SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000700010082-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 16, 2016
• Document Release Date: August 10, 2005
• Sequence Number: 82
• Publication Date: March 30, 1959
• Content Type: REPORT

119,064
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Copy N? 391
SECRET
BIWEEKLY REPORT
SINO - SOVIET BLOC
ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
EIC-WGR-1 /82
30 March 1959
PREPARED BY THE WORKING GROUP
ON SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
APR 2 0 1959 REC'D V
SECRET
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WARNING
THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
These biweekly reports on "Sino-Soviet Bloc Economic Ac-
tivities in Underdeveloped Areas" are prepared and issued
by a Working Group of the Economic Intelligence Commit-
tee, including representatives of the Departments of State,
the Army, the Navy, the Air Force, Commerce, and Agricul-
ture; the International Cooperation Administration; the
Office of the Secretary of Defense; and the Central Intelli-
gence Agency. Their purpose is to provide up-to-date fac-
tual information on significant developments in the eco-
nomic relations of Sino-Soviet Bloc countries with under-
developed countries of the Free World. The EIC-R-14 series
of reports, under the same title, provide periodic summaries
and analytical interpretations of these developments.
Printed and Disseminated by the
Central Intelligence Agency
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Summary of Events
13 - 26 March 1959
The USSR reportedly has granted Afghanistan lower transit rates
and improved transit time on shipments through Soviet territory.
This action, in the form of a protocol to the Afghan-Soviet general
transit agreement, is an effort by Moscow to offset the effects of the
US-financed Afghan-Pakistani transit agreement of June 1958, under
which Pakistan promised improved port facilities in Karachi and the
expeditious movement of Afghan goods through Pakistan.
Ceylon and the USSR signed a contract on 10 March under which
the USSR agreed to draw designs and provide technical assistance
for the construction of a tire plant in Ceylon. The plant, which is
scheduled to produce approximately 360, 000 tires a year, is scheduled
to be completed in 1962.
Construction of the technological institute and hotel in Rangoon
and the hospital in Taunggyi, being built as Soviet aid projects, is
progressing ahead of schedule, All three projects, costing a total
of $21 million, are expected to be completed by June 1960, from 6
months to a year ahead of the original target dates.
Communist China recently became a direct supplier of military
equipment to Indonesia. About 8 I1-10's (trainers) and perhaps 10
Tu- 2's (twin-engine light bombers) are believed to have arrived in
Indonesia from Communist China.
I
he USSR has agreed to lend Indonesia $5 million for use in
L
e ucatio-,i but has insisted that all the money be allocated for projects
at Amboina, the capital of the Molucca Islands. The Ministry of
Education had originally planned projects at Makasar (South Celebes)
and Medan (North Sumatra) as well as Amboina. To date, Indonesia
has not accepted the offer.
A $137.5 million Soviet credit was extended to Iraq under an eco-
nomic and technical cooperation agreement concluded on 16 March in
Moscow. The credit will carry 2. 5-percent interest and will be
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repayable in 12 annual installments. Four general conclusions may
be drawn from a preliminary analysis of the agreement, as follows:
(1) the scope of the 17 enumerated projects reveals that the role of
the USSR in Iraq's economy will.be even more significant than the
amount of credit involved would indicate; (2) in itself, this Soviet eco-
nomic assistance would hardly give the USSR a preponderant influence
over the Iraqi economy; (3) the present Iraqi regime plans to give
considerably more emphasis than its predecessor to industrial develop-
ment; and (4) political considerations and prestige as well as economic
motives were doubtless determinants in the choice of projects.
In addition to stepped-up Soviet political pressures against Iran
because of its breakoff of negotiations for a Soviet-Iranian nonaggres-
sion pact and its subsequent signing of a bilateral defense agreement
with the US, the USSR may also apply economic pressures, including
one or more of the following: (1) termination of trade with Iran;
(2) pressure on other Bloc countries to cease their trade with Iran;
(3) termination of Iranian transit through the USSR; and (4) refusal to
implement Soviet-Iranian agreements for the exploitation of the Aras,
Rud-e Atrak, and Harirud Rivers through the construction of hydro-
electric and irrigation projects.. The impact of such measures on the
Iranian economy probably would cause some local economic dislocation
but would not be decisive.
Poland signed a contract with a private Iranian firm in January
1959 for a sugar beet plant to be constructed at Baghan in northeastern
Iran. The total value of the contract is $4. 7 million, including ma-
chinery and equipment valued at $3. 6 million and transportation and
insurance costs as well as the costs of plans and the costs of assem-
bling equipment by Polish technicians.
On 16 March the USSR and Sudan signed a barter trade agreement,
the first to be concluded between these two countries. Detailed terms
are not yet available, but the agreement reportedly provides for the
exchange of goods worth $7. 2 million over a 1-year period.
The Yugoslav - Chinese Communist trade agreement for 1959,
signed in Peiping on 18 March, calls for an exchange of goods totaling
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$7 million, a figure 60 percent lower than that set in the 1958 agree-
ment. Yugoslavia is to export sheet aluminum, steel pipe, cables,
and chemicals and will import soybeans, minerals, oils, and silk.
Certain actions by Sino-Soviet Bloc countries since 1956 have
given rise to assertions by Free World suppliers that the Bloc is
practicing dumping and that Bloc price-cutting is directed toward
undermining the economic stability of the Free World. Such fears,
however, appear to be without foundation. Recent Bloc price compe-
tition sometimes has adversely affected Free World economies, par-
ticularly those of primary producing countries. Such price competition,
however, appears to reflect the Bloc's need to obtain foreign exchange
rather than a deliberate attempt to sabotage the structure of world
commodity markets.
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CONTENTS
Page
I. General (Sino-Soviet Bloc Trade with the Free
World) . . . . . . . . . . . . . . . . . . . . . .
A. Pricing Practices . . . . . . . . . . . . . . . 1
B. Soviet Exports to the Industrial West . . . . . . . 4
A. Soviet Grant to Afghanistan of Improved Facilities
and Lower Rates on Transit Shipments . . . , . 6
B. Ceylonese Contract for Fourth Soviet Project
Under Aid Agreement . . . . . . . . . . . . . 7
III. Southeast Asia . . . . . . . . . . . . . . . . . . 8
A. Progress on Soviet Construction Projects
in Burma . . . . . . . . . . . . . . . . . 8
B. Indonesia . . . . . . . . . . . . . . . . . . . 9
1. Sino-Soviet Military Assistance to Indonesia 9
2. Soviet Loan to Indonesia for Education . . . . 10
IV. Middle East . . . . . . . . . . . . . . . . . . . . 10
A. Soviet-Iraqi Economic Agreement . . . . . . . . 10
B. Iran . . . . . . . . . . . . . . . . . . . . . 12
1. Possible Impact of Soviet Economic Pressures
on Iran . . . . . . . . . . . . . . . . . . 12
2< Second Polish Sugar Plant for Iran . . . . . . 14
C. Sudanese-Soviet Trade Agreement . . . . . . . . 15
V. Europe (Yugoslav - Chinese Communist Trade Agree-
ment for 1959) . . . . . . . . . . . . . . . . . 16
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