LETTER TO LEE H. HAMILTON FROM JOHN L. HELGERSON

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91B00874R000100150001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 27, 2016
• Document Release Date: August 2, 2011
• Sequence Number: 1
• Publication Date: April 9, 1986
• Content Type: LETTER

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Central Intelligence Agency
9 April 1986
The Honorable Lee H. Hamilton
Chairman
Permanent Select Committee on Intelligence
House of Representatives
Washington, D. C. 20515
Enclosed is our analysis of the impact of falling oil prices
on the Soviet Union and recent Nicaraguan military activity in
'the northeast. I believe they answer the questions raised by the
members.
I have also included some examples of the fine work being
done by our Counterterrorist Center. Three of the papers are
unclassified and two were released by the State Department as
White Papers.
As always, we stand ready to respond to any other questions
you may have.
n L. neiLgerson
Assq/cijate Deputy Director
r Intelligence
25X6
25X6
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Impact of Lower Oil Prices on the USSR
Low oil prices, a depreciating dollar, and declining domestic oil
production will substantially reduce Moscow's ability to import Western
equipment, agricultural goods, and industrial materials. Oil earnings droDDed
b
t $3 bi
a
ou
llion in 1985 and could fall as much as $7 billion this year.
Over one-third of Soviet imports are paid for in hard currency. Should
oil prices remain low, the dollar fail to appreciate, and domestic oil
production continue to decline for the rest of the decade, Moscow's annual
hard currency import capacity could drop by nearly 40 percent from its 1984
level of $27 billion. While this estimate allows for some increase in debt to
the West, large annual gold sales, and little increase in nonenergy exports,
we doubt Moscow will abandon its conservative borrowing strategy, and thus
jeopardize its ability to finance key imports such as grain in bad harvest
Instead, mounting evidence indicates that the Soviets are reducing the
level of planned imports for 1986 and beyond. These cutbacks appear to be
occurring across the board. In addition to dealing with the inmediate
scarcity of hard currency, these cuts will buy the leadership time to
implement an import strategy that reflects the long term nature of the
-...L1
While success of Gorbachev's modernization program hinges on internal
factors, his lofty goals--when matched against a realistic assessment of the
capabilities of domestic producers--imply that some highly specialized imports
from the West for such sectors as energy, machine tools, microelectronics, and
telecommunications must be continued, if not increased. Import cuts in key
intermediate goods such as s ecialt steels, in turn, could exacerbate already
Soviet planners will--if they are not already doing so--need to revise
and reformulate the five-year plan to account for reduced imports. In setting
new priorities, Moscow may hope that efforts to improve worker discipline and
economic management will boost domestic production of farm products,
industrial materials, and machinery, reducing reliance on Western imports.
Even with some success in this regard, the drop in hard currency earnings will
increase pressure on Moscow to alter the nature of its trade relations both
ith i
w
ts clients and with the West.
o Moscow will press its East European allies to fill some of the gap in
hard currency imports, particularly machinery, and at sane point could
cut back on its oil deliveries to the region. Eastern Europe,
however, is not in a postion to provide the scale of support the
Soviets are likely to want or to absorb large cuts in oil imports from
T7000 F
th
e
(;()NF T fF.NT T AT.
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o Moscow may decide to step up the pace of current efforts to alter the
relationship between Soviet entities and Western firms to enhance the
effectiveness of imported technology and equipment, e.g. Western
management participation and profit sharing. The Soviet leadership
may even consider measures to ease East-West tensions to foster a
climate more conducive to attracting the help it needs. It will
proceed cautiously, however, and not hesitate to pull back should it
sense that the West is striving to take advantage of its weakened
trade position.
2
CONFIDENTIAL
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SECRET
Sandinista Campaign in Northeast Nicaragua
The Sandinistas attacked Indian insurgent camps at Bilwaskarma and Kum on
25 March. Managua probably had multiple objectives, as with its campaign in
the Las Vegas salient. It sought to disrupt any plans for the reactivation of
the northeastern front, largely quiet for the past year, and to round up
conscripts.
-- Refugees debriefed by representatives of the US Embassy and United
Nations High Commission on Refugees (UNHCR) report the Nicaraguan
forces used "tanks"--more likely armored personnel carriers--and
mortars.
-- In other villages nearby, according to press and refugee accounts,
Sandinista soldiers posing as Red Cross teams conscripted young men.
The Sandinistas also reportedly threatened to remove the Indians to
resettlement camps again.
The flight of the Indians into Honduras has prompted the UNHCR to declare
a refugee emergency.
-- By 4 April, some 3,000 Indians had arrived in Honduran refugee camps,
and the UNHCR expected another 1,500-2,500 within days, possibly
straining its resources.
-- KISAN leaders have little confidence they can persuade the refugees to
return to Nicaragua.
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 11~ nu I i i I le_~IIU~LI'~II~1~It1iWl1l~ll IIUSIIIIIIII 1I uua11 II n 11 I I _
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.United States Department of State
Terrorist Attacks on
US Businesses Abroad
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United States Department of State
Patterns of Global
Terrorism: 1984
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