RECENT UPSURGE IN EAST GERMAN ECONOMIC ASSISTANCE TO LESS DEVELOPED COUNTRIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A002200170001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 9, 2016
• Document Release Date: March 20, 2001
• Sequence Number: 1
• Publication Date: March 1, 1965
• Content Type: BRIEF

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INTELLIGENCE BRIEF
CIA/RR CB 65-17
March 1965
Copy No.
RECENT UPSURGE
IN EAST GERMAN ECONOMIC ASSISTANCE
TO LESS DEVELOPED COUNTRIES
DIRECTORATE OF INTELLIGENCE
Office of Research and Reports
SECRET
GROUP 1
Excluded From automatic
downgrading and
declassification
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This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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S-E-C-R-E-T
RECENT UPSURGE
IN EAST GERMAN ECONOMIC ASSISTANCE
TO LESS DEVELOPED COUNTRIES
As part of a drive to strengthen its economic
recently has Pncreasedldra-ith
less developed countries, East Germany
matically the volume of its offers and extensions of economic aid. After
aid to developing countries
having extended only $55 million of economic 1 54-63), East
in the first 10 years of the Communist
1964 has more than tripled the amount
Germany since the beginning of 0
ion of its previous commitments by extending
upsurgerin the level of aid new
economic aid (see the table). This d to
Extende1 64 Le15 March 1965Countries
Developed East German Economic
and 1
1954-63
Million US
1954-63 1 January 1964 - 15 March 1965
54.9 191.8
Total
6.8 .8 66.55
1.7 0
Ghana 0
Guinea 50.1 0
Mali 0 6.5
Tanzania
10.6 84.4
Asia
0 42.0
Ceylon 2.0 0
India 8.6 42.4 J
Indonesia
Middle East J-7'-5
100.9
2.7 0.1
Syrian Arab Republic ioo.8
United Arab Republic 30:1 0
Yemen
a. This figure may be as higl: as 0 million.
S-E-C-R-E-T
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S-E-C-R-E-T
activities reflects a greater. East German determination to use its
increased economic capability to exploit more fully the political poten-
tial of the aid program. Another factor in the regime's decision is its
need to develop new outlets for machinery and equipment exports that
generally are not competitive in Western markets. Pursuant to the ac-
complishment of these economic and political objectives in the less
developed countries, East Germany has expanded recently the scope
of its aid undertakings and has liberalized its terms.
I. Pattern of East German Aid, 1954-63
Before 1964, except for a $20 million credit to the UAR and a
$3 million credit to Guinea, all East German aid had been designated
for the purchase of equipment for single projects rather than for
large lines of credit as was typical of the aid from most other Com-
mu.nist lenders. Thus, for example, credits were extended to Ghana,
Guinea, and Mali for the purchase of printing plant equipment; to
India, Syria, and the UAR for textile machinery; to Indonesia for a
sugar refinery; and to Yemen for a telephone exchange. Amortization
periods for these credits averaged about 5 years, and interest rates
were 2. 5 to 4 percent. These hard repayments terms plus the fact
that the agreements were actually contracts to sell equipment tended
to make most of East Germany's transactions more commercial than
aid-oriented. Also, deliveries of equipment under these contracts
were expedited rapidly because in many cases there was a minimum
of project involvement and the projects were relatively simple to
implement. By the end of 1964, virtually all of the $55 million of
said committed between 1954 and 1963 had been delivered.
2. The New, Expanded Program
Similar to the Soviet practice, East Germany now offers large
lines of credit, and recent credit extensions have generally been made
under general economic cooperation agreements. These agreements
encompass numerous projects for which contracts will be drawn after
feasibility surveys are made and individual project negotiations are
completed. East Germany also will become more directly involved
in project activities and for the first time has agreed to cover local
cots of some aid projects that it is undertaking. For example, in
its credit to Ceylon, one-fourth of the total amount extended has been
obligated for that purpose. Similar provision was made in its aid
agreement with Tanzania. In Ghana its offer of aid was for projects for which East "turnkey"
Germany would assume full responsibility.
Repayment periods, under recently extended credits, also have been
prolonged and interest rates reduced to be more nearly consistent
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with Soviet aid terms. The $42 million credit to Ceylon is repayable
in 10 annual installments and carries an interest rate of 2. 5 percent.
The East German credit of about $100 million to the UAR is to be
repaid in 12 years. $70 million of the credit will bear an interest
rate of 2. 5 percent and the remainder will carry 4 percent.
3. Political Implications of the New Program
While its expanded program is intended to satisfy certain eco-
nomic requirements of the East German economy, it is being em-
ployed simultaneously as an instrument to exact greater political
concessions from the less developed countries. Offers, aggregating
more than $135 million, currently are being negotiated with Burma,
Cambodia, Ghana, Malawi, Uruguay, and Yemen. Most of these
offers, as well as the extensions of aid that have been agreed to in
recent months, are believed to have been associated with political
conditions. For example, the Leuschner delegation that visited
India in February 1964 discussed; (1) Indian recognition of East
Germany; (2) establishment of an East German consular or diplo-
matic mission in India; (3) Indian representation, such as a trade
mission, in East Germany; (4) liberalization of Indian visa regula-
tions; and (5) long-term economic assistance. Although in no
instance has East Germany achieved full diplomatic recognition as
a result of its aid offers, Ceylon raised East German representation
to consular status before the receipt of a $42 million credit, and the
UAR agreed to establish a consular mission in East Germany when
it accepted the credit of about $100 million from East Germany during
Ulbricht's recent visit. In spite of the blunt pressures put on
Indonesia to extend full diplomatic recognition in return for sizable
long-term credits, the threat of-West German withdrawal of aid may
have made Indonesia reluctant to go beyond the consular representa-
tion that had been agreed to in 1960. Nevertheless, Indonesia has
received a series of credits totaling more than $40 million that may
come under a line of credit reported to be as high as $60 million.
4. Outlook
East Germany will probably continue to press less developed coup-
tries to accept additional aid offers so long as the political. and economic
factors that have impelled the recent upsurge are operative and so long
as the increased viability of the East German economy makes it able to
fulfill the higher level of its new aid undertakings.
Analyst:
Coord: M ORR
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SERIES NUMBER
CIA/RR CB 65-17
CLASSIFICATION OF REPORT
SECRET
DISTRIBUTION TO RC
50
DATE OF DOCUMENT
March 1965
NUMBER OF COPIES
280
NUMBER IN RC
COPY
DATE
NO. (S)
RECIPIENT
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SENT
RETURNED
97, 175-
30 Rec'd in St/P/C
26 Mar 65
97
St/P
30 Mar 65
175
OCR
"
/ b5
176
CGS/HR/O s 1G81
177
178-181
iI
182
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183--
184-186i
187
r~
188-230
Filed in St/P/C
30 Mar 65
~
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SUBJECT: Distribution of Current Support Brief No.
Upsurge East German Zcono c Assistance to Less
ountrss.... March (SECRET)
Copy No. Recipient
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St/A/DS Distribution of Current Support Brief No.
in East German Economic Asei
1965 (SECRET)
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36
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55
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61-66
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MEMORANDUM FOR: Chief, Dissemination Control Branch, DD/CR
FROM Chief, Publications Staff, ORR
SUBJECT ' Transmittal of Material
It is requested that the attached copies of CIA/RR CB 65-17,
nt Upsurge in East German Economic Assistance to Less Develo
j es March 1965.. Secret, be forwarded as follows:
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Suggested distribution for
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Report Series
RR CB 65-17
Title Recent Upsurge in East German Economic Assistance to Less
Developed Countries March 1965 (SECRET)
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