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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97-00771R000707120001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 34
• Document Creation Date: January 12, 2017
• Document Release Date: October 5, 2010
• Sequence Number: 1
• Publication Date: August 10, 1984
• Content Type: REPORT

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Intelligence
Directorate of -ph a- e--- -F a-t
615X_~ '172o-Z ir?me-v-Z.~
Weekly
or~~~ C-Vv~
International
Economic & Energy
DI IEEW 84-032
10 August 1984
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Secret
Weekly
International
Economic & Energy
10 August 1984
Synopsis
, Briefs
Energy
International Finance
Global and Regional Developments
National Developments
13 / Commercial Jet Engines: Competition for the 150-Seat Aircraft Market
17 The Contribution of Western Technology to
oviet Economic Performance
21 T oviet Aluminum Industry: Slowing'Growth and Increasing
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.-Dependence on Foreign Raw Materials 25X1
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25 International Financial Situation: Political Update
Afghanistan: Tenuous Food Situation
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Comments and queries regarding this publication are welcome. They may be
Directorate of Intelligence,
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10 August 1984
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International
Economic & Energy
Weekly
Synopsis
Commercial Jet Engines: Competition for the 150-Seat Aircraft Market
Announcement of a go-ahead by a five-nation consortium led by Pratt &
Whitney and Rolls-Royce to build the V-2500 jet engine signals heightened
competition for engines sized for 150-to-200-seat commercial aircraft. The
engine programs aimed at this market have furthered the internationalization
of key aerospace projects, narrowing the gap between US and foreign
technological capabilities.
17 The Contribution of Western Technology to Soviet Economic
Performance
The benefits of acquired Western technology to general economic performance
will continue to be far below potential as long as the inefficiencies of the Soviet
administrative and incentive systems persist.
21 The Soviet Aluminum Industry: Slowing Growth and Increasing
Dependence on Foreign Raw Materials
The Soviets' rapid expansion in aluminum production in the 1960s and early
1970s was spurred by demand in the defense, electrical, and construction
industries. Since 1975, growth has slowed sharply.
25 International. Financial Situation: Political Update
Over the past month, budget stringencies have heightened military disaffection
in Argentina, Peru, Bolivia, and Nigeria. In the Philippines, the newly elected
political opposition moved immediately to challenge President Marcos's
handling of the economy
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10 August 1984
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27 Afghanistan: Tenuous Food Situation
While food supplies over the past year probably have been comparable to levels
before the Soviet invasion and adequate to meet current needs, problems
associated with subsistence agriculture and the food distribution system could
cause serious shortages later this year.
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Energy
Red Sea Oil Flows The recent rash of ship explosions in the Red Sea may be disrupting some oil
traffic through the region.
Red Sea: Current Oil Flows a Thousand b/d
Egyptian oilfields
450
200
Saudi Arabia/Yanbu
200
200
Persian Gulf via Bab at Mandab
950
900
Destination
United States/Canada
100
100
Other
350
100
Southbound
350
270
120
a Estimated; based on 1983 oil flows and trade
patterns.
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Currently almost 3 million b/d of crude oil and refined petroleum products
transit the Gulf of Suez to enter the Suez Canal and SuMed Pipeline.
Approximately one million b/d of this traffic originates within the area, at
either Yanbu or from Egypt's offshore oilfields in the Gulf of Suez. The
remainder-which comes almost entirely from the Persian Gulf-enters the
Red Sea via the Bab al Mandab. Approximately 350,000 b/d of oil flows
southward through the Suez Canal; one-fourth is bound for Red Sea ports and
the remainder enters the Indian Ocean through the Bab al Mandab
Pote tial Offshore Oil India's offshore oil discovery in an area claimed by India and Pakistan is likely
D' pute Between India to add another irritant to growing tensions on the subcontinent. The US
nd Pakistan Embassy in New Delhi reports that two months ago an Indian official claimed
that a chartered US rig struck oil 30 miles off the Pakistan coast in the Gulf of
Kutch. Recent Pakistani press accounts suggest that the find is within
Pakistan's territorial waters. Both India and Pakistan incur heavy foreign
exchange costs importing oil and are actively searching for new domestic
supplies.
J
Mexico ,,Battles Unplanned outlays are making it difficult for Mexico City to meet this year's
To.Co trol the Budget public-sector budget deficit target set in its IMF-supported austerity program.
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While the IMF earlier agreed that Mexico City could increase the public-
sector budget deficit from 5.5 to 6.5 percent of GDP if the Mexican economy
did not show signs of recovery in the first half of 1984, Mexico City will have
to make additional reductions in subsidies or generate new revenues to meet
even the more lenient target. If the target is missed by only a small margin, we
believe the IMF will continue its support because economic growth remains
below the IMF goal and interest rates have risen sharply.
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Trinidad and Tobago Trinidad and Tobago will soon seek financial relief from the IMF
To Seek IMF Help The economy has been hard hit by the slack oil market;
petroleum accounts for 90 percent of exports. The Trinidadian Government
already has instituted limited austerity measures such as cuts in consumer
subsidies and public jobs in an attempt to accustom the public to belt
tightening before adjustments under an IMF-supported adjustment program
are put into place. The government hopes that a gradual approach will
minimize political backlash and that the economy under IMF tutelage will
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improve before the 1986 general elections.
New Foreign Aid
or Nicaragua
Until oil prices fell in 1982, Trinidad was among the Caribbean's most
dynamic economic performers. As the wealthiest member of the Caribbean
Economic Community (CARICOM), Trinidad served as one of the largest
local markets for regionally produced goods and provided aid to other
CARICOM countries. Trinidad's deteriorating economic situation has sharply
curtailed its economic largess. 25X1
which has occurred in July and August.
A Mexican journalist with good access to leftist circles claims in an article that
Moscow has agreed to supply Nicaragua with $45 million worth of oil during
the second half of this year to compensate for declining Mexican deliveries.
This represents a 50-percent jump over Soviet supplies in the first half of the
year. The journalist's claim is substantiated by recent shipping patterns. 25X1
Deliveries on this scale would require the arrival of one tanker per month,
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P tuguese Current
ccount Deficit
Shrinking
Preliminary data indicate that Portugal's current account deficit in 1984 could
be less than half of last year's $1.7 billion. Most of the improvement should
come from trimming the trade deficit. During the first five months of this year
the trade deficit declined by $500 million because of a drop in import demand
and strong export performance. For the year, it may shrink by close to $1 bil-
lion. Earnings from services and transfers, on the other hand, probably will re-
main weak despite a rebound in tourism earnings because of falling worker re-
mittances and higher interest payments. Portuguese officials nonetheless
expect to stay within the $1.25 billion target for the current account deficit
that is part of Portugal's agreement with the IMF.
Global and Regional Developments
A.7EAN Considers The foreign ministers of the Association of Southeast Asian Nations
acific Basin (ASEAN}-Indonesia, Malaysia, Thailand, Singapore, Brunei, and the Philip-
Community pines-for the first time included a discussion of a Pacific Basin economic
community at their annual meeting last month. Malaysia's Prime Minister
Mahathir has become increasingly vocal in his support for the grouping-to be
patterned after the European Economic Community-and will probably use
Malaysia's position as chairman of ASEAN's standing committee to push this
idea in the coming year. A unified ASEAN position is unlikely in the near
and how the community would be administered are still being debated.
Moreover, the other ASEAN countries are concerned that a new community
would overshadow ASEAN's current role.
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Th ' and Debates
-16 Purchase
Thailand's budget committee approved in principle $54 million for the first
payment on the F- 16A/ 100 aircraft last week, but continuing debate over the
financial and military implications of the $520 million purchase could delay a
final decision for two or three years.
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The sale, still subject to
US Congressional approval, would be the first to an ASEAN nation and could
prompt similar requests from other ASEAN members.F___1 25X1
Australian Wheat Despite a drop in wheat production after last year's record level, we expect
orts to Stay Up . Australia to remain an aggressive competitor of the United States in the 1985
( Market Year (MY 85)-July 1984 to June 1985-because of a 7.5-million-
metric-ton wheat stock carryover. According to USDA estimates, Australian
wheat exports will. reach 14 million tons this market year-two million tons
above last year and the highest level in five years. These exports represent
nearly 14 percent of total expected world wheat ex orts.
Libyan-Italian Libya and Italy reached a breakthrough on debt repayment and discussed
Cooperation Improves several commercial ventures during the recent meeting of the Italian-Libyan
barter arrangements.
Commission. Under a new agreement, Rome will accept crude oil from Tripoli
in payment for up to $600 million in government-guaranteed commercial
debts, and cash for as much as $200 million in other commercial debts. In ad-
dition, Libya offered $1.2 billion in public works contracts to Italian firms and
signed a $235 million contract to develop offshore oil resources. Nuclear
cooperation was discussed and a new military sales agreement was signed,
according to the US Embassy in Rome. Qadhafi's moderate stance with the
Italians reinforces his efforts to end Libya's isolation and to exploit differences
between West European countries and the United States over their policies
toward Libya. The weak market for Libyan petroleum and declining foreign
exchange reserves also provide strong motivations for the regime to seek oil
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EC ncourages
P ent Licensing
Israeli
Bang Difficulties
Sout 'African
Ec nomic Woes
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10 August 1984
The Commission hopes the measure will stimulate EC patent holders to
increase licensing of their manufacturing technology throughout the Commu-
nity. While this provision may increase the flow of technology among EC
firms, we believe the market sharing will tend to keep prices of the goods
produced high and will do little to improve competitiveness in non-EC markets.
The EC Commission recently issued a regulation that permits firms to arrange
market sharing and cooperation agreements with licensees of their patents.
This effort to spur technology transfer within the Community exempts firms
from prohibitions in the EC treaty against such trade-hindering arrangements.
National Developments
Developed Countries
The managing directors of Israel's four largest banks-Bank Leumi, Bank
Hapoalim, Israel Discount Bank, and United Mizrachi Bank-were indicted
on charges of collusion last week. The Industry and Trade Ministry charged
that during the period of June-November 1983, the four bank heads acted
together to simultaneously drop the annual interest rate on certificates of
deposit from 120 to 85 percent. Israel's inflation rate in 1983 was 191 percent.
Spokesmen for the banks have denied the charge and claim that they were fol-
lowing sound business practice because interest rates charged to loan custom-
ers were lower than those being paid on CDs and bank applications to the Fi-
nance Ministry for interest rate increases on loans were consistently denied.
. reports.
The charges against the banks come when confidence in Israeli banks has
already been damaged because of poor 1983 profits. Moreover, the banks are.
directly involved in Israel's foreign exchange transactions and any damage to
their international credit rating could harm Israel's ability to borrow abroad at
a time when its foreign exchange position has weakened. In July, foreign
exchange reserves fell by $350 million to $2.6 billion, according to press
South African rand, which has fallen to record lows against the dollar.
Major South African banks are expected to raise their prime lending rate to a
record 25 percent in response to government austerity measures, according to
Embassy sources. Pretoria has tightened credit for commercial banks, prom-
ised to restrain government spending, and placed restrictions on consumer
borrowing. These measures are intended to reduce inflation and buttress the
South Africa will suffer its third consecutive year of declining real national in-
come and rising black unemployment because of the strict controls on
borrowing combined with the drought and low gold prices. Few funds will be
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Irish Austerity
Push hrough
D ing Summer Recess
available to satisfy the expectations of nonwhites for more economic benefits
under the new Constitution, which creates parliamentary chambers for
Coloreds and Indians separate from those of whites. Moreover, the government
may lose some support among whites hardest hit by credit restrictions,
including farmers and middle-class consumers. Rightwing opposition parties
who already are attacking the government for its racial reform\policies will
seek to exploit the dismal economic outlook.r 7 25X1
The Fine Gael-Labor coalition launched a new austerity program this week-
earlier than expected-by instituting expenditure cuts while Parliament is in
recess. The spending cuts come primarily from halving food subsidies and will
raise milk, bread, and butter prices immediately. Labor's support was
apparently won only with some difficulty, and we believe Prime Minister 25X1
FitzGerald faces a fierce budget battle in September, when the government
unveils the next installment of its austerity plan. By instituting part of the plan
during the summer holiday, the Prime Minister may hope to get the public
used to the idea that more cuts are on the way and thus reduce the controversy
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1983.
This is FitzGerald's second attempt at austerity. His Fine Gael-Labor
coalition fell apart two years ago over an austerity budget and lost the
subsequent election. When the coalition regained power in January, it was
careful to avoid controversial budget cuts or tax increases. The government
now claims, however, that high US interest rates and the strong dollar are
forcing Dublin to take austerity measures to assist efforts to repay medium-
and long-term foreign debt-close to $14 billion in 1983-and to reduce the
nagging government budget deficit-$1.1 billion, or 7 percent of GNP in
Less Developed Countries
Indian Planners India will curb import growth and restrain government investment in new
Revise Development industrial projects, according to the recently approved guidelines for the
Strategy Seventh Five-Year Plan (1985-90). According to press and US Embassy
reports, the preliminary planning paper emphasizes more efficient use of
existing industrial capacity; completion of ongoing energy, irrigation; and 25X1
transportation projects; and agricultural growth-particularly rice production
in eastern India. The paper also proposes greater freedom from government
controls for small- and medium-size private firms. In our view, this economic
strategy reflects concern over impending shortages of foreign exchange and of
government revenue. Prime Minister Gandhi, however, has publicly character-
ized the plan priorities as food, work, and productivity to highlight jobs and
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Argentina's Wheat Unseasonable weather during the May-August planting season and a smaller
Export Prospects planted area have lowered the projected 1984/85 (December to November)
Decline wheat crop to 10.0 million metric tons. This compares with 12.0- and 14.5-
million-ton crops the two previous seasons. Argentine farmers-expecting
better prices and yields from soybeans-are expected to plant only 6.3 million
hectares to wheat, down 700,000 hectares. A smaller crop will provide roughly
5.5 million tons of new crop wheat for export during 1984/85-as much as a
third lower than this year. While this export level will allow Buenos Aires to
service its key markets-the Soviet Union and Iran-it will reduce Argenti-
na's ability to sell to other markets. This setback for wheat could reduce
Argentina's export earnings by as much as $300 million in late 1984 and early
1985-Argentina's primary wheat export period. Buenos Aires could recoup
some of this loss when the new soybean crop is marketed in mid-1985.
Argentina Wheat Trends a
1980/81
-1981/82
1982/83
1983/84
1984/85 b
Million metric tons
7.78 3.95 3.84
8.30 4.30 3.64
14.50 4.45 9.85
12.00 4.50 7.90
10.00 4.50 5.50
a Data based on a December-to-November crop year.
b Forecast.
Zi tbabwean Budget Zimbabwe's recently annnounced budget for FY 1984/85 is intended to slow
growing government deficits. Expenditures are set to rise by 7 percent-
compared with the prevailing 19-percent inflation rate-while revenues are
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Record Chinese
S mer Harvest
louds Imports
projected to increase 8 percent. According to US Embassy sources, the budget
represents a victory for moderates in the government because of reductions in
government operating expenditures and greater emphasis on export incentives.
The planned deficit of $560 million, however, still is equivalent to nearly 11
percent of projected national income-substantially above the IMF's guideline
of 5.5 percent-and this may be a sticking point in future negotiations between
Harare and the IMF. Moreover, controlling government spending will prove
difficult. Defense expenditures, for example, are to fall by 16 percent under
the new budget, but we expect that Prime Minister Mugabe will come under
pressure from the military to restore defense funds in the supplemental budget
next February.
According to Chinese press reports, China has harvested a record summer
grain crop, mostly wheat, of 88.5 million metric tons, up 5 percent from 1983's
revised output of 84 millions tons. Total grain production this year could top
the 1983 record harvest of 387 million tons if favorable weather continues. The
record summer grain crop will lessen Beijing's incentive to take delivery of the
14 million tons of grain it agreed to import from various sources in 1984,
including 8 million tons under the US-China long-term grain agreement
(LTA)
Problems With Hanoi is taking measures to forestall widespread food shortages later this year
Northern Vietnamese because of a shortfall in rice production in the north. Alternating floods and
Rice rop drought, combined with the worst insect infestation since 1980 reduced the
70,000 tons of low-quality rice from Thailand.
spring rice crop in the north by 91,000 metric tons compared with 1983-a 10-
percent drop-according to the Vietnamese press. The late spring harvest then
delayed the transplanting of seedlings for the main crop until the onset of the
summer monsoon, and this will further reduce output. Although early
indicators point to a good rice crop in the south, which produces 60 percent of
the country's rice, Hanoi is concerned that its inefficient food distribution
system will not be able to transport sufficient rice to the heavily populated
north. As a result, the government has accelerated efforts to transport..,-rice
from the south, made informal requests to Sweden and the Soviet Union for
aid, and last month-despite a critical shortage of foreign exchange-bought
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Commercial Jet Engines:
Competition for the 150-Seat
Aircraft Market
Announcement of a go-ahead to build the V-2500
jet engine made by a five-nation consortium led by
Pratt & Whitney and Rolls-Royce, signals height-
ened competition for engines sized for 150-to-200-
seat commercial aircraft. This new engine will
compete with the SNECMA/GE CFM56, which
has enjoyed a five-year monopoly in this engine
class. The overall market for this size engine is
estimated to be some 7,000 units to the end of the
century, with a potential value of $18-20 billion.
We estimate that the United States will garner 40
to 45 percent of sales, down, however, from as
much as 75 percent in previous competitions for
other-size engines because of the increased interna-
tionalization of production. In addition, we expect
US firms will get almost all of the lucrative follow-
on spare parts and maintenance business.
An International Program
International Aero Engine Corp. (IAE) was formed
early this year to develop and produce the V-2500.
This advanced-technology, 20,000-to-25,000-
pound-thrust engine is designed for 150-seat air-
craft such as the all new Airbus Industrie A320
and derivative designs of US aircraft-the Boeing
737 and the DC-9. Each of the major shareholders,
Great Britain's Rolls-Royce and United Technol-
ogies' Pratt & Whitney, has 30 percent; Japan's
The technology base for the V-2500 relies heavily
on the modern large engines of Rolls-Royce and
Pratt & Whitney, the RB211 and PW2037. Each
of the consortium members will be responsible for
the design, development, and manufacture of a
major engine component, with the final assembly at
Rolls-Royce and Pratt & Whitney plants. Rolls has
responsibility for the high-pressure compressor,
while Pratt & Whitney is designing and developing
the engine hot section (combustor and high-
pressure turbine). Japan Aero Engine Company
will design and produce the fan and low-pressure
compressor. Motoren and Turbinen Union of West
Germany has responsibility for the low-pressure
turbine, and Fiat of Italy is responsible for the
gearbox.
Foreign participation in the V-2500 program is
facilitated by substantial government support. Lon-
don, for example, is expected to finance about half
of the $360 million contribution by Rolls-Royce
and already has appropriated $87 million to launch
its program. Similarly, we believe the Japanese
Government is providing JAEC more than half of
the estimated $240 million Japanese share.
Market and Timing
Ishikawajima-Harima Heavy Industry, Kawasaki The V-2500 engine competes with the CFM56
Heavy Industry, and Mitsubishi Heavy Industry, engine from CFM International. This company,
have 20 percent; and Motoren and Turbinen Union formed in 1974 by General Electric and the French
of West Germany and Fiat of Italy have the company SNECMA, developed the CFM56 family
remaining 20 percent. According to IAE officials, of fuel-efficient engines. The engines were based on
the engine offers a 14-percent fuel saving over the GE's military 17101 engine core and its commercial
CFM56 engine. Certification has been promised CF6 fan and turbine technology. The 700 engines
for April 1988, with deliveries later that year.
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New Fuel-Efficient Engines Produced by
International Consortiums
O SNECMA
General Electric
Consortium
Percent
members
equity
General Electric
50
International
Rolls-Royce
30
Aero Engines
V-2500
Pratt & Whitney
30
Combustor
High-pressure
turbine
= Rolls-Royce
l) Pratt & Whitney
O JAEC (Japanese Aero Engine Company)
? MTU (Motuoren and Turbinen Union)
Fiat
Responsibility
High-pressure compressor, FIOI
combustor, high-pressure turbine,
engine assembly
High-pressure compressor, RB211
engine assembly
Combustor, high-pressure turbine, PW2037
engine assembly
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The new engine designs are being built for the
aircraft competing in the 150 passenger market,
including the all-new Airbus Industrie A320 and
derivatives of Boeing's 737 and the Douglas DC9
(MD80). The A320 incorporates new technologies
in wing aerodynamics, composite fiber and kevlar
structures, and a two-man cockpit arrangement
with advanced electronic controls and advanced
avionics. Scheduled for delivery in early 1988, it is
being offered with either CFM56 or V-2500 en-
gines. Five airlines have placed orders and options
for 96 of the CFM56-powered A320s to date, with
deliveries starting in 1988. Marketing by IAE and
AI has started for V-2500 versions that will be
available six to 12 months after initial aircraft
deliveries. Airbus is also considering the V-2500
for longer range four-engine aircraft,. the TA 11,
but has not announced firm plans.
Among US-derivative designs, Boeing is offering
the 737-300 for delivery in late 1984. This
stretched model with the CFM56 engine offers
approximately half the fuel saving projected by
Airbus for the A320. Other possible designs in-
cludefurther stretched versions of the 737 and an
all new 7-7 with deliveries in 1989 if launched this
fall. McDonnell Douglas's entry is the MD80,
currently powered by the PW JT8D-200, a less
fuel-efficient engine. Further derivatives and an
all-new aircraft using the newer engines are being
studied, but no plans have crystallized.
The market for these engines is estimated at $18-
20 billion of the projected $65-70 billion market for
150-seat-aircraft sales through the year 2000.
Eventual demand for these new engines will be
reduced, however, when an all-new turboprop air-
plane with a 25-percent-fuel-usage advantage is
introduced. This new design could be introduced as
early as the mid-1990s. The feasibility of the
turboprop concept, including R&D requirements
for engine, propellors, and gearbox, is being as-
sessed by NASA, and results are expected late in
the decade.
Another factor that could affect sales of the V-
2500 is the timing of the V-2500 engine availabil-
ity. Airbus officials, for example, have expressed
concern about the delay that could be caused by
customers waiting for the V-2500 engine. In addi-
tion, industry, observers note that a seven-company
consortium is without precedent in aircraft engine
development. The GE/SNECMA consortium with
two members has been successful, but previous
joint efforts between Rolls-Royce and Pratt &
Whitney failed; both went on to develop their own
engines (the RB211 and PW2037). Moreover, any
shift in US export policies on engine sales to other
countries could strain the program.
Implications for the United States
The two jet-engine programs aimed at the 150-seat
market furthers the trend toward internationalizing
sold to date have gone primarily for reengining
older jet aircraft. The latest derivative, the
CFM56-4, is offered for new 150-seat aircraft
designs and is scheduled for availability in 1988. It
will provide a fuel saving of up to 40 percent
compared with engines used on early 737 and DC-9
aircraft. Another variant, designated the CFM56-
5, with a further 7-percent increase in efficiency is
to be announced soon
key aerospace projects, and narrows the gap be-
tween foreign and US technological capabilities.
On the sales side, we estimate that US participa-
tion in both engine programs will garner some 45
percent or $9 billion of sales through the year 2000,
regardless of the outcome of the engine competi-
tion. The United States is expected to secure the
major portion of follow-on spare parts sales and
maintenance contracts.
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While the US share of engine sales is smaller than
in past programs, we believe part of the difference
is offset by the development funds put up by the
foreign consortium participants. On the negative
side, however, we believe this pattern of joint
development spurs technology transfer and diffu-
sion to West European and Japanese companies
and tends to narrow the gap in existing design
capability, particularly in the engine combustor
and turbine hot section and in compressor aerody-
namics. Such diffusion also provides the USSR
with additional targets from which to acquire these
technologies.
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Technology to Soviet
Economic Performance
The USSR's planning and management system
impedes assimilation and diffusion of imported
Western technology.' The Soviets have mounted a
large and effective effort to identify and acquire
potentially helpful Western plant and equipment
through both legal and covert channels. Moscow
provides special resources to enable the prompt and
efficient use of some of these imports, especially
those for high-priority industries such as defense
and energy. Most imports of Western plant and
equipment, however, do not receive such special
attention and fall victim to a host of constraints
that diminish their usefulness.
Despite official encouragement, enterprise manag-
ers often resist introduction of new equipment and
processes-imported or domestic. Product and
process innovation cause downtime to increase and
produce other short-term disruptions that jeopar-
dize output goals-the prime success indicator of
Soviet enterprises. Western studies have shown that
it takes Soviet industry more than twice as long to
implement innovations as in the West.
The inability of Soviet industry to assimilate new
technology more easily and more quickly results in
large part from:
? Poorly formulated shipping schedules, inadequate
port facilities, and shortages of domestic trans-
port that frequently delay the delivery of import-
ed equipment to end-users.
? Chronic delays in construction that result in
equipment lying idle for long periods of time.
' Assimilation is the mastering of imported technology by a single
end-user. Diffusion is the use of the imported technology through-
? Reliable suppliers of the materials and equipment
necessary to install and service the new technol-
ogy that are either unavailable or difficult to find.
? Coordination among central planners responsibile
for different phases of the same project that is
often lacking.'
Perhaps the most common obstacle to the efficient
assimilation of imports, however, is continuing So-
viet reliance on technical documentation in using
foreign equipment. Studies have shown that tech-
nology is transferred more efficiently through per-
sonal interaction. For example, Moscow imported
the IBM Information Management System in
1974, but,
it has never worked well mainly be-
cause the Soviets, rather than using IBM consul-
tants, have used only the written instructions that
accompany the equipment.
The malfunctioning of imported equipment is a
major problem as well. Many malfunctions stem
from the processing of unusually low-quality mate-
rials or from inadequate preventive maintenance.
For example, Western equipment has broken down
when used to make parts from steel that has too
great a tensile strength or when used to make parts
that exceed the specifications of the machinery.
'An example of a situation where poor planning hinders the
assimilation of new technology in the USSR is the construction of a
color picture tube factory in Voronezh and a plant in the Western
Ukraine to supply the picture tube factory with "sealing glass." The
two plants-both using Western technology-are 1,400 kilometers
apart, greatly increasing delivery problems and raising transporta-
tion costs.
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When equipment malfunctions, the Soviets do a
poor job of repairing it. Bureaucratic meddling
often delays repair work.
Moscow tends to be tightfisted in spending foreign
exchange on replacement parts. A breakdown of
the simplest part can cause a bottleneck because
the Soviets are slow in ordering replacements from
the West. This problem occurs more frequently as
equipment ages. Half of the 50 Western-made
bulldozers used by the Lenzoloto Production Asso-
ciation gold-mining facility were idle recently be-
cause of a lack of spare parts. A parts shortage also
has kept many imported US pipelaying machines-
critical to the USSR's oil and gas industries-out
of service for extended periods. This problem is
likely to worsen. The spare parts portions of recent
import contracts for the petroleum drilling industry
have in many cases been cut by the Soviets by over
50 percent.
The arduous task of successfully diffusing Western
technology throughout the Soviet economy is be-
coming increasingly difficult because of the grow-
ing complexity of imports. Successful diffusion
usually requires the design of the import to be
copied and incorporated in a Soviet-built machine.
In many cases the Soviets lack the skills needed for
series production.
Soviet researchers do not always have access to the
types of equipment and resources used in the West
to produce state-of-the-art machinery and thus
have difficulty achieving the necessary quality
standards. A case in point is the effort in the late
1970s of the research staff at the Mechanical
Project Institute for Oil and Water Equipment in
Moscow to develop a submersibl, pump for use in
oil wells. The staff took apart a number of US
pumps and attempted to copy them with minor
modifications. The major stumblingblock was the
refusal of Soviet industrial officials to supply the
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10 August 1984
direct defense applications.
materials needed to duplicate the quality and dura-
bility of imported pumps. Staff engineers were
amazed that US companies could easily obtain
nickel and other metals for their pumps, since
Soviet strategic metals are reserved primarily for
A workable R&D organization is an absolute pre-
requisite for the successful adaptation and diffusion
of imported technology throughout Soviet industry.
The geographic and bureaucratic separation of
most R&D organizations from end-user plants de-
prives the R&D employees of full knowledge of the
environment within which their concepts must
work. The perversity of the Soviet incentive system
is also a problem. Worker bonuses are paid before
ideas are translated into production. As a conse-
quence, there is a significant gap between research
and its actual application.
The formulation of workable concepts by R&D
institutes is also impaired by the low quality (and
sometimes virtual absence) of support services and
equipment
the Soviet Union has only 20,000 to 30,000 photo-
copiers.
R&D labor resources are misallocated. For exam-
ple, most well-qualified scientists, for reasons of
prestige, pursue theoretical work in research insti-
tutes-and are not the prime movers in applied
R&D and technology diffusion. In addition, the
successful performance'of pilot plants developed to
manufacture prototypes requires highly skilled
blue-collar workers.
the innovating sector has
difficulty attracting the talented workers it needs.
Even after workable R&D concepts are formulated
and pilot tested, there is still no assurance they will
be introduced into serial production. The R&D
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establishment, for the most part, lacks the author-
ity to force implementation of its recommendations
over the objections of plant managers. The State
Committee for Science and Technology (GKNT)
supervises interbranch R&D, but its authority ends
with the preparation of a prototype. The State
Planning Committee (Gosplan) handles the serial
production and distribution phases. With this split,
each organization under the nominal supervision of
the GKNT or Gosplan has tended to become
parochial, creating barriers that inhibit the move-
ment of an idea from conception to production.
Implications
During the first half of the 1970s, Soviet imports of
Western plant and equipment measured in constant
prices almost tripled. Even though the total value
remained small-roughly 5 percent of Soviet in-
vestment in machinery and equipment-Moscow
hoped these imports would have a substantial im-
pact on economic performance and productivity.
Moscow reasoned that the demonstration effect of
Western technology would spur advances in Soviet
equipment that would spread throughout the econo-
my. The planned boosts in industrial productivity
have not materialized, primarily because of assimi-
lation and diffusion problems.
Moscow appears to have become more selective in
its acquisitions of foreign technology. The volume
of imports from the West last year was below what
it was in the mid-1970s. In seeking Western tech-
nology, the Soviets now seem to be concentrating
mostly on increasing their defense industries' capa-
bilities and breaking bottlenecks in the energy and
agro-industrial sectors.
Purchases of equipment from Eastern Europe are
on the rise. This equipment, while less sophisticated
than that available from the West, is still better
than what is currently available in the USSR.
Moreover, East European equipment generally is
closer in overall design and specifications to Soviet
equipment than is Western equipment. The Soviets
apparently now perceive East European technology
as a potentially greater contributor to general
economic growth than the more advanced but
harder to use Western equipment:
? Instead of having to rely almost exclusively on
written instructions, the Soviets can easily enlist
East European assistance in the transfer of equip-
ment. East European engineers can help train
Soviet workers and return to the plant to solve
operational problems. Thus, the chance of suc-
cessful assimilation is greatly increased.
? Instead of depending only on domestic research
and development efforts to embody the import in
Soviet equipment, Moscow can draw more easily
on the work of the East European scientists who
developed the technology, thus increasing the
chance of successful diffusion.
The benefits of acquired Western technology to
general economic performance will continue to be
far below potential as long as the inefficiency of the
Soviet administrative and incentive systems per-
sists. As such, while imports can provide important
contributions to some high-priority industrial sec-
tors, they are not likely to play a critical role in any
Soviet strategy to increase overall economic
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The Soviet Aluminum Industry:
Slowing Growth and Increasing
Dependence on Foreign
Raw Materials
The USSR is the world's second-largest producer
of aluminum, accounting for 19 percent of world
output compared with the United States's 23 per-
cent. The Soviets' rapid expansion in aluminum
production in the 1960s and early 1970s was
spurred by demand in the defense, electrical, and
construction industries. Since 1975, growth has
slowed sharply. All plants built or under construc-
tion since the early 1970s have used Western
technology extensively, but there have been serious'
assimilation problems. Soviet growth in aluminum
capacity has not been matched by expansion in the
supporting domestic raw material base. As a result,
the Soviets have had to depend increasingly on
imports of bauxite and alumina which will continue
to increase throughout the 1980s as domestic re-
serves of high-grade bauxite are rapidly depleted.
Leading Producers of Primary Thousand metric tons
Aluminum a
USSR
565
1,640
2,735
Canada
691
972
1,075
Japan
133
733
351
West Germany
169
309
723
a Primary aluminum is the product of smelting alumina in an
electric furnace. US primary aluminum production declined by 30
percent from 1980 to 1982, mostly because of weak markets in the
transportation and construction industries caused by declines in the
sales of new domestic automobiles and new houses. Japanese
aluminum production decreased by almost 70 percent during the
same period because high energy costs forced Japan to rely
increasingly on less expensive aluminum imports.
Expansion of Capacity, 1959-83
Domestic demand-primarily in the defense, elec-
trical, and construction industries-and growing
export commitments have driven the expansion of
the Soviet aluminum industry. Although the share
of aluminum production directly consumed by de-
fense has declined from roughly 35 percent in 1960
to about 15 percent in 1982, the defense industry
remains the largest and most important consumer
of aluminum and has top priority for quality and
delivery.
Annual output of aluminum grew from an estimat-
ed 515,000 metric tons in 1959 to 2.8 million tons
in 1983. Nearly 85 percent of this growth occurred
before 1976, however, as production rose at an
average annual rate of 10 percent a year. In 1976-
80, growth slowed markedly to 3 percent a year,
and during 1981-83 slowed to 1 percent a year.
The dramatic slowdown in the growth of aluminum
production that began in 1976 has resulted from:
? A cutback in investment mainly in response to
slower growth in domestic demand.
? A failure to meet production targets because of
delays in constructing aluminum plants.
? Labor shortages and inadequate equipment
maintenance.
? Slow assimilation of new production technology
and periodic electric power shortages.
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United States and USSR: End Uses
of Aluminum, 1980
The Contribution of Western Technology
Much of the investment allocated to the aluminum
industry since 1970 reflects expenditures for West-
ern equipment and technology. All new plants built
or under construction since the early 1970s-the
Nikolayev alumina plant, the Tursunzade and
Sayansk aluminum plants, and the prebaked anode
plant at Tursunzade-use Western technology ex-
tensively. In particular, the Soviets have been
trying to upgrade the technology used in automa-
tion, electric power use, pollution control, and other
production-related equipment. One of the Soviets'
key objectives in seeking Western help in building
the Sayansk plant was to gain advanced automa-
tion technology.
USSR: Additions of New Capacity
for Aluminum Production, 1959-85
The Soviets often import technology for new alumi-
num plants and then reproduce the technology in
other facilities. Potline operations, for example,
were partially automated in the two decades be-
tween 1958 and 1978 by installation of computer-
ized equipment (the alyuminii system), copied from
French equipment. Assimilation of this system was
very slow; for example, installation of the first
system began at the Volgograd plant in 1958 but
was not fully implemented until 1973.
Increasing Dependence on Foreign Raw Materials
Since the mid-1960s, domestic output of raw mate-
rials and aluminum has failed to keep pace with the
growth in aluminum production capacity. The So-
viets have been unable to meet increasing require-
ments for domestic raw materials because reserves
of high-quality bauxite are being rapidly depleted
and because of the unexpected cost and technical
0 1959-65
a Projected.
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difficulty of exploiting nonbauxite ores.
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In 1960, domestic raw materials were used for
about 85 percent of aluminum production; in 1970,
this share had fallen to about 70 percent; and, in
1980, to about 65 percent. Furthermore, the share
of aluminum produced from domestic raw materi-
als will continue to decline as aluminum production
increases.
The USSR is the world's second leading exporter of
unwrought aluminum. It exported roughly 600,000
tons in 1982-nearly one-fourth of production. Of
this, about 70 percent went to Eastern Europe.
Exports to non-Communist markets in 1982
amounted to only 165,000 tons, with almost 50
percent going to Japan. Sales of aluminum have
been a small but stable source of hard currency
earnings for, Moscow. In 1983, exports of alumi-
num probably earned $250-300 million, supplying
about 1 percent of total hard currency earnings.
Overhead photography of construction projects un-
der way indicates that additions to new aluminum
capacity during 1984-90 will be limited. As a
result, we project that Soviet aluminum production
will grow at an annual rate of about 2 percent
during 1984-90, reaching 3.2 million tons by 1990.
Shortages of labor will continue to be a major
problem in the aluminum industry. Although plan-
ners have emphasized that increased automation
would reduce manpower needs, the USSR has been
unable either to produce the necessary equipment
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We believe depletion of high-grade bauxite reserves
will continue, causing mining to become increasing-
ly expensive and forcing the Soviets to import
increasing amounts of bauxite and alumina.
Despite slow growth, we do not expect domestic
shortages of aluminum. Any large increase in
domestic consumption could be met by reducing
exports. Because of long-term trade agreements
with Eastern Europe, such a decrease would proba-
bly reduce aluminum exports to the West and
might even force reductions in sales to Eastern
Europe.
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International Financial Situation:
Political Update
Over the past month, budget stringencies have
heightened military disaffection in Argentina,
Peru, Bolivia, and Nigeria, although in Peru meas-
ures are being taken to minimize the impact of the
cuts. In the Philippines, the opening of the National
Assembly on 23 July spurred large-scale demon-
strations, and the newly elected political opposition
moved immediately to challenge President Mar-
cos's handling of the economy. Concern that meet-
ing targets under an IMF program would spark
widespread social unrest has prompted the Domini-
can Republic to pursue a program of gradual
economic adjustment measures, but without reach-
French Mirage 2000 jets. This $650 million arms
purchase will conflict with Peru's budget targets
under its IMF-supported economic adjustment pro-
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ue to offer tanks and helicopters on generous terms.
According to. press reports, the Soviet Union of-
fered a $50 million long-term, low-interest package
with partial payment in commodities instead of
hard currency. The military is seeking increased
capabilities in part to counter a new wave of
terrorist attacks by the Sendero Luminoso.
ing a formal IMF accord.
In Argentina, President Alfonsin has displayed a
"take charge" attitude in quelling overt dissension
within the Army and in dealing with labor and the
public on economic austerity measures. Alfonsin
reshuffled the top Army command by replacing the
Army Chief of Staff and other senior officers last
month.
L____JOn the labor front, the President has
protected low-wage earners but held other wage
increases below inflation. He offered fresh conces-
sions to union bosses from the opposition Peronist
party but warned them to curb strike activity and
ease their wage demands. In his speeches, Alfonsin
prepared the public for a period of "mild" austerity
as negotiations with the IMF continue. He also
moved to improve Argentina's international image
by indicating a willingness to reach agreement with
Chile on the Beagle Channel dispute and holding
talks with the United Kingdom on the Falklands.
To improve strained relations with the military,
President Belaunde of Peru concluded prolonged
negotiations with the French for the purchase of
The US Embassy in Peru reports that teachers may
not remain satisfied with their June wage settle-
ment because public workers subsequently received
20,000 more soles a month (about $7) in their
settlement. Increases in the teacher and govern-
ment-worker wage settlements will cost the govern-
ment the equivalent of 2 percent of GNP or $340
million, according to the Embassy. The government
blamed the three-week strike by public workers in
June for its inability in early July to make interest
payments on external debt.
We believe a failed military coup and kidnaping of
Bolivian President Siles on 30 June temporarily has
solidified civilian support for his government and
may encourage leftist radicals in the government to
take steps to defend against a coup. Nevertheless,
Siles faces enormous economic problems and wide-
spread opposition to austerity measures. Last week
civil servants began an indefinite strike demanding
higher wages.
The Buhari government in Nigeria is fearful that
any new policy initiative could trigger a coup
attempt. The eight-month-old government has
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failed to meet its promise to revive Nigeria's econo-
my swiftly, thus fanning public and military dissat-
isfaction. Food prices have risen above levels before
the coup, and shortages of sugar, rice, and vegeta-
ble oil are increasing.
In the Philippines, continued delays in reaching
agreement with the IMF are adding to the eco-
nomic deterioration and making it more difficult
for President Marcos to manage domestic politics.
A full military alert for the opening of the National
Assembly led to a confrontation between soldiers
and thousands of antigovernment demonstrators
who were lobbying for political reforms. The gov-
ernment also faced numerous student demonstra-
tions across the country last month protesting
tuition increases and reduced government subsidies
for education. Workers, too, have stepped up their
protests. To cope with increased opposition activity,
the government has beefed up its training for riot
police, used tear gas in student protests near Mala-
canang Palace, and temporarily reinstituted "street
marshals" to fight street crime.
Both moderate and radical opposition groups are
using economic issues-including the domestic
banking crisis-to challenge and discredit the Mar-
cos government. At the opening of the National
Assembly, the newly elected political opposition
questioned reappointment of Prime Minister Cesar
Virata, charging that he has mishandled the econo-
my. The Communist Party of the Philippines (CPP)
also is exploiting the economic crisis. According to
US Embassy reports, the CPP has begun a cam-
paign of economic sabotage that has targeted large
projects linked with Marcos's associates as well as
government showcase projects. The Embassy has
recorded 16 incidents since April.
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10 August 1984
The Dominican Republic has been pursuing an
informal program with the IMF since the govern-
ment broke off talks for a standby last month.
President Jorge Blanco feared that IMF proposals
for electricity rate increases-on top of planned
boosts in fuel prices-would precipitate widespread
social unrest. Santo Domingo hopes its program
will serve as a steppingstone to a formal IMF
standby agreement sometime in early 1985. De-
spite the President's efforts to build a consensus
behind belt-tightening measures, labor unions and
leftist groups are continuing preparations to protest
austerity.
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Afghanistan: Tenuous
Food Situation
Food supplies over the past year probably have
been comparable to levels before the Soviet inva-
sion and adequate to meet current needs. Soviet
operations have caused some disruptions, but have
not significantly reduced overall food supply levels.
Localized shortages of food and high prices have
resulted from disruptions in the distribution system
and poor harvests in a few areas. The high level of
military operations last spring and this summer or
an effort by the Soviets to deny food to the
insurgents and their rural supporters could lead to
serious shortages as early as this winter, and unfa-
vorable weather could lead to widespread shortages
by early next- year.
Agricultural Problems and Resiliency
Since the Soviet invasion, the agricultural sector
has faced numerous disruptions.
large numbers of landowners have
fled the country, taking valuable machinery as well
as financial assets. The flight of more than 3
million people to neighboring Pakistan and Iran
and migration to the cities have reduced the extent
of cultivation as well as demand. Routine mainte-
nance of vineyards, orchards, and irrigation net-
works is being neglected.
military operations have resulted in burned crops,
damaged grainfields, and destroyed irrigation sys-
tems. In some cases the Soviets have deliberately
destroyed crops in retaliation for insurgent opera-
tions. land
along major transportation routes and around mili-
tary bases has fallen out of production either
because the Soviets want a security zone or the
farmers fear for their lives.
The Soviets, however, generally allow the agricul-
tural sector to operate as it did before the invasion.
Government-produced fertilizer, for example, is
sold freely throughout Afghanistan
cutting
production of food in rural insurgent-held areas
would only force the USSR to increase its supplies
of food to urban areas.
The primitive nature of Afghanistan's agricultural
sector has softened the impact of the Soviet occupa-
tion. Most farmers operate at the subsistence level
and are not heavily dependent on outside sources of
modern equipment, fuel, chemical fertilizers, im-
proved seeds, or pesticides. In addition,7--=
the
destruction associated with military operations is
only a very small share of total land under cultiva-
tion.
Manpower apparently has been sufficient to sow
and harvest crops, albeit on fewer acres. We believe
some of those who have left the country or migrat-
ed to the cities return to work in the fields during
periods of peak labor demand.
there were good food harvests in most regions
during 1983. The major exception was in the
Khowst Valley, where heavy fighting resulted in
abandoned fields. While we cannot measure pro-
duction of all food crops, we believe the wheat
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Major Grain-Producing Regions in Afghanistan
Soviet Union
Iran
'~ H rud
.Herat ^~J~ L- ' KA U?~" .Jal ig bsd
0 ;,
Mpz3r-e on
heberghgn
S aril
ne-h
May 1. ',
5a a ga a
Ba
?'
Badghis \'J,
? R6mrn Parva
st`\5i~ Konarha
/LaghmBn
api@a l
Herat
. V
JFa h
Farah
rx'
Nimruz
r1
sv an arhar
L gs N
Hazare`hjaL
j to rJ
n Paktia.
?~?~- \ OrG gan Ghazn(,
PJ~ r Khowst
7 I )) J~
j ~?O~ aktika
a~~ Zabol
(la dahar
Qandahar
Boundary representation is
not necessarily authoritative.
harvest is a useful indicator of total food produc-
tion. We estimate the 1983 wheat crop at between
2.5 and 3.0 million metric tons.
Production of industrial crops, even by government
records, has dropped dramatically. Harvests of
cotton, the most important commercial crop, and
sugar beets have declined by two-thirds since the
mid-1970s. We believe some of the resources in
producing these crops-land and labor-may now
be used in producing basic foodstuffs.
Secret
10 August 1984
Fey}a o8d
"d,u v t3ada~hs an
~~T harms
hIa \-~/? a\ ~
Imports Fill Gap
istan
Grain-producing area
Province boundary
We estimate that slightly more than 300,000 tons
of wheat were brought into Afghanistan from the
USSR and Pakistan in 1983. According to
Soviet and Afghan press report-
ing, wheat imports from the Soviet Union in 1983
were 160,000 to 180,000 tons. Most of the Soviet
grain was sent to Kabul, where the population has
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Agriculture Before the Invasion
Agriculture is the most important sector of the
economy. In the mid-to-late 1970s, agriculture
provided about 60 percent of national income and
employed 80 percent of the population. Agricultur-
al output grew by 3 percent annually in the mid-
1970s, and the country was roughly self-sufficient
in foodgrain production in 1977.
Afghanistan's cultivated land is scattered through-
out the country, mostly in valleys along rivers and
other sources of water because rainfall is uncertain
and inconsistent. Only 8 million of Afghanistan's
63 million hectares are arable, and throughout the
mid-to-late 1970s Afghan farmers cultivated on
average only about half of the arable land. Total
irrigable area is about 5.3 million hectares, of
which about 2.6 million were irrigated annually,
with the balance remaining fallow. About 1.4
million hectares of irrigated land has adequate
water throughout the year to make double crop-
ping possible.
The production offoodgrains utilizes 90 percent of
land under cultivation. The remaining 10 percent
has been devoted primarily to fruits, vegetables,
cotton, oil seeds, and fodder crops:
? Wheat, the primary grain crop and main food
staple, is grown on about 60 percent of the total
cultivated area-2.4 million hectares. It is grown
increased to nearly 2 million from 750,000 before
the invasion. the
movement of people from rural to urban areas,
disruption of transportation, and the government's
inability to collect grain and other agricultural
products in insurgent-controlled areas left urban
areas with serious shortfalls.
Most of rural Afghanistan, which is controlled by
the insurgents or is only subject to limited govern-
ment control, appears to be almost self-sufficient in
food production.
throughout the country and on half of the irrigat-
ed land. In 1976, wheat production reached a
record 2.9 million metric tons, and no imports
were required.
? Corn is the second most important cereal and is
used for human consumption and animal fodder.
It is planted on about 500,000 hectares, and
average production has been about 800,000 tons.
Corn is grown primarily in the eastern valleys
bordering Pakistan and in the Helmand Valley.
? Rice is grown principally. in the north around
Baghlan and Konduz; other rice-growing areas
are Herat, Nangarhar, and Helmand. Rice is
planted on about 200,000 hectares, and peak
production reached about 450,000 tons in 1976.
? Barley is grown on about 300,000 hectares, pri-
marily in rain-fed, highland areas with short
growing seasons. It is used for human consump-
tion and animal feed. Peak output was about
400,000 tons in 1976.
? Truck gardens, cultivated orchards, and vine-
yards, while utilizing less than 10 percent of the
arable land, yield an important harvest of vegeta-
bles, fruits, and nuts. Peak production was about
1.6 million tons in 1976.
population and do not carry large supplies while on
operations.
We believe that in areas where domestic supplies
are insufficient, shortages are alleviated by imports
primarily from Pakistan. Western observers esti-
mate that roughly 140,000 tons of wheat are
brought in annually from Pakistan through unoffi-
cial channels. The US Embassy in Kabul assumes
that a large share of these supplies are diverted
from the refugee camps. The Afghans also pur-
chase surplus grain from the Pakistanis.
most of the insurgents get their food from the local
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Afghanistan: Foodgrain Productiona
Total grain
Wheat
I I I I I I I I I I I I
0 1970 75 80
Production figures are for fiscal years ending 20 March of the
stated year.
Military operations and patrols, however, have
interfered with internal and external trading neces-
sary to balance food deficit and surplus areas and
have caused higher prices. Goods used in barter are
visible and subject to destruction or confiscation.
We believe there is now a greater use of and more
demand for money to buy basic commodities and
reduce the risks of transporting goods.
Food supplies in Afghanistan last year probably
were near the levels available before the Soviet
invasion. We believe there were 2.8 to 3.3 million
tons of wheat available from domestic production
and imports to feed roughly 14 million people.
Afghanistan was generally considered self-
sufficient in wheat supplies in 1976, when wheat
production reached 2.9 million tons and the popula-
tion was roughly 14.5 million.
Afghanistan: Kabul Prices Indexa
100
90
1978 79 80 81 82
a Index figures are for fiscal years ending 20 March of the
stated year.
Our estimate of the range of food supplies in
Afghanistan leads us to conclude that even at the
lower end of the range there was sufficient food in
the country to feed the population at prewar levels
if distributed properly. If food supplies were at the
upper range of the estimate, they would have
exceeded minimum requirements by 400,000 tons.
Even when supplies are sufficient, however, prob-
lems in distribution and combat operations could
still lead to spot shortages
supplies probably were greater than
the minimum. For the past year we have had little
reporting of severe food shortages. Extra food
would compensate for the additional inefficiencies
in the system, allow for private stockpiles and
hoarding, especially in the rural areas, and the
destruction of some food supplies from military
operations and sabotage.
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Secret
Preliminary information indicates that food sup-
plies in 1984 generally are still adequate, with the
possible exception of Farah province. Crops pro-
duced thus far this year-primarily winter wheat-
appeared to be of at least normal quantity
sufficient
water in rivers, canals, and reservoirs to satisfy the
needs of the spring growing season.
Afghanistan's food supplies, agriculture produc-
tion, and food distribution networks, however, re-
main fragile. The advent of widespread combat
operations or a Soviet effort to deny food supplies
could easily upset the tenuous balance and could
quickly lead to localized shortages.
in the Panjsher Valley, for exam-
ple, the fighting from April to June left crops
rotting in the fields. If large areas of crops go
unharvested and unplanted, and the Soviets block
the main entrances to the valley, the inhabitants
are likely to face shortages this winter. The same
would hold true in other areas of concentrated
military activity.
Adverse weather would lead to more wides read
food shortages. last
winter's snowfall was below normal. Some areas of
western and southwestern Afghanistan reportedly
are experiencing drought.
While the US Embassy in Kabul has indicated that
it usually takes two years of light snowfall to cause
serious problems, insufficient snowfall last winter
probably will reduce the water available for sum-
mer crops and fall planting.
Spot 25X1
shortages attributed to bad weather are likely to be 25X1
felt first in the western provinces and the Hazareh-
jat-areas most inaccessible to supplies from Paki- 25X1
stan or the northern provinces. We estimate, how-
ever, that it would be sometime next year before
severe weather conditions cause widespread food
supply problems.
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