INTERNATIONAL ECONOMIC & ENERGY WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-00798R000300110006-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 61
• Document Creation Date: December 22, 2016
• Document Release Date: June 16, 2011
• Sequence Number: 6
• Publication Date: April 11, 1986
• Content Type: REPORT

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Directorate of
Intelligence
Weekly r-
International
Economic & Energy
DI IEEW 86-015
11 April /986
Copy 8 3 7
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International
Economic & Energy Weekly
11 April 1986
iii Synopsis
1 Perspective-Soviet-Supported LDCs: Economic Decline and US
Opportunities
3 Soviet-Supported LDCs: Still Reliant on Trade With the West
El Salvador: Austerity Program Under Fire
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Peru: Continued Footdragging on Debt
Energy
International Finance
International Trade
Global and Regional Developments
National Developments
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Comments and queries regarding this publication are welcome. They may be 25X1
directed to Directorate of Intelligence 25X1
Secret
DI IEEW 86-0/5
11 April 1986
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International
Economic & Energy Weekly
Synopsis
1 Perspective-Soviet-Supported LDCs: Economic Decline and US Opportunities
Years of following Soviet-encouraged centralist approaches to development
have left Moscow's LDC allies ill prepared to handle the series of oil shocks,
global recessions and higher interest rates that have beset the Third World in
recent times.
3 Soviet-Supported LDCs: Still Reliant on Trade With the West
Despite their dependence on Moscow for military aid, Angola, Ethiopia,
Mozambique, Nicaragua, and South Yemen continue to rely on the industrial-
ized West for hard currency export markets and for imports of many
foodstuffs and key capital goods.
Trade tensions between the United States and the European Community are
high, with little likelihood of substantial improvement in the near term. US
and EC policymakers will meet later this month to discuss agricultural trade
problems, but EC trade restrictions on oilseeds and grains and US counter-
measures planned for 1 May and 1 July threaten to undermine Japan's hopes
for harmony at the Tokyo Summit.
11 El Salvador: Austerity Program Under Fire
President Duarte's economic reform plan has come under continued criticism
from both the left and the right since it was announced three months ago, but
opponents have had little success in mobilizing widespread public support for
protests.
Secret
DI IEEW 86-015
11 April 1986
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19 Peru: Continued Footdragging on Debt
President Garcia faces the prospect of managing Peru's debilitated economy
without foreign credit. Despite recent minor adjustments in Peru's debt policy,
we doubt Garcia is prepared at this juncture to make the concessions necessary
to reach an accommodation with foreign creditors.
Czechoslovakia's five-year plan, approved by the party congress last month,
calls for a closer relationship with the Soviet Union, which in our view will
limit the economy to slow growth at best. As as result, the regime will face the
difficult task of scaling back its modernization program or making politically
risky cuts in consumption.
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International
Economic & Energy Weekly
11 April 1986
Perspective Soviet-Supported LDCs: Economic Decline and US Opportunities
Years of following Soviet-encouraged centralist approaches to development
have left Moscow's LDC allies ill prepared to handle the series of oil shocks,
global recessions, and higher interest rates that have beset the Third World in
recent times. Indeed, the placement of restraints on market forces almost
certainly has hampered efforts by Soviet-backed LDCs such as Mozambique,
Ethiopia, and Nicaragua to deal with key problems such as hunger, unemploy-
ment, or balance-of-payments deficits. While Moscow's economic assistance
has increased-including deliveries of oil to some countries on favorable
terms-such support has remained insufficient to deal with the growing
economic difficulties facing many of its LDC allies. Soviet leader Gorbachev's
speech at the Communist Party Congress in February, which touched
relatively lightly on Third World issues while focusing heavily on domestic
economic problems, suggests that Moscow is unlikely to change its position any
time soon.
We believe that further deterioration in the economies of Soviet-supported
LDCs may prompt some of them to seek expanded economic relations with the
West. Continued Soviet rejection of requests for increased economic aid,
combined with longstanding LDC unhappiness over the poor quality of USSR
aid programs, will probably encourage Moscow's allies to seek expanded
Western alternatives to Soviet economic support. We believe Moscow will
often have little choice but to accept this approach, while counting on military
assistance to maintain its status as those countries' principal patron. The
USSR runs the risk, however, that the LDCs not only will involve themselves
more closely in the Western trading and financial structure, but that in some
cases they will also gradually increase the market orientation of their
economies. LDCs that accept guidelines from international organizations such
as the IMF and World Bank, for example, would be encouraged to eventually
adopt economic approaches better suited to competition in the international
market. Gradual changes in foreign policy and domestic political orientation,
while hardly automatic, could follow. Mozambique, for example, already has
made efforts toward economic liberalization and broader Western economic
ties that could eventually weaken Soviet influence.
In the near term, however, prospects for translating the economic problems of
most Soviet-supported LDCs into loosened ties to Moscow are poor. Few of the
countries' leaders are likely to lessen their ideological identification with
socialism and "anti-imperialism." For a variety of political and security
reasons, including in some cases the presence of Western-backed insurgent
movements, they will probably value the continuation of Soviet military aid.
Moreover, LDC regimes will remain vulnerable to domestic and external
1 Secret
D/ IEEW 86-015
11 April 1986
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Secret
pressures that the Soviets can exploit. Some LDC leaders, for example, will
probably respond to political difficulties by tightening government control of
the economy, rather than by encouraging market forces. Nicaragua is a clear
case in point.
The West thus faces both obstacles and opportunities in pursuing political
benefits from the economic problems of Soviet-supported LDCs. Encouraging
such countries to take a longer term view regarding the value of having an in-
creased stake in the Western system will be difficult. As in the past, many of
those LDC regimes will probably seek assistance from both sides, maintaining
some distrust of both Western and Soviet motives. Demonstrable Western
success in assisting other LDCs, however, could help gradually shift the
thinking of Soviet-supported LDCs. Successful handling by industrial coun-
tries of LDC debt and trade difficulties would probably help in this regard, as
would clear-cut LDC benefits from Western aid programs. Although such
examples would not necessarily affect the LDCs' ideological stripes, they could
buttress Western arguments that Soviet military support is hardly the best
answer to key domestic challenges facing LDC regimes.
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Soviet-Supported LDCs: t
Still Reliant on Trade
With the West
Despite their dependence on Moscow for military
aid, Angola, Ethiopia, Mozambique, Nicaragua,
and South Yemen continue to rely on the industri-
alized West for hard currency export markets and
for imports of many foodstuffs and key capital
goods. The five countries face a deteriorating eco-
nomic situation, caused in part by worsening export
performance. Although Soviet military and ideo-
logical ties will remain the overriding concern for
the five LDCs, the need for hard currency-
combined with Moscow's unwillingness to offer
such aid-has led some to explore stronger eco-
nomic ties to the West.
Continued Dependence on OECD Trade
The five Soviet-supported LDCs-Angola, Ethio-
pia, Mozambique, Nicaragua, and South Yemen-
despite strong military and ideological ties to Mos-
cow, maintain high trade levels with OECD coun-
tries. During 1975-84, OECD countries accounted
for at least three-fourths of the LDCs' total annual
exports. The United States has been a major
purchaser of their exports. In 1984, for example, it
was either the first- or second-largest export mar-
ket for each LDC except South Yemen. The
OECD, moreover, is the primary importer of Ango-
lan oil, which accounts for the bulk of these LDCs'
exports to the West.
Selected Soviet-Supported LDCs:
Total Exports and Imports, 1975-84a
1975 80
a Data for Angola, Ethiopia, Mozambique,
Nicaragua, and South Yemen.
b Less Angolan fuel exports.
more than $900 million-almost twice the level of
similar imports from the Soviet Union. Imports of
chemical products-including pesticides and medi-
cines-were $235 million, compared with $6 mil-
lion from the Soviets. By 1984 food deliveries from
the West had become a major component of the
The five LDCs also depend on the West rather than
on their Soviet benefactors for most imports of
capital goods and foodstuffs essential to sustaining
development. Total imports from OECD countries
remained strong over the decade and in 1984 were
over $2.3 billion. Imports of machinery and trans-
portation equipment from OECD countries totaled
' The Soviet-supported LDCs referred to in this article are not
necessarily Soviet client states but consider themselves Marxist-
Leninist and rely on varying levels of military support from
Moscow. The five LDCs were selected on the basis of their
dependence on trade with the West and hard currency trade
arrangements with the USSR. We do not include LDC trade with
Eastern Europe or Cuba, which in most cases is insignificant and
LDCs' imports.
Trade With the Soviets: Mostly One-Way
Over the past decade, each of the five LDCs has
with few exceptions run annual trade deficits with
the Soviet Union. According to 1984 Soviet trade
statistics, these deficits ranged from $129 million
for South Yemen to $227 million for Ethiopia and
Secret
DI IEEW 86-015
11 April 1986
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Selected Soviet-Supported LDCs: Commodity Composition
of Trade to the USSR and OECD
LDCs include Angola, Ethiopia, Mozambique, Nicaragua, and
South Yemen. Data come from UN and Soviet trade statistics.
represented the largest bilateral trade deficit for
each LDC. We believe that about two-thirds of the
combined deficit since 1980 was financed under
economic and aid agreements, which lessens the
trade deficit's impact on the five LDCs' balance of
payments.
While these LDCs have some commodities of inter-
est to Moscow-Angolan oil, Ethiopian coffee,
Mozambican minerals-they have been reluctant
to sell goods to the Soviet Union that can earn
foreign exchange through exports to the West.
Consequently, these LDCs have been willing to
export to the USSR on average only about $40
million annually.
The five LDCs' strong growth in imports from the
Soviet Union-totaling over $900 million in
1984-has been financed through the high volume
of credits that Moscow offers through its aid
programs. These credits have financed large im-
ports of trucks, aircraft, and power engineering and
metallurgical equipment. For each LDC except
Angola, there has also been a rapid increase in
imports of Soviet crude oil and oil products, with
Ethiopia and Nicaragua depending. almost entirely
on Soviet oil. these
cash-starved LDCs have been able to increase their
oil imports through price subsidies-Ethiopia-and
credit arrangements offered by Moscow, much of
which is unlikely to be repaid-Nicaragua.
Frustrations With Moscow Emerge
The five LDCs have sought greater Soviet assis-
tance and balance-of-payments support to reverse
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Selected Soviet-Supported LDCs:
Trade With the USSR and OECD
USSR US Non-US
OECD
USSR US Non-US USSR US Non-US
OECD OECD
their economic decline. In our view, because of
Moscow's unwillingness to provide more beneficial
arrangements, these LDCs have looked increasing-
ly to the West and their regional allies:
? Angola has sought direct investment and Western
financial support to counter weak Soviet aid.
? Mozambique has sought and gained acceptance
into the IMF, the World Bank, and the EC's
Lome Convention. The government also adopted
several market-oriented reforms, such as flexible
wages and prices.
? Ethiopia has resisted pressures by the Soviets to
limit debts to the West and cut back on Western
imports
? South Yemen, before the recent change of re-
gime, partially countered weak Soviet economic
support with stronger trade and aid links with its
Arab neighbors.
? Nicaragua's economic support from the Soviets
has increased sharply in recent years. Managua,
however, may become more dependent on West
European trade and aid, especially if Moscow
cuts back on hard currency support this year.
We do not believe the five LDCs' foreign payments
situation will improve measurably in the near term.
Although most have managed to limit nonmilitary
hard currency imports in recent years, prospects for
substantial increases in export earnings are not
good:
? Ethiopia's coffee exports probably will only part-
ly recover this year, despite higher prices and
relaxed quotas.
? Nicaragua's total cotton exports will drop consid-
erably in 1986, according to US Embassy
reporting.
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Selected Soviet-Supported LDCs:
Trade Balances, 1975-84a
Billion US $
1.0
-1.0 1975 80 84
a Data for Angola, Ethiopia, Mozambique,
and South Yemen.
? Angola, despite an expected increase in domestic
oil production, will probably suffer a considerable
decline in export revenues because of lower oil
prices.
? South Yemen, largely dependent on its refinery
operations, probably will suffer from falling oil
prices.
? Mozambique's exports look bleak for 1986, de-
spite market-oriented reforms and marginally
increased Western aid.
There also is little indication that the five LDCs
will be able to count on the Soviets for much more
assistance in offsetting their large bilateral trade
deficits. In our judgment, these LDCs will resist
Moscow's pressures to increase exports to the Sovi-
et Union. Moscow's own economic difficulties may
result in greater demands for payment in hard
currency or equivalent goods.
Despite the five LDCs' trade problems with the
USSR, Soviet military aid remains essential to
their regimes. We believe, moreover, that Moscow
will continue to provide military aid and other
support to these countries because it still considers
these commitments worthwhile.
To sustain economic development, the Soviet-sup-
ported LDCs almost certainly will remain depen-
dent on Western trade for reliable export markets
and imports of foodstuffs and capital goods. Al-
though military and ideological concerns will con-
tinue to link the LDCs to Moscow, their poor
economic straits may encourage them to seek long-
term developmental assistance, balance-of-pay-
ments support, as well as direct investment from
the West. Reliance on Western trade in turn could
encourage the LDCs eventually to restrict Soviet-
style development strategies and possibly adopt
some pragmatic, market-oriented reforms. While
friction between Moscow and these LDC allies may
not directly translate into stronger Western rela-
tions, it could allow the West to play on their
frustrations and sharpen differences with the
Soviets.
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Summit Issues: EC-US
Trade Problems
Trade tensions between the United States and the
European Community are high, with little likeli-
hood of substantial improvement in the near term.
US and EC policymakers will meet later this
month to discuss agricultural trade problems, but
EC trade restrictions of oilseeds and grains and US
countermeasures planned for 1 May and 1 July
threaten to undermine Japan's hopes for harmony
at the Tokyo Summit. The EC has stressed it wants
a negotiated settlement but has warned it will
retaliate if the United States acts on 1 May, three
days before the start of the summit. Other bilateral
trade issues-steel, aircraft, and textiles-are less
contentious and probably will not interfere with the
summit, but are nonetheless likely to heat up again.
Agriculture: Growing Discord
EC member states have expressed concern about
the United States' threatened actions concerning
the tariff and quantitative measures on grain and
soybean trade the EC imposed on 1 March in
conjunction with the accession of Spain and Portu-
gal to the EC. The EC contends that enlargement
will ultimately result in an overall trade advantage
for the United States-as more tariffs affecting US
trade will go down than up, particularly on manu-
factured goods-and that the United States will
receive indirect compensation for lost agricultural
markets through increased access to other Iberian
sectors. The EC also believes it adequately notified
the United States through the GATT last July and
through the text furnished last November.
The EC will, however, probably use the enlarge-
ment argument to implement new agricultural
measures. With the Portuguese oilseed quota as a
first case, the EC may try to end its no-duty
treatment of oilseed imports, thereby affecting $1.8
billion of US oilseed exports-primarily soybeans
and sunflower seeds-to the whole Community.
Million
uss
Percent
Million
Us$
Percent
Foodstuffs
3,605
6.6
4,039
8.4
Crude materials
592
1.1
5,450
11.3
Energy
4,922
9.0
2,031
4.2
Chemicals
5,056
9.2
4,916
10.2
Basic manufactures
9,360
17.0
3,411
7.1
Miscellaneous
manufactures
7,468
13.6
4,777
9.9
The Commission is preparing a new oilseeds regime
under the Common Agricultural Policy (CAP) to be
submitted to the EC agriculture ministers this fall.
Spain and Portugal have increased EC olive oil
production by 70 percent-the Community was
already 95 percent self-sufficient in olive oil before
enlargement. The new regime is likely to include
tariff hikes on imported oilseeds: the new suspend-
ed tariff schedule for the EC-12-to be used as the
basis for compensation negotiations in the GATT-
has left blank the tariff lines for oilseeds, oilcake
and meal, and corn gluten feed. US Embassy
reporting has indicated that the EC may try to use
the potential gains from lower Spanish and Portu-
guese duties on manufactured goods to justify
raising tariffs on the products left blank in the new
schedule. France and Italy are especially keen to
use this approach, while the United Kingdom, West
Germany, and Denmark are against raising oilseed
tariffs.
Secret
DI IEEW 86-015
l 1 April 1986
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EC: Trade With the United States,
1980-85
-25 1980
1
85,
The Community strongly prefers that the dispute
be settled by negotiation through the GATT pro-
cess and places great importance on high-level
political talks with the United States set for 19
April concerning the full implications of enlarge-
ment. It is highly likely, however, that the EC will
retaliate if the United States goes forward on 1
May with announced measures against Community
agricultural exports. The Twelve are firmly united
in their belief that their actions are consistent with
the GATT and unavoidable as a result of enlarge-
ment. Even the United Kingdom, which is often the
most likely to sympathize with US concerns, advo-
cates a firm Community line on this issue. The EC
Commissioners for External Relations and Agricul-
ture, De Clercq and Andriessen, are likely to stress
at the meeting this month their appreciation for the
political significance of the issue in the United
States, their willingness to negotiate compensation
and avoid a trade war, and their insistence that
enlargement will benefit the United States overall.
They almost certainly will ask US officials to delay
United States: Steel Imports From
the EC, 1975-85
0 1975
implementation of the 1 May retaliatory measures.
If their request is denied, the Commission would
probably consider quantitative restrictions on im-
ports of US oilseeds and corn gluten feed, as well as
taxes on oils and fats--except for olive oil-to
discourage imports of these products.
Other Simmering Disputes
A number of additional trade disputes have created
problems in EC-US relations, and, although they
are less contentious than agricultural trade, the
potential for more flareups exists, with possible
spillover effects into other sectors and the new
GATT round.
Steel. Issues over steel trade have calmed following
the imposition of import restrictions by the United
States and retaliatory EC measures-quotas
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against imports of US fertilizer, coated paper, and
beef tallow. Steel trade is particularly sensitive to
both sides because of sluggish domestic market
conditions and the number of jobs involved. US
restrictions-which cut EC shipments of semifin-
ished steel by one-third to 600,000 metric tons-
come as the Community is in the midst of restruc-
turing the steel industry. Since 1980, nearly
200,000 workers have lost their jobs, and the EC
wants to minimize further job losses. Tensions are
likely to rise again at the end of the year when the
pipes and tubes agreement expires if the United
States chooses to tighten restrictions; under the
current arrangement the EC share of the US pipe
and tube market is limited to 7.6 percent.
Aircraft. Government support of the Airbus is a
growing source of friction between the United
States and the West Europeans. US and West
European negotiators met last month to discuss
government subsidies to Airbus, although nothing
tangible resulted from the discussions. Both sides
decided to continue the talks in June. Support
practices by participating member governments-
France, West Germany, Britain, and Spain-en-
able Airbus to cut prices and cost of financing to
attract customers, making it more difficult for US
companies to compete. US companies complain
that the terms offered by Airbus violate GATT
rules, which prohibit subsidies that adversely affect
the trade interest of other signatories. Airbus does
not publish income statements or production fig-
ures, making it difficult to prove violations.
Textiles. The Community fears that its rapidly
rising textile sales to the United States may become
another bilateral trade issue. US textile imports
from the EC have risen at a faster rate over the
past two years than those from the big three LDC
exporters-Hong Kong, South Korea, and Taiwan.
The rapid growth in imports is primarily the result
of the strong dollar and the trade-diverting effects
of US restrictions against LDC suppliers. EC offi-
cials argue that a weaker dollar and slower US
economic growth this year should alleviate the
problem. The EC's textile industry, however, is
only beginning to recover from a decade of reces-
sion caused by import competition and stagnant
United States: Annual Growth in
Textile Imports, 1983-85
European
Community
Asian
exporters
domestic demand and is anxious to maintain its
exports to the United States. With the negotiations
for renewing the Multifiber Arrangement (MFA)
just starting, the Community would view any at-
tempt to restrict its textile exports as a setback in
its efforts to protect employment in the textile
sector. The Community favors renewal of the
MFA, although it will probably adopt a more
liberal stance than the United States-in part
deflecting LDC criticism of developed country pro-
tectionism. An EC-US confrontation over textiles
could lessen EC willingness to cooperate with the
United States on MFA or on the new trade round.
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EC Agricultural Trade Actions
Disputed by the United States
The most significant disputes include:
? Imposition of the CAP variable levy on Spanish
imports of corn and sorghum effective 1 March.
This measure, adopted for the integration of
Spain into the CAP, increases the tariff from 20
percent to a range of 30 to 80 percent, and will
affect $600 million a year in US exports. The EC
variable levy has not been formally accepted by
the United States nor deemed to be legal by
provisions of GATT.
? Establishment in Portugal of a maximum
amount of vegetable oil-except for olive oil-
that can be produced for domestic consumption,
implicitly limiting oilseed imports. The quota-
set at 50,000 metric tons this year-could re-
strict $238 million of US soybean and sunflower
seed exports. It is designed to preclude any
sudden change in the price relationship between
olive oil and other vegetable oils so that the olive
oil surplus does not worsen. A similar arrange-
ment is already functioning in Spain. The EC
contends Portuguese imports of oilseeds would
not be affected as long as any oil produced from
them above the quota amount was reexported.
? Requirement for Portugal to import 15 percent of
its grain needs from EC countries, including
Spain, effective 1 March. This measure is intend-
ed to reorient Portuguese imports toward Com-
munity countries as Portugal joins the CAP and
The EC-US enlargement dispute could disrupt the
Tokyo Summit and complicate preparations for or
even delay the start of the new trade round. The
EC is insisting that the fundamentals of CAP not
be discussed at the new round and that all agricul-
tural issues, including the use of export subsidies,
be limited to one working committee. US counter-
measures on 1 May could also push the United
ends its state grain import monopoly. The Unit-
ed States has in the past supplied virtually all of
the market, with exports of $392 million in
1984.
? EC preferential tariffs on citrus imports from
Mediterranean countries for the purpose of pro-
moting economic development and political sta-
bility will cost US citrus exporters an estimated
$50 million a year in lost sales to the EC. This
dispute concerning preferential tariffs, which has
languished for 16 years in the GATT and
spawned the recent pasta war, is unlikely to be
resolved until the EC completes negotiations
with the Mediterranean countries for new prefer-
ential agreements, perhaps by this summer.
? A total ban on the nontherapeutic use of hor-
mones in EC livestock, effective in 1988, in
response to consumer pressures. Imports from
non-EC countries could also be affected, depend-
ing on enforcement measures, including $100
million of US beef
? An EC directive establishing sanitary procedures
for foreign meat packers exporting to the EC,
effective for the United States in 1987. US meat
exports of $125 million could be affected.
? Use of export subsidies to sell grain in world
markets. The United States and EC are each
filing complaints against the other in the GATT.
Kingdom, West Germany, and Denmark into
agreeing to permanent soybean tariffs as a part of
the new oilseeds regime. Other EC-US agricultural
trade disputes-such as EC preferences for Medi-
terranean citrus-are likely to be more difficult to
solve should the enlargement dispute continue, but
are not likely to affect summit deliberations.
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El Salvador: Austerity
Program Under Fire r
President Duarte's economic reform plan has come
under continued criticism from both the left and
the right since it was announced three months ago,
but opponents have had little success in mobilizing
widespread public support for protests. More dem-
onstrations are likely in the next few months,
especially if Duarte enacts additional reforms as
expected. The President, however, will probably
remain flexible and willing to make compromises as
pressures grow.
Marxist labor leaders have attempted to use opposi-
tion to the plan to politically undermine Duarte,
The US
Embassy reported that as many as 7,000 partici-
pants turned out for a demonstration in February
organized in part by the National Unity of Salva-
doran Workers (UNTS), a recently formed labor
coalition partly controlled by a Marxist labor orga-
nization. The protestors demanded not only an end
to austerity but also a resumption of dialogue with
Duarte's Austerity Initiative
The economic plan-Duarte's first comprehensive
package since taking office in June 1984-com-
bines austerity with attempts to protect workers
and consumers. In particular, the initial plan froze
most government spending, effectively devalued the
colon by 20 percent, sharply increased prices for
industrial and automotive fuels, and substantially
boosted coffee taxes. To blunt consumer reaction,
prices of food staples, rents, utilities, public trans-
portation, and medicines were frozen, and stiff
penalities for violations of new price and exchange
controls were announced.
According to the US Embassy, Duarte showed his
willingness to compromise almost immediately af-
ter the plan was announced, scaling back increases
in gasoline prices and some luxury taxes. Both the
President's advisers and the Embassy have said,
however, that additional belt-tightening mea-
sures-including hikes in food prices and utility
rates-will be needed later this spring.
the government is considering
measures to stimulate exports and production in an
effort to address the business community's discon-
tent with the program.
the guerrillas.
UNTS reportedly is planning additional marches
and forums, but such demonstrations have yet to
move beyond sporadic protests and have been ham-
pered by the lack of widespread popular support,
financial difficulties, and ineffective coordination.
In addition, Embassy reporting suggests Duarte's
skill in preempting labor issues by making timely
compromises also has helped avoid more serious
confrontations.
US Embassy reporting indicates Duarte has fared
better with the major democratic labor groups,
although they also have asked for a softening of the
austerity package. A progovernment rally last
month by the National Worker and Campesino
Union (UNOC)-a recently formed alliance of
democratic worker and peasant unions-attracted
some 25,000 participants, according to US Embas-
sy estimates. While pledging support for the Duarte
administration, demonstrators also demanded low-
er fuel and food prices. The UNOC also has paid
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El Salvador: Selected Economic
Indicators, 1981-86
for advertisements calling for guaranteed prices for
both consumers and farmers, increased minimum
wages for all workers, and more effective price
controls.
Real Per Capita GDP Growth
Percent
Consumer Price Growth
Percent
Current Account Deficit
Million US $
0
a Estimated.
b Projected.
Flagging Private-Sector Confidence
Business leaders and organizations also have criti-
cized the program, asserting that the package lacks
production incentives and perpetuates excessive
government interference in the economy. Officials
of a San Salvador-based metals fabrication firm
report, for example, that their regional business has
plummeted because of uncertainty about their abil-
ity to import crucial raw materials
We believe both moderate and leftist unionists will
continue to snipe at Duarte's package, but with
different goals. For its part, UNOC is likely to
believe that its credibility as an independent orga-
nization depends on its ability to win concessions
from the administration. UNOC has been criti-
cized by both the left and the right, for example,
25X1
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for its close ties to the ruling Christian Democrats,
and has lost some popular backing because of
accusations of support for the austerity program
In our
judgment, the leftist-dominated UNTS believes
that any concessions won from demonstrations are
secondary to the longer term political goal of
furthering the insurgency. While we believe more
leftist-inspired protests are inevitable, we do not
believe these unions currently have sufficient sup-
port from either their rank and file or the popula-
tion to launch and sustain a general strike or
widespread work actions.
The US Embassy reports that Duarte's advisers are
continuing to press for improved communications
with the private sector, but we believe that pros-
pects for any near-term reconciliation are poor. In
our judgment, the business community's deeply
ingrained suspicions of Duarte's populist style and
the perceived antibusiness posture of the ruling
Christian Democrats leave business with little room
for compromise. Even if San Salvador enacted a
package with incentives demanded by the private
sector, as reportedly is being considered, we believe
businessmen probably would wait for a year or so to
see the changes fully implemented before revising
their gloomy assessment of the economic climate.
Despite challenges to his austerity program, we
believe President Duarte probably will be able to
continue balancing economic demands with addi-
tional revitalization efforts. He retains a good deal
of popular support and the backing of the military.
Nonetheless, even if the economic package survives
this round of protests intact, its overall impact on
the economy probably will not be sufficient to
restore business or foreign investor confidence in
the near term.
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Peru:
Continued Footdragging
on Debt
President Garcia faces the prospect of managing
Peru's debilitated economy without foreign credit.
Despite recent minor adjustments in Peru's debt
policy, we doubt Garcia is prepared at this juncture
to make the concessions necessary to reach an
accommodation with foreign creditors. His at-
tempts to buy time in order to boost foreign
exchange reserves could backfire, particularly if he
underestimates creditors' reactions.
Debt Policy Under Garcia
Garcia believes that many of the problems burden-
ing Peru-and the region in general-result from
alleged Western economic exploitation of the Third
World, and he sees the debt as an impediment to
progress on social and economic reforms. More-
over, Garcia is keenly aware that he tapped into a
wellspring of nationalism with his public promises
last year to limit debt payments to 10 percent of
export earnings and not to deal with the IMF. His
resolve not to accept an IMF program was under-
scored last October in Seoul when Finance Minis-
ter Alva Castro rejected a proposal for an IMF
technical team visit to Lima, thereby delaying an
economic review by the Fund for six months.
Lima's payment strategy has favored those willing
to provide new loans, namely multilateral institu-
tions (not including the IMF) and some government
donors. As a result, nearly 30 percent of Peru's
actual debt payments went to international organi-
zations such as the World Bank and Inter-Ameri-
can Development Bank in 1985, while most of the
remainder settled regional obligations and food
import bills.
Last year, Garcia's intransigence bought his gov-
ernment time to gather information on the negoti-
ating strategies of other Third World debtors,
explore innovative debt repayment schemes, and
Peru's external debt to Western creditors totals
$12 billion, less than 5 percent of Latin American
debt. About $5.6 billion represents medium- and
long-term obligations owed to private creditors
primarily at floating rates; the other $6.4 billion is
owed to official creditors primarily on fixed repay-
ment terms. US bank exposure is about $1.8
billion of total debt, including 30 to 35 percent of
Peru's $250-300 million short-term credit lines.
Peru's debt to the Soviet Bloc, which willingly
accept goods as payment, amounts to approximate-
ly $2 billion.
The private sector is current in servicing its obliga-
tions-$400 million a year-which do not fall
under President Garcia's 10-percent debt service
ceiling. At the end of 1985, however, the public
sector was about $1.5 billion in arrears to Western
creditors. Western bankers received the last inter-
est payment in May 1985 under the Belaunde
administration. Moreover, Lima has yet to sign its
1984 commercial bank or Paris Club rescheduling
agreements.
boost foreign exchange reserves.
Peru tried-apparently
without success-to interest Western bankers in
arrangements similar to Lima's payments-in-goods
agreement with the USSR. By the end of 1985, the
limit on debt repayments, combined with a freeze
on dollar accounts and lower profit remittances by
foreign oil companies, had pushed exchange re-
serves up 62 percent since July to $1.5 billion-
enough to finance nine months of imports.
Secret
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Secret
Peru: Balance of Payments, 1981-86
Million US $
(except where noted)
Peruvian CIA
Government
Short-term capital, 389 544
errors and omissions
Estimated.
b Projected.
Scheduled interest payments minus arrears.
d Yearend, excluding gold holdings, as reported in the IMF's
International Financial Statistics.
As of 7 February 1986.
? In January 1986, private creditor banks insisted
on a $120 million interest payment before the end
of April to convince them that Peru intends to
address promptly and seriously its external com-
mercial bank debt.
Garcia's anti-US and anti-IMF rhetoric and his
generally confrontational approach to the debt
issue have strained relations with Western creditors
and increasingly isolated Peru from international
lenders:
? The World Bank has informed Peru it will cut off
new loans unless Lima pays $140 million in
arrearages to the IMF by mid-April.
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Secret
? Trade credit available to the government is nearly
zero, while that for the private sector has fallen
50 percent-to about $125 million-since July
1985, according to the US Embassy.
Faced with dwindling foreign loans and credits,
Garcia made several concessions in early 1986,
authorizing a symbolic payment to the Fund and
some payments for operating expenses to commer-
cial bankers. Nonetheless, at the end of January,
E_:::~ Peru rolled over $960 million of
short-term debt for the second time since he took
office in July 1985.
Lima's lack of a coordinated policy to address the
debt problem reflects, in part, disagreements be-
tween Garcia and his advisers:
? Prime Minister Alva Castro and Foreign Minis-
ter Wagner have sought to maintain cordial
relations with creditors
Peru's economic performance is not likely to im-
prove dramatically in 1986. GDP growth probably
will be slightly above last year's 2-percent rate,
reflecting government stimulative measures. The
current account deficit will worsen in 1986 as lower
Peru: Service of the Public Million US S
External Debt Due, 1985-86
Payments
Due
Scheduled
Actual
Arrearages
in 1986
Total
3,196
617
2,579
2,119
International
organizations
174
171
3
221
Western
governments
and agencies
410
43
367
273
International
banks
1,280
133
1,147
737
Communist
countries
284
170
114
252
oil prices reduce export earnings at least $200
million from last year's $3 billion level
activity and sporadic food shortages.
Unemployment and under-
employment will remain close to 70 percent, and
inflation will probably reach the three-digit level in
1986. Continued price controls will discourage do-
mestic production and lead to more black-market
Over the next several months, we expect Garcia to
continue his current delaying strategy of making
occasional conciliatory but largely emptyhanded
gestures toward Peru's creditors. He will probably
lobby for more time to work out differences with
creditors.
As economic problems deepen, however, Garcia
may be persuaded that he cannot maintain a
politically acceptable level of economic perfor-
mance without Western aid, trade, and investment.
Even so, Garcia would probably pay arrearages
only to favored lenders, because he wants to use
foreign exchange to purchase essential imports-
including food-and to improve social welfare,
according to the US Embassy.
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The outlook for a near-term improvement in Peru's
economic relations with the United States is bleak.
Lima's import controls will constrain US exports to
Peru in 1986, continuing the 1985 downturn. Peru,
moreover, has jeopardized approximately $58 mil-
lion in US aid previously scheduled for disbursal in
fiscal year 1986 because of persistent payment
arrearages.
Problems persist over the nationalization of a US
oil company in late 1985, which may lead to
economic sanctions if Lima fails to adequately
compensate for the expropriation. President Garcia
also has indicated he intends to review the profit-
sharing practices of a US copper firm. Relations
with the United States might sour further if Peru's
overtures to the financial community are rebuffed
and creditors threaten punitive action. If such
confrontational developments occur, Garcia might
repudiate the debt or make new moves against US
interests in Peru.
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Czechoslovakia: Modest
Economic Plan for 1986-90
Czechoslovakia's five-year plan, approved by the
party congress last month, calls for a closer rela-
tionship with the Soviet Union, which in our view
will limit the economy to slow growth at best. The
plan entails closer cooperation with the Soviets on
natural gas sales and nuclear power development
that will help Prague shift from coal and oil
consumption. Increased Soviet trade demands
could hamper Prague's effort to achieve its mod-
ernization and growth targets. The leadership con-
tinues to accord a low priority to trade with the
West and appears unwilling to introduce reforms
that would make the economy more efficient. As a
result, the economy is likely to experience contin-
ued slow growth, and the regime will face the
difficult decision of scaling back its modernization
program or making politically risky cuts in con-
sumption.
The economy's mediocre showing over the 1981-85
plan period-GNP rose at an average annual rate
of 1.5 percent-resulted at least in part from the
leadership's orthodox policies. Prague's conserva-
tive approach to foreign borrowing limited imports
of Western technology needed to modernize the
capital stock. Indeed, total investment in real terms
declined nearly 2 percent in 1981-85 from the
previous five-year period. Czechoslovak productivi-
ty stagnated and exports became increasingly un-
competitive, forcing a growing share of foreign
trade to CEMA countries. A modest reform pro-
gram introduced in 1981, called the "Set of Mea-
sures," was gutted by conservative ideologues in the
leadership and effectively ignored at lower levels.
Czechoslovakia:
Key Growth Rates, 1981-90
Percent
1981
1982
1983
1984
1985
1986-90
Plan
Electronics
NA
4.8
8.4
12.2
8.0
10.0
Investment
-4.6
-2.3
0.6
-4.2
6.5
2.2
Labor productivity
-0.6
-0.4
1.4
2.8
2.6
3.3
a Average annual growth rates implicit in announced five-year plan
goals except for investment, which is an annual average rate.
b GNP in Western accounting will usually register a lower growth
rate than national income in Marxist accounting. Western accounts
remove distortions of turnover taxes in prices and include sectors 25X1
left out of Marxist accounts such as housing, government, finance
and banking, education, health, recreation, and consumer and
business services. These "unproductive" sectors grow more slowly
and thus lower the overall GNP growth rate.
Preliminary.
a Approximate GNP equivalent to the plan for national income.
Growth in 1986-90 is keyed to productivity im-
provements. National income is planned to increase
by 18 percent by 1990 while raw material inputs
remain constant. Investment is to increase 10 to 12
percent over the 1981-85 level with expenditures
targeted at improving efficiency in the use of raw
materials and at modernizing Czechoslovakia's in-
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dustrial base. Highest priority will go to the ma-
chine-building and electronics industries, which are
to expand output by 22 and 60 percent, respective-
ly. Raw-material-intensive metallurgical industries
are to be scaled back.
Trade Ties To East Strengthen
In response to Soviet pressure to expand intra-Bloc
trade and cooperation, the plan calls for trade with
CEMA and other Communist countries to grow by
22 percent by the end of the decade. In 1985
Czechoslovakia conducted a record 79 percent of
its total foreign trade with CEMA and other
Communist nations and was more dependent on
such trade than any other country in Eastern
Europe. Czechoslovakia is looking particularly to
participation in CEMA's Complex Program for
Technical Progress Until the Year 2000-a Soviet
initiative to promote CEMA self-sufficiency and
technological modernization-to give impetus to its
development of advanced technology.
Prague has indicated an interest in importing more
Western technology, but the difficulty of paying for
hard currency imports and its reluctance to incur
debt will keep the Western share in trade small.
The government approved the formation of joint
ventures in August 1985, but plans to keep com-
mercial links to the West limited.
Czechoslovakia: Structure of Energy
Consumptiona
1984
Electricity Imports I
Hydroelectric 1
Nuclear 3
1990
Electricity Imports 1
Hydroelectric 2-
Nuclear 8
a Primary energy consumption, measured
by caloric equivalents, plus electricity
imports.
The Soviet Union is Czechoslovakia's most impor-
tant economic partner, accounting for 46 percent of
1985 foreign trade. The new five-year plan stresses 308799486
the importance of even closer Soviet trade ties,
especially in Czechoslovak machinery exports. return for assistance on natural gas projects, the
Prague also will participate in Soviet natural gas Soviets will increase gas deliveries to Czechoslova-
projects such as the Yamburg-Uzhgorod pipeline kia by nearly 50 percent, to 15.4 billion cubic
and the Karachaganak gas production facility in meters annually by the end of the decade.
the Ural Mountains. Cooperation with the USSR
will be crucial to Czechoslovakia's planned transi- The Soviets have assured Prague that they will
tion away from coal and oil to natural gas and maintain current oil deliveries, which represent 42
nuclear power. Most Soviet technical assistance to percent of the value of Czechoslovak imports from
Czechoslovakia in the coming five years will go to the USSR and account for 95 percent of the
develop nuclear power, which is slated to provide 28 Czechoslovak oil supply. Nevertheless, the desire to
percent of Czechoslovak electricity needs and 8
percent of total energy consumption by 1990. In
Secret 24
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maintain hard currency earnings in the face of
falling world oil prices and production problems in
the Soviet oil industry may tempt Moscow to
reduce oil deliveries. Czechoslovakia does not pres-
ently benefit from the fall in oil prices because
Soviet oil prices are pegged to a five-year average
of world prices. Lower oil prices eventually will
improve Czechoslovakia's terms of trade.
According to a source of the US Embassy, the
Czechoslovaks may be overcommitted to participa-
tion in Soviet resource development projects. The
source claims that Czechoslovak commitments ex-
ceed the capacity of the economy to meet domestic
targets, and that five-year plan goals will have to be
rewritten after 1986 to be reconciled with Soviet
demands. Czechoslovak officials are generally re-
luctant to discuss Soviet economic pressure-the
Soviets can still exert a claim for increased exports
to repay Prague's ruble debt run up over the past
decade. Their dependence on Soviet trade leaves
them little room to maneuver. Moscow probably
would stop short of demanding total compliance,
however, if it required crippling austerity measures
that could undermine the stability of one of its most
faithful leaderships in Eastern Europe.
Stalling Consumer Welfare
Czechoslovakia's leaders have maintained political
stability since the "Prague Spring" and subsequent
Warsaw Pact invasion in 1968 in part by support-
ing living standards, which are among the highest
in Eastern Europe. During the 1970s, consumption
grew at a comparatively rapid pace and was main-
tained at the expense of investment during the
economic slowdown of recent years. While the
relatively high rate of consumption has promoted
domestic stability, its long-term effect has been the
obsolescence of capital stock. The leadership may
now feel more confident in its ability to maintain
control given the muted popular reaction to stag-
nating living standards and may not feel that
maintaining consumption is as important to domes-
tic stability as it once was. Goals for improving the
population's standard of living in the coming five
years are modest.
Limited Prospects for Reform
The Czechoslovak leadership has rejected decen-
tralization of economic authority for fear it would
encourage political decentralization as well. Limit-
ed implementation of market-oriented economic
reforms was forerunner of the Prague Spring of
1968. The new Soviet leadership may push Prague
to introduce significant changes in economic man-
agement, but the signals so far have been mixed.
The draft plan and public rhetoric before and
during the congress have stressed increased disci-
pline, efficiency, and improved central planning as
the keys to improved economic performance. Pre-
mier Strougal, in his report to the congress on the
plan, advocated some minor reforms, but these
proposals, reminiscent of the "Set of Measures,"
were accompanied by calls to strengthen the role of
the central plan. Strougal's proposals, moreover,
received little support from other speakers at the
congress. In the absence of any real commitment
by the leadership, reform in Czechoslovakia seems
elusive.
The Czechoslovak leadership is not introducing any
significant departures from the policies it has pur-
sued over the past few years. Under these condi-
tions, the most Prague can reasonably hope for is to
sustain the 1983-85 recovery through 1990. This
would still leave them short of key targets for
national income and labor productivity. The leader-
ship's stress on modernizing production relies more
on exhortation than on concrete measures. Czecho-
slovakia is not willing to incur the hard currency
debt that Western technology imports would re-
quire or to introduce structural reforms necessary
for increased economic efficiency.
The regime probably will have to make some hard
choices over the next several years in responding to
competing demands for increasing investment, im-
proving living standards, and meeting Soviet re-
quirements for more and higher quality goods. The
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leadership will be under particularly strong pres-
sure to satisfy Soviet demands and probably will
accord the highest priority to them. It also appears
committed to meeting its investment targets. Gains
in consumption, therefore, are likely to fall short of
plan.
The 1986-90 five-year plan's emphasis on CEMA
suggests Czechoslovakia is resigned to playing an
even smaller role in international trade. Prague's
plans for further integration with the Soviet econo-
my probably will secure important energy supplies
and a market for machinery and electronics ex-
ports. While this tight integration into CEMA
probably limits Czechoslovakia to slow growth,
Prague may be satisfied with a relatively strong
economic performance by East European stan-
dards.
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measures to limit OPEC production since last month's meeting, and some
officials believe that a session next week would be unproductive. Saudi Arabia
remains hesitant to promote a dialogue and appears content with the oil
market's present course. OPEC's regularly scheduled semiannual meeting is
set for June. OPEC crude oil production during March dropped by 800,000
b/d to 17.7 million b/d. Slight increases in output from Indonesia, Kuwait,
Nigeria, and Venezuela were more than offset by declines from Saudi Arabia
and Iran. Saudi output reportedly fell because of market competition and is ex-
pected to rebound in April after Riyadh renewed several netback contracts.
Iran has refused to renegotiate prices on some of its contracts and appears con-
tent to lose sales temporarily as part of its efforts to shore up prices.
Algeria 0.66 0.7 0.7 0.7 0.7
Amount in parentheses excludes production from the Neutral
Zone, whose output is divided between Saudi Arabia and Kuwait
and included in their country quotas; the Neutral Zone has no
production quota of its own.
Secret
DI IEEW 86-0/5
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Spot Oil Price The spot oil market continues to be volatile, with prices fluctuating by as much
Developments as $2 per barrel per day in recent weeks. Continuing high worldwide
production and concern over the downturn in demand this spring led some spot
crudes to trade temporarily below $10 per barrel early last week. News of the
Norwegian oil workers' strike-and the loss of 900,000 b/d of production-
temporarily boosted prices. Some of the gain, however, was erased later this
week, reflecting weak underlying market conditions. By midweek, key North
Sea and US crudes were selling in the $12-14 per barrel range.
Norwegian Oil Oslo's refusal to intervene in a strike that has halted Norway's oil production
Industry Strike of 900,000 b/d could help the government temporarily deflect OPEC criticism
Halts Output of its production policy. The offshore caterers' union struck over wages last
Saturday, after which the employers locked out all other offshore oil workers.
Oslo has usually moved quickly to end strikes by offshore oil workers, but with
OPEC slated to meet next week, the government may be more inclined this
time to tolerate a short-term fall in output. Oslo is probably also concerned
that achieving a quick settlement by dictating concessions to striking workers
would affect wage negotiations in progress with other offshore unions and
prove too costly to producers already squeezed by falling prices and revenues.
A strike lasting several weeks could temporarily shore up oil prices. The
Willoch government, however, would want to avoid the loss in revenues that a
prolonged stoppage would entail, and it would probably not be prepared to
stand aside much beyond next week.
Possible Soviet It appears that the Soviets have made their first major oil discovery in the
Oil Discovery Barents Sea. extensive oil exploration on the east
in Barents Sea coast of Kolguyev Island, in the southeastern Barents Sea.
E::::123 completed or nearly completed wells and nine operating oil rigs along
a 25-kilometer stretch of coast. In addition, the Soviets have conducted seismic
surveys onshore and in nearby offshore areas. The number and size of the
drilling rigs in operation indicate that the Soviets are measuring the field. If
the Soviets continue to move quickly, commercial oil production is possible as
early as 1990. Geological analysis of this complex region suggests that
substantial amounts of oil are likely to be found there and in other locations
throughout the Barents Sea.
New Algerian- Algiers and Gaz de France have agreed on a new LNG pricing formula for
French LNG second-quarter deliveries that slashes the price for Algerian gas by nearly 40
Pricing Agreement percent. Embassy reporting indicates that, although the agreement covers only
second-quarter sales, Algeria's retreat from its previous hardline pricing policy
augurs well for full contract negotiations set to begin in early June. Algiers is
facing a loss of as much as 50 percent of its export earnings-hydrocarbons
sales account for 98 percent of total receipts-and probably believes it has no
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choice but to temporarily reduce LNG prices as long as oil prices continue to
fall. Algeria's other LNG customers in Europe are closely following French
developments, although Spain and Italy are more concerned with reducing the
volume of gas imported than the price.
The OECD No agreement yet exists among Export Credit Arrangement members con-
Export Credit cerning Chairman Wallen's proposal to increase control over the use of tied aid
Issue credits, according to US Embassy reporting. Switzerland and Japan-coun-
tries with low interest rates-object to the proposed differentiated discount
factor, which would calculate on the basis of domestic interest rates the grant
element for tied aid credits; currently, all countries use a 10-percent discount
factor. The new formula would reduce the calculated aid portion provided by
low interest rate countries. Tokyo believes the new method would make it too
difficult to reach its goal of doubling Official Development Assistance by
1992. On the other hand, the EC has announced its mandate to eliminate tied
aid credits for relatively rich countries, increase immediately the current 25-
percent minimum grant element to 50 percent for the poorest countries, and
increase the minimum to 35 percent for other countries by May 1987. The
mandate is close to the US-EC compromise that nearly succeeded at the
Export Credit meeting last month. The EC also has agreed to the new discount
factor as a concession to France and Italy-countries with high interest
rates-to offset the cost of increased tied aid requirements. OECD representa-
tives are scheduled to meet on 16 April to try to achieve a consensus, although
the issue probably will surface at the Ministerial that begins 17 April.
Moroccan Debt The April meeting between Morocco and its commercial creditors to discuss
Rescheduling Delayed the rescheduling of 1985-86 debt payments has been postponed indefinitely.
Bankers are unwilling to hold further discussions until Morocco provides
additional budgetary information as part of its request for $200 million in new
aid. Commercial creditors believe that lower oil prices and interest rates
should allow Rabat to institute further austerity measures to bring its finances
in line. The IMF, while supporting Rabat, insists that any financial windfall
from reduced oil prices or interest rates should be used to bolster nearly
depleted foreign reserves rather than to pay bills.
if the rescheduling is not resolved quickly, Rabat will have to make
payments selectively and will fall further in arrears to official creditors and
other benefactors.
Costa Rican Costa Rica last week lost access to $20 million in IMF standby funds after
Debt Woes failing its third consecutive quarterly review, further undercutting its ability to
meet pressing debt service obligations. According to the IMF program, debt
arrearages should have been eliminated by 31 March, but they now stand at
about $100 million Unwilling-
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Secret
ness to clamp down on import demand has caused debt arrearages to grow by
$40 million during the first quarter of this year alone. Meanwhile, Costa
Rica's failure to reform tariffs and freeze public-sector hiring is holding up a
$40 million disbursement of a World Bank structural adjustment loan.
Although negotia-
tions with the IMF for a new arrangement are already set for late this month,
no new accord can be expected before August
Japanese Trade Prime Minister Nakasone-in his visit to Washington this weekend-will
Policy Offerings stress the recommendations of the Maekawa Commission, his private study
group on trade policy, which were released on Monday. Nakasone has already
pledged to adopt the report's themes: that Tokyo set a national goal of steadily
reducing its current account imbalances and move to implement measures
designed to wean Japan from dependence on export-led growth. The Prime
Minister, who also wishes to have the commission's work endorsed by the
Tokyo Economic Summit in May, plans to announce specific measures by the
end of April. Despite attempts to sell the recommendations as an historic
about-face for Japanese economic policy, we believe Tokyo sees the report
more as a tactic to divert the attention of its summit partners away from short-
term measures that might ease the trade imbalance. The commission's
findings-general and long-term in nature-break little new ground. The
omission of numerical goals for the current account surplus, moreover, will
make it difficult to evaluate Tokyo's progress. The key test of how seriously
Tokyo takes the group's recommendations comes this summer as the Cabinet
begins to debate tax reform and the 1987 budget. Sharp cuts in personal
income tax rates, the elimination of tax-free small savers' accounts, and a
major increase in public works spending-likely items on Nakasone's imple-
mentation list-all face strong political opposition.
China Buys China recently purchased 4 million board feet of finished US lumber-only
US Lumber the third such purchase since 1978-and further lumber purchases reportedly
are being discussed. In the past, China had vigorously resisted US lumber
marketing efforts, preferring instead to import logs mainly because their
sawmills employ a large number of workers and produce waste used in other
products. Prospects for further purchases look bright. The purchase of one
shipload of finished lumber in lieu of more than two shiploads of raw logs prob-
ably is more attractive now because of China's limited foreign exchange
supply. Moreover, a switch from raw logs to finished lumber could reduce by
more than half the number of wood-carrying vessels arriving in China's
severely congested ports. Moreover, lumber can be carried on container or
general cargo ships, whereas over 90 percent of the specialized log carriers
only have cargos on one leg of the trip. Finally, China's sawmills reportedly
have a backlog because the Soviets-who market a lower grade log-had over-
delivered on last year's log contracts.
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Secret
Negotiating At the 4-8 March meeting in Beijing of LDC textile exporters, Uruguay's
a New MFA delegation reportedly argued for accepting the inclusion of new fibers under
the Multifiber Arrangement (MFA) in exchange for eliminating other catego-
ries and increasing growth rate flexibility. Uruguay believes that LDCs cannot
be too resistant to increases in coverage when several have already agreed to
include new items in bilateral agreements with developed country importers.
Nonetheless, South Korea and India were adamantly opposed.
Global and Regional Developments
Arianespace Pushing Arianespace has begun an aggressive campaign to attract customers booked on
Space Launch Services the US space shuttle who currently face launch delays of at least two years. In-
telsat has become the first customer to switch
The
European launch service is now offering up to eight additional launch slots
through 1988 from a combination of unsold slots on the untested Ariane-4,
delays of previously booked European satellites, and the production of
additional launch vehicles. The delay of three West European satellites to
accommodate potential US customers shows the high priority Arianespace
continues to give to capturing US business. The ability to schedule more
launches, however, will be limited by a longer-than-expected launchpad
turnaround time, by the need for a test program for the Ariane-4, and by the
difficulty of increasing launch vehicle production over the next two years. At
most, we believe Arianespace could build and launch two additional launchers
through 1988.
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Secret
Multifiber Members of the GATT Textiles Committee now appear prepared to negotiate
Arrangement specific aspects of the Multifiber Arrangement (MFA), according to US
Negotiations representatives in Geneva. At a meeting of the committee last week, the EC
supported progressive MFA liberalization but also reserved its right to take
appropriate actions to restrain trade. Textile-exporting countries supported
free trade through higher growth rates, generous flexibility provisions, and
fewer quotas in bilateral agreements. Brazil, India, Colombia, South Korea,
and Hong Kong linked MFA talks to progress on the new GATT Round
discussions. India continued to demand that textiles trade be returned to
GATT rule. The United States' position on growth, new fibers, and antimar-
keting distorting measures drew fire from LDC exporters and selective support
from Canada, Austria, and the EC.
SAARC Seeks Following a two-day meeting in Islamadad in early April, the finance and
Unified Economic commerce ministers from the South Asian Association for Regional Develop-
Positions ment (SAARC) member countries-India, Nepal, Maldives, Pakistan, Bangla-
desh, Bhutan, and Sri Lanka-adopted a 16-point declaration urging industri-
alized nations to improve the economic conditions of developing countries. The
points adopted by SAARC include a call for developed countries to reschedule
Third World debt and fulfill their pledge to contribute 0.07 percent of their
GNP for development assistance. The ministers, however, failed to reach an
agreement on regional trade, the major reason behind SAARC's formation.
Until the organization is strong enough to overcome serious bilateral economic
issues, such as opening markets to neighboring countries, it is likely to focus on
topics dealing with the more general plight of LDCs.
National Developments
Developed Countries
Japan Announces Tokyo's repeated fear of being assailed at economic summits for its trade
Pre-Summit Import policies appears to have prompted the Trade Ministry's recent announcement
Promotion Plan that Japan will conduct a campaign to promote imports, scheduled to take
place before this year's 4-6 May summit. The three-week campaign, undertak-
en at Prime Minister Nakasone's request, aims to boost purchases by more
than $115 million; 118 Japanese retailers will participate in the scheme. The
campaign's timing as well as Japanese anxiety over potential criticism suggest
the plan is a public relations effort rather than a genuine attempt to alter Japa-
nese buying habits.
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Israeli Government
Aid to Ailing
Enterprises
call for Modai's resignation and to the coalition crisis.
In a move that precipitated the current coalition crisis, the Israeli Cabinet
recently approved a $350 million aid package for several failing Israeli
enterprises. The package, consisting of rescheduled loans, new lending, and
some grant aid, will primarily benefit a large construction firm and the
national health insurance fund, both owned by the Histadrut labor federation.
The plan also will allow other private construction companies to issue long-
term credits and grants a $30 million emergency loan to cotton growers. These,
and a large number of other Israeli enterprises, are reportedly failing, in part
because of the sudden replacement of government long-term development
credits with short-term commercial credits at high interest rates. The aid
package was opposed by Finance Minister Modai, who pressed for more
growth-inducing moves. Modai later made disparaging public remarks about
Prime Minister Peres's economic policies-remarks that quickly led to Peres's
New French The new French Government used last weekend's realignment of the European
Austerity Measures Monetary System to announce new austerity measures to help fight inflation
and liberalize the economy. Finance Minister Balladur announced spending
cuts of about 1.5 percent and said the government would try to hold money
supply growth to 5 percent this year. The government will continue the
Socialist program of reducing price controls by eliminating most of the
remaining controls on industrial prices. Exchange controls also will be
modified: exporters will no longer be required to repatriate earnings, importers
will be allowed more freedom in prearranging payment, and resident firms will
be allowed to engage freely in direct investment abroad. Paris is expected to
announce further details and additional policy changes in the next month. In
addition to a privatization strategy, further measures will probably include a
small tax cut and perhaps a complete dismantling of the price control system.
33 Secret
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Secret
Less Developed Countries
Mexican Declining oil revenues are causing Mexican state corporations to suspend
Private Businesses payments to private domestic suppliers, aggravating private businessmen's
Financially Squeezed already severe financial problems. According to the US Embassy, heavy
government borrowing to cover public-sector operating expenses has caused a
domestic credit shortage, with virtually no bank lending to the private sector.
Moreover, domestic demand has slackened significantly during the past
several quarters, leaving businessmen with large inventories and reduced
profits. National business groups, concerned about the impact of the payment
suspension on already weakened commercial enterprises, are threatening a
moratorium on taxes and loan payments to government banks unless public
enterprise payments are resumed.
Deindexation Brazil's economic stabilization package announced on 28 February is seriously
Wreaks Havoc on disrupting the country's financial system and forcing the banking sector to
Brazilian Banks undergo a major restructuring Until
recently, Brazilian banks reaped huge profits, in spite of high fixed costs, by
investing considerable cash balances in indexed securities that guaranteed high
returns. The stabilization package's end of indexation for financial transac-
tions, however, caused bank profit margins to decline
Observers in Brazil and in the
international banking community believe Brazilian banks will be forced to
close many of their 15,000 branches and lay off as many as 100,000 of their
800,000 workers to remain solvent. The activist bank workers union will
probably take to the streets in protest and offer stiff opposition to such cost-
saving moves. Moreover, government budget austerity would clash with
Brasilia's willingness to bail out failing banks or to dole out large amounts in
unemployment insurance.
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Secret
Chile Developing Construction has begun on a $20 million loading port to service the huge
Isolated Pecket coal deposit north of Punta Arenas, according to the Chilean press.
Southern Region Most of the coal is destined for a thermoelectric power plant at Topocilla in
northern Chile operated by the state-owned copper company, CODELCO. The
mine and port facilities will have a total capacity of 1.5-2 million metric tons
per year and are scheduled to be operational by 1987. In another major project
in the far south, construction has begun on a methanol plant designed to take
advantage of the abundant natural gas of the Magallanes region. The plant
will produce 750,000 tons of methanol per year and should be completed in two
to three years. The Chilean and Argentine petroleum companies are also
discussing the possibility of joint exploitation of oil fields in Argentine waters
east of the entrance to the Strait of Magellan. The economic development of
the south should prove a major economic boon for Chile, cutting imports of pe-
troleum by substituting domestically produced coal, developing already docu-
mented oil resources with Argentina, and increasing export earnings from
methanol.
Disastrous Floods in Flooding of Lake Titicaca and surrounding rivers over the past six months has
Bolivia and Peru left over 470,000 peasants homeless in Bolivia and Peru, according to the US
Embassy. Floodwater damaged nearly 50,000 dwellings as well as roads and
railroads. La Paz and Lima have declared a state of emergency in several
departments to address the local effects of the disaster; nevertheless, Bolivia
and Peru lack the financial resources necessary to meet the needs of the
victims, and La Paz has publicly asked for more foreign aid. Although the
flooding affected over 150,000 hectares of farmland, it will not have a
significant effect on the coca crop or on agricultural output in either country,
because anticipated losses are small in relation to total crop production.
Hong Kong Tightening The Hong Kong Government is enacting a new banking law to end a string of
Control Over Troubled small bank failures that have afflicted the colony over the last several years.
Banking Industry The new law will require all banks to maintain a reserve ratio of at least 5 per-
cent beginning in 1988. It will also prohibit financial institutions from lending
more than 25 percent of their capital to a single borrower. The new law comes
on the heels of the failure of two banks that were rescued privately with
government backing earlier this year. In both cases, however, the government
received widespread criticism from the business community for using Hong
Kong's foreign exchange reserves to guarantee questionable loans these banks
had made. The Hong Kong Government has been anxious to prevent banks
from collapsing because it fears that a chain of bankruptcies would undermine
Hong Kong's economic stability. The new law should place Hong Kong's
banking industry on a more stable footing, but stricter enforcement powers
given to the bank commissioner could be abused by future regulators.
35 Secret
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Secret
Indonesian Current Finance Minister Prawiro announced recently that the current account deficit
Account Results for the 1985 fiscal year that ended on 31 March was $2.1 billion-slightly
higher than the $2 billion deficit recorded a year earlier-according to US
Embassy reporting. Sharply lower oil prices since last January have caused
foreign exchange earnings to drop 9 percent to $18 billion, but import
restrictions and fiscal austerity slowed imports to $12.5 billion and helped keep
the deficit in check. While these provisional results are better than anticipated,
the US Embassy reports Jakarta has been carefully managing the flow of
information about oil revenues so as not to fuel concerns within the interna-
tional financial community over Indonesia's $40 billion foreign debt. More-
over, we believe the favorable current account results do not tell the whole sto-
ry, because there is a growing suspicion that Jakarta is drawing down its
accounts with the Bank of Indonesia faster than usual to finance expenditure
outlays.
India Tries The sharp drop in world oil prices will help India alleviate a growing trade def-
To Cut Oil Bill icit that reached more than $5 billion during the fiscal year that ended on 31
March-petroleum accounted for about 60 percent of the trade deficit. To
reduce import costs, India has begun purchasing more oil on the spot market
and is attempting to renegotiate higher priced oil contracts, especially with the
Soviet Union. In addition, New Delhi raised domestic oil prices in late January
in part to slow domestic consumption, which grew 7 percent last year. It has
committed over $2.5 billion in the 1986-87 budget for oil exploration and
development, allotting choice onshore areas to the Soviet Union, and will be of-
fering offshore oilfields for foreign exploration later this year. Nonetheless, we
expect India's dependence on oil imports to grow. Domestic production from
known reserves has hit a plateau, and geological studies show that prospects
for large new finds are not favorable. Moreover, because of the low price of oil,
many foreign petroleum companies have cut development programs.
China Pushing China's grain exports last year increased by 300 percent to 9.3 million metric
Farm Exports tons, and press reports indicate that first quarter 1986 -grain exports are well
above the same period last year. A mild winter and good spring planting
conditions have set the stage for a promising crop this year, according to
agriculture officials, and grain output is expected to reach 400 million tons,
compared with 379 million tons in 1985. Beijing will increase agricultural
exports even further in 1986 to offset losses in foreign exchange earnings
caused by the drop in oil prices. As in 1985, Beijing most likely will limit do-
mestic sales of coarse grains and will sell as much grain as can be pushed
through China's overcrowded ports. Sales efforts will focus on the USSR,
South Korea, and Japan-traditional US grain markets-with corn and
soybeans as the major commodities sold.
Secret 36
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Secret
North Korean
Payments Problems
Plaguing Economy
North Korea's bad debt payment record has continued to limit its ability to ac-
quire raw materials needed to spur the economy.
North Korea relies completely on imports for its supplies of coking
export.
coal, and most come from China. I (both the USSR
and Japan have also indicated that they will not deliver co ing coal without as-
surances of payment from P'yongyang. The need to pay cash has resulted in
serious shortages of coking coal, which in turn has impinged on North Korean
output of steel, important not only for the domestic economy but also as an
Soviet construction of the world's first
Ultra-High-Voltage 1.5-million-volt direct-current transmission line has stalled-only minor activi-
Powerline in Question ty has been seen since June 1982. This line was planned to connect the coal-
fired power plants being built in northern Kazakhstan with the Moscow area.
my 30 kilometers of the 2,400-kilometer line have
been completed, and that construction of the two critical converter stations has
been at a virtual standstill. As recently as June 1985, Soviet media claimed
that crews were working on the 1.4-billion-ruble line, scheduled to begin
operating in 1986. In January 1986, however, the USSR's main construction
authority, GOSSTROY, recommended cutting the line from the current five-
year plan, a move seconded by the USSR construction bank. We believe that
the slow pace of construction may indicate that the Soviets do not have the
technical capability to manufacture converter equipment.
t e imstry o ower an E ectri cation will probably try
to keep the project alive, hoping for technical breakthroughs, more funding for
converter research, and possibly some Western assistance.
37 Secret
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Directorate of
Intelligence
Economic & Energy
Indicators
DI EEI 86-008
11 April 1986
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This publication is prepared for the use of US Government
officials, and the format, coverage, and content are designed to
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Requesters outside the US Government may obtain subscriptions to
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Economic & Energy
Indicators
Energy
Money Supply
Unemployment Rate
Foreign Trade
Current Account Balance
Export Prices in US $
Import Prices in US $
Exchange Rate Trends
Money Market Rates
Agricultural Prices
Industrial Materials Prices
Page
World Crude Oil Production, Excluding Natural Gas Liquids 8
Big Seven: Inland Oil Consumption 9
Big Seven: Crude Oil Imports 9
OPEC: Crude Oil Official Sales Price 10
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Japan 1.0 0.4 3.5 11.1 4.7 -0.4 -2.9 -6.7 -1.0
Percent change from previous period
seasonally adjusted at an annual rate
Percent change from previous period
seasonally adjusted at an annual rate
Percent change from previous period
seasonally adjusted at an annual rate
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Percent change front previous period
seasonally adjusted at an annual rate
Based on amounts in national currency units.
i' Including MI-A and MI-B.
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Foreign Trade
United States b
Exports
233.5
212.3
200.7
217.6
213.3
52.6
52.6
52.4
Imports
261.0
244.0
258.2
325.6
346.1
86.4
84.5
90.8
31.0
31.1
Balance
-27.5
-31.6
-57.5
-108.0
-132.8
-33.8
-31.9
-38.4
Japan
Exports
149.6
138.2
145.5
168.1
173.9
42.6
43.6
47.3
16.3
16.0
Imports
129.5
119.6
114.1
124.1
117.9
29.5
29.2
30.3
10.4
10.5
Balance
20.1
18.6
31.4
44.0
56.0
13.1
14.4
17.0
5.9
5.4
West Germany
Exports
175.4
176.4
169.5
171.9
184.3
43.6
48.7
51.3
18.9
19.1
Imports
163.4
155.3
152.9
153.1
159.0
37.2
41.8
43.8
15.4
15.6
Balance
11.9
21.1
16.6
18.8
25.3
6.4
6.9
7.5
3.5
3.5
France
Exports
106.3
96.4
95.1
97.5
101.9
24.4
26.1
28.9
10.2
10.3
Imports
115.6
110.5
101.0
100.3
104.5
24.7
26.8
29.2
9.7
10.3
Balance
-9.3
-14.0
-5.9
-2.8
-2.5
-0.4
-0.7
-0.3
0.5
0
United Kingdom
Exports
102.5
97.1
92.1
93.7
101.2
25.4
25.8
27.3
8.9
8.8
Imports
94.6
93.1
93.7
99.1
103.9
25.7
26.4
27.6
8.7
9.3
Balance
7.9
4.0
-1.6
-5.3
-2.7
-0.3
-0.6
-0.3
0.2
-0.5
Italy
Exports
75.4
73.9
72.8
73.5
78.9
18.3
20.3
22.5
7.2
8.6
Imports
91.2
86.7
80.6
84.3
90.7
21.9
21.3
26.0
8.9
9.4
Balance
-15.9
-12.8
-7.9
-10.9
-11.9
-3.7
-1.0
-3.5
-1.6
-0.8
Canada
Exports
70.5
68.5
73.7
86.5
88.0
21.8
21.8
22.5
7.7
Imports
64.4
54.1
59.3
70.6
75.7
18.6
19.6
19.6
6.9
Balance
6.1
14.4
14.4
15.9
12.3
3.2
2.2
2.9
0.8
Seasonally adjusted.
b Imports are customs values.
Imports are c.i.f.
,Japan
4.8
6.9
20.8
35.0
49.3
13.1
16.1
6.8
1.9
3.9
West Germany
-6.8
3.3
4.2
6.0
13.7
2.0
7.0
2.8
1.4
3.0
United Kingdom
15.3
8.5
4.5
1.6
4.0
1.5
1.3
0.7
1.6
0.4
Seasonally adjusted; converted to US dollars at current market
rates of exchange.
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
Percent change from previous period
at an annual rate
Percent change from previous period
at an annual rate
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
Exchange Rate Trends
Japan
9.3
-5.7
10.4
6.2
6.8
11.1
69.1
-5.0
West Germany
-2.1
7.0
5.8
1.0
1.7
8.4
11.6
6.5
United Kingdom
2.5
-2.1
-5.0
-2.5
2.0
16.7
-6.5
-39.5
Italy
-9.2
-5.1
-1.6
-3.1
-3.8
-9.8
4.5
6.3
Japan
2.7
-12.9
4.6
0
-0.3
18.6
42.9
14.1
61.4
West Germany
-24.6
-7.2
-5.2
-11.5
-3.3
27.8
32.1
27.4
41.0
United Kingdom
-13.2
-13.4
-13.3
-11.9
-3.0
44.5
17.8
-12.8
-0.3
Italy
-32.8
-18.8
-12.3
-15.6
-8.6
15.6
26.3
29.6
40.9
Canada
-2.5
-2.9
0.1
-5.1
-5.4
2.7
-6.0
-8.8
1.1
Money Market Rates
United States
90-day certificates of
deposit, secondary market
Japan
loans and discounts
(2 months)
West Germany
interbank loans
(3 months)
France
interbank money market
(3 months)
United Kingdom
sterling interbank loans
(3 months)
Italy
Milan interbank loans
(3 months)
Canada
finance paper (3 months)
Eurodollars
3-month deposits
Percent change from previous period
at an annual rate
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
Bananas 214.0 217.0 232.0 243.0 110.3 108.1 109.4 109.3 NA
Fresh imported,
(Total world, $ per metric ton)
Australia
(Boneless beef,
f.o.b. US Ports)
United States
(Wholesale steer beef,
midwest markets)
Corn
(US #3 yellow,
c.i.f. Rotterdam, $ per metric ton)
150
123
148
150
125
117
119
115
112
Cotton
(World Cotton Prices, "A"
index, c.i.f. Osaka, US ?/Ib.)
Palm Oil
(United Kingdom 5% bulk,
c.i.f., $ per metric ton)
571
445
502
730
501
369
342
283
235
US (No. 2, milled,
4% c.i.f. Rotterdam)
632
481
514
514
484
465
450
455
455
Thai SWR
(100% grade B
c.i.f. Rotterdam)
Soybeans
(US #2 yellow,
c.i.f. Rotterdam, $ per metric ton)
288
244
282
283
225
208
218
217
218
Soybean Oil
(Dutch, f.o.b. ex-mill,
$ per metric ton)
507
447
527
727
571
454
457
395
370
Soybean Meal
(US, c.i.f. Rotterdam
$ per metric ton)
252
219
238
197
157
174
186
186
194
Sugar
(World raw cane, f.o.b.
Caribbean Ports, spot prices ? per pound)
Tea
Average Auction (London)
(c per pound)
91.0
89.9
105.2
156.6
90.0
78.1
82.1
85.7
NA
Wheat
(US #2. DNS
c.i.f. Rotterdam, $ per metric ton)
210
187
183
182
169
175
175
175
165
The food index is compiled by The Economist for 14 food commodities which enter international trade. Commodities are weighted by 3-
year moving averages of imports into industrialized countries.
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
Major US producer
77.3
76.0
Chrome Ore
(South Africa chemical
grade, S per metric ton)
Copper ' (bar, c per pound)
79.0
67.1
72.0
64.2
64.5
64.2
64.2
63.8
65.6
Cold ($ per troy ounce)
460.0
375.5
424.4
360.0
317.2
326.0
343.1
338.9
345.7
Lead (c per pound)
32.9
24.7
19.3
20.0
17.7
17.8
16.7
16.7
16.6
Manganese Ore
(48% Mn, $ per long ton)
82.1
79.9
Cathode major producer 3.5
3.2
Major producer 475.0
475.0
Metals week, 446.0
New York dealers' price
326.7
Synthetic b 47.5
45.7
Silver ($ per troy ounce) 10.5
7.9
11.4
8.1
6.1
6.1
6.0
5.9
5.7
Steel Scrap a ($ per long ton) 92.0
63.1
73.2
86.4
74.4
69.2
73.2
75.0
`A
Tin a (c per pound) 641.4
581.6
590.9
556.6
543.2
559.4
NA
385.6
329.2
Tungsten Ore 18,097
(contained metal,
S per metric ton)
13,426
10,177
10,243
10,656
9,488
8,588
8,745
8.687
US Steel
(finished steel, composite,
$ per long ton)
Zinc I (c per pound) 38.4
33.7
Lumber Index 95
(1980=100)
84
Industrial Materials Index 85
71
(1980=100)
Approximates world market price frequently used by major world
producers and traders, although only small quantities of these
metals are actually traded on the LME. As of February 1986 tin
prices from the Penang market.
b S-type styrene, US export price.
Quoted on New York market.
d Average of No. I heavy melting steel scrap and No. 2 bundles
delivered to consumers at Pittsburgh, Philadelphia, and Chicago.
This index is compiled by using the average of I I types of lumber
whose prices are regarded as bellwethers of US lumber construction
costs.
The industrial materials index is compiled by The Economist for
18 raw materials which enter international trade. Commodities are
weighted by 3-year moving averages of imports into industrialized
countries.
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
World Crude Oil Production
Excluding Natural Gas Liquids
World
55,837
53,092
52,633
53,691
53,356
52,373
55,015
54,709
55,051
Non-Communist countries
41,602
38,810
38,228
39,257
38,692
37,588
40,707
40,418
40,760
Developed countries
12,886
13,276
13,864
14,302
14,730
14,643
14,958
14,989
14,860
United States
8,572
8,658
8,680
8,735
8,933
8,954
8,933
8,901
8,936
1,356
1,411
1,457
1,444
1,476
1,475
1,500
United Kingdom
1,811
2,094
2,299
2,535
2,533
2,399
2,6 77
2,655
2,481
736
915
921
1,022
1,023
1,072
1,079
1,073
Non-OPEC LDCs
6,036
6,633
6,823
7,515
7,845
7,922
7,888
7,849
7,915
Mexico
2,321
2,746
2,666
2,746
2,733
2,738
2,721
2,679
2,733
Egypt
598
665
689
827
874
Other
3,117
3,222
3,468
3,942
4,238
4,294
4,311
4,310
4,322
OPEC
22,680
18,901
17,541
17,440
16,117
15,023
17,8 11
17,580
17,985
211
236
253
280
282
287
290
290
154
157
152
153
153
160
160
160
Indonesia
1,604
1,324
1,385
1,466
1,235
1,203
1,286
1,200
1,100
Iran
1,381
2,282
2,492
2,187
2,258
2,335
2,301
2,200
2,400
Iraq
993
972
922
1,203
1,437
1,482
1,666
1,700
1,650
Kuwait b
947
663
881
912
862
800
899
950
900
370
317
390
410
355
306
391
400
360
1,445
1,298
1,241
1,393
1,464
1,214
1,686
1,760
1,620
328
295
399
302
312
312
300
335
Saudi Arabia b
9,625
6,327
4,867
4,444
3,290
2,564
4,067
4,000
4,500
UAE
1,500
1,248
1,119
1,097
1,146
1,193
1,242
1,185
1,165
Venezuela
2,108
1,893
1,781
1,813
1,621
1,630
1,670
1,555
1,555
Communist countries
14,235
14,282
14,405
14,434
14,664
14,785
14,308
14,291
14,291
USSR
11,800
11,830
11,864
11,728
11,749
11,866
11,367
11,350
11,350
China
2,024
2,042
2,121
2,286
2,496
2,504
2,521
2,521
2,521
Preliminary,
b Excluding Neutral Zone production, which is shown separately.
Production is shared equally between Saudi Arabia and Kuwait.
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
Big Seven: Inland Oil Consumption
United States
16,058
15,296
15,184
15,708
15,697
15,452
15,557
15,748
16,541
15,923
Japan
4,444
4,204
4,193
4,349
4,124
3,580
3,839
4,276
5,036
West Germany
2,120
2,024
2,009
2,012
2,077
2,034
2,258
2,018
1,932
France
1,744
1,632
1,594
1,531
1,493
1,342
1,310
1,569
1,504
1,622
United Kingdom
1,325
1,345
1,290
1,624
1,398
1,208
1,230
1,292
1,203
Italy b
1,705
1,618
1,594
1,513
1,511
1,281
1,417
1,642
1,707
1,718
Canada
1,617
1,454
1,354
1,348
1,350
1,286
1,366
1,419
1,481
Including bunkers, refinery fuel, and losses.
b Principal products only prior to 1981.
Big Seven: Crude Oil Imports
United States
4,406
3,488
3,329
3,402
3,216
3,171
3,662
4,105
3,640
3,329
Japan
3,919
3,657
3,567
3,664
3,003
3,233
West Germany
1,591
1,451
1,307
1,335
1,284
1,248
1,210
1,182
1,150
France
1,804
1,596
1,429
1,395
1,476
1,421
1,590
1,527
1,690
1,430
United Kingdom
736
565
456
482
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
OPEC: Crude Oil Official Sales Price
OPEC average b
30.87
34.50
33.63
29.31
28.70
28.14
28.09
28.11
28.08
28.09
Algeria
44? API 0.10% sulfur
37.59
39.58
35.79
31.30
30.50
29.66
29.50
29.50
29.50
29.50
Ecuador
28? API 0.93% sulfur
34.42
34.50
32.96
27.59
27.50
26.41
26.15
26.15
26.15
26.15
Gabon
29? API 1.26 % sulfur
31.09
34.83
34.00
29.82
29.00
28.09
28.00
28.00
28.00
28.00
Indonesia
35? API 0.09% sulfur
30.55
35.00
34.92
29.95
29.53
28.62
28.53
28.53
28.53
28.53
Light
34? API 1.35% sulfur
34.54
36.60
31.05
28.61
28.00
28.13
28.05
28.05
28.05
28.05
Heavy
31 ? API 1.60% sulfur
33.60
35.57
29.15
27.44
27.10
27.37
27.35
27.35
27.35
27.35
Iraq ?
35? API 1.95% sulfur
30.30
36.66
34.86
30.32
29.43
28.27
28.43
28.43
28.43
28.43
Kuwait
31 ? API 2.50% sulfur
29.84
35.08
32.30
27.68
27.30
27.30
27.30
27.30
27.30
27.30
Libya
40? API 0.22% sulfur
36.07
40.08
35.69
30.91
30.40
30.40
30.40
30.40
30.40
30.40
Nigeria
34? API 0.16% sulfur
35.50
38.48
35.64
30.22
29.12
28.34
28.37
28.37
28.37
28.37
Qatar
40? API 1.17% sulfur
37.12
34.56
29.95
29.49
28.48
28.10
28.10
28.10
28.10
28.10
Berri
39? API 1.16% sulfur
30.19
34.04
34.68
29.96
29.52
28.20
28.11
28.11
28.11
28.11
Light
34? API 1.70% sulfur
28.67
32.50
34.00
29.46
29.00
28.08
28.00
28.00
28.00
28.00
Medium
31 ? API 2.40% sulfur
28.12
31.84
32.40
27.86
27.40
27.32
27.20
27.20
27.20
27.20
Heavy
27? API 2.85% sulfur
27.67
31.13
31.00
26.46
26.00
26.25
26.00
26.00
26.00
26.00
UAE
39? API 0.75% sulfur
31.57
36.42
34.74
30.38
29.56
28.24
28.15
28.15
28.15
28.15
Venezuela
26? API 1.52% sulfur
28.44
32.88
32.88
28.69
27.88
27.37
27.10
27.10
27.1
227.10
F.o.b. prices set by the government for direct sales and, in most
cases, for the producing company buy-back oil.
b Weighted by the volume of production.
Beginning in 1981 the price of Kirkuk (Mediterranean) is used in
calculating the OPEC average official sales price.
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
OPEC: Average Crude Oil Sales Price
29.31 28.70 28.14
e v
v o
e n
~'+ v
N N N
STAT
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3
Declassified in Part - Sanitized Copy Approved for Release 2011/12/12 : CIA-RDP88-00798R000300110006-3