SOVIET AND EAST EUROPEAN ECONOMIC ASSISTANCE PROGRAMS IN NON-COMMUNIST LESS DEVELOPED COUNTRIES, 1982 AND 1983

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• Publication Date: November 1, 1984
• Content Type: REPORT

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Directorate of S ret.
Intelligence
Soviet and East European
Economic Assistance Programs
in Non-Communist Less Developed
Countries, 1982 and 1983
A Research Paper
GI 84-10182
November 1984
Copy 4 4 2
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Intelligence
V n
Soviet and East European
Economic Assistance Programs
in Non-Communist Less Developed
Countries, 1982 and 1983
This paper was prepared b~ I Office
of Global Issues. This paper has been coordinated
with the Department of State, the Defense
Intelligence Agency, and the Agency for International
Development
Comments and queries are welcome and may be
directed to the Chief, Subversion Analysis Branch,
Instability and Insurgency Center, OGIF_~
Secret
G1 84-10182
November 1984
25X1
25X1
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Summary
Information available
as of 14 September 1984
was used in this report.
Countries, 1982 and 1983
Soviet and East European
Economic Assistance Programs
in Non-Communist Less Developed
In the past three decades, the USSR and Eastern Europe have provided
nearly $40 billion in economic credits and grants to non-Communist less
developed countries. In tandem with military assistance, the USSR and its
allies have used their economic aid programs to try to replace Western
influence in LDCs, to expand Soviet trade, and to gain access to strategic
raw materials. Initially, the USSR gave preference to emerging states that
were following a noncapitalist path of development. In the I 960s the
program was broadened to include almost any country willing to accept
aid. Today more than 70 countries have accepted economic aid from the
USSR or its allies.
Soviet economic aid since 1954 has never had the dramatic impact of the
military program. It has been far more modest-totaling about $27 billion,
as compared with $83 billion for the military. Moreover, the Soviet
economic program has been small by international standards. Moscow's
disbursements to LDCs over the past few years have accounted for less
than 3 percent of all international aid, compared with a US share of nearly
25 percent. Despite the large number of countries which have received
Communist economic aid, the program is focused on a few countries along
the Soviet border and in the Middle East; Arab and South Asian countries
account for two-thirds of Soviet pledges. East European countries, follow-
ing a similar pattern in their programs, also have concentrated on Arab
and Asian recipients.
Since the start of the 1980s, most Soviet and East European economic
credits have carried somewhat harder terms. This reflects Communist
attempts to minimize the costs associated with the program. The agree-
ments increasingly, for example, call for repayment in hard currency, oil,
and other strategic materials. Grants now go almost exclusively to Marxist
LDCs such as Afghanistan and Ethiopia. Consequently, the spread
between liberal official Western development aid and Communist aid
terms has increased. Still, the new Communist credits provide cheaper
funds than Western market financing and have enabled Communist
countries to compete successfully with Western bidders on lucrative LDC
development contracts. Moreover, the Soviets have been more willing than
other aid donors to build the large industrial establishments demanded by
LDCs, sometimes with little economic justification.
Secret
GI 84-1O, 2
Novemhe, 1984
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During the past few years, personnel exchanges have become an increas-
ingly important part of Warsaw Pact relations with LDCs, and have
provided good financial and political returns. Nearly 125,000 Soviet and
East European economic project specialists and professionals were in LDCs
in 1983, and nearly 15,000 LDC students departed for academic training
in Warsaw Pact institutions. The technical services and academic training
programs have been broadly based, and Communist countries have person-
nel agreements with 110 countries, 34 of which have not accepted other
forms of Communist aid.
At present, the LDCs employ more than 40,000 Soviet project specialists
and professionals. Originally, LDCs financed the services of Soviet person-
nel under aid agreements. Now, aside from a few doctors and teachers
provided on a grant basis, the USSR charges $40,000 to $70,000 a year for
each of its specialists. Most are located in oil-producing LDCs, which can
pay in hard currency. Because of a skilled labor shortage at home, Moscow
is very reluctant to send civilian personnel to LDCs unless they earn
foreign exchange.
The academic training program has the potential for significant political
payoffs for the Kremlin. In some countries, mostly in Africa and Latin
America, it is Moscow's only ongoing activity. Nearly 100,000 students
from LDCs have attended Soviet universities and technical schools since
the mid-1950s. In Soviet-oriented LDCs, including Afghanistan and
Ethiopia, the USSR has available 15,000 local graduates of Soviet military
or academic programs who can at least speak Russian even if they do not
sympathize with Soviet goals.
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Summary
Preface
1. Trends in Soviet and East European Economic Assistance
The Record on Commitments
The East European Program
The Record on Disbursements
Economic Technical Services: A Growth Industr}
Academic Programs: Showing Continued Dynamism
The Program Ahead
Soviet Credits Still Popular
II. Communist Economic Programs: A Regional Analysis
Middle East and North Africa: Moscow's Largest Economic Stake
South Asia: Deepening Communist Involvement
East Asia: Suspicious of Soviet Initiatives
The Caribbean and Central America: The Newest
Assistance Program
South America: Pursuing New Opportunities
Sub-Saharan Africa: Heightened Economic Support
20
22
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Figure 1
Warsaw Pact: LDC Economic Aid Programs
ICcunomic kid in
Billions of I S S
4(I
Aid credits
~ l-rude credit. 3
I El Grunts 3.11
I ast P.urupain I tensions
1.6
Ihousands of
Person.
0.12
III
0-R
116
0.1
0.2
21)
ISSK
First F.uropc.in 11111
100
H0
60
60
11
11
1
111
40
11
,0
1
20
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Soviet and East European
Economic Assistance Programs
in Non-Communist Less DeveI
Countries, 1982 and 19831
I: Trends in Soviet and East European Economic
Assistance '
Economic assistance has been an important element
in Soviet foreign policy in LDCs since Moscow pro-
vided its first aid to a few Asian neighbors in the mid-
1950s. The USSR has used its aid program to:
? Create and maintain stable ties with LDCs.
? Demonstrate a continuing commitment to countries
that have a chosen socialist path to development.
? Secure resources for its own and East European
economies.
The Soviet economic aid program has been successful
in gaining increased access to the LDCs for Moscow
through placement of Communist personnel in key
countries, expanded access to strategic commodities,
growing hard currency earnings, and, in some cases,
increased trade dependency. In addition, economic aid
' The data on economic agreements reflect the latest information
available and supersede information in our previous publications.
They are derived from a variety of sources.
For the purpose of this report, the term Communist countries
refers to the USSR and the following countries of Eastern Europe:
Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and
Romania. We have also included data on Cuban economic aid
extensions to LDCs, because Cuba frequently acts in concert with
Warsaw Pact countries and generally supports their political goals
through its aid program.
The term less developed countries includes all countries of
Africa except the Republic of South Africa; all countries of East
Asia except Hong Kong and Japan; Malta, Portugal, Greece, and
Spain in Europe; all countries in Latin America except Cuba; and
all countries in the Middle East except Israel. Data include about
$50 million in aid to Kampuchea and Laos, which became Commu-
nist in 1975 and are reported on for prior years for historical
reasons.
The term Marxist clients refers to countries that consider
themselves Marxist and that rely primarily or entirely on Commu-
nist military support to maintain their power. They are Afghani-
stan, Angola, Ethiopia, Mozambique, Nicaragua, and South Ye-
Within the aid context, the terms agreements, commitments,
and extensions refer to pledges to provide goods and services, either
on deferred payment terms or as grants. Assistance is considered to
have been extended when accords are initialed and constitute a
formal declaration of intent. For economic aid, credits with repay-
ment terms of five years or more are included. These credits are
designated as "trade credits" if amortization is less than 10 years.
The terms drawings and disbursements refer to the delivery of
has sometimes led to other relations, including mili-
tary assistance; access to ports, repair facilities, and
airfields in LDCs; and an expanded political presence
in some countries through the provision of high-level
advisers to ministries responsible for economic affairs.
The Record on Commitments
Since the start of the 1980s, the Smict Union has
pledged almost $6.5 billion of economic aid to non-
Communist LDCs. After a severe dropoff in 1981 and
1982, the program recovered in 1983 when total new
commitments approached $2.3 billion. The earlier
decline may have reflected a retrenchment made
necessary because of increasing demands from all of
Moscow's aid recipients. Along with the resumption
of the historic level of commitments in 1983, a distinct
tier system for countries receiving Soviet aid has
materialized. Key elements are:
? Larger amounts of grant aid and commodity sup-
port for Marxist clients.
? Occasional lenient long-term credits for a few tradi-
tional partners.
? Expanding use of trade credits for the majority of
LDC recipients.
Support to Marxist Clients. Moscow made nearly
$1.6 billion in new economic commitments during 25X1
1982 and 1983 to the Marxist LDCs. bringing total
Soviet economic pledges to this group of countries to
nearly $5.6 billion over the past three decades (table
1). In 1982, almost all new Soviet commitments went
to them. For Afghanistan, Ethiopia, and South Ye-
men, the USSR and its allies have almost completely 25X1
displaced bilateral Western aid donors, although sig-
nificant multilateral funds continue .o flow to aU but
Afghanistan. 25X1
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Table I
USSR: Economic Aid
Extended to Non-Communist LDCs
Total Marxist Non-Marxist
States States
Total 26,699 5,557 21,142
1954-77 13,501 1,988 11,513
1978 3,002 94 2,908
1979 3,749 530 3,219
1980 2,588 1,168 1,420
1981 580 218 362
1982 965 890 75
1983 2,314 668 1,646
Of which:
Algeria
Ethiopia
Syria
Afghanistan
India 140
Pakistan 275
Recent Soviet economic aid agreements with client
states have contained some unusual features:
? A $400 million credit to Angola in 1982 for a
hydropower project (extended under a 1982 frame-
work agreement that could eventually provide $2
billion in financing) calls for Brazil's participation in
construction of the Capanda dam and powerplant,
the first instance of a Soviet joint venture with an
LDC in a third country.
? The $170 million in aid to Ethiopia financed oil
purchases from the USSR for 1983. Moscow has
never before underwritten oil purchases by a non-
Communist country.
? The $165 million credit extension to Nicaragua
provided some $50 million for technical services and
project studies, for which Moscow usually requires
hard currency on a cash basis.
These agreements were politically and strategically
motivated and will provide few economic returns in
the form of raw materials or foreign exchange, which
the USSR usually seeks in its aid agreements. Only
the Angolan agreement offers Moscow the prospect of
breaking even financially. Such aid, however, deepens
LDC ties with the USSR and opens opportunities for
Moscow to extract concessions such as port and air
facilities in Ethiopia and access to petroleum and
strategic materials in Angola and Mozambique. In
the case of Nicaragua, Moscow is supporting the first
viable Latin American Marxist regime since Cuba
changed governments in 1959. This aid also repre-
sents the price Moscow must pay to retain its influ-
ence in these states.
Commitments to Non-Marxist LDCs. Aid to this
group consists principally of long-term credits used to
finance major development projects and trade credits
to facilitate the purchase of Soviet goods. Trade
credits are the most vigorous and fastest growing
element of the Soviet economic program in these
countries (table 2). Both categories essentially dried
up in 1982 as extensive project studies and contract
negotiations dragged on with a number of recipients;
in 1983, of the $1.6 billion of total Soviet economic
aid commitments to non-Marxist LDCs, $1.1 billion
represented trade credits to recipients with long-
established political, military, or business ties with the
Kremlin.2 Among the major allocations were:
? $325 million to Syria for thermal power plant
construction and commercial aircraft acquisition.
? $200-400 million to Greece for an alumina plant.
? $275 million to Pakistan for a thermal power plant.
? An estimated $250 million to Algeria for railroad
construction. The actual value of these credits could
be much higher.
? Credits in the $70-80 million range to Argentina,
Bangladesh, and Bolivia for equipment purchases.
Our figure for Soviet trade credits in 1983 is probably understated
because we have been unable to ascertain the scope of Soviet credits
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Table 2
USSR: Trade Credits to
Non-Communist LDCs a
Total
Extended
Trade
Credits
Total
26,699
4,975
1954-73
9,275
980
1974
815
5
1975
1,970
205
1976
1,005
290
1977
435
1978
3,002
225
1979
3,749
1,200
1980
2,588
640
1981
580
285
1982
965
50
1983
2,314
1,095
The allocations in 1983 underlined the near-commer-
cial nature of Soviet development activities in this
group of countries. About $1.1 billion of the new
credits carried 10-year repayments with interest rang-
ing from 4 to 6 percent. These terms, assuming a
grace period, barely meet standards for aid as defined
by the international community.3 Although Western
donors also expand exports by tying some aid funds to
procurement from the donor country, the USSR is
devoting almost all of its financing for non-Marxist
LDCs to promote sales of Soviet equipment. The
proportion of these export-type credits in new Soviet
pledges has grown steadily in the 1980s. Moreover,
many of the agreements that Moscow concludes with
non-Marxist states call for payback in raw materials:
the 1983 credit to Greece for an alumina plant will be
paid for in alumina. Others are payable in hard
currency.
' Western aid donors use a "grant element" as a common basis for
comparing the concessional nature of aid programs under different
terms of repayment. A 100-percent grant element is an outright
gift, while a 12-year, 2.5-percent loan with a 25-percent grant
element qualifies as official development assistance under mini-
only 15 percent in 1975.
In addition to tightering credit term, Moscow also
has moved to broaden its participation in the imple-
mentation of projects undertaken in non-Marxist
states. Moscow is
getting more extensively involved in turnkey projects,
under which the USSR manages all phases of project
implementation, including letting subcontracts, hiring
local labor, arranging for local materials supply, and
the provision of equipment and supervisory technical
services. Turnkey construction generally is more effi-
cient in LDCs than Moscow's more traditional tech-
nique of supplying only equipment and technicians to
supervise installation and startup operations. It also
requires a far more extensive technical presence.
According to the Soviet magazine F,rc gn Trade,
turnkey activity accounted for 45 percent of the
volume of Soviet assistance in 1982, compared with
The East European Program
Our information about East European contracts with
LDC:s is extremely fragmentary. In many instances
we cannot determine whether a contract is a straight
commercial deal or one involving Ea't European aid
to the Third World country involved in the transac-
tion. In 1982 and 1983, some S3.5 billion in East
European-LDC contacts fell into this uncertain area.
These contracts include:
? A 5185 million Bulgarian contract with Syria for
petroleum gas development.
? A S 130 million Czechoslovak credit to Syria for a
gas treatment plant and pipeline.
? A S100 million Czechoslovak agre:ment with Iraq
to reclaim 13,000 hectares of desert land.
? A 51.5 billion Romanian contract lo build houses in
Algeria.
? A S1 billion Bulgarian contract with Syria for
further gas development
? A Romanian agreement to assist
$500 million power plant
At least some of these deals may in fact have provided
some aid. So far, however, we are able to identify only
about $950 million in new East European deals with
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Moscow has become more concerned about its inter-
national image as an aid donor. For the first time in
1982, the USSR responded to criticism by Western
countries and LDCs of its meager aid performance.
At the July 1982 meeting of the UN Economic and
Social Council, the Soviet Ambassador to the United
Nations announced that net Soviet aid disbursements
to LDCs in the period 1976-80 amounted to 30 billion
rubles ($40-45 billion at average annual exchange
rates), and accounted for 1.3 percent of Soviet GNP in
1980
According to our estimates, Soviet gross disburse-
ments could have reached at least half of the claimed
level if, in addition to some $3 billion in aid to non-
Communist LDCs, Moscow also included the follow-
ing components:
? More than $13 billion of aid to Cuba (most of it in
the.form of subsidies that do not conform to
international definitions of aid).
? $3.4 billion of aid to Vietnam.
? $4.0 billion to other Asian Communist LDCs.
? Up to $1 billion for academic assistance to all
Third World countries.
LDCs in 1982/83 that clearly constitute aid pledges
(table 3). Although most East European countries
have preferred to provide the bulk of their assistance
to wealthier LDCs to promote hard currency exports,
two-thirds of East European 1983 aid commitments
went to Marxist states. These countries have rarely
accounted for more than 25 percent of annual East
European pledges, and overall they account for just
over 10 percent of total pledges.
East Germany, whose aid program has traditionally
been driven by its own political interests-especially
the desire to establish its worldwide status and legiti-
macy vis-a-vis West Germany-made the best show-
ing in 1982 and 1983 with more than $300 million in
? Several billion dollars in grant technical assistance
subsidies (the difference between what the USSR
charges and what Western technicians performing
similar services would receive) to Communist and
non-Communist LDCs.
It is probable that the Soviets placed an unreasonably
high value on their technical services and included
unsettled trade deficits and possibly even military
debt rollovers in their claimed aid totals. Our esti-
mates show that the aid the USSR claims for 1980
would account for about 1.4 percent of national
income or about 1 percent of GNP, as measured by
the West. We believe, however, that net aid is sub-
stantially lower than the Soviet estimate.
In addition to carrying hard terms for most non-
Communist recipients, the USSR's aid is narrowly
focused. Of the estimated $23.6 billion in Soviet
economic aid disbursements between 1976-80, 85
percent went to the USSR's Communist allies outside
the Warsaw Pact, and another 4 percent went to
Marxist LDCs such as Angola, Ethiopia, Mozam-
bique, and South Yemen. Since 1981, more than 90
percent of the USSR's estimated $16.4 billion of aid
to both Communist and non-Communist developing
nations has gone to Communist LDCs and other
Soviet client states.
new commitments (table 4). More than 70 percent
($220 million) of its new aid pledges were directed to
countries targeted for special attention by the War-
saw Pact-Grenada, Mozambique, and Nicaragua.
Because of its longstanding policy of aiding "frater-
nal" states, East Germany has responded more will-
ingly than other East European states to Moscow's
call for both political and material support to Marxist
clients; it accounts for more than half of East Europe-
an pledges to them-chiefly to Ethiopia, Nicaragua,
and Mozambique. Furthermore, Bulgaria devoted
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Table 3
Eastern Europe: Economic Aid
Extended to LDCs
Table 4
Eastern Europe: Economic Aid
Extended to Non-Communist LDCs,
1982 and 1983 a
Total
Marxist
States
13,120
1,567
1954-77
7,883
239
1978
1,598
417
1979
646
95
1980
1,322
192
1981
723
173
1982
560
94
1983
388
.257
nearly 60 percent ($87 million) of its new aid to
Marxist states in 1982 and 1983; Czechoslovakia
directed about 70 percent ($48 million) to these
countries.
Among the East European allocations to other LDCs,
Romania made the largest single commitment $250
million to Bangladesh as a second tranche of a $500
million credit to finance projects in virtually every
area of Dhaka's public sector. Always sensitive to the
question of maximizing benefits to its own economy,
Romania has consistently refused to devote aid re-
sources to Marxist clients who cannot afford repay-
ment. Other East European donors made allocations
in the $50 million range to traditional clients. Poland
did not conclude any new development agreements
with LDCs; potential recipients are concerned that
Warsaw cannot meet contract obligations because of
domestic political and economic problems.
The Record on Disbursements
Soviet and East European aid disbursements reached
a record $1.8 billion in 1983, driven by Soviet deliver-
ies of nearly $1.3 billion (table 5). Major recipients of
Soviet aid in 1983 included:
? Ethiopia, with $235 million of oil and project
assistance.
? Afghanistan, with more than $200 million in com-
modities and other assistance.
Total
560
388
Bulgaria
~2
95
Czechoslovakia
21
47
East Germany
I ( I
205
Hung.iry
Romania
125
10
? Nigeria, which received an estima.ed $150 million
of steelmaking equ pment for the Alaokuta project.
? Pakistan, whose Krachi steel plant absorbed $110
million of equipment.
The :nigh level of Soviet disbursements reflects Mos-
cow's unprecedented volume of grant commodity sup-
port to Marxist state;-over $300 million in 1983.
This type of aid is delivered very quickly, compared
with project assistance that may be disbursed over a
decade or more. Afghanistan has been the largest
beneliciary, receiving commodity shipments to help
stabilize the regime. Ethiopia also has required petro-
leum subsidies and shipments under credit because of
foreign exchange shortages. It is likely that Soviet
support is even more extensive than c e know. For
example, we do not include possible budgetary sup-
port to South Yemen, whose annual trade deficit with
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Moscow has been in the $100 million range for the 25X1
past three years. Moscow may be deferring (or possi-
bly excusing) Aden's annual trade settlements
Recent East European disbursement, of close to $500
million in 1983 regaiiied the levels o' the mid-1970s
after three sluggish years that gener,illy coincided
with the outbreak of the war between Iran and Iraq
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Table 5
USSR and Eastern Europe:
Economic Aid Deliveries to
Non-Communist LDCs
Million US $
USSR
Eastern
Europe
Total
Deliveries
Of which:
Grants
1979
574
30
305
1980
812
306
298
1981
853
198
384
1982
1,162
152
485
1983
1,300
330
495
Table 6
Economic Technicians in
Non-Communist LDCs, 1983 a
Total
Total
124,470
USSR
41,085
Eastern
Europe
83,385
th Af
i
N
155
69
11
625
57
530
or
r
ca
,
,
,
Sub-Saharan Africa
17,870
11,315
6,555
East Asia
40
15
25
Europe
75
75
Latin America
1,365
515
850
Middle East
28,125
10,465
17,660
7,840
7,150
690
(where major East European development programs
were in progress) and the troubles in Poland. The
acceleration of Bulgarian and East German deliveries
to Nicaragua and Mozambique under recent agree-
ments were responsible for much of the increase.
Economic Technical Services: A Growth Industry
A key feature of Soviet and East European economic
aid to LDCs continues to be extensive technical
support. A record 124,500 Warsaw Pact economic
technicians were posted to 74 LDCs in 1983-50
percent more than in 1980. The programs are focused
on a few clients particularly Algeria, Iraq, and
Libya-with more than three-fourths of all techni-
cians working in Middle Eastern and North African
oil-producing states that pay hard currency or oil for
services (table 6). About 15,000 were in countries that
have received large amounts of Soviet development
aid, such as India, Syria, and Turkey. Another 15,000
were in Marxist states and were employed under a
mix of terms that ranged from hard currency pay-
ments for Angola and Mozambique to deferred
charges under development credits to Afghanistan,
Ethiopia, Nicaragua, and South Yemen.
We estimate that Soviet and East European hard
currency earnings from their economic technical serv-
ices programs have been close to $2 billion annually in
the past few years as much as $500 million for
USSR and $1.5 billion for Eastern Europe. Even the
poorest African states, such as Guinea and Mali, must
remit half of the charges for Soviet services in hard
currency from their very limited foreign exchange
reserves; the requirement causes considerable friction
in their relationships with Moscow. The balance is
paid in local currency or goods. The Soviets charge
$40,000 to $70,000 annually for technicians, based on
their skills and seniority, while East European coun-
tries charge up to $80,000 a year. Communist coun-
tries, which originally provided services at bargain
rates, recently have brought technicians' salaries clos-
er to Western levels.
Academic Programs: Showing Continued Dynamism
The number of students from non-Communist LDCs
being trained in Soviet and East European academic
institutions grew to more than 90,000 in 1983
(table 7). Nearly 15,000 of these students were enter-
ing Communist universities for the first time. Afghan-
istan, whose educational system is being revamped
along Marxist lines by Communist educational plan-
ners, had 11,000 nationals in the USSR and Eastern
Europe under agreements signed in 1980. Jordanians
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Table 7
Academic Students From LDCs
in Training, December 1983 a
As a payoff, they hope to establish tics to persons who
may eventually obtain influential positions in their
home countries. East
European countries also hope to establish lasting
relationships with LDC nationals who they can use to
USSR
Eastern
Europe
Total
56,070
34,785
North Africa
Sub-Saharan-Africa
17,915
12,645
East Asia
60
35
Europe
15
20
Latin America
7,590
2,975
Middle East
15,105
13,140
South Asia
12,030
4,030
promote business relations.
The Soviet program has been showing some success.
One of the members of the ruling Directorate in
Nicaragua is a Soviet graduate, according to the US
Embassy in Managua. Other Soviet-trained LDC
officials include four cabinet ministers, three sub-
cabinet directors, several ambassadors, and thousands
of government bureaucrats, professors, and doctors.
,Sorrie nre willino, to serve Soviet ends
made up the second-largest national grouping (8,500)
under a large-scale training program that began
about five years ago. Some 40 percent of the LDC
students in Communist countries were from Africa,
dominated by contingents from Marxist nations such
as Ethiopia (5,000), Madagascar (2,325), Mozambique
(2,775), Algeria (2,350), Congo (1,800), and Angola
(1,900). Nigeria was the only moderate African state
with a large student population in Communist coun-
tries (2,500).
The continued popularity of European Communist
scholarships stems from the dearth of educational
opportunities in most LDCs, as well as from the fact
that the Warsaw Pact states cover most expenses,
(transportation, room and board, tuition, medical ex-
penses, and pocket money) and sometimes accept
dubious academic credentials. These scholarships are
valued at about $5,000 annually, according to Soviet
officials)
Academic and technical training have long been the
most concessional feature of Soviet and East Europe-
an aid programs and often represent the only assist-
ance provided to some LDCs. We estimate that the
Warsaw Pact countries spend the equivalent of $400-
500 million a year to maintain these educational ties.
The Program Ahead
The Soviet economic aid program seems to be on a
dual track. A core effort is devoted to providing
financial support for Marxist LDCs. We see no
decline in the need for such assistance in the years
immediately ahead. Most of these countries have
weak economies, and frail linkages to the Western
economic system. Consequently, they are becoming
increasingly dependent on Soviet largesse. Moscow,
however, will not be willing to provide much more
funding than it has during the recent peak years.
Although the Kremlin would like to minimize the
financial drain these countries impose, it does not
want to give the impression that it is letting its
Marxist allies down. For example, Moscow is study-
ing a large hydropower project in Nicaragua, an oil
refinery in Angola, and an aluminum plant and
railroad construction in Mozambique. Some of these
contracts could carry 10-year repayment terms
The more dynamic element of the Soviet economic aid
program will involve Moscow's efforts in non-Marxist
LDCs. These countries will receive expanded Soviet
credits for their ambitious development plans, as
Moscow moves to enhance or protect its presence.
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Figure 2
Major Soviet Offers of Aid for Projects in Less Developed Countries (LDCs), 1983
Type of project
Nuclear power plant O Heavy industry
Other power plant o Metals industry
MEXICO
OEI
PHILIPPINES
0
Moscow also sees the program as a way to boost hard
currency revenues. Indeed, Kremlin officials have
recently shown greater interest in export-type devel-
opment financing for both old and new non-Commu-
nist recipients. In 1982 and 1983 Moscow was negoti-
ating 10-year repayment terms for:
? $500 million for electrification and transportation
projects in Argentina.
? A $500 million hydropower plant in Mexico.
? A $250 million cement plant in the Philippines.
? A multipurpose dam and power plant in Pakistan
that will cost $3.7 billion.
The USSR also has recently begun a push to sell
nuclear power plant equipment to LDCs. India, Iraq,
Morocco, Pakistan, Syria, and Turkey have received
Soviet offers for nuclear plants, and Libya may
already have concluded a contract. Moscow probably
will have to provide substantial financing to clinch
these deals, since price tags on this equipment range
from $1.7 to $3.5 billion. Because of cast advantages,
nuclear power development seems a most promising
area of the LDC market for the USSR to exploit, if it
can convince LDCs that Soviet-made equipment is as
reliable and safe as that from Western suppliers.
We expect Moscow to bring many of these contract
offers to a successful conclusion. They would keep
annual Soviet extensions well over the billion-dollar
level through the end of the decade. Through these
contracts, Moscow will gain:
? Expanded equipment markets, particularly in the
Middle East and Latin America.
? Increased hard currency repayments as it phases out
amortization in many traditional local agricultural
products.
? Strategic raw materials that will alleviate shortages
in CEMA countries through aid repayments and
associated buyback arrangements.
? Expanded hard currency payments for technical
services that accompany development programs.
n Transportation and
communications
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Soviet Credits Still Popular
For their part, developing countries continue to seek
Soviet development credits for several reasons:
? The USSR still quotes terms that are below market
rates for construction financing and that are cheap-
er than most Western construction loans. For exam-
ple, recent World Bank loans extended for similar
projects were repayable over 10 to 15 years at 7.5-
to 8.5-percent interest.
? The USSR is willing to finance extensive infrastruc-
tural projects in the public sector (completely owned
by the state), an area that many of Moscow's
recipients are trying to develop. Most loans from the
World Bank and associated agencies and the US
Eximbank go to the private sector.
? The USSR is willing to accept goods, such as
strategic raw materials, in repayment for its loans.
Western financial institutions will not do so.
? The USSR has been helped by the debt-related
problem in a number of LDCs of securing Western
funds for development.
East European commitments will probably remain
low unless promotion efforts in Arab countries begin
to pay off. East European countries are fighting their
own poor reputations for product reliability, spare
parts supply, and service, as well as a general prefer-
ence for traditional suppliers in their attempts to
break into Arab (particularly Gulf) markets. One
bright note: East European countries stand to gain
when the Iran-Iraq hostilities end because both sides
have indicated that they will favor supplier bids by
East European countries that supported them in the
war. Given the deterioration in some East European
economies, we do not foresee any more major alloca-
tions to Marxist states in the next few years.
II. Communist Economic Programs: A Regional
Analysis
Middle East and North Africa: Moscow's Largest
Economic Stake
Since 1980, the USSR's support of Marxist LDCs has
diverted some of its energies away from its important
traditional clients in the Middle East and North
Table 8
Middle East and North Africa:
Economic Agreements With
Non-Communist LDCs a
1982
NEGI,
92
Egypt
83
Mauritania
Turkey
NEGi
9
1983
600
50
Algeria
250
Iraq
Mauritania
NA
2
NEGL
Syria
325
Tunisia
27
50
Turkey
NA
Africa (table 8). Nonetheless, Communist economic
activities in the area accelerated in :982 and 1983
with the conclusion of several large new development
contracts, including:
? Some $325 million in Soviet credits to Syria for civil
aircraft purchases and power development.
? A $1.2 billion' Soviet contract with Iraq to develop
the West Qurnah Oilfields. The Iraqi deal probably
involves Soviet credits because of Baghdad's
strained finances.
? Multibillion-dollar infrastructure development con-
tracts with Algeria and Libya and more than $250
million in financing for Algiers.
? New East European credits--85 million to Egypt
from East Germany and Hungary for equipment
purchases and $9 million to TurkeN from Romania
for power equipment.
According to the press, the USSR also began prelimi-
nary construction work on the joint Khoda Aferin
dam on the Soviet-Iranian border and turned over
designs for expensive industrial complexes promised
to the Shah.
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Figure 3
Middle East and North Africa:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954-83
l~ More than $1 billion
$500 million-1 billion
$100-500 million
Less than $100 million
Boundary repro en tation .s
not necessarily authoritative
P.DA..R.Y.-PEOPLES DEMOCRATIC REPUBLIC OF YEME
U.E. -UNITED ARAB EMIRATES
V.A.R -YEMEN ARAB REPUBLIC
donned OMAN/,
b
oundary
t YYE J IE V.Q.p. V
Nearly 100,000 Communist economic personnel were
employed in the Middle East and North Africa by the
end of 1983, almost 80 percent of all Warsaw Pact
economic technicians in non-Communist LDCs.
Nearly 55,000 technicians were in Libya, which has
employed large numbers of East Europeans on devel-
opment projects since the early 1970s, nearly 18,000
were in Iran and Iraq, and more than 11,000 were in
Algeria.
Several conservative governments in the Persian Gulf
have appeared more receptive to overtures by Com-
munist states in the past two years, possibly because
of Kuwait's support for relations with Communist
countries. The Saudi Foreign Minister paid a visit to
Moscow in February 1982 as a member of an Arab
delegation but denied to US officials that the visit
moved Riyadh closer to the establishment of diplo-
matic ties with Moscow. The smaller Gulf states have
received bids from East European countries to partici-
pate in development projects, most of which are still
pending.
that emphasizes sophisticated Western technology,
has continued to distance itself somewhat from the
USSR. Still, relations have been good, and Commu-
nist countries were able to close several billion dollars
worth of contracts for housing and other projects
under Algeria's $100 billion 1980-84 development
plan. The USSR provided at least $250 million in new
credits to finance construction of the High Plateaus
railway. We have no firm information on the terms of
other contracts, but open sources report that the
USSR is offering 10-year repayment terms on agree-
ments that probably run into several hundred million
dollars. Projects to be constructed under Soviet con-
tracts signed in 1982 and 1983 include:
? Three-fourths of the 1,000-kW Alrar-Hassi R'Mel
gas pipeline, for which the USSR is acting as
general contractor.
? Four major dams.
? A 500,000-ton-per-year cement plant.
Some 6,000 Soviet personnel supported Soviet proj-
ects in Algeria in 1983 (the largest Soviet economic
contingent in any LDC), and about 1,600 Algerians
were being trained in the USSR.
Algeria. There has been little discernible change in
Algeria's relations with the USSR and Eastern Eu-
rope over the past two years. The five-year-old Benje-
did government, with its insistence on a neutral
political stance and an economic development strategy
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East European countries also emerged as substantial
participants in Algerian development, with large
agreements in 1982-83 to support Algeria's building
boom:
? Bulgaria negotiated a contract to construct a $50
million forklift plant and to send more agricultural
experts to work in several provinces.
? East Germany, Algeria's largest East European
donor with $375 million in pledges, agreed to build
32 vocational training centers, a teacher training
institute, 280 training workshops to accommodate
20,000 students, a cement plant, 30 opthalmology
centers, 5,000 housing units, and several more un-
identified industrial projects. East Germany also
completed an industrial complex at Berrouaghia
under a $95 million credit agreement.
? Hungary began work on 4,000 apartment units, 10
poultry farms, and four plants for animal feed, and
agreed to supply 8,000 buses, under contracts val-
ued at more than $300 million.
units, valued at $1.5 billion.
Iran. Despite the Ayatollah's continuing suspicions
about Soviet intentions toward Iran, the expulsion of
18 Soviet diplomats, and the arrest and public trial of
leading Iranian Communists, Tehran's economic rela-
tions with the USSR and East European countries
improved in 1983. Iran increased oil exports to
160,000 b/d in payment for Communist-supplied
commodities and technical support, employed 2,600
Communist technicians at development projects, and
exchanged a record $1.3 billion of goods with the
USSR
Moscow's heightened project activity was largely re-
sponsible for the record $750-800 million in annual
Soviet exports to Iran over the past two years. The
USSR:
? Accelerated work on the Esfahan power plant.
? Completed a second blast furnace and a rolling mill
at the Esfahan steel complex.
? Finished repairs on the war-damaged Ramin power
plant.
Soviet personnel also worked on grain silos and flour
mills. coal mines, and prefabricated housing plants,
and began construction of the Khodi Afarin dam and
power plant on the Iranian-Soviet border. Moscow
presented plans for mining machinery and metal
casting plants in Kerman, first agreed to under a
billion-dollar prerevolutionary agreement to develop
industrial zones in the northern provinces. In contrast,
the triangular deal with the Shah to sell Soviet gas to
Western Europe in return for Iranian gas shipments
to the USSR-in limbo since the Khomeini take-
over----died quietly as Iran planned construction of a
gas pipeline to Western Europe through Turkey
The USSR remained instrumental in transporting
Communist and Western goods overland to Iran. The
USSR also instituted tanker service to Baku from the
Iranian port of Now Shahr (an arrangement that
could also serve West European oil customers) and
began the study of possible new transit routes through
the USSR. to carry cargo to Iran. Tehran's depen-
dence on Soviet road and rail links because of Iraqi
attacks on Iranian sh;pping in the Persian Gulf
emphasized the weakness of Iran's transportation
networks and may result in speedier implementation
of Soviet agreements to construct additional rail
capacity at several border crossing points. According
to the press, the Soviets still are periodically forced to
turn away cargo for Iran because of severe congestion
at the border
The Iranian-East European relationship is still cen-
tered on the exchange of Iranian oil for commodities
and technical services. Tehran has become heavily 25X1
dependent on Eastern Europe for medical equipment,
supplies, and services to support the \Nar with Iraq.
Iraq. Communist participation in Iraq's economy has
continued in spite of Iraqi financial strains caused by
the four-year-old war with Iran (estimated to cost
$700 million a month), and the near cessation of oil
shipments to traditional East European importers.
Under a $1.2 billion contract signed in 1983 to
develop the West Qurnah Oilfields, the USSR is to
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drill 100 producing wells to shore up Iraq's declining
production capacity. We believe the USSR may have
provided some credits for this project because of
Iraq's deteriorating finances, but press reports have
not mentioned financial terms. Some 5,000 Soviet
civilian technicians in Iraq worked on several petro-
leum transport and storage projects and power and
irrigation schemes, the largest of which is the Haditha
dam in northern Iraq, designed to produce 570 mega-
watts of power. Moscow also discussed projects to
overhaul the Najibiyah power plant and to increase
output at the Ar Rumaylah oilfield
Bulgaria, East Germany, and Romania signed wide-
ranging, long-term economic cooperation agreements
with Iraq in 1982 and 1983 that call for participation
in all economic sectors:
? Czechoslovakia signed a $100 million pact to re-
claim 13,000 hectares of land over the next four
years and agreed to repair the war-damaged Sala-
huddin refinery.
? Hungary, together with a West German firm, will
build a $165 million poultry complex, housing for
agricultural workers, and a new bus assembly plant.
? Poland, with 9,000 specialists in Iraq, signed a $50
million contract for a ground water survey and
began work on 80 transformer stations.
? Romania was awarded a $450 million contract to
build a lubricating oil plant and was approached to
build a multibillion-dollar oil pipeline through Tur-
key to service East European customers. Romania
would have to fund the project.
The East European development effort in Iraq was
supported by more than 10,000 technicians in 1983.
Iraq has indicated that it expects to award more and
larger contracts to Eastern Europe in appreciation for
its support during the war.
Libya. Difficulties in meeting hard currency pay-
ments for Soviet arms and other Communist debts
have dominated Tripoli's economic relations with
Communist countries over the past two years. Libya's
massive $1.5-2 billion scheduled annual debt payment
to the USSR for weapons has been a source of friction
between the two countries for several years. Moscow
has tried to hold out for hard currency payments as
specified in most of Libya's military contracts, but in
1982 it was forced to begin accepting several million
tons of Libyan oil annually to prevent a default. The
USSR ships most of the oil to West European custom-
ers for hard currency, a move Tripoli has protested
because it undercuts Libyan sales. Diplomatic sources
report that, in spite of the difficulties, the two coun-
tries may have agreed in principle in 1983 to sign a
long-term friendship treaty that could further formal-
ize economic, technical, and military relations.
The USSR has also maintained a fairly rapid pace on
development projects, with more than 5,000 Soviet
technicians in Libya, and was preparing to undertake
several new projects, including:
? New power transmission lines.
? An extension of the $3.8 billion Soviet-built Brega-
Misratah gas pipeline to al Khums.
? A nitrogen fertilizer plant.
? A chemical complex at Maradah.
? A hospital.
Soviet personnel put the finishing touches on the
billion-dollar nuclear research laboratory at Tajura,
and the USSR, as general contractor for a nuclear
power plant at Surt, began to solicit equipment bids
from West European and Japanese suppliers. A final
contract on the power plant reportedly was expected
in mid-1984.
Among East European countries, Bulgaria and Roma-
nia signed new long-term friendship and cooperation
agreements. Libya also used oil shipments to resolve
payment problems with Bulgaria, Hungary, Poland,
and Romania. Libyan obligations to East European
countries stem from nearly 50,000 technicians work-
ing on development contracts worth several billion
dollars. East European countries are active in road
and housing construction, agricultural development,
and the oil industry. New contracts have been signed
with East Germany to construct agricultural and
training facilities and with Hungary for railroad
design.
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Morocco. Morocco's relations with Communist coun-
tries, always concentrated in the economic sector,
remain low key. In spite of the chill over the Polisario
issue that has permeated exchanges for the past
several years, economic relations with the USSR
proceeded at a normal pace. Rabat continued to buy
Soviet oil, and the Moroccans awarded the USSR a
contract under negotiation since 1978 to build an
experimental power station fueled by oil shale. The
USSR also completed surveys for the Meskala phos-
phate development project, which will be financed
with $2 billion in Soviet credits extended earlier, and
reportedly contracted to build a superphosphoric acid
plant at Jorf Lasfar to supply the Soviet market. In
addition, the Soviets agreed in principle in 1983 to
begin a feasibility report on a fish processing plant to
be supplied under a joint fishing agreement. Moscow's
reluctance to move ahead with fisheries development
under a 1978 accord has generated considerable
acrimony in the relationship between the two coun-
tries.
Recent East European relations with Morocco were
highlighted by Romania's plans for a 1.1-million-ton
steel complex at Nador, including blast and oxygen
furnaces, a steel bar casting facility, rolling mills, a
thermal power plant, and a coke facility. Bulgaria has
agreed to finance development of a magnesite mine at
Boudkek (probably under a 1979 credit of $45 mil-
lion), and Rabat requested $40 million in aid projects
from Poland to develop water purification and supply
systems in several cities. More than 2,300 East Euro-
pean economic personnel were in Morocco in 1983 in
connection with an extensive technical services pro-
gram that has spanned two decades
Syria. The upgrading of the Syrian-Soviet military
relationship in 1983 has been paralleled by new
directions in the economic program. The USSR pro-
vided $325 million in new financing for several pro-
jects and by yearend had begun engineering studies
on a 600-megawatt nuclear power plant and on
Syria's first nuclear research center. Several hundred
million dollars of new financing would be required for
these nuclear projects if they reach the implementa-
tion stage, which could double Moscow's $1.1 billion
in standing economic assistance pledges. The more
traditional allocations; under the 1983 agreements
were:
? A $150 million credit for a thermal power plant.
? A $130 million credit for gas treatment plant and
pipeline.
? A $46.5 million credit for civilian aircraft.
? A contract to increase the storage capacity of Lake
Asad and the power output of the Soviet-built
Euphrates hydropower project.
The USSR also completed the 108-kilometer Hims-
Damascus railroad, and continued work on the expan-
sion of the Latakia port and the al-Kcbir dam and
power project downstream from the Euphrates Dam.
Eastern Europe, which has provided nearly $1.2 bil-
lion in aid to Syria over the past two decades, won
several contracts by offering below-market financing:
? Bulgaria signed a $200 million contract to drill as
many as 150 gas wells and develop a gas-gathering
system.
? Czechoslovakia agreed to build a $130 million sour
gas treatment plant and associated pipeline.
The new agreements will maintain the pervasive
presence of the USSR and Eastern Europe in the
Syrian development program. More than 3,500 Soviet
and East European nonmilitary technicians were in
Syria in 1982, and the US Embassy in Damascus
reports that all East Bloc countries except Poland are
involved in large-scale, multiyear, turnkey projects.
Egypt. Under President Mubarak, Cairo's relations
with Communist countries have recovered from the
near break in the Egyptian-Soviet relationship
brought about by Sadat. Egypt received almost all of
the known East European economic aid to the Middle
East in 1982 and 1983. The new economic commit-
ments-$50 million from Hungary and $35 million
from East Germany--were bank credits designed to
finance Egyptian imports of capital goods from the
two countries. Hungary will provide power, agricul-
tural, and light industrial equipment. while East
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Germany will increase its participation in Egyptian
power development by rebuilding a power grid. Ro-
mania allocated $100 million of an old $300 million
credit for electrification projects in the Sinai and
agreed to send technicians to correct problems at a
phosphate plant (built under an earlier aid agree-
ment), whose products are of such poor quality that
even Bucharest refuses to buy them
The USSR signed new economic contracts in 1982
and 1983 and returned some Soviet specialists to
Egypt in response to President Mubarak's invitation
to install equipment (ordered several years ago) at the
Helwan steel plant, the cement plant at Asyut, and a
generator at the Cairo power station. Some 200 Soviet
personnel were in Egypt at the end of 1983 under the
new contracts. Egypt also agreed to sell about $6
million worth of cotton to the USSR in 1982, the first
such sale since 1978A
South Yemen. Economic realities strained South Ye-
men's relations with the USSR and its East European
allies in 1982-83. Dismayed by the lack of economic
progress made since the revolution in the late 1960s,
President al Hasani has begun to seek economic
investment from the West and Saudi Arabia. Even
though the USSR and its allies have promised nearly
$1 billion in economic aid to Aden, Communist-
sponsored projects have suffered compared 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. In addi-
tion, the USSR has not built long-awaited power and
cement production facilities;
= the cost of the power plant has increased three-
fold since the original agreement was signed. Still, in
1982 and 1983 the USSR signed pacts to improve
Aden port and construct a satellite receiving station as
part of the Intersputnik network. Work continued on
a fishing port, irrigation projects, a hospital, and the
power plant, while Moscow promised action soon on
the cement plant.
Table 9
South Asia: Economic Credits
and Grants, 1982 and 1983 a
USSR Eastern
Europe
1982 93 252
Afghanistan 90
Bangladesh
Nepal 3
1983 860
Afghanistan 371
Bangladesh 73
India 140
Pakistan 277
South Asia: Deepening Communist Involvement
The Soviet occupation of Afghanistan has dominated
Communist relations with South Asia since 1981. The
USSR's commitment to shore up Kabul's Marxist
government and its desire to maintain friendly rela-
tions with South Asian countries have moved them
into the limelight among Moscow's aid recipients. In
1982 and 1983, the USSR provided nearly a billion
dollars in assistance on very liberal terms to South
Asian recipients; this was about 30 percent of its total
program in those years (table 9). India, still a major
Russian customer despite frictions over the Afghan
invasion, received $140 million in Soviet financing for
a steel plant, and Pakistan took up some of the $2
billion in credits offered by the Kremlin to mend the
rift caused by the Soviet presence in Afghanistan.
Afghanistan. Since the Marxist takeover in 1977,
Afghanistan has become one of the USSR's largest
economic aid beneficiaries (after India and Turkey) in
the non-Communist world. The USSR provided $460
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Figure 4
South and Southeast Asia:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954-83
Value of agreements
More than $1 billion
$500 million-1 billion
$100-500 million
Less than $100 million
million in new assistance to Afghanistan in 1982 and
1983; most of it was grant aid to finance the delivery
of commodities. More than $800 million of Moscow's
$1.1 billion in economic aid deliveries to the Marxist
government have been in the form of grants, generally
to cover the delivery of food and other basic commod-
ities. The USSR reportedly also has been forced to
provide $75-100 million in hard currency loans to
procure consumer goods from third countries.
Through 1983 disbursements have averaged nearly
$300 million per year since the December 1979 Soviet
invasion. In addition to its fairly generous commodity
support, the USSR has permitted Afghanistan to
defer payments on the services of Soviet technicians,
for which the USSR usually demands cash payments.
Deliveries to projects also have continued at about
$75-100 million annually as the Soviets expedited
work on transport and military-related projects that
will facilitate logistics for Soviet troops. For example,
the Afghan press reported that Soviet personnel com-
pleted a bridge across the Amu Darya river at the
border well ahead of schedule. Moscow also has:
? Built two oil-products pipelines to service Soviet
units in Afghanistan.
E3nundary represe oration .e
~~~t n ardy aulhoritat,e
? Recently agreed to build Afghanistan's first rail-
road, linking Pul-i-Khumri and Kabul with the
Soviet border and possibly extending to Iran and
Pakistan.
? Agreed to finance expansion of the Kabul airport.
In contrast, the war has impeded Soy iet efforts to
move forward with other major development projects
such as the Ainak copper complex, the Hajigak iron
ore scheme, and natural gas exploration in the north.
The only major development contract announced be-
tween Moscow and Kabul in the past two years was a
$200 million project to link Afghanistan to the
USSR's power grid, to be financed under old agree-
ments. Moscow also signed protocols in 1983 to
continue oil and gas exploration and exploitation, to
complete the Mazar-i-Sharif thermal power plant,
and to reconstruct the Torgundi railway station. The
Soviet program in 1983 was supported by 5,000
technicians in Afghanistan and a burgeoning training
effort that saw nearly 9,000 Afghans in Soviet educa-
tional institutions at yearend.
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Until the invasion, Moscow's economic program in
Afghanistan was self-sustaining. Commercial deliver-
ies and aid flows were nearly balanced by Afghan
exports of three billion cubic meters of natural gas
annually through a pipeline built by the Soviets in the
mid- I960s. With gas deliveries, Kabul financed a
Soviet program that over the past 25 years has
accounted for two-thirds of Afghanistan's 21,000
kilometers of roads, nearly all of its major airfields,
two-thirds of its electric generating capacity and an
extensive transmission network, 40,000 hectares of
land cultivable through irrigation and reclamation,
and the entire natural gas industry, which produces
about 3.5 billion cubic meters of gas per year. Since
the invasion, however, the Soviets have been providing
about $200 million in aid annually that will not be
reimbursed. In addition, rebels have blown up the gas
pipeline several times in the last two years. interrupt-
ing gas supplies to the USSR.
India. Complementing the large new military cooper-
ation agreements signed in the past two years, the
USSR and India announced significant progress in
bilateral economic relations. In addition to $140
million in 17-year loans to finance expansion of the
Vishakapatnam steel plant, Moscow apparently has
offered to provide financing for several other projects,
including:
? A nuclear power plant.
? Onshore oil exploration and secondary recovery
technology.
? An oil refinery.
? Modernization of the Soviet-built antibiotics plant
at Rishikesh.
? Upgrading the Soviet-built Neyveli and Patratu
thermal power plants, and equipping the Kalgaon
power plant.
? Cooperation in building high-technology oil and
coal extraction equipment at Indian plants for use
by both countries.
? Joint ventures in third countries.
Protocols for oil development and the antibiotics plant
were signed in early 1983. Some of these undertakings
could be funded with the $1 billion of Soviet aid in the
pipeline, but massive new credits would be required to
cover costs for such ambitious projects as the nuclear
power plant. The USSR also hinted that it would
finance some equipment for the 600,000-ton Orissa
Alumina Plant, a project held up by Indian budgetary
problems.
The USSR also has deepened its involvement in
India's ongoing project development with major deals
that will fall under earlier aid arrangements,
including:
? A $400 million contract to set up the Vindhyachal
superthermal plant in Madhya Pradesh.
? Protocols to proceed with development of the
Jhanjra coal mine.
? Agreements to assist a synthetic rubber plant and a
hydrogen peroxide facility.
? A protocol to improve the Korba aluminum smelter.
Last year Moscow also concluded a protocol to ex-
change $3.6 billion of goods in 1984, a 6-percent
increase over 1983 that will keep India in first place
among the USSR's LDC trading partners. The new
protocol includes 6 million tons of petroleum and
products from the USSR
Pakistan. Pakistan's economic relations with the
USSR have improved somewhat (in spite of political
strains over the Soviet occupation of Afghanistan) on
the strength of $275 million in new credits for a
thermal power plant at Multan. The new credit was
part of as much as $2 billion in financing the USSR
offered in 1982 for Pakistani projects, including:
? Downstream industries related to the Soviet-built
Karachi steel plant.
? Additional power capacity.
? Oil and gas development.
In March 1983 the first stage of the Soviet-sponsored
Karachi steel plant, the largest industrial construction
project in Pakistan's history, was officially commis-
sioned. The second stage, to be completed in 1984,
includes a second blast furnace, a hot strip mill, and a
cold rolling mill. The USSR also began construction
of a plant to assemble 51,000 Belarus tractors a year
under an $18 million credit agreement.
East Asia: Suspicious of Soviet Initiatives
Because of evidence of the area's lingering suspicions
about the Soviet military presence in Vietnam, ongo-
ing contention over the Kampuchea issue, and the
general unwillingness of East Asian governments to
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Table 10
East Asia: Economic Credits
and Grants, 1982 and 1983
1982 10
Indonesia NA
Philippines 10
become involved in a power struggle between Moscow
and Beijing, Moscow has failed to improve its political
fortunes in most of East Asia over the past few years
(table 10):
? Soviet relations with Indonesia were strained by the
exposure of espionage activities by Soviet diplomats
and Aeroflot officials in 1982. The Aeroflot office
was closed, but plans to eliminate the Soviet Consul-
ates in Medan and Surabaya and disband the press
and trade sections of the Jakarta Embassy have not
been implemented. While remaining cool toward
Moscow, Jakarta has sent trade representatives to
the USSR to prevent a further deterioration in
relations because of its interest in expanded trade
with the USSR and Eastern Europe and a desire to
promote Indonesia's nonaligned image.
? The USSR made some progress in the Philippines.
First Lady Imelda Marcos caused a furor in con-
servative quarters in Manila in 1982 by accepting a
Soviet offer of a 1-million-metric-ton cement plant
during a July trip to Moscow. If carried out, the
project would provide the USSR with a long-sought
means to increase its presence in the Philippines.
Soviet technicians already have gathered initial data
for the cement project, together with a related coal
development scheme and power plant. The $200-
250 million cement project may run into trouble,
however, over Manila's request for full Soviet fi-
nancing over 20 years. Moscow also has offered aid
to power development and food processing.
? Singapore's largest shipyard won a $1 10 million
contract in 1982 to repair and convert two Soviet
whalers to fish-factory ships--the largest single
such contract ever undertaken in Singapore. None-
theless, Prime Minister Lee remains suspicious of
the large Soviet commercial presence in Singapore,
and political relations deteriorated after the expo-
sure last year of Soviet espionage activity in Singa-
pore.
East European countries continued to offer trade
credits to expand commercial dealings in the area.
East Germany discussed reviving its aid program in
Indonesia--dormant for 20 years--- while Romania
signed an economic cooperation agreement that estab-
lished a joint commission for cooperation. Romania
and Indonesia agreed to accelerate negotiations on
agricultural, livestock, and forestry projects. The Phil-
ippines accepted $10 million in trade credits from
Czechoslovakia, and Thailand turned down a $22
millicn Polish bid to build an aluminum sulfate plant
because of its high cost and fears that instability in
Poland could cause a contract default. No decision
was announced on a Romanian offer to provide
equipment and technical assistance to a Thai fertilizer
complex and help for other development projects.
The Caribbean and Central America: The Newest
Assistance Program
During 1982 and 1983, Communist countries re-
sponded to opportunities created by the Marxist re-
gime in Nicaragua and continuing turmoil in the
Caribbean and Central America with more than $735
million in new economic agreements. Nicaragua re-
ceived most of the aid as Cuba, the I. SSR, and East
European donors signed $700 million in agreements to
finance commodities, equipment, and technical serv-
ices. The Communist commitment to Nicaragua was
further demonstrated by Managua's acceptance as an
associate member of CEMA in 1983. Before the US
intervention, Grenada also received its first significant
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Figure 5
Latin America and the Caribbean:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954-83
DOMINICAN sT CxaiSTOR:ER .:s HAITI REPUBLIC / NO BARBUDA
sr v:CE:T Ax'
GUATEMALA y
" eAReaoos
IRGARAGUA T_ oRexawxas
EL SALVADOR _' _ aRCxApA_
Value of agreements
none More than $1 billion
$500 million-1 billion
$100-500 million
Less than $100 million
aid from the USSR, $10 million in credits for commu-
nications and other projects, and an additional $10
million from Eastern Europe (table 11).
Grenada. In 1983, Grenada was the site of one of the
most dramatic failures for Soviet policy in Latin
America. Prior to the US-Caribbean intervention,
Communist countries had deepened their economic
relationships with the leftist government of Prime
Boundary representation is
not necessarily autnornatne
Minister Bishop with more than $50 million in eco-
nomic commitments that included:
? Soviet pledges of more than $10 million in credits
and grants to finance a deepwater port at Grenville,
a satellite receiving station, agricultural supplies
and services, and commodities. Moscow also partici-
pated in Grenadian economic planning under an
agreement signed in December 1982, and Soviet
technicians had arrived in 1983 in connection with
these projects.
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Table 11
Western Hemisphere: Communist
Economic Credits and Grants,
1982 and 1983
USSR
Eastern
Europe
Cuba
Central America/Caribbean
1982
173
93
131
Costa Rica
..
..
1
Grenada
10
9
NEGL
Nicaragua
163
84
130
1983
26
255
60
Grenada
..
NEGL
NEGL
Jamaica
Nicaragua
South America
1982
2
Bolivia
2
. .
1983
156
10
NEGL
Argentina
68
Bolivia
72
10
NEGL
Brazil
15
..
Peru
? East German promises of $10 million in credits for a
new telephone system, a cocoa processing plant, and
other agricultural and communications equipment.
? Cuban pledges of $30 million for an airport at Point
Salines, fishing trawlers, television equipment, and
40 tractors. More than 700 Cubans, the largest
foreign contingent in Grenada, were associated with
the construction projects.
Nicaragua. Communist countries continued their un-
precedented level of economic support to Nicaragua
in 1982/83 with more than $700 million in economic
pledges. Cuba was the largest donor with $190 million
in commitments designated for a sugar plant., agricul-
tural equipment, medical supplies, consumer goods,
and services. Most of the Cuban program consists of
technical services rather than financial aid. The
USSR ran a close second with $180 million in new
agreements, which included, among :ther projects:
? Studies for hydropower stations in Matagalpa and
Majolka, for which Nicaragua eve'itually expects
several hundred million dollars in construction
loans.
? Port construction al San Juan del 'cur.
? Five training schools in agriculture. energy, fishing,
and mining.
? A 400-bed hospital.
? Mineral prospecting, gold mine reh.tbilitation, and
topographical mapping.
Some $30 million of the new aid is allocated to
develop the mining industry: another $50 million is
for technical assistance and feasibility studies, items
for which the USSR generally demands cash pay-
ments. In addition, Moscow is allowing Nicaragua
$30 million in commodity credits - usually reserved
for favored clients.
East European countries pledged almost $350 million
in new aid to Nicaragua. Among thc'.e countries' new
agreements (which brought their total pledges since
1979 to $465 million) were:
? $85 million from Bulgaria for hydra,power, mining,
and agricultural projects.
? $200 million from East Germany for projects and
con-modities, consolidating East Germany's position
as Nicaragua's major East European donor.
Larger Communist economic programs were accom-
panied by an expanded technical pre,,cnce. The num-
ber of Communist economic personnel assigned to
Nicaragua rose to nei rly 7,000 in I9~~3. more than 90
percent of them Cubans.
The USSR and Eastern Europe delivered an estimat-
ed $250 million in aic to Nicaragua it 1982 83,' but
only .bout $45 million served as balance-of-payments
assistance compared to Nicaraguan receipts of $500
million in aid annually from non-Communist sources.
" A January 1984 Soviet at.reement to deliver .ii in exchange for
Nicaraguan products will mean a greater Soviet contribution to
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I he ~ cst of the assistance was in the form of machin-
e y and equipment and technical assistance. Soviet
oflici als reportedly have expressed concern over Nica-
raguan expectations of a "bailout" and have voiced
reservations to Western officials over the Sandinistas'
ability to manage the economy. According to the US
Embassy, :Moscow has advised Nicaragua to pursue
some policies that will allay the concerns of Western
donors and increase Western aid flows.
Guyana. Guyana's relations with Communist coun-
tries have been generally friendly in spite of George-
town's differences with the USSR over aid and trade
issues. Ties to the USSR cooled because of Moscow's
unwillingness to provide development assistance on
cas\ terms. The Soviet Ambassador to Guyana pub-
licly stated that Moscow has offered assistance tinder
a 1977 agreement for bauxite, gold. and aluminum
development as well as "unlimited" credit for equip-
nient purchases such as aircraft, helicopters, bulldoz-
ers, and other machinery. Guyana turned down these
offers because of harsh terms. The USSR required
hard currency payment for a feasibility study on a
proposed aluminum plant and for Soviet technical
services both standard Soviet practice. Moscow re-
cently renewed its offer to rehabilitate a bauxite
processing facility at Linden in return for bauxite
deliveries
Jamaica. In spite of the Seaga governments intention
to reduce contacts with Communist countries, the
I. SSR may have signed a construction contract for a
600,000-ton caustic soda plant (probably under the
credit agreement signed in 1977) and reached an
agreement to buy I million tons of bauxite annually
beginning in 1984. The USSR also provided Jamaica
a $It) million trade credit to purchase Lada automo-
biles as part of the new trade agreement.
.Mexico. The USSR and Eastern Europe have contin-
ued to pursue economic initiatives individually and
within the framework of the Mexican-CEMA Joint
Commission, established under an agreement signed
in the mid- I 970s. The USSR (in a consortium with
Finland) bid on a contract for a joint newsprint
factory in Mexico and has prepared offers on several
power projects valued at half a billion dollars Mos-
cow also was negotiating for Mexican oil shipments to
Cuba in return for Soviet oil deliveries to Mexican
customers in Europe--a deal that could involve as
much as 60 percent of Cuba's oil requirements.
Mexico has been cool toward this arrangement
kets.
South America: Pursuing New Opportunities
In contrast to expanding programs in parts of Central
America and the Caribbean, longstanding efforts to
increase the Communist economic presence in South
America have had more limited success. This has
prompted the Kremlin to assign high priority to the
expansion of aid and trade relations with major South
American countries to redress the annual $2-2.5
billion hard currency drain on the USSR from its
purchases of South American grain and other com-
modities. In 1982 and 1983, the USSR placed $155
million of credits at the disposal of South American
suppliers to buy Soviet machinery and equipment,
only a fraction of the several hundred million dollars
Moscow has offered for major power and minerals
industry projects. However, Moscow was able to
break new ground with a triangular agreement in
1982 under which Brazilian contractors will provide
construction services for a Soviet-sponsored dam and
hydropower project in Angola. Argentina and the
USSR reportedly are undertaking a similar venture in
Peru. Moscow hopes that these creative approaches to
cooperation will help it break into South America's
Western-dominated private-sector equipment mar-
Argentina. Moscow hopes that its political support for
Argentina during the Falklands war, its position as
Buenos Aires' major single trading partner (account-
ing for 60 percent of all Argentine export earnings in
1982), and its willingness to offer financing for devel-
opment projects will open opportunities for a more
extensive role in Argentine development projects.
Argentina's acceptance of $68 million in credits for
the Piedra del Aguila power project may signal
reduced Argentine reluctance to Soviet participation
in local projects. Moscow also has threatened a
cutback in agricultural purchases to prod Buenos
Aires into accepting a larger Soviet role. As head of a
multinational consortium, the USSR submitted a bid
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to construct the $10 billion Middle Parana power
project, for which Moscow has completed feasibility
studies and designs. Other projects under discussion
include:
? The power complexes at Santa Cruz, San Juan,
Parana Medio, and Bahia Blanca.
? A $100 million graphite electrode plant.
? Port construction and modernization at Bahia Blan-
ca, Puerto Madryn, and Ushuaia.
? Electrification of a railroad from Buenos Aires to
Rosario.
? A natural gas pipeline.
? A papermill.
Moscow and Buenos Aires also discussed joint con-
struction of a power project in Peru, and Argentina
began shipping uranium to the USSR for enrichment
under an agreement signed in 1981. In anticipation of
increased business, the USSR renewed a 1980 agree-
ment that provides open-ended trade credits.
There were few significant developments in Argen-
tine-East European relations during the year. East
European countries tried to fill the void caused by the
EC embargo of Argentina during the Falklands con-
frontation. Bulgaria, Czechoslovakia, and East Ger-
many offered unspecified financial support, probably
for commodities, and Sofia offered to provide com-
modities affected by the Western embargo.
Brazil. The USSR has tried to move toward a closer,
more broadly based economic relationship with Brazil
over the past two year.;, in spite of Brazil's well-
publicized suspicions about Moscow's aims in the
Western Hemisphere. Fundamental to the growing
relationship were:
? New Soviet agreements to participate in joint power
projects with Brazil in Angola and Mozambique.
? Soviet offers to supply equipment to the Santa
Isobel and Piedra do Cavala power projects.
? Soviet interest in the $900 million project to reclaim
1.5 million hectares of irrigable lowlands in the
Varzeas region.
? Soviet offers to participate in the $650 million
copper segment of the Carajas general development
project.
? Startup on Soviet contracts to install 15 methanol
plants in Brazil and negotiations to sell licenses for
Soviet tin, steel, copper, and iron technologies.
Moscow's large trade deficit with Brntl was cased
somewhat in the past two years by a drop in Brazilian
agricultural commodity prices and b\. Soviet sales of
oil valued at around $375 million. Deliveries of
equipment, however, -emained low iti spite of high-
powered Soviet sales efforts over the ;past two or three
years According to the US Embassy in Brasilia, the
USSR was disappointed that plans to sell hydroelec-
tric equipment for four or five medium-kale hydro-
power projects under a 1981 agreement fell through,
as did plans to exchange a Soviet rol on/roll-off ship
for Brazilian agricultural products. Moscow also ex-
pressed interest in Brazilian bauxite irtd copper in
exchange for Soviet machinery and equipment and
signed a contract for Brazilian sugar valued at $160
million.
The activities of most East European countries contin-
ue to focus on easing their growing trade deficits with
Brazil:
? Bulgaria held talks on possible construction in Bra-
zil of facilities for dehydrating vegetables and man-
ufacturing pharmaceuticals.
? Czechoslovakia agreed to construct two thermal
power plants (including $25 million worth of equip-
ment to the Jorge Lacerda plant) and three cement
factories, which are to be repaid with iron ore.
? East Germany signed contracts under a 1978 credit
agreement to install $150 million worth of cranes
and to provide technology for Bra/ 1 to produce
more. Berlin also offered $20 milliwi in credits for
laboratory equipme it.
? Brazil and Hungary established reciprocal trade
credits in the $200 nillion range _ind agreed to
cooperate in agriculture, livestock breeding, culture,
and science. In a turnabout, Brazil sought participa-
tion in World Bank financed projects in Hungary.
? Romania proposed r,everal project,, under outstand-
ing credits worth some $150 million, including the
sale of drilling rigs, agricultural anc mining equip-
ment, and the construction of an iron ore processing
plant.
? Soviet offers to enrich Brazilian uranium.
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Most East European countries explored prospects for
joining with Brazil to construct projects in third
countries, and Czechoslovakia, East Germany, Hun-
gary, and Romania also requested credits to reduce
their commercial settlements burden. Warsaw's nego-
tiations to reschedule its $1.6 billion debt to Brazil
have dominated relations between the two countries
over the past several years.
Bolivia. The major development in Bolivia's economic
relations with Communist countries was $72 million
of Soviet credits for a second tin volatilization plant
(at Marchamarca) in spite of problems and cost
overruns encountered during the construction of a
similar plant at La Palca. The two plants together will
absorb $150 million in Soviet credits, repayable in
nonferrous metals. The La Palca plant, the largest of
its type in the world, was turned over to Bolivia
several years behind schedule in 1982. The Bolivians
hope to buy another $160 million worth of machinery
and equipment from the USSR and Eastern Europe
over the next year or so for the mining industry.
According to the US Embassy in La Paz, this will tie
the strategic tin industry to the USSR for the next
decade. The USSR also is considering assistance for
trolley bus systems for Cochabamba and Santa Cruz,
a prefabricated housing plant, four hydropower
plants, geological prospecting, a tractor plant, and a
cement plant under an open-ended 1976 line of credit.
Bolivian relations with Eastern Europe were high-
lighted by a Romanian offer of as much as $100
million in credits to finance purchases of agricultural
equipment and fertilizer. La Paz also signed an
agreement with Hungary to exchange tin for pharma-
ceutical products
Sub-Saharan Africa: Heightened Economic Support
Soviet and East European economic agreements in
Sub-Saharan Africa rose to more than $1 billion in
1982 and 1983 as the USSR provided expanded
balance-of-payments and development aid to client
states. Angola signed an agreement with the USSR in
January 1982 that eventually could provide $2 billion
in credits; $400 million in contracts already have been
signed for a dam project the USSR will construct
jointly with Brazil. The USSR agreed to let Ethiopia
defer payments for 12 years on an estimated $150
Table 12
Sub-Saharan Africa: Economic Credits
and Grants, 1982 and 1983 a
1982
Angola
Equatorial Guinea
Ethiopia
Ghana
Guinea-
Guinea-Bissau
Madagascar
Mali
Mozambique
Nigeria
Tanzania
Zimbabwe
Ethiopia
Ghana
Kenya
Lesotho
Mozambique
USSR Eastern
Europe
10 NEGL
20
15
6
10
70
2
308 72
266 2
NFGL NEGL
Nigeria
Seychelles
Somalia
Uganda
million worth of oil, and also agreed to provide $250
million in new aid for an irrigation project. Moscow
also was studying the feasibility of several hundred
million dollars worth of projects for Mozambique
(table 12)
There has not been a similar increase in assistance for
politically moderate countries in the region with the
exception of Nigeria, which pays for Soviet assistance
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Figure 6
Sub-Saharan Africa:
Economic Credits and Grants Extended by the Soviet Union and Eastern Europe, 1954- 83
Value of agreements
More than $1 billion
$500 million-1 billion
$100-500 million
Less than $100 million
',TANZANIA
MALAWI
COMOROS.
ZAMBIA
ZIMBABWE(MAMBIQUE1
MADAGASCAP
703405 (545038) 1 1-84
in hard currency. Until the 1980s, African states had
absorbed only about 10 percent of Soviet assistance,
as Moscow pursued more lucrative interests among
wealthier LDCs. Now that the USSR is supporting
some balance-of-payments needs in African client
states (especially Ethiopia), Soviet aid to Africa in the
I 980s has risen to 15 percent of total pledges.
Angola. The USSR moved quickly to implement a 10-
year agreement signed in January 1982 that eventual-
ly could provide as much as $2 billion in economic
development aid. The USSR signed a contract to
provide $400 million in equipment credits for the
Kapanda hydroelectric dam and power plant-an
undertaking that will be Angola's largest construction
project. In an unusual move, the USSR will join with
Brazil to execute this contract. It is part of a compre-
hensive Soviet-formulated development plan under
which Moscow will also construct a 400,000--hectare
irrigation system, bridges, and other projects in Ma-
lanje Province. Angola and the USSR also are dis-
cussing the construction of an oil refinery.
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The new Soviet agreement has not appreciably re-
duced the growing tension in relations caused by the
Soviet and East European failure to help reverse the
decline in Angola's economy.
SOUTH
AFRICA i ESO1HO
there is a widespread belief' among
Angolan officials that nearly 10 year of Soviet
economic aid has been a failure. More than 9,500
Communist economic technicians were present in
Angola in 1983, but industrial production lagged far
behind prewar levels, and only the VVestern-run oil
industry operated at t profit. Food and consumer
goods shortages have become more pronounced. Mos-
cow has flatly refused to provide emergency food
assistance for war-torn southern Angola. Meanwhile,
Angolan officials are watching the growing Soviet
debt burden with dismay: Angola may have agreed to
settle some of its obligations to Communist countries
by repaying in oil
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Ethiopia. As a result of lengthy economic negotia-
tions, Moscow made substantial new credits available
in 1982 and 1983 to Ethiopia for oil-its first such
concession to a non-Communist LDC--and for devel-
opment projects. 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 moved forward on
Chairman Mengistu's repeated requests for project
aid with a $250 million credit for an irrigation project
and for further oil exploration. The Soviets continued
work on:
? A cement plant.
? A firm machinery assembly complex.
? A caustic soda plant.
? Ninety grain and fodder warehouses.
? Oil, gas, and mineral prospecting projects
Although publicly reaffirming his political commit-
ment to Moscow, Mengistu continues to rely on the
West for economic assistance. Ethiopia is trying to
increase Western aid for Ethiopian development pro-
jects above the $250 million it now receives annually.
Mozambique. Mozambique's expanding economic ties
with Western powers have not affected its economic
relations with the USSR and its East European allies,
who deepened their economic involvement in Mozam-
bique during 1982 and 1983 with nearly 2,400 War-
saw Pact technicians and $30 million in new aid. The
USSR, already the largest Communist donor with
$140 million in outstanding development credits, pur-
sued several initiatives:
? Participation in a railroad from the Moatize coal-
fields to the port of Beira, using Brazilian firms as
civil works contractors.
? The supply of $150 million worth of equipment for
the second stage of the Cabora Bassa hydropower
project.
? Acceleration of work on mining and agricultural
projects, an aluminum smelting plant at Caia, and
coal exploration.
The USSR also donated $20 million worth of grain,
food, other commodities and seed grain to Mozam-
bique
Other Communist donors concentrated on implement-
ing projects agreed to earlier. East Germany, under a
new agreement, provided $10 million in grant aid for
commodity purchases. The East Germans also dis-
cussed a 120,000-hectare grain-growing project, ac-
cepted several thousand new students into a program
developed in 1981 to train Mozambicans at home and
in East Germany, sent more agricultural advisers and
equipment, and donated educational materials. Ro-
mania prepared to begin work on a $16 million steel
plant for which it is providing some financing. Some
1,400 East European economic personnel were sta-
tioned in Mozambique during 1983, commanding
hard currency payments estimated at $25 million
annually for their home governments. In addition,
about 1,000 Cubans worked in Mozambique on agri-
cultural, medical, and educational projects, governed
by a series of agreements signed in the mid-1970s
Ghana. Under Rawlings's leadership, Ghana has
stressed state investment in all economic areas, and
encouraged the USSR and East European countries
to revive aid programs abandoned in the mid-1960s.
Highlights of new commitments are:
? Bulgarian participation in construction of a truck
plant and development of agriculture and
transportation.
? Czechoslovak rehabilitation of a sugar refinery, tire
factory, tannery, and ceramic facilities as well as
construction of a tractor plant and irrigation dams,
probably with credits under earlier agreements.
? Hungarian construction of two brick and tile works
and expansion of a pharmaceutical factory.
? Soviet reactivation of a prefabricated construction
materials plant, construction of a machine-building
and power-engineering center, and rehabilitation of
a gold refinery, with nearly $10 million in credits,
possibly under old agreements.
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In addition, Bulgaria, East Germany, and Hungary
have provided emergency assistance valued at less
than $1 million, and Cuba has established a joint
commission to study development projects.
Guinea. The USSR's relations with Guinea, its first
African aid client, have deteriorated sharply in the
1980s as former President Toure intensified his search
for Western trade and investment to revive Guinea's
economy. The low level of economic aid and argu-
ments over the price the USSR pays for Guinean
bauxite continued to plague the Soviet-Guinean eco-
nomic relationship. To underline its disappointment
with the Soviet program, Guinea expelled 30 Soviet
technicians from the Kindia Bauxite Plant in 1982,
charging them with inferior performance and smug-
gling, and cut back on the number of students travel-
ing to the USSR. At present, Guinea's reliance on the
Soviets for arms provides the major momentum for
the relationship.
Nigeria. Lagos became the USSR's largest single
economic aid recipient in Sub-Saharan Africa in 1979
with a $1.2 billion credit for the Ajaokuta Steel Plant.
About 5,300 Soviets were at the project site at the end
of 1982, working to complete the first stage of the
plant by 1985. Hungary has been the most important
East European donor: in 1982, Budapest pledged
another $70 million in credits for medical, education-
al, and agricultural equipment, which brought its
credits to Nigeria to more than $190 million. Buda-
pest also offered $150 million for additional projects,
but no agreement has been signed.
Sanitized Copy Approved for Release 2011/01/28: CIA-RDP85SO0315R000300010004-5
 Secret Sanitized Copy Approved for Release 2011/01/28: CIA-RDP85SO0315R000300010004-5
Secret
Sanitized Copy Approved for Release 2011/01/28: CIA-RDP85SO0315R000300010004-5