COMMUNIST AID AND TRADE ACTIVITIES IN LESS DEVLEOPED COUNTRIES, SEPTEMBER 1975

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01098A000600100007-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: November 16, 2016
• Document Release Date: February 28, 2000
• Sequence Number: 7
• Publication Date: November 1, 1975
• Content Type: REPORT

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secret
NOFORN
(See inside cover)
Communist Aid and Trade Activities in
Less Developed Countrief, September 1975
Secret
ER RP 75.31
November 1975
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NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
DISSEMINATION CONTROL ABBREVIATIONS
NOFORN- Not Releasable to Foreign Nationals
NOCONTRACT- Not Releasable to Contractors or
Contractor/ Consultants
PROPIN- Caution-Proprietary Information
Involved
USIBONLY- USIB Departments Only
ORCON- Dissemination and Extraction of Infor-
mation Controlled by Originator
REL - This Information has been Authorized
for Release to . . .
Classified by 015319
Exempt from General Declassification Schedule
of E.O. 11652, exemption category:
? 5B(1), (2), and (3)
Automatically declassified on:
data impossible to determine
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NoForn
CONTENTS AND SUMMARY OF EVENTS
(September 1975)
Highlights
? Libya became the second LDC to receive the Soviet TU-22
medium-range bomber.
? The USSR pledged $18 million in new credits for housing in Iran.
? China declined to participate in the long-discussed $365 million
Manantali Dam in Mali.
? Peking has renewed a $50 million development credit to Chile.
? Zambia began shipping copper over the recently completed
Chinese-built Tan-Zam Railroad.
First Zambian Copper Shipments on the Tan-Zam Railroad . . . . . . 1
Assesses the just completed Chinese-built Tan-Zam Railroad.
Soviet Aid to LDC Oil and Gas Industries . . . . . . . . . . . . . . 4
Examines Soviet aid to LDC petroleum and gas industries and indi-
cates the benf its accruing to the USSR and aid recipients.
Communist Arms Transfers to Major Arab Countries in 1975 . . . . . . 7
Details Communist arms deliveries to major Arab states in the first
nine months of the year.
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Other Activities
Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Military . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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COMMUNIST AID AND TRADE ACTIVITIES
IN LESS DEVELOPED COUNTRIES
SEPTEMBER 1975
First Zambian Copper Shipments on the Tan-Zam Railroad*
In September, Zambia began diverting some west-bound copper ship-
merits to the Tanzanian port of Dar es Salaam over the Chinese-built Tan-
Zam Railroad, although the rail. line is not scheduled to begin normal
commercial operation until early 1976. Zambia's move came after rebel
activity caused the suspension of service on the Benguela rail line through
Angola, a route over which half of Zambia's export traffic moves. Port
congestion at Dar es Salaam will limit the diversion of large amounts of
traffic over the Tan-Zam Railroad for some time, but the availability of
interim service on the line points up the potential importance of the project
as an alternative to Zambia's existing transport arrangements.
Peking undertook this massive project in 1970 after conducting
extensive surveys. It financed the project with a $402 million credit that
covered construction of the rail line and ancillary facilities, the purchase of
commodities to finance local costs, and the procurement of some Chinese
rolling stock. Repayments on the 30-year loan are to be made equally by
Tanzania and Zambia with income from rail operations. An estimated 16,000
Chinese personnel were present in Tanzania and Zambia at the height of
construction.
* The classification of this article is Confidential.
Note: The substance of this publication has been coordinated with the
Bureau of Intelligence and Research of the Department of State, with the
Defense Intelligence Agency, and with the Agency for International
Development. Comments and queries re ardin this publication are
welcomed. They may be directed to of the Office of
Economic Research, Code 143, Extension 5291.
25X1A
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The Track Record
Tracklaying on the 1,150-mile rail line was completed in June 1975, a
year ahead of schedule. Western experts assess the railroad as high quality in
design and execution.
When the railroad is formally turned over to the Tanzanian and Zambian
governments some time in 1976, it will be operating at an initial annual
capacity of 1 million tons each way. This capacity will accommodate two-
thirds of Tanzania's total transport requirements and 50% of Zambia's,
including three-fourths of its copper exports. At full capacity, 7 million tons
to be reached in 1978, the railroad will meet all Zambian and Tanzanian rail
transport needs. About 300 Chinese personnel are expected to remain
through 1978 to provide technical services. Repayment of the loan will not
impose a hardship on the two countries. An operating surplus of $27 million
annually is projected by 1983, when repayments totaling $14 million annually
are scheduled to begin.
Potential Benefits
The railroad is expected to have spinoff economic and social benefits.
For Tanzania, it will stimulate agricultural development in the western
region and provide access to coal and iron ore reserves in the Southern
Highlands. For its part, China recently extended a $75 million loan for
exploitation of iron ore deposits at Chunya and coal deposits at Tukuyu. A
feeder line from the deposit sites to the main line will also be financed
under this credit.
The Tan-Zam Railroad will provide landlocked Zambia with a major
alternative foreign trade transport option and will increase access to
northern Zambia, where there is some opportunity to expand cattle raising,
dairy farming, and production of coffee, tea, corn, and rice. China recently
extended a $50 million credit to Zambia for rural development projects.
Zambia also could exploit manganese and copper ore deposits near Mkushi,
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which have remained undeveloped because essential transportation facilities
were lacking (see the map).
Soviet Aid to LDC Oil and Gas Industries
Soviet aid to LDC oil and gas industries -- until now about 10% of
Moscow's total aid program -- probably will decline over the next few years
as major clients turn to the West for more advanced technology. Moscow's
most important contribution will be to LDCs with limited output potential
that are unable or unwilling to obtain Western equipment, technical services,
and training. (Secret)
LDCs Profit from the Aid
The USSR originally provided aid to national oil industries in LDCs as
part of its overall effort to expand economic relations with the Third World.
In the mid-1960s Moscow began to focus this aid on a few Middle Eastern
and South Asian countries. By taking repayment in oil and gas, Moscow
hoped to expand its ability to meet Communist countries' growing energy
needs. Out of the $1 billion in assistance provided since 1956, three-quarters
went to five countries - Iraq, Iran, Syria, Afghanistan, and India. Smaller
scale aid also was provided to 18 other countries. The USSR constructed
refineries in Ethiopia, Egypt, and Turkey and built and staffed training
institutes in Algeria and Nigeria. Some 2,500 Soviet technicians have been
assigned to LDC gas and oil industries in recent years; about 1,100 LDC
personnel have received training in petroleum technology in the USSR.
(Secret)
Soviet oil development aid has filled an important gap for many LDCs,
particularly the poorer nations. It came at a time when Western oil
companies were unwilling for political or economic reasons to invest in these
countries. Now, however, the major Soviet clients are finding that they
need more sophisticated Western technology to accelerate their develop-
ment. (Secret)
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The Tan-Zam Railroad
}
U clflda
"
T.- Lill
A~ ai N sd
Mn A. I'
outhe it Rho dc$la
~:nduma
-'TM Y
Satlma
Pemba
Zanzibar
.Dar as Salaam
Economic Resources
Agricultural area
^ Coal Fe Iron
Cu Copper Mn Manganese
Au Gold Na Salt
Scale 1:10.230.000
0 100
Boundary representation is ate
not necessarily authoritative
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In Syria, now a net oil exporter, Soviet aid has been almost entirely
responsible for the development of crude capacity. Damascus
recently announced, however, that Soviet exploration will be
terminated in favor of Western participation. (For Official Use
Only)
In India, the USSR provided the impetus for a state-owned oil
industry. Production from Soviet-developed fields now accounts for
one-half of Indian output, and Soviet-built refineries satisfy one-
third of Indian product needs. Although New Delhi has been
satisfied with Soviet onshore development, it is turning to US firms
for the larger offshore effort. (For Official Use Only)
In Iraq, although Soviet-aided output contributes less than 10% to
total production, Soviet assistance filled an important void in 1969.
Moscow provided aid after private companies refused to expand
output in the wake of nationalization. The USSR also purchased
Iraqi crude after Baghdad's traditional market outlets were
threatened. Since the October war, Soviet purchases have dropped
65% because of Baghdad's insistence on receiving world market
prices. (Secret Noforn)
In Afghanistan and Iran, the USSR was largely responsible for
creating national gas industries -- in the Iranian case, by establish-
ing a market for gas previously flared. The two countries are
shipping natural gas as payment for economic and military aid. (For
Official Use Only)
Soviet Benefits Persist
The USSR will continue to profit from repayments in kind for its
assistance to LDCs. In 1975, Iran and Afghanistan will provide 460 billion
cubic feet of natural gas valued at $240 million to the USSR. These receipts
facilitate Soviet gas exports to Western Europe for which Moscow receives
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hard currency and prices nearly twice what it pays the LDC suppliers.
Moscow also benefits from repayments in oil. Iraq is expected to provide less
than 20,000 b/d of crude oil, valued at under $80 million, as repayments
during 1975, about 20% of total Soviet oil imports from the Middle East this
year. The USSR has been diverting increasing shares of this oil to fulfill
contracts with LDCs, freeing an equivalent amount of Soviet-produced oil
for shipment to cash customers in Western Europe. (Secret Noforn)
Communist Arms Transfers to Major Arab Countries in 1975*
Communist countries delivered over $600 million in arms to major Arab
countries in the first nine months of 1975 (see Table 1). For the full year the
amount is likely to reach the $1 billion 1974 level.
Libya has emerged as the largest Arab recipient of Communist arms.
From January through September 1975, Libya's share was slightly above the
combined total for Iraq and Syria. Shipments to Egypt continued at a high
rate until midyear, when apparently they were cut off.
Table 1
Value of Communist Equipment Deliveries to Major Arab States
Million US $
1. Jan - 30 Sep 1975
1974
Total
610
967
Egypt
155
91
Iraq
125
337
Libya
230
90
Syria
100
449
Liter
The $230 million worth of equipment received by Libya reflects
deliveries in response to the nearly $840 million in cash orders placed since
1 January 1974. These purchases are designed to bring Libya's military
* The classification of this article in Secret Noforn.
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inventories into line with those of Syria and Egypt. Libya is receiving MIG-
23 jet fighters and TU-22 medium-range bombers (see Table 2).
Table 2
Communist Military Deliveries to Major Arab States
1 January - 30 September 1975
Recipient Equipment
Egypt MIG-23 jet fighters
25X1 B
Iraq
Libya
Syria
MIG-21 jet fighters
SU-20 jet fighters
Helicopter
Medium tanks
Radar
MIG-23 jet fighters
MIG-21 jet fighters
Yevgena class minesweepers
Osa II class guided missile patrol boats
ZUUK patrol boats
180-millimeter (mm) field guns
armored cars
Radar
TU-22 bombers
MIG-23 jet fighters
SA-2 missiles
SA-6 missile equipment
Medium tanks
130-mm guns
Armored personnel carriers
Radar
MIG-21 jet fighters
SU-20 jet fighters
Petya II class destroyer escort ship
Medium tanks
Armored cars
MI-8 helicopters
Radar
Artillery pieces
Libya hopes a large arsenal of Communist weaponry will enhance its
prestige among Arab states. It will allow Libya to use its inventory to
replace equipment lost by Arab combatants should new hostilities break out
in the Middle East. Soviet equipment clearly will increase Libya's depend-
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ence on the USSR for technical and other support personnel. The few Soviet
military instructors left in Egypt are being transferred to Libya as their
contracts in Egypt expire.
Iraq and Syria
Reduced Communist shipments to both Syria and Iraq in 1975 largely
reflect the end of the post-October 1973 War deliveries. Damascus has
replaced its war losses and has expanded and upgraded air and ground forces
units. Baghdad's need for Communist equipment and spare parts also
declined after settlement of the Kurdish conflict early this year. Both
countries must now absorb the military equipment they have received.
Syria - the major object of Soviet military supply activity since the October
War -- will have to assimilate more than $1 billion worth of military
hardware; Iraq, $700 million from Communist countries and $1 billion in
Western and Yugoslav arms ordered in the past two years.
Deliveries of $125 million to Iraq and $100 million to Syria in 1975
include minesweepers and Osa II class guided missile patrol boats for Iraq
25X1 B and a Petya class destroyer escort for Syria. Negotiations with Moscow also
25X1 B
25X1 B
began for MIG-23s for Syria,
Egypt
Soviet military deliveries to Egypt apparently were halted at midyear.
aircraft, including Egypt's first MIG-23s, had been transferred
25X1 B before that time The value of 1975 deliveries was
$155 million, or nearly twice last year's level. Egypt may have paid cash for
both the 1974 and 1975 shipments. The drop off in Moscow's military support
to Cairo has led to intensified negotiations with Western military suppliers.
25X1 B
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OTHER ACTIVITIES
Economic
Africa
General. The Organization of Senegal River States has announced that a
combination of Western and OPEC countries and multilateral institutions
will finance the $365 million Manantali Dam project, ending speculation that
China would construct the project. (Unclassified)
Algeria. Bulgaria is to finance and construct a dam near Algiers to
irrigate 100,000 acres and is studying participation in two other dams. The
activity probably will be financed under the $40 million credit provided in
1970. (Unclassified)
Gabon. A team of Romanian geologists arrived in Gabon to study
development of local uranium deposits. (Unclassified)
Ghana. A Chinese trade delegation arrived in Accra on 18 September
for two weeks of discussion on expanding trade relations with Ghana. The
delegation previously had visited Nigeria. (Unclassified)
Ghana and East Germany are negotiating a trade agreement under
which Ghana will sell cocoa at below the world market price in return for
$8.5 million worth of East German equipment for developing facilities to
produce chocolate and chocolate beverages. (Secret Noforn)
A high-level Ghanaian economic delegation was in Moscow negotiating
the resumption of Soviet aid projects. A contract was signed to build a
prefabricated housing plant. (Unclassified)
Morocco. In late September, a Moroccan delegation departed for
Moscow to conclude negotiations on Soviet development of the Meskala
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phosphate deposits, under discussion for more than a year. (Confidential)
Ni er. The USSR and Niger signed an agreement on economic and
technical cooperation on 12 September. The terms were not announced.
(Unclassified)
Nigeria. Nigeria and Bulgaria, signed a long-term trade agreement to
exchange Nigerian raw materials for Bulgarian light industrial equipment
and chemicals. The agreement is the latest in a series of pacts designed to
upgrade Nigeria's commercial relations with Eastern Europe. Late last year,
long-term agreements were signed with Czechoslovakia and East Germany.
(Unclassified)
Somalia. A Chinese trade delegation concluded a $2.5 million contract
to purchase hides and skins from Somalia. China apparently will pay in hard
currency. (Unclassified)
Zaire. The PRC signed contracts to purchase an undisclosed quantity of
Zairian copper in 1976. (Unclassified)
East Asia
Laos. During recent talks in Vientiane, Hungary agreed to provide
technical assistance to agriculture. The two sides also agreed on methods to
expedite Hungarian shipments of textiles, food, and medical supplies being
provided as emergency aid. (Unclassified)
Malaysia. The Malaysian Minister of Trade and Industry was in
Bucharest during September presumably to discuss Romanian participation in
development projects. (Unclassified)
Papua New Guinea. A Chinese trade delegation agreed to buy $3.5
million worth of cocoa and copper from the newly independent government
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of Papua New Guinea. The two countries have been studying trade
possibilities since early this year. (Unclassified)
Philippines. During September, Philippine officials signed agreements
with Bulgaria and Romania to facilitate trade exchanges under agreements
signed earlier this year. (Unclassified)
Europe
Spain. Spain and the USSR signed an agreement to set up a joint
company capitalized at about $500,000 to service Soviet ships, presumably
fishing vessels. Spain already provides the Soviet fleet with extensive
servicing facilities in the Canary Islands. The USSR purchased its first
Spanish fishing vessel in August. (Unclassified)
Latin America
Argentina. Two Romanian officials arrived in Argentina on 4 September
for talks on constructing a coke oven plant. The total cost of the 240,000 ton
plant is estimated at $30 million. Romania will supply equipment under a
$100 million credit signed last year. (Unclassified)
Bolivia. On 16 September the Czech-built antimony smelter at Vinto
began operations. Czechoslovakia extended $3.2 million in long-term credits
in 1971 to cover equipment for the project. Early this year, Prague signed a
$1.5 million contract for a second aid project in Bolivia, a ferroalloy plant.
(Unclassified)
Chile. A Chilean delegation to Peking negotiated renewal of a $50
million three-year credit provided to the Allende government in 1972. The
loan will be used to purchase industrial plants from China. Peking also
agreed to increase its purchases of copper and nitrates in 1976 and possibly
to exchange petroleum for Chilean iron ore. (Secret Noforn)
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Eucador. East Germany will exchange educational equipment worth
$3 million for Ecuadorean bananas under an agreement signed on 15
September. The sale is in addition to annual East German imports of 150,000
tons. (Unclassified)
Guyana. A high-level official will travel to China in mid-October to
discuss trade and aid implementation problems. Georgetown is dissatisfied
with the rate of construction on. Chinese aid projects as well as prices
charged for equipment used to finance local costs. Guyana also hopes to
negotiate additional sales of sugar and bauxite. (Confidential)
Mexico. Mexico and the PRC concluded a five year technical and
scientific cooperation agreement on 10 September. (Unclassified)
Peru. During September, Romania made a test purchase of 35,000 tons
of iron ore from the recently nationalized Marcona mines. The availability
of additional amounts of ore for sale to Romania depends on the outcome of
pending Peruvian negotiations with M,arcona's former US owners. (Unclassi-
fied)
Near East and South Asia
Afghanistan. The USSR recently agreed to begin electric power surveys
in northern Afghanistan under an open ended credit agreement signed early
in 1.975. The USSR has tentatively agreed to assist in the construction of
several major hydroelectric power generating and transmission projects in
Afghanistan over the next 10 years. (Unclassified)
Cyprus. Cyprus has invited Bulgaria to bid on construction of a 20,000
ton capacity desalination plant. Bulgaria probably has been asked to finance
the project under long-term credits (Secret Noforn)
India. Beginning in 1976, India will provide and install equipment for a
640,000 ton capacity coke oven at the Danube Iron Works in Hungary. This
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is India's first major steel construction contract outside its national
boundaries. Much of the Indian firm's previous experience stems from work
on Soviet-aided steel mills at Bhilai and Bokaro. (Confidential)
On 16 September, India and the USSR signed contracts to study a
3 million ton open cast mine at Singrauli and two projects using experi-
mental mining techniques at Ranigang. This is the first activity on a Soviet
proposal to finance the development of India's coal resources under a 1966
trade credit. (Unclassified)
Iran. On 14 September, Bulgaria and Iran agreed to set up a joint
economic commission to expand mutual trade and economic cooperation.
Only small amounts of Sofia's $20 million in aid to Iran have been used to
date. The two sides also held talks on establishing a joint transport company.
(Unclassified)
Iran and Poland plan to expand annual trade by 25% to $100 million in
1976. The new protocol signed on 17 September calls for increased sales of
Iranian light manufactures in exchange for Polish agricultural goods,
machinery, and chemicals. (Unclassified)
Moscow apparently agreed in July to provide $18 million in new aid to
build housing at Ahwaz in southern Iran, bringing total Soviet aid to that
country to $800 million. The new credit, which is repayable over seven
years, covers the foreign exchange costs of the $36 million project. (Secret
Noforn)
Iraq. On 14 September, Iraq and the USSR signed contracts to establish
two vocational training centers for the chemical, petrochemical, mechan-
ical, and mineral industries in Iraq. The centers, to accommodate about
1,200 students, will cost $25 million and will be completed by 1978. The
USSR has contracted to build a minimum of 10 training complexes in Iraq.
(Unclassified)
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Kuwait. The Kuwait Investment Company is handling the sale of a $60
million Hungarian bond issue to Kuwaiti subscribers. In 1974, Kuwait
managed a similar transaction for $40 million on Hungary's behalf. In
addition, an agreement for the sale of 2 million barrels of Kuwaiti crude oil,
valued at $20 million at market prices, is to be signed with Hungary soon.
(Unclassified)
Pakistan. China will conduct feasibility studies for soda ash, sulfuric
acid, and ceramics factories in northern Pakistan. Chinese assistance in
constructing the plants presumably would come under a $200 million credit
extended in 1970. (Unclassified)
Turkey. Turkey and Poland signed a small credit agreement in
September. The $2.8 million loan will cover the purchase of road
construction equipment to be delivered by 1978. The credit is repayable over
6 years, including 21 year's grace, and carries 7% interest. (Unclassified)
Turkey recently signed new trade agreements with Czechoslovakia and
East Germany calling for all transactions to be conducted on a hard currency
basis. Planned levels of trade for the coming year were not announced. Last
year's protocols called for total trade of $90 million with the two countries.
(Unclassified)
The Turkish and Bulgarian foreign ministers met early in September to
discuss a proposal to institute regional cooperation among the Balkan states.
Later in the month, a meeting of the joint Turkish-Bulgarian economic
commission ended with the conclusion of a long-term economic, technical,
industrial, and scientific cooperation agreement. The major area of Turkish-
Bulgarian economic cooperation at present is distribution of electricity.
Northwestern Turkey recently was linked to a Bulgarian power transmission
system. (Unclassified)
A group of 15 Chinese technicians is preparing to return home after
completing a textile mill under a commercial contract with a private
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Turkish firm. In September 1974, Peking agreed to construct and equip the
mill at Karatas, Turkey, (Secret Noforn) 25X1 C
Military
Africa
Guinea-Bissau. The first known Soviet military specialists for Guinea- 25X1 B
Bissau arrived in August,
25X1 B (Secret Noforn)
Somalia. The USSR delivered an Osa II class patrol boat armed with
Styx missiles to Somalia in September. Agreement for the ship probably was
reached last December during a Soviet delegation's visit to Somalia. About
50 Somali naval personnel began training in the Soviet Union in January.
(Confidential)
Zaire. The PRC is continuing deliveries of T-62 tanks to Zaire
25X1 B
25X1 B
(Confidential)
Latin America
25X1 B
Cuba. The arrival of= MIG-2ls in Cuba during September brings
Soviet deliveries of this aircraft this year to ^ nearly matching the total
for the previous three years. The Cuban inventory of MIG-21s now stands at
more than 100. (Secret Noforn)
Peru. The Peruvian army filled the last major gap in its force
modernization program through acquisition of a Soviet self-propelled auto-
matic antiaircraft gun system -- the quad 22-mm ZSU 23-4. It will provide
an effective mobile close-support air defense weapon. The weapons system
is now known to be in Peru, but the number delivered and their arrival dates
are not known. (Confidential)
25X1 B
25X1 B
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Near East and South Asia
Egypt. The Egyptian Minister of War Production visited North Korea
during early September. Cairo probably was looking into the availability of
spare parts for its Soviet-built equipment. (Confidential)
25X1 B
India. The USSR delivered = MI-8 helicopters during September,
probably under an agreement concluded earlier in the year. The new delivery
brings India's MI-8 inventory- (Confidential Noforn)
25X1 B
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Secret
Secret
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