COMMUNIST AID AND TRADE ACTIVITIES IN LESS DEVELOPED COUNTRIES, MARCH 1976

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01045A000100050001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 15, 2016
• Document Release Date: December 2, 2002
• Sequence Number: 1
• Publication Date: June 1, 1976
• Content Type: REPORT

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Secret
Communist Aid and Trade Activities
in Less Developed Countries, March 1976
Secret
ER CAT 76-005
June 1976
Copy
N? 58
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CONTENTS AND SUMMARY OF EVENTS
(March 1976)
Highlights
? A Soviet delegation visiting Kuwait proposed that the two countries invest
in joint projects in the USSR and third countries. It also asked Kuwait to
make deposits in Soviet banks.
? The USSR extended US $14 million in credits to Bolivia in January,
probably to cover cost overruns at a Soviet-financed tin plant.
? Hungary agreed to construct an aluminum plant in Jamaica, the first East
European development project in that country.
? Romania signed agreements to participate in petroleum development with
Greece, Mexico. and Jordan.
? Warsaw signed a $3.2 billion five-year trade agreement with Brazil, which
will make Poland the largest East European trader in Latin America.
China signed new trade agreements with Chile and Peru, offered to sell
petroleum to Brazil, and offered to open formal trade relations with
Uruguay.
Page
Egypt: Soviet Relations After the Cancellation
of the Friendship Treaty . . .. . . . . . .. . . .. .. . . . . . . .. .. .
The USSR and Egypt are maintaining economic relations in the wake of
Sadat's abrogation of the Friendship Treaty.
Communist Aid to LDC Oil Industries in 1975 . . . . . . . . . . . . 3
Summarizes 1975 Communist activity to help develop LDC oil
industries.
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Page
Other Activities
Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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COMMUNIST AID AND TRADE ACTIVITIES
IN LESS DEVELOPED COUNTRIES
MARCH 1976
EGYPT: SOVIET RELATIONS AFTER THE CANCELLATION
OF THE FRIENDSHIP TREATY
Soviet-Egyptian economic relations continue despite President Sadat's
cancellation of the 1971 Soviet-Egyptian Friendship Treaty in March 1976 and the
Soviet arms embargo, which has seriously impaired Egypt's combat readiness.
Military Supplies-Recurrent Antagonism
The Soviet arms move ended two decades of almost total Egyptian dependence
on Soviet arms. Since 1956 Egypt has received $3.4 billion worth of military
hardware from the USSR and has been Moscow's largest Third World arms customer.
After peaking in 1970, deliveries dropped sharply in 1972 following Egypt's
expulsion of 13,000 Soviet military personnel. Although Moscow provided
emergency shipments during and immediately after the October 1973 war, it then
intermittently stopped shipments and in mid-1975 virtually cut off all deliveries. 25X1
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Cairo, now facing a spare parts crisis and a threat to its combat readiness, is
actively pursuing alternative supply sources and equipment refitting services.
Supported by aid from Arab oil producers, Cairo has placed $225 million in orders
in the West since 1973. Recent Saudi and Abu Dhabi financial pledges totaling $845
million will enable Egypt to place additional orders. The non-Soviet arms, however,
will not have an impact on the effectiveness of Egypt's military for several years.
Deliveries will be slow because Western order books are full. Even after these
alternative arms are received it will take time to integrate them into Egyptian forces.
Egypt's military preparedness thus will suffer for the next several years unless
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
regarding this publication are welcomed. They may be directed to of 25X1A
the Office of Economic Research, 25X1A
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sufficient parts for Soviet arms can be acquired. Cairo has convassed East European 25X1 B
countries, Yugoslavia, and China for spares with limited success. In 1975
Czechoslovakia agreed to provide I lammunition, and Hungary I 25X1 B
spare parts for helicopters. More recently China gave Egypt 25X1 B
engines as a gift and possibly some other spare parts.
Since 1974 the military supply issue has been linked directly to the question of
the large debt Cairo owes Moscow. The debt amounts to over $5 billion (including
principal and interest), of which almost $4 billion is related to military equipment
purchases. Although Egypt's economic debt has been repaid on schedule, repayment
of the military debt has been deferred through successive reschedulings beginning in
1965. Large-scale repayments were to begin in 1974 under the old rescheduling
agreements, but Egypt again requested debt relief. After two years of negotiations
the issue remains unresolved. The 1976 trade protocol, meanwhile, provides an
interim payment arrangement. Discussions on a long-term settlement may have been
reopened during the recent negotiations in Moscow.
Moscow has tended to carry out economic agreements in the LDCs despite
political differences. Cairo's decision to throw out Soviet military personnel in 1972
produced no interruption of economic projects. During the height of the recent
controversy over debt scheduling and military spares, Moscow even offered
assistance for developing the Abu Tartur phosphate deposits, which would require at
least $600 million in new credits.
In April 1976 Egypt and the USSR signed their 1976 trade protocol and
initiated discussions on a new long-term agreement to replace the one that expires
this year. The new protocol calls for $500 million in Egyptian exports and $320
million in imports in 1976, leaving a $180 million surplus to reduce Egypt's debt
with the USSR.*
The USSR provided Egypt $1 billion in economic assistance from 1956
through 1975. Until the 1973 war, Moscow was Cairo's major aid source. Some
$400 million in Soviet credits remain unused, and about 1,800 Soviet technicians
* Recent information indicates that trade for 1976 is planned at $820 million instead of the $640 million
previously reported.
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were assigned to economic projects in Egypt in 1975. Most of them are scheduled to
remain until Soviet projects under way are completed. Those working as advisers in
completed plants will gradually be replaced.
Two major Soviet projects are now being expanded: the Hulwan steel mill
(Egypt's only integrated steel complex) and the Naja Hammadi aluminum plant.
Other projects include fisheries assistance, irrigation and electrification schemes
associated with the Aswan Dam, cement plants, textile mills, and agricultural
facilities.
The bulk of Communist aid to LDC oil industries in 1975 continued to be
provided by the USSR and Romania and to be concentrated in Iraq and Syria.
Although no new credits were provided, new contracts were signed under old
agreements, and $70 million worth of aid was delivered to ongoing projects. Almost
3,000 Communist oil technicians were operating in LDCs in 1975. CEMA, in its first
general cooperation agreements with Third World countries, agreed to study
development of oil resources in Iraq and Mexico as part of Eastern Europe's search
for stable long-term oil supplies. (For aid in 1956-75, see the table.)
Moscow's Programs
Accelerate
In Iraq, where Mos-
cow has its most active
program, the third stage of
the North Rumaila oilfield
was completed. The field,
exploited entirely with So-
viet aid, now has an instal-
led capacity of more than
800,000 b/d. Soviet techni-
cians, however, still are at-
tempting to solve pressur-
ization problems that have
limited output to less than
20% of capacity. Produc-
tion was initiated (10,000
b/d) at the Soviet-assisted
Nahr Umar oilfield, and
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Estimated Communist Aid to Third World Oil Industries
1956-75
Extended
Drawn
Total
USSR
Eastern
Europe
Total
USSR
Eastern
Europe
Total
1,588.7'
1,066.8
521.9
798.9
646.7
152.2
Africa
54.9
43.0
11.9
32.6
30.3
2.3
Algeria
18.6
18.6
....
15.2
15.2
Ethiopia
11.7
11.7
....
11.7
11.7
....
Ghana
0.9
....
0.9
0.9
....
0.9
Mali
2.0
2.0
....
1.0
1.0
....
Morocco
1.7
0.7
1.0
1.5
0.5
1.0
Nigeria
6.0
2.0
4.0
1.9
1.9
....
Somalia
8.0
8.0
....
....
....
....
Sudan
3.0
....
3.0
0.4
....
0.4
Tunisia
3.0
....
3.0
....
....
East Asia
29.8
....
29.8
....
....
....
Indonesia
29.8
....
29.8
....
....
....
Latin America
132.0
73.5
58.5
63.3
40.3
23.0
Argentina
88.3
43.3
45.0
51.9
33.9
18.0
Bolivia
0.7
0.7
....
0.4
0.4
....
Brazil
13.0
5.0
8.0
10.0
5.0
5.0
Chile
20.5
15.0
5.5
....
...
...
Peru
9.5
9.5
....
1.0
1.0
....
Middle East
823.4
438.0
385.4
367.6
264.8
102.8
Egypt
138.3
87.3
51.0
103.3
81.3
22.0
Iran
81.0
77.0
4.0
77.0
77.0
....
Iraq
299.4
195.7
103.7
100.6
64.0
36.6
Jordan
2.0
2.0
....
....
North Yemen
1.0
1.0
....
0.5
0.5
....
South Yemen
3.0
1.0
2.0
0.6
0.5
0.1
Syria
274.5
49.8
224.7
61.4
17.3
44.1
Turkey
24.2
24.2
....
24.2
24.2
....
South Asia
548.6
512.3
36.3
335.4
311.3
24.1
Afghanistan
149.6
149.6
....
119.3
119.3
....
Bangladesh
16.2
16.2
....
12.4
12.4
....
India
321.7
300.6
21.1
161.4
142.3
19.1
Pakistan
59.6
44.4
15.2
42.1
37.1
5.0
Sri Lanka
1.5
1.5
....
0.2
0.2
....
1. In addition, China has provided credits totaling under $5 million to the Congo, Nepal, Somalia, and ut
Yemen for oil surveys.
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work was begun on the 375 mile petroleum pipeline from Baghdad to Basra. In July
the USSR signed contracts to exploit the Luhais field in southern Iraq, which is
expected to produce 50,000 b/d; financing for the estimated $50 million
undertaking has not been identified.
Already responsible for developing most of Syria's crude capacity, the USSR
signed a protocol in December for further prospecting under Syria's current oil
development program (1975-80). The protocol was signed despite earlier reports
that Soviet oil exploration would be terminated in favor of Western-type
concessions.
? India ordered $20 million in equipment for the Soviet-aided Mathura
refinery, slated to become India's largest refinery, with 120,000 b/d
capacity. New Delhi also sought Soviet assistance in offshore exploration,
for which it had previously employed only Western technology.
Meanwhile, Soviet teams continued to explore for petroleum in Assam.
? Soviet technicians struck oil at the first onshore well sunk in its two-year
exploration effort in Sri Lanka. The USSR also collaborated with US
companies to locate sites for offshore drilling, scheduled to begin in 1976.
The USSR agreed to expand exploration into new areas in Pakistan with
funds remaining from S45 million of oil development credits committed
in 1961 and 1969.
Moscow agreed to develop new gas fields in Afghanistan, using some US
equipment.
Romania: A Successful Sales Promotion Campaign
Among East European countries, only Romania expanded oil development
work in the LDCs in 1975. A 120,000 b/d refinery at Banias, Syria-Romania's
largest project in the Third World-got under way in 1975, using $180 million in
Romanian credits. Both Romania and Hungary obtained oil concessions from
Damascus, the first known use of this Western-type arrangement by Communist
countries.
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Romania signed com-
mercial contracts to ex-
pand refineries and to dev-
elop oil resources with
many LDCs. It agreed with
India to jointly explore for
oil in Libya. It also under-
took joint ventures (a) with
Jordan for oil exploration
and a new refinery and (b)
with Ecuador for prospec-
ting-Romania's first joint
oil exploration effort in
Latin America. Other
agreements on refinery ex-
pansion were signed with
the Malagasy Republic and
Trinidad and Tobago.
China-Shopping
for Expertise
China, which has pro-
vided only small amounts
of oil development aid,
sought oil technology from
the Third World. A high-
level Chinese delegation vis-
ited Venezuela, Mexico,
and Trinidad and Tobago in
January to discuss the exchange of information on offshore oil development. At the
end of the year, a Chinese team arrived in Mexico to study offshore drilling
techniques.
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OTHER ACTIVITIES
Economic
Benin. Soviet officials in Benin recently expressed interest in providing aid
for a bus system in Cotonou, mineral exploitation, and fisheries development. A
geological study completed by a Soviet team late last year would be the basis
for pursuing mineral exploitation. China is the only Communist count that has
hitherto extended economic credits to Benin.
Chad' Moscow completed its drought aid mission in Chad, which involved
the transport of 2,500 metric tons of goods to remote areas of the country. Services
of Soviet AN-26 transports and pilots were donated to the relief effort.
A Chinese delegation visited Chad during March probably to discuss
implementation of $48 million of credits outstanding under a 1973 agreement.
Gabon. A Chinese delegation arrived in Libreville during March to plan the
construction of two medical centers and several agricultural projects under the $25
million credit extended in January 1975.
In January Gabon signed a protocol for Romanian participation in the
development of the Belinga iron deposits. The terms of Romanian involvement
Ghana. At the end of March, Accra announced that Soviet technicians would
arrive soon to reactivate the Kwabenya nuclear reactor, abandoned in 1966.
Negotiations with Hungary proceeded on a feasibility study for a bauxite project
at Nyinahin, under discussion since 1973. Romania and China signed 1976 trade
protocols with Ghana. The Chinese agreement calls for total trade of $28 million,
about a third higher than in 1975.
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Czechoslovakia to inspect industrial enterprises.
Libya. During a visit to Tripoli in March the Czech Foreign Trade Minister
negotiated an agreement to build housing, communications, and industrial facilities
for Libya. Earlier in the month, a Libyan government delegation had gone to
financed under a 1964 credit.
Mali. Mali recently announced that China will finance a third sugar mill, in
the Sikasso region. Those at Seribala and Dougabougou were completed in the
early 1970s. Last month, China inaugurated production at the Sevare rice mill,
-Mauritania. China plans to request visas for 2,000 Chinese personnel to begin
work on the Nouakchott port, which will be financed under a $55 million 1974
agreement.
Morocco. A Soviet Foreign Affairs Ministry delegation visited Morocco in late
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in March under a technical assistance agreement concluded last year.
111ozambique. A fourth group of Bulgarian technicians arrived in Mozambique
bridge, built with Chinese assistance under a 1971 credit.
Sierra Leone. Opening ceremonies were held in March for the Manjeh highway
Somalia. Somalia has requested Bulgarian assistance in the manufacture of
shoes and textiles and in processing and marketing skins.
assistance, opened to traffic at the beginning of March.
Sudan. A section of the Wad Madani road, built with $23 million of Chinese
annual rice production in the region by nearly 2017r.
Dpper Volta. China recently turned over the operation of a rice project in
the Kou Valley to the Upper Voltan government. The project already has increased
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General. China plans to begin imports of 100,000 tons of bauxite annually
from Malaysia and Thailand, its first such purchases from these countries.
Philippines. Under a 1976 protocol the Philippines will continue to import
Chinese crude oil and other products in return for copper, sugar, lumber, and textile
products. Peking agreed to eliminate its trade surplus, which in 1975 was $22
million.
President Marcos plans to visit Moscow in May, where he is expected to
announce the establishment of di lomatic relations and sign the long-pending
Soviet-Philippine trade agreement.
Bolivia. The USSR extended $14 million in additional credits to Bolivia in
January 1976 to supplement aid provided under a 1970 agreement. The new credits
probably will finance cost overruns at the problem-ridden Potosi tin plant. The
foreign exchange cost of the Soviet-built plant has reached $20 million, from the
original $6 million estimate.
Brazil. In an attempt to redress its huge trade deficit with Brazil, China has
offered to export petroleum. In each of the past four years, China has imported
more than $60 million worth of Brazilian products but has exported less than
$1 million annually.
Brazil and Poland signed a five-year agreement in March calling for $3.2 billion
in trade through 1980. The new agreement supersedes a 1975 agreement that called
for $1.7 billion in trade over 10 years. If the level envisaged in the new pact
is achieved, Poland will become the largest East European trader in Latin America.
Chilean government officials met in February to discuss ratification of an
agreement to reactivate Chinese credits extended to the Allende regime. Santiago
reportedly has asked China to raise the credit limit to $100 million from the $63
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million extended in 1972. China has tied the credit to the purchase of plants to
manufacture industrial and agricultural processing machinery. The Chilean private
sector, however, has shown little interest in the Chinese equipment.
Guyana. Ten Guyanese went to China for training in textile technology; the
Chinese are building a textile plant under a $26 million credit.
In an effort to initiate formal trade relations with Georgetown, Moscow invited
a Guyanese trade delegation to the USSR to discuss the exchange of sugar for
machinery and equipment.
Hungary has agreed to construct an aluminum plant in Jamaica, the first firm
commitment of development assistance from an East European country. The
agreement follows a 1975 Jamaican offer to exchange bauxite for Hungarian
aluminum technology. Jamaica has had trouble in attracting new Western investment
because of its threat to nationalize foreign holdings.
Mexico. China and Mexico announced plans to cooperate in developing water,
agricultural, and fishery resources. The two countries also agreed to exchange
petroleum industry technicians. A group of Chinese technicians is in Mexico
studying offshore drilling techniques.
Mexico and Romania signed agreements in February for extensive cooperation
in petroleum development. Romania will provide technical assistance in secondary
petroleum recovery techniques in exchange for Mexican assistance in offshore
drilling.
Poland and Mexico signed a trade agreement in early March under which
Poland will construct a coal mine, the first large Communist-assisted project in
Mexico. Poland and Mexico also will cooperate in electric power development,
nonferrous metals exploration, fisheries, and sulfur extraction. A joint commission
was set up to administer these activities.
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Peru. China signed agreements with Peru to import $57 million worth of metals
and fishmeal and to sell rice and kerosene valued at $23 million. The kerosene
sale will be China's first outside of East Asia. Although China will still run a deficit
in its trade with Peru, the new agreement is designed to reduce the large deficits
of recent years. In 1974, China imported $72 million worth of metals and other
Peruvian raw materials but sold only $0.6 million worth of goods.
China reportedly will sell both the rice and kerosene at reduced prices. Rice
will be sold at almost $50 a ton below world market prices. The two sides may
have also reached agreement on the use of some of the outstanding Chinese credits
for agricultural equipment, possibly for the Chimbote irrigation project now being
studied by China.
Romania and Peru signed agreements in March to expand industrial
development cooperation, possibly drawing on some $25 million in Romanian
assistance provided in 1973.
Lima has signed contracts with the Polish firm KOPEX for an engineering
study of a mining and energy complex at Alto Chicaha in Northern Peru. Polish
technicians completed a feasibility study for the project, to use coal for thermal
power generation, under a 1972 credit agreement.
Uruguay. The USSR agreed to extend the life of a 1969 $20 million credit
agreement for machinery and equipment. About $3.5 million of the credit has been
drawn.
Bangladesh. Bangladesh and the USSR signed a protocol in Moscow at the
end of March, calling for $35 million in trade in 1976. Earlier in the month
Bangladesh signed its annual trade protocol with Bulgaria.
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Bangladesh plans to buy 40,000 tons of wheat for shipment to the USSR
in July and August as the first of five installments repaying the 1973 Soviet wheat
Greece. Under a long-term agreement signed in late March, Romania will
undertake oil exploration and exploitation at several locations in Greece. Financial
terms were not announced. The two countries also signed a trade agreement calling
for $80 million in exchanges in 1976. Romania will export oil products, machinery,
metallurgical products, and vehicles.
India. The third session of the Soviet-Indian Economic Commission, chaired
by the head of the Soviet State Committee for Foreign Economic Relations, opened
in Moscow on 31 March. The commission was set up in 1972 to integrate Soviet
and Indian economic and commercial planning.
Iraq. The deputy chairman of the East German planning commission arrived
in Baghdad to discuss cooperation in economic planning. Iraq previously has drawn
on the services of East European economists in formulating economic development
plans.
Economic talks ended in Moscow with Soviet agreement to assist in the
construction of a new power station, a cement plant, and an irrigation network,
as well as additional assistance to the petroleum industry. Financial terms of the
new Soviet participation were not revealed.
Kuwait. Romanian President Ceausescu, on a visit to Kuwait in late March,
revived the question of Kuwaiti participation in a $1 billion petrochemical complex
in Romania. Last year, the two sides agreed to study the project, for which Kuwait
would provide half of the financing, as well as the crude oil for the plant. Romania
also proposed construction of a similar complex in Kuwait. Agreement was not
reached, however, suggesting that Kuwaiti objections to Romania's 1975 feasibility
study have not been resolved.
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Notorn
Sri Lanka. China emerged as Sri Lanka's major trading partner in 1975,
according to the Sri Lankan press. The announcement was made at the inauguration
of the Sri Lankan-Chinese shipping line's services to Europe.
Syria. Syria's Petroleum Minister inaugurated production at the Czech-built
distillation unit at the Horns petroleum refinery.
Turkey. The 17th annual Soviet-Turkish trade protocol, signed on 4 March,
calls for total trade of $170 million in 1976, slightly less than 1975 trade. In
addition, Turkey will ship $35 million worth of goods to the USSR for repayment
of past credits.
Construction is scheduled to begin soon on a $35 million dam on the Arpacay
River, which is being financed jointly by the USSR and Turkey. The waters will
be shared equally by the countries, as will the 17 million kilowatts of electricity
to be produced by an associated hydroelectric plant.
Military
Kenya. In March, Moscow offered its first military assistance to Kenya.
Nairobi, worried about expanding arms inventories in Uganda and Somalia and
facing territorial claims by both, has also been negotiating with several Western
arms suppliers.
Malagasy Republic. The Malagasy Republic is scheduled to receive its first
Soviet aircraft - an MI-8 helicopter for VIP use.
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Afghanistan. A Soviet military delegation arrived in Kabul in mid-March,
probably to sign protocols negotiated last year for armored personnel carriers to
be used to reorganize Afghanistan's three armored divisions. The additional
equipment will do little to increase the army's capabilities because of its
rudimentary logistic system and a shortage of skilled manpower.
Iran. Since 1974 Iran has received ZSU-23-4 self-propelled
antiaircraft guns that were ordered from the USSR, one of the few Soviet combat
systems purchased by Iran. Most of the $826 million in Iranian military orders
placed with the USSR since 1967 were for support equipment.
I
Sri Lanka. The ship Moscow gave Colombo last November has been identified
as a Mol class patrol boat, probably the naval combatant promised Prime Minister
Sirimavo Bandaranaike during her November 1974 visit to Moscow. The Mol is
an unsophisticated boat that uses an old type Osa hull.
The Soviets have built at least two or possibly three Mols and will quite likely
continue to produce a limited number of them. The Mol class was identified for
the first time last summer. Sri Lanka might be the first country to receive this
ship.
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Secret
Secret
Approved For Release 2003/01/29 : CIA-RDP79SO1045A000100050001-6
 STAT Approved For Release 2003/01/29 : CIA-RDP79SO1045A000100050001-6
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Approved For Release 2003/01/29 : CIA-RDP79SO1045A000100050001-6