efforts, and a relatively massive
X While, on a trip to the USSR in June, Senegal's Secretary of State
for Planning and Development signed an agreement that calls for Soviet
aid in expanding the production of an agricultural project which cur-
rently consists of 6,000 hectares. Soviet assistance will be provided
under the terms of a general economic and technical assistance agree-
ment signed in June 1962. Whether or not financial assistance has been
extended is not known, but it is estimated that the total cost of the
project is about $16 million.
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scholarship program. Communist China entered into active competition;
for Somali favor during the reporting period.
European Satellite activity, particularly by Poland and Bulgaria,
represented the greatest Bloc initiatives in the field of economic
assistance to Algeria. In addition to its development credit, tul-
garia also signed technical cooperation and trade and payments agree-
ments. Poland signed trade, economic, and scientific and technical
cooperation agreements with that country. The USSR has been the most
active in military aid and is carrying out de-mining operations on
Algeria's eastern and western borders. More than 350 Algerians went
to the USSR for military training.
Despite the banning of the Tunisian Communist Party and its publi-
cations in January, the Bloc moved ahead with its economic aid program
in Tunisia. Besides extending a credit for the sports center, Bulgaria
renewed its trade agreement for 1963. Poland completed a spinning miAl
and agreed to undertake the study and financing of facilities for cooper-
atives.
Ghana postponed indefinitely the projected establishment of a trade
mission in East Germany and continued its review of agreements with the
Bloc. Ghana sought to revise its trade and payments agreements with
Bloc countries to permit the periodic settlement of bilateral accounts.
Complaints about the quality of Bloc equipment increased, and work on
Bloc projects proceeded slowly. Provisions of previous credit exten-
sions were revised in order to facilitate implementation of Sovi~,t
projects. A protocol signed in March earmarked unused portions )f
previously extended credits for the import of Soviet commodities valued
at $22.2 million. The local currency generated from the sale of then,
commodities will be used for the,domestic costs of certain Sovie.t-
assisted projects in Ghana.
Guinea's relations with Bloc countries continued at a reduced lev,.l.
Only Communist China increased its activity as it began to impitaent
its aid program. Economic relations with the Bloc approached a critieeal
point as Guinea sought to make the Bloc implement its aid progreunn at a
faster pace while the Bloc tried to enforce overdue payments on trade
accounts. In June an aid protocol provided for the creation of a
Soviet building organization in Guinea to be fully responsible for the
completion of all Soviet aid projects.
Mali's financial situation deteriorated as debts to the Bloc- became
due in increasing amounts; the country defaulted on payments, and the
USSR apparently agreed to ease some of the terms. The Bloc retained
its dominant position in Mali's aviation, but Air Mali continued to
have financial difficulties. The Bloc's major aid projects mad( Little
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progress, and no new ones were announced. Some of the Bloc-supported
economic ventures have proved disappointing. Meanwhile, however, the
extensive Malian-Bloc exchange of delegations continued, President
Keita received the Lenin Peace Prize, and Malian information media
continued to favor the Bloc.
In East Africa, Bloc efforts consisted primarily of diplomatic,
cultural, and trade relations. The only significant commercial activity
was the Chinese purchase of Tanganyikan and Ugandan cotton, which caused
a price rise in both countries' markets. Uganda and Kenya sent com-
mercial missions to the Bloc in quest of markets, and the Bloc can ex-
pand its presence in the East African economy by purchasing those agri-
cultural products on which export earnings are dependent and for which
the world market is limited.
Asia
`[rle most noteworthy developments in Southeast Asia during the first
half of 1963 consisted of the first acceptance by Cambodia of military
equipment from the USSR, Burma's purchase of additional tractors from
the USSR and Czechoslovakia, and the Soviet accommodation on repayments
on outstanding debts owed by Indonesia. In South Asia, significant
developments included (1) a shift of government in Afghanistan which
appeared favorable to the West and a renewal of economic relations with
Pakistan when the latter opened its borders once again for transit to
Afghanistan and (2) Soviet deliveries of fighter planes to India, fol-
lowed by offers of broader military aid and the conclusion of a trade
agreement calling for expanded commerce between the USSR and India.
In Indonesia the Soviet Bloc continued its policy of supporting
President Sukarno and received from him in turn support for a number
of Bloc positions in the international field. However, Soviet leverage
in Indonesia decreased somewhat as a result of the adoption by the
Indonesian Government in May of an economic stabilization program
along; Western lines and predicated upon substantial new economic aid
from the West. The USSR, after prolonged negotiations, agreed to re-
duce the annual payments on Indonesian military indebtedness, a con-
cession the United States had stipulated as a precondition to Western
aid. At the same time, the way was prepared. for more rapid implemen-
tation of Soviet economic aid commitments.
Prince Sihanouk continued to emphasize the special position of
Communist China as a friend and protector of Cambodia. Sihanouk's
visit to Communist China in February and Liu. Shao-chi's return visit
to Cambodia in May were occasions for a reaffirmation of mutual sup-
port, although no new economic credits were forthcoming from the
Chinese. The USSR extended a credit of $12.2 million to Cambodia for
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the construction of a dam on the Kamehay River. The USSR also agreed
to supply four MIG aircraft, 24+ 37-mm antiaircraft guns, and some ratio
equipment -- the first penetration by the Bloc into the military aid
field in Cambodia.
The major developments in Burmese-Bloc relations during the first
half of 1963 were the Burmese purchase in January of an additional
500 tractors from Czechoslovakia, bringing the total number purchaser
from that Bloc country to 2,000, and the purchase of 1,000 tractors
from the USSR in March. The tractors from the USSR were purchased
under a $2.6 million credit to be repaid over 5 years at 2.5 percent
interest. The Bloc will thus play a significant role in the develop-
ment of the agricultural sector in Burma.
Prime Minister Daud of Afghanistan, who had supported the develob-
ment of Afghan relations with the USSR, resigned in March and was re-
placed by a more pro-Western regime. In May, Afghan-Pakistan duplo
matic relations were restored, and the transit route through P3.kista,i
was reopened. The latter development provided a significant a,eist
for the Afghan economy and reduced its dependence on the Soviet. tran.3it
route. No change in the Soviet military program was observed, but the
new regime has reportedly shown interest in obtaining some military
supplies and training in the West. New aid agreements conclud:ud during
the period totaled $5.5 million. Of the total, $1.5 million wa for
the import of wheat to generate local currency for use in Soviet
projects and $4 million was for a 5-year trade credit. Weekly air
service between Prague and Kabul was inaugurated by the Czecho Jovak
Airlines, and the Soviet-built air terminal at Kabul was opened. `Ch
1963 Soviet-Afghan trade protocol provided for an Afghan trade ;urplls
of $6 million, the bulk of which is indebtedness to the USSR, but it
did not require that Afghan hard currency earning products -- karakul
and carpets -- be exported to the USSR as the USSR had initially de-
manded.
Soviet willingness to provide military aid to India, thrown into
question in late 1962 after the Chinese Communist attack from biie
Tibetan border, was reaffirmed when the first shipment of MIG-L's
previously promised was delivered in February 1963. Two further
agreements were signed during the period under review between the
USSR and India -- for military aid valued at $16 million. In Tune
the USSR and Czechoslovakia offered a wide range of military equip-
ment, and an Indian negotiating mission left for Moscow in July.
There were only minor additions in 1963 to the substantial Bloc eco-
nomic aid program in India, but new agreements with the USSR project
a continuing increase in Indian-Soviet trade and in cultural exchar? es.
Implementation of existing projects progressed without difficulties.
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SECRET
BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS'
Selected Years, 1954 - June 1963
BLOC ECONOMIC ASSISTANCE
TO UNDERDEVELOPED COUNTRIES
1954 -JUNE 1963
BLOC ECONOMIC AND MILITARY TECHNICIANS
IN UNDERDEVELOPED COUNTRIES,
1955 -JUNE 1963
First NnH
1963
SECRET
BLOC MILITARY AID TO UNDERIDEVELO'ED
COUNTRIES, 1955 - JUNE 1963 `*
STUDENTS FROM UNDERDEVELOPED COU TRIMS
TRAINED IN THE BLOC, 1956 -JUNE 19-53
* Proiected of an athnuol rate Iran, A ,r o mopcfei (q q(j
**Since Bloc Military Assistonc for _,: nn rowan.
cannot be distributed by y-sar, ui 1 ,' fig;'re
are only estimates.
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 SECRET
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S
SINO-SOVIET BLOC ECONOMIC ACTIVIT
IN UNDEDEVELOPED AREAS
1 JAIU.RY - 3 JUNE 1963
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SECRET
SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JANUARY-30 JUNE 1963
October 1963
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The reports on Sino-Soviet Bloc economic activities in underde-
veloped areas in this series provide periodic summaries and analytical
interpretations of significant developments in the economic relations
of Bloc countries with underdeveloped countries of the Free World.
These developments are reported on a current, factual basis in biweekly
reports under the same title.
This report, covering the 6 months from 1 January through To Jwie
1963, constitutes the fifteenth periodic supplement to a background
report on Sino-Soviet Bloc Postwar Economic Activities in UnderdeveJ2ke
Areas, 8 August 1956, SECRET. The present supplement relates notewwcrth5
noneconomic activities, including military aid, to the economic opera-
tions of the Bloc in underdeveloped countries in order to place the
economic aspects in the perspective of the over-all programs of the
Bloc in these countries.
For the purposes of this report, the term underdeveloped areas in-
cludes the following countries of the Free World: 1 all coun_tries
in Latin America except Cuba; (2) all countries in the Middle East,
including Cyprus, Greece, the Syrian Arab Republic, Turkey, and the
United Arab Republic (Egypt); (3) all countries in Africa except the
Republic of South Africa; (4) all countries in South and Southeast
Asia; and (5) Iceland, Portugal, and Spain.
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CONTENTS
Summary . . . . . . . . . . . . . .
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SING-SOVIET BLOC ECONOMIC ACTIVITIES
IN NON-COMMUNIST UNDERDEVELOPED AREAS
1 JANUARY - 3O JUNE 1903
Summary
Current Trends
Sino-Soviet Bloc economic aid activities in underdeveloped coun-
tries during the first 6 months of 1963 continued to reflect a more
critical appraisal by both lending and recipient countries -- an
appraisal in which the Bloc gave evidence of a more realistic asoess-
ment of the politicostrategic returns commensurate with the aid
resources committed and some underdeveloped countries exhibited a
greater appreciation of the limitations of Bloc economic assistance.
While both the level and the more selective pattern of new Bloc aid
extensions have reflected this changing assessment, both the Bloc and
the underdeveloped countries have been reluctant to relinquish a pro-
gram which has hitherto netted some advantages to both sides.
Sino-Soviet Bloc new economic aid extensions during this 6-month
review period totaled $101 million* -- the smallest Bloc commitment
during any comparable period since 1957. The USSR concluded military
agreements with India and Cambodia in the first half of 1963 axid pos-
sibly also with Algeria, the UAR, and Indonesia.
It is still not possible to :Mate with confidence, however, :ne
extent to which the lag in new extensions reflects (1) a more cautious
and selective approach motivated by the apparent feeling in some Bloc
circles that economic aid has not been as effective as had ear-i i_-r been
anticipated in furthering Bloc policy objectives, (2) a decision by the
USSR to lessen the burden of its aid program in view of domestic eco-
nomic stringencies and substantial commitments in Cuba and elsewnere,
(3) the large backlog of undrawn credits resulting partly from toe
inability of recipient countries to implement their part of the program,
or (4) more limited opportunities in newly emergent countries for large
scale aid agreements of the kind that the Bloc has hitherto entered into.
* All data in this report exclude Cuba and Yugoslavia and thus are not
comparable to aggregative figures in previous issues of this series.
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When viewed against (1) some disappointing results of the program in
Iraq, Africa, and elsewhere, (2) the simultaneous Bloc commitments in
heavy industry, military, space, consumer welfare, and support for less
developed Bloc members and`Cuba, and (3) bitter Chinese and other Com-
munisst denunciations of Kh.rushchev's coexistence strategy in under-
devel.o$>ed areas, foreign aid may well have also generated larger
political issues within the Bloc than the actual economic costs of
the aid program would. seem to warrant. Indeed, all these factors
probabLy have contributed to the recent decline in new Bloc aid com-
mitment's.
Pht, first half of 1963 was also marked by ambivalent attitudes
toward. Bloc aid. by many of the underdeveloped country recipients.
Guinea, Ghana, and Mali, countries on which the Bloc had pinned great
hopes i'or extending its influence in Africa, have been increasingly
vocal in expressing their dissatisfaction with the implementation of
Bloc a.-id. Ugly racial incidents involving African students in the
USSR, Czechoslovakia, and Bulgaria have also tended to generate
hostile, if only transitory, criticism of the Bloc. In Iraq the
new regime sought to redress the balance of its Bloc-oriented prede-
cessor by seeking to canceL its contract for Soviet missiles and by
canceling two economic aid projects and halting the implementation of
three others pending a more thoroughgoing review. However, by the end
of the reporting period very few of the academic students had returned.
Afghanistan, Indonesia, and the UAR also have indicated a greater
desire to establish closer relations with the West as a means of de-
creasing their dependence on the Bloc.
In response to such mounting problems and disappointments coinci-
dent with the implementation of its aid program -- difficulties not
peculiar to Bloc programs alone -- the USSR has sought to adopt a
more flexible and pragmatic approach in order to facilitate more
rapid, implementation of its aid projects. In Guinea, after talks
reportedly marked by much mutual recrimination and hard bargaining
and during which Guinean grievances over the cost and rate of imple-
mentation of Soviet projects and the shortcomings of Soviet technicians
were aired along with Soviet frustration over Guinea's delay in pro-
viding local labor and materials, the USSR agreed to assume full
responsibility for the completion of all Soviet aid projects in Guinea --
a step which Moscow had hitherto been reluctant to take. In Ghana,
similar efforts by the USSR to facilitate lagging implementation of its
aid projects resulted in a Soviet agreement to allocate $22 million of
previously extended developmental credits for the purchase of Soviet
commodities, the proceeds of which are to be used exclusively to
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finance the local currency costs of certain Soviet-assisted proiecte.
In response to Indonesian entreaties, the USSR has reportedly agreed
to a substantial reduction of the annual payments on Soviet military
loans and to a rescheduling of the payments over a longer period.
While the USSR at first seemed eager to salvage what it could of`
its heavy commitments in Iraq, continued Baghdad repression of Iraqi
Communists and an offensive against the Kurdish minority provoked
strong Soviet reaction. Ic an unprecedented threat belying the "die-
interested" nature of Soviet aid, Pravda warned that Moscow's patience
and its aid funds -- were not inexhaustible. Pravda asserted ':,hat tie
rendering of aid to newly independent states did not mean that the USSR
had "money to spare" or that such funds could not be used profitably
at home. The USSR, therefore, could not remain indifferent to ,he o0jec-
tives on which its aid funds were being spent.
While Bloc aid program,, were meeting delays and dissatisfaction in
some countries, they were apparently making progress in others. Blc~
projects in the UAR, particularly the High Dam, were reportedly moving
ahead satisfactorily, and a new economic credit of nearly $>45 n.llio?.
was extended by the USSR during the 6-month period. Construction work
was stepped up on Bloc projects in the Somali Republic and Yemeenn, ant
the number of Soviet technicians in both countries increased substan-
tially. Work appeared to be moving ahead at a faster pace, to.), in
India and Afghanistan. The USSR widened its commitments to Canbodin
by signing agreements for military aid and for a power dam. B?-nzi_
finally ratified a number of large, medium-term credits from the
European Satellites extended in 1961 and 1962 for machinery aril equi-:)-
ment purchases under bilateral trade agreements.
During the past year, ;soviet spokesmen have openly expressed the
limited foreign aid potential of the USSR and coupled such stat,em.ento>
with demands that underdeveloped countries rely more on their o rn -
resources or seek more aid from the West and the UN. Moreover, in
contrast to the preeminent role that hitherto has been accorded the
Bloc aid program, Moscow., perhaps under the urgings of its European
Satellites who rely more than the USSR on foreign trade, has tended
to place increased emphasis on trade rather than aid as the mcii
decisive factor in securing and maintaining the "economic indel=~endence"
of new states. There is no firm evidence, however, that the Soviet.
leadership has revised any of its fundamental assumptions with respect
to its policies in underdeveloped areas. Indeed, under the pre-.,Eeure::
of Chinese criticisms, Pravda on 7 August, in a major exposition of
the USSR's aid program, sought to reassert with increased vigor the
true militancy of the Soviet doctrine of coexistence and the implicit
connection of its trade and aid program -- with which its prestige seems
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irrevocably committed -- with the wider political objectives of the
natioaisl liberation movement.
]3]_oc Economic Assistance
Credits and Grants
Bloc economic aid extensions to underdeveloped countries totaLed
$101 million during the first half of 1963, the lowest semiannual aid
commatrnent since 1957. The UAR, Syria, and Cambodia were the major re-
cipierit.s of new Bloc aid, bringing the cumulative total of Bloc economic
credits extended since the beginning of the program in 1954 to $4.7 bil-
lion. The USSR contributed almost two-thirds of the total of new aid
extended in the first 6 months of 1963; the European Satellites con-
tributed almost 20 percent, and Communist China the remainder. More
than two-thirds of total Bloc credits extended during this period went
to industry, 12 percent to hydroelectric power development, and approxi-
mately 3 percent to agriculture.
Drawings in the first half of 1963 were $209 million, bringing
the total cumulative drawings on economic credits to $1.5 billion. Dis-
satisfaaction on both sides with the slow progress of many Bloc aid
projects has led the USSR to intensify its efforts to accelerate the
implementation of credits already extended. Recent instances in Guinea
and Ghana suggest that even greater emphasis on project implementation
may be anticipated in the future.
Technicians and Trainees
Bloc economic technicians employed in underdeveloped countries
during the first 6 months of 1963 numbered approximately 11,250, an in-
crease of almost 20 percent over the previous 6-month period. Greater
economic aid activity in Algeria, India, Iraq, the Somali Republic,
the UAR, and Yemen accounted for about 90 percent of the net increase.
Afghanistan, Algeria, Guinea, India, Iraq, the UAR, and Yemen employed
almost three-fourths of the total number of Bloc economic technicians.
Approximately 15 percent of the total technicians were engaged in
medical, education, planning, advisory, and managerial activities not
related to economic aid credits -- indicating a significant growth in
nonproject technical assistance activities.
During the first 6 months of 1963, approximately 1,400 academic
and technical trainees from underdeveloped countries enrolled in Bloc
institutions, bringing to approximately 12,000 those who are currently
receiving instruction. It is estimated that 18,300 students have under-
taken such training since the inception of the Bloc's aid program.
Complaints of racial discrimination, political indoctrination, dissatis-
faction with academic curricula, and other grievances, however, have
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resulted in some exodus of African students, largely from Bulgaria but
also in smaller numbers from other Bloc countries.
Military Assistance
Credits and Grants
New agreements between India and the USSR for the extension of
military credits brought the minimum cumulative total of Bloc nilitiry
assistance to underdeveloped countries to almost $3 billion by the ;end
of June 1963. New military aid agreements of undetermined value were
also reportedly signed with Algeria, Cambodia, Indonesia, and the MR.
Deliveries of military equipment to Indonesia, the UAR, Syria, Alge-ia,
Iraq (before the February coup), and Yemen continued under prF',i_-Loos
agreements.
During the review period the Bloc sought to resolve sorrte of
the problems which have plagued military aid recipients. Bloc coun-
tries entered into negotiations with India, Iraq, and the UAP. in an
attempt to resolve the problems of spares, replacement parts, and
maintenance, and the USSR offered some relief to Indonesia's repay-
ment burden by lengthening the repayment period so as to reduce Indo-
nesia's annual repayment obligations.
Technicians and Trainees
Approximately 4,600 Bloc military technicians were assigned
to underdeveloped countries during the first half of 1963, an increase
of almost 40 percent above the second half of 1962. Greater number
of technicians were present in Indonesia, Syria, the UAR, and Yemen,
whereas the number in Iraq began to decline at the end of the period.
During the first half of 1963, 1,780 nationals from under-
developed countries enrolled in military training programs in the
Bloc. This figure is an increase of more than 25 percent above the
previous 6-month period and brings the cumulative total of military
trainees to the Bloc to more than 13,000 as of the end of June L963.
During the first half of 1963 the Sino-Soviet Bloc continued to =x-
pand its trade with the underdeveloped countries with increased stress,
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particularly on the part of the European Satellites, on the close re-
lationship between trade and aid and on the importance of credit exten-
sions as a precondition for any substantial expansion of trade with the
tarea,. he underdeveloped countries, while continuing to recognize the
advantages in trade with the Bloc, displayed an increasing awareness
of some of the difficulties involved in such exchanges.
In 1_()h2, Sino-Soviet Bloc trade turnover with underdeveloped coun-
tries rose 11 percent above the 1961 level and amounted to $2.5 billion.
Although. this increase was greater than the 3--percent rise noted in
1961, it was still well below the percentage gains of earlier years.
The share of the underdeveloped countries in the total trade of the
,`.,ino-Soviet Bloc in 1962 continued at its recent level of about 7 per-
cent, while the Bloc's share of the aggregate trade of the underde-
veloped countries remained unchanged at about 5 percent. The Bloc,
however, continued to account for a heavy share of the trade of cer-
tain underdeveloped countries, notably Afghanistan, the UAR, Mali, and
Ca uinea.
Bloc trade with Latin America remained at about the $300 million
level of 1961, whereas Latin America's-share in total Bloc trade with
underdeveloped areas declined slightly to 12 percent. Asia, which re-
corded the largest increase in trade with the Bloc, replaced the Middle
East as the most important area trading with the Bloc. In 1960, Asia
and the Middle East each accounted for about 35 percent of Bloc trade
with underdeveloped countries; by the end of 1962 the share of the
Middle East in this trade had fallen to 32 percent while Asia's share
had risen sharply to L.2 percent. Bloc trade with Africa increased
slightly, reflecting increased Bloc imports from Ghana.
L, tiri America
There were few instances of significant Latin American responses
Lu Sitio-Soviet Bloc economic overtures during the first half of 1963-
The area as a whole maintained only limited economic relations with
the Bloc; trade between Latin America (excluding Cuba) and the Bloc
amounts to no more than 3 percent of the area's total trade. There
are i:d.E.cations, however, that closer ties with the Bloc are developing
i.e some countries.
The most important steps toward closer economic relations with the
Bloc were taken by Brazil. In February 1963, Brazil announced ratifica-
tion of a series of 1961 trade agreements with six European Satellite
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nations. The agreements contain provisions for up to $180 million in
long-term credits as well as calling for greatly increased trade levels.
Brazil also signed a new trade pact with the USSR providing for a tripl
ing of trade during the next 3 years, including shipment of large qu.n.- : .
tities of Soviet oil. As corollaries to these developments, the Bra ili-~
Government set up a coordinating group called COLESTE to promote trade
with the Bloc, and a number of trade missions from the Bloc visited, the
country in an effort -- unsuccessful as of the end of June -- #;, imple-
ment the credits extended.
The Brazilian-Soviet trade agreement does not provide for long-t.,nn
credits but includes several features considered to be of cons derab e
importance to Brazil: Strict controls are placed on reexport of goods
exchanged (a measure designed to protect Brazil's position in -Ye world
coffee market), and provision is made for the transfer, with agreement
of all parties concerned, of balances accumulated in trade with third
countries. If trade goals set forth in the agreement are met, the
USSR will provide one-third of Brazil's estimated requirements o1' crade
petroleum and petroleum products by 1.965; at present, Soviet oil forts
only a small percentage of Brazil's imports.
Bolivia's negotiations with Czechoslovakia for an antimony smelt?r
contract moved somewhat closer to approval with the offer of in prover
terms by the Czechoslovaks. Final approval of the contract still wa
being delayed by the Bolivian Government, despite leftist pressires
for its acceptance.
In Chile, there are sign.; of increased interest in trade with the
USSR, particularly in regard to copper. Negotiations were commenced
for the sale by Chile of up to 21,000 tons of that product.
Uruguay's recurrent foreign exchange problems caused considerable
pressure to broaden the country's export market. A number of BLooc
proposals for purchases of agricultural products were made, but
sales agreement with East Germany early in the year was the onl.,r
instance of final acceptance of a, proposal by Uruguay.
Bloc efforts in other countries of Latin America (with the ;cep-
tion of Cuba) included visits by commercial missions and various-. trade
proposals. Some sales contracts resulted from these approaches, but
significantly closer economic relations between Latin America and the
Bloc have not come about.
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Middle East
The chief developments affecting Bloc relations with the Middle East
in the first half of 1963 were the following: the coup in Iraq, which
replacedQasim's regime with an anti-Communist Ba'athi government more
critieai.. of Bloc assistance programs; the buildup of Soviet technicians
in Yemenn, associated with LAR and Soviet military support of the Yemeni
Government; and an increase in economic ties with and probably military
assistance to the UAR from the Bloc.
The strong Bloc position in Iraq deteriorated sharply following the
Ba'at-dominated coup of 8 February 1963. The severe repression of
Iraqi Communists by the new regime was followed by a sharply antago-
nistic reaction from the USSR and the European Satellites and by counter-
propag,anda from the Iraqi side. A general review of development plans
and c-i'13loc-aided projects was initiated by the government; this review
has yet to be completed. A number of Bloc industrial projects on which
littJe work had been done have been canceled, whereas others well under-
way at the time of the review will probably be completed. Iraqi authori-
ties indicated their interest in developing alternative sources of supply
for to Litary equipment but cannot quickly eliminate their present depend-
ence on Soviet supplies; deliveries of some conventional military items
from the USSR continued, but abrogation of a major contract for surface-
to-air missiles was requested by Iraq. The number of Soviet technicians
in Iraq and Iraqi students in the Bloc will have been substantially re-
duced by mid-summer 1963. On 9 June 1963 the Iraqi Government decreed
that all academic students studying in the Bloc return to Iraq.
.n Yemen the number of Soviet technicians more than doubled, rising
to about 1,000: somewhat less than half were working on a military
airfie!cl north of San'a; some were serving as instructors at the mili-
tary academy in Ta'izz, and others providing civilian services in the
port of Hudaydah and elsewhere. Under a military assistance agreement
concluded with Yemen in November 1962, the USSR reportedly provided a
variety of small arms, antiaircraft guns, grenades and mines, jeeps,
trucks, and ambulances. Meanwhile, economic aid was under discussion
with several Bloc countries, but only a Chinese Communist grant of
wheat, valued at $200,000, had been extended by the end of June.
'C'hee UAR obtained a new $44.4 million credit from the USSR in June,
to be used for unspecified industrial projects. In January a protocol
covering final blueprints and specifications for the Aswan High Dam
was concluded, and work on the dam is proceeding well. The extent of
new military aid from the USSR is not known, but reports on items con-
nected with development of surface-to-air missiles indicate rapid
progress toward an air defense system.
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Elsewhere in the Near East, the USSR continued its goodwill cam-
paign in Iran, and a Soviet delegation arrived in Teheran late in Jute
to discuss specific proposals for joint economic cooperation.* In
Syria, where a Ba'ath Party coup (like that in Iraq) occurred during
March, the chief new development was the extension of a $16 million
economic credit by Communist China; other Bloc activities, including
implementation of existing economic and military aid programs, pro-
ceeded without incident, and Syrian-Bloc trade rose substantially in.
1962.
Africa
There were no major changes in the level or pattern of Bloc actiFi-
ties in Africa during the first half of 1963. The USSR undertook steps
to implement more rapidly its aid program in Ghana and Guinea and in-'ti-
ated a large-scale military training program for Algeria. `There was
an increase in Bloc diplomatic representation, and the first Soviet
ambassadors to Senegal and Burundi were accredited. Hungary opened
the first Bloc mission in Dahomey, and the Chinese Communists opened.
the first Bloc mission in Uganda.
The Bloc continued to place increasing emphasis on the stimulatirn
and support of nationalist forces in the southern third of Africa.
Here the USSR and Communist China continued to support the same libea-
ation groups, and both called upon independent Afro-Asian states to
give military and financial aid to these groups.
The Bloc also made some progress in extending its air operations-
in Africa. An agreement with Tunisia in February gave Czechoslovak
Airlines (CSA) the right to fly to Tunis. Mid-March talks in Prague
resulted in the initialing by a Sudanese delegation of an air trans-
port agreement with CSA. The agreement provides rights between Prague
and Khartoum, but the Sudanese have indicated that no onward rights
are to be granted. The Somali Cabinet decided to grant landing rights
to Aeroflot in Somali, but Ethiopia denied the Soviet request for
landing and overflight rights. The USSR attempted to obtain rights
across central Africa in order to be able to fly the circular route
* On 27 July 1963 an agreement was concluded for joint development
of the Aras River in northwestern Iran. The USSR extended a credit
of $38.8 million to cover Iran's share of the foreign exchange costs:.
Assistance also will be provided to increase the productivity of
Iran's sturgeon fisheries in the Caspian Sea and for the construction-
of 11 grain silos.
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Moscow-Cairo-Khartoum-Accra-Conakry-Rabat-Moscow but apparently did not
obtain the necessary overflight rights from Chad and Nigeria. Air Ghana
servic to Moscow began in February but was terminated after two flights.
Aeroi'1)t obtained and then apparently lost Guinean permission to use
Conakry as a stopover on flights to Havana, but it did acquire the right
to use Ouargla in Algeria for flights to Cuba.
1;J.nnc prestige in Africa was adversely affected in February when Bul-
garian militia. broke up a demonstration of about 200 African students
in Sccfia. The students had. been prohibited by the Bulgarian Government
from firming a union that would represent them in efforts to alleviate
some or their grievances. Approximately 150 African students left
Bu.lg-aria as a result of the incident..
(,invited successes were achieved by some Bloc countries at major
Afro-A,>ian conferences in early 1963. The Afro-Asian Peoples' Soli-
darity Organization (AAPSO) held its third conference at Moshi,
Tang.-:I1,,,/ika, in February. Here the USSR and Communist China helped
to giv,> the conference a distinctly anti-Western character. The Chi-
nese h:i.d relative success in posing as "non-white" champions of African
liberation struggles. Two months later, the conference of Afro-Asian
Journla.lists, from which the Chinese Communists succeeded in having the
USSR excluded, benefited from contacts built up at Moshi and attracted
delegates from. more than 20 African territories to Djakarta. Many of
these delegates, who had also attended the AAPSO conference, went on
to visit Communist China.
'lhore were few new Bloc credits to Africa in the first half of
1963.* The first long-term. development credit from a Bloc country to
Algeria was a $6 million Bulgarian credit for a textile plant, tannery,
and Fei ctric motor factory. Under an agreement concluded in February,
Bulgar:i..a also extended a, credit of $1.5 million to Tunisia for the
construction of a sports center.
?1:,c activity continued at a relatively low level in Ethiopia but
greatly increased in the Somali Republic. The Somalis resisted Bloc
overtures only in the military field, and the USSR moved rapidly ahead
with e(-onomic aid, trade promotion efforts, and a relatively massive
Wliie on a trip to the USSR in June, Senegal's Secretary of State
for 11.tnning and Development signed an agreement that calls for Soviet
aid
in expanding the production of an agricultural project which cur-
rently consists of 6,000 hectares. Soviet assistance will be provided
under the terms of a general economic and technical assistance agree-
ment signed in June 1962. Whether or not financial assistance has been
extended is not known, but it is estimated that the total cost of the
project is about $16 mill-_on.
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scholarship program. Communist China entered into active conrue?titii>n
for Somali favor during the reporting period.
European Satellite activity, particularly by Poland and Bulgari
represented the greatest Bloc initiatives in the field of economic
assistance to Algeria. In addition to its development credit, Bul-
garia also signed technical cooperation and trade and payments agr-
ments. Poland signed trade, economic, and scientific and technical
cooperation agreements with that country. The USSR has been the mo.t
active in military aid and is carrying out de-mining operations on
Algeria's eastern and western borders. More than 350 Algerians wens
to the USSR for military training.
Despite the banning of the Tunisian Communist Party and its publi-
cations in January, the Bloc moved ahead with its economic aid trogxam
in Tunisia. Besides extending a credit for the sports center, Bulgaria
renewed its trade agreement for 1963. Poland completed a spinning rill
and agreed to undertake the study and financing of facilities for cooper-=
atives.
Ghana postponed indefinitely the projected establishment or' a trade
mission in East Germany and continued its review of agreements with the
Bloc. Ghana sought to revise its trade and payments agreements with
Bloc countries to permit the periodic settlement of bilateral accounts.
Complaints about the quality of Bloc equipment increased, and work of
Bloc projects proceeded slowly. Provisions of previous credit r,xten-
sions were revised in order to facilitate implementation of Soviet
projects. A protocol signed in March earmarked unused portion of
previously extended credits for the import of Soviet commoditi-?a valued
at $22.2 million. The local currency generated from the sale or there
commodities will be used. for the domestic costs of certain Soviet-
assisted projects in Ghana.
Guinea's relations with Bloc countries continued at a reduced level.
Only Communist China increased its activity as it began to implement
its aid program. Economic relations with the Bloc approached a,c~ritacal
point as Guinea sought to make the Bloc implement its aid program at a
faster pace while the Bloc tried to enforce overdue payments on tradf
accounts. In June an aid protocol provided for the creation of -I.
Soviet building organization in Guinea to be fully responsible tor the
completion of all Soviet aid projects.
Mali's financial situation deteriorated as debts to the Bloc became
due in increasing amounts; the country defaulted on payments, and the
USSR apparently agreed to ease some of the terms. The Bloc reta'ned
its dominant position in Mali's aviation, but Air Mali continued to
have financial difficulties. The Bloc's major aid projects made littLe
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progress, and no new ones were announced. Some of the Bloc-supported
economic ventures have proved disappointing. Meanwhile, however, the
extensive Malian-Bloc exchange of delegations continued, President
Keita received the Lenin Peace Prize, and Mal-Lan information media
continued to favor the Bloc.
In East Africa, Bloc efforts consisted primarily of diplomatic,
culturo_l, and trade relations. The only significant commercial activity
was the Chinese purchase of Tanganyikan and Ugandan cotton, which caused
a print: rise in both countries' markets. Uganda and Kenya sent com-
mercial missions to the Bloc in quest of markets, and the Bloc can ex-
pand it; presence in the East African economy by purchasing those agri-
cultura_! products on which export earnings are dependent and for which
the wor.J.d market is limited.
Asia
T}LF> most noteworthy developments in Southeast Asia during the first
half' of 1963 consisted of the first acceptance by Cambodia of military
equipment from the USSR, Burma's purchase of additional tractors from
the USSR and Czechoslovakia, and the Soviet accommodation on repayments
on outstanding debts owed by Indonesia. In South Asia, significant
developments included (1) a, shift of government in Afghanistan which
appeared favorable to the West and a renewal of economic relations with
Pakistan when the latter opened its borders once again for transit to
Afghanistan and (2) Soviet deliveries of fighter planes to India, fol-
lowed by offers of -broader military aid and the conclusion of a trade
agreement calling for expanded commerce between the USSR and India.
lie Indonesia the Soviet Bloc continued its policy of supporting
President Sukarno and received from him in turn support for a number
of Bloc positions in the international field. However, Soviet leverage
in Indonesia decreased somewhat as a result of the adoption by the
Indonesian Government in May of an economic stabilization program
along, Western lines and predicated. upon substantial new economic aid
from the West. The USSR, after prolonged negotiations, agreed to re-
duce the annual payments on Indonesian military indebtedness, a con-
cession the United States had stipulated as a precondition to Western
aid. At the same time, the way was prepared for more rapid implemen-
tation of Soviet economic aid commitments. The only new Bloc credit
was a Czechoslovak loan of $5.6 million for the purchase of trucks.
Prince Sihanouk continued to emphasize the special position of
Communist China as a friend and protector of Cambodia. Sihanouk's
visit to Communist China in February and Liu Shao-chi's return visit
to Cambodia in May were occasions for a reaffirmation of mutual sup-
port, although no new economic credits were forthcoming from the
Chinese. The USSR extended a credit of $12.2 million to Cambodia for
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the construction of a dam on the Kamchay River. The USSR also agre:nd
to supply four MIG aircraft, 24 37-mm antiaircraft guns, and some radio
equipment -- the first penetration by the Bloc into the military aij.
field in Cambodia.
The major developments in 33urmese-Bloc relations during the first
half of 1963 were the Burmese purchase in January of an additional
500 tractors from Czechoslovakia, bringing the total number pu,rchas_,d
from that Bloc country to "',000, and the purchase of 1,000 tractors
from the USSR in March. The tractors from the USSR were pureh sed
under a $2.6 million credit to be repaid over 5 years at 2.5 pcrcenl
interest. The Bloc will thus play a significant role in the .1tcveloj-
ment of the agricultural sector in Burma.
Prime Minister Daud of Afghanistan, who had supported the Lleveh.p-
ment of Afghan relations with the USSR, resigned in March and wvas r
placed by a more pro-Western regime. In May, Afghan-Pakistan diplo-
matic relations were restored, and the transit route through Pakistan
was reopened. The latter development provided a significant assist
for the Afghan economy and reduced its dependence on the Soviet tra-isit
route. No change in the Soviet military program was observed, but-she
new regime has reportedly shown interest in obtaining some military
supplies and training in the West. Weekly air service between. Prague
and Kabul was inaugurated by the Czechoslovak Airlines, and the Sovet-
built air terminal at Kabul was opened.
Soviet willingness to provide military aid to India, thrown intn-.
question in late 1962 after the Chinese Communist attack from the
Tibetan border, was reaffirmed with the delivery of the MIG-21's
previously promised. Further agreements were signed during the period
under review between the USSR and India -- for additional aircraft.
In June the USSR and Czechoslovakia offered a wide range of military
equipment, and an Indian negotiating mission left for Moscow in Jul;
There were only minor additions in 1963 to the substantial Blase eco
nomic aid program in India, but new agreements with the USSR project, a
continuing increase in Indian-Soviet trade and in cultural exchange.,.
Implementation of existing projects progressed without difficulties
Czechoslovakia extended a $5.6 million credit to Indonesia in Jane
for the purchase of trucks.
In other parts of South Asia, Bloc activities in Ceylon and Nep,l
continued at a moderate level but without any significant new develr!p-
ments. Half of the original 16 Soviet projects in Ceylon have been
dropped, owing largely to poor Ceylonese planning. Construction war
begun on the Soviet iron and steel mill, and several Czechoslovak
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projects were close to completion. Poland extended a credit of $6.4
million to Ceylon for the purchase of industrial equipment. Consider-
able progress was made on the Soviet sugar and cigaret factories and
the hydroelectric project in Nepal, and the Chinese Communists com-
pleted a survey of the road from Katmandu to the Tibetan border.
Communist China's approaches to Pakistan included a border agreement
(concluded in December 1962 and signed in March 1963), discussion of
a civil air agreement, and a trade agreement which added little to
existing trade.
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