COMMUNIST AID TO SELECTED CLIENT STATES

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CIA-RDP85T00287R000600920001-6
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RIPPUB
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S
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18
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December 22, 2016
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September 15, 2010
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1
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Publication Date: 
December 12, 1983
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MEMO
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Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Central Intelligence Agency MEMORANDUM FOR: Robert Friel EUR/RTE/EWEA 25X1 Department of State Chief, ommuni.st Activities Branch Attached is the final version of the paper provided to NATO in September, 1983. If you have any questions, please contact Attachment: Communist Aid to Selected Client States, GI M 83-10232, December 1983, (S) Unclassified When Separated From Attachment. ~ 1 M 3-- /OcQ3 25X1 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 I Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 LUKE 1' Central Intelligence Agency Washington, D. C. 20505 DIRECTORATE OF INTELLIGENCE 8 December 1983 Communist Aid to Selected Client Stafes Summary The USSR and its Eastern European allies promised nearly $1 billion in new military and economic assistance to selected Soviet client states (Afghanistan, Angola, Ethiopia, Mozambique, and South Yemen) in 1982, bringing total commitments to the five countries to more than $14 billion. Almost all of this assistance has been provided since the mid-1970s. Since 1979, client states (especially Afghanistan and Ethiopia) have accounted for an increa roportion of Soviet allocations to Third World countries. 25X1 Identified military agreements plunged dramatically in 1982 to about 15 percent of the 1981 level, and we1Z below the $1.4 billion annual average of the previous five years. A precipitous drop in identified new Soviet contracts with Ethiopia and Afghanistan, which together have received two-thirds of the 25X1 Communist Activities Branch, OGI, This memorandum was prepared) (International Security Issues Division, Office of Global Issues. This analysis is based on information available as of September 1983. Comments and queries are, welcome and may be addressed to the Chief, Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 USSR's military pledges to the client states under consideration, was responsible for the drop*. In contrast, Soviet economic commitments to client states rose to a record $650 million, propelled by a $400 million agreement with Angola to build a dam and powerplant, and by oil assistance to Ethiopia. The Military Program Still the Most Important Policy Instrument In spite of the drop in new military agreements, Moscow's military program in client states remained its most important instrument to maintain its presence and to further its influence. The USSR and East European countries are the primary military suppliers for all five of the client states. Even though this group accounts for only a little more than 10 percent Table 1 USSR and Eastern Europe: Military Agreements with and Deliveries to Client States Million US $ Agreements Deliveries Eastern Eastern USSR Europe USSR Europe Totala 9,085 565 5,675 470 1955-74 680 35 600 35 1975 305 10 95 ?? 1976 790 25 150 1977 1,305 165 600 130 1978 1,330 125 1,,460 120 1979 1,785 70 760 70 1980 520 100 875 50 1981 2,085 5 575 35 1982 280 35 555 35 aBecause of rounding, components may not add to totals shown. Numbers are rounded to nearest five. *This level could be much higher. We have been unable to assign a value to possible new contracts with Angola and Mozambique. 2 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET of the USSR's total sales, Ethiopian agreements account for more than two-thirds of the Moscow's sales to all of Africa. Ethiopia is Moscow's seventh largest military recipient, Afghanistan is eighth. With military assistance the USSR has helped modernize military establishments in Afghanistan and Ethiopia, and has converted rebel armies into conventional fighting forces in Angola, Mozambique, and South Yemen. In turn, the USSR has created a dependence within client states for spares and follow- on support and has strengthened the Soviet position in their In 1982, Moscow's Marxist allies were excepted from a general downtrend in deliveries to non-Arab clients. Angola and Mozambique experienced sharp increases in Soviet arms transfers in 1982, as Moscow bolstered the defenses of its African allies against increasing threats from South Africa. Angola received its first guided missile patrol boats and T-62 medium tanks as well as MIG-21. jet fighters. Moscow also introduced several types of equipment into Mozambique to improve the army's power structures. USSR and Eastern Europe: Military Agreements Concluded and Equipment Delivered, 1955-82 Million US $ Agreements Concluded Equipment Delivered Eastern Eastern USSR Europe USSR Europe Totals 9,085 565 5,675 470 Afghanistanb 2,885 90 1,270 40 Angola 780 220 775 205 Ethiopia 3,940 110 2,250 110 Mozambique 320 125 290 95 South Yemen 1,155 25 1,090 25 'Because of rounding, components may not add to totals shown. Numbers are rounded to nearest five. bExcluding Soviet equipment transfer used exclusively by Soviet troops. 3 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 capabilities, including APCs, tanks, and bridging equipment. Other notable deliveries included: o SU-22 fighter bombers and MI-8 helicopters to Afghanistan, o Costal patrol craft, tanks, APCs, and other ground guided missile patrol boat to South Yemen. weapons to Ethiopia, and o SU-22 fighter bombers, MI-8 helicopters, and Military Services The USSR has backed up its weapons sales to client states with the most active technical services program in the Third World. About three-fourths of the Warsaw Pact and Cuban military Table 3 Communist Military Technicians in Client States, 1982a USSR Eastern Europe Cubab 6,700 1,200 34,800 Afghanistan 2,000 NA c Angola 1,200 500 25,000 Ethiopia 1,700 600 9,000 Mozambique 800 .. 800 South Yemen 1,000 100 aMinimum estimates of the number of persons present for a period of one month or more. Numbers are, rounded to the nearest five. bincluding combat units in Angola and Ethiopia. CHighest estimate is 30,000. dHighest estimate is 11,000. 4 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET USSR and Eastern Europe: Training of Client States Military Personnel in Communist Countries, 1956-82a 1956-82 1982 USSR Eastern Europe USSR Eastern Europe Total 8,570 1,340 400 10 Afghanistan 5,075 655 150 Angola 300 5 3.25 NA Ethiopia 1,600 520 25 Mozambique 400 130 ?. ?? South Yemen 1,195 30 100 10 aData refer to the minimum number of persons departing for training. Numbers are rounded to nearest five. 25X1 personnel in non-Communist LDCs are employed in these countries. The ratio for Cubans is more than 90 percent, as Havana has dispatched a full range of military personnel (including the only combat units in the Third World) to Angola and Ethiopia to keep their revolutionary regimes afloat. During 1982, Havana increased its presence in Angola to up to 30,000 troops to support Luanda against more aggressive forays over the border by South Africans. Moscow also accepted about 400 milit r trainees from client states for advanced training in the USSR. 25X1 Economic Aid: Beginning to Make Impact Until recently, the USSR's economic program in.client states has been a secondary effort, and aid levels have disappointed Marxist leaders eager for large amounts of Soviet financing for economic development. In 1982, the USSR provided $650 million in new credits and grants to hard-pressed client states--about three-fourths of its new pledges for the year. Notable among the new agreements were: o A $400 million credit to Angola for a hydropower project, extended under a 1982 framework agreement that could 5 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 eventually provide $2 billion in financing. This deal calls for Brazil to undertake the infrastructure for the project. o Some $170 million in credits and grants to Ethiopia for oil purchases--the first such allocation to a non-CEMA country. USSR and Eastern Europe: Economic Credits and Grants to Client States, 1982a Million US $ USSR Eastern Europe Total 650 Afghanistan 75 ?? Angola 400 ?? Ethiopia 170 ?? Mozambique. 5 10 South Yemen ?? ?? aNumbers are rounded to nearest five. The new credits bring Soviet aid to client states in the past five years to more than $2 billion, about $500 million to Afghanistan for commodities and consumer goods. The aid has included a high proport grants, a feature not usually found in the Soviet program. 25X1 6 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET USSR and Eastern Europe: Economic Credits and Grants to Client States, Extended and Drawn, 1954-82 Million US $ Extended Drawn Eastern Eastern USSR Europe USSR Europe Tot ls 3,660 980 2,270 315 a Afghanistan 2,195 210 1,625 75 Angola 440 100 30 20 Ethiopia 645 390 430 70 Mozambique 180 155 40 80 South Yemen 205 125 140 65 aBecause of rounding, components may not add to totals shown. Numbers are rounded to nearest five. 25X1 Disbursement rates under agreements with client states have been unusually high for the Soviet program because Moscow has provided unprecedented levels of commodity support to Afghanistan to help stabilize the regime. Ethiopia also has required oil subsidies and petroleum shipments under credit because of foreign exchange shortages. This has meant that disbursements to client states have averaged about $400 million annually in the 1980s, or more than two-fifths of Soviet aid deliveries to all non- Communist LDCs. Support to these countries propelled Soviet aid flows over the billion dollar mark for the first time in 1982. It is likely that this Soviet support is even more extensive than we know. For example, we do not include possible budgetary support to South Yemen, whose annual trade deficit with Moscow has been in the $100 million range for the past three years. Moscow may b ing (or possibly even excusing) annual trade settlements.- ______ 7 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET USSR and Eastern Europe: Economic Agreements With and Disbursements to Client States Million US $ Agreements Disbursements Eastern Eastern USSR Europe USSR Europe Totals 3 , 660 980 2 , 270 1954-74 1,030 115 680 45 1975 440 30 25 15 1976 90 45 55 30 1977 40 50 80 25 1978 95 400 90 20 1979 530 75 135 25 1980 650 175 395 20 1981 135 80 330 50 1982 650 10 480 85 aNumbers are rounded to nearest five. 25X1 The USSR's aid to its LDC clients has been noteworthy for its easy terms. About $500 million to Afghanistan and Ethiopia over the past five years have been grants. Credits have been repayable over a minimum of 12 years at a maximum 2.5 percent interest rate. In addition, the Kremlin has.shown itself unusually flexible in rescheduling payments on the large military and economic debts run up by this group of countries. Afghanistan, Ethiopia, and South Yemen have received reschedulings that run through at leas 985 on an estimated $3-4 billion in economic and military debt. 25X1 Economic Technicians There were more than 22,000 Soviet, East European, and Cuban economic personnel in client states in 1982, a little over 15 percent of the Communist technical contingent in the Third World. Angola hosted the largest contingent of Cuban economic personnel abroad--about 2,000 construction workers and 4,000 teachers and doctors working in all sectors of the economy. Communist advisors permeated all levels of the bureaucracies in the Marxist states, providing policy planning, administrative and 8 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET managerial services in the industrial, political, financial, and educational sectors and directing the economy on a day-to-day basis for some. Communist personnel also provided the bulk of the foreign educational and medical services available in most client states. Again, the USSR has shown flexibility in allowing its poorer clients to defer technical services payments under existing lines of credit. Only Angola and Mozambique are known to pay hard currency--generally requisite for an LDC desiring Communist technicians. 25X1 Communist Economic Technicans in Client States, 1982" Number of Persons USSR Eastern Europe Cuba 9,000 5,000 8,300 Afghanistan 3,500 300 100 Angola 1,500 2,050 6,000 Ethiopia 1,000 600 1,000 Mozambique 1,000 1,300 1,000 South Yemen 2,000 750 200 "Minimum estimates of number present for a period of one month or more. Numbers are rounded to nearest five. students in Soviet establishments. Client states also sent a disproportionately large share of the foreign academic students enrolled in Soviet and East European universities under agreements to revamp and upgrade their educational system along Marxist lines. Students from Moscow's five clients accounted for more than one-fourth of the 83,000 students in Communist universities from 100 countries at the end of 1982. Afghanistan had the largest student contingent in the USSR under a 1980 agreement to train upwards of 15,000 9 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Academic Students From Client States Trained in USSR and Eastern Europe, 1956-82a 1956-82 Being Trained as of Dec 1982 USSR Europ e USSR Europe Total 17,620 11,51 5 13,555 7,945 Afghanistan 9,015 4,12 0 7,535 2,675 Angola 1,260 1,07 0 985 790 Ethiopia 5,005 2,32 0 3,680 1,905 Mozambique 625 2,97 5 395 2,200 South Yemen 1,715 1,03 0 960 375 aNumbers are rounded to nearest five. Most of the estimates are based on scholarship awards. Country Surveys Afghanistan the Soviet military campaign against the Afghan insurgents has slowed, if not forced some cutback's in, Moscow's military and economic development programs in Afghanistan. Security breakdowns in the countryside have affected progress on development projects, while military operations have been hampered by conscription and leadership problems. Even so, aid flows have ned substantial because of food and commodity assistance. 25X1 lar e25x1nbers for instruction and indoctrination in the USSR. Military Force Improvements Despite some slippage, the USSR is continuing its effort to expand and upgrade the Afghan def-ense establishment. Inflows of weapons and material for Afghan forces remained heavy in 1982, while Afghan military personnel continued to leave the country in The Soviets are upgrading the Afghan arms inventory with new and sometimes better equipment. For example, old T-34 tanks are being replaced with T-55 and newer model amored personnel 10 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET f~~bicians, for which the USSR usually demands cash payments. Along with the infusion of new and better hardware, the USSR has invested heavily in improving Afghanistan's logistic base. While much of the new construction--airfields, training facilities, and depots--is being financed with credits under economic agreements, it is dedicated to the support of the Soviet expeditionary force. Other Soviet building projects earmarked for the Afghans have been identified and include several NCO and officer training schools, new barracks, a mi vehicle repair shop, and a large medical treatment center. 25X1 Economic Aid Turns to Basic Needs Since the Marxist takeover, Afghanistan has become one of the USSR's largest economic aid recipients (after India) in the non-Communist world. The USSR provided $75 million in new assistance to Afghanistan in 1982, most of it grant aid to finance the delivery of commodities. More than $500 million in aid deliveries to the Marxist government has been in the form of grants, generally to cover the delivery of food and other basic commodities. Disbursements were stepped up after the December 1.979 Soviet invasion, and have averaged $200-300 million per year. In addition to its sizable commodity support, the USSR has permitted Afghanistan to defer payments on the services of Soviet for battle losses. carriers. The Air Force has received the most attention and improvement thus far; in 1982, the USSR reportedly transferred SU-22 fighter-bombers and MI-8 helicopters to the Afghan government. On a few of th25xi aircraft represented replacement In contrast, the war has greatly impeded Soviet efforts to move forward with such other major development projects as the Ainak copper complex, the Hajigak iron ore scheme, natural gas exploration in the north, and extension of the Soviet power grid into Afghanistan. Rebels blew up the gas pipeline close to the border at Jeraqduq in 1982, interrupting gas supplies to the USSR. The only major development contract concluded between Moscow and Kabul in 1982 was for a $200 million project to link Afghanistan to the USSR's power grid, to be financed under old agreements. The Soviet program in 1982 was supported by 3,500 technicians in Afghanistan, and a burgeoning training effort that saw 7,500 Af hans in Soviet civilian educational institutions at year end. 25X1 well ahead of schedule. Deliveries to projects have continued at about $75 million annually as the Soviets expedite work on transport and military- related projects under credit agreements with Afghanistan that ultimately will facilitate logistics for Soviet troops. For example, in April Soviet personnel completed a bridge across the Amu Darya, a river which forms part of the USSR-Afghan border, 25X1 11 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 U 1L 'i .L 1 Until the invasion, Moscow's economic program in Afghanistan was self-sustaining. Commercial deliveries and aid flows were nearly balanced by Afghan exports of 3 billion cubic meters of natural gas annually'through a pipeline built by the Soviets in the mid-1960s. Since the invasion the Soviets have had to provide an average of 150 -21 lion in commodities annually that will not be repaid. of Afghanistan has become almost completely dependent on the Soviets for economic aid as well as military equipment. Moscow has been forced to supply food to Afghan cities because the war has disrupted traditional distribution patterns, but it has been unable to replace the $100 million plus in annual Western aid flows to Kabul that dried up when it crossed the Afghan border in December 1979. Almost all of Afghanistan's foreign trade is now carried out-with the USSR, and Moscow is having difficulty in meeting im ort demands from Afghanistan's consumer goods-oriented society. 25X1 sides are also discussing the construction of an oil refinery. On the economic side, Angola finally received a significant Soviet commitment to economic development in January under a 10- year agreement that eventually could provide up to $2 billion in credits. The USSR already has signed a contract to provide $400 million in equipment credits for the Kapanda hydroelectric dam and powerplant that will be Angola's largest construction project. In an unusual move, the USSR joined with Brazil (which will perform civil construction) to execute this project. It is part of a comprehensive Soviet-formulated development plan under which Moscow will also construct a 990,000 acre irrigation system, bridges, and other projects in Malanje province. The two equipment deliveries for the year. Angola Military setbacks and heavy casualties stemming from more aggressive actions by UNITA guerrillas and South African government troops precipitated sharp increases in Soviet and Cuban'support to Angola last year. Putting aside an earlier reluctance to deepen its military assistance, Moscow boosted arms shipments to Angola to record levels and introduced more advanced weapons to shore up Luanda's air and coastal defenses. Some $180 million in Soviet military equipment deliveries was identified in 1982, twice the level of past years. The higher value is linked largely to the arrival of more advanced, more costly weapons, including Angola's first OSA missile patrol boat, late-model medium tanks, BMP armored reconnaissance vehicles, and MIG-21 fighters and various early warning ra-dar stations. Additional T-55 tanks, armored personnel carriers, 25X1 artillery and military transport vehicles rounded out Soviet 12 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 The large new Soviet agreement has not appreciably reduced the growing tension in relations over the Soviet and East European failure to help reverse the decline in Angola's economy. More than 9,500 Communist economic technicians were present in Angola in 1982, but industrial production lagged far behind prewar levels, and only the Western assisted oil industry operated at a profit. Food and consumer goods shortages became more pronounced during the year. Once an agricultural exporter, the country now imports 90 percent of its food. Angola's poverty has been camouflaged by sharp increases in petroleum prices--oil nrine droDs have virtually bankrupted the government. contributes 80 percent of Angola's export earnings--butt -recent military supplies and technical services. Angolans became more restive over what they saw as Communist monopolizing of the few food and consumer items that were imported, while Angolan cials watched the growing Soviet debt burden with dismay. 25X1 has been costing it-$2 billion a year in hard currency for Ethiopia Concessions made on both sides of the bargaining table during Chairman Mengistu's October visit to Moscow in 1982 appear to have strengthened the bonds linking the USSR and Ethiopia. In return for signing an agreement to move forward with the establishment of a Communist party in Ethiopia, the USSR agreed (a) to review rescheduling of the country's large military indebtedness (estimated at $2-3 billion), (b) additional economic assistance, and (c) additional arms deliveries. 25X1 Soviet arms deliveries to Ethiopia in 1982 fell to $110 million (a six-year low), but the volume remained substantial by any measure. Equipment arrivals consisted mostly of land armaments--tanks, APCs, artillery and heavy transport vehicles. Three Soviet-made coast patrol craft rounded out the year's 25X1 deliveries to Ethiopia. As a result of lengthy economic negotiations, Moscow made substantial new credits available to Ethiopia for oil--its first such concession to a non-Communist LDC, and promised additional development aid. The USSR agreed to provide 500,000 tons of crude oil in 1983 (all of Ethiopia's requirements) on credit at prices 10 percent below the world market. The USSR also appeared to be moving forward on Chairman Mengistu's repeated requests for development aid. Moscow began preliminary work on the $250 million Gambella irigation project for which the USSR reportedly will provide large new credits. The USSR also continued work on: o acement plant, o a farm machinery assembly complex, o a caustic soda plant 13 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET While publicly reaffirming his political commitment to Moscow, Mengistu continues to rely on the West for economic assistance. Ethiopia is trying to arrange a Western donors' conference in 1983 in the hopes of increasing aid for Ethiopian development projects. Mengistu hopes to obtain substantial increases in aid to food production, the centerpiece of his ambitious five-year plan. Funding has been reduced by several years of low coffee prices and decreasing production. In spite of the deteriorating economy, Mengistu probably will not make the political concessions necessary to attract significant increases in Western funds above the cur 50 million Ethiopia receives annually from Western donors. 25X1 o grain and fodder warehouses, o oil, gas, and mineral prospecting. Mozambique The. USSR and its East European allies deepened their economic involvement in Mozambique during the year with over 500 new technicians and $15 million in new aid. The USSR, the largest donor with $140 million in outstanding development credits, pursued several initiatives: o Participation in a railroad from the Moatize coal fields to the port of Beira using Brazilian firms as civil works contractors, J U[Jy V U LGU L1L Y1 1lIJ U I r, G11 LJ. Mozambique's policy of expanding ties with Western powers did not affect its relations with Communist countries in 1982. As the security situation worsened, some Mozambican officials questioned the wisdom of relying on Comnunist countries for military equipment and services, but these reservations have not yet become urgent enough to damage ties forged during Freliino's long liberation struggle and reinforced with nearly half a billion dollars in Communist military equipment and supplies. Deliveries of Soviet military equipment in 1982 included light cross-country armor and vehicles and bridging equipment tailored to help the Mozambican armed forces cope with the South African o The supply of $150 million of equipment for the second stage of the Cabora Bassa hydropower projects, o Accelerated work on mining and agricultural projects, an aluminum smelting plant at Caia, and intensified coal exploration. The USSR also donated $4.6 million in food and see ins to Mozambique and signed a two-year trade agreement. 14 SECRET, Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 V L V14L 1 East Germany was the only other Communist donor that provided new aid--$10 million in commodities as a grant. For the most part, East European countries concentrated on implementing projects agreed to earlier. East Germany (a) discussed a 120,000 hectare grain-growing project, (b) accepted several thousand new students under a program developed in 1981 to train Mozambicans at home and in Germany, (c) sent more agricultural advisors and equipment, and (d) donated educational materiels. Romania prepared to being work on a $16 million steel plant for which it is providing some financing. Some 1,300 East European economic personnel were stationed in Mozambique during 1982, commanding hard currency payments estimated at $25 million annually for 25X1 their home governments. Mozambique's Cuban connection has evolved into a relation- ship that is characterized by good rapport from the leadership level down. About 1,000 Cubans worked in Mozambique on agricultural, medical, and educational projects; governed by a 25X1 series of agreements signed in the mid-1970s. Even with Communist assistance, Mozambique has made scant headway in filling the void left by the departure of nearly 200,000 Protuguese who were in the country before independence. Production of key export crops--cashews, sugar, and cotton--is at about half of pre-independence levels, manufacturing output is at about half of capacity, and the prospects for economic recovery soon are poor. Increasing rebel activity dampens prospects for an increase in foreign investment and major development projects are falling by the wayside. 25X1 South Yemen The USSR values South Yemen both for its strategic location and its Marxist politics, and maintains its position in Aden because it is the major provider of arms and military technical assistance. In 1982, the USSR provided Aden with an advanced variant of the SU-22 fighter/bomber that will upgrade pilot training and ground attack-capabilities, MI-8 helicopters, an OSA-II guided missile patrol boat (plus STYX missiles), a torpedo retriever, and armored personnel carriers. Nevertheless, Soviet arms deliveries dropped by more than half from the 1981 level to $55 million, as shipments unde 850 million in agreements signedxl in the late 1970s wound down. Despite his concern over the mounting military debt to the USSR, President Al-Hasani shows no signs of turning elsewhere for military assistance. We have received reports that both the economic and military debt (estimated at $1-1.5 billion) have been deferred for five years. 25X1 Economic realities, however, threaten to damage South Yemen's relations with the USSR and its East European allies over the long term. Dismayed by the lack of economic progress made since the revolution, President al-Hasani has begun actively to 15 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET seek trade and investment in the West and Saudi Arabia. Communist-sponsored projects have suffered in comparison to the limited Western effort in South Yemen. For example, in 1982 an Italian firm discovered oil in Aden's territorial waters; long- term Soviet and Romanian land-based efforts have turned up nothing. Nor has the USSR made much progress on long-awaited the cost of the powerplant has increased threefold since i- was originally promised. The Soviets also are encountering increasing hostility from the local populace because of arrogant behavior and plundering of South Yemeni markets of consumer durables and food to send back to the USSR. In spite of the increasing impatience of South Yemen leaders, in 1982 the USSR managed to sign agreements to improve Aden port and construct a satellite receiving station as part- of the Intersputnik network. Work continued on a fishin port, irrigation projects, a hospital, and the powerplant. 25X1 16 SECRET Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6 SECRET SUBJECT: Communist Aid to Selected States OGI/IS/CA:C. Distribution: Orig - 1 - 1 - 1 - 1 - 1 - 8 - Addressee CPAS/ILS NIO/USSR D/GI, DD/GI C/ISID C/IS/CA OGI/PG (12 December 1983) Sanitized Copy Approved for Release 2010/09/15: CIA-RDP85T00287R000600920001-6