RHODESIA: A THIRD ROUND OF SANCTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600010021-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 22, 2016
• Document Release Date: October 1, 2009
• Sequence Number: 21
• Publication Date: June 1, 1968
• Content Type: IM

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DIRECTORATE OF
INTELLIGENCE
Secret
Intelligence Memorandum
Rhodesia: A Third Round of Sanctions
Secret
ER IM 68-71
June 1968
copy N2 8S
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
GROUP 1
Eacludid Iron autor.atic
downgrading and
dcdaaif cation
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
June 1968
INTELLIGENCE MEMORANDUM
Rhodesia: A Third Round of Sanctions
Summary
The comprehensive sanctions imposed by the UN
Security Council on 29 May 1968 against Rhodesia
are unlikely to have much more effect in forcing
Salisbury to relinquish its independence than have
previous limited sanction efforts. So long as
South Africa and Portugal refuse to comply with
the Security Council's demand, Rhodesia will almost
certainly be able to sell sufficient exports and
obtain necessary imports to maintain its economy.
Most of Rhodesia's foreign trade has been reoriented
to adjust to previous sanctions and already either
is with South Africa and Portugal or is carried
out through disguised trade arrangements. Moreover,
the country is more self-sufficient now than at the
time of its Unilateral Declaration of Independence
in late 1965 and is, therefore, better able to cope
with the increased sanctions.
Zambia and Congo (Kinshasa) will not be able
to apply trade sanctions fully against Rhodesia
without bringing serious economic damage to them-
selves. Without Rhodesian coal, Zambian and Congo
copper production would have to be cut back dras-
tically. Moreover, Rhodesia can retaliate against
sanctions by refusing to supply Zambia with electric
power, which is essential to the copper industry,
or by refusing to carry most of the country's
imports and exports, on which the Zambian economy
is dependent. Although the UN resolution requests
member states to assist Zambia, there is little
that can be done over the next few years to replace
the essential goods and services supplied by
neighboring Rhodesia.
Note: This memorandum was produced solely by CIA.
It was prepared by the office of Economic Research
and was coordinated with the Office of Current
Intelligence.
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Sanction Efforts
1. The UN Security Council's resolution of
29 May 1968 against Rhodesia further expands the
two-and-one-half-year-old economic warfare effort
aimed at toppling the regime of Prime Minister Ian
Smith. The initial sanctions, imposed immediately
after Salisbury's Unilateral Declaration of Inde-
pendence (UDI) in November 1965, consisted of a
UK-sponsored embargo on trade and finance with
Rhodesia. A number of other countries also volun-
tarily supported the UK move. By late 1966, it was
clear that these efforts had failed to achieve
their goal. As a consequence of increasing African
pressures for stronger sanctions against Salisbury,
in late 1966 Britain requested the UN to invoke
selective mandatory sanctions against Rhodesia's
major exports and a few strategic imports such as
crude oil and petroleum products, aircraft, and
motor vehicles. The 1966 effort, like the earlier
one, rather than bringing down the Smith regime,
strengthened its political position and increased
the resolve of white Rhodesians to maintain their
independent state.
2. The UN resolution is aimed at cutting
nearly all of Rhodesia's direct and indirect ties
with the outside world. According to the resolu-
tion, all UN member states are enjoined from trading
with Rhodesia except for a few minor items such as
medical supplies and educational materials. The
resolution also prohibits member states from pro-
viding investment capital to Rhodesia and calls
for an end to all airline service to and from the
country. Rhodesian passports are no longer to be
recognized, and foreign governments are urged to
end consular relations with Salisbury. Non-member
states, such as West Germany and Switzerland, are
requested to comply with the resolution.
Implications for Rhodesia
3. The new measures are unlikely to have any
significant adverse impact on the economy of
Rhodesia. With the cooperation of South Africa
and Portugal and the help of foreign businessmen
seeking profits, Rhodesia will almost certainly
be able to sell sufficient exports and obtain
necessary imports to at least maintain present
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economic levels. The United Kingdom and some
other countries have been able to ferret out some
sanctions violators, but Rhodesian businessmen are
becoming more adept at circumventing sanctions.
4. Because the previous embargoes covered most
of Rhodesia's exports, the new comprehensive sanc-
tions will not have much additional effect on ex-
ports. Those goods already embargoed are being
sold mainly to countries refusing to comply with
sanctions -- South Africa and Portugal -- or to
other nations Newly
embargoed products are sold mostly to the non-
participating countries and to Zambia, whose
economy is dependent on a steady supply of goods.
from Rhodesia.
5. Rhodesian exports, after declining by about
35 percent in 1966, remained about constant in 1967
despite the imposition of mandatory sanctions.
The initial drop reflects mainly a reduction in sales
to Britain and Zambia, which together in 1965 accounted
for about 40 percent of Rhodesia's exports. Direct
sales to the united Kingdom have virtually ceased,
while exports to Zambia have declined by about one-
half. Tobacco has been especially hard hit by
sanctions, and sales are down by about one-half.
Most of this drop represents the cessation of
British purchases. Exports of manufactured goods,
mainly to Zambia, and of sugar have also been
sharply reduced.
6. Although the new sanctions prohibit vir-
tually all sales to Rhodesia, in practice, the
country will probably be able to purchase most of
its needs. Because Rhodesia's import requirements
are such a minute portion of world trade, effective
measures to enforce an embargo would be difficult.
At present, about three-quarters of Rhodesia's
imports come directly from southern African coun-
tries or via disguised trade channels. Although
statistics of almost all major exporting countries
indicate sharp declines in sales to Rhodesia, large
amounts of goods, including items already nominally
subject to sanctions, are reaching Rhodesia.
According to official British figures, for example,
exports to Rhodesia during 1967 totaled less than
$3 million. Salisbury, however, claims it purchased
some $20 million in British goods. The difference
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consisted of British goods purchased by Rhodesia
through third countries.
7. Imports in 1967 totaled about $262 million,
some 10 percent above the 1966 level and about one-
fifth below that of 1965. While there are some
shortages, particularly of luxury items, most re-
quirements are being met. For example, imports of
petroleum products, which have been embargoed since
late 1965, have continued to flow into the country
via South Africa and Mozambique, and Rhodesian POL
consumption now almost matches the pre-UDI level.
Moreover, there are sufficient stocks on hand to
maintain consumption for at least six months if the
government returns to the more stringent rations
that existed in 1966.
8. Rhodesia's progress over the past few years
in diversifying its production has further reduced
the country's limited dependence on imports. Even
in 1965, the country essentially fed itself and
produced a wide assortment of manufactured goods.
Import controls, in effect since UDI, have encouraged
local firms to produce a large number of additional
goods for the domestic market. This trend of import
substitution is expected to continue. Rhodesia will
not, however, escape some detrimental effects of
the new sanctions on imports. There will probably
be temporary shortages of some goods, especially
consumer items not already produced locally, but
this will not lead to any significant reduction in
white living standards. Also, imports of machinery
and equipment will become more expensive and more
difficult to obtain, and consequently economic
development will be slowed somewhat.
9. The performance of Rhodesia's economy since
UDI reflects its overall strength and its ability
to cope with increased sanctions. After a small
decline in 1966, overall economic activity returned
to pre-UDI level. In 1967, gross national product
in real terms was probably 2 percent higher than
in 1965. Foreign exchange reserves fell by less
than $2 million in 1967, to roughly $25 million.
Although the current account showed a deficit last
year, this was almost completely offset by a sharp
rise in private foreign investment. There was a
net capital inflow of $25.5 million in 1967, pri-
marily from South Africa, compared to an outflow
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of $5.3 million in 1966. The government has easily
financed its operations despite increased emergency
spending, and monetary stability has been maintained.
During 1968, overall economic activity will probably
not increase much above the 1967 level, not because
of new sanctions but as a consequence of a decline
in agricultural output caused by a severe drought.
10. The expanded sanctions will almost certainly
result in stronger economic ties between Rhodesia
and South Africa and Portuguese Africa. South
Africa has replaced the United Kingdom as Rhodesia's
most important trading partner. South African in-
vestments are giving an important boost to Rhodesia's
mining industry; development of large nickel deposits
is expected to result in exports valued at more than
$20 million annually beginning in 1969. South
African interests are also involved in a $47 million
fertilizer plant, which, when completed, will result
in foreign exchange savings of about $10 million
annually.
Implications for Zambia and Congo (Kinshasa)
11. Zambia will not be able to fully participate
in the sanctions effort without bringing economic
disaster on itself. Despite costly efforts to
break its economic ties with Salisbury, Zambia is
still heavily dependent on Rhodesian goods and
services to operate the modern sector of its
economy and particularly the all-important copper
industry. Without coal from Rhodesia's Warkie
colliery, for example, copper production would have
to be cut back drastically. Efforts to develop
domestic coal supplies have moved very slowly, and
it will be at least two years before self-sufficiency
is achieved. Current coal supplies are adequate to
maintain copper production for about six months.
Zambia also needs many products produced in
Rhodesia, especially construction materials, to
carry out its development program.
12. Moreover, Rhodesia retains the capacity to
retaliate against Zambia by refusing to allow
Zambian goods to move through Rhodesia and by cut-
ting off electric power supplies. The Zambian
copper industry gets almost all of its electric
power from the jointly owned Kariba prwer station
located on the Rhodesian side of the Zambezi River
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and controlled entirely by Rhodesia. Although
Zambia is planning to build its own hydroelectric
powerplant on the Kafue River, this plant would not
be completed until 1972 at the earliest. Existing
thermal stations in Zambia could meet only a small
portion of the country's requirements.
13. While Zambia has made some progress in
developing alternative transport routes that avoid
Rhodesia, most of its imports and exports still
transit that country. In 1967, more than 40 per-
cent of Zambia's copper exports and nearly 90 per-
cent of its general goods imports were moved by
Rhodesia Railways. Oil is the only import that is
shipped completely over non-Rhodesian routes, but
this item accounts for less than 10 percent of the
volume of Zambia's foreign trade.
14. Although the UN resolution requests member
states to assist Zambia, there is little they can
do to supply the country with even its minimal
needs should access to Rhodesian transport routes
be cut off. Existing alternate transport facili-
ties could not make up the difference, and emergency
steps such as an airlift could fill only a small
part of Zambia's essential import requirements.
There is no way to substitute for the electricity
supplied from the Kariba power station. As a
consequence of Zambia's dependence on Rhodesian
goods and services, Lusaka is almost certain to
disregard the new sanctions whenever necessary.
Rhodesia, for its part, will probably refrain from
taking action against Zambia in order to maintain
its foreign exchange earnings.
15. Congo (Kinshasa) will also be seriously
hurt if it imposes full trade sanctions against
Rhodesia. The Congo's important mining industry,
which is concentrated in the southern province of
Katanga, normally imports about 100,000 tons of
Rhodesian coal a year to operate its smelters.
Another 200,000 tons are required to meet the
needs of the railroads and other Katangan consumers.
Although alternate sources of coal are available --
at more than double the cost of Wankie coal --
from the United States, Europe, and South Africa,
transportation bottlenecks would almost certainly
preclude obtaining adequate supplies. Serious
difficulties already plague Congolese transport
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routes, and it is unlikely that they could handle
an additional 300,000 tons of coal a year. More-
over, Katanga imports a large quantity of foodstuffs
and general merchandise from Rhodesia, which if
purchased elsewhere would cost considerably more.
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