INTERNATIONAL ECONOMIC & ENERGY WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97-00771R000706790001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 50
• Document Creation Date: December 22, 2016
• Document Release Date: July 14, 2010
• Sequence Number: 1
• Publication Date: December 23, 1983
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Directorate of
Intelligence
G-~
Weekly
International
Economic & Energy
Secret
Secret
DI IEEW 83-050
23 December 1983
Copy e
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
International
Economic & Energy
Weekly
23 December 1983
iii Synopsis
Perspective-The Debt Crisis 25X1
3 Briefs Energy
International Finance
Global and Regional Developments
National Developments
13
rospects for Soviet Commercial Exploitation of Space Systems and Related
,P
Services
19 Pakistan: Strong Economy Dampens Unrest
25 "~Suriname: Dutch Aid Cutoff Initiates Economic Tailspin
The High-Frequency World Administrative Radio Conference
frica and France: An Enduring Rel
ationship
Eastern Europe: 1983 Grain Crop and Implications
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Comments and queries regarding this publication are welcome. They may be
directed to Directorate of Intelligence,
Note: The International Economic and Energy Weekly will not be published
next week. The next issue will be on 6 January 1984.
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
International,
Economic & Energy
Weekly.
Synopsis.
Perspective-The Debt Crisis 25X1
The adequacy of the present prescription for treating debt-troubled coun-
tries-new lending and rescheduling in conjunction with an IMF program-is
being questioned by a growing number of observers. The growing doubts over
the current short-term, case-by-case approach to the debt crisis have renewed
calls for a.longer term, more comprehensive solution.
13 Prospects for Soviet Commercial Exploitation of Space Systems and
Related Services
satellites and the. sale of communications services', where its goals are to
supplement its hard currency earnings, gain access to customer-supplied
technology, open up markets for other products, and increase Soviet prestige.
Moscow has indicated that it intends to compete for a share of the growing in-
ternational market for space systems and related services and is increasing its
.capability to do so. It is concentrating its marketing efforts on the lauching of
19 Pakistan: Strong Economy Dampens Unrest
The relative prosperity of'Pakistan's economy has made it difficult for
antigovernment forces to carry their cause throughout the country and gain
broader popular support. Longer term economic prospects, however, are likely
to be affected by a shaken confidence among private foreign and domestic
investors in Pakistan's domestic stability
25
Suriname: Dutch Aid Cutoff Initiates Economic Tailspin 0
Despite cooler relations with Havana, Suriname has failed to secure new
Western aid to replace that suspended by the Dutch in December 1982 and
iii Secret
DI IEEW 83-050
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
29 The High-Frequency World Administrative Radio Conference
The International Telecommunication Union (ITU) on 10 January will
resume-after a 25-year hiatus-discussion in Geneva on the use of the high-
frequency broadcasting spectrum. Although agreement is possible, we believe
the Conference is more likely to refer several alternative planning methods to a
working group, which will report to a second session of the High-Frequency
World Administrative Radio Conference (HF-WARC), scheduled to convene
31 Africa and France: An Enduring Relationship
President Mitterrand is keenly aware of the need to preserve extensive French
economic interests in Africa, especially in its former colonies. Continued
problems in the French economy, however, could force Paris to cut back on its
financial and military assistance.
37 Eastern Europe: 1983 Grain Crop and Implications
We estimate Eastern Europe will harvest a 97-million-metric-ton grain crop
this year, the region's second-largest crop, but down from last year's record
102 million tons. Near record production in the grain importing northern
countries of Eastern Europe will do little to improve food supplies because
imports will remain below the levels of the recent past. In most of the southern
countries production shortfalls will lower grain exports at a time when these fi-
nancially hard-pressed regimes are attempting to boost sales to obtain hard
currency.
Secret
23 December. 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
25X1
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Perspective
International
Economic & Energy
Weekly
After nearly a year and a half of the debt crisis, financial analysts have not yet
developed a consensus as to when or how the problem can be resolved. For
every banker who believes we are progressing from the crisis to the adjustment
stage, there is another who believes we are still in the eye of the storm. Major
differences of opinion exist regarding the measures needed to address the debt
problem and the responsibilities of the debtor countries, commercial banks,
creditor governments,'and the IMF
tighter regulatory supervision and the need to improve their balance sheets.
The adequacy of the present prescription for treating debt-troubled coun-
tries-new lending and rescheduling in conjunction with an IMF program-is
being questioned by a growing number of observers. This approach worked
well when only a few debtors were experiencing problems at the same time.
The present situation, however, involves roughly 40 countries, including nearly
all of Latin America. Faced with sluggish growth in exports to the developed
countries, many Third World officials complain that the IMF's program for
increased exports and reduced imports is nearly impossible to fulfill. Moreover,
banks may not be able to provide large amounts of new financing because of
An additional concern about the present commercial bank/IMF financial
packages is the time frame. Most programs cover only a year, with economic
targets monitored quarterly. This is too short a period to produce the desired
turnaround, and the result-as best evidenced by Brazil-is that programs
must be continually reworked. Each revision risks losing the cooperation of the
25X1
on a universal plan appears insurmountable.
Another problem voiced by LDCs is their perception that shortsighted IMF
programs do not address their social and political realities. Although most
LDCs have made harsh domestic adjustments, a key question is whether they
can continue to do so over the.next several years. Financial analysts are
increasingly concerned about the potential for domestic unrest and political
upheaval resulting from prolonged austerity 25X1
The growing doubts over the current short-term, case-by-case approach to the
debt crisis have renewed calls for a longer term, more comprehensive solution.
Yet most financial experts agree that a global solution covering all debtor
countries is far less feasible than the case-by-case method because there are
broad differences between individual debtors. The task of reaching agreement
1 Secret
DI IEEW 83-050
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Secret Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Opinion is divided about the responsibilities of creditors and debtors. Commer-
cial bankers believe that more official assistance in the form of loan guarantees
is needed. Creditor governments are pushing for a private-sector solution
involving greater equity investment and cofinancing arrangements between
banks and multilateral institutions. Debtor countries stress the need for
favorable debt terms and more lending. All parties agree, however, that
greater cooperation and coordination is essential.
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Energy
Soviet Oil Production Oil production in the USSR dropped substantially during October and
Sluggish November, primarily because of problems in the West Siberian oilfields.
Soviet statistics indicate that production during the two months dropped to an
average of 12.16 million barrels per day, as compared with an average of 12.36
million barrels per day or more in eight of the first nine months of the year. 25X1
The production rate also was below the average annual rates for 1981 and
1982. Nonetheless, the higher output levels earlier this year will enable
Moscow to come close to its production target of 12.38 million barrels per day
for 1983. To reach their goal, the Soviets would need to attain a record
I I I I I I I I I I I 1 I
12.0 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
1982 1983
3 Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
production level of 12.72 million barrels per day in December-a nearly
Even if production again rises to the level of early 1983, many of the problems
plaguing operations in West Siberia are likely to intensify. With production
declining in the older oil-producing regions, sizable increases in West Siberia
are necessary to maintain total output. It will become increasingly important
for the Soviets to exploit the region's smaller deposits. This effort will call for a
substantial increase in investment for drilling, pump installation, and well
maintenance.)
S toil
arket Trends
Overproduction by several OPEC members combined with the absence of any
strong recovery in oil consumption in most industrialized countries caused spot
crude oil prices to slide further in mid-December. Arab Light and Bonny Light
crudes are selling at $28.20 per barrel and $28.75 per barrel, respectively, or
about $1 below their official.prices. Spot oil prices have been running below
official prices for most of the fourth quarter. As a result, the Soviet Union
announced price cuts in late November and early December for its crude oil
sold in Western Europe. More recently two US refiners reduced posted prices
by $1.50 per barrel. an additional
reduction in nominal oil prices could be necessary in early 1984 unless OPEC
members practice more stringent production discipline or oil consumption
/
ameroon Oil
Marketing Problems
Cameroon's state oil company has been unable to market its share of crude oil
production since late November, forcing total out ut to decline from 140,000
b/d to 22,000 b/d. the government opted to
shut in production rather than discount its oil below the official selling price of
$29.85 in the hope that market prices would firm following the 7 December
OPEC meeting. Earlier this month, a foreign company operating in Cameroon
sold a cargo of crude at $28.30 per barrel, and the price will
slide even further before the end of the year. Persistent market weakness
coupled with the threat of losing both market share and crude oil export
revenues could compel Yaounde to reconsider its position. Widespread price
discounting by non-OPEC oil producers would make it increasingly difficult
for OPEC to maintain its current price structure.
J
Algerian LNG Contract The US company Panhandle/Trunkline decided last week to temporarily
Suspended
Secret
23 December 1983
suspend its purchases of Algerian LNG. Algerian officials previously have
indicated that such an action would have serious implications on US-Algerian
economic relations. The firm had purchased 20 percent of Algeria's LNG
exports valued at $380 million this year. The decision comes despite an
agreement last July that allowed postponement until December 1984 of 40
percent of the annual contract commitments of 4.5 billion cubic meters of
natural gas. The US company cited the high cost of Algerian gas and surplus
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
supplies as the primary reasons for the: suspension. Panhandle/Trunkline and
Algerian energy officials are planning to meet on 28 December to address the
status of the US company's take-or-pay obligations during the suspension.
Sweden Reduces Oil
tockpile Goal .
oviets Begin Supplying
Fuel to Nicaragua
Lebanese Electrical
roblems
Hydro-Quebec Cuts
orecasts and Capital .
pending
Based on forecasts of lower consumption requirements, a government commis-
sion has recommended a reduction in Sweden's oil stockpile goal. With future
demand, estimates reduced from 465,000 b/d to 300,000 b/d, the commission
has proposed that the oil stockpile goal be reduced to 96 million barrels in 1987
rather than the present goal of 140 million barrels.: The, commission also
proposed that government-owned stocks be held at current levels of 32 million
barrels rather than increased to a planned 41 million barrels. The government
is expected to propose a bill based on the commission's recommendation next
spring. Although oil stocks at the new level would still cover about 320 days of
Sweden's projected consumption needs, the government is among a growing
.list of consuming countries who have reduced stockpile goals in the wake of
continued weak consumption.
decline.
The Soviet Union is scheduled to deliver about $8 million worth of crude oil,
jet fuel, and aviation gas to Nicaragua by early January-the first known
Soviet fuel deliveries to the Sandinistas. Mexico, which currently supplies
nearly all of Nicaragua's oil on long-term credit, is scheduled to cut back its
deliveries by one-fourth at the end of January. These Soviet shipments may
presage regular Soviet fuel deliveries to compensate as Mexican supplies
Technical problems in high-voltage lines and at a key substation are causing
electrical shortages in Beirut. As a result, the utility company, Electricite Du
Liban, is providing power to war-ravaged West Beirut between midnight and
.6 am and at staggered six-hour intervals the rest of the day. Earlier plans to 25X1
provide: power to most parts of the city for at least 18 hours per day proved too
ambitious; we expect that meeting the current targets will prove difficult. F___-]
build plants in. Quebec
Reduced electricity demand, competition from natural gas, and, new hydro-
electric capacity combined to produce a surplus of electricity in Quebec this
past year. As a result Hydro-Quebec, the provincially owned electric power
utility, has reduced its forecast of long-term electricity demand growth to 2.9
percent compared with. the 3.7 percent projected in 1982. These lower demand
forecasts recently caused the utility to slash its planned capital expenditures
over the next 10 years by 45 percent to $14.5 billion. We believe Hydro-
Quebec will move aggressively to sell its surplus electricity to neighboring
provinces, New York State, and.New England. Hydro-Quebec already is
offering discounts to large industrial consumers of electricity who agree to
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Syr s Foreign Syria's chronic shortage of foreign exchange appears to have intensified in the
past two months. According to the US Embassy, Syrian businessmen are.
becoming increasingly frustrated with delays in government approvals of
letters of credit for needed imports. Time lags between applications and
approvals-a reliable indicator of the severity of Syria's financial squeeze-
have stretched to more than 11 months for private-sector importers. These
delays are upsetting manufacturing and have begun to affect Syrian exports;
even Soviet customers are becoming less tolerant of missed deadlines and high
raq Draws Down
Foreign Assets
assets out of Syria in the wake of the tense regional situation.
The plight of private importers has been further complicated by fluctuations in
the free market exchange rate caused by economic and political uncertainty.
In November, the rate shifted from 6.25 to 6.85 Syrian pounds per dollar then
back to the lower rate by month's end. As a result, importers are now paying
15- to 20-percent premiums to middlemen, including members of the Syrian
military, as compensation for the risk of accepting Syrian pounds and
acquiring foreign exchange to bring in foreign goods. The shortage of foreign
exchange can partially be traced to falloffs in Arab aid this year-well under
last year's $2.0 billion level-and the expense of the Lebanese occupation. The
high demand for foreign exchange reflects, in part,.the movement of some
Iraq reportedly withdrew the remainder of its foreign exchange reserves in four
British banks earlier this month. In addition, Baghdad in recent months has
sold gold to help cover its foreign exchange obligations,
Baghdad faces unpopular import restrictions in 1984.
$5 billion as compared with a prewar level of about $31 billion. The depletion
of foreign exchange reserves, the gold sales, and large cuts in imports
underscore the severity of Iraq's financial situation. Foreign assistance,
including aid from Arab states in the Persian Gulf and deferred payments
arranged with Western creditors, have not been enough to offset the serious
decline in oil income caused by the war. Incomplete trade data for 1983
suggest imports probably will fall to between $10 billion and $12 billion, a de-
cline from $19 billion in 1982. With foreign exchange reserves nearly
exhausted and no prospects for a major increase in oil exports in the near term,
We estimate Iraq's foreign exchange assets have dropped to less than
4'orld Bank Approves The World Bank recently approved a $40 million structural adjustment loan to
/Loan to Mauritius Mauritius, primarily to cover burgeoning debt servicing requirements. As a
Secret
23 December 1983
result of drought-induced reductions in sugar production-the country's
principal crop-and the government's heavy deficit spending, Mauritian
external debt has more than doubled since 1980 and now exceeds $500 million.
Meanwhile, an IMF team will visit Mauritius next month to review compli-
ance with terms of a pending standby agreement, the country's fourth. Port
Louis has already announced reduced subsidies, higher taxes, and a freeze on
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
25X1
25X1
25X1
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
public-sector hiring. to buoy its prospects for continued IMF assistance.
Domestic opposition to the austerity measures, however, has caused the
government to look to Western nations for additional credits.
Global and Regional Developments
ossible.Halt in USSR The Soviets seem prepared to forgo hard currency earnings rather than accede
Nickel Sales to the to Washington's demand for certifying that the nickel they sell in the United 25X1 4
United States States is of non-Cuban origin. The US ban on Soviet nickel imports became ef-
fective this week and only Soviet nickel certified to be of non-Cuban origin will 25X1
be allowed into the United States. Although certification talks may still 25X1
continue
the USSR will not agree to an inter overnmental
certification agreement with the United States. _the Soviets would 25X1
view such an agreement as an attempt to drive a wedge between the USSR
and Cuba. the Soviets might agree to 25X1
certify that their exports do not include Cuban nickel if an agreement could be
concluded through strictly commercial channels.F__~ 25X1
The loss of US nickel sales-roughly $20 million annually-would not be
burdensome to Moscow. Japan, however, has already restricted trade in nickel
with Cuba, and it may consider curtailing such trade with the USSR. If Japan,
West Germany, and other major Western importers take action against
purchases of Soviet nickel, Soviet hard currency losses could rise to $100
million a year
Pak"' tan-USSR Pakistan's Finance Minister, who returned on 20 December from a visit to the
onomic Agreements USSR, announced that agreement has been reached with the Soviets on a
number of proposals for economic cooperation. The accords reportedly include
concessionary financing by the USSR for the construction of a power station
and the sale of two drilling rigs in exchange for Pakistani goods. The
Pakistanis indicate that the value of the new agreements may reach $400
million.
Both countries apparently have concluded that economic agreements are a
noncontentious means of maintaining lines of communication. Islamabad can
use the economic aid, and probably hopes improved ties will reduce the
opportunity for Moscow to justify a more aggressive policy toward Pakistan.
With the Soviet-financed steel mill nearing completion, the USSR has been
looking. for a new means of maintaining an economic role in Pakistan.
Although the Soviets probably hope that a continuing dialogue might encour-
age Islamabad to soften its stand on Afghanistan and offset US influence in
Pakistan, President Zia will remain unwilling to compromise his foreign policy.
. positions.
7 Secret
23 December 1983
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
'C Signs Accord With The European Community on 17 December signed a five-year economic
c -- -"-" -a' - ---? --?-? ? -wuaa -- lla(.1v11O L11a L jJI UIIIULGJ L. A..
investment in and trade with these South American countries. EC imports
from Andean Pact members in 1982 topped $4.5 billion-Venezuelan oil
accounted for one-half-while exports reached $4.3 billion. The five Andean-
countries-Bolivia; Colombia, Ecuador, Peru, and- Venezuela-will receive a
total of $450,000 next year for trade promotion in the Community, and both
blocs.will extend most-favored-nation status to the other's exports.-The
agreement calls for increased joint ventures between EC and'Andean enter-
prises.
The EC Commission is likely to tout the agreement as proof that two years of
strained relations with Latin American countries has ended. The negotiations
with the Andean Pact, which started in 1979, were suspended in 1982
following EC actions in support of the United Kingdom during the Falklands
crisis. The agreement with the Andean Pact probably will serve as a model for
future EC accords with Central American states.
National Developments
Developed Countries
sraeli Wage Update The Manufacturers' Association has agreed to pay the large advance on the 1
February cost-of-living adjustment demanded by the Histadrut, the large
union organization. According to the US Embassy, December salaries of all
workers will be increased by 17.9 percent. The Manufacturers' Association-
whose members have been hurt by rising wage costs and the overvalued
shekel-originally had refused to pay an advance, ,but threats "of labor unrest
probably caused them to capitulate.
Prices rose 15.2 percent in November-after a record 21.1-percent increase in
October-bringing inflation during the first 11 months of the year to an
annual rate of 184 percent. Israeli officials have already increased prices, on
government-controlled commodities by 12 to 30 percent this month. We
believe prices could increase enough in December to push the inflation rate for
C ntroversial French The decision by the government to permit Peugeot to lay off 2,000 workers has
bor Cutback .provoked a strike that could weaken the government's resolve to pursue
austerity. The government and the company agreed that the firm can lay off
the workers as part. of Peugeot's plan for an eventual reduction of 7,500.
Peugeot agreed to pay a $2,500 retraining allowance for each worker laid off.
The Communist-led General Confederation of Labor initially accepted the
agreement but reversed itself when spontaneous demonstrations broke out.
Workers at the affected plant now have been on strike for two weeks. Their
Secret 8
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
West German Wage
egotiations
Turkey's New Prime
ester Announces
rogram
Peugeot plants.
Socialist-leaning union and the Confederation have attacked the government's
decision and vow to continue the strike while threatening to extend it to other
would endanger future adjustments throughout industry.
This is the first test of the government's willingness to accept the large
reductions in employment that are required to restructure industry and
accommodate technical change. Similar decisions will soon be required in
other industries, including coal, steel, textiles, shipbuilding, and heavy chemi-
cals. Backing off from the Peugeot decision in the face of labor opposition
adopted the 35-hour week as a collective bargaining goal.
The spring 1984 wage negotiations have begun with labor leaders and
management further apart than usual. The first round of talks focused on
reductions in the 40-hour workweek rather than on wage increases. The
powerful Metalworkers Union, by far the country's largest with 2.6 million
members, is seeking a 35-hour week and pay increases to maintain real
incomes. Most unions usually follow the metalworkers; the West German
Trade Union Federation, which represents more than one-third of West
German workers, including the Metalworkers and 16 other unions, has
and early retirement benefits.F--]
We believe that the metalworkers will back off at least for this year from the
35-hour week in the face of firm employer resistance. The union does not have
overwhelming support on this issue from its membership, and record unem-
ployment-expected to reach 2.35 million this winter-has weakened labor's
bargaining position. Employers assert that current profits will not support the
added cost-of a shorter week, that it would weaken West German international
competitiveness, and that with vacations, holidays, and other breaks, West
German workers already have the shortest working hours in the industrialized
countries. Employers are willing, however, to negotiate flexible working hours
Turkish Prime Minister Turgut Ozal presented his government's program to
the Grand National Assembly on 19 December. Ozal's goals include:
? Controlling inflation-Ozal's top priority because he believes economic
growth and achieving a more equitable distribution of income are impossible
unless inflation is curtailed.
? Increasing exports to help generate long-term development.
? Limiting state involvement in industry and trade-a far cry from the large
role now played by Turkey's State Economic Enterprises.
In support of Ozal's program, the Central Bank moved quickly to raise interest
rates on one-year time deposits and reduce taxes on bank loans-from 15
percent to 3 percent.FI
An ardent monetarist, Ozal plans to keep a tight leash on the growth of the
money supply and has criticized the IMF for not being tough enough on
Ankara in the past. He has blamed the spurt in Turkey's inflation-currently
Secret
23 December 1983
25X11
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
35 percent-on attempts by the military government to bail out failing
.businesses. To implement his policies, Ozal has reorganized the Turkish
bureaucracy, reducing the number of ministries from 20 to 14. The effect is to
place economic policy under the direction of his close advisers and bypass the
Ministry of Finance, regarded by Ozal as a stronghold of traditional, state-di-
rected economic policies.
Turkey remains a poor country by OECD standards, with deep-seated .
economic problems, but we are optimistic about its future. We believe Ozal is
the best possible person for the job and that his policies will keep the economic
recovery on track. Although Turkey will continue to be plagued by high
unemployment and need foreign assistance, we see little chance of a return to
the economic crisis of the late 1970s while Ozal is in charge.
Less Developed Countries
Libyan Concern Over Libya, fearing that the United States is about to impose more stringent trade
U,S' Sanctions sanctions against it
is searching for other suppliers for a multibillion-dollar
,
water relocation project-a showpiece of its current development plan. The
project is designed to move 2 million cubic meters of water daily over 1,900 ki-
lometers from southern water wells to urban areas along the coast. The
government expects the pipeline to provide badly needed water for agriculture,
industry, and human consumption by 1989.
Libyan leader Qadhafi originally may have wanted to secure the participation
of US businesses in the multibillion-dollar project,'hoping to encourage the
United States to ease trade sanctions against Libya. Concern that the United
States may now tighten some or all of the sanctions probably has prompted the
Libyans to take the precaution of finding alternative suppliers in case they are
needed. The search would also serve to threaten US companies involved with
?possible loss of the highly profitable contracts. Failure to use US goods-for
whatever reason-would cause delays in the project, despite the terms of the
contract While such delays probably would be a
blow to Qadhafi, who has promoted the project with much fanfare, they are
unlikely to be a major obstacle to the project's completion or to cause a
reaction among the Libyan public.
Secret
23 December 1983
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Proposed Water Pipeline
Mediterranean Sea
L i b y a
Tiizirbu'
well field
Egypt
Secret
23 December 1983
Al Kufrah
well field
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Insurgent Damage to Direct costs of insurgent activity to the Salvadoran economy in 1983 rose to
Salvadoran Economy about $230 million, 8 percent of annual output, according to US Embassy
in 193' estimates. This total is about 50 percent higher than the average of the
arter Bauxite Deals structure are forcing Jamaica to seek barter trade deals. Kingston recently
FY 1983 was slightly more than $350 million.
preceding four years and includes lost agricultural production ($90 million),
damage to public works ($22 million), and greatly increased defense spending
($102 million). We believe indirect costs such as capital flight, loss of foreign
investment and credits, and unemployment add heavily to the insurgency's
direct costs to the economy. US military and economic aid to Salvador in US
maica Pursues Slow recovery of world aluminum demand and Kingston's uncompetitive price
signed an agreement to provide the US strategic stockpile with 400,000 tons of
bauxite for $13.6 million worth of dairy products. It also agreed to barter an
additional 600,000 tons of bauxite later. Other barter efforts include:
? Negotiations with Yugoslavia for 200,000 tons of bauxite and 170,000 tons
of alumina annually for five years, partly in exchange for prefabricated
houses.
? Preliminary contacts with a Japanese trading company to exchange about
200,000 tons of alumina for Japanese agricultural commodities and
equipment.
? Proposals to the Arab world to swap alumina and bauxite for oil.
Even if these deals are completed, we believe Jamaica will need to take
additional action. Negotiations are under way between the Jamaican Govern-
ment and aluminum companies to replace the production levy that expires 31
December. Although the levy provides crucial revenues for the government, we
believe Kingston will have-to reduce the levy to make Jamaican bauxite prices
competitive.
ecord Thai Trade Thailand's 1983 trade deficit will reach $3.1 billion-nearly double last year's
$1.6 billion-according to Bangkok Bank, the largest commercial bank in
Southeast Asia. Export earnings have suffered because of continued low prices
for rice, sugar, and tin; exports of manufactures are down substantially
because of reduced demand in industrial countries. A nearly 15-percent
increase in imports, stimulated by a domestic investment boom, compounds the.
payments problems. Although Bangkok so far has had little trouble financing
the ballooning trade deficit, the Bank of Thailand-the Central Bank-is
concerned about another poor trade performance in 1984. Import financing
has been tightened and if exports do not pick up early next year,.we expect the
Central Bank to raise interest rates and recommend that the government
impose import controls. Although Bank of Thailand Governor Nukun denies
it, a devaluation-which would be politically controversial-is also under
consideration, according to the financial press.
Secret
23 December 1983
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Prospects for Soviet Commercial
Exploitation of Space Systems
and Related Services
Moscow has indicated that it intends to compete for
a share of the growing international market for
space systems and related services and is increasing
its capability to do so. It is concentrating its
marketing efforts on the launching of satellites and
the sale of communications services, where its goals
are to supplement its hard currency earnings, gain
access to customer-supplied technology, open up
markets for other products, and increase Soviet
prestige.
Moscow has strong incentives to make commercial
use of its space capabilities. Although there is great
uncertainty about the eventual size of the market
for space-related services and products, Western
space and industry analysts estimate that the man-
ufacturing and launching of communications satel-
lites alone will yield billions of dollars of revenues a
year by the late 1980s. Capturing a share of this
market would provide the USSR with an important
supplement to its hard currency earnings. Moscow
would view participation in the market for supply-
ing launch services for Western communications
satellites as an opportunity to acquire advanced
technology and would probably perceive activity in
this high-technology export trade as a foot in the
door for other Soviet products. In addition, the
Soviets would view commercial exploitation of
space as a means of increasing their national
prestige.
Entry into the market, however, will require
changes in Soviet operating procedures. Customers
will need to know satellite capabilities and launch
vehicle reliability and will require access to satellite
assembly and checkout facilities, launchsites, and
support facilities. Even when involved in joint space
ventures, the Soviets have often refused to provide
information requested by the other participating
country. They have never released data on the
reliability of their launch vehicles or their com-
mand and control systems and have generally not
Soviet Publicity for Satellite Launch Service
LICENSINTORG
Panorama
No. 5 ? 1982
A quarterly publication
of V/O LICENSINTORG, Moscow, USSR.
Appears in English, Russian, Finnish, French, German and
Spanish.
All articles and illustrations in this issue may be freely repro-
duced. The Editors would appreciate a copy.
Cover Picture:
The achievements
of Soviet
scientists
and designers
in space research
are universally
known.
Licenstransmash
is ready to assist
foreign firms
in launching
their artificial
earth satellites
by Soviet
carrier rockets.
From a Soviet foreign trade magazine disseminated in Western Europe
and the United States.
Secret
DI IEEW 83-050
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Payload Capabilities of Selected US, French,
and Soviet Launch Vehicles
Payload (kg)
(Low Earth orbit)
Payload (kg)
(Geostationary orbit)
Space Atlas/
Transportation Delta 2914 Centaur
System
29,500 2,000 5,135
maintained separate civilian and military space
facilities or allowed foreign access to military space
complexes.
Soviet Intentions and Capabilities
The Soviets have indicated they intend to market
space-based services and are increasing their capa-
bilities to do so. Moscow's marketing efforts and its
prospects for success vary greatly with the type of
space-related service or product.
Secret
23 December 1983
(SL-12)
Proton
(SL-13)
Proton
Launch Services. The US Government virtually
monopolizes the current commercial satellite
launch market, using the Atlas-Centaur and the
Delta expendable launch vehicles and the reusable
shuttle system. The Atlas-Centaur and Delta sys-
tems, however, are to be phased out by the US
Government by 1985, and US space analysts esti-
mate that the increasing demand for commercial
and government launch services will exceed what
the shuttle can provide during the period 1986-94.
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
In 1983 the US Government decided to allow
private US firms to continue producing current
expendable launchers and to rent US launchpads.
These firms, however, will need to prove their
capability to launch and position satellites before
many customers will be willing to book launches
because of launch failure. They apparently have
prepared a handbook of specifications for potential
users of the Proton.
The shuttle's main Western competitor is the
French Ariane'booster sponsored by the European
Space Agency (ESA). Two of the seven Arianes
launched thus far, however, have failed to reach
orbit. Only in June 1983 did the Ariane deliver its
first commercial satellite into geosynchronous or-
bit, and the first fully successful commercial launch
did not occur until October 1983
The Soviets have said they will enter the launch
service market with the SL- 12/13 Proton, a booster
that has maintained about a 90-percent reliability
rate over the past 10 years and that has a payload
capacity about 'b5 percent as large as that of the
US shuttle.
The Soviets have tripled the production capability
of the Proton manufacturing plant in Moscow,
doubled the number of Proton launchsites from two
to four, and tripled the assembly and checkout
capability at the launch center. This increase in
SL-12/13 production and launch capability ex-
ceeds what we estimate the Soviets will need for
their own military and scientific purposes. We
believe they will have a sufficient number of Proton
boosters-between four and six annually-to use
for commercial launches and could probably main-
tain a reliable launch schedule.
According to Western press reports, Moscow has
already succeeded in having the Proton included on
a list of candidate launch vehicles' for the Interna-
tional Maritime Satellite Organization
(INMARSAT) and is seeking to underprice West-
ern competitors. The Soviets offered to supply
launch vehicles for INMARSAT satellites during
the period 1988-89 for $24 million per launch, and
are offering to commit themselves to a replacement
mission at one-half that fee if a satellite is lost
The Soviets are developing a heavy-lift launch
vehicle and a shuttle orbiter that will greatly
enhance their ability to compete with the United 25X1
States, the ESA, and Japan. We believe this system
will become fully operational during the period
1990-91. Successful development of a Soviet space
tug with capabilities to retrieve satellites for repair
and refurbishing would increase the attractiveness
of a Soviet contract
Leasing and Sale of Communications Satellites.
The Soviet-sponsored INTERSPUTNIK organiza- 25X1
tion has attempted to compete with the US-
sponsored International Telecommunications Orga-
nization (INTELSAT) in marketing international
communications services in the Third World since
the late 1970s. INTERSPUTNIK, which has pri-
marily served the needs of Soviet Bloc members,
remains a much smaller organization than 25X1
INTELSAT, which currently provides services to
more than 120 countries. INTERSPUTNIK has,
however, succeeded in attracting new users among
pro-Soviet Third World countries, including Alge-
ria, Angola, Iraq, Libya, and Nicaragua and has
been willing to offer financial and other incentives
to attract new customers for its international serv-
ices. We believe its fees for domestic services are
below those charged by INTELSAT for similar
services.
Soviet requests to the International Frequency
Registration Board (IFRB) for satellite positions 25X1
and radiofrequencies, plus other open-source data,
suggest that Moscow is planning to have space 25X1
platforms in geostationary positions with several
communications systems on board using different
frequency ranges. Some of these systems will be
dedicated solely to military subscribers and others
to civil uses. These systems will enhance the Sovi-
ets' ability to provide commercial services to a
variety of non-Soviet civil users if they choose to do
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
='z STATSI9NAR-4
(Gonzont)r;
Czechoslovakia
German
Democratic,
Republic
Algeria
Cuba
Romania
Hungary
Bulgaria
This 1983 Novosti Press Agency map shows the 14 INTERSPUTNIK
members, some of which do not have operating ground stations,
and one nonmember user, Algeria. In addition, other Third World
nations are planning to use the system in the future; some have
ground stations under construction.
Afghanistan'-
Mongolia
Laos
Vietnam
Syria
People's
Democratic
Republic of Yemen
Secret
23 December 1983
INTERSPUTNIK INTERNATIONAL.
COMMUNICATIONS SYSTEM
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Although there is no evidence of Soviet intentions
to manufacture communications satellites for for-
eign countries or firms, the USSR is capable of
doing so. To succeed in such an effort, however, the
Soviets would have to either increase the service
life of their satellites or price them low enough to
offset the increased replacement costs that the
customer would incur; current Soviet communica-
tions satellites have a shorter lifespan than Western
equipment. We believe the Soviets now have pro-
grams under way to produce communications satel-
lites with longer service lives.
Remote Sensing. Both industrial and developing
countries are looking to data collected by remote-
sensing satellites to locate mineral and energy
resources, to identify potential problems in such
areas as agriculture and forestry management, for
land-use studies, and for cartographic work. The
export of remote-sensing data or associated equip-
ment and services is currently not a financially
profitable business. Although the market for the
data is potentially huge and is growing because of
an international awareness of the need to better
manage resources, the only profitable market may
be for computer-processed data, an area in which
the Soviet Union is not expected to become compet-
itive because of insufficient software and processing
Thus far the US Landsat program has provided all
of the remote-sensing data to non-Communist cus-
tomers. The US commitment to provide the data to
both domestic and foreign users, however, does not
extend beyond the mid-1980s. Moreover, competi-
tion is expected in the later 1980s from the French
Spot program, a Japanese system, and possibly
from new US commercial systems
In 1977 the Soviet Union publicly offered to pro-
vide photographic services and remote-sensing data
from outer space to other countries. Although the
Soviets have given no subsequent public indication
that they intend to develop a market for such data,
Moscow may be waiting until the end of this
decade, when we expect it will have an operational
multispectral scanning system competitive with a
US and projected French system. The Soviet policy
of requiring prior consent from the target country
before disseminating data with potential military or
economic significance to third parties will probably
aid in marketing-remote-sensing data to Third
World countries
Materials Processing. Experiments show that the
zero gravity of the space environment facilitates the
manufacture of products that are difficult or im-
possible to produce on Earth. The products most
likely to be produced in space are pharmaceuticals,
electronic devices, optical equipment, and metal 25X1
alloys. Until permanent manufacturing facilities
are established in space that can produce materials
of sufficient quantity, the potential market cannot
be estimated with confidence.
The USSR has conducted the most extensive ex-
periments in space manufacturing on board the
Salyut 6 and 7 space stations, and the Soviet press
has claimed that such experiments will lead to the
creation of space-based manufacturing facilities to
produce pharmaceuticals, semiconductors, alloys,
and special glasses. Officials associated with the
Soviet space program have indicated that Cosmos
1443, which docked to Salyut 7 in early 1983, is a
prototype module of a future multimodular space
station that will be used for a variety of missions,
including materials processing. Although most of 25X1
the materials that the Soviets are experimenting
with have military applications, the Soviets evident-
ly plan to produce for their civilian economy and
could produce for export as well.
Soviet Prospects and Implications for US Interests
The Soviets probably will enjoy their greatest 25X1
success during the next 10 years in the launch
services market. Although unlikely to lure sched-
uled customers away from the US shuttle in the
1980s, the Soviets, by virtue of their long experi-
ence with expendable launch vehicles, are in a good
position to compete with ESA and private US firms
for a portion of the international launch services
market that the US shuttle cannot accommodate.
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Success in-the expendable launcher field could pave
the way for broader Soviet efforts to make com-
mercial use of space in the 1990s, when the
USSR's owri space shuttle and its other space
programs with extensive economic applications ma-
ture.
We also expect the Soviets to step up efforts to
lease communications services both through the
INTERSPUTNIK organization and to individual
nonmember countries. Moscow has communica-
tions circuits available now for lease and apparently
plans such use for some of its future communica-
tions satellites. Largely because Soviet satellites
currently have shorter service lives and use less
.advanced technology than Western equipment,
Moscow is unlikely to try to compete with the West
in selling communications satellites or-high-tech-
nology satellite communications applications.
At present, the Soviet Union is not competitive in
supplying civil remote-sensing data, and we do not
expect it to be so in the near term. Moscow,
however, may view its remote-sensing data as a
political tool or a means of enhancing the attrac-
tiveness of other Soviet products and supply re-
mote-sensing data to nations in the Third World
where it has political, strategic, or economic inter-
ests. Similarly, the Soviets might be willing to
provide at least some materials processed in space
to their clients. in "package deals" that would be
contingent upon the purchase of other Soviet equip-
ment
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
25X1
25X1
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Pakistan: Strong Economy
Dampens Unrest
The relative prosperity of Pakistan's economy has
made it difficult for antigovernment forces to gain
broader popular support. Civil disturbances since
August have had only a small impact on Pakistan's
economic activity and have been confined primarily
to Sind Province. Longer term economic prospects,
however, are likely to be affected by a shaken
confidence among private and foriegn investors in
Pakistan's domestic stability.
Economic Performance Under Zia
The Pakistani economy recorded its sixth consecu-
tive year of rapid growth in FY 1983-1 July 1982
to 30 June 1983-increasing by almost 6 percent,
according to Pakistani statistics and US Embassy
estimates. Agriculture, which remains the corner-
stone of the economy, continued to benefit from
favorable weather and increases in government
procurement prices. Pakistan now is self-sufficient
in all major food categories except edible oil.F_
Industrial production last year grew by about 8
percent, according to government statistics, in large
part because of new public-sector capacity in the
fertilizer and steel sectors. President Zia's active
encouragement of private-sector investment com-
bined with government incentives such as custom
duty exemptions, export rebates, and improved
availability of financing also contributed to the
growth of small-scale manufacturing firms. Al-
though industrial output still represents less than
20 percent of GNP, the sector is important in
providing new jobs for a rapidly growing population
and in expanding exports of nontraditional manu-
factured goods
In our view, Pakistan's most impressive economic
achievement over the past year has been the im-
provement in its foreign payments. The current
account deficit declined to the lowest level since
Zia came to power, falling from $1.6 billion in FY
1982 to $430 million last year. The improvement
resulted mainly from the continuing growth of
worker remittances, which reached $2.9.billion.
Lower oil prices and import substitution resulting
from increased domestic production reduced the
import bill. A 25-percent depreciation of the rupee
since early 1982 has enabled Pakistan to expand 25X1
exports of nontraditional manufactured goods, es-
pecially synthetic textiles, garments, and tents and
tarpaulins. Pakistan ended the fiscal year with
almost $2 billion in foreign exchange reserves, the
equivalent of about four months of imports.
Consequences of Civil Disturbances
The antigovernment campaign that began in Au-
gust thus far has been confined primarily to Sind
Province and has had only a small impact on the
economy. The economic damage from the civil 25X1
disobedience campaign has been confined to rural
areas and directed primarily toward symbols of
government authority-police stations, banks, and
railway stations-rather than directly toward eco-
nomic facilities.
Nonetheless, the transportation system and trading
community have been affected adversely, according
to reporting from the Consulate General in
Karachi. Much of the economic damage that has
occurred has been to railway rolling stock and
facilities; press reports suggest that this damage
could exceed $20 million. Consulate reporting indi-
cates that disruptions of road and rail transporta-
tion have led to spot shortages and higher prices,
particularly for food, throughout Sind Province.
Imported goods at the port of Karachi have piled
up and fuel shipments to rural areas have been
Secret
DI IEEW 83-050
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
-630
-1,126
-1,145
-991
-1,610
-433
-1,464
-2,170
-2,516
-2,765
-3,450
-2,904
Exports (f.o.b.)
1,287
1,646
2,341
2,798
2,319
2,628
Imports (f.o.b.)
2,751
3,816
4,857
5,563
5,769
5,532
Services
-392
-452
-524
-459
-548
-592
399
510
678
945
935
962
791
962
1,202
1,404
1,483
1,554
212
276
290
357
416
424
1,226
1,496
1,895
2,233
2,388
3,063
1,166
1,395
1,748
2,095
2,224
2,886
hampered by the transportation problems.
ment of goods within Sind Province declined by as
much as 30 percent during the peak of the disturb-
to Karachi and Hyderabad. Early in the disturb-
ances, several trucks carrying crude oil from a
small oilfield at Badin to the refinery in Karachi
were destroyed.
ances.
Political turmoil also has affected the agricultural
sector in Sind, according to the Consulate General.
Sind Province normally accounts for about 20
percent of Pakistan's agricultural output. The ab-
sence of workers and particularly of landlords who
traditionally are responsible for the marketing of
crops delayed the cotton harvest. Disruptions in
transportation have delayed the movement of crops
to market as well as distribution of fertilizer to
farmers. The flooding of fields caused by intention-
al breaching of irrigation canals has damaged some
crops.
Although the dissidents have threatened broader
economic disruptions, thus far such attempts have
been scattered and not serious. In one instance, the
US Consulate reported that radical students tried
unsuccessfully to cut the natural gas pipeline run-
ning from the Sui gasfields in eastern Baluchistan
We believe the civil disobedience campaign has not
solicited broader popular support and not spread
from the Sind in large part because the bulk of the
population has enjoyed the benefits of economic
prosperity. Zia's opposition cannot guarantee either
that stability and relative prosperity would contin-
ue or that economic welfare would be improved
under its leadership. Although inflation has been a
concern voiced by some protesters and many
Pakistanis dislike the increases in fuel prices and
reduced subsidies for food and fertilizers, the infla-
tion issue has failed to generate more widespread
discontent. The government has kept the rise in the
consumer price index to an average of less.than 9
percent annually for the past six year
Secret
23 December 1983
25X1
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Peshawar
I-Y
Feder&Iy
Administbred)
Substantial violence
Large protest
Boundary representation is
not necessarily authoritative.
China
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
The negative political impact of higher prices for
the most part has been offset by improvements in
income brought about by domestic economic
growth, remittances, foreign aid, and good luck:
? Farmers have enjoyed rising incomes because of
good weather and higher government procure-
ment prices for their crops.
? We estimate about 1.5 million Pakistani workers
have found relatively high paying jobs in the
Middle East, which provide direct income for
more than 10 percent of all Pakistani households.
? Laborers remaining in Pakistan have benefited
from the reduced competition caused by the
outflow of workers from the domestic market as
well as the new jobs created by the growing
economy.
? Bazaar merchants, traders, and owners of cottage
industries and service establishments, who are
key supporters of Zia's regime, have seen their
fortunes improved by the growing purchasing
power of Pakistani families.
Optimistic Short-Term Outlook
Several signs point to a strong economic perform-
ance for the current fiscal year ending next June:
? The government is predicting about 6-percent
growth in rice production and another good wheat
crop following a record harvest last spring.
? We believe there will- be continuing growth in the
steel, fertilizer, and nontraditional manufacturing
industries.
? Preliminary reports from the Embassy show that
worker remittances are still growing. Some West-
ern economists and energy experts believe the
economic slump in the Middle East, which could
retard the growth of remittances, has bottomed
out or will do so by the end of 1984.
Secret
23 December 1983
? We expect the government will reach its export
growth target of about 12 percent. First-quarter
exports were up by more than 30 percent because
of an increase in exports of rice and manufac-
tured goods. A drawdown in cotton stocks and
higher world prices will partially offset a poor
crop this year.
? US Embassy reporting indicates import growth
will again be sluggish because of the soft world oil
market and continued domestic substitution of
previously imported goods such as wheat and
fertilizer.
As a result of these favorable trends, we believe:
? The economy will grow by 5 to 6 percent.
? The current account deficit will be only slightly
higher than last year's.
? Foreign exchange reserves will reach $2.5 billion
by the end of the fiscal year.
Gathering Clouds
Despite Pakistan's generally bright outlook, a num-
ber of economic factors could impinge on future
economic performance and pose some problems for
the Zia government. Inflationary pressures are
likely to be of most serious concern. According to
the government consumer price index, prices rose at
an annual rate of 14.4 percent during the first
quarter of FY 1984. While Finance Ministry offi-
cials have told US Embassy officials that they hope
to hold price increases below 10 percent for the
fiscal year, we are skeptical that they will succeed:
? The US Consulate General in Karachi reports
that food prices have been increasing, especially
in the Sind, because of hoarding and distribution
problems associated with the civil disobedience
and a government increase in the price of cooking
oil, a basic staple in the diet.
? Monetary expansion resulting from higher do-
mestic borrowing by the government for budget
22
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Pakistan: Economic Indicators'
Note scale change
Real GDP Growth
Percent
Trade Balance
Billion US $
-1
"I I LJI l
-3
I
Worker Remittances
Billion US $
Consumer Price Growth
Percent
M
Foreign Exchange Reserves
Billion US $
Current Account Balances
Billion US $
0
-0.2
-0.4
-0.6
'
t
flR
u
E
1980 81 82 83 84 -1.8 1980 81 82 83 84b
aProjection based on first quarter reporting and government plans.
'Data for fiscal year ending 30 June.
support and commodity subsidies will add to the
inflationary !.pressures.
Although :agricultural output will increase this
year, this will occur despite a reduced cotton crop.
Officials in the industry believe the cotton harvest
will be 30 to 40 percent less than last year's record
crop because of late rains and pest infestation. The
flooding of some agricultural plots and disruptions
in fertilizer distribution could also reduce yields in
some areas over the next year.
Labor is becoming increasingly restive over. the
issue of rising prices and the poor cotton crop could
exacerbate the problem. Textile mill operators have
already warned the government that, if they are
forced to close mills, there will be increased unem-
ployment that will have a multiplier effect on the
rest of the economy. According to the Consulate in
Karachi, the cotton industry accounts for 20 per-
cent of Pakistan's industrial output and an equal
percentage of the industrial work force.
Over the Horizon
While the civil disobedience program has not had a
major short-term impact on the economy, future
economic growth is likely to suffer. The current
five-year plan assumes that a revival in the private
sector will contribute a larger share of investment
for industrial development. We believe that fresh
doubts about Pakistan's long-term stability are
inhibiting both foreign and domestic investment in
private industry. Without growth in private invest-
ment, Pakistan will have to look for additional
foreign aid donations and labor migration to meet
its development plans and provide jobs for a rapidly
growing work force.
Of more immediate concern would be a renewed
outbreak of violence in Sind. A new round of
antigovernment activity would lead to more inter-
ruptions on the vital road and rail links between
Karachi and the Punjab and more sabotage direct-
ed toward economic targets. We believe sustained
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
economic disruptions would cause politically signif-
icant shortages of consumer goods and materials
for industries. Such economic warfare would seri-
ously undercut Zia's image as a leader capable of
maintaining order and undermine the military's
confidence in his ability to lead Pakistan.
.Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Suriname: Dutch Aid Cutoff Initiates
Economic Tailspin
Despite cooler relations with Havana, Suriname
has failed to secure new Western aid to replace that
suspended by the Dutch in December 1982. To
compensate for the sizable foreign exchange loss,
the military regime of Army Commander Desire
Bouterse has steadily drained the country's once
ample reserves to cushion the import decline. Fac-
ing a prolonged aid embargo, however, Paramaribo
probably is considering the imposition of austerity
measures for early next year. Despite some hopes
for increased bauxite-related exports next year,
further cuts in imports will be necessary to avoid
depleting Suriname's foreign exchange holdings,
thereby dimming the economic outlook at least
through 1984.
Coping With an Empty Till
Since the suspension in December 1982 of critical
Western aid-almost all Dutch-in response to the
execution of 15 prominent opposition leaders, Para-
maribo has launched an unsuccessful search for
replacement aid
Cuba and Suriname concluded several agreements
encompassing economic cooperation, technical as-
sistance, and military training, but these involved
little, if any, financial support. Paramaribo appar-
ently pulled back from the accords to placate
neighboring Brazil and because of the high local
costs and loss of administrative control involved in
implementing the Cuban programs.
Brazil told the Bouterse regime in April 1983 to
reduce the Cuban influence or risk possible Brazil-
ian military reaction. Brasilia was unwilling to
offer significant cash aid but did conclude a $1-5
million aid agreement for military equipment
Suriname: Balance of Payments Million US $
Current account
44
16
-25
-57
-140
Trade balance
74
61
-38
- 36
- 30
Exports (f.o.b.)
444
515
474
429
370
Imports (f.o.b.)
370
454
512
465
400
Net services,
private and official
transfers
-30
-45
13
-21
-110
Grants b
81
74
96
90
0
Capital account
-6
3
43
26
20
Change in reserves
38
19
18
-31
-120
a Estimated.
b The majority of grants are from the Netherlands.
25X1
International financial institutions including the
IMF, World Bank, and Inter-American Develop- 25X1
ment Bank have been approached by Suriname-
with Brazilian guidance-but new aid has not
materialized. Other responses have been equally
disappointing:
? A small US aid program remains suspended.
? International bankers, put off by Suriname's lack
of financial expertise and inability or unwilling-
ness to supply necessary financial data, have been
unresponsive.
? A Libyan $80 million loan offer apparently never
panned out.
Although Havana appears to have backed Para-
maribo's cultivation of Western donors for the hard
currency support Cuba could not provide, Bouterse 25X1
was concerned that Havana might try to destabilize
Secret
DI IEEW 83-050
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
his regime in favor of a more pro-Cuban govern-
ment. We believe the power struggle within the
regime in Grenada, resulting in the assassination of
Prime Minister Bishop, increased Bouterse's appre-
hension over the consequence of close ties to Cuba
and sparked Suriname's move in October to reduce
its relations with Havana. Bouterse ordered Ha-
vana to recall its Ambassador and cut the size of its
Embassy staff, suspended all bilateral aid agree-
ments, and summoned all Surinamese students to
return from Cuba; Havana responded by withdraw-
ing all of its diplomatic personnel.
Meanwhile, political infighting between Suri-
name's radical pro-Cuban party and the more
moderate socialist party has precluded the formula-
tion of comprehensive economic policies. The re-
gime has taken stopgap measures to reduce imports
and stem capital flight that include the slowed
processing of import licenses, a loosely enforced
ban on consumer imports, and restrictions on cur-
rency convertibility. These measures, however,
failed to stem the fall in reserves. According to data
provided to the IMF, nongold foreign exchange
reserves dwindled to $75 million by October, about
two months' import cover, down from $176 million
at the end of 1982.
Paramaribo tried to keep on track the development
projects previously funded by the Dutch despite the
loss of some $90 million in Dutch aid originally
anticipated for 1983. The government has financed
the budget deficit, expected to reach 17.5 percent
of GDP this year, by borrowing from the central
bank, pressuring domestic banks for concessional
loans and businesses for contributions, as well as by
drawing down foreign reserves.
Despite the. government's attempt to maintain de-
velopment projects, the domestic economy remains
depressed and tax revenues have dwindled. Private
investment has declined because of political uncer-
tainty, growing and haphazard government regula-
tion of imports;' prices, and profits, and the regime's
heavyhanded requests for financial contributions.
Bankruptcies have risen in recent months in re-
sponse to the depressed local market, import curbs,
Secret
23 December 1983
and new laws that prevent worker layoffs. Produc-
tion of bauxite, alumina, and aluminum-which
together contribute almost 20 percent of GDP-
has nosedived, mainly because of soft world market
conditions. Output in the import-dependent agri-
cultural and manufacturing sectors has stagnated.
Even with protective employment laws, rising un-
employment-probably now exceeding 20 per-
cent-has prompted Suriname to expel at least
2,000 Guyanese workers this year.
We believe mounting foreign financial pressure will
force the regime to take further action soon. At the
current rate of spending, foreign exchange reserves
will be depleted early next year. The IMF and
other international lenders are likely to keep their
distance until the regime demonstrates its resolve to
undertake and maintain tight austerity measures.
Paramaribo may temporize, however, in hopes of a
renewal of Dutch funding-over half of the $1.5
billion "golden handshake" that accompanied Suri-
name's independence in 1975 remains to be drawn.
The regime has yet to make any headway, however,
in meeting Dutch demands for an impartial investi-
gation into the events surrounding the December
1982 massacre, increased protection of human
rights, and the restoration of constitutional order
and democracy. Moreover, the regime's attacks on
Dutch "colonialism" are likely to increase opposi-
tion within the Dutch Government on aid to Suri-
name, especially given the Netherlands' domestic
budgetary problems
We believe the Surinamese economy is unlikely to
recover in 1984, even with the expected improve-
ment in bauxite-sector output stemming from the
world economic recovery and local production in-
centives contained in a new bauxite levy agreement.
Faced with dim prospects for renewed aid, the
regime appears to be considering the imposition of
austerity measures that could further dampen eco-
nomic activity. Paramaribo has'appointed a com-
mission to consider new import controls and the
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
government-controlled press is calling for economic
sacrifices. The uneven application of import and
currency controls-as in the past-could force
producers to bear the brunt of possible import
shortages. Paramaribo already has increased in-
come and sales taxes effective in January and is
likely to toy with additional tax measures and
government spending cuts.
Domestic frustration over economic uncertainty,
government harassment, and rising unemployment
probably could be vented in part by another tide of
emigration. Criticism to Bouterse's repressive rule,
however, would intensify should the economy dete-
riorate rapidly.
27 Secret
23 December 1983
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
The High-Frequency World Administrative
Radio Conference
The International Telecommunication Union (ITU)
on 10 January'will convene-after a 25-year hia-
tus-a planning conference in Geneva on the use of
the high-frequency broadcasting spectrum. We be-
lieve the Conference is likely to refer several alter-
native planning methods to a working group, which
will report to a second session of the High Frequen-
cy World Administrative Radio Conference (HF-
WARC), scheduled to convene in October 1986.
Almost all of the issues to be addressed could result
in North-South or East-West disagreements. F7
The United States with the Voice of America,
Radio Free Europe, and Radio Liberty is the
second-largest user-after the USSR-of the
HF-broadcasting spectrum. If the Conference
adopted a rigid planning method or if limits were
placed on transmitter power or access to broadcast-
ing frequencies, US broadcasting interests would
suffer and US ability to counter Soviet jamming
would be impaired. Although the United States
could refuse to accede to Conference results, if
countries serving as hosts for US relay transmitters
accepted the results US broadcasting would be
affected because of its dependence on host nations
for international broadcasting. This dependency is
not shared by the Soviet Union, which broadcasts
US- 1,336
UK- 1,247
Brazil-1,101
China -1,078
FRG-849
Colombia-594
India-583
South Korea-535
Chile-514
Mexico-509
Cuba-449
from its own territory
According to an agreement reached at the 1979
WARC, the main purpose of the January meeting
is to establish a planning method to assign
HF-broadcasting frequencies to countries. In addi-
tion, the meeting will seek to establish principles
Major HF-Broadcasters Hours of.
Transmissions'
governing the use of the bands and the technical
parameters for planning spectrum use. The session
scheduled for 1986 is to carry out the actual
planning of the bands according to the method and
principles established in 1984.
29 Secret
DI IEEW 83-050
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
The success of the meeting in January will largely
depend on:
? Identification of a planning method that meets
both the minimum requirements of major broad-
casters-the United States, the Soviet Union,
West Germany, and the United Kingdom-as
well as LDC demands for improved quality of
service for their own broadcasts. The problem is
that demands exceed presently available broad-
cast hours in the HF spectrum by almost 50
percent. The industrial nations want to maintain
the current flexible system under which countries
notify the ITU of proposed broadcast schedules
for each season and cooperate voluntarily in
resolving potential interference. The developing
nations want a fixed system under which the
assignment of frequencies and broadcasting hours
would be in effect for one or more years at a time.
? The availability from 1989 to 1994 of new bands
reallocated from fixed services ' to general broad-
casting. The one-third increase in the spectrum
provided by the new bands would improve the
quality of service. for many broadcasters, but it
does not include new bands at the lower end of
the spectrum, which is the most crowded. More-
over, this increase will be at least partly offset by
a continued expansion of country demands.
? The possibility of a prolonged East-West ideolog-
ical debate over the principles governing the use
of the broadcasting bands. The principle most
likely to affect the Conference concerns the free
flow of information. Resolutions against jamming
have already been submitted by Canada and the
United Kingdom. The Soviets almost certainly
would oppose any type of antijamming resolution.
Most developing countries favor setting aside the
East-West ideological debate and proceeding
with the technical issues that more directly con-
' Fixed services include point-to-point transmissions used for do-
mestic or military communications.
Secret
23 December 1983
If, as we expect, the Conference cannot reach
agreement on the substantive matters:
? The Conference could call for an intersessional
group to examine a number of possible planning
methods. The ITU could then arrange the agenda
of the second session to allow examination of the
intersessional results. We believe this alternative
will be the most likely result of the Conference.
? The LDC majority in the ITU-if they can agree
among themselves-could adopt a planning
method unacceptable to the industrial nation
minority. We believe major broadcasters, includ-
ing the Soviet Union, probably would go along
with an LDC plan where it coincided with their
interests and broadcast as they please where it
did not. This result would be tantamount to
broadcast chaos; the industrialized nations would
use their technical expertise to overcome interfer-
ence, while the LDCs' broadcasting would contin-
ue to suffer significant interference.
? The Conference could admit failure, which would
probably result in a continuation of the present
planning method. ~~ -
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Africa and France:
An Enduring Relationship
President Mitterrand's decision last August to
counter the Libyan intervention in Chad reflects
France's intention to maintain its traditional role as
the most important Western power in Africa. Mit-
terrand is keenly aware of the need to preserve
extensive French economic interests in Africa, es-
pecially in its former colonies. Of particular con-
cern are French, participation in much of the
commercial activity in West Africa and access to
strategic minerals in such places as Niger, Nigeria,
Zaire, and South Africa. Continued problems in
the French economy, however, could force Paris to
cut back on its financial and military assistance.
This will be particularly worrisome for Franco-
phone' West African governments that depend on
French budgetary support and technical assistance.
We believe that Paris, as well as moderate African
leaders, will be looking to the United States to
make up for shortfalls in French assistance. All
parties probably will emphasize the importance to
the United States of helping the region and mini-
mizing opportunities for Libyan or Soviet Bloc
adventurism.
The French derive substantial benefits from their
complex economic ties with the French-speaking
African states. Commercial distribution channels,
sources of financing, product standards, and long-
established personal ties impel economic and com-
mercial relationships along a well-defined track.
Frenchmen in senior positions in many Franco-
phone governments use their influence to assist
' In this article the term "Francophone Africa" includes the former
colonies of Benin, Cameroon, Central African Republic, Chad,
Congo, Djibouti, Gabon, Guinea, Ivory Coast, Madagascar, Mali,
Mauritania, Niger, Senegal, Togo, and Upper Volta. Zaire, Rwan-
da, and Burundi, though French speaking because of Belgian
colonization, are considered separately from the French communi-
ty.F---]
French firms in obtaining contracts. French compa-
nies frequently have as partners senior African
government officials to ensure that their interests
are protected. French import-export firms, shipping
companies, and financial institutions all work to-
gether. French investors receive substantial support
from Paris in the form of government guarantees
by the French Insurance Company for Foreign
Trade (COFACE) and access to substantial
amounts of concessional money. About one-half of
all official French aid goes to African subsidiaries
of French firms.'
French economic influence is most fully realized in
the institutions of the franc zone-one of the few
relatively successful experiments in international
monetary and economic integration and a primary
factor behind the favorable economic performance
of Francophone states relative to their neighbors.
The zone provides a common monetary system for
its members overseen. by French personnel and
guided by French expertise through direct links
with the French Central Bank and treasury. Mem-
bers of the franc zone can borrow from the French
Central Bank at favorable rates and may draw on a
generous line of credit at a token 1.0-percent
interest. The convertibility of the franc zone cur-
rency facilitates international trade and foreign
private investment
Nevertheless, the attraction of the zone for both
France and some of the African members is begin-
ning to fade. The foreign exchange accounts with
the French treasury have been a substantial
2 The principal institutions disbursing French assistance are the
Central Fund for Economic Cooperation (CCCE) and the Aid and
Cooperation Fund (FAC). The CCCE offers subsidized loans with
interest rates as low as 1.8 percent and repayment periods of 30
years after a 10-year grace period. The FAC is the instrument for
extending grant aid.
Secret
DI IEEW 83-050
23 December 1983
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
The French Stake in Sub-Saharan Africa
The French stake in Sub-Saharan Africa is sub-
stantial and wide ranging:
France relies on Africa as an important supplier
of strategic minerals petroleum, uranium, man-
ganese, copper, and cobalt.
The French have interests in over three fourths
of all commercial firms in Francophone Africa;
the largest of them, the West Africa Company
(CFAD), has more than 60 subsidiaries in Africa,
employs about 16,000 people, and had a turnover
in 1981-the latest year for which data are
available-of more than $1.5 billion.
? To protect these economic interests, Paris has
military bases in.eight countries and about
13,000 troops in Africa as a whole. It also
provides military equipment and training on
which a number of pro-French African govern-
ments depend to maintain internal security.
? France provides African countries with. more
than $1 billion annually in economic and mili-
tary aid, an amount that constitutes nearly 60
percent of all French assistance worldwide.
? The African franc zone organization, while com-
mitting Paris to underwriting a stable, convert-
ible currency in Francophone Africa, controls a
part of member countries' foreign reserves, and
has used these funds on occasion to support the
French currency.
? Paris underwrites the salaries of more than
10,000 expatriate teachers, technicians, and ad-
visers in Sub-Saharan Africa, many of whom
hold key positions in Francophone African gov-
Secret
23 December 1983
financial drain for Paris because of heavy borrow-
ing by African members to cover their foreign
payments needs. At the same time the Africans
complain that they have to suffer for France's
economic ills, because their currencies are tied to
the weak French franc, yet they have no influence
on either French economic decision making or on
the devaluation process. The 35-percent decline in
the French franc relative to the dollar in the past
two years has increased foreign payments strains on
African franc zone governments saddled with debt
service payments and oil bills denominated in dol-
lars
Another area of concern for franc zone members is
the prevailing high interest rates in France and the
freedom to transfer capital reserves within the
zone. The Africans claim they have lost sizable
amounts of funds to French banks that otherwise
could have been available for local investment. This
is particularly worrisome in the larger African
economies, such as Ivory Coast, where companies
borrow considerable amounts locally and invest it
in French money markets. The Senegalese press
reported African resentment over what they per-
ceive as support for the faltering French economy
at a time when their own economies are deteriorat-
ing.
The worsening economic positions of franc zone
countries prompted a major reassessment of mem-
bership by all parties during 1983. According to
US Embassy reporting, the Africans want to shift
some of the burden of regional development from
Francophone community institutions to other
Western and Arab countries. Togo, Ivory Coast,
and Senegal already rely on the IMF for the sort of
balance-of-payments support that France previous-
ly provided. French press reports indicate that Paris
also would like to shift some of the financial cost of
supporting the franc zone to the IMF and other
multilateral organizations such as the EC and the
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Oil and Politics
In 1982 over 80 percent of the production of Elf
Aquitaine, the French state oil group, was in
Africa, and the company is the leading oil prospec-
tor in the region. Four countries account for most
of this activity-Nigeria, Congo, Gabon, and Cam-
eroon: Elf's holdings
in Angola within the next 10 years will rank
second only to those it has in Nigeria and will be
capable of producing as much as 200,000 b/d. F_
Mitterrand regards the government-controlled
company as both an instrument of French foreign
policy and a major revenue producer. These two
goals sometimes conflict. During a recent visit to
Brazzaville, Mitterrand told President Sassou-
Nguesso that, although France supported better
economic terms for Third World countries, Paris
would not pressure Elf to moderate its demands
for a higher profit margin.
Elf's policies closely affect local politics in those
Francophone African countries where the company
dominates the oil industry-Gabon, Congo, and
Cameroon. For example, when Elf instituted a
production slowdown in the mid-1970s in reaction
to Congo's demand for higher profits, the move
disrupted the Congolese economy and spurred
political unrest that resulted in the assassination
of President Ngouabi.
The Role of French Expatriates
More than 200,000 French citizens-one-fifth of
all those living abroad-live in Sub-Saharan Afri-
ca, with the largest concentrations in Ivory Coast
(40,000) and Gabon (27,000). In our judgment the
cumulative day-to-day influence of the French
A similar embroglio has broken out between Elf-
Gabon and Gabon's President Bongo. The Gabo-
nese Government wants to raise its 25-percent
share in the company to 40 percent by the end of
the year. Elf has been both holding back on
production and making little effort to find and
develop new resources. These policies have led to a
serious depletion of Gabon's known reserves and a
shortfall in oil revenues. Gabonese economic plan- 25X1
ners were forced to extend the 1980-82 interim
economic plan for a year and a half and hold off on
the new five-year development plan until 1984.
Elf's managers are worried by the increasing com-
petition from Western oil groups in developing oil
potential in various Francophone African coun-
tries. In Ivory Coast, for example, US companies
have made significant discoveries in areas that Elf
had earlier abandoned as containing noncommer-
cial deposits. In Cameroon, Elf lost its position as
the sole oil producer when the government invited
US companies to share in the growing Cameroo-
nian oil sector. Even Gabonese President Bongo,
previously a supporter of Elf, is using the compa-
ny's investment slowdown as a pretext for inviting
non-French firms to develop some of Gabon's
oilfields. A US firm has already made one major
find offshore.
communities, particularly in the economic sector,
probably has an even greater influence on African
government policies than do exchanges between .
African and French officials at the highest levels.
Elf-Aquitaine, the largest French oil producer in
Africa, is deeply involved in Francophone African
politics and is an important instrument of the .
French policy to keep out US and other foreign
commercial competitors. A major factor behind the
company's aggressive posture is its reliance on
Secret
23 December 1983
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
black Africa for over 80 percent of its total produc-
tion of 485,000 barrels per day. The company
maintains close links with Francophone African
leaders, particularly with Presidents Bongo of Ga-
bon and Sassou-Nguesso of Congo, according to
press reports. In turn, company officials provide a
useful channel by which African leaders can convey
their problems directly to Mitterrand.
In addition to the businessmen, there are some
10,000 French technical advisers in Africa, many
of them holding positions that give them access to
information and the means to exert influence on
behalf of French interests. In Ivory Coast, for
example, US Embassy sources report that French
advisers are placed in nearly every Ivorian ministry.
They occupy several senior positions and are fre-
quently involved directly in the decisionmaking
process. In Gabon, French advisers are using their
government positions to screen non-French con-
tracts)
Changing Relations Between Non-Francophone'
Africa and France
The Mitterrand regime is building on previous
French efforts to develop financially profitable
relations with areas outside the French community.
France is an attractive trade and investment part-
ner because of Paris's willingness to extend credit
on lenient terms to African business partners, as
well as its long experience in African markets.
Within the last decade, Nigeria and South Africa
have become France's most important trade part-
ners in Sub-Saharan Africa, thanks to Nigeria's oil
and South Africa's strategic minerals, particularly
manganese, titanium, uranium, and chrome.
French firms also are active in Zimbabwe, Kenya,
Mozambique, and Angola and are partners with
Paris in expanding French access to the mineral
wealth of Zaire
Nigeria. Nigeria provides an outstanding example
of Paris's ability to woo non-Francophone Africans.
The French pushed their way into the Nigerian
market in the late 1970s at the peak of Lagos's
Secret
23 December 1983
unhappiness with the United Kingdom's handling
of the transition to majority rule in Rhodesia.
Nigeria is now the principal site of new French
investment in black Africa, and in 1980 and 1981,
according to press sources, Lagos awarded French
companies over $3.7 billion in new contracts. The
French have been doing well in the construction
sector and are active in transport, retailing, and
manufacturing. Peugeot, for example, has the larg-
est automobile assembly plant in Nigeria, produc-
ing nearly 60,000 vehicles for the local market last
year.
South Africa. The continuity of French policy
toward South Africa has been particularly striking.
Despite shrill criticism by French officials of South
African racial policies, Paris has carefully sought
to insulate substantial French-South African com-
mercial ties from the political fallout. The'Mitter
rand government, for example, has defended the
participation of French companies in the controver-
sial Koeberg nuclear reactor construction project,
agreed to fabricate nuclear fuel rods necessary for
its eventual operation, and approved large pur-
chases of South African coal and uranium by state-
owned companies to meet French energy needs.
Moreover, according to the US Embassy in Pre-
toria, French officials have privately acknowledged
that, despite their government's compliance with
the UN arms embargo, the South African defense
force has been able to obtain spare parts for its
Mirage fighters and French-built helicopters on the
international market.
Zaire. France's financial support has enabled Mo-
butu to reduce his economic -dependence on Bel-
gium-the former colonial power-and Paris's mil-
itary support has been an important factor in
maintaining the stability of his regime. Although
the warming of French-Zairian relations was built
on a close working relationship between Mobutu
and former French President Giscard, Mitterrand
has increased French military assistance and re-
tained France's position as one of Zaire's major
foreign creditors.
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
The Francophone states will continue to look to
Paris for the bulk of their economic support:
? For the poorer Francophone countries such as
Niger, the Central African Republic, Upper Vol-
ta, and Djibouti, French financial aid is a vital
prop. French funds provide food and other essen-
tial goods for politically sensitive urban areas.
French personnel, needed to keep many of the
African economies and governments working, are
largely funded by Paris. There is no other West-
ern donor at present willing to step in and assume
France's role in what are some of the world's
poorest countries.
? For wealthier Francophone states, such as Ivory
Coast, Cameroon, and Gabon, we believe the
need for a substantial French military and eco-
nomic presence will remain strong. Ruling elites,
still heavily influenced by French education and
military training, are concerned over the Libyan
threat to the region. They feel particularly vul-
nerable to efforts by Qadhafi to exploit popular
unhappiness with the economic situation and
declining urban living standards within their
countries. We anticipate that they will resist any
efforts by Paris to reduce the presence of French
troops whom the Africans view as an important
deterrent to local unrest.
Nevertheless, there are a number of trends develop-
ing that could, over the long term, jeopardize these
ties:
? The Africans will be looking to France to be more
supportive of their positions on issues the Afri-
cans deem vital. West African governments, for
example, have been resentful of Paris's reluctance
to cut off dealings with Qadhafi. Another conten-
tious issue is French participation in South Afri-
ca's nuclear program. If French business interests
build another nuclear plant in South Africa, it
will almost certainly prompt a storm of criticism
from the Africans. The Nigerian press already is
sounding warnings on this subject, and public
pressure could force Lagos to take some retalia-
tory measures against French firms operating in
Nigeria.
? Africa's unease over its dependence on France is
certain to increase as the present generation of
leaders committed to a French role in Africa is
replaced by a more nationalistic elite.
? The French will find it difficult to maintain their
financial assistance-covering budgetary and ex-
ternal deficits and paying salaries of essential
French technicians-given France's own econom-
ic slowdown. Paris also will have to: back away
from. funding costly prestige development pro-
jects, such as the Kribi liquefied natural gas
project.in Cameroon and the Konkoure hydro-
electric project in Guinea because of uncertainty
over their .long-term economic payoff. I 25X1
If Paris decided to ease its own economic straits by
cutting back on its financial and military commit-
ments in black Africa, this would prompt an inten-
sive campaign by Francophone leaders to find
substitute partners. High on their list would be
Washington. We would anticipate requests for a
substantial increase in US economic aid, but also
for a stepped-up military role in ,the region-as
indicated by urgent appeals last summer by
Houphouet and others for US military intervention
in Chad. The Africans probably would try to enlist
US help in persuading the IMF and the World
Bank to increase their financial programs and
soften their terms
African leaders will view Washington's reaction to
their requests-as a sign of the importance to the
United States of its African relationships. A favor-
able response would be well publicized by the
Africans, who might become more supportive of the
United States on international issues.
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Failure to satisfy African expectations, however,
could provoke criticism of US- policy, create a more
difficult climate for US businesses, and prompt
threats to turn to the Soviets, the Libyans, or even
the Iranians for. help. Such conditions also could
prompt the Libyans and the Soviets to take the
initiative. Moscow has-long viewed France as a
competitor for influence in Africa, particularly in
the area of military assistance to Francophone
countries. Soviet efforts probably would continue to
concentrate on. extending long-term credits for the
purchase of weapons and military training, rather
than trying to match the level of economic aid now
given by France. But Moscow would use the oppor-
tunity to blame African economic hardships on the
failure of both Washington and Paris to step in
with financial aid.
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Eastern Europe: 1983 Grain Crop
and Implications
We estimate Eastern Europe will harvest a 97-
million-metric-ton grain crop this year, the region's
second-largest crop, but down from last year's
record 102 million tons. Near record production in
the grain-importing northern countries of Eastern
Europe will do little to improve food supplies
because imports will remain below the levels of the
recent past. In most of the southern countries,
production shortfalls will lower grain exports at a
time when these financially hard-pressed regimes
are attempting to boost sales to obtain hard curren-
cy. We believe retail food prices are likely to rise in
most East European countries; the food situation
will be worse in Poland and Romania where al-
ready depressed meat supplies are expected to
worsen. With the US share of the grain market
down sharply in recent years-largely because of a
reluctance of US Government and private sources
to.provide financing for grain purchases-other
countries have increased their market share.
Canada, however, is the only major grain exporter
to use government-backed trade credits aggressive-
ly to expand sales. Despite threats to boycott the
US market, most grain traders contend that East-
ern Europe would quickly return to the US market
should credit become available on favorable terms.
Based on analysis of satellite imagery, weather
data, and press and attache reporting, we expect
1983 grain production in Eastern Europe to reach
some 97.4 million tons, the second-highest crop
ever, but short of the 110-million-ton target for
1983 and below last year's record harvest of 102
million tons. All of the reduction is expected to
occur in the southern countries,' which were hit
hard by drought in May and July. In contrast,
overall favorable weather and a large sown area
helped the chronically grain-deficient northern
countries, where production is expected to reach
near-record levels.
Southern Countries -A Falloff in Production. We
expect the southern countries of Eastern Europe to
produce about 55 million tons of grain this year.
The crop, about average for the region but some 5.5
million tons below last year's record output, was
hurt by a drought in May that reduced. winter grain
yields:
? Severe damage to Romania's winter grain crop in
May is expected to result in a below-average total
grain output of 17.6 million tons.
? Because of the drought, Bulgaria will harvest a
below-average grain crop of 7.5 million tons.
? Losses from droughts in May and July will keep
Hungary's output to about 12.9 million tons, a
decline from last year's record of 14.8 million
tons.
? Excellent conditions in Yugoslavia since late May
have made an above-average harvest of 17 million
tons likely, although it will probably fall short of
the estimated 1983 plan of 17.7 million tons.
' The southern countries are Romania, Bulgaria, Hungary, and
Yugoslavia. The northern countries are Poland, Czechoslovakia,
and East Germany. We discuss the two groups separately because
they differ in climatic conditions, crops, and degree of self-
Secret
DI IEEW 83-050
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Areas in Eastern Europe Affected by Drought, Spring 1983
Germany
Secret
23 December 1983
Yugos.Iavia
Severe damage
Slight to moderate damage
The United Slates Government has not recognized
the incorporation of Estonia, Labia, and Lithuania
into the Soviet Union. Other boundary representation
is not necessarily authoritative.
Romania
Aegean Sea
Soviet.
Union
Turkey
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Eastern Europe: Grain Production a
1977-81
Average
1977
1978
1979
Eastern Europe
93.8
93.7
96.2
90.8
96.0
92.1
102.0
97.4
Southern countries
55.2
55.3
53.9
55.4
57.4
54.0
60.5
55.0
Romania
18.9
18.6
19.0
19.3
20.2
17.5
19.7 b
17.6
Bulgaria
8.1
7.8
7.7
8.5
7.8
8.7
8.6 b
7.5
Hungary
12.8
12.3
13.3
12.0
13.8
12.6
14.8
12.9
Yugoslavia
15.4
16.6
13.9
15.6
15.6
15.2
17.4
17.0
Northern countries
38.6
38.4
42.3
35.4
38.6
38.1
41.5
42.4
Poland
19.3
19.4
21.5
17.3
18.3
19.8
21.2
21.6
Czechoslovakia
10.1
10.3
11.0
9.2
10.7
9.4
10.3
10.8
East Germany
9.2
8.7
9.8
8.9
9.6
8.9
10.0
10.0
a Grains include wheat, rye, barley, oats, corn, mixed grains; in the
southern countries rice, is also included; in Bulgaria, legumes.
b Estimated.
Northern Countries-Near-Record Grain Output.
The northern countries of Eastern Europe have
experienced generally favorable weather during
this crop season, and they are headed toward a
near-record grain harvest of over 42 million tons,
the best outcome since 1974. Winter grains, which
make, up 60 percent of production, benefited from
mild temperatures and ample soil moisture. Some
of the region's spring grains on poorer sandy soils
were hurt by drought in July, but
damage was significantly lighter than
had been portrayed earlier in local press accounts:
? We expect 1983 grain production in Poland to
slightly surpass its 21.2-million-ton plan.
? Czechoslovakia will produce 10.8 million tons of
grain in 1983, 5 percent better than last year.
? President Honecker announced in October that
.East, Germany had harvested 10 million tons of
grain and called this the largest grain harvest in
We estimate that during marketing year (MY)
1983/84 (1 July-30 June) Eastern Europe will
import between 8 million and 9 million tons of
grain, at most 1 million tons more than last year
but well below the 17-million-ton average of the
early 1980s.2 Our estimate is.based on USDA
projections, on our assessment of each country's
ability to finance imports, as well as on its estimat-
ed grain requirements. We expect the region's
grain exports to total 3-4 million tons, down from 5
million tons last year. Despite the increase in
imports and cutback in exports, we estimate total
] The northern countries-Czechoslovakia, East Germany, and
Poland-are traditionally net grain importers. In contrast the
southern countries as a whole are net grain exporters. Hungary is
the region's only consistent net grain exporter; Bulgaria is usually a
marginal exporter, and Yugoslavia a net importer. Romania, a net
exporter, is sometimes referred to as Eastern Europe's "grain
broker," often exporting and importing large quantities of grain in
the same year in order to take advantage of changing world prices.
the country's history. although production fell
short of the 1983 plan target of 10.3 million tons.
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
grain supplies will be roughly 3.4 million tons lower
in MY 1983/84 than last year due to this year's
reduced harvest.
The South. While the southern region will remain a
net grain exporter, the expected decline in net
exports this year will adversely affect economically
hard-pressed regimes that are trying to boost ex-
ports for hard currency:
? Romania's net grain exports are expected to fall
in. MY -1983/84, but domestic shortages will
persist. Grain exports will decline to 1.0-1.2
million tons, while imports could rise to 0.9
million: tons.
? Bulgaria, in a turnaround from last year, is
expected tb become a net grain importer in MY
1983/84.
? Hungary, although suffering a large decline in
grain export earnings, will remain a net grain
exporter, partly because of large carryover stocks
from last year's record harvest. Hungarian offi-
cials have already predicted that the shortfall in
this y'ear's grain production could cost as much as
$300 million in lost export earnings.
? Yugoslavia's good corn harvest should enable the
country to increase grain exports. A large share
of these exports is expected to be handled through
countertrade arrangements, whereby Western
firms will provide Yugoslavia with soybeans and
meal products in exchange for corn.
The North. We expect that this year's near-record
harvest in the north will be augmented by imports
of approximately 6.0 million to 6.9 million tons.
This level is about the same as last year, but
substantially below the 11.4-million-ton average of
MY 1980-82. Total grain supplies are expected to
rise only marginally-300,000 tons-above last
year's level and will remain below the average of
the late 1970s:
? Poland's imports in MY 1983/84 will probably
be about 700,000 tons less than last year and well
short of the amount needed to rebuild the live-
stock herds reduced by distress slaughtering in
Secret
23 December 1983
1982. To help replace imports from the West, the
USSR is expected to deliver about 650,000 tons,
some 140,000 tons more than it provided last
year.
? Czechoslovakia is expected in MY 1983/84 to
import about 100,000 tons less than last year.
Because of reduced harvests in Romania and
Hungary, Prague will probably be forced to
purchase a larger share of its corn from sources
requiring hard currency.
? East Germany's grain imports are estimated be-
tween 2.5 million and 3.0 million tons, roughly
500,000 tons above the level of MY 1982/83.
The Search for Western Financing
Since the early 1970s, Eastern Europe has relied on
Western credits to finance grain imports. The
situation changed in 1982 when East-West political
frictions, economic crises, and debt problems in
Poland and Romania cast doubt on the cre-
ditworthiness of all of Eastern Europe. While East
European access to Western credits generally has
tightened, the availability of credit to purchase
grain has been less severely affected.
A number of Western governments have been
willing to play down the issue of Eastern Europe's
creditworthiness for political reasons and to find
outlets for surplus grain:
? Canada has been particularly aggressive in ex-
panding its sales to Eastern Europe through the
use of government-backed commercial credits.
Officially backed loans paved the way for the 1-
million-ton sale to East Germany in January,
East Berlin's first major purchase from Canada
since the mid-1970s. More recently, the two
countries signed a long-term agreement calling
for East German purchases of 1 million'tons per
year in 1984-86 financed by officially guaranteed
credits. Press reports indicate that Canada is also
pursuing talks with Romania on a two-year"
agreement.
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Eastern Europe
17.50
15.66
12.36
7.80
7.7-9.0
Southern countries
3.86
3.82
3.53
0.95
1.7-2.1
Romania
1.63
2.15
1.18
0.32
0.8-0.9
Bulgaria
0.82
0.85
0.72
0.33
0.4-0:5
Hungary
0.14
0.15
0.18
0.12
0.1-0.2
Yugoslavia
1.27
0.67
1.45
0.18
0.4-0.5
13.64
11.84
8.83
6.85
6.0-6.9
Poland
7.75
8.16
4.71
4.00
3.0-3.3
Czechoslovakia
1.87 -
0.67
1.37
0.65
0.5-0.6
East Germany
4.02
3.01
2.75
2.20
2.5-3.0
e Marketing year 1 July to 30 June. Import data for all marketing
years, except 1983/84, are from the Foreign Agricultural Service,
USDA.
b Estimates are based upon our projection of the countries' needs
and ability to finance grain purchases.
Eastern Europe: Grain Exports a
Eastern Europe
2.93
4.58
4.22
5.43
3.14-3.90
Southern countries
2.54
4.11
3.82
5.03
2.85-3.50
Romania
1.25
1.75
1.70
1.75
1.00-1.20
Bulgaria
10.60
0.40
0.79
1.10
0.05-0.10
Hungary
0.49
1.55
1.05
1.18
0.80-0.90
Yugoslavia
0.20
0.41
0.28
1.00
1.00-1.30
0.39
0.47
0.40
0.40
0.29-0.40
Poland
0
0.06
0.02
0.03
0-0.05
Czechoslovakia
0.01
0.04
0.05
0.05
0.04-0.05
East Germany
0.38
0.37
0.33
0.32
0.25-0.30
a Marketing year 1 July to 30 June. Export data for all marketing
years, except 1983/84, are from the Foreign Agricultural Service,
USDA.
b Estimated.
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Eastern Europe: Estimated Grain Production,
Imports, and Availability, MY 1983/84
Production
Imports
Availability
Availability
Change in Availability
1983 .
1983/84a
1983/84b
1982/83
1983/84 to 1982/83
Southern countries
55.0
1.90
57.5
61.4
-3.7
Romania
17.6
0.85
18.4
20.0
-1.5
7.5 ?
0.45
8.0
8.9
-0.9
Hungary
12.9
0.15
13.6
14.9
-1.3
Yugoslavia
17.0
0.45
17.6
17.6
0
Northern countries
42.4
6.45
48.8
48.4
0.3
21.6
3.15
24.8
25.2
-0.5
Czechoslovakia
10.8
0.55
11.4
11.0
0.3
East Germany
10.0
2.75
12.8
12.2
0.5
a Figures are based on midpoint of our estimated range of imports
given in table on grain imports.
b Available for domestic consumption or export. Availability equals
production plus imports and beginning stocks in Hungary (500,000
tons) and Yugoslavia (100;000 tons). Because the bulk of the East
European grain harvests occurs between 1 July and 31 December,
annual production falls within the trade year 1 July and 30 June.
The two may be added to give an approximation of grain availabil-
ity for a common period-MY 1 July to 30 June.
? Although only a small supplier, Austria has used
government-backed credits to ring up sales to
Poland, East Germany, Czechoslovakia, and Yu-
goslavia during the last two years.
? Despite France's failure to renew its long-term
agreement with Poland, Paris has continued to
provide Warsaw with short-term government
guarantees: promised before the imposition of
martial law. Although concerned about East
Germany's creditworthiness, France reportedly
has continued to extend guarantees for grain
shipments but at a lower level than in previous
years.
West Germany .
has been encouraging domestic commodity trad
ers to provide credit'lines'to East Germany, even
if government subsidies are necessary.
In contrast to their West European and Canadian
counterparts, US banks and grain traders generally
remain reluctant to extend credits for grain pur-
chases. Further, the restrictions on Commodity
Secret
23 December 1983'
Credit Corporation (CCC) credits to Poland, im-
posed after martial law was declared in December
1981, will continue to sharply limit sales of US
grain. Prior to the credit cutoff, the United States
supplied about half of Poland's grain imports. We
estimate that US grain sales to Eastern Europe in
MY 1983/84 will total only about 1.7-2.0 million
tons. Most of these sales will be to East Germany,
Poland (on a cash and limited credit basis), and
Yugoslavia (CCC credits). As a result, the US
share of the East European grain market this year
is expected to range from 20 to 25 percent, near
last year's level but well below the 55-percent.share
in the late 1970s.
Outlook for Food Supplies
East European consumers can expect little im-
provement in food supplies this year. Further cut-
backs in supplies and increases in retail food prices
are likely as agricultural imports remain depressed
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Eastern Europe: Declining Imports of
U.S. Agricultural Commodities'
aDoes not include transshipments.
b Includes corn, barley, and grain sorghums.
Total
Other
Cotton
Hides and
skins
and exports of food continue. Shortfalls in food
supplies will be most severe in Poland and Roma-
nia, where meat is already in short supply.
In Poland, although food supplies have improved
somewhat since the first of the year, prospects for
the coming months indicate continuing shortages.
Rationing is expected to continue in the foreseeable
future for such items as meat, animal fats, butter,
sugar, flour products, chocolate, and coffee. War-
saw has already announced that food prices will
rise, possibly 10 to 20 percent, as of the first of the
year. With livestock herds down sharply and feed
supplies curtailed, no improvement in meat supplies
is expected in 1984.
Among the southern countries, Romania is in the
worst condition. Over the past year and a half,
US Commodity Credit Financing
Poland has been the region's primary recipient of
US CCC export financing programs, receiving
roughly $2.6 billion in credit guarantees and direct
credits-more than 80 percent of CCC-financed
sales to Eastern Europe-during fiscal years (FY)
1970-82. Since East Germany, Czechoslovakia,
and Bulgaria do not have most-favored-nation
status, they are not eligible for CCC financing.
Romania did not receive any financing in FY 1983
because of its debt servicing problems. Although
Bucharest has made informal inquiries into credit
availabilities for FY 1984, no formal request has
been made. Hungary and Yugoslavia received $42
million and $240 million, respectively, in CCC
financing in FY 1983. Hungary has requested
$76.5 million and Yugoslavia has requested $341
million in CCC financing for FY 1984.
consumers have faced sharp price increases, long
queues, rationing, and shortages of meat, cheese,
and butter. In its attempt to gain tighter control
over the supply and distribution of food, the regime
has restricted the sale and transport of privately
produced food. This has reduced supplies, however,
and worsened shortages
In East Germany, Czechoslovakia, Bulgaria, and
Yugoslavia, local shortages of meat, dairy products,
vegetable oils, citrus, coffee, and chocolate will
continue, and prospects for additional increases in
food prices will make life uncomfortable. In Hun-
gary, food supplies are expected to be near normal
but more costly. Budapest, blaming this year's
drought, recently ordered an immediate increase of
16 to 23 percent in the retail prices of bread, sugar,
cooking oil, and other basic foodstuffs.
The political fallout from tight food supplies has
remained muffled so far. On the surface, at least, it
appears that East European consumers are getting
accustomed to long lines, selective food rationing,
and price hikes. We believe that the East European
Secret
23 December 1983
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
governments would move quickly to shift food
supplies from surplus regions or state reserves to
specific areas if popular rumbling appeared threat-
ening. The Romanians and the Poles have done this
successfully in the past. Sudden sharp price in-
creases and new or tighter rationing requirements
are the most serious potential flashpoints. Polish
authorities were recently stung by public criticism
when butter rationing was reinstituted. Nonethe-
less, Warsaw remains committed to food price
hikes next year, and other regimes are likely to
continue raising prices to restrain domestic de-
mand.
Food supplies in the region will not improve much
if at all in the coming years unless Eastern Europe
imports more grain. Although most East European
governments have pledged to sharply increase do-
mestic grain production, numerous constraints
stand in the way. In addition to large-scale invest-
ments, the East Europeans would have to initiate
institutional reforms designed to overcome man-
agement problems, inadequate incentives, and low
productivity. In our view, the necessary measures
are unlikely any time soon.
Sustained improvements in food supplies in the
next few years, therefore, will depend largely on
Eastern Europe's ability to boost grain imports.
Financing will remain the critical factor. Because
of their financial weakness, most East European
countries will buy from those suppliers willing to
extend credit or to accept countertrade arrange-
Secret
23 December 1983
Role of Western Grain Suppliers
Although the reduced US presence has given other
countries the opportunity to increase grain sales to
Eastern Europe, we expect Canada will remain the
only major grain exporter to use government-
backed trade credits aggressively to expand its
market share. Other large grain exporters-Aus-
tralia and Argentina-seem reluctant to jump in,
either because of concerns over Eastern Europe's
creditworthiness or because of their own inability to
extend loans. France will probably continue to
extend some credit on a selective basis, but Paris
appears cautious about financing a major expan-
sion of grain sales to Eastern Europe. As a net
grain importer, West Germany is unlikely to stake
out a long-term share of East Germany's grain
market and would probably reduce its tole if other
financing becomes available. F
We believe that US exporters could quickly recoup
much of their lost market share if US commercial
and official lenders eased their restrictions on new
loans to Eastern Europe. Some East European
countries have threatened to boycott purchases of
US grain over what they perceive as "discrimina-
tory. financing practices." Most traders, however,
contend that Eastern Europe would quickly return
to the US market should credit become available
on favorable terms)
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3
Secret
Secret
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706790001-3